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Abigail: Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to the Kura Oncology, Inc. fourth-quarter 2025 financial results earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. To allow everybody the opportunity to participate, we ask that you please limit yourself to one question and then reenter the queue for any follow-ups. At this time, I would like to turn the call over to Greg Mann, SVP of Investor Relations and Corporate Affairs of Kura Oncology, Inc. Please go ahead. Greg Mann: Thank you, Abigail. Good morning, and welcome to Kura Oncology, Inc.'s fourth-quarter 2025 conference call. Joining the call today are Dr. Troy Wilson, President and Chief Executive Officer; Brian T. Powl, Chief Commercial Officer; Dr. Mollie Leoni, Chief Medical Officer; and Tom Doyle, Senior Vice President, Finance and Accounting. We remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today, and may involve risks and uncertainties that cause actual results to differ materially from expected results. Please refer to Kura Oncology, Inc.'s filings with the SEC, which are available from the SEC or on the Kura Oncology, Inc. website for information concerning risk factors that could affect the company. With that, I will turn the call over to Troy. Troy Wilson: Thank you, Greg, and good morning, everyone. 2025 was a defining year for Kura Oncology, Inc. Marked by FDA approval of Comzifty and initiation of a successful commercial launch. As we enter 2026, our priorities are clear. Execute commercially, move aggressively into frontline AML and combinations, and build long-term leadership in menin inhibition while advancing a data-rich pipeline. Comzifty generated $2.1 million in net product revenue in the final weeks of 2025. Although it is early, the launch is off to a strong start. Feedback from physicians, pharmacists, and payers has been consistent. Comzifty delivers meaningful efficacy with differentiated safety, simplicity, and combinability with concomitant medications. In medically complex AML patients, that matters. We believe leadership in relapsed and refractory NPM1-mutant AML will be determined by preference, not by who enters the market first. Importantly, Comzifty is now listed in the FDA's Orange Book with patent protection through July 2044. That runway strengthens the long-term value of the franchise, particularly as we expand into frontline AML and combination settings. Our strategy extends well beyond the initial approval. Enrollment is underway in our pivotal COMET-017 frontline trials, and 2026 will bring important data in both the frontline and relapsed/refractory settings. We are positioning ziftomenib as a foundational combination partner in AML, including with FLT3 inhibitors and standard backbone regimens. Across relapsed/refractory and frontline AML, we estimate the total U.S. opportunity at approximately $7 billion. Beyond AML, we are advancing a focused solid tumor strategy. Our ziftomenib combination with imatinib in gastrointestinal stromal tumors, or GIST, is progressing in dose escalation, and our next-generation menin programs are advancing. Darlafarnib, our farnesyl transferase inhibitor, is designed to address resistance mechanisms across multiple oncogenic pathways. Its combination flexibility, including with cabozantinib, KRAS inhibitors, and PI3K inhibitors, gives it potential to impact more than 200,000 patients annually in the U.S. We expect multiple clinical updates this year. In short, we are executing commercially, expanding development of ziftomenib across the AML treatment continuum, and advancing a pipeline with meaningful catalysts in 2026. With that, I will turn it over to Brian. Brian T. Powl: Thank you, Troy. Good morning. Our commercial objectives for Comzifty are straightforward. Establish clear differentiation in the menin inhibitor class, deliver strong quarter-over-quarter growth, and achieve leading class share in relapsed/refractory NPM1-mutant AML. The early launch is exceeding expectations. I could not be happier with the execution of our world-class team, which has been laser-focused on delivering a strong launch. Prescription trends are strong, and the qualitative feedback has been consistent and encouraging. Physicians, both academic and community-based, consistently cite Comzifty's clinical activity and ease of use. Once-daily dosing and lack of required azole dose adjustments are meaningful advantages in real-world AML practice. Institutional pharmacists firmly echo this. In complex patients on multiple medications, safety and predictability drive confidence. We also hear clearly that the safety profile matters. Comzifty carries a single boxed warning for differentiation syndrome compared to multiple boxed warnings for a competitor. That difference is resonating. Importantly, Comzifty was added to the NCCN Guidelines as a Category 2A recommendation within a week of Kura Oncology, Inc.'s submission. That rapid decision reflects enthusiasm and strong alignment among clinical thought leaders. Operational execution has been strong. Comzifty was shipped within days of approval, and our experienced sales force, which brings an average of more than 20 years of industry experience and deep hematology expertise, was trained and fully deployed in partnership with Kyowa Kirin, targeting more than 4,000 hematology professionals. Our message is simple. NPM1 mutations are now actionable, and Comzifty offers a differentiated profile. Access has been a major strength and highlights a powerful leading indicator early in the launch. We engaged payers covering approximately 90% of insured lives prior to approval. Within 90 days, approximately 84% of private payers had established coverage aligned with the label and without additional restrictions. That speed of coverage surpasses both industry benchmarks and our internal expectations. We are also thrilled to report that certain Blue plans are now requiring patients to go on Comzifty before allowing coverage for the other approved menin inhibitor. It is our understanding that their decision to implement this step edit was based on the efficacy, safety, and predictable price per patient. Step editing is uncommon in oncology. We view this as a meaningful independent validation of Comzifty's profile and competitive advantage as the class evolves. Comzifty is distributed through a focused network of specialty distributors and pharmacies. Through KuraRx Connect, the average time from prescription to payer decision is two days. Patients are getting rapid access. We estimate the initial U.S. market for NPM1 relapsed/refractory AML at approximately $350 million to $400 million annually. This is our starting point. On top of our enthusiasm about our early launch, we strongly believe that long-term leadership across the AML continuum will be determined by breadth: by who can combine effectively with venetoclax, 7+3, and FLT3 inhibitors, and take the lead in frontline disease. Comzifty's profile, particularly its safety, combinability, and simplicity, positions us to maximize the efficacy benefit across settings and drive class leadership. In the near term, we will remain focused on quarter-over-quarter growth, net revenue, and new patient starts. Over time, we anticipate providing additional metrics to track progress. I will now turn it over to Mollie to discuss our pipeline. Mollie Leoni: Thank you, Brian. FDA approval in relapsed/refractory NPM1-mutant AML was a major milestone, and it is just the beginning. We are building a durable, expanding franchise backed by the most comprehensive development strategy. Our goal is clear: make ziftomenib the foundational therapy across AML. We are executing the most comprehensive development strategy in the category. We expect to deliver multiple updates this year across key programs at major medical meetings, supported by an expanding publication plan. Relapse rates in AML remain high, up to 70% within three years. We believe deeper and more durable outcomes require moving therapies earlier in treatment. This drives our first-to-frontline strategy. We are rapidly advancing our registrational COMET-017 program in newly diagnosed AML, which will recruit patients at approximately 200 global sites. The program includes two independently powered trials, intensive and non-intensive chemotherapies, each designed to support potential U.S. accelerated approval and full approval. Data from the Phase 1 COMET-007 trial support this strategy. In newly diagnosed patients treated with 7+3 or venetoclax plus ziftomenib, we observed high CR rates and deep MRD negativity. Importantly, the addition of ziftomenib did not meaningfully delay platelet or neutrophil count recovery in either combination. We expect to present updated intensive chemotherapy data from COMET-007 in 2026. In parallel, we are preparing a manuscript detailing ziftomenib in combination with venetoclax in the relapsed/refractory NPM1-mutant AML setting. Data presented last December showed encouraging safety, tolerability, and clinical activity in this population. The combination was generally well tolerated without additive toxicity and meaningfully improved overall response rate, composite CR rate, and overall survival relative to ziftomenib alone. We view this as an important component of our strategy. We believe it has the potential to significantly improve outcomes in patients with relapsed/refractory NPM1-mutant AML. FLT3 co-mutations present another significant opportunity and one where we are well ahead of competitors. We are evaluating ziftomenib in combination with gilteritinib in the relapsed/refractory setting and with quizartinib in the frontline setting. If we can demonstrate the ability to combine ziftomenib safely with FLT3 inhibitors, we believe that will be a key differentiator. Outside AML, COMODO-15 is evaluating ziftomenib plus imatinib in patients with advanced GIST. Dose escalation continues without dose-limiting toxicities across a broad range of doses. We remain very encouraged and plan to provide an update when appropriate. Turning to darlafarnib, we are advancing this FTI in combinations to address resistance biology across solid tumors. We announced today the initiation of the Phase 1b dose expansion of FIT-001 with cabozantinib in advanced renal cell carcinoma. The Phase 1b portion comprises a randomization into three arms, in line with Project Optimus, including one cabozantinib monotherapy arm. This third arm provides a control benchmark and enables us to evaluate the combination in patients who are not responding to or just beginning to fail cabozantinib therapy. Phase 1a dose escalation data from FIT-001 showed encouraging safety and tolerability as well as antitumor activity, including in patients previously treated with cabozantinib. Updated data will be presented in the second half of this year. We also plan to present preliminary data from our Phase 1a study evaluating darlafarnib with adagrasib in patients with KRAS G12C-mutated lung, colorectal, and pancreatic cancers in 2026. Finally, our menin inhibitor programs continue to advance, including preclinical work in solid tumors as well as diabetes and cardiometabolic indications. In summary, we are working to move ziftomenib earlier in the AML treatment paradigm, expanding our combination strategies, and advancing a second growth pillar with the FTI platform with multiple catalysts this year. And with that, I will turn it over to Tom for a financial update. Tom Doyle: Thank you, Mollie. I am happy to provide a brief overview of our financial results for 2025. As we preannounced in January, our net product revenue from Comzifty sales was $2.1 million compared to none for 2024. The first commercial sale triggered a $135 million milestone payment under our collaboration agreement with Kyowa Kirin. Collaboration revenue from our Kyowa Kirin partnership was $15.2 million compared to $53.9 million for the same period in 2024. Research and development expenses were $64.4 million compared to $52.3 million for 2024. The increase was driven by ziftomenib combination trials, including the start of enrollment in our COMET-017 trial in 2025. Sales, general and administrative expenses were $39.1 million compared to $24.1 million for 2024. The increase was driven by the commercial launch of Comzifty. Net loss for 2025 was $81 million compared to a net loss of $19.2 million for 2024. This includes non-cash share-based compensation expense of $11.3 million compared to $8.6 million for the same period in 2024. As of 12/31/2025, Kura Oncology, Inc. had cash, cash equivalents, and short-term investments of $667.2 million compared to $727.4 million as of 12/31/2024. Our $667.2 million balance at year-end 2025 reflects fourth-quarter 2025 receipts of $195 million for the first commercial sale of Comzifty and COMET-017 enrollment milestone payments. Kura Oncology, Inc. is providing guidance for collaboration revenue, which reflects non-cash-based accounting recognition of performance obligations under our collaboration agreement with Kyowa Kirin. We expect this to be $45 million to $55 million in 2026, $90 million to $110 million in 2027, and $90 million to $110 million in 2028. Current cash, cash equivalents, and short-term investments as of 12/31/2025, together with anticipated milestones of $180 million under our collaboration agreement with Kyowa Kirin, are expected to fund our ziftomenib AML program through the first top-line Phase 3 results from COMET-017, anticipated in 2028. With that, I turn the call back over to Troy. Troy Wilson: Kura Oncology, Inc. enters 2026 with strong momentum. We have a launched product which is performing well. We have the broadest frontline AML development strategy underway. We have multiple data readouts ahead, and we have a second platform advancing in solid tumors. Our priorities are clear. Accelerate uptake of Comzifty in relapsed and refractory NPM1-mutant AML, deliver strong quarter-over-quarter product revenue growth, advance and execute on our first-to-frontline strategy, generate and publish combination data which guides treatment decisions, and deliver clinical updates across our FTI platform. 2026 will be a year of execution, expansion, and data. We are building a durable franchise in AML and a broader oncology pipeline with both breadth and depth. Everything is moving forward commercially, clinically, and operationally, and we are focused on converting that momentum into long-term value for patients and shareholders. With that, Abigail, we will conclude and open the call for questions. Abigail: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. Our first question comes from Li Watsek with Cantor Fitzgerald. Li, please unmute your line and ask your question. Li Watsek: Hey. Good morning. Congrats on the progress. Maybe a commercial question for Brian. You made a very interesting comment about step editing, that some payers may require use of Comzifty before the competitor product. I just wonder if you can give us a little bit more information about that. What percentage of payers have implemented this step-through policy? And any specific feedback you can share from payers regarding the status? Troy Wilson: Yeah. Thanks, Li, for the question. I am going to, just to remind everyone, we are going to try to limit to one question per analyst so that we can get through everyone. But, Brian, I will let you—you know, there are two or three questions tucked in there. I will sort of let you speak to them. Brian T. Powl: Alright. Thanks, and thanks, Li, for the question. As we shared in the remarks, we think that this news of a step edit required from some payers that has just come forward is a powerful leading indicator that supports our overall assertion about Comzifty being differentiated. I will say that our market access team has done a phenomenal job securing access and working with payers so broadly to get this access so early. What I can share around the step edit, and as you know what that recommendation from some of these payers is, is that a patient would be recommended to receive Comzifty before receiving any other menin inhibitor. Our understanding is the basis of that is built on a report from a group called IPD Analytics. It is an independent consulting firm that is influential to many payers. And their recent reports evaluating Comzifty in relapsed/refractory recommended this step edit for adult patients with relapsed/refractory NPM1-mutant AML. We know that there are some payers that have started to implement that, as I shared. The biggest driver, from what we can understand from the consulting summary from IPD, is that the four pillars we talked about around the differentiation of Comzifty stood out, particularly because of the predictability of the cost. If you look at, based on their assessment, the annual WAC for Comzifty in this setting is just under $600,000 a year, but with our competitor menin inhibitor, because of the different dosing schemas and SKUs that come forward, it comes up to almost $1 million a year. And I think that is where we see they are driving the difference when you also add in the safety profile, the combinability, and the predictability of that. So I cannot really give you an overview of how many plans—there are a handful—and we cannot predict how many other plans may do this in the future, but it is encouraging for us as we look to become the class leader here in the NPM1 space. Thank you. Abigail: Next question comes from Roger Song from Jefferies. Please unmute your line and ask your question. Roger Song: Congrats for the update and the very encouraging early launch signal. So the step edit is certainly very interesting. Maybe just given the access is very rapid and broad, can you comment on the patient demand side versus the revenue generation? If anything you can comment on the trend for the rest of the year, that would be helpful. Thank you. Brian T. Powl: Thanks, Roger. I am happy to do that. We are not going to be giving guidance specifically on the trend. What we can tell you is that the launch has been off to a very strong start. We are seeing patient demand. The feedback we have heard from physicians has echoed back the differentiation pillars that we have talked about. Payers, physicians, and pharmacists have all given us similar feedback. So what we anticipate, as we get into our next quarters, we will start to see a little bit more data we will be able to share around new patient starts and other things. I can tell you that the demand has been strong and that we have been pleased with the direction that the launch has gone so far. Action. Thank you. Abigail: Our next question comes from Jonathan Chang with Leerink Partners. Jonathan, you may now unmute and ask your question. Albert Augustines: Good morning. This is Albert Augustines on for Jonathan Chang. Thank you for taking my question, and congratulations on all your progress. So my question is, what do you see as the biggest hurdle now for Comzifty to gain market share in 2026? Is it just prescriber inertia or something else? Thanks. Brian T. Powl: Thanks, Albert, for that. We anticipate that the NPM1 market is a market that is really going to be driven on new patients coming forward and incident patients, as they are diagnosed into or progress into second-, third-, and fourth-line settings. So it really will come down for us to getting those patients into our queue. One element of this market that is a bit unpredictable for us, as you well know, is that we are approved in a monotherapy setting. That is where our teams are going to be promoting. But we have heard a lot from physicians that they are looking to use menin inhibitors and Comzifty in combination. That will be one of the questions for us to understand—how that uptake comes up in the combination setting. That will be something we will be able to see coming forward in the future. We do not see payer hurdles; the payer hurdles have been really nonexistent. We are very pleased with how quickly our uptake has been getting on policies. So we do not really see any major hurdles other than just getting those incident patients onto therapy. Troy Wilson: Yeah. Albert, this is Troy. I might just add a comment or two to Brian’s response. This is why we have laid out, in our milestones for 2026, the significance of the publication in relapsed/refractory NPM1-mutant AML with venetoclax that Mollie mentioned, as well as the combination with gilteritinib. As Brian mentioned, this is a very different market than KMT2A. We are obviously going to have the sales team promoting on-label with monotherapy. But what is clear, and I think will continue to be clear, is the ability to combine—the ability to drive better outcomes for patients—is ultimately going to be of great value. And it is what we see. It is why we feel confident that we are going to take leadership not only of the NPM1-mutant class, but ultimately of the much larger opportunity. Because it is going to be about combinations. Those attributes that Brian mentioned that were highlighted in the IPD Analytics report become ever more important as you move into combinations. Just to make an example, we are well ahead of the competition in terms of combining with FLT3 inhibitors. As you know, that is half of the NPM1 population. So it is an important part of our leadership strategy. Thank you. Abigail: Your next question comes from Salim Syed with Mizuho Securities. Please unmute and ask your question. Salim Syed: Great. Thanks so much, guys. Congrats on the progress. Just one from us on the 50% that you noted here, Troy. Market feedback suggests you get up to 50% of AML patients here. We are targeting just—what are the assumptions that you put in front of these doctors when you are doing your market feedback work? Is it just based on the existing data, or is there something that you are still planning to get to that leads you to that leading share, as you put it? Troy Wilson: And, Salim, I take from your question you are referring to the relapsed/refractory segment—is that where your question is? Salim Syed: Correct, correct. Troy Wilson: Yeah. I will ask Brian to speak to that. Thanks for the clarification. Brian? Brian T. Powl: Absolutely. We have gotten feedback both from physicians and from physician market research as well. We basically provide the profiles of the products. It is blinded. We do not ask them which company; they do not know who is asking the questions. Of those who have had familiarity with the menin class, the profile that we have outlined has come back as the preferred profile, across efficacy, safety, simplicity, combinability, and compatibility of working with other agents. That is the feedback we have heard that gives us confidence that as we build into this market, we will have an opportunity to become the market leader and take the lead share in the menin class. Troy Wilson: And I will just add to that, Salim. At this point, we are not really talking about FLT3 in terms of doing the market research. This is really focused on the monotherapy. But one of the differences between this market and the KMT2A market is, obviously, if you have an FLT3 mutation, gilteritinib has a survival advantage. And so it is reasonable to assume a menin inhibitor is going to be sequenced after gilt. If you can demonstrate, as Mollie indicated, that you can safely combine and that that is beneficial to the patient, that is going to ultimately drive a next leg within that relapsed/refractory segment. We are not really yet there with the physicians because we obviously have to do that with data. But that is what gives us the encouragement. Today, it is monotherapy. Tomorrow, it is the combination with venetoclax. The day or two after tomorrow, it is the FLT3 combination. And it just builds one after the other. Salim Syed: Got it. Super helpful. Thanks so much, guys. Sure. Abigail: Your next question comes from Reni Benjamin with JMP Securities. Please unmute and ask your question. Reni Benjamin: Hey, good morning, guys. Thanks for taking the question, and congratulations on the early launch. Hopefully, it is going well for 2026. You talked a little bit—Mollie talked a little bit—about the combination of quizartinib and gilteritinib and the FLT3 opportunity. Can you talk a little bit about what you are hoping to see in your FLT3 data and how important is maximizing the FLT3 opportunity when we are thinking about the potential $7 billion TAM for ziftomenib? Thanks. Mollie Leoni: Yes. Thanks for that question. The most important thing you can see when you look at our combination data is going to be safety—safety indicating that you actually can combine. And obviously after that, looking to improve upon the agents in isolation. As I said, we will be presenting our relapsed data towards the end of the year. We will be presenting both the dose escalation and the expansion, which should tell you that we were able to combine the drugs successfully and safely for these patients. With the frontline, we are in the process of dose escalation with quizartinib in combination with ziftomenib plus 7+3. And again, that continues to advance. Overall, we expect to be able to show you not just the fact that we can combine, but that we can improve upon the outcomes of these drugs in isolation. Troy Wilson: And, Ren, just to build on Mollie’s comments, we have seen commentary recently from Astellas that has identified gilteritinib as one of their blockbusters, one of the five sort of emerging blockbusters. They have a frontline trial that was conducted with HOVON that is expected to read out any day now. As we said, FLT3 is a third of all AML patients. It is hard to imagine you can have a market leadership strategy without including FLT3. That is why we are combining with both quizartinib and gilteritinib. You will see us over the next quarter or two move more aggressively into the FLT3 frontline setting, because we have not really yet broken it out, but that will be a major driver in that $7 billion TAM as you look across all lines of therapy. Reni Benjamin: Perfect. Thanks very much, guys. Abigail: Your next question comes from Charles Yu with LifeSci Capital. Please unmute and ask your question. Charles Yu: Hey. Good morning, everyone. Thanks for taking our questions, and congrats on all the progress. I will ask one on a slightly different topic, regarding RCC. We had a lot of updates from the recent ASCO GU conference, particularly in renal cell carcinoma, and some of the emerging HIF-2α—or emerging and approved HIF-2α—inhibitors in that space. Maybe could you help contextualize your upcoming second-half data for darla plus cabo, not only within the current standard of care, but also amongst the potential emerging standard of care as well? Thank you. Mollie Leoni: Sure. We are following that data very closely as well, and it is looking very good for patients. In fact, I think, as you are referring to, it is looking so good that it probably will end up moving up in line of therapy for these patients. We, as we announced, have just started our Phase 1b, which is a randomized Phase 1b, so that we can both contend with Project Optimus but also set some baseline data for ourselves with cabozantinib in this particular line of therapy. And we will be able to also see if patients that are randomized to the cabo monotherapy can cross over and successfully either gain or regain responses when you combine it with darlafarnib, which I think is an important demonstration of our mechanism of action. We do think that our data, as they are progressing—and we have limited follow-up time compared to some of these other studies—are still competitive with a lot of these data that are being presented, and we look forward to sharing that updated information with you. What we do think is, again, that these good outcomes for patients with HIF-2α inhibitors will move them earlier in lines of therapy, so you will see them in the frontline, and ultimately it can open a rather big vacuous space in the second line that we could then jump right into with this cabo–darlafarnib combination. Charles Yu: Got it. Thanks. Abigail: Your next question comes from Jason Zemansky with BofA. Please unmute and ask your question. Jason Eron Zemansky: Good morning. Thanks so much for taking our question, and congrats on the progress. Brian, I was hoping you could share some of the early feedback from your prescribers that are new to Comzifty, maybe that have not been associated with any of your clinical programs or at least minimally associated. Recognize this is a small community and it is early days, but for those especially who have not participated in a trial associated with your rival or who do not have a large AML population, how has the product profile resonated? Thanks. Brian T. Powl: Thanks for that question, Jason. I would speak to it both from physicians we have heard from, but I would also point to pharmacists—the pharmacists that have maybe not been involved so much with treating the patients in the trials. The feedback that we have heard is that they recognize there are multiple menin inhibitors available. The efficacy, we have heard, seems to be table stakes, essentially. I think both products have similar efficacy. What really does stand out are the questions around how to manage QT, understanding what monitoring for QT prolongation means, and the potential implication of higher risk of cardiac issues, as well as the simplicity of treating patients once a day without having to do a lot of dose modifications based on the complexity of other therapies they have. So we have heard that. Of course, a lot of early scripts are probably going to be those for people who have had a lot of experience with us. But we have received feedback from physicians who are new to the menin class, and we have been spending our time educating them around Comzifty. As we said, it is early days, but we are pleased with what we are hearing so far, and it seems to be consistent with what we have heard from those who do have experience. Abigail: As a reminder, if you wish to ask a question, please use the raise hand button which can be found at the bottom of your Zoom screen. Our next question comes from Gustav on for Etzer DeRoute with Barclays. Please unmute and ask your question. Gustav: Hi. Good morning. This is Gustav on for Etzer. Thank you for taking our question. I would like to ask about COMET-008, guided to showing data in combination with gilteritinib in the back half of this year. Could you remind us where you stand with regards to combination of ziftomenib with FLAG-IDA and with low-dose cytarabine? Thank you. Mollie Leoni: Sure. As you said, we have been guiding to release the gilteritinib data because, in large part, we think that is very informative to physicians on how to treat the relapsed/refractory NPM1 mutants co-mutated with FLT3 as well. But also within that study are our FLAG-IDA combination, which sees mostly second-line patients, and our LDAC combination, which allows for an easy combination with ziftomenib that gives time for this differentiating agent to really take effect while keeping disease control simultaneously. We have not guided to when we will be releasing that data. But I do think that we will do it in pieces at a time to keep the information coming, and also be writing a publication. But again, we have not guided as to when those additional cohorts will be shared. Abigail: Your next question comes from Philip Nadeau with TD Cowen. Please unmute your line and ask your question. Philip Nadeau: Morning. Thanks for taking our question, and it was great to see the team this week in Boston. We have one commercial question. I think you suggested that the relapsed/refractory NPM1 market is about $300 million to $400 million in revenue. We are curious to hear how quickly you think the menin class can penetrate the market. Seems like the value proposition is pretty clear today, but we are wondering if there is any gating, like combo therapy data in particular, that could be necessary to fully penetrate the opportunity. Thank you. Brian T. Powl: Thanks, Phil, and thanks again—good to see you yesterday. As we have said, this TAM of $350 million to $400 million represents that relapsed/refractory space. We think, because of the dynamics of the NPM1 population, where physicians have previously had choices for their patients to either get venetoclax or an FLT3 inhibitor for those who are co-mutated, we anticipate that early on there will probably be more in the relapsed/refractory third- or fourth-line setting. Combinations will help to drive that into the second line, where you would be able to see more patients get therapy and benefit earlier. Our expectation is that there will be a lot of use as a monotherapy, but physicians are very excited about using in combination. It is not something we can promote on actively, but we will educate based on publications, like the venetoclax publication we plan to publish based on COMET-007. We anticipate there will be a ramp based on incident patients coming forward, probably starting more in the third/fourth line, but we will see, and we are starting to see, those second-line patients as well. We will need a little bit of time to get an understanding as to how Comzifty is being used in combination relative to monotherapy. Abigail: Your next question comes from David Dai with UBS. Please unmute and ask your question. David Dai: Great. Thanks for taking my question, and congrats on the quarter. Just one question on the duration of therapy. I understand early innings, but any thoughts on duration of therapy for Comzifty so far? And as you are thinking about combination with venetoclax or gilteritinib, how do you think the duration of therapy could evolve over time? Brian T. Powl: Great. Thanks, David, for that question. Obviously, we are sharing five weeks of data. We cannot really give you a lot of detail around duration of therapy at this point. Our expectation is that patients will be able to get therapy for, on average, six months. Our label suggests that patients are treated for up to six months to maximize the depth of their response. And for those patients who do get a response, we have seen duration of response of five months, and oftentimes it takes three months or so for them to achieve that deep response. We are not seeing any signs yet because it is too early. We are seeing repeat prescriptions, but it is too early to talk through any duration right now. To your question around FLT3 inhibitors, I think that any combination is expected to give a longer duration of treatment than you would expect as a monotherapy. Abigail: There are no more questions at this time. I would now like to turn the call over to Troy Wilson for closing remarks. Troy Wilson: Thank you, Abigail. Thanks, everyone, for joining the call today, and thanks for all the questions. We will see many of you next week in Miami at the various events and conferences. If you have any additional questions, please reach out to Greg or me. We wish all of you a good morning and a good rest of the day. Thanks again.
Operator: Hello, and welcome to the Rentokil Full Year Results 2025. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Andy Ransom, Chief Executive, to begin. Please go ahead when you're ready. Andrew Ransom: Good morning, everyone, and welcome to our full year results presentation for 2025. After my opening remarks, Paul will provide a review of our financial performance. I will then focus on the execution of our plan in North America as well as providing a brief update on our International region, our categories and our adoption of AI. We'll then open the floor for your questions. And as usual, details of how to ask a question can be found on the web portal. 2025 has been a year of encouraging progress with group revenues increasing by 3.8% and with organic revenue growth of 2.6%. Our H2 performance was particularly encouraging with group revenues increasing by 4.5% and with organic revenue growth being 3.5%. My main focus for today, however, will be on North America, looking at our performance in 2025 and how we're building on that platform in 2026. This time last year, we set out our plan for growth in North America, and it has been a year of encouraging progress with our performance, particularly in the second half, improving significantly. Whilst we're not there yet where we want to be, organic growth reached 2.6% in the fourth quarter. This was underpinned by strong execution, rolling out our new marketing plan, investing in our regional brands, opening 150 small local branches through our satellite program and delivering $25 million of in-year cost savings through our efficiency program. Our International business also saw improving organic revenue growth of 3.4% in the second half. This combination of improved growth and cost efficiencies delivered adjusted operating profit growth of 5.4% and positions us well to deliver our plans for 20% net operating margins in North America next year. Now looking to 2026, we have clear plans in place to build on the progress made last year. Our focus continues to be on growth, where we plan to expand our multi-brand strategy, deploying around 30 regional and local brands instead of the 9 we had previously indicated, and we'll continue to increase our local presence, taking our network of small local branches to around 220. As I'll explain in a little more detail later on, the team in North America has also used the pause in integration to develop a simpler plan for the creation of a single unified field operation. On systems, we've developed a new branch data portal, meaning we can maintain our existing systems for longer. And on pay plans, we're taking a more simplified approach to harmonizing pay policy where, in essence, service colleagues joining us next year will join our new plan, whereas existing colleagues will be given the choice of the new plan or to be grandfathered in their existing plan. So this combination of maintaining more brands and their branches, continuing to use our existing branch systems, whilst also simplifying the pay plan process means less change at the front line and more focus on the customer and indeed on growth. Fueling this growth and supporting our 2027 financial targets is our efficiency program, and Paul will now take you through this in more detail along with the rest of the financials. Paul Edgecliffe-Johnson: Thank you, Andy, and good morning, everyone. I will now walk you through our key financial highlights for 2025 and look at our regional performance in more detail before closing on cash flow and capital allocation. As a reminder, unless I state otherwise, all numbers are on a continuing operations basis following the sale of our France Workwear business, and any comparative performance is on a constant currency basis. Revenue was up 3.8% to $6.9 billion with organic revenue growth of 2.6%. Adjusted operating profit increased by 5.4% to just over $1 billion. This resulted in a group adjusted operating profit margin of 15.5%, a 30 basis point increase year-on-year. After an adjusted interest charge of $204 million, up $29 million due to the cost of additional bond debt issued in the year and an adjusted effective tax rate of 25.3%, adjusted basic EPS increased 2.4% to $0.2591. I have spoken previously about our focus on maximizing cash, and I'm particularly pleased with our free cash flow performance with 24.5% growth to $615 million and free cash flow conversion of 98%. This reflects disciplined working capital management and also some one-off benefits, including real estate sales. With the growth in profits and free cash flow and the proceeds from the sale of France Workwear, partly offset by an adverse foreign exchange impact of $181 million on year-end net debt, our leverage ratio improved to 2.6x, down from 2.9x a year ago and close to our target range of 2 to 2.5x. Reflecting this performance, the Board is recommending a full year dividend of $0.1239 per share, an increase of 3%, in line with our progressive dividend policy. Turning to North America. Revenue grew 3.2% to $4.3 billion with organic growth of 2.3%. Pest Control Services was up 1.1%, while Business Services grew 8.9%. I'll come back to talk about these performances in more detail shortly. Adjusted operating profit for the region was $749 million, up 5.1%, bringing our adjusted operating profit margin to 17.4%. This improvement reflects the early benefits of our cost efficiency program, which delivered $25 million of savings in the year. Operationally, we are seeing our strategic initiatives strengthen key KPIs with colleague retention up 2.8 percentage points to 82.2% and customer retention increasing to 80.5%. We also completed 12 bolt-on acquisitions in the region with combined revenues of approximately $27 million in the year prior to purchase. Looking at our performance in North America in more detail. Fourth quarter organic revenue growth in Pest Control Services improved to 2.6% from 1.8% in the third quarter and 0.1% in the first half. This sequential improvement demonstrates the results we're seeing from the strategic initiatives we put in place at the start of this year. Lead flow, a key metric to indicate future growth in our contract portfolio, grew over 7% across the second half of the year, driven by our revised sales and marketing strategy. This has included a shift towards a more targeted digital marketing approach with a bigger focus on driving organic leads and also increased investment in our regional brands to boost lead generation and brand awareness. The ongoing rollout of smaller local branches through the satellite program to bolster customer proximity and local presence is proving successful with branches with one of these localized hubs attached to it, generating more than double the lead flow of those without. We've also improved our execution by moving sales accountability directly back into the branches. In addition to winning new customers, we have retained more through a relentless focus on customer service, and we've been able to sustain strong pricing discipline through the year. Andy will talk more about these initiatives shortly and how we will continue to build into 2026. Turning to Business Services. We were pleased with fourth quarter organic growth of 7.8% against a strong prior year comparative, which included $6 million of emergency vector control revenue, which did not repeat in 2025. Across the year, Business Services organic revenue growth of almost 9% was supported by double-digit growth in both our distribution business and our brand standards business, with the latter benefiting from significant new business wins. Throughout the year, we have been executing against our plans to simplify the North American business, improving the efficiency of our cost base and creating fuel for growth. We are increasing discipline in our day-to-day operations with improvements in organizational design and simplification of processes. The streamlining of operations led to headcount reductions of over 500 roles by the end of 2025. We are also reducing cost in the business through outsourcing and moving non-core functions to lower-cost locations. This has allowed us to scale our back office operations more effectively while reducing our fixed cost base. To date, around 430 roles have successfully been offshored. We're using technology to automate manual processes and improve our overall efficiency while better leveraging the benefits of our purchasing scale through managing our third-party spend and consolidating spend with suppliers. As well as reducing costs, we continue to drive improvements in how we invest our sales and marketing spend to optimize ROI and have reallocated some $20 million of marketing spend away from suboptimal paid lead activity to higher efficiency channels and campaigns. We rapidly mobilized to deliver $25 million of savings in 2025, targeting the cost areas that were easiest to impact quickly. There remains very significant opportunities for us to create efficiency in our cost base. As we drive up efficiency in the business, we are also investing back in a targeted way to drive organic growth. In 2025, this has included incremental marketing investment and strategic initiatives such as the rollout of smaller local branches and enhancing our capabilities in areas from pricing to data insight. This is helping us to identify the levers to elevate performance and amplify the benefits of our strategic initiatives. Improving our data has been and will continue to be fundamental to our ability to optimize our marketing budgets to maximize our reach into available customer demand. We have already delivered a double-digit reduction in our cost per lead, and there is more to do. Balancing driving cost out with funding investments behind sustainable improvements in organic growth has been key to improving both top line growth and profit margin, and we will continue to balance this carefully as we progress towards our North America margin target of over 20% in 2027. Moving to our International business, which encompasses all regions outside North America. Revenue grew 4.8% to $2.6 billion with organic revenue up 3%. Organic revenue growth improved in the second half, up 3.4% compared to 2.6% in the first half. We saw our strongest performance in Europe, driven by healthy demand and solid pricing in Southern Europe, while growth in Asia was supported by the fast-growing economies of India and Indonesia. Adjusted operating profit increased 5.7% to $518 million, with margins increasing 20 basis points to 19.8%. The U.K. and Sub-Sahara Africa delivered double-digit growth, reflecting a strong revenue performance. Asia and MENAT also displayed margin resilience despite a backdrop of high wage inflation. Customer retention remained strong at 85.7%, and excellent colleague retention was seen throughout the year at 90.3%. We also completed 24 acquisitions in the region with combined annualized revenues of approximately $36 million. Turning now to central costs, which in the year were $191 million, up almost 7% and up 9% at actual rates with some 85% of our central costs in sterling. In addition to underlying inflation, this growth represents multiyear ongoing investments in proprietary technology, digital applications and AI capabilities to support colleague efficiency, customer satisfaction and to generate revenue. In 2026, we expect continued above inflation rates of growth in addition to an FX headwind. One-off and adjusting items, excluding termites, were $92 million in 2025, primarily incurred in North America as part of the overall cost efficiency program. Looking forward to 2026, we are expecting a similar level of spend. Moving now to the termite provision, which, across the year, we have increased by $201 million with an additional $122 million in the second half after the $79 million in half 1. The trends that we saw in the first half of the year have continued. These included an increase in the number of complex residential and commercial litigation claims compared to 2024, albeit at a lower level than at the time of acquisition. More detail on this is included in a slide in the appendix, and a continued increase in cost per claim as our proactive strategy to solve customer problems and reduce litigation continues. In addition, during the second half, we have resolved numerous large commercial legacy claims at a cost ahead of the historic average and increased the long-term inflation assumption in our provision model from 2% to 3.2% as a result of persistently high inflation in legal defense, housing and building materials costs. The cash cost of settling claims in 2025 was $95 million, and we expect a similar level of cash payments in 2026. Turning now to cash flow. We generated free cash flow from continuing operations of $615 million, representing an adjusted free cash flow conversion of 98%. This was ahead of our guidance of 80% and a further improvement from the half year. We reduced the working capital outflow by $67 million to an outflow of $59 million through our disciplined focus on debtor management and supplier harmonization, moving to more consistent credit terms across our supplier base. Although some of this improvement was one-off in nature, the underlying discipline remains, and we are focused on continuing to improve in this important area. Our overall free cash flow conversion also benefited from $20 million of real estate sales. Our gross CapEx of $196 million was in line with guidance, and we would expect a similar level of spend in 2026. Cash interest increased by $41 million to $222 million following our refinancing activities earlier in the year. Cash tax was $7 million lower at $100 million, mainly due to legislative changes in the U.S. Looking ahead, we continue to target a free cash flow conversion above 80%. Our strong operational cash generation, combined with strategic divestments, has allowed us to make progress in strengthening the balance sheet. Net debt at the end of the year was $3.65 billion compared to $4 billion at the start of the period. The key cash inflows in the year were $636 million of free cash flow and $391 million in net proceeds from the sale of our France Workwear business, which completed on the 30th of September 2025. Beyond the immediate cash influx, this disposal has simplified our International business, reduced our ongoing capital expenditure requirements and structurally improved our group cash conversion. We reinvested $121 million of cash in bolt-on M&A, which remains core to our growth strategy. This was less than originally planned with some slippage of deals into 2026. Our pipeline for 2026 remains strong, and we're targeting spend of around $200 million. The cash impact from one-off and adjusting items amounted to $100 million for the year. These costs were largely attributable to transformation costs in North America, which, combined with other cash one-off items, will be a further outflow of around $80 million to $85 million in 2026. Our closing net debt was impacted by $181 million adverse FX translation movement. Nonetheless, we are pleased to see progressive strengthening in our balance sheet with our net debt to adjusted EBITDA ratio reducing from 2.9x to 2.6x, bringing us close to our target range of 2 to 2.5x. Turning now to capital allocation, where our framework is built around 5 key priorities designed to balance growth, shareholder returns and financial resilience. Our primary focus is on organic investment as it drives the best ROI, deploying capital to support the long-term growth of our business. We will also continue to pursue targeted inorganic growth through bolt-on M&A. We have a strong track record of successfully integrating acquisitions to drive value creation, and we will remain selective and strategic in identifying opportunities that complement our existing portfolio, strengthen our market position and deliver long-term shareholder value. We remain committed to a progressive dividend policy, ensuring that dividends grow over time. Our approach reflects confidence in the underlying strength of our business and our ability to generate consistent cash flows while maintaining financial flexibility. We recognize the importance of returning excess capital to shareholders at the appropriate time. When we do have surplus capital beyond our reinvestment needs, we will evaluate opportunities to return it, always ensuring that such actions align with our broader financial strategy. Finally, we remain focused on maintaining a strong and resilient balance sheet. Overall, our capital allocation strategy is designed to strike the right balance between investing for the future, delivering long-term value to shareholders and maintaining financial strength. So in summary, we have delivered an in-line performance in 2025. We are encouraged by the clear signs that our revised North America strategy is working and the improvement in growth in the second half from our International businesses. Our focus on cash is improving our operational cash conversion and reducing leverage towards our target range. As we balance investing in sustainable organic growth and driving up the efficiency of the business, we remain firmly on track to achieve our $100 million cost reduction target and our goal of a North America margin above 20% in 2027. Although the first month of 2026 in the U.S. has seen some disruption from extreme weather, as we look forward, we have confidence in delivering in line with market expectations. Thank you. I will now hand you back to Andy. Andrew Ransom: Thank you, Paul. So over the next few minutes, I'm going to start by highlighting the strength of the pest control market, both in the U.S. and globally before diving into North America's performance. I'll then finish with brief updates on our international growth and emerging markets, on our 2 categories and on the good progress we are making with the use of generative AI across the business. As you can see, the global pest control market has demonstrated consistent, resilient growth, expanding from $15.4 billion a decade ago to an estimated $29 billion in 2025. This represents a robust 6.6% compound annual growth rate over the last 10 years. Looking ahead, the market forecast for growth in the pest control industry remains very healthy with a projected 6.2% CAGR through to 2035. This growth is driven by multiple consistent factors, including increasing urbanization and growing middle classes, which drive demand for professional pest services. Heightened demand for higher hygiene standards across all sectors and as you would expect, climate change are also contributing to a rise in pest activity, all combining to create a sustained need for our services. In Hygiene & Wellbeing, which accounted for 17% of group revenues in 2025, we are the leaders in an attractive global market, which is expected to grow at around 4% annually through to 2030. This is being driven by an aging global population and their increasing hygiene needs, social and demographic trends such as urbanization and increasing middle classes, so similar to pest control, a heightened focus on hygiene standards post the pandemic and greater environmental and regulatory compliance requirements. So we're operating in 2 very healthy global markets. Let's now get into the main focus of today's presentation, that's our plan for North America, where we're continuing on our journey to create an undisputed powerhouse in pest control. This is founded on a number of key themes. First, as I've just shown, we operate in an attractive noncyclical growth market with the U.S. accounting for approximately 50% of the world's pest control market and where we are now a leader for commercial, residential and termite services. Second, we are laser-focused on scale and on density. And this is not just about size. It's a fundamental understanding of how density unlocks significant economies of scale and efficiency opportunities. Third, we are building power brands like Terminix and other well-known regional brands such as Western Exterminator and Florida Pest Control, giving us strong brand equity in every city in the United States and, in turn, supporting other parts of the business' need for local digital leads, local sales, local pricing and recruitment. And finally, everything is powered by our proven, repeatable low-cost operating model, centered on being an employer of choice and maintaining an unwavering focus on customer service. Importantly, as you know, we are primarily a contract-based portfolio business with around 75% of Pest Control revenues in the U.S. being under contract. Now looking back, the integration of Terminix required 2 main thrusts: Firstly, to create a unified enterprise in the U.S.; and secondly, to create a single unified field operation. To date, at an enterprise level, we've successfully established a single leadership structure. We've completed the complex legal merger. We've aligned on our core back-office stack of systems, for example, for people management. We've introduced a single approach to procurement, and we've harmonized our management salary and benefit structure. Crucially, we've also made investments that will drive future performance. We've launched our first U.S. Pest Innovation Center, which is focused on residential pest control, termite and mosquitoes. We've placed an intense focus on being an employer of choice, making excellent progress in turning around colleague retention, particularly within Terminix. And we've also invested in new data and pricing capabilities. These are all important steps in unlocking the true long-term potential of the combined business. Now as you know, in 2024, we began pilot migrations to create a single unified field operation. And while these were very successful at delivering the expected cost synergies, and they did not negatively impact on the retention of our field-based colleagues, we did, however, experience a negative impact on our growth. The combination of fewer locations and a complex change agenda saw lower levels of inbound leads and some customers reacting negatively to the change in their technicians, eventually leading to lower customer retention in the migrated branches. Therefore, we made a decision to pause the full-scale migration throughout last year and to focus on returning the business to growth. This time last year, we outlined a new growth plan to address the root causes of the lead flow and customer retention reductions. And as you know, we saw encouraging signs of progress at the half year and again at Q3. And pleasingly, this has continued into the fourth quarter. The detailed plan that we set out in 2025 extended across a number of key areas, but was essentially focused on operational execution. For leads, we revised the marketing plan to add greater emphasis on organic leads on more local web content and on beginning to leverage AI optimization for local search. For 2025, we focused on 9 core regional brands alongside the Terminix brand, and a key part of the plan was to roll out our small branches under the satellite program to give us greater customer proximity. For sales, we moved ownership of field operations back into the branches, making the branch managers fully accountable for their local sales performance. This was coupled with a dedicated door-to-door pilot over the summer in around 25 territories. And as Paul has already highlighted, we also began driving business simplification, including the outsourcing of a number of key functional activities. Whilst this was all underway, our North America team has been working on plans to build on the successes of 2025 and to introduce a much simpler approach to branches, brands, systems and to pay. So let me provide a brief update. Our people, of course, are our greatest asset and our commitment to being an employer of choice is yielding excellent results. We've seen a 19% improvement in Terminix technician retention since the acquisition. And in 2025, North America colleague retention was up a further 2.8% to 82.2%. This is absolutely foundational to our future success. On the customer front, we delivered very encouraging improvements in customer satisfaction ratings, and we've continued our focus on the end-to-end customer experience, delivering a 0.4 percentage increase in customer retention now at 80.5%. And this will continue to be an area of maximum focus going forward. Our marketing focus shifted in 2025 to generate more organic leads through local brands and local content, where we optimize the content of around 1,200 individual web pages. And while only a very small part of the overall impact last year, we've also begun to leverage AI to optimize our local search presence so that when customers need pest control, Terminix is increasingly the AI cited domain to be shown in the search results. Critically, the successful rollout of our local network of new small branches under the successful satellite program brings us much closer to the neighborhoods where our target customers are living. By the end of last year, we had around 150 of these small branches open. In addition, our successful toe in the water with a dedicated door-to-door sales program in 25 territories last year will be expanded to around 40 territories this year. This local approach was reinforced with our focus on 9 regional and local brands alongside Terminix, which together drove a turnaround in residential lead flow, which was up 7.1% in the second half against the same period last year. As you've already heard from Paul, in addition to growth, efficiency was a big theme for 2025 and will continue to be so in 2026. Clearly, improving our marketing, our lead generation and our sales execution only matters if we're efficiently installing and subsequently billing our new customers. We continue to focus on increasing our speed to install rate. And in 2025, we introduced new KPIs to track the percentage of installs within 24 and 48 hours of signing. Overall, performance was good in '25, but this is another area where there is room for further improvement this year. By improving these operational performance areas, we have, in turn, improved our financial performance. Organic growth for Pest Control Services increased through the year, achieving 2.2% in H2 compared to 0.1% in the first half. This culminated in a strong fourth quarter, delivering organic growth of 2.6%. And importantly, the progress on contract revenue was particularly pleasing, up by 2.4% in Q4, alongside a healthy 5.6% increase in jobs. So an encouraging 2025 and one on which to build in 2026. Our brand strategy is a core lever for growth and the original plan focused primarily on both the core Terminix and Rentokil brands. The new plan outlined last year saw us add investment and focus on 9 highly recognized regional and local brands, which included the relaunch of their stand-alone websites and which delivered an encouraging increase in our inbound lead flow. And going forward, we will now invest in around 30 brands and support each of them with our best practice digital and marketing approaches. We'll have the Terminix brand as our national flagship, the 9 brands that we supported last year and a further 20 local and regional brands in key cities where their local brand equity is strong. Next, our focus is on the local branch network. And I've already highlighted the impact of the 2024 pilots and our pivot this time last year to focus on more branches. We've now added 150 small local branches, and the path forward is to continue that rollout, where we will open an additional 70 in 2026, taking our local network of branches to around 800 by the end of this year. This combination of keeping more local brands and their branches and by expanding our network of small branches as part of the satellite program gives us greater customer proximity and a stronger local brand presence. The most significant recent refinement to our plan involves our approach to data and branch systems harmonization. Our updated approach provides us with the immediate benefits of operational harmonization. We're launching Branch 360, which is a unified reporting and insight solution. It's been designed to provide a single pane of glass for our field leadership and our sales and marketing teams. By integrating data across our current branch infrastructure, this system-agnostic platform delivers consistent KPIs and daily accountability without being dependent on a single fully integrated back-end system. This ensures a standardized management experience across the entire organization regardless of the legacy platforms in place at the local level. Going forward, every branch manager will utilize a standardized performance interface that displays critical financial, operational, leads and sales metrics. Rather than requiring managers to manually extract and interpret data, Branch 360 will push actionable insights and reports directly to them on a daily basis. Finally, the team in North America has also developed a new approach for pay plans. The original plan required a branch-by-branch system harmonization to have been implemented before we could change the pay plans. Our new approach is to decouple pay plan implementation from systems harmonization. This year, we will harmonize branch manager pay, and then we'll focus on sales team pay in commercial pest control. This removes complexity and frustration of the different plans, and it's something that we expect to be well received. Finally, for our largest population, the technicians, we're taking a very pragmatic approach. New colleagues will be onboarded directly onto the new plan from 2027. However, we will give our current colleagues the choice to either opt into the new plan or to be grandfathered in their existing plan with no obligation to change. To conclude our dive into North America, we've continued to make good progress on employer of choice and on customer service. We've increased residential lead flow, underpinned by the rollout of 150 small local branches and our additional brands. This execution has led to an improved organic growth performance, which was particularly encouraging in the fourth quarter. Going forward, we're building on this growth platform with a focus on 30 brands and increasing the number of small local branches, which will continue to roll out at pace this year. And we now have a new simpler approach for branch data and systems and for pay plans. There is still a lot of work to be done, but clearly, we are seeing encouraging progress. So before we conclude and take any questions, a brief look at International and our categories as well as at generative AI, which I know will be of interest to you. As you saw earlier, our International businesses continue to operate in strong and resilient growth markets, with revenue in Pest Control up 5.4% in 2025 and increasing by 4% in Hygiene & Wellbeing. International growth markets delivered a solid financial performance with our revenue up 4.4% and profit up by 4.7%. Here, technology and innovation are our core competitive advantages. Our PestConnect deployment continues to progress well with around 100,000 additional devices installed in 2025, bringing our total to over 600,000. And in the Netherlands, for example, over 50% of our commercial pest control portfolio is now connected through technology. Our emerging markets continue to perform well, posting revenue growth of 6.2% and profit growth of 10.8%. And here, we are continuing to execute our cities of the future M&A strategy to capitalize on the development of the mega cities, which has resulted in 24 deals over the last 3 years and has secured leading market positions in key growth markets, including India and Indonesia, and this will be an outstanding platform for future long-term growth. I won't go into this slide in detail, but it's a summary of our overall Pest Control category performance globally and where organic revenue growth increased from 1.8% in the first half to 3.4% in the second. And similarly, in Hygiene & Wellbeing, which increased organic growth from 0.9% in the first half to 3.6% in the second and, as you can see, has delivered consistent revenue growth post pandemic. So this is my 50th and my last presentation to you. And looking ahead, if there's just one area in particular that I will be very excited to see develop, it's how the business adopts generative AI to enhance its productivity and efficiency as well as providing further service differentiation to our increasingly digital savvy customer base. Although clearly, it's still early days, we're making good progress. In 2025, we successfully launched Google Gemini AI to all 60,000 plus of our colleagues, and we had over 1 million users in just the first 6 months alone. On the service side, our innovations like PestConnect Optix, which was launched last year, uses AI to identify individual rodents from images sent from the field. And we've created our own in-house AI portal, lovingly named Rat-GPT, where over 100 dedicated AI agents are already in use or in development. The power of this focus on AI is perhaps best demonstrated by just a couple of brief examples of our Agentic AI solutions currently being piloted. Our prospect prioritization solution is a fully developed system, which uses multiple AI agents to analyze the wide range of leads that we receive. We receive Internet leads. We receive telephone leads, field-based leads, small leads, national account leads, jobs leads, contract leads, leads in high and low-density areas. And what this new agent will do is score each lead based on conversion likelihood, sales value and a range of other metrics, and then will nudge the salesperson to prioritize the best of the leads. Equally impactful is our on-the-go technician assistant. So if you can imagine a technician walking towards a customer site, this GenAI-powered tool will be speaking to the technician, giving them vital information; information about the site's history, the last infestation details, what the open recommendations are, what the bill payment status is and other important practical information. These are just 2 ways in which we are taking the power of AI and deploying it across the company. Clearly, there are many significant opportunities ahead of us, and we're really only just starting. So to wrap up, for the final time, I've included our RIGHT WAY scorecard in the appendix for you to read. But in short, as I prepare to hand over the baton to Mike, I personally feel very encouraged by the group's performance in 2025. Clearly, there is still much more to be done, but I'm very pleased to see our progress in North America, and I'm highly optimistic about the long-term prospects for the company where I will be cheering on from the sidelines in the future. Thank you very much. Paul and I will now be very happy to take your questions, and there will be a brief pause for the operator to line up any questions. Thank you. Operator: [Operator Instructions] And our first question comes from Andy Grobler with BNP Paribas. Andrew Grobler: Just a couple from me, if I may. Firstly, in America and operationally, as the strategy moves to kind of more branches, more systems, more brands and so forth, how would you balance the cost of doing that against and the visibility that you need from a central perspective. Is there a risk that some of these branches become somewhat independent through that process? And then secondly, just in terms of cash costs with termite costs going up in '25 and looking to '26, what are your expectations going in the longer term for those -- both for those termite costs and for the one-off integration costs over the next 2, 3, 4 years? Andrew Ransom: Thanks, Andy. I'll take the first one and hand it to Paul for the second. Look, I don't think so is the answer to your question in terms of risk either on the cost side or indeed on the risk of loss of control of lots and lots of small branches. If I take the second limb of that first. The Branch 360 single pane of glass, in particular, is going to give us the best visibility that we've ever had at branch level. At the moment, if you're a branch manager, across our suite of branches, you've got to have about 42 different tabs if you want to complete the full suite of KPI metrics and measures. And going forward, every single branch is going to have the same desktop open with the same KPIs, metrics, measures, dashboards and push reports going to them centrally. So I actually think we're going to have better control, visibility and consistency across our branches than we've ever had. And many of the smaller branches opened under the satellite program are really an extension of the larger local branch. So they're run by the same branch managers. So I don't think there's any risk there at all of loss of control, quite the opposite, I think. In terms of cost, the smaller branches are relatively cheap, if I can use that word, relatively inexpensive. The costs have been included in our plans, in our budgets, in our forward look on our numbers. So not a significant increase. And the majority of the increased investment on the brand side is actually on organic search. So it's not so much on the paid search, which is quite expensive. It's on organic, supporting their independent websites, web pages, et cetera. So I think the increased cost is modest. It's all factored into our forward-looking numbers. And I think it's going to give us great, great transparency and consistency on the branch level. So Paul? Paul Edgecliffe-Johnson: Look, on the cash side, I think the first thing that we should all remember is this is a very cash-generative business, and we've proven that in 2025. So we brought the leverage down. Cash conversion was at 98%, and we're going to keep pushing really hard on this. The working capital outflows were significantly lower in '25 than they were in 2024. In terms of the sort of one-off areas, the cost of the termite provision, $95 million in 2025 cash cost. We expect it will be about the same in 2026. Our strategy is to try and close off claims as quickly as we can, whether that's litigated claims or non-litigated claims. It's good to push them through, get them to resolution, and that's our plan so that we can put this behind us as quickly as possible. I can't tell you really exactly what the cash is going to be in '27 and 2028, how that will track down. Expectation is that it will track down because we are dealing with large complex claims now. That's what's put up the provision in the second half. And so we will see it ameliorating over time, but I can't tell you exactly the trajectory on that. In terms of the costs related to the transformation plan, the cost-out plan, we will continue to see those costs in 2026. I'm really pleased with how the plan has gone in 2025, how quickly we've managed to get cost out, but there's a lot more to do. The returns on this, obviously, though, are very, very good. So where we see an opportunity to take cost out of the business, yes, it will have a onetime cost for redundancies or restructuring, but we'll continue to pursue those. Thanks, Andy. Andrew Grobler: And just one further thing. Andy, thank you for however many years it's now been, and best of luck with whatever the future brings. Andrew Ransom: Appreciate it, Andy. Operator: The next question comes from Suhasini Varanasi with Goldman Sachs. Suhasini Varanasi: A couple for me, please. I just want to get some more color on the door-to-door pilot that you implemented in 2025. In the places where you implemented it, is it possible to understand the proportion of new sales that came from this new channel versus your traditional or digital channels? That's the first one. And the second one, I think Business Services has been delivering very strong growth despite the headwinds in vector control services in 4Q. Just wanted to understand the drivers behind this and your expectations for 2026. Andrew Ransom: Thanks, Suhasini. The door-to-door program, we're pleased with it. It did not make a major contribution to the revenue performance, relatively modest, but we were pleased with it. It's our first toe in the water for door-to-door. And as I've said before, it's become a big channel. I still think we're learning on the job with this. And I'm on the record of saying in the past, I've always had a slight concern about door-to-door that the customer retention rate on door-to-door isn't as strong as it is where a customer has reached out to find us. And that's proven to be the case. So retention rates have been lower in the door-to-door business, but absolutely in line with what we modeled. So we put a big tick against the program in 2025 as a success, but as a pilot. And we've included, I'd say, a relatively modest ambition in 2026. We're moving up from 25 territories to about 40 territories. If it continues to go well, and I don't see why it wouldn't, in '26. It will obviously be up to Mike and the team, but I wouldn't be surprised to see that getting potentially materially bigger in '27. So not a big contributor. We don't break it out separately. More to come for in '26. Let's see how we get on. If it continues to go well, I think that could be a much more material potential opportunity in the future. Business Services, yes, it's had a really good year actually off a less good year in '24. So you've got a little bit of comp benefit, I would say, '25 on '24. Just a reminder what's in Business Services, half of Business Services or just over half of Business Services is our distribution business, our products distribution business, which is really quite different from everything else. Everything else is a contract portfolio services business. The products business is selling pest products and turf and ornamental products to the industry and to individual consumers. That is a very lumpy business. It can go in waves, and we've had a very strong finish to the year in that business. But it's a good business. It's a good, well-run, solid business. So I don't see -- I'd be surprised if it grows as strongly in '26 as it did in '25, but I would say it's a good performing business, and it's going nicely. The other businesses are contract portfolio businesses. They are Business Service operations. So we have brand standards, which looks after franchise properties and goes and checks if they are living up to the standards that the franchise owner has set. That's a good business, running very nicely. We've won some big new recent accounts. So I would expect that business to perform pretty well in '26. We've got our plants business, Ambius, which is a nice business, doesn't grow at the sort of rates that Pest Control does. So that's a slower growth business, and I'd expect that to be similar in '26. So look, I think it's had a great year, slightly flattered by a poor year in '24, but solid businesses, well run, and I don't see why they shouldn't make a decent contribution in '26, but perhaps not at the stellar growth rates we've seen in '25 would be my best view. Operator: And the next question comes from Annelies Vermeulen with Morgan Stanley. Annelies Vermeulen: I had two questions, please. So firstly, on the rebranding of the retiring brands, I think you said a lot of those are one-branch businesses. So how many branches or brands does that involve? And what was the criteria for the decision on that segment specifically? Were there certain things that you look for in terms of signing those off? And then secondly, on the pay plans for the technicians, have you collected feedback on this from your existing technicians? And what was that based on? And if so, do you expect it to meaningfully continue to contribute to improving retention from here? And are there any additional costs associated with having to run 2 pay plans? Andrew Ransom: Thanks, Annelies. On the rebranding, those who've got a good and long memory will remember that we've got about 80 brands, give or take. So we're going to keep 30. So that means there's 50 -- I unfairly call them 1 horse towns. There are 50 brands. They're almost exclusively single city or single town brands. It doesn't mean to say we don't love them and like them, but it doesn't make economic sense to support those 50 individuals. So they are the 50 smallest. In aggregate, those 50 brands don't even represent 10% of the total revenues. So they will be retired quietly, slowly, gently over the next couple of years. And the criteria really was just based on scale. It's the ones that have got the least footprint, the smallest brands in small towns and smaller cities. And we tested brand equity as well. So we actually tried to work out how strong are these brands in the market. And the ones where we've got strong brand equity, we've retained and the ones where the brand equity is weak, we've taken a decision that it's better to migrate those to a strong brand equity local brand, whether that's Terminix or it might be one of the other 30. On the pay plans, no, look, there's not additional costs. There's the absence of some savings, but it's not material. And again, it's all fully costed in the plan. But as I said in the remarks, it's a very pragmatic decision. As I've explained several times over the last 2 or 3 years, we do have quite a distribution on a bell curve of pay for technicians and some have got legacy pay plans that look quite generous compared to the pay plans we've been operating across the business for some time now. And we've just taken a pragmatic decision that we will grandfather those. So if you want to stay on the pay plan that you're on because you like it, because you think it's generous, because you've worked out how to maximize your income, you can stay on it. So for the pay plan that we're moving to for the new people that joined from '27 onwards, we're essentially taking an existing pay plan that works quite well. We've modified it slightly. So there's absolutely no reason to believe it will be anything other than business as usual and a successful new pay plan. But it does mean we're running more than one pay plan for longer than we originally wanted. So there was some modest cost improvement originally planned to move to a single pay plan. We've foregone that saving. But as I say, relatively modest and included in our forward-looking plans. Annelies Vermeulen: Great. Thank you for the engagement, Andy. Best of luck. Andrew Ransom: Thank you. Cheers. Pleasure. . Operator: And the next question comes from Bill Kirkness with Bernstein Societe Generale Group. William Kirkness: I have two questions, please. Firstly, as organic growth rehabilitates, I assume there's some market share gains happening. And if so, can you just talk about where you see those? Are they quite broad-based? Or are they sort of focused with the smaller peers or larger operators? And then secondly, you mentioned the weather impact in Jan. I just wonder if that's so material as to disrupt this sort of improving momentum we're seeing in North America pest or whether actually you've got enough self-help to drive ongoing improvements regardless of the adverse weather? Andrew Ransom: Thanks, Bill. Look, market share in pest control is a notoriously difficult endeavor, there's about 18,000 to 19,000 pest control companies in the United States, and we're operating across hundreds of cities. So in any particular town, any particular city, customers have got massive choice. Typically, they've got a choice of 10 to 20 local players. And so trying to work out when we improve where the share improvement is coming from and vice versa is really, really difficult. You can only really see in a live dynamic way, whether you're winning or losing share on the big national account piece. And that isn't really what's driving our improvement in organic growth. I'd say it's broad-based, and it's coming essentially from improvement in our operations in residential and termite, and it's across multiple towns and cities. So really difficult to say where we're winning or where we're winning from. But most of it, I would say, is local movement as such. On the weather, look, the way it works in our North American business, the way the entire industry works in North America is you only get paid and you only recognize revenue once you have done the work. So if you get a weather event, as we saw for a few days in January and you can't get your colleagues out on the road to do their routines. If you're not visiting that customer, then you're not billing that customer and that revenue doesn't happen. But that doesn't mean that revenue has gone. What that means is you work like crazy in the month of February to catch up the visits that you missed in the month of January. And clearly, that's what we will have been doing in February to try and catch up that work as much as possible. February weather, we thought was going to be a bit wobbly as well. At one point, there was a couple of snow days. But in actual fact, the weather in Feb turned out fine in the end. So we draw attention to it simply because it happened. It was material. It wasn't just one day. It was a few days down the Eastern Seaboard. But we will be working very hard to catch it up through February and into March. So we're not flagging a major issue, but clearly some softness in the month of January. Operator: The next question comes from Nicole Manion with UBS. Nicole Manion: One on the price and volume split in North America piece. There are a few mentions in the release about the robust pricing environment. I think that's actually sort of fairly consistent with what you said earlier in the year. But is there anything to call out here in terms of the pricing piece still accelerating or just holding at a similar level? And then secondly, sorry if I've missed this, I think you can sort of back it out from the numbers on branches that you have given in the release and the presentation. But could you sort of just confirm the total sort of branch base number as of the end of 2025 in North America? Paul Edgecliffe-Johnson: Thanks, Nicole. So in terms of price and volume, we're still very encouraged by what we're seeing on price. We do manage to get inflation plus, which we've seen through the year. And as you've seen, the organic growth has been ticking up quarter by quarter. So we are continuing at a similar level on price and clearly doing better on volume. We're still losing a bit of volume if you look at that number that we printed in the fourth quarter, but it's improving sequentially. And in terms of the number of branches, well, we said that by the end of this year, we expect to get up to approximately 800, and that's going to include 220 of these sort of small local branches or satellite branches, which we're at 150 on. So the 70 delta is the change from 730-ish at the end of this year to 800-ish at the end of 2026. Nicole Manion: Got it. All the best, Andy. Andrew Ransom: Appreciate it. Cheers, Nicole. Thanks. Operator: And the next question comes from Jane Sparrow with JPMorgan. Jane Sparrow: Two questions, please. Just on the regional brands and the Terminix brand, it sounds like the improvement in lead generation is largely being driven by the reinvigorated regional brands. Can you perhaps comment on the main Terminix brand and how that is performing? And then secondly, of those branches where there's a high proportion of people sticking on the old plan, is there any noticeable divergence on KPIs on your new one pay scorecard versus the other branches where more people are on the new plan, please? Andrew Ransom: Jane. Yes. Look, the Terminix brand is doing well, but you're correct in your deduction that the regional brands must have done really well. They did do really well. Super pleased with the performance of quite a number of the 9 regional brands. And as I said in an earlier answer, a lot of that has come through really focusing on organic search performance, and that's what's given us the encouragement in part to go with the 30 brands. So that's excellent. But the big, big battleship brand, Terminix, is going well and has performed very nicely. We haven't seen as big percentage increases, but it is performing nicely. And there, we do things like market testing for brand recognition, unaided brand recognition. Can you name a pest control company in the United States? Can you name a pest control company that you would consider using if you had a pest control problem. And we've had a recent survey on that, and the data has come out very, very strong. It's a powerhouse brand, and it's got fantastic brand recognition. And so it's performing well, but we do support Terminix significantly with paid search as well as organic search. And over time, what we'll be looking to do, particularly as we get more into the AI generative search, we'll be looking to move further down the organic search for Terminix as well. So it's performing well, but a big part of the rebound in lead performance has come from those regional brands and the reason why we're supporting the 30 going forward. In the second question, that's way too early to say what that looks like in terms of branches with a high proportion of people on old pay plan, which is largely heritage Terminix brands and then performance of branches with people on newer pay plans. So it's too early to call that. What we have been doing, and Paul has made this observation a few times, we've been much more into the data than we've been before. We've got a Head of Data and Data Science. We've got a small data science team, actually not so small these days, analyzing data from branches and really trying to work out, well, where we've got fantastic performing branches versus poor performing branches, what are the factors that are contributing? Is it tenure? Is it pay? Is it geography? Is it commercial versus residential, all of those factors. And we're getting more insight into that, not ready to call it on that, but pay plan might be one element out of about a dozen, but there is no binary read across between old pay plan equals great performance, new pay plan doesn't. That doesn't exist. But the point of the question, what drives different branch level performances and what are those factors, that's really why we're super excited about the 360 single pane of glass. Mike and the team are going to have much better data over the next few years than we've certainly had for the last 2 or 3 years. But no correlation at this point to call out, Jane. Jane Sparrow: Okay. All the best for the future apart from the obvious foot front. Andrew Ransom: Yes. Well, I would say the same to you, Jane. I would say I hope Spurs don't get relegated, but I would be lying if I said that. So good luck, Jane. Operator: [Operator Instructions] And our next question comes from Allen Wells with Jefferies. Allen Wells: Most have been answered, but just two quick ones. Firstly, Paul, just on the $100 million cost saving plan. Obviously, we've had lots of moving parts over the last 12 to 18 months with the change in brand strategy, less closures, more satellites, changing brands, changing remunerations. As we sit here today, could you maybe take a step back and simplify down how we should think about the maiden building blocks of the $100 million and what will be delivered in 2026? That's the first question. And then maybe just secondly, just following up on the remuneration plan and the allowing of grandfathering, et cetera. Obviously, we're a couple of years into this process now. And what drove the need to change that at this stage? What have you seen? What were staff telling you? And why now? That would be my question. Paul Edgecliffe-Johnson: Thanks, Allen. So in terms of the cost plan, I'll happily take a step back and many of you will remember that we had our integration cost savings back in the day. That got a little bit difficult to track through. So when I came in, I said, take the 2024 cost base, there will still be inflation on that cost base, but we will take $100 million of that. And that's what we are tracking well against. So I've said that we've taken $25 million out of the cost base in 2025. We came sort of at that from a cold start. So most of the savings were manifested in the second half. So if you think about that, that means that on a run rate, it's more than double that, that we're achieving, we are investing back into the business. So whether it's the new capabilities we've talked about in pricing, in data, in many other areas of the business or the additional resources we're making available for marketing and for our additional branch network, that's all being funded. So it's a fuel for growth strategy, and we'll continue to do that. So we will tackle back-office costs, we'll tackle inefficiencies, we'll tackle spans and layers, all the normal opportunities that you would see in a very large-scale business to take cost out. There is significant opportunity. What we are doing is going after the right cost at the right time. Some we will leave a little because they might be a bit more disruptive to the business. So the focus at the moment has been on that back office cost, cost of finance of accounts payable, et cetera, et cetera, removing roles, offshoring roles, et cetera. But still lots to do, and we will get that $100 million out by the time we're reporting the 2027 results and to get the margin up to 20% plus. And look, in terms of the pay plans, the whole plan that we're coming up with in terms of how we simplify the go-forward integration is not to cause disruption. It's to settle people down. If there was some anxiety in technicians that perhaps they wouldn't like the new plan as much as their current plan, fine. They can just grandfather on to their current plan. We want people to get focused on doing their jobs well. We are an employer of choice in the industry, and that's the most important thing to make people go out and delight customers every day. And if there's something getting in the way of that, then we've removed that. So yes, that's our thinking. Operator: And the next question comes from James Beard with Deutsche Bank. James Beard: I've got two, please. Firstly, you noted the improvement in residential leads in the second half. I was wondering if you could talk through the time that you expect those to convert over and how that improvement in resi leads is splits between contract and jobbing. And then secondly, going back on to pay plans, again, you said no change to residential sales staff pay plans in '26. When should we expect any sort of change to residential sales staff pay plans, please? Andrew Ransom: Thanks, James. '27 is the answer to the second question. Sorry, I should have said that. In terms of the time it takes from lead into sale into install is a really good question. I mean, that's a proper pest control question, James, that's really down in the weeds, but it's really, really important. Because if it's residential, if you've got a mouse running around your kitchen, when do you want that solved? You want it solved immediately. So the speed from which we can take a residential lead, and the same is true of termite. You've just discovered termites munching away in your basement or your cellar, you want that sorted quickly. And what we've seen is why I mentioned the new KPIs, operational KPIs in terms of how quickly are we getting from the lead to the sale to the install and it only becomes revenue when you do the install. We've got to get faster and we've got to get more consistent at that. So we are now getting a good proportion of the leads converted, sold and installed within 24 to 48 hours. And that's the sort of time window we are giving ourselves because if customers are having to wait 3 days for their mouse running around the kitchen to be dealt with or for the worry of the fact that termites are in their house, for many customers, that's too long. On the commercial side, time is much less critical. Commercial customers, that's fine. You can come next week, you can come next month unless they've got an emergency. So yes, look, it's a really, really key part of the business. And if we look through 2025, what we saw, particularly in the second half was a -- if you go at the top of the funnel and come down, really good improvements in the leads coming into the business. So MQLs, which we track on a daily basis. We look forward to that. At 4:00 every afternoon, we get a daily report on MQLs. Really good progress on SQLs. So what percentage of MQLs turn into sales-qualified leads. So that's gone really, really well. Really good progress on sales. So the marketing leads are good leads. They're turning into sales leads. The sales colleagues are selling and then it gets less good in terms of how many of those sales actually get converted into revenue. So that's the critical thing that the team are now working on is the next challenge as they work from the top of the funnel and they're working through down into the middle and into the bottom of the funnel. So that's why these KPIs of what percentage of sales are getting turned into activity with the customer is super critical. So good, good progress, and I think that's where Mike will have the team focused this year is improving the conversion of actual sales into -- turning into revenue. In terms of the split between contract and jobs, I have explained many, many times, we're a portfolio business, portfolio, meaning a book of contract revenues, roughly 75% of the U.S. For group level, we're more about 80-20. But at North America, U.S. pest, it's 75% contract portfolio, 25% jobs. Really good performance on jobs, over 5% organic growth in jobs in the fourth quarter and improving performance on contract portfolio. But it's that contract portfolio that we've got to get into consistent, healthy positive quarter-on-quarter improvement. We've seen some of that now, but we've got to build on that. It's only when we get that and back to the question we had a while ago about price versus volume. We've got to get that volume growth consistently back into the portfolio. It feels like it's coming. It feels like it's building, but that's where we need to push on in 2026 and into 2027. Only when we get that plus the jobs, will we get the business back into industry levels of growth and beyond. But I'm really confident the team are all over this. But good performance on jobs and an improving performance on contracts as well. James Beard: And all the best in the future, Andy. Andrew Ransom: Appreciate it. Cheers. Thank you. Operator: [Operator Instructions] And our next question comes from James Rose with Barclays. James Rosenthal: I've got a few on commercial, please. In the release, this has been flagged as a particular growth area. I wonder can you expand on your growth plans there? Secondly, is it right that commercial branches will be running on new systems, so slightly different ones to resi and termite branches? And then finally, how progressed are you in bringing some of the innovations and technology you have in the international and European business into the U.S. And what's the opportunity there? Andrew Ransom: Thanks, James. Yes, look, good question. Rentokil is the undisputed global leader in commercial pest control. The Terminix acquisition brought with it a big business in residential and termite. But Rentokil, which operates in, what, 88, 89 countries is globally renowned for its commercial pest control business. So we should be punching above our weight in commercial in the United States. And we're not yet where we need to be in commercial. I think in part because we've had so much focus on getting the resi business right and getting the termite business right. We've recently taken the decision to give independent leadership of the commercial business to one person. We've got an individual who probably knows more about commercial pest control than just about anyone on the planet. He's an export from the United Kingdom. So we've given it dedicated leadership. In terms of the plan for the business, improving customer retention has to be at the first part of that plan. We still don't have retention where it should be. Customer retention in commercial should be very high typically. It needs to be higher. It is going to be -- the commercial business will all be on PestPac, which is the core system that Rentokil has been using for 3 or 4 years now in the United States. So there won't be any great surprises or drama there. So that should be relatively straightforward. And you're absolutely right to raise the question of innovation. I was chatting to Mike the other day, and he's been introduced to some of the really cool innovations that we've got in pest control and commercial pest control, in particular. And we've got some really interesting ones coming in the pipeline over the next year or 2. But we have manifestly been weakest at deployment of commercial pest control innovation, in particular, our connected solutions in the United States. And we're going to fix that. That needs to be a key priority for 2026. We need to see the U.S. really starting to adopt and drive innovation. That's why the individual that's in charge of the business has been chosen in part because he's got great experience with that innovation. So look, I think it's an area we should be punching above our weight given our global position. The systems are relatively straightforward in the innovation agenda. It just needs execution now. We've got the products. We've got the services. We've got the technology. We just have to execute. And it's easy for me to say, particularly as I'm about to walk out the door and say, over to you, Mike. It is easy to say, but that's what we do around the world. So I'm confident we will do that in the United States. Super. Thank you very much, James. I'm looking at Heather across the table here. Are we done with the questions? No more questions. Unbelievable. Thank you all very much. I can't believe that is it. As I said earlier, that was my 50th set of results, and I think quite a good one to sign off on. It has been an immense privilege to be CEO of this company for the last few years. We've gone from a reasonably unstructured conglomerate to a pretty focused world #1 in our chosen industries, which is a pretty cool thing, I feel. And it's been, as I say, a great privilege to be here, but the success we've made in the last decade or so is absolutely down to the people in the organization. I've always said if we get the colleague strategy right in Rentokil Initial, everything else follows. And I think we have got a wonderful culture in this company. So I do want to pay tribute to the 60-odd thousand colleagues and all the ones that went before them in creating the brilliant company that it is. And believe it or not, I do want to thank you a lot. It's been great dealing with you for such a long time, doing my best to answer your questions. Will I miss it? I think I probably will a little bit, but I'll get over it. So thank you all for your interest in the company. It's been great getting to know many of you. And for the next few weeks, I really look forward to handing over to Mike. We're having a great transition. He's having a lot of fun getting to know all the people around the business, and I'm sure he's going to be a great success. And personally, I think the company is set fair for long-term value creation, which is, at the end of the day, what it's all about. So thank you all for your support of the company, your questions and in many cases, your friendship as well. So thank you all very much indeed.
