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Mike Chang: [Presentation] Good afternoon and welcome to Samsara's Fourth Quarter Fiscal 2026 Earnings Call. I'm Mike Chang, Samsara's Senior Vice President of Finance. Joining me today are Samsara's Chief Executive Officer and Co-Founder, Sanjit Biswas; and our Chief Financial Officer, Dominic Phillips. In addition to our prepared remarks on this call, additional information can be found in our shareholder letter, press release, investor presentation and SEC filings on our Investor Relations website at investors.samsara.com. The matters we'll discuss today include forward-looking statements. Actual results may differ materially from those contained in the forward-looking statements and are subject to risks and uncertainties described more fully in our SEC filings. Any forward-looking statements that we make on this call are based on assumptions as of today, March 5, 2026, and we undertake no obligation to update these statements as a result of new information or future events unless required by law. During today's call, we will discuss our fourth quarter fiscal 2026 financial results. We'd like to point out that the company reports non-GAAP results, in addition to, and not as a substitute for or superior to financial measures calculated in accordance with GAAP. We also report both actual and constant currency growth rates for certain metrics. On the call, we only provide constant currency commentary when there is difference. Reconciliations of GAAP to non-GAAP financial measures and additional information on constant currency are provided in our press release and investor presentation. We'll make opening remarks, dive into highlights for the quarter and open the call up for Q&A. With that, I'll hand the call over to Sanjit. Sanjit Biswas: Thanks, Mike, and thank you, everyone, for joining us today. FY '26 was an outstanding year of durable and efficient growth. We ended the year with $1.9 billion in ARR, growing 30% year-over-year. Our $432 million of net new ARR drove this performance, growing 21% year-over-year and demonstrating our ability to accelerate growth even as we operate at much larger scale. Our momentum is strongest with our largest customers. We ended the year with $1.2 billion of ARR from our $100,000-plus ARR customers, an increase of 37% year-over-year and our second consecutive quarter of sequential acceleration. As we look back on FY '26, it's clear we are uniquely positioned to help digitize the world of physical operations. We help these industries transform through a combination of hardware devices, cloud connectivity, deep AI and data integrations. At the heart of our competitive advantage is our proprietary data asset, information that simply isn't found on the Internet. This includes everything from dash cam imagery captured across hundreds of millions of miles of roads daily to specific maintenance inspection workflows and service routes. We now have more than 25 trillion data points flowing through our platform every year. This data provides us with the unique moat that fuels a powerful data network effect, as we add more customers and assets, our AI models become more insightful for everyone on the platform. This creates a compounding advantage that is difficult for others to replicate. Since our founding in 2015, we've worked towards a vision of fully digitized operations. We see this transformation occurring in 3 distinct phases. Phase 1, connecting the world's physical operations, then Phase 2, analyzing the data to surface actionable operational insights and Phase 3 automating entire workflows with proprietary AI agents. Let's start with Phase 1. Our customers are service businesses that rely on physical assets and labor and require a wide range of equipment for their operations. This includes light-duty vehicles, school buses, yellow iron construction equipment, trailers, tools and even dumpsters. On average, our largest customers spend around 80% of the revenue on these types of assets and workers. By connecting their operations to the cloud using IoT hardware, we're building a massive and proprietary data asset that represents the physical world. This includes real-time data such as video, GPS locations, sensor readings and diagnostics codes which our customers use to gain operational benefits, including protecting frontline workers from false claims and liability with HD video evidence, delivering best-in-class customer service with live locations to provide accurate ETAs and ensuring compliance with asset and worker monitoring. While customers can immediately achieve clear and fast ROI from connecting their operations to the cloud, this digitization is still in its early stages. This is due to the significant change management required to digitize revenue-generating assets. We believe the multi-decade effort to connect the world's physical operations creates a durable long-term growth opportunity for our business. Once we've collected all the data, our customers enter Phase 2. We trained purpose-built AI to surface deeper cross-functional insights that were previously unattainable. For the first time, our customers can see the direct correlation between worker behavior and long-term vehicle health, how specific service routes impact both fuel efficiency and customer satisfaction and how real-time coaching helps prevent accidents and keep their workers safe. By applying AI to this operational data, our customers are using actionable insights to transform their operations. This includes identifying safety risks through 40-plus AI detections, like drowsiness, risky weather and passenger left behind, and correlating that risk with the workers' broader safety record, simplifying compliance tracking by automating the verification of worker and asset qualifications and minimizing fuel spend through coaching driving behavior and intelligently suggesting the most cost-effective gas stations along their routes. Our AI analysis can now go even deeper by expanding the scope beyond a single customer driving actionable insights from analyzing our network of tens of thousands of customers collectively. For example, we can predict asset breakdowns by analyzing sensor data and comparing it against data from tens of thousands of assets of the identical make, model, and year to understand the average time to failure. Analyze weather risk by comparing national weather service data with actual camera footage from Samsara's network of millions of devices, and optimize operational performance by comparing an organization's safety records -- safety scores, utilization rates and fuel efficiency against anonymized data from industry peers to identify specific areas for improvement. These actionable insights do more than just power dashboards. They build a high-velocity, high-quality data foundation required for automation. You cannot effectively automate what you've not first unified and understood. Next, our customers enter Phase 3. Advances in AI reasoning capabilities allow us to build AI agents to take action and automate entire workflows. We are shifting the paradigm from providing insights in Phase 2 which require a human to interpret and act to delivering automated outcomes in Phase 3. These agents will supercharge our customers' operations, giving them virtual teammates to completely transform their approach to safety, efficiency and sustainability. As part of this, we're excited to announce our very first AI agent, the AI Safety Coach. It comprehends risk by self-reviewing data sources such as safety event videos, workers' safety records and weather conditions. This depth of understanding allows the agent to deliver automated safety outcomes, providing real-time voice coaching in the cab, and personalized end-of-week coaching videos for workers. It even dynamically adjust safety alerts based on risky conditions such as increasing following distances when it begins to snow. Beyond safety, our road map includes a suite of specialized AI agents designed to act as force multipliers for back office teams. We're developing additional AI agents to assist with compliance, maintenance and dispatching. By automating these high-frequency complex tasks, we're enabling our customers to scale their operations without the traditional linear increase in administrative costs. To realize the full potential of these 3 phases, technology must be adopted by the people who power the business every day. Today, the majority of physical operations are moving into Phase 1 or Phase 2 of their digital transformation, which requires installation of our hardware and change management with their frontline workers. From there, the transition to Phase 3 can happen much faster as the core parts of their operation are digitized and prepared for AI automation. The progress we've made in digitizing the world's physical operations is directly translating to our results. We partner with many of the leading physical operations organizations, including 7 of the top 10 food service companies, 7 of the top 10 waste management companies, and 5 of the top 10 wholesale and retail companies. In Q4, we added 204 new $100,000-plus ARR customers and ended FY '26 with 3,194, $100,000-plus ARR customers. Our large customer momentum is laying the foundation for durable growth as these organizations adopt more products across our platform to achieve additional ROI. Large customer wins for the quarter include Southern California Edison, Groundworks and Harris County in Texas. I'd like to share 2 examples of how we're expanding with our customers. The first is with 1 of North America's leading freight transportation companies, operating a rail network of more than 30,000 route miles. Since becoming a customer in 2021, they've used our video-based safety and telematics products on their freight hostlers to build a world-class safety program. This resulted in a 90% drop in safety events and a 97% drop in distracted driving. In Q4, we expanded our partnership to include AI Multicam as they are growing their safety program. They were a top 10 win for the quarter. We estimate they will save over $12 million per year through fewer and less severe accidents, lower maintenance spend and reduced fuel consumption. Another example is with Estes, which was also a top 10 win for the quarter. Estes is the largest privately held freight transportation company in North America. They operate over 43,000 trailers and 10,500 tractors to move 70 million pounds of freight daily. After initially partnering with Samsara for video-based safety and Telematics, they expanded in Q4 to add equipment monitoring, Asset Tags and connected asset maintenance, further unifying their operations on our platform. Estes is deploying asset gateways across their trailer fleet to gain real-time visibility and safety insights. They're using Asset Tags to track thousands of smaller mission-critical assets, including dollies, forklifts and ramps that are essential to their daily dock operations. They're also using connected asset maintenance to detect issues early and reduce unplanned downtime and streamlined shop operations with integrated warranty and inventory management. We are proud of the impact we're making together with our customers. We introduced the Asset Tag 18 months ago, and our customers are rapidly adopting them to get better visibility across their operations from heavy-duty assets to smaller tools and equipment. This is only made possible by our industry-leading industrial-grade Samsara network, which continues to get bigger and better. In just the last 2 years, we doubled our network density and can now detect Asset Tags in near real time providing visibility at scale that can't be replicated. We are further strengthening our network through an integration with Hubble's terrestrial network of more than 90 million consumer smartphones. This builds on Samsara's strong presence on roads, job sites, and in residential areas by extending visibility inside buildings. To continue the momentum of our Asset Tags, we are introducing the all-new Asset Tag XS, a form factor 5x smaller than our original Asset Tag. It is purpose built for more compact, high-value handheld tools and specialized equipment, such as gas meters and IV pumps. Equipment managers can now mix and match Asset Tags based on the size and shape of their assets. Finally, we also introduced the latest generation of our Asset Tag. It has 6 years of maintenance-free battery life, a 50% increase over the previous generation and improved precision finding and range. We're excited to see the growing impact that Asset Tags are having on our customers' operations. As we close out a fantastic FY '26, I want to thank our customers for their continued partnership and our team for their relentless focus on innovation. We're in the early innings of a multi-decade opportunity to transform the physical world and I have never been more excited about the road ahead. We also wanted to share that our Chief Product Officer, Kiran Saker has retired. Our CTO and Co-Founder, John Bicket; and SVP of Product Management, Johan Land, will take over leadership of our engineering and product organizations, respectively. We thank Kiran for his outsized impact and customer focus which were instrumental in growing Samsara from an early-stage idea into a multibillion-dollar business. Lastly, we're excited to announce that we will be hosting our customer conference Beyond 2026 from June 23 to 26 in Las Vegas. We'll also be hosting an Investor Day as part of the event. Beyond is our opportunity to bring together leaders from across industries to discuss the state of physical operations and new ways to deliver value through digitization. We hope you'll join us and are looking forward to seeing many of you there. I'll now hand it over to Dominic to go over the financial highlights for the quarter. Dominic Phillips: Thank you, Sanjit. Q4 was another quarter of accelerating growth and improved operating leverage. The quarter was highlighted by strong performance across several key metrics, including 31% year-over-year net new ARR growth in constant currency, the third consecutive quarter of sequential acceleration and the highest net new ARR growth in the past 8 quarters. leading to 30% total ARR growth also accelerating sequentially at a larger scale. 37% year-over-year ARR growth for $100,000-plus customers, the second consecutive quarter of sequential acceleration at a larger scale, and 56% year-over-year ARR growth for $1 million-plus customers, the third consecutive quarter of sequential acceleration at a larger scale. A quarterly record 13 $1 million plus net new ACV transactions, 23% of net new ACV from emerging products launched over the past 2 years and achieving our second consecutive quarter of GAAP profitability. More broadly, our durable and increasingly efficient growth demonstrates the large yet still early opportunity for digital transformation across physical operations. Looking ahead, we believe we're well positioned to deliver durable growth and create long-term shareholder value for several key reasons. The first is that we have a unique defensible data advantage. By instrumenting physical assets with IoT hardware, we generate a large and growing proprietary data asset that cannot be easily replicated. Second, we're leveraging this proprietary data to power a closed loop of intelligence and action. We use AI to surface operational insights and deploy AI agents to take action on those insights and automate workflows across the platform. This drives stronger customer engagement and expands the long-term value of our platform. Third, we have exposure to secular growth in physical infrastructure. Our business model scales with physical assets rather than headcount or knowledge workers and aligns us with end markets benefiting from major initiatives such as the global AI infrastructure build-out. The stock price performance of our top 100 public customers is up more than 30% over the past year. Fourth, our products offer a differentiated value prop in mission-critical workflows, delivering fast tangible ROI such as accident reduction, fuel and maintenance savings, and improved asset utilization, making us essential to our customers' operations. And lastly, we're targeting the large less discretionary operations budget, which represents approximately 80% of our customers' revenue on average. And because we help them optimize this significant cost base, we have a large opportunity to drive customer impact and long-term growth. Okay. Now turning to our results. Q4 and FY '26 ending ARR was $1.9 billion, an increase of 30% year-over-year, accelerating sequentially at a larger scale. Within that, we added $145 million of net new ARR in Q4, an increase of 33% year-over-year or 31% in constant currency, resulting in the third consecutive quarter of accelerating sequential growth and the highest net new ARR growth rate in the past 8 quarters. Our overall net new ARR in FY '26 was $432 million, an increase of 21% year-over-year, which also accelerated year-over-year at a larger scale. And FY '26 revenue was $1.6 billion, an increase of 30% year-over-year or 29% in constant currency. Several factors drove our strong top line performance in Q4. First, large customer momentum is leading to higher growth at scale. In terms of large deals, we signed a quarterly record 13 $1 million plus net new transactions in Q4. This reflects the success of our R&D and go-to-market investments to support these larger customer opportunities. In terms of large customers, we ended Q4 with 3,194, $100,000 ARR customers including a quarterly increase of 204, our second highest quarter ever. ARR from $100,000-plus customers was $1.2 billion, increasing 37% year-over-year resulting in the second consecutive quarter of sequential acceleration at a larger scale. $100,000-plus customers represent 61% of total ARR, up from 58% 1 year ago and 56% 2 years ago. Additionally, ARR from $1 million-plus customers increased 56% year-over-year, representing the third consecutive quarter of sequential acceleration at a larger scale. Consistently over time, our ARR mix from large customers has increased, while ARR mix from smaller customers has decreased. To better reflect this trend and align with our capital allocation strategy, we're refreshing our definition of core customers to include customers with more than $25,000 in ARR versus $10,000 previously. At the end of Q4, $25,000-plus customers contributed 85% of total ARR, up from 83% 1 year ago and 81% 2 years ago. We expect this trend to continue and believe this update also helps investors better understand our focus on larger customers versus other competitors in the space. Second, our customers are increasingly using Samsara as their mission-critical system of action by subscribing to multiple applications on a single unified platform. 96% of our $100,000-plus ARR customers subscribed to 2 or more products and 69% subscribe to 3 or more. In Q4, 9 of the top 10 net new ACV deals included, 2 or more products. 8 of the top 10 included 3 or more products, and 6 of the top 10 included 4 more products. In Q4, we had a large win with 1 of the Midwest's largest farmer-owned co-ops, following rapid M&A-driven growth that left data fragmented across systems, they consolidated on Samsara. This customer leverages route planning to digitally access daily orders, commercial navigation for safe, compliant vehicle aware turn-by-turn directions, and connected workflows to streamline proof of delivery and signatures. Additionally, Telematics and video-based safety provide real-time visibility to enable proactive protection of drivers and reduce risk. In a pilot, they achieved a 65% reduction in safety events, an 85% reduction in speeding events, and a 45% reduction in idling time. Strong multiproduct adoption like this helped us achieve our target dollar-based net retention rate of approximately 115% for core customers, both for our prior definition of $10,000-plus ARR customers and our updated definition of $25,000-plus ARR customers. And third, we demonstrated strong execution across several frontiers. In terms of emerging products, 23% of net new ACV in Q4 came from new products launched over the past 2 years, including AI Multicam, asset maintenance, Asset Tags, commercial navigation, qualifications, routing, training and workflows. Emerging products now contribute more than $100 million in ARR, 8 of the top 10 net new ACV transactions in Q4 included in emerging product, 58 transactions in Q4 included more than $100,000 in emerging product net new ACV and Asset Tags ending ARR more than tripled year-over-year. In Q4, we signed our largest ever Asset Tags deal with Total Safety, a leading provider of industrial safety services with over 250,000 assets in the U.S. Total Safety is deploying Asset Tags to track critical high-value safety equipment such as breathing air tanks, eyewash stations, and small tools to ensure asset visibility critical to their operations. By digitizing their inventory, they are increasing equipment recovery and helping their customers eliminate the high cost of lost assets. In terms of end markets, we saw strong momentum across construction, wholesale and retail trade and public sector. Construction contributed the highest net new ACV mix of all industries for the tenth consecutive quarter and had its highest net new ACV growth in the last 7 quarters. Wholesale and retail trade was our second largest vertical in Q4 and contributed its highest net new ACV mix in the last 3 years and public sector FY '26 net new ACV growth accelerated for the third consecutive year, including Q4 wins with the state of New York and Harris County, the third largest county in the U.S. And in terms of international, 15% of net new ACV came from non-U.S. geographies. Europe ARR growth accelerated for the fourth straight quarter, led by our largest ever European net new ACV deal with Dawsongroup, the U.K.'s largest independent asset rental leasing and contract hire company. And Canada had a highest year-over-year net new ACV growth in the last 10 quarters. In addition to driving strong top line growth, we continue to deliver operating leverage across our business as we scale. In FY '26, non-GAAP gross margin was 78%, up 1 percentage point year-over-year. Non-GAAP operating margin was 17%, up 8 percentage points from 1 year ago, and free cash flow margin was 13% in FY '26, up 4 percentage points year-over-year. Okay. Now turning to Q1 and FY '27 guidance based on FX rates as of January 31. Our guidance philosophy remains the same and is derisked for potential downside scenarios. For Q1, we expect revenue to be between $454 million and $456 million, representing 24% year-over-year growth or 22% to 23% growth in constant currency. Non-GAAP operating margin to be 15%. And Non-GAAP EPS to be between $0.12 and $0.13. For full year FY '27, we expect revenue to be between $1.965 billion and $1.975 billion, representing 21% to 22% year-over-year growth or 21% growth in constant currency. Non-GAAP operating margin to be 19%, non-GAAP EPS to be between $0.65 and $0.69. And we also expect to be GAAP profitable for full year FY '27. Finally, please see the additional modeling notes in our shareholder letter. To wrap up in Q4 and in FY '26, we delivered accelerating growth at scale while expanding operating leverage across the board. Looking ahead, we believe we're well positioned to sustain durable and efficient growth because we use hardware to generate a unique defensible data asset that we harness with AI to surface operational insights and automatically take action to drive more customer value. We are aligned with the secular growth in physical operations and markets that are benefiting from major initiatives such as the global AI infrastructure build-out and we deliver large tangible customer ROI with fast payback periods. We look forward to building on this momentum as we help our customers operate more safely, efficiently and sustainably at a greater scale. And with that, I'll hand it over to Mike to moderate Q&A. Mike Chang: Thanks, Dominic. We will now open the line up for questions. [Operator Instructions] The first question today comes from Matt Hedberg with RBC followed by Keith Weiss with Morgan Stanley. Matthew Hedberg: Can you hear me? Dominic Phillips: Yes. Matthew Hedberg: Great. And great job this quarter. A lot of positives to pick through here. The emerging product success was certainly a standout reaching 2 really significant milestones. I guess, as you look to the future, and by the way, I think you guys outlined a really, really compelling reason why data is at the core of Samsara and why that is extremely defensive and in fact, offensive in an AI environment. Can you talk about, though, where you're seeing some of the best adoption rates for some of these emerging products? Is it across all your customers? Is it some of your larger customers, particular verticals? Any sense for just kind of how those emerging products are distributed? Sanjit Biswas: Matt, this is Sanjit. I'll take that one. So I would say we are seeing very strong momentum, especially with large customers because they have the most complex physical operations thousands of, and tens of thousands of frontline workers and similar -- probably a larger number of assets. So when we introduce new technologies like commercial navigation, maintenance, training, they're very well received because they know immediately how to put that technology to work. So I would say if I had to choose a pattern, it would be among these larger customers where they're set up to absorb these new products. Mike Chang: The next question comes from Keith Weiss with Morgan Stanley, followed by Alex Zukin with Wolfe. Keith Weiss: Congratulations on a really outstanding quarter and end to the year. Two -- Really 2 questions I want to ask 1 more tactical, 1 more strategic. On the more tactical side of the equation, the acceleration that we've seen over the past couple of quarters in net new ARR. Is it too simple to say that this is sort of Asset Tags and that new solution ramping up within the product portfolio? Or is there like a broader set of drivers that are behind that acceleration? And then on the more strategic side, coming out of the Morgan Stanley TMT Conference. We've been talking a lot about proprietary data. And 1 of the debates that emerged is the, how the value of data sustains over time? And I'd love to hear your guys' view on it in terms of the relative value of the data when it's brand new and it's just coming off of the devices versus how much value it retains as it becomes older and older and becomes part of that like bigger data set that you have over time? Dominic Phillips: It's Dominic. I'll go for the first 1 and then Sanjit can take the second one. I think the acceleration, the net new ARR acceleration over the last 3 quarters has been much broader than something just simply as Asset Tags. I think broadly as a bucket, the emerging products have definitely been a big contributor. So going from 8% of the net new ACV mix in Q2 to 20% in Q3 and then 23% in Q4. Asset Tags has been important within that. But once again, we didn't see 1 product within the emerging products driving more than 50% of that contribution. I think it's been a lot of large customer momentum and success. Again, a quarterly record 13 $1 million plus net new ACV transactions, our second highest quarter ever of $100,000-plus adds. We're seeing good momentum internationally. And then in specific verticals, again, things like construction and wholesale and retail and public sector this quarter were all strong. So emerging products definitely playing a role, but it's been -- the strength and the growth has been much more broader than that. Sanjit Biswas: And Keith, on the proprietary data angle, we think there's a lot of value in the sort of accumulation and really the data asset that builds up over time. And I'll give you 1 or 2 just kind of concrete examples. Maintenance is actually 1 that our customers have really started taking to. We have a tremendous amount of information about what happens with the specific make, model, year of a truck. So for example, if you have a 2020 Freightliner Cascadia, how does it wear over time? What have others seen? Where does it start to break down? Where does the maintenance cost go up? That is from the accumulation of a lot of data over time. The same philosophy applies to things like risk data. You want to understand how millions of drivers over different weather conditions over time, different tenures of their company, different risk patterns behave. So it's not just in-the-moment data, that's, of course, valuable, but it's really being able to look at it over time and across customers, that's where it accumulates to be something really interesting. Mike Chang: The next question comes from Alex Zukin with Wolfe Research, followed by Michael Turrin with Wells Fargo. Aleksandr Zukin: I echo my congratulations on really, really strong quarter. Maybe first one for you, Sanjit, just the AI offering that you launched the agentic offering. Maybe just help us understand a little bit of how you plan to monetize that within your customer base and kind of how -- I think listed a few that are on the maybe horizon. Maybe talk to us a little bit about your vision for introducing that type of functionality and maybe how the pricing evolves around that. And then Dom, it's your largest net new ARR beat as a public company. Despite the conservatism you always embedded in the guidance, I think we're starting with a 2 percentage point expansion on a larger scale, implying the largest starting incremental margin guidance for a fiscal year guide. So maybe walk through kind of just the momentum that you're seeing in existing and new customers that gives you that confidence to embed that sales efficiency to start the guidance. Sanjit Biswas: Sure. I'll start with the agentic question. So AI agents are sort of new concept to the world and very new in the world of our customers. We are getting these products out there to understand better how they're going to use the agents, how often they use it, the patterns and so on. And that will give us the data we need to figure out the right pricing model. both is a fair share of value but also matches how the customers use the product. So we'll have more to come there. We'll really get these out there starting in the summer with Beyond. And we are excited, not just about the Safety Agent, but also the maintenance compliance and the other sort of virtual team members we can add to our customers' teams. Dominic Phillips: Yes. And I would say, that we've -- again, Q4 was fantastic, but we've really had 3 consecutive quarters now of accelerating net new ARR growth. And so a lot of great momentum, obviously, to end FY '26 and then taking us into FY '27. I think not only have we demonstrated a lot of accelerating growth, but we've also done so by getting more efficient, again across the board. And so we're finding ways to operate more efficiently. We're using a lot of AI tools internally to drive a lot more productivity. Even looking at something as simple as like ARR per employee, that has increased every year over the last several years, I think it's like up like more than 30% over the last 3 years. And so we're able to drive a lot more top line scale while doing so much more efficiently. And that gives us confidence that we can continue to do that into FY '27. Mike Chang: The next question comes from Michael Turrin with Wells Fargo, followed by Matt Martino with Goldman Sachs. Michael Turrin: Echo my congrats as well. The 4Q results are really impressive even for Samsara in Q4. So the first question is just, you had a lot of rich detail in there, but just help us understand where the sources of upside came from? And if anything at all, surprised you relative to what you're expecting? And as sort of the second part to that, just how that shades what you're framing to us for fiscal '27 as well, Dom?. Dominic Phillips: Yes. Again, as I -- we just kind of talked with Alex a third consecutive quarter of net new ARR acceleration, strongest net new ARR growth in 8 quarters. And then -- and so much net new ARR acceleration that the overall $1.9 billion of ending ARR accelerated back up to 30%. Again, large customers, a lot of large deals, the record 13 $1 million-plus transactions and then the $200,000 and $400,000-plus adds was very strong. I think tied into the emerging products, we're just seeing much larger multiproduct transactions. So 9 of the top 10 deals, 2-plus products; 8 of the top 10, 3 plus; and then 6 of the top 10, 4 plus. So a lot of multiproduct strengths driving the growth. And then we're getting contribution from these emerging frontiers, whether it's the emerging products at 23%, international or again some of these verticals. And so 3 consecutive quarters, I'd say, of acceleration and a lot of growth strength, and that gives us a lot of good momentum going into '27. Michael Turrin: Congrats again. Mike Chang: Next question comes from Matt Martino with Goldman Sachs, followed by Matt Bullock with BofA. Matthew Martino: Sanjit, for you, Asset Tags clearly feels like something much bigger. So as you introduce the XS form factor, bring in Hubble to extend the network, how should we think about the strategic end state there? Is this mainly about driving deeper adoption within the base? Or does this really start to open up an entirely broader asset visibility platform for you guys? Sanjit Biswas: Yes, Matt, I would say it's definitely both. The world of physical operations has a ton of assets. There's, of course, vehicles and trailers and construction equipment, but I mentioned a lot of the smaller handheld assets, there's tools, there's dollies and so on. So really, our first priority here is, like I said, with Phase 1, we're just simply trying to digitize and get this information into the cloud so we can start operating on it. As we do that, I think it does open up a lot of interesting use cases. Many of our customers are interested in things like asset dormancy, which piece of equipment haven't moved, maybe they don't need to own them and they could rent them instead there are definitely sophisticated ways to kind of load balance where those assets are placed. And then I do think there's this agentic opportunity. All of that will appeal to our existing customers. And I do think this will open up some new possibilities of maybe some customers that don't have a tremendous number of vehicles, but have a lot of other kinds of field assets. We highlighted total safety, for example, they have about 250,000 assets. That will be a good example of one. Mike Chang: Great. The next question comes from Matt Bullock with BofA, followed by Derrick Wood with TD Cowen. Matthew Bullock: Sanjit, I wanted to ask about the public sector. Annual net new ACV growth accelerated for the third consecutive year here. It's now a $100 million plus ARR business that's pretty clearly benefiting from network effects. My question was about legislation or the policy environment. We noticed that Samsara presented to Congress twice during February. What was that about specifically? And are there any kind of legislative tailwinds that we should have on our radar as we enter fiscal '27? Sanjit Biswas: Yes, absolutely. So we are very excited about momentum in the public sector. Just as a reminder, the public sector, they have a lot of physical operations that are required to maintain and really run all of our communities. There -- a lot of the reason that we're providing so much information to Congress is simply to educate. We want them to understand the benefit of these technologies, not just in the public sector, but even in the private sector. Our products have a huge impact on safety, on efficiency, and it's part of this bigger digitization trend. So there, I would say the work has really been around kind of education, first and foremost. And then in the public sector itself, I think we are seeing some great network effects, as you highlighted, cities and states that are not competitive with 1 another. So when you unlock value for one, they tend to talk about it and tell others about it. Matthew Bullock: That's fantastic. And if I could squeeze 1 more in for Dom, if I could. Obviously, the large deal momentum was excellent in 4Q. But I wanted to ask about helping frame the contribution from large deals that were ramping from 2Q and 3Q? Just helping us understand kind of what the contribution was from prior deal momentum in 4Q given the pretty huge net new ARR number. Dominic Phillips: Yes. Most of the Q4 performance and results were driven by new deals booked and signed in the quarter. The -- I assume the 1 that you're referring to in Q2 is the First Student transaction. That was a large deal that we signed in Q2 and is a phased rollout. And so we got some of that contribution in Q4 will continue to be rolled out over time. But most of the bookings and ARR, the net new ARR in Q4 were the result of new deals, whether they are expansions to existing customers or signing new customers, but that were booked in the quarter. Mike Chang: The next question comes from Derrick Wood with TD Cowen followed by Jim Fish with Piper Sandler. James Wood: Great. I'll echo my congrats as well. I guess, Sanjit, just going back on vertical discussion, construction, 10th sequential -- or 10th quarter in a row of strength, outsized. How much of that is being driven by physical AI data center infrastructure build-out? And what are some of the other drivers? And then just -- I mean, given the projected tens of gigawatts of data center capacity expected to be stood up over the next couple of years, are you -- can you just talk about the strength of your pipeline, not only in construction but those other verticals, energy, utilities, field services that are tied to data center builds. Sanjit Biswas: Sure. So Derrick, Construction was absolutely another strong vertical for us this quarter. I would say that a significant number of our customers are involved in this AI data center build-out, but they're also helping build and maintain roadways and buildings and kind of all the infrastructure that powers the planet. So while it has been a kind of tailwind in general in the construction industry, there are a number of different sort of areas of interest there. But on the utility side, we see electrical utilities, other trades. We work with a lot of electrical contracting companies, for example, they are all involved in this AI data center build-out. So it's really been an interesting kind of macro tailwind or effect in that industry. But at the adjacent industries, as you highlighted, utilities and field services, too. James Wood: Great. And if I could squeeze 1 for Dom, speaking of macro. I -- We have been getting questions on whether the rise in memory prices would have any impact on your margins or cash flow or supply chain dynamics or anything to flag to think about potential impact on the model? Dominic Phillips: Yes. We're definitely seeing some increase in memory for us. It's more on the storage side, more on the NAND side than on the memory side. I think we've operated through different supply chain disruptions. We have a very kind of nimble supply chain team that's really well prepared to kind of handle and navigate the current dynamics. We kind of went through something similar in 2022. And I think most importantly, we were able to meet all customer demand while driving free cash flow leverage, and we feel like we're in a similar position now we factored this into the -- in the modeling notes and the gross margin and the 100 basis points of free cash flow leverage that we started with in the notes. I think, also something that we think about it from a competitive standpoint, we think that we're best positioned and best capitalized to navigate through this. This could be an opportunity for us to increase more market share and then ultimately, we obviously think that the prices are going to stabilize over time, and we don't see any long-term structural changes to our financial profile. Mike Chang: The next question comes from Jim Fish with Piper Sandler, followed by Alex Sklar with Raymond James. Sanjit Biswas: Thanks for the question here. Look, I think a lot of people here are impressed by the emerging product side of things. Dom, another quarter north of 20% here. It seems like this is starting to become the new norm. I guess, how are you guys thinking about it for the annual guide here? And was it fairly balanced again or a few of the products underneath starting to lead a little bit more. And Sanjit, just for you, was tags XS, a customer-driven ask? Or why this version? How should we think about capability difference or pricing difference? Dominic Phillips: Yes. From the emerging products side, very similar to the previous quarters. It was very widespread. There wasn't 1 of the kind of emerging products that drove more than 50% of the bookings. And so we saw pretty broad-based strength, and we have good momentum across all of those products going into '27. Sanjit Biswas: Yes. And in terms of Asset Tag XS, it very much was customer-driven. Customers tried the original Asset Tags. They really like the functionality. Many of these customers, they have smaller, often handheld tools where they needed something that basically had less volume. So that's where that ask came from, and that's why we built XS. The pricing is similar to the original Asset Tag family. It's really the form factor that's different. Mike Chang: The next question comes from Alex Sklar with Raymond James, followed by Peter Burkly with Evercore. Johnathan McCary: This is Johnathan McCary on for Alex. So Sanjit, I'll start with you. You guys called