Operator: Ladies and gentlemen, welcome to the LEG Immobilien Full Year 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Frank Kopfinger, Head of Investor Relations. Please go ahead. Frank Kopfinger: Thank you, Valentina, and good morning, everyone, from Dusseldorf. Welcome to our call for our full year 2025 results, and thank you for your participation. We have in the call our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Kohling; as well as our COO, Volker Wiegel. You'll find the presentation document as well as the annual report and documents within the IR section of our homepage. Please note that, there is also a disclaimer, which you'll find on Page 2 of our presentation. And without further ado, I hand it over to you, Lars. Lars Von Lackum: Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. I am very proud to share that 2025 has been an outstanding year for us. We have delivered AFFO of EUR 220.5 million, marking a 10% increase, the highest level in our company's history. This performance is a clear reflection of our disciplined execution, our strong portfolio and our willingness to capture opportunities, like we did with BCP. Building on this success, we are proposing a dividend increase of 8% to EUR 2.92 per share. This reflects the full 100% payout of our AFFO, a strong signal of both cash generation as well as our financial health. We have also made solid progress on the balance sheet. Our loan-to-value ratio has improved to 46.8%, and we remain on track to reach 45% in 2026. This improvement was supported by a 3% positive valuation effect, which is backed by our own disposals and markets building higher confidence, although admittedly, markets remain at lower transaction volumes. On the portfolio side, we have completed or agreed on the sale of 3,100 units in 2025. These disposals further optimize our balance sheet and the efficiency of our portfolio. We are well on track with further disposals in 2026. The planned sale of the Glasmacher development plot in Dusseldorf has made significant progress. Renowned real estate developer, Hines signed a purchase option for the site with LEG just yesterday. We confirm our 2026 guidance with AFFO expected between EUR 220 million and EUR 240 million. We will grow cash generation also this year, while weathering higher interest costs as well as lower subsidies. Looking further ahead, I am equally excited about our midterm growth outlook. From 2028 to 2030, we see strong potential driven by a substantial part of units running off subsidization in 2028 and by the creation of a new operating model based on comprehensive digitalization across our business. These initiatives will not only strengthen our competitive position, but at the same time, create long-term value for all stakeholders. In summary, 2025 has been a year of achievement, strategic progress and measurable results. We have delivered growth, improved resilience and positioned ourselves for an even stronger future. Thank you to our teams for their dedication and to our investors for their trust. The foundation we have built today ensures that the years ahead will be just as successful. Let's now turn to Slide 6 and the 2025 financial highlights, a year that truly embodies our theme of promised and delivered. We entered 2025 with a clear set of targets, and I am proud to say we did not just meet them, we partially exceeded them. Starting with the net cold rent. We closed the year at EUR 919.9 million, representing a 7% increase year-over-year. This growth was supported by a healthy 3.5% like-for-like rent increase, but equally by the successful integration of BCP, which added 9,000 high-quality units to our portfolio. This integration was executed seamlessly and has already begun contributing to earnings as planned. On operating profitability, our adjusted EBITDA margin came in at 78.1%, well above our planned level of 76% and even above our improved guided level of roughly 77%. Those 110 basis points of outperformance reflect both our tight cost discipline and our continued success in driving efficiencies across operations. Moving to our earnings metrics. FFO I reached EUR 481.5 million, a 5.2% increase, lending right above the midpoint of our guidance range of EUR 470 million to EUR 490 million. Even more impressively, AFFO grew by a strong 10% to EUR 220.5 million, lending smoothly within our improved guidance range of EUR 215 million to EUR 225 million. This marks a record high for the company. And speaking of returns, our dividend proposal of EUR 2.92 per share reflect a 100% payout ratio of AFFO. Year-on-year, this is an increase of 8% and ensures that our investors benefit directly from these strong results. Let me now turn to one specific growth driver going forward, our subsidized units coming off restriction from 2028 onwards. Today, we have around 30,000 subsidized units that are still subject to rent regulation under the so-called cost rent regime. These units are currently rented out for about EUR 5.40 per square meter, which is significantly below market levels. By comparison, the relevant market rent for a similar mix of units is roughly EUR 9 per square meter. This means there exists a rent gap of more than 60%. As these units get off restriction, we can start closing that gap in a controlled and sustainable way like we have done with smaller numbers of subsidized units over the past years. In general, we will apply the 15% or 20% rent increase on all units getting off restriction depending on whether they are based in tense or non-tense markets. However, the cost rent adjustments executed in 2026 as well as the new lettings in 2026 and 2027 absorb parts of that maximum rent increase potential. As of today, we assume that this limits the rent increase potential to around 12% in 2028. On the portfolio level, that alone translates into about 1 percentage point to our overall rental growth in 2028. And importantly, the effects do not stop there. We expect spillover effects into 2029 and beyond as further adjustments and relettings will deliver further rent growth. This will become a recurring and predictable growth driver for our residential portfolio as it will take quite some time until we can close the gap towards market rent level. In short, as soon as these restrictions expire, we are going to not only unlock immediate rental uplift, but also secure a long-term structural growth contributor. That will support our earnings trajectory well beyond 2028 until the gap towards market level is fully closed. Let me now turn to our second midterm growth driver that will become equally important to LEG's value creation going forward, our technology and digitalization agenda. Our industry environment has changed fundamentally. The regulatory framework in the German residential real estate sector is becoming even more restrictive, whether in terms of rent regulation, energy efficiency requirements or tenant protection. The traditional levers for operational optimization are reaching their limits. This makes it even more important to identify new sources of efficiency and value creation. And we are firmly convinced that technology and digitalization represent the most significant untapped lever available to us today. We have made a very deliberate strategic choice in how we approach this. We are dedicated to building a completely new operating model by making the best use of technology and digitalization, not just implementing software, but truly embracing it and redefining the way we serve our tenants. We manage our buildings, we steer our contractors. Rather than diverting resources to building proprietary software, we pursue a disciplined Buy & Partner strategy. And we have chosen 2 world-class partners to execute on this vision. The first one is ServiceNow. With ServiceNow, we are building an end-to-end system architecture that spans our entire operative value chain from customer service to technical operations to administrative processes. This gives us the flexibility to deploy AI at every touch point along that chain rather than in isolated pockets and thus enables us to drive automation to unprecedented levels. We are, to our knowledge, among the first residential real estate platforms globally to adopt ServiceNow as a core platform, and we see this as a genuine competitive advantage. The second is SAP. We have made a consequent commitment to building on the most modern ERP system available in the market. In fact, we have been operating on the latest version of SAP since the end of 2024. This positions us ahead of many peers who are still facing complex migration journeys. Together, SAP and ServiceNow form our central tech backbone, enabling not only system consolidation and process standardization, but critically the systematic scaling of AI across our operations and administration. Our technology investments are designed to drive AFFO and FFO I optimization along 3 core value drivers: efficiency, top line and investment management. The first focus will be on efficiency, streamlining our customer-facing technical and administrative processes with best-in-class AI-powered solutions. Beyond that, we see meaningful opportunities to leverage technology for revenue growth and smarter capital allocation across our portfolio. We are investing meaningfully in this transformation with the bulk of spending concentrated in the near-term implementation phase. This is a conscious front-loading of investment. From 2028, we expect these initiatives to turn cash flow positive, building to a contribution of more than EUR 10 million in AFFO from 2030. In short, in an environment where traditional optimization levers are increasingly constrained, we are building the technological foundation that will make LEG a more efficient, more scalable and ultimately more profitable platform for the years to come. And with this, I hand it over to Volker for some insights into the operations. Volker Wiegel: Thank you, Lars, and good morning to everyone from the shiny AI future back to 2025 and specifically to our rent development. As we mentioned earlier in the year, rent growth followed a different quarterly trajectory compared to last year. After 9 months, we were at 3.1%, but I'm very pleased to report that, as promised, we delivered fully on our guidance range of 3.4% to 3.6%. We closed the year right at the midpoint of 3.5% like-for-like in-place rent growth. At year-end, the average in-place rent of our residential portfolio stood at EUR 7.04 per square meter on a like-for-like basis. This compares to EUR 6.81 in the previous year. The drivers behind this growth were well balanced. 2% came from rent table increases and another 1.5% from modernization and reletting activities. Looking across our market segments, stable markets showed the highest momentum with 3.8% like-for-like rent growth, while higher-yielding markets grew by 3.1%. Our free financed units specifically saw rent increases of 4%, which reflects the underlying strong momentum in the market. Specifically, we saw rent table publications in Hilden with 11%, Wilhelmshaven with 7% and Leverkusen with 5%. However, the growth momentum seems to have reached its maximum level, while years with higher rent growth are reflected in the published rent tables, lower growth rates will limit this development going forward. As expected, there was no effect yet from the cost rent adjustment for the subsidized portfolio in 2025. Importantly, this growth came with an ultra-low vacancy. Our like-for-like EPRA vacancy rate remained at 2.3%, virtually unchanged versus last year, confirming the strong demand we continue to see across our markets. Looking ahead, for the current fiscal year, our goal is to deliver 3.8% to 4% like-for-like rent growth as already indicated with our Q3 numbers. The cost rent adjustment should contribute around 40 to 50 basis points to that result. Moving on to our investments in 2025 on Slide 10. Our guidance for the year was to invest more than EUR 35 per square meter, and I'm pleased to confirm that we exceeded that target coming in at EUR 36.11 per square meter. In absolute terms, we invested slightly more than EUR 400 million into our portfolio, an increase of 10% year-on-year. This increase to the prior year was largely driven by the integration of the BCP portfolio where we had to accelerate necessary investment measures. Looking at the composition of investments in more detail. CapEx accounted for EUR 228 million or EUR 0.46 per square meter, while maintenance represented EUR 175 million or EUR 15.65 per square meter. Altogether, this brought the per square meter figure up by 6.2% versus last year. Our capitalization ratio remained broadly unchanged at 57%. With substantially lower new construction activity, recurring CapEx still increased by a moderate 2%, reaching EUR 261 million. Overall, 2025 was another year of disciplined and targeted portfolio investment. We delivered above guidance, managed the BCP integration successfully and continued to invest responsibly in the quality and long-term value of our housing stock. For 2026, we are guiding for investments of more than EUR 35 per square meter, which remains similar to the investment level of 2025. Let me now touch on one of our operational growth drivers, our value-add businesses. These operations are a key pillar of LEG's strategy and a reliable growth driver for the company. They allow us to generate additional earnings beyond pure rent growth, while at the same time, those improve service quality and efficiency for our tenants. I'm very pleased to report that in 2025, we achieved strong FFO I growth of around 20% in this segment, increasing from EUR 50 million in 2024 to around EUR 60 million in 2025. While others in the market are still talking about the value-add additions, we are delivering real results. The foundation of this success lies in our technician and craftsmen services, our project management and electrical service units and of course, our energy and heating business as well as the multimedia business. In particular, we are very optimistic about the continuing growth of our energy services, which benefit from the ongoing focus on energy efficiency and shift towards heat pumps as well as our small repairs and in-house maintenance business. Beyond these established value-add services, we are also building momentum in our Green Ventures. These include new climate-focused services such as RENOWATE for serial refurbishment; termios, with smart thermostats for hydraulic optimization and dekarbo for the installation and maintenance of heat pumps. It is important to note that the Green Ventures are not yet included in the financial numbers shown on this chart, but they will become a meaningful growth contributor over the next few years. Between 2024 and 2028, we strive to generate a cumulative contribution of around EUR 20 million from our Green Ventures. To sum up, our value-add business combines stable cash flows, operational synergies and sustainability, while our Green Ventures offer the chance to participate in one of the fastest-growing segments in our market, decarbonization of real estate. They significantly enhance the resilience and profitability of LEG's business model and will continue to be a strong source of earnings growth forward. Let's now take a look at our disposals in 2025 on Slide 12. In total, we completed or agreed on sales for around 3,100 units and a total of more than EUR 250 million. During the year, we sold 2,252 residential units for total proceeds of around EUR 190 million. After deducting financing redemption fees and taxes, net proceeds amounted to roughly EUR 100 million. The transaction market remained subdued throughout the year. Overall, investment volumes in the German residential sector declined by about 4%. Even more telling, the share of large-scale transactions above EUR 100 million fell sharply from 63% in 2024, down to just 34% in 2025. You find additional information for the transaction activity in the German market on Slide 29 in the appendix. Against this challenging backdrop and while maintaining our strict disposal discipline, we are very satisfied with the year's outcome. All in all, disposals were executed at or above book values, fully in line with our policy of value-preserving capital recycling. The chart on the slide shows the units that have been transferred in 2025, but there's more to come. Year-to-date, we had already signed additional sales contracts for roughly 950 units, representing around EUR 70 million in proceeds. These transactions will transfer in the first half of 2026, and we already issued a press release about the majority of them in early January. Within these transactions, we also made strong progress on the Glasmacher district development plot in Dusseldorf. This would certainly contribute to our deleveraging strategy. As already described by Lars, we were able to agree with Hines on an option to buy the plot. The next step will be an agreement between Hines and the city of Dusseldorf. In case that works well, we expect to sign the deal by end of September, the latest. However, please be aware that the sales proceeds will follow the progress made in the building permission process. Moreover, we continue to advance our broader disposal program of up to 5,000 units, including around 1,400 units in Eastern Germany. Overall, our selective approach, i.e., focusing on sales of smaller portfolios or even single multifamily houses in the current market environment clearly demonstrates our ability to deliver on disposals. We remain focused on execution, disciplined pricing and support to our balance sheet as well as improvement of the overall quality of our portfolio. And with this, I hand it over to Kathrin. Kathrin Köhling: Thanks, Volker, and good morning also from my side. Let us now look at Slide #13, which covers our most recent portfolio revaluation. The results clearly confirm that market conditions are stabilizing. They also reflect the upward trend seen in leading market indicators such as the VDP Property Index and the German Real Estate Index GREIX. While the VDP Index recorded an increase of around 5.3%, the GREIX showed an increase of 4.8% for 2025. Against this backdrop, our portfolio valuation result in the second half of 2025 posted a 1.8% uplift, which was even stronger than the 1.2% increase we saw in the first half of the year. Altogether, for the full financial year 2025, we saw a valuation result of 3%, demonstrating clear upward momentum. Further details can be found in the appendix on Slide 30, where we show valuation changes by market segment. Our gross yield now stands at 4.8%, which continues to offer a comfortable spread versus bond yields, an important buffer in a still cautious investment environment. On a net initial yield basis, excluding incidental acquisition costs, we stand at 4.3%. The average gross asset value per square meter amounts currently to EUR 1,710, ranging from about EUR 2,320 in high-growth markets to EUR 1,190 in higher-yielding markets. Overall, the valuation result confirms that the correction phase of the past 2 years is behind us. We remain confident that this recovery path will continue into 2026, driven by renewed investor interest, more stable financing conditions and the intrinsic strength of the German residential sector. The trend has turned positive and the positive outlook is being supported by the view of major real estate experts such as CBRE, JLL as well as Moody's. Let's turn to Slide #14 and take a closer look at the development of our AFFO in 2025. We ended the year with an AFFO of EUR 220.5 million, representing a 10% increase year-on-year or about EUR 20 million higher compared to the prior year's EUR 200.4 million. The main driver behind this growth was, as expected, higher net cold rent. Altogether, this contributed roughly EUR 60 million. From that, about EUR 28 million comes from organic rent growth and another EUR 49 million from the acquisition of BCP. These positive effects more than offset the EUR 17 million negative impact from disposals. Net cash interest rose by EUR 12 million, driven by the increase in debt due to BCP and by higher refinancing costs. Still, I would like to highlight that we were able to keep our average interest cost at a very competitive 1.66%, which is an excellent outcome given the current interest rate environment. In addition, our Green Ventures still in their early investment phase, had a temporary negative impact of EUR 4.2 million on AFFO in the reporting period. Maintenance and CapEx spending amounted to about EUR 13 million more after subsidies, reflecting the enlarged asset base. To sum up, 2025 was another solid year of strong growth and recurring cash flows, underlining both the resilience of our operating platform and the profitability contribution from the BCP integration. Finally, let's turn to Slide #15, which highlights LEG's financing structure and key figures, starting with our loan-to-value ratio. We closed 2025 at 46.8%, coming down by 110 basis points year-on-year. That puts us well on track to reach our target of 45% during 2026. This continued deleveraging is driven by our solid cash generation, disposal proceeds as well as valuation effects. In addition to LTV, another key indicator, especially with regard to our bond covenants is the interest coverage ratio or ICR. Our ICR stands at a very strong 4.3x, and also all other bond covenants have ample headroom. For those interested in more detail, we've provided the full overview in the appendix. Our average interest cost increased modestly by just 17 basis points to 1.66%, still a very low level in today's market environment. At the same time, the average debt maturity remains comfortable at 5.5 years. Our liquidity position remains very strong, with more than EUR 800 million available as of year-end 2025 and undrawn revolving credit facilities of EUR 750 million. As already discussed in the last earnings call, all debt maturities for 2026 are covered. At the beginning of this year, we redeemed our EUR 500 million bond, and we are now evaluating refinancing options for the 2027 maturities, including the next bond, which comes due only in November 2027. We'll continue to take an opportunistic and disciplined approach here, depending on market conditions. All in all, our balance sheet is resilient. Our maturity profile is well structured, and we are in a very strong financing position with ample flexibility going forward. And with this, I'll hand it back to Lars. Lars Von Lackum: Thanks, Kathrin. Let me conclude today's presentation, with a brief summary of our guidance for 2026, as shown on Slide 16. These targets were already introduced with our Q3 2025 results, and I'm happy to reconfirm today that our guidance remains fully in place. For 2026, we expect a further improvement in our cash generation with AFFO between EUR 220 million and EUR 240 million. That represents continued growth on top of the strong performance we delivered in 2025. In line with that, our FFO I is expected to come in between EUR 475 million and EUR 495 million, supported by an adjusted EBITDA margin of around 78%. On the operational side, we target like-for-like rent growth between 3.8% and 4%, driven by our solid rent dynamics, targeted modernizations and the cost rent adjustment for subsidized units. Our investment volume will again exceed EUR 35 per square meter, ensuring that we maintain the quality, energy efficiency and long-term attractiveness of our housing stock. On the balance sheet, we remain fully committed to further deleveraging. With our LTV expected at around 45% by year-end 2026, we are well on track to achieve this. As announced, we plan to distribute 100% of AFFO to our shareholders, reflecting both our strong cash flow generation and our disciplined capital allocation approach. We will propose a dividend of EUR 2.92 either in cash or shares, the latter depending on the market environment. Beyond the financials, we also continue to make measurable progress in sustainability. In 2026, we target a CO2 reduction of about 7,600 tonnes. And by 2029, we aim to lower our relative CO2 emission saving costs per ton by 20%. To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for our shareholders and tenants alike. As we've said before, cash flow remains king and the best metric to steer our business. Our 2026 guidance once again underlines the strength and resilience of our business model. And with this, I come to the end of our presentation, and we are now looking forward to answer your questions. Operator: [Operator Instructions] The first question comes from Marios Pastou from Bernstein. Marios Pastou: I've got 2 questions from my side. So firstly, on the 5,000 unit disposal pool. Can you provide an update here on the progress you're having with current discussions? I think on the last update call, you mentioned you were in exclusivity in East Germany. So any comments on the progress there would be helpful. And then secondly, on the slide with the 16,000 units coming off restriction in 2028. Based on your prior experience when adjusting the rents, do you foresee any vacancy risk here, the uplift being 15% or 20% depending on the cap level seems like quite a step change in one go. So any comments there will be helpful. Lars Von Lackum: Marios, thanks a lot for your questions. So with regards to the 5,000 units disposal portfolio we have on the market, around 1,400 units are in Eastern Germany. So for parts of it, we are in exclusivity. And unfortunately, still the transaction times are much longer than initially expected. This is partially due to the financing and the more stricter view of banks with regards to real estate. Those processes still take much longer than we had forecasted. So therefore, yes, there are still portfolios in exclusivity. And certainly, we hope that we can close those over the course of Q1 and Q2. With regards to the remaining 5,000 units, we are selling those in smaller portfolios as well as single multifamily houses exactly as Volker has laid out during his presentation. So it is unfortunately not the case that we see bigger investors or transaction liquidity to have increased since the beginning of the year. So let's wait how the discussions at MIPIM next year -- next week will look like. It might certainly be that this brings additional liquidity to the market. With regards to the subsidized units, which run off, you might have seen that most of those which are getting off restriction are those in the high-growth markets. So the non-tense markets account for around 2/3 of those units getting off restriction. So therefore, I have full confidence in Volker and his team that they will relet those very quickly and easily because the undersupply in those markets is quite strong. Volker Wiegel: And even to add up, we don't see the risk of higher -- significantly higher fluctuation. Of course, there will be some fluctuation, but not in a way that we will not be able to cover it. And on Slide 27 in the appendix, you see the spread to the market rent, and you see that it's hard to find a substitute which is at the previous cost. Operator: The next question comes from Veronique Meertens from Van Lanschot Kempen. Veronique Meertens: A few from my side. So first, on the Dusseldorf land plot, could you please elaborate what you exactly meant with the time line you see for the sales proceeds of this disposal because I didn't fully understand it. Lars Von Lackum: Veronique, thanks a lot for the question. So unfortunately, first of all, let me say that certainly, we have a U.S. investor on the other side. So confidentiality requirements are quite strict. I try to give you as much of an insight as possible as of today's stage. So we have signed a purchase option with Hines yesterday, and they can make use of that call option until the end of September. If they are agreeing to that call option, we have a fully laid out contract with regards to the acquisition of the plots. So that contract will then be signed immediately and all those terms and conditions are pre-agreed, certainly including the price and the payment pattern. The payment pattern then foresees that a certain part of the sales proceeds will be paid by year-end, and the remaining payments will depend on the progress of the building permission process. And that is what I can disclose as of today. Veronique Meertens: Okay. That's clear. And then maybe that also rolls into my next question. So your LTV target is still 45%. It sounds that you're not probably get all the proceeds of this disposal in '26. So how strict is that target? How do you expect to get there as in what have you assumed in terms of disposals and value gains? And also, are you willing to sell at a discount if that means that that's what's necessary to meet that target? Lars Von Lackum: Yes. So Veronique, as you know, we have currently 5,000 units in the market. We will strictly stick to the levels which we were sticking to for all the previous years, which means we are not willing to sell below book value. So that is what we have executed over the last -- much more difficult years, and we will also stick to that guidance for this year. In order to arrive at those 45%, certainly a contribution comes from the sales proceeds, and we are also seeing a positive development in the market. Let's wait whether that is consistent over the year. Certainly, we now have a big war in the Middle East. If that tends to be longer than initially assumed, that certainly might have an impact. As of today, and looking into whatever we heard at least, it might be not that, that war is extending for weeks. So therefore, if that's not going to happen, we are quite confident that we can reach our 45% target. And this is, as of today, what we are now striving for, and we are quite confident to reach that within 2026. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: You have a pretty clear focus on disposals for the next 12 months or so, it seems. But I was just wondering on the other side of it, if large disposals in the market today require "portfolio discounts", then is there a case where you can see actually accretive acquisition opportunities yourself to be a buyer, which would be financed through an equity raise? And I guess I'm particularly thinking about some of these news flows around open-ended funds for German residential that need to fulfill their redemption needs. Lars Von Lackum: Yes, Andres. And thanks for your question. So with regards to our own acquisition activity, I think we have just acquired a big portfolio, BCP, 9,000 units, integrated that fully. Certainly, we are being offered bigger portfolios on a regular basis. I can tell you that we have not seen any of those willing sellers to give in on price. So therefore, there was nothing comparable with regards to any acquisition opportunity with regards to the quality and also the pricing of the BCP portfolio. Looking at our share price, I think it would be very, very difficult to identify anything which in the current market would then really end up with an accretive value for our shareholders, making the next acquisition. So therefore, our focus currently is strictly on deleveraging, reaching that 45% target, getting sales executed. Andres Toome: That's clear. And then maybe related to this, maybe not in terms of pure straight equity raise, but are you perhaps seeing any options where the seller would accept LEG shares as a buying consideration? I think we've seen some of these examples in other geographies in Europe, but I wonder if there's any discussions around that in Germany. Lars Von Lackum: So currently, we haven't had that discussion with any of the willing sellers. Andres Toome: Understood. And then my final question was just on the points you made around AI. And I think one of the points you highlighted was gaining also some revenue upside. I just wanted to understand how does that work in a regulated residential market? What are the levers you can pull beyond the regulatory constraints you already have in putting through in place rent increases? Lars Von Lackum: Yes. As you know, Andres, the number of criteria with regards to the rent tables can be up to 100 for a single rent table. So the qualitative criteria, which you need to take into consideration is quite a long list. Certainly, being more precise on those different criteria can certainly give you additional upside to just mention one of the examples with -- which certainly gives you an additional rental potential to be realized if you are using more AI. Operator: The next question comes from Thomas Neuhold from Kepler Cheuvreux. Thomas Neuhold: I have 2. The first one is a follow-up on the Gerresheimer project. I understand you're bound by NDA. But I was wondering, would you be able to sell the land plot at or above book value? Can you comment on that? Lars Von Lackum: Yes, so the book value is at around EUR 71 million, and we've been able to realize a substantial uplift on that if we get the sales contract signed end of September. Thomas Neuhold: Good. The second question is on the regulatory environment. I was wondering, if there have been any recent important news on the planned change to the rent regulation. Did you hear anything important? Lars Von Lackum: Yes. So if you look at the current discussion in Berlin, I think on a federal level, you might be aware that there are still discussions on how the regulation for refurbished apartments will look like, how index rents will be limited and also how those pure payments are being regulated. So those are the 3 big issues the Social Democrats are currently forcing through. And from our perspective, that is already a given and that's going to be agreed. With regard to the city of Berlin, there's certainly a lot of discussion and let's wait of what's going to happen now. As you know, we do not own a single unit in Berlin. So we will be not affected by whatever is being decided or at least being discussed in the upcoming election in Berlin. Operator: The next question comes from Kai Klose from Berenberg. Kai Klose: I've got 3 quick questions, if I may. The first one is on the -- actually, the first 2 are on the AFFO statement. Could you indicate or give more details on the increase for the nonrecurring special items from EUR 16 million to EUR 33.9 million and if there will be a similar level or similar increase in '26? Second question is on the green investments, which -- investment income from Green Ventures, where you mentioned that this will leave the investment phase in '26. So can you read that there will be a positive contribution to the AFFO in 2026? And the third question would be on maintenance. You mentioned there was an increase in '26 -- '25 because of the BCP portfolio. Has this been -- this increase only in '25? Or can we expect slightly higher levels because of ongoing work for BCP -- ex BCP assets in '26? Kathrin Köhling: Thanks, Kai, for your questions. With regard to the first one on the nonrecurring special items, this was a special case this year because of BCP. Obviously, we had some integration costs that took place this year, and that's why this number was higher than in the previous year. As long as we don't buy another BCP this year, this should be lower next year. Volker Wiegel: On the second question on Green Ventures, yes, we expect a positive result will not be record high. And of course, there's more risk in these ventures as it's new, but we expect a positive result and yes, expect breakeven. Lars Von Lackum: And to conclude the round here, so with regards to the maintenance expenditures we had in 2025, we do not expect an additional expenditure on the BCP portfolio within 2026. Operator: The next question comes from Paul May from Barclays. Paul May: Three, if I may, probably doing one at a time might be easier. Just following on from the question earlier around acquisitions out of the open-ended funds. I appreciate you said they're not willing to move on price, but there comes a point where they don't have a choice. They do need to meet those redemptions. So I assume that opportunity may still come. You mentioned it wouldn't be accretive for investors if you fund it with equity. Just wondering how you're viewing that, whether you're viewing that on a cash flow basis or whether you're viewing that on a kind of balance sheet made up value basis. That would be great. And then we live it next to separately. Lars Von Lackum: Yes, Paul, thanks for your question. So with regards to the acquisition opportunities out in the market, I think you rightly assume that certainly some of those open-ended funds will sell portfolios. What we still see in those discussions is that liquidity there does not seem to be so stretched that they are under pressure to do really fire sales. So therefore, currently, no indication for them really giving in on price. Certainly, and you might have seen that, we had 2 funds which have also stopped accepting redemptions. You can close down on the fund for 3 years. So that once again also might be a prolonged period where you are not seeing those funds to really do for selling. So therefore, that is what we've currently seen in the market with regards to those funds currently offering portfolios in the market. Secondly, with regards to how we view those acquisition opportunities, we certainly look at it from a cash flow basis, but also from an NTA perspective. And currently, we were not willing to really offer our shareholders any exposure towards those acquisitions. From our perspective, we are well advised to be strict on sales and do our deleveraging path in 2026, in order to arrive at that 45% LTV target. Paul May: Just sort of following on that, I guess, you mentioned the trend in the market, I think it was in Kathrin's commentary has turned positive. I mean, to some extent, the only thing that's positive is valuation prints. Transaction market is lower. Swap rates and bonds have moved higher now versus the average through 2025. So one might argue that the activity levels are lower and worse versus the valuation prints that have got better. Just wondering how you're reconciling those 2 things, which seem to be moving in opposite directions. Kathrin Köhling: Yes. So happy to take your question. When you just look at what is happening in the market with the undersupply that we continue to see, we still expect that rent growth will be a key driver for property values also this year. And yes, it is -- it has been a low year in terms of transaction volumes last year. But when we look at what the big valuators are expecting for this year, they are expecting at least transaction volumes, which are a little bit higher than last year. So we've seen around EUR 9 billion last year. We'll probably see around EUR 10 billion this year. So there are some positive signs. I mean, given currently the Iranian conflict, things look quite different these days, but we have to see what will happen ultimately over the next weeks. If we were to come back to a rather normal environment, which we've had like a week ago, then I'm quite positive that we will see what I just said. Paul May: I think the brokers were quite positive on improving last year as well and ended up being slightly worse, but just be interested to see how that comes out. And then I think again for you, Kathrin, just another one. So over the next 6 years, I think it is roughly, you've got about EUR 1 billion of debt maturing. I think it's just over EUR 1 billion of debt per annum with an average cost of about 1.3% at the moment. Obviously, the cost of that will likely go up by somewhere around 220, 230 basis points, which I think implies a financial headwind to FFO of about 28% versus 2025 FFO and about 63% headwind to AFFO based on FY '25 AFFO. I appreciate that we offset to some extent by rental growth. But just wondering your thoughts there, how you're going to manage that? And obviously, you mentioned disposals, but those in theory come at a higher EBIT yield than your financing costs. Otherwise, you're better off refinancing and holding on to those assets. So I just wonder how you're going to manage that sort of headwind to FFO and AFFO moving forwards over the next 6 years. Lars Von Lackum: Yes. Thanks a lot for your question, Paul. With regards to our midterm planning, our assumption currently is that we can realize, on average, a 5% growth of our key KPI, AFFO over the coming years despite the headwind from interest rates, which you have just mentioned. Certainly, exactly as you mentioned, we are expecting the core business to deliver strongly due to the undersupply in the market and the additional element, which we have disclosed hopefully, in a bit more detail as of today, the substantial number of subsidized units running out of those subsidization schemes and then being treated as free financed units. Secondly, you've seen what happened to the value-added businesses. We are quite confident that we can grow those value-added businesses going forward. That was certainly a very strong year, EUR 50 million to EUR 60 million. So please do not extrapolate that going forward. But that's certainly a contribution we are going to see. Green Ventures, you heard that. That was the last investment year. Last year, they are supposed to contribute substantially. Cumulatively, we strive for a profit of around EUR 20 million until 2028. That's an ambitious target. Certainly, as always, it's under risk if you are talking about start-ups, but the market certainly on the decarbonization side is huge. And finally, we will strive for a new digital operating model, and that certainly will give rise for efficiency gains, lower investments and certainly and most importantly, also additional top line. So with those elements, we feel comfortable to say over the next years, despite the headwind from interest rates, we can increase AFFO per year at around 5%. Paul May: Cool. Perfect. And just to check, the marginal financing costs you're assuming in that 5%, just so you got a sense. Lars Von Lackum: The marginal financing cost for a 10-year financing in the -- in the... Paul May: In your planning, you mentioned 5% per annum AFFO growth. So I just wondered, what is the assumed marginal financing cost? Lars Von Lackum: Yes. So what we do is that we certainly use the interest rate curve as of the time where we are preparing and finally deciding the midterm planning, which was October last year. So certainly, if that is going to change, that will have an impact. But believe me, everyone here in the management team and the full team is fully dedicated to deliver those returns going forward. Paul May: Okay. So we're about sort of 15-ish basis points higher on that versus October last year. Operator: The next question comes from Thomas Rothaeusler from Deutsche Bank. Thomas Rothaeusler: A couple of questions, I think 2 or 3. The first one is on subsidized rents and the adjustment potential, more looking at the long-term upside. I mean, should we expect a structurally higher rental growth rate from '28 considering the higher reversion potential? I mean, you can almost double the rents over time, as you've shown. Maybe you could provide a rough idea about the long-term impact on rental growth. Volker Wiegel: You will have significant impact on the next 3 years starting 2028. Thomas Rothaeusler: But I mean from there, like more the very long term, I mean, you can basically adjust by 12%, as I understand, in '28. But then from there, actually, there is much more adjustment potential, I think, given the low level where subsidized rents come from. Volker Wiegel: Yes, it's -- well, you see the spread to the market rent, and it will take time to adjust it until it's there. And market rent also develops. So this will -- there will be a significant gap that we need to close. And of course, we have the German rent regulation where we can adjust all 3 years then the rents. And we haven't simulated for the next 20 years, but it will have a structural impact over the next decade, I would say. Thomas Rothaeusler: Okay. And then on value-add services, I mean, which contributed a record EUR 60 million in '25. Just wondering what to expect in the coming years? Lars Von Lackum: Yes. So please do not expect that value-added services are now increasing on a regular basis by 20%. That would be highly unrealistic. So that we had -- that lower growth over the last 3 years was certainly very much driven by the energy crisis and the Ukraine war. So that was a strong impact on the Energy Services business. So from our perspective, for this year, assumes something in the growth range for the AFFO. So that will be growing pretty in line with AFFO for this year. Thomas Rothaeusler: Okay. Last one, yes, on property values. I'm just wondering if you could -- if you already got any indication from your appraisers for the first half? Kathrin Köhling: Yes, we just finished our last valuation. So as always, we will start with our new valuation with our cutoff date end of March. And then we'll have more insights once we meet again in May, and then we will give you an indication on H1 as we've always done. Operator: The next question comes from Neeraj Kumar from Barclays. Neeraj Kumar: I've seen a couple of questions on equity raise, so I'll probably not ask that. But on the other side, I would say that it's assuring that you see your values are strong and you don't look to sell below book values. But given your current share price, which seems to be pricing more than 50% discount to your NTA, do you see a potential in saying disposal of EUR 500 million assets of your least profitable assets at 10% discount to your book value and then using those proceeds to buy back shares? If yes, why you're not considering it? And if not, then how do you think about your share price here? Do you think it's fairly representing your property values? I'm just trying to understand if we should be believing your reported property values or your share price implied property values here. Lars Von Lackum: Yes. Thanks a lot, Neeraj, for the question. So it's always difficult with hypothetical questions. So we have not thought about doing that, and we will not do that. So from our perspective and looking at the value increases, especially with those with the lowest yields, those have grown substantially in value over the last 2 years. So therefore, from our perspective, that's nothing which we would -- we would look at. Neeraj Kumar: Okay. So if I understand correctly, like selling assets at 10% discount to book value is not accretive, if you were to use that to buy your shares at more than 50% discount to book value? Lars Von Lackum: This is not what I said, Neeraj. I said that we are not thinking about doing so because from our perspective, the highest value creation on those assets is still to come due to the strong undersupply in the especially high-growth markets. Neeraj Kumar: Got it. And last question. You seem to have been able to refinance your debt with good success with Baa2 rating. I was just trying to understand how critical the LTV target of 45% or a potential rating of Baa1 for you is? Or you think that is better in terms of running with high leverage and doing more share accretive stuff here? Kathrin Köhling: Yes. So of course, as I've always said, the 45% LTV is definitely something that would help to get an upgrade from Moody's on our rating. Although, as you know, it's not the only thing -- the only KPI and the only qualitative factor they look at. So obviously, we would love to have a better rating, but is it essential? Like do we need it to refinance? No. We have refinanced also in the past years. We have refinanced at very attractive levels. So it is not an absolute need that we get this rating upgrade. But however, it's still something nice to have. Operator: [Operator Instructions] The next question comes from Manuel Martin from ODDO BHF. Manuel Martin: Two questions from my side, please. One follow-up question on the units getting off restriction in 2028. Having looked from a political perspective, have you heard anything from the political players in the locations where the units will come off restrictions, i.e., could there be some headwinds to be expected? Maybe you can elaborate a bit on that and thereafter, will be my second question. Lars Von Lackum: Yes, Manuel, thanks a lot for the question. So we have not heard from any political resistance. If you look at the prices of those subsidized units, EUR 5.40 versus the market level EUR 9, that is the difference you're currently seeing in the market. We paid back the subsidized loans already in 2018. So there was a waiting period for another 10 years. So therefore, from our perspective, nothing to be expected on the political side, no political pushback also with regards to those units, which were getting off restriction over the past years. So also no political pushback to be expected from that bigger portfolio. Volker Wiegel: And maybe to add, we are in close contact with almost every mayor and every bigger location, and they understand what's going on and accept it. Manuel Martin: Okay. Perfect. Second question about project development, you're not actively doing that. Do you think this could become an option again for LEG to restart project development? It might be a bit too early, but maybe you can say a word on that, please. Lars Von Lackum: Yes. So very happy to do so, Manuel. We are still struggling to come up with a return worthwhile taking the additional risk on our balance sheet. It is still something which certainly we have explored with that big plot in Dusseldorf of 19 hectares. Finally, we were not making or coming up with a business plan, which will have at least brought about the return worthwhile spending additional money on that plot. So therefore, from our perspective, no, the current regulation is still very strict. The Bau-Turbo, so that's speeding up of building permission processes, we have not seen that really kicking in. We still wait for that building type E, which is assumed to reduce some of the requirements with regards to the building type and the building qualities. Also, those reductions are still not being decided or not in a way currently being discussed politically, which would come then finally to lower construction costs. So therefore, from our perspective, no, we currently do not see any real benefit of that for us to reenter the development market. So that is the current status there. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Frank Kopfinger for any closing remarks. Frank Kopfinger: Yes. Thank you, Valentina, and thanks for all your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 13th of May when we report our Q1 results. And with this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows and conferences. Thank you, and goodbye, everybody. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
David Paja: Okay. Good morning, everybody. I'm delighted to welcome you to today's presentation covering our financial year 2025. Let's move to the first slide. This is today's agenda. First, I'm going to take you through the highlights of the year. Hannah will then present our financial performance. And after that, I will give a strategic update, including our new divisional structure, our growth drivers and our updated medium-term targets. After the summary and outlook, we'll take your questions. So let's start with the highlights of the year. 2025 has been my first full year as Chief Executive of the group, and it has been a year of significant evolution for the business with 2 significant M&A transactions, resilient trading in a challenging market and great progress in our growth initiatives. As a result, today, we announced renewed and more ambitious medium-term targets. In 2025, we have acquired OrthoLite and divested our U.S. Yarns business. We have demonstrated once more our ability to gain market share, reflecting the benefits of differentiators that our competitors cannot match. And our new target, organic adjacencies have added 1 percentage point to growth at group level. Finally, we have delivered a record level of free cash flow of $160 million. For reference, this is more than the free cash flow that we have delivered in the past 10 years combined, and it reflects the new and improved cash generation profile of the group following the end of U.K. pension contributions and the end of large restructuring activities. With that, I will hand over to Hannah to take you through our financial performance. Hannah Nichols: Thank you, David, and good morning, everyone. Now before I start, it's worth noting that the Americas Yarns business has been treated as a discontinued operation and is therefore excluded from the numbers presented here. I'm pleased to report that the group has delivered a resilient performance in 2025 set against a backdrop of macroeconomic and tariff uncertainty from the second quarter onwards. Revenue was $1.46 billion, flat on an organic constant exchange rate basis, comfortably outperforming our core apparel and footwear end markets, which we estimate were down low to mid-single digit for the full year. EBIT was $290 million, in line with expectations, and up 3% on an organic CER basis. Pleasingly, group operating margin increased by 80 basis points to 19.8%. And in the second half, we matched our strong first half performance organically despite challenging markets, showcasing the resilience of the group. Earnings per share was in line with expectations at $0.093 with higher EBIT offset by higher pension-related interest charges and the timing of the share placing in July 2025. The group generated $160 million of free cash flow pre-dividends, reflecting the powerful dynamics of high margins and low capital intensity and timing benefits from the OrthoLite acquisition. In line with our guidance, year-end leverage increased to 2.2x following the OrthoLite acquisition, and we expect leverage to fall below 2x by the end of 2026, underpinned by the cash-generative characteristics of the enlarged group. So turning to our margin performance. The group delivered strong margin expansion in 2025 with EBIT margin increasing by 80 basis points to 19.8%. As you can see from the chart on this slide, the margin improvement reflects pricing discipline as we successfully managed pricing pressures during the year and mix benefits with a focus on premium and sustainable product lines. In addition, our teams continue to focus on driving productivity, including procurement savings and operational improvement actions. Margins also benefited from strategic project savings, including the footwear division manufacturing site consolidation and the move of operations to Indonesia. In line with expectations, OrthoLite contributed to $11 million of operating profit in the last 2 months of the year. If we now turn to the divisional performance, starting with the Apparel division. At $769 million, revenue was up 1% on a CER basis. This was a strong performance in a year that started with market growth momentum but softened following the U.S. tariff changes in April with market conditions remaining challenging through the rest of the year. The division continued to gain market share, outperforming the core apparel threads markets, which we estimate were down around 3% in the year. This was achieved through a focus on delivery and service and supported by our flexible global manufacturing capabilities. The division benefited from favorable mix with year-on-year growth in premium thread sales and recycled thread products. In addition, there was good growth in the China domestic market, which requires high levels of operational agility to meet demanding customer lead times. EBIT increased by 4% on a CER basis to $156 million and EBIT margin increased by 60 basis points to 20.2%. The margin expansion reflects the benefits of the favorable product mix and pricing discipline alongside prudent cost control and an ongoing focus on productivity gains. If we turn to Footwear, at $440 million, revenue was 2% lower than 2025 on an organic CER basis. This reflected a period of growth until the end of April, followed by customers taking a cautious approach to ordering. And in the last few months of the year, we saw brands managing down inventory further in response to the uncertain 2026 outlook. As such, we estimate our core footwear end markets were down around 4% to 5% for the full year. Despite this challenging backdrop, the division outperformed with estimated organic market share growing to around 30%. The division also successfully maintained pricing despite downward pressures. EBIT was $105 million, flat on an organic CER basis compared to the prior year. The division delivered a strong EBIT margin of 23.9%, an increase of 40 basis points, reflecting pricing strategy and prudent cost control measures alongside operational actions taken in the past year, including footprint consolidation in Europe and the rebalancing of the division's manufacturing towards Indonesia. The acquisition of OrthoLite was completed at the end of October 2025, and 2 months trading are included in the 2025 divisional results. The 2025 full year profit performance for OrthoLite was in line with our expectations with above-market revenue growth and high levels of cash generation. Turning to Performance Materials. Now this is the last time that we will talk about Performance Materials in this format given the move to the 2 divisional structure. However, we are pleased with the improvements made in 2025. Revenue in the year was $256 million, flat on an organic CER basis, reflecting a return to growth in the second half of the year of 2%. Industrial revenue was 1% lower than prior year, with share gains in automotive thread, partly offsetting softness in other industrial end markets. The division also saw strong demand in 2 organic adjacency target areas: Safety Fabrics, which delivered 40% revenue growth in the year; and composite tapes for the energy market, which grew 21% in the full year after a particularly strong performance in the second half. As expected, EBIT was $29 million, an increase of 10% on an organic basis, with margin increasing to 11.3%. The organic margin improvement reflects the benefits of operational actions and the stronger second half trading with Q4 exit rate margins at 11.8%, approaching the bottom end of the medium-term targets set out in March 2025. In the second quarter, we exited from the noncore U.S. Yarns business, improving the quality of the portfolio with the divisional margin increasing 390 basis points, including Americas Yarns results in the 2024 comparator. In addition, the small acquisition of VizLite was completed in October 2025, accelerating our Safety Fabrics growth strategy. If we turn to the income statement, there are certain areas worth highlighting. At $2 million, exceptional items significantly reduced from 2024 with previous strategic projects now complete. Acquisition-related items included $27 million for the amortization of acquisition intangibles and $20 million for acquisition transaction costs, mainly relating to the OrthoLite acquisition. Finance costs were $41 million, higher year-on-year due to the impact of the 2024 U.K. pension buy-in payment and including $3 million of exceptional charges associated with acquisition loan financing. At 29%, the full year effective tax rate remains well controlled and in line with expectations. As a result, 2025 adjusted earnings per share was $0.093. The higher EBIT was offset by higher finance costs given the 2024 pension buy-in and the increased number of shares in issuance following the successful capital raise that took place in July 2025 to part fund the OrthoLite acquisition. And finally, given the full year performance and our confidence in the group outlook, we're pleased to propose a final dividend of $0.0228, resulting in a full year dividend of $0.0328, up 5% year-on-year. If we now turn to look at cash flow and leverage. The group delivered strong cash performance in 2025, generating $160 million of free cash flow. This reflects the low capital intensity of the group, a lower level of exceptional cash flows and the positive contribution from OrthoLite. As you can see from the chart, the working capital inflow in the year was $13 million, reflecting disciplined working capital management and a timing benefit from OrthoLite. Working capital as a percentage of sales was 11% in 2025. In 2026, we expect this ratio to return to a more typical level of around 12%. Capital expenditure was $32 million as we maintained a disciplined approach to investing in growth opportunities. We expect capital expenditure to increase to the $40 million to $45 million range, including the OrthoLite business, as we continue to allocate cash in support of our organic growth strategy. The exceptionals cash flow of $24 million included cash outflows related to strategic projects, which are now complete, and was significantly lower than 2024, which included $128 million of cash outflow associated with the U.K. pension scheme. Acquisition-related cash flows of $793 million, mainly relate to the completion of OrthoLite transaction at the end of October 2025. And as a result, net debt, excluding lease liabilities, was $815 million at the end of the year, representing a pro forma leverage of 2.2x, in line with our previous guidance. And given the cash generative characteristics of the enlarged group, we continue to expect leverage to fall below 2x by the end of 2026. And finally, moving on to modeling guidance for 2026 and beyond. Now I won't run through all the details on this slide. However, the main focus is to provide you with more color around the building blocks for the group cash flow in 2026 and the medium term. I've already touched on some of the guidance areas, including working capital and capital expenditure. In terms of the other areas to draw your attention to, it's worth calling out that we expect the effective tax rate to reduce slightly over the medium term given the benefits of the OrthoLite acquisition. In terms of OrthoLite cost synergies and integration costs, we're maintaining the guidance we provided at the time of the acquisition announcement, and we will provide you with progress updates as the integration progresses. In addition, in the appendices to this deck, we set out some indicative 2025 numbers under the new 2 divisional structure to assist you with your modeling going forward. So in summary, we've delivered a resilient performance in 2025 with strong cash generation, which sets us up well for 2026. I will now pass back to David to provide a strategic update. Thank you. David Paja: Thank you, Hannah. As I said earlier, I cannot understate the strategic progress that we've made during the year with substantial improvements and positive momentum. The reshaping of our portfolio has included the divestment of our U.S. Yarns business in June 2025, following the closure of the Toluca, Mexico facility in December 2024. These actions have removed slower growth and lower margin business from the portfolio. Notably, this action has enhanced group margins by 100 basis points, and it has enabled us to focus our investment on other businesses in the portfolio. In October, we completed the acquisition of OrthoLite for an enterprise value of $770 million, which has accelerated our strategy to create a leading Tier 2 supplier in footwear components by adding an exciting, high-growth and high-margin business to our portfolio. OrthoLite brings with it compelling revenue and cost synergy opportunities. I will share more on OrthoLite later. These significant changes have facilitated the streamlining of the group into 2 divisions, Apparel and Footwear, enabling us to reduce internal complexity and better align our underlying technologies. We have continued to take share. We delivered flat organic revenue during 2025, a year in which we estimate our markets declined by a low to mid-single-digit percentage. This proves again the resilience of our business model and our ability to grow faster than the market in all conditions. Our target adjacencies have delivered quickly, contributing 1 percentage point to group revenue growth overall, in line with our guidance. Especially pleasing this year was the growth from our Safety Fabrics, which I will come back to later, and energy tapes. We expect our revenue in these target adjacencies to continue to scale up over time as we expand the customer base and introduce new products. We have consolidated our divisional structure into 2 divisions. The former Performance Materials businesses of Personal Protection and Industrials, which accounted for 80% of PM sales, have been incorporated under Apparel. And the Telecom & Energy business, 20% of PM sales, under Footwear. We now have 2 divisions with technology cohesion, scale and strong operating margins. The Apparel division is predominantly focused on textile engineering with thread as the main product category and 2 exciting growth opportunities in Safety Fabrics and Coats Digital. The Footwear division is predominantly focused on polymer science with a more diverse product portfolio and OrthoLite as its largest business. This change provides increased focus and operational simplicity. Coats has a number of levers to generate organic growth in excess of 5% per annum on average through the cycle. We estimate that our underlying markets can grow on average 3% through the cycle. We will continue to outpace our markets by 100 to 200 basis points as the industry consolidates around fewer, stronger players. We have consistently gained share over the past few years. And in 2025, we have done it again in a difficult market context. Last year, we launched the initiative to grow in target organic adjacencies, and this strategy has already delivered 1% of group growth in 2025, which will continue as we scale up. Set together, this is how we will deliver more than 5% growth, 200 basis points ahead of the underlying market on average through the cycle over the medium term. Additionally, our strong cash generation provides us as we deliver with optionality to enter attractive inorganic adjacent markets as we did with OrthoLite. We continue to monitor companies with differentiated positions, a sustainability focus, cross-selling and cost synergy opportunities. This slide summarizes our key differentiators on one page. These differentiators are the drivers of our share gains. The Apparel and Footwear supply chains are very fragmented, but they are consolidating to cope with increase in product complexity, the increase in sustainability requirements and the changes in sourcing countries. Coats is in an enviable position to gain market share because we have the scale and capabilities to support our customers where it matters to them. At the bottom of this chart, you will see that the strength of our customer relationships is underpinned by our people and our culture of customer centricity. We have built deep trust with our customers through a track record of delivery over the years in any market conditions. Service is king for our customers, and this translates into the operational and commercial excellence focus at Coats. Customers value our high product quality and our ability to deliver it consistently from all our manufacturing sites, including accurate color matching, which is a key differentiator. And our investments in operational agility are paying off as orders are becoming more fragmented. Our service is also reflected in the way that our commercial and technical teams support our brand customers and manufacturers every day around the world to make the right product choices and improve their manufacturing productivity. At the top of the house, you can see our 3 key growth enablers. Our scale and financial strength allow us to invest more than other companies in sustainability in both products and operations, innovative new solutions and digital systems that make customer interactions more efficient and enhance supply chain transparency. This is how we win in the marketplace. Sustainability is at the heart of both Coats' and OrthoLite's strategies. Our sustainable thread portfolio grew 43% in 2025 and contributed to our share gains in the year. But we also drive sustainability in how we run our operations. In 2022, we set ambitious 2026 targets, and we are well advanced in many areas. Since 2022, we have achieved a 30% reduction in our Scope 1 and 2 emissions, ahead of our 2026 target of 22%. We have also achieved zero waste to landfill a year early. And women now occupy 33% of our top 150 leadership roles, ahead of our 30% target for 2026, a significant improvement as we continue to ensure equality for all employees. OrthoLite shares the same sustainability DNA with a similar focus on increasing recycled material content, developing breakthrough innovations like Cirql or making operations more sustainable. Our target organic adjacencies represent an addressable market of approximately $2 billion, growing at more than 5% per annum. We have increased the size of this addressable market from $1.3 billion to $2 billion since last year because we have added a new product category, high-visibility trims within Safety Fabrics. All these initiatives represent opportunities to offer new differentiated product categories to our existing customers, building on our expertise in textile, engineering and polymer science. In Safety Fabrics, we are bringing innovative protective materials to workers in hazardous jobs, combining premium protection with comfort and lightweight. In energy, we're expanding our range of highly engineered tape products that protects critical on and offshore pipeline applications. In Coats Digital, we provide to our apparel customers software products that optimize their production planning and costs. In Footwear, our woven upper technology, ProWeave, delivers increased performance and more design freedom with lighter weight. In lifestyle, we are extending our structural components offering from luxury to premium handbag customers. These 5 adjacencies, combined accounted for $45 million sales in 2025 with great momentum going into 2026. Let me give you more color on our Safety Fabrics initiative, which grew strongly in 2025. Safety regulation continues to tighten globally, and customers are demanding products that are not only protective, but also comfortable to wear. We already sell thread for safety applications, and we are now using those existing customer relationships to offer highly engineered fabrics and high visibility trims, leveraging our core know-how in textile engineering and polymer science and our cost-competitive supply chain in Asia. In the second half of 2025, we brought to market our latest innovation in protective clothing, FlamePro ARC, which offers superior protection against electric arc hazards. What sets this technology apart is that protection comes together with extreme lightweight and comfort, allowing workers the enhanced mobility and comfort needed to perform their roles. We also have a portfolio of high visibility trims, which can be paired with our safety fabrics, bringing life-saving identification characteristics in all types of ambient light, including no light. In the second half of 2025, we acquired VizLite, a small company with a lot of potential, whose glow-in-the-dark technology is already enhancing our portfolio. We combine it with our existing retro-reflective, fluorescent trims to create 3 layers of visibility in environments with reduced or no light. This technology has been specified for U.K. firefighters and has significant potential for growth in other parts of the world and other applications. The acquisition of OrthoLite is an excellent example of our strategy of making inorganic investments into adjacent markets. This high-quality business improves the quality of the group in terms of growth and profitability potential. OrthoLite is highly complementary to our existing Footwear business, creating a leading Tier 2 supplier of footwear components. In 2025, OrthoLite delivered full year profit in line with our expectations. So a good start. The complementary nature of these footwear businesses gives us the opportunity to create additional value from the acquisition in 2 significant ways. Firstly, we have identified $20 million of joint cost synergies, which we expect to deliver by 2028 through savings in joint footprint optimization with significant overlap in operational footprint and from strategic procurement initiatives, operational excellence and systems implementation. In 2026, we expect to deliver $5 million of these savings. In addition, there is significant overlap in our respective customer portfolios, route to market and leadership in sustainability. These commonalities present opportunities to accelerate growth through cross-selling as well as the development of joint innovation initiatives. This builds on our recent track record from the multiyear integration of the Texon and Rhenoflex footwear acquisitions in 2022. Innovation is at the core of OrthoLite. The adoption of open-cell foam technology will continue to increase in the core footwear market as well as positive mix given the shift towards molded insoles. But new OrthoLite products will also create additional opportunities in 3 adjacencies not served by OrthoLite until now, expanding our addressable market in insoles. In 2026, we plan to launch the first insoles made of open-cell foam technology with electrostatic discharge protection targeted at safety shoes. OrthoLite's technology will provide both comfort and protection in one insole. A leading European brand is currently testing the product with positive results. Within the core premium footwear market, we are also entering 2 new product categories. Using the Cirql technology, we have developed our first supercritical foam insoles, a solution that addresses requests from brands for a lower density, high rebound insole. These are aimed at the trail and road running markets and are also currently being tested by 2 leading brands. In parallel, we continue to assess the commercial potential and go-to-market strategy for the Cirql technology in midsoles, which we expect to complete in the first half. The third adjacency is very exciting as it perfectly shows how we can leverage the combined technology capabilities of Coats and OrthoLite to make technological breakthroughs. We have integrated in one product the comfort of OrthoLite's insoles with the performance of Coats' carbon plates, and we are aiming to launch this product starting in the aftermarket. This is just the beginning of the collaboration between our innovation teams, and we are excited at the many opportunities this may create. With the significant changes to the portfolio in 2025, we have looked again at our medium-term targets to ensure they remain appropriate. Based on this exercise, we have upgraded and simplified parts of our medium-term framework. We have maintained our above 5% revenue CAGR target through the cycle, expecting that the portfolio quality we have now will support a more consistent delivery ahead of the market. Our growth will be a combination of market growth of 3%, and our ability to continue to deliver growth ahead of the market through market share gains and target organic adjacencies. With the acquisition of the margin-accretive OrthoLite business and the associated synergies and with increased confidence in our business potential following the 2025 margin performance of 19.8%, we have increased our group margin target range by 200 basis points to 21% to 23%. Reflecting the contribution of OrthoLite, we have also increased our cumulative free cash flow target over the next 5 years from $750 million to $1 billion. This major step-up reflects the highly cash-generative nature of the group, including OrthoLite. We have also improved the quality of our measure of free cash flow, which is now defined as after exceptionals. This underlines how determined we are as a management team to drive cash generation for the benefit of shareholders. Finally, we have maintained our target of a strong double-digit EPS CAGR post M&A or share buybacks over a medium-term time frame. Our capital allocation strategy remains consistent. Our target debt leverage range is 1 to 2x EBITDA. We intend to allocate capital to support our organic growth, continue to deliver a progressive dividend and pursue disciplined M&A or share buybacks. With circa $1 billion of free cash flow generation over the next 5 years, we're excited about our future prospects, and committed to delivering EPS growth in excess of 10%. So to conclude, 2025 was a year of strong strategic progress with a resilient operating performance and where we outgrew our markets. While we expect our Apparel and Footwear markets to remain uncertain in 2026, we anticipate delivering organic revenue growth with easier comparatives as we move through the year. Our growth will be underpinned by our ability to outgrow the market. That said, we are mindful of the potential impact on demand and supply chains as a result of the conflict in the Middle East, which we are assessing. However, it is too early to provide an update. If conditions do prove more challenging, then the example of the past few years highlights our ability to adapt and the resilience of the group's trading. Importantly, we also expect OrthoLite to significantly outperform the underlying footwear market as its technology differentiation enables it to win new customers and share. We expect to deliver further adjusted EBIT margin expansion in the year from a full year OrthoLite contribution as well as from the modest organic margin improvement. Consistent with our enhanced ability to generate cash, we will have another year of strong free cash flow generation. We go into 2026 with upgraded medium-term targets, reflecting our enhanced portfolio of businesses and optimism about the future of the business. Thank you very much for listening. We're happy to take your questions now. Charles Hall: Charles Hall from Peel Hunt. David, could you just talk a little bit more about the adjacencies, that $2 billion total addressable market. What do you see as a realistic share of that, say, on a 5-year view? How much of that would be organic? How much of that would be M&A? And how do you see the margin profile of sales in that area? David Paja: Thank you, Charles, for the question. So we're pretty excited about the opportunity of growing into that $2 billion market. Obviously, our starting revenue last year was $45 million, with a good growth from the year before. But we see this driving at least 1% of organic growth at the group level going forward. This is based on just organic moves. I mean most of those efforts are organic. They are obviously built into our framework. And we believe that those adjacencies can deliver margin rates in line with our group medium-term targets. So obviously, there's going to be a scaling-up effect over maybe the first few years, but we see the margin potential there to reach that group level ambition. So look, overall, probably we always look at -- also check M&A opportunities. And obviously, we're exploring these spaces, but most of our focus is on organic work right now. Charles Hall: Got it. And then on the tariff situation. Obviously, we're in a year in now to tariffs. Has everything settled down in terms of supply chains? And do you see any changes as a result of the sort of recent tariff changes? David Paja: I think the direction of travel is quite clear. It was already kind of clear at the mid of last year. And it's fairly settled right now. So we don't think there's going to be a huge change in terms of where things are going relative to where they stand now. Obviously, we are monitoring the situation in the Middle East, but that's going to create probably more disruption in the near term. That disruption will require operational agility, which is one of our strengths. So we're ready to handle that as we've done in the past few years. And there might be a little bit of, again, shift of volumes temporarily maybe away from the Middle East as well, going back maybe into other locations. But strategically, in terms of overall market direction, we think it's quite settled and the near term, it will just require agility, which we are ready for. Mark Fielding: Mark Fielding from RBC. I've got 3 questions, but I'm going to ask the first 2 together and then I'll come to the other one because they're sort of linked. Firstly, can we talk a little bit more about OrthoLite's performance so far? I mean, obviously, you said it was performing ahead of the market. But I mean, the implication of your sort of 5% decline in Footwear in the second half as the market is down high single digits. So I'm just -- a bit more clarity on whether OrthoLite is stable, growing or still actually down a bit with the market, just better than that market and how we think about that evolving this year? And the reason that ties to my second one was, I mean, quite sensibly, your medium-term targets, you've sort of dropped the divisional part. But historically, you were targeting 3% to 4% growth in Apparel and 7% to 8% in Footwear. So do we still think about that as the sort of medium-term split? Or is there any changes because you've slightly rejigged the divisions, et cetera? David Paja: Yes. So I'll start with OrthoLite. OrthoLite substantially outperformed the market, the underlying footwear market and also outperformed our own Footwear business last year. And if you recall, that's because they have a couple of growth levers that we don't have in the rest of our business. One is technology penetration. Open-cell foam insoles are increasing in adoption within the footwear market. And the other driver is their shift from flat insoles to molded insoles, which raises their average selling price. So these 2 drivers are helping them deliver substantial growth ahead of the underlying market. Having said this, they also saw a sequential impact from the market decline that happened in the back end of the year. As Hannah mentioned, we saw some destocking in the footwear market in the last couple of months of the year. OrthoLite felt the same trend. But we see, as we are now obviously in Q1, we start to see kind of a sequential -- some level of sequential recovery from what happened at the end of Q4. And we expect OrthoLite to deliver strong growth ahead of market this year as well. Maybe to your second question, over the medium term, we still expect Footwear to be a higher growth division than Apparel. We think the fundamentals in there support a higher underlying market plus with the addition of OrthoLite, we think that, that's going to act as another incremental, I would say, accelerator to our performance within that market. So we see that medium term still the trend. Mark Fielding: Okay. And then just my third question, the high visibility trims business, just so I understand that a little bit. I'm assuming the market structure is relatively similar to others as in that you sell to a garment manufacturer who then includes it in the garments. And then I suppose I'm just checking, what does it mean that you are specified for U.K. firefighters? Does that mean they all have to have it? Or it's just something that could be used? David Paja: Yes. So the high visibility trims is a product that makes a lot of sense for us. And actually, for those who haven't noticed, [ Chris ] is wearing one of our products. So typically, you have -- in that particular product, that's our fabric. So it's a protective fabric. It has our thread and it has the high visibility trims. So that shows how you can go for that particular application with very complementary offerings. And by the way, as I said in my remarks, it just builds on our capabilities in textile engineering and polymer science. So it's at the core of what we know how to do. With regards to the question on VizLite, in particular, it's now specified on all U.K. firefighter applications. So that's a technology, a fluorescent technology that glows in the dark. So in a pitch dark room or when there's heavy smoke and you can see anything, this technology will glow by itself without the need for any light input. So it's a very interesting IP. That's what attracted -- what made it very attractive to us. There's about -- even though we specified it as a technology, there's only about 30% of U.K. firefighters that have already started tendering it because the other specification for the other 70% is more recent. But we expect that other 70% to start tendering this technology relatively soon and then kind of ramp up progressively over the next 5 years. So we're excited about that. We're also excited about the opportunity of this glow-in-the-dark technology to expand into other firefighter applications globally outside of the U.K. And as well as we see that as a technology that can be applied to other end markets even in the core Footwear and Apparel businesses. So we look at it as an IP acquisition. It's a relatively small company now, but we think very complementary and differentiated and it helps us scale up in a direction that makes a lot of sense to us. David Richard Farrell: David Farrell from Jefferies. I've got a couple of questions. I'll take them one at a time. 2026 is a World Cup year in North America. If I remember back to the 2022 Capital Markets Day, there was some excitement about kind of ProWeave. Is there anything in your forecast for higher sales as a relation to the Soccer World Cup? And if so, would that come in '26 or at the back end of '25? David Paja: So I think there's a couple of questions there. I'll take it as one in general on the Olympics and then the other one is more about ProWeave in particular. So on the Olympics, look, we have not planned for a bump or a significant one-off benefit of -- in our sales from the Olympics. So it's not something that we are accounting for. And there's a lot of discussion out there on how much of a bump these type of events generate in reality. Yes, with regards to ProWeave, it's one of the adjacencies obviously, that we're doing. It's a relatively niche technology that basically applies only to kind of relatively high-end applications. We already deployed it across almost 10 different shoes. So it's already being sold on 10 different shoe models for different brands. But we continue to drive with the help of OrthoLite, actually, that's one of the cross-selling areas we're working together to increase penetration in some of the major brands. But it will always be -- I mean, we know that is a little bit limited for its kind of high-end characteristics. I think I mentioned last year, the interest of ProWeave goes a little bit beyond in terms of longer term, how we see the upper space as an interesting space. And we see this as kind of the entry point with a very kind of high-end type of technology. David Richard Farrell: One for Hannah. If I look at the capital allocation slide, there's nothing in there for net debt reduction. Obviously, you're coming at that from going into '26 for the next 5 years at 2.2x leverage. Should actually some of that capital allocation be thought about? Or is the reduction in the leverage coming just from the EBITDA? Hannah Nichols: No, absolutely. Our focus is, on '26 is on reducing the net debt. We see it in terms of capital allocation actually as an output of allocating capital to support organic growth. It's sort of a natural outcome, which is why it's not explicitly referenced on the slide. But absolutely, our priority is on deleveraging. And we've talked about the cash generation of the group. You've seen that evidence in 2025. And with OrthoLite as well, that sort of clearly enhances the cash generation. So short answer is yes. David Richard Farrell: And final question, kind of EcoVerde. I guess over the last few years, the kind of higher selling point of that has been a real benefit of driving Apparel organic revenue growth above the market. How much is left to go from that as a tailwind as you look out over the next kind of 5 years? And can you just talk about kind of new customer bases versus kind of a replacement of existing customers? David Paja: Yes. So our 100% recycled thread product, EcoVerde, the EcoVerde brand is I think has been a phenomenal success for the group. I mean, literally 5 years ago, there was no sales. And last year, it was $550 million, which is about half of all the thread that we make. So it's been an impressive ramp-up that has required a substantial effort to develop a new supply chain, adapt our manufacturing processes, requalify all our color recipes. So we see that as something that is very difficult to replicate. Now from here, where do we go? We are at about 52% now with -- in terms of penetration. We think it can go -- it can keep going still. But obviously, as you increase towards 60% or beyond 60%, you're going to the very, very price sensitive pieces of the market. So we see that as a substantial differentiator, difficult to replicate with some room to grow. But in terms of sustainability, what we're doing now is we are continuing to drive recycled penetration, so kind of continue to push that, but it will moderate in terms of growth rate. You won't see the 50% kind of ranges that we've seen this year. And at the same time, we've launched a big initiative on supplier decarbonization, which will complement our efforts to get to our Scope 3 targets. So now when we go to brands, we have both the big push we have on recycled. And on top of that, supplier decarbonization as another big kind of driver for their sustainability -- to achieve their sustainability goals. James Bayliss: James Bayliss from Berenberg. Two, if I may. On Footwear customers, you noted they were managing down their inventory levels in the last few months of 2025. Can you just give us a sense of where that trend is for the first few months of 2026? Do you feel that levels are steady and in the right place now, absent any further shocks or Middle Eastern ramifications? And then my second question on market share. Your ambition seems to be to continue to grow for 1% to 2% per year over the medium term, but you're coming from quite a high base already. Are there any regulatory considerations in local markets or any territories where growth will be naturally more limited than others that we should be aware of? David Paja: Yes. So I'll start with the latter question. So on market share, yes, we're at close to 30%, right, on both divisions. We still see this as a number that continues to increase and going to continue to increase. The reason is, I mean, it may look like a big number, but when you look at manufacturer by manufacturer, in general, they like to concentrate thereby on fewer, stronger players, and it's not unusual to have manufacturers, so Tier 1s that buy 60%, 70% from us. So at a manufacturer level, they don't have an issue. They actually typically want to have kind of a core supplier that is at that high level, and brands also are trying to consolidate the number of Tier 1s. So we think those 2 trends, the fact that the Tier 1s are not necessarily trying to kind of limit the share they give to their largest supplier, and the fact that brands are trying to reduce the number of Tier 1s, I think, continue to play in our favor going forward. And sorry, remind me the first question was on -- yes, the sequential for Footwear. So I mentioned a little bit earlier, we saw the last 2 months were a little bit tough. We're obviously focused on delivering our profit and cash commitments, which we did. But we saw a substantial slowdown in the last 2 months of the year in Footwear in particular. But we've seen a sequential improvement in Q1. So it's not back to where it should be, but we've seen a sequential improvement that makes us think that, that kind of destocking that was done towards the back end of the year was already completed. Andrew Ford: Quick question. Andrew from Peel Hunt. I wondered if within that sort of market data information that you provided, whether there was anything, more detail you could bring out of that because I could see that -- sorry, I've lost the train of thought. I'll move on to the next one. So the other one is around competition on sustainability. Obviously, 5 years ago, EcoVerde, it was quite sort of a greenfield area for you. Just wondering where -- what the competition is currently within that area? I'll come back to the other one as I remember it. David Paja: So on sustainable threads, we see ourselves as by far the leading provider. As I mentioned before, it's actually not easy to transition to recycled polyester. It's a completely different supply chain. You need to develop suppliers that basically recycled PET bottles, so plastic bottles. And the quality requirements are very sensitive to our manufacturing process. So you need to kind of make sure that you define very clear requirements. Otherwise, your productivity goes down quite substantially. And on top of that, you need to redo all your color recipes for all the -- I mean, on average, on a given year, we delivered 200,000 different sets of color. And doing that is a gigantic piece of work. We have systems that allow us to do that very, very efficiently. But we find it like a very substantial differentiator when you combine all those things for people to replicate to the scale that we've done. And obviously, with scale comes also negotiation ability in terms of pricing and everything. So overall, we think we've built something that is very substantial in terms of scale and difficulty to replicate, and we don't see any competitor anywhere near that. Andrew Ford: Great. I'll try again with the other one. So I was just wondering about whether that was a broad-based sort of market decline? Or was it sort of within more sort of specific niches that either hindered you more than the market or was actually helpful sort of your relative -- I guess, the granular detail of that market movement, if you like? David Paja: Yes. The bigger -- so at the back end of the year, the bigger drop was in Footwear. Footwear is always more volatile. If you go over time just because of the average price of one of these athletic shoes is typically higher than a typical apparel garment. And for the second reason, there's fewer larger brands. So it's more concentrated around a few big brands like Nike, adidas, et cetera. So typically, you see a little bit of more kind of volatility when they decide to either destock or restock. So that's something we've seen in the past. We don't -- we haven't seen it in a particular OEM or a particular part of the market is being quite broad-based, but that's also because we are -- in Footwear, in particular, we have a higher percentage of exposure to those brands relative to Apparel. Hannah Nichols: I was just going to say, I think if you look at Apparel and the markets decline there, we really play to our strengths in Apparel in terms of our global footprint, our agility. And actually, when we look at our sort of the trends within the market share gains, a lot of those came after the tariff announcements because of our ability to react to the shifts and the agility. So it's really played to our strength, I think, is what I'd say about the Apparel piece. Mark Fielding: Sorry, Mark Fielding again. Just a couple of follow-ups on those questions. I mean, firstly, in terms of the recycled thread, I mean, there was conversation in the past about future sort of natural biodegradable threads, et cetera. I'm just curious how you think about the next generation in that? And then also possibly linked but more immediate. In terms of in Hannah's presentation, you talked about the price mix benefit. And then in Apparel, you talked specifically about mix, whereas it was price strategy in Footwear. Maybe a bit more elaboration on that. And just a reminder, I mean, is my impression that EcoVerde is slightly higher revenues, not higher margins? So it's not a mix benefit, but I'm just double checking that. David Paja: So I'll let Hannah comment on the second one. With regards to the next step in terms of recycled product, the big focus is going from PET bottle recycling to textile recycling, what is called textile to textile. So instead of just taking plastic bottles and recycling them into polyester, you would recycle garments. And starting with waste from manufacturing processes, there's a lot of waste generated by the Tier 1s in the manufacturing process. So we're very actively working in that space. This year, we've launched our first textile to textile recycled products. Today, it's a more expensive technology than the PET bottle recycling. But like we did a few years ago, as we led in the industry PET bottle recycling, we are now leading as well in textile to textile, it's now in the market. So we're selling -- it's still small volumes because it's higher priced. But we're doing a lot of work through our sustainability innovation center in India with all the supply chain that is developing the capabilities and the scale to make this happen. So we also have innovation in that same hub around all the type of products like you're saying, biodegradable or natural origin, not oil-based at all. But those, we see them as more at this stage probably those would be a further step away. So I would say the next step will be going more to textile to textile. And there's quite a lot of, I would say, interest from the brands. The leading brands in sustainability, they are already starting to at least look at that textile to textile as the next step. Hannah Nichols: And I think your question was about Apparel mix and what's driving that. So it's actually a combination of both premium products, but with premium products, they are more likely demand recycled product offerings. So it's a combination of the 2, which is where Apparel have benefited. So the correlation with the margins of recycled thread because they're going into premium products that they are typically higher margin, if that makes sense. David Paja: Okay. So if there's no other question, well, you see, basically, we delivered strong 2025, and we entered '26 with good momentum. Thank you very much for joining us today. We wrap up the call here. Hannah Nichols: Thank you.
Jennie Daly: So good morning to you all. We're going to start nice and sharp today because I know it's a really, really busy results day. But before I do, and it has become usual practice, we have members of our group management team with us here today and also our first newly appointed Customer Experience Director, Maria Sebastian. So Maria, give everybody a wave so they know who you are. And we will -- hopefully, you'll have the opportunity to catch up with Maria later this morning. And while not -- there is Maria. Actually, you missed your moment, Maria. So here is Maria, our Customer Experience Director. And while not here today, I'm also pleased to say that we have appointed a new Divisional Chair for the London and Southeast, Tom Pocock, formerly of Barclays. And Tom will be joining us soon, and you'll no doubt meet through the course of the year. Right. Let's get started. So I'll start with some highlights on 2025 and the delivery of the medium-term targets we set out last October. And Chris will cover 2025 performance in more detail and turn to guidance. And then I'll update you on how the spring selling season is playing out and how we are driving the business forward with those medium-term targets firmly in our sights. There we go. So this morning, you'll hear our strategy for driving returns in what has been a challenging year for the industry. Against that backdrop, we delivered 2025 volumes in line with guidance, growing completions by 6% with new outlet openings up 29% in the year, ending 2025 with 219 outlets ahead of expectations. The planning activity we created and stopped over the last 3 years has gained momentum through the year and is now delivering both in applications -- results, sorry, in both applications submitted, but more pleasingly, in the rate of permissions granted. And this is ultimately the basis for future outlet openings. And you'll hear that we remain very confident in delivering average outlet growth year-on-year. Another key focus is utilizing our strong existing landbank and increasing capital efficiency. Chris will speak more about this. It's not something that happens overnight, but we are well on that journey. Our strategy and the actions that we've been taking will drive improved returns, both in terms of margin and return on assets in the medium-term. We have a continued focus on cost discipline, grinding out cost whilst protecting value and balancing the medium-term strategy commitments. And while the housing market remains tough, we remain confident in this plan that is in our control and deliverable. And you'll hear more about this during the presentation. However, our outlook does not incorporate potential impacts from recent events in the Middle East that may arise for the U.K. economy and our business given the early stages of development. And finally, you will have seen that we've added flexibility to our capital allocation. Chris will talk you through the detail, but suffice to say that we remain confident that the unchanged quantum of net asset value-based returns remains appropriate, but do see benefits for shareholders and having more flexibility by adding the potential for a buyback element to our ordinary distributions. So this slide will be a bit more familiar to you and gets a bit more into the guts of our 2025 performance. I won't run through them all, but I'll just pull out a couple of the highlights. We delivered a robust sales rate, which I think attests to the quality of our product and locations and the efforts of our teams. Turning now to landbank. You can see that our landbank has come down slightly as planned as we seek to reduce landbank years. This is a key objective for us given the strong landbank that we hold, though we will do so principally by growing volumes. We've continued to prioritize customer scores and build quality as part of our commitment to operational excellence. We have a high customer score comfortably above the 5-star threshold under the new survey criteria, and our build quality continues to lead the sector. I'm delighted that for the second consecutive year and the third in 5 years, our Taylor Wimpey site manager was awarded the Supreme Award in the NHBC Housebuilders Award. This year, congratulations go to Lee Dewing of our North Yorkshire business. So you'll have already seen most of the key numbers on the slide through the trading statement, but I'll just highlight the outlet chart, which I think illustrates the progress that we are making in outlet openings. We opened 71 outlets last year, 29% up from 2024 with good progress year-on-year. There's some good momentum here, and we remain very much on track. We expect to open more outlets in 2026 than we did in 2025 and remain confident in growing average outlet numbers year-on-year. I think it is worth reminding you what we said about our approach to outlets. We have a strong single brand, and we mostly run our sites as single outlets. So this increase in outlets represents real growth in new markets. So I'll now hand over to Chris to take you through our performance and guidance in detail. Chris Carney: Thanks, Jennie, and good morning, everyone. As usual, I'll take you through the financial performance for 2025, a year in which the group delivered a robust set of results despite a challenging market backdrop. Our disciplined operational focus, the consistent execution of our strategy and the continued progress in planning and outlet openings underpins the financial resilience you'll see across the next few slides. So let me begin with the headline financials. Group revenue increased 13% to GBP 3.84 billion, supported by growth in the U.K. completions, resilient private pricing and a stronger contribution from land sales. Overall, a very good performance in a year where second half sentiment softened. Gross profit was slightly higher at GBP 658 million with gross margin stepping down to 17.1%. This movement is consistent with the factors that we've been flagging throughout the year, modest build cost inflation, slightly lower opening order book pricing and the impact of landbank evolution. Adjusted operating profit was GBP 421 million, up 1% year-on-year, delivering an adjusted operating margin of 10.9%, and I'll come back to margin performance in more detail shortly. PBT and adjusted EPS were both lower year-on-year, reflecting higher net finance costs. And finally, return on net operating assets edged up to 11% with improved asset turn more than offsetting the margin headwinds. Turning to the U.K. We completed 10,614 homes, excluding joint ventures, up 6.4% year-on-year and in the middle of the guidance range we set a year ago. Private completions increased by 7.7%, while affordable completions increased by almost 2%. Affordable represented 21% of total completions, and we expect a similar mix of around 20% to 21% in 2026. The blended U.K. average selling price was GBP 335,000 with the private average selling price at GBP 374,000, both about 5% higher. This reflects a greater proportion of completions in London and the South. Underlying pricing was positive in the North and became progressively softer as you move down the country, but overall remained reasonably resilient. As we entered 2026, underlying pricing in the order book was roughly 0.5% lower year-on-year, primarily due to those late year book deals in London that we highlighted in the January trading update. After taking that into account, we expect mix benefits to support an increase in the 2026 blended average selling price of around 2% over the GBP 335,000 reported for 2025. Adjusted U.K. operating profit remained steady at GBP 369 million, while margin softened to 10.1%. On the next slide, I'll walk you through the main drivers of the 1.4 percentage point operating margin reduction. So in 2025, we saw modest market-driven pressures from both pricing and build cost, which together reduced adjusted operating margin by 110 basis points. On pricing, the pressure came from the opening 2025 order book and the London bulk deals, which contributed to completions in 2025 and formed part of the order book for 2026. Build cost inflation was about 0.5% in half one and 1% for the year overall, driven mainly by materials rather than labor. The underlying market rate was slightly higher, but our supply chain self-help initiatives and increasing usage of our new house type range helped offset part of the pressure, and that work will continue into 2026. Landbank evolution was also a factor as we continue to trade out of older higher-margin sites acquired after the Brexit referendum. We still expect this to normalize and then become a positive contributor. And as we discussed in October, that improvement will start in 2027 and become more meaningful in 2028 and 2029. As we said in January, land sales were particularly strong in 2025, enhancing our group margin by roughly 60 basis points, a similar benefit to 2024. However, as we said, we don't expect land sales to be margin enhancing in 2026, so that benefit will unwind. We also had a 0.5 percentage point impact from the GBP 20 million one-off charge relating to historic workmanship issues at the legacy London apartment scheme. So these 2 impacts dropping out will be broadly neutral going into 2026. The headwinds from pricing and build cost inflation were partly offset by improved recovery of operating expenses as both volume and revenue grew. So turning to cladding and fire safety. This slide will look familiar to everyone from the half year, and I'm pleased to say that the overall provision has remained broadly unchanged. That sits alongside strong operational progress. We've continued to move at pace, progressing assessments, initiating further works, and we've now fully remediated 62 buildings. Since June, the number of buildings awaiting formal assessment has reduced by around half. There is still significant work ahead, but the stability of the provision over the past 6 months reinforces the robustness of the assumptions we updated in June. To date, we have set aside GBP 544 million for cladding and fire safety remediation and spent GBP 131 million. That leaves a remaining provision of GBP 413 million. Our cost estimates on assessed buildings, including the cavity barrier risks highlighted at the half year have continued to prove robust. The small uplift you see reflects routine mechanics, the unwind of discounting and minor updates to assumptions such as inflation and legal costs. Cash spent in 2025 was GBP 49 million, around half our previous guidance, mainly due to the delayed invoicing from the Building Safety Fund. With those payments now expected this year, we anticipate around GBP 150 million of cash outflow in 2026 and about GBP 100 million in 2027, with remediation still expected to conclude in 2030. Our balance sheet remains a core strength of the business. Net operating assets were broadly flat at GBP 3.8 billion. Land -- net of land creditors reduced modestly, reflecting the contraction in the short-term landbank to 77,000 plots, consistent with progress towards the targets we set out in October. Work in progress increased year-on-year, supporting higher outlet numbers and continued infrastructure investment to support new outlet openings. Tangible net asset value per share declined to GBP 1.176, driven by the increase in the building safety provisions in the first half. Turning to cash flow then. This bridge shows the movement from opening to closing net cash. The working capital outflow reflects higher debtors due to the London bulk deal signed towards the end of the year and lower creditors mainly from reduced affordable advance receipts and customer deposits. The land decrease includes a higher level of deferred receipts on land sales and the increase in WIP supports our outlook growth strategy as planning momentum improves. After tax, interest, dividends and other items, we ended the year with a strong net cash position of GBP 343 million, in line with guidance provided at the half year. Now I've included this slide to reiterate a couple of points from our investor and analyst event in October as this is a critical focus for the business. Our medium-term plan remains 14,000 U.K. completions, 4.5 to 5 years of short-term landbank, 16% to 18% adjusted operating margin and return on net operating assets above 20%. Capital discipline across land and WIP is central to delivering those improved returns. In 2025, we made good progress, returning capital into smaller sites, reducing the scale of the landbank, increasing outlet numbers and improving the distribution of our investments across the country. The short-term owned and controlled landbank is now 77,000 plots, down from 79,000. The average approved site size reduced again in 2025 to 211 plots compared to an average of 260 in the previous 5 years. And we closed the year with 219 outlets, up 3%. As we discussed in October, WIP invested in both London and infrastructure will take time to normalize, but we're seeing early progress. WIP per outlet has improved since the half year and is now back in line with end of 2024 levels. London apartment WIP reduced from GBP 270 million in June to GBP 200 million and the GBP 100 million of land sales completed in 2025 will release around GBP 30 million of infrastructure capital for reinvestment to fuel future growth. So there was good progress in 2025, increasing confidence in our ability to deliver the returns set out in our medium-term plan. Next, turning to our capital allocation priorities. Today, we're announcing an evolution of our shareholder distribution policy. But before outlining the change, I think it's important to note the context. Taylor Wimpey is inherently highly cash generative through the cycle, and that cash continues to fund the consistent investment we make in land and work in progress to support future growth. That remains unchanged. As a result, the first 2 priorities of our framework stay exactly as they are, maintaining a strong balance sheet and investing in land and WIP to underpin sustainable long-term growth. We've been equally consistent in returning significant cash to shareholders. Since introducing our ordinary dividend policy in 2018, more than GBP 2.8 billion has been returned. Our existing distribution policy, returning 7.5% of net assets or at least GBP 250 million each year through the cycle also remains in place. What we're introducing today is an element of flexibility in how that amount is delivered. We will continue to return 7.5% of net assets split equally between the final and interim. However, from here, a minimum of 5% of net assets will be paid as a regular ordinary dividend with the remaining portion returned either via dividend or share buyback to be determined by the Board as most appropriate at the time. This added flexibility strengthens the policy and supports the long-term interests of all shareholders. Accordingly, today, we are announcing a final 2025 dividend of GBP 0.0295 per share, equivalent to GBP 105 million and a GBP 52 million share buyback, which will commence shortly. Taken together, this brings total shareholder distributions for 2025 to GBP 322 million, including the 2025 interim dividend. Finally, our fourth priority remains unchanged. We will return excess cash to shareholders when appropriate. So with the combination of good cash generation, a strong landbank and an invested WIP position, giving us everything we need to support disciplined profitable growth, it's clear that our long-standing commitment to funding the business first remains fully intact, and this evolution in policy is built on that foundation. So finally, turning to guidance. As you would expect, we remain mindful of the broader geopolitical backdrop, including recent developments in the Middle East. Our outlook today reflects the conditions we see in our markets at present and does not incorporate any potential impact from those emerging events given the uncertainty and the early stage of development. With our strategic approach to land and strong conversion into outlets, we continue to expect average outlets to be higher in 2026 than in 2025. Trading in the year-to-date has been encouraging, although we did enter the year with a slightly lower order book. Against that backdrop, we are setting U.K. volume guidance, excluding joint ventures at 10,600 to 11,000 completions for 2026. At our January trading update, we covered the 2 main moving parts impacting adjusted operating margin in 2026, and I'll recap those now together with one further relevant factor for 2026. Pricing in the opening order book was around 0.5% lower year-on-year, driven by bulk deals. We continue to see low single-digit build cost inflation and legal completions in Spain are expected to normalize this year to around GBP 350 million to GBP 400 million after 2 years of higher than usual output. Taken together, these factors are a headwind to profit margin in 2026 relative to 2025, and we, therefore, expect adjusted operating profit of around GBP 400 million, and we expect pre-exceptional net finance charges to be around GBP 30 million. As we said in January, U.K. volumes in 2026 are likely to be more second half weighted than usual with around 40% completing in half 1, reflecting the softer market conditions in Q4 last year. Given the half 1, half 2 phasing effect, we anticipate a larger half 1 cash outflow than last year, resulting in around GBP 0 to GBP 50 million of net cash at the half year with the half 2 weighting of completion supporting a recovery in the balance by the year-end. So in summary, I'm pleased with the group's performance in 2025, a strong and resilient result despite a changeable market backdrop. Looking ahead, our focus is on leveraging our excellent land position to drive outlet growth, which in turn supports volume growth, margin progression and enhanced return to shareholders over time. I'll hand you back to Jennie. Jennie Daly: So taking a step back then and looking at the market as a whole, we are pleased to see some signs of improvement and opportunity. Mortgage availability remains good with mortgage rates lower year-on-year and real wage growth supporting affordability, though still more challenged than in the years before the downturn. Unemployment remains at low levels. And although customer sentiment is lower generally, it has been on an improving trend. In addition to the budget uncertainty through much of the second half, last year was also impacted by a notable increase in the amount of secondhand stock on the market. And although we hope for improvement this year, we're also ensuring that our customers are aware of the benefits of buying new. Encouragingly, first-time buyer numbers are showing some signs of improvement, but remain well below the levels we saw before the downturn. Deposit building remains a real challenge for this group, particularly in the affordability constrained south. On the Section 106 affordable housing side of the market, securing partners remains a challenge. But despite that, we are in a good position for 2026 affordable deliveries. Overall, medium- to long-term drivers continue to look positive. And as a result, our medium- to long-term view of the market opportunity is unchanged. There is a long-term structural undersupply of homes in the U.K. However, we also now have a political commitment to address undersupply with meaningful interventions to support supply side bottlenecks such as planning and more on that later. So turning now to Taylor Wimpey and our focus on controlling what we can and driving value from it. A good example here is the performance that we're driving from our marketing platforms. Last year, we updated you on how we changed our marketing approach to target fewer but higher quality leads, and it's pleasing to see clear benefits of this. We've also improved the online experience for customers through optimizing media and website effectiveness. We are seeing good quality lead generation, a year-on-year increase in overall appointments, which is still the best indicator of future intention to purchase and better conversion rates. And finally, we are seeing good quality visitors with a strong intention to move, but decisions are taking time with customers visiting sites multiple times before commitment. Spring selling season is progressing well with our performance similar to this time last year, which you will remember as a strong comparator. The year-to-date net private sales rate compares well to this point last year. The last 4 weeks have been a bit stronger at 0.87, including bulks or 0.83, excluding bulks, and that compares to the same period in 2025, which was 0.82 with no bulks. Whilst this is encouraging, I think we should remain mindful of the weak trading in quarter 4 and that it is still early in the year. As we told you in January, our order book at the start of the year is a bit lower than the comparative period given the tougher trading environment that we saw in the second half of 2025. We had a strong Boxing Day sales campaign supported by proactive management actions, and we can see that the appointments taken in this period are now converting into sales in recent weeks. As a result, the order book has made some progress, and it currently stands at 7,678 homes compared to around 8,000 at the same time last year. As I said, customer sentiment is moving in the right direction. However, we are still seeing first-time buyers, especially those in the South, grappling with affordability constraints. As a result, incentives remain an important factor in gaining commitment and are running around 6%. Now over the next few slides, I'll show you the progress that we're making in driving a more efficient land position and liberating our strategic land pipeline through our assertive planning strategy. We're still at the relatively early stages of the new planning cycle. But as expected, we've seen some early improvements in decision-making because of the changes introduced by the NPPF at the very end of 2024. These pie charts represent a snapshot of expected outcomes for our assertive strategic applications as at February 2025 and February 2026. I think if you want a stat that really shows a shift in sentiment, this is a good one. At this moment in time, we forecast 49% of planning officers will make a positive recommendation on our assertive applications. That's more than double the 22% we saw at the same point last year. I would stress that this is a point-in-time snapshot of what is a dynamic process. So as applications progress through the various stages of planning consideration, such as consultation stage, we would expect the not known categories to crystallize in some numbers towards the positive. With a clearer and more consistent planning policy backdrop weighted to housing delivery, our proactive strategy is delivering. This clarity means that we are being more determinative in our approach to engagement at a local level. It also means that we are more confident in a positive appeal outcome than in past years, and we are choosing this route more quickly when local engagement routes are exhausted. And not on the slide, but in terms of overall applications, sentiment has visibly improved with positive planning progress or planning achieved on 71% of applications in 2025 compared to 58% the prior year. So against this positive and improving backdrop, how are we faring? So you will recall that I've been telling you for some time that we've had a very deliberate and targeted strategy since 2023 to get ahead, load the planning basis and now we are seeing results. We achieved detailed planning for over 10,000 plots in 2025, 28% increase year-on-year. On the chart that you can see on the left, while some of those applications have been in the system since 2023, many more were submitted more recently and have benefited from early progress following the NPPF. We also converted over 5,000 plots from the strategic pipeline in the year, not unexpectedly weighted to the second half and final quarter. Additionally, plots for first principal planning determination are continuing to increase, now standing around 32,000 plots, and we are progressing them through planning at a pleasing rate. At the investor and analyst update, we set out a number of set of applications that we intended to submit from our strategic land pipeline. Just to stress, these applications are over and above our business as usual planning activity. In October, we expected to submit 52 applications in 2025 compared to 20 in 2024 or around 11,500 plots. I'm pleased to say that our teams have worked hard and hit the application target, surpassing the plot count level. In October, we also talked about 17 set of applications being targeted for committee decisions. And this was a stretching target. And whilst applications came in slightly below, in plot terms, the numbers came in broadly in line. And we have since had a number of those delayed applications go to planning committees in 2026. So all in all, I think it's a good showing relative to our experience in most recent years. All this is key to driving outlets, and we are maintaining the momentum, which we will see in the next slides. We start from a position of strength, a strong short-term landbank sitting at 77,000 plots, which continues to give us the confidence that we can deliver growth without net investment in land. Our intention in the land market in 2025 was to continue to be selective and below replacement. In the year, we approved around 8,000 plots. And as you heard from Chris already, the average site size of those approvals was around 211 plots, in line with our strategy to target smaller sites. And the geographic distribution approvals nudged in favor of our Northern businesses. The land market remains uneven, but there are signs of gradual stabilizing as the flows of opportunity improve. Competition remains high for well-located deliverable sites, whilst more complex or lower-value locations see less competition. Investment is, I think, expected to remain selective in the near-term as landowner pricing realism continues to act as a constraint in some areas. We remain confident of delivery over the next few years. We already own and have planning for all of our 2026 completions and already own or control everything we need for 2027, almost all of which has planning. With the momentum we've outlined, we are on track to open more outlets in 2026 than we did in 2025 and expect average outlets to increase year-on-year. So now I'm going to run through a couple of example sites approved during 2025. Both examples are own sites that we've unlocked and I think reflect the tangible benefit of our assertive planning actions. They demonstrate the improving planning environment and illustrate how our mature strategic land pipeline is supporting early delivery during this period of planning opportunity. So you may recall that in October, Shaun White highlighted this particular site located in the Green Belt on the edge of Solihull. We have held this land for over 30 years. And I think a few sites demonstrate the maturity and value within our strategic pipeline or indeed the frustrations of the planning system quite as well as this one. The journey hasn't been straightforward though it was considered as a draft allocation in the early 2010s, the site didn't make it into the 2013 adopted Solihull local plan given limited Green Belt review. Though the site was not formally adopted, it was never dropped, but was identified as a draft allocation since the local plan review commenced in 2015. After various stages of consultation, the local plan journey concluded negatively in October 2024 when an inspector's report into the plan concluded that it would be found unsigned if pursued. So after nearly 10 years of effort, the council withdrew their plan. But the breakthrough came when 2 things aligned, our continuing local engagement and the emergence of the draft NPPF 2024. This caused an immediate shift in sentiment within the council, a council which now find itself under real pressure to deliver a 5-year housing land supply. In fact, as Shaun noted in October, whilst we had already worked to prepare an application, we were now actively encouraged by the planning authority, and we submitted an application in December 2024. This came against a positive backdrop, an updated NPPF guidance on Green Belt release and strengthened recognition of local housing need. What followed was a marked change in pace, engagement with officers and elected members was constructive throughout, and we secured a resolution to grant within 12 months. That is rapid progress in today's planning environment and a testament to the quality of the work from our team and the appetite of forward-thinking councils to approve high quality schemes on a proactive basis to support their housing need. We now move to the next phase. Reserve matters applications are underway and will be submitted later this year with an outlet anticipated late 2027. This site, I think, is a story of the commitment and our commitment to strategic land over the long-term, to partnership and being agile enough to act decisively when the environment shifts in our favor. And it represents exactly the kind of capital-efficient progress we need, land we have held for decades, unlock through determination, good timing and the strength of our relationships. And now a smaller site example, this one at Abbots Langley, another owned site, which was acquired in 1996 on Green Belt land now considered grey belt. We submitted a detailed application in July 2025, proposing 50% affordable housing. What made this possible was the constructive early engagement with the local planning authority. They encouraged a detailed submission in this instance because the housing need was clear and the authority could not demonstrate a 5 year housing land supply. And as a result, the presumption in favor applied, giving the application a strong footing from the outset. That clarity and national policy meant that our teams could move confidently and present a high quality scheme with the right evidence behind it. The shift in sentiment, combined with the planning reforms created an environment where good applications are now progressed quickly and Abbots Langley is a perfect example. We'll shortly begin work on site with an outlet scheduled to open in the second half of this year. So to summarize, the assertive planning strategy that we've pursued since 2023 is delivering results. The planning reforms have created a more decisive and supportive environment and where engagement is tougher, if updated, then the NPPF gives our teams the certainty they need to pursue an appeal route if required. The examples this morning give me confidence that the planning landscape is continuing to improve and that it will be supportive of our medium-term targets. So we outlined these targets to you in October last year, and this is our business focus. We remain both committed and confident in achieving these over the medium-term. During 2026, we will continue to focus on strategy execution and with improvements in results coming through over the medium-term. And as a reminder, this plan is predicated on current market conditions, so sales rates around the levels we've seen over the last 2 years. So you've heard today that our strategy is in progress and is driving returns on what has been a challenging environment over the last few years. We are a business with a strong balance sheet, excellent landbank and experienced teams, and we've ensured that we are ready and poised for growth. We are well positioned. Our planning strategy shows signs of early wins with continuing momentum in an improving planning backdrop. Day-to-day, we're focused on driving outlets, recycling capital and driving returns without net land investment. Thank you, and happy now to move to questions. Allison Sun: Jennie, Allison from Bank of America. Just 2 questions from my side. So first, can you give us a bit color in terms of the sales rate in January, February, like how it is progressing? And what's the driver behind that? And the second is, can you tell us how the incentive has changed maybe year-to-date versus last year? Jennie Daly: Okay. So I think in terms of what's driving the sales rate, probably different than we saw at the end of 2024 and start of 2025. we had a fairly subdued market in the final stages of 2025. I talked about sort of our leaning into the Boxing Day campaign. We had generated a lot of interest, but we were coming off a fairly soft start. So the teams need the opportunity to build the leads into sort of further engagement into site visits and then reservations. So it's perhaps not surprising that January was just a little softer given that sort of a slow start coming in from the tail end of 2025. And as I mentioned, we have seen sort of increased momentum in the last 4 weeks. So February, the last 4 week rate was 0.87 and excluding bulk was 0.83 against a comparator of 0.82. So month-on-month improvement there. And in terms of incentives, we're running at around 6% now. We are seeing that customers have an expectation of a deal. And there is, as I mentioned, quite a lot of inventory on the secondhand market. So there's customer choice. So using that incentive to support customer commitment. Zaim Beekawa: Zaim Beekawa, JPMorgan. The first is on the -- obviously, in light of no demand stimulus, some of your peers have done some shared equity schemes. Has a view changed there in terms of offering something similar? And then second, on the landbank evolution, Chris, I think you gave sort of the details on the margin bridge, but maybe some details as to how much that could impact completions in '26 also? Jennie Daly: Okay. I'll give Chris the landbank evolution question. We continue to look at various models in the market around sort of shared equity and others. We see them as quite expensive, both for the customer and for our balance sheet. And from what we can see in the market, they're not really driving sort of customer engagement. We have a very strong platform to engage with customers and to drive inquiries, which is working well for us at the moment. I would stress that we do continue to look at various models coming to the market, but we need to ensure that it is actually a benefit to the customer and that it also comes at a reasonable price to the developer. Chris? Chris Carney: Yes. And on the landbank evolution, I said back in October that our expectation was that the impact would be minimal in 2026. It would start to kick in, in 2027 with the lion's share in '28 and '29. Ami Galla: Ami Galla from Citi. A few questions from me. The first one was on the market. To an extent on the PRS side or on bulk deals, I remember that the broader backdrop was a lot more difficult in the second half of last year. How has that shifted into early this year? And are you seeing more sort of opportunities there to make bulk deals at a better pricing? If you could give us some color in terms of the sort of discount that you have to give on bulk deals, that will be helpful. The second question was just on the Section 106 process. The government has talked about a clearance mechanism. Can you give us some sense of how do you think that will pan out? And do you think that would help you as we think about the sort of second half and the order book beyond that? And the last one was just on the timber frame facility. Can you give us an update of how that is progressing? And how should we think about the utilization there? Jennie Daly: Okay. Just on the Section 106, Ami, to government clearance. Yes. Okay. We haven't seen any sort of material change in sort of PRS sort of activity or pricing since we entered the year. And we're seeing some fairly deep discounts being sort of presented sort of out in the market. So no shift that we are seeing. On the Section 106, although government have sort of made some guidance available, the frustration, if I can call it that, is that it is just guidance. It's not a directive, and it lacks a degree of punch that we need with local authorities who are unwilling to engage. We're actually making really good progress with local authorities who are willing to engage, and that's very pleasing. But we do continue to meet some fairly incalcitrant authorities unwilling to discuss potential cascade mechanisms, for example, for Section 106. So we would be still asking government for something that's genuinely a solution to drive that part of the market. But to just reconfirm, we are in a good place for 2026. And in terms of timber frame, it's progressing well. It's maturing. We're learning as we go, and I'm quite pleased with progress at this point, Ami. But it really will come into its own when volumes start to step up. It's intended to be there to support us through skill shortage and sort of more rapid growth period. Aynsley Lammin: Aynsley Lammin from Investec. I think I've got 3 as well actually, please. Just you flagged up again the kind of affordability constraint around first-time buyers, and there's been some noise again around the potential kind of fiscal stimulus support on the demand side for government. Just interested, I think you're always quite well plugged in. So interested in your view of where we might be there, where government's thinking is on a kind of Help to Buy type scheme. And second question, just interested a bit more color, I guess, on build material cost inflation, labor inflation, what the trends are doing there? And then thirdly, just on the kind of change of more flexible share capital returns, did you consider at all reducing the quantum? You still obviously seem very wedded to that 7.5%. And what's the criteria you'd use between kind of choosing dividends versus share capital return -- share buyback? Jennie Daly: Okay. I mean in terms of affordability, although we're seeing some improvements, we talked about the sort of variable difference between North and South. The wage growth and some improvements into -- sort of from the FCA and PRA changes last year have helped around thresholds, stress testing, income multiples. But in higher value areas where deposit building is still a very significant challenge and maybe add on to that stamp duty as well in some areas where entry homes are above the stamp duty threshold. So we see that the first-time buyer is still sort of heavily impacted. And I think that, that's playing out right across the market. The scale of the inventory sitting in the second half market. I think that the lack of activity from first-time buyers is part of the cause of that also. So we do think that there is a case, particularly now that we're seeing such progress in supply side, but continuing weakness in demand for some form of demand side stimulus. There have been discussions with government, but it would be too much to say that those are progressive at this point. And then in terms of sort of capital returns before I pass over to Chris for the build cost and maybe more detail around dividend, I think it's important to note that the overall distribution remains at 7.5% of net asset value. But that flexibility or sort of evolution, we think, is in the best interest of our shareholders at this point in time. Chris, do you want to pick up on build costs? Chris Carney: Yes, of course. So you saw on the slide today, 1% build cost inflation for completions in 2025. The exit rate that I mentioned, I think, in January was 1.5%. In January, we saw several manufacturers request pretty sizable increases, the order of 5% to 10%, well above inflation. We pushed back and many of those were sort of either withdrawn, deferred or partially offset through rebates, although we haven't been able to eliminate all of those increases. And the pressure is coming from sort of raw materials, energy, packaging and a little bit of labor inflation as well. So based on where we stand today, obviously, you can see we're guiding to another year of low single-digit build cost inflation, likely higher than the 1% that you saw on the slide. But we'll continue to aim to beat the market through improvement in our procurement practices and other self-help measures, including the benefits from the pull-through of the new house type range, but we would still expect build cost inflation to be above 1% in 2026. And just to follow-up on what Jennie said on the question on capital returns. We're in a very strong position, Aynsley, to grow output and volumes without needing additional investment across land and WIP as we set out in October. And yes, as you'd expect, the Board does regularly review the overall quantum of distributions in the context of our capital allocation priorities. And you remember what they are. The first one is maintain a strong balance sheet and the second is to invest in land and WIP to support future growth. And yes, if either of those constraints came about in either one of those priorities, then that would prompt to change, but we don't have that at the moment. William Jones: Will Jones from Rothschild & Co Redburn. Try 3 as well, please. First, just maybe extending on build costs. Could you just remind us at this stage of the year, what visibility you have in terms of cover for the year ahead? And maybe just expand if you can a little bit on those efficiencies and particularly interested in the house type range and where we are on rollout. Second was London. Could you give us a sense of either plots remaining completions, just some sense of the proportions there? And maybe if you could help on what the margin drag has been from London in '25 and potentially '26, just high level to think about as and when that reverses back out? And the last, maybe just around land and intake margins, and I appreciate you don't give kind of hard numbers anymore, but any color on as you've got migrated somewhat to the smaller sites into the north, how that's affecting the economics? Jennie Daly: Okay. Chris Carney: Yes. So in terms of build cost inflation and cover, yes, I mean, we are well progressed in those -- in that position. So over 90% of our materials are negotiated centrally. We don't -- we've moved away in recent years from having like a point in the year where they all get negotiated, but we have pretty good visibility for this year. So very comfortable with what I've outlined. I think it's worth just bearing in mind that we've been dealing with build cost inflation and little or no house price inflation for 3 years now, and that's been tough. And it has driven a real sort of step change in how we procure. We've expanded the number of categories and the spend that we manage centrally to maximize our purchasing power. We're retendering those categories more often. We've introduced rapid repricing, which lets us benchmark more quickly and secure better terms as soon as we see sort of signs of pressure from suppliers. And we've recently added e-auctions as one of the things that we're doing and the early results are very encouraging. And yes, where we have suppliers who are a bit in transient, pushing for unjustified increases, then if we have to, we'll switch supply. So we've made pretty meaningful changes in how we address the market conditions, and we're seeing benefits in that. In terms of the new house type range, it accounted for just over 1/4 of our completions in 2025, and that will rise to just under half in 2026. So obviously, those rollouts just take time to flush them through the landbank. And obviously, planning has been difficult. So now it's a little bit better than obviously, the pace improves. In terms of, pardon me, London completions and margin drag and all that sort of stuff, actually, it's -- I don't think you should necessarily think about it like that. It is all tied up in the landbank evolution that we've talked about. But actually, some of the London sites that they were procured a long time ago, and they've been delivered very well. So it's not quite right to just assume that they have a massive drag. Some of them are actually pretty good in terms of the margin performance. And the last one was... Jennie Daly: Yes, the landbank or the land intake, I'll take that I'll give you a rest there, Chris. I mean, look, we don't give sort of guidance or -- but I'm really comfortable the acquisitions that we made last year, good markets, good sort of intake margins, entirely supportive of our medium-term targets. Glynis Johnson: Glynis Johnson, Jefferies. Chris Carney: Yes, Glynis. Glynis Johnson: Nice to steal the microphone for someone else. Four questions, but hopefully, super quick. You talked about North-South in terms of approvals, a bit of a skew. Can you talk about the outlet openings? Do the outlet openings also have a North-South SKU? And does that make a difference? Second of all, in terms of incentives, one of your peers yesterday talked about stepping up incentives and stepping up quite substantially and was of the view that others would have to follow. Have you seen incentives move up as we've gone through February? Are you seeing any areas where incentives have stepped up markedly or competition as a whole step up? Thirdly, London, when do you need to take the decision about whether or not to do further bulk sales in London? What is the -- what are you looking for in London to say, okay, we can just sell out on a normal basis or need to do bulk deals, which you've already said PRS is at quite substantial discounts. Actually, I'll leave it there at 3. Jennie Daly: Yes. In terms of sort of outlet openings, we're a business that looks to support all our businesses. And I think that we've got a reasonably good spread sort of across our divisions of outlet openings. On incentives, I mean, I mentioned that incentives are running at 6%. I think that we're working hard on pricing, Glynis. It remains disciplined, and we're certainly aligned to the wider market rather than trading aggressively sort of for volumes. So we're working, as we always do, to balance price and sales rates without sort of sacrificing sort of value or sort of long-term value. We can see some movements. It's part of the every day. There's a lot going on in the markets. And so our businesses are mindful of sort of changes in behavior by others. But we'll continue to drive that really disciplined sort of balance and ensure that we're doing the right thing in terms of long-term value. And then in London, the decisions around sort of bulk deals, they're carefully balanced. They're relative to how we're seeing the sales market evolve. We're also mindful of the capital that's potentially locked up and where we think that, that capital is better recycled through a potential bulk deal. As you saw last year, we will make those decisions. But we remain very active in the private sales market also. So there's no plan as such, we will continue to watch the market, and we'll make judgments as we progress. But overall, our approach to bulks hasn't changed. Our preference is to do those on a planned basis. Alastair Stewart: Alastair Stewart from Progressive. A couple of broad-ish questions. First, on the market. You mentioned it's taking time to secure sales. Have you got any broad comparatives either in the overall length of time from first clicking on to the website and then finishing? Or is it a case of coming back and forward more often than in the past? And related to that, you said there's quite a lot of inventory in the secondhand market. Is a lot of that buy-to-let landlords trying to get out? So that's kind of the first question. Second question is on the Iran situation. Obviously, a week is not a long time. But are you getting any feedback from your sales outlets that the rank and file buyers are getting a bit jittery. And possibly on the other side, is this great exodus to Dubai tax [indiscernible]. Some of them actually thinking of getting back in a hurry and that in turn may actually support your London market. And finally, again, costs, any brick manufacturers or anybody else giving you gentle calls saying we've been noticing the price of gas recently, guild your lines for further increases. Jennie Daly: Okay. Quite a few things there. Alastair Stewart: Two questions. Jennie Daly: Yes, yes. I think there's 4, but we'll go. In terms of taking time, I mean, I think the overall time taken about 80 days from inquiry to reservation. Alastair Stewart: Sorry, what was that? Jennie Daly: 80, 8-0. And actually, that hasn't moved massively. The interesting point in the comments that I made was the multiple visits. So we're seeing customers coming back sort of more frequently than previously. And our teams are working hard with our customer group. In terms of the secondhand market, it's a good question. And we did do some work as we saw the secondhand inventory climbing sort of last year. It's not as simple as that. Yes, there's a couple of markets where you would say maybe buy-to-let landlords. But it's pretty pervasive, Alastair, right across the country. And I would take it back to you, you need first-time buyers to drive the whole ecosystem, and that's where I would put the issue. We're not hearing anything from customers as yet. And we haven't had any calls from any of the suppliers. And if they're listening, I don't want any are on gas. And a lot of them are hedged in the near-term in any event. And as Chris says, then we will make sure that we're sort of pushing back very hard on that. And whether there's opportunity sort of in this crisis, I'm going to say there's a human cost to what's going on in the Middle East, then I'm sure that our London teams will be sort of ready and able to talk to them. Rebecca Parker: Rebecca Parker from Goldman Sachs. Just wondering in terms of your outlets that you plan to open in 2026, how many of those have detailed planning consent? And then secondly, how are you seeing land market opportunities? At the moment I know that you were saying that some landowners, the pricing realism is acting as a bit of a constraint. And then thirdly, how should we be thinking about WIP as we go into 2026, just given that you do have that target to increase outlets? Jennie Daly: Okay. Sorry, could you repeat the second question? Rebecca Parker: How are you seeing land market opportunities just given that you commented that there was a bit of pricing realism acting as a constraint? Jennie Daly: Okay. I mean I think as I said in my narrative, we're in an excellent position for 2026 in terms of planning and in fact, in an exceptionally good position for 2027 as well. We are seeing, as I said, some stabilization in the land market. We are seeing more opportunities coming through in many of the geographies. Competition is stronger for sites that are sort of further along the planning process and in good quality locations, weaker where it's more complex, where planning is less evolved. But we talked about in an environment with build cost inflation and particularly with some of the regulatory costs that we're going to see sort of realizing over the coming year, ensuring that landowners are realistic is an important part in the market. And some of the other commentators, Savills and the RICS are seeing very similar sort of positions. And then WIP, Chris, can you take the WIP question? Chris Carney: Yes. So WIP at the end of 2025 was GBP 2.07 billion. And I think as we progress to the first half, it'd probably be somewhere between GBP 2.1 billion, GBP 2.2 billion at that point. Jennie Daly: Chris? Christopher Millington: Chris Millington at Deutsche. First one, I just wanted to ask about the medium-term targets. Obviously, the market has been a bit stop starting over the last couple of years. And recalling back to the CMD, it looked like the profile was to get you to those 14,000 completions by about 2029 based on the CAGR growth rate. Where do you think that is at the moment? Obviously, this year, we're looking at kind of 2% growth at the midrange. That's number one, just the timing about mid-terms. Second one is you've had a few questions around London, et cetera, et cetera. But could you just talk in a general sense kind of how North Midlands versus South has progressed over the last couple of years? And does it move up? And is there much of a margin difference between the 2, given the relative demand profiles rather than just picking out discrete parts of the market? And the final one is H1, H2 margins this year with volumes back-end loaded with the order book coming in a bit lower. Can you give us some feel kind of how that H1 margin can look? Obviously, we can do the sums over the full year and back out H2? Jennie Daly: Okay. If you will take the last one, Chris. I mean in terms of the medium-term, I think we were really clear when we spoke in October about 2026, not likely to sort of demonstrate sort of full growth, and we talked about the achievement of our medium-term targets not being linear. And we also said somewhere between 3 and 5 years. So I think that we remain confident. I've talked a few times in the narrative about remaining confident in the medium-term targets over that time frame. In terms of London differential, I think it's probably the same answer that Chris gave really. There are differentials. There's always been sort of differentials between our Northern operating businesses and in London. And it would be wrong to characterize all schemes in and around London as per schemes. There's definitely some challenge around sales in those sites, but some of them are performing fairly well on a relative basis. And then half 1, half 2 margins, Chris? Chris Carney: Yes. Yes, of course. So our half 1 operating margin in 2026 is going to be lower than half 1 operating margin was in 2025, which I think was 9.7% and that reflects 3 sort of key factors. We came into this year with underlying pricing in the order book around 0.5% lower year-on-year. Second, we've seen low single-digit build cost inflation in that 12-month period, we talked about that this morning. And third, obviously, we've signaled very clearly in the statement that the volumes are going to be weighted 40% in the first half, 60% in the second half. And that was due obviously to the softer market conditions that we experienced in Q4. And I think that means we expect to deliver around 30% of the group's 2026 adjusted operating profit in the first half. Christopher Millington: And can I come back really quickly? Not on the margin on the geographic split, proportional on completions. However you do split your geography, how much would you regard as North and Midlands versus below that or South of that? Chris Carney: Sorry, Chris. Christopher Millington: I'm talking about the proportion of... Jennie Daly: Yes. So [ between the ] segment, Chris as you know, I mean, it would be reasonable to expect everything sort of from Nottingham, Birmingham North is North and everything South is South. But we've talked about it's also gradations of. So it gets softer the further South you come. It's not simply just characterizing all of the South as impacted. There are some markets that are more challenged in the South. There are some markets in the North, which are more challenged. So I'm not happy to sort of strike a line and say that's North and this is South because it's a movable depending on markets. Christopher Millington: It's just -- it keeps getting referred to as being soft. And it's just to put context around that comment. Jennie Daly: Yes. Well, you just think of it on the basis of the further South you come, there's a gradual softening or look at it in terms of sort of pricing. Pricing is, as you come South as it increases, then it becomes more challenging. There are some markets in Kent where affordability is easier. They're doing really well. So I think it's just a way of sort of helping you understand the broad variables. Okay. One more. Kate Middleton: Kate Middleton, Panmure Liberum. Just a quick question on pricing. So I know you're speaking about stronger growth in sales prices in the Northern regions. But just wondering if you can attribute a particular ASP to the North versus London and the South. And then just a couple on sites. So guiding to net outlet growth. And obviously, you've said 211 plots per site is the average for the year. Wondering if that's just what you're continuing to target moving forward or whether that's due to reduce? And also with the outlet growth, are we looking at sites closing as well as opening at a greater rate? Or is the rate of site closure kind of staying relatively consistent moving forward? Jennie Daly: Okay. So we don't segment on an ASP basis, albeit we do give Spain on a separate basis. In terms of sort of average site size, so the 211 that we referred to was on land intake rather than outlet opening. We talked about targeting smaller sites. I think we were really clear in October, that's not small. It's sites that we can still achieve a volume housebuilder sort of benefit in. So 211 is pretty good. I'm comfortable with that. If it was a little bit lower, that would be good, a little bit higher, fine. And then in terms of outlet growth, well, the rate of closure is a function of the market. And so we'll see how the market sort of evolves over time in the coming months. All right. Well, thank you very much for your time today. I do know it's a busy -- it's been a busy results day. And Chris and I look forward to seeing you later in the year.
Operator: Welcome to Evogene's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evogene's management will constitute forward-looking statements that relate to future events. This presentation contains forward-looking statements relating to future events and Evogene Ltd., the company may from time to time, make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, the PSLRA and other securities laws as amended. Statements that are not statements of historical fact may be deemed to forward-looking statements. Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimate, intend and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers, commercialization efforts and timing, product development and launches, estimate market sizes and milestones, pipeline as well as our capabilities and technology. Such statements are based on current expectations, estimates, projections and assumptions, describe opinions about future events, involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance. Readers are cautioned that certain important factors may affect the company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this presentation. Therefore, actual future results, performance or achievements and trends in the future may differ materially from what is expressed or implied by such forward-looking statements due to a variety of factors, many of which are beyond our control, including, without limitation, the aftermath of the recent war between Israel and each of the terrorist groups, Hamas and Hezbollah, Iran and other regional terrorist groups supported by Iran and any destabilizations in Israel, neighboring territories or the Middle East region and those described in greater detail in Evogene's annual report on Form 20-F and in other information Evogene files and furnished with the Israel Securities Authority and the U.S. Securities and Exchange Commission, including those factors under the heading Risk Factors. Except as required by applicable security laws, we disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statements that may be made to reflect future events or developments or changes in expectations, estimates, projections and assumptions. The information contained herein does not constitute a prospectus or other offering document nor does it constitute or form part of any invitation or offer to sell or any solicitation of any invitation or offer to purchase or subscribe for any securities of Evogene or the company nor shall the information or any part of it or the fact of its distribution from the basis of or be relied on in connection with any action, contract, commitment or relating thereto or the securities of Evogene or the company. The trademarks include herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of our product or services. With us on the line will be Ofer Haviv, President and CEO of Evogene and Yaron Eldad, CFO of Evogene. Now I will turn the call over to Ofer Haviv. Mr. Haviv, please go ahead. Ofer Haviv: Thank you for joining Evogene's Fourth Quarter and Annual 2025 Analyst Call. In today's call, I would like to focus on the significant progress Evogene has made over the past year and to outline the strategic transformation we initiated to position the company for long-term value creation. Following my remarks, our CFO, Yaron Eldad, will present the financial results, and we will then open the call for questions. During 2025, following a comprehensive review of our technology, markets and capital allocation, we made deliberate choice to sharpen our focus and execution. This transformation was guided by a strong objective to direct Evogene resources where we believe we can create the greatest sustainable value. Today, our mission is clear and focused. to design novel, highly potent small molecules optimized across multiple parameters for drug development and ag chemicals by utilizing ChemPass AI, our computational generative AI engine. For this purpose, we implemented 2 core strategic decisions. First, we focused our technology development on a single computational engine, ChemPass AI. Second, we streamlined our business activities to concentrate exclusively on 2 high-impact markets where ChemPass AI offers strong differentiation, human health centered on small molecule drugs and agriculture focused on novel ag chemicals. These decisions led to determined actions across the company. We dedicated our computational capabilities to ChemPass AI, discontinued noncore activities, divested misaligned assets, resized the organization and established a business development team aligned with our refined strategy. I would like to elaborate on ChemPass AI and emphasize its competitive advantage for small molecules generation. ChemPass AI is designed to generate novel, highly active molecules while meeting the complex parameters required to meaningfully increase the probability of downstream development success. ChemPass AI competitive advantage lies in the powerful combination of the following 2 capabilities. The first, generating novel molecules based on vast chemical territories and the second, ensuring they meet demanding multiple parameters requirement from day 1. Our platform goes far beyond the chemical space the industry traditionally explores. Based on 38 billion molecules universe, ChemPass AI foundation model navigates vast diverse chemical domains that others simply cannot access. This enables us to design truly original molecular structures with strong biological potential and highly defensible intellectual property, opening the door to breakthrough products and new IP landscape. At the same time, precision is built into every molecules we create. Our AI engine simultaneously optimize a wide range of critical chemical, biological and physical parameters, tailoring each compound to the exact constraints and success criteria of the specific target product. The result is not just innovations, but synthesizable active molecules engineered from the outset to meet real development requirements, dramatically increasing the probability of real-world commercial success. This differentiation is supported by proprietary technological advancements developed by our internal team, guided by world-class scientific advisers and reinforced through multiple collaborations with leading technology companies, including Google Cloud with whom we are currently engaged in our second collaboration. Our first announced collaboration with Google Cloud was successfully completed in mid-2025 with a first-in-class foundation model for the generation of novel molecular product candidates optimized for multiple parameters by processing a database of 38 billion structures. We tripled our benchmarks for accuracy, delivering 90% design precision. Building on this, we were pleased to announce our second collaboration with Google Cloud initiated this February. We are now integrating advanced AI agents into ChemPass AI using Google Cloud Vertex AI to decrease manual errors and automate complex scientific workflows, aiming to improve our novel small molecule candidate probability of development success. This move towards autonomous discovery is key to advancing and scaling our capabilities for the support of future partnerships across the pharma and agriculture industries. To summarize the uniqueness of Evogene's offering, our product candidate combines 3 powerful capabilities: novel molecules generated based on vast and diverse chemical space, simultaneous optimizations for multiparameters requirements from the outset, highly potent molecules optimized through targeted experimental validation. We don't just design novel chemistry. We generate novel chemistry that performs. ChemPass AI is built on fully integrated partnership-driven workflow, forming our business model expressed in collaboration and in-house development towards proprietary product candidate. Our partners are engaged at every stage from joint strategic review through rigorous experimental validation and collaborative evaluation. Each project is custom designed to align precisely with each specific scientific and strategic objectives. I view this collaborative structure as a key strategic advantage for us, both in enhancing the likelihood of advancing proprietary candidate molecules with the highest potential to become successful products and in positioning Evogene as a true development partner, enabling participation in the product's future revenue stream. That brings me to this slide, demonstrating the implementation of our business model, summarizing Evogene's current achievements of which I'm very proud. In human health, we are advancing multiple partnered drug discovery programs with biotechnology companies and academic institutions. In this partnership, ChemPass AI is driving discovery and optimization of candidates that are progressing into testing with our partners. To date, we have publicly disclosed 4 such collaborations, and we expect such activity to scale with additional collaborations. These achievements were made within a very short time frame of several months, and we aim to present similar advancement during the remainder of 2026 and beyond. You are invited to visit Evogene's website and review our company's presentation for additional details on each of these collaborations. In agriculture, our subsidiary, AgPlenus, continues to apply ChemPass AI to development of novel herbicides and fungicides. The maturity and robustness of the platform are reflected through our strategic collaboration with Bayer and Corteva alongside a differentiated internal pipeline. We expect continued growth through the expansion of those collaborations and the formation of new partnerships. In our future quarterly analyst call, I expect to go deeper into these business engagements and update on new ones. To complete my part in today's call, I would like to send a clear message. The generation of proprietary small molecule product candidates is our mission. With ChemPass AI, our well-differentiated generative AI engine, disciplined capital allocation focused on high potential markets and a strong strategic partnerships, we believe Evogene is now positioned on a defined more focused path towards sustainable value creation. Our business aim for short and midterm is to become the partner of choice for small molecule discovery and optimization with pharma and big biotech companies for drug development and with multinational agriculture companies for ag chemical development. For the long term, Evogene aims to develop its own product pipeline, benefiting from the competitive edge of our proprietary technology. This is Evogene, combining cutting-edge AI with deep scientific expertise to generate real-world innovation. Thank you for your time and attention. With this, I conclude my part and will now hand the call to our CFO, Yaron Eldad, to present the financial results. Yaron Eldad: As part of the company's updated strategic plan, management implemented an organizational realignment and cost reduction initiatives. The effects of these measures are reflected in the significant decrease in operating expenses net, which declined to approximately $13.8 million for the year ended 2025 compared to approximately $22 million in 2024. The impact is also evident in the fourth quarter results with total operating expenses net of approximately $3.2 million compared to approximately $4.3 million in the corresponding period of 2024. The company expects this reduced expense level to be sustained in future periods. In 2025, Lavie Bio Ltd, a subsidiary of Evogene Ltd focused on agriculture biologicals, completed the sale of the majority of its operations to ICL. As a result of this transaction, Lavie Bio no longer maintains employees and its operation expense level has decreased significantly. Lavie Bio anticipates distributing the majority of its remaining cash to its shareholders, including Evogene during 2026. During 2025, as part of the company's updated strategic plan, we scaled down Biomica's operations and research and development activities and reduced its personnel to a minimal level. In early 2026, Biomica entered into a license agreement with Lishan Pharmaceuticals for its lead oncology candidate, BMC128. Following this transaction, Biomica does not expect to conduct further material operational activities and anticipates distributing the majority of its remaining cash to its shareholders, including Evogene. With respect to AgPlenus, we integrated AgPlenus, our ag chemical subsidiary into the core operations of Evogene with the objective of maximizing the value of our ChemPass AI platform for the development of novel ag chemical products. In alignment with the company's updated organizational structure, AgPlenus was resized and streamlined to reflect the revised operating model. During 2025, due to a significant decline in demand for castor seeds, Casterra AG ceased its operations in Kenya, reduced its headcount and overall expense level and is currently focusing its activities on the Brazilian market. As a result of these developments, Casterra recorded an impairment of approximately $2.2 million related to its seed inventory. This impairment is presented within cost of sales in the consolidated financial statements in a separate line item. In February 2026, Evogene entered into a warrant inducement agreement with an existing investor, providing the immediate exercise in full of its August 2024 Series A and Series B warrants, resulting in gross proceeds to the company of approximately $3.4 million before deducting placement agent fees and other offering expenses. In consideration for such exercise, the investor will receive in a private placement, new unregistered Series A1 and Series B1 warrants to purchase up to an aggregate of 5,076,924 ordinary shares. The new warrants are exercisable immediately at an exercise price of $1.25 per ordinary share. Cash position. As of December 31, 2025, Evogene held consolidated cash, cash equivalents and short-term bank deposits of approximately $13 million. The consolidated cash usage during the fourth quarter of 2025 was approximately $3 million. Excluding Lavie Bio and Biomica, Evogene and its other subsidiaries used approximately $2.4 million in cash during the fourth quarter of 2025. Revenues for 2025 totaled approximately $3.9 million compared to approximately $5.6 million in the same period the previous year, reflecting a decrease of approximately $1.7 million. The decrease was primarily driven by lower revenue recognized from AgPlenus' activity, which included onetime payment during the first quarter of 2024 and revenues recognized from the collaboration agreement with Corteva that was completed during 2024. Revenues for the fourth quarter of 2025 were approximately $0.3 million, a decrease compared to approximately $1.5 million in the same period last year. The decrease was mainly due to reduced seed sales generated by Casterra during the fourth quarter of 2025. Cost of revenues for the year ending 2025 was approximately $4.1 million compared to approximately $2.4 million in the previous year. The increase was primarily attributable to an inventory impairment of approximately $2.2 million recorded by Casterra during the fourth quarter of 2025, mainly due to its decision to cease its operations in Kenya as noted above. Cost of revenues for the fourth quarter of 2025 was $2.3 million compared to $0.7 million in the fourth quarter of the previous year. The increase in quarterly cost of revenues was mainly driven by the same inventory impairment of Casterra as noted above. R&D expenses net of nonrefundable grants for the year 2025 were approximately $8 million, a decrease of approximately $4.5 million compared to $12.5 million in the year 2024. The decrease was primarily due to reduced R&D expenses in Biomica, Casterra and AgPlenus. In the fourth quarter of 2025, R&D expenses were approximately $1.8 million, down from approximately $2.7 million in the same period of 2024. This decrease is mainly attributed to decreased expenses in Biomica. Sales and marketing expenses for the year 2025 were approximately $1.5 million, a decrease of approximately $0.5 million compared to approximately $2 million in the same period last year. The decrease was mainly due to reductions in Evogene and Biomica's personnel costs. Sales and marketing expenses for the fourth quarter of 2025 and 2024 were approximately $0.3 million and $0.4 million, respectively. General and administrative expenses for the year 2025 decreased to approximately $4.3 million from approximately $7 million in the same period last year. This decrease is mainly attributable to expenses recorded during the year 2024 related to a provision for doubtful debt for one of Casterra's seed suppliers as well as transaction costs associated with Evogene's fundraising in August 2024. Additional decrease is attributable to a reduction in Biomica's activity and personnel costs during 2025. General and administrative expenses for the fourth quarter of 2025 decreased to approximately $0.9 million compared to approximately $1.3 million in the same period of the previous year. primarily due to decreased expenses in Evogene and Biomica, as mentioned above. Operating loss for 2025 was approximately $14 million, a significant decrease from approximately $18.8 million in the same period of the previous year, mainly due to decreased operating expenses, partially offset by the decreased revenues, as mentioned above, and the higher cost of revenues, mainly due to an inventory impairment of approximately $2.2 million recorded by Casterra in the fourth quarter of 2025. The operating loss for the fourth quarter of 2025 was approximately $5.2 million, an increase from approximately $3.5 million in the same period of the previous year primarily due to the decreased revenues and increased cost of revenues mentioned above, partially offset by decreased operating expenses. Financing income net for the year 2025 was approximately $0.6 million compared to approximately $4 million in the previous year. The decrease in financing income net was mainly associated with accounting treatment of prefunded warrants and warrants issued in August 2024 fundraising. As a result, during the 12 months of 2025, the company recorded financial income net related to prefunded warrants and warrants of approximately $458,000 as compared to a financial income of approximately $3.4 million in the same period of 2024. Financing expenses net for the fourth quarter of 2025 were approximately $0.2 million compared to financing income net of approximately $4.5 million in the same period of the previous year. The decrease in financing income is mainly associated with accounting treatment of prefunded warrants and warrants issued in the August 2024 fundraising as mentioned above. Income from discontinued operations net for the 12 months of 2025 was approximately $5.7 million compared to a loss of approximately $3.2 million in the same period of 2024. For the fourth quarter of 2025, loss from discontinued operations net was approximately $16,000 compared to a loss of approximately $1 million in the fourth quarter of the previous year. These amounts primarily reflect the financial results of Lavie Bio's operations as well as expenses related to the development and maintenance of MicroBoost AI for Ag, which are presented as a single line item in the consolidated statements of profit and loss. Following the sale of the majority of Lavie Bio's assets as well as Evogene's MicroBoost AI for Ag to ICL, the company recognized a gain on sale of approximately $6.4 million which is also included in the income from discontinued operations net for the year of 2025. All prior period amounts have been reclassified to confirm to this presentation. Net loss for the 12 months of 2025 was approximately $7.8 million compared to approximately $18.1 million in the same period last year. The $10.3 million decrease in net loss was primarily due to decreased operating expenses and an income derived from discontinued operations due to the asset sale to ICL net, partially offset by reduced revenues, higher cost of revenues and a decreased financing income net. The net loss for the fourth quarter of 2025 was approximately $5.4 million compared to net loss of approximately $5,000 in the same period last year. This increase in net loss was primarily due to decreased financial income, decreased revenues and increased cost of revenues, partially offset by decreased operating expenses as mentioned above. Operator? Operator: [Operator Instructions] There is a siren in Israel. We will be back in a few minutes. Thank you for standing by. The first question, can you speak to the terms of the BMC128 license agreement with Lishan Pharmaceuticals? Ofer Haviv: This is Ofer. Sorry for asking you to wait. It's not a regular time here in Israel, we are -- everybody that participated in the call is in the same place at Evogene Office. With respect to this question, what I can disclose is that the agreement with Lishan includes a milestone payment, which is expected based on advancing the BMC128 in the pipeline or if there will be any commercial transaction that will generate value for Lishan so we will participate in this amount. And of course, revenue sharing from revenue the end product will generate. So this is what we can disclose. And in pharma, the numbers will be quite significant. So when this [indiscernible], it could be significant for Evogene. It could be quite significant for Biomica and Evogene as a major shareholders in Biomica is expected to benefit from it. We can move to the next question. Operator: Can you speak to the magnitude of cash potentially coming in from Lavie Bio and Biomica. To summarize, can you highlight investor catalysts over the coming 12 months? Ofer Haviv: So with respect to the cash expected from Biomica and Lavie Bio. So we disclosed the financial terms of the acquisition of the majority of Lavie Bio -- and MicroBoost and to ICL and what we have expected is that the cash that Evogene will have after this dividend distribution will satisfy our need for at least mid next year, maybe even more. But the current operation, the expectation is that even without additional financial transaction, we have sufficient cash for a little bit more than 1.5 years. And with respect to the catalyst that might took place -- so I think that I tried to describe it in my part. So you can envision 3 type of catalysts. The first one, additional technology collaboration with companies such as Google. What I can share is that we are talking with some other company in the same size like Google, where we are looking for a different opportunity to work together and leverage their assets and knowledge to the where we acted. And each time that such a thing happen, it really pushed the limitation that we are addressing with our technology to further and further. So this is quite important. And of course, it the attention of potential partners because it increased the evidence that what we are offering is something very unique if all of this mega, mega company is working with us. So this is one type of catalyst. The second type of catalyst is additional collaboration agreement with pharma companies or with biotech companies where we are going to use ChemPass AI to identify small molecules which bind to the protein of interest addressing multi actor criteria, novel chemical structure and with high potency. The first set of collaboration that we engaged with small biotech companies and institution. Now we are targeting for more and bigger type of tech companies. And we are also expecting that at least some of those transactions will inject cash to the company to Evogene even in the early stage to cover our expenses. So this is the first type of catalyst that you can think of. And the second type of catalyst you can think of. And the third is, again, collaboration agreement, but this time with other chemical companies -- we are talking with some companies in this field. The industry in the last few years didn't have a positive performance the market. And this has had a negative effect on their willingness and appetite to enter into a collaboration. But things start to change now and understanding that there is a clear need for innovation increase. And also I think that the performance that AgPlenus achieved in the last year, hopefully will help us to engage in some collaboration agreements with potential partners in this industry. So to summarize, 3 type of catalyst technology collaboration with companies like Google and others, then collaboration with midsized biotech and pharma companies and collaboration with other chemical companies. This is the main catalyst I'm expecting to share coming from the core business of Evogene as we see today -- we also have some other activities such as Casterra and some other legacy activity. But I prefer not to refer to them today because it's very important for me to make sure that it's very clear that what is the strategic avenue Evogene decided to go through and we truly believe this represent the highest potential for our shareholders for the next few years. Operator: There are no further questions at this time. Mr. Haviv, would you like to make a concluding statement? Ofer Haviv: Yes. I would like to thank everybody to participate in today's conference call. We are here in Evogene committed to achieve our targets I can assure you that all of Evogene employees are working from home or even coming to our offices. And I'm looking forward to continue to update you and share with you additional great announcement like in the last quarter. Thank you. Operator: Thank you. This concludes Evogene's Fourth Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Welcome to the Dürr conference call for the preliminary figures of 2025. I will now hand over to Mathias Christen. Mathias Christen: Thank you, Anna. Welcome to today's call, ladies and gentlemen. The corresponding presentation is available on our website, and I assume you have it in front of you. As you know, we published select key figures in an ad hoc release already on February 17. Nonetheless, there are still enough figures and news to share with you today. The figures usually relate to continued operations with some exceptions that will be marked. Our CEO, Jochen Weyrauch will start on Page 2 before Dietmar Heinrich, our CFO, will take you through the financials. Jochen, the floor is yours, please. Jochen Weyrauch: Thank you, Mathias, and good afternoon to all participants on the call. As the most important figures, as Mathias said, were already released, I would like to start with a wider perspective and share with you what I personally consider the most important achievements of 2025. Basically, we delivered on what we promised. We simplified our group structure and turned Dürr in a more focused technology company with only 3 instead of 5 divisions. This involves sharpening our focus on the core business, which is automating production processes and making them more sustainable and efficient or Sustainable Automation as we call it. In this context, we successfully sold the noncore environmental technology business with a high post-tax book gain of EUR 227 million. On top, we started resizing our administrative structure to adapt to a smaller scope of business and tackle cost savings of EUR 50 million. This was after the capacity measures at HOMAG, a further major step to systematically reduce our fixed costs. The effectiveness of our cost-cutting measures is being testified by the improved operating performance in 2025 that was achieved despite the adverse macro environment. Next is Slide 3. The improved operating performance is reflected by 100 basis points improvement of the EBIT margin before extraordinaries. At 5.6%, the margin even slightly exceeded the target corridor of 4.5% to 5.5%. The group's net profit of EUR 206 million benefited from the good operating performance and the high book profit from the environmental technology sale. At EUR 227 million, the book profit was higher than assumed, mainly due to valuation and currency effects. We met our revised order intake guidance, thanks to a strong finish [ to the ] year. In Q4, customers have more flexibly adapted to the uncertain environment and started to place large strategical orders again. However, I would like to underline that we might see quarterly fluctuations in new orders again as the macro volatility remains high. Sales stood at EUR 4.2 billion and we were not satisfied. But given the fact that we were facing customer-induced project delays, I would still call them solid. Free cash flow for the continued operations reached EUR 162 million and was appreciably higher than projected, mainly because of very high premature payments in Q4 that were expected in 2026. For 2026, we see potential for further earnings improvement. I'd like to talk about the drivers in a few minutes. Slide 4 shows the already released figures relating to the developments I just described. I would like to highlight that we managed to increase operating EBIT by 19% despite the slight drop in sales. This was mainly supported by 50% earnings increase at HOMAG and further improvements in Automotive from an already high base level. Moreover, we benefited from lower cost -- lower expenses for our OneDürrGroup synergy program that will be closed in 2026. On Slide 5, you see strong fourth quarters are not -- as you can see -- as we already mentioned a number of times, strong fourth quarters are not unusual at Dürr. Nonetheless, Q4 2025 was a really good one. As I already mentioned, the good levels of order intake and free cash flow, I would like to underscore the high 7.4% EBIT margin before extraordinaries, mainly resulting from an 11% margin in Automotive and an above 6% margin at HOMAG. Automotive's high margin reflects the division's best-in-class project execution and the effects of the value before volume strategy while HOMAG benefited from its self-help measures. Slide 6 shows that we met or exceeded all of our targets that has in part been revised in July. Please note that the low reported EBIT margin of 0.7% was influenced by high extraordinary expenses of EUR 204 million, while the book gain of EUR 264 million before taxes was not considered in EBIT as it is not attributable to the continued business. On the opposite, net income of the group includes the post-tax book profit and thus doubled to EUR 206 million. Slide 7 reveals the strong impact of the tariff conflicts on order intake in Q2 and Q3. In both quarters, new orders were almost EUR 300 million lower than they should have been in order to meet our initial guidance from March. Q4 included 2 major automotive orders from U.S. and Eastern Europe and the largest order ever for HOMAG in timber house construction equipment. This order from North America has a volume of not much less than EUR 100 million and underlines the outstanding market position of HOMAG when it comes to really large projects. Slide 8, please. The global distribution of order intake was well balanced. We saw the expected declines in those regions that we were very strong in 2025. That means Europe and particularly Germany. While the China share continued to decline, we benefited from higher dynamics in other Asian countries, especially India and Saudi Arabia. Slide 9 underscores that the sale of the environmental technology business was a really successful transaction. This is mainly expressed by the high book profit. Before 2018, [ these ] environmental technology activities were a low-performing business. Then we acquired our main competitor, MEGTEC/Universal, shaped an integrated global player with best-in-class technology and consequently created additional value. This value is reflected in the high book gain we generated from the sale. When looking at the lower table, please keep in mind that the 12% margin in 2025 is not an adequate measure for assessing the selling transaction as it includes EUR 9 million of positive nonoperating allocation effects. Let's have a look on the divisions, starting on Page 11 with Automotive. Looking at the 29% drop in order intake, please consider that the 2024 base was very high due to several exceptionally large orders. On the opposite, Q2 and Q3 2025 were exceptionally weak as automotive OEMs postponed CapEx decisions due to tariff-induced uncertainty. Q4 was appreciably better again with customers resuming strategically important projects. At constant sales, the operating margin exceeded last year's high level and reached a strong 11% in Q4. There were 2 decisive factors for this. Our excellence in order execution under the umbrella of the combined Automotive division and our value before volume strategy with its focus on margins, strong projects in the sales process. Page 12. At the Industrial Automation, order intake [indiscernible] were mainly burdened by the market weakness in the lithium-ion battery business. We restructured this business and transferred it to the Automotive division at the beginning of 2026 to make use of Automotive's execution strength. The negative EBIT includes impairments of EUR 135 million. Of this, EUR 120 million are attributable to the impairment of BBS Automation in July. Further impairments of EUR 15 million were recognized in the battery business in Q4, reflecting the weaker market outlook. A quick view on the other 2 businesses of Industrial Automation. Schenck's balancing technology business showed a very good earnings performance, while at BBS Automation, there's still room for improvement. We installed a new management at BBS at the beginning of 2026, headed by the former Chief Operating Officer of HOMAG. His task is to improve operating excellence at BBS and further develop the strategy. He has a great track record at HOMAG, and I'm very sure he will do a very good job at Industrial Automation and BBS as well. Speaking about HOMAG, the main message on Page 13 is that the division made excellent margin progress despite slightly lower sales and was able to much better cope with the difficult furniture market environment than in 2024. The margin increase of just under 200 basis points is the result of self-help measures and successfully reduced fixed costs. Order intake slightly grew on the back of the accelerating demand in the timber house sector. 3 years after the beginning of the market weakness in the furniture sector, it's still difficult to tell when there will be a real recovery. But what we know is that HOMAG is well prepared for it. Next is Page 14. Service sales were almost on last year's level, even though the uncertain environment prompted customers to temporarily be more cautious in their service spending. With this, I hand over to Dietmar, who will take you through the financials. Dietmar Heinrich: Thank you, Jochen. Ladies and gentlemen, a warm welcome also from my side. Page 16 basically presents figures Jochen already touched upon. Therefore, I would like to limit myself on shedding some light on net income. You can see 2 net income figures here. The first one is minus EUR 50 million for the continuing operations, resulting from the high extraordinary expenses of EUR 204 million, of which EUR 135 million were impairment driven. We will get back to this point more in details later on as well. On the second topic on the bottom, you can see the net income of EUR 206 million of the group as a whole. This additionally includes the post-tax book gain of EUR 227 million from the environmental technology sale. Slide 17 contains information on the quarterly and regional sales split which will certainly be helpful for your follow-up analysis. For now, I would like to directly jump to Slide 18 with the EBIT before extraordinary effects. As mentioned, operating earnings increased by a high 19%, spurred by a strong second half when HOMAG fully benefited from its self-help measures and Automotive contributed very high earnings. High margin towards the end of the year are a characteristic at Dürr. But the 7.4% in Q4 2025 are really remarkable and came close to our midterm target level of 8%. The main earnings driver in the full year was a gross profit increase of EUR 23 million based on lower material costs, good order execution and well-managed personnel costs. And this despite a sales drop compared to previous year. On top, we benefited from lower costs for the OneDürrGroup synergy program as well as from lower negative allocation effects of EUR 9 million. On Slide 19, we show the composition of the extraordinary expenses of EUR 204 million in continued operations. 2/3 were attributable to the impairments and will not lead to any cash out. The second largest item was cost of EUR 38 million for restructuring measures, mainly for the admin adjustments announced in mid-2025 that are well on track. PPA decreased from EUR 42 million to EUR 28 million. On the group level, the extraordinary expenses were opposed by the high book gain of EUR 264 million from the environmental technology transaction. Now let's turn to Page 20. Back in December, we announced that free cash flow would be in the range of EUR 100 million to EUR 200 million and exceed the original target of up to EUR 50 million. In fact, it reached EUR 162 million in the continued business. This resulted from very high customer prepayments before Christmas. We were often asked about the reasons for this. The answer has a lot to do with customers' balance sheet and cash flow considerations. If they expect lower cash flows in the year to come, they will bring forward payments to the old year to reduce future cash outs. Beyond high prepayments, free cash flow mainly benefited from lower cash outs for investments. Page 21 shows that we kept net working capital under respective 2024 levels during the complete year with very low days working capital of 27 at the year-end. While the business volume was almost constant with a sales decline of just under 3%, we strongly reduced inventories, receivables and contract assets. This shows that we are able to keep a decent level of cash in the company, which is even more important when macro uncertainty is high. I'm pleased to say that we saw strong progress in net working capital management at BBS Automation under the Dürr umbrella and that the Automotive division managed to further reduce net working capital to less than 0. Page 22 is next. In the group as a whole, free cash flow expanded to EUR 193 million. Based on this and the EUR 295 million proceeds from the environmental technology sale, we were able to reduce net financial debt by EUR 330 million to only EUR 66 million. This equals to a low leverage of 0.2 and brought back debt to the very comfortable levels before the acquisition of BBS Automation in 2023. My last slide, #23, is on ESG. I would like to point out 2 important facts in our climate reporting. The first one is a reduction of Scope 3 emissions by 27% in 2025. Scope 3 mainly includes emissions in the use phase of our products. 27% is an enormous decline. This figure illustrates the very high relevance of our painting equipment for reducing our customers' CO2 footprint. The reason for the strong reduction is that a large share of the painting equipment we commissioned in 2025 features low-emission technology. The prime example is the world's first paint shop to operate entirely without fossil fuels that we handed over to a customer in Europe. The second fact I would like to draw your attention on is related to the EU taxonomy. We were able for the first time to recognize sales from the spare parts and service business in our taxonomy eligible and taxonomy aligned revenues. This means that almost 1/4 of group revenues are taxonomy aligned compared to 13% in 2024. With this, I would like to hand back to Jochen, who will make you familiar with the outlook for 2026. Jochen Weyrauch: Thank you, Dietmar. Slide 25 expresses that we expect the high level of macro uncertainty to persist in 2026. And looking at the war in the Middle East, this assumption seems absolutely justified. Automotive, we see a solid pipeline with quite a number of CapEx projects in the field of painting and assembly technology. However, the lesson learned from 2025 is that predicting the timing of contract awards is difficult nowadays. There's enough new business out there, but we cannot rule out that projects expected for 2026 might be postponed. Industrial Automation continues to see good prospects in the medtech and consumer sector, while new business with auto OEMs and suppliers is expected to remain volatile given the slower pace of EV transformation. At Woodworking or HOMAG, it's difficult to predict when the furniture business will finally recover. From today's point of view, we would rather expect another challenging year. However, HOMAG is strong enough to cope with this, especially given the upward trend in the timber house business that will support utilization and sales realization. Page 26, please. The war in the Middle East additionally threatens economic stability. This increases uncertainty and makes the outlook for 2026 even more difficult. Provided that the war will not further escalate, but rather be finished in the foreseeable future and under the assumption that no other international conflicts put additional pressure on supply chains and economic stability, we can give the following guidance for 2026. Sounds like a little longer disclaimer this year, however. We see potential to increase both order intake and sales. In the best case, order intake could rise up by up to 8% to EUR 4.2 billion, while sales could expand to up to EUR 4.3 billion. Looking at the ongoing uncertainties and the fragile geopolitical situation, however, we also included the possibility of declining new orders and sales in the guidance. With respect to earnings, our target is to further improve the operating performance and to increase the EBIT margin before extraordinaries to up to 6.5%. This also requires that the world will return to a more stable state soon. Supporting factors from earnings increase in 2026 include further earnings potential at HOMAG, operating improvements at BBS Automation, positive effects from the capacity cuts in the administrative sector and the battery business as well as strongly reduced expenses for the OneDürrGroup synergy program. On the opposite, we expect a onetime burden of around EUR 10 million at HOMAG for the transition to a new ERP system and for ramping up a new factory in Poland that will yield efficiency improvements from 2027 on. For free cash flow, we are giving a guidance of EUR 150 million minus to EUR 0 million. This considers the advanced customer payments at the end of 2025, higher net working capital needs for 2026, the tax payments for the environmental technology sale and the cash out for the administrative adjustments. Moreover, there might be a payment resulting from a tax audit that we will have examined by court, however. Upside potential for free cash flow may arise from customer prepayments in the course of the year that are not yet fully foreseeable. Page 27, please. To keep it short, I would like to refrain from going into detail on the divisional outlook. When looking at this, please note that the shift of the battery business from Industrial Automation to Automotive at the beginning of 2026 and the transfer of the BENZ Tooling business to Woodworking. The joint sales volume of both businesses is around EUR 100 million. This brings us to the summary on Slide 28. 