out success in Europe again this quarter. So I wanted to think ask how you're thinking about resourcing to that region as we head into fiscal '27. And then conceptually, how much of a priority is geo expansion over the next few years? And then tangentially for Dom, I wanted to ask on the hiring embedded in the outlook for the year. continued success in Europe, but you're also seeing product velocity that seems like it continues to pick up. So curious where you're adding more manpower across the business? And then which areas are driving the leverage embedded in the guide. Sanjit Biswas: Yes. I'll take the first part of that. So we're, again, very pleased with the progress in Europe. Dawsongroup [indiscernible] Fraikin. These have all been huge lands for us are very well-known companies in the geo. So I think it's just going to be continued investment and effort. We're planning to just be consistent there. And we're making the product investments that are required as well in terms of the features and functionality that are required. But if we take a step back, we play in some of the most important geographic markets today between North America and Western Europe. So I think it's really about to follow through and really helping digitize these large-scale operations. We still have a long way to go, which we're excited about. Dominic Phillips: Yes. And then on the hiring front, I touched on this a little bit earlier. But again, we expect FY '27 is going to be another year of productivity improvements. I use the stat that over the past 3 years, the ARR per employee is up more than 30%. We expect it will increase again in FY '27. Most of the hiring in FY '27 will be in our go-to-market and sales-related roles. Most of the other functions are going to be roughly the same size, maybe some smaller, which we expect will drive leverage across all of the OpEx line items. Mike Chang: The next question comes from Peter Burkly with Evercore followed by Jackson with William Blair. Peter Burkly: This is Pete Burkly on for Kirk Materne. I'll echo my congrats on a really strong quarter here. So just want to sort of focus in on, again, on the large customer segment and really strong growth and acceleration, the $100,000 ARR segment and the $1 million-plus segment as well. So I'm curious if you could just sort of unpack some of that strength, whether it's primarily multiproduct attach, some of the emerging products like Asset Tags and AI Multicam or if you're just seeing a broader fleet and asset expansion sort of underneath the hood in some of those larger customers. And then just curious how much runway sort of remains to continue to expand ARPU within that really large ARR customer base. Dominic Phillips: Yes, I'd say on the large customers, it was weighted a little bit more towards existing customers doing expansions, multiproduct adoption across the board definitely drove strength. And again, almost all of those licensing the core kind of vehicle-based products, Telematics and video-based safety. But as I said, things like 8 out of the top 10 had 3-plus products and 6 of the top 10 at 4 or more. So licensing something outside 1 of these emerging products, which is also quite strong for us. And similarly, even on the new logo side, the new customer lands, the large ones, all had or multiproduct transactions out of the gate. Mike Chang: The next question comes from Jackson with William Blair, followed by Jason Celino with KeyBanc. Jackson Bogli: This is Jackson on for doing Dylan Becker. We've talked about the substantial data set. We have more than 25 trillion data points on the platform. Large customers are doing more. There's more products in earlier stages of development and adoption altogether, I was curious if you could speak to how all of these things really allow you to accelerate the time to value with customers and really support the already considerable value proposition that you guys offer customers? Sanjit Biswas: Yes. I think, first of all, we're excited to be able to expand the platform. This really expands areas of value more than anything else. So for example, with maintenance, that was something weren't doing as much in before, but it's a tremendous area of expense for our customers who have a lot of assets. Time to value continues to be strong. Our customers realize this ROI within a year. So that's never really been an issue of like how do we speed that up. I'm excited about helping just kind of drive that already 8x ROI that we see with customers even broader as we expand into kind of more adjacent areas like maintenance, training, qualifications, workflows and so on. Jackson Bogli: Got it. That's super helpful. And then 1 more quickly, if I could. There's a lot of geopolitical turmoil going on in multiple regions. How should we think about the impact to the business' international expansion plans? Like would you even say the heightened uncertainty may provide a tailwind or headwind to potential adoption? I'm just curious any color you guys would have on the current macro landscape. Sanjit Biswas: I think it's -- for us, again, as I said on an earlier question, we're pretty focused on North America and Western Europe. There's 35 million commercial vehicles here in North America. There's 45 million in Western Europe. So we feel that the markets we're selling in are ready for this kind of digital transformation, they're adopting these technologies. So we're going to stay focused in the geographies we're in. Mike Chang: Great. Next question comes from Jason Celino with KeyBanc, followed by Nick Altmann with BTIG. Jason Celino: Maybe my first one, I think it was mentioned that you have 40 different AI detections, I don't know if this is a new way to frame it, but how many of these are powered by like AI-type models? Or can they be powered by kind of the same models. And then when we think about the categories of some of these detections, are they more than just safety-based detections? Sanjit Biswas: Sure. So these are all different forms of AI detection. Some of them involve technologies like large language models, others are kind of more time series-based models. So we are continuously expanding the library of types of detections. And safety is, of course, an important area for these detections, but are thinking about AI models much more generally. So we look at things like weather conditions and road conditions. We're looking at other kind of health vehicle and asset health related AI models. So we're continually expanding, but they build on a number of different technologies. Jason Celino: Okay. Great. And then maybe just a quick 1 for Dom. SBC philosophy. I know you're guiding to GAAP full year profitability, which is refreshing. But maybe refresh us on how you're thinking about SBC as a whole and its trajectory. Dominic Phillips: Yes. We view equity-based compensation as a real cost of the business. We forecast that we're driving leverage. I think we were in the kind of the high 20s 4 years ago, when we went public. We got it down into that low 20s last year in FY '26, the 10-K will come out -- or it's in the press release, but it was 20%, we'll be below that again in FY '27 and expect it to go down even further from there. So this is a big area of focus for us. And pleased that we were able to get to GAAP profitability now for 2 consecutive quarters. I think it will probably go a little bit negative in Q1, where we tend to spend a little bit more money, not on the SBC side, but on the OpEx side, but then we've got a path to getting it to positive for the full year. Mike Chang: The next question comes from Nick with BTIG, followed by Mark with Loop Capital. Nicholas Altmann: You mentioned you doubled the network density, and that is enabling you guys to detect the Asset Tags in near real time. So can you just talk about how much of an unlock those new real-time detection capabilities could be for both customers who are looking to adopt Asset Tags or even existing Asset Tags customers who are potentially looking to expand their footprint. Sanjit Biswas: Yes, absolutely. So the network density is an interesting 1 because it lets us basically increase the frequency and fidelity of the data we're getting back. This is especially helpful in a scenario like theft and loss. A lot of these assets get lost or stolen, and they walk away from job sites and so on. So customers are looking to go recover those. They need to know where they are if they're moving and so on, so it definitely helps there. And then we also embed this technology in other areas like our worker safety wearable. And so even if someone is not near a vehicle, we're able to help keep them safe outside of the cab. So for field services workers, for example, this is a helpful technology. So I think it just increases the number of applications we can address from kind of basic asset tracking, doing much more fine-grain analytics on these assets because we get much more frequent data updates. Mike Chang: The next question comes from Mark with Loop followed by Andrew with BNP. Mark Schappel: Congrats on the strong quarter here. Sanjit, typically at the start of the year is when software companies will adjust their sales orgs and the go-to-market strategies. I was wondering if you're planning any meaningful changes on the sales front in the coming year? Sanjit Biswas: No. I would say, Mark, we're always looking at efficiencies, trying to make sure we're approaching the market in the best way possible. We're very happy with our structure, nothing significant to report there. I don't know, Dominic, if you want to add anything? Dominic Phillips: I think more like evolutionary changes. And so -- having kind of more global account specialists for these like larger multinationals, we're experimenting and we'll make more investments in things like product sales specialists to cover all of these emerging products, but nothing hugely structurally different going into FY '27. Mike Chang: Our next question comes from Andrew with BNP followed by Junaid with Truist. Andrew? Okay. Let's pass there. Okay. Our last question today comes from Junaid with Truist. Junaid Siddiqui: Great. Given the scale of your network now and with offerings like AI Multicam, 360, real-time weather intelligence. How do you see these capabilities, positioning the platform as fleets begin adopting higher levels of autonomy. And how should we think about the monetization potential of that proprietary data in an autonomous future context? Sanjit Biswas: Yes. From our perspective, autonomy is an exciting technology. It's been on the horizon for some time, and it's starting to come to fruition on the consumer side at least. We kind of view operations as a whole. So autonomy is an and for us. We're going to start seeing autonomous vehicles and devices appear in our customers' operations at some point. We do think that will help expand the number of types of asset -- number and types of assets and the applications we address. So you're going to see more workflows, more automation happening where people and these autonomous vehicles are working together. We don't have plans to take this video data and sell it to the autonomous providers or anything like that. But for us, we're really just tracking it as more of a technology. Mike Chang: All right. So this concludes the question-and-answer portion. Thank you all for attending our Q4 fiscal year 2026 earnings call. Before I let you go have a few short announcements. We'll be attending the Loop Capital Markets Conference on March 10 and the Wells Fargo Symposium on April 8. We'll also be hosting the William Blair Bus Tour on March 16 and the Goldman Sachs Bus Tour on April 13 in San Francisco. We hope to see you at 1 of these events. Finally, we are hosting our Investor Day, as Sanjit mentioned, this June in Las Vegas. Please send an e-mail to ir@samsara.com, if you're interested in attending in person. For those who prefer to attend virtually our IR website will have a link to a live broadcast. That's it for today's meeting. If you have any follow-up questions, you can e-mail at ir@samsara.com. Bye everyone.
Milena Mondini: Good morning, everyone, and welcome, and thank you for joining us as we review Admiral 2025 year-end results. Today, we'll be announcing another remarkable year of financial results and strategic progress. So I will start with the key highlights before handing over to Geraint on the financials and to Alistair on U.K. Insurance and Costi on Europe. I will then come back to reflect on what we have achieved over the last 5 years and finally explain how the evolution of our strategy position us to create even more value in the years ahead. So let's start with the main achievement for 2025. We delivered a record profit of GBP 958 million. This was up 16% year-on-year, reflecting disciplined execution and growth across the group. 2025 also marked exciting progress across data, technology and AI and the evolution of our motor proposition, including the acquisition of Flock subject to regulatory approval. Today, we'll also outline the evolution of our group strategy. This strategy builds on a very strong platform, but more diversified customer base and the competitive advantage we already have to deliver higher long-term value for all our stakeholders. We will also cover our new capital distribution framework, including share buybacks. Geraint will take you through that later. So more in detail. As already mentioned, 2025 was a year of record. Our customer base increased 7%, while we continue delivering strong customer outcomes with the group Net Promoter Score over 50. Group profit reached a new high, driven by record U.K. Motor profit, passing now the bar of GBP 1 billion, following another record year in 2024. This was achieved in a challenging market environment, thanks to positive evolution of recent years and continued underwriting discipline across the cycle. Importantly, this was not just a U.K. Motor story. All parts of the group contributed. In the U.K., Other Personal Lines, Admiral Money combined delivered a profit of GBP 88 million. Europe also performed strongly with a fast return to profitability in Italy and great results in France, which Costi will cover shortly. 2025 was also a year of strong shareholder returns, supported by a 7% increase in dividend per share, a very strong capital position with a solvency ratio of 193% and another stellar return on equity of 53%. Beyond the financial results, 2025 marked an acceleration in our strategic progress. We are pleased with our rapid advancement on artificial intelligence, particularly with the value delivered by machine learning models and the new gen AI center of excellence to scale priority use case, train our people and provide them with the right tools. We are managing more than 150 gen AI initiatives across the group, including support to over 4,000 colleagues, some agentic models with promising initial results and more potential to come. Selling more product to our existing customers remains a key growth driver with our multi-risk customers now exceeding GBP 1.6 million. Across Europe, we continue to evolve our broker propositions with stronger segmentation and more customized offering, driving better margin, as Costi will explain later. We also continue to innovate in Motor. An example is our partnership with Octopus that positions us well in the fast-growing salary-sacrifice scheme for electric vehicles with a tailored risk-based proposition aligned with our ambition to support customers in making greener choices. And in Admiral Money, completing our first forward flow deal was an important milestone as it opened up a more capital-efficient growth path and support higher returns and lower volatility. On M&A, the integration of More Than is now fully completed and contributed positively. Elephant disposal is also completed. And finally, early this year, we announced our intention to acquire Flock, a company we had invested in since 2024. Flock offers a telemetry-based fleet proposition with an effective feedback loop to improve safety and performance. It's an excellent strategic fit with our U.K. Motor expertise with promising underwriting and claim synergies and it's closely aligned with our joint ambition to improve safety on the roads. And by combining Admiral data ambition to Admiral's strength with Flock technology, we see an opportunity to develop a differentiated fleet business in an underserved market. So in summary, 2025 was a record year for Admiral with strong profits, customer growth and progress in technology and strategy. Now before handing over to Geraint, I want to take a moment because this will be the last time that you joined me on stage to present results. And I think it's fair to say that the strength and discipline of the performance for about 2 years are a good reflection of his leadership, his judgment and his consistency over the last 12 years as CFO, a period during which Admiral tripled its turnover and grew profit from GBP 350 million to almost GBP 1 billion. And please join me to congratulate Rachel who is here with us today and will succeed to Geraint, bringing deep knowledge of Admiral, a strong track record within the group and a great skill set for the role. So thank you, Geraint, and congratulations, Rachel. Geraint Jones: Thank you. Good morning, everyone. 12 years of not being conduct. One last time, let me talk you through the main drivers of an excellent 2025 result. Lots of positives, lots of good milestones. I'll cover the U.K. Motor loss ratios, the dividend, strong capital position. And as Milena mentioned, I'll talk you through the change in the approach to capital return that we've announced today. To start with though, let's look at the component parts of the group profits and the main ratios. The group combined ratio was very positive again at 80%. That was 3 points higher than 2024, though the impact of Ogden accounted for around 2 points of that difference. So in reality, only a very small change. And that, in turn, has made up of a slightly improved expense ratio and a slightly higher loss ratio. The latter as expected, due to the higher loss ratio 2025, underwriting year in the U.K. Motor having an impact. On to the results then. In U.K. Insurance, overall profit was GBP 1.1 billion. That's GBP 110 million higher than 2024, including Ogden, or GBP 180 million higher if Ogden is excluded, very big increase. The U.K. Motor results, I'll cover shortly, but the result there was a record profit, just over GBP 1 billion. And we're very pleased with a really strong year for the U.K. Other Personal Lines, Home insurance, Travel and Pet insurance, all profitable, strong growth. And the combined profit there was GBP 62 million, was nearly triple of 2024's result. In Europe, we're reporting a much better results, improving by nearly GBP 30 million versus 2024. We see growth in higher profits in France, small loss in Spain, impacted by new reinsurance arrangements and a recovery to profit in Italy. Good to see that happen so swiftly. And worth reminding that we continue to hold prudent booked reserves in Europe in the upper end of our range and the best estimates are also conservative. Admiral Money had a great year. Profit was double 2024's, benefiting firstly from good growth in the balance sheet. But also, as we talked about at the 2025 half year from profit generated from selling some back book loans in the first half and selling newly originated loans, which don't hit Admiral's balance sheet. That will be a continuing, we think, attractive feature of the Admiral Money business model. We continue to see good margins on the unsecured loans business, which makes up the big majority of the balances, but the results from car finance, which was relaunched in late 2024, are also encouraging. Credit loss experience remains very solid, and we hold an appropriately prudent provision for losses. There are some other comments on the page, which cover the movement in the share scheme costs and the other line, and you've got the usual extra information in the back of the pack. All in all, group profit was up 16% or 28% if you exclude the impact of Ogden on both years. Let's take a look at the very impressive U.K. Motor results. So this is a summarized income statement plus some of the key ratios and some commentary. Both years include the impact of the Ogden discount rate change. And so some of those year-on-year comparisons, you see look a little less stronger than they really are. We show the pounds and the percentage impact of Ogden in the table and starting with the top line. Customer numbers increased by 2% year-on-year, 50,000 added in the first half and around 80,000 in the second half, so 1% increases half-on-half. As Alistair will talk a bit more about later, we reduced our prices in H1 last year, and hence, average premiums have fallen. And so despite our bigger portfolio, turnover was down by 7% as the team took a disciplined approach in the competitive U.K. market and reflecting the claims trends that we were seeing. As a result of the reduced premiums and continued claims inflation, the current year loss ratio for '25 is 3 points higher than '24. And of course, we also don't see quite the same positive impact of Ogden in '25 than we did last year. And those 2 items are the main drivers of the higher combined ratio you see at the bottom, which is as we expected. The underwriting results improved by around GBP 40 million with higher earned premiums and a much lower reinsurance charge offsetting the higher net claims cost. You'll remember that we had much more limited quota share recovery assets coming into 2025, and we see a similar picture as we exit 2025 too. Net investment income was higher, up to a record level due mainly to higher invested assets at a similar rate of return. Profit commission was notably higher as we started now to recognize income on the high profitability 2024 underwriting year, though we still haven't yet recognized income on '21 to '23 or on 2025. We do expect to see revenue coming through on '21 and '25 very soon. I already mentioned the main drivers of the higher combined ratio we see at the bottom. But within that mix, reserve releases were 10% year-on-year, basically the same like-for-like. Next up, we'll take a quick look at the main U.K. Motor loss ratios, which, as always, are a key driver of this result. The chart shows the U.K. Motor discounted book loss ratios and there are generally positive and consistent messages to report here. We can see -- we see continued strong improvements in '23 and especially on '24 over the last year. 2024 is clearly a very good margin year on a very large premium base. In 2025, we see burn cost inflation around mid-single digits level and that's a small improvement in H2 versus where we saw things at the half year point. The first discounted booked loss ratio for '25 is at 78%. That's 7 points up versus '24 at its equivalent point. And that's again basically in line with our expectation. On an undiscounted basis, 2025 is 85% compared to 77% for '24. Now we expect '25 will be a good profitable year. You can see it looks healthy on the chart at the 12-month point, and it should develop positively from here, though obviously won't end as profitably as 2024. We maintained very high reserve strength. It's very close to the maximum percentile, and we expect that will reduce a bit further in 2026 towards the middle of our range. Overall, on claims, positive experience in line with our expectations, usual trends and there's more information in the back of the document. Moving now to look at the capital position. So this is the bridge of the solvency ratio from half year to full year '25. There's a couple of observations. Firstly, the capital generation in the second half is largely offset by the final dividend. And secondly, due mainly to pretty flat revenue in '25 versus '24, we see a much smaller change in the capital requirement in '25 than we did in '24 and particularly in the second half. And then the change in the capital requirements and the other items in the middle almost cancel each other out, leaving the group with a healthy -- very healthy, almost flat ratio of 193%. Short update on the internal model. Lots of hard work by our team, as usual, over the past few months since we last updated you. We now expect to make our application for approval shortly. Post approval, we'll target solvency coverage in the 150% to 170% range, probably at the upper end, in part to give us flexibility for smaller M&A opportunities. We'll give more information on the post-model approval capital position at the appropriate time. Speaking of M&A briefly, Milena mentioned earlier, the Flock acquisition. As we said in the press release, if that gets regulatory approval and completes in the second quarter, we estimate the impact on solvency will be a bit less than 10 percentage points and is, therefore, largely absorbed by the strong position. Next up is the dividend. So these are the details of the dividends, split between interim and final. And for 2024, we call out the impact of the Ogden change, which was obviously significant on the dividend for last year. The proposed final dividend is 90p per share. That brings the total for the year to 205p, over GBP 620 million, and that's 7% higher than 2024. The difference in the payout ratios year-on-year is due to us starting to use capital to purchase shares for the share schemes, which we said back in August would start in the second half of '25. You'll remember that historically, we issued new shares each year for those share schemes rather than purchased in the market, but we haven't done that since 2023. In the fourth quarter last year, the trust bought about 1 million shares for just over GBP 30 million. And the capital that we use for dividend and the share scheme purchases equated to basically the same percentage of earnings across both years, close to the 90% level. And in 2026, we expect the trust will buy around 3 million shares. Next up, we'll cover the change in the capital return approach. On the left, we show a summary of our capital allocation framework. Milena will talk a bit more about Point 1 later, which covers how we allocate capital to our businesses. And we're generally comfortable that around 10% of earnings is a fair guide of what we need to retain to fund and invest in growth. And that's meant an average dividend payout over the last 5 or 6 years of 90%. Step 2, we know the importance of strong cash returns to our shareholders. So the ordinary dividend remains at 65% of earnings. Step 3, as just mentioned, we purchased shares for the share plans. And final -- and Step 4, not finally, using some surplus capital is an option for funding M&A. And then that leaves the surplus capital and that's what's changing today. Historically, as you know, we've returned this to shareholders in the form of special dividends. But from the interim 2026 dividend, we'll change that Step 5 to be either buyback and cancel shares or pay a special dividend depending on what the Board believes is the best option. For 2026, subject to regulatory approval, we expect to buy shares at the interim and final dividend dates. The 90% guidance we've given out over the past few years to cover the ordinary plus the special or buyback plus the share schemes purchase should generally hold moving forward. And then one final slide for me to sum up. Looking back on 2025, clearly, it was a really strong year, record profits, record returns to shareholders, lots of positive results and developments across the group. For U.K., the Personal Lines and Admiral Money, great results, strong and swift turnaround in Europe, progress on the internal model, very pleasing stuff. And looking ahead, a few comments on what we might expect in 2026. On growth, in summary, we plan to grow everywhere. That's obviously subject to how the markets develop, in particular, when prices in U.K. Motor start to increase. For turnover, I'd expect a bit more growth in '26 than we saw in '25. And in general, of course, we expect faster growth from the newer businesses, U.K., the Personal Lines, Admiral Money and Europe. And then a few comments in respect to the group profit. Firstly, obviously, we will see more of an impact of the less profitable '25 underwriting year feeding into the 2026 results, but we will still benefit from good releases and profit commission coming through on 2024 and '23 and some of the earlier years too. Secondly, we project continued improvements in the results in aggregate for the newer businesses that we talked about. And finally, we expect group profit in '26 to be quite flat versus '25 after a really very strong last couple of years where profits have more than doubled. And all those comments, of course, subject to the usual caveats on markets, geopolitics, war and weather. That's it from me. I will hand you to Alistair now to talk to us about U.K. Insurance. Alistair Hargreaves: Thank you, Geraint. Good morning. I'm very pleased to take you through an excellent set of U.K. Insurance results. 2025 has been a record year across all our lines of business, underpinned by disciplined execution, customer centricity and strong operational delivery. Starting with the headlines. Customer numbers reached 9.6 million, up 9% year-on-year, with strong contributions from Motor, Household, Travel and Pet. We delivered GBP 5 billion of turnover and GBP 1.1 billion of profit, passing the GBP 1 billion profit milestone for the first time. We continue to deliver competitive prices, great service and good customer outcomes, which is recognized in customer feedback. We remain #1 in Trustpilot and achieve an NPS over 55. Importantly, 1.6 million customers now hold 2 or more products with us, a 14% increase year-on-year. Customers buying more products gives us better data to improve risk selection for all products. is a driver of our retention advantage in Motor and growth in new lines of business. Overall, an efficient source of growth that contributes to improved expense ratios. Recent announcements are leading to a more predictable regulatory landscape. Outcomes from the Motor insurance task force and premium finance review were in line with expectations, and the Home and Travel claims handling review is now complete, and we have no significant concerns. Let's turn to the Motor market. Starting with claims trends, frequency was largely flat following the marked decline we saw in 2024, and severity has returned to more normal mid-single-digit levels. Our expectation is that these trends continue, but the current macro environment introduces some uncertainty. The graph on the left shows a dark line for claims burn costs. Claims burn costs increased steeply through 2022 and then continue to increase but more modestly. The light line for market average premiums shows a lagging response to claims costs, increasing rapidly in 2023, outpacing claims costs and then declining. Both lines are indexed to 2021, and you see they cross in 2025 as increases in claims costs now exceed increases in premiums over the period. Let's focus on recent market prices. On the right, you see prices continue to decline through the second half of 2025, though at a slower rate than in the first half. We estimate average premiums declined by around 10% in 2025, broadly in line with movements reflected in ABI data. Since the start of '26, market prices are relatively flat with some differences in strategy between market participants. Market prices need to increase imminently. EY forecasts a Motor market combined ratio of 111% for 2026. This is on an earned basis, and EY assumed price increases through 2026. So delays in market price increases will put more pressure on this 2026 market combined ratio. Turning to Admiral U.K. Motor. In 2025, we focused on disciplined cycle management and maintaining our strong advantage in pricing, claims and customer retention. In 2025, we reduced rates by around half as much as the market. All the decreases were in H1. In H2, our prices were broadly flat. The left-hand graph shows that this led to a decline in new business market share in the second half of '25. Lower new business was more than offset by strong retention, resulting in modest policy growth, though lower average premiums resulted in a drop in turnover. In '26, we started increasing premiums with low single-digit increases at the start of the year to reflect the claims outlook and maintain good written margins. Taking a longer view, our disciplined approach results in varying growth through the cycle, but maximizes value and growth over the medium term. The graph on the right shows our year-on-year vehicle growth rate in blue, in yellow is our written loss ratio. Our loss ratio is consistently better than the market, but still fluctuates within a range due to the cycle. We respond quickly to claims trends, even if it results in slower growth in the short term. It then enables us to grow quickly when loss ratios are low, for example, by 15% in 2024. Since the start of 2020, our vehicles covered has grown at a CAGR of 5% and with an average combined ratio advantage of around 20% versus the market. We continue to invest in strengthening our pricing, claims and claims capabilities, including embracing predictive AI and gen AI, which Milena will talk more about. Electric vehicles is a great example of our pricing and claims focus. We lead in this growing segment. We're very competitive whilst delivering comparable loss ratios to high levels of reparability. Our overall approach is to be disciplined and grow when the time is right, whilst focusing on driving advantage in pricing, claims and customer retention. We're confident this will result in growth and maximizing value over the medium term. Let's move to our other U.K. Insurance lines where we've had an outstanding year. We welcomed 650,000 new customers, year-on-year growth of 21% and tripled profits across Household, Travel and Pet. In Household, market premiums softened further and subsidence claims were elevated in the second half of the year. Our own pricing remained more disciplined than the market and weather-adjusted loss ratios improved by about 2 percentage points. This, combined with top line growth meant that although prior year reserve releases normalize from the 2024 exceptional levels, we still delivered a record Household profit. The More Than integration is complete with around 380,000 Home and Pet customers transferred successfully. This has accelerated growth and enhanced capability, particularly in Pet. Travel grew customers by 29% and continued its positive profit trajectory. Pet grew even faster and reached breakeven just 3 years after launch. All 3 lines are now profitable with clear momentum and strong positions across their markets. So -- I'm going on too fast. So in summary, in 2025, we've delivered record profits. But in addition, Motor remains disciplined and well positioned ahead of the market. Pricing increases expected in 2026. Household, Travel and Pet are performing extremely well with growing scale and margin and customer satisfaction and retention are excellent with more customers choosing to buy more products from us. We enter 2026 with confidence that we'll continue to deliver sustainable profitable growth over the medium term. Milena will talk more about this shortly. Now I'll hand over to Costi for Europe. Costantino Moretti: Thank you, Al, and good morning, everyone. For our European operations, 2025 has been a year of consolidation. We have directed our efforts towards strengthening the operational core across our 3 markets, focusing on the fundamentals of discipline and optimization. It has been a positive period where we have made good progress on our strategy, providing a positive contribution to the group's ongoing diversification efforts. Moving to the financial results. The headline for the year is a return to combined profitability across the region. The business delivered GBP 39 million Motor profit on a wall account basis, of which GBP 11 million is the Admiral's share. Going back to the business performance, we closed 2025 with a good combined ratio of 94%. While this represents a significant year-on-year improvement of over 10 points, it is important to look at the individual market dynamics. In Italy, with ConTe, we have reached a small profit which is a GBP 30 million recovery from the previous year. This significant recovery was driven by strong actions taken on the expenses and a deliberate and disciplined pruning of the portfolio. We made the conscious decision to prioritize technical margins over volumes, leading to an expected vehicle in force reduction. With the business now on a more stable footing, we are in a position to look towards growth, always keeping the focus on its underwriting quality. Moving to Spain, where Admiral Seguros' reported results includes about GBP 8 million of one-off accounting impact related to a change in the reinsurance structure. Going forward, we have established new multiyear and large reinsurance arrangements at the European level with our historical partners. Effective from 2026, these agreements aim to improve capital efficiency and provide greater stability to our results. Excluding this specific item, the Spanish business is nearly breakeven. This is supported by the direct business, which provides a positive contribution to the results. While our diversification initiatives with ING Bank and brokers are showing very encouraging improvements while scaling up. Closing with France, where L'olivier has had a very strong year. We achieved double-digit growth in both turnover and profit with results reaching GBP 16 million profit and we surpassed 0.5 million customers. This performance demonstrates that L'olivier is successfully applying the Admiral model, maintaining a strong combined ratio advantage versus the market while driving growth through digital channels. Let's move to review our strategic progress, starting from the shift in distribution. We have focused heavily on our new brokers proposition in Italy and Spain. As the business mix indicates, we have moved away from an initial test and learn proposition towards this new one, which focuses on building long-term relationships with the intermediaries and also targets better risk segments and higher-margin business in line with our expectations. The early metrics from this shift are positive and provide a solid foundation. We are seeing solid improvement compared to our order book across all the key metrics like higher income per policy, lower frequency and lower cost per claim. And these improved fundamentals have contributed to a 9-point reduction in the overall loss ratio. While there is still more work to do, we expect these benefits to continue as more growth will come and the new proposition mature. In France, we are continuing to diversify through our household insurance product. We now cover over 100,000 risks, a 25% increase versus last year, which provides a meaningful second pillar to our French operation. Regarding efficiency, we have managed to steadily reduce the European motor expense ratio by 7 points since 2022. This has been a necessary step to remain competitive. And even in Italy, despite the reduction in turnover, we improved the expense ratio by 1 point through automation and more streamlined digital customer experience. These operational improvements are also supported by our new common data platform, which is now operational across the 3 countries. This asset allows us to deploy data futures and machine learning models across border with greater technical agility and quality, which is essential for maintaining our edge in a rapidly evolving market. To wrap up, we're very pleased by the progress made this year. Our European operations have reached combined profitability, giving us confidence in their future contribution to group's broader diversification strategy. Our objective moving forward is to leverage this stability to increase our scale and enhance our earnings. We have the right expertise, a solid data and technological framework and a disciplined path ahead. Thank you. I'll now hand over to Milena to talk more about the group strategy. Milena Mondini: Thank you, Costi. So as you just heard, 2025 was an excellent year across the group. Now I would like to take a moment and step back with you and see what we have accomplished over the last 5 years. In 2020, we announced our 5-year group strategy based on 3 pillars: business diversification, Admiral 2.0 and Motor evolution. And today, we're extremely proud of what we achieved in this time frame. First, remarkable growth with turnover up nearly 90% and group risk and profit almost 60%. We returned overall GBP 3.2 billion to our shareholders. Second, we diversified the group with more than 50% of customers now coming from other lines of business or geographies and contributing close to GBP 100 million of profit. In addition, we developed new business such as Pet insurance in the U.K., Commercial insurance in the U.K. also, Household insurance in France and we extend our addressable target market with U.K. Commercial Insurance as just mentioned in B2B2C, in B2B and B2B2C in Europe by opening up the broker distribution channel. Third, we refocus our portfolio. We exit all of our price comparison sites and the U.S. insurance business to concentrate on the growth great opportunities we have in U.K. and in Continental Europe. The acquisition of More Than and of Flock are instrumental to strengthen our product diversification in the U.K. Fourth, we overachieved our Admiral 2.0 ambition. With cloud migration, new data platform, tech stack renewal, hybrid working, scaled agile delivery, predictive AI excellence at scale and the announcement of our multiproduct offer. Fifth, we made further progress