2025 was marked by the transformation of Dürr into a leaner group with only 3 divisions and full focus on automation and sustainable production. Alongside with this, we improved our earnings resilience. Our 2 largest divisions, Automotive and Woodworking, were able to increase earnings in an adverse environment based on operating excellence and self-help measures. Industrial Automation will go the same way and improve its performance under the new management. Order intake was impacted by market uncertainties in 2025, but there is potential for improvements in 2026, provided that the extremely high level of uncertainty that we are facing right now will not last too long. Sales should, if at all, only grow slightly in 2026, but are expected to accelerate more strongly again in 2027. Provided that the geopolitical situation will calm down soon, there are good prospects for further margin improvements in 2026 and beyond based on operating excellence and further cost reductions, for example, in administration. Free cash flow will probably be lower in 2026. However, given our business model, it makes more sense to look at the 3-year cash flow average as this smooths out the high fluctuations in customer payments. Our balance sheet is very solid, securing the funds to grow and further develop our business. In 2026, we will put full focus on further strengthening our efficiency and operating excellence, especially at BBS Automation. Large acquisitions should not be expected this year, but are an option to speed up top line growth beyond 2026. Ladies and gentlemen, thank you very much for listening. Dietmar and I will now be happy to answer your questions. Operator: [Operator Instructions] We have a couple of questions already incoming. We will start with the first question from Nikita Papaccio, Deutsche Bank. Nikita Lal: I would actually have 3. The first one is on your service part of the business. The share of revenues is fluctuating close to 30%. Are there any initiatives or planning to increase the share? The second one is on your margin guidance for your automation business. I understand that you installed a new management team, but could you explain in more detail the building blocks of the margin improvement in 2026, please? And my final question is on dividends. Maybe I oversee it, but any comments here would be really helpful. Jochen Weyrauch: Thank you for your question, Nikita. First on service. We have always ongoing initiatives for the service business. And it's a bit different by division. We have already a very good share of service revenues in Automotive, which we are further expanding with new offerings, for example, our spare parts in many cases now comprise RFID chips to make it easier for our customers to track the lifetime of our products on the one hand. But on the other hand, of course, make our business more captive as companies, let me simplify, like pirates are more difficult to work on similar spare parts. We use a lot digital products in the service system now partially based already on artificial intelligence. This maybe on Automotive. On the HOMAG side, we are developing because we have a very high installed base, a very complex installed base. We are developing very special standardized service and upgrade programs that will help to support the service there as well, just given a few examples. And as you can see on our Industrial Automation business, especially at the BBS side, is not so much used to a strong service business yet. There, we're really kicking off programs to benefit from the [ potential ] that's out there. So lots of programs. And this makes us really very confident that this business will grow. And actually, we've set this as a strategic target even down to our remuneration for the year. On the margin guidance for Industrial Automation, the blocks and improvements, Dietmar, do you want to cover a few topics where we see the improvements? Dietmar Heinrich: It's on one side, continuing the optimization measures that are already established. We will on the -- one impact have the -- negative impact from the lithium-ion business that Jochen mentioned before that was under stress, and we had to do the impairment actually is removed to auto. This helps them to lift already to a certain extent then the margin. The second topic is that we are working on operational excellence in project management that we are improving the footprint continuously. We are combining 2 locations here in Germany that are very close together. That's already agreed upon with the works council there so that we can realize synergies. So that's why we are finally confident that we can reach the margin improvement, but it's not yet where we want to go. So there are still further steps to come finally beyond 2026. Jochen Weyrauch: On the dividends, I think we have -- there is nothing to be communicated yet. So it's difficult to comment on it at this point. Dietmar Heinrich: But Nikita, maybe to add, Jochen, we have the guardrails of 30% to 40% of the net income, but you are for sure aware that in case of extraordinary charges, we did some adjustments. This year, we have, 2025, an extraordinary benefit. So we might consider this. But in general, we are a good friend of a continuous dividend policy. And of course, nevertheless, having our shareholders having a share of the -- or the income [ that is the ] benefit that we produce. So it's a very generic statement, I have to say. We will discuss with the Supervisory Board. And when we get out with the final report at the end of March, you will get information in that regard. Operator: All right. The next question is from Philippe Lorrain from Bernstein. Philippe Lorrain: So I also have like a few questions. So maybe if I can just follow up a little bit on the impairment that you were mentioning for Industrial Automation, if you can quantify that? And also with regard to the guidance that you provide per division, you give indications on the sales for 2025 in the lithium-ion battery system business and also for BENZ. But looking at 2026, what would have been like the kind of figures that you were anticipating for this in terms of order intake and also like the margin impact, maybe the dilutive margin impact on Automotive and the relative margin impact on Industrial Automation would help a little bit. So that would be the first question. Dietmar Heinrich: So Philippe, in regard to the impairment, just to make sure it's LIB that you mentioned. Philippe Lorrain: Yes... Dietmar Heinrich: Because I was still busy taking note, sorry for that. Yes, it's the market situation in the battery market in European market is very, very difficult. That's the area that we focus on because we have been of the opinion that we can gain business in the European market with the drive also for independency in regard to battery supplies in the European Union. We can see that from a customer perspective, this did not materialize finally. We could see the difficulties of Northvolt. We could see Porsche's announcement regarding their joint venture, Cellforce. And we do see that last year, the market in regard to new business was very, very low. At the very end of -- then we reviewed the business opportunities, we reviewed the business plan, and we came to the conclusion that for the foreseeable future, it's not going to build up then finally in the area that we really targeted. And we did then finally impairment of EUR 15 million. So the impairment as a whole is EUR 135 million. As I mentioned before, thereof the EUR 120 million for BBS that we already [ or PAS ] at that time that we already did at the end of the first half of the year and the EUR 15 million now in the fourth quarter for LIB. Philippe Lorrain: Okay. So the margin -- yes, sir. Jochen Weyrauch: Maybe to add to that - go ahead, Philippe. Go. Philippe Lorrain: No, I was just meaning -- so the margin step-ups come basically from the fact that we just reduced the amount of depreciation going forward? Jochen Weyrauch: Yes, it's also operational improvement. So we expect a significant -- after restructuring we've made in the lithium-ion business, we really expect even close to double-digit million improvement in the lithium-ion business as such operationally independent from any depreciations on the business. You were asking also on the dilution for the business, it's... Dietmar Heinrich: Based on last year, it would be around 70 basis points for Automotive in the margin. Philippe Lorrain: Okay. So basically, so if I take like the 7% to 8% target -- margin target range, sorry, for 2026, I would need to hike that by basically like around 70 bps. So more or less what you expect... Dietmar Heinrich: Philippe, when you look to 2020 figures, then you would go down from the 8.6% towards 7.9% in order to have it comparable. And in regard to 2026 guidance, as Jochen outlined, we want to bring back the figure to the breakeven or the business to breakeven for 2026. So the dilutive effect is significantly smaller. Jochen Weyrauch: More comes from volume. And you were asking about volumes, both businesses are in the magnitude of EUR 50 million or a bit more at the moment. Philippe Lorrain: So that was the order intake volume for the LIB. Jochen Weyrauch: Also order intake on lithium-ion was lower last year. We had a good 2024 with a large order that we're currently still executing and BENZ would be around the EUR 50 million roughly, yes. Philippe Lorrain: Okay. Perfect. Then I have like one question maybe on the large order that you had for timber house for HOMAG in Q4, if you can quantify a little bit that kind of impact? Jochen Weyrauch: Yes. That order was close to EUR 100 million in order intake is coming from North America. It will be executed this year and to some extent, also next year. And all in all, in that area, what we call [indiscernible], which is the wooden houses business, we had an order intake of about EUR 200 million last year, record order intake. Philippe Lorrain: Okay, including that order? Jochen Weyrauch: Including that order, yes. Philippe Lorrain: Okay. Perfect. I've got 2 more technical questions, so to say, for you. So the first one is on the announcement that you already preemptively make that you are to revise the 2030 sales guidance. So obviously, there's a need to adjust anyway for the sale of the environmental business of CTS. But are there any other reasons also that push you to do that, say, for instance, like the slightly lighter anticipation in terms of order intake for 2026 versus what could have -- one could have expected, so let's say, me, for example, in terms of growth and also generally like the cautious stance that you have with regard to the geopolitical situation? Jochen Weyrauch: All of what you're saying is valid in a certain sense. However, EUR 100 million up or down, maybe I'm a bit too generous now, in 2026 don't have much impact on 2030, at least I hope. So CTS is a valid discussion. We will be, of course, reviewing growth potentials, which currently we are really revisiting in order to, not too far in the future, redefine what would bring us to the EUR 6 billion or whether the EUR 6 billion are still the EUR 6 billion. Dietmar Heinrich: And Philippe, it's always including both organic growth and inorganic growth, which means acquisition, Jochen pointed out with -- on the presentation, you can see 2026 is on efficiency. But of course, for the future, especially when opportunities coming up to strengthen the business, we will seriously diligently look into them. Jochen Weyrauch: Within the core business. Dietmar Heinrich: Within the core business and with net debt being reduced to a level close to 0, we are also now having a good headroom again to act when opportunities are coming up in the future. Philippe Lorrain: Okay. So maybe you will actually stop targeting such a fixed figure, including, let's say, like M&A and so on and rather guide organically that could actually like be wiser, I guess, going forward? Dietmar Heinrich: We will take it into consideration. Philippe Lorrain: Yes. That's good. And finally, I've got a question for you, Dietmar, because you were mentioning the fact that contract assets were actually reduced. So to which extent do you manage to proactively reduce or keep that under control versus what is it that you actually cannot control? Because I understand there's always a relation between that item and also the sales recognition and the earnings recognition and actually, the market typically likes if contract assets are not too much inflated. So it's good news here, but we get that to be seen. But I was wondering whether there's actually like -- really like something that you can control versus something that you have to actually deal with. Dietmar Heinrich: Yes, you're right, Philippe, and looking into the number, we had a decline of EUR 84 million from end of 2024 to end of '25. So that's a significant decline. But basically, I would say the majority of this, we can manage. I think one of the reasons for this at the very end is in conjunction with the sales recognization, especially the excellent EBIT margin on the automotive side in the fourth quarter business. So a couple of projects have been completed. We had to -- or we could then finally realize the outstanding sales. We could realize then also the profit with releasing contingencies that we had in there, and that was also making a contribution to the drop in the total contract assets as well. Philippe Lorrain: Okay. Perfect. And if you don't mind just like a very -- like a little housekeeping stuff. So you mentioned EUR 10 million of cost for HOMAG for ERP transition. Is it going to be recognized below the line, so i.e., in earnings adjustments or within the guided margin? Dietmar Heinrich: We had internally some discussion, but let's say it this way, the Head of our Audit Committee is not too much a friend of it. Jochen Weyrauch: So it really goes bottom line. Philippe Lorrain: Okay. So in the adjusted EBIT still? Jochen Weyrauch: This is earnings before extraordinary effects. Dietmar Heinrich: And that's also -- Jochen mentioned that we had a decline or we expect a decline or had already a decline last year in the OneDürrGroup synergy program. In that regard, we stopped the one ERP approach, and we finally moved now to a brownfield approach regarding SAP R/3 to S/4 transformation that is division based. And we have on one side, the savings, and we have smaller amounts due to the brownfield approach than in the division, but it's reflected directly in the divisions, and it's shown there. Operator: The next question is from Adrian Pehl, ODDO BHF SE. Adrian Pehl: Actually, 2 questions left from my side. First of all, on the cash flow guidance that you gave, just to get a sense of what defines really the very low end and the upper end of that? Because if you take the 2 years together, i.e., 2025 and your, let's say, very low end of 2026, there's literally any -- hardly any cash flow left on an EBITDA of EUR 600 million. So that seems a very cautious to me, but maybe also the moving parts and building blocks would be interested on that number. And then secondly, on the regional developments, I mean, obviously, throughout the year, we have seen, in particular, China quite soft. And I was wondering also on the order side of things, actually now down to book-to-bill of 0.4 in Q4. First of all, how do you think of that business progressing? And secondly, is that due to a structure of Chinese rather buying Chinese products? So is that a structural thing? Or how should we see it? And then I might have a follow-up on the regional setup. Dietmar Heinrich: Shall I start with the free cash flow guidance? Adrian, in that regard, we mentioned that we received quite big early prepayments or payments in December from our customer side that had a strong influence. Remember that the guidance originally was 0 to EUR 50 million. Now -- then we increased, we got out now with EUR 162 million. Based on the past, maybe we sometimes could overexceed a little bit. So you can roughly say that we received around EUR 100 million more than we expected finally. And this, of course, is missing as a cash inflow in 2026. So that's why we are certain. On the other side, we will not, for ongoing projects, receive significant milestone payments because these earlier payments also to some extent are made. And then we have nonoperating cash outs like we mentioned for the tax on the environmental technology sale. We booked the net gain finally, but the tax payments will be made in 2026. And we have the expected payout from the tax audit in Germany that we are targeting or not targeting, we will have it examined by the court. We don't want to mention the number due to the tax authority not letting to know our real position on this, but we build up respective provisions. So no impact on the profit side impacted. And that's actually -- and of course, when orders are coming in towards the end of the year, we could have again the advantage that we get the initial down payments and then have a better cash flow development despite the fact that not much of the contracts as is being built up during that time. So this defines the upper and the lower end from a verbal explanation. Jochen Weyrauch: On the regional distribution, especially China of the orders, first, as a disclaimer, as you know, in many cases, we have orders that are triple-digit millions. So this can fluctuate over time. However, especially on China, where we've seen some declines, it is -- China is a very competitive market. And from what we see, it's not about in terms of winning the orders, at least in most cases, independent from whether you are local or not local. In fact, we are local for more than 30 years already in China. It is competition. And of course, the market after boom times around adding capacities with now dozens of producers that -- it's natural that the investments have been somewhat down. However, I can note that this year, we've already seen some upwind and book 1/2 orders in automotive, not the big orders, but activities there. So let's see what's happening. And China, of course, is the most competitive market on the planet. This is why we are also continuing to play there, especially to learn from them. And not to forget, we're using our own Chinese facilities to follow Chinese OEMs into the world. So if you look at China from a holistic point of view, it's a bit more than just the order intake mix. Adrian Pehl: Right. And more generally on that, I mean, how are you managing your capacities, in particular on the automotive side of things? So I mean, obviously, your overall profitability was solid in particular in the second half of the year. It looks like you are probably also assuming or selecting orders depending on the margin profile. Is that continuously the case? And how should we think of the margin profile in your order backlog going forward? Jochen Weyrauch: Yes. We have a healthy -- continue to have a healthy margin in the order backlog. And in many cases, with the excellence that we have in order execution, we turn or we even increase the margin that we have in the backlog when executing projects. Then in terms of capacity management, we are very much used still today to manage projects very globally. So when we -- just to give you an example, execute an order in Saudi Arabia, you would have colleagues from China involved, from Korea, from Italy, from Poland, from Germany and probably a few more countries. This is how we are used to execute orders, not saying independently from where they are, but to a large extent. And this is why we can manage capacities quite well. And second, also very important is that a lot of the P&L, especially in automotive, is purchased goods. So we are not so dependent in terms of load in factories because our value adding, our own value adding in terms of products is limited to the amount where we can differentiate with own IP. Operator: So dear ladies and gentlemen, there are no more questions in the queue at the moment. [Operator Instructions] And there is a follow-up from Philippe Lorrain, Bernstein again. Philippe Lorrain: So the first one would be on the extra cost that you had on the continuing business prior to the actual sale of CTS Environmental. So could you quantify that again for the full year of 2025, so we know what negative impact actually leaves the P&L? Dietmar Heinrich: This was around EUR 30 million, Philippe, as a whole, a smaller amount, low to 1-digit million euro, I would say, EUR 3 million to EUR 4 million was already in 2024. The remainder was in 2025. So that's the amount that we spent, and this was related to the carve-out preparation, which was quite complex and was then transaction-related expenses. Philippe Lorrain: Okay. But you had also this -- this also includes the impact of shifting the costs that were actually not recognized anymore in CTS Environmental, but rather in the existing continuing business also [indiscernible] all together? Dietmar Heinrich: That's correct. It recorded in the discontinued operations. Philippe Lorrain: Okay. Perfect. And second question that came to my mind as well, as you were mentioning Saudi Arabia. But with the current situation in the Middle East, so do you have any, let's say, like significant projects where you have works on the ground and so on? And what's the situation like there in this kind of scenario that we are going through in the Middle East? Jochen Weyrauch: Yes. We are -- Philippe, we're having 2 projects that are currently significant, the 2 projects in Saudi Arabia, but they are not at the Persian Gulf side in the East, but they are in the West, near Jeddah, King Abdullah Economic Zone. So far, first of all, our people are safe because we have the people there. We have all the plans to deal with the situation and escalate if necessary. And second, in terms of the supply chain, we're carefully watching. And where necessary, we reroute goods at this point. So, so far, we're not with a view on this region, expect any interruptions. What, of course, we have to carefully watch is our supply chain in general. And there, it's difficult to say at this point. It is what we said before, if this conflict is managed within the foreseeable future, we don't see a real impact. If it takes longer, we will have to see. Operator: Thank you very much. With that, since there are no more questions in the queue, I'm closing the Q&A session again and handing the floor back over to the host. Mathias Christen: Thank you, Anna. Thank you, ladies and gentlemen, for your questions and the discussion. If there are follow-ups, please don't hesitate to contact me. The full annual report will be published on March 26 and the Q1 figures on May 12. We are planning a Capital Markets Day in the course of the year as we are currently examining our midterm sales targets and working on a strategy update. For today, that's it. Take care. Goodbye.
Operator: Good afternoon, and thank you for waiting. Welcome to Rumo's Fourth Quarter 2025 Earnings Presentation. [Operator Instructions] This presentation is being recorded and simultaneous translation is available by clicking on the interpretation button. [Operator Instructions]. Before proceeding, we would like to reiterate that forward-looking statements are based on Rumo's Executive Board's beliefs and assumptions and information currently available to the company. These statements involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not materialize. We recommend that you refer to the disclaimer on the second page of the presentation. Now I'll turn the conference over to Mr. Felipe Saraiva, Rumo's Head of Investor Relations. Mr. Saraiva, you may begin the presentation. Felipe Saraiva: Good afternoon, everyone, and thank you for joining Rumo's earnings conference call for the fourth quarter of 2025. Let me start with the highlights on Slide 3 of the presentation. We closed the quarter with transported volume of 22.9 billion RTK, the all-time high performance in the fourth Q. For the full year, volume increased 5% as a result of structural gains in capacity and operational efficiency. The combination of higher volumes and disciplined execution with lower costs and expenses allowed us to maintain resilient margins. I would like to highlight the 11% nominal reduction in unit fixed costs. showing better productivity levels. Adjusted EBITDA reached BRL 1.8 billion in the quarter, an increase of 8% year-over-year. Investments were BRL 1.5 billion in the quarter, in line with our planning for the period. Financial leverage at the end of the quarter was 1.9x the net debt to adjusted EBITDA ratio, stable compared to the previous one. Moving to Page 4, I will present our market share in the quarter. Our market share remained at consistent levels, reaching 48% in Mato Grosso, 36% in Goias and 65% at the Port of Santos. It's important to note that the fourth quarter had an exceptionally high comparison base for market share. In the fourth quarter last year, export volumes were unusually low, which temporarily increased our market share in that period since we booked our capacity at the beginning of the season. Throughout 2025, we observed a normalization of the market dynamics with market share returning to more normalized levels since the second quarter of the year. Now moving to Page 5, I will share more details about this market dynamic in the Santos corridor, which is our main market. Let me start by reminding that the railway capacity is shared between the Goias and Mato Grosso markets, functioning as a system of communicating vessels. Grain exports in these markets increased compared to 2024, although still below the peak observed in 2023. In this scenario, we expanded our market share compared to 2023, supported by the efficient use of our capacity. I would like to highlight the operational flexibility of the railway with the simultaneous transportation of soybean, corn and soybean meal throughout almost the entire second half of the year, maximizing the use of our assets. In the soybean complex, we recorded volume growth and market share gains compared to the 2023 [ co-crop ]. In corn, the record production was more directed to the domestic market with higher carryover inventories at the end of the season. The railway remains the dominant transportation mode at the Port of Santos, reinforcing our key role in the transportation of agricultural commodities from the Midwest of the country. Moving to Page 6 with the operational indicators. We increased volumes in the Northern operation by 14%, which means more trains running throughout our system. Even so, we maintained stability in our main operational indicators, including transit time and dwell time at the Port of Santos. Regarding energy efficiency, we reduced fuel consumption by 2% with good performance in both the Northern and Southern operations. On Slide 7, I present the operational results and volumes. In the Northern operation, I would like to highlight the strong performance in grains with the simultaneous transportation of the 3 commodities and growth in almost all commercial portfolios. In the Southern operation, we also delivered a quarter of growth with highlights in the agricultural commodities portfolio. Moving to Page 8. Let's look at the highlights for revenues and tariffs. In the fourth Q, we continued the commercial adjustment that started in the second quarter of the year. It's important to remember that the 2024 comparison base reflected a scenario with higher expectations for the corn market, which did not materialize over the last 2 seasons. In this context, transportation prices are now reflecting more closely the actual dynamics and seasonality for our markets. I would like to reinforce our commercial strategy of maximizing value through the efficient use of our capacity. On Page 9, I present the quarterly EBITDA. EBITDA increased 8% in the quarter, reaching BRL 1.8 billion. In the Northern operation, the better performance in fixed costs and expenses in addition to tax-related benefits of roughly BRL 80 million helped to support stable results even in an environment of adjusted prices. In the Southern operation, the higher transported volumes offset the lower average prices during the quarter. In addition, we had tax benefits of roughly BRL 44 million, which also contributed to the quarterly performance. Moving to Page 10, we present the financial results and net income. Net financial expenses in the quarter were BRL 721 million, mainly reflecting a higher net debt base and interest rates. Even so, we delivered adjusted net income of BRL 441 million in the quarter and BRL 2.1 billion in 2025, both growing year-over-year. On Slide 11, we move to debt and leverage. The net debt at the end of the quarter was BRL 15.5 billion, reflecting the cash generation during the period. The financial leverage ratio was 1.9x, the same level as the previous quarter. Our liquidity position remains strong with BRL 7.5 billion in cash position at the year-end and a well-distributed debt maturity profile. As presented in the chart on the right, we have no significant maturities in 2026 and 2027. Additionally, we have BRL 2.7 billion in committed credit lines that remain undrawn. On Page 12, we present investments in the quarter. We invested BRL 1.5 billion in the quarter with BRL 490 million in recurring maintenance and BRL 973 million in expansion. At the Ferrovia do Mato Grosso project, we have accumulated roughly BRL 4 billion in investments since the beginning of the construction, with 80% of physical progress at the end of the year. Now let's move to Page 13 with an update on the soybean market. In the state of Mato Grosso, production is estimated at 52 million tons. Harvesting is progressing normally in the region, slightly above the historical average. Exports from the state are expected to be slightly higher than the last year with an estimated 33 million tons exported. Moving now to Page 14 with the corn outlook. Corn production in the state of Mato Grosso is expected to remain at a high level, close to 60 million tons. The expansion of planted area by roughly 400,000 hectares supports strong agricultural production levels in the state. The corn Safrinha seeding pace is also slightly faster than the historical average. Exports from the state are estimated at roughly 24 million tons with strong production levels offsetting the increase in domestic demand. This concludes my presentation, and we are now available for the Q&A session. Thank you. Operator: Joining us today are Mr. Pedro Palma, Mr. Guilherme Machado and Mr. Felipe Saraiva. Before we begin the Q&A session, Mr. Pedro Palma would like to say a few words. Please go ahead, Mr. Palma. Pedro Palma: Thank you. Good afternoon. Thanks for joining us on Rumo's earnings release call. I'd like to start by reiterating that 2025 was a solid execution year in our operation. We have proven our ability to break records and show our resilience and flexibility to navigate through different market scenarios. As Saraiva said, for instance, we had to operate products such as soybean, corn and soybean meal simultaneously during the second semester. We also made significant progress in our efficiency agenda, both energy efficiency, proving the value of rail engineering and the use of technology that have allowed us to use 135 cars in the North operation improving the whole logistics network and reducing fixed costs and unit SG&A, showing our discipline in reducing company costs and also improving structures and processes. These are inherent values to our culture, and they will continue to be strengthened looking forward. According to our plan, we also made all the planned investments for the year. I'd like to highlight the progress in Phase 1 of the Mato Grosso Railway as we announced in the material we shared with you yesterday. So 80% physical execution halfway through the year and on track for what we had mentioned. The main challenge in the year, and this is no secret to you, was the market environment. We had to do some tactical price repositioning, especially in the grains market, and we concluded that repositioning now this quarter in 2025. To remind you of what happened in the tariff scenario and providing a bit more detail on the North system, we increased prices by approximately 70% between '22 and '24. When we started '25, in the first quarter, we realized that we were too expensive compared to other logistics alternatives. So we had to do some pricing repositioning to adjust our pricing level to market levels to make sure that we could continue to be the best, most suitable competitive solution to be the first choice in logistics for the clients and markets where we operate. We're confident that now we are at a more suitable pricing level. We're working on our value creation -- long-term value creation agenda at the company using our available capacity intelligently. And we also believe in the positive structural side of our market. Rumo is a single logistic platform because of the position of our railway and our terminals, and we operate in the best markets such as Mato Grosso and Goias, where there's growing demand and Rumo has the ability to lead in logistics solutions to meet that demand. One point I'd like to mention is safety, which continues to be a nonnegotiable value to us. In 2025, we restructured all of our safety and security process management. We reduced our incident frequency rate by 40%, both with lost time and no lost time and safe operations are productive operations. We still have some work to do. For instance, the rail security, there have been some events. You may have seen it in the media in the second half of the year. We did have a couple of events that led to a rail incident frequency above what we had expected. But rest assured that all of the events have been analyzed in depth and all the lessons learned have been brought in-house and there was nothing structural in common among all those incidents, but each one of them was a lesson learned that will make us more resilient, more safer and more secure. As I said, safety and security is not a priority. It is a value that we will always continue to pursue. And as for the bottom line, I'd like to reiterate how solid our balance sheet is. We have been efficient in raising funds in the financial market. We raised close to BRL 4 billion in new funding lines, reimbursed credit lines or undrawn credit lines, which ensures financial instruments at a very competitive cost and with a long-term maturity profile. So that will allow us to manage any turbulences with peace of mind. So the company is concluding the year with a very solid balance sheet, relevant operating indicators, very liquid cash position and a great position in terms of investments execution profile. Looking forward, before we move on to the Q&A session, you've seen our volume results in January and February. We started off the year with solid volumes in both operations, both North and South, which makes me excited and confident with regards to the plan we'll be executing on in 2026. And absolutely sure that the company is ready to continue with its agenda to execute and profit from the investments that are being made. Now let's move on to the most interesting part of the presentation, the Q&A. Myself, Guilherme and Felipe are here to take your questions. Have a great afternoon. Operator: [Operator Instructions] First question is from Mr. Lucas Marquiori from BTG Pactual. Please go ahead, Mr. Marquiori. Lucas Marquiori: Based on your disclosure and your comment on the pricing repositioning, Pedro, I understand that you've concluded the tariff repositioning process. So what exactly does that mean now going into this new year? What kind of tariff competitive process are you considering for the Q1 or first half of the year? We've seen road transportation now coming to life, especially at the beginning of the year. So I'd like to understand what your commercial dynamics will be in terms of tariff repositioning that you mentioned for Q1 and Q2 so that we can model it. Pedro Palma: Lucas, thanks for the question. This is Pedro. I'll take your question. Well, we concluded repositioning in this last quarter because we had reached the execution and pricing level that would attract the volumes we expect. So what does that mean for 2026? Let me try and explain. In Q1, obviously, you know that there will be a price reduction compared to the first Q '25 because we started repositioning in Q2 '25. So the comparison basis with Q1 last year is not a great comparison basis. And we said that before because we were clearly outside the right pricing level according to market levels. Now to be specific in terms of what we expect to show in Q1 '26, there will be a price reduction compared to the amounts we were operating with in Q1 '25, that will be just over 10%. So obviously, that will depend on the execution. We are contracted, and that's another point. We are contracted for the whole of Q1 and practically Q2. But in our execution, there is a mix of regions, mix of clients, mix of products that may affect the end price level. But the pricing level that you will see when we publish our -- when we post our results for Q1 will be roughly a 10% reduction compared to Q1 '25. Now moving on to Q2 and consistent with what I said that we started repositioning in Q2 then things, prices should become more stable, which goes to my point, that's when we'll conclude the pricing repositioning process. So all the price changes that we did in '25 were enough to balance our competitive positioning, both -- so I'm not expecting any great pricing variation in terms of Q2 last year. And we have also been able to contract prices for Q1 that are very healthy. Obviously, there was some carryover to the beginning of '26 at the end of the year, but it was the risk of contracting the discussion with our clients in a very healthy environment. And it was all very natural. Also looking at Q2, Lucas, obviously, the second half of the year actually. As you know, those dynamics will depend on the corn dynamics. Corn tends to be a more uncertain crop. So obviously, that means a bit more -- a bit less contracting from clients. So for the second half of the year, we still have relevant volumes to be sold, but we are at a comfortable level for the second half of the year. And in terms of pricing, they are balanced with our prices in 2025, once again, reiterating, and that's why I made that statement. I consider the repricing to be concluded not only because we had reached the right price, but because contracts are coming at the pace that we believe is consistent with what we expect in order to execute on our plans. So the first half of the year is solid. We've made good contracts on track with the prices that we had planned and at price levels that we believe to be suitable for the second half. Everything we've already sold has been sold for the right prices, in line with what we executed on in 2025. And the continuation of the sales process will depend on time the sale dynamics, what happens in the market and our crop projections and our competitive positioning in the logistics market. Operator: Next question is from Mr. Andre Ferreira from Bradesco BBI. Andre Ferreira: Pedro, Guilherme. Thank you for providing us with more on that second question. In terms of CapEx. Could you tell us what the CapEx for 2026 might be and how it will be distributed across your main projects? And what are your expectations for the second phase of the Mato Grosso expansion? Guilherme Lelis Machado: Andre, thanks for the question. This is Guilherme. For 2026, we'll continue with our investment portfolio at the level we had planned. Obviously, the company has been watching market movements in terms of cash generation and cash consumption. We did make an adjustment, and it means that the CapEx level we will be executing in 2026 will be less than the 2025 CapEx, but higher than the 2024 CapEx. So it will be between those 2. And obviously, we'll continue executing on the company's main projects. As we had been saying to you, this will be an important year for us. We'll conclude the Mato Grosso Rail Phase 1. We're going to conclude the main milestones on the tracks and the terminal. We'll also continue with our investment programs in maintenance, which is roughly BRL 2 billion. We're also investing in rolling stock to meet the volume increases that will take place in our operation and -- we also have some investments in our operation as a whole, which includes the construction work schedule in the Paulista network, investing in Fips around the Port of Santos. These are all very important continue to increase productivity in our operations. So as I said, our CapEx this year will be less than last year's, but we won't lose traction in our projects. Let me just say that at that CapEx level, I'm sharing with you now, will include the conclusion of the first phase of Mato Grosso. We haven't planned anything for Phase 2 of the Mato Grosso rail yet. That's under discussion. The company is looking into it, but we don't foresee any investments in the second phase yet because we're still assessing the project. but we are keeping to our schedule. We do have flexibility in that contract, and we are complying with all the metrics in the project. Operator: The next question is from Mr. Guilherme Mendes from JPMorgan. Guilherme Mendes: Pedro, Guilherme, Saraiva. The first question about the contract phase in the first half of the year is very clear. Now in order to understand things in the context of the conflicts in the Middle East, we know that, that's an important region for the demand of Brazilian corn and fertilizer imports. Now this conflict started a few days ago. Have you noticed any change in the pace of contracts for the second half of the year? And maybe looking at the future, how much do you think this conflict might impact on the volume to be contracted for the second half of the year? Pedro Palma: Thanks for the question Guilherme. This is Pedro. Let me answer your question. First of all, the Middle East in terms of operational continuity and supplies is not relevant. So it doesn't mean any relevant risk to our rail. So I just wanted to reiterate that we're not concerned about that. As you put very well, Iran's relevance more specifically in the Middle East, the Brazilian agricultural market finds it relevant in terms of corn export as a destination for the second half of the year. It is relevant. Iran is for the Brazilian corn. It does vary from year-to-year. Last year, they bought a lot, 9.5 million tonnes. The year before, it was 5 million tonnes. So corn has a very capitalized, very fragmented market by nature, which is different to soybean. China is the main client of the Brazilian agricultural soybean. Corn is more capitalized. But Iran is a relevant destination for corn exports. But again, it's a relevant player for exports in the second half of the year. So to be very transparent, my crystal ball is as good as yours. So we're going to have to monitor things to understand how long this conflict will last, what kind of an impact it will have. Looking at current data, historical data, I wouldn't say that it won't cause any relevant problems to Brazilian agriculture, but we'll have to monitor the situation. Obviously, ourselves and the whole market will be monitoring it. As you said, Middle East also supplies some fertilizers to Brazil. And those global logistics networks, they end up changing when those impacts happen. The resilience in global commodities is considerable. You can have an impact on the cost of commodities on prices, but markets that need that product will find a way to meet their needs. So to us, we believe the company's figures will materialize. But obviously, it is a relevant conflict, and we'll continue to monitor it. But right now, we don't believe it's going to be a major problem. We're not terribly concerned about what's happening there and its impact on the company. Operator: Next question is from Mr. Gabriel Rezende from Itau BBA. Gabriel Rezende: Pedro, Guilherme, Felipe. I have a follow-up question about geopolitics, but it's more about fuels. It's clear that Petrobras' pricing practices parity are quite detached now if there is a price adjustment on internal fuels, what do you think is going to happen? If fuel prices go up, do you think there will be more pressure on the margin considering the company is contracted for Q1, but will you consider more take or pay for the second half of the year? How do you see that dynamics? Do you think it could be a net positive for the company? And will it help offset the effect you just mentioned on fertilizers and corn exports. Felipe Saraiva: Gabriel, this is Felipe. Thank you for your question. The impact on Rumo will be mainly diesel. That's the first point we should clarify. We need to look price fluctuations in oil tend to affect diesel prices. So how does pricing dynamics work for Rumo? All volume margins that we have with our clients, both to transport general cargo or grain transportation have a protection mechanism. So we can pass on any fluctuations in the price of fuel. So for the whole volume that's been contracted, we are not exposed. We have a natural hedging mechanism that protects the company's margin in terms of passing on the price. Obviously, that will depend on market conditions. If fuels become more expensive, then rail becomes more competitive because the energy efficiency is better than other corridors that depend on road transportation. If it's not clear, let me know, and I'll try and rephrase my explanation, but that's how we see the fuel dynamics. Operator: The next question is from Mr. Rafael Simonetti from UBS BB. Rafael Simonetti: Pedro, Guilherme, Saraiva. It's about working capital. Now looking at 2025, there was a significant variation compared to 2025. Could you please comment on the main factors that explain that? And also what we can expect for 2026. Guilherme Lelis Machado: Rafael, this is Guilherme. Well, from quarter-to-quarter, there's always some phasing -- sometimes they haven't materialized or they are materializing in terms of cash conversion. And there are many topics, but if I focus on, one, the activation of some extemporaneous tax credits that we had over the year. And the monetization dynamics wasn't exactly as it's passed on to the results. So suppliers, clients dynamics are predictable. We know how they work. It's all very healthy. And there are some specific elements that took place that led to that mismatch, but nothing concerning or nothing that changes the dynamics of our working capital dynamics? Operator: The next question is from Mr. Bruno Amorim from Goldman Sachs. Bruno Amorim: I have a follow-up question about the Mato Grosso extension, please. Over the year, how can the extension contribute with volume? Do you think it can make a relevant volume contribution over the year? And for the next years, how are you going to ramp up the use of that capacity? In terms of Mato Grosso. If you're not going to invest in Mato Grosso Phase 2, and you were going to spend about BRL 2 billion a year on the expansion, then there should be a BRL 1 billion reduction in this year's CapEx compared to last year. I know that there are many moving parts, but -- your CapEx is pointing to a CapEx that's closer to BRL 6 billion than BRL 5 billion. And if we take away BRL 1 billion from last year's CapEx, it will be closer to BRL 5 million. So if you can help us reconcile those points. Maybe there's another project that's ramping up this year. Unknown Executive: Bruno, thanks for the question. As for the first part of your question, yes, the beginning of operations of Phase 1 will happen in Q3. Then we'll have the commissioning phase, the beginning of operations. We'll do it gradually, and we'll be very careful about it. We'll begin to move some volume at the BR70 terminal more consistently in Q4. And the main thing is that the company's current capacity would already be enough to move all that volume that will transport in 2026, which will be more than 90 billion RTK in terms of where we want our operation to be. So the terminal will make its contribution. However, it won't bring any substantial additional capacity. So the portfolio we have right now would be enough for the volume. Now as of 2027, yes, there will be more of an inflow to that terminal, and it will grow as the market grows. Let's not forget, there are 10 million tons, and we want to fill up that capacity. And the volume of our operation should be at the same level as the market grows. Now in terms of our investments, yes, we will continue to make major investments in the company to conclude Mato Grosso Phase 1, that will be roughly BRL 1 billion. approximately. And as I said previously, we'll continue with our plan to make recurring investments in maintenance that will be BRL 2 billion. And there is an increase in investments in rolling stock that's considerable. Over the last few years, we have been increasing our asset pool, but in structures that weren't necessarily the direct use of company funds. We did establish partnerships with clients. We will now resume investments in rolling stock using company capital. Now also to pay for the Paulista Network program, we'll also need to increase investments. So it's not a straightforward math. In our investments mix, there are also increases in other investments in the portfolio that have placed us in that position between '24 and '25. Operator: The next question is from Mr. Rogerio Araujo from Bank of America. Rogério Araújo: Now still on your tariff repositioning dynamics. If I could ask a couple of follow-up questions. First, if you hadn't repositioned your prices, would those volumes have left through other corridors, or would it have stayed in Mato Grosso? Second question, could you talk about Rumo's rail gap compared to other transportation mode alternatives, other corridors? And also what kind of freight price floors can we consider. What would be a level that would make the company comfortable to believe that you've reached the right level. Felipe Saraiva: Rogerio, this is Saraiva. Thank you for your question. It's hard for the company to try and work out in hindsight what would have happened, what would have happened if we had positioned it this way or that way. I can tell you what we did do, what we looked into and what variables we took into account. We started 2025 with the company more expensive than other companies in Mato Grosso and around Mato Grosso. We are more expensive than other logistics solutions. So as we said, we repositioned it by roughly 10% as of Q2. Once we repositioned the prices, our market share level normalized, and that's the indicator that the company prices are now level with market levels. If prices were below -- too far below the competition, then that market share might have been much bigger than it was. So the way we look at it and what we estimate for -- from the competition and what we want in terms of market share for the company suggests that we are at an average competitive level in terms of origins in Mato Grosso. Now for 2026, looking at the first half of the year, it suggests that our price is competitive, and they were good for the clients that decided to use rail transportation. If there's any need to change tactics, the company is always open. We are consistently monitoring the market to position rail transportation competitively. That is the priority. We need to make sure that we are occupying our capacity efficiently and always fitting it with the market reality. If there are capture opportunities in the market, we'll capture them like we did last year. If we need to reposition again, we'll keep an eye out for that. That's it, if you'd like anymore explaintions, we'll be here. Rogério Araújo: That's very clear. Operator: The next question is from Mr. Daniel Gasparete from Itau BBA. Daniel Gasparete: I have a follow-up question to Pedro's comments. I just want to double-check the number. Did you say 10%, a little bit less than 10% for Q1. So I just want to double-check that. And then I'd like to talk about the West Network. How are discussions going? And the last one, if I may, is a bit more qualitative. How are you thinking in terms of commercial policies? Saraiva's comments were very clear. And based on what Pedro said, last year, the company had higher prices than other modes of transportation. So how are you thinking about your prices prospectively to protect yourselves from movements like that in the future? Or is it just a price sake, that's the reality of life, and you need to optimize what you can in terms of cost? Unknown Executive: Thank you for your questions, Daniel. Now I'm going to answer your question about the West Network. Now to be transparent, we've been saying this to the market, and we've been discussing it with the government. And the natural way forward would be to return the asset to the granting authority. That is a concession that we have been aware that hasn't been operating at the right level. We reconditioned the last operation we had in the West Network. Right now, that operation has basically been interrupted. There are no volumes being transported. The last contract has terminated with the last remaining client. We're not allocating any funds to that operation. So the next natural step will be to continue to talk to the government to formally return the asset. And we are doing our best to move diligently in that process. There are no news, nothing new to share with you, and this should happen this year. And the contract will end halfway through the year. So we're not allocating any funds to that network. We won't be allocating any funds as of the second half because the operation has been suspended. So we'll now just formally return the asset to the granting authority. Pedro Palma: This is Pedro now, Andre. I'll take your question about the commercial policies. Just to clarify my comment just over 10% price reduction in Q1 2026 compared to Q1 2025. I'm talking about the North operation consolidated yield specifically, which is the most relevant piece of data in our balance sheet. So that's it. The RTK in North operation in Q1 '26 compared to Q1 '25. In terms of our commercial policy, Daniel, to be very candid with you. I used the expression tactical readjustment, tactical positioning because our strategy hasn't changed. We haven't changed our commercial policy. Our policy has always been and continues to be the most competitive logistics solution or competitive in markets where we choose to operate to ensure that we can use our capacity efficiently and intelligently. That allows us to be the player with the lowest cost to serve with the best capacity and the most resilience in the system, connecting Brazil's main export corridor, which is the Port of Santos. So we'll maximize value creation in that structure is key. What we did in 2025 and when we say that in Q1, our price was wrong, that was actually -- just to go back a bit, we came from a crop failure in 2024. So the information about the right price for 2025 that we knew was going to be a year where there would be good product supply for exports, but it was uncertain. Nobody knew. The market didn't know. We didn't know exactly what the pricing level would be for logistics in Mato Grosso and what level it would become stable in 2025. So Q1 was necessary to find out what the new logistics price would be. As we found out what this new pricing level would be, we've made the adjustments -- there were complexities, but we have been doing it throughout the year. In 2025, we had very healthy volumes. We delivered very consolidated volumes because the only adjustments we made were to the prices. Now the level of uncertainty is much less than it was in Q1 '25. Obviously, things can change. I always reiterate, we can never forget that we work with agricultural commodities that are part of our business. That's why we like to keep a high liquidity position and focus on execution, discipline and being very strict when we use company funds. That's why we need to have an agenda to optimize our costs, looking at unit costs to make sure that we have healthy margin levels regardless of what can happen in the commodities environment, which is where we operate. So we can't give you a guarantee of an absolute price level or absolute crop level. What we can guarantee is that our company is increasingly more solid, disciplined and strict when it comes to everyday expenses so that regardless of what happens, we will be the benchmark player, and we will be able to navigate whatever happens. Thank you. Have a great afternoon. Operator: The Q&A session is now concluded. We would like to hand the floor back to Mr. Guilherme Machado for his closing remarks. Guilherme Lelis Machado: I'd like to conclude the call by thank you all for joining us. And to reiterate, we're very confident about 2026, as you saw in our opening remarks. We had a very solid execution in January and February in terms of volume. We'll begin the year practically with the first half of the year fully contracted, focusing on operating those volumes. And we know that the operations back when there's pressure on our system. We do best when we have demand, and that's when we can optimize our system. We also mentioned that at the end of Q1, we'll have more visibility in terms of prices are going, as Pedro reiterated more than once. We should have a little bit less than 10% reduction. And as of the next quarters, pricing levels will be more compatible with the repositioning that we started in 2025. It's reasonable to believe that we'll have more stable prices over the year. We'll monitor market dynamics. There should be a lot of information available at the beginning of the year. And for volumes that haven't been contracted, we will continue to follow our strategy and look out for any opportunities. We aim to increase transported volumes within our system capacity over 90 billion RTK. We'll continue to comply with our investment portfolio and company contracts and concluding Phase 1 of the Mato Grosso Rail, we are absolutely confident that we will be delivering that project in Q3 2026. We have been working on liability management and liquidity in 2025, and that has made us feel sure that we are liquid and our leverage level is consistent with our business profile and our ability to navigate any volatilities this year, maybe due to election or anything else that might happen. That's it. The company is ready to operate efficiently, cost efficiency, whether they be fixed or variable and executing on our investment portfolio. Thank you once again for joining, and I'll see you again during the call for Q1 2026 or some other time. Thank you. Operator: This concludes Rumo's earnings release video conference. Thank you for joining us, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Stella David: Good morning, everybody, and welcome to Entain's 2025 Results Presentation. I'm delighted to be here to present a strong set of results. I'm joined this morning on stage by Rob Wood, our CFO and Deputy CFO. And I also have members -- by the way, can you hear me? Good, good. Okay. Always helps in a presentation to be heard, I think. Anyway, I'm also joined by the IR team here in the audience. We also have senior members of the executive team in the audience as well. And we have our new CFO designate, Michael Snape, who's in the front row as well. So welcome to everybody. And now on to the agenda. I'm going to start with the headlines and some of the highlights of our strong progress. After that, Rob will then take you through the financials and provide you with the guidelines for 2026. And then it's going to be back to me to discuss our strategic delivery, how our priorities are evolving to further accelerate our performance and why we have confidence in our pathway to earnings growth, margin expansion and cash generation, including our conviction that we are going to hit at least GBP 500 million of annual adjusted cash flow from 2028. And then finally, I will briefly wrap up before we open everything to your questions. But before I actually do move on to 2025 financial performance, this is the first time that I have spoken publicly since the U.K. budget back in November. The U.K. government's decision to dramatically increase taxes on the gambling sector was extremely disappointing. It opens the door to the illegal black market who pay no tax, do not have a license and offer no player protections. However, during this period of turmoil, we will invest wisely in the U.K., and we will seize the opportunity to gain share from the long tail of subscale operators who, quite frankly, are ill-equipped to withstand this impact. Okay. Now turning to our results. 2025 has been a good year for the group. We delivered against our strategic priorities and achieved a strong financial performance with EBITDA for both Entain and BetMGM ahead of expectations. Importantly, growth was broad-based and underpinned by strong volume growth, which demonstrates the underlying health of the business. Online volumes were up 7% year-on-year in 2025. And impressively, it was up 9% in Q4. Throughout 2025, online business consistently delivered growth, and we now have 7 consecutive quarters of revenue growth online, and that is despite starting to lap some tough comps. The U.K. continues to be a standout performance, but also there are markets like Spain, Canada, Greece, Georgia, New Zealand, all showing strong double-digit growth. And our joint venture, BetMGM, produced an excellent year of strong and profitable growth. We also enjoyed efficiency improvements. Entain's EBITDA was up 8% year-on-year to GBP 1.16 billion. And including our share of BetMGM, EBITDA was up an impressive 28% to GBP 1.244 billion. The EBITDA outperformance is stronger than expected and -- the EBITDA performance and the stronger-than-expected cash return from BetMGM has driven a meaningful improvement in our adjusted cash flow, again, ahead of expectations. So our improvement journey is working and it is delivering. Our diversified portfolio of podium positions provides resilience and scale advantages that matter more than ever now. Building on this momentum, we have evolved our strategic priorities to further optimize how we work, enhance profitability, drive meaningful cash generation. So in summary, 2025 has been a strong year. The business is in good shape, and we're confident in our ability to not only navigate the challenges, but to emerge stronger. And with that, I'll temporarily hand over to Rob. Rob Wood: Thanks, Stella. Good morning, everyone. So for the eighth and final time, I'm delighted to be delivering the full year results presentation, and it's a pleasure to present strong numbers again before I hand over the baton to Mike. It's a familiar format for me this morning, so let me jump straight in. And as usual, all revenue and EBITDA growth numbers that I quote are in constant currency unless stated otherwise. So starting with revenue, and I'm really pleased with the growth we delivered across the whole group. Total revenue, including 50% of BetMGM, was up by nearly GBP 0.5 billion to GBP 6.4 billion or up 8% year-on-year. Within that, online NGR ex U.S. was up -- was GBP 3.9 billion, up 6% year-on-year. And barring adverse sports results in Q4, that growth number would have been 7%, in line with volume growth for the year. On to EBITDA, which came in ahead of expectations for both BetMGM and Entain. Ex U.S. EBITDA of GBP 1.16 billion beat our guidance and was up 8% year-on-year despite digesting new taxes from Brazil following their new regulatory regime. Online EBITDA margin also beat guidance, and I'm delighted to say it was up 0.4 percentage points year-on-year despite a 1.4 percentage point drag from Brazil taxes. So that means that our scaled growth and improving operational execution drove an underlying 1.8 percentage point margin improvement, which is a key highlight of the year. So with EBITDA beats from both Entain and BetMGM, total group EBITDA was GBP 1.24 billion, which was up a very strong 28% on the prior year. And that EBITDA growth led to equally impressive EPS growth, which more than doubled to 62p. Moving on to adjusted cash flow, which is a key measure for us, and I'm delighted to report a strong year-on-year improvement from an outflow in 2024 to an inflow of GBP 151 million in 2025. GBP 151 million is comfortably ahead of expectations and was driven by both the Entain EBITDA beats and higher-than-expected cash from BetMGM. On to dividends, we've declared a final dividend of 9.8p per share, up 5% year-on-year, which is consistent with the half year and our progressive dividend policy. Finally, leverage. We've added a look-through leverage metric, which better reflects the group's leverage position. What do we mean by look-through? On the debt side of the equation, we include the outstanding DPA payments and the balance sheet value of the CEE minority. And on the EBITDA side, we include our 50% share of BetMGM. And as the slide shows, look-through leverage at year-end was 3.6x, which is down significantly from 4.3x at the end of 2024 due to both EBITDA growth, but also paying down the DPA. On a reported basis, leverage has come in at 3.1x, flat year-on-year as expected, and available cash remains strong at over GBP 900 million. Let's turn now to our online revenue performance ex U.S. over recent quarters. And this chart shows 2 lines: one for NGR growth, which includes volatility from sports margin and one for volume growth, which adjusts NGR to remove any impact from sports margin and is therefore a clear measure of underlying growth. Two particularly satisfying callouts. Firstly, we've now delivered 7 consecutive quarters of growth, all on an organic basis, evidencing the structural growth in our business model. And secondly, we maintained strong volume growth into the second half of the year despite lapping the voluntary code in the U.K. in the summer. No doubt there'll be some recycling benefit to volumes in H2, given margin was below expectation in both Q3 and Q4, but volumes were consistently strong and grew 7% across the year. So that means we're growing at least in line with our markets, and we enter 2026 with continued momentum. Now for the eagle eyed amongst you, you'll note this chart is not quite the same as we've shown previously. The prior version normalized for Euro 2024 and it adjusted the current year margin to a normalized margin, meaning that volatility from the prior year margin still impacts the picture, but that version is included in the appendix. Now to our usual market breakdown. And again, it's a strong picture with growth coming from across the portfolio. Our largest market, UK&I, continues to be a standout performer, delivering growth of 15% in online, well in excess of market growth as we continue to regain market share. We also saw sustained double-digit volume growth in the U.K. throughout every quarter of 2025. And U.K. Retail also saw market share gains as we were flat like-for-like across the year in a market which declined by mid-single digits. International online NGR grew 2%, slightly behind volume growth of 4% due to soft margins, especially in Brazil and also Australia. Importantly, the second half saw an acceleration in volumes from 1% in H1 to 7% in H2, helped by lapping the regulatory changes in 2024 from Belgium and Netherlands. If we look now by market within international, Brazil had a tough sport margin in H2, falling 3 percentage points year-on-year. So consequently, NGR declined in H2 and brought growth for the year down to flat. However, on the plus side, volumes were up 13% over the year. Market share was maintained over H2, so we know other operators were hit by a poor margin, too. And we delivered a positive contribution to EBITDA despite the new regulation and high competition. Australia next, where customer-friendly results at several tentpole events suppressed NGR, particularly in the second half of the year. Volume growth fared better with 3% growth in H2 as our refreshed management team have been a catalyst for improving performance and improving profitability. Italy online was up 5%, growing NGR consistently by mid-single digits in every quarter of the year. And Italy retail also fared well with 7% NGR growth over the year. Other large markets in International continued to see double-digit growth, including New Zealand, Georgia and Spain on this page, but also Canada, Greece and parts of the Baltics and Nordics as well. CEE next and both Croatia and Poland delivered growth in both NGR and EBITDA and retained their market leadership positions in those markets. And finally, BetMGM also reported an outstanding performance with 34% growth in online revenue. The key takeaway from this slide should be the unrivaled broad-based growth that Entain enjoys across the diversified portfolio. Looking forward, we're targeting growth across every one of these online markets in 2026, which positions us very well for '26 and beyond. Moving on now to EBITDA, which came in ahead of expectations for both Entain and BetMGM. This slide shows our year-on-year bridge with EBITDA excluding BetMGM on the left and then EBITDA including BetMGM on the right. Starting on the left, Entain's EBITDA grew 7% or up GBP 71 million on a reported basis, that 7% becomes 8% on a constant currency basis, and it would be 14% excluding the new Brazil taxes. As usual, as the left-hand side chart shows, our online business is the main growth engine, adding GBP 136 million year-on-year. Where did that come from? Three things. Firstly, NGR growth, as we've looked at on the prior slides. Two, efficiency savings, particularly within cost of sales as our online gross profit margin increased a whole percentage point before Brazil tax. And thirdly, improved marketing returns, enabling us to hold spend broadly flat year-on-year in absolute terms, thereby improving margin. Retail now, and we saw EBITDA up GBP 16 million year-on-year, helped by a favorable margin versus our expectations. Then in addition to Entain's GBP 71 million year-on-year increase from the left-hand side, the right-hand chart adds our share of BetMGM's significant EBITDA improvement of GBP 178 million year-on-year as it inflected to profitability, which gives an all-in total group EBITDA of GBP 1.244 billion, up almost GBP 250 million year-on-year. That's an impressive 25% growth on a reported basis and a touch higher at 28% in constant currency, and that's all organic growth. And as I mentioned earlier, that EBITDA growth is the primary driver of why EPS more than doubled last year. Let's now take a closer look at cash flow and leverage. And as always, there's a detailed cash flow provided in the appendix. As a reminder, adjusted cash flow is effectively our distributable cash, i.e., cash flow pre-equity dividends, and we also exclude working capital noise and strip out M&A and debt movements. In 2025, we delivered adjusted cash flow of GBP 151 million, which is meaningfully ahead of expectations. You'll remember a year ago, I had guided adjusted cash flow to be broadly neutral. And then by Q3, we were ahead of plan, particularly thanks to BetMGM. And so guidance effectively moved from neutral to GBP 75 million, and then we beat that too. So what drove the outperformance? Firstly, Entain's EBITDA beat guidance. And secondly, BetMGM returned more cash to parents than guided, $270 million in total for 2025, which far exceeded expectation. And finally, a net favorable movement across other cash items, including lower interest costs following our debt refinancing efforts last year. Net debt ended the year at GBP 3.6 billion, with the improvement in adjusted cash flow offset by an FX translation bad guy of over GBP 100 million and the working capital outflow that was as expected. So overall, reported leverage of 3.1x is in line with where we expected it to be, but more insightfully, look-through leverage of 3.6x saw a meaningful improvement, down from 4.3x in the prior year, reflecting EBITDA growth, improved cash flow and a reduction in the remaining DPA balance. So our cash flow and look-through leverage improved significantly. Our available cash remains strong at over GBP 900 million, and we have a healthy debt maturity profile with our next significant maturity of around 20% of the debt not falling due until 2028. A few quick comments on BetMGM now. It won't be new news, but it's still important given its significance to the group's priorities, particularly cash generation. BetMGM had a fantastic year and delivered ahead of its upgraded expectations with total revenues up 33% and EBITDA up over $460 million year-on-year as it moved into profitability. This inflection triggered the start of cash returns to parents with $270 million distributed in 2025, including excess cash from the 2024 year-end. The strong performance last year was driven by BetMGM's disciplined execution, underpinned by a leading iGaming offering and BetMGM remains on track to deliver approximately $500 million of adjusted EBITDA in 2027. Since we created BetMGM around 8 years ago, total net investment between parents now sits at almost exactly $1 billion. So with approximately $500 million of EBITDA next year, it's easy to see that the ROI on that investment has been excellent. Now last slide from me, the outlook for 2026. And remember, the appendix includes a detailed guidance slide for modeling purposes as well as a slide on the BetMGM parent fee mechanics. To be consistent with prior years, when I refer to Entain EBITDA, this is before parent fee income, which does start in 2026. So for 2026, we expect online NGR growth of 5% to 7% on a constant currency basis with broad-based growth across the portfolio. Online EBITDA margin is expected to drop to 23% to 24% in 2026 following the increase in U.K. gaming taxes, including our expectation of mitigating approximately 25% of that cost in 2026. Stella will talk about it more shortly, but our upgraded mitigation expectation today is to improve cost mitigation to over 50% of the U.K. tax impact from 2027 onwards. The efficiency plans, which Stella will take you through, will support an upward trajectory for both EBITDA and EBITDA margin from 2027. So with 5% to 7% online NGR growth and 23% to 24% online EBITDA margin, we're comfortable with current market expectations for 2026 Entain EBITDA, which represents a small decline year-on-year. However, when combined with growth in the U.S., EBITDA, including the U.S., will be broadly stable year-on-year. And broadly stable, of course, represents significant underlying growth before absorbing the U.K. gambling tax rises. Another consequence of the U.K. tax rise is that we lose a year on a deleveraging profile because now look-through leverage will be broadly stable in 2026 before resuming deleveraging thereafter. Two more bits of guidance to touch on. Firstly, marketing phasing because 2026 is a World Cup year, we expect approximately 55% of marketing spend to be in the first half, consistent with previous tournament years. And then secondly, now that BetMGM is sustainably profitable, our ETR guidance going forward is on an including U.S. basis. And the new ETR, so effective tax rate, the new number is 30%. This is higher than 2025 due to the U.K. tax increase as we'll now have less profits in the U.K., which are taxed at a below average ETR. And so that adverse change in geographical mix pushes up the group's blended ETR. In addition, there's a slide in the appendix, which takes you through expected tax accounting treatment of our share of the $1 billion of available brought forward losses in BetMGM. In short, a deferred tax asset is expected to be recognized in 2026, which will give a boost to EPS in 2026, but then available losses are no longer benefiting EPS in the following 2 to 3 years. Cash tax is not impacted. So in summary from my section, we expect 2026 total group EBITDA, including BetMGM, to be stable year-on-year despite digesting the significant increase in U.K. taxes. How do we achieve that? We operate in growth markets where we have the most diverse set of podium positions globally. So we have structural sustained growth built into our model. We also have a gaming-led business in the U.S. without material exposure to prediction markets. So those combined give us confidence that underlying growth will continue into 2026 and beyond. And on a final note, I'm proud to say that our EBITDA of just under GBP 1.25 billion is now twice the size of the first EBITDA number that I reported 7 years ago and is many multiples bigger than my early days at Gala Coral. It's been quite a journey. It's been hugely eventful. It's been highly rewarding, and I'm delighted to be leaving the business with great momentum across an outstanding global footprint, yet still with so many growth opportunities ahead. And it's also clear that in Mike, we have -- I'll be handing over the CFO reins to a hugely capable replacement. With that, I'll hand back to Stella. Stella David: Thank you, Rob. It's difficult to beat that because he's got all the numbers, and I've got all the fluffy stuff. So -- and this is the audience for fluffy stuff. You like numbers. So I'll do my best, okay? So look, Entain in 2025 did deliver strategically and financially. So that is a really good starting point. But now our priorities have to evolve because we have to reflect the next stage in our journey, and it's an improvement journey. And we have to build on some of those achievements, but we also have to be bolder in our mindsets. We have to address the significant challenges from the dramatic tax increases in the U.K. So what are we doing about it? Well, we're intensifying our focus on cash generation and disciplined capital allocation. And importantly, today, we reiterated our confidence in delivering at least GBP 500 million in annual adjusted cash flow from 2028. Cash generation being a key component of long-term value creation. And as you can see from this slide -- yes, good, you see from this slide, it is now an explicit strategic priority, called out in our bonusing for our people, called out in our long-term incentive plans, it's a very important part of where we're trying to go. But before discussing our achievements and progress during '25 in detail, these next 2 slides are an important reminder of Entain's foundations. We are a global leader in an industry that is in long-term growth, and we are well positioned. This slide is a powerful visual representation of the breadth and the quality of our business. In Entain's 16 largest online markets, we have a podium position in 13 of them. And we're in the top 4 in all 16. And excitingly, many of these positions have the opportunity for significant growth. So for example, if you take New Zealand, where we are the partner with the New Zealand government for sports betting. We now have a great opportunity in iGaming when it becomes regulated at the end of '26 beginning of '27. And in Spain, we have a great revitalization of our beautiful bwin brand. And we're really hopeful that by the end of 2026, it will also have a podium position. And this next slide is also going to be familiar. I'm a bit boring. I keep showing the same slides, but that's consistency for you. Consistency is good. The left-hand bar chart shows that over 98% of our NGR is locally licensed. And 97% of our online revenue is from markets estimated to grow at least by mid-single-digit CAGR. That is a truly impressive statistic, 97% of revenue coming from markets in good, sustained long-term growth. And the pie charts on the right showcase the diversity of the portfolio by both geography and by product. And it's the combination of all of these things that gives our business the resilience that it needs, underpinning our ability to deliver long-term shareholder value. And now I'm going to share a few of the highlights from across our portfolio in 2025. In the U.K., one of our many initiatives was refining our bonusing, using real-time player data to increase segmentation, reduce bonusing as a percentage of GGR while increasing player value. This bonus optimization on our central platform is also driving benefits in markets like Brazil, Spain, Portugal and Canada. Our U.K. retail team continued to raise the bar with a state-wide rollout of our group bet stations. And this has driven an increase in our market share as well as an increase in our Bet Builder staking. In Australia, our new leadership team adopted a disciplined and returns-led approach, retiring some of the inefficient legacy marketing initiatives whilst also leaning into AI to produce high-quality creative assets more quickly and at a fraction of the cost. Across the group, we've also reduced nonworking marketing spend, centralized performance marketing and improved our allocation of investment. Our strong performance in Spain reflects that reawakening of the bwin brand and also markets like Canada, Brazil, Georgia, all benefiting from refining how our brands engage with our customers. And also some things on product and tech. In Poland, STS migrated onto our Croatia Sportsbook, rebuilt its mobile app and now has a slicker, faster user experience. And in Brazil, we launched Sporting bot for the Club World Cup, an AI personalized assistance to help our customers enjoy the product more. And it's proved to be such a success that it's being rolled out across more markets and more sports this year. So that's just a flavor of the strategy in action. We're seeing improvements to the portfolio because we have shared learnings that generate a powerful multiplier effect, supporting our momentum and our operational efficiency. Moving on now to customer acquisition and retention. And again, this slide will be familiar. Net revenue retention is holding strong. It's above the 85% benchmark, and it has been north of 90% for the entirety of 2025. And this reflects the work that has been done to close product gaps and improve our customer journeys. You'll see there's a slight drop-off in Q4, but that is due to customer-friendly sports results, and it's nothing structural. Customer acquisition also remains comfortably above the 15% level. So if you get the combination of strong net revenue retention and healthy acquisition, that underpins our sustainable growth. And these metrics remain strong as we enter into 2026. As I mentioned with our strategic priorities, Entain is now in the next phase of its improvement journey to accelerate forward. Project Romer delivered over GBP 100 million in savings annually. But we can and we have to do more by continuing to improve on our cost of sales, by optimizing marketing rates as a percentage of NGR and a continued focus on operating efficiencies. We already have multiple work streams identified to deliver against these 3 key levers. And we're also excited by the opportunities that our continued AI enablement program will have for improving the customer experience, the colleague experience and importantly, for increasing our bandwidth, whether that's resolving legacy issues with old -- can't say that, old code. You know what I mean. I hope you know what I mean. Speeding up development cycles to improve the user experience, improving our customer care handling, automating low-quality contracts and legal work or dramatically cutting the cost of asset generation in our marketing areas. So delivery of these type of group-wide initiatives support our expectations to now offset over 50% of the U.K. tax increases from 2027, up from our previous estimate of 25%. I just want to do a slight call out on that. When the tax rates went up, we said immediately, we would mitigate 25%. That was the right thing to say because we haven't done the work at that stage. You need to take the time to add up the numbers and go through the figures to have the confidence. So we didn't come out of the block shouting it's going to be 50% or 60% because that would have been quite frankly, a made-up number. Now we've done the work, and we've got increasing confidence in our ability to deliver against that. And that is the right way to do these things, engage into the business, build the confidence and start to solidify those initiatives. So I just wanted to give that flavor. We're not being dramatic and changing our minds. We're just building on what we started to do immediately after the tax increases, really important points. So let's bring this all together. Despite the jump in those taxes in the U.K., we now remain comfortable with the market expectations for 2026. And when you combine BetMGM and Entain, that means we are delivering a stable set of numbers in '26 versus '25. From '27 onwards, organic growth and those optimization initiatives means that we're going to grow both EBITDA and cash flow and both on a year-on-year basis and importantly, versus 2025. And by 2028, we've got the building blocks in place to achieve at least GBP 500 million in annual adjusted cash flow. And therefore, that will support our journey to getting our leverage back to our target range of 2 to 3x. So let me briefly wrap up before we go into Q&A. 2025 was definitely a strong year. We delivered growth across the portfolio, and that is a highly attractive portfolio that is well diversified. And our relative scale means that we will be winners in the U.K. because we will gain meaningful share from the regulated market. So execution is definitely improving. There's definitely a lot more to do. There always is. That's how you keep being competitive. And we have a clear pathway ahead. So we are confident in it. We are getting more disciplined, and we are accelerating forward. And on that note, I would like to open the floor to your questions, and I will return back over here. Operator: [Operator Instructions]. Monique Pollard: It's Monique Pollard here from Citi. So 2 questions from me. Firstly, on the UK&I, obviously, you've delivered a pretty amazing performance today. You're now materially outperforming, let's say, your main competitor and largest competitor in the market, both on iGaming and sports and even including the comp, so on a 2-year stack, outperforming on both those metrics and taking material market share. Just wanted to get a sense from you of whether you think that can continue as we go into 2026, given some of the initiatives that you've taken on. Second question I had was when we think about the Q4 win margin and that was down 1.4 percentage points in the fourth quarter online sports margin and year-on-year. But obviously, the online EBITDA has come in really good. So what are the sort of measures you've taken to protect that online EBITDA margin despite the unfavorable sports results in the quarter? Stella David: Okay. Great. Well, I think that's 2 questions. So I'll answer one, and Rob will answer the other one. Which one should I do? Okay. I'll take the U.K. and Ireland one because it's been great actually, the revitalization that we've seen in the U.K. And I actually have the U.K. team here. So they are in the audience, so I have to be nice to them. But they genuinely have done a great job. We've done lots of things, improved customer journeys, innovated, more innovation yet to come. We're putting a whole new Ladbrokes experience together before the start of the World Cup. We innovated with the first Bet Builder in horse racing. So there's a lot of focus and there's a lot of energy. And it's energy is really important in these journeys, that belief and that willing to lean in and get it done. So we think there are lots of opportunities, both online where we definitely think we will win share once the new taxes come in place. But let's not forget, we have the best retail estate in the U.K. It's 2,400 shops, great shop colleagues. You would be amazed about their motivation. When we do our global employment engagement survey, they score amazingly. And you think about -- they're not high paid people, but their motivation and their customer care is just outstanding. And those things make a difference to how you perform and how you are relative winners in a marketplace that is going through change. So we're very optimistic. And I can say this because it's true, the U.K. has got off to a great start in 2026. Rob Wood: And then on to the online question. So yes, as you say, win margins below expectations. So in the end, NGR only plus 3%, but volumes plus 9%. How did we still get there on the EBITDA delivery? The main answer is within that gross profit margin point that I made earlier. We've seen great success, particularly this year sort of the continuation of Project Romer. Hugo sat in front of me, his team working on things like payment service providers where we've generated material savings. I referenced it earlier, if you take out Brazil tax, gross profit margin was up about a percentage point. And actually, there were some other tax rises at Netherlands and others that meant that it was even more on an underlying basis. So 1 point across the whole online revenue base, that's GBP 40 million, and actually, it's more like GBP 50 million, GBP 60 million. So that's the primary answer. It wasn't marketing. We spent exactly as we intended to in the second half of the year. We spent GBP 20 million more than we did in the first half, which is what we guided to last summer. So it's really the cost of sales margin or gross profit margin that delivered the catch-up against the NGR miss. Benjamin Shelley: It's Ben Shelley from UBS. Two for me, if I may. One, could you talk about the growth outlook for the U.K. iGaming business, specifically amid the tax changes in that market? And then secondly, on New Zealand, can we expand a bit more on that opportunity? I appreciate it's very early, but what kind of upside do you think that can present to medium-term revenue guidance? Stella David: Okay. Well, we'll try and do them sort of -- I say a bit, you say a bit. Rob Wood: Okay. Stella David: So growth in iGaming, I mean, clearly, there is a market share opportunity here when the taxes go up. If you look at the shape of the business, the bottom 25% share of the iGaming market is through competitors, which are very subscale, 1% percentage share -- 1% share of the market. And they're just ill-equipped to ride the storm with this. So we feel very confident that we will gain share during that journey of the regulated market. Clearly, the black market is going to grow. At the moment, there aren't enough barriers in the way of the black market. And there are still 4 black market operators advertising on the front of football shirts on the Premier League. I spent a letter expressing my concern about that. There is a consultation that's taking place with government. But quite frankly, that should be dealt with now because for all the reasons, the level of interest in the black market is going to go up. But we are in a very strong position. We're very strong in gaming. We have the scale to significantly increase share, which I think we will do. And we factored that partly into our numbers. Anything else on the U.K. before I go into New Zealand? Rob Wood: I mean we also extended the coin economies to Gala and Foxy. So it's not just about Ladbrokes and Coral driving growth in gaming in the U.K. So those brands are responding well, too. Stella David: Yes, that's great. And then on to New Zealand, just as a kind of a bit of background for everybody in case everybody isn't fully up to speed. We are the partner of government in New Zealand. We are the only licensed sports betting operator, and we have that long-term license agreement. Going forward, towards the end of '26, maybe the beginning of '27, there will be licensed operators for iGaming. They're going to be giving out 15 licenses. We are confident that we'll probably get 3 of those licenses. And I think the opportunity for us is significant because we'll be the only player who will be able to do cross-sell, yes. And so therefore, it's too early to say. We haven't explicitly factored it into our numbers, but we have put it forward as one of those opportunity areas that could be significant for us as we go forward. So really exciting. And what's great about the team over in Australia and New Zealand under the leadership of Andrew Boris is they're really leaning into this that they're working very closely with our partners over there. We have 2 brands. Actually, we do under our licensing agreement. We have the TAB brand, but we also have betcha. Betcha is more focused on sports in general, whereas the TAB brand is more focused on horse racing. So we have lots of opportunities going forward. Rob Wood: And maybe put some numbers on it. Andrew probably won't appreciate this, but the opportunity is big. And we estimate that there's around a GBP 600 million marketplace. And currently, we're less than GBP 200 million. So if we have all of sports and a reasonable share of gaming, why can't that below GBP 200 million number go to, say, GBP 300 million. So an opportunity for significant growth over a number of years. Estelle Weingrod: Estelle Weingrod from JPMorgan. I've got 2 questions as well. The first one on your online organic growth revenue guidance. Could you perhaps provide more granularity, more color on the different geographies, what you're baking in like between U.K. and IAC and international? And the second one on the Netherlands. I know it's a small market for you now. But just to understand a bit better how is your -- how was the exit rate and maybe what you're seeing right now in the market because you -- I think you're now lapping some of the affordability check comps that were implemented last year in February. Just to see if you're seeing an inflection in the market now. Stella David: You go and then I'll chip in. Rob Wood: Okay. We'll do it the other way around. So first question, the 5% to 7% guidance, where does it come from? I mean, unusually, I think it's going to be pretty uniform across our segments. So I mentioned it earlier, but international, for example, was below in 2025, but it had the drag from Netherlands and Belgium. I'll come back to Netherlands. So that's now washed through and it exited with 7% volume growth in the second half of the year. And U.K. incredible in '25 with 15% growth. Of course, it won't be 15% in 2026. And so I'd expect those segments to be much more uniform. Plus I mentioned earlier, if you look at the negatives, I'll come back to Netherlands in a moment. But Australia, we do expect Australia to return to growth in '26. And Brazil, when we annualize against those poor margins in the second half of the year, you'd expect growth in Brazil as well. So I think you'll see a more uniform picture. And then the second part of the question, Netherlands. So as at Q3, we were minus 30% at the end of Q3. Then Q4, I think I'm right saying was minus 2%, so you can see a massive difference in performance. So the objective now is to get back into a little bit of growth. But even if we don't, the key thing is we've washed out that minus 30% that we were carrying for 4 quarters. Stella David: Yes. And just one thing to add on Netherlands. It's a kind of -- it's a terrible combination as a market because not only have the gambling taxes gone up significantly, but there's huge amounts of friction for players with very low thresholds in terms of deposit limits, et cetera. And I think I'm right that there's just another tweak up that's going to go on in duty rates, I think from January. Is that right? Yes. I think it's going from 34% to 37.5%, which is, again, a little bit more friction for players there. Richard Stuber: Richard Stuber from Deutsche Bank. Can I ask just a couple of questions on the optimization plan. You talked about it's going to be effective from 2027. I was just wondering whether there are any opportunities to accelerate that? Why don't you sort of start those plans now? And the second question on that as well is, I guess, the initial guidance you gave in terms of U.K. tax mitigation was looking at the U.K. market. So how much of the optimization plan do you think is related to the U.K. and how much is sort of more of a global initiatives? Stella David: Thanks very much. I'll take the first, you take the second. Rob Wood: Yes. Stella David: So I hope I haven't miscommunicated. Optimization plans take place every single day. So it's an ongoing journey. And I think the way that I would describe it is prior to the U.K. taxes going up, we had areas that we were continually thinking about what are the next areas we can improve, whether that's payment service providers, whether it's automation, removing the processes, whether it's using AI to cut down our marketing production costs. So it's an ongoing journey. And if you think about the hit in 2026, we take the big hit from gaming, which is the big increase from 21% to 40% bang first of April. And so without mitigation, we'd obviously have a lower run rate. So we are mitigating and optimizing in 2026 to get to the numbers we have. But some of these other initiatives, they organically happen sequentially over time. And so it will continue to build as we go forward. So it isn't a wait and see. I think everybody is very active in the company looking for those improvements in run rate that come from multiple activities. There isn't one big silver bullet. And I think if I were you, I'd be horrified if there was a silver bullet because why haven't we shot it. So therefore, it is literally multiple activities that go into how we improve the customer experience, how we improve the colleague experience, so we get more efficiency out of them, how we generally cut costs using the tools that are available to us and how we use AI, which is a huge game changer if it's done in the right way, to increase our bandwidth and our capability. A lot of people say AI is about this or that. AI is about enabling us to do more with the resources that we have to help protect us in the future. Rob Wood: And perhaps the only thing I'd add from a modeling perspective, put it through in '27. We're happy with where the market sits for '26 as it stands. And in terms of where is it coming from, where is that initial 25% that we announced last November, that was U.K. focused. The second 25% is a global view for all the reasons Stella has just said, primarily all online, but you can assume it's uniform or proportionate with the segments. There will be a little bit of corporate benefit as well, but the lion's share would be online across all the segments. I think that was the question. Adrien de Saint Hilaire: Adrien de Saint Hilaire from Bank of America, please. A couple of questions. First of all, can you talk about the risk in your view of prediction market platforms coming into your markets and I say your markets beyond the U.S., obviously. And then, Rob, maybe an easy one as the last question. I can see your cash flow Slide 21. You have it down in '26, and I'm not too sure why because you've got stable EBITDA, declining CapEx, declining interest and so on and so forth. So what's the moving part? Stella David: Okay. I'll take the first question on prediction markets outside the U.S. I might even comment on it in the U.S. as well. So in the U.S., there is a unique set of circumstances. It doesn't get taxed like sports betting, and it is not approved by the state regulators. which means that there is a huge amount of prediction markets goes through nonregulated states, particularly California and Texas. I think the percentage going through those 2 states is it's -- I don't know, it's something like 80% of the total volume. There's also a huge amount of play of underage players. So in the U.S., you're going to be 21 to play. So 18- to 21-year olds are playing prediction markets, and they're playing prediction markets in non Luno regulated states. It doesn't touch us that much in the U.S. because we are very much stronger in iGaming, and we never had a business to protect in those nonregulated states. So it is a bit of an anomaly in the U.S. And let me be clear. When people play the prediction markets in sports, it looks like a sports bet, it sounds like a sports bet, and it acts like a sports bet. So I don't think anybody should be any doubt it's sports betting. Now what happens to that legally in the U.S. and have a strong relationship with the regulators. We are in Nevada. Other sports players are not in Nevada. It is a key part of our offering. It's just what I wanted to say that. If you look outside the U.S., equivalents to prediction markets, effectively like betting exchanges with Betfair in the U.K. have existed for decades, and it takes a small single-digit share of the market. There are not the structural reasons for prediction markets to be the hot topic, the flavor of the month in other markets. And indeed, in some countries, they've already come out and said, it's illegal. I think the Netherlands have said, polymarket you're out, otherwise, it's going to cost you $450,000 a week in fines. France has come out against it. So it is a much smaller threat than I think it is -- than people perceive it to be in the U.S. But in the U.S., we're quite comfortable with our position, if that helps. Sorry for the long answer, but I thought it was going to come up at some time. Do you want to take the easy question? Rob Wood: I'll take the easy one. It's easy if I keep it simple. There is more complexity to it. But the simple part of it is Entain EBITDA does go backwards a little bit, as we referenced earlier. So consensus right now is GBP 1,126 million. We delivered GBP 1,160 million in 2025. So there's a little bit of a drop there. The second part of the answer is BetMGM. Even though BetMGM EBITDA does grow, remember, in 2025, we had an outsized cash distribution, including the 2024 surplus. So from a cash perspective, BetMGM is broadly neutral, whereas Entain EBITDA is down a little bit. That's the bulk of the answer. There are some other puts and takes. CapEx is down a bit, interest is down a bit. But that ETR point that I mentioned earlier, that's an offset against that. So the 2 primary drivers, Entain EBITDA down a little bit and BetMGM cash not up, just flat because of the 2024 credit that came through in '25. Luis Chinchilla: I'm Ricardo Chinchilla from Deutsche Bank. I was hoping if you could give us a little bit more of a breakdown of the different buckets for the mitigation strategy for 2026 and 2027. Is it going to be mostly marketing reductions? Do you guys anticipate operational efficiencies from the use of AI? And if you could also comment on how you anticipate the promotional environment to be in the U.K., given that all of the large players have actually referenced the fact that 25% of the market is not going to be able to compete. So we anticipate that there is going to be competition to take that share back. Stella David: Okay. So let me just talk a little bit about mitigation. There are many initiatives. The way we try and sort of bundle them up in the business, we probably put them into probably 8 key buckets of opportunity. It ranges from optimizing our marketing expenditure. It ranges to looking at our cost structure to make sure we're more efficient. It ranges to looking at procurement, lots of opportunity in the very large amount of third-party spend we have. So third-party spend is a very interesting area because we get lots and lots of feeds externally. We have lots of licenses externally. We have lots of external legal fees. I'm just adding them up, giving you a flavor of the different areas that we have. And then the devil's in the detail going down to specific line-by-line item activities. We also see that there is opportunities in terms of hopefully increasing our trading margin sequentially over time. But it takes -- it's a long-run thing, reducing fraud, taking the opportunity to get rid of bonus abusers. There's lots of things that build those buckets up to where they need to be. But I think the thing that I was trying to say is we have a detailed road map. We have sponsors behind that. We have targets that are being set. And we also have specific targets for how we increase the bandwidth from AI, which means that if you think about it, everybody who works in a corporate role or an in-market role or a finance role, they all have to become competent with AI so we can increase efficiency and make those people actually highly employable for the future. But again, efficiencies flow out of doing those kind of things. So there are just many, many initiatives that build up to the total number, yes. Promotional costs, do you want to have a stab at that? Rob Wood: Yes, sure. I'll have a go. So I think you're right. I think the 2 obvious large competitors in the U.K. will lean in as well as ourselves. The fourth largest probably not so much. But then there is such a long tail, as we've touched on earlier. And when you look at one of these staggering numbers as a consequence of these U.K. gambling tax increases, when you look at the tax that we'll now pay in the U.K. as a percentage of profit before tax, it's over 80%. So in how many sectors and how many parts of the world you operate in an environment where your income tax rate is over 80%. That's an astonishing number, which essentially means how can subscale operators possibly want to do business and spend money here. So I think with the exception of the 3 larger operators who I fully expect to want to, just like us, capitalize on it and seize the moment to take market share, I think you will see a lot less promos from mid- to smaller firms. The sort of the unknown dynamic is the black market. Of course, they'll be aggressive, why wouldn't they be? And quite what the impact of that is, we'll see from April onwards. Operator: We're just coming up to time. I'm going to -- just one last question on Italy from Andrew Tam from Rothschild. It wasn't touched on a huge amount in the presentation. Obviously, it remains a key market. So a bit of color on the performance this year and then actually opportunities and actually how you're thinking about going forward. Stella David: Well, I'm happy to just talk about some of the opportunities, and I'll let Robbie okay, just talk about some of the performance at the moment. So we are a distant #3 in Italy, but we do have some exciting plans coming up in 2026. I don't want to share the confidential information. But if you watch this space in the next few weeks, I think we'll be announcing some nice initiatives that will give some more high-profile presence for our business in Italy. There is quite a detailed plan that has been developed to help optimize our position, recognizing that we are disadvantaged in terms of our footprint because we don't do retail gaming. And that is something that is not available to us because we don't have the license and the license isn't open for that. But there are some other things that we can definitely do, but I don't want to spoil the surprise. So, talk about the numbers. Rob Wood: Can I just clarify, these are organic plans in Italy. Stella David: Sorry, definitely organic plans, yes. Rob Wood: So in terms of performance of the business, the way we look at it, we grew online 5% last year, mid-single digits. Retail grew 7%. EBITDA grew 8%. It's a healthy business that's growing nicely year after year after year. That's very well run, tight ship. And so yes, there's a gap to the top 2 operators, but we have a great healthy business in the #3, particularly with Eurobet, which is a very strong brand. Stella David: Are we -- any more questions? Or are we having to wrap now? There was one there. Unless it's a hard one. Pravin Gondhale: I'm Pravin from Barclays. Firstly, on the marketing expense, you sort of mostly answered that, but 45% in second half, given -- I appreciate its mitigation in U.K. seems a bit low given it's World Cup year. So do you think is there any scope in your guidance to sort of raise that if the market demands that, if competitors sort of market hard in second half? And then secondly, on regulation, is the worst behind us or you are still hearing anything in any of your markets there? Stella David: So on the marketing expense, we're investing well throughout the year. We're just shifting it forward because it's World Cup year. So World Cup, even though it's sort of June, July, it goes over 39 days, which is the longest World Cup there's ever been and there's more teams than there's ever been, means that the activity for acquisition, which is one of the things you really want to do in the World Cup comes quite a lot before then. So you're doing -- you do a buildup in terms of marketing. So it does pull investment through into H1. But hopefully, that acquisition then rolls through into H2. But I'm a marketeer by training. If we have any spare money, I'll always put more money into marketing. But we have to deliver the numbers, too. I realize that. So that's obviously an area that we'd always look at going forward. But I think World Cup is a great opportunity. I think it's going to be a bit of a roller coaster ride because there's so many teams playing. In the early days, the margins may be volatile. But hopefully, net-net, the whole thing is going to be an amazing thing, particularly for some of our markets. So given it's in the Americas, our business in Brazil will be really engaged in it. Our business in Canada -- by the way, Canadians, they love betting on soccer. Yes, absolutely love betting on soccer. And also, we've got quite a lot of our markets have teams already in the World Cup final. So we have a high overlap. So I think it will be good for us. And of course, and BetMGM, that small company in the U.S., BetMGM, yes. Regulation. Look, I think it is -- it's our duty to flag the challenges of the increase in taxes and the increase in regulation that it does fuel the black market. I think we talked about the Netherlands earlier. I mean that is the perfectly worst mix. You have highly frictionful regulation and high taxes and their own government or the regulator says that over 50% of their market is black. That is a place that no sensible government would want to go into, in my view, because actually, it's just fueling profits in a different part of the world. And so I think it is the job of people like ourselves to flag the dangers of the black market to try and dissuade other places going like where the Netherlands has gone. Rob Wood: Yes. Can I just make one point of clarification on marketing. So we do expect marketing to increase in absolute terms. You can probably model broadly in line with revenue. So the marketing rate holding firm. It's just the weighting that's H1 related. Yes. And then on regulation, aside from the U.K., then everything else looks a lot more of a balanced picture, which is nice. I know the Republic of Ireland, we have to do a wallet decoupling, which is a small adverse move there. But in Germany, it looks like touchwood, this might be the year that we get an increase in the slots cap, which, as you'll know, has driven the slots market to be 70%, 80% black. So that could be significant for us. We have New Zealand iGaming and other examples of clamping down on the black market as well. So aside from the U.K., and that's a big an aside, but aside from the U.K., it's a more balanced regulatory outlook, I would say. Operator: I draw your attention to the 2 slides that started about the podium positions and our quality of our foundations of our portfolio, which gives us that resilience and the ballast to absorb any regulatory changes. Stella David: I think we're going to have to wrap it up now. But before we do, I just wanted to say a huge thanks to Rob for his huge dedication and passion for this business. He's been in it for 13 years, I think. And I do think if I chopped his arm off, it would actually say Entain. Rob Wood: Glad. Stella David: Should try. No, no. But genuinely, thank you so much, Rob. I really, really appreciate it. And I'm sure everybody in the room, along with all your Entain colleagues, is wishing you the very best in your new ventures when you eventually start them. But he's not going anywhere just yet. He's helping us out on some things until the end of June, but Mike takes over formally as the CFO tomorrow. But Rob is still with us, and we just say thank you so much. Rob Wood: Thank you. Stella David: I'm just going to say something. Rob soak that in. You never get clapped at one of these events ever. This will be the first and last time you get a round of applause. Rob Wood: Thank you very much, everyone. I do really appreciate it. As I said earlier, it's been quite a ride. And you can tell I've been here a long time and also I don't wear suits very often because I looked this morning, and I've got GVC business card. Yes. Thanks, everyone. Stella David: That's funny. Thank you very much. Thank you.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Q4 2025 SandRidge Energy Conference Call. [Operator Instructions] I will now hand the call over to Scott Prestridge, Senior Vice President of Finance and Strategy. Please go ahead. Scott Prestridge: Thank you, and welcome, everyone. With me today are Grayson Pranin, our CEO; Jonathan Frates, our CFO; Brandon Brown, our CAO; as well as Dean Parrish, our COO. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risks and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. These statements are not guarantees of future performance, and our actual results may differ materially due to known and unknown risks and uncertainties as discussed in greater detail in our earnings release in our SEC filings. We may also refer to adjusted EBITDA and adjusted G&A and other non-GAAP financial measures. Reconciliations of these measures can be found on our website. With that, I'll turn the call over to Grayson. Grayson Pranin: Thank you, and good afternoon. I'm pleased to report on a strong quarter and the year for the company. Production averaged 18.5 MBoe per day during the full year, an increase of 12% on a Boe basis and 32% on oil versus 2024, benefited by our operated development program in the Cherokee Play and production for the fourth quarter averaged 19.5 MBoe per day. Before getting into this and other highlights, I will turn things over to Jonathan for details on financial results. Jonathan Frates: Thank you, Grayson. Compared to the third quarter of 2025, the company continued to see higher natural gas prices, partially offset by lower WTI. We continue to grow production, generating revenues of approximately $156 million for the year, which represents a 25% increase compared to 2024. Adjusted EBITDA was roughly $25 million in the quarter and $101 million (sic) [ $101.1 million ] for the year compared to $24 million and $69 million in the prior year period. As always, we continue to manage the business within cash flow while growing production and utilizing our NOLs to shield us from federal income taxes. At the end of the quarter, cash, including restricted cash, was approximately $112 million (sic) [ $112.3 million ], which represents over $3 per common share outstanding. The company paid $4.4 million in dividends during the quarter, which includes $0.6 million of dividends paid in shares under our Dividend Reinvestment Plan, including special dividends, SandRidge has now paid $4.60 per share in dividends since the beginning of 2023. On March 3, 2026, the Board of Directors declared a $0.12 per share dividend payable on March 31 to shareholders of record on March 20, 2026. Shareholders may elect to receive cash or additional shares of common stock through the company's noted Dividend Reinvestment Plan. During the year, the company repurchased approximately 600,000 or $6.4 million worth of common shares at a weighted average price of $10.72 per share. Our share repurchase program remains in place with $68.3 million remaining authorized. Capital expenditures during the quarter were approximately $18 million, including drilling and completions and new leasehold acquisitions. The company has no debt outstanding and continues to fund all capital expenditures and capital returns with cash flows from operations. Commodity price realization for the quarter before considering the impact of hedges were $57.56 per barrel of oil, $2.20 per Mcf of gas, and $14.92 per barrel of NGL. This compares to third quarter realizations of $65.23 per barrel of oil, $1.71 per Mcf of gas, and $15.61 per barrel of NGL. Our commitment to cost discipline continues to result with adjusted G&A for the quarter of approximately $2.7 million or $1.53 per Boe and $10.2 million or $1.50 per Boe for the full year. This compares to $2.4 million or $1.39 per Boe and $9.3 million or $1.54 per Boe in the same period last year. Net income was $21.6 million for the quarter or $0.59 per diluted share, and adjusted net income was $12.5 million or $0.34 per diluted share. This compares to $17.6 million or $0.47 per share and $12.7 million or $0.34 per share, respectively, during the same period last year. Net income for the full year was $70.2 million or $1.90 per diluted share and adjusted net income was $54.7 million or $1.48 per share. The company generated adjusted operating cash flow of approximately $108 million for the year compared to $77 million in 2024 and despite the ramp-up in our capital program, free cash flow before acquisitions of roughly $44 million compared to $48 million last year. Lastly, our production is hedged with a combination of swaps and collars representing approximately 23% of the midpoint of our 2026 guidance. This includes approximately 37% of natural gas production and 27% of oil production. These hedges will help secure a portion of our cash flows and support our drilling program through the rest of the year. We continue to monitor the market and we'll take advantage of further opportunities to lock in favorable prices as volatility continues. Before shifting to our outlook, we should note that our earnings release and 10-K will provide further details on our financial and operational performance during the quarter. Now I will turn it over to Dean for an update on operations. Dean Parrish: Thank you, Jonathan. Let's start with a brief review of a very successful year in 2025, then discuss recent results in 2026 drilling and completions. Average production in 2025 was 18.5 MBoe per day, which was 4% above the midpoint of guidance. This was driven by strong well results on new wells in the Cherokee Play as well as continued focus of our operations team on optimizing base production. Total capital spend for the year, including leasehold, was $76.2 million, which falls in line with midpoint of guidance A rigorous bidding process focused on driving drilling and completion costs down in the Cherokee Play and low artificial lift failure rates from previous years of improvements kept us on budget. Lease operating expenses for the year were $36.2 million or 14% below the low point of guidance. That includes $4.3 million but nonrecurring, noncash adjustments of operating accruals that benefited LOE. Excluding those, LOE still came in below the low point, driven by the team's focus on reducing expense mark overs, LOE efficiencies implemented on recent acquisitions and utility costs. During the year, the company successfully completed and brought 6 wells online from our operated one-rig Cherokee drilling program. We recently brought online well 7 and 8 in the program and are drilling the 9. We are pleased with the results of the first 6 operated wells which had a per well average peak 30-day production rate of approximately 2,000 Boe per day, made up of 44% oil. Moving to our 2026 capital program. We plan to drill 10 operated Cherokee wells with one-rig this year and complete 8 wells. The remaining 2 completions are anticipated to carry over to next year. A majority of the remaining wells in our development program this year directly offset proven or in progress wells in the area. These new wells and the results in the area give further confidence in reservoir quality and expectations in the area. Gross well costs vary by depth, but are estimated to be between approximately $9 million to $11 million. We intend to spend between $76 million and $97 million in our 2026 capital program, which is made up of $62 million to $80 million in drilling and completions activity and between $14 million and $17 million in capital markovers, production optimization and selective leasing in the Cherokee Play. Our high-grade leasing is focused to further bolster our interest, consolidate our position, and extend development into future years. With that, I will turn things back over to Grayson. Grayson Pranin: Thank you, Dean. I'd like to look back at 2025 for a moment. 12 months ago, we initiated our operated development program in the Cherokee, which, among other factors, has contributed to reaching a multiyear high with production averaging 19.5 BOE per day in the fourth quarter. In addition, something for which we are very proud, we set a new record of over 4 years without a recordable safety incident. I'm very proud of our team for these accomplishments and other value-adding contributions this year. They stood up the Cherokee development program from scratch, have implemented several cost efficiency initiatives, and have done all this while championing safety, resulting in 0 incidents. In addition, these achievements were done with a lean, but very engaged and experienced staff which have proven to be capable operators with peer-leading operating and administrative cost efficiencies. Given the promising initial results achieved in 2025 and the attractive returns for these Cherokee wells, we plan to continue our Cherokee development with one-rig throughout 2026. As we look forward to developing these high-return assets, we anticipate growing oil production volumes another approximately 20% this year. In addition, we plan to sustain our ground game by opportunistically securing new leases at attractive metrics to further increase our interest in wells that we plan to operate or that will further extend our development option. We're hopeful that our approximately 24,000 net acres in the Cherokee Play as well as our continued leasing efforts will translate to a meaningful multiyear runway as we look beyond 2026. Our operated Cherokee wells have a robust return with breakevens for our planned wells down at $35 WTI. Our baseline economics were set earlier this year and recent increases in commodity price would only enhance these returns. In addition, while these returns are durable and the program is attractive in a range of commodity environments. Our team will continue to be diligent about prioritizing full-cycle returns, monitoring reasonable reinvestment rates and when needed, exercise drill schedule flexibility to make prudent adjustments to our development plans in different economic environments. Also, we do not have significant near-term leasehold expirations and have the flexibility to defer these projects if needed for a period of time. I'd like to pause here to highlight the optionality we have across our asset base, coupled with the strength of our balance sheet, which sets us up to leverage commodity price cycles. The combination of our oil-weighted and Cherokee gas-weighted legacy assets as well as a robust net cash position give us a multifaceted options to maneuver and take advantage of different commodity cycles. Put simply, we have a strong balance sheet and a versatile kit bag, which makes the company more resilient, better poised to maneuver and adjust to matter the commodity environment. I will now revisit the company's advantages. Our asset base is focused in the Mid-Continent region with a PDP well set that provides meaningful cash flow, which does not require any routine flaring of produced gas. These well-understood assets are almost fully held by production along history, shallowing and diversified production profile and double-digit reserve life. Our incumbent assets include more than 1,000 miles each of owned and operated SWD and electric infrastructure over our footprint. This substantial owned and integrated infrastructure helps de-risk individual well profitability for a majority of our legacy producing wells down to roughly $40 WTI and $2 Henry Hub. Our assets continue to yield free cash flow. This cash generation potential provides several paths to increase shareholder value realization and is benefited by a low G&A burden. Sandridge's value proposition is materially derisked from a financial perspective by our strengthened balance sheet, including negative net leverage, financial flexibility, and an advantaged tax position. Further, the company is not subject to MVCs or other significant off-balance sheet financial commitment. We have bolstered our inventory to provide further organic growth opportunities in incremental oil diversification with low breakevens in the high-graded areas. Finally, it is worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around this. Not only do we continue to operate our existing assets extremely efficiently and execute on our Cherokee development in an efficient manner but we do so in a prudent and safe manner. Shifting to strategy. We remain committed to growing the value of our business in a safe, responsible, efficient manner while prudently allocating capital to high-return growth projects. We will also evaluate merger and acquisition opportunities in a disciplined manner, consideration of our balance sheet and commitment to our capital return program. This strategy has 5 points: one, maximize the value of our incumbent Mid-Con PDP assets by extending and flattening our production profile with high rate of return production optimization projects as well as continuously pressing on operating and administrative costs. Two, exercise capital stewardship and invest in projects and opportunities that have high risk-adjusted fully burdened rate of return while being mindful and prudently targeting reasonable reinvestment rates that sustain our cash flow and prioritize a regular way dividend. An important part of this organic growth strategy is further progressing our Cherokee development and economically growing our production levels while providing further oil diversification. However, we will continue to exercise capital stewardship and maintain flexibility to respond to changes in commodity prices, costs, macroeconomic and other factors. Three, maintain optionality to execute on value-accretive merger and acquisition opportunities that could bring synergies, leverage the company's core competencies, complements its portfolio's assets further utilized approximately $1.6 billion of federal net operating losses or otherwise yield attractive returns for its shareholders. Fourth, as we generate cash, we will continue to work with our Board to assess path to maximize shareholder value to include investment and strategic opportunities, advancement of our return of capital program and other uses. Our regular way quarterly dividend is an important aspect of our capital return program, which we plan to prioritize in capital allocation along with opportunistic share repurchases. The final staple is to uphold our ESG responsibilities. Now shifting to administrative expenses, I will turn things over to Brandon. Brandon Brown: Thank you, Grayson. As we approach the conclusion of our prepared remarks, I will point out our fourth quarter adjusted G&A of $2.7 million or $1.53 per Boe continues to compare favorably to our peers. The continued efficiency of our organization reflects our core value to remain cost disciplined as well as prior initiatives, which have tailored our organization be fit for purpose. We will maintain our efficiency and low-cost operation mindset and continue to balance the weighting of field versus corporate personnel to reflect where we create value. Outsourcing necessary but for [indiscernible] and less core functions such as operations accounting, land administration, IT, tax and HR has allowed us to operate with total personnel of just over 100 people while retaining key technical skill sets that have both the experience and institutional knowledge of our business. In summary, at the end of the fourth quarter, the company had approximately $112 million in cash and cash equivalents, which represents over $3 per share of our common stock outstanding and inventory of high rate of return, low breakeven projects, low overhead, top-tier adjusted G&A, no debt, negative leverage, a flattening production profile, double-digit reserve life and approximately $1.6 billion of federal NOLs. This concludes our prepared remarks. Thank you for your time today. We will now open the call to questions. Operator: [Operator Instructions] Your first question comes from Christopher Dowd of Third Avenue Management. Christopher Dowd: Your 2026 production guidance of 6.4 million to 7.7 million Boe and CapEx of $76 million to $97 million. has got a bit of a range to it, for the benefit of everyone on the call, could you just give a little more context on what scenarios might lead to the higher and lower end of that guidance? And then I've got a follow-up. Grayson Pranin: Sure. Yes. Thank you for the interest and the questions. Things that we're watching for that range is timing is a big part of it. So right now, we're planning on drilling 10 wells and completing 8, if the timing of the shift due to the availability of crews or weather or anything like that, that could shift wells later in the year or into next year potentially that could affect the range as well as working interest. A lot of the wells that we're developing this year, their pooling hasn't been finalized in Oklahoma, as you pool the well and sometimes you can achieve higher working interest through that pooling process. And so while we budgeted for some potential net increases, additional could -- add additional capital, but it also adds additional production with that as well. And so we tend to like to make sure that we're budgeting at appropriate achievable levels. And so we're not accounting for all of that potential upside that could occur through the normal planning and development process throughout the year. Christopher Dowd: Very helpful. And then just as my follow-up question, can you comment on how you're viewing what seems to be a fairly supportive spot market today relative to how that might influence your hedging positions going forward? I know you mentioned, I think, about 23% hedged today. But how should we think about the opportunity to kind of lock in more certainty on the cash flows going forward? Grayson Pranin: Sure. No, it's a great question, one that we're watching literally by the mid year even as we're on the call now, I'm going to say a few words and then hand this off to our CFO, Jonathan Frates, to say more. But I think a big piece of this is, one, we do not have the debt, so we don't have any bank-mandated hedging requirements. Maybe we're not required to hedge in the down side and could be more opportunistic in nature. It has -- prices have increased this year. We've just -- we've done that and taken in additional options. You can probably see a lot of speculation in the marketplace on where oil prices could go to. So we're mindful to layer in additional contracts. We want to do so that we also have some opportunities for the potential upside. And with that, I'll hand things over to Jonathan. Jonathan Frates: Yes. I think you said it well, Grayson. We're very opportunistic with this program. I'll point out that majority of these oil hedges came very recently. So if you look at the balance of the year, I know I mentioned in the commentary that we had up 27% of guided production hedged on the oil side, but that -- due to the fact that we put a lot of these very recently, and we're 2 months into the year. The balance is going to look a little higher than that, which you can calculate based on your own estimates. But we're very optimistic as these prices continue to rise up. We're watching it every day, and we'll layer on more as the year goes on, assuming things continue in this direction. Operator: [Operator Instructions] Your next question comes from the line of Sergey Pigarev of Freedom Broker. Sergey Pigarev: I think everyone had this question on guidance, '26 with production and CapEx. And so actually, I want to ask about the guidance too, I say that you have this higher range of price differentials guidance for NGLs. And actually in Q4, we were a bit surprised because of actually higher differentials that we expected for Q4 yes, so do you see some temporary things here or it's like something structural, and we will see higher differentials from here. Grayson Pranin: Sure, Sergey. I appreciate your question. As we obviously, there's different differential depending on the commodity. I think if you look at oil, that's been relatively tight, I think you may be referencing gas. As we talk to gas and we've talked about this directionally, as we benefit from higher commodity prices and when compared to the Henry Hub benchmark, the fixed deducts within our gas stream are reduced, so you kind of have an expanded realization. So if you look into an environment where we have $4 gas, you'll see us towards the higher end of our guidance range. If you're looking at $2 gas, it's going to be near that lower range, and that's why we provided that range of 50% to 70% to try to accommodate different gas environment. I think if you look at the whole year, we're really close to that center of 60%, and we're averaging that -- I think that average just over $3 for a benchmark perspective. Relative to Q4, in particular, you had a widening of a regional basis, a lot of our gas is sold through Panhandle Eastern and [ NGL PL ] markets. I think that is localized and temporal. I think as we look in structurally, we're wanting to make sure that we're selling as much gas as we can at higher commodity prices because that's when we see the highest realization. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Stephanie Luyten: Good morning. Thank you for joining us as we present Elia Group's Full Year Figures and have a look at what 2026 will bring for the Group. I'm joined today with our CEO, Bernard Gustin; and Marco Nix. Bernard Gustin: Good morning. Stephanie Luyten: Good morning, both. Before we start, please take a moment to review the on-screen disclaimer. It contains some important information you should take note of. And as always, the slides will be and the script will be published on our live stream afterwards. Bernard, I'll let you kick off. Bernard Gustin: Thank you, Stephanie. I want to start by saying how proud I am of what we've achieved this year. Three achievements stand out. First, we secured financing for significant growth and reestablished market trust. When I took on this role, there were questions about our capacity to fund ambitious growth and deliver on our promises. Addressing this was my main focus. And I'm pleased to say that we are back on track. Second, we delivered operationally investing EUR 5.2 billion in CapEx this year, more than triple our historical annual average. And third, we are attracting exceptional talent. Despite challenges, people want to join us because they see Elia Group as a place to make a real difference and help build the energy infrastructure of the future. That tells me we have the right people and the right vision. Stephanie Luyten: Thank you, Bernard. Before Marco takes us through the financials, let's have a look together at the major highlights that defined the year. [Presentation] Bernard Gustin: Well, 2025 was indeed a year marked by major milestones, collective achievements and moments that shaped who we are and where we are heading. When it comes to project execution, 2025 was a year of real tangible progress. In Belgium, we continued to advance on several strategic infrastructure projects that form the backbone of the country's future electricity system. Ventilus and the Boucle du Hainaut, both critical missing links in connecting large volumes of offshore wind and reinforcing Belgium's North-South transmission corridor progressed through key regulatory and construction milestones. These projects are essential for integrating the Princess Elisabeth zone, strengthening system reliability and ensuring Belgium can transport renewable energy efficiently across the country. BRABO III also entered its final stretch, further reinforcing the Antwerp region and enhancing cross-border capacity with the Netherlands. The construction of the Princess Elisabeth Island also continued to advance steadily. The installation of the concrete caisson made solid progress with 11 of the 23 caisson already installed at the sea. And the remaining units are ready for deployment as soon as weather conditions allow it. This brings Belgium another step closer to achieving its decarbonization targets. And in Germany, we also saw real progress. On SuedOstLink+, one of the country's most important North-South transmission corridors with permitting moving ahead and technical preparation advancing, the project is now getting much closer to implementation. At the same time, offshore progress stayed on track. We successfully completed the cable laying for Ostwind 3, the link for the next wave of wind projects at the German Baltic Sea, securing future capacity to integrate more renewable energy. And on Bornholm Energy Island, Germany and Denmark signed a landmark agreement for 3 gigawatts of offshore wind connected through new hybrid grid links to both countries. It's a major step forward future toward future cross-border offshore grids in the Baltic Sea and support Germany's vision for a more meshed and resilient offshore system. We also put 2 new high-voltage lines into service, each over 100 kilometers, boosting our transmission capacity and strengthening stability across key parts of the German grid. So overall, it was a year of strong delivery with our teams moving forward the strategic projects, but at the same time, congestion is becoming more visible. As more renewables connect to the system, and that's a good thing, our consumption patterns also evolve and that is putting pressure on our grid. And this isn't just a Belgian or a German challenge, it's a European one. Our recent study on storage shows just how quickly the landscape is changing. Storage and batteries, in particular, will be a cornerstone of the future system. But equally important is the question, how, where and when storage operates. Today, the current wave of connection request isn't always a healthy growth. We are seeing a huge number of speculative projects across Europe. In Germany alone, TSOs are facing requests equivalent to the load of 100 million households. That's not sustainable. It strains the grid, dodge the queue and delays more mature investments that society actually needs. This is why we advocate for a new approach. We need to prioritize system relevant mature projects and move away from a first come, first serve logic that is now being exploited and risk driving up cost for all consumers. This is where the EU grid package helps set the direction. It supports anticipatory investment and clearer rules so that flexibility, renewables and storage can work together as aligned pillars of a sustainable, affordable and secure system. Marco Nix: And another key factor for our long-term investment needs is the right regulatory frameworks. Based on what we know so far about the German regulation, we welcome BSR's ambition and its recognition that the full package matters for investors. However, the draft framework still does not provide the balanced and internationally competitive returns needed to attract the level of capital required for the grid expansion. Key adjustments are still necessary, particularly on return on equity level, debt cost coverage, OpEx predictability and the effectiveness of the incentive schemes to ensure the framework truly supports the unprecedented investment effort ahead. We remain committed to constructive dialogue to help shape the final determination that safeguards investments capability and supports Germany's long-term energy goals. To speak about 50Hertz goals, we will now share a short video from the CEO of 50Hertz, Stefan Kapferer, on the progress made and the milestones still ahead of us. Stefan Kapferer: With a new focus on resilience of the energy infrastructure and affordability of energy transition, it became clear in 2025 that an overarching responsibility for the electricity system is urgently needed. This can only be delivered by companies like Elia Group with 2 national TSOs, ETB in Belgium and 50Hertz in Germany. In 2026, 50Hertz will once again invest a record high amount of money in additional grid infrastructure, substations and new connections for consumers, EUR 5.1 billion. So affordability of the energy transition will be key. We have to harvest efficiency potential, and we have to take care that only those projects are included in the next grid expansion development plan, which are really needed to make the energy transition happen. And to finance these challenges, the current review of the regulatory framework in Germany has to deliver an internationally competitive return on equity to guarantee that the engagement of the investors will be the same also in the upcoming years. Stephanie Luyten: 2026 will be a year in which significant regulatory developments and grid planning milestones emerge in both our countries, giving us much more clarity on the investment landscape and its associated returns. To build on that, I'd like to turn to the CEO of Frederic Dunon. He will walk us through the challenges and opportunities shaping our next steps. Frederic Dunon: Discussions will begin on our regulatory framework for the period '28, '31. Two major objectives are at stake. First, to ensure that market parties have the right incentives to allow safe and efficient system development and operation. And second, to ensure that Elia has a financial and human means to realize the plans approved by the authorities. The design of our '27, '37 federal development plan will be at the center of attention of our authorities. Indeed, it will define the boundaries of possible futures in terms of energy, industrial and economical policies. Whereas development plans were seen in the past as an administrative process, it is now well understood that they are the foundation of our major society for the coming decades. Stephanie Luyten: Now that we've looked at Belgium and Germany, let's shift to what's happening internationally. As you know, we took a minority investment in energyRe Giga at the end of 2023 with a clear understanding that this is a long development cycle model and that progress would not be linear. Since then, the U.S. environment has evolved. At federal level, the current administration has created uncertainty for offshore wind with slower permitting and approvals while at the same time, many states continue to actively push for grid expansion. In parallel, the U.S. power system is facing rapidly rising electricity demand driven by electrification and data centers, which reinforces the structural need for additional transmission capacity. Last year, we also saw the acceleration of the phaseout of the wind and solar tax credits. This puts pressure on the developers to bring the projects forward and required adjustments in project structures and portfolios across the sector. Against this backdrop, we have taken a disciplined approach, prioritizing value protection over speed. As a result, contributions from energyRe Giga to the Group results will come later than initially expected, but we remain supportive of the investment and of its long-term strategic rationale. As we already flagged at our Q3 results, Clean Path New York faced a setback. For SOO Green, the picture is more positive. Permitting is close to completion and land acquisition is largely secured. Finally, the offshore project, Leading Light Wind is, as you know, currently on hold under the present federal administration. Translated in financials, this means the group recognizes an impairment on its U.S. assets of EUR 99.1 million. This consists of 2 elements. On the one hand, a EUR 70.8 million write-off on the energyRe Giga portfolio, an additional provision of EUR 28.3 million, reflecting the group's remaining commitment to invest USD 150 million to reach its 35.1% ownership stake. Let me remind you that this impairment is a noncash and reflects a prudent reassessment of, on the one hand, value and timing, and it's not at all a change in our discipline or our financial strength. Our exposure remains well controlled. Our commitments are fully manageable within our balance sheet, and we retain flexibility on the pace of future capital deployment. Marco Nix: Thank you, Stephanie. Let me now elaborate on some of the headline figures for '25. We delivered strong progress across all fronts in 2025. Our 5-year CapEx plan remains fairly on track. We invested EUR 5.2 billion, EUR 1.4 billion in Belgium and EUR 3.8 billion in Germany. As a result, our regulatory asset base expanded to EUR 22.6 billion. Our hiring drive in '25 was also a success. We welcomed again more than 760 new employees, strengthening our operational capabilities and supporting the growth objectives we laid out during the Capital Markets Day. On the operational side, system performance remained outstanding. Grid reliability reached 99.9% in Belgium and 99.8% in Germany, positioning our TSOs among the most reliable grid operators in Europe. These figures highlight our continued focus on operational excellence and the effectiveness of our investments in technology, infrastructure and talent. In terms of financial results, the group delivered a strong performance with net profit attributable to Elia Group shareholders of EUR 556.6 million. This corresponds to an adjusted return on equity of 7.3% and earnings per share of EUR 5.51 per share. As shown on the slide, we indeed had a busy year on funding as well. We proactively secured the funding needed to support our strategic priorities in Belgium and Germany. We executed a well-diversified financing program across entities and instruments, reflecting the greater flexibility we have embedded into our funding strategy. A key focus early in the year was strengthening the balance sheet. We completed a EUR 2.2 billion equity package, which reinforced our capital base, broadened our strategic partnerships and provided significant financial flexibility. On the debt side, we raised EUR 3.6 billion in green financing through loans and bonds and both Elia and Eurogrid issued their first EU-labeled green bonds, an important milestone that broadened again our investor base and reinforced the central role of sustainable finance within our capital structure. At the start of the year, Standard & Poor's reaffirmed the credit ratings of all entities. We also strengthened liquidity, bringing the total available funds at year-end at EUR 11.9 billion, which underpins our prudent risk profile and supports our investment-grade ratings. Overall, the group's investment plan is backed by a robust financial framework designed to maintain its current ratings, ensuring continued strong access to capital markets and providing funding flexibility. Finally, the group is progressing on the various options of the funding toolkit as outlined to the market. Elia Group delivered strong operational and financial results reflected in a sharp increase in adjusted net profit. These figures excludes material one-offs and reflects the group's underlying performance. Adjusted net profit rose by 39.8% to EUR 716.5 million, driven by CapEx execution, higher equity remuneration and solid operations. Additionally, the third segment benefited from the first time of a tax benefit linked to the application of tax consolidation in Belgium. Germany remained the largest contributor, delivering just over 60% of the group adjusted result. Belgium added around 38%, while nonregulated activities and Nemo Link contributed EUR 5 million, including EUR 33.4 million in one-off adjustments, the reported net profit reached EUR 683 million. After noncontrolling interest and hybrid costs, net profit attributable to Elia Group shareholders increased by 32% to EUR 556.6 million. On this slide, we show that the reported figures include several nonrecurring items, both in Germany and in the nonregulated activities. We adjust for those to show the underlying performance. Starting with Germany, the reported net profit includes a EUR 46.5 million deferred tax impact. This relates to the revaluation of deferred taxes following the planned reduction in the German federal corporate tax rate from 15% down to 10% between the years '28 to '32. Turning to the third segment. There are 2 main adjusted items. As said by Stephanie, the U.S. impairment amounting to EUR 99.1 million negatively. On the positive side, the tax consolidation had a positive impact due to the application of the Belgium tax consolidation mechanism and linked to the tax periods prior to '25. It is there of a one-off effect, not reflected of a recurring tax benefit. After adjusting for all these items, adjusted net profit amounts to EUR 716.5 million at Group level. Stephanie Luyten: The RAB remains the core driver of the group's regulated remuneration. Supported by the execution of our investment program, Elia Group's RAB increased by 22.5% year-on-year, reaching EUR 22.6 billion at the end of '25, up from EUR 18.5 billion in 2024. This increase reflects the acceleration of major infrastructure projects in both Belgium and Germany that are critical to integrating growing volumes of renewable generation, reinforcing cross-border capacity and strengthening the overall system resilience. These investments ensure we can deliver the energy transition at the lowest societal costs, while contributing to Europe's long-term energy autonomy. When we look ahead, we expect an average annual RAB growth of over 20% for the period '24 to 2028, supported by around EUR 21.6 billion of cumulative CapEx over the next 3 years. As we have invested EUR 5.2 billion across our Belgium and German grids, the impact on our funding metrics remains well under control. Net financial debt increased by around EUR 1 billion, bringing the total to EUR 14.1 billion. This limited increase reflects the successful capital increase and the fact that a large share of our investment was funded through operating cash flows. Our average cost of debt rose slightly to 2.9%, and the portfolio remains very well protected from interest rate volatility with 98% of our debt held at fixed rates. Finally, our credit profile remains solid. Standard & Poor's reaffirmed our BBB rating with a stable outlook, underscoring the resilience of our financial structure and the strength of our funding strategy. Marco Nix: As this concludes the group overview, let me guide you through into the segments, starting with Belgium. In '25, adjusted net profit rose by 27% to EUR 272 million. This was mainly driven by a EUR 30 million increase in fair remuneration, reflecting continued RAB growth, higher equity and improved risk-free rate to 3.2% Incentives were up slightly by EUR 1.1 million. Beyond the regulatory result, the outcomes was also influenced by IFRS restatements. These were mainly driven by higher capitalized borrowing costs from the larger portfolio of assets under construction as well as tariff compensation for the costs linked to the capital increase. This compensation is recorded as equity under IFRS, but these costs are fully passed through to the tariffs under the embedded debt principle. In total, the Belgium segment delivered a return on equity of 6.2% for the year. For Germany, the adjusted net profit rose to EUR 439 million, up 42%. This strong performance is the result of several key factors. First, asset growth continues to be the biggest driver of the result, combined with imputed depreciation and cost of debt coverage. This was further supported by a slight increase in the allowed equity remuneration on new investments, reaching 5.7% for the year. On the cost side, the onshore OpEx outperformance declined slightly by EUR 3 million. The inflation index-based year revenues helped to offset most of the operational cost increases, associated with our expanding activity footprint. At the same time, a number of offsetting effects also incurred. Depreciation increased as several major projects were successfully commissioned and brought online. Financial costs rose due to the higher interest expenses from debt financing. This was balanced by capitalized interest during construction, which increased and interest income from a prefinancing agreement. After including a one-off deferred tax revaluation gain of EUR 46.5 million, net profit reached EUR 485 million. Considering the adjusted net profit, 50Hertz achieved a total return on equity of 11.1% for the year. Finally, the nonregulated activities and Nemo Link segment delivered an adjusted net profit of EUR 5.3 million in '25. This performance was mainly driven by the application of group contributions for the '25 financial year, which contributed EUR 24.7 million to the result. This reflects the Belgian tax consolidation mechanism that allows to utilize a tax loss at the group level and Eurogrid International. The positive impact followed a legislative change adopted at year-end, which removed the discriminatory treatment previously applicable when combining the group contribution regime with the dividend received deduction regime. This positive effect was partly offset by several factors, mainly higher holding company costs, a lower contribution of our consultancy business, EGI. Finally, Nemo Link contributed slightly less to the result. After taking into account net adjusted items, the net loss amounts to minus EUR 74.5 million. Stephanie Luyten: Before we move to the final part of the presentation, our financial guidance for 2026, I'd like to briefly touch on the group's dividend policy. Elia Group proposes a dividend of EUR 2.05 per share. This dividend proposal will be submitted for approval at the Annual General Meeting and is expected to be paid in June 2026. Marco Nix: Ending with the outlook for '26, Elia Group expects a net profit at Elia Group share in the range between EUR 690 million and EUR 740 million. In Belgium, we plan to invest around EUR 1.7 billion, delivering an adjusted net profit between EUR 290 million and EUR 320 million. While in Germany, we plan to invest around EUR 5.1 billion and an adjusted net result in the range of EUR 585 million and EUR 625 million. The nonregulated and Nemo Link segment is expected to report an adjusted loss of minus EUR 10 million to EUR 30 million. Bernard Gustin: Well, thank you, Stephanie. Thank you, Marco. Before we move into our Q&A session, let me share some closing remarks with you. Earlier this year, the Hamburg North Sea Summit highlighted the urgency of building an integrated offshore grid with European TSOs presenting a joint framework for hybrid interconnections and shared cost models capable of enabling up to 1,000 terawatt hour of clean energy by 2050. At the same time, the Hamburg declaration committed key North Sea countries to delivering 100 gigawatts of joint offshore wind projects, underscoring that system security and sovereignty will increase, increasingly depend on collaborative offshore development rather than isolated national solutions. Complementing this, Mrs. von der Leyen, underscored at the recent Antwerp Industry Summit that Europe's continued dependence on fossil fuels exposes industry to volatile price swings and highlighted the urgent need to reduce this exposure by accelerating the shift towards stable homegrown clean energy sources. The current war in the Middle East underlines once again how vulnerable Europe remains to external shocks. Strengthening and interconnecting the European grid is, therefore, essential, not only to expand access to affordable clean electricity, but also to reinforce Europe's energy sovereignty and reduce dependence on increasingly unstable fossil fuel supply. In this context, Elia Group stands out as the only international electricity transmission group in Europe, combining a multi-country footprint, deep operational presence in both the North and Baltic Seas and a public-private capital structure capable of aligning public anchors with long-term private investors behind strategic and critical infrastructure. This combination is exceptionally unique in our sector and precisely what Europe needs in these troubled times. Our leadership is most visible in our flagship hybrid interconnector portfolio, the first of its kind in Europe and the foundation of tomorrow's meshed offshore grid. Kriegers, yes, thinks and acts on European scale. Together with Energnet, they already have put the world's first hybrid interconnector Kriegers Flak into operation. Furthermore, together with Denmark, they will realize Bornholm Energy Island, unlocking large-scale offshore wind in the Baltic Sea and connect through hybrid HVDC links. And in Belgium, Princess Elisabeth Island and Nautilus could form one of Europe's earliest true hybrid offshore hubs, pulling up to 3.5 gigawatt of offshore wind, while interconnecting Belgium and the U.K. HansaLink, a key project of our entity WindGrid, expands this logic across new cross-border corridors, drawing private capital into offshore infrastructure at scale. And with Nemo Link operating reliably for years, we have already proven our capability to deliver, operate and maintain complex interconnectors safely and efficiently. This portfolio is unmatched in Europe. No other player combines so many hybrid assets across the 2 strategic European sea basins under one group, not as concept, but as concrete investable projects that show how offshore wind and interconnection can be planned, financed and built together. Thank you for your attention. Stephanie, I think we are now ready to move to the Q&A section. Stephanie Luyten: Yes. Thank you, Bernard. And in the meantime, Yannick Dekoninck, our Head of Corporate Finance, has also joined us. Stephanie Luyten: So let's turn to the screen. I see that our first question comes from UBS, Wanda. Wierzbicka Serwinowska: Congratulations on the results and the CapEx delivery because there were some concerns last year if you will deliver. The first question -- I mean, 2 questions to Marco. The first one is on the capitalized cost at the net income level. I mean, what was it in 2025 for 50Hertz because I couldn't see it disclosed. And what is embedded in your 2026 guidance? And also, if you could give us any rough guidance on the capitalized cost until 2028, that would be much appreciated. It's a very hard to model item. And the second question is on the S&P. As you said, back in September, S&P confirmed the rating, but they also said that the Elia Group consolidated business risk has marginally increased. And they raised the FFO to net debt threshold by 100 bps. And they also assume that your CapEx post-2029 will moderate. So does a higher FFO to net debt requirement worry you when thinking about CapEx plan or funding beyond 2028? Marco Nix: Maybe start with the technical question then on the capitalized borrowing costs. It's indeed something we are mindful of in the figures of '25, which are subject to disclosure finally, with the annual accounts at year-end, there's a part close to EUR 90 million considered in the German figures. So what is a noncash result contribution. So -- and that puts a little bit 11% into a certain perspective as, of course, this is being included in the 11% guidance. For the future growth, it's indeed linked to some degree with the investments to be taken. However, it's not linear simply as we try to limit the impact to some degree, and it's being connected to a relatively short period between 2 milestones of the projects, where I must admit that that's a little bit hard to model in the future. But I assume on one hand, that the IFRS standard is subject of a change, which might help us then in the future to limit that impact. However, it will grow. And as a rule of thumb, potentially, it's good to look into the investments in the year being taken compared with the previous year, how it will be growing in the year '26. Wierzbicka Serwinowska: So what should we -- what is embedded in your guidance because your guidance for 50Hertz was running much, much above consensus? Marco Nix: In the guidance of 50Hertz, it's a similar area, so between EUR 90 million and EUR 100 million. So that's currently what we have embedded there. Bernard Gustin: And then... Marco Nix: So then on the FFO to net debt. So currently, after the capital raise, we feel rather comfortable, in particular, with an eye on the liquidity position the group currently has. So therefore, we are not in a rush. Of course, we are looking into the horizon beyond '29. But as we stated, it's subject of the new CapEx plan, which is still under development as both the grid development plan in Germany and the federal development plan in Belgium is still under construction, if you want to say it like this. And as this is the underlying combined with the regulation of our future capacity in funding and of course, in remuneration, that is a necessary input for our funding plans. And of course, the rating will play a significant role in there as, of course, we don't expect that the growth will stop and taking that into perspective, there's a solid investment-grade position being needed to fund the investments in the future as well. Stephanie Luyten: Thank you, Wanda. Let's go to the next question. I believe it's from Bank of America, Julius. Julius Nickelsen: I have 2. The first one is on German regulation. So in the draft methodology that came out in December, I think the BNetzA for now ruled out the concept of a return on equity adder. But I believe since then, you've and the other TSO have provided some evidence why there should be an adder. So if you have any update, do you still believe that this could come in the final methodology? Any update on the reception that would be quite useful. And then the second question is a little bit more high level. But if I look out to like beyond the summer and towards the end of the year. Correct me if I'm wrong, but I think at that point in time, you should have the new Belgium returns, the final methodology in Germany and a good idea on the grid development plan in both countries. Could there be a point in time where you will upgrade the market -- update the market on your investment plan and maybe roll forward to 2030 with the new CMD? It would be useful to know. Marco Nix: Maybe starting from the last question and then developing to the other ones. Our expectation will be more towards year-end or beginning of next year to have that clarity as there are some specific aspect that you name a few of them in the regulation, but on the CapEx plan as well. To name a few, in Germany, that will be the total amount and the sequence of the offshore grid connections, which will play a big role in our CapEx program, or the question on overhead lines versus cabling in the big DC corridors. And that will, of course, change significantly the means being needed to realize that CapEx program. And this debate, to be fair, is still open. So there, we do not see really a landing zone for the time being. A little bit the same in Belgium with the Princess Elisabeth Island and the DC components or the interconnector there. Even though government will potentially take a position then in the second quarter, you do see kind of delay in that decision-making as this was originally being foreseen in March. So therefore, likely that it's more towards the end of the year where we have that kind of clarity. So on the point you mentioned in regards to the framework, in the conference, BNetzA hosted, they stated a little bit that they are not convinced yet on an adder to the return on equity. That's still a subject of a discussion, at least they opened the door for, and we provided some evidence that this is being needed. But it's fair to say there's an ongoing discussion on that one. What is, first of all, a positive sign that the door has not been closed. But so far, it's not being drafted in any adjustment of the determination of the return rates for the future. Stephanie Luyten: Thank you, Julius. Are there any other questions? I do not see -- Temi. Good morning, Temi, please go ahead. We have you here with us. Temitope Sulaiman: Congrats also on the results presentation this morning. I've got a couple of questions, but I'll keep it to 2. One is just clarity on your 2026 net debt expectations. If you can provide an update on that, that would be very helpful. Clarity on the Belgian regulatory time lines in terms of the consultations, but also the final determinations. And then finally, it seems that you've had strong operational delivery in Belgium and Germany, '24, '25, '26, you've raised the guidance above consensus expectations. And I'm just wondering whether you might consider revisiting your '24 to '28 guidance in terms of returns and when maybe you might consider that? Yannick Dekoninck: Maybe net debt, I will take. So on net debt for '26, we expect to land with the CapEx that we have announced at a net debt of around EUR 19.5 billion. So that's what we are targeting for in '26. Marco Nix: On Belgium regulation, there's a relatively straightforward path being published. So there will be a public consultation on 14th of April, if I'm not -- 17th or mid of April. Bernard Gustin: [indiscernible] Marco Nix: Mid of April. So happy to invite you to comment on that one once it is being out there and a final determination in the course of quarter 2. So end of half year, there is likely a robust visibility how the scheme will look like. Stephanie Luyten: And in terms of guidance? Marco Nix: Guidance, I think we still stick to the guidance which we have given as the growth is still intact with the double-digit percentage growth on the EPS and on the net results to the shareholders and around, as you have seen in the past, the 20% growth on the RAB. So that's quite consistent to each other, even though the guidance for '26 seems to be a little bit higher than the expectation, if you make it linear, but that comes from some of the aspects, which are not that fully linearized as we try to optimize the results, of course, as we can. And in connection with commissioning, for instance, we might have one or the other year an outliner and '26 seems to be one of them as a couple of significant investments come to commissioning, which gives us a favor in particular, in Germany. Stephanie Luyten: The next question will come from Piotr from Citibank. Piotr Dzieciolowski: I have a couple of questions. So the first one I wanted to ask you about this financial result in 50Hertz. So in your disclosures, you also point out apart from increased capitalized interest, you point out to accrued interest from the developer of an offshore platform of EUR 28 million, plus EUR 10 million from discounting effects on long-term provisions. So just wanted to understand, can you please explain on this first item what it really means? And is there any change on these numbers between '25 and '26? So I'm trying to get a bridge between '25 and '26 financial item. Is it just capitalized interest going up and these things disappear? Or how shall we think about these items? And second question, I wanted to ask you about your actual performance. So in your Slide 20, sorry, Slide 19, you said that the net income of ETB increased by EUR 1 million because of incentives. I was under impression that the incentives should grow in line with RAB with the size of the business, but it doesn't seem so. So can you please tell us how do you assume the incentives increment between the '25, '26? And likewise, you don't disclose incentives for the 50Hertz. I think there are some outperformance. So can you also say like operationally, do you improve -- or do you keep like a size of outperformance in line with the business growing with RAB growing or that basically the incentives and outperformance becomes bigger -- smaller relative to the size of RAB and so on. So these were 2 questions. Marco Nix: Okay. Maybe taking the first one on the wind farm contract, which we closed. So there's a nearshore wind farm at the German coast, which is being connected by 50Hertz in an AC technology. And for efficiency reasons, we agreed on to share the platform with the wind farm developer so that not both needs to have a platform being erected, what saves costs for both sides. And it's more or less a 50-50 split there. As the wind farm developer pushed back for some of the costs to some degree, and we had a relatively long-lasting negotiations on that one. We finally agreed on that the funding costs, the financing costs of this chunk, which is related to the final agreement, and which will be borne by the wind farm operator are being out of the regulatory sphere. So that's something the 50Hertz and Elia Group can keep finally. And the number you referred to is the accumulated interest income over the periods once we started that construction. So the effect itself will remain, but the order of magnitude will potentially go down as this is a kind of loan agreement, which is related on one hand to the size and the second to the scheme where there's some flexibility on the wind farm operator side once they are paying us, then, of course, the interest connected to the outstanding exposure will be lower in one of the years. And as this wind farm will likely be -- the connection of the wind farm will likely be finished in '26 and the wind farm operator will potentially commission its assets then beginning of '27, despite the fact that there's a 15 years period on that contract, there might be some changes over time in the payment scheme as the flexibility is on the wind farm operator. So that's a little bit long explanation. It's relatively complex matter, but likely that there will be an interest income over a certain period of time with different kind of order of magnitude. Bernard Gustin: Okay. And maybe, Piotr, on your question on the incentives in Belgium, it's indeed correct that they increased by EUR 1 million compared to last year. And it's indeed correct that they are, to a certain extent, correlated with the RAB, but as well, they are -- they have in the regulation a maximum amount that you can have on certain incentives. So that's one element. And some of the incentives are a bit, I would say, binary between 0 to 1. If you remember last year, we had a cable issue linked to the availability of the MOG in '24. So we had no incentive at that year. This year, we have a full incentive, a full maximum amount. So that gives a little bit why you don't see exactly that linear evolution on the incentives. Nevertheless, I think we had a solid operational results where incentives remain quite important to the overall result in Belgium. Stephanie Luyten: Let's now turn to Deutsche Bank, Olly. Olly Jeffery: Two questions from my side, please, like everyone else. So the first one just is on CapEx. Now I appreciate that you need to wait for the grid development plans to give a precise view on future CapEx for '29 onwards, and that's more likely to impact presumably CapEx in the 2030s. Are you able to give kind of a high-level view in Germany of kind of the broad level of increase you think might be likely given that most of the changes to the grid development plan are probably going to impact in the 2030s. Any insight you can give there would be helpful. And then secondly, just on funding the plan from '29 and onwards. I know obviously, you don't want to be precise about this. But could you say, is there a credible scenario where you think you might be able to fund CapEx in '29 and 2030 without the need for equity using the rest of your equity toolkit with the hybrids and opening up the capital structure of some of the TSOs potentially? Any views on that would be great. Bernard Gustin: Taking the first one, it's still, as we said, a little bit too premature to lay out a number. So if you take the total volume, which is currently as a price tag being seen on a total grid development plan in Germany, you can compare the EUR 320 billion, which was the number in the last grid development plan, which the EUR 340 billion, which is currently the number connected to the most likely scenario. It's not chosen yet, but that gives a little bit the view that likely the outcome will be rather the same with an eye on EUR 345 billion in terms of euros. However, there will be a kind of different allocation on that one. And that what makes it that's hard for the time being really to say the CapEx is further growing or going down at a certain point of time. As, of course, only part of the EUR 340 billion are connected then to 50Hertz to the Elia Group. So as a rule of thumb, it was 20% all the time. But the spread over 20 years is a difference than the spread over 10 years. So that's -- I mean, that's the simple math. And as the former government was quite in a rush to complete or to set very ambitious targets, which partially have been out of reality, the current government is more pragmatic in that view, and that's a little bit what still the debate is on. Stephanie Luyten: And on the funding? Marco Nix: On the funding, I mean, we have full flexibility now. So that's currently what we are going to execute. That's all our options are valid. We are working on further optionalities as well. But please, as we don't have the CapEx numbers currently in place, we do not want to give guess how we are continuing to fund the growth in the future at this moment. Stephanie Luyten: Nor do we have the regulatory framework set in place? Bernard Gustin: Yes, it's a bit early... Stephanie Luyten: So I think it would be a bit too early. But thank you for the questions. I see the next questions will come from ODDO, Thijs. Thijs Berkelder: A couple of questions. Do you still require probably an additional EUR 2 billion of equity? And can you confirm that you still aim to raise this via in principle, EUR 4 billion of hybrids? Second question is on your Energy Island and the DC connectivity there as well as for the U.K. connector. The HVDC cost price was too high. Any reason in your view why HVDC pricing now should be lower? And third is on the North Sea offshore wind projects targeting 15 gigawatts installations by 2031. What can we expect as impact for your CapEx from that plant compared to what we currently are installing on the North Sea? Marco Nix: Yes. Maybe starting with the first one. Our toolkits provide us flexibility, and we stated that it can be both hybrid -- the hybrid capacity potentially being sufficient at this point of time, while another option is to open the capital on one of the subsidiaries and/or finding structural solutions to help us funding the growth. And that's still something we are closely monitoring. And there's a couple of key elements to be considered and criteria's in the decision-making, once is timing. Another one is, of course, cost of capital. Third one is execution to name a few of them. And as we have a strong liquidity position and of course, the credit rating is comfortable as well. So we are carefully looking for the best solutions there. And once this is being decided, it can be both extremes. So both elements of the toolkit would gives us the credit in total, so it has the potential. However, it could be a combination as well depending on the point of time where we make the decision. Bernard Gustin: On the Princess Elisabeth Island, I would say that, first, it was the right decision to postpone the project because, as you know, at the time, we were really in a very heated market on the HVDC component. However, the teams have been working on updated design. We have also some very good discussion between U.K. and Belgium on how to best share the cost and the benefits of the project. And I hope that in the coming weeks, months, we can come with a solution that fits with the original objectives, while being more reasonable from a cost point of view. We see that the HVDC technology remains an expensive technology, but we also see that the heat that we had a few months ago is a little bit lower. On your North Sea approach, which actually the Princess Elisabeth Island is a subpart of. As I explained in my conclusion, I think we are really, as Elia Group extremely well positioned being the only transmission group having a portfolio of assets already in our base today. But of different nature because we have the Belgian port on the North Sea. We have the projects on the Baltic Sea with Windanker's. But we have also with our subsidiary, WindGrid, a project called HansaLink. And the advantage, of course, of this setup is that it's a setup where you can also use financial players who can help the financing of the project. So I'm not going to preempt on the decision of Europe. I think, by the way, we see with what's happening now in the Middle East that it's high time that we reduce our dependency on gas and that offshore wind in the North and the Baltic Sea is a critical element in there. We will see how Europe will evolve in -- and the grid package already goes that direction, but how they translate that into a series of projects. But I think what's interesting is that Elia by its strategic geographic positioning, by its current portfolio of projects, but also by its setup where we can leverage financing capital at different levels is very well placed to play a role in there. And already in our current portfolio of projects and in our current asset base, we have projects on both seas in the North and in the Baltic Sea. Stephanie Luyten: Are there -- yes. I see the next question coming. Unknown Analyst: And also from my side, compliments for the good results and outlook, of course. Yes, on the -- I'm still going to try on the North Sea, and thank you for the answers so far. But looking at the ambitions and with the involvement of TSOs as well in these kind of framework ambitions that were published, a step-up to 15 gigawatts already in 2031 and for a number of years, even a decade. And now looking at your CapEx approaching EUR 7 billion. So let's say, connecting all these gigawatts already upfront or preparing for that upfront and for a number of years to come. Is it fair to say that, yes, maybe previous assumptions on EUR 7 billion being the higher end of forward CapEx. Is that something that we need to reassess to a larger number, higher number? That's my first question. And the second one is on CapEx, and it's a great achievement that, of course, you met the expectation after the -- I think the questions that were raised at the midyear presentation. What should we expect for 2026? Will it be a more balanced picture of the EUR 6.8 billion or also 1/3, 2/3, maybe some guidance there. Bernard Gustin: I will take the first one and let the team go for the second one. I think the guidance remains the same. So we are on EUR 7 billion CapEx because we are talking on a series of projects that we know. Then we will have to see how the developments happen, and we will be looking at it as you do. And according to the developments, of course, Elia Group wants to position itself on these developments. But I think then there will be also another way at looking at it. And I think from the European standpoint, from the political standpoint, we will have also to think of the tools to make sure that we can reach those developments without having always a direct impact on the balance sheet of the TSOs. And that's where I say with some of our tools like WindGrid and so, we are very well placed to test those type of model. We will also have to see what Europe does in terms of SAF funding and other conditions. So just to say, within the current framework, we are in the current guidance, and there is no reason to change. Of course, we remain attentive and opportunist of what it would develop. But I think then there would be other ways of looking at the thing and not directly in the CapEx of a TSO, which will be one of the topic to manage if we want to reach this great ambition, but also needed ambition when you see the situation of Europe. Marco Nix: And maybe to complement, we published recently a paper then which could be a way forward in the future to fund in particular the far offshore wind farm developments and the connection to that one mainly via hybrid interconnectors, where we are facing several constraints to go ahead there, and that could be an element with the so-called WSPV concept, which helps both on one hand to unlock a little bit resistance in one or the other countries. And secondly, combine the forces with giving some securities by public authorities like European investment banks, for instance, and combining with private capital to fund that in the future, as Bernard rightly said, it's questionable whether all TSO can absorb simply these big request of capital in the future. In regards to our CapEx program, it's likely that you will do see a heavy loaded second half year again as this is, on one hand, a little bit in nature as during the summer, most of the construction is being made. And then, of course, we usually account for the progress once a certain milestone has been reached, and that's likely more in autumn than in spring. And the second one is that at least in Germany, gives us a favor to have that backloaded profile. As usually, you get remunerated for the average of the year while -- for the capital cost as well. While, of course, the later you will have it, the bigger the gain could be. And that's something which we have seen in the results as well as, in particular, the difference between the real funding costs and the funding costs, which are being embedded in the grid fees gives us a favor to some degree and contributes to results, too. Stephanie Luyten: And let's go to Wim from KBC. Wim Hoste: Yes. I hope you can hear me. Stephanie Luyten: Very well. Marco Nix: Yes. Wim Hoste: All right. Also congrats from me. Lots of questions have been asked. I just want to throw in some add-ons. If I want to come back to the financing, the equity raise potential, and I understand regulatory framework has to be put in place. Can you give an idea, suppose that if you want to do something like an ABB like in '24, EUR 0.5 billion, if that's possible, what you need to do, whether you would need to have some kind of Board's agreement first, if that's a possibility simply because the share price has rallied quite a lot. It's more than doubled since the last capital raise. So how you feel about that? Then smaller questions on the dividend. I think in the past, you said that, that would go in line with inflation. I think it stays more flat now. Is that also the outlook for the future? I completely would agree that would make sense as well. And then lastly, more like a general question and something that we've seen in the U.S. where the government has asked big tech to -- yes, basically pay via some kind of taxes to upgrade the grid because obviously, we know that, that demands a lot of investments to accommodate all the hyperscale investments. So just your view, is that something that could be possible in Europe? Obviously, things move a little bit slower. But if there's anything that you can say just in order to kind of divert the pressure that we have seen and the pushback from industry and consumers on -- yes, obviously, offloading a lot of the investments via the energy prices. So those are my 3 questions. Stephanie Luyten: Maybe I can tackle the dividends, if you like. We indeed gave a dividend or proposing a dividend of EUR 2.05. But what you need to take is as a basis is actually the EUR 2 because when we did the capital increase, we actually restated the dividend. And if we were to increase the dividend on a restated basis, it would be close to EUR 2, but we did not want to pay less than last year dividend. So we have increased it slightly. That has been our rationale for the EUR 2.05. Marco Nix: And we do see that as a strong signal that the investment in the Elia Group is a value-accretive one and the dividend payment is one of the elements there. So that gives some certainty that our growth path is intact. Stephanie Luyten: Regarding the ABB, what do we need to have in place for that? First of all, yes, we will have to have an authorized capital in order to do such a transaction. But we -- as Marco already highlighted today, we are not looking to use any nondilutive -- we are looking to use nondilutive options. And I think there, we have enough flexibility. The way forward would be towards the future to bring back unauthorized capital, put that in place, and that are the first steps that we need to take. Bernard Gustin: And on the U.S., well, first of all, it reminds us of the potential in the U.S. We have a little bit of a setback at the moment, but we are convinced that over the long run, we know the situation of the grid in the U.S. It's certainly not at level with the AI ambition that the U.S. has and the battle of AI will pass via a strong grid. So I think it's good that we are positioned in there. It will take a little bit more longer than expected, but I'm convinced that the potential is the same because the grid becomes a critical asset in every region of the world that want to electrify. The debate, of course, is who needs to pay, and we see the investments that the hyperscalers are doing and all things relative, the investment in the grids are indeed a fraction of the investments they are generally doing. So the idea to make them contribute is a political decision where it will be difficult for me to take a position, but it's clear that we've seen in our countries that the development of AI and data centers is representing a certain burden on the net, burden on the consumption. And I think at some point, there are 2 positions that need to be taken. The first one is what do we want in terms of industrial development and where do we give the priorities in terms of segments, AI, data centers versus general industry. And then how do we make sure that the general consumer is not hampered by a consumption that is not responsible for. So I think I don't know what is the exact recipe, but the direction is certainly a direction to investigate. Marco Nix: And maybe to complement on that one, on one hand, there are multiple congestions on all these connection requests. So funding is one. So in Germany, for instance, the consumers are not paying for the direct connection. It's indeed then the applicant. On the other side, we do see that the grid is heavily loaded and simply that makes a congestion in connecting a new device to the grid. So as this is something we need to be careful of as well to protect our people in doing the works there. And last but not least, it's not all the time that visible how mature the project is. And our lead time, it's fair to say, are still longer than the ones from this developer. And as they want to go in a staged process usually with extending the devices which are consuming them at the stage, but we are designing the -- yes, the connection only once. So that's all the time a little bit mismatch in the planning horizon. That's something which we need to work on commonly to make sure that we do see how mature the project is that we can give some access being granted and we can rely on that one as well as, of course, we want to prevent that we invest in an area where nothing is going to happen. As we honestly have seen in Germany with the ship industry as Intel canceled the big factory in an area of Magdeburg, and then the TSO was forced to bring down the commitments in that area. However, the land has been already being acquired. So that's a mismatch, which we need to be careful on as, of course, we need to protect then the final consumer, as Bernard rightly says, that we are not socializing cost of the industry, yes. That's a little bit what we are in. Bernard Gustin: But it's clear that AI needs the grid, but the grid also needs AI. And we will also -- and we are really developing an AI strategy and developing -- we are already using a lot of AI, but we want to accelerate there because AI is also a way to solve some of the bottleneck issues that we have today. So it's really a very close relationship, both ends. Stephanie Luyten: Let's now move to Juan from Kepler. Juan Rodriguez: I have 2, which are more of a follow-up, if I may. The first one is on guidance. Can you please confirm that you have no additional hybrids included on your 2026 guidance? And on guidance as well, what is the targeted return on equity that you have on Belgium and Germany within the guidance that you've given, especially on Germany as is substantially above expectations? And the second one is on the U.S. impairments. What are your expectations now in terms of the timing and size of the expected earnings contribution that you expect in the region going forward? If you can give us more clarity on that, that will be helpful. Marco Nix: You take the hybrid? Yannick Dekoninck: I think in the guidance that we have given is a guidance that takes into consideration multiple options that we have in the funding toolkit. So we do not exclude -- to be clear, we do not exclude a hybrid issuance, but the guidance that we have published this morning takes into consideration multiple options. Now in terms of return on equity, as you know, we are not guiding specifically on the return on equity for a specific year. We have guided on the return on equity over the period, over the regulatory period, both in Germany and Belgium. So that's still something that we are targeting for, knowing that you could have certain variability year-over-year due to important one-off effects like we had this year. That's also why we have been very clear on what that one-off effect was in Germany. Marco Nix: So to remind you, the average guidance which we have given was between 7% and 8% in Belgium, while in Germany, it was 8% to 10%. Stephanie Luyten: Yes. And on the impairment? Bernard Gustin: Did we miss one? Stephanie Luyten: Yes. I think on the U.S. impairment on the timing, when we could expect a positive contribution, but that one is a little early to say today because there's still a lot of uncertainty on when those projects and how and when they will materialize, but that's more towards the end of the decade, I would say. Bernard Gustin: Yes. And it's clear that, as you know, we have 3 projects, the project on Clean Path, New York, which is a line in New York, didn't pass some regulatory approval, what we call a priority transmission project, but it doesn't take away that New York needs an extra transmission line. And so we will use the assets to participate to further project development. So there, we believe we are rather facing a delay. You know the uncertainty that exists today in the U.S. about the offshore and things can turn very quickly one way or the other. So our strategy there is to secure the assets that we have in place. We have already the leasing rights on this project, that's Leading Light Wind. And on SOO Green there for the moment, that's a project that, as Stephanie explained in the presentation, continues on its path of the different regulatory hurdles. And so there, for the moment, there is no reason to review the project. So as you say, we are rather delaying in time. But as I said to your colleague just earlier, I'm convinced that the fundamentals stay and at some point, somebody will see that these projects are heavily needed. Marco Nix: So in the '26 guidance, there's no positive contribution being expected to make that clear. Stephanie Luyten: Thank you, Juan. Let's now turn to Alberto from Exane. Alberto de Antonio Gardeta: Congratulations for the results. A couple of follow-ups from my side. The first one is regarding the German regulation. Maybe if you could -- based on the like already published consultation papers, if you could quantify what are your expectations in terms of ROE and WACC based on the current consultation papers and what else is needed? So maybe if you could give us some guidance of what will be your expected level of returns in order to get the competitive returns that you need for being competitive in the equity markets? And the second one will be regarding the potential update to the market, the potential Capital Market Day. You have said that maybe by the end of the year or beginning of 2027. When do you know that we will have more visibility if this is happening or if we can consider as confirmed or it's still pending? Stephanie Luyten: I think maybe I'll start on the Capital Markets Day. That's still very much pending. As Marco clearly said, there are still a lot of moving factors. We don't yet have clarity in Germany. And also in Germany, the final elements will only be defined somewhere in 2027. So that's why we cannot fix to a date somewhere in the future. So next to that, we also have grid development planning that is ongoing in Belgium, in Germany. Those time lines aren't super fixed neither. So this will be something, I think, towards the end of the year, we will have more clarity on. So I do not expect us to really do a CMD still this year. Marco Nix: So to come to the German regulation, if you really look into the paper, even though it's heavy reading, I would say, it's for the time being, for our perception, more a description of a structural approach while the ingredients are not being flagged yet. And even though a WACC model could be something comparable, but the big debate on the cost of debt coverage is not finished yet. So that's still ongoing, but a rating adjustment is being made, which kind of reference rate is being used. These elements are still pending. That's why it's a little bit too early really to say what the outcome could look like, and we previously discussed equity or return adder for the TSOs, what is still in the discussion, which is not in yet. So I would say we are not there yet with that what we assume BSR could deploy. However, our clear target is not being worse than today. And if you take the return on equity, which we disclosed and take off all the accounting items, there's still a return rate above 8.4%, which is, if you want to name it, a kind of cash return. And as BSR already said, the total package matters, that's something we are requesting, and that's something which we are targeting to get out of it. Which elements shall we put in place. There, we have some openness. So if there's an incentive being put in place, which gives us an order of magnitude lending there, we are fine with it as well. We are happy to get challenged in terms of our operations. But so far, it's not really clear. So therefore, we are hesitating to give a guidance what it could give for the time being. Stephanie Luyten: Thank you, Alberto. Let's now -- I see Olly, you have some further follow-up questions? Can you hear us, Olly? Olly Jeffery: Yes. Just one follow-up question, please. Going back to the discussion on the capitalized interest within the guidance for '26 at 50Hertz. Is that -- which is noncash. Is there anything else within that '26 guide 50Hertz that is noncash in addition to the capitalized interest that we should know about? Or is that the only item? Marco Nix: I wouldn't say it material. There is -- now we come a little bit in great territory as we assume commissioning, which gives us a full depreciation in the revenues, there's a cash connected to that one, while the depreciation is lower, the real depreciation, which we are recording in that year. So for us, it's a cash item, which contributes to the results as well. While the capitalized borrowing cost is a noncash item as this is reverted later stage. So -- and therefore, I would keep it on that one, knowing that, of course, the example which I raised could give us a favor in the results of next year as well. And as I said, if you only linearize that, the result would look a little bit outstanding compared to that linearization in line with the CapEx, which you otherwise would compute. Yannick Dekoninck: And maybe if I can complement it, Marco, for those that have been following us for a couple of years, you see that we also have sometimes discounting of interconnecting provisions or interconnected income. As you know, you -- sometimes have spike in the forward rates that has an impact on those long-term provisions. That's not something that we estimate or take into account in the guidance as such, but that's always something that can happen. We were confronted with that a little bit at the end of Q4 of this year, where the interest rates started to move up. But that's not something that we can -- that we have a control on. That's not something that we can steer. So there, we have a neutral approach. But in the actuals, of course, that can have an impact. Olly Jeffery: And what was the impact of that in the '25 results from that movement at the end of Q4? Yannick Dekoninck: I think at the end of Q4, we had a net impact of EUR 22 million that was coming from this discounting of provisions. Stephanie Luyten: Thank you, Olly. If there are no further questions, let's wrap up today's presentation. First of all, a big thank you to all the teams who have contributed. Thank you, Bernard, Marco, Yannick. Marco Nix: Thank you, Stephanie. Stephanie Luyten: And thank you for joining us today. Have a nice day, and see you soon.