in our Motor proposition, including market leadership in EV, as Alistair mentioned, growing telematic product, fast-growing subscription model and short-term insurance with our brand for the youngest Veygo. Last but most important, throughout this period, we maintained our historical and quite unique strength. More than 20-point combined ratio advantage versus market in our core business, a unique 30-point delta return on equity versus market, a group NPS above 50 and the legendary Great Place to Work status. So back to nowadays where this leave us. Our current market presents very significant growth opportunities. They are large, attractive, growing with a combined size of around GBP 130 billion. And today, our market share across many of these markets remains relatively modest, and this leaves us substantial headroom to grow. We're continuing evolving our offering to unlock further opportunity in lending with the first forward flow deal and a new car finance product in Europe, extending our distribution and product lines. Commercial Insurance and SME are also good opportunity to provide strong proposition to a large underserved market, experiencing similar trends to Personal Lines 20 years ago with more digitalization, pricing sophistication and automation, where we can deploy our competitive advantage. Organic growth in all these segments will be driven by market-leading expertise in price comparison site and digital distribution, channels that are growing faster than the rest of the market. Cross-selling and higher retention and increasing economies of scale; and fourth, automation and synergies across the group. Our plan is based on organic growth, but we will consider opportunities for selective accretive acquisitions to accelerate diversification. Importantly, the diversification also reduced over time our exposure to any single market cycle, making Admiral more resilient in time. So having delivered on our strategy, we now look forward starting with the market context that is fast evolving, but also presenting very interesting opportunities and tailwinds. The U.K. market cycle in Motor is expected to turn and the regulatory environment is expected to be more predictable as Alistair commented before. Market consolidation could create more rational dynamics overall. More importantly, the rapid evolution of AI and gen AI represents a major opportunity for us. Predictive AI is becoming the key driver of underwriting differentiation. And we already have 12 points of loss ratio advantage versus market and this is a big driver of it. Gen AI and automation offer efficiency potential of up to 30% in the long term for customer service area and may also disrupt distribution and proposition in the long run. What is interesting to us is also the potential to accelerate the transition to direct distribution in markets where direct has more room to grow. Another major trend is the advancement of car technology, another key pillar of our strategy since 2020 Motor evolution. In the short to medium term, the most impactful change will be the shift to electric vehicles, expected to reach around 80% of new car sales by 2030, where we already have underwriting and market share leadership, as Alistair commented before. This is followed by an increased penetration of advanced safety systems. These technologies have a positive impact on collision frequency, but this has been so far more than offset by an increase in severity. As for EV, our scale and sophisticated prices approach results in a competitive advantage. In the long run, we expect autonomous vehicles, now in their infancy, to grow in share and reach a point where frequency decrease will not be anymore offset by severity. For this to happen, we need to see technology, customer appetite, regulation, infrastructure, all to further develop across countries. It will take anyhow long time to scale with higher level autonomy expected to represent around 4% of the car park by 2035, and the overall market premiums expected to be continuing to grow for at least 20 years, supported by number of cars on the road and the mix. We remain very close to this evolution, having, for example, underwritten Wayve, an autonomous vehicles player in the U.K. since 2018. As AI and mobility trends evolve, our view is that the key winning factor will remain sophisticated data-driven decision-making, scale and a lot of good quality data at scale, an entrepreneurial mindset consistently looking for opportunity to innovate and cost efficiency. And those are all areas where Admiral has a structural advantage, including 8-point expense ratio delta versus market. So overall, we are strongly positioned to leverage those key trends. Now let me introduce our evolved strategy framework. First of all, this is not a discontinuity in our strategy. It's an inflection point where we start compounding what we have already built, a more diversified business, stronger platforms and proven competitive advantage. The focus is now making those trends to reinforce each other and more deliberately over time. I think about this strategy with a set of reinforcing layers, each layer supports the next and within each layer, the benefit compound as the business grows. The other layer of our strategy is where we compound performance. Our first pillar is scaled selectively and profitably. And this is about translating diversification into sustainable growth and accelerate margin in our newer lines of business as they mature. The middle layer is where we compound capabilities. Our second pillar is future-proof our competitive advantage and it is about leveraging on the strong capability we have built in data and technology and the multiproduct benefits to improve customer lifetime value and our structural edge. At the core, at the center, we are compounding our foundations. Our third pillar is amplify the Admiral DNA, and this is to ensure that our culture, our talent, the innovation and the impact continue to evolve, providing stability and long-term direction and resilience as we grow. So the pillars are interconnected. Stronger foundation are a driver of stronger capability and in turn, these are enabler of stronger performance. Let me now walk you through each of these pillars in more detail and explain what we intend to prioritize and what we aim to deliver for each. So first pillar, scaling selectively and profitably. We have a clear ambition to continue to scale all our business while increasing margins in our newer lines. In U.K. Motor, we'll continue to grow as we have done in every cycle since Admiral was founded with discipline and at the right time, as Alistair illustrated earlier. We'll continue to invest to maintain our market-leading margins. In other lines of business, U.K. Personal Lines, Admiral Money and Europe, we will continue to grow and at a faster pace of Motor on average, generating greater economy of scale and higher margins. A key focus will be transferring our underwriting and claims trends from U.K. Motor into other products and geography as well as creating more cost synergies across the group and leverage the benefit of multi-risk ownership. Overall, we expect to deliver strong revenue growth everywhere, including reaching top 3 position in Other Insurance Personal Lines in the U.K. and substantially higher margin for those business combined, more than doubling profit by 2028 and more profitable growth thereafter. Finally, we will continue to develop our new and still small U.K. Commercial Insurance business, building a stronger SME proposition and growing commercial motor starting with the integration of Flock. Now let's move to the capabilities that are the key enabler of the growth ambition that we just discussed. It's a virtuous circle that starts from our structural strength in data, customer focus and speed with the objective to increase customer lifetime value. And with higher customer lifetime value, we create optionality, the flexibility to reinvest in these capabilities or to invest and grow or to retain margins. On the left side of the slide, we see how this focus translate into better underwriting results and efficiency. We'll continue to extend our advanced predictive AI capability, increasing both the quality and the velocity of pricing across all the lines of business and geography beyond motor. We'll also increasingly leverage on connected vehicle data and predictive AI beyond underwriting into customer-based management. This model -- this predictive AI model already delivered over GBP 100 million of incremental loss ratio value, and we expect this to continue over time. At the same time, we see good potential from generative AI to improve customer engagement, to increase productivity in technology and service area, and in particular, to improve speed of settlement that is great for customer and in addition, correlates with lower cost of claims. It's a win-win. Combined with further automation and continued cost discipline, we expect more than GBP 100 million of annual efficiency benefit by 2028. That as I said before, we may decide to reinvest in existing capability. On the right side of the slide, we look at our customers. We are strengthening a mobile-first digital end-to-end experience, multiproduct ownership and retention, which is already above market and will further benefit from multiproduct customers retaining around 5 points better than the rest. Lower expense ratio, higher retention and multiproduct ownership are key driver of higher customer lifetime value. As mentioned, this creates optionality, but also a more resilience to long-term market trends, margin pressures and volatility. So moving to the third pillar, amplifying Admiral DNA. This is what makes Admiral Admiral and different. It's our culture, it's our approach and it's something we are deeply proud of. As the environment evolves, we are focused on ensuring that our DNA evolves too, starting with our people through reskilling, developing internal talent and strengthening diversity and mobility across the group. We had this year so many examples of senior leader moving across different area and geography, including the new CEO of Veygo and new Head of Claims, new Group Data Officer, new Head of Data and Tech in Europe. And this internal mobility allow us to get different perspective and cross-fertilization from one side, but also continuity and cultural fit from the other. Another strong feature of Admiral culture is relentless curiosity and innovation, and we'll continue to evolve our products and innovate for our customers. We focus on offering competitive price, inclusive product, affordable product, including for nonstandard risks. Safety and sustainability are central in our product proposition, whether through fleet safety proposition like Flock or through EV electric vehicle leadership or initiatives around flood prevention. We also want to increase our positive impact on communities, investing around 1% of profit into community initiatives with focus on employability and climate resilience. We are proud of the 45,000 volunteering hours delivered by our colleague in 2025 and remain committed to our net zero ambition by 2040. So that was the third pillar of our strategy. Our strategy is also supported by a simple and disciplined capital management framework that is designed to increase value over time. So how we allocate capital to our operation? In U.K. Insurance, we focus on optimizing returns over the medium term. As we've always done, targeting consistently high return on equity with no structural capital constraints. In other lines, we invest to support growth and margin expansions where financial orders are met or expected to be met in the near term. In newer hires, like commercial, for example, we allocate capital to R&D and early-stage investment while requiring a clear right to win and scalability in the medium to long term. A key structural advantage is our capital-efficient reinsurance model and this is a competitive advantage that is quite difficult to replicate as it stands as it is built over more than 20 years of strong track record. Geraint already talked you through the other steps of our framework, including the introduction of buyback as additional way to return surplus to our shareholders. Selective M&A remains an opportunistic tool to accelerate growth, especially on Other Personal Lines in the U.K. and in Europe, only where our financial hurdles are met. So in this slide, next slide, we bring all of it together. Our strategy and capital management framework designed to deliver strong value for our customers and shareholders. We already delivered strong earnings growth, exceptional return and resilience through the cycle with a 7.6% EPS CAGR over the last 5 years. Looking forward, our ambition is to sustain and build on that performance by scaling what already works, disciplined growing U.K. Motor, faster growth and margin expansions in other lines and continued optionality from capability improvements. Our model is quite unique in the sector, delivering at the same time, strong returns, growth and exceptional capital efficiency. Importantly, this is about quality of growth as much as quantity, retaining our competitive advantage, our capital discipline and our culture that underpins them. In short, we believe we can continue to deliver higher returns sustainably while staying true to what makes Admiral different. So conclusion, to sum up, 2025 was a record year for Admiral, record profits, record dividends and strong customer growth delivered through discipline in U.K. Motor and increasingly diversified contribution across the group. Second, we have fully delivered our 2020-2025 strategy. Admiral today is resilient and more diversified with proven competitive advantage that are difficult to replicate. Third, looking ahead to 2026, while U.K. Motor market remains competitive, we expect price to increase. Admiral is well positioned to perform strongly and remain disciplined and resilient through the cycle. Fourth, we have evolved our strategy to compound those trends, not change direction, but raising ambition while staying disciplined. We have strengthened our capital management framework, adding buybacks alongside dividends while maintaining a very strong balance sheet and flexibility to invest. We remain confident on our trajectory, on our ability to leverage market trends and continue to deliver even greater value to our customers and to our shareholders for the long term. Thank you very much for listening. And now we're ready to take questions. Milena Mondini: [Operator Instructions] I think, first one, I saw it. Darius Satkauskas: Darius Satkauskas with KBW. The first question is sort of a statement and a question. I appreciate the update to the capital return policy introduction of opportunistic buyback. I think one of the challenges with having an opportunistic buyback rather than the program is that when you do it, it's great. When you don't, it sort of signals in the market that management is saying the shares may be expensive. How are you going to deal with that challenge? And are there any hurdle rates you'd like to point for us to sort of gauge how you think about when we should expect buyback and when not? And the second question is, your Flock acquisition, where do you think you are in positioning for the potential liability shift to Commercial from Personal among your competitors? And who do you think is going to determine the win in the future? Is there a risk that a company like Allianz with a huge balance sheet simply takes the entire market in Commercial Insurance? Or do you think Admiral can appropriately compete 10 years down the line, 20 years down the line? Milena Mondini: Geraint, do you want to take the first one, I'll take the second? Geraint Jones: Yes. So buybacks, it will be based on what the Board assesses is the right thing to do to try and deliver the max return for shareholders over the medium to long term. I don't, certainly for the foreseeable future, expect it to be dip in, dip out. We'd expect to be doing it for 2026, and we'll give -- we -- the company will give an update on that at least annually, I suspect, as we move forward. But yes, I hear your point on opportunistic versus steady. Milena Mondini: So your second question is about Flock and Commercial Insurance. So there are a few reasons why we're interested in this market. It's attractive as stand-alone market, but it's also a market where we see we can deploy a lot of our strength. And the fleet market is very competitive. So you do need to be a very good underwriter. Our claims and pricing strength can be transferred across nicely. But we also think it's a market that is -- it will be disrupted. And that's why we didn't want to really enter in the traditional way, but just focus on a proposition that we think is fit for the future, is the type of business that's going to grow in the future. So it's telemetry based. There's a lot of data from -- a lot of driving data, a sector in which we already have developed strong components to very large and growing telematic portfolio in Personal Lines. It's an interesting proposition because there is a strong feedback loop to driver to increase safety, to increase performance. And I would say it's also a building block for car of the future. The more the car become -- embed safety features and become autonomous, the more this type of skill set, data-driven pricing and underwriting and the feedback loop is important. So for us, it's a very interesting way to create and to develop a business that is interesting per se, but is also a way into the future. And I think it's a competitive market. We need to do it in the right way and with a proposition that is future fit. That's our ambition there. And we think the mix of Flock skill, technology and proposition, an Admiral amount of data, strength in pricing, data-driven pricing sophisticated telematic and also very strong claims management really can create something unique. Sorry, I'm going to go in order one. Ivan Bokhmat: It's Ivan Bokhmat from Barclays. My first question would be on the strategy into 2030. I just want to clarify, perhaps, did I interpret it correctly. So the slide that shows your 8% CAGR in the past 5 years, you're saying that you're trying to achieve that same growth into 2030. So as a statement, maybe you could just confirm that. And secondly, on the trajectory of those earnings, as far as I understand, for 2026, you're talking about flattish numbers and then it would imply more of a hockey stick trajectory in later years. So perhaps you could just talk a little bit about how this trajectory might look like, where the acceleration will come and maybe specifically on the U.K. Motor, that cyclical target where you would grow 5% through the cycle over time, when will that time frame apply in this particular case? And maybe one final small question. The partial internal model, the -- if you apply imminently, do you think you will get the regulatory approval by year-end? And what does it mean for some extra capital decisions? Milena Mondini: Yes. So I think what we're seeing here is 3 things. As you know, we normally don't give very precise guidance on long-term or medium-term earnings. But what we're saying is that there are 2 very clear revenue for growth and profitable growth in the future. Our core market, that is U.K. Motor, is a market where we have a market-leading business, we expect to continue to grow across the cycle. We'll continue to do at the right time and with the right choice and the discipline around pricing. But we'll continue, as we've done in every single cycle since Admiral was founded. We'll continue to grow our U.K. business from a larger base and retaining very, very strong margin. We also have another leg that is our other lines of business, Personal Lines and U.K. Insurance, Europe and Money, and we're planning to grow across all of them indistinctively and also increase margin for those business combined. So if you take those 2 things together, we expect to increase shareholders' returns over time without having necessarily put a specific date because there will still be some cyclicality. But the other preservation is with increased contribution from other lines, although there will still be market model cyclically to impact our results. We think we are gradually, over time, reducing the dependence on a single cycle. So that's the key message. Geraint Jones: Internal model? On the internal model, we do expect to submit our application for approval very soon. The time line for review of that is not fixed. And as you can imagine, it's not a short read. So I think we'd update on the outcome of that at the appropriate time rather than comment on how long we expect it to take. If and when it's approved, you can be sure we'll be trying to use it around the business to optimize and things like that. And again, we'll talk about that at the right time. Milena Mondini: Sorry, you mentioned something also about the shape. And as I was saying, there is still crack in the market. So as Geraint suggested, we do see a different path across the next few years. So we'll grow through the cycle. But next year may have a different impact on our growth ambition than the year after that. So that's -- but that's very normal. That's what we have done in the past, as you've seen in the slide that Alistair projected. We tend to grow when it's the right time when underwriting margin are healthier and will continue to do so. Sorry... Benjamin Cohen: Ben Cohen at RBC. I just wanted to ask a few things on the U.K. Motor business. Firstly, would your central assumption be that you would be able to match claims inflation through the course of '26? And could you make a comment as to what you've seen in the market reaction as you've tried to put through or you have put through some price increases at the beginning of the year? And the third element, could you just remind us what happened to claims inflation in Motor kind of post the Ukraine, Russia invasion, just to maybe give some sort of comparison with maybe where we are now in terms of the situation in the Middle East? Milena Mondini: Al, take it the first and I'll, sorry... Alistair Hargreaves: Yes, sure. So in terms of managing through the cycle in 2026, we're expecting claims inflation, as I mentioned, to be towards more normal levels, so mid-single digits. We'll be looking at that. We'll be looking at elasticity within the market. We'll be thinking about average premiums and continuing to price with discipline. As you saw in 2025, we did that and we've -- as Geraint said, we're very happy with the profitability on that yet. It's not as strong as '24, but it's still strong. So that will be the same approach that we'll take to 2026. As Milena said, reiterated, we think that's the right approach to optimizing both value and growth over the medium term. So far, in terms of market at the start of this year, we're seeing different strategies from different players. But broadly speaking, I'd say that market premiums have been relatively flat. But as I say, we've started to increase our prices at the start of the year. In terms of claims inflation post the Russia invasion, there was a lot of disruption to the supply chain and that was one of the impacts that caused higher parts, vehicle inflation as well as supply chain constraints. We don't think it's a direct parallel to what we're seeing at the moment. In terms of the disruption that we're seeing at the moment is more about oil and fuel prices not directly related. But I think as you're inferring, it increases supply chain or the geopolitical instability increases the risk of that. So that's something we'll be watching very carefully through our supply chain. William Hardcastle: Will Hardcastle, UBS. First of all, I'm going to embarrass you, Geraint. Thanks very much for your help over the years. There's been some journey in the current role. I've always really enjoyed our interactions, some of them quite lively. But you've always been really helpful. So good luck for future endeavors, including the Admiral roles. Next, on to the questions, I'll ask you the tough ones now. You booked 2025 under -- undiscounted booked loss ratio at the 78% or 85% undiscounted. That's an average number. So I'm assuming the exit was slightly worse, given the shape of the pricing last year. I guess prepricing in excess of inflation, pre-percentile shifts, how roughly, where is the starting point essentially for that '26? How much worse than the 85% should we be thinking? And then moving on to something a bit bigger picture, doubling of the non-U.K. Motor business. It's quite non-Admiral to give a target like this. I'm sort of intrigued as to the logic, the thinking behind being -- it must imply a lot of confidence behind it. Does it imply any slowdown at all of top line and sort of extraction of the benefits you put through? Or is this just a better hope and a direction of Travel from here? Alistair Hargreaves: I'll take the first one. So the first one was about the exit loss ratio. So as you pointed out, the undiscounted booked loss ratio is at 85%. It's not -- it's higher, obviously, than '24 that was an exceptional year, but it's not unusual if you look back at previous years, hence, the comments about good profitability. As I said, we managed rates through the year, paying very close eye on claims trends. And in the second half, we were flat. And I think that means that the exit loss ratio was slightly higher than the overall, but not significantly so. And as I also mentioned, as we started in '26, we made some adjustments to price to make sure that our starting point in '26 was in the right place. Milena Mondini: The second point is about confidence about the other line of business. It's a mix of 2 things. First of all, is the momentum. If you look at where we are, momentum and maturity, if you want, of some of our other lines of business, we have fantastic 2025, doubling profit in Admiral Money, strong recovery in Europe and return to profitability with confidence in the prospect and the future. And other lines of insurance in the U.K. also deliver a stellar year. I think we are reaching a maturity in those areas that allow us to continue to grow and increase margin over time. And it's also, I would say, a reflection of our strategy because the strategy is also very much about compounding. And so what I mean is that we have a few things -- we're focusing a lot on is our proposition to multi customers, very important because customers with more risk have better retention, have better loss ratio and better NPS, tend to be happier and stick longer with better results and also better experience for them. So I think there is momentum in terms of the multi -- our journey to multi-products are probably later than some other player in the market because historically, we were very much a U.K. Motor story. But as this business grow, there's a lot of potential there. That's a very interesting opportunity, but also transferring some of the strength in Predictive AI, for example, across all the business is also another big driver of value. And so if you merge those 2 things, plus economy of scale, plus potential benefit, we do see a momentum that will allow us to both continue growing and deliver more profit. And so I think it's really very much a reflection of our strategy and a bit of the switch of focus from growing individual business that are stand-alone interesting to really compound the benefit. So it's just meant to be that over time. We'll continue to be disciplined. So we follow cyclicality. There's cyclicality in the U.K. Household market that will take into account, but we do think we can achieve both growth and higher margins. Thomas Bateman: Thomas Bateman from Mediobanca. Just a quick question on the reserving. I was surprised to see the PYD quite low, but then the risk adjustment percentile come down. Could you just explain now how that's working? And the second question is actually a follow-up to Will's on -- I guess, on Europe. I take your comment of Spain is breakeven now, but I guess you have been working on that for a while and there is more confidence there. And you alluded to AI platforms, et cetera. Have you been able to launch on any of those AI platforms, either in the U.K. or in Europe yet? Milena Mondini: So do you want to take the risk adjustment? Costi maybe briefly comment on the confidence in Europe and Spain, and I will pick up maybe on the AI. Geraint Jones: Actually, Tom, if you split out the Ogden impact on last year and compare year-on-year, you get the same percentage. So a fairly strong level of releases coming through year-on-year. The percentile was really ever so slightly down. I wouldn't say that we'd notably dropped the risk adjustment strength. So it's a very strong set of reserves and continued pretty consistent releases coming through basically in line, I think, with what we've guided in that kind of 10-ish range over the past couple of years. Costantino Moretti: So on Europe and then on the AI point, so basically, yes, as Milena mentioned, there is a good level of confidence. It's a large opportunity where we are making very good progress on several fronts. And what is giving to us the confidence is that we are keep trading at very good margins on the direct business and we are seeing very good progress coming from the distribution-diversification initiatives, which will help us to target much larger opportunities. And so once also those initiatives will turn into profitable ones in the medium term, we expect our overall margins to expand. In addition to that, we expect a more efficient reinsurance agreements to provide benefit in the medium to longer term. Clearly, there is also an element about the competitiveness on the expense side on the efficiency. And we're also there making good progress, and we are testing also some more advanced gen AI tools and models. On this front, it's more early days, but early signs are very promising. Milena Mondini: I think more in general on AI, there is a lot of opportunities. And a lot of that is focused on improving efficiency internally. It's about improving automation, increasing speed of servicing the customer and so forth. I guess your question was more referred to the distribution element. So how customers interact and choose insurance. And if you think about Admiral from very early stage, we've always been a bit of a forefront of disruption and distribution, and we were among the first direct player in the market in the U.K. We were the first to have an Internet-only brand, Elephant, let's call it in U.K. We're the first one to embed price comparison site with confused.com and so forth. So it's obviously something that, as you may imagine, we're very close -- we're working very close to price comparison site as they may embed more gen AI technology in their way of interacting to customer and distribution and adapting our website. We also have interesting pilot in part of the business, like gen AI embed chatbot in Veygo and other initiative across the group. So something we're very, very close. Now if you ask me, do you think this is going to be a very big disruption in U.K. Motor in the short term? I personally don't think is the case. I think there will be a different way of interacting with the customer. But the value proposition to a customer, how much you can save by shopping on price comparison site on Motor insurance is huge. It's hundreds of pounds sometimes. So I don't think it's going to be the first market where we see a lot of change. I think it's early to say. Everything is very nascent at this stage, but I think there are markets where this could be an acceleration to direct and that could be the one where customers are more used to speak with an intermediary, for example. So it can be commercial lines, it can be Europe where direct is not picked. But at this stage, it's very early to say. As for us, we try to be close to everything and work and progress on all the fronts at the same time. I think we had 1, 2 and 3, yes. Carl Lofthagen: Carl Lofthagen from Berenberg. Just the first one on the U.K. Home book. I think we've seen kind of continued expense ratio improvement as you've gained scale and you're now running the business at a combined ratio in sort of the mid-80s. Is that sort of the level that you're sort of happy with? Or are you willing to trade some margin to take market share as you've kind of said you want to be a top 3 player? And then the second question is just a clarification on the share count development. I think if I just look at the basic share count, which decreased by GBP 5 million from GBP 306 million to GBP 301 million in H2, but diluted went up GBP 1 million. Presumably, the shares you're buying back for the share scheme shouldn't impact the share count. Just I guess for modeling purposes, I mean, how should we kind of think about that, excluding sort of any sort of additional buybacks, et cetera? Milena Mondini: Sorry, Al, you take the first. Geraint will take the second. Alistair Hargreaves: So on the Household expense ratio, we've had an advantage in terms of expense ratio for Household for some time. But as you highlight, it's an area of focus. As the book grows and we get more renewals to customers, that helps in terms of expense ratio, but we're also focused on driving improvements. For example, Milena talked about how we can use gen AI for both customer experience and efficiency. So those are areas of focus. In terms of the combined ratio range, we think about Household similar to Motor, where it's about optimizing for value over the medium term. But as you're alluding to, we're a bit more biased towards growth on Household than margin. But we -- I think the 80% is good. I think we talked a bit about a range when we did the deep dive, so we're not sort of sticking to a specific target. But we'll do that in optimizing for value and growth over the medium term. Geraint Jones: On share count, Carl, if you look at the -- in the back of our accounts on Note 12, you got the update the number of shares that were in issue every year. It's been GBP 306 million odd for a couple of years since we stopped diluting for the share plans. The GBP 301 million is actually the number that's used in the EPS, and that excludes some of those shares that are held in the trust. The share purchases per share plans won't adjust the number of shares that were an issue, obviously. They will go to employees. The share buyback and cancel, obviously, that will reduce the number of shares in issue. So the purchase for the share plans doesn't change the number of shares. Buybacks obviously will. Derald Goh: It's Derald Goh from Jefferies. Two big picture questions, if I may, please. So the 4% sort of EV -- sorry, AV penetration rate by 2035, that's an interesting number. I'm just keen to hear what are the main variables that might sway that number. Essentially how prudent is that 4%? And maybe if you could also say what were your projections 10 years ago? How does that compare to what you had 10 years ago, let's say? And then secondly, going back to distribution, you mentioned there's potential to disrupt there. Maybe could you speak to your past experiences? I know you've been trying to push PCWs outside the U.K. Some places are more successful than others. What might be different this time that would allow you to be more successful with whether it's AI or changes in customer behaviors and what not? Milena Mondini: Sure. I think I'll take the first and second, but Costi, if you want to add anything on distribution outside U.K., it would be great. So EV, this is referred to this is referred to relatively common forecasts that have been out like the World Economic Forum and a lot of other organization. And I think the number is quite aligned. You may look at car sales in terms of car park is 4% because there is quite a lag time from new sales to fit into car park. The average -- the median age of a car in U.K. is 16 and probably the average is 11 years. So it takes time as the new model gets released. I think you're absolutely right. So it's still very much of an estimate, and there are a lot of influencing factors. You need to get, first of all, regulation in place, infrastructure in place, technology and investment in place and customer appetite in place. So there are a lot of things that can contribute and can go both direction. If we don't see the simultaneous development of all these 4 areas, it's difficult to imagine a world in which people will really freely just use autonomous vehicles car on the roads. So I cannot tell if it's prudent or not. But I would say this is really the majority of the -- I think everybody agrees that it takes some time, both because there are some hurdles and because there is time for the car park to evolve. And I think also take the chance to remind that this is about L3+. L3 basically means when the driver can take the highs off of the wheel, but still need to get in, in 10 seconds. So it's not really full benefit of EV in terms of, for example, liability shift and so forth. Anyway, it's very nascent now. So you asked me how this was versus 10 years ago? I think this is a story that we see in all the technology disruption. If I go back 10 years, this was supposed to be earlier. And so what happened is that this projection tend to shift. If you ask me how it was compared to a few years back, like maybe 3, 4? What I would say is not very different, but we see a slightly later adoption, but probably faster. It very often happen with every technology now that it takes longer, longer, longer, but then it can be more. So it's difficult to say, honestly. It's very, very early stage, and the U.K. is a bit behind the U.S. in terms of regulation and so forth. Second question was on distribution. I don't know, Costi, do you want to kick it off on? Costantino Moretti: Yes. On distribution, the -- well, the European markets, as you know, are very different. When we started our businesses a few years ago, I think direct was about 5%. Now on average, it's getting closer to 20% -- between 15% and 20%, so direct is still growing. And therefore, if a more AI-driven disruption would happen, we could say that being a leading player in those markets that will put us in a nice place. At the same time, price comparisons, you're right. We try to educate the market and to push more digital growth to accelerate. It didn't happen at the speed we expected. And at the moment, as I said, direct is still growing, price comparisons are doing nicely, but not at a supe- fast speed. At the same time, traditional are still a very important channel, which predominantly is the main channel, which is linked why we decided a while ago to start to diversify the distribution and on how to win and how we can be confident basically because the right to wins are exactly the same of direct. So risk selection, customer experience and lean operations. And the moment you demonstrate that you can replicate those, then you can win in that market and our results that are coming through are making us confident more and more that we can achieve this. Andreas de Groot van Embden: Andreas van Embden, Peel Hunt. Two questions, please. First one is on ancillary sales. I saw that the average sort of revenue per vehicle in the U.K. has come down from GBP 76 to GBP 71. Just wondered what your outlook is for this in '26 and '27, particularly not only on the installment income because I assume you've lowered your APRs, which has brought down the average premium per policy there or per vehicle there. But also on the other ancillary sales, whether you're seeing any pressure on those fees and commissions? And on -- the second question is on price velocity. I think you mentioned that. I just wondered what would you exactly meant by that in the U.K. and whether extending it means changing pricing more. I don't know whether you do intraday pricing or not in the U.K. But whether -- with that velocity, by how much could you extend it? And how important is that to maintain your competitive position, particularly through PCWs in the U.K. as the market becomes more competitive? Alistair Hargreaves: So it's Al. I'll take the first one. As you mentioned, the main driver of the change in the revenue is premium finance. It's worth noting that there's 2 impacts there. So we did reduce our APR through 2025, in line with the cost of funds. But also, we saw our average premiums coming down through the year. So that also impacts on the other revenue per vehicle. So in terms of our APRs, they're very competitive at the moment, not necessarily anticipating any changes, but we'll continue to assess for fair value on that product. In terms of average premiums, as we've said, we're expecting the market to turn and that will lead to -- and we're increasing our premium, so that will flow through as well. I don't think there's anything else of significant note to call out on other revenue. Milena Mondini: So on the price velocity, I think if we step back just a few years back, a lot of the pricing was done through SaaS or XL, and we could put price change in production overnight, we can have a meeting. If you all ask me, I'll let Geraint decide and make change almost overnight. That is still the case. And I think it's an advantage. And I think it's really rooted in the culture and the closeness of the management team to price into claims trend and that relevance that we give to loss ratio all around Admiral. But our pricing is more and more based on machine learning and predictive AI models. And this, of course, is not something that you change overnight because it's more complex, require more technology, the process to upgrade and renew the model just takes longer. And we've done a fantastic -- like a lot of work in the last year or 2 to really bring this time from ideation to change in production much shorter and shorter. I think there is still a bit we can go for. And so we're very close and we have a strong capability, more than 120 models in place, GBP 100 million of loss ratio incremental value. So we start from a good point. But I think there is more we can go to increase this even more. But the biggest opportunity in my mind is to extend this also more and to extend these trends more into other lines of business. So that's where I see the excitement. And to do that, we appointed this year a new group CDO. She did a great job in Europe to set up a new data platform. She just -- she's coming over and she came over actually a couple of months ago, and she's going to help to increase even more this ability. So I think we're really in a very strong position, but want to go. We're very keen to be as fast as we can. Operator: [Operator Instructions] We will now go to the question. And the question comes from the line of Vash Gosalia from Goldman Sachs. Vash Gosalia: Hopefully you can hear me. First of all, apologies for not being there in person. I have 2 questions, please. The first one is just on something you mentioned on your 2026 profitability. So if I heard you correctly, you said you plan to move to the middle of your confidence interval through 2026. And you've obviously also said you expect flattish profitability. So can I read that as your earnings in 2026 actually being supported by PYD just to offset some of the weakness in U.K. Motor? And any sort of color as to how or why that might be different would be really helpful. And the second question, a slightly longer term or big picture question. So you've obviously sort of alluded to you having a lot of sort of advantage on the cost ratio front. And you can obviously leverage AI and gen AI to improve that. But I'm just trying to think if the technology essentially democratizes the use of AI, wouldn't that allow your competitors to actually gain advantage quicker and narrow the gap to you? So any sort of color or comment on that would be helpful as well. Milena Mondini: Will you take the first? Geraint Jones: Yes. So we would expect to start to release our -- reduce our risk adjustment percentile from its current near max level towards the middle of the range during 2026. I would reject your assertion of weak U.K. Motor. I think U.K. Motor profitability for '25 is strong, but slightly less strong than the extremely strong 2024. So we think there's good profitability to come on 2025. And obviously, that starts to feed into the accounts in 2026. PYD and reserve releases are a constant feature of our income statement and profitability. But you are right to expect as we reduce the risk adjustment to some extent, obviously, that contributes to profitability in 2026 versus 2025. And if you do the mix, flat profitability, but higher profits from other lines of business means slightly lower profits from U.K. Motor, but from a very high start point. So I think -- Vash, I think that was the nature of the question, right? Vash Gosalia: Yes. I mean -- and apologies if I said like weak profitability. I meant more direction-wise. But yes, you've answered my question. Geraint Jones: No offense taken. Milena Mondini: On the second point, it's a very good question. It's a very good question. I think every technological evolution, data evolution and if you think about digitalization, automation, migration to cloud, more and more like technology, it becomes more and more a commodity itself, but the way technology is implemented is very differentiating and it becomes more so as we move along. And so a big decision on AI is how you do it. A big driver are how much this is adopted. So you can deploy gen AI tool to have all the organization, but how much is adopted, how is adopted is a massive driver of how much efficiency benefit you can drive. I think we start in a great situation because we tend to have a very strong culture, very transparent and people with good expertise that are really, really keen to do what is right for the business. Governance is another differentiating factor, how you govern what you put in place and how you make sure that it's solid, is stable, how make sure that the model learn over time. I think an appetite for innovation, bottom up as well as top-down is also very important. So I think a lot of the element that plays here are a culture and also the ability to do it faster, better and cheaper than others. And it's still early to say, but I think we are well positioned to achieve that. We have a last question. Shanti Kang: It's Shanti from Bank of America. You just touched a bit earlier when we talked about the internal model and how that could give you a bit of flexion for M&A. Historically, I guess, you guys have partnered with names via Pioneer or you've had a relationship with the existing names before you would kind of move forward with an M&A transaction. What kind of skill sets or regions, if you were looking at that, would you be thinking of? Milena Mondini: It's the last question. Do you want to take it? Geraint Jones: It sounds like I've explained this badly. I wasn't really referring to the internal model coming in, giving us more firepower for M&A necessarily. I understand the point of the question, but I think funding small M&A to retain profitability is one of the options I would talk about. I know you should cover where M&A might play a part of it. Milena Mondini: Yes. So as I said, our plan -- our history of successful organic growth, and we're excited about the plan we have on growing organically. We will look into opportunity mainly to accelerate diversification, I would say. So as we've done with Flock as we've done with More Than, we'll look at accelerated diversification in other lines of business in insurance in the U.K. or in Europe where we need more scale. But we stay open, look and see, but also very, very focused on our organic growth plan and consider different option on how to eventually tackle the challenge. Thank you very much. Thank you for your question, and thank you for your time. And we'll be around a few minutes if that can help. Thanks a lot.