Operator: Ladies and gentlemen, thank you for standing by for Autohome's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] If you have any objections, you may disconnect at this time. A live and archived webcast of this earnings conference call will be available on Autohome's IR website. It is now my pleasure to introduce your host, Sterling Song, Autohome's IR Director. Mr. Song, please go ahead. Sterling Song: [Interpreted] Thank you, operator. Hello, everyone, and welcome to Autohome's Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me on today's call is our Chief Financial Officer, Ms. Craig Yan Zeng. Management will go through the prepared remarks first, which will be followed by a Q&A session where they will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements, except as required under applicable laws. Please also note that Autohome's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I will now turn the call over to Autohome's Chief Financial Officer, Mr. Craig Yan Zeng, for opening remarks. Craig, please go ahead. Yan Zeng: [Interpreted] Thank you, Sterling. Hello, everyone. This is Craig Zeng. Thank you for joining our earnings conference call today. 2025 was a pivotal year in our evolution, transforming from an automotive information platform into an automotive service ecosystem. Facing a dynamic industry landscape, our focus was on driving 2 core initiatives. On the content front, we continue to strengthen the development of high-quality content while enhancing our creator ecosystem and expanding new media distribution capabilities. On the service front, we accelerated the development of fully integrated online to offline services to create a more efficient and convenient end-to-end automotive service ecosystem for users and industry partners. Throughout this transformation, we are using AI as a core engine to drive product innovation and optimize operations and have already achieved substantial progress across multiple business areas. On the user side, by continuously optimizing and iterating our platform tools, we've effectively reduced decision-making costs and significantly enhanced the overall user experience. Taking new energy vehicles as an example, we've launched features such as optional configuration selection and vehicle comparison list further enriching the car selection tool set to help users make faster purchasing decisions. Moreover, by building a traffic alliance and expanding service categories, Autohome now covers a broader range of user scenarios, enabling us to better meet diverse user needs. Our O2O integration initiatives are key to reshaping the automotive consumption process. Throughout 2025, we organized over 5,000 offline automotive exhibition and group purchase events nationwide and collaborated across industries with user-oriented culture IPs such as esports and music festivals. These efforts went beyond the traditional car purchasing model by reaching a broader consumer base and ultimately integrating car-viewing, selection, test-driving and repurchasing and purchasing into an immersive experience. Specifically, within the development of our transaction service ecosystem, we launched the Autohome Mall in the second half of last year, providing users with a smoother digital car purchasing experience. Currently, this business, though still in its initial phase has achieved stable operations and is demonstrating positive momentum, which make us even more confident in the growth prospects of our transactions segment in the coming year. Behind every product and service upgrade, integration and real-world deployment is a strong foundation powered by data and AI technology. In 2025, we introduced our proprietary Cangjie Large Language Model and Tianshu Intelligence Service Platform, integrating Autohome's 2 decades of industry data and service experience with cutting-edge algorithms. This integration helps our ecosystem partners accelerate their smart transformation. Meanwhile, Autohome's full product portfolio has been comprehensively upgraded with AI-powered capabilities from AI smart assistant that supports users throughout the entire car selection and purchase process to AIGC technology that generates and distributes marketing content across platforms and further to AI-driven intelligent advertising placement covering the entire advertising chain and more. So we are advancing Autohome's shift from a traffic gateway into an intelligent engine that improves efficiency across the entire ecosystem. Specifically, over the past year, we continue to make progress in our content ecosystem, strengthening our professional influence and expanding our reach across new media channels. For instance, during the Guangzhou Auto Show last November, we integrated our event coverage with a creator conference centered on the theme of utility-driven coverage. We produced a marathon live stream spanning 2 days and 23 hours. Content was closely tied to real-world user scenarios and the results were distributed simultaneously across 6 major new media platforms, achieving a multidimensional scenario-based content broadcast. In addition, in the fourth quarter, we launched Autohome Wanxiang, a comprehensive one-stop content marketing platform for the automotive industry by building creator matrix centered on 5 key pillars: industry experts, technology, racing, outdoor lifestyle and global markets. We provide automakers with a one-stop automotive content service covering articles, videos, live streaming and more. This allows us to meet the diverse and various marketing needs of automakers. As of the end of 2025, the platform has attracted over 2,500 premier creators from Autohome and various new media channels. At the same time, we achieved significant results in building our MCN system. Autohome Media MCN now covers over 500 high-quality KOLs and KOCs across diverse fields, and our new media platforms have cumulatively reached over 100 million users. According to QuestMobile, Autohome's average mobile DAUs in December 2025 were 77.51 million, remaining stable year-over-year. In the new energy vehicle sector, following a successful pilot in late September 2025, Autohome Mall was officially launched in the fourth quarter, continuously advancing our transaction service upgrade, unlocking resources across the industry chain to expand vehicle offerings and optimize the car purchasing experience for users. Offline, we are focused on low-tier cities by establishing a franchise network, filling gaps in OEMs channel coverage. Autohome Mall's one-stop shopping trading and service ecosystem is still in the exploratory and refinement phase has already secured partners with 23 mainstream automotive brands. Looking ahead, we will continue to refine the automotive transaction ecosystem and work with partners across the entire industry value chain to advance the automotive industry's digital and online transformation. For the full year 2025, Autohome's NEV-related revenues, including the new retail business maintained steady growth, increasing by 30.2% year-over-year. On digitalization, we completed a series of AI-driven upgrades to our products in 2025. Early in the year, the Autohome launched an AI-powered intelligent assistant built on DeepSeek and Autohome's proprietary data, significantly enhancing the Q&A experience in the automotive vertical. In April, we introduced an intelligent used car purchasing assistant that addresses pain points in transaction matching and the purchase decision-making for nonstandard used cars. As a result, we now have achieved full AI assistant coverage across both new car and user scenarios, maintaining industry-leading quality response rates for user Q&A. For partners, we used our unique data resources and industry analytics models to upgrade our digital product line across the entire value chain from marketing outreach to potential customer acquisition to sales conversion and to aftersales services. This has enabled end-to-end efficiency improvements across the process for our clients. To date, we have served over 50 automotive brands. In our Used Car business, we continue to advance the development of a standardized service system. For vehicle pricing, our AI Vehicle Inspector has been successfully deployed across multiple third-party platforms. It allows users to obtain registration services through various inputs, including license plate images and vehicle registrations, while also providing in-depth and analysis of marketing pricing trends. Its pricing accuracy and the user adoption rate both rank among the highest in the industry. On the vehicle supply side, we partnered with 9 authoritative inspection agencies to establish the Vehicle Certification Alliance. Over the year, we completed standardized inspections for more than 500,000 vehicles, offering professional and reliable quality assurance for transactions on our platform and effectively reducing trust-related costs during the transaction process. Overall, in 2025, we remain committed to a user-centric approach, continuously improving the user experience through rich diverse and high-quality content as well as intelligent tools. We also achieved key breakthroughs in the practical application of AI and in building an integrated online to offline transaction ecosystem. Moving forward, we remain committed to improving the user experience, continuously enhancing our service and transaction ecosystem and driving the high-quality and sustainable development of Autohome. With that, let me briefly walk you through the key financials for the fourth quarter and the full year of 2025. Please note that I will reference RMB only in my discussion today, unless otherwise stated. Net revenues for the fourth quarter were RMB 1.46 billion. To break it down further, media services revenues were RMB 334 million. Lead generation services revenue were RMB 68 million. And online marketplace and others revenues contributed RMB 408 million. Cost of revenues in the fourth quarter was RMB 319 million compared to RMB 428 million in the fourth quarter of 2024. Gross margin in the fourth quarter was 78.2% compared to 76% in the same period of 2024. Turning to operating expenses. Sales and marketing expenses in the fourth quarter were RMB 739 million compared to RMB 718 million in the fourth quarter of 2024. Product and development expenses were RMB 258 million compared to RMB 328 million in the same period of 2024. General and administrative expenses were RMB 115 million compared to RMB 131 million during the same period of 2024. Overall, we delivered an operating profit of RMB 92 million in the fourth quarter compared to RMB 232 million for the same period of 2024. Adjusted net income attributable to Autohome was RMB 304 million in the first quarter compared to RMB 487 million in the corresponding period of 2024. Non-GAAP basic and diluted earnings per share in the fourth quarter were both RMB 0.65 compared to RMB 1 for both in the corresponding period of 2024. Non-GAAP basic and diluted earnings per ADS in the fourth quarter were RMB 2.60 and RMB 2.59, respectively, compared to RMB 4.02 and RMB 3.99 respectively, in the corresponding period of 2024. Next, I will briefly summarize our full year 2025 results. Total revenues were RMB 6.45 billion, of which media services revenues were RMB 1.15 billion, lead generation services revenues were RMB 2.71 billion and online marketplace and others revenues were RMB 2.59 billion, representing an increase of 8.8% year-over-year. In addition, we delivered an adjusted net income attributable to Autohome of RMB 1.61 billion with an adjusted net margin of 24.9%. As of December 31, 2025, our balance sheet remains robust. Cash, cash equivalents, short-term investments and long-term financial products totaled RMB 21.36 billion. We generated net operating cash flow of RMB 0.89 billion in 2025. On September 4, 2024, our Board of Directors authorized a share repurchase program under which we are committed to repurchase up to USD 200 million of Autohome's ADS for a period not to exceed 12 months thereafter. On August 14, 2025, the Board approved an extension of the program through December 31, 2025. Under this program, we have repurchased approximately 7.12 million ADS for a total cost of approximately USD 185 million. I'm also pleased to announce that on March 5, 2026, our Board of Directors authorized a new share repurchase program under which we may repurchase up to USD 200 million of Autohome's ADS over the next 18 months. This reflects our strong confidence in our business prospects and the long-term development as well as our consistent commitment to continuously creating and delivering value to our shareholders. So that concludes our financial summary. We are now ready to open up the Q&A session. Operator, please open the line for the Q&A. Operator: [Operator Instructions] Our first question comes from the line of Thomas Chong of Jefferies. Thomas Chong: [Interpreted] My first question is about can management provide more color about your thoughts about the auto industry outlook? My second question is about capital return. We know there are updates on buyback, how should we think about the dividends? Sterling Song: [Interpreted] First, let me share with you some recent market developments and future trends. First, we believe the total vehicle sales in 2026 is expected to increase slightly or modestly with the overall industry profitability still remain under pressure. On the policy side, the purchase tax incentives for NEVs are gradually being phased out. And at the same time, the few new subsidy policy has shifted from a fixed subsidy to a variable subsidy. On the market side, both the China Passenger Car Association, that is CPCA and the China Association of Automobile Manufacturers, CAAM, both of them projected that this year, China's total auto sales will only increase slightly by 1% year-over-year, which is the lowest in the past few years. So we believe the competition in the auto market will shift from the price war to value war. And meanwhile, overall, in the auto sector profitability still remains under pressure. And the profit margin last year for the auto sector is only 4.1%, down from 4.3% compared with the previous year. And so the overall sector is entered into a year of very low profit. So next step, we believe the technological innovation and intelligentization should be the key themes for the competition for auto sector in the next stage. So for ourselves, for Autohome, we believe this represents a rare opportunity to leverage our integrated O2O business model to connect the entire vehicle purchasing life cycle for users. At the same time, we can also help OEMs to acquire more incremental customers and drive additional sales to helping them to capture greater market shares in an increasingly competitive and more mature market environment. Just now, we announced the Board of Directors authorized a new share repurchase program. And also on the cash dividends, we firmly remain committed to distributing no less than RMB 1.5 billion in total in the cash dividend for the full year. And so we can ensure consistent, reliable cash dividends to our shareholders. So over the long run, we have committed to building a comprehensive shareholder return framework centered on sustained dividend plus share repurchase, striving to deliver predictable and sustainable returns to all our shareholders. So in the future, we will continue to uphold the long-term, stable and proactive shareholder return policy. We sincerely appreciate all our shareholders for their long-term strong and continued support to the company. Operator: Our next question comes from [indiscernible] from CICC. Unknown Analyst: [Interpreted] After Haier became the major shareholder, how has the company's business plan been updated? And what's the potential for future collaboration? And my second question is what are the expansion plan for offline stores? Sterling Song: [Interpreted] After Haier becoming our new controlling shareholder, we don't have material change in our overall strategic direction. First, we are strengthening the development of user first, and we are more focused on the user experience as the top priority. Second, as we just mentioned, we will transform from information platform to a transaction platform. So we set up the Autohome Mall, which was established last year. And third, with the continuous upgrade of AI capabilities, which will bring us more -- help us more in our future operation. So in the long run, our target is to -- we will transform from information platform into a one-stop transaction ecosystem platform. And in terms of synergies with Haier, we will leverage Haier's strength in channels, supply chain management and service networks to further optimize our integrated O2O new retail model. We will explore a low-cost, high efficiency and experience-driven channel sales approach to drive our business upgrade from a transaction matchmaking model to a full chain service model. And ultimately, our goal is to provide more convenient, more transparent and trustworthy car purchasing experience covering the entire [process] from the vehicle searching, selecting to purchasing, using and replacing. For the offline stores, we will continue to expand our primary franchise model. So our focus should be covering more cities from Tier 3 to Tier 5 low-tier cities to help OEMs to strengthen their channel networks and find them -- to try to help them to find more incremental users and addressing the OEMs pain points, for example, insufficient channel coverage in low-tier markets, et cetera. Operator: Our next question comes from the line of Richie Sun from HSBC. Ritchie Sun: [Interpreted] Firstly, regarding the NEV business, can you share what will we bring to the partners in 2026? And what are the key indicators we should look for to assess the development progress? Secondly, in terms of the rapid development for AI agents, we are seeing there's some impact to some industry and platforms. So how does management assess the impact of AI agent towards auto verticals? And what would Autohome do to address this risk? And what are the progress made in the AI applications? And finally, in terms of the dealer side, the dealer's related revenue has been falling. So when do management think this decline will actually stop? Sterling Song: [Interpreted] Thank you for your questions. First, let me answer your question about what value can we -- can our NEV transaction business bring to our partners. As I just mentioned, the transaction business was launched in the second half of last year. And this year, we'll continue to further explore this business model. So for EVs, what we provide is far beyond the advertising and lead generation businesses. So we are now delivering a complete end-to-end solution that covers from car searching to transaction conversion process. So this approach differentiates Autohome from other platforms in the market. In terms of metrics to monitor for this progress is quite simple. First is the number of brands, how many brands want to cooperate with us, want to grow our platform. For offline, the metrics should be focused more on the coverage of the channel works. Besides, in addition, transaction volume is another key metric. We are -- what we are looking now to validate this business model and we target to increase the scale of this model gradually. For the how to assess the AI agents impact on the auto media vertical, first from the interaction model level, AI agents are more and more becoming the new hub connecting users and services with conversational interaction replacing the traditional models. And the second is more from the service side, service level. This is just what we just mentioned, we are transitioning to more transaction model, transaction platform. So for Autohome, our response has 2 points. First is, we try to build an Autohome AI agent for the auto sector, for the auto industry, and we try to enhance the 2C user experience. So what we are doing is we try to enable the agent to deliver a complete one-stop personalized concept style service across the entire auto life cycle. So we are -- what we are doing is we try to make AI a trusted intelligent companion throughout the car purchasing to ownership life cycle. The second point is we try to establish an AI-based intelligent service network, which can connect the automakers, dealers, financial institutions and others, stakeholders, et cetera, so to enable the direct service delivery and collaborate ecosystem value creation, and we try to balance the 2C experience and 2B conversion efficiency. From the very beginning, Autohome focus on the AI, and we have made a lot of progress. For example, we developed a proprietary auto vertical large language model, which is called Cangjie. It ranks first in the auto knowledge evaluation among Chinese large models. And for the C-end users, AI pioneered conversational assistant covering the full life cycle of car searching, selection, purchasing and using so we can achieve industry-leading performance evaluation and significantly enhance the users. And in this way, we can shorten the user decision-making cycles. And for the B-end customers, we also leverage AI to make more new content, provide one-stop AIGC capabilities and intelligent operational services. And we will focus on the dealers' business conditions. Last year, our dealerships suffered severe losses. So their survival conditions worsened. And even we find new vehicle prices fell below the prices for used cars. From our data statistics, it showed over 70% of the dealers nationwide in China were in loss-making. Because of the tough environment, some dealers have exited the dealership network last year, which is the most difficult in the last few years. So based on our own data and statistics, at the end of last year, the total number of dealers declined by approximately 5% year-over-year. So under such environment, the decrease in dealer groups budget was anticipated by us already. So this year, our renewal for our dealership member of product has been completed. So the coverage still remains at a solid level. And this year, next -- for the next step, we will work with our dealer customers together to try to find solutions, and we want to get a win-win situation for both sides. So as we just mentioned, we will work with dealer clients together, for example, work on more digital products, increase their traffic, increase their conversion rate and other auto business as well, try to help them to increase their [indiscernible] to help the dealers' operations, and we try to decrease any negative impact on their operations. The above is my answer to your questions. Thank you. Operator: There are no further questions at this time. I'll turn the call back over to management for closing remarks. Sterling Song: [Interpreted] Thank you, everyone. Thank you very much for joining us today. We appreciate your continued support and look forward to updating you on our next quarter's conference call in a few months' time. In the meantime, please feel free to contact us if you have any further questions or comments. Thank you. Goodbye. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to the TriSalus Life Sciences Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Jeremy Feffer, Investor Relations. Please go ahead. Jeremy Feffer: Thank you, operator, and thank you all for participating in today's call. Joining me today from TriSalus Life Sciences are Mary Szela, President and Chief Executive Officer; David Patience, Chief Financial Officer; and Dr. Richard Marshak, Medical Director. Ms. Szela will provide an overview of the company's first quarter results and strategy for the balance of the year, and then David will review the financial results for the quarter in detail. Following their prepared remarks, Dr. Marshak will join the call to help address questions from covering analysts. Earlier this afternoon, TriSalus released its financial results for the quarter and year ended December 31, 2025. A copy of this press release is available on TriSalus' website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Any statements contained in this call other than the statements of historical fact are forward-looking statements. All forward-looking statements, including, without limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors sections of our Forms 10-Q and 10-K on file with the SEC and available on EDGAR and in our other reports filed periodically with the SEC. TriSalus disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements with new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 5, 2026. And with that, I'll turn the call over to Mary. Mary Szela: Thank you, Jeremy, and good afternoon, everyone. Thank you for joining us for a review of our 2025 fourth quarter and year-end financial results. I'll begin with a high-level review of our results for the quarter and the year, recap some of the highlights from recent weeks. And then provide an overview of our longer-term strategy and expectations for 2026 and beyond. David will follow my remarks with a more in-depth review of our financial and operational results for the reporting periods. And we'll be happy to open up the call for your questions. Let's begin. I'm pleased to report that our results for both the fourth quarter and the full year were strong. Fourth quarter revenues were $13.2 million, and full year revenues were $45.2 million, representing a 60% and 53% increase, respectively, over the prior year periods. Importantly, we achieved our revenue growth guidance for the 2025 fiscal year. Our strong commercial performance for the year was driven by consistent execution of our commercial strategy, and our expansion of our TriNav product suite and proprietary PEDD platform across a broad range of indications beyond the liver. In recent weeks, we took significant steps to strengthen both our Board and our balance sheet. In February, we announced the appointment of Veteran Health care Investor, Michael Stansky to our Board of Directors. Michael has a strong track record as an investor and board member across the health care landscape with deep experience in capital markets, governance and value creation. We believe he will be a meaningful asset to TriSalus as we continue to execute on our growth objectives. Also in February, we announced the completion of a public offering through which we raised $46 million in gross proceeds from fundamental health care investors. The financing was more than 2x oversubscribed and was supported by experienced health care investors who share in our conviction in the long-term value of the PEDD platform. Importantly, these investors understand that building a category-defining company requires disciplined investment in commercial infrastructure, clinical evidence and product innovation. This capital enables us to lean into our strategic priorities from a position of strength. Our primary strategic priority is to expand our sales and commercial infrastructure which we initiated at the beginning of the year to more effectively drive adoption and long-term success across our portfolio. Second, we are investing aggressively in foundational clinical studies to further demonstrate and validate the value of pressure enabled drug delivery, PEDD. These studies are critical to reinforcing the clinical and economic differentiation of our PEDD platform and will fuel continued growth in 2027 and beyond. And third, we're continuing to enhance and evolve our PEDD technology. to strengthen physician adoption and utilization, not only in liver embolization, but also across our expanding set of new applications. The success of the upside financing and the quality of investors brought into the company through the process are highly validating of our strategy and the growth opportunities before us. Based on our performance in 2025 and our visibility entering 2026, we are reaffirming our revenue guidance of $60 million to $62 million. As is typical for emerging growth companies investing ahead of a steep adoption curve, expanding our commercial footprint requires upfront hiring, onboarding, training and current territory realignment, which will influence revenue cadence in the first half of the year to be approximately 40% and revenue in the back half of the year to be approximately 60%. We believe the significant investment in the sales force virtually doubling our commercial footprint positions us for meaningful stronger productivity exiting 2026 and beyond. The revenue cadence will build meaningfully throughout the year as the realignment is completed. TriNav Advance has launched and the increasing productivity of the significantly expanded sales organization progress. Importantly, this cadence should not be interpreted as a change in underlying demand trends. We continue to see strong physician engagement, utilization and interest in the PEDD platform. The first half weighting is instead a function of timing, specifically the onboarding, training and territory development associated with our commercial expansion as well as the expected timing of new product contribution. We made a conscious decision to lean into these investments early in the year. deploying growth capital to expand our sales infrastructure and accelerate clinical and commercial initiatives affects near-term revenue phasing modestly, but it meaningfully enhances our growth trajectory exiting 2026 and positions us for sustained acceleration beyond our long-range plan. Now turning now to our commercial strategy. We've assembled a comprehensive PEDD portfolio that enables interventional radiologists to address virtually every vascular anatomy that they encounter. With a complete solution set, Physicians now can confidently standardize on PEDD across a broader range of cases, increasing utilization with existing accounts and accelerating adoption in new ones. At the beginning of 2025, we had 2 core commercial products. As we move into 2026, our portfolio will expand to 7 differentiated offerings across the embolization spectrum. This portfolio depth enhances the productivity of our sales organization by allowing each representative to drive more procedures per account, reduce selling complexity and position TriSalus as a single-source partner rather than a point solution provider to fully leverage this opportunity is why we're expanding our sales resources now and why we pursued the growth capital to increase our market coverage, improve our cell penetration and scale the commercial execution in a disciplined, high-return manner. Over the course of 2025, we launched TriNav LV, TriGuide and TriNav FLX, each addressing a particular vascular anatomy challenge that the interventional radiologist encounters. The TriNav FLX improves trackability and access to torturous anatomy. Tortures anatomy is commonly found in tougher to treat complex patients. During our fourth quarter, we launched the TriNav XP infusion system which was engineered specifically for compatibility with larger embolic particles, a more flexible distal tip for improved trackability in multiple linked and vessel sizes. These features were also important to use in low bar liver procedures, mapping our simulation procedures and for application in uterine artery embolization, market reception of TriNav XP thus far has been outstanding. The KOLs we surveyed highlight the exceptional trackability, enhanced visualization for precise targeting and improved procedural efficiency. As I mentioned, our next expansion of the TriNav product suite will be trying to have advance, which we anticipate launching in the first half of 2026. TriNav have Advance is an important addition to our embolization portfolio. This device is designed to facilitate selective therapy delivery to small distal vessels via a standard microcatheter, but still allow for PEDD to enhance therapeutic delivery to the tumor and protect against off-target delivery. The ability for an interventional radiologist to still use the microcatheter of their preference, but also benefit from improved delivery opens up a significant market opportunity for the use of PEDD. We are currently awaiting 510(k) clearance and plan to conduct a rapid market evaluation before fully launching in the second half of the year. With the launch of TriNav Advance, we'll have a complete portfolio of products that support all aspects of liver embolization procedures, which alone represents a total addressable market of approximately $480 million. Additionally, this portfolio of embolization devices supports embolization procedures in thyroid uterine artery embolization, genicular artery embolization or GAE, along with other embolization procedures, collectively representing USD 2.3 billion addressable market. The commercial adoption of the platform was bolstered earlier in 2025 by the introduction of the Centers for Medicare and Medicaid Services, CMS HCPCS code C8004. This code expanded coverage to include simulation or mapping procedures using TriNav, enabling interventional radiologists to utilize TriNav for other treatment planning and delivery using radio embolization. As a result, the reimbursable use of our technology within the radio embolization market has effectively doubled, supporting the broader adoption we are observing. Now interventional radiologists are able to use TriNav across a full spectrum of radio embolization care. Early feedback from key accounts and users highlights the clinical and economic advantages of the expanded reimbursement which we expect to continue driving adoption throughout 2026. In December, we hosted a second in a series of Key Opinion Leader event focused on our platform's potential and new clinical applications. The event featured Dr. Juan Camacho of Florida State University, discuss the unmet need in treatment landscape for multinodular goiter thyroid disease. In 2026, we intend to continue this program further to educate stakeholders on the advantages of the TriNav platform for our multiple indications. They're only continues in our PROTECT registry, a multicenter initiative, evaluating PEDD for patients with thyroid nodules or orders who are not candidates for surgery, radioidine or ablation. This study is designed to assess disease-related quality of life, thyroid function and outcomes following PEDD-based thyroid artery embolization. Preliminary results published in the Journal of the Endocrine Society were highly encouraging, showing 100% technical and clinical success, no neurovascular complications, mild and transient discomfort in 81% of patients all resolved within 2 weeks a 73% reduction in thyroid size and normalization of thyroid function and 71% of participants. These findings reinforce the promise of this minimally invasive alternative to thyroidectomy. In 2025, we also initiated a pilot registry in GAE. This is an emerging field, which offers a novel minimally invasive approach to pain management and mobility preservation for patients with knee osteoarthritis. GAE has the potential to delay or avoid total knee arthroplasty in select patients. In parallel, we're preparing to launch a clinical trial registry evaluating GAE as a treatment option for knee osteoarthritis, a condition affecting more than 30 million adults in the United States. This study aims to determine whether GAE can effectively reduce pain and delay the need for knee replacement surgery. Now turning to our nelitolimod program. Last year, we communicated our intention to release updated clinical data in the fourth quarter of 2025. We did not meet that time line, and I want to address that directly. As the PERIO-03 study progressed towards completion, it became clear that the most responsible and strategically valuable approach would be to consolidate data across all 3 PERIO Phase I studies into a comprehensive update rather than releasing partial data sets sequentially. In addition, we evaluated the potential inclusion of emerging data from an ongoing investigator-initiated study to provide a more complete view of the program's clinical potential. Final database lock and report preparation for PERIO-03 tend to beyond our original expectations, and as a result, we elected to delay disclosure to ensure that data package is thorough, internally validated and passioned appropriately for potential partners. We now anticipate releasing a consolidated clinical update in the second half of 2026. Importantly, this timing shift is not driven by safety concerns, efficacy signals or changes in our strategic priorities. All 3 PERIO Phase I dose escalation studies are complete. Enrollment in PERIO-03 has concluded and clinical study reports are in preparation. The decision to delay reflects our commitment to presenting a complete and cohesive data set that we believe will better support partnership discussions and maximize long-term value. As previously discussed, we have substantially reduced internal development spending related to nelitolimod following study completion. This allows us to preserve the program's optionality while maintaining capital discipline and focusing our resources on the near-term growth opportunities within our PEDD platform. We continue to advance partnership discussions and to support ongoing investigator-initiated studies. Before turning the call over to David, for a review of our financial results, I want to reiterate that TriSalus remains focused on executing on our near-term milestones, including achieving our 2026 annual revenue in the range of $60 million to $62 million, with growth weighted towards the second half of the year, launching TriNav Advance in the first half of 2026, publishing HEOR data on trip use in complex liver patients, delivering differentiated clinical data across the liver, UAE, TAE and GAE indications. As we look ahead to the balance of 2026, our strategy is fully funded, we're executing on our commitments of the recently raised growth capital and are confident in the commercial opportunities before us. We believe TriSalus-PEDD technology represents a transformative opportunity with substantial long-term value across a wide range of solid tumors and interventional treatment approaches. With that, I'll turn the call over to David. David Patience: Thank you, Mary, and good afternoon, everyone. As Mary mentioned earlier, our results for both the fourth quarter and 2025 fiscal year were strong. Turning first to our results for the quarter. revenue was $13.2 million, representing a 60% year-over-year increase over the $8.3 million recorded in the prior period. Gross margin for the quarter was 87% and compared to 85% in the prior year period. The increase in gross margin for the quarter was driven by improving manufacturing efficiency associated with our newly launched products. Research and development expenses were $2.6 million compared to approximately $3 million in the fourth quarter of 2024. The decrease was largely attributable to the completion of the enrollment and closure of our PERIO clinical studies for nelitolimod, as Mary alluded to earlier. Sales and marketing expenses were approximately $8 million compared to $7 million in the prior year period. The increase was primarily due the higher performance-based compensation, reflecting our strong commercial execution. General and administrative expenses were $4.2 million, down from $4.6 million in the prior year period. The reduction is primarily due to improving operational efficiency and tighter cost discipline related to corporate overhead. Net operating loss for the quarter was $3.3 million compared to $7.6 million in the prior year period. The decrease was primarily driven by increases in revenue and margin contribution for the quarter. Adjusted EBITDA loss for the quarter was approximately $950,000, an improvement versus adjusted EBITDA loss of $5.7 million in the prior year period. Turning to the results for the full year. revenue all from the TriNav system was $45 million for the year ended December 31, 2025, an increase of 53% compared to the same period in 2024. We revenue growth was primarily driven by increased TriNav units sold within liver-directed therapies. Gross profit increased by $12.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, while gross margin decreased from 86% and to 85% year-over-year. The increase in gross profit was primarily driven by the increase in TriNav units sold while the year-over-year decline in gross margin was primarily driven by lower manufacturing efficiencies associated with our newly launched product throughout the second and third quarters, a dynamic in which we improved in the fourth quarter. Research and development expenses decreased by $2.7 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to the closeout of clinical trial expenses related to nelitolimod. Sales and marketing expenses increased by $2.9 million for the year ended December 31, 2025. The as compared to the year ended December 31, 2024. The increase was primarily due to an increase in performance-related compensation, driven by the increase in sales during the year ended December 31, 2025, compared to the prior year period. General and administrative expenses increased by $3.5 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to a onetime charge during the third quarter relating to $1.6 million of accelerated noncash stock-based compensation vesting along with the revision of approximately $700,000 of certain patent related expenses from R&D to general and administrative expenses. Operating losses were $26.9 million compared to operating losses of $36.2 million for the same period in the prior year. The decrease was primarily driven by the increase in revenue, and strong margin contribution, highlighting our strong operating leverage. The basic and diluted loss per share was $1.84 compared to $1.31 for the same period in 2024. We increase was primarily due to the conversion of preferred stock to common stock. As of December 31, 2025, cash and cash equivalents totaled $20.4 million. As previously discussed, in February, we raised $46 million in gross proceeds via a public offering we concluded with fundamental health care investors. With that, operator, we are ready to open the line for questions. Operator: [Operator Instructions] And our first question will come from the line of Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Great. Congrats on finish to the year. I was hoping to start with one on kind of components to growth in 2026. More specifically, how should we think about kind of contribution from liver versus non-liver, Obviously, liver has been the primary growth driver up until recently, and there's obviously a lot of exciting developments occurring in some of the non-liver areas. So curious if you could kind of talk through how much growth contribution could come from some of the non-liver areas? And then as an extension to that, just talk through maybe some of the clinical development you're going to pursue in some of the non-liver areas. Mary Szela: Sure. Frank, are you good to hear everybody. So this year, in 2026, it will still be the majority of our top line revenue will be associated with liver. But we hope to, in the second half, see some meaningful progress on the new applications, and that's really tied to data release. As you know, we have in thyroid, we have over 10 clinical sites that are enrolling patients, and we'll have some data released in the second half. We'll have data releases beginning at SIR around uterine fibroid and then data releases on both other new applications in the latter part of the year. So that's when we'll start to see some uptake in those indications. Frank Takkinen: Got it. That's helpful. And then for my second one, I was hoping to talk a little bit more about EBITDA. A lot of progress made to get the EBITDA that you produced in Q4. Obviously, a lot of exciting things to invest in and new capital on the balance sheet. How should we balance kind of your growth cadence in that EBITDA pathway as you build the foundation for growth. David Patience: Thanks, Frank. This is David. I'll take that one. At this time, we're not providing specific timing or guidance and cash flow breakeven our adjusted EBITDA breakeven as we're just at the early stages of investing in our commercial expansion. We're very focused and excited about the investments that we're making because they're intended to really position us to scale the company in a very meaningful way. And so we're very focused on investing to fit the organization for procedural volume. We anticipate essentially providing more visibility later in the year. It's just a little early for us to give that guidance right now. Operator: And that will come from the line of John Young with Canaccord. Unknown Analyst: Mary. I wanted to start first on the strategy set with the increased financial flexibility. You spoke a lot about the accelerated investment in the commercial footprint. Just more color details there might be helpful. What will the sales organization structure look like after these investments would round -- I heard you say doubling of reps. So would 120 reps be right exiting 2026. And maybe some color on have they all been hired and when and perhaps are you doing like a junior rep, or a senior rep pairing or anything like that would be helpful. Mary Szela: Sure. Tom, it's good to hear you place as well. We're not providing any details on the numbers of reps and clinicians right now, but we are meaningfully doubling the size of the commercial organization and that includes adding a layer of management in just because what was happening with our sales organization, just the ratio of repo manager is getting too high. And that was limiting our opportunities. So we added in a layer of management. We also have expanded into significant more coverage, geographic coverage and we also targeted areas where we really believe some of the new applications are going to add substantial growth. So this is a pretty significant organizational upgrade and change across the organization. I think it's going to meaningfully drive acceleration in sales at the beginning in the second half of the year and forward. And your concept of kind of a junior rep, senior reps, what we found that rely has worked for us is, we have this peering of a clinical specialist with a representative. And what that allows us to do is if a rep pursues a new account and they garner position you as interest, the rep will begin to work with the physician and then the clinical specialist will come in and work in the case with the physician until we get comfortable and we can do it independently. So -- and many of those clinical specialists have become reps. So I guess, in a way, it could be kind of a junior senior rep. But we feel that type of approach allows us to have a lot of depth clinically with the representative. And maybe I'd even have Dr. Marshak talk about that because he's been pretty instrumental with us in terms of how do we define the right architecture for our product. Now that we have a new portfolio the expertise of the rep and the clinical specialist is going to be quite deep in terms of helping the physicians choose the right product for whatever type of vascular situation in that physician may encounter. So Dr. Marshak, do you want to jump in and provide some color on that? I don't know if we can hear you, Dr. Marshall. You're still on mute. Dr. Marshak, you're still unused. So I apologize, he was on and then all of a sudden, he's gone. But he's been very instrumental in helping us design this. The portfolio that we have it's quite broad, and it allows us to address virtually every situation. And that's why we feel like the clinical specialists and the rep is a better model for us right now. Unknown Analyst: Great. And then, David, maybe for the 2026 guidance, it sounds like most of this is predicated on continued use in liver, how much mapping growth is factored into that guidance as you annualize this either the code being rolled out, do you still expect continued mapping growth? And just maybe just walk us through that. David Patience: Yes. No, thank you, and great question. And I thank you again for your help with us achieving a mapping and simulation code yet again. As we look at it, we think XP can make a meaningful impact on our mapping. The larger new interior diameter is going to be extremely helpful. And then with that, we think we can meaningfully bring up growth within XP as well. And then with Advance, which is still pending FDA clearance, we think that could be even more meaningful from an imaging and mapping perspective as well. And so not only we're confident we can grow it just with some studies that will be releasing concorded studies in the first part of the year, but XP in advance will also make a meaningful impact in the growth there as well. Mary Szela: Yes, John, one of the things that we found with Advance and as you know, this is where physicians still gets the benefit of pressure enabled drug delivery, but they can use their own microcatheter. Some of the feedback that we've heard from physicians is it actually allows them to even be more trackable. And the way that we've designed the technology, the visualization is just the per. So we think the thing have advance is going to meaningfully help us in mapping because this is where they really want to interrogate the vascular structure and make sure they don't have any feeder vessels, and they really want to get a lot of clarity around what they're encountering and what they want to deliver the dose on. So between those 2 products as well as TriNav, we now feel once we get advanced EFT cleared, we'll have a portfolio that can penetrate mapping in a very meaningful way. Richard Marshak: Mary, it's Dr. Marshall. I'd like to add that the -- TriNav Advance is going to allow us to capture cases that were previously capturable with TriNav because we can get into much smaller arteries, those are cases that we're going to be able to add to our portfolio that weren't there in 2025. Operator: [Operator Instructions] One moment for our next question. That will come from the line of Justin Walsh with Jones Trading. Justin Walsh: Can you provide any commentary on use patterns for your TriNav product portfolio? Just wondering if you see the same positions and accounts wanting access to the full portfolio to allow clinical flexibility or if some users focus on their favorite TriNav product and don't necessarily order the others? Mary Szela: Yes. Dr. Marshall, do you want to jump in and then I'll comment after you. It's [indiscernible]. Richard Marshak: It is. One trend that we have seen is when users get their hands on our finance Flex, which is a much more flexible tip that has enhanced trackability meaning we can get it into smaller arteries, easier or around turns easier. We've seen a trend where some or some users say, "I want that for every case. And then we still have other sites where they like the different opportunities with different catheters. So yes, it's varied. Justin Walsh: Got it. And maybe one follow-up. You talked a little bit about the kind of expectations on non-liver growth in the near term. I'm just wondering what your thoughts are on kind of the medium long-term opportunities for TriNav in liver versus non-liver if you think it will be more challenging to grow some of these uses than others? And just some thoughts on that longer-term picture. Mary Szela: Yes. So the liver still is going to be a very significant component of our sales for next year and throughout the long-range plan. today, we ran roughly about 10% share. So we have enormous opportunity to penetrate that. And one of the things that we talked about in my opening comments was that we have physicians come to us in the latter part of last year. And this was really one of the reasons why they pushed us and why we went to go pursue the growth capital is we had leading KOLs come to us and say, now it's the time for you to really do those foundational studies to prove the superiority of your technology versus the microcatheter. So we're going to be doing foundational studies in the liver, both with TheraSphere and the SIR tech product to prove how our technology and liver embolization is superior. And we think that's going to be a very important driver of long-term liver penetration. Now in regard to the new applications, each one is a little bit different. So it's hard to put them out collectively. But I think it's going to be driven by the data. This year, you're going to see more publications on the thyroid. I mean this is a thyroid embolization. This is an opportunity that we think just makes sense for the patient in many dimensions. It's an easier procedure for the patient. It preserves fibroid function. It prevents them when we have in taking long-term thyroid medications. It's less costly. So depending on the value proposition, each of these are very significant opportunities that we want to pursue. And I think one of the things that we're starting to see, and I'll let Marshak talk about it is, if the physician begins to use the technology in the liver, we do see them starting to use the technology for other applications. In fact, that's where all these new applications came from. These were physicians who used our product, innovated it in a different procedure and then team to us to collaborate with us on how to develop that further. So Dr. Marshak do you want to make any further comments on that? Richard Marshak: No, I think that captured it. The one thing I'll add is there is a lot of excitement around thyroid at realization. There continues to be. And this is a market that we're building. It's an unmet need for a lot of patients who don't have other options. So I do see that right now, that's a growth that's potentially exploding in 2026. Uterine realization is something that our XP is designed for. That's a market that already exists, and we're seeing adoption with that. And I think that's going to continue to grow. Operator: I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mary Szela for any closing remarks. Mary Szela: Well, just thank you again. Thank you for the phenomenal questions and all the interest in trials appliances I really appreciate it. Thank you. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
Operator: Thank you for standing by. Welcome to Gevo's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Eric Frey, Vice President of Finance and Strategy. Please go ahead, sir. Eric Frey: Good afternoon, everyone, and thank you for joining us on today's call to discuss Gevo's Fourth Quarter and Full year 2025 results. I'm Eric Frey, Vice President of Finance and Strategy at Gevo. With me today, we have Patrick Gruber, our Chief Executive Officer; Paul Bloom, our President; Leke Agiri, our Chief Financial Officer; and Chris Ryan, our Chief Operating Officer. Earlier today, we issued a press release that outlines our fourth quarter and full year 2025 results and some of the topics we plan to discuss as well as a slide presentation that we will discuss on today's call. Copies of the press release and the slide presentation are available on our website at www.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing and construction of our alcohol to jet projects, our future carbon credit sales, our Gevo, North Dakota and RNG plants and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the Investor Relations section. Following the prepared remarks, we'll open the call for questions. I'd like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company's Investor Relations page at www.gevo.com. I'd now like to turn the call over to the CEO of Gevo, Patrick Gruber. Pat? Patrick Gruber: Thanks, Eric. What a year. Successfully acquiring and integrating our North Dakota ethanol and carbon capture assets has transformed our adjusted EBITDA and has enabled us to learn and to capture value from carbon, treating it as an important co-product in addition to the ethanol, animal feed and oil that we produce. Gevo North Dakota has performed superbly well. It's the well-run operations, combined with our learnings on how to capture value from carbon dioxide that have allowed us to turn positive on operating cash flow in the fourth quarter. We also now have 3 quarters in a row of positive non-GAAP adjusted EBITDA. I'm very pleased with the progress and what we are learning. Great operating results, combined with consolidating our debt in early 2026, has strengthened our balance sheet and increased our cash on the balance sheet without tapping into equity markets. We also continue to make progress on our ATJ-30 plant, the jet fuel project that is targeted for our North Dakota site. I believe Gevo is in a really good place. I make this point because you probably all recall that I'm retiring as CEO on March 31. Paul Bloom, who has been with us 5 years now, will assume the role of CEO on April 1. He has been instrumental in helping us build the business platform to where it is today. He also knows technology and processing, operations, market development and business. I'm convinced he's the right person to take over. I think he will be a really strong CEO, and I'm excited for him to take the helm. Paul, it's your show today. Paul Bloom: Thanks, Pat. To begin, I'm extremely honored to be taking on the role of CEO starting April 1. Pat has led the company for nearly 2 decades, guiding Gevo through some incredible times and put us in a great spot with our current business that sets the stage for future growth. From developing our intellectual property portfolio to shaping Gevo's business system from field to flight, Pat has been a visionary leader for renewable fuels and chemicals. I'm happy to announce that after Pat's retirement, he will continue to serve on Gevo's Board of Directors, and the company will continue to benefit from his expertise and insights. Thank you, Pat. Now I'm pleased to highlight some of the progress we made in Q4 and on our full year for 2025. 2025 was truly a transformational year for Gevo. The successful acquisition and integration of the Red Trail Energy assets now operating as Gevo North Dakota marked a pivotal moment in the company's growth story. I want to express my sincere appreciation for the outstanding people and great community who have welcomed us so warmly. Their partnership and dedication have been essential to our success. The team did an outstanding job across the board in 2025, delivering record-setting biofuel production, starting up our carbon business and leading the industry with some of the first large-scale 45Z clean fuel production tax credit sales. All of this was accomplished while substantially advancing our alcohol-to-jet growth platform. Our execution in 2025 led to 3 consecutive quarters of positive adjusted EBITDA with almost $8 million in adjusted EBITDA in Q4 as we continue to make solid progress on our goal of reaching $40 million in adjusted EBITDA on an annualized basis from our current asset base. Leke will give more color when he highlights our financial results. Gevo's operations team exceeded the nameplate capacity of our ethanol production facility, reporting a record of about 69 million gallons of ethanol produced during the full 12-month period of 2025 while capturing 173,000 metric tons of carbon dioxide. To further build on these strong results, I'm happy to announce that we've approved our capital plan for Gevo North Dakota to expand capacity to 75 million gallons per year, produce more co-products, improve energy efficiency, capture more carbon dioxide and invest in our operational reliability. We are reinvesting in Gevo North Dakota to grow our base business and improve our returns while we set the table for alcohol to jet. We have an aggressive time line to deliver these projects and anticipate they will be starting to deliver returns in early 2027. Chris will say more on this during his operations update. During 2025, we also started up our carbon business. The team has done extremely well developing the business from scratch, and we believe we are the first biofuel producer to develop and operate this business model. We believe our flexibility to sell carbon value either with our fuel products or separately in the voluntary carbon market provides a distinct advantage for optimizing returns and will apply to our ATJ growth platform in the future. In Q4, about 80% of our carbon benefits remained attached to ethanol gallons sold into low carbon fuel markets, and we built our inventory to roughly 30,000 tons of carbon dioxide removal credits or CDRs, by the quarter's end to meet future demand from spot and contract sales. Our customer base for CDR credits continues to grow beyond those previously reported such as NASDAQ and now includes companies like PayPal, Bank of Montreal and additional international clients. As the market develops, we are confident that Gevo is well positioned to produce, certify and supply high-integrity carbon credits that can help supply the growing market demand. In addition, Gevo retired carbon credits from Gevo, North Dakota to offset substantially all our own air travel in 2025. At Gevo, we're committed to leading by example. We don't just talk about our values. We put them into action by utilizing our own products and solutions. Turning to our growth platform. Let me comment on ATJ-30, which stands for alcohol to jet at 30 million gallons per year in North Dakota. We refer to this as Project North Star. As we've mentioned before, we anticipate that by adding Project North Star, once constructed, we could deliver $150 million in adjusted EBITDA per year from the fuels, carbon value and co-products. From there, we believe we can enable and create a franchise approach to deploying synthetic aviation fuel globally. But first, we need to build cereal #1 and demonstrate the value proposition monetizing our commodities and carbon. Project North Star is designed to be a modular build that we can copy edit paste to meet the growing global demand for synthetic aviation fuel. North Star lays the groundwork for building out a franchise that is deploying many similar plants, either with our own capital or through partnerships to meet the growing global demand for jet fuel as the world flies more, not less. We are developing the playbook containing Gevo's intellectual property and business system, which can be effectively replicated and implemented on a global scale. The work we are doing at Gevo North Dakota and with Verity is critical and provides the blueprint for what needs to happen at more ethanol plants in the future. Low carbon ethanol is the feedstock for our synthetic aviation fuel. We need more of it, and we can help enable it. In fact, we started to sign letters of intent with third-party ethanol producers to bring Gevo's carbon business and Verity capabilities to other locations along with carbon management services. We believe our collaboration with Frontier Infrastructure Holdings and the options we are exploring to transport and store third-party carbon dioxide at Gevo North Dakota may enable more low-carbon ethanol facilities to be viable sites for additional ATJ plants. As we started to show at Gevo North Dakota, there is money to be made in setting the table with low-carbon ethanol today and potentially a lot more with ATJ additions in the future. We currently believe that this will take the form of us delivering and getting paid for our technology, business system and know-how. It could give us more flexibility between investing our own capital and more of a capital-light type growth model, the franchise model. While we are very optimistic about this growth, we will continue to be laser-focused on getting Project North Star to the finish line. Our goal is to reach FID on the project in 2026. We have a conditional commitment from the U.S. Department of Energy's Office of Energy Dominance Financing, or EDF, for a loan guarantee to finance the construction of an ATJ plant. As previously announced, we are discussing with them using that loan for ATJ-30. EDF is an excellent goal-aligned partner and a strong option for us, assuming we can get all the details worked out. Our goal is project level non-dilutive funding to build ATJ-30. Finally, as part of our growth strategy and what we've learned at Gevo, North Dakota, we'll also stay on the lookout for more acquisitions that are accretive, that strategically fit our platform and further scale our adjusted EBITDA. It was a transformational 2025 that we are leveraging to make 2026 even better. With that, I'll turn it over to Leke. Oluwagbemileke Agiri: Thanks, Paul. Starting on Slide 4 of our earnings presentation. For the full year 2025, we had revenue of $161 million, a loss from operations of $20 million, non-GAAP adjusted EBITDA of $16 million, a record-setting low carbon ethanol volume of about 69 million gallons plus 173,000 metric tons of CCS at our production facility. During the fourth quarter of 2025, we turned positive on cash flows from operations, generating $20 million during the period. We increased cash, cash equivalents and restricted cash to $117 million at year-end, which is a $9 million increase versus the third quarter. All of the restricted cash we had at year-end was released after we completed our debt consolidation transaction in February 2026. Finally, we maintained our strong 2026 outlook, including our previously communicated near-term organic growth target of achieving annualized non-GAAP adjusted EBITDA of about $40 million and a neutral to positive operating cash flow in full year 2026. Turning to Slide 5. Our full year 2025 results showcase a transformative year and highlight how we executed on and integrated our strategic acquisition of Red Trail Energy assets. In comparison to prior year, revenue during full year 2025 increased by 849% Loss from operations decreased by $71 million, non-GAAP adjusted EBITDA increased by $74 million and the cash flow from operations increased by $44 million. On Slide 6, we can see the step change and the strong foundation for growth that we have built. The past 3 quarters have averaged $43 million to $45 million in revenue. Going forward, we expect revenue to vary quarter-to-quarter depending on the market prices of ethanol, RNG and environmental benefits. However, we expect our adjusted EBITDA drivers to remain resilient and grow in 2026. One of our adjusted EBITDA drivers, which does not depend on the market prices that I just mentioned, is our production tax credits. Last year, we sold $52 million of production tax credits related to Gevo, North Dakota as we produce ethanol and sequester carbon. We received about $41 million of cash proceeds in 2025 and expect the remainder in the first quarter of 2026. As a reminder, we book production tax credit as a reduction to cost of goods sold each quarter. Looking forward to 2026 operating results, we are confident in our execution capabilities and remain focused on achieving our target of approximately $10 million in adjusted EBITDA per quarter in 2026 or roughly $40 million on an annualized basis. We're also now targeting neutral to positive operating cash flow in 2026. With that, I'll turn it over to Chris. Christopher Ryan: Thanks, Leke. 2025 was a record operational year. Gevo North Dakota recorded 69 million gallons of low-carbon ethanol volume during the full 12-month period and achieved a yield of nearly 3 gallons per bushel, which is close to the theoretical maximum. Included in that number is approximately 2 million gallons of cellulosic ethanol that was produced from corn kernel fiber. That adds incremental value due to its lower carbon score. Our carbon sequestration system sequestered 173,000 metric tons of CO2, exceeding our previously stated benchmark of 165,000 metric tons. Operationally, the plant is running reliably and efficiently. Our focus now is on; one, debottlenecking to increase ethanol, CO2 and co-product volumes; two, reducing carbon intensity further; and three, preparing for the fabrication of modules for our ATJ-30 project. We think our debottlenecking and expansion organic growth projects can increase efficiencies, put more money in the pockets of our farmer partners and local communities, drive down our carbon intensity score, optimize our production tax credits and finally, increase ethanol production to as high as 75 million gallons per year and we'll raise carbon sequestration to at least 200,000 metric tons a year. Most of these projects have a 1- to 2-year payback, and the remainder of the projects will improve our operational efficiency and asset life. In 2026, we plan to deploy about $26 million of capital, which further positions us to achieve stronger operating results starting next year. In addition to the incremental organic growth, Gevo North Dakota provides an exceptional foundation for our ATJ-30 project. We have our own captive low-carbon ethanol feedstock, our own operating CCS, we have rail infrastructure. We have about 500 acres of space, and we have a great operations team. This is why we believe ATJ-30 is the right project for the site and why Project North Star will be a good showcase to pursue Gevo's long-term copy-paste strategy. Back to you, Pat. Patrick Gruber: Thanks, Chris, Paul and Leke. While the company has solid economic footing with a clear path to grow adjusted EBITDA even without building the jet plant, investors should be able to see how the cash flow from our businesses benefit us prior to the ATJ-30 plant coming online in the future. We built a strong foundation from which to grow. I believe the ATJ opportunity is exciting, especially with Project North Star and the franchise approach. It has taken longer than I ever wanted to get to the point where we are today, but here we are. And looking back, what a journey it's been. I'm incredibly pleased with where we are and where we are going. I'm most proud of the terrific team we have. I hear from investors and partners all the time how impressed they are with our people. We work to deliver, and we are incredibly persistent because we believe in what we are doing with deep conviction. So for me, the timing is right. The team is strong. The balance sheet is looking good. There are what I believe to be great opportunities in front of us. It's time for me to pass the torch to Paul, who I have bet will be a great CEO. And with that, we'll take your questions. Operator? Operator: Certainly. And our first question for today comes from the line of Jeff Grampp from Northland Capital Markets. Jeffrey Grampp: I was curious on the CI front. I believe there were some changes in the calculations that kicked in at the start of this year. I was just kind of curious to contextualize those a bit more. Is there any way you guys could share maybe like what your CI score were in the back half of 2025 and how much of a benefit that could be for you guys looking ahead into this year? Patrick Gruber: I think let's -- I think what we should do is give an outline, Leke, of the kind of numbers that you're seeing. Oluwagbemileke Agiri: Yes. Absolutely. Thanks, Pat. I think high level, so last year, our Gevo North Dakota, as you know, we generated and monetized $52 million of tax credits. That was based on a CI score of low double digits last year. With the changes to the guidance and then the 45Z-GREET model, how that's going to work in terms of [ no eye lock ] effectively, I think that's what you're referring to. That impact is going to be reflected in the amount of 45Z that we generate for our Gevo North Dakota asset in 2026, not necessarily 2025. And the impact that, that has on our CI score is it's going to reduce our CI score by pretty much 6 to 7 CI points. And when that happens, we expect to generate an incremental $0.10 per gallon in 2026. That is what we expect to see from our facility in 2026 in terms of 45Z. So based on our projected production of our Gevo North Dakota asset in 2026 of 67 million gallons, we are going to be in that threshold of $0.90 per gallon of credit generation in 2026. Changes to the 45Z guidance has very little to no impact to the 45Z generation for our RNG production or RNG asset at this time. Jeffrey Grampp: Perfect. I appreciate it. That's exactly what I was looking for. My follow-up is on the ATJ side. I believe that DOE extension that you guys got last year has maybe a couple more months remaining, at least on the original extension. Is it fair to assume that something gets figured out with them or another party by that deadline? Do you think additional time may be needed? I know you guys are targeting this year for FID on that, but wasn't sure if there's other things at play to reach that FID outside of financing. Patrick Gruber: Paul, your question. Paul Bloom: Yes, sure. Great question, Jeff. Yes, we're working -- we've been working on this for a number of years now, 3 years going on. And so we want to get this to the finish line with the DOE. And we're pretty excited about where we're at and continuing to move this forward. But yes, we're absolutely -- when that got extended through mid-April, so we'll be working with the DOE to reach a decision there on most likely an extra extension is what we're looking for. But we're also working with a number of other parties who we're excited about, who see the value in the ATJ platform. So it's a combination of things. Patrick Gruber: Yes, I'll add to this point is that the economics look good. One of the interesting things that happened was that we're having -- our engagement with the DOE, and they fully understand that we want to build that ATJ-30 plant up there in North Dakota rather than a 60 million gallon plant down in South Dakota, outstanding. You know what, the economics are good. We have low carbon ethanol. It's a great site. Carbon capture is under our control. We've got half of what we would have had to build in South Dakota already built up there in North Dakota. And so other parties are interested, too, and other people are interested in working with us to finance it, particularly because of this franchise model that Paul was talking about. Operator: And our next question comes from the line of Dushyant Ailani from Jefferies. Dushyant Ailani: Pat, it was a pleasure working with you and Paul. Again, congrats on the new role. My first question, I know that you kind of talked about that incremental $0.10. Maybe could you give a little bit more on the details on the path to get to that $40 million in EBITDA, the bridge? I know you guys have highlighted that before, but maybe if you can talk a little bit about the timing of it and how you can think about that going forward? Patrick Gruber: Paul, that's a question for you, and then you and Leke teaming up on it, I think. Paul Bloom: Yes. Sure thing, Dushyant. I mean you see what we've done right now. I mean, last quarter, we were kind of at this $20 million in EBITDA run rate. And with the extra push on the carbon and our good and low carbon fuel sales, we've got that coming forward. Now we're looking at -- you heard what Leke was saying, we can't get more than kind of this dollar per gallon. That's where we're going to cap out with the 45Z tax credits. So you put those kind of things together with the existing assets even before expansion, and we're really looking at how this shapes up to something like around a $10 million kind of average per quarter going forward. So that kind of puts in perspective. Leke, maybe you can chime in with a few extra details there. Oluwagbemileke Agiri: Paul, no, I think you captured it. I think the trajectory is we are on track with really just how our EBITDA mix is made up to be tracking exactly as to how we're projecting, which is that $10 million per quarter. We feel very confident. I think 45Z is going to be part of the story, but we also do believe that really the intrinsic EBITDA margin that our assets can also generate also from the carbon monetization that we're doing, we're on the right track to achieve that goal. Dushyant Ailani: Understood. And then my follow-up was, I know you mentioned some talk around potential acquisitions as well. Maybe could you dive a little bit further into that, what kind of assets you're looking for and maybe around timing of those? Patrick Gruber: Yes. I think I'm going to follow up on one other thing about an important point about Gevo and Leke and his team compared to other companies who talk about 45Z. We actually -- Leke his team actually brought the money in the door. That's an important distinction. And it shouldn't be -- that's an important point. It's not a hypothetical. It's a real thing that's been brought in. Now as far as looking at are there other Gevo North Dakotas that we could apply our skill to and bring value to. Paul, do you want to comment on that? Paul Bloom: Yes, sure. I mean, look, I think this is what we're learning, Dushyant, at Gevo North Dakota that there's a lot of money to be made kind of setting the table as we think about the ATJ franchise. So as we look for how do we build out that franchise, we're looking for similar things that we've already identified. And it was a good learning for us going from South Dakota to North Dakota. We have on-site CCS in capture. So that's good. You got to have good corn. You got to have good logistics, right? You have to have all the good things that we're proving that are critical. And again, that kind of sets the base for then how do you grow ATJ. And so as we look through this and we talk to others, we know there aren't that many of these different assets out there, but we're going to keep our eye on that because I'd sure like to have another Gevo North Dakota if it exists. But we're going to just keep watching for that and be opportunistic. Operator: And our next question comes from the line of Sameer Joshi from H.C. Wainwright. Sameer Joshi: Just sticking to ATJ-30 and the financing thereof. The FID is expected during 2026. Is it dependent on the EDF loan guarantee transferring to this? Or it is independent of it? Paul Bloom: Sure, Sameer. Look, I mean, it definitely accelerates things quickly, right? We can get the debt sizing right and move this forward and get the loan completed here. So that's a fast track that we want to try to keep moving forward. But like we said before, we're working with others because we're advancing the engineering along. And if you remember, we did a lot of work in South Dakota. So this is -- as we're thinking about how do we fit this project into -- at North Dakota, it's really taking it from that 60 million gallon size that we had there to a 30 million gallon size. Good news is now we've got 2 different sized designs for our franchise. And then we basically have a little bit less on the capital to go out and get. But it's a combination of looking at what's the debt and the equity that we're going to have and who are the partners to put that together. Either way, we want to get this thing moving because we want to get -- like Pat was saying before, North Star has just fantastic economics. And we think that the returns speak for themselves with potential to add up to $150 million in EBITDA from adding the ATJ-30 and Gevo North Dakota. Patrick Gruber: And you have to remember that we're a lot more interesting than we used to be. We're positive cash flow kind of situation here. And so that makes us a whole lot less risky. And that's not lost on all kinds of people who invest in these types of things, right? There's a good base, same thing we were talking about, strong base, good economics up there. Everything is under our Gevo control, and it's a good situation. So yes, there's other options available. Sameer Joshi: Makes sense. It was interesting to see the 2 million gallons of corn fiber cellulosic ethanol being produced. Is it -- like what are the considerations in either increasing that volume or in order to get a higher CI score, like can you go do 4 million next year or 7 million? Just wanted to understand what the limits or extent is. Patrick Gruber: Chris? Christopher Ryan: Sure. So the way we make that corn fiber ethanol is really through the new enzymes that we add. And there's definitely room to optimize things, absolutely. We continue to do that. So you might expect incremental increases. At the same time, we are working on getting more ethanol gallons out the plant, including the capital investment to further debottleneck the plant. And likewise, that will result in more corn fiber ethanol. So that's really -- it's really in the enzymes. Patrick Gruber: And I think as far as improving the overall economics, you got several levers they're working on, right? Chris just mentioned the increased production of ethanol. We're producing quite a lot of CO2 right now, capturing more of it and then capturing additional that comes off as we produce more ethanol, that's awesome. We have -- we can optimize co-products, the protein and the corn oil. And of course, we were just talking about the cellulosic. So there are several levels. And that's why helping debottlenecking up there is important every little bit matters because we really would rather have $1 a gallon on the tax credits, plus it generates more CDRs, and those are valuable in the marketplace. And those are completely separate than those production tax credits. They're not the same at all. So that's an important point. We're increasing the number of products available by increasing how effective we are capturing the co-products and the ethanol. Sameer Joshi: Got it. Just one last one. I don't think we discussed Verity in any detail. But are we on track to sort of commercialize that during this year for feedstock traceability, agricultural applications. Just would like to see where Verity is at. Paul Bloom: Well, Sameer, great question. So we're pretty excited. I think we finally got a really good catalyst. And we talked a little bit about the 45Z tax credits. And if you see -- if you look at what guidance came out from treasury recently, while it didn't perfectly include that ag benefits would be counted and indicated that ag benefits would likely be part of what is going to be added into 45Z tax credits, which is exactly the kind of carbon accounting and traceability solutions that Verity was designed to actually deliver. So we've been actually signing up more customers over the past quarter than we ever have before. So it's a combination of traceability and basically think about compliance services that you need to simplify, right? These are a lot of complicated calculations that need to be done. Gevo has to do them for ourselves. This is why we created it. We created it as a tool to simplify our lives and make things more accurate and easier to do. But that's the same thing that our customers for Verity need. So we're really excited about that, and we're trying to make it more operational friendly and work with farmers. So you may have seen that we also announced the partnership with Bushel who has a lot of farm management and grain software that help farmers just with their regular business. And so this is how we're now starting to integrate Verity with actual farm business software to make it really an integral part of how people do their business and also do their tracking and traceability that is needed to monetize. So we're pretty excited about that. So thanks for asking the question. Sameer Joshi: Yes. sounds really good. Thanks, Patrick, for bringing the company so far Paul, good luck for the future. Operator: And our next question comes from the line of Derrick Whitfield from Texas Capital. Derrick Whitfield: Congrats on a strong year-end. And Pat and Paul, congrats on your respective updates. And Pat, hopefully, you can enjoy some well-deserved time off in retirement. Starting maybe first with bigger picture. With what you guys have accomplished over the last year, I mean, it's quite remarkable as you look at Slide 5. Paul, for you specifically, as you think about, again, this progress that the organization has accomplished and where you'd like the organization to be next year at this time, how would you paint the picture of what changes, if any, to expect? And it could be as simple as emphasizing certain aspects of the business, but just kind of how you think about the business and where you'd like to be 1 year from now? Operator: Yes, sure, Derrick. And look, it's an exciting time, right, because we have come so far in this past year and started things. I think the carbon business is one that we're really excited about, and we've been working on growing, and it's just getting started, right? So we're selling fuel with carbon attached or pulling that off separately. And I think the biggest thing that we've learned and the biggest -- maybe the biggest opportunity is just how do we really sell and monetize that carbon. We're starting to see our sales pick up with brand names. And obviously, there's a long way to go because we're just getting started. But really, the market is just getting started. So I think as carbon develops, if you look at some of the stats on the carbon markets, about 44 million tons of carbon has been sold in these carbon dioxide removal markets, but only about 2.8% of that has actually been delivered. We're one of the first companies to be actually producing and delivering carbon credits and have a model where we can basically select between do we sell into low carbon fuel markets that have good returns or do we separate that carbon if there's more value to sell into separate markets. So really getting that -- dialing in that carbon business and improving on it because we're just getting started, I think, is a big deal for us. And that not only rolls into how we're doing our low-carbon ethanol business, that's exactly the same way we're thinking about the ATJ business as we think about a franchise, right? Because we can sell that fuel with those carbon attributes. It's called a little bit different terminology, Scope 1s and Scope 3s when it's sold with the fuel, but we can also separate those off and sell customers, those Scope 1s and Scope 3 separately from that physical fuel. So it's really the same business model just applied to different commodities. And so as we get good at this, and we've already got essentially half of the output of the carbon sold from ATJ-30 under contracts. So I think that's going to be a bigger part of what we do. And that's a bigger part of the business that we believe we can bring to others, right, as we franchise this business. We don't have to own all the ethanol assets in the world. We don't have to own all the ATJ plants in the world. We have a business system that we can kind of copy paste even on that side and help people and get paid for our know-how and our business system as we bring that playbook, right? And so this will be kind of the piece we really look at is what is our -- how capital intensive do we want to be? Obviously, we like -- we love the returns that we're getting from Gevo North Dakota. And so it's great to have that asset, and we'd sure love more. But we realize that we got to manage that growth and how can we do that in an efficient way to balance our capital versus a capital-light strategy, which is where we think that franchise model comes into place. And that's a model, too, just thinking about how else we grow. We're talking a lot about ATJ, but we just licensed our technology to Praj for IBA for diesel in India. And I think this model really applies not only for what we're doing in ATJ, low-carbon ethanol, but it applies for what we can do in renewable chemicals. It applies for what we can do in isobutanol. So just think about that as we bring these business systems forward, that's the picture that we're going to be working on and developing with partners, and we're excited to get this going. And like we said earlier, signing LOIs with even other ethanol companies to bring kind of Gevo's know-how and business system to help them and then for us to get paid for it. Derrick Whitfield: Great. No, that's a great update. And maybe shifting over to ATJ with my follow-up. One of your industry peers has experienced some challenges with their ATJ project over the last year. As we inch closer to your FID, could you speak to how your ATJ-30 project is different from a scale process and risk perspective to that other project that I'm referring to? Patrick Gruber: I can give -- I think I can give a perspective and then Chris. One of the things that we did, we're using known unit operations, proven at full-scale commercially unit operations. We didn't rely on anything new like other people might have done. We didn't take something off of a laboratory in a national lab and never have it seen proven out. We're using unit operations that anyone can go kick the tires upon because they come directly from the petrochemical industry. So there's nothing new in that regard. How we put it together, how you lower CI score, how you optimize, that's different, but that's not what makes or break it. Chris, Paul, you guys want to add anything else? Christopher Ryan: I'll add just a bit and then Paul can chime in. So Pat, I'll echo what you just said, which is, yes, we're using proven technologies and their technologies from a proven company that has commercialized many, many things at large scale, including at oil refineries. In fact, the engineering that's been done, so at the heart of the process is from a company called Axens. But as we design the entire process around it, we only use engineers that have experience working on these things and have the capability of supporting operations once we get operating. So these engineers aren't just desktop engineers. They've actually operated assets. and they have experience starting up plants. And so it's that experience. And like what Pat said, there's no new technology gives us a lot of confidence this is going to start up very easily. Paul? Paul Bloom: Yes. I think Chris nailed it, right? I mean when we talk to a lot of companies in diligence, right, they figure out, especially on the petroleum side that they've got these assets already running, not all coupled together in the same order, but individually running in operations that they already are running. So it's one of those kind of things where we took a proven approach, right? So we know these unit operations work. Yes, they're integrated together a little bit differently, but we've also been working with companies like Praj. And Praj actually just put all these unit operations together in a fully functional integrated pilot plant. And I was actually there and got to open this spigot and jet fuel poured out the other end with ethanol going in one end. So it was great, but I think we've really -- the combination of using known technologies and really good partners and great engineers who understand this have really put us in a very different spot from that other group that you're mentioning if I'm assuming who it is and how we're ready to execute. Patrick Gruber: And I'll add one more thing is that we think about it completely differently. We're trying to do something that's scalable to really big scale and really low economics. We're not trying to do some one-off specialty thing, and we're not venture-backed. We were -- it isn't that kind of a perspective. We're actually trying to solve a real-life problem, deliver jet fuel that's cost competitive with petroleum. Yes, we're going to sell the carbon attributes to go with it. And no waste is not a strategy. You can't get there from here. I was just doing some research about this, again, where it's -- you take waste products, yes, it drives up the price. We've seen this over and over again. You know what, carbohydrates are a great feedstock there, way abundant in oversupply across the world. Paul has got a great saying that I love, take carbohydrates, right? Paul, what do you do with them? From the waste line to the airline, I think. Paul Bloom: We take those carbohydrate calories from the waste line to the airline so fast. Patrick Gruber: I see one more [indiscernible] to make jet fuel out of it. So it's a whole different perspective of scale of what we're trying to do. And that's how we think about it. Super pragmatic. We don't want technology risk. That's why we're able to clear diligence at the DOE. That's why we've been able to clear diligence with our other big partners. It isn't a -- it's not a project just to generate vibes, is to make it breaking real for the long run and win. Derrick Whitfield: That's a great answer. And maybe one if I could just follow up on the $40 million run rate. I think based on what I've heard you guys say, there appears to be some upside with debottlenecking that hasn't necessarily been factored into the $10 million per quarter run rate. And then also when you kind of think about what's happening in the LCFS markets now and where you're going to place the product, it feels like there might be a little bit of extra upside there because you now have a few more markets competing with one another for those molecules. But again, any color you can offer on that front would be helpful. Paul Bloom: Yes, sure, Derrick. A couple of things there. If you look at the LCFS markets first, right, we're still applying for pathways where we want the pathway with carbon capture. We've got pathways today without carbon capture and sequestration, but we'll look at applying and we're in the process of applying for those today and positive outlook on getting those done. But places like Canada in Canadian CFR, right, where the credit prices are $2.50 or higher, right, really nice from a carbon perspective, and that looks positive. We're obviously selling into markets today that have good returns on LCF markets. But the other thing that you have to remember is we're also inventorying some CDRs to build inventory to satisfy some of our contracts and spot sales in that market that we think is going to grow later. And as we do that, that's carbon value that we can't sell into those existing LCF markets that we're selling into today. So it's a little bit of a delayed revenue there. And so what you probably will see and Leke was talking about this a little earlier, we'll have this kind of push and pull with inventory build on carbon that we sell separately into carbon dioxide removal markets. LCF markets that have more immediate returns. And so you'll see that kind of balance out a little back and forth. And then, yes, I think, of course, as we continue to finish up some energy efficiency projects, we get a lift from additional or lower CI score on 45Z going forward. All those things are going to be adding up to get us to that number. Operator: And our next question comes from the line of Peter Gastreich from Water Tower Research. Peter Gastreich: So congratulations to the team on the results. Also, Pat and Paul, many congratulations to you and really wish you both the best during the transition. Just a couple of questions. First of all, you were just talking about the -- or Paul is just talking about the CDR inventory and carbon credits. Just curious what you're seeing in terms of pricing in terms -- in the voluntary CDR market? And what is your outlook there? Paul Bloom: Thanks first, Peter, for the congratulations. And when you look at the carbon markets, like we said, it's a developing space, right? So it's hard to peg it at kind of a number. And that's why if you look at our investor presentation, we've got a range. So typically, we have a range in the voluntary markets anywhere from $100 to $300 a ton for those voluntary carbon dioxide removal credits. And like I said, we're on the top 10 list of the suppliers in that market today. So that's pretty exciting for Gevo to move from basically nonexistent there to one of the top 10. And then when you look at the low carbon fuel markets, I would have said even in the investor presentation that's on our website, we've got that pegged a little lower. Typically, we've seen markets like California be down even as low as $50 a ton, which that's not very attractive, especially if we're -- we have this optionality. But now when you see Canada and Oregon start to really ramp up and get up to these $200 or $200 plus over $200 numbers, then this is where we've got good competition between carbon dioxide removal markets in the voluntary space and the compliance markets with low carbon fuel. And so we're going to continue to leverage that to our advantage so we can make some decisions and figure out where to place volume both with our commodity and our carbon value to get Gevo the best returns. Peter Gastreich: Okay. Great. So my next question is just about your share CCS capacity. So it looks like the Frontier partnership that's really going to help accelerate the plans there. I'm just curious, first of all, are you able to share what would be a realistic time line for starting to bring in that third-party CO2? And the question also second question related to that would be, once you reach a critical mass of volume, I don't know if that's in terms of contracts or whatever, will you have incremental CapEx of any sort, perhaps above ground that will be required to accept those incremental volumes? Paul Bloom: Yes. Sure, Peter. I mean I think when -- the Frontier Infrastructure Holdings partnership or collaboration that we've been working on, it's been really interesting because I think what -- there was a lot of promise from these pipelines. And obviously, we had a pipeline that we thought was going to come to us in South Dakota that didn't materialize. So we feel that. And so this is exciting to think about CO2 by rail. And I think it comes back to -- we're going to be producing more fuel and more carbon dioxide co-product and capturing that and capturing more in North Dakota. But today, for example, we're only using 16% to 17% of what's called our pore space, which is the available volume for storage. So we've got a lot of extra capacity. So really, our goal is to figure out, as we expand, we want to make sure we're capturing Gevo's carbon dioxide, but we can help others. And what we've learned working with Frontier is that there is -- there are a lot of ethanol companies out there that we can help. And this is where it comes back into this approach where our carbon management services, if we can bring in CO2 by rail and monetize our pore space, this is a big deal for us because we could get paid in things like storage fees. We can help with carbon marketing. So we're still in the design phase of this. So we're scoping this out. I think it's still going to take a while because you have to build basically a terminal to put in place. But that does get pretty exciting if we can connect the dots between the rest of the capacity that we've got, and it doesn't mean that we have to stop there. We could probably access more capacity in the pore space around us. But pretty good opportunity for us. And if you look at our investor presentation, this is where a lot of the unlock going beyond that $40 million up to the $110 million in adjusted EBITDA and the carbon value comes from how do we monetize this pore space, how do we help others with the carbon business. And that, in turn, right, I mean, the other piece, and I'll just try to connect the dots full circle here, is the more low-carbon ethanol plants we can enable by helping them with carbon management services, whether it's the actual physical removal and storage of that carbon or the digital services like Verity and things like our carbon business, that sets that table for more sites to be fully enabled and ready to be a site for an alcohol to jet plant. So I think that's really that combination and how it fits. It's not just the revenues that we could generate today from that kind of relationship. Those are great, but it's really how do we have or enable 10, 15, 20 more sites in the future. Operator: This does conclude the question-and-answer session of today's program. I'd now like to hand the program back to Pat Gruber for any further remarks. Patrick Gruber: Well, thank you all. It was a fantastic year. It's a lot of potential. This carbon business is extremely interesting. It gives us the ability to arbitrage, look at -- make decisions discretely about where can we capture the most value. We're the first to do it, and we're breaking a lot of new ground at it, and it's quite interesting. I'm really grateful for the team up there at Gevo North Dakota. They've done a fantastic job running that plant. Congratulations to all the folks who've done it. Chris, great job. And it was really a good move for us to acquire that and bring it under our -- get that asset under our control because it solves all kinds of problems. Now we have low carbon available, boom, box checked. That question is answered, sequestration available. It's a beautiful sequestration site. I don't think we had a full appreciation of how great it actually is compared to the others that are out there. It's outstanding in that it's a -- we're the only ones in that formation, and it's an outstanding well. And so we're learning more and more about why that's so important. And you see the results in that we got certified as a 1,000-year well by Puro.Earth. And I look at the potential of what's going on here, and you see these things that Paul mentioned, like the IBA in diesel fuel. Who would have thought? We never have quit working on IBA. It's just in the background because you don't need it for jet fuel, but it's good for other stuff, other fuels. Great. Those things are going to happen sometime in the future using partners. Awesome. And so get the ATJ plant done. You heard Paul talk about it. We got to get that done and then do the franchise model. Already, Paul talked about bringing the -- being able to go to other parties or other ethanol companies who want to learn from us, and we can -- we have a service we can provide and get paid for. Those are all very interesting things. So we're hugely derisked situation compared to where we've been. We have a huge amount of intellectual property, huge amount of growth potential. And so this is, I think, something around my 59th or 60th earnings call, my very last one. I want to thank you all for your investment. Thank you for your questions and sharpening us -- forcing us to sharpen up over the years, especially me, and thank you for all the opportunity to work with you all. I truly appreciate it, and I wish the team the very, very best. And with that, I sign off. Thank you much. Operator: Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon. Thank you for attending today's Traeger's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Megan, and I'll be your moderator for today. I would now like to pass the conference over to Stephanie Read, Vice President of Finance, Strategy and Investor Relations. Stephanie, you may proceed. Stephanie Read: Good afternoon, everyone. Thank you for joining Traeger's call to discuss its fourth quarter and full year 2025 results, which were released this afternoon and can be found on our website at investors.traeger.com. I'm Stephanie Reed, Vice President of Finance, Strategy and Investor Relations at Traeger. With me on the call today are Jeremy Andrus, our Chief Executive Officer; and Joey Hord, our Chief Financial Officer. Before we get started, I want to remind everyone that management's remarks on this call may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and views of future events, including, but not limited to, statements made regarding our organizational focus and strategy, our mitigation efforts to offset the direct impact of tariffs, our Project Gravity initiative and its impact on our business, our expected product launches and our outlook as to our anticipated first quarter 2026 and full year 2026 results. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein. I encourage you to review our annual report on Form 10-K for the year ended December 31, 2025, once filed and our other filings for a discussion of these factors and uncertainties, which are available on the Investor Relations portion of our website. You should not take undue reliance on these forward-looking statements, which we speak to only as of today. We undertake no obligation to update or revise them for any new information. This call also contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, adjusted gross margin, free cash flow and net debt, which we believe are useful supplemental measures. The most comparable GAAP financial measures and reconciliation of the non-GAAP measures contained herein to such GAAP measures are included in our earnings release and investor presentation, which are available on the Investor Relations portion of our website at investors.traeger.com. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. Now I'd like to turn the call over to Jeremy Andrus, Chief Executive Officer of Traeger. Jeremy? Jeremy Andrus: Thanks, Steph, and thank you all for joining our fourth quarter earnings call. We closed fiscal 2025 with strong execution and meaningful strategic progress, and I'm proud of how this team performed in a dynamic environment. For the full year, revenue came in above the high end of our guidance at $560 million and adjusted EBITDA landed in the upper half of the range at $70 million. More importantly, we delivered on what we said we would do. We navigated tariffs, took actions to protect profitability and made hard decisions that simplify the business and strengthen our foundation for the long term. Before I get into 2026, I want to step back and talk about what we saw in 2025 and why we remain confident in the long-term value of this business. Even with more cautious consumer spending, the Traeger brand remains as strong as ever, and our community engagement continues to be a leading indicator of demand. Over the holiday season, we leaned into seasonal cooks and ambassador content and the community showed up in a big way. On Thanksgiving alone, we had 315,000 connected cooks, up 11% year-over-year, which we believe is a powerful signal of engagement across our installed base. What's important is that this brand strength is translating into business performance. In 2025, we held market share across outdoor grilling, including fuels, despite a sluggish category backdrop. That performance was supported in part by strong consumer response at price points below $1,000 where we've seen traction without sacrificing brand or performance. And with household penetration still low, we believe this brand strength positions us well as replacement cycles normalize over time. Innovation has always been core to Traeger, and it continues to be rewarded when we execute. A good example of how we're meeting consumers where they are is the Woodbridge platform launched earlier this year. Woodridge combines thoughtful innovation like the Easy Clean Grease and Ash Keg increased cooking space and our free flow fire pot that delivers better smoke with approachable price points. That balance of performance and value has driven strong consumer reception, and we believe Woodbridge is well positioned to be a meaningful contributor to our grills business in 2026 as consumers continue to prioritize value without compromising quality. Looking ahead, we plan to launch 2 additional products in 2026 that we expect will deliver Traeger innovation at more accessible price points and with a broader reach. That matters because expanding household penetration remains one of our largest long-term opportunities and the ability to deliver great product at price points that meet consumers where they are is a key part of our strategy. Our pellets business performed well this year, supported by the continued fuel category expansion of wood pellets overall. Pellet performance remains an important indicator for the broader category. When consumers are buying fuel, they're cooking. And when they're cooking, it supports the long-term health and replacement outlook. Historically, parts of this category have been tied to housing cycles and broader consumer confidence. The outdoor grilling market, including fuels, has been relatively steady since 2022, reflecting only modest declines. We believe replacement cycles have been extended beyond historical norms due to elasticity following tariff pricing actions and other macro factors. Now let's talk about what defined the operating environment in 2025. Tariffs had a meaningful impact on the category this year, and they drove volatility in ordering behavior across the channel. But through discipline and execution, we managed the impact while still delivering the full year results I just mentioned. As we've discussed in prior quarters, our approach has been consistent. We focused on 3 pillars: supply chain, pricing and cost discipline, and we've worked closely with our partners to protect profitability and maintain inventory health. We'll continue to take a disciplined approach, managing pricing on a portfolio basis as policy evolves. Meanwhile, our current guidance remains based on the framework in place earlier this year. Next, I want to provide an update on Project Gravity because it's a central part of how we're building a stronger Traeger. Project Gravity is a multiyear effort to reshape the business, not just to reduce costs but to simplify how we operate, sharpen where we compete and improve the durability of our profit model. Just as importantly, it allows us to focus and invest in the areas that matter most, including product innovation and brand. Phase 1 focused on organizational efficiency and foundational cost actions, including changes to our operating structure and the integration of MEATER into our Salt Lake City infrastructure. Phase 2 builds on that foundation and is more strategic in nature. It is focused on simplifying the business, sharpening our channel strategy, reallocating resources to our highest return opportunities and driving sustainable profitability improvements. A key component of Phase 2 has been channel optimization, including exiting the Costco roadshow, winding down direct-to-consumer commerce and transitioning to a distributor model in Europe. We've executed most of these actions already, along with additional organizational changes announced for the fourth quarter, and we expect continued progress on the distributor transition as we move through 2026. Taken together, these previously announced Phase 1 and Phase 2 savings are expected to deliver approximately $58 million of run rate savings with benefits beginning to materialize in 2025 and continuing as we move through 2026. As we've gone deeper into the work, we've also identified additional value capture opportunities within Phase 2, particularly around SKU rationalization and pricing. These initiatives are focused on simplifying our product portfolio, exiting lower-margin SKUs and taking a more strategic approach to pricing, which results in a simpler product architecture and a structurally higher-margin business mix. We expect these actions to drive an incremental $6 million to $12 million of run rate value with the majority of that benefit realized in 2027 and 2028 as the portfolio fully resets and end-of-life activity rolls off. Taken together, Project Gravity is now expected to deliver approximately $64 million to $70 million of total value across both phases. And I want to be clear, the point of Gravity isn't just about cost takeout. It's about applying a more disciplined, return-focused lens to how we run the business. Gravity is helping us simplify the model, concentrate resources where returns are highest and make deliberate trade-offs that improve margins, cash generation and long-term earnings power. That's what enables us to perform through uncertainty and generate operating leverage as the business grows. Before I move to guidance, I want to briefly address MEATER. MEATER continues to face challenging competitive dynamics, and we're working through elevated inventory as we reset the business. The steps we've taken, including closing the U.K. operation, integrating MEATER into our Salt Lake City infrastructure as part of Phase 1 of Project Gravity and optimizing demand creation investments are designed to improve the profitability profile of the business and give us more flexibility to invest in the product road map and retail channel over time. Near term, we're prioritizing inventory health and margin discipline. Longer term, we remain focused on product and retail execution to stabilize and improve performance. Now turning to guidance, 2026 is a year of disciplined execution as we focus the business on our highest return opportunities for long-term growth. After a period of tariff-driven disruption and ordering volatility in 2025, we are focused on normalizing channel inventory and working through discontinued product in the marketplace as we enter the year. In addition, our outlook reflects the full year annualization of price elasticity impacts from prior pricing actions taken in response to tariffs. At the same time, our channel actions under Project Gravity, particularly exiting the Costco roadshow and winding down DTC commerce will reduce revenue, but these are deliberate choices that simplify the business and improve profitability over time. Finally, our accessories business will continue to see pressure in 2026, primarily driven by the ongoing MEA reset. To be clear, these impacts are driven by specific identifiable actions and timing dynamics, not a change in underlying consumer demand. For fiscal 2026, we are guiding to revenue of $465 million to $485 million and adjusted EBITDA of $50 million to $60 million. Importantly, our expectations for sell-through in 2026 are significantly higher than what our sell-in plan reflects. We view this as a normalization of channel behavior rather than a change in underlying consumer demand, and we expect closer alignment in sell-through and sell-in as we move into 2027. As a result, we expect to exit 2026 with owned in-channel inventory aligned to our new grill product architecture, a lineup that delivers clear price value for consumers and supports a healthier marketplace as we move into 2027. Encouragingly, we are seeing early sell-through trends exceed expectations, particularly with our largest retail partners. That said, we are taking a prudent approach to extrapolating those trends across the full year given promotion timing and broader operating environment. We believe we're taking the right actions on efficiency, product strategy and inventory management to position Traeger for sustainable long-term growth and profitability. To wrap up, fiscal 2025 was a year where the team executed through uncertainty. We delivered on our commitments, managed meaningful tariff pressure and drove structural changes that strengthened Traeger for the long term. We're approaching 2026 with strategic discipline to set the foundation for our long-term growth strategy. We are prioritizing inventory health and continue to invest behind the product and brand with a focus on extending our consumer reach. And we believe the work we've done through Project Gravity sets up a stronger foundation for operating leverage as we look beyond 2026. And with that, I'll turn the call over to Joey. Joey? Joey Hord: Thanks, Jeremy, and good afternoon, everyone. I'll walk through our fourth quarter and full year financial results in more detail, then discuss our balance sheet, cash flow and our outlook for fiscal '26. Starting with the fourth quarter and the full year, I'm pleased with how the business performed financially in a dynamic operating environment. In the fourth quarter, we exceeded the top end of our revenue guidance and delivered adjusted EBITDA in the upper half of our full year range despite continued elasticity following tariff-related pricing actions and ongoing pressure in m. For the full year, we delivered adjusted EBITDA of $70 million while executing through these pressures and making deliberate decisions to simplify the business. There are 3 financial takeaways from fiscal '25 worth highlighting. First, we successfully managed tariff exposure and protected profitability through disciplined pricing, supply chain actions and cost control. Second, consumables, including pellets, continue to be a source of strength and stability, reinforcing the durability of the reoccurring fuel model even in the cautious consumer environment. And third, we made meaningful progress on Project Gravity, delivering $20 million of cost savings in fiscal '25. This exceeded our original expectation of $13 million and represents an important step towards a structurally improved cost base and stronger cash generation profile. Turning to fourth quarter results. Fourth quarter revenues decreased by 14% to $145 million. Grow revenues were $61 million or down 22% compared to the fourth quarter of last year. Declines in our grow category were driven primarily by elasticity and an unfavorable mix shift as well as a difficult comparison related to the Wood Ridge load-in ahead of launch in the prior year quarter. Consumables revenues were $36 million, up 16% from the prior year. Consumables growth was driven by higher unit volumes across both wood pellets and food consumables. Accessories revenues were $49 million, down 18% versus the fourth quarter of '24. Revenues were pressured by negative sales growth at MEATER. Fourth quarter gross margin was 37.4%, down 350 basis points versus the prior year. Excluding $3 million in costs related to Project Gravity, adjusted gross margin was 39.5%, down 130 basis points, driven primarily by tariff-related costs, offset by lower promotional activity and supply chain efficiencies. Sales and marketing expenses were $23 million compared to $34 million in the fourth quarter of '24. The decrease was driven by the reduced MEATER investment and Project Gravity savings. General and administrative expenses were $22 million compared to $27 million in the fourth quarter of '24. The decrease is primarily driven by lower stock-based compensation expense as well as lower professional fees and employee-related costs as a result of Project Gravity. Net loss for the fourth quarter was $17 million as compared to net loss of $7 million in the fourth quarter of '24. Net loss per diluted share was $0.13 compared to a loss of $0.05 in the fourth quarter of '24. Adjusted net income for the quarter was $2 million or $0.01 per diluted share as compared to $2 million or $0.01 per diluted share in the same period in '24. Adjusted EBITDA increased 6% to $19 million in the fourth quarter as compared to $18 million in the same period of '24, demonstrating operating leverage in the model even at lower revenue levels. Turning to the balance sheet. We exited the year in a solid financial position after making the balance sheet health a leading priority throughout '25. Cash and cash equivalents were $20 million compared to $15 million at the end of '24. We had $403 million of short-term and long-term debt, resulting in total net debt of $384 million. Net debt declined by $10 million in fiscal '25 compared to the end of fiscal '24. Cash flow from operations was $16 million in the fourth quarter, driven by disciplined working capital management and Project Gravity cost savings. From a liquidity perspective, we ended the fourth quarter with ample liquidity of $162 million. Inventory at the end of the fourth quarter was $99 million, down from $107 million in the fourth quarter last year and down from $115 million at the end of the third quarter. While we have elevated meter inventory that we expect to work through in '26, we are pleased with the positioning of our Traeger branded inventory. Now turning to our outlook. As Jeremy outlined, fiscal '26 is a foundational year. From a financial perspective, it is a year of disciplined execution as we continue to focus the business on our highest return opportunities. For fiscal '26, we are guiding to revenues of $465 million to $485 million and adjusted EBITDA of $50 million to $60 million. As Jeremy mentioned, we expect a divergence between sell-through and sell-in in '26. Importantly, the year-over-year revenue decline implied by our guidance is driven by a small number of specific identifiable factors, not a deterioration in the underlying consumer demand. There are 4 primary drivers shaping our '26 revenue outlook. First, Project Gravity actions reflect deliberate decisions to exit or reshape lower return revenue streams, including the Costco roadshow direct-to-consumer commerce and certain international markets as we prioritize profitability and cash generation. Second, the annualization of tariff-related elasticity reflects pricing actions taken primarily in the second half of '25 to offset tariff costs. Because those actions were not fully in effect for the full year, we continue to see their impact carry into the first half of '26. Together, these 2 drivers are continuations of strategic actions taken in fiscal '25 and account for approximately $70 million of the year-over-year decline with just over half coming from Project Gravity actions net of recapture. Next, our outlook reflects deliberate actions to optimize marketplace health. We exited fiscal '25 with select pockets of elevated inventory, and we're proactively managing these positions to reduce weeks of supply. That inventory dynamic was driven by 2 largely timing-related factors in fiscal '25. First, advanced orders placed to mitigate anticipated tariff exposure and support country of origin transitions; and second, higher order volumes following a strong spring selling season before the full impact of pricing elasticity became evident. Finally, we are planning for continued competitive pressure in LTE as we reset that business. Taken together, these factors explain the expected revenue decline in '26 and importantly, reflect deliberate actions and timing dynamics rather than a change in the long-term demand profile of the Traeger brand. From a margin perspective, we are guiding to gross margin of 38% to 39% or down 120 basis points to down 20 basis points versus fiscal '25. Margin guidance reflects pressure from tariffs and deleverage on fixed promotional investments, partially offset by the benefits of Project Gravity. On operating expenses, we expect meaningful improvement in '26 as we realize the full year benefit of actions taken in '25 and continue executing Phase 2. In total, we expect Project Gravity to deliver approximately $50 million of adjusted EBITDA benefit in fiscal '26, reflecting roughly $30 million of incremental benefit on top of approximately $20 million realized in fiscal '25. Taken together, adjusted EBITDA for fiscal year '26 is expected to be $50 million to $60 million. Despite the year-over-year decline in adjusted EBITDA, we continue to expect strong free cash flow generation. While we do not typically provide free cash flow guidance, we currently expect free cash flow of at least $30 million in fiscal '26, driven primarily by inventory reductions and working capital management. This expected free cash flow will support continued net debt reduction as we expect our leverage ratio to remain comfortably below covenant levels throughout the year. I'd also note that our covenant calculation includes credit for cost calculations taken over the trailing 12 months, resulting in a lower leverage ratio than what you would calculate using published EBITDA alone. As a reminder, our revolver capacity will step down by $30 million in the second quarter as part of the amendment executed in '25. This has no impact on our operations. The remaining $82.5 million of capacity is fully available through December of '27 and currently undrawn. Our first lien term facility does not mature until June 2028. Turning to the first quarter. We are seeing some meaningful timing shifts from Q1 into Q2, so I want to provide explicit guidance for the quarter. Importantly, we expect first half seasonality to be broadly consistent with historical patterns, with 26 impacted by new product load-ins occurring in Q2 rather than Q1. From a margin perspective, we also expect some timing impacts between the first and second quarters, driven by promotional activity and direct import mix, which we believe will pressure gross margin rate in Q1 and benefit later quarters. For the first quarter, we are guiding revenue of $92 million to $97 million and adjusted EBITDA of $3 million to $7 million. As it relates to tariffs, our guidance is based on the tariff framework that was in effect through mid-February and does not incorporate the recently announced changes. Depending on market conditions, any incremental benefit could flow through a combination of improved gross margin, dealer margin support or pricing actions for consumers. Before I close, I want to step back and talk about how we see the business position beyond '26. As we move into '27, we believe several factors create a constructive setup for improved profitability. These include the continued realization of Project Gravity value beyond what is reflected in our '26 guidance, including the incremental $6 million to $12 million of value capture announced today as well as the potential for a more favorable tariff environment and improved alignment between sell-in and sell-through. As these dynamics come together, we would expect the business to begin to benefit from meaningful operating leverage as revenue returns to growth with a structurally improved margin profile and cost base. As a result, these factors support our view that fiscal '26 represents a transition year financially and that the business is positioned to deliver higher profitability and improved adjusted EBITDA performance as we move into '27 and beyond. And with that, I'll turn it over to the operator. Operator? Operator: Our first question will go to the line of Brian McNamara with Canaccord. Brian McNamara: First, I'm curious, where did the grill market finish in 2025 relative to 2019 levels in terms of industry volumes? And what is the company's expectation for grill market growth in '26, if any? Jeremy Andrus: Thanks, Brian. So a couple of thoughts. First of all, after, of course, a very meaningful decline in unit volume between '21 and '22, the market has been modestly down the last handful of years. Last year, down probably sort of mid-single digits or so on a revenue basis. I don't have the exact numbers in front of me on unit volumes between last year and 2019. What I can tell you is that units are still down meaningfully. We, of course, we spent a lot of time thinking about, in addition to our strategy from a macro perspective, what are the catalysts to really to get the outdoor cooking category to return to more normalized replacement levels. Mathematically, we should be heading into that window. We did not see that last year, and that was probably in part driven by the fact that tariffs really hit in the spring, and we saw this corresponding very, very material drop in consumer confidence. But we are now 6 years removed from the beginning of the pandemic, and that should be when consumers generally begin to think about replacing other grills, at least the Traeger Grill in terms of the ownership life cycle that we observe. I will say this has been historically a remarkably steady category. And what we've seen, of course, is unusual since the pandemic. But our expectation is that the market will recover. There are just as many, in fact, slightly more outdoor books than there were pre-pandemic. And so this is more around the replacement cycle. I will say that we have not forecasted in the guidance that we've offered, we have not forecasted a return to a more normalized replacement cycle because it's hard to know exactly when. We just believe that this is a very durable category and then it will return to those more normalized levels. So we're heading to that period at some point in time, certainly over the next 12 to 24 months. The other thing that I would add that I think is relevant as we think about brand position and engagement as the category improves is that this is a brand that has been very consistent in terms of the consumer engagement. We observed, for example, in the fourth quarter, connected cooks up 11%. We still -- we continue to see strong pellet attach, which, of course, is another important measure of engagement for us. So we're very focused on the things that we can control. We're not forecasting the next cycle, but we believe that we're getting closer to it. Brian McNamara: Great. You actually answered my second question. So good on you there. My next question is, how big is the expected revenue impact from the DTC exit? And what is the underlying assumption for sales recapture with your retail partners? And in addition to that, I guess, why wouldn't we see a bigger margin boost there? It sounds like Project Gravity is accounting for kind of $50 million of the $50 million to $60 million EBITDA guidance, if I heard that correctly. Joey Hord: Sure. Brian, it's Joey. As far as what we're speaking to right now, we spoke originally around the $60 million just recapture or sorry, a $60 million impact in terms of just overall the shift out of DTC, Costco roadshow and international. That was on a rear-looking number. On the go-forward number, it's a little bit smaller. What we can say is overall between the full year pricing elasticity and Project Gravity, the shift there is around $70 million of the total revenue impact. And if you're doing the math on the P&L flow-through, we have margin rate pressure, and that's driven by full year tariffs and promo deleverage. And that's probably if you're doing the math on why there's not as much flow-through. Operator: Our next question will go to the line of Peter Benedict with Baird. Zachary Beeck: This is Zach on for Peter. Nice to see the additional savings from Gravity. Just curious if you could share more about the SKU rationalization efforts there, maybe which items or categories you plan to address? And then on pricing, Jeremy, you mentioned annualizing some elasticity impacts from your last round, which I believe was last spring. Could you just share more details around that dynamic and maybe how the consumer response to pricing actions is influencing your innovation plans for both this year and beyond? Jeremy Andrus: Yes, of course. So let me start with the SKU rationalization, and then I'll lead into some of the thoughts on pricing and sort of how it impacts our product line or how we think about product strategy going forward. The intent of SKU rationalization was it was twofold. First of all, I wanted to streamline the product portfolio so that we create efficiencies in manufacturing and inventory. There are certainly opportunities to, in a modular way, ensure that we're just driving more volume in assembly, in subcomponents and fewer SKUs, of course, leads to lower inventory levels. That's sort of thought number one. Thought number two is that the rationalization also has consumer benefit. Our ability to create a more clear line, a clear line with a clear step-up story and real clarity from a consumer decision process also was an underlying motivation of the rationalization. These things take time. Of course, we are in a consumer durable, we're looking years out from a product line perspective, and we will sunset certain SKUs beginning this year, but over the next 2 to 3 years. And so as you saw from some of the increased value capture of Gravity, some of these things extend out into '27 and into '28. But we believe in that. We think it's going to make us a better, more focused business, and we have begun this process. The pricing is -- I will say, really forecasting price elasticity last year was challenging. not only because our prices were moving around, but it was a very dynamic environment, not knowing how competition was going to price, being a discretionary, high-ticket discretionary durable, how decision-making on the consumer part relative not only to this category, but thinking about other discretionary purchases that they'll make. We're getting sharper on elasticity. I would say that one of the learnings is that during promotional windows, there is there's greater elasticity. And -- but I would say on balance, we're feeling pretty good about how we've priced our products, and it's given us confidence where we are going forward. We'll continue to evaluate this. There -- as has been announced over the last week or so, there have been some shifts in tariffs. We haven't forecasted any of that in our guidance, but there is some decline in our tariff rate, which will give us the ability to sort of step back and think about how do we allocate those savings. Where will we get value in reducing MSRP versus value in allocating some of that to our dealers where there is some additional margin need. And of course, to the extent that some of it gets allocated back to Traeger, how do we think about that from a business reinvestment perspective. As it pertains to our product strategy relative to what we've learned about elasticity, I would say that it really doesn't change how we think about the future. It takes it takes 30 to 36 months to bring a durable -- this durable, which is a highly engineered product with firmware, software, industrial mechanical design from concept to consumer launch. And so it's hard to really build a product line around macro environment trends. But I think what we've learned is that although there has been a little bit of pressure on price point as consumers have tightened their belt, notably last year as we saw consumer sentiment decline meaningfully -- what we believe and what we see -- what we have seen in cycles over time is that the consumer will return to price points in better times where they are comfortable, but also where there is a reason to purchase. So those features and those innovations that may be slightly discounted in a down period, we believe a consumer will continue to value. And so we think about our product line going forward in a very similar way. Of course, we're always learning from the consumer, and we're always thinking about how should our brand be positioned long term. On a positive, and this just happens to be a nature of where we are in our product development life cycle, we're launching a couple of new products this year in the second quarter. As is our strategy, we really launch innovation at more premium price points, and we cascade that innovation downstream as we understand consumer value of certain products and features and as we understand how we get scale from a product manufacturing perspective. And it so happens that where we are in that life cycle, the 2 product platforms that we're launching this spring, they're sub-$1,000 products, which are -- which is certainly very appropriate for the moment in time. But otherwise, we don't shift our product strategy relative to the cycles that we're in. Operator: Our next question will go to the line of Peter Keith with Piper Sandler. Peter Keith: So just trying to understand the revenue decline and maybe how you're thinking about general demand trends. So I'm going to kind of interpret what you've told us, which was some good detail. So we've got an $85 million revenue decline at the midpoint for the year. It sounds like $70 million of that is from exiting the Costco roadshows, DTC and then some demand elasticity impact from pricing. So there's sort of a $15 million delta that I'm trying to get my arms around. Is that a sort of a lack of sell-in because of the orders last year? Is that demand declines? Kind of how should we think about that other chunk of revenue decline? Joey Hord: Sure. Thanks for the question. So just to be clear, there's -- we're planning on sell-through. There's a divergence between sell-through and sell-in in '26. And sell-through, we're planning to -- current sell-through trends in the beginning of the year are exceeding our expectations. We're planning on sell-through to be in line with the overall category, and that's sort of flattish. So keep in mind, there's a divergence there. As far as the remaining $15 million, there's sort of 2 factors driving that. One is ongoing meter pressure. And the other is we're calling it marketplace health initiatives. We have as Jeremy mentioned, we have specific inventory pockets in a specific retailer that have higher weeks of supply inventory in market than we would like, and we're going to rightsize the inventory. And keep in mind, pricing elasticity, project Gravity reduction in revenue and marketplace health initiatives are strategic in nature. MEATER is -- we're addressing MEATER through the centralization of the MEATER office here in Salt Lake, leveraging the fixed cost infrastructure. We're resourcing the plan and the business to drive ongoing growth. So if you're doing the math on that, it's really focused on that marketplace health initiatives in MEATER. Peter Keith: Okay. Yes. That's the detail I was looking for. And that -- just a follow-up on that, that marketplace pressure, that's just with one retailer where you're trying to rebalance the inventory? Or is that across a variety of retailers? Jeremy Andrus: Generally speaking, yes. It's a distinct pocket of inventory. And keep in mind, it's high-volume inventory, it's high flow-through, and that also puts pressure on overall margin. And the other thing point I'll make on that is as we rightsize marketplace, this is the marketplace health initiative. There's going to be a role in FY '26, but this will create capacity in '27 and beyond, and we'll be able to fill that capacity, and that's why we're confident in the future growth algorithm. Peter Keith: Yes. Yes, that makes sense. Okay. And so then my last question, and I think you partially addressed this in your last answer, but we're looking at the decremental margin on the revenue declines, it's around 30% this year, pretty similar to last year. And I guess with Project Gravity, one would think that maybe the decremental margins would be coming down this year. So why is it a similar level of 30% decremental on the EBITDA margin with the revenue decline? Joey Hord: Yes. I think we need to focus on overall gross margin and gross margin is being impacted full year of tariffs. So last year, tariffs were announced -- they were announced in February, but they were relatively low in the first quarter. Liberation Day, I believe, was in early April, and then we had a much higher tariff burden. They've sort of settled throughout the year. So we have a full year of tariff impact. So that's driving some margin degradation. The other is what we're calling is promo funded deleverage. So we invest a fixed promo number into our P&L every year. And with the overall revenue coming down, it's eroding margin. That is also going to drive margin expansion in the out years as well as we get to more normalized revenue numbers. Operator: With no additional questions waiting in queue, we will conclude both the Q&A session as well as today's earnings call. Thank you for your participation, and enjoy the rest of your day.
Mary Vilakazi: Good morning, everyone. Welcome to FirstRand's results presentation for the 6 months ended 31st December 2025. I'll start with the -- I'll start the presentation with an overview of the group's operating environment over the last 6 months. In the period under review, the global macroeconomic backdrop continued to be characterized by heightened geopolitical uncertainty, and this is likely to persist for some time. Global growth slowed and inflation and monetary policy continued to play out differently across the world's largest economies. The FirstRand house view is underpinned by an expectation of ongoing geopolitical fracturing and reorientation. Unfortunately, that does imply more frequent global economic shocks, the impact of which is controlled for in our baseline and risk expectations. The current Middle East conflict is an example of one such shock. In South Africa, the combination of structural reform efforts spearheaded by Operation Vulindlela, fiscal discipline and the lowering of the inflation target have started to have a positive impact. South Africa's sovereign rating improved. The country was removed from the FATF gray list, the currency strengthened and inflation registered the lowest average in years. These factors have mitigated the impact of elevated global uncertainty within the SA macro context. The recent bond market impact of the Middle East conflict have seen bond yields lift 40 basis points off their recent lows. Whilst it is still early days, this is a relatively small impact on the overall bond yield reduction of 220 basis points over the last year. We are monitoring the unfolding events and the related impacts closely. Lower inflation allowed the sub to cut the interest rates and affordability pressures on consumers and households are easing. During the period under review, we saw household borrowing tick up marginally in real terms, whilst corporate borrowing continued to grow strongly, potentially signaling an emerging credit and investment cycle. The RMB/BER Business Confidence Index rose from 44 to 47 since the last quarter, an encouraging data point. Barring the post-COVID recovery, this is the highest business confidence level since 2015, giving us confidence about the emergence of credit and investment cycle for South Africa. Several countries in the group's broader Africa portfolio also made good progress on reforms. Nigeria continued to strengthen its macroeconomic position, while Ghana and Zambia have benefited from the post-debt restructuring reforms implemented over the last few years. The 3 countries made difficult and tough decisions and are now reaping the benefits of the reform processes. Certain cyclical factors also provided support with inflation moderating and growth stabilizing on the back of a positive commodity cycle. By the end of 2025, economic activity in the U.K. had slowed. Inflation eased but remained above target, and the Bank of England responded cautiously. Activity was supported by public sector spending. However, private sector demand remained constrained by still elevated borrowing costs and persistent inflation pressures. Moving on to an unpack of the group's operating performance. And just to recap how the group's operational performance in the first 6 months is tracking against the guidance for the full year to June 2026. Pleasingly, all the key line items are trending as expected. NII is up high single digits with a significantly NIM uplift with NIR print materially higher than the previous year. This strong top line performance has resulted in an improved cost-to-income ratio continuing to be in the 40s range. Credit is in line with our expectations with NPLs looking better given the supportive macro environment. As guided, the group's ROE is moving closer to the top of our stated range of 18% to 22%. These metrics clearly demonstrate the strength of the operational performance delivered by the business, which we are very pleased about. This slide unpacks the performance metrics, particular callouts include the strong growth in earnings, economic profits and NAV accretion. We are also pleased to be in a position to grow the dividend faster than earnings as the high ROE means we continue to generate excess capital. This is earnings and ROE over a 5-year period. The only point I'd like to make here is that earnings growth has shown a stronger trajectory over the past 3 years. This demonstrates the group's ability to deliver higher and more sustainable growth in earnings despite one-off contributions in each year's base, testament to the quality of earnings generated by our franchises. This slide demonstrates the group's -- that the group continues to accrete to NAV. The 5-year CAGR of 8% is testament to the group's ability to consistently deliver value for shareholders. Net income after cost of capital or economic profits is the group's key performance measure for shareholder value creation. We saw very strong growth in this period in NIACC. The 5-year CAGR of 14% in economic profit is particularly pleasing given that this was delivered during a period characterized by muted macros and sluggish GDP growth. It demonstrates the group's ability to deliver on its objective to capture the largest share of economic profits available in the system. The group's superior ROE benefited from an ongoing improvement in return on assets, which increased 5 basis points in the period. This was again a result of the quality of our operational performance, particularly the strong growth in investment income, a recovery in trading income and stable impairments. Gearing continued to decrease and the lower cost of equity contributed 10% to the NIACC growth of 26%. The reduction in the SA risk premium is potentially structural given the improved macroeconomic conditions, fiscal discipline as reflected in the recent budget and delivery on the reform agenda. The market pricing indicates a further ratings upgrade is possible in this calendar year, and this could present potential for a sustainable lower cost of equity going forward for South Africa. This is a snapshot of the operational performances delivered by our client-facing franchises. All the domestic franchises performed extremely well, more than holding their own in a fiercely competitive operating environment. FNB performed well, growing earnings by 8% and significantly lifting ROE to 41%. And within this, FNB SA grew earnings by 10%, offset by softer performance in broader Africa. RMB really had a standout 6 months, lifting its margins and ROE on the back of strong top line growth. WesBank again delivered a solid growth and an impressive ROE given how fiercely competitive the market is. The broader Africa portfolio continues to contribute to overall earnings growth. This year, the performance was driven by RMB's cross-border activities. RMB's in-country CIB businesses delivered an impressive increase of 62% in profits before tax. And FNB's in-country -- broader Africa in-country performance was impacted by macro pressures in Botswana and Mozambique, as we previously signaled. Pleasingly, the long-term strategy of growing in-country franchises remains on track. The group is relentless in its pursuit of high-quality earnings growth and superior ROE. And many of the decisions the team makes are anchored to these -- to deliver on these 2 ambitions. From a balance sheet perspective, this is why we are so focused on growing advances at an appropriate risk-adjusted returns and why we have a limitless appetite for deposits. We are working hard to defend and grow our large valuable transactional franchises, given that they provide a significant underpin to our ROE, and we continue to find sources of capital-light income streams. I'll now cover the performance across the 3 themes, similar to how I presented this in the June results. So let me start with the health and quality of our client-facing franchises. As I mentioned in the previous slide, FNB SA franchise performed really well. Turning to FNB Retail first. The business delivered 14% growth in PBT and was the most significant contributor to FNB's overall ROE uplift. The performance was characterized by solid top line growth with NII growth impacted by tough lending markets with muted demand, although we do expect this to pick up in the second half. NII growth improved on the back of higher transaction volumes and customer growth. The retail credit experience was better than we expected and supported retail earnings growth during this period. I just want to call out the turnaround in the customer growth in the personal segment, where competition is really tough. At June 2025, this segment was struggling to grow customers, but this has now reversed significantly on the back of a strong sales effort. Before migrations to the private segment, personal segment grew customers up 3%. In our early engagements with Optasia, we do see exciting opportunities to leverage their capabilities to further grow FNB's offerings in this segment. The private segment grew up -- grew a solid 8%, driven by customer acquisition and migration from personal segment. And overall, we continue to see growth in FNB's main bank clients. This is up 6%, which demonstrates FNB's success in switching customers banked elsewhere with a single FNB product to a full transactional offering, the strength of the FNB franchise. FNB commercial continues to grow off a high base. NII was supported by steady advances and deposit growth. The commercial deposit franchise remains by far the largest in South Africa. Solid customer growth has supported growth in fees and transactional volumes, supporting NII. Merchant Services experienced margin pressure -- margin compression as FNB responds to a competitive environment. In response, FNB has launched new Speedpoints yesterday with enhanced business solution offerings and competitive pricing points. FNB is still leaning in for SMEs that are well positioned to benefit from the early structural reforms and FNB remains the largest lender in South Africa to this sector. FNB's focus on meeting the needs of SMEs is also supporting its strategy to grow in the community economy with advances now at ZAR 17.3 billion and deposits at ZAR 43.3 billion. As I mentioned earlier, FNB continues to grow NIR and the growth is reflective of the different strategies to defend and grow the transactional franchise. The slide shows that the business continues to achieve steady growth across traditional sources of fees and importantly, is scaling new sources of fees supported by its platform strategy. Digital wallet and PayShap volumes are showing very strong growth. And the PayShap volumes also reflecting the strategy to fulfill client needs or the business strategy to ensure that they fulfill client needs and payments needs as client behavior and adoption evolves. The graph on the right-hand side demonstrates ongoing traction in FNB's long-standing strategy to monetize its value-added services. FNB -- the MVNO business, in particular, is scaling well with users increasing to 3 million. West Bank delivered another strong performance, growing advances in a market showing signs of a sustained recovery, driven by new car sales in the industry, which are up 16% and an emerging replacement cycle. There was a slight recalibration of risk appetite to capture the opportunities emerging from these market dynamics. Origination has shifted from only originating in low to medium risk to a higher proportion of medium-risk customers. This has resulted in some front book strain, but remains well within expectations. The insurance business continues to deliver good growth on the group's own licenses as reflected in the new business APE numbers on the slide. The growth in the in-force APE for life and short term demonstrates the quality of these books. The top line growth has not translated into PBT growth in this period as we continue investing for future growth. This investment in distribution capability will set the business up strongly to grow in FNB's customer base as well as the open market. A data point that supports this thesis is the 38% growth in APE that's been generated from the private adviser distribution channel. As I called out earlier, RMB had an excellent first 6 months of the year. Absolute advances growth declined due to the distribution strategy, but production was robust at significantly higher margins. NIR benefited from a private equity realization and a turnaround from the Global Markets business. All these drivers helped lift RMB's ROE. The HSBC transaction has been successfully completed, introducing 260 new large corporates and multinational clients to RMB. And the chart out here goes out to the technology teams who ensured that there was a seamless transition of these clients, building platform capabilities that the group will be able to leverage in future growth strategies. The strategy to build scale in the corporate transactional bank and the introduction of a dedicated executive focus is resulting in good progress on mining the client base, and it is clear that there's a great deal of runway here. I've already mentioned the turnaround in the Global Markets business. This slide demonstrates that the early recovery is emanating from across the portfolio and the business continues to focus on client franchise activities to ensure that the recovery is sustained. I want to cover the point-in-time ROE at the Aldermore Group. We are still -- we are still executing on a clear medium strategy to move this ROE closer to 15%. However, this journey -- the journey to operational efficiency has required a hefty investment into the current offshoring initiatives. This, in time, will increase operational leverage once completed. In addition, the NIM pressure across the industry has also had an impact on Aldermore's performance in 6 months. This will be partly addressed by Aldermore's objective to diversify into higher-margin asset classes as well as accessing other funding sources post the FCA's motor redress process when Aldermore again can go into the capital markets. The excess capital we continue to hold in the U.K. depresses the Aldermore ROE by 1.5%, but we are hopeful that this will be resolved by the end of this year. The performance from our broader Africa portfolio is pleasing, particularly given the macro pressures in Botswana, which is one of our larger jurisdictions. This portfolio is still relatively undiversified, so volatility in 2 markets will have an impact. However, despite these pressures, the overall profitability and ROE held up well, supported by good performances from Zambia, Nigeria and Namibia. There was cost pressure in Ghana due to the platform investment that's required there. RMB's cross-border business and in-country CIB activities performed strongly, as I mentioned earlier. I want to spend a little time on the overall strength and health of our origination franchises, and Markos will cover line-by-line growth in more detail when he takes over the presentation. This slide unpacks the group's long-standing philosophy on origination. One recent adjustment is a slight shift in WesBank's risk appetite, which I covered earlier. A key element of our FRM strategy is to originate to the most appropriate balance sheet and underwriting vehicles. This has created additional capacity for the group, creating additional capital and funding velocity to support further origination. On Slide 28, here, we can see that the lending growth we have achieved across brands, customer segments and product lines, and we are comfortable with these outcomes. Standouts here are WesBank corporate and commercial, where we have seen growth pick up as the economy shows signs of shifting to a more investment-led cycle. Given the macro backdrop, we expect the modest pickup in retail to accelerate in the second half. The pie chart on the right unpacks the results of the sector-specific lending strategies we have been pursuing. Again, this is a high-level unpack of the credit performance, which Markos will cover in much more detail. The point I'd like to make here is that retail is performing better than our initial expectations and the U.K. normalization this year in the CLR is in line with expectations given the base effect from last year's provision releases. And I want to spend a bit more time on the deposit franchises, which deliver our high-quality capital-light NII. It is extremely pleasing to see that all of the group's deposit franchises delivered good growth over this period. RMB's corporate deposit franchise showing good momentum in South Africa and in broader Africa. The steady strategy to build country deposit franchises in the broader Africa portfolio is also gaining traction. SA retail and commercial deposits continue to increase and grow off an already high base. The group once again benefited from the group treasury's active management of interest rate risk and ALM risks, ensuring that the group earns appropriate value from interest rate risk and credit premium. In the current year, this strategy produced an additional ZAR 1.2 billion of NII compared to an opportunity cost in the comparative period. With interest rates forecasted to further reduce, the ALM strategy is expected to yet again have outperformed as shown in the gray shaded area on the graph. The group's margin was up 8 basis points and up 15 basis points, excluding the U.K. operations. Improved asset margins were achieved through the mix of balance sheet growth and deliberate FRM strategies with disciplined segment execution to ensure appropriate risk return margin considering client channel and market conditions. Where quality credits did not meet the balance sheet costs and frictions, these were matched to alternative platforms and investor base as executed through the RMB distribution strategy. The negative impact to the group margin in funding and liquidity of 11 basis points was a consequence of both the levels of higher levels of excess liquidity and lower return on liquid assets. This is a strong margin outcome achieved through active FRM, which the group will continue to use as a central process to deliver shareholder value. A walk-through of the group's CET1 ratio shows a lifting in the capital position following ongoing optimization, FRM initiatives I've highlighted and Basel reforms. RWA consumption up 70 basis points reflects ongoing growth in constant currency as well as investment in strategic initiatives. A CET1 ratio of 14.4% provides the group with sufficient financial resources to deliver on the group's growth ambitions. The strong level of capital and FRM initiatives support a sustainable dividend cover that remains at the bottom end of the range. I will now hand over to Markos, and I will come back to conclude with the prospects and looking forward. Markos Davias: Thank you, Mary, and good morning, everyone. Considering the backdrop of the group's strategic and operational performance, I'm now pleased to present the financial review of the FirstRand Group for the 6 months ended 31 December 2025. Mary has covered the key performance highlights. And as a quick recap, the group delivered 11% normalized earnings growth, coupled with an improving ROE and a resultant 26% growth in NIACC. This performance did not include an adjustment to the U.K. FCA motor redress provision. However, legal and specialist costs of ZAR 333 million pretax and ZAR 244 million post-tax impacted operating expenses and earnings growth by 1%. The group expects the final redress scheme to be published by the end of March, and we'll update shareholders on any potential impact thereafter. NAV is up 7% with the stronger rand impacting the group's foreign currency translation reserve. Excluding this impact, NAV would be up 10% for the period. The final call out is that the group's stronger CET1 position of 14.4% places it in a position that if required, the group can absorb any of the possible negative outcomes from the U.K. FCA motor commission redress scheme, and Mary will touch on this further in the prospects. The group's normalized earnings growth is driven by a strong top line performance with both NII and NIR up 8% and 12%, respectively, creating positive jaws against credit impairments, which are up 6% at a CLR of 86 basis points and cost growth up 9%. I will unpack all of these shortly. As the only additional note to the slide, RMB implemented a debt-to-equity restructure during the period. As a result, a portion of the nonperforming loan was converted to equity with the remaining loan settled. In accordance with IFRS, the group recognized an investment income gain of ZAR 242 million for this conversion with a settled advance resulting in a release of Stage 3 impairments of ZAR 143 million, and the remainder of the loan was written off. The converted equity exposure is then recognized in associate for the group and the cumulative equity accounted losses resulted in a ZAR 377 million loss in associate earnings line, but the net impact to NIR is therefore ZAR 135 million. Netting these impacts results in only a ZAR 8 million gain being recognized, and hence, I will not cover it further in this presentation. Let me now turn to the quality of the financial performance and its key drivers, starting with NII. Turning to advances. Retail mortgage growth continues to be subdued as overall demand and customer affordability do start to show early signs of improvement. Production has picked up in recent months with this improvement expected to drive momentum into the second half of the financial year. WesBank VAF grew 14%, capturing a large proportion of the bounce back in vehicle sales. An important note is that additional retail risk appetite has been allocated. Mary did touch on this. We are using a data-led basis, and we're expanding lending to the quality side of medium-risk customers as the group continues to monitor improvements in retail credit lending conditions and proactively prepares for an improving affordability cycle. Commercial growth of 9% reflects the consistent and focused strategy Mary alluded to earlier with a continued focus on growing the SME customer base and unsecured SME lending is up 11%. Broader Africa continued to service customer needs for credit products in the group's presence countries, up 9% in constant currency. And as a callout, Zambia showed excellent in-country advances growth of 35%. Aldermore delivered 9% growth in advances, primarily driven by its strong origination network in property finance, which was up 15%. Final point on the slide relates to RMB where growth appears subdued at 7% down, but both translation impacts and the deliberate distribution strategy that Mary touched on earlier impacted its balance sheet growth. But what is pleasing about this, we now have a demonstrable financial data point on the underlying hypothesis with RMB's portfolio margin improving by 20 basis points and despite a smaller balance sheet, RMB lending NII is up 15% for the period. On this slide, we reflect the impact of the RMB distribution strategy and the group's currency translation impacts to total advances with each having a 2% negative impact to growth. The group's deposit franchises continue to show momentum across all of the customer segments with overall growth of 6%. This performance, when coupled with RMB distribution strategy enabled a net 2% reduction in total institutional and other funding and in particular, a reduced term debt securities funding cost, which further benefited NII and margins. The group's institutional funding mix and weighted average term continues to be well managed with the right side graph depicting the funding mix change between FI deposits and NCDs. Reflecting the group's balance sheet strategies and an activity view highlights the effective partnership and FRM discipline between the franchises and group treasury. Lending NII benefited from advances growth and mix changes as well as the improved margins in RMB. Despite 107 basis points decline in average interest rates, both transactional NII and capital endowment activities increased 7%, strongly supported by growth in invested balances and the group's ALM strategies and active portfolio management approach. Group Treasury delivered a very good outcome with NII up 61%, driven by the lower funding costs previously mentioned, improved deployment of currency funding and a partial offset in the lower margins on HQLA that Mary mentioned earlier. The U.K. NII is up only 1% with pressure on cost of funding and deposit margins given the continued elevated level of competition for liabilities and a reducing rate cycle, which had some impact on unhedged capital endowment. Mary has already covered the margin outcome earlier. And here, I depicted in the usual waterfall view. In summary, group margins, excluding the U.K., have expanded 15 basis points, 8 basis points to June '25 and then a further 7 basis points to December. Lending asset margins expansion contributed 12 basis points with RMB a significant contributor to the uplift and with continued disciplined pricing across all the other lending portfolios. As mentioned, the ALM strategies reinforced both deposit and capital endowment margins, with Group Treasury reflecting an 11 basis points impact, mainly due to the lower HQLA margins. The U.K. margin compression resulted in an offset of 7 basis points to the group. Moving to the group's impairment charge, which is up 6%. The group's total CLR remains below the midpoint of the TTC range, with a slight improvement of 2 basis points to the CLR excluding the U.K. An important note at this point is that in the comparative period, the U.K. CLR benefited from one-offs relating to various items, including last year cost of living, and these did not repeat in the current period. These supported the prior period outcome for the group CLR, that was 84 basis points. And if you look at the current period, 86 basis points, this is a normalization of these impacts in effect. The overall diversification of the group portfolio continues to support the CLR below the midpoint of the TTC range. The group's impairment charge of ZAR 7.3 billion further reflects the U.K. normalization as well as front-book strain from balance sheet growth, impacting Stage 1 provisions predominantly. I'll give more color to this shortly in the segmental breakdown of the charge. Stage 2 provisions and subsequent coverage are lower as a result of a migration of a few higher coverage watch list assets to Stage 3 in RMB. This then reflects in the slight growth in Stage 3 provisions and coverage of 43.8% and further contributing to the Stage 3 coverage were increases relating to an aging NPL portfolio and higher operational NPL inflows. The group's overall provision stock remains appropriate at ZAR 56 billion, with a performing coverage of 1.43%. The group's NPL formation continues to reflect a slowing 6-month trend across most portfolios, except WesBank VAF and RMB. RMB had a single counterparty in the cross-border portfolio that migrated straight from Stage 1 to Stage 3 and has been appropriately provided for at this point in time. The particular circumstances of this event are isolated and is not pervasive to the portfolio. This new slide depicts the group's segmental composition of its impairment charge. It aims to highlight the diversification of the credit charge as well as period-on-period increases of each segment's charge. What can be seen is that the U.K. impairment growth accounts for ZAR 338 million of the total ZAR 442 million group increase, with Commercial and broader Africa also up significantly for the period. These were then offset by lower impairment outcomes in Retail and CIB. With this backdrop, let me now unpack these individually. Retail CLR, as expected, trended lower into the bottom end of its TTC range, improved forward-looking macros, better collections, coupled with increased customer prepayments and reduced Stage 3 inflows were all key contributors. Strong book growth in VAF drove some front-book strain, which was more than offset by an improved mortgage outcome as house prices in [ Gauteng and KZN ] showed signs of recovery. Increased NPL coverage driven by time in NPL and slowing lower coverage inflows also weighed in. Retail unsecured is benefiting from lower front-book strain and pleasingly, a decline in debt counseling inflows, albeit this portfolio remains structurally higher than in the past. Commercial's impairment outcome continues to lag Retail, but with signs of improvement since June. There has been no new jump to default counters like in the prior period, but the group has proactively raised out-of-model provisions against the larger Commercial watch list, exposures and potential industry concentrations. The 94 basis points CLR is an improved rolling 6-month print compared to the previous 125 basis points, and remains below the midpoint of the TTC range. A significant driver of the increase in charge relates to what I refer to as good CLR in the form of front-book strain, which is as a result of the continued strong advances growth across most of the Commercial lending portfolios. RMB's impairment charge continues to be best described as benign, with a single counter migrating to Stage 2 due to a rating revision triggering SICR. NPLs continue to see some new inflows from the credit watch list, with an offset from migrations out of NPL as RMB's debt restructuring capability continues to successfully assist customers. In addition, the previously mentioned broader Africa exposure that migrated to Stage 3 also impacted RMB's NPL level and provision increases. And finally, the debt to equity restructure I mentioned earlier impacted RMB. But even if you add it back, RMB is below its TTC range of 30 basis points to 50 basis points. I've already covered the core one-off benefits to the U.K.'s 14 basis points charge in the prior period and the primary reason for the more than doubling of the charge to this year. And during this period, in line with the expectations, the U.K. CLR has trended up to the bottom end of the TTC range, with core performance and collections tracking well. Arrears continue to improve, with new origination resulting in some front-book strain. U.K. forward-looking macros have, on average, compared to the prior period, December '24, deteriorated and key call-outs are a weaker house price index, marginally higher inflation forecast and an upward trend in unemployment. This has resulted in an increased modeled FLI requirement for the period and accounts for more than 50% of the U.K. CLR charge to December. Broader Africa's underlying customer portfolio continues to be resilient. The increase in impairment charges mainly from proactive provisioning in Botswana to capture the potential impacts of the visible slowdown in activity, and additional out-of-model provisions have been raised to cater for the increased uncertainty in Mozambique. Moving on to NIR, where the group delivered 12% growth driven by resilient fee income, a robust recovery in global markets and a private equity realization. Pleasingly, fee and commission income continues to show resilience, up 7%, driven by inflationary fee increases, coupled with 4% growth in both FNB customers and volumes. RMB knowledge-based fees also printed good growth off a relatively high base as it continues to offer clients market-leading structuring, arranging and advisory solutions. Mary has already highlighted the key message from the FNB fee and commission outcome, including the 14% growth in value-added services income. What I'd like to do is just give a little more color to the financial impacts of two of the items she referred to earlier. Firstly, FNB defaulted customers real-time payment requests to the cheaper PayShap rail. This resulted in a reduced contribution and reliance on the old rail and associated fees, and it meant -- you would have seen in her chart, there was a graph that showed payment fees down. It meant that those fees are 33% down for the period, and effectively have been replaced by the other fee income lines if you look at the 7% up at the total level. This strategy also was the key driver to the sixfold increase in the values and volumes that Mary highlighted. Secondly, Mary also highlighted the pressure related to merchant services competition, with fees relatively flat for the period. But what I can also note is that billable devices are actually up 10% for the period. And again, the key takeout is that despite these two big impacts, the group has managed to grow its fee and commission 7%. Total insurance income is up 5% and requires further unpacking. Life is up 13%, with underlying performance in underwritten life growing 14%, credit life up 15% and core life growth of 16%. FNB employee benefits were also moved into FNB life from commercial during the period due to the synergies of the group life and employee benefit offerings, and were a slight offset to the other life product performances based on take-on of a large client Mary mentioned earlier. Short-term insurance continues to scale ahead of expectations, with insurance income up 17%. WesBank benefited from the exit of MotoVantage, which resulted in a rundown portfolio being recognized this year, with no base as the investment was classified as held for sale in the prior period. The offset to these good performances relate to a continued reduction in the income from participation agreements. We have previously noted these are winding down and any new business is being written on the group licenses. In addition, broader Africa is down 26% due to additional weather-related claims in Namibia and a lackluster premium growth in credit-linked products in Botswana. And finally, the group continues to invest in its operational and distribution capabilities, which Mary touched on. In the insurance income, the attributable costs get offset against these and reflect in this chart against the growth levels. These investments are expected to result in ongoing support for growth in policy numbers and new business APE. Trading and other fair value income was driven by the strong recovery in RMB global markets, which Mary unpacked in some detail earlier. This graph does, however, reflect the extent of the recovery and highlights that in the prior period, there were also contributions from fair value income from RMB's PI portfolio and other group treasury related benefits, which in the year-to-date have all been replaced by the global markets revenues. Turning to the significant growth of 65% in investment income, which is predominantly driven by a significant realization in the private equity portfolio. But in addition, RMB's associate earnings in the light gray on the chart also remain resilient, especially considering the lost earnings from the prior year realizations that would no longer be in the base. It highlights the quality of the underlying performance of the investee companies. Pleasingly, despite these realizations, the unrealized value of the private equity portfolio has also increased by 12% to ZAR 8.4 billion, driven primarily by an earnings uplift. WesBank's associates, TFS and VWFS, also had improved performances, driven by advances in NII growth and a good impairment print. VWFS also benefited from a large one-off in the current period, which is not expected to repeat next year. Lastly, the improved overall performance in the bond and equity markets resulted in an uplift of ZAR 239 million in investment income related to the assets backing the group post-retirement employee liability portfolio. Turning to operating expenses, which grew 9%. As mentioned earlier, the costs incurred in response to the U.K. FCA consultation paper resulted in a 1% impact to cost growth, and its impact is included in the appropriate cost lines in the pie chart. Going forward, once a redress scheme is announced, any future legal costs would be allocated against the provision raised as opposed to expense through the income statement. The group also continues to invest and allocate resources to its technology platform. The total IT functional spend across all cost category is up 13% to just under ZAR 11 billion. A more detailed breakdown of this is included in the presentation annexures and the booklet. Professional fee growth of 26% is as a result of increased spend related to the implementation of the HSBC transaction, including API integration, as well as some external professional support during the implementation of a core banking platform in Ghana. These costs are not expected to repeat next year. Advertising and marketing costs increased 14% as FNB continued to invest in its brand value proposition and marketing activities. And the increase in the group's depreciation, repairs and maintenance costs are mainly due to increased campus requirements as staff return more regularly to the office. In addition, amortization costs were impacted by the implementation of a new global markets platform, a portion of which was previously capitalized. And then finally, on OpEx, included in other expenses is the increase in the Department of Home Affairs ID verification fee, which had a 6-monthly impact of ZAR 60 million, and is a new ongoing cost of customer onboarding and compliance. Staff cost remains a significant portion of the cost base and increased 7% for the period. Salary increases of 5%, coupled with average head count growth of 1.5% were the key drivers. Head count growth was focused on growing the group's points of presence, particularly in community economies, with 18 new branches opened during the period. In addition, Mary has mentioned the U.K. strategy to offshore some of its enablement head count as part of improving the overall U.K. cost-to-income ratio and ROE. This does, however, result in transition costs with a period of duplicate head count to appropriately manage the offshoring execution. To date, the costs incurred totaled GBP 2 million and is expected to ramp up by June as the execution nears completion. As highlighted earlier, this performance has resulted in positive cost jaws, with an improved cost-to-income ratio anchored below 49%. And in closing, and as an overall summary from my side, solid group performance with strong business execution and financial outcomes that reflect the progress against the group's strategic framework. Thank you. I will now hand you back to Mary to cover the group's full year prospects. Mary Vilakazi: Okay. We are nearing the end. Thanks, Markos, and turning to prospects. Looking forward in terms of macro developments in South Africa, further moderation in inflation creates scope for additional policy rate cuts. This is, of course, barring the events that are taking place at the moment with the oil price from the Middle East conflict. But set aside, combined with structural reform improvements and supportive commodity cycle prices, we believe that this is expected to begin lifting real GDP growth. With regards to broader Africa, despite global uncertainty, economic prospects for most countries in the portfolio are improving, thanks to lower inflation and policy rates and economic reform progress and supportive commodity prices. We expect this to continue. The key exceptions are linked to domestic governance and debt pressures in the case of Mozambique and the need to diversify the economy following the diamond price correction in the case of Botswana. Hopefully, we have provided you with appropriate insights to support our view that FirstRand is on track to deliver another strong operational performance in line with guidance. We expect to deliver high single-digit growth in NII, a strong NIR trajectory and an improving credit outcome. The combination of a growing top line and an increased focus on managing costs will result in positive jaws, something this management team is fully committed to. As the last bullet on this slide points out, this guidance does not include any potential adjustment to the current accounting provision for the FCA process in the U.K. In closing, I want to identify two significant strategic advantages this group has at its disposal to generate an ongoing strong operational performance for the rest of this year and beyond. Our client-facing franchises are healthy, and they are well positioned for growth as they have demonstrated in the last 6 months of this year, delivering top line -- good quality top line growth, growth in earnings and improving returns. Our FRM strategies, which I consider to be a clear differentiator for FirstRand versus our peers, have added significant value in driving balance sheet efficiency, margin uplift, capital strength and ultimately, a superior ROE. Our strong capital position means that under any expected scenario outcomes from the FCA redress scheme, the Board and the management team are confident that the group will be in a position to pay a dividend on normalized earnings pre the motor provision. This brings me to the end of the results presentation. I'd like to thank the employees across the FirstRand Group for your diligent efforts in looking after our businesses and ensuring that the group executes on its vision of delivering shared prosperity to our customers, to each other, to the communities that we serve. You can be proud of what the group has delivered to its shareholders. And lastly, thank you to our customers across the group. Your trust in us inspires us to innovate, to support your current and evolving needs. I will now pause to take questions, if there are any. Thank you. Mary Vilakazi: Okay. There's a question in front. Unknown Analyst: Mary, compliments on the excellent results. I find it very challenging to see you're sustaining this level of growth because you seem to have accelerated your growth tremendously while the economy has not helped you much at all. If I may make a minor comment, on Slide #11 of your earnings, it would have been very helpful if you had included in that slide a line showing the headline earnings per share. And maybe you could consider that in the future. And then on your private equity realizations, every presentation, they're a feature of the results. What fascinates me is the size of the deals that you must be doing and the quantum. And again, I asked the question how sustainable that might be. And on Slide 23, the global markets growth of 62%, again raises the same sustainability question. And I found your comment at the end, quite telling in terms of the dividend in the context of the U.K. provision. Because unless the world falls apart or the U.K. motor market falls apart, that's never going to impact your overall earnings to any extent to affect your dividend. Mary Vilakazi: Okay. I will take some of those questions. And then Emrie, you can prepare for the private equity related one and the global markets one. Let me see if my memory holds well. So we are confident that we can deliver on the full year earnings guidance and the strong growth print. And as I said, I think the quality of our franchises and the diversified portfolio that we have, it means some other businesses are doing well and others are not doing well. We can have an overall good outcome. So -- and I suppose we've had a number of very large one-offs in the past. And I think our commitment is to ensure that we are overall ensuring that -- the portfolio growth. So the last period that we've operated in, in the last couple of years, the macros in South Africa haven't been particularly supportive, and we are constructive on a better operating environment going forward. And I suppose the fact that our business is 80% in South Africa, this is really the market that we are looking to see some recovery. And you can see we are gaining traction in our strategies in broader Africa, where some of those markets are growing. So I think you can take comfort that our earnings growth is sustainable. I'll ask Emrie to comment on the RMB private equity portfolio, which actually has quite a number of investments and then the global markets recovery -- oh, sorry, Markos will make a note of the headline earnings per share disclosure for next time. I'll come back to the U.K. Emrie Brown: Thanks, Mary. Yes, just firstly, private equity portfolio. I think first of all, for us, we have been very focused over all the years to build a diversified portfolio. And as indicated in the booklet, we, I think, now take a much more active portfolio management approach in respect of the portfolio, which ensures that we make continuous investments. I think if you think back about 5 years ago, that was one of the challenges, we didn't regularly invest. And -- so the portfolio management from an investment perspective, but also managing continuous realizations to have the velocity of capital is very much a focus on how we think about our private equity business. So I think where we are at the moment, based on the contribution of private equity to the overall RMB and FirstRand results, this is the level that we're comfortable with, and we manage that part of our business very much with that in mind. On global markets, yes, I would say this year is more a bounce-back from a low in the prior year as well as very deliberate strategies in how we take our global markets products to our full client base. So we feel that this is a more normalized performance. But having said that, the global markets business is exposed to geopolitics and market movements. So it is always a business where there can be fluctuations, but we feel the foundations we've laid in the business set us up for a much more sustainable performance going forward. Mary Vilakazi: And lastly, on the U.K., I mean the reason we make that statement is because the final redress scheme by the FCA is going to be announced end of this month, they have undertaken. And we haven't -- and we are waiting for that final redress scheme to ultimately understand what the financial impact on the group will be. So we don't have the number, but we also know that there are some scenarios that -- where the number is not the amount that we've provided. And hence, we make that comment that as we've worked through all the expected scenarios from the consultation paper, shareholders can be assured that the capital that we sit with should be able to cover any of those scenarios. So still high levels of uncertainty. But hopefully, the end is near with the redress scheme over the next month. Do we have any other questions online? Sorry, James. James Starke: James Starke from RMB Morgan Stanley. Mary and Markos, congratulations on the strong results. Three questions from me. The first, I think maybe we can pass this one to Harry. On the customer gains in FNB, can you perhaps expand on some of the initiatives you've deployed to turn around the growth trends there? Then just pleasing progress on the cost-to- income ratio more generally, I mean, how do you plan to sustain this momentum going forward? And then lastly, just on capital generation, it is very strong. Can you please expand on your plans for the surplus capital generation, particularly with regards to acquisitions? Mary Vilakazi: Okay. So we just take it in that order. Harry? Hetash Kellan: James, thanks for the question. If you look at the customer growth, I mean, if you look at the investments we've done in terms of infrastructure and people, so you've seen growth in our head count, but a lot of that growth is sitting in our branch network. Branches, I mean, if I remember the number right, between December last year to December now, our branches were up 13. So 13 branches new. At the same time, we're investing in what we call AgencyPlus. That went from 63 to just over 170 AgencyPlus in the last 12 months. So we actually got a larger footprint in order to be able to serve customers. And clearly, we've capacitated that with individuals who are able to sell. So I mean, I think that's probably the largest drivers. Mary Vilakazi: Lots of hard work, James. I think on the cost-to-income ratio, Markos will cover the expense piece and the sustainability of the cost trajectory. But James, fair to say that our ambition is for that cost-to-income ratio to have a full handle looking forward. So Markos, maybe on the cost? Markos Davias: Thanks, James. I mean, I guess we've said it a few times, but positive jaws will result in the CTI improving. So that focus is actually what drives it. And during budget periods, I mean, that's kind of the key point that we drive into the teams when they bring budgets. If you have revenue up by a low number, you better find a way to manage the cost there. What I would say on the cost that's important is that we have a high investment base already in the base. And as we deliver projects, we reinvest that from the current cost structure into the base. So we're not doing this at the expense of important investments. And you can see, where there are one-offs to be incurred to increase implementation costs and the likes, we take them. But effectively, it actually is the base, size of the cost base allows us to kind of manage this to the objective we stated. Thanks. Mary Vilakazi: Okay. And then, James, on your question on the surplus capital. So I mean that we acknowledge. I guess the Board's target range for the CET1 is 11.5% to 12.5%. So at 14.4%, we are way over. I guess you have to appreciate the fact that we've been operating in an environment where there's been high levels of uncertainty because if it wasn't that we had to make sure that we are well positioned to deal with any adverse scenarios, I suppose we would have reconsidered those capital levels in the last year. So hopefully, we are close to doing that, and then we can have a bit more clarity on the capital that we require. So I think we have enough capital to fund any of the growth initiatives that we are looking at. We are not holding on to that level of capital because there's something very big pencil-marked, James. I think it's just to get through the U.K. uncertainty soon. You can trust that we will do the right thing when we have better clarity on the way forward. Andries, do you want to comment? Unknown Executive: Mary? Sorry, yes. Unknown Attendee: [indiscernible] from Reuters. Mary, what's your strategy, if any, around East Africa? I mean we're seeing a lot of activity there. We're seeing South African lenders also having a lot of interest there. I mean are you thinking about it? Are you actively looking in that region? Mary Vilakazi: Okay. This one, I can definitely pass on to Andries, who looks after the broader Africa strategies and as well as M&A activities. Andries Du Toit: Thank you. I'll also link to the previous one. When we do expand to M&A, there's two fundamental cornerstones, we underpin our disciplined FRM and we have to add shareholder value. On expansion, we look at capabilities. Can we acquire capabilities, customers? Is it franchise value? And then to your question, geographical expansion. Eastern Africa is a key market we want to enter. We've had discussions. It didn't come to fruition, and we're looking at appropriate vehicle, but it's very important from a FirstRand perspective, we won't [indiscernible] on our FRM discipline and how do we create shareholder value. Mary Vilakazi: Yes. So we keep looking. We've been looking for a while, though. But hopefully, some of the consolidation activities that are taking place in the market will open up some opportunities for us. There's another question, okay. Okay. There's -- yes, you come here. Do we have questions on the webcast? We've got a few. Okay. Unknown Analyst: Mary, if I may. On Slide 60, there's a caption that says share price incentives linked, a negative. Now I follow your share price probably as closely as you do, and I haven't seen it negative. I know it bounces around. I'm just fascinated to understand the basis of that comment. Mary Vilakazi: Okay. Thanks. Markos can take that. Markos Davias: Thanks. That refers to the share scheme -- employee share scheme, which previously vested at a higher level based on the performance in prior periods. And all it means is that currently, that vesting is expected to be lower based on the current performance measures. And when I say high, it was higher than 100% in the prior year. So it's currently accruing at 100%, which is below that. So it's negative year-on-year. That's the main reason. There's not share price -- there's no share price impacts into the employee share scheme. It comes through IFRS 2 charge. Unknown Analyst: Did I hear you correctly that -- I saw your structured aspects of your performance incentives. Is that the key point here? Markos Davias: Yes. So it's just the way the accounting plays out on the long-term incentive scheme, as such. Mary Vilakazi: Okay. Let's go to the line. Maybe what you can just maybe do is just check if some of the questions we've answered already, and maybe we don't repeat them. Operator: We'll do. Thank you, Mary. Some of them have already been partially answered. We'll start with Baron Nkomo from JPMorgan. Given your strong capital ratios, in which segment or region do you see the greatest opportunity to deploy capital over the next 2 years? I think that's been partially answered. The second one is, what is your strategy to deepen and grow broader Africa franchises? Mary Vilakazi: Okay. So I think opportunities that we see for -- in our business, I think the Corporate and Commercial sector, I think we are quite optimistic about the structural economic reforms and activity that will happen in SA. So I guess there, we would say that that's what we've earmarked. Hopefully, the Retail credit expansion as suggested provides more opportunities for further growth of our Retail franchise. So yes, so I think -- we still think that our balance sheet will probably track more the Corporate, Commercial aspects of opportunities. And I guess, broadly, we are looking at making sure that all our franchises are growing and are actively taking advantage of the different various opportunities. So it's not just penciling in those growth aspects for SA. And then how we -- plans to grow broader Africa. I suppose we are executing on organic strategies. We had an opportunity of buying the Standard Charter book in Zambia. So that provided us an opportunity to scale some of our existing markets. The M&A team continues to look if there are other inorganic opportunities that come our way. But I'd say that we are quite small in Ghana and Nigeria. And I think in the various markets, we still think we've got runway in our current existing portfolio. So -- but there's lots of focus to ensure that we are capturing the growth that we are expecting from the rest of the region. Operator: We've got Charles Russell from SBG Securities. He's got three questions. I think one of them has been answered. The first one is, can you take us through key dates and FirstRand's decisions and responses over the coming 12 months relating to the U.K. motor commission issue? The second one is, can you unpack the 37% growth in trading and fair value income? And then the third one, I think we've answered, saying our CET1 looks very full, but I think we've answered how we're going to manage that. Mary Vilakazi: Okay. Markos? Markos Davias: So on the dates, I mean, we've called out that even recently as this week, the FCA have said that by the end of March, they will give an update on the final redress scheme paper. Obviously, our legal teams would need to work through that together with our specialists, and we would have to then regroup on a path of action if we are happy with the paper or if we are not. So that will play out in the next month. Thereafter, we'll update shareholders once we've got a sense of kind of what the impact is. We've got all our models built and ready for the various scenarios that can play out. And in the booklet, we do call out kind of the three criteria, which are the biggest drivers of impact in things that we didn't agree with in the original paper. Mary Vilakazi: And then the trading income question. Unknown Executive: I didn't get it. Mary Vilakazi: Okay. That's basically the global markets recovery that we spoke about. And there is a slide, I don't know which slide that is, that shows where the global market growth came from. I mentioned that slide number. And yes, I suppose Emrie has covered it earlier on that for global markets, it's a recovery because we had a number of years where we went backwards, and I think it's largely reflective of global markets. Operator: Then the last set of questions is from Ross Krige from Investec. He says, just to clarify on the FY '26 guidance. Does unchanged guidance imply an expectation of high mid-teens earnings growth ex U.K. motor provisions and assuming PE realizations as expected? And then the second question, on the U.K. motor commission-related OpEx, how do you expect this to unfold in H2 '26 and beyond? Mary Vilakazi: Okay. I think Markos has covered the last point by saying that depending on just the path that we take forward, any expenses that get incurred will be charged against the provision that we've released. I think it was just to give an indication that, that base, hopefully -- that base should -- hopefully should not have as many legal expenses as we have incurred, and I think that's how they will be dealt with. And the other question, [ Levo ]? Operator: Just on the guidance. Mary Vilakazi: On the guidance, yes. Okay. Let me step through this slowly. So the guidance we gave for the full year, it had the U.K. provision, obviously, in the base. And we said, assuming there's no other provision, earnings growth should be up mid-teens. So that's the guidance that we are confirming today. And private equity, there's uncertainty. There's always uncertainty, but I guess we are not saying we are -- we're not saying that the guidance is subject to that realization taking place, but we note that there can always be changes in the dates. I think my RMB team are still good for their number. Operator: We have additional questions that have come through online. So the first one is from [ Mario Stratum ]. He does say, well done with your strong insurance new business growth and thank you for your improved disclosure on these businesses. Can you please speak to the near-term outlook for operating expenses growth, the rundown profile for other participation agreements and the potential for short-term insurance to double policy count by FY '30. Mary Vilakazi: Okay. Andries, maybe you can take some of that and then I will fill in for the insurance. And [ Mario ], I suppose all these questions are related to insurance, even the expense outlook. Andries Du Toit: Yes. No problem. The strategy was to obviously originate our own licenses. So that will continue. We're quite confident to the numbers that you've alluded to, both as we go in our own channels and also open market on the short term. Our expenses will probably continue to be at high end as we invest in new products and also new distribution and also further into new business lines where we're underrepresented. And maybe... Mary Vilakazi: Yes, but I mean there's a fair chunk of investment in the distribution channel, Andries, which, once we get to a point whereby surely we have -- we are at the levels we want to operate with, I mean it will be rather acquisition cost versus an investment in that. So that I would say is a part of cost that profile should change. Markos Davias: Maybe just a point to add on the other participating agreements. This year, you'll see the 66% decrease means there's a ZAR 50 million 6-monthly base there. So it's a much more manageable base than what it was in the past year. So its impact is reducing. Operator: And then we have the last one, it comes from Harry Botha from BofA Securities. To clarify, is the mid-teens earnings growth potential still intact for 2026? Are you making any technical adjustments to your hedging program for yield curve changes? Mary Vilakazi: Okay. So the first answer is very simple. Harry, no change to the full year earnings guidance that we provided. Hope that helps. [indiscernible] do you want to comment on the hedging strategy? Unknown Executive: So the hedging strategy follows an investment process. So with the volatility we've been experiencing this week. Certainly, there would be tactical adjustments, but that would follow the investment process that's in place. Mary Vilakazi: Okay. I think -- are we at the end? Operator: Yes, we have no further questions. Mary Vilakazi: Okay. All right. No further questions in the room? Okay. Well, thanks, everybody, for joining. Thanks for your time, and we'll see you in 6 months' time.