Milena Mondini: Good morning, everyone, and welcome, and thank you for joining us as we review Admiral 2025 year-end results. Today, we'll be announcing another remarkable year of financial results and strategic progress. So I will start with the key highlights before handing over to Geraint on the financials and to Alistair on U.K. Insurance and Costi on Europe. I will then come back to reflect on what we have achieved over the last 5 years and finally explain how the evolution of our strategy position us to create even more value in the years ahead. So let's start with the main achievement for 2025. We delivered a record profit of GBP 958 million. This was up 16% year-on-year, reflecting disciplined execution and growth across the group. 2025 also marked exciting progress across data, technology and AI and the evolution of our motor proposition, including the acquisition of Flock subject to regulatory approval. Today, we'll also outline the evolution of our group strategy. This strategy builds on a very strong platform, but more diversified customer base and the competitive advantage we already have to deliver higher long-term value for all our stakeholders. We will also cover our new capital distribution framework, including share buybacks. Geraint will take you through that later. So more in detail. As already mentioned, 2025 was a year of record. Our customer base increased 7%, while we continue delivering strong customer outcomes with the group Net Promoter Score over 50. Group profit reached a new high, driven by record U.K. Motor profit, passing now the bar of GBP 1 billion, following another record year in 2024. This was achieved in a challenging market environment, thanks to positive evolution of recent years and continued underwriting discipline across the cycle. Importantly, this was not just a U.K. Motor story. All parts of the group contributed. In the U.K., Other Personal Lines, Admiral Money combined delivered a profit of GBP 88 million. Europe also performed strongly with a fast return to profitability in Italy and great results in France, which Costi will cover shortly. 2025 was also a year of strong shareholder returns, supported by a 7% increase in dividend per share, a very strong capital position with a solvency ratio of 193% and another stellar return on equity of 53%. Beyond the financial results, 2025 marked an acceleration in our strategic progress. We are pleased with our rapid advancement on artificial intelligence, particularly with the value delivered by machine learning models and the new gen AI center of excellence to scale priority use case, train our people and provide them with the right tools. We are managing more than 150 gen AI initiatives across the group, including support to over 4,000 colleagues, some agentic models with promising initial results and more potential to come. Selling more product to our existing customers remains a key growth driver with our multi-risk customers now exceeding GBP 1.6 million. Across Europe, we continue to evolve our broker propositions with stronger segmentation and more customized offering, driving better margin, as Costi will explain later. We also continue to innovate in Motor. An example is our partnership with Octopus that positions us well in the fast-growing salary-sacrifice scheme for electric vehicles with a tailored risk-based proposition aligned with our ambition to support customers in making greener choices. And in Admiral Money, completing our first forward flow deal was an important milestone as it opened up a more capital-efficient growth path and support higher returns and lower volatility. On M&A, the integration of More Than is now fully completed and contributed positively. Elephant disposal is also completed. And finally, early this year, we announced our intention to acquire Flock, a company we had invested in since 2024. Flock offers a telemetry-based fleet proposition with an effective feedback loop to improve safety and performance. It's an excellent strategic fit with our U.K. Motor expertise with promising underwriting and claim synergies and it's closely aligned with our joint ambition to improve safety on the roads. And by combining Admiral data ambition to Admiral's strength with Flock technology, we see an opportunity to develop a differentiated fleet business in an underserved market. So in summary, 2025 was a record year for Admiral with strong profits, customer growth and progress in technology and strategy. Now before handing over to Geraint, I want to take a moment because this will be the last time that you joined me on stage to present results. And I think it's fair to say that the strength and discipline of the performance for about 2 years are a good reflection of his leadership, his judgment and his consistency over the last 12 years as CFO, a period during which Admiral tripled its turnover and grew profit from GBP 350 million to almost GBP 1 billion. And please join me to congratulate Rachel who is here with us today and will succeed to Geraint, bringing deep knowledge of Admiral, a strong track record within the group and a great skill set for the role. So thank you, Geraint, and congratulations, Rachel. Geraint Jones: Thank you. Good morning, everyone. 12 years of not being conduct. One last time, let me talk you through the main drivers of an excellent 2025 result. Lots of positives, lots of good milestones. I'll cover the U.K. Motor loss ratios, the dividend, strong capital position. And as Milena mentioned, I'll talk you through the change in the approach to capital return that we've announced today. To start with though, let's look at the component parts of the group profits and the main ratios. The group combined ratio was very positive again at 80%. That was 3 points higher than 2024, though the impact of Ogden accounted for around 2 points of that difference. So in reality, only a very small change. And that, in turn, has made up of a slightly improved expense ratio and a slightly higher loss ratio. The latter as expected, due to the higher loss ratio 2025, underwriting year in the U.K. Motor having an impact. On to the results then. In U.K. Insurance, overall profit was GBP 1.1 billion. That's GBP 110 million higher than 2024, including Ogden, or GBP 180 million higher if Ogden is excluded, very big increase. The U.K. Motor results, I'll cover shortly, but the result there was a record profit, just over GBP 1 billion. And we're very pleased with a really strong year for the U.K. Other Personal Lines, Home insurance, Travel and Pet insurance, all profitable, strong growth. And the combined profit there was GBP 62 million, was nearly triple of 2024's result. In Europe, we're reporting a much better results, improving by nearly GBP 30 million versus 2024. We see growth in higher profits in France, small loss in Spain, impacted by new reinsurance arrangements and a recovery to profit in Italy. Good to see that happen so swiftly. And worth reminding that we continue to hold prudent booked reserves in Europe in the upper end of our range and the best estimates are also conservative. Admiral Money had a great year. Profit was double 2024's, benefiting firstly from good growth in the balance sheet. But also, as we talked about at the 2025 half year from profit generated from selling some back book loans in the first half and selling newly originated loans, which don't hit Admiral's balance sheet. That will be a continuing, we think, attractive feature of the Admiral Money business model. We continue to see good margins on the unsecured loans business, which makes up the big majority of the balances, but the results from car finance, which was relaunched in late 2024, are also encouraging. Credit loss experience remains very solid, and we hold an appropriately prudent provision for losses. There are some other comments on the page, which cover the movement in the share scheme costs and the other line, and you've got the usual extra information in the back of the pack. All in all, group profit was up 16% or 28% if you exclude the impact of Ogden on both years. Let's take a look at the very impressive U.K. Motor results. So this is a summarized income statement plus some of the key ratios and some commentary. Both years include the impact of the Ogden discount rate change. And so some of those year-on-year comparisons, you see look a little less stronger than they really are. We show the pounds and the percentage impact of Ogden in the table and starting with the top line. Customer numbers increased by 2% year-on-year, 50,000 added in the first half and around 80,000 in the second half, so 1% increases half-on-half. As Alistair will talk a bit more about later, we reduced our prices in H1 last year, and hence, average premiums have fallen. And so despite our bigger portfolio, turnover was down by 7% as the team took a disciplined approach in the competitive U.K. market and reflecting the claims trends that we were seeing. As a result of the reduced premiums and continued claims inflation, the current year loss ratio for '25 is 3 points higher than '24. And of course, we also don't see quite the same positive impact of Ogden in '25 than we did last year. And those 2 items are the main drivers of the higher combined ratio you see at the bottom, which is as we expected. The underwriting results improved by around GBP 40 million with higher earned premiums and a much lower reinsurance charge offsetting the higher net claims cost. You'll remember that we had much more limited quota share recovery assets coming into 2025, and we see a similar picture as we exit 2025 too. Net investment income was higher, up to a record level due mainly to higher invested assets at a similar rate of return. Profit commission was notably higher as we started now to recognize income on the high profitability 2024 underwriting year, though we still haven't yet recognized income on '21 to '23 or on 2025. We do expect to see revenue coming through on '21 and '25 very soon. I already mentioned the main drivers of the higher combined ratio we see at the bottom. But within that mix, reserve releases were 10% year-on-year, basically the same like-for-like. Next up, we'll take a quick look at the main U.K. Motor loss ratios, which, as always, are a key driver of this result. The chart shows the U.K. Motor discounted book loss ratios and there are generally positive and consistent messages to report here. We can see -- we see continued strong improvements in '23 and especially on '24 over the last year. 2024 is clearly a very good margin year on a very large premium base. In 2025, we see burn cost inflation around mid-single digits level and that's a small improvement in H2 versus where we saw things at the half year point. The first discounted booked loss ratio for '25 is at 78%. That's 7 points up versus '24 at its equivalent point. And that's again basically in line with our expectation. On an undiscounted basis, 2025 is 85% compared to 77% for '24. Now we expect '25 will be a good profitable year. You can see it looks healthy on the chart at the 12-month point, and it should develop positively from here, though obviously won't end as profitably as 2024. We maintained very high reserve strength. It's very close to the maximum percentile, and we expect that will reduce a bit further in 2026 towards the middle of our range. Overall, on claims, positive experience in line with our expectations, usual trends and there's more information in the back of the document. Moving now to look at the capital position. So this is the bridge of the solvency ratio from half year to full year '25. There's a couple of observations. Firstly, the capital generation in the second half is largely offset by the final dividend. And secondly, due mainly to pretty flat revenue in '25 versus '24, we see a much smaller change in the capital requirement in '25 than we did in '24 and particularly in the second half. And then the change in the capital requirements and the other items in the middle almost cancel each other out, leaving the group with a healthy -- very healthy, almost flat ratio of 193%. Short update on the internal model. Lots of hard work by our team, as usual, over the past few months since we last updated you. We now expect to make our application for approval shortly. Post approval, we'll target solvency coverage in the 150% to 170% range, probably at the upper end, in part to give us flexibility for smaller M&A opportunities. We'll give more information on the post-model approval capital position at the appropriate time. Speaking of M&A briefly, Milena mentioned earlier, the Flock acquisition. As we said in the press release, if that gets regulatory approval and completes in the second quarter, we estimate the impact on solvency will be a bit less than 10 percentage points and is, therefore, largely absorbed by the strong position. Next up is the dividend. So these are the details of the dividends, split between interim and final. And for 2024, we call out the impact of the Ogden change, which was obviously significant on the dividend for last year. The proposed final dividend is 90p per share. That brings the total for the year to 205p, over GBP 620 million, and that's 7% higher than 2024. The difference in the payout ratios year-on-year is due to us starting to use capital to purchase shares for the share schemes, which we said back in August would start in the second half of '25. You'll remember that historically, we issued new shares each year for those share schemes rather than purchased in the market, but we haven't done that since 2023. In the fourth quarter last year, the trust bought about 1 million shares for just over GBP 30 million. And the capital that we use for dividend and the share scheme purchases equated to basically the same percentage of earnings across both years, close to the 90% level. And in 2026, we expect the trust will buy around 3 million shares. Next up, we'll cover the change in the capital return approach. On the left, we show a summary of our capital allocation framework. Milena will talk a bit more about Point 1 later, which covers how we allocate capital to our businesses. And we're generally comfortable that around 10% of earnings is a fair guide of what we need to retain to fund and invest in growth. And that's meant an average dividend payout over the last 5 or 6 years of 90%. Step 2, we know the importance of strong cash returns to our shareholders. So the ordinary dividend remains at 65% of earnings. Step 3, as just mentioned, we purchased shares for the share plans. And final -- and Step 4, not finally, using some surplus capital is an option for funding M&A. And then that leaves the surplus capital and that's what's changing today. Historically, as you know, we've returned this to shareholders in the form of special dividends. But from the interim 2026 dividend, we'll change that Step 5 to be either buyback and cancel shares or pay a special dividend depending on what the Board believes is the best option. For 2026, subject to regulatory approval, we expect to buy shares at the interim and final dividend dates. The 90% guidance we've given out over the past few years to cover the ordinary plus the special or buyback plus the share schemes purchase should generally hold moving forward. And then one final slide for me to sum up. Looking back on 2025, clearly, it was a really strong year, record profits, record returns to shareholders, lots of positive results and developments across the group. For U.K., the Personal Lines and Admiral Money, great results, strong and swift turnaround in Europe, progress on the internal model, very pleasing stuff. And looking ahead, a few comments on what we might expect in 2026. On growth, in summary, we plan to grow everywhere. That's obviously subject to how the markets develop, in particular, when prices in U.K. Motor start to increase. For turnover, I'd expect a bit more growth in '26 than we saw in '25. And in general, of course, we expect faster growth from the newer businesses, U.K., the Personal Lines, Admiral Money and Europe. And then a few comments in respect to the group profit. Firstly, obviously, we will see more of an impact of the less profitable '25 underwriting year feeding into the 2026 results, but we will still benefit from good releases and profit commission coming through on 2024 and '23 and some of the earlier years too. Secondly, we project continued improvements in the results in aggregate for the newer businesses that we talked about. And finally, we expect group profit in '26 to be quite flat versus '25 after a really very strong last couple of years where profits have more than doubled. And all those comments, of course, subject to the usual caveats on markets, geopolitics, war and weather. That's it from me. I will hand you to Alistair now to talk to us about U.K. Insurance. Alistair Hargreaves: Thank you, Geraint. Good morning. I'm very pleased to take you through an excellent set of U.K. Insurance results. 2025 has been a record year across all our lines of business, underpinned by disciplined execution, customer centricity and strong operational delivery. Starting with the headlines. Customer numbers reached 9.6 million, up 9% year-on-year, with strong contributions from Motor, Household, Travel and Pet. We delivered GBP 5 billion of turnover and GBP 1.1 billion of profit, passing the GBP 1 billion profit milestone for the first time. We continue to deliver competitive prices, great service and good customer outcomes, which is recognized in customer feedback. We remain #1 in Trustpilot and achieve an NPS over 55. Importantly, 1.6 million customers now hold 2 or more products with us, a 14% increase year-on-year. Customers buying more products gives us better data to improve risk selection for all products. is a driver of our retention advantage in Motor and growth in new lines of business. Overall, an efficient source of growth that contributes to improved expense ratios. Recent announcements are leading to a more predictable regulatory landscape. Outcomes from the Motor insurance task force and premium finance review were in line with expectations, and the Home and Travel claims handling review is now complete, and we have no significant concerns. Let's turn to the Motor market. Starting with claims trends, frequency was largely flat following the marked decline we saw in 2024, and severity has returned to more normal mid-single-digit levels. Our expectation is that these trends continue, but the current macro environment introduces some uncertainty. The graph on the left shows a dark line for claims burn costs. Claims burn costs increased steeply through 2022 and then continue to increase but more modestly. The light line for market average premiums shows a lagging response to claims costs, increasing rapidly in 2023, outpacing claims costs and then declining. Both lines are indexed to 2021, and you see they cross in 2025 as increases in claims costs now exceed increases in premiums over the period. Let's focus on recent market prices. On the right, you see prices continue to decline through the second half of 2025, though at a slower rate than in the first half. We estimate average premiums declined by around 10% in 2025, broadly in line with movements reflected in ABI data. Since the start of '26, market prices are relatively flat with some differences in strategy between market participants. Market prices need to increase imminently. EY forecasts a Motor market combined ratio of 111% for 2026. This is on an earned basis, and EY assumed price increases through 2026. So delays in market price increases will put more pressure on this 2026 market combined ratio. Turning to Admiral U.K. Motor. In 2025, we focused on disciplined cycle management and maintaining our strong advantage in pricing, claims and customer retention. In 2025, we reduced rates by around half as much as the market. All the decreases were in H1. In H2, our prices were broadly flat. The left-hand graph shows that this led to a decline in new business market share in the second half of '25. Lower new business was more than offset by strong retention, resulting in modest policy growth, though lower average premiums resulted in a drop in turnover. In '26, we started increasing premiums with low single-digit increases at the start of the year to reflect the claims outlook and maintain good written margins. Taking a longer view, our disciplined approach results in varying growth through the cycle, but maximizes value and growth over the medium term. The graph on the right shows our year-on-year vehicle growth rate in blue, in yellow is our written loss ratio. Our loss ratio is consistently better than the market, but still fluctuates within a range due to the cycle. We respond quickly to claims trends, even if it results in slower growth in the short term. It then enables us to grow quickly when loss ratios are low, for example, by 15% in 2024. Since the start of 2020, our vehicles covered has grown at a CAGR of 5% and with an average combined ratio advantage of around 20% versus the market. We continue to invest in strengthening our pricing, claims and claims capabilities, including embracing predictive AI and gen AI, which Milena will talk more about. Electric vehicles is a great example of our pricing and claims focus. We lead in this growing segment. We're very competitive whilst delivering comparable loss ratios to high levels of reparability. Our overall approach is to be disciplined and grow when the time is right, whilst focusing on driving advantage in pricing, claims and customer retention. We're confident this will result in growth and maximizing value over the medium term. Let's move to our other U.K. Insurance lines where we've had an outstanding year. We welcomed 650,000 new customers, year-on-year growth of 21% and tripled profits across Household, Travel and Pet. In Household, market premiums softened further and subsidence claims were elevated in the second half of the year. Our own pricing remained more disciplined than the market and weather-adjusted loss ratios improved by about 2 percentage points. This, combined with top line growth meant that although prior year reserve releases normalize from the 2024 exceptional levels, we still delivered a record Household profit. The More Than integration is complete with around 380,000 Home and Pet customers transferred successfully. This has accelerated growth and enhanced capability, particularly in Pet. Travel grew customers by 29% and continued its positive profit trajectory. Pet grew even faster and reached breakeven just 3 years after launch. All 3 lines are now profitable with clear momentum and strong positions across their markets. So -- I'm going on too fast. So in summary, in 2025, we've delivered record profits. But in addition, Motor remains disciplined and well positioned ahead of the market. Pricing increases expected in 2026. Household, Travel and Pet are performing extremely well with growing scale and margin and customer satisfaction and retention are excellent with more customers choosing to buy more products from us. We enter 2026 with confidence that we'll continue to deliver sustainable profitable growth over the medium term. Milena will talk more about this shortly. Now I'll hand over to Costi for Europe. Costantino Moretti: Thank you, Al, and good morning, everyone. For our European operations, 2025 has been a year of consolidation. We have directed our efforts towards strengthening the operational core across our 3 markets, focusing on the fundamentals of discipline and optimization. It has been a positive period where we have made good progress on our strategy, providing a positive contribution to the group's ongoing diversification efforts. Moving to the financial results. The headline for the year is a return to combined profitability across the region. The business delivered GBP 39 million Motor profit on a wall account basis, of which GBP 11 million is the Admiral's share. Going back to the business performance, we closed 2025 with a good combined ratio of 94%. While this represents a significant year-on-year improvement of over 10 points, it is important to look at the individual market dynamics. In Italy, with ConTe, we have reached a small profit which is a GBP 30 million recovery from the previous year. This significant recovery was driven by strong actions taken on the expenses and a deliberate and disciplined pruning of the portfolio. We made the conscious decision to prioritize technical margins over volumes, leading to an expected vehicle in force reduction. With the business now on a more stable footing, we are in a position to look towards growth, always keeping the focus on its underwriting quality. Moving to Spain, where Admiral Seguros' reported results includes about GBP 8 million of one-off accounting impact related to a change in the reinsurance structure. Going forward, we have established new multiyear and large reinsurance arrangements at the European level with our historical partners. Effective from 2026, these agreements aim to improve capital efficiency and provide greater stability to our results. Excluding this specific item, the Spanish business is nearly breakeven. This is supported by the direct business, which provides a positive contribution to the results. While our diversification initiatives with ING Bank and brokers are showing very encouraging improvements while scaling up. Closing with France, where L'olivier has had a very strong year. We achieved double-digit growth in both turnover and profit with results reaching GBP 16 million profit and we surpassed 0.5 million customers. This performance demonstrates that L'olivier is successfully applying the Admiral model, maintaining a strong combined ratio advantage versus the market while driving growth through digital channels. Let's move to review our strategic progress, starting from the shift in distribution. We have focused heavily on our new brokers proposition in Italy and Spain. As the business mix indicates, we have moved away from an initial test and learn proposition towards this new one, which focuses on building long-term relationships with the intermediaries and also targets better risk segments and higher-margin business in line with our expectations. The early metrics from this shift are positive and provide a solid foundation. We are seeing solid improvement compared to our order book across all the key metrics like higher income per policy, lower frequency and lower cost per claim. And these improved fundamentals have contributed to a 9-point reduction in the overall loss ratio. While there is still more work to do, we expect these benefits to continue as more growth will come and the new proposition mature. In France, we are continuing to diversify through our household insurance product. We now cover over 100,000 risks, a 25% increase versus last year, which provides a meaningful second pillar to our French operation. Regarding efficiency, we have managed to steadily reduce the European motor expense ratio by 7 points since 2022. This has been a necessary step to remain competitive. And even in Italy, despite the reduction in turnover, we improved the expense ratio by 1 point through automation and more streamlined digital customer experience. These operational improvements are also supported by our new common data platform, which is now operational across the 3 countries. This asset allows us to deploy data futures and machine learning models across border with greater technical agility and quality, which is essential for maintaining our edge in a rapidly evolving market. To wrap up, we're very pleased by the progress made this year. Our European operations have reached combined profitability, giving us confidence in their future contribution to group's broader diversification strategy. Our objective moving forward is to leverage this stability to increase our scale and enhance our earnings. We have the right expertise, a solid data and technological framework and a disciplined path ahead. Thank you. I'll now hand over to Milena to talk more about the group strategy. Milena Mondini: Thank you, Costi. So as you just heard, 2025 was an excellent year across the group. Now I would like to take a moment and step back with you and see what we have accomplished over the last 5 years. In 2020, we announced our 5-year group strategy based on 3 pillars: business diversification, Admiral 2.0 and Motor evolution. And today, we're extremely proud of what we achieved in this time frame. First, remarkable growth with turnover up nearly 90% and group risk and profit almost 60%. We returned overall GBP 3.2 billion to our shareholders. Second, we diversified the group with more than 50% of customers now coming from other lines of business or geographies and contributing close to GBP 100 million of profit. In addition, we developed new business such as Pet insurance in the U.K., Commercial insurance in the U.K. also, Household insurance in France and we extend our addressable target market with U.K. Commercial Insurance as just mentioned in B2B2C, in B2B and B2B2C in Europe by opening up the broker distribution channel. Third, we refocus our portfolio. We exit all of our price comparison sites and the U.S. insurance business to concentrate on the growth great opportunities we have in U.K. and in Continental Europe. The acquisition of More Than and of Flock are instrumental to strengthen our product diversification in the U.K. Fourth, we overachieved our Admiral 2.0 ambition. With cloud migration, new data platform, tech stack renewal, hybrid working, scaled agile delivery, predictive AI excellence at scale and the announcement of our multiproduct offer. Fifth, we made further progress in our Motor proposition, including market leadership in EV, as Alistair mentioned, growing telematic product, fast-growing subscription model and short-term insurance with our brand for the youngest Veygo. Last but most important, throughout this period, we maintained our historical and quite unique strength. More than 20-point combined ratio advantage versus market in our core business, a unique 30-point delta return on equity versus market, a group NPS above 50 and the legendary Great Place to Work status. So back to nowadays where this leave us. Our current market presents very significant growth opportunities. They are large, attractive, growing with a combined size of around GBP 130 billion. And today, our market share across many of these markets remains relatively modest, and this leaves us substantial headroom to grow. We're continuing evolving our offering to unlock further opportunity in lending with the first forward flow deal and a new car finance product in Europe, extending our distribution and product lines. Commercial Insurance and SME are also good opportunity to provide strong proposition to a large underserved market, experiencing similar trends to Personal Lines 20 years ago with more digitalization, pricing sophistication and automation, where we can deploy our competitive advantage. Organic growth in all these segments will be driven by market-leading expertise in price comparison site and digital distribution, channels that are growing faster than the rest of the market. Cross-selling and higher retention and increasing economies of scale; and fourth, automation and synergies across the group. Our plan is based on organic growth, but we will consider opportunities for selective accretive acquisitions to accelerate diversification. Importantly, the diversification also reduced over time our exposure to any single market cycle, making Admiral more resilient in time. So having delivered on our strategy, we now look forward starting with the market context that is fast evolving, but also presenting very interesting opportunities and tailwinds. The U.K. market cycle in Motor is expected to turn and the regulatory environment is expected to be more predictable as Alistair commented before. Market consolidation could create more rational dynamics overall. More importantly, the rapid evolution of AI and gen AI represents a major opportunity for us. Predictive AI is becoming the key driver of underwriting differentiation. And we already have 12 points of loss ratio advantage versus market and this is a big driver of it. Gen AI and automation offer efficiency potential of up to 30% in the long term for customer service area and may also disrupt distribution and proposition in the long run. What is interesting to us is also the potential to accelerate the transition to direct distribution in markets where direct has more room to grow. Another major trend is the advancement of car technology, another key pillar of our strategy since 2020 Motor evolution. In the short to medium term, the most impactful change will be the shift to electric vehicles, expected to reach around 80% of new car sales by 2030, where we already have underwriting and market share leadership, as Alistair commented before. This is followed by an increased penetration of advanced safety systems. These technologies have a positive impact on collision frequency, but this has been so far more than offset by an increase in severity. As for EV, our scale and sophisticated prices approach results in a competitive advantage. In the long run, we expect autonomous vehicles, now in their infancy, to grow in share and reach a point where frequency decrease will not be anymore offset by severity. For this to happen, we need to see technology, customer appetite, regulation, infrastructure, all to further develop across countries. It will take anyhow long time to scale with higher level autonomy expected to represent around 4% of the car park by 2035, and the overall market premiums expected to be continuing to grow for at least 20 years, supported by number of cars on the road and the mix. We remain very close to this evolution, having, for example, underwritten Wayve, an autonomous vehicles player in the U.K. since 2018. As AI and mobility trends evolve, our view is that the key winning factor will remain sophisticated data-driven decision-making, scale and a lot of good quality data at scale, an entrepreneurial mindset consistently looking for opportunity to innovate and cost efficiency. And those are all areas where Admiral has a structural advantage, including 8-point expense ratio delta versus market. So overall, we are strongly positioned to leverage those key trends. Now let me introduce our evolved strategy framework. First of all, this is not a discontinuity in our strategy. It's an inflection point where we start compounding what we have already built, a more diversified business, stronger platforms and proven competitive advantage. The focus is now making those trends to reinforce each other and more deliberately over time. I think about this strategy with a set of reinforcing layers, each layer supports the next and within each layer, the benefit compound as the business grows. The other layer of our strategy is where we compound performance. Our first pillar is scaled selectively and profitably. And this is about translating diversification into sustainable growth and accelerate margin in our newer lines of business as they mature. The middle layer is where we compound capabilities. Our second pillar is future-proof our competitive advantage and it is about leveraging on the strong capability we have built in data and technology and the multiproduct benefits to improve customer lifetime value and our structural edge. At the core, at the center, we are compounding our foundations. Our third pillar is amplify the Admiral DNA, and this is to ensure that our culture, our talent, the innovation and the impact continue to evolve, providing stability and long-term direction and resilience as we grow. So the pillars are interconnected. Stronger foundation are a driver of stronger capability and in turn, these are enabler of stronger performance. Let me now walk you through each of these pillars in more detail and explain what we intend to prioritize and what we aim to deliver for each. So first pillar, scaling selectively and profitably. We have a clear ambition to continue to scale all our business while increasing margins in our newer lines. In U.K. Motor, we'll continue to grow as we have done in every cycle since Admiral was founded with discipline and at the right time, as Alistair illustrated earlier. We'll continue to invest to maintain our market-leading margins. In other lines of business, U.K. Personal Lines, Admiral Money and Europe, we will continue to grow and at a faster pace of Motor on average, generating greater economy of scale and higher margins. A key focus will be transferring our underwriting and claims trends from U.K. Motor into other products and geography as well as creating more cost synergies across the group and leverage the benefit of multi-risk ownership. Overall, we expect to deliver strong revenue growth everywhere, including reaching top 3 position in Other Insurance Personal Lines in the U.K. and substantially higher margin for those business combined, more than doubling profit by 2028 and more profitable growth thereafter. Finally, we will continue to develop our new and still small U.K. Commercial Insurance business, building a stronger SME proposition and growing commercial motor starting with the integration of Flock. Now let's move to the capabilities that are the key enabler of the growth ambition that we just discussed. It's a virtuous circle that starts from our structural strength in data, customer focus and speed with the objective to increase customer lifetime value. And with higher customer lifetime value, we create optionality, the flexibility to reinvest in these capabilities or to invest and grow or to retain margins. On the left side of the slide, we see how this focus translate into better underwriting results and efficiency. We'll continue to extend our advanced predictive AI capability, increasing both the quality and the velocity of pricing across all the lines of business and geography beyond motor. We'll also increasingly leverage on connected vehicle data and predictive AI beyond underwriting into customer-based management. This model -- this predictive AI model already delivered over GBP 100 million of incremental loss ratio value, and we expect this to continue over time. At the same time, we see good potential from generative AI to improve customer engagement, to increase productivity in technology and service area, and in particular, to improve speed of settlement that is great for customer and in addition, correlates with lower cost of claims. It's a win-win. Combined with further automation and continued cost discipline, we expect more than GBP 100 million of annual efficiency benefit by 2028. That as I said before, we may decide to reinvest in existing capability. On the right side of the slide, we look at our customers. We are strengthening a mobile-first digital end-to-end experience, multiproduct ownership and retention, which is already above market and will further benefit from multiproduct customers retaining around 5 points better than the rest. Lower expense ratio, higher retention and multiproduct ownership are key driver of higher customer lifetime value. As mentioned, this creates optionality, but also a more resilience to long-term market trends, margin pressures and volatility. So moving to the third pillar, amplifying Admiral DNA. This is what makes Admiral Admiral and different. It's our culture, it's our approach and it's something we are deeply proud of. As the environment evolves, we are focused on ensuring that our DNA evolves too, starting with our people through reskilling, developing internal talent and strengthening diversity and mobility across the group. We had this year so many examples of senior leader moving across different area and geography, including the new CEO of Veygo and new Head of Claims, new Group Data Officer, new Head of Data and Tech in Europe. And this internal mobility allow us to get different perspective and cross-fertilization from one side, but also continuity and cultural fit from the other. Another strong feature of Admiral culture is relentless curiosity and innovation, and we'll continue to evolve our products and innovate for our customers. We focus on offering competitive price, inclusive product, affordable product, including for nonstandard risks. Safety and sustainability are central in our product proposition, whether through fleet safety proposition like Flock or through EV electric vehicle leadership or initiatives around flood prevention. We also want to increase our positive impact on communities, investing around 1% of profit into community initiatives with focus on employability and climate resilience. We are proud of the 45,000 volunteering hours delivered by our colleague in 2025 and remain committed to our net zero ambition by 2040. So that was the third pillar of our strategy. Our strategy is also supported by a simple and disciplined capital management framework that is designed to increase value over time. So how we allocate capital to our operation? In U.K. Insurance, we focus on optimizing returns over the medium term. As we've always done, targeting consistently high return on equity with no structural capital constraints. In other lines, we invest to support growth and margin expansions where financial orders are met or expected to be met in the near term. In newer hires, like commercial, for example, we allocate capital to R&D and early-stage investment while requiring a clear right to win and scalability in the medium to long term. A key structural advantage is our capital-efficient reinsurance model and this is a competitive advantage that is quite difficult to replicate as it stands as it is built over more than 20 years of strong track record. Geraint already talked you through the other steps of our framework, including the introduction of buyback as additional way to return surplus to our shareholders. Selective M&A remains an opportunistic tool to accelerate growth, especially on Other Personal Lines in the U.K. and in Europe, only where our financial hurdles are met. So in this slide, next slide, we bring all of it together. Our strategy and capital management framework designed to deliver strong value for our customers and shareholders. We already delivered strong earnings growth, exceptional return and resilience through the cycle with a 7.6% EPS CAGR over the last 5 years. Looking forward, our ambition is to sustain and build on that performance by scaling what already works, disciplined growing U.K. Motor, faster growth and margin expansions in other lines and continued optionality from capability improvements. Our model is quite unique in the sector, delivering at the same time, strong returns, growth and exceptional capital efficiency. Importantly, this is about quality of growth as much as quantity, retaining our competitive advantage, our capital discipline and our culture that underpins them. In short, we believe we can continue to deliver higher returns sustainably while staying true to what makes Admiral different. So conclusion, to sum up, 2025 was a record year for Admiral, record profits, record dividends and strong customer growth delivered through discipline in U.K. Motor and increasingly diversified contribution across the group. Second, we have fully delivered our 2020-2025 strategy. Admiral today is resilient and more diversified with proven competitive advantage that are difficult to replicate. Third, looking ahead to 2026, while U.K. Motor market remains competitive, we expect price to increase. Admiral is well positioned to perform strongly and remain disciplined and resilient through the cycle. Fourth, we have evolved our strategy to compound those trends, not change direction, but raising ambition while staying disciplined. We have strengthened our capital management framework, adding buybacks alongside dividends while maintaining a very strong balance sheet and flexibility to invest. We remain confident on our trajectory, on our ability to leverage market trends and continue to deliver even greater value to our customers and to our shareholders for the long term. Thank you very much for listening. And now we're ready to take questions. Milena Mondini: [Operator Instructions] I think, first one, I saw it. Darius Satkauskas: Darius Satkauskas with KBW. The first question is sort of a statement and a question. I appreciate the update to the capital return policy introduction of opportunistic buyback. I think one of the challenges with having an opportunistic buyback rather than the program is that when you do it, it's great. When you don't, it sort of signals in the market that management is saying the shares may be expensive. How are you going to deal with that challenge? And are there any hurdle rates you'd like to point for us to sort of gauge how you think about when we should expect buyback and when not? And the second question is, your Flock acquisition, where do you think you are in positioning for the potential liability shift to Commercial from Personal among your competitors? And who do you think is going to determine the win in the future? Is there a risk that a company like Allianz with a huge balance sheet simply takes the entire market in Commercial Insurance? Or do you think Admiral can appropriately compete 10 years down the line, 20 years down the line? Milena Mondini: Geraint, do you want to take the first one, I'll take the second? Geraint Jones: Yes. So buybacks, it will be based on what the Board assesses is the right thing to do to try and deliver the max return for shareholders over the medium to long term. I don't, certainly for the foreseeable future, expect it to be dip in, dip out. We'd expect to be doing it for 2026, and we'll give -- we -- the company will give an update on that at least annually, I suspect, as we move forward. But yes, I hear your point on opportunistic versus steady. Milena Mondini: So your second question is about Flock and Commercial Insurance. So there are a few reasons why we're interested in this market. It's attractive as stand-alone market, but it's also a market where we see we can deploy a lot of our strength. And the fleet market is very competitive. So you do need to be a very good underwriter. Our claims and pricing strength can be transferred across nicely. But we also think it's a market that is -- it will be disrupted. And that's why we didn't want to really enter in the traditional way, but just focus on a proposition that we think is fit for the future, is the type of business that's going to grow in the future. So it's telemetry based. There's a lot of data from -- a lot of driving data, a sector in which we already have developed strong components to very large and growing telematic portfolio in Personal Lines. It's an interesting proposition because there is a strong feedback loop to driver to increase safety, to increase performance. And I would say it's also a building block for car of the future. The more the car become -- embed safety features and become autonomous, the more this type of skill set, data-driven pricing and underwriting and the feedback loop is important. So for us, it's a very interesting way to create and to develop a business that is interesting per se, but is also a way into the future. And I think it's a competitive market. We need to do it in the right way and with a proposition that is future fit. That's our ambition there. And we think the mix of Flock skill, technology and proposition, an Admiral amount of data, strength in pricing, data-driven pricing sophisticated telematic and also very strong claims management really can create something unique. Sorry, I'm going to go in order one. Ivan Bokhmat: It's Ivan Bokhmat from Barclays. My first question would be on the strategy into 2030. I just want to clarify, perhaps, did I interpret it correctly. So the slide that shows your 8% CAGR in the past 5 years, you're saying that you're trying to achieve that same growth into 2030. So as a statement, maybe you could just confirm that. And secondly, on the trajectory of those earnings, as far as I understand, for 2026, you're talking about flattish numbers and then it would imply more of a hockey stick trajectory in later years. So perhaps you could just talk a little bit about how this trajectory might look like, where the acceleration will come and maybe specifically on the U.K. Motor, that cyclical target where you would grow 5% through the cycle over time, when will that time frame apply in this particular case? And maybe one final small question. The partial internal model, the -- if you apply imminently, do you think you will get the regulatory approval by year-end? And what does it mean for some extra capital decisions? Milena Mondini: Yes. So I think what we're seeing here is 3 things. As you know, we normally don't give very precise guidance on long-term or medium-term earnings. But what we're saying is that there are 2 very clear revenue for growth and profitable growth in the future. Our core market, that is U.K. Motor, is a market where we have a market-leading business, we expect to continue to grow across the cycle. We'll continue to do at the right time and with the right choice and the discipline around pricing. But we'll continue, as we've done in every single cycle since Admiral was founded. We'll continue to grow our U.K. business from a larger base and retaining very, very strong margin. We also have another leg that is our other lines of business, Personal Lines and U.K. Insurance, Europe and Money, and we're planning to grow across all of them indistinctively and also increase margin for those business combined. So if you take those 2 things together, we expect to increase shareholders' returns over time without having necessarily put a specific date because there will still be some cyclicality. But the other preservation is with increased contribution from other lines, although there will still be market model cyclically to impact our results. We think we are gradually, over time, reducing the dependence on a single cycle. So that's the key message. Geraint Jones: Internal model? On the internal model, we do expect to submit our application for approval very soon. The time line for review of that is not fixed. And as you can imagine, it's not a short read. So I think we'd update on the outcome of that at the appropriate time rather than comment on how long we expect it to take. If and when it's approved, you can be sure we'll be trying to use it around the business to optimize and things like that. And again, we'll talk about that at the right time. Milena Mondini: Sorry, you mentioned something also about the shape. And as I was saying, there is still crack in the market. So as Geraint suggested, we do see a different path across the next few years. So we'll grow through the cycle. But next year may have a different impact on our growth ambition than the year after that. So that's -- but that's very normal. That's what we have done in the past, as you've seen in the slide that Alistair projected. We tend to grow when it's the right time when underwriting margin are healthier and will continue to do so. Sorry... Benjamin Cohen: Ben Cohen at RBC. I just wanted to ask a few things on the U.K. Motor business. Firstly, would your central assumption be that you would be able to match claims inflation through the course of '26? And could you make a comment as to what you've seen in the market reaction as you've tried to put through or you have put through some price increases at the beginning of the year? And the third element, could you just remind us what happened to claims inflation in Motor kind of post the Ukraine, Russia invasion, just to maybe give some sort of comparison with maybe where we are now in terms of the situation in the Middle East? Milena Mondini: Al, take it the first and I'll, sorry... Alistair Hargreaves: Yes, sure. So in terms of managing through the cycle in 2026, we're expecting claims inflation, as I mentioned, to be towards more normal levels, so mid-single digits. We'll be looking at that. We'll be looking at elasticity within the market. We'll be thinking about average premiums and continuing to price with discipline. As you saw in 2025, we did that and we've -- as Geraint said, we're very happy with the profitability on that yet. It's not as strong as '24, but it's still strong. So that will be the same approach that we'll take to 2026. As Milena said, reiterated, we think that's the right approach to optimizing both value and growth over the medium term. So far, in terms of market at the start of this year, we're seeing different strategies from different players. But broadly speaking, I'd say that market premiums have been relatively flat. But as I say, we've started to increase our prices at the start of the year. In terms of claims inflation post the Russia invasion, there was a lot of disruption to the supply chain and that was one of the impacts that caused higher parts, vehicle inflation as well as supply chain constraints. We don't think it's a direct parallel to what we're seeing at the moment. In terms of the disruption that we're seeing at the moment is more about oil and fuel prices not directly related. But I think as you're inferring, it increases supply chain or the geopolitical instability increases the risk of that. So that's something we'll be watching very carefully through our supply chain. William Hardcastle: Will Hardcastle, UBS. First of all, I'm going to embarrass you, Geraint. Thanks very much for your help over the years. There's been some journey in the current role. I've always really enjoyed our interactions, some of them quite lively. But you've always been really helpful. So good luck for future endeavors, including the Admiral roles. Next, on to the questions, I'll ask you the tough ones now. You booked 2025 under -- undiscounted booked loss ratio at the 78% or 85% undiscounted. That's an average number. So I'm assuming the exit was slightly worse, given the shape of the pricing last year. I guess prepricing in excess of inflation, pre-percentile shifts, how roughly, where is the starting point essentially for that '26? How much worse than the 85% should we be thinking? And then moving on to something a bit bigger picture, doubling of the non-U.K. Motor business. It's quite non-Admiral to give a target like this. I'm sort of intrigued as to the logic, the thinking behind being -- it must imply a lot of confidence behind it. Does it imply any slowdown at all of top line and sort of extraction of the benefits you put through? Or is this just a better hope and a direction of Travel from here? Alistair Hargreaves: I'll take the first one. So the first one was about the exit loss ratio. So as you pointed out, the undiscounted booked loss ratio is at 85%. It's not -- it's higher, obviously, than '24 that was an exceptional year, but it's not unusual if you look back at previous years, hence, the comments about good profitability. As I said, we managed rates through the year, paying very close eye on claims trends. And in the second half, we were flat. And I think that means that the exit loss ratio was slightly higher than the overall, but not significantly so. And as I also mentioned, as we started in '26, we made some adjustments to price to make sure that our starting point in '26 was in the right place. Milena Mondini: The second point is about confidence about the other line of business. It's a mix of 2 things. First of all, is the momentum. If you look at where we are, momentum and maturity, if you want, of some of our other lines of business, we have fantastic 2025, doubling profit in Admiral Money, strong recovery in Europe and return to profitability with confidence in the prospect and the future. And other lines of insurance in the U.K. also deliver a stellar year. I think we are reaching a maturity in those areas that allow us to continue to grow and increase margin over time. And it's also, I would say, a reflection of our strategy because the strategy is also very much about compounding. And so what I mean is that we have a few things -- we're focusing a lot on is our proposition to multi customers, very important because customers with more risk have better retention, have better loss ratio and better NPS, tend to be happier and stick longer with better results and also better experience for them. So I think there is momentum in terms of the multi -- our journey to multi-products are probably later than some other player in the market because historically, we were very much a U.K. Motor story. But as this business grow, there's a lot of potential there. That's a very interesting opportunity, but also transferring some of the strength in Predictive AI, for example, across all the business is also another big driver of value. And so if you merge those 2 things, plus economy of scale, plus potential benefit, we do see a momentum that will allow us to both continue growing and deliver more profit. And so I think it's really very much a reflection of our strategy and a bit of the switch of focus from growing individual business that are stand-alone interesting to really compound the benefit. So it's just meant to be that over time. We'll continue to be disciplined. So we follow cyclicality. There's cyclicality in the U.K. Household market that will take into account, but we do think we can achieve both growth and higher margins. Thomas Bateman: Thomas Bateman from Mediobanca. Just a quick question on the reserving. I was surprised to see the PYD quite low, but then the risk adjustment percentile come down. Could you just explain now how that's working? And the second question is actually a follow-up to Will's on -- I guess, on Europe. I take your comment of Spain is breakeven now, but I guess you have been working on that for a while and there is more confidence there. And you alluded to AI platforms, et cetera. Have you been able to launch on any of those AI platforms, either in the U.K. or in Europe yet? Milena Mondini: So do you want to take the risk adjustment? Costi maybe briefly comment on the confidence in Europe and Spain, and I will pick up maybe on the AI. Geraint Jones: Actually, Tom, if you split out the Ogden impact on last year and compare year-on-year, you get the same percentage. So a fairly strong level of releases coming through year-on-year. The percentile was really ever so slightly down. I wouldn't say that we'd notably dropped the risk adjustment strength. So it's a very strong set of reserves and continued pretty consistent releases coming through basically in line, I think, with what we've guided in that kind of 10-ish range over the past couple of years. Costantino Moretti: So on Europe and then on the AI point, so basically, yes, as Milena mentioned, there is a good level of confidence. It's a large opportunity where we are making very good progress on several fronts. And what is giving to us the confidence is that we are keep trading at very good margins on the direct business and we are seeing very good progress coming from the distribution-diversification initiatives, which will help us to target much larger opportunities. And so once also those initiatives will turn into profitable ones in the medium term, we expect our overall margins to expand. In addition to that, we expect a more efficient reinsurance agreements to provide benefit in the medium to longer term. Clearly, there is also an element about the competitiveness on the expense side on the efficiency. And we're also there making good progress, and we are testing also some more advanced gen AI tools and models. On this front, it's more early days, but early signs are very promising. Milena Mondini: I think more in general on AI, there is a lot of opportunities. And a lot of that is focused on improving efficiency internally. It's about improving automation, increasing speed of servicing the customer and so forth. I guess your question was more referred to the distribution element. So how customers interact and choose insurance. And if you think about Admiral from very early stage, we've always been a bit of a forefront of disruption and distribution, and we were among the first direct player in the market in the U.K. We were the first to have an Internet-only brand, Elephant, let's call it in U.K. We're the first one to embed price comparison site with confused.com and so forth. So it's obviously something that, as you may imagine, we're very close -- we're working very close to price comparison site as they may embed more gen AI technology in their way of interacting to customer and distribution and adapting our website. We also have interesting pilot in part of the business, like gen AI embed chatbot in Veygo and other initiative across the group. So something we're very, very close. Now if you ask me, do you think this is going to be a very big disruption in U.K. Motor in the short term? I personally don't think is the case. I think there will be a different way of interacting with the customer. But the value proposition to a customer, how much you can save by shopping on price comparison site on Motor insurance is huge. It's hundreds of pounds sometimes. So I don't think it's going to be the first market where we see a lot of change. I think it's early to say. Everything is very nascent at this stage, but I think there are markets where this could be an acceleration to direct and that could be the one where customers are more used to speak with an intermediary, for example. So it can be commercial lines, it can be Europe where direct is not picked. But at this stage, it's very early to say. As for us, we try to be close to everything and work and progress on all the fronts at the same time. I think we had 1, 2 and 3, yes. Carl Lofthagen: Carl Lofthagen from Berenberg. Just the first one on the U.K. Home book. I think we've seen kind of continued expense ratio improvement as you've gained scale and you're now running the business at a combined ratio in sort of the mid-80s. Is that sort of the level that you're sort of happy with? Or are you willing to trade some margin to take market share as you've kind of said you want to be a top 3 player? And then the second question is just a clarification on the share count development. I think if I just look at the basic share count, which decreased by GBP 5 million from GBP 306 million to GBP 301 million in H2, but diluted went up GBP 1 million. Presumably, the shares you're buying back for the share scheme shouldn't impact the share count. Just I guess for modeling purposes, I mean, how should we kind of think about that, excluding sort of any sort of additional buybacks, et cetera? Milena Mondini: Sorry, Al, you take the first. Geraint will take the second. Alistair Hargreaves: So on the Household expense ratio, we've had an advantage in terms of expense ratio for Household for some time. But as you highlight, it's an area of focus. As the book grows and we get more renewals to customers, that helps in terms of expense ratio, but we're also focused on driving improvements. For example, Milena talked about how we can use gen AI for both customer experience and efficiency. So those are areas of focus. In terms of the combined ratio range, we think about Household similar to Motor, where it's about optimizing for value over the medium term. But as you're alluding to, we're a bit more biased towards growth on Household than margin. But we -- I think the 80% is good. I think we talked a bit about a range when we did the deep dive, so we're not sort of sticking to a specific target. But we'll do that in optimizing for value and growth over the medium term. Geraint Jones: On share count, Carl, if you look at the -- in the back of our accounts on Note 12, you got the update the number of shares that were in issue every year. It's been GBP 306 million odd for a couple of years since we stopped diluting for the share plans. The GBP 301 million is actually the number that's used in the EPS, and that excludes some of those shares that are held in the trust. The share purchases per share plans won't adjust the number of shares that were an issue, obviously. They will go to employees. The share buyback and cancel, obviously, that will reduce the number of shares in issue. So the purchase for the share plans doesn't change the number of shares. Buybacks obviously will. Derald Goh: It's Derald Goh from Jefferies. Two big picture questions, if I may, please. So the 4% sort of EV -- sorry, AV penetration rate by 2035, that's an interesting number. I'm just keen to hear what are the main variables that might sway that number. Essentially how prudent is that 4%? And maybe if you could also say what were your projections 10 years ago? How does that compare to what you had 10 years ago, let's say? And then secondly, going back to distribution, you mentioned there's potential to disrupt there. Maybe could you speak to your past experiences? I know you've been trying to push PCWs outside the U.K. Some places are more successful than others. What might be different this time that would allow you to be more successful with whether it's AI or changes in customer behaviors and what not? Milena Mondini: Sure. I think I'll take the first and second, but Costi, if you want to add anything on distribution outside U.K., it would be great. So EV, this is referred to this is referred to relatively common forecasts that have been out like the World Economic Forum and a lot of other organization. And I think the number is quite aligned. You may look at car sales in terms of car park is 4% because there is quite a lag time from new sales to fit into car park. The average -- the median age of a car in U.K. is 16 and probably the average is 11 years. So it takes time as the new model gets released. I think you're absolutely right. So it's still very much of an estimate, and there are a lot of influencing factors. You need to get, first of all, regulation in place, infrastructure in place, technology and investment in place and customer appetite in place. So there are a lot of things that can contribute and can go both direction. If we don't see the simultaneous development of all these 4 areas, it's difficult to imagine a world in which people will really freely just use autonomous vehicles car on the roads. So I cannot tell if it's prudent or not. But I would say this is really the majority of the -- I think everybody agrees that it takes some time, both because there are some hurdles and because there is time for the car park to evolve. And I think also take the chance to remind that this is about L3+. L3 basically means when the driver can take the highs off of the wheel, but still need to get in, in 10 seconds. So it's not really full benefit of EV in terms of, for example, liability shift and so forth. Anyway, it's very nascent now. So you asked me how this was versus 10 years ago? I think this is a story that we see in all the technology disruption. If I go back 10 years, this was supposed to be earlier. And so what happened is that this projection tend to shift. If you ask me how it was compared to a few years back, like maybe 3, 4? What I would say is not very different, but we see a slightly later adoption, but probably faster. It very often happen with every technology now that it takes longer, longer, longer, but then it can be more. So it's difficult to say, honestly. It's very, very early stage, and the U.K. is a bit behind the U.S. in terms of regulation and so forth. Second question was on distribution. I don't know, Costi, do you want to kick it off on? Costantino Moretti: Yes. On distribution, the -- well, the European markets, as you know, are very different. When we started our businesses a few years ago, I think direct was about 5%. Now on average, it's getting closer to 20% -- between 15% and 20%, so direct is still growing. And therefore, if a more AI-driven disruption would happen, we could say that being a leading player in those markets that will put us in a nice place. At the same time, price comparisons, you're right. We try to educate the market and to push more digital growth to accelerate. It didn't happen at the speed we expected. And at the moment, as I said, direct is still growing, price comparisons are doing nicely, but not at a supe- fast speed. At the same time, traditional are still a very important channel, which predominantly is the main channel, which is linked why we decided a while ago to start to diversify the distribution and on how to win and how we can be confident basically because the right to wins are exactly the same of direct. So risk selection, customer experience and lean operations. And the moment you demonstrate that you can replicate those, then you can win in that market and our results that are coming through are making us confident more and more that we can achieve this. Andreas de Groot van Embden: Andreas van Embden, Peel Hunt. Two questions, please. First one is on ancillary sales. I saw that the average sort of revenue per vehicle in the U.K. has come down from GBP 76 to GBP 71. Just wondered what your outlook is for this in '26 and '27, particularly not only on the installment income because I assume you've lowered your APRs, which has brought down the average premium per policy there or per vehicle there. But also on the other ancillary sales, whether you're seeing any pressure on those fees and commissions? And on -- the second question is on price velocity. I think you mentioned that. I just wondered what would you exactly meant by that in the U.K. and whether extending it means changing pricing more. I don't know whether you do intraday pricing or not in the U.K. But whether -- with that velocity, by how much could you extend it? And how important is that to maintain your competitive position, particularly through PCWs in the U.K. as the market becomes more competitive? Alistair Hargreaves: So it's Al. I'll take the first one. As you mentioned, the main driver of the change in the revenue is premium finance. It's worth noting that there's 2 impacts there. So we did reduce our APR through 2025, in line with the cost of funds. But also, we saw our average premiums coming down through the year. So that also impacts on the other revenue per vehicle. So in terms of our APRs, they're very competitive at the moment, not necessarily anticipating any changes, but we'll continue to assess for fair value on that product. In terms of average premiums, as we've said, we're expecting the market to turn and that will lead to -- and we're increasing our premium, so that will flow through as well. I don't think there's anything else of significant note to call out on other revenue. Milena Mondini: So on the price velocity, I think if we step back just a few years back, a lot of the pricing was done through SaaS or XL, and we could put price change in production overnight, we can have a meeting. If you all ask me, I'll let Geraint decide and make change almost overnight. That is still the case. And I think it's an advantage. And I think it's really rooted in the culture and the closeness of the management team to price into claims trend and that relevance that we give to loss ratio all around Admiral. But our pricing is more and more based on machine learning and predictive AI models. And this, of course, is not something that you change overnight because it's more complex, require more technology, the process to upgrade and renew the model just takes longer. And we've done a fantastic -- like a lot of work in the last year or 2 to really bring this time from ideation to change in production much shorter and shorter. I think there is still a bit we can go for. And so we're very close and we have a strong capability, more than 120 models in place, GBP 100 million of loss ratio incremental value. So we start from a good point. But I think there is more we can go to increase this even more. But the biggest opportunity in my mind is to extend this also more and to extend these trends more into other lines of business. So that's where I see the excitement. And to do that, we appointed this year a new group CDO. She did a great job in Europe to set up a new data platform. She just -- she's coming over and she came over actually a couple of months ago, and she's going to help to increase even more this ability. So I think we're really in a very strong position, but want to go. We're very keen to be as fast as we can. Operator: [Operator Instructions] We will now go to the question. And the question comes from the line of Vash Gosalia from Goldman Sachs. Vash Gosalia: Hopefully you can hear me. First of all, apologies for not being there in person. I have 2 questions, please. The first one is just on something you mentioned on your 2026 profitability. So if I heard you correctly, you said you plan to move to the middle of your confidence interval through 2026. And you've obviously also said you expect flattish profitability. So can I read that as your earnings in 2026 actually being supported by PYD just to offset some of the weakness in U.K. Motor? And any sort of color as to how or why that might be different would be really helpful. And the second question, a slightly longer term or big picture question. So you've obviously sort of alluded to you having a lot of sort of advantage on the cost ratio front. And you can obviously leverage AI and gen AI to improve that. But I'm just trying to think if the technology essentially democratizes the use of AI, wouldn't that allow your competitors to actually gain advantage quicker and narrow the gap to you? So any sort of color or comment on that would be helpful as well. Milena Mondini: Will you take the first? Geraint Jones: Yes. So we would expect to start to release our -- reduce our risk adjustment percentile from its current near max level towards the middle of the range during 2026. I would reject your assertion of weak U.K. Motor. I think U.K. Motor profitability for '25 is strong, but slightly less strong than the extremely strong 2024. So we think there's good profitability to come on 2025. And obviously, that starts to feed into the accounts in 2026. PYD and reserve releases are a constant feature of our income statement and profitability. But you are right to expect as we reduce the risk adjustment to some extent, obviously, that contributes to profitability in 2026 versus 2025. And if you do the mix, flat profitability, but higher profits from other lines of business means slightly lower profits from U.K. Motor, but from a very high start point. So I think -- Vash, I think that was the nature of the question, right? Vash Gosalia: Yes. I mean -- and apologies if I said like weak profitability. I meant more direction-wise. But yes, you've answered my question. Geraint Jones: No offense taken. Milena Mondini: On the second point, it's a very good question. It's a very good question. I think every technological evolution, data evolution and if you think about digitalization, automation, migration to cloud, more and more like technology, it becomes more and more a commodity itself, but the way technology is implemented is very differentiating and it becomes more so as we move along. And so a big decision on AI is how you do it. A big driver are how much this is adopted. So you can deploy gen AI tool to have all the organization, but how much is adopted, how is adopted is a massive driver of how much efficiency benefit you can drive. I think we start in a great situation because we tend to have a very strong culture, very transparent and people with good expertise that are really, really keen to do what is right for the business. Governance is another differentiating factor, how you govern what you put in place and how you make sure that it's solid, is stable, how make sure that the model learn over time. I think an appetite for innovation, bottom up as well as top-down is also very important. So I think a lot of the element that plays here are a culture and also the ability to do it faster, better and cheaper than others. And it's still early to say, but I think we are well positioned to achieve that. We have a last question. Shanti Kang: It's Shanti from Bank of America. You just touched a bit earlier when we talked about the internal model and how that could give you a bit of flexion for M&A. Historically, I guess, you guys have partnered with names via Pioneer or you've had a relationship with the existing names before you would kind of move forward with an M&A transaction. What kind of skill sets or regions, if you were looking at that, would you be thinking of? Milena Mondini: It's the last question. Do you want to take it? Geraint Jones: It sounds like I've explained this badly. I wasn't really referring to the internal model coming in, giving us more firepower for M&A necessarily. I understand the point of the question, but I think funding small M&A to retain profitability is one of the options I would talk about. I know you should cover where M&A might play a part of it. Milena Mondini: Yes. So as I said, our plan -- our history of successful organic growth, and we're excited about the plan we have on growing organically. We will look into opportunity mainly to accelerate diversification, I would say. So as we've done with Flock as we've done with More Than, we'll look at accelerated diversification in other lines of business in insurance in the U.K. or in Europe where we need more scale. But we stay open, look and see, but also very, very focused on our organic growth plan and consider different option on how to eventually tackle the challenge. Thank you very much. Thank you for your question, and thank you for your time. And we'll be around a few minutes if that can help. Thanks a lot.