Operator: Good day, and thank you for standing by. Welcome to the AerSale Corp. Q4 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jackie Carlon, Senior Vice President of Marketing. Jacqueline Carlon: Good afternoon. I'd like to welcome everyone to AerSale's Fourth Quarter and Full Year 2025 Earnings Call. Conducting the call today are Nick Finazzo, Chief Executive Officer; and Martin Garmendia, Chief Financial Officer. Before we discuss this quarter's results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission, SEC, to be filed on March 9, 2026, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the Investors section of the AerSale website at ir.aersale.com. With that, I'll turn the call over to Nick Finazzo. Nicolas Finazzo: Thank you, Jackie. Good afternoon, everyone, and thank you for joining us today. I'll begin with an overview of our fourth quarter and full year 2025 results, highlight key operational developments, and then discuss our priorities for 2026 before turning the call over to Martin to review the numbers in greater detail. We finished 2025 on a strong note. Our fourth quarter adjusted EBITDA increased $2.2 million or 17.1% to $15.2 million, compared to $13 million in the fourth quarter of 2024. Fourth quarter revenue was $90.9 million, a 4% decrease from the prior year period. Excluding flight equipment sales, which tend to be volatile quarter-to-quarter, fourth quarter revenue actually increased 9.8%, reflecting continued growth across our component MROs, USM and leasing. Sales of our Engineered Solutions product, AerSafe, also increased as operators began upgrades in advance of a Federal Aviation Administration 2026 compliance deadline for a Fuel Quantity Indication System Airworthiness Directive related to fuel tank safety systems. You'll hear me refer to this as the FQISAD. This overall growth has improved profitability and provides more consistency in our quarter-over-quarter performance. This also led to improvement in our adjusted EBITDA, supported by stronger operating performance and the continued benefits of the efficiency initiatives we implemented in early 2025. For the full year, we generated $335.3 million in total revenue, a decrease of $9.8 million, or 2.8% year-over-year, primarily due to fewer flight equipment sales. Excluding flight equipment sales, full year revenue increased 18.7%, driven by stronger USM demand, higher average lease rates and asset yields and robust growth in sales at our component MROs and of AerSafe products. Full year adjusted EBITDA also increased $12.8 million to $46.1 million, up 38.2% year-over-year, reflecting higher volumes, favorable mix and margin and cost benefits from our efficiency program. During the fourth quarter of 2025, we acquired $15.4 million of feedstock, bringing full year acquisitions to $99.6 million. While the feedstock environment remains constrained, we have been steadfast in our disciplined acquisition pricing and believe opportunities will improve as OEM production normalizes. Our win rate in the quarter was 4.8% versus 17.2% in the fourth quarter of 2024. We disclosed this number to provide investors with a measure of how conservative we are when buying feedstock in a hypercompetitive environment, although a quarter-over-quarter comparison may not fully reflect this discipline. Year-over-year, our win rate was 6% in 2025 versus 8.6% in 2024. Regarding our Boeing 757 passenger to freighter converted aircraft, we ended 2025 with 2 on lease and 5 aircraft we converted remaining in inventory. We are actively engaged in discussions with potential customers. Increased demand for cargo and the FAA's recent grounding of the MD11 freighter fleet continue to make us bullish. We'll deploy all our 757 freighters in 2026, with two of these aircraft under letters of intent at year-end. During 2025, we made several strategic adjustments across our on-airport MRO facilities. In Goodyear, we transitioned from an expiring contract to new business at higher rates resulting in improved profitability. In Roswell, we shifted our focus to storage and end-of-life fleet activities, largely offsetting lost heavy check margin. Our on-airport MRO expansion project in Millington, Tennessee is now fully operational and productive with heavy check work that began in December, following the award of a multiyear maintenance agreement with a regional airline, positioning the facility to significantly contribute to profitability in 2026. Regarding our component MRO facility expansion initiatives, we moved into our new 90,000 square foot aerostructures facility in January 2026. With existing customer approvals and more underway, we expect aerostructure's volumes to ramp up throughout 2026. Our pneumatic expansion project is also progressing with all construction now complete, and we expect this additional capability will come online by the end of the first quarter. As these 3 expansion initiatives begin to contribute in 2026, we remain confident in their revenue potential. While we previously communicated an incremental annualized opportunity of approximately $50 million, updated assessments indicate that the full capacity potential is likely to exceed that original estimate. As we ramp up in 2026, we will provide an update on the progress of these projects as contributions from this additional capacity and capability are realized. We're also proud to announce that our landing gear shop received FAA approval to overhaul Boeing 737 MAX and 787 landing gear, which supplements our existing authority to overhaul gear for 737 Classic and NG Series 757, 767 and the Airbus A320 series of aircraft. This expansion to include MRO for new technology flight equipment allows us to better support our expanding customer base as mid-technology flight equipment is eventually replaced. Looking ahead to 2026, we're mitigating earnings volatility by growing the more recurring and predictable parts of our business. These initiatives include filling capacity at all our on-airport MRO facilities, growing USM sales, generating significant additional component MRO revenue with our available expanded capacity and new capabilities, increasing the number of assets deployed in our lease pool, and continued strength in AerSafe revenue as the FAA's November 2026 deadline to comply with the FQISAD comes due. Finally, we remain committed to the success of our revolutionary Enhanced Flight Vision System AerAware, by marketing this to select interested customers, both commercial and governmental. Concurrently, we are taking steps to educate our U.S. regulators and the agencies responsible for the safety of our air transportation system on how the unique features of AerAware will improve safety and provide economic efficiency to the industry. On the cost side, the enhanced efficiency programs we implemented last year have allowed us to streamline workflow at each facility with a goal to better match facility scheduling with volume while opening available capacity at other facilities to maximize profitability. Taken together, we expect 2026 to be another growth year for AerSale on both the top and bottom lines. Our strong balance sheet will support increased USM sales and leasing, thereby providing improving recurring revenue from our Asset Management segment. Customer expansion, increased capacity and efficiency initiatives have put us in a position with all our MROs to see significant incremental revenue progression quarter-over-quarter. I want to conclude by thanking our employees for their dedication and hard work in meeting our growth initiatives in 2025 and our investors for their continued support as we work on maturing the business and reducing volatility. We look forward to updating you on our progress throughout 2026. With that, I'll turn the call over to our Chief Financial Officer, Martin Garmendia. Martin Garmendia: Thanks, Nick, and good afternoon, everyone. I'll walk through some additional details on our fourth quarter and full year financial results, then touch on cash flow and liquidity and close with our outlook for 2026. Fourth quarter revenue was $90.9 million, which includes $20.9 million of flight equipment sales consisting of 4 engines. This compares to $94.7 million in the fourth quarter of last year, which included $31 million of flight equipment sales consisting of 6 engines. As we note each quarter, flight equipment sales can vary meaningfully from period to period. As a result, we believe performance is best assessed over time with a focus on feedstock acquisition, monetization of those investments and profitability trends. Fourth quarter revenue for Asset Management declined approximately 11.1% year-over-year to $56.9 million due to fewer flight equipment sales. Excluding flight equipment sales, revenue increased 9.1%, driven by continued strength in USM and an expanded lease pool. For the full year, asset management revenue was $211.6 million, down 1.8% year-over-year. Excluding flight equipment sales, segment revenue increased 47.3%, supported by strong inventory levels and demand that allowed us to grow our USM and leasing activity. Turning to TechOps. Fourth quarter revenue increased 10.7% to $34 million, driven by higher sales in our aerostructures and landing gear MROs as we have been successful in winning new contracts. A focus on higher-margin opportunities and the efficiency measures taken in early 2025, allowed us to further improve our profitability and set the foundation to grow our on-airport MROs beyond historical levels and with a greater profit profile in 2026 and beyond. TechOps was also strengthened by strong demand from our component MROs and continued momentum in AerSafe products as customers prepare for the 2026 compliance deadline. For the full year, TechOps revenues declined 4.5% to $123.7 million, primarily due to lower on-airport MRO activity. However, improved mix and efficiency initiatives improved gross margin for the year to 25.6%, compared to 16.6% in the prior year period, due to favorable mix and benefits of the efficiency measures taken in early 2025. Selling, general and administrative expenses for the year were $90 million, including $4.9 million of noncash equity-based compensation compared to $94.2 million last year, which included $4.3 million of noncash equity compensation. The decrease was primarily driven by lower payroll-related expenses, which also benefited from the efficiency measures taken in 2025. Income from operations was $15.8 million for the full year of 2025, compared to $9.7 million in the prior year. On an adjusted basis, net income for the year was $15.8 million compared to adjusted net income of $9.5 million last year. Adjusted diluted earnings per share for the year was $0.33 compared to adjusted diluted earnings per share of $0.18 in 2024. Adjusted EBITDA for the year was $46.1 million compared to $33.4 million in the prior year period, which benefited from a higher margin product mix as well as improved overall margins and lower expenses. Year-to-date cash used in operating activities was $23 million, primarily related to feedstock acquisitions as we continue to make strategic investments to grow the Asset Management segment. We ended the year with $71.6 million of total liquidity, including $4.4 million in cash and $67.2 million of revolver availability on our $180 million asset-backed revolver, which can be expanded to an additional $200 million -- sorry, to an additional $20 million. This available liquidity and our strong inventory position provide us with the fuel to continue to grow our business into 2026. Looking ahead, as we shift our emphasis away from trading and toward expanding the more recurring core elements of our business, we expect both full year revenue and profitability to increase relative to 2025. We anticipate steady incremental improvements as new revenue streams ramp up and their efficiency initiatives continue to gain traction. With that, operator, we're ready to take questions. Operator: [Operator Instructions] Our first question comes from Michael Ciarmoli with Truist. Michael Ciarmoli: I guess, Nick or Martin, do you have a sort of a goal in mind of kind of how much material feedstock you think you can buy? I know you're being pretty conservative, and it's still a tight market out there. Just trying to get a sense of what do you think you can close and out of -- and maybe the other part, out of what you have on hand right now? Do you think you can move all of that product this year? Nicolas Finazzo: As far as feedstock -- this is Nick speaking. Thanks for the question, Mike. As far as feedstock purchases, we anticipate a lower level of feedstock purchases this year than we did last year. And why is that? The market is just hypercompetitive at this point. The pricing that we see, the reason that I mentioned the -- our win rate not that it's materially different from last year, it's just under 10%, which means that we lose 9 out of 10 deals that we bid on, not to mention the hundreds of deals that we don't bid on at all because we just don't think we would be competitive. And because of the extreme competition in the market for, I candidly believe less informed people who don't understand how difficult it is to make money buying used flight equipment, and then parting it out, and then finding a way to extract value out of it that we see people buying stuff at prices. And I've said this many quarters in a row at prices that are well beyond what we believe we can make in total margin based on what they have to pay for to win the deal. So we will continue to be disciplined on our buy side. And look, I've been doing this for a long time. This isn't the first company I've been with or that have been -- that I founded that buys -- that has bought in the aftermarket. And in my prior experience, lots of money moves into the space. uneducated investors don't know what they're buying, don't know how to properly monetize it. They spend too much money, and then eventually, they go away. And so we have to remain disciplined because overpaying kills companies. So as far as what do we think we could do this year? We think we could do -- if last year, we did $100 million. We don't think we'll do $100 million this year, but it could happen. And as far as monetizing the existing inventory that we have, I may defer a little bit of that to Martin, but we have ample inventory to continue to grow our business without buying as much as we did last year. I mean, I don't know, Martin, if you want to add any more color to that. Martin Garmendia: Yes. No, absolutely. I was going to say we're coming into starting 2026, with about $364 million of inventory, and that includes about -- almost roughly $150 million that's ready to be deployed in the USM channels as well as almost $118 million that's still in whole assets that we can put as USM or continue to grow our leasing portfolio. So on a positive, even as we're being very prudent as we always have been in deploying capital, we have more than enough to continue our growth trajectory, and that will increase our liquidity position. So when the opportunities are right, we'll continue to deploy capital. Michael Ciarmoli: Okay. Okay. Got it. That's really helpful. And then just on that growth trajectory. I think, the press release mentioned some of the storage revenues may have been benefiting from GTF. If I think about kind of GTF revenues and as that normalizes, and then you've got the AerSafe '26 deadline, which we kind of always see this dynamic across various end markets and industries. That probably is going to create a big uptick this year, but then maybe backfilling that. Should we think about GTF normalization, maybe AerSafe, kind of how you backfill that, maybe some of the new capacity coming online? And I guess, I'm thinking into '27, too, as maybe those trends normalize a bit with the GTF and AerSafe. Is that maybe the right way to think about it? . Nicolas Finazzo: Well, not 100% sure I got your question, but with regard to the GTF situation, we don't see that normalizing in '26 because we're hearing that before track and get the engines back to the aircraft that is going to drag into '27. So the opportunity for us isn't so much in the GTF storage as it is in returning the aircraft that have been parked now for several years, and returning those to service those aircraft require heavy checks. And we have -- I don't know how many, 70, 80 airplanes sitting in Goodyear and Roswell. So we've got -- we have got a lot of GTF-powered airplane sitting in our facility in Goodyear and Roswell. The Goodyear ones are going to require a return to service if they're not parted out, believe it or not. We are seeing the part out of brand new -- or relatively brand-new several-year-old A320Neos. But the opportunity for us is really yet to come. It's not through storing these airplanes and pulling engines off and putting engines on, it's that is helping. And at this point, because of the volume of it, it kind of reminds me of the COVID situation where we had 500 airplanes parked. And although you wouldn't think you make much money doing storage, you're removing engines, putting engines on, putting airplanes into storage, taking airplanes out of storage, and then prepping them for the next lessee. With that number of airplanes in one facility, that really creates a capacity issue, not so much a demand issue. So the demand is there. We see that, that will continue through '26 and '27 as we begin doing return to service work on the aircraft that are parked and are getting engines that are coming back from Pratt. Now -- the other part of your question was? Martin Garmendia: Just AerAware, does that create a big headwind next year as everybody preps for the deadline later this year? Nicolas Finazzo: With regard to -- it's AerSafe actually, with regards to AerSafe, the greatest amount of sales are going to happen this year. I mean, we have a backlog that already exceeds last year, sales for all of last year, and then we're still in the first quarter. As we -- it doesn't mean that it goes away altogether, but it will be significantly diminished. Now, it's not that we're sitting around waiting to sell these, and then we have nothing else to sell. We are working on other engineered products and STCs that airlines have asked us about to say, "Hey, can you make this product for us? Can you help us resolve this technical issue?" So we are -- our engineering group is working on airline demand for engineering products or engineered products that they need to keep their fleet flying because they're not getting -- it's not getting properly addressed by the OEMs that are producing those components. . So that is an active business that we are pursuing now, which will help us with our customers. Not to mention that we continue to look for opportunities to deploy our AerAware product not just across the 737, but we're talking across multiple other platforms, including 757 and even ATR 72. Operator: And I'm not showing any further questions at this time. I would now like to turn the call back over to Nick Finazzo for any closing remarks. . Nicolas Finazzo: Okay. Thank you, Ben. Thanks again. So as we've explained and mentioned the last quarter, even with just a few whole asset trades, no AerAware sales and no incremental revenue from our facility expansion projects in the fourth quarter. Our operating margins have continued to grow. I believe this validates our unique multidimensional and fully integrated business model. And as our businesses continue to develop will put us in an excellent position to achieve substantial growth in the years ahead. As always, I want to thank Mike Ciarmoli for his questions, which I believe provides additional insight into our business model and progress to date. I very much appreciate your interest in listening to our call today and look forward to bringing you up to date during our next earnings call. I wish you all a good evening. Thank you. Operator: This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. The Recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and interim report for the fourth quarter and full year of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance with Section 32A of the securities law, 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. The financial statements for 2025 show that TASE ended the year on a high note. Q4 2025 capped another record year for TASE with revenues reaching an all-time high of ILS 149.3 million for Q4 and ILS 563.5 million for the full year 2025. These results represent a record increase of 29% year-over-year and quarter-over-quarter. We also saw a record increase of 58% in adjusted EBITDA, and an increase of 9.5% in the adjusted EBITDA margin as well as an all-time high in TASE net profit with a 79% increase compared to 2024. All this was achieved while continuing to maintain organic growth across all TASE's core activities despite Israel having fought a multi-front work for most of 2025. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. For most of 2025, trading on TASE took place against the backdrop of the ongoing world and elevated volatility. Against this background, the Israeli capital market has exhibited resilience and economic strength during 2024 and 2025. The leading equity indices on TASE broke their historic record on numerous occasions, outperforming the leading global indices. The TA-90 Index and the TA-35 topped the global return table with gains of 46.6% and 51.6%, respectively, compared to 17.9% on the S&P 500 Index and 21% on the NASDAQ-100 Index. In addition, the positive and exceptional trend was also evident in the sectoral indices, particularly in the financial sector. At the end of 2025, TASE equity market cap reached ILS 2 trillion, a 46% increase from year-end 2024 due to the impact of the rise in TASE equity indices. Trading volumes also set new records with the cash equities ADV rising to ILS 3.4 billion in 2025, 57% increase over 2024. The IPO market stagged an impressive resurgence in 2025 with 21 IPOs and an additional 5 companies listing their shares without raising capital, including 1 dual-listed company. Overall, the total capital raised on the equity market sold to ILS 21 billion compared to ILS 8 billion in 2024. In 2025, the TASE bond market displayed increased trends as a major source for debt funding, both for corporate issuers and for the Israeli government. Corporate bond issuances totaled ILS 187 billion in 2025, compared to ILS 124 billion in the previous year. The Ministry of Finance raised ILS 137 billion in Israel during 2025. The strong demand and successful issuances in Israel and abroad, is a powerful sign of confidence in the Israeli economy. Trading volumes in the corporate bond market rose by 9% in 2025, compared to the volume in 2024, while the government bonds ADV, amounting to ILS 3.3 billion similar to 2024. We have continued implementing our strategic plan to strengthen business activity. As part of a significant milestone in strengthening TASE international profile and attracting foreign investors, I'm pleased to update that we have completed transition to a Monday through Friday trading week at the beginning of 2026. In the last 2 months, this move has already led to a substantial influx of foreign investors during Friday trading, exceeding the average recorded on Sundays in 2025. In addition, on February 23, the cyber giant Palo Alto Networks began trading on TASE, officially making it a dual-listed company on the U.S. and Israeli market, which constitutes a profound vote of confidence in Israeli capital market. And we believe this will lead to further breakthrough for the local capital market while strengthening TASE position on the international financial stage. Foreign investors too expressed confidence in the local capital market and purchased equities totaling ILS 4.4 billion in 2025, mainly in the financial and defense sector. This is in marked contrast to the previous year when foreign investors' activity resulted in net sales. It is worth noting that in the first 9 months of 2025, the value of foreign investors holdings in non-dual listed equities grew by 70%, and in September 2025, the value of their holdings reached an historic high of ILS 64 billion, reflecting the deepening presence in the Israeli market. The Israeli retail segment continued to show significant increased interest in the domestic market and the growth in the opening of new trading accounts continued throughout 2025. The retail investors opened approximately 200,000 new trading accounts, 25% more than in 2024. In the trading segment, we continue to invest and develop the indices market in 2025. In total, we launched 10 new equity and bond indices during 2025, of which 7 indices are exclusive and we intend to continue developing new indices to increase and diversify the products as part of our strategic plan to refine and develop more investment products for the investors. At the end of December 2025, the total AUM of all TASE indices amounted to ILS 148 billion compared to ILS 99 billion at the end of 2024. The total AUM of TASE equity indices amounted to ILS 91 billion, compared to ILS 48 billion at the end of 2024. In the derivatives market, we have seen average daily trading volume grow by 14% compared to 2024. In light of the success of the equities market making reform, that I have mentioned in my previous calls, 7 large companies included in the TA-35 Index joined the tailor-made market-making program, resulting in the trading volumes of those companies increasing significantly. I would now like to provide you with an update to what I reported to you in our previous earnings call regarding examination of a partial or full sale of our index activity. We are currently negotiating to enter into a deal to sell the activity and to cooperate strategically with a major international entity. At this stage, there is no certainty as to when, if at all, the negotiation will bear fruit and result in a binding agreement. I would also like to update you regarding the dividend payment to the current shareholders. You will no doubt recall that we previously adopted a dividend distribution policy for the years 2024 to 2026, pursuant to which TASE is to distribute a cash dividend to its shareholders at a rate of 50% of the annual net profit for 2025. The dividend according to the policy amounts to ILS 90.5 million. In addition to this, in light of the substantial growth in TASE profitability in 2025 and the consequent significant increase in the company's liquid reserves, TASE will distribute a special dividend of ILS 54.3 million. In all, TASE will distribute a total dividend of ILS 144.8 million, representing ILS 1.56 per ordinary share that will be paid on March 20, 2026. Furthermore, during the coming year, TASE management will examine drawing up a buyback plan with this being subject to market conditions and other relevant considerations. In conclusion, the 2025 financial statements show that despite all the challenges of the last few years, we are witnessing the growth and resilience of TASE and of the Israeli economy. Our financial statements continue to reflect our investment in developing new and diverse products for the benefit of the public and the investments made for the benefit of technological and innovative developments so that we continue to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the year results. Yehuda Ben-Ezra: Thank you, Ittai. As Ittai mentioned earlier, TASE outstanding fourth quarter financial results capped off a highly successful 2025 with the company is delivering record revenues across all lines of businesses. Throughout the year, including the fourth quarter, TASE demonstrated remarkable resilience, [ given ] Israel faced an extended multi-front conflict. This will thus highlight the strength of Israel economy and the stability of its capital markets, showcasing best consistent performance under challenging conditions. I will continue with Slide #7, which shows some of the key highlights from our results for the year 2025. Our revenues in 2025 reached a new high of ILS 563.5 million, increasing by a record 29% compared to the previous year. Adjusted EBITDA in 2025 improved significantly by 58% to record of ILS 293.8 million, while the adjusted EBITDA margin also improved from 42.6% to 52.1%. Our net profit displayed substantial growth of 79% and increase to a new record of ILS 181 million. Our basic EPS in 2025 reached a new high of ILS 1.97, increasing by a record 81% compared to the previous year. I will continue with Slide 17, which shows some of the key highlights from our results for the fourth quarter. Revenues amounted to ILS 149.3 million compared to ILS 115.4 million in the same quarter last year, a 29% increase. This is the highestly quarter of the revenue since the TASE IPO and growth was evidenced across all operations. Our revenues from non-transactional services amounted to 63% of total revenues, the same the corresponding quarter last year. Expenses totaled ILS 84.5 million compared to ILS 84.2 million in the same quarter last year, a 0.4% increase. Adjusted EBITDA totaled ILS 80.8 million, compared to ILS 46.8 million in the same quarter last year, a 73% increase. The increase was due to higher revenues. Net profit amounted to ILS 51.6 million compared to ILS 25.4 million in the same quarter last year, a 104% increase. The increase was due mainly to higher average for services. This increase was partially offset by the increase in tax expenses. I will continue with Slide 15, where we can take a deeper look into our revenues in the fourth quarter. Revenues from trading and clearing commission increased by 27% compared to the same quarter last year and totaled ILS 54.7 million. The increase is due mainly to higher trading volumes, particularly in shares and in the volume of trade share reduction of mutual fund units. Revenues from listing fees in annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.4 million. The increase is due mainly to revenue for annual levies as a result of the increase in the numbers of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees were also higher due to the increase in the volume of funds raised. Revenue from clearing [ and ] services increased by 58% compared to the same quarter last year and totaled ILS 41.2 million. The increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors related to the increase were the higher custodian fees as a result of the increase in the value assets under custody and the updating of the custodian fees price [ lift ]. Revenues from data distribution and connectivity services increased by 19% compared to the same quarter last year and totaled ILS 27.4 million. The increase is due to an increase in revenues from index licensing fees, mainly as a result of the increase in the value and the use of TASE indices and from higher data distribution revenues for businesses and private customers in Israel and abroad. I will continue with Slide 18, which shows some of our fourth quarter expenses. Compensate expenses decreased by 4% compared to the same quarter last year and totaled ILS 43.3 million. The decrease was due to a decrease in variable compensation. Computer and communication expenses increased by 11% and totaled ILS 11.7 million. The increase results mainly from an increase in the maintenance cost of new computer system and licenses and from an increase in man power and projects. Marketing expenses decreased by 40% compared to the same quarter last year and totaled ILS 1.7 million. The decrease is mainly from a decrease in campaigns. Depreciation and amortization expenses increased by 6% compared to the same quarter last year and totaled ILS 15.2 million. The increase in depreciation expenses was due mainly to the upgrading of infrastructure and the launch of new products. Net financing income totaled ILS 2.5 million compared to net financing income of ILS 2.6 million in the same quarter last year, a 1% decrease. Let's now go to Slide 19, where we can review our financial position. At the end of year 2025 [Audio Gap] our adjusted equity includes deferred income from listing fees and excluding open derivatives position balances, represents 77% of the adjusted balance sheet. We held ILS 494 million in cash and investment financial assets. The balance of the bank loan totaled ILS 21 million. The surplus equity, other regulatory requirements at year-end 2025 totaled ILS 550 million compared to ILS 627 million at year-end 2024. The decrease was mainly due to the decrease in the TASE equity resulting from the buyback of TASE shares and a distribution of dividend in 2025. This decrease was partially offset by the net profit in 2025. The surplus liquidity, other regulatory requirements at year-end 2025 totaled ILS 310 million compared to ILS 172 million at year-end 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA. I will continue with Slide 20, where we can review our fourth quarter cash flow highlights. Cash flow from financing activities resulted in negative cash flows of ILS 13.1 million compared to negative cash flow of ILS 4.9 million in the third quarter last year. The higher negative cash flow are due mainly to proceeds of ILS 10 million from the sale of our arrangement shares in the same quarter last year. Cash flows for investing activities resulted in negative cash flows of ILS 38.5 million compared to negative cash flow of ILS 20 million in the same quarter last year. The increase in negative cash flow is due to -- mainly to the acquisition of financial assets net. TASE free cash flow amounted to ILS 75.4 million compared to 35.9 million in the same quarter [Audio Gap] the increase in the EBITDA. Also, the Board of Directors today approved the payment of a dividend of ILS 144.8 million, representing ILS 1.56 per ordinary shares to be distributed on March 2026. In conclusion, TASE performance in the last quarter and throughout 2025 demonstrates its solid foundation as well as the fundamental resilience and growth potential of the Israeli economy. And with that, I will return the call over to Operator to conduct the Q&A. Operator: [Operator Instructions] The first question is for Hector Erazo from Jefferies. Hector Erazo Pinto: This is Hector Erazo on for Dan Fannon at Jefferies. On expenses, as you think about the budget for 2026, how does that compare to 2025? And what are the areas of spend that are different going into this year? Ittai Ben-Zeev: Hector. So I think looking at this year, in terms of our marketing budget, it will not exceed what we had in the last couple of years. In terms of the compensation of the employees, it should be similar according to the agreement that we have with the employees. And we continue to invest in our IT, and you can estimate the CapEx ILS 55 million to ILS 60 million a year. So shouldn't be any surprises on that front. Operator: [Operator Instructions] There are no further questions at this time. Thank you. This concludes the Tel Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Welcome to Evogene's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evogene's management will constitute forward-looking statements that relate to future events. This presentation contains forward-looking statements relating to future events and Evogene Ltd., the company may from time to time, make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, the PSLRA and other securities laws as amended. Statements that are not statements of historical fact may be deemed to forward-looking statements. Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimate, intend and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers, commercialization efforts and timing, product development and launches, estimate market sizes and milestones, pipeline as well as our capabilities and technology. Such statements are based on current expectations, estimates, projections and assumptions, describe opinions about future events, involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance. Readers are cautioned that certain important factors may affect the company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this presentation. Therefore, actual future results, performance or achievements and trends in the future may differ materially from what is expressed or implied by such forward-looking statements due to a variety of factors, many of which are beyond our control, including, without limitation, the aftermath of the recent war between Israel and each of the terrorist groups, Hamas and Hezbollah, Iran and other regional terrorist groups supported by Iran and any destabilizations in Israel, neighboring territories or the Middle East region and those described in greater detail in Evogene's annual report on Form 20-F and in other information Evogene files and furnished with the Israel Securities Authority and the U.S. Securities and Exchange Commission, including those factors under the heading Risk Factors. Except as required by applicable security laws, we disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statements that may be made to reflect future events or developments or changes in expectations, estimates, projections and assumptions. The information contained herein does not constitute a prospectus or other offering document nor does it constitute or form part of any invitation or offer to sell or any solicitation of any invitation or offer to purchase or subscribe for any securities of Evogene or the company nor shall the information or any part of it or the fact of its distribution from the basis of or be relied on in connection with any action, contract, commitment or relating thereto or the securities of Evogene or the company. The trademarks include herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of our product or services. With us on the line will be Ofer Haviv, President and CEO of Evogene and Yaron Eldad, CFO of Evogene. Now I will turn the call over to Ofer Haviv. Mr. Haviv, please go ahead. Ofer Haviv: Thank you for joining Evogene's Fourth Quarter and Annual 2025 Analyst Call. In today's call, I would like to focus on the significant progress Evogene has made over the past year and to outline the strategic transformation we initiated to position the company for long-term value creation. Following my remarks, our CFO, Yaron Eldad, will present the financial results, and we will then open the call for questions. During 2025, following a comprehensive review of our technology, markets and capital allocation, we made deliberate choice to sharpen our focus and execution. This transformation was guided by a strong objective to direct Evogene resources where we believe we can create the greatest sustainable value. Today, our mission is clear and focused. to design novel, highly potent small molecules optimized across multiple parameters for drug development and ag chemicals by utilizing ChemPass AI, our computational generative AI engine. For this purpose, we implemented 2 core strategic decisions. First, we focused our technology development on a single computational engine, ChemPass AI. Second, we streamlined our business activities to concentrate exclusively on 2 high-impact markets where ChemPass AI offers strong differentiation, human health centered on small molecule drugs and agriculture focused on novel ag chemicals. These decisions led to determined actions across the company. We dedicated our computational capabilities to ChemPass AI, discontinued noncore activities, divested misaligned assets, resized the organization and established a business development team aligned with our refined strategy. I would like to elaborate on ChemPass AI and emphasize its competitive advantage for small molecules generation. ChemPass AI is designed to generate novel, highly active molecules while meeting the complex parameters required to meaningfully increase the probability of downstream development success. ChemPass AI competitive advantage lies in the powerful combination of the following 2 capabilities. The first, generating novel molecules based on vast chemical territories and the second, ensuring they meet demanding multiple parameters requirement from day 1. Our platform goes far beyond the chemical space the industry traditionally explores. Based on 38 billion molecules universe, ChemPass AI foundation model navigates vast diverse chemical domains that others simply cannot access. This enables us to design truly original molecular structures with strong biological potential and highly defensible intellectual property, opening the door to breakthrough products and new IP landscape. At the same time, precision is built into every molecules we create. Our AI engine simultaneously optimize a wide range of critical chemical, biological and physical parameters, tailoring each compound to the exact constraints and success criteria of the specific target product. The result is not just innovations, but synthesizable active molecules engineered from the outset to meet real development requirements, dramatically increasing the probability of real-world commercial success. This differentiation is supported by proprietary technological advancements developed by our internal team, guided by world-class scientific advisers and reinforced through multiple collaborations with leading technology companies, including Google Cloud with whom we are currently engaged in our second collaboration. Our first announced collaboration with Google Cloud was successfully completed in mid-2025 with a first-in-class foundation model for the generation of novel molecular product candidates optimized for multiple parameters by processing a database of 38 billion structures. We tripled our benchmarks for accuracy, delivering 90% design precision. Building on this, we were pleased to announce our second collaboration with Google Cloud initiated this February. We are now integrating advanced AI agents into ChemPass AI using Google Cloud Vertex AI to decrease manual errors and automate complex scientific workflows, aiming to improve our novel small molecule candidate probability of development success. This move towards autonomous discovery is key to advancing and scaling our capabilities for the support of future partnerships across the pharma and agriculture industries. To summarize the uniqueness of Evogene's offering, our product candidate combines 3 powerful capabilities: novel molecules generated based on vast and diverse chemical space, simultaneous optimizations for multiparameters requirements from the outset, highly potent molecules optimized through targeted experimental validation. We don't just design novel chemistry. We generate novel chemistry that performs. ChemPass AI is built on fully integrated partnership-driven workflow, forming our business model expressed in collaboration and in-house development towards proprietary product candidate. Our partners are engaged at every stage from joint strategic review through rigorous experimental validation and collaborative evaluation. Each project is custom designed to align precisely with each specific scientific and strategic objectives. I view this collaborative structure as a key strategic advantage for us, both in enhancing the likelihood of advancing proprietary candidate molecules with the highest potential to become successful products and in positioning Evogene as a true development partner, enabling participation in the product's future revenue stream. That brings me to this slide, demonstrating the implementation of our business model, summarizing Evogene's current achievements of which I'm very proud. In human health, we are advancing multiple partnered drug discovery programs with biotechnology companies and academic institutions. In this partnership, ChemPass AI is driving discovery and optimization of candidates that are progressing into testing with our partners. To date, we have publicly disclosed 4 such collaborations, and we expect such activity to scale with additional collaborations. These achievements were made within a very short time frame of several months, and we aim to present similar advancement during the remainder of 2026 and beyond. You are invited to visit Evogene's website and review our company's presentation for additional details on each of these collaborations. In agriculture, our subsidiary, AgPlenus, continues to apply ChemPass AI to development of novel herbicides and fungicides. The maturity and robustness of the platform are reflected through our strategic collaboration with Bayer and Corteva alongside a differentiated internal pipeline. We expect continued growth through the expansion of those collaborations and the formation of new partnerships. In our future quarterly analyst call, I expect to go deeper into these business engagements and update on new ones. To complete my part in today's call, I would like to send a clear message. The generation of proprietary small molecule product candidates is our mission. With ChemPass AI, our well-differentiated generative AI engine, disciplined capital allocation focused on high potential markets and a strong strategic partnerships, we believe Evogene is now positioned on a defined more focused path towards sustainable value creation. Our business aim for short and midterm is to become the partner of choice for small molecule discovery and optimization with pharma and big biotech companies for drug development and with multinational agriculture companies for ag chemical development. For the long term, Evogene aims to develop its own product pipeline, benefiting from the competitive edge of our proprietary technology. This is Evogene, combining cutting-edge AI with deep scientific expertise to generate real-world innovation. Thank you for your time and attention. With this, I conclude my part and will now hand the call to our CFO, Yaron Eldad, to present the financial results. Yaron Eldad: As part of the company's updated strategic plan, management implemented an organizational realignment and cost reduction initiatives. The effects of these measures are reflected in the significant decrease in operating expenses net, which declined to approximately $13.8 million for the year ended 2025 compared to approximately $22 million in 2024. The impact is also evident in the fourth quarter results with total operating expenses net of approximately $3.2 million compared to approximately $4.3 million in the corresponding period of 2024. The company expects this reduced expense level to be sustained in future periods. In 2025, Lavie Bio Ltd, a subsidiary of Evogene Ltd focused on agriculture biologicals, completed the sale of the majority of its operations to ICL. As a result of this transaction, Lavie Bio no longer maintains employees and its operation expense level has decreased significantly. Lavie Bio anticipates distributing the majority of its remaining cash to its shareholders, including Evogene during 2026. During 2025, as part of the company's updated strategic plan, we scaled down Biomica's operations and research and development activities and reduced its personnel to a minimal level. In early 2026, Biomica entered into a license agreement with Lishan Pharmaceuticals for its lead oncology candidate, BMC128. Following this transaction, Biomica does not expect to conduct further material operational activities and anticipates distributing the majority of its remaining cash to its shareholders, including Evogene. With respect to AgPlenus, we integrated AgPlenus, our ag chemical subsidiary into the core operations of Evogene with the objective of maximizing the value of our ChemPass AI platform for the development of novel ag chemical products. In alignment with the company's updated organizational structure, AgPlenus was resized and streamlined to reflect the revised operating model. During 2025, due to a significant decline in demand for castor seeds, Casterra AG ceased its operations in Kenya, reduced its headcount and overall expense level and is currently focusing its activities on the Brazilian market. As a result of these developments, Casterra recorded an impairment of approximately $2.2 million related to its seed inventory. This impairment is presented within cost of sales in the consolidated financial statements in a separate line item. In February 2026, Evogene entered into a warrant inducement agreement with an existing investor, providing the immediate exercise in full of its August 2024 Series A and Series B warrants, resulting in gross proceeds to the company of approximately $3.4 million before deducting placement agent fees and other offering expenses. In consideration for such exercise, the investor will receive in a private placement, new unregistered Series A1 and Series B1 warrants to purchase up to an aggregate of 5,076,924 ordinary shares. The new warrants are exercisable immediately at an exercise price of $1.25 per ordinary share. Cash position. As of December 31, 2025, Evogene held consolidated cash, cash equivalents and short-term bank deposits of approximately $13 million. The consolidated cash usage during the fourth quarter of 2025 was approximately $3 million. Excluding Lavie Bio and Biomica, Evogene and its other subsidiaries used approximately $2.4 million in cash during the fourth quarter of 2025. Revenues for 2025 totaled approximately $3.9 million compared to approximately $5.6 million in the same period the previous year, reflecting a decrease of approximately $1.7 million. The decrease was primarily driven by lower revenue recognized from AgPlenus' activity, which included onetime payment during the first quarter of 2024 and revenues recognized from the collaboration agreement with Corteva that was completed during 2024. Revenues for the fourth quarter of 2025 were approximately $0.3 million, a decrease compared to approximately $1.5 million in the same period last year. The decrease was mainly due to reduced seed sales generated by Casterra during the fourth quarter of 2025. Cost of revenues for the year ending 2025 was approximately $4.1 million compared to approximately $2.4 million in the previous year. The increase was primarily attributable to an inventory impairment of approximately $2.2 million recorded by Casterra during the fourth quarter of 2025, mainly due to its decision to cease its operations in Kenya as noted above. Cost of revenues for the fourth quarter of 2025 was $2.3 million compared to $0.7 million in the fourth quarter of the previous year. The increase in quarterly cost of revenues was mainly driven by the same inventory impairment of Casterra as noted above. R&D expenses net of nonrefundable grants for the year 2025 were approximately $8 million, a decrease of approximately $4.5 million compared to $12.5 million in the year 2024. The decrease was primarily due to reduced R&D expenses in Biomica, Casterra and AgPlenus. In the fourth quarter of 2025, R&D expenses were approximately $1.8 million, down from approximately $2.7 million in the same period of 2024. This decrease is mainly attributed to decreased expenses in Biomica. Sales and marketing expenses for the year 2025 were approximately $1.5 million, a decrease of approximately $0.5 million compared to approximately $2 million in the same period last year. The decrease was mainly due to reductions in Evogene and Biomica's personnel costs. Sales and marketing expenses for the fourth quarter of 2025 and 2024 were approximately $0.3 million and $0.4 million, respectively. General and administrative expenses for the year 2025 decreased to approximately $4.3 million from approximately $7 million in the same period last year. This decrease is mainly attributable to expenses recorded during the year 2024 related to a provision for doubtful debt for one of Casterra's seed suppliers as well as transaction costs associated with Evogene's fundraising in August 2024. Additional decrease is attributable to a reduction in Biomica's activity and personnel costs during 2025. General and administrative expenses for the fourth quarter of 2025 decreased to approximately $0.9 million compared to approximately $1.3 million in the same period of the previous year. primarily due to decreased expenses in Evogene and Biomica, as mentioned above. Operating loss for 2025 was approximately $14 million, a significant decrease from approximately $18.8 million in the same period of the previous year, mainly due to decreased operating expenses, partially offset by the decreased revenues, as mentioned above, and the higher cost of revenues, mainly due to an inventory impairment of approximately $2.2 million recorded by Casterra in the fourth quarter of 2025. The operating loss for the fourth quarter of 2025 was approximately $5.2 million, an increase from approximately $3.5 million in the same period of the previous year primarily due to the decreased revenues and increased cost of revenues mentioned above, partially offset by decreased operating expenses. Financing income net for the year 2025 was approximately $0.6 million compared to approximately $4 million in the previous year. The decrease in financing income net was mainly associated with accounting treatment of prefunded warrants and warrants issued in August 2024 fundraising. As a result, during the 12 months of 2025, the company recorded financial income net related to prefunded warrants and warrants of approximately $458,000 as compared to a financial income of approximately $3.4 million in the same period of 2024. Financing expenses net for the fourth quarter of 2025 were approximately $0.2 million compared to financing income net of approximately $4.5 million in the same period of the previous year. The decrease in financing income is mainly associated with accounting treatment of prefunded warrants and warrants issued in the August 2024 fundraising as mentioned above. Income from discontinued operations net for the 12 months of 2025 was approximately $5.7 million compared to a loss of approximately $3.2 million in the same period of 2024. For the fourth quarter of 2025, loss from discontinued operations net was approximately $16,000 compared to a loss of approximately $1 million in the fourth quarter of the previous year. These amounts primarily reflect the financial results of Lavie Bio's operations as well as expenses related to the development and maintenance of MicroBoost AI for Ag, which are presented as a single line item in the consolidated statements of profit and loss. Following the sale of the majority of Lavie Bio's assets as well as Evogene's MicroBoost AI for Ag to ICL, the company recognized a gain on sale of approximately $6.4 million which is also included in the income from discontinued operations net for the year of 2025. All prior period amounts have been reclassified to confirm to this presentation. Net loss for the 12 months of 2025 was approximately $7.8 million compared to approximately $18.1 million in the same period last year. The $10.3 million decrease in net loss was primarily due to decreased operating expenses and an income derived from discontinued operations due to the asset sale to ICL net, partially offset by reduced revenues, higher cost of revenues and a decreased financing income net. The net loss for the fourth quarter of 2025 was approximately $5.4 million compared to net loss of approximately $5,000 in the same period last year. This increase in net loss was primarily due to decreased financial income, decreased revenues and increased cost of revenues, partially offset by decreased operating expenses as mentioned above. Operator? Operator: [Operator Instructions] There is a siren in Israel. We will be back in a few minutes. Thank you for standing by. The first question, can you speak to the terms of the BMC128 license agreement with Lishan Pharmaceuticals? Ofer Haviv: This is Ofer. Sorry for asking you to wait. It's not a regular time here in Israel, we are -- everybody that participated in the call is in the same place at Evogene Office. With respect to this question, what I can disclose is that the agreement with Lishan includes a milestone payment, which is expected based on advancing the BMC128 in the pipeline or if there will be any commercial transaction that will generate value for Lishan so we will participate in this amount. And of course, revenue sharing from revenue the end product will generate. So this is what we can disclose. And in pharma, the numbers will be quite significant. So when this [indiscernible], it could be significant for Evogene. It could be quite significant for Biomica and Evogene as a major shareholders in Biomica is expected to benefit from it. We can move to the next question. Operator: Can you speak to the magnitude of cash potentially coming in from Lavie Bio and Biomica. To summarize, can you highlight investor catalysts over the coming 12 months? Ofer Haviv: So with respect to the cash expected from Biomica and Lavie Bio. So we disclosed the financial terms of the acquisition of the majority of Lavie Bio -- and MicroBoost and to ICL and what we have expected is that the cash that Evogene will have after this dividend distribution will satisfy our need for at least mid next year, maybe even more. But the current operation, the expectation is that even without additional financial transaction, we have sufficient cash for a little bit more than 1.5 years. And with respect to the catalyst that might took place -- so I think that I tried to describe it in my part. So you can envision 3 type of catalysts. The first one, additional technology collaboration with companies such as Google. What I can share is that we are talking with some other company in the same size like Google, where we are looking for a different opportunity to work together and leverage their assets and knowledge to the where we acted. And each time that such a thing happen, it really pushed the limitation that we are addressing with our technology to further and further. So this is quite important. And of course, it the attention of potential partners because it increased the evidence that what we are offering is something very unique if all of this mega, mega company is working with us. So this is one type of catalyst. The second type of catalyst is additional collaboration agreement with pharma companies or with biotech companies where we are going to use ChemPass AI to identify small molecules which bind to the protein of interest addressing multi actor criteria, novel chemical structure and with high potency. The first set of collaboration that we engaged with small biotech companies and institution. Now we are targeting for more and bigger type of tech companies. And we are also expecting that at least some of those transactions will inject cash to the company to Evogene even in the early stage to cover our expenses. So this is the first type of catalyst that you can think of. And the second type of catalyst you can think of. And the third is, again, collaboration agreement, but this time with other chemical companies -- we are talking with some companies in this field. The industry in the last few years didn't have a positive performance the market. And this has had a negative effect on their willingness and appetite to enter into a collaboration. But things start to change now and understanding that there is a clear need for innovation increase. And also I think that the performance that AgPlenus achieved in the last year, hopefully will help us to engage in some collaboration agreements with potential partners in this industry. So to summarize, 3 type of catalyst technology collaboration with companies like Google and others, then collaboration with midsized biotech and pharma companies and collaboration with other chemical companies. This is the main catalyst I'm expecting to share coming from the core business of Evogene as we see today -- we also have some other activities such as Casterra and some other legacy activity. But I prefer not to refer to them today because it's very important for me to make sure that it's very clear that what is the strategic avenue Evogene decided to go through and we truly believe this represent the highest potential for our shareholders for the next few years. Operator: There are no further questions at this time. Mr. Haviv, would you like to make a concluding statement? Ofer Haviv: Yes. I would like to thank everybody to participate in today's conference call. We are here in Evogene committed to achieve our targets I can assure you that all of Evogene employees are working from home or even coming to our offices. And I'm looking forward to continue to update you and share with you additional great announcement like in the last quarter. Thank you. Operator: Thank you. This concludes Evogene's Fourth Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. The Recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and interim report for the fourth quarter and full year of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance with Section 32A of the securities law, 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. The financial statements for 2025 show that TASE ended the year on a high note. Q4 2025 capped another record year for TASE with revenues reaching an all-time high of ILS 149.3 million for Q4 and ILS 563.5 million for the full year 2025. These results represent a record increase of 29% year-over-year and quarter-over-quarter. We also saw a record increase of 58% in adjusted EBITDA, and an increase of 9.5% in the adjusted EBITDA margin as well as an all-time high in TASE net profit with a 79% increase compared to 2024. All this was achieved while continuing to maintain organic growth across all TASE's core activities despite Israel having fought a multi-front work for most of 2025. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. For most of 2025, trading on TASE took place against the backdrop of the ongoing world and elevated volatility. Against this background, the Israeli capital market has exhibited resilience and economic strength during 2024 and 2025. The leading equity indices on TASE broke their historic record on numerous occasions, outperforming the leading global indices. The TA-90 Index and the TA-35 topped the global return table with gains of 46.6% and 51.6%, respectively, compared to 17.9% on the S&P 500 Index and 21% on the NASDAQ-100 Index. In addition, the positive and exceptional trend was also evident in the sectoral indices, particularly in the financial sector. At the end of 2025, TASE equity market cap reached ILS 2 trillion, a 46% increase from year-end 2024 due to the impact of the rise in TASE equity indices. Trading volumes also set new records with the cash equities ADV rising to ILS 3.4 billion in 2025, 57% increase over 2024. The IPO market stagged an impressive resurgence in 2025 with 21 IPOs and an additional 5 companies listing their shares without raising capital, including 1 dual-listed company. Overall, the total capital raised on the equity market sold to ILS 21 billion compared to ILS 8 billion in 2024. In 2025, the TASE bond market displayed increased trends as a major source for debt funding, both for corporate issuers and for the Israeli government. Corporate bond issuances totaled ILS 187 billion in 2025, compared to ILS 124 billion in the previous year. The Ministry of Finance raised ILS 137 billion in Israel during 2025. The strong demand and successful issuances in Israel and abroad, is a powerful sign of confidence in the Israeli economy. Trading volumes in the corporate bond market rose by 9% in 2025, compared to the volume in 2024, while the government bonds ADV, amounting to ILS 3.3 billion similar to 2024. We have continued implementing our strategic plan to strengthen business activity. As part of a significant milestone in strengthening TASE international profile and attracting foreign investors, I'm pleased to update that we have completed transition to a Monday through Friday trading week at the beginning of 2026. In the last 2 months, this move has already led to a substantial influx of foreign investors during Friday trading, exceeding the average recorded on Sundays in 2025. In addition, on February 23, the cyber giant Palo Alto Networks began trading on TASE, officially making it a dual-listed company on the U.S. and Israeli market, which constitutes a profound vote of confidence in Israeli capital market. And we believe this will lead to further breakthrough for the local capital market while strengthening TASE position on the international financial stage. Foreign investors too expressed confidence in the local capital market and purchased equities totaling ILS 4.4 billion in 2025, mainly in the financial and defense sector. This is in marked contrast to the previous year when foreign investors' activity resulted in net sales. It is worth noting that in the first 9 months of 2025, the value of foreign investors holdings in non-dual listed equities grew by 70%, and in September 2025, the value of their holdings reached an historic high of ILS 64 billion, reflecting the deepening presence in the Israeli market. The Israeli retail segment continued to show significant increased interest in the domestic market and the growth in the opening of new trading accounts continued throughout 2025. The retail investors opened approximately 200,000 new trading accounts, 25% more than in 2024. In the trading segment, we continue to invest and develop the indices market in 2025. In total, we launched 10 new equity and bond indices during 2025, of which 7 indices are exclusive and we intend to continue developing new indices to increase and diversify the products as part of our strategic plan to refine and develop more investment products for the investors. At the end of December 2025, the total AUM of all TASE indices amounted to ILS 148 billion compared to ILS 99 billion at the end of 2024. The total AUM of TASE equity indices amounted to ILS 91 billion, compared to ILS 48 billion at the end of 2024. In the derivatives market, we have seen average daily trading volume grow by 14% compared to 2024. In light of the success of the equities market making reform, that I have mentioned in my previous calls, 7 large companies included in the TA-35 Index joined the tailor-made market-making program, resulting in the trading volumes of those companies increasing significantly. I would now like to provide you with an update to what I reported to you in our previous earnings call regarding examination of a partial or full sale of our index activity. We are currently negotiating to enter into a deal to sell the activity and to cooperate strategically with a major international entity. At this stage, there is no certainty as to when, if at all, the negotiation will bear fruit and result in a binding agreement. I would also like to update you regarding the dividend payment to the current shareholders. You will no doubt recall that we previously adopted a dividend distribution policy for the years 2024 to 2026, pursuant to which TASE is to distribute a cash dividend to its shareholders at a rate of 50% of the annual net profit for 2025. The dividend according to the policy amounts to ILS 90.5 million. In addition to this, in light of the substantial growth in TASE profitability in 2025 and the consequent significant increase in the company's liquid reserves, TASE will distribute a special dividend of ILS 54.3 million. In all, TASE will distribute a total dividend of ILS 144.8 million, representing ILS 1.56 per ordinary share that will be paid on March 20, 2026. Furthermore, during the coming year, TASE management will examine drawing up a buyback plan with this being subject to market conditions and other relevant considerations. In conclusion, the 2025 financial statements show that despite all the challenges of the last few years, we are witnessing the growth and resilience of TASE and of the Israeli economy. Our financial statements continue to reflect our investment in developing new and diverse products for the benefit of the public and the investments made for the benefit of technological and innovative developments so that we continue to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the year results. Yehuda Ben-Ezra: Thank you, Ittai. As Ittai mentioned earlier, TASE outstanding fourth quarter financial results capped off a highly successful 2025 with the company is delivering record revenues across all lines of businesses. Throughout the year, including the fourth quarter, TASE demonstrated remarkable resilience, [ given ] Israel faced an extended multi-front conflict. This will thus highlight the strength of Israel economy and the stability of its capital markets, showcasing best consistent performance under challenging conditions. I will continue with Slide #7, which shows some of the key highlights from our results for the year 2025. Our revenues in 2025 reached a new high of ILS 563.5 million, increasing by a record 29% compared to the previous year. Adjusted EBITDA in 2025 improved significantly by 58% to record of ILS 293.8 million, while the adjusted EBITDA margin also improved from 42.6% to 52.1%. Our net profit displayed substantial growth of 79% and increase to a new record of ILS 181 million. Our basic EPS in 2025 reached a new high of ILS 1.97, increasing by a record 81% compared to the previous year. I will continue with Slide 17, which shows some of the key highlights from our results for the fourth quarter. Revenues amounted to ILS 149.3 million compared to ILS 115.4 million in the same quarter last year, a 29% increase. This is the highestly quarter of the revenue since the TASE IPO and growth was evidenced across all operations. Our revenues from non-transactional services amounted to 63% of total revenues, the same the corresponding quarter last year. Expenses totaled ILS 84.5 million compared to ILS 84.2 million in the same quarter last year, a 0.4% increase. Adjusted EBITDA totaled ILS 80.8 million, compared to ILS 46.8 million in the same quarter last year, a 73% increase. The increase was due to higher revenues. Net profit amounted to ILS 51.6 million compared to ILS 25.4 million in the same quarter last year, a 104% increase. The increase was due mainly to higher average for services. This increase was partially offset by the increase in tax expenses. I will continue with Slide 15, where we can take a deeper look into our revenues in the fourth quarter. Revenues from trading and clearing commission increased by 27% compared to the same quarter last year and totaled ILS 54.7 million. The increase is due mainly to higher trading volumes, particularly in shares and in the volume of trade share reduction of mutual fund units. Revenues from listing fees in annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.4 million. The increase is due mainly to revenue for annual levies as a result of the increase in the numbers of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees were also higher due to the increase in the volume of funds raised. Revenue from clearing [ and ] services increased by 58% compared to the same quarter last year and totaled ILS 41.2 million. The increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors related to the increase were the higher custodian fees as a result of the increase in the value assets under custody and the updating of the custodian fees price [ lift ]. Revenues from data distribution and connectivity services increased by 19% compared to the same quarter last year and totaled ILS 27.4 million. The increase is due to an increase in revenues from index licensing fees, mainly as a result of the increase in the value and the use of TASE indices and from higher data distribution revenues for businesses and private customers in Israel and abroad. I will continue with Slide 18, which shows some of our fourth quarter expenses. Compensate expenses decreased by 4% compared to the same quarter last year and totaled ILS 43.3 million. The decrease was due to a decrease in variable compensation. Computer and communication expenses increased by 11% and totaled ILS 11.7 million. The increase results mainly from an increase in the maintenance cost of new computer system and licenses and from an increase in man power and projects. Marketing expenses decreased by 40% compared to the same quarter last year and totaled ILS 1.7 million. The decrease is mainly from a decrease in campaigns. Depreciation and amortization expenses increased by 6% compared to the same quarter last year and totaled ILS 15.2 million. The increase in depreciation expenses was due mainly to the upgrading of infrastructure and the launch of new products. Net financing income totaled ILS 2.5 million compared to net financing income of ILS 2.6 million in the same quarter last year, a 1% decrease. Let's now go to Slide 19, where we can review our financial position. At the end of year 2025 [Audio Gap] our adjusted equity includes deferred income from listing fees and excluding open derivatives position balances, represents 77% of the adjusted balance sheet. We held ILS 494 million in cash and investment financial assets. The balance of the bank loan totaled ILS 21 million. The surplus equity, other regulatory requirements at year-end 2025 totaled ILS 550 million compared to ILS 627 million at year-end 2024. The decrease was mainly due to the decrease in the TASE equity resulting from the buyback of TASE shares and a distribution of dividend in 2025. This decrease was partially offset by the net profit in 2025. The surplus liquidity, other regulatory requirements at year-end 2025 totaled ILS 310 million compared to ILS 172 million at year-end 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA. I will continue with Slide 20, where we can review our fourth quarter cash flow highlights. Cash flow from financing activities resulted in negative cash flows of ILS 13.1 million compared to negative cash flow of ILS 4.9 million in the third quarter last year. The higher negative cash flow are due mainly to proceeds of ILS 10 million from the sale of our arrangement shares in the same quarter last year. Cash flows for investing activities resulted in negative cash flows of ILS 38.5 million compared to negative cash flow of ILS 20 million in the same quarter last year. The increase in negative cash flow is due to -- mainly to the acquisition of financial assets net. TASE free cash flow amounted to ILS 75.4 million compared to 35.9 million in the same quarter [Audio Gap] the increase in the EBITDA. Also, the Board of Directors today approved the payment of a dividend of ILS 144.8 million, representing ILS 1.56 per ordinary shares to be distributed on March 2026. In conclusion, TASE performance in the last quarter and throughout 2025 demonstrates its solid foundation as well as the fundamental resilience and growth potential of the Israeli economy. And with that, I will return the call over to Operator to conduct the Q&A. Operator: [Operator Instructions] The first question is for Hector Erazo from Jefferies. Hector Erazo Pinto: This is Hector Erazo on for Dan Fannon at Jefferies. On expenses, as you think about the budget for 2026, how does that compare to 2025? And what are the areas of spend that are different going into this year? Ittai Ben-Zeev: Hector. So I think looking at this year, in terms of our marketing budget, it will not exceed what we had in the last couple of years. In terms of the compensation of the employees, it should be similar according to the agreement that we have with the employees. And we continue to invest in our IT, and you can estimate the CapEx ILS 55 million to ILS 60 million a year. So shouldn't be any surprises on that front. Operator: [Operator Instructions] There are no further questions at this time. Thank you. This concludes the Tel Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.