Operator: Good afternoon, and thank you for standing by. Welcome to Grove Collaborative Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Hosting today's call are Grove's CEO, Jeff Yurcisin and CFO, Tom Siragusa. Some of the statements made today about future prospects, financial results, business strategies, industry trends and Grove's ability to successfully respond to business risks may be considered forward-looking, including statements relating to reactivation of lapsed customers, future increases in advertising spend, stabilization of our e-commerce platform, sequential revenue growth throughout the year, while maintaining profitability discipline, increased capacity to execute additional growth initiatives, savings from reduction in force and improved subscription experience, future increases in product development, guidance for 2026, including guidance related to revenue and adjusted EBITDA; net revenue reaching a low point in the first quarter of 2026, seasonality and advertising investment in the first quarter of 2026, sequential improvement in revenue and acceleration of advertising investment, such statements are based on current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including those risks discussed in Grove's filings with the Securities and Exchange Commission. All of these statements are based on Grove's views today, and Grove assumes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. During today's call, Grove will also discuss certain non-GAAP financial measures, which adjust GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP items to the most directly comparable GAAP financial measures and Grove's earnings release, which is also available on Grove's Investor Relations website. I would now like to turn the call over to Jeff Yurcisin to begin. Jeff Yurcisin: Thank you, operator, and thank you for everyone joining us. I want to start with the financial headlines. We delivered on our revised full year 2025 revenue and adjusted EBITDA guidance, and we returned to positive adjusted EBITDA in the fourth quarter. This was our first positive adjusted EBITDA quarter in the last 6 quarters, and the result reflects a deliberate choice to prioritize liquidity and adjusted EBITDA profitability while we work through customer experience disruptions tied to our e-commerce platform migration. Stepping back Grove's focus remains the same. Driving long-term shareholder value by building a stronger, more resilient business, one that can deliver sustainable growth and consistent profitability over time. Our mission is also unchanged to be the leading destination for clean, sustainable nontoxic products for every room in the home. To earn that position in a market dominated by scale, digital platforms, we have to win where it matters by delivering a customer experience that's meaningfully differentiated with unit economics that support profitable growth and that starts with execution in the near term. Today's consumer is navigating a fragmented, often confusing marketplace crowded with options, inconsistent standards and marketing claims that are hard to verify. And I have higher conviction than ever that Grove is positioned to capitalize on this consumer problem by building a platform of curated and highly vetted products leading with transparency and making it easier for customers to align everyday purchases with their values without sacrificing efficacy. For the conscientious 57 million consumers who care about ingredients, performance and sustainability, shopping can feel like a trade-off between convenience and trust. We believe Grove is uniquely positioned to simplify that decision. We curate and vet products to a higher standard. We lead with transparency, and we make it easier for customers to align everyday purchases with their values without sacrificing efficacy. That positioning matters because it's not just a brand promise. It's a business model that we believe can drive durable unit economics over time. When customers trust the curation and feel confident in the experience, we earn repeat behavior. And when we earn repeat behavior, we can invest more efficiently and scale more profitably. However, '25 was a challenging year and a meaningful part of that came from our e-commerce platform migration early in the year. While the migration was strategically important, the transition created real friction in the customer experience, most notably across the mobile app, subscriptions and our VIP program. When those areas did not perform consistently, we saw more churn in '25 than we originally expected. That was particularly disappointing because we entered '25 with real momentum. We had delivered our first quarter of sequential revenue growth in Q4 2024 and our first full year of positive adjusted EBITDA. The migration issues interrupted that progress. We ended 2025 with 599,000 active customers, down 13% from 689,000 at the end of 2024. That ending customer base is the starting point for our 2026 revenue expectations. Importantly, we don't view the customers who churned as gone forever. As we continue to stabilize our e-commerce platform and restore reliability and the customer experience, we believe we have an opportunity to reactivate a meaningful portion of them over time. But first, we need to build the best possible shopping experience for clean, sustainable products that arrive regularly in one's home. And that's what 2026 is for us, a year of rebuilding that momentum. We are encouraged by the direction because we now have clarity on the root e-commerce platform issues, and we're making tangible progress to fixing them. As those fixes take hold, we expect to stabilize active customers, reactivate lapsed ones and measurably increasing advertising spend to acquire new customers. We expect to deliver sequential revenue growth through the year while maintaining profitability discipline. And as the core experience stabilizes, we will also have more capacity to execute additional growth initiatives, which I'm looking forward to highlighting in future quarters. As we execute that plan, we're staying anchored to the same 4 key pillars we've discussed throughout the year, balance sheet strength, sustainable profitability, revenue growth in environmental and human health. These pillars continue to represent the framework that keeps us focused as we're still rebuilding parts of the customer experience. Starting with balance sheet strength and profitability. In the fourth quarter, we delivered $1.6 million of positive adjusted EBITDA. It reinforces our commitment to navigate this transformation responsibly, protecting liquidity, managing profitability and scaling advertising spend only when the customer experience is stable and paybacks justify it. We also delivered breakeven operating cash flow in the quarter. This is the fifth quarter in the last 8, where we've achieved at least breakeven or positive operating cash flow. That consistency matters. It underscores our focus on disciplined execution and building a more durable operating model. Contributing to these results, we continue to align expenses to the current scale of the business. We executed a reduction in force in November that we expect to generate approximately $5 million of annualized savings. This action was necessary to match our cost structure to the business today, improve operating leverage and create capacity to invest as performance improves. On the revenue and customer side, we advanced several important initiatives to strengthen the experience and rebuild engagement. First, we launched our loyalty program, Grove Green Rewards in the fourth quarter. The program is designed to deepen engagement, reward repeat behavior and reinforce the value customers get from shopping growth. It includes a sign-up bonus, differentiated earn rates for VIP customers and enhance earning on subscriptions. It also gives us multiple levers to run points-based promotions and exclusive VIP deals. And importantly, it allows us to incorporate rewards into new customer offers and reintroduce referral capabilities. Second, in February, we launched our redesigned mobile app, which is a key step towards stabilizing the mobile experience. We moved away from our prior third-party approach and rebuilt our own customer app. Mobile is too important to the customer experience to tolerate instability. This release restores much of the functionality and experience customers have prior to the migration. There's still work ahead to improve performance over the coming quarters. But this release represents a meaningful step forward in delivering a better customer experience. Third, we're focused on strengthening our subscription experience, which is a core driver of retention and lifetime value and an experience that was negatively impacted in the platform migration. In 2025, subscription units drove 60% of our revenue and orders with subscriptions were 79% of total orders. By the time we report second quarter earnings we expect to meaningfully improve the subscription experience to customers who want a box of home essentials delivered on a regular basis to their home. Taken together, Grove, Green Rewards, the redesigned mobile app and our planned subscription improvements are foundational to our strategy this year. They are designed to restore elements of the experience customers know and love, deepen engagement through loyalty, improve discovery and convenience and help us deliver a more personalized and reliable experience that reinforces Grove as the destination for clean and sustainable Assets. Our fourth pillar is environmental and human health. In the first quarter of 2026, we expanded Grove's ingredient standards to cover more than 10,000 banned or restricted ingredients, including more than 3,000 outright banned across every category we carry. To our knowledge, this is the most stringent standards and curated assortment that exists in this space. These standards are also informed by leading EU safety frameworks and often go beyond baseline U.S. requirements through tighter limits and stricter exclusions. For customers, the benefit is straightforward, more confidence in what comes into their home. Strategically, it further differentiates Grove versus competitors that have shorter, less comprehensive less, reinforcing our role as the trusted curator not just the marketplace. Alongside our focus on core execution, as we've stated previously, we continue to evaluate strategic options to maximize shareholder value. These may include additional acquisitions or partnerships, divestitures and other strategic options consistent with our mission and long-term vision. Any action we take will be guided by the same principles that shape how we operate the business every day, customer focus, capital efficiency and sustainable shareholder value creation. In closing, I'm energized about 2026 because the work in front of us is clear and gives us a credible path to stabilizing the business and then reaccelerating responsibly without sacrificing profitability discipline. Grove remains uniquely positioned to lead in human health and wellness by combining trusted standards with the convenience and economics of a modern digital platform. Tom will now walk you through the financials and our 2026 outlook. Tom Siragusa: Thank you, Jeff, and welcome, everyone. I'll walk through our fourth quarter and full year financial results and then review our outlook for 2026. Starting at the top line, revenue for the fourth quarter was $42.4 million, down 14.3% year-over-year. The decline was primarily driven by fewer orders reflecting reduced advertising investment and the lagging effects of disruptions from our e-commerce platform migration earlier in the year. That decline was partially offset by $2.9 million of QVC revenue driven by 8Greens Today’s Special Value program. QVC was an existing 8Greens sales channel that Grove acquired as part of the 8Greens acquisition in the first quarter. For the full year, revenue was $173.7 million, within our revised guidance range. While revenue declined 14.6% year-over-year, we made deliberate trade-offs to protect liquidity and profitability while prioritizing fixes to the customer experience, and we ended the year with positive adjusted EBITDA in the fourth quarter. Turning to our operating metrics. DTC total orders were $539,000, a decline of 25% year-over-year, while active customers ended the quarter at $599,000, down 13% versus the prior year. These declines were driven primarily by headwinds related to the e-commerce migration and lower advertising spend relative to prior years, which reduced new customer acquisition and in turn repeat orders given the recurring nature of our business. DTC net revenue per order was $69.50, an increase of 4.1% year-over-year. The increase was primarily driven by more targeted promotional strategies and a larger mix of higher-priced items and customer orders as we continue to expand our selection. Our gross margin was 53.0%, an increase of 60 basis points compared to 52.4% in the fourth quarter of 2024. The increase was primarily driven by lower promotional activity, partially offset by a nonrecurring benefit in the prior year period related to the sell-through of previously reserved inventory. Turning to advertising. We invested $1 million in the quarter, a 65.2% decrease year-over-year. This reduction reflects a strategic decision to preserve liquidity and drive profitability while we focus on optimizing the core experience through ongoing improvements across our web and app platforms. Product development expense was $1.9 million, down 59.2% year-over-year. This decline reflects our decision to streamline our technology organization as well as lower amortization costs following the e-commerce platform migration. In the near term, we've also been more selective in own brand innovation, prioritizing resources towards stabilizing and improving our core technology and customer experience. As the platform work progresses, we expect to rebalance our investment in product development to support both innovation and growth initiatives aligned with our financial discipline. SG&A expense was $21.2 million, a 20.8% decrease versus the prior year. The reduction was driven by lower fulfillment costs from fewer orders, ongoing cost optimization initiatives, including the reduction in force executed in the fourth quarter as well as reduced depreciation and amortization and lower stock-based compensation. Net loss was $1.6 million or a 3.7% net loss margin compared to a net loss of $12.6 million or a 25.5% net loss margin in the prior year. The year-over-year improvement reflects lower operating expenses and lower interest expense as well as the absence of the noncash loss on debt extinguishment related to the payoff of our term loan in the fourth quarter of 2024. Adjusted EBITDA was $1.6 million or a 3.7% margin compared to negative $1.6 million or a negative 3.3% margin in the prior year. The year-over-year increase reflects structural cost reductions, including our reduction in force from November and disciplined advertising investment. As Jeff mentioned, this is a return to positive adjusted EBITDA for the first time in 6 quarters, reaffirming our commitment to navigating our transformation with discipline. For the full year, net loss was $11.7 million, and adjusted EBITDA was negative $2.2 million, which is in line with our revised full year adjusted EBITDA guidance and reflects the trade-offs we made throughout the year as we navigated the migration and reset our cost structure. Turning to the balance sheet and liquidity. We ended the quarter with $11.8 million in cash, cash equivalents and restricted cash down from $12.3 million at the end of the third quarter, primarily reflecting cash used in investing and financing activities. Operating cash flow was breakeven for the quarter as noncash items more than offset the net loss while working capital was a modest use of cash. This is compared to a $0.3 million operating cash inflow in the prior year. Now turning to our outlook. For the full year 2026, we expect net revenue to be approximately $140 million to $150 million and adjusted EBITDA to be approximately breakeven. Looking across the year, we expect Q1 to represent the trough in revenue for the year, reflecting seasonality and continued disciplined advertising investment. From that point, we expect sequential improvement as customer experience enhancements support customer retention and enable a measured reacceleration of customer acquisition investment throughout the year. In closing, our priorities for 2026 are clear, maintain financial discipline as we continue to optimize the customer experience. These actions are laying the foundation for a healthier, more efficient business that can return to profitable growth going forward. With that, I'll turn the call back over to Jeff for closing remarks. Jeff Yurcisin: Thank you, Tom. As we close out the year, I want to bring us back to what's most important. Grove is rebuilding for the long term, but we also have to deliver in the short term. Over the past year, we've done the really hard work. migrating to a modern platform, reshaping our cost base and refocusing the organization on fixing the core customer experience. We now believe we're past the most disruptive phase of this migration. Our priorities for the next phase are clear. First, keep improving the experience, especially on mobile and subscriptions, so customers can reliably shop, subscribe and reorder with confidence. Second, operate with tight financial discipline protecting liquidity and ensuring that investments meet our standards for payback and lifetime value. And third, as these improvements take hold, we turn to measured growth built on stronger unit economics and a more efficient cost structure. The last year hasn't been good enough, but we know the path forward, and we're executing with urgency and discipline. That's how we'll rebuild long-term shareholder value and reinforce Grove as the destination for clean and sustainable essentials. With that, we're happy to answer any questions you have. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Susan Anderson with Canaccord Genuity. Susan Anderson: Maybe just to start off, if you could kind of talk about -- so first quarter is going to be the trough in sales and then pick up after that. Maybe talk about the drivers that's going to drive the pickup sequentially in sales as we go throughout the year. And then also, maybe if you could just talk about your customer acquisition investment for this year? Are you expecting to invest more in customer acquisition versus what you did last year? Jeff Yurcisin: Susan, let me take that, and then I'll let Tom kind of share in terms of total acquisition spend. So the core reason we're expecting the sequential growth goes back to building a better customer experience. Over the last 12 months since that -- since we jumped on the platform migration, it's been a rough customer experience. The mobile app alone was a really big change that we just launched in Q1, and we're seeing early positive signals. The loyalty program in Q4, each one of these will improve the core customer experience. We mentioned the subscription experience that we hope to be able to announce before our next call, and you put all of this together. And it's pretty energizing about what we can get accomplished. And so that is the primary driver. And then with that in parallel, we do expect to be increasing marketing spend because we are seeing the better repeat rates and a better LTV to CAC and ultimately, better paybacks. Tom, I'll let you kind of handle the specifics around marketing spend. Tom Siragusa: Thanks, Jeff. Yes, so Susan, we -- if you look at our P&L in the fourth quarter, we took our advertising spend down from about $3 million in the third quarter, down to about $1 million in the fourth quarter. We expect to be in about the same range in the first quarter. And we're not going to give specifics as to what we think that ramp is going to look like over the course of the year. But given some of the technology improvements and the impact that those will have on the CX, those should be the enabler for us to go and grow advertising spend because there will be a better user experience, and that should be one of the key enablers for growth over the course of the year. That, along with stabilizing existing customer base. So that's how I would think about the cadence. Susan Anderson: Okay. Great. And then maybe if you could just talk about the categories that you offer currently on your site. And I guess, is there any white space left. You've obviously been able to expand quite a bit into health and wellness and then beauty and pet as well. So maybe just talk about kind of where you're at with those newer categories and then also any white space opportunity ahead. Jeff Yurcisin: Appreciate that. We think most of the opportunity is within our core categories, and we see real growth paths within the type of assortment that we are currently selling. Are there opportunities adjacent, of course, they are. So some of those will be when we think about wellness, thinking in a more broad perspective than justify them as minerals and supplements, but everything going into air filters and even potentially mattresses where the opportunity is to deliver and curate the best products for a healthy home. And that goes beyond just our kind of standard categories. I would also say, this year, we will be enabling some drop ship capabilities, which will allow us to get into some higher AOV categories with the right type of economics. But again, all through the lens of these 3,000 banned ingredients and substances, the highest most -- the highest standards from an ingredients perspective. And also the most kind of curated assortment out there. And so from a category perspective, we are seeing success in all of these new categories whenever we launch more products, customers love it. And we're seeing growth, but the real opportunity is serving the core customer with an adjacency towards drop ship, which will expand our overall categories into beyond just VMS, but into broader human health. Susan Anderson: Okay. Great. And then maybe lastly, if you could just talk about the margins for this year and if there's any varying cadence by quarter, whether it's gross margin or operating expense to get to your breakeven for the year? Jeff Yurcisin: Tom, I'll let you take this. Tom Siragusa: Yes. So I think in terms of margins, without giving specific guidance, I think from a gross margin perspective, we don't expect there to be a lot to move the needle one way or the other there. We did launched our loyalty program, which will allow us to be more tactical with our promotions from a point-based perspective. So we'll be leaning into that and using that to be as effective as we possibly can from a promotional perspective to engage customers. And then from an advertising perspective, we're going to spend similar to the fourth quarter and the first quarter, and then we'll scale it from there. I think given the discretionary nature of advertising spend, we'll lean in there as we see the results from some of the technology improvements and from a new customer acquisition perspective. And then from an operating expense perspective, we executed the RIF in the fourth quarter that reset our cost base lower. And so I think that's probably a good baseline to think about what our operating expense structure will look like going forward. Operator: There are no further questions at this time. I'd like to hand the floor back over to Jeff Yurcisin for any closing comments. Jeff Yurcisin: Thank you very much. I just want to thank everyone who joined the call, and hope you have a great night. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen. Welcome to Grupo Financiero Galicia Fourth Quarter 2025 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at gfgsa.com. [Operator Instructions] Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. federal securities laws and are subject to risks and uncertainty that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Now I will turn the conference over to Mr. Pablo Firvida, Head of Investor Relations. You may begin your conference. Pablo Firvida: Thank you. Good morning, everyone. I will make a short introduction, and then Gonzalo Fernández Covaro, our CFO, will have some words. Latest figures indicate that Argentina's economy grew by 4.4% on average during 2025 and the primary surplus stood at 1.4% of GDP with an overall fiscal result of 0.2% of GDP. The National Consumer Price Index recorded a 7.9% increase during the fourth quarter of 2025. Inflation for the year stood at 31.5%, significantly decelerating from the 117.8% recorded in 2024 and reaching its lowest level in 8 years. However, monthly inflation accelerated during the second half of the year and displayed a 2.8% increase in December after having reached lows of 1.5% in May and 1.6% in June. In January 2026, monthly inflation rose to 2.9%, while the year-on-year rate accelerated to 32.4%. On the monetary side, the Central Bank expanded the monetary base by ARS 0.7 trillion in the fourth quarter and by ARS 13.2 trillion over the year, bringing the year-on-year increase to 44.5% as of the end of 2025. In December 2025, the exchange rate averaged ARS 1,448 per dollar, reflecting a 29.5% year-on-year depreciation. As of January 1, 2026, both the floor and the ceiling of the exchange rate band began to adjust monthly in line with the latest available monthly inflation data. In December 2025, the average rate on peso-denominated private sector time deposits for up to 59 days stood at 26.6%, 6.4 percentage points below the December 2024 average. Private sector deposits in pesos averaged ARS 104.1 trillion in December, increasing by 10.6% during the quarter and 40.1% in the last 12 months. Time deposits rose 4.3% during the quarter and 44.8% in the year. Peso-denominated transactional deposits increased 18.3% during the fourth quarter and 35.2% in year-over-year terms. Private sector dollar-denominated deposits amounted to $36.4 billion in December 2025, increasing 11.7% during the quarter and 14.6% in the last 12 months. Peso-denominated loans to the private sector averaged ARS 87.6 trillion in December, showing a 10.4% quarterly increase and a 73% year-over-year rise. Private sector dollar-denominated loans amounted to $18.2 billion, recording a 0.5% quarterly decrease and an 83.6% annual increase. Turning now to Grupo Galicia. Net income for 2025 amounted to ARS 196 billion, 91% lower than in the previous year, which represented a 0.4% return on average assets and a 2.5% return on average shareholders' equity. Excluding integration expenses, the result would have been ARS 333 billion and the ROE 4.2%. The result was mainly due to profits from Galicia Asset Management for ARS 127 billion from Naranja X for ARS 59 billion and from Galicia Seguros for ARS 40 billion, partially offset by ARS 70 billion loss from Banco Galicia. Going to the fourth quarter, net loss amounted to ARS 84 billion as the improvement of the financial margin was more than offset by the impact of asset quality deterioration. In the quarter, Banco Galicia recorded ARS 104 billion loss, Naranja X, ARS 49 billion loss, while Galicia Asset Management and Galicia Seguros posted profits for ARS 36 billion and ARS 27 billion, respectively. This loss represented a minus 0.7% annualized return on average assets and a minus 4.3% return on average shareholders' equity. The net result from Banco Galicia for the fiscal year was negatively affected by the non-recurring expenses related to the merger with HSBC, without which it would have reported ARS 60 billion profit. In addition, during the year, the financial margin was negatively affected by changes in reserve requirement regulations and by a significant increase in interest rate, which had an impact on the cost of funding. At the same time, loan loss provisions increased significantly compared to 2024, mainly due to the increase in the retail-loan-portfolio-delinquency rates. The most relevant factors for the deterioration of asset quality were the abrupt increase in interest rate in real terms, the loss of purchasing power of customers and the disappearance of the dilution effect on the installments related to a lower level of inflation. During the quarter, the bank reported ARS 105 billion loss, decreasing 6% as compared to the loss of the third quarter. Operating income increased, reaching ARS 164 billion, up from the ARS 6 billion recorded in the previous quarter due to higher net operating income driven by an improvement of financial margin, offset by higher loan loss provisions, which still showed an upward trend. Average interest-earning assets reached ARS 25 trillion, 3% higher than in the previous quarter, primarily due to the increase of the average volume of dollar-denominated loans, which grew 9%. In the same period, its yield increased 130 basis points, reaching 31.4%, 39.7% in the Peso Portfolio and 8% in the Dollar Portfolio. Interest-bearing liabilities increased 4% from September 2025, amounting to ARS 22 trillion, primarily due to an increase of the dollar-denominated deposits. During this period, its cost decreased 220 basis points to 14.3%. Net interest income increased 23% when compared to the third quarter because of a 7% increase in interest income and of a 9% decrease of interest expenses. Net fee income increased 4% from the previous quarter, mainly stood out the fees related with bundles of products and the ones of deposit accounts. Net income from financial instruments decreased 3%. Gains from FX quotation difference were 29% higher from the previous quarter, including the results from foreign currency trading and other operating income decreased 8% in the quarter. Provision for loan losses increased 42% in the quarter and 220% when compared to the fourth quarter of 2024. Deterioration that was mainly focused in the retail portfolio in which NPLs rose to 14.3%, up from 3.2% recorded at the end of the previous year, particularly affecting personal loans and credit card financing. Personnel expenses reached ARS 178 billion and were 50% lower than in the previous quarter as during that period, losses for ARS 181 billion were recorded due to the restructuring plan following the acquisition of HSBC business in Argentina. Administrative expenses were 12% higher than in the previous quarter due to a 13% increase of taxes and to a 23% increase in expenses for maintenance and repairment of goods and IT. Other operating expenses increased 10%, mainly due to a 68% higher charge for other provisions. The income tax charge was positive as the pretax net income was a loss. The bank's financing to the private sector reached ARS 21 trillion at the end of the quarter, down 2% in the quarter with peso financing decreasing 1% and dollar-denominated financing down 5%. Deposits reached ARS 26 trillion, 4% higher than the quarter before, mainly due to a 6% increase in dollar-denominated deposits. The bank's estimated market share of loans to the private sector was 14.3%, 50 basis points lower than at the end of the previous quarter, and the market share of deposits from the private sector was 16.2%, 20 basis points lower than in the third quarter of 2025. The bank's liquid assets represented 93.2% of transactional deposits and 59.4% of total deposits, similar levels to those of the previous quarter. As regards to asset quality, the ratio of non-performing loans to total financing ended the quarter at 6.9%, recording a 110 basis points deterioration as compared to the 5.8% of the third quarter. As I mentioned before, the deterioration is mainly related to the personal loans and credit card financing portfolios. At the same time, the coverage with allowances reached 97.4%, down from the 101.5% recorded a quarter ago. As of the end of December 2025, the bank's total regulatory capital ratio reached 25.2%, increasing 310 basis points from the end of the third quarter, while the Tier 1 ratio was 25.1%, up 330 basis points during the same period. In summary, during the fourth quarter, financial margin partially recovered and efficiency improved, but still asset quality and the monetary loss due to inflation had a significant impact on profitability. Despite this, Grupo Financiero Galicia was able to keep liquidity and solvency metrics at healthy levels, and we expect an improvement in profitability during 2026. Now Gonzalo Fernández Covaro will make some additional remarks. Thank you. Gonzalo Covaro: Thank you, Pablo. Hi, everyone. Well, looking ahead, I mean, we believe Argentina is entering in a phase of stability, more predictable policy framework and renewal potential for great growth. As normalization continues and structural reforms advance, the banking system is expected to play a central role in supporting investment, productive activity and the long-term economic development. So we see a positive trends for the future for the country. Talking about 2026 specifically, we see inflation a bit higher than our first estimation, now at 23% and GDP growing at 3.7%. We're keeping our projections of 25% loan growth for the year, but we see slower pace at the first half and accelerating in the second half, that could put some pressure to our revenues. As we said in prior calls, we expect NPLs in the bank to have their peak in March '26. So during March to be -- to with the peak, but the cost of risk, we are seeing that we already had the peak in the fourth quarter of 2025, and we started to see credit losses charges to the P&L to decrease in the first quarter of 2026 in the bank. In Naranja X, same trend, but with some slower pace, but also same trend. We expect to have the benefit of the restructuring made last year after the HSBC acquisition and to continue to improve our efficiency ratios and to capture those positive effects during 2026. We are keeping our ROE guidance for 2026 in the low-double-digit range, I would say, between 10% and 11% going from low to high during the year. And regarding dividend payments, we are proposing a payment of ARS 190 billion, which ARS 40 billion are subject to Central Bank approval as usual. So with that, I mean, we are open for questions. Operator: [Operator Instructions] Our first question is from Mr. Brian Flores with Citi. Brian Flores: Gonzalo, Pablo. Gonzalo, just a quick follow-up on the 2026 guidance. So basically, you're maintaining around 25% real year-over-year growth in deposits should be a bit lower. I think the last notion you provided was around 20%. So I just wanted to confirm if these ranges are still value. Gonzalo Covaro: Yes, we said deposit between 15% and 20%, but close to not material changes, I would say. Brian Flores: And then something that caught our attention here is that we saw a strong maybe revision of the growth strategy, right? Because you were growing very fast in the first 3 quarters and you slowed down significantly in the last quarter. Just wanted to check if you have changed your focus on growth, if we should see maybe Galicia losing a bit of market share in 2026 as this asset quality is digested? Or do you think you will defend and keep it steady during 2026? Gonzalo Covaro: No. I mean our goal is to keep market share and also increase it -- try to increase it. But I would say that maybe at a slower pace, as I said before, in the first half and accelerating in the second half. I mean, in the last quarter, yes, I mean, you saw mainly a slower pace in the consumer lending. We still in the same scenario in the first quarter. But until we see that it is the right time to accelerate again, that will be, we assume later in the quarters. But in the whole year, we expect really to defend market share and to grow market share. In terms of commercial, we have lending, we have been seeing some lower demand from customers. But there, as you know, our NPLs in the commercial portfolio in the wholesale portfolio are okay. But we are working with our customers and trying to accelerate commercial lending where we see also a lot of opportunities. But to summarize the answer, the idea is to continue protecting defending market share. And -- but as we said, we see lower growth in the first half, I would say, and higher growth in the second half of the year. Brian Flores: If I may, just a very quick follow-up. So in terms of potential catalysts, do you think the recovery could come more from the macro filtering to the micro, or do you think regulatory -- this is more on the regulatory side than on the economic side? Gonzalo Covaro: I would say that the macro should start accelerating impacting the micro. That's something that we haven't seen maybe last year a lot. But we are expecting that the macro -- I mean, I think it's a combination. We, of course, expect the macro to start accelerating the micro at some point, and we believe that the government should take measures to do that because it's what country needs. From regulatory side, I mean, we don't know what will happen. So we are not betting on changes on the regulatory side. Of course, at some point, they may come, but that's something that we cannot manage. So we are not betting on that one. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: My question, you mentioned already provisioning levels should begin to come down in 1Q, although this quarter was a bit higher than expected, and we're still seeing that deterioration in asset quality. I guess how quickly can it come down? And what does give you that comfort that you maintain the loan growth guidance, but that credit quality should improve sufficiently to be able to grow at a faster pace in the second half of the year? Is there anything that you need to see? Or do you think it's just getting through the cycle another quarter or 2 and things should get better? Or any other -- any risk to that? Gonzalo Covaro: I mean, of course, that's something that we are assessing and monitoring. Anyway, still 25% is lower than the pace that we have been coming in the last year. So it's a deceleration from what we were coming -- so it's not that we keeping the growth of the prior years. But I mean, it's -- we think that is part of the cycle, as you said. We are starting, of course, to focus in different scores and different segments and that's where we're focusing so far our growth, and that's starting to show. Of course, it's lower than what we were happening in the first half of last year. But we believe that 2 things. First, the cycle is going -- is passing. And also, as I said to Brian before, we believe that the -- at some point, the economy, the current economy -- the growth in the economy should start impacting the micro, and we should start seeing activity to rebound in different sectors. And we should see not in every sector, but we, of course, are monitoring niches of customers and groups of customers where we will focus. So we believe that, that should come. Of course, that if the economy doesn't impact the micro and we don't see growth impacting the activity, well, of course, that would be more difficult. But we expect that, that should happen, and that's where we are seeing the growth -- that's why we are maintaining the growth. Daer Labarta: Okay. No, that's helpful. And just on the cost of risk because it was a little bit elevated, you compared to the last quarter, and you said it should, I guess, beginning to improve already in 1Q. But how -- can you get back to the low-double-digits, high-single-digits maybe by the end of the year? Just sort of what kind of magnitude of improvement should we expect from here on the cost of risk? Gonzalo Covaro: Cost of risk, we are seeing to end the year 8%, I would say, for the 12 months of the year of 2026. The last quarter was -- I am talking about the bank. Last quarter was 12.5%. So we are expecting that -- and the year was like 10%, 10.5% this year -- sorry, 2025 full-year, 12.5% in the last quarter, which is the highest, and we expect to end '26 in 8%, that would be the projection we are managing, and we started to see that in the -- we made some updates of our models, the variables, as you know, you need to do every year. In the fourth quarter, that contributed also in the growth of the charges. So that's done, and we don't expect -- we expect that our next update that we need to be making by the end of this year won't be increasing charges. So that also explains the peak on the last quarter. Operator: Our next question comes from Pedro Offenhenden with Latin Securities. Pedro Offenhenden: I wanted to ask on cost. Should we expect some restructuring or acquisition or integration costs throughout the year or the one-offs are largely behind that? Gonzalo Covaro: One-offs are largely behind, as you said. We continue, of course, looking for the right size of the organization and trying to make our organization more efficient. So we may see some things here and there, but nothing material or that will be treated as one-off as last year. So from now on, everything we do is part of our normal operations. So we won't have any big impact like the ones we had last year. Pedro Offenhenden: And do you have some target on efficiency or administrative expenses growth for the year? Gonzalo Covaro: I mean we expect to see -- I mean, a reduction of around 10% to 11% year-over-year, excluding the one-off of last year. Nevertheless, if you consider the one-off of last year, the reduction will be higher. But excluding the one-off in the expense line of last year, we see a reduction of around 10% to 11% year-over-year, and we see efficiency a bit below 40% for the year. Operator: Our next question comes from Yuri Fernandes with JPMorgan. Yuri Fernandes: No, very briefly on margins. If you can help us understand a little bit the trajectory because I guess the risk-adjusted message is clear, right? This was likely the peak and NPLs still could deteriorate a little bit in the first quarter, but the cost of risk is lower. But I'd like to understand the margins because if your cost of risk improves, maybe we could see better risk-adjusted NIMs this year. So maybe just asking, could we see more stable or not? Like what is the view given the mix shift towards commercial lending? And then my second question is regarding -- I think like there are 2 big debates in Argentina, right? One is the ROE recovery -- and the second one is growth, right? Like when growth will pick up, like could we see more than 20% real growth or not? How confident you are on those 2? Like if you were to pick just one for 2026, are you more comfortable that ROEs, they should recover to more normalized level? Or are you more comfortable with growth? Gonzalo Covaro: Okay. Let's go. I think the first question was NIMs. I mean we see -- as you know, the last 4 quarter, we saw December NIMs recuperating. Remember that October, November were still recovering from the higher -- the spike in interest rates of the elections period. We see the first -- for the year, we see around 16.5% the margins for the bank. Total margin for the bank 16.4%, maybe starting a bit higher around 17%, 18% and ending in 16% during the year. But on average for the year, with the mix we are expecting, we see margins around 16.4% for the year. I mean talking about growth and ROEs, I mean, I would say that we are, I would say, determined to protect our share in the market. So we are focusing a lot in -- I mean, it's difficult to answer which are -- with the ones are more sure in an economy that is still recovering and that we still depend on the economy evolution for the growth, of course, I mean, we need the economy to grows as expected and that the macro impacts the micro as we were saying before, and that families should salaries in real terms starts to recovering, which we expect that to happen, but it's something that we depend -- so it cannot be guaranteed. So I would say that our guidance is -- we maintain the guidance because we believe we can achieve both. But of course, we depend on the -- how the economy evolves and not having any surprise like we have, for example, last year in the third quarter with the interest rate spike or stuff like that. I would say that still, it depend on inflation. Remember that inflation accounting for Argentine banks is a big thing. The lower the inflation comes and interest rates goes down, I would say that in relative terms, the higher the impact is when we compare with other banks in the region, for example, because at some point, we may end with an inflation of 15% or 12% and still booking inflation accounting, where other countries with 8% inflation are not booking it. So -- and if you see, it's a big portion of our P&L. So at some point, when that disappear, I would say that hopefully, in 2028, that will help the Argentine financial system to improve ROE significantly. But on top of that, I would say that we can get to ROE levels above 15% next year. So low-double-digits this year, but including inflation accounting, we can achieve above 15% next year. And after 2028 without inflation accounting, I would say that the consolidation of the higher ROEs will be easier and more stable for the banks in Argentina because you won't have that drag on the inflation accounting that as you know, it's a big burden for us. So in summary, I would say that we are -- we think that we can maintain both. But of course, in both cases, we depend on how the economy continues also in the growth in the top line, but also in the NPLs and the cost of risk that, of course, we are counting this to continue to improve because we see the economy growing and the families to -- with enough disposable income, et cetera, et cetera. Yuri Fernandes: If I may, just on the growth, just to touch on deposits. I think the guidance is 15% to 20%, right? Can you break down dollar and pesos on this? And I don't know like we have another tax kind of flexibilization, right? Like the dollar under the mattress kind of the date. Can this be helpful for deposits to grow this year? So just checking if funding could be another part of the equation for growth. Gonzalo Covaro: Yes. I mean regarding the dollar deposit growth, we may see something with this change in the legislation. We don't expect to be as high as the prior effect that we had with the Tax Amnesty that we have between last year and the year before, but some effect it may have. Remember that today, our dollar deposits are almost half of our deposits. Our goal, of course, is to get more profits out of the dollar. So we are seeing how to get more margins on those. I mean, trying to increase the dollar lending. But as you know, we have some restrictions in terms of who we can lend, but that's something that we are focusing a lot because it's increased. I don't know, Pablo, if you remember the growth divided by dollar deposits and peso deposits? Pablo Firvida: It was -- basically, we concentrated in the peso one around 20%. Dollars is more sensitive to political environment, this type of legislation, as you said. And as we are not really making a good profit on dollar deposits we really don't pay that much attention in a way. We forecast more the peso financing and funding more than the dollar one that perhaps is also -- we cannot manage it as much as the peso funding. The peso was 20%, the dollar, I think it was something like 15%, but they take it as a bulk number. Operator: Our next question comes from Mario Estrella with Itau. Mario Estrella: Well, I guess you already answered with the evolution for the next quarters. I believe well, the next quarter is going to be relatively better than 2025, going from lower ROE to higher as we move towards the end of the year, right? And I understood that the drivers for that, of course, is going to be less pressure on the cost of risk side. But because, I mean, the full quarter results, I mean, in terms of NII, I believe they weren't that bad, I would say. So my question is, I mean, with the inflation trend that we've seen, the first quarter was more inflationary than expected. I mean, what are the downside risk that you see for your guidance if inflation keeps surprising in the upside right? Taking into account that monetary correction loss that the fourth quarter was actually higher than in the third one, right? So that kind of shows you the potential downside risk that we can see from much inflation -- for more inflation, right? Gonzalo Covaro: Yes. I mean the downside, of course, as you just mentioned, is more inflation that, of course, affects our balance sheet. So that could be -- if inflation is higher than expected, that could be a downside. And I would say that we are focusing all our efforts in improving the cost of risk. As you can see easily from our results, margins are okay. I mean costs are okay. I mean, efficiency, but of course, that the thing that is putting some sticks in the wheel for profitability is the cost of risk. So that's main focus we have. So I mean -- and that, of course, is for the good and for the bad. I mean we have a lot of room for improvement there. But also if the improvement is lower than we will see an improvement. I mean that we cannot guarantee anything, but my point is we are seeing the improvement. I would say that the risk could be that the improvement is at a slower pace than expected, and that could impact results, not getting the improvements in as fast as we expect during the year. I would say that could be a downward risk that we're facing. We -- so far, January, we came what we are expecting. But of course, the year is long, and we depend on a lot of things on how economy evolves, et cetera, et cetera, that I mentioned before. So on the other hand, top line is important. I mean even though margins are still healthy, we depend, of course, in growth and growing the top line. And of course, that if we don't see the demand of lending because the economy has any deceleration or whatever, well, that could also -- I would say that both -- those 2 could be downward risks. It's not our base case. We are not -- we are expecting that the economy should help on that. But of course, those 2 are downward risk. In the cost side, I think we are okay. We have done a good job in restructuring. As you know, last year, more than 2,000 people from the HSBC acquisition. Of course, we continue to look for more alternatives to continue to improve efficiency. So we continue in that work to always find and adjust the rightsizing of the organization. But I think those are more predictable or manageable by us. The other 2 top line and NPLs, of cost of risk. In our base case, those should come as expected. But of course, if we have different evolution of the economy and also as we were discussing before, how the macro impacts in the micro, we need to start seeing the economic activity in more sectors moves faster. Well, that could be a downward risk, of course. Mario Estrella: I understood that the ROE evolution for this year will be something around high-single-digits. And then 2027 something around 15%, right? I mean, based on improvement in asset quality, right? Is that right? Gonzalo Covaro: Yes, yes. This year, we're saying low-double-digits or high single is close. So you're right? But the idea is between 10% and 11% this year and next year, around 15% or above and to stabilize those in 2028 without inflation accounting. But what you are in the spot of what you just described, yes. Operator: Our next question comes from Bruno Kenji with UBS. Bruno Kenji: It would be a follow-up regarding the recovery that you expected for results next -- this year. When we look to Naranja X and lower ROE levels that we saw in those fourth quarter results, should the recovery on the metrics such as NPL and cost of risk be on the same pace of the bank or it could have a little delay in terms of the recovery? And if that and also reflects on the ROEs, do you think that there might be a lower acceleration of loans considering the portfolio of Naranja X for the first half and then an opportunity to have a quicker recovery in second quarter if the economies have some space for personal loans and retail when we compare to the bank? Gonzalo Covaro: Yes. I would say that we are seeing improvements in NPLs at Naranja X, albeit at a slower pace than the bank. Nevertheless, that what we are seeing, but still expect also improving during the year. And the scenario -- the growth scenario is similar to the bank. We are seeing also higher growth in the second half. As you know, we still are stabilizing the portfolio in Naranja, which is, of course, 100% consumer, so we don't have a commercial portfolio to go there. But we are growing, of course, selectively growing, but at a slower pace during the first months of the year, and we expect us in the bank to regain as we stabilize the portfolio, regain the growth, the faster growth. We will grow, of course, but the faster growth closer to the midterm of the year or something like that. Operator: Our next question is from Santiago Petri with Franklin Templeton. Santiago Petri: Can you help us understand in which segments are you expecting to grow this year, this 20%, 25%? Is it commercial, consumer? And within commercial, which sectors do you see that you can lend to? Gonzalo Covaro: I mean we are growing -- I mean, I would say that we were growing in the first half. Today, the mix is more 45% consumer, 55% companies in the toll in the bank, our mix. I would say the first half, we are focusing a bit more in commercial. So maybe by the end of the year, we will maybe 60%-40%. So this year, we may see more growth in the commercial and the consumer. But of course, we are growing -- we are going to grow both portfolio, but more towards the commercial portfolio, mainly because in the first half, we are -- as well, we are lending at a higher pace than in the consumer side, as I said before. In the commercial portfolio, of course, we are picking segments, I mean, that are less affected or not affected by the change in the economics or the imports opening and everything we know that it is suffering. We are strong and we are focusing a lot in the agribusiness. As you know, we are one of the main banks in that sector, and we continue to do that and our expectations in this year to continue strongly there. We are also lending in the oil and gas sector, not just the big loans, but because that's local bank doesn't have the balance sheet, but also all the supply chain and all the value chain in oil and gas. In mining, we are also making deals with supply chain in that sector. We see -- we also see the automotive industry doing okay. So we are also focusing on that and part of the value chain. So we have different -- we divided our wholesale operations in verticals. We have oil and gas, we have automotive, we have agribusiness, and we are going through all the value chains. We see commerce, retail commerce that at some point, some sectors not doing that good. So we are not growing in those ones. But we are doing a very good and deep analysis in which sectors we believe that are going to be the winners in these changes that the economy is doing or at least in this transition. And the sectors I mentioned are ones that we see growth and there are others like technologicals and a lot of SMEs that do services, provide services that we see them strong that we are also helping them in the growth path. So we see room for growth in the commercial portfolio. Of course, that, as you know, there are sectors that are not doing good, and we have them very clear, and we are not growing those ones. Santiago Petri: A follow-up, if I may. There are some conversations or I don't know how to name it, about the possibility of banks expanding their U.S. dollar lending to non-U.S. dollar revenue-generating entities. Is this something that you see with, are you comfortable with this change in regulation? Gonzalo Covaro: I mean, two things. Regulation could change then we'll see if we apply or we use it or not. I mean, I would say that for us, that would be on a very cautious way. We don't believe that going massive in lending dollars to non-dollar producer will be something safe. So of course, that will be more focused in the Commercial side, the Wholesale side. And if we have big local companies that are very strong or international, but big companies that even though they are not dollar producer, we see that they could -- they are a devaluation or whatever, well, that would be on a case-by-case basis. But we are not seeing anything massive that we will start lending massively if the regulation change massively to non-dollar producers. So my answer would be, we will evaluate it cautiously and do it on a case-by-case basis, but nothing massive. At least is what we are seeing now with this year, with the -- how the economy is evolving in the future, if Argentine start being more dollarized or how the dollar start being more important in the daily trading, well, we may change our mind. But so far, our first reaction is that if this happen, we will do it on a selective basis and cautiously basis. Operator: The question and answer session is over. We would like to hand the floor back to Pablo Firvida for the company's final remarks. Pablo Firvida: Okay. Thank you, everybody, for attending this call. As always, we are available if you have any further questions. Good morning and good afternoon. Bye-bye. Operator: Grupo Financiero Galicia conference is now closed. We thank you for your participation and wish you a nice day.
Operator: Good afternoon, everyone, and thank you for joining OptimizeRx' Fourth Quarter and Fiscal 2025 Earnings Conference Call. With us today is Chief Executive Officer, Steve Silvestro. He is joined by Chief Financial and Strategic Officer, Ed Stelmakh; Chief Legal and Administrative Officer, Marion Odence-Ford; and Chief Business Officer, Andrew D'Silva. At the conclusion of today's call, I will provide some important cautions regarding the forward-looking statements made by management during today's call. The company will also be discussing certain non-GAAP financial measures, which it believes are useful in evaluating the company's operating results. A reconciliation of such non-GAAP financial measures is included in the earnings release the company issued this afternoon as well as in the Investor Relations section of the company's website. I would like to remind everyone that today's call is being recorded and will be made available for replay as an audio recording of this conference call on the Investor Relations section of the company's website. Now I would like to turn the call over to OptimizeRx CEO, Steve Silvestro. Mr. Silvestro, you may begin. Stephen Silvestro: Thank you, operator, and good afternoon to everyone joining us for today's fourth quarter and fiscal year 2025 earnings call. We delivered a strong fourth quarter, exceeding both consensus estimates and our internal expectations. Revenue for the fourth quarter was $32.2 million, and adjusted EBITDA was $12 million. For the full year, revenue totaled $109.4 million with adjusted EBITDA of $24.3 million. Our full year 2025 results clearly demonstrate the strength of our operating model and the significant opportunity within our market. We delivered solid top line performance across both our largest and most established clients and a growing cohort of newer customers, particularly in the mid-tier and long-tail life science companies. We view this segment as highly attractive, providing a meaningful runway to expand our customer base and deepen our relationships over time. At the same time, improvements in our product mix and channel partner strategy contributed to higher gross margins in 2025. When combined with cost optimization initiatives following the Medicx acquisition and the benefits of our largely fixed cost, highly scalable operating model, we more than doubled both adjusted EBITDA and free cash flow year-over-year. While we're pleased with our fourth quarter results, we are seeing softness in our year-to-date contracted revenue numbers as compared to last year. This is mostly driven by a previously communicated market shift away from managed services, which contributed a material portion of our contracted revenue in the first half of 2025. In addition, we believe some of our clients are adopting a more conservative spending tone in the early stages of 2026 as they adjust their portfolios to most favored nation pricing. We feel confident that the latter is a temporary phenomenon that will start to normalize in the course of the coming few months. Given this backdrop, we are updating our 2026 guidance and are taking a more conservative view on revenue while continuing to stay focused on profitability. For 2026, we expect revenue in the range of $109 million to $114 million and adjusted EBITDA between $21 million and $25 million. I also want to be clear, management and our Board believe there is still significant opportunity for value creation, particularly when examining the demand and operating leverage we saw in 2025. Indeed, fiscal 2025 demonstrated the strength of our profitable growth model. We achieved Rule of 40 performance, delivered adjusted EBITDA margins above 20% for the year and generated nearly $19 million in free cash flow from operations. Reflecting our confidence in the long-term value of the business, our Board has authorized a $10 million share repurchase program. We intend to finance the repurchase using our available cash and cash equivalents in open market or privately negotiated transactions. I'd also like to address some of the speculation and questions we received regarding artificial intelligence. Our business has experienced minimal disruption from AI, and we do not expect to be disrupted in the future. We are not a commoditized software solution or a strategic partner to life science companies supported by a proprietary and highly valuable communications network that connects pharmaceutical manufacturers with health care professionals and patients at critical moments of care. In fact, AI may serve as a tailwind. We are hearing from customers that historically up to 50% of marketing budgets were allocated to content creation. As AI drives efficiencies within our client base, that allocation of spend is likely to be redeployed to both expand reach and improve execution of marketing efforts, areas where OptimizeRx is particularly well positioned. We believe we are strongly positioned for long-term outperformance on both the top and bottom line. We address key pain points for our customers, including enhancing brand visibility, reducing script abandonment, improving interoperability between disparate point-of-care platforms and supporting the transition to more complex and specialty medications. A strong example of our impact comes from one of our largest customers, a top 10 pharmaceutical manufacturer that engaged OptimizeRx to support specific oncology initiatives through our point-of-care and point-of-prescribe-based marketing solutions. While early programs were focused on targeted use cases, the results demonstrated measurable impact in reaching prescribers within a clinical workflow and influencing engagement at key decision points. As performance validated the DAAP model, the manufacturer expanded their investment with OptimizeRx in 2025 to support multiple oncology brands across various indications. This expansion across brands and tumor types drove meaningful year-over-year revenue growth, evolving from initial pilot programs into a scaled multi-brand oncology engagement strategy. When we talk about enterprise engagements, this is the momentum we're looking for. We're also seeing strong momentum in the med tech sector. One flagship client first partnered with us post-COVID to expand prescriber reach to our legacy point-of-care marketing solutions. Consistent script lift in 2024 prompted the client to adopt DAAP, our AI-enabled Dynamic Audience Activation Platform, which facilitated precise timely outreach to prescribers, including many previously untapped new prescribers, exactly when it mattered most in the patient journey. This continues to be a major differentiator for the company and for our clients. By activating and leveraging these high-value HCP audiences identified through DAAP, the client rapidly scaled deployment to additional brands and channels. This multi-brand, multichannel scaling is delivering substantial impact in a highly competitive and rapidly growing landscape. The success of this program resulted in the customer drastically increasing its investment in OptimizeRx solutions from pilot dollars in 2022 to several million dollars in 2025. This pattern, starting with targeted POC engagement, progressing to DAAP adoption and then accelerating across the portfolio highlights the repeatable path to accelerated growth and stronger ROI that we see across dozens of similar pharma and med tech companies. OptimizeRx is uniquely positioned to drive sustainable long-term growth and shareholder value. The keyword here is sustainable. With one of the nation's largest point-of-care networks and the only true point of prescribe network, we enable pharmaceutical manufacturers to engage health care providers directly at the moments that matter most when actual decisions are being considered and made. Building on this foundation, we've developed a purpose-built omnichannel platform that integrates advanced patient finding capabilities such as DAAP and micro neighborhood targeting. These tools are redefining how pharmaceutical companies, physicians and patients connect, improving patient outcomes and transforming engagement across the health care ecosystem. Our reach across both point-of-care and direct-to-consumer channels provides a durable competitive advantage. We believe OptimizeRx is the only company with the scale, technology and data integration required to seamlessly engage providers and patients across all channels. This positions us as a comprehensive commercialization partner, supporting customers throughout the full product life cycle, deepening relationships and expanding long-term value capture. As we have discussed on prior calls, a key focus moving forward is to further demonstrate our reach, scalability and value as a trusted strategic partner. Our ability to consistently expand relationships with our largest customers underscores the value we deliver and the impact we have on script lift in the commercialization process. I'm confident that continued focus on execution, notwithstanding some of the near-term headwinds seen in our space, combined with our differentiated platform and strong customer outcomes will translate into meaningful long-term shareholder value. We believe our momentum positions us to capture additional market share and expand our role within the pharma industry's multibillion-dollar digital ecosystem. Our customers remain deeply integrated across our HCP and DTC offerings, and our objective is to support them seamlessly across the full patient care journey. And with that, I'd like to turn the call over to our CFSO, Ed Stelmakh, who will walk us through the financials. Ed? Edward Stelmakh: Thanks, Steve, and good afternoon, everyone. A press release was issued with the financial results for our fourth quarter and fiscal year ended December 31, 2025. A copy is available for viewing and may be downloaded from the Investor Relations section of our website, and additional information can be obtained through our forthcoming Form 10-K. Fourth quarter revenue came in at $32.2 million, and this was largely in line with our previously communicated expectations as we continue to convert more of our DAAP agreements into subscription revenue that spread more evenly over the course of the year. In addition, buys came in at a more moderate level than in 2024. Gross margin increased from 68.1% in the quarter ended December 31, 2024, 74.8% in the quarter ended December 31, 2025. Year-over-year gross margin expansion is tied to a favorable solution and channel partner mix. While the fourth quarter was a record gross margin quarter, we don't anticipate gross margins to be at this level in 2026 and continue to believe we'll be in the mid-60% range as the fourth quarter saw an unusually high amount of specialty messaging in higher-margin channels, which was a favorable but uncommon mix for us. Our operating expenses for the quarter ended December 31, 2025, decreased by $2.9 million year-over-year, largely due to lower cash OpEx as we saw benefits from the post-acquisition cost reduction measures we implemented in 2024. Meanwhile, our net income came in at $5 million or $0.26 on a fully diluted basis for the fourth quarter of 2025 compared to a net loss of $0.1 million during the fourth quarter of 2024. On a non-GAAP basis, our net income for the fourth quarter of 2025 was $9.9 million or $0.51 per diluted share outstanding as compared to a non-GAAP net income of $5.5 million or $0.30 per diluted share outstanding in the same year ago period. Our adjusted EBITDA came in at $12 million for the fourth quarter of 2025 compared to $8.8 million during the fourth quarter of 2024. We ended the year with cash and short-term investments totaling $23.4 million as of December 31, 2025, as compared to $13.4 million on December 31, 2024. We were able to increase our cash balance throughout the year despite paying off $8 million in principal during 2025, including $6 million ahead of our prepayment schedule. Our operating cash flow was $18.7 million for 2025 versus $4.9 million in 2024. As a result, our current debt balance stands at $26.3 million. We continue to believe we're well funded to execute against our strategic and operational goals, and we'll look to utilize free cash flow to pay down debt at an accelerated rate and opportunistically look to repurchase shares. Now I'd like to turn to our KPIs for the 12 months ended December 31, 2025. Average revenue per top 20 pharmaceutical manufacturer was $2.8 million, which declined slightly from $3 million in 2024 and was directly tied to lower buy-ups and data-related revenue that I highlighted earlier. Meanwhile, net revenue retention rate remained strong at 116% and revenue per FTE came in at $839,000, topping the $701,000 we posted during the 12 months ended December 31, 2024. Finally, I'd like to provide additional color around our guidance, which now calls for 2026 revenue to come in between $109 million and $114 million and adjusted EBITDA between $21 million and $25 million. As you may recall, our first half 2025 revenue was positively impacted by managed service revenues, which contributed to approximately $9 million in the first half of 2025. Since we don't expect a similar revenue mix in 2026, our revenue phasing is likely to fall in line with historical 40% to 60% contribution between first and second half of the year. And with that, I'll turn the call back over to Steve. Steve? Stephen Silvestro: Thanks, Ed. Operator, now let's move to Q&A. Operator: We'll now begin the question-and-answer session. [Operator Instructions] The first question comes from Ryan Daniels with William Blair. Ryan Daniels: Curious in your commentary on some of the end market weakness, a few points there. One, are you really just seeing the conservatism with the 17 companies that are in MFN negotiations? Or is it broader across the entire client base? That's number one. Stephen Silvestro: Great. Thanks, Ryan. Good to hear from you. We're seeing a broader pause across all of the clients as they're trying to just digest what it's going to mean for them. So the contracting duration has started to shorten a little bit from maybe 6 to 12 months down to quarter pulses or even half year pulses as they're sort of contemplating how they're going to deploy spend. I think that will normalize over time or we think it's going to normalize over time as they get through it. And outside of those that are -- I think it's really just over conservatism for the first quarter. That's sort of our stance. And that's what we're hearing as people are just being cautious. Ryan Daniels: Okay. And are you seeing any nuances between D2C and HCP marketing? Are you seeing pressure on both of those from your partners? Stephen Silvestro: Yes, it's about the same across the board. They're not being viewed differently at this point by any of the manufacturers. Everybody has got the same view of both DTC and HCP spend as a whole. Ryan Daniels: Okay. Okay. That's helpful. And then maybe one for Ed. You mentioned during the quarter, gross margins were obviously great and drove a lot of upside to the bottom line. I think you said there were some specialty messaging and higher-margin channels. Can you go into a little bit more detail on what that was or what drove that? And then why you don't think that could be sustainable? Is it just something that you don't want to model, but maybe in a given quarter, you might be able to do that again and drive margins through those specialty messages? Edward Stelmakh: Ryan, yes, thanks for the question. Yes. So, I guess, two parts here. First of all, what happened in Q4 2025. So there, we did have a very positive -- very favorable mix of channel partners that we utilize to drive our messages. And as you know, we can pick and choose which channel partners we can drive messages to, but we're clearly going to be running those messages through channel partners where we can reach the best audience under DAAP. So that's what happened there in terms of our ability to drive higher margins for that quarter. As far as 2026 is concerned, we are guiding to mid-60% gross margin range, mainly due to the fact that we don't feel comfortable taking the high end of the equation and running it through the year. We can do it periodically, but I don't see us doing this on a regular basis throughout the year. Ryan Daniels: Okay. I appreciate that. And then maybe last question, I'll go back to Steve. You mentioned you're not seeing any disruption from AI, but would love to hear your purview on how it's actually helping your operations. I know you have used AI in some of your kind of real-time analytics and product deployment in the past. So just curious what AI has meant to you maybe over the last quarter or two and what you're investing in as we look forward over the next few years to enhance your offering or your ROI for clients. Stephen Silvestro: Yes. No problem, Ryan. Happy to talk to it. And it's actually an extension of what Ed just mentioned, which is everyone is pretty hyped up on the Agentic AI deployment across the board. As you know, we've been doing this now for years. So it's not anything new for OptimizeRx. But what it does is creates efficiency and speed within organizations. You still need human input to get things to actually move. But what it will enable us to do is get clients to stop spending money on things like content creation or other stuff where they were just very people heavy and start to deploy AI in a way that enables them to spend more money on commercial execution, and that's where we're particularly strong. And so we're excited about the AI piece. We don't see it as disruptive to us at all. We see us as an enabler of people adopting more AI. And then just to piggyback on Ed's comment around sort of channel partner selection and deployment of messages that impacts the profile, I think that is a great example of what AI could do for OptimizeRx as more people adopt the Agentic and other components of AI that are getting out there. It allows us to be more efficient with channel partner distribution message distribution and physician identification. And so we are welcoming it. I think it's not broad enough yet, Ryan, where we're willing to reset the profile of the business from a margin perspective, but we were able to flash that publicly and show what the potential is within this business as we continue to grow it. So, for me, I'm very excited about it. I'm trying not to overhype it, but it's a positive, net positive for us. I appreciate you calling it out. Operator: The next question is from Eric Martinuzzi with Lake Street. Eric Martinuzzi: Yes. Historically, you've been able to give some color on the percent of revenue that's under contract. I would guess, given the duration color that you gave, Steve, that maybe that number is not in what I would say a 30% number is what you've talked about in the past. Can you give us any color on percent under contract? Stephen Silvestro: Yes, we can give a little bit of color. I mean right now, we're roughly -- if we take out the managed service component, Eric, that we talked about, which is predominantly first half contracted, we're running roughly 15% to 20% off of where we normally would be. And that's mostly due to the timing of the contract, the duration of the contracts. When you take out the managed service component, it's mostly contract duration, meaning shorter-term contracts than we would have seen same time last year or years previous. And we think that's -- we're not panicking about that. We think that's going to adjust over time. And we think as we get to the midyear, we'll start to see that the contracted revenue numbers will take care of themselves and normalize themselves. But Ed, you can feel free to chime in if you want. I know you and Andy are also tracking it very closely. Edward Stelmakh: Yes. I think you got it right, Steve, 15% to 20% behind last year's numbers. We typically don't disclose the exact percentage of revenue that's already under contract, but we will give you a gauge for whether or not we're running ahead or behind. But just to give you a little more color, as Steve said, there was an impact of managed services playing a pretty big material role last year in the first half around the same time. So that's missing from the equation this year to a large extent. And also shorter duration contracts are also hitting us a little bit out of the gates. But we are kind of reading the market, and we are very positive and very optimistic about pharma once they get through the first quarter or two of this year, normalizing their spending within the year and coming back strong in the back half of the year. Eric Martinuzzi: And following up on the managed services comment. I think you said there was -- was it $9 million in the first half? Or was it $9 million for 2025? Edward Stelmakh: So it was $9 million of revenue in the first half of 2025. Eric Martinuzzi: And is there -- have you -- does the guide for 2026, does that include any amount for managed services? Edward Stelmakh: It includes very little. As we said last year, managed services is a very episodic solution for us. It comes and goes. So we're not counting on much of it coming in this year. Operator: The next question is from Constantine Davides with Citizens. Constantine Davides: Great. Steve, you highlighted in your prepared remarks performance from mid-tier and smaller manufacturers. Just wondering what exactly you're doing to attack that portion of the market and what's been driving that success? Stephen Silvestro: Constantine, good to hear from you. Really, what it is, is we have an ability to supplement a lot of what those mid-tier and long-tail clients don't have infrastructurally within their own businesses. So if you think about what OptimizeRx is evolving into as a commercialization partner for a lot of these assets, taking new -- a lot of these companies, taking new assets to market, launching them, trying to drive sales, we can fill a lot of the empty space where they may not have big budgets for big marketing teams, Cadillac budgets for agencies, hundreds of sales reps out on the street. And we're able to fill that gap very seamlessly in a cost-efficient, effective way. And the growth in the mid-tier and the long tail has, I would say, has exceeded our expectations that the uptick there is faster than we were even initially anticipating, which is a really, really good sign. And coming back to one of the questions that Ryan had around the people that are negotiating on the MFN front, all of those are the top 10 manufacturers, right? It's the Lillys of the world and the Pfizers and everybody else that people are familiar with household names. But the volume of specialty pharmaceuticals is actually still coming out of the mid-tier and the long tail, the biotech sector. And so it's a particularly interesting opportunity for our business. So we're honing in on it. I appreciate, it's a great question. Constantine Davides: Great. And then just in terms of capital deployment, I saw you guys announced a share repurchase plan. And just trying to think about or understand how you're thinking about paying down debt versus deploying it towards buybacks, just what we should be expecting there? Stephen Silvestro: Sure. Ed, I'll let you handle that one. Edward Stelmakh: Thanks, Steve. Constant, Yes, so we're going to look at every opportunity as it comes to us. As you know, historically, we've paid down debt with all of our excess cash flow. And the plan is to continue to do that as much as possible this year as well. But also we'll gauge it against the opportunity to come in and buy back our stock at the right price point. So, I guess, the easy answer to your question is it depends. But in most cases, I think you can expect us to spend that money on paying down the debt. Constantine Davides: Got it. And then maybe one last one for you, Ed. What have you contemplated in guidance in terms of approximate NRR for the year? Edward Stelmakh: So, NRR in our case, as I said consistently, we're shooting for anything above 100% as a good marker. So we haven't really unpacked our guidance based on specific NRR numbers. But I think if you look at where we're guiding now, there's probably some room for slight excess above 100%. Operator: [Operator Instructions] The next question is from Jeff Garro with Stephens. Jeffrey Garro: I wanted to ask a few more follow-ups on the end market dynamics. I'll throw a couple out to start, really focused around customer behavior. And curious if any comments you can give on what January and February bookings looked like versus December when those large pharma companies were still in the middle of negotiating those most favored nation pricing agreements. And then as we think about lower spend, early here in 2026. Is that likely to result in increased catch-up spend in the back half of the year? Or is there a possibility that, that piece of the budget is just unlikely to be recaptured this year? Any particular feedback or anecdotes you're hearing from your customers to support what the likely back half behavior is? Stephen Silvestro: Yes. Jeff, good to hear from you. So just the dynamics right now that we're seeing out in the marketplace, which is pretty consistent with everybody in our peer group that I think you guys are all either following or aware of, is exactly what we said, right? Everyone is a little bit distracted with the MFN negotiations, even if they're not directly in those negotiations, they're sort of in a wait-and-see what's going on with it. We do think that, that's disruptive in the first half of the year. That's why we've adjusted the guide to accommodate for that. We do think the business will be back to its 40-60 traditional performance in terms of revenue flow. And so that would tell you that the back half will probably be a little bit stronger than the first half. In terms of how January, February, et cetera, are looking, we've already shared a contracted revenue number and told you that we did $9 million in the first half. So you'd have to pull that out because we know it's not repeatable. And then we told you sort of where we were year-to-date. So that should give you the info that you're looking for. We feel pretty confident in the way that we're going to get to the first half, and we feel more confident in the back half. And the conversations we're currently having with clients, the client satisfaction that we're hearing back from our Chief Commercial Officer, has us feeling bullish on the back half of the year. But again, we've dropped the guide a little bit on the top line just to adjust for some of the things that we've already mentioned. And we've reiterated and raised the guide on EBITDA. So that should be, I think, a pretty good signal on how we feel about the year. Happy to answer more questions around the dynamics, but I think that probably addresses that. Jeffrey Garro: All super helpful. And maybe to just kind of probe a little bit more on visibility and the business shifts to drive more consistent results. Maybe you could update us on converting some of your DAAP arrangements to subscription. I think at one point in 2025, it was greater than 5% of annual revenue, I would assume for 2025. And a later update, you talked about a line of sight into moving that to 10%. So any color you could give on where that subscription mix ended exiting 2025 and how you see that progressing in 2026 would be helpful. Stephen Silvestro: Andy, why don't I have you talk to just the conversion factor, if you'd like. And I don't know if we're going to disclose a number yet, Jeff, but Andy can talk to you about the trend we're seeing, and we feel really good about it is what I would say. Andy, why don't you take that? Andrew D'Silva: Yes. So we got pretty close to 10% as it relates to exiting the year on that run rate, obviously, not for the full year. We were between 5% and 10% for the full year. As you think about it in 2026 and going forward, if we continue to increase DAAP as a percent of our overall business, I believe you'd start to see a continued increase in the subscription side of the business, and DAAP is a key focus area for our growth. Operator: The next question is from David Grossman with Stifel. David Grossman: So just to kind of level set on maybe the macro assumptions underlying the revised guide for '26. Are you thinking that we've kind of stabilized at a level and it should be flat to up from these levels? Are you contemplating incremental degradation? Maybe you could just give us some incremental insight into how you're thinking about that and how that was embedded in the guide -- the revised guidance. Stephen Silvestro: Sure. Ed, do you want to take that one? Edward Stelmakh: Yes, I can take that. Yes. So I would say, yes, definitely a slower start to the year than we had hoped for. Our current thinking is that as the year goes forward, these things will start to improve. hoping Q2, Q3 is when we really see that come to fruition. And those are the signals we're getting back from the market that they're taking a bit of a pause, trying to digest what MFN means to their individual portfolios. So they're signing up for shorter duration contracts out of the gates, but eventually, they'll open up their wallets and continue to market like the kind of industry they've been for many, many years. David Grossman: Is your sense that we'll have more of a fourth -- back-end loaded year than we typically have in the fourth quarter? Or do you expect it will be similar? Edward Stelmakh: It's tough to predict, but I look at it in a similar way we had a few years ago, a slowdown in FDA approvals. And pharma watches certain factors like that very closely. So any time there's any kind of disruption or change in course, they'll usually hit the pause button or pump the brakes a bit, but then come back strong in the back half of the year. David Grossman: Got it. And on the net revenue retention, how much is the decline in the fourth quarter related to managed services? Or was managed services in the fourth quarter similar to what you saw in the fourth quarter last year? Just trying to get a sense because it looks like NRR dipped a little bit in the fourth quarter. And just wondering if that's really tied to the managed service dynamic or if there are other things that play there like the reduced spending. Edward Stelmakh: Yes. I mean it's partially that. Partially also the quarter is the buy-ups and the conversion to a subscription model that happened in 2025. It just smooth out the way revenues are recognized. So those two factors contributed to the drop. David Grossman: Got it. And I guess, Steve, just on kind of your AI commentary. What -- when you're talking to these large pharmaceutical companies, what are they sharing with you in terms of their own internal efforts and where they want you to fill in, in terms of how they're kind of deploying AI on the marketing side of the house? Stephen Silvestro: Yes, sure. Happy to comment on it. And then I know we're looking -- we're looking to see you here next week, so we can chat some more on it. But the large part of what they're trying to do right now is look at it for basically internally the way that they're structuring clinical trials, making that more efficient, large language models, looking to train on those large language models, looking to use data that they've got from places like IQVIA, Surescripts or any of the other providers that they've amassed over the years and start to deploy some of that in a more, I think, a direct way and create some efficiencies around that. So those are the big things that they're looking to do. And I already shared the content creation comment, David, which is a huge one. The amount of content, as everybody knows on the call, that pharma creates is enormous. And if they can leverage some of these tools that are coming out to basically eliminate the manual labor associated with building all of that content and the approval process that is constrained that content from getting deployed in a timely manner, that is going to be an unbelievable unlock for the industry. The biggest frustration for pharmaceutical marketers is going through the medical legal and regulatory process. And one of the areas that they're really looking at is trying to use AI to eliminate the need to go through that entire process the way that it's currently constituted. So you can think about like medical simulations, you could think about legal. Obviously, legal is a huge place that could be disrupted with this, right? And then on the regulatory front, same thing. Those are all places where large language models and AI can absolutely disrupt or replace what's going on in those spaces. And so if pharma is successful in the deployment of what really is being called by McKinsey and others, Agentic AI, they'll be able to speed their time to get things to market. So drugs getting through approval and getting launched and getting deployed and all that will be rapidly to be significantly faster than it currently is. And that will give them way more marketing opportunity and more marketing budget to focus on execution, which is what they really want to spend money on. And that's where we sit. We sit on the execution side. Operator: The next question is a follow-up from Constantine Davides with Citizens. Constantine Davides: Let me ask one more. Steve, at the end of '26, you guys announced a few new partnerships and transitioned -- it looks like transitioned a couple to exclusivity arrangements. So just wondering if you can talk about your ongoing efforts there. I think perception that, that world was pretty well canvassed, but just how much more room to run is there in both the EHR world, but also the stand-alone e-prescribing arena? Stephen Silvestro: Yes. Thanks for the question, Constantine. It's a great one. So it's important for the group to know for everybody to know EHR and e-prescribe are two different animals. And every EHR has an e-prescribe module that's bolted into it. In some cases, the EHR owns the e-prescribe and it's native. In other cases, they've integrated and e-prescribe into it. So those are two different points of connectivity that we have. what we're really focused on is expanding not just our EHR footprint, but what we call our point-of-prescribe footprint as well. And the reason for that is we want to make sure that we are actively engaging in the digital conversation with the prescriber when they are contemplating the diagnosis and prescription therapy selection and subsequently transmitting that prescription to whatever pharmacy it's going to go to after the real-time benefit check and so on and so forth. So it's less about platforms that we don't have. It's more about further integrations into those platforms and making sure that we're consistently embedded in every part of the workflow that we can be. We did sign just on your question around the exclusivity, we were able to peel back a few channel partners from competitors who had signed agreements with these specific channel partners and either failed to pay the channel partner, failed to perform didn't deliver on what they said they were going to deliver. And so those channel partners proactively approached OptimizeRx through our channel lead who's done a phenomenal job of relationships and wanted to become part of the network. And to me, that is a huge positive signal that we are doing good by our partners and striving to be the best partner that we can for them, and that's why we have more people coming. So I'm excited to share more about that. I'm not going to share names on this call, Constantine, but at some point, you're going to see press releases with the names and joint statements from me and those additional channel partners coming in the not-too-distant future. Constantine Davides: Thanks for the additional color. Stephen Silvestro: Yes, you got it. Does that answer the question? I just want to make sure I got it. Constantine Davides: Absolutely. Yes. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Steve Silvestro for any closing remarks. Stephen Silvestro: Thank you, operator. Thank you all for joining us today. I'd like to end by congratulating and thanking the entire OptimizeRx team for a tremendous 2025. We deeply appreciate their dedication and hard work as we navigate an increasingly complex and rapidly evolving digital pharma marketing landscape. Our industry is undergoing significant transformation, and our products and services are uniquely positioned to redefine how pharmaceutical brands, patients and prescribers connect. Our mission-driven culture continues to fuel innovation and execution, enabling us to attract and retain strong partnerships while reinforcing our role as a trusted and long-term technology partner. While we remain in the early stages of what is still a relatively nascent industry, we are confident that our proven business model, solutions and technology platform are directly addressing the evolving needs of our customers. Our synchronized HCP and DTC marketing capabilities powered by real-time brand eligibility signals, combined with expanded functionality such as micro neighborhood targeting allow us to deliver hyperlocal privacy-safe audiences across both patients and prescribers. These differentiated capabilities continue to expand our competitive moat and strengthen our market leadership. For the remainder of the year, our priorities are clear. We are intensely focused on increasing customer utilization of DAAP and building greater revenue predictability by transitioning more customers to a subscription-based model. Establishing a consistent recurring revenue component is a critical step as we advance toward becoming a sustained Rule of 40 company. We believe these initiatives will be transformative and central to driving long-term shareholder value for OptimizeRx. Thank you again for your time today. I look forward to speaking with you on our next earnings call and connecting with many of you at the upcoming industry conferences. Operator, please proceed with OptimizeRx' safe harbor statement. Operator: Thank you, sir. Before we conclude today's call, I would like to provide the company's safe harbor statement that includes important cautions regarding forward-looking statements made during today's call. Statements made by management during today's call may contain forward-looking statements within the definition of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended. These forward-looking statements should not be used to make investment decisions. The words anticipate, estimate, expect, possible and seeking and similar expressions identify forward-looking statements. They may speak only to the date that such statements were made. Forward-looking statements in this call include statements regarding our plans to drive sustainable long-term growth, plans for shareholder value creation, converting more customers to our reoccurring model. Becoming a sustained Rule of 40 company, strength of our operating model, experiencing minimal disruption from AI, unlocking new opportunities for profitable revenue growth, plans to make our revenue streams more predictable, plans to drive substantial operating leverage, estimated 2026 revenue and adjusted EBITDA ranges, long-term outperformance on both the top and bottom lines, continued strong momentum in the medtech sector, ability to improve patient outcome and to transform engagement across the health care ecosystem, ability to consistently expand relationships with our largest customers, estimation of total addressable market size, ability to capture additional market share and expand our role within the pharma digital ecosystem, market penetration, revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions and upcoming announcements. Forward-looking statements also include the management's expectations for the rest of the year. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying these forward-looking statements. The risks and uncertainties to which forward-looking statements are subject to include, but are not limited to, the effects of government regulation, competition, dependence on a concentrated group of customers, cybersecurity incidents that could disrupt operations, the ability to keep pace with growing and evolving technology, the ability to maintain contracts with electronic prescription platforms and electronic health records networks and other material risks. Risks and uncertainties to which forward-looking statements are subject could affect business and financial results are included in the company's annual report on Form 10-K for the year ended December 31, 2023, and in other filings the company has made and may make with the SEC in the future. These filings when made, are available on the company's website and on the SEC website at sec.gov. Before we end today's conference, I would like to remind everyone that an audio recording of this conference call will be available for replay starting later this evening running through for a year on the Investors section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen. I would like to welcome everyone to The Gap Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host, Whitney Notaro, Head of Investor Relations. Whitney Notaro: Good afternoon, everyone. Welcome to Gap Inc.'s Fourth Quarter Fiscal 2025 Earnings Conference Call. Before we begin, I'd like to remind you that the information made available on this conference call contains forward-looking statements that are subject to risks that could cause our actual results to be materially different. For information on factors that could cause our actual results to differ materially from any forward-looking statements, please refer to the cautionary statements contained in our latest earnings release, the risk factors described in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2025, quarterly reports on Form 10-Q filed with the Securities and Exchange Commission on May 30, 2025, August 29, 2025, and November 26, 2025, and other filings with the Securities and Exchange Commission, all of which are available on gapinc.com. These forward-looking statements are based on information as of today, March 5, 2026, and we assume no obligation to publicly update or revise our forward-looking statements. Our latest earnings release and the accompanying materials available on gapinc.com also include descriptions and where available, reconciliations of financial measures not consistent with generally accepted accounting principles. All market share data referenced today will be from Circana's U.S. apparel consumer service for the 12 months ending January 2026, unless otherwise stated. Joining me on the call today are Chief Executive Officer, Richard Dickson; and Chief Financial Officer, Katrina O'Connell. With that, I'll turn the call over to Richard. Richard Dickson: Thanks, Whitney, and good afternoon, everyone. I am pleased to report that we delivered another successful fourth quarter, in line with our expectations and marking another year of meaningful progress for Gap Inc. In the quarter, we achieved comparable sales of 3%, our eighth consecutive quarter of positive comps, while once again winning across all income cohorts. We continue to do what we said we were going to do, underscoring the growing resilience, durability and potential of our portfolio. Reflecting on the full year, 2025 continued to demonstrate our ability to perform while we transform even in a highly dynamic environment as we execute our strategic priorities and deliver consistent performance while fixing the fundamentals. Through the disciplined execution of our brand reinvigoration playbook, we are building a clear track record of reliable growth, proving our 3 largest brands can deliver quarter after quarter. Gap Inc. achieved its second consecutive year of top line growth. Full year net sales grew 2% at the high end of our outlook, fueled by comparable sales of 3%, building on last year's 1% net sales growth and 3% comp. Our playbook continues to fuel our portfolio with Gap brand delivering its third consecutive year of positive comp sales and both Old Navy and Banana Republic reporting their second consecutive year of positive comp sales. We delivered one of our highest gross margins in the last 25 years and generated $1.1 billion in full year operating income, a clear reflection of the strength of our platform and the financial and operational rigor embedded across the organization. Disciplined execution throughout the year further strengthened our balance sheet, enabling us to end 2025 with a cash balance of $3 billion, our highest in nearly 2 decades. Based on our strong financial position and confidence in our continued progress, the Board recently approved an increase in our first quarter dividend and a new $1 billion share repurchase authorization. I am proud of the resilience this team has shown and what we have achieved together. This performance gives me confidence as we continue to move forward. That confidence is rooted in something deeper than any single quarter or year. Since 1969, when the Fishers opened a single store to bridge a generation gap, Gap Inc. has proven that purpose and profit can coexist, taking pride in doing what's right for our company, our customers and our communities and building brands that matter. It's that legacy of bridging gaps and leading with purpose that brings us to today. We have a unique opportunity with the legal settlement received to pledge a $50 million charitable donation to a combination of the Gap Foundation and our donor-advised fund. This marks a true legacy moment, honoring a heritage rooted in shared humanity and ensuring that our commitment to create a better world endures for generations to come. On today's call, I'll discuss our fourth quarter performance by brand and share how we're thinking about 2026 in the context of our strategy. Then Katrina will walk you through our detailed financial results and outlook, after which we will open the call for questions. Starting with Old Navy. As we execute on our reinvigoration playbook, Old Navy is becoming a proven growth engine with consistency and scale that drives meaningful value. Fourth quarter comp sales grew 3%, building on last year's 3% comp growth and reflecting the brand's fifth consecutive quarter of positive comps. Old Navy ranks as a top 3 brand in 9 of the 10 largest apparel categories and gained share in all 5 of the largest categories on a rolling 12 basis. Old Navy continues to win at the intersection of great product, quality and price. The brand's focused pursuit of leadership in active, denim and kids and baby drove strong performance across each of these categories as the brand continued to innovate and excite our customers. Both active and denim continue to grow share and the strong execution of our Disney partnership has positioned Old Navy as Disney's #1 apparel brand direct-to-consumer partner in the United States. The brand has also continued to evolve its media mix model to meet consumers where they are, growing its presence on social media platforms and significantly increasing creator volume with over 15,000 creators in the fourth quarter, almost 3x the number of creators last year. Looking ahead, we believe Old Navy is well positioned, and we're confident in the brand's ability to deliver consistently largely in line with its performance over the past 2 years. Now let's turn to Gap. Gap's momentum accelerated meaningfully in the fourth quarter, delivering comp sales up 7% on top of last year's 7% comp growth, marking its ninth consecutive quarter of positive comps. Returning to its powerful heritage, the brand is once again bridging the generation gap, continuing to attract Gen Z while growing its core customer. And that multigenerational appeal is showing up in the results. Gap at its best is a true original, a pop culture brand that celebrates individuality united through music, genres and collaborations that bridge generations and cultures. We're leaning into that heritage with intention from red carpet moments, most recently dressing Leon Thomas for the Grammys and Claire Danes for the Golden Globes, to co-hosting a star-studded Super Bowl event in San Francisco to spotlighting emerging artists from Tyla and Troye Sivan to KATSEYE and Siena Spiro. Gap is showing up in culture in ways that are authentic and relevant. In the fourth quarter, the team executed our playbook with Fluency, which was demonstrated through their Give Your Gifts Holiday Campaign and culturally relevant collaborations, supported by a highly evolved media mix. We saw particular strength in key categories like fleece, including logo, denim and sleepwear. As brand relevance has increased, we're also proving elasticity. This was our second quarter of meaningfully pulling back discounting driven by on-trend product and strong brand heat. With a focus on elevating the customer shopping experience, new store models continue to outperform the fleet, giving us confidence in the opportunity to accelerate these formats in 2026. I'm proud to say that Gap, our namesake brand of 56 years, is firmly back in growth mode. Banana Republic delivered a 4% comp, building on a 4% comp last year with sharper merchandising and execution. Banana Republic has returned to its roots as a storytelling brand expressed through the lens of the modern explorer. You could see that story coming to life more cohesively and comprehensively through our assortments, merchandising and how we show up in culture and consumers have taken notice. There's greater synergy between men's and women's with head-to-toe wardrobing guided by a clear style guide and design language that's informing design, presentation and storytelling. Leather, suede, cashmere and texture, all synonymous with Banana Republic's design language are reinforcing the brand's distinctive point of view. This is a great example of the differentiation of our portfolio coming alive, and we look forward to getting even sharper with more precision, more narrative-led merchandising and a dialed-up fashion quotient that underscores Banana Republic's unique brand DNA. Shifting to Athleta. While Athleta remains a work in progress, we took decisive action in the second half of 2025, appointing Maggie Gauger to lead its reinvigoration. The active category remains strategically important and resilient. Even amid disruption, customers continue to make fashion choices that are active oriented. Within that landscape, Athleta holds a meaningful position as the #5 women's active brand with distinction as a women's-only brand rooted in quality, performance and design intent exclusively for her. And while Athleta sales trend has been disappointing, we've accumulated critical learnings and are acting on them with intention. We are re-architecting the assortment, building key items into enduring franchises and reorganizing the brand around consumer insights. Maggie is going deep with the team, even meeting with Athleta's founder to reconnect the brand to its original purpose and establish clarity and alignment around the brand's identity. With the strength of our portfolio and our proven playbook, 2026 will be about positioning the brand for sustainable growth in the years ahead. Progress will take time, but I am confident we are attracting the right talent to rebuild Athleta. In 2025, the power of our portfolio became clear as our playbook successfully delivered consistent growth across our 3 largest brands. This was reflected in the metrics that matter, the strength of our product and in the cultural narratives that are resonating with consumers. Moving at the speed of culture takes focus and discipline, and we're working together with clarity and conviction to continue to advance our strategy. As we've shared, we've been very purposeful in the sequential order of our transformation. Over the last 2 years, we have focused on fixing the fundamentals, maintaining financial and operational rigor, reinvigorating our brands, strengthening our platform and energizing our culture. The meaningful progress we've made across these strategic priorities has enabled us to consistently perform while we transform, strengthening our financial model and driving shareholder value. As we move into the next phase of our transformation, building momentum, our primary focus will be growing our core apparel business through continuous improvement, driven by disciplined execution with better product, marketing and storytelling. In parallel, we will be building on the strength of our apparel business by thoughtfully seeding growth accelerators and new capabilities. We are beginning with expansions into adjacent lifestyle categories such as beauty and accessories, 2 categories that are underdeveloped in our portfolio but are meaningful to our consumers and sizable in the industry. We will also continue advancing our Fashiontainment platform and technology capabilities, all with the intent to build scale, relevance and revenue over time. Let me take a moment to share more about each of these, starting with beauty. As discussed in the past, beauty is one of the fastest-growing, most resilient retail categories in the U.S., and our customer insights reinforce strong engagement. Our research suggests that for other fashion apparel businesses that have entered the beauty space, beauty makes up anywhere from 5% to 20% of their business. We believe this is a good indicator of the category's potential in our business over the longer term. In 2025, we introduced the consumer to our expanded beauty assortment at Old Navy and are making refinements based on our customer feedback. In 2026, we'll be deepening this engagement with consumers and look forward to reintroducing a fragrance assortment at Gap this summer. Turning to accessories. Our accessory category performed well in 2025, reinforcing our confidence in this expansion. According to Euromonitor, this category has a $15 billion total addressable market. And today, Gap Inc. represents just 1% of the market share. Consumers are looking for us to be more pronounced in accessories and we see an exciting opportunity to become a destination for wardrobing. We look forward to launching an expanded accessory line for holiday. We believe the beauty and accessory categories have the added benefit of serving as margin and traffic drivers that strengthen our brands, deepen customer connection and build lasting loyalty. We have appointed proven industry experts to lead each of these areas with focus and discipline. Our Fashiontainment platform is another area we will be focusing on in 2026. Today's customers aren't just buying apparel. They're buying brands that tell stories and drive cultural conversations. As we continue to build our brands, we see entertainment as a powerful growth lever. Last month, Pam Kaufman joined Gap Inc. as Chief Entertainment Officer, adding focused leadership, expertise and relationships across entertainment and licensing. The Fashiontainment platform we're building is about amplifying and scaling what is already working, expanding licensing, strengthening strategic partnerships and aligning our assortments more intentionally with the entertainment calendar. One capability we believe can be better monetized is our loyalty program. Gap Inc. has one of the largest programs in U.S. apparel retail with nearly 40 million active members. Last week, we launched Encore, our newly reimagined loyalty program, setting a new standard for loyalty in the apparel space. Encore brings our Fashiontainment platform to life by turning purchases into experiences that give members access to fashion, entertainment and the moments they care about across our portfolio of brands. It represents a shift from a traditional points-based loyalty program to a broader engagement platform. By bringing fashion, entertainment and access together, we are building momentum, deepening relationships and creating long-term value across our portfolio. Technology is another platform capability where we see opportunity, especially with AI. Our AI strategy is focused on 3 areas: enable, optimize and reinvent. Enable is about enterprise-wide adoption, equipping our teams with AI tools that improve day-to-day productivity, streamline workflows and build AI fluency across the organization. Optimize focuses on high-impact process improvements to drive efficiency, accuracy and speed. Reinvent is about reimagining our customer, product and enterprise journeys end-to-end. We are focusing on areas where AI can meaningfully reduce customer friction, increase predictability across product to market and unlock productivity within the enterprise. As we close the first chapter of our transformation and step into the next, we do so with a brand portfolio that is consistently growing, healthy gross margins, disciplined expense management, sustained bottom line performance and strong cash on hand. Looking ahead, we have a focused, energized team that believes in the future we're building. Our aspirations remain high, and we're positioned to deliver. I'm excited about the opportunity ahead and confident in our ability to capture it. I'll now turn the call to Katrina for a closer look at our financials. Katrina O'Connell: Thank you, Richard, and thanks, everyone, for joining us this afternoon. Execution of our strategic priorities continues to drive results, and 2025 was a strong year of financial performance. We grew net sales 2%, gaining market share for the year as we demonstrated relevance to customers of all income levels. It's exciting to see our playbook driving the second consecutive year of top line growth, fueled by positive comp sales across our largest brands, Old Navy, Gap and Banana Republic. The rigor we've developed is delivering reliable profit performance with another historically high gross margin of 40.8%, operating profit of $1.1 billion and an operating margin of 7.3%. These results reflect improved AURs as we capitalize on the growing strength of our brands, combined with SG&A leverage as we continued to optimize our cost structure. Tariff impacts were significant. However, our mitigation strategies have effectively managed these pressures. Our focus on cost optimization and inventory management drove robust cash generation, ending the year with $3 billion in cash, cash equivalents and short-term investments. In 2025, we generated $1.3 billion in net operating cash and $823 million in free cash flow. Our strong balance sheet allowed us to invest in high-returning projects while returning over $400 million to our shareholders through dividends and share repurchases. I'm incredibly proud of what this team has accomplished, and our performance gives us confidence in the 2026 outlook we provided today, which reflects another year of sales growth in addition to operating margin expansion. Before discussing the detailed results for the quarter and the year, it's important to note that changes in global tariff rates in 2025 had a substantial impact on our profits. Specifically, tariffs influenced our fiscal year's gross and operating margins by approximately 120 basis points and affected our fourth quarter gross and operating margins by approximately 200 basis points. Despite these pressures, our reported results today include these factors, showcasing our strong underlying performance, thanks to the effective execution of our strategic priorities. Now let's turn to our fourth quarter results. I'm pleased with our performance, which included a solid holiday season, underscoring the increasing resonance of our brands with consumers. Fourth quarter net sales of $4.2 billion increased 2% year-over-year with comparable sales up 3%, marking our eighth consecutive quarter of positive comps. Results were in line with our plans despite disruption from expansive store closures due to extreme weather at the end of January. By brand, Old Navy net sales were $2.3 billion, up 3% versus last year, with comparable sales up 3%, building on last year's 3% comp growth. The brand's price value equation is resonating with consumers as Old Navy continues to win with strategic categories and across a wide range of income levels. Turning to Gap brand. Net sales of $1.1 billion were up an impressive 8% versus last year, and comparable sales were up 7%. This was on top of last year's 7% comp growth, demonstrating Gap's momentum as it continues to expand its customer base across generations. Banana Republic net sales of $549 million were up 1% year-over-year with comparable sales up 4%. The brand delivered its third consecutive quarter of comp growth, reflecting progress in product elevation and sharper marketing and merchandising. Athleta net sales of $354 million decreased 11% versus last year and comparable sales were down 10%. We remain focused on rebuilding the brand for the long term. Let's continue to the balance of the P&L. Gross margin of 38.1% declined 80 basis points. Lower discounting resulted in another quarter of AUR growth, driven by the consumers' response to our relevant product and storytelling. Compared to last year, merchandise margins were down 90 basis points due to the net impact of tariffs. ROD leveraged 10 basis points in the quarter. SG&A increased to $1.4 billion, primarily due to the quarterly timing of incentive compensation in addition to strategic investments. SG&A as a percentage of net sales was 32.7%, deleveraging 10 basis points versus last year. Fourth quarter operating margin of 5.4% was down 80 basis points compared to last year, primarily due to the approximately 200 basis point headwind from tariffs. Earnings per share in the quarter were $0.45 versus last year's earnings per share of $0.54. Now let's turn to our full year 2025 results. Net sales of $15.4 billion increased 2% year-over-year at the high end of the guidance range we provided with comparable sales up 3%. Our playbook is working and drove strong results across our 3 largest brands, with Old Navy comp sales up 3%, Gap up 6% and Banana Republic up 3%. Comp sales for Athleta were down 9%. Gross margin of 40.8% declined 50 basis points versus last year. Merchandise margin was down 80 basis points due to the impact of tariffs and ROD leveraged 30 basis points. SG&A was $5.2 billion. As a percentage of net sales, SG&A was 33.5%, leveraging 40 basis points versus last year. We achieved our targeted cost efficiencies in 2025 as we rigorously managed our core expenses to fund inflation and begin our investments in growth accelerators. Fiscal 2025 operating income was $1.1 billion, resulting in an operating margin of 7.3%. The 10 basis point decline in operating margin versus last year was due to the estimated 120 basis point impact of tariffs, implying roughly 110 basis points of underlying margin expansion versus last year's 7.4%. Earnings per share for the year were $2.13, down 3% versus last year's EPS of $2.20. Now turning to the balance sheet and cash flow. End of quarter inventory levels were up 7% year-over-year, primarily attributable to increases in tariff-related costs. Our disciplined inventory management resulted in units down year-over-year, and we believe we ended the year with the right inventory composition going into fiscal 2026. We expect our inventory buys in the year ahead to be in line with our principle of unit purchases positioned modestly below sales. As I highlighted earlier, we ended the year with cash, cash equivalents and short-term investments of $3 billion, an increase of over $400 million compared to last year. Full year net cash from operating activities was $1.3 billion, and we generated free cash flow of $823 million for the year. Capital expenditures were $470 million. With regard to returning cash to shareholders during the year, we paid $247 million to shareholders in the form of dividends. Additionally, we repurchased 7 million shares for $155 million, achieving our 2025 goal of offsetting dilution. Before I move on, I want to thank our teams for their hard work and diligence this past year. Our 2025 results reflect significant progress in our transformation journey with the execution of our strategic priorities, driving 2 years of impressive results. We are moving forward from a position of strength, and we'll continue to operate with the same rigor in 2026. Looking ahead, we are energized by our strong business results, which underpin a confident outlook for 2026. Our strong performance at Old Navy, Gap and Banana Republic is expected to drive another year of net sales growth. At the same time, we are committed to rebuilding Athleta for sustainable long-term success. With our brands becoming increasingly relevant to consumers and our stringent inventory management practices, we anticipate continuous improvement in average unit retails, supporting robust gross margins aligned with historically high levels. Successfully navigating the challenges of a second year of tariff dynamics, we are poised to not only maintain but improve our financial health. Our strategy for 2026 includes generating further cost savings by increasing efficiencies in our core operations, enabling us to combat inflationary pressures while reallocating resources into strategic growth investments. This approach is designed to deliver a third consecutive year of profitable sales growth and robust cash flow generation, enabling us to continue capital investments and enhance shareholder returns. I want to note that our guidance today reflects tariff rates under the IEEPA regime and therefore, does not contemplate the recently announced Supreme Court ruling and subsequent Section 122 announcement. These recent events were not contemplated in our original plans for fiscal year 2026. If the Section 122 tariffs stay in place for the year or expire in July, we do believe there could be an incremental benefit to our current plans. With many scenarios still being debated, we are awaiting more clarity before changing our plans. At this time, we expect any benefit to Q1 to be minimal based on the timing of receipts. In the meantime, our teams are continuing to leverage the extensive tariff mitigation strategies we've built out over the past year, which sets us up for the annualization of last year's tariffs to be net neutral to 2026 full year operating income as previously disclosed. As noted in today's earnings press release, our outlook excludes the net estimated gain related to a legal settlement in the first quarter as well as the pledged charitable donation of approximately $50 million to a combination of the Gap Foundation and our donor-advised fund, which we are pleased to make as we look to advance our purpose. Both are included in our reported EPS guidance for fiscal year 2026. As I take you through the details of our 2026 outlook, I'll spend some time unpacking the factors that shape the year as there is some nuance to the quarterly cadence related to the timing of tariffs and investments. Let's jump into the full year. Starting with revenue, we expect net sales growth of approximately 2% to 3% year-over-year. While there are a range of outcomes for each of our brands, we expect continued comp sales growth across our 3 largest brands and negative mid-to-high single-digit sales declines for Athleta in the first half of the year, and the team is hard at work on the second half. Turning to gross margin. We are proud of the underlying gross margin performance achieved in 2025 and expect gross margins to be flat to up slightly year-over-year in 2026 compared to 40.8% last year. This includes a balanced plan of realizing higher AURs through better sell-throughs and lower discounting as well as implementing adjusted sourcing strategies as we offset the tariff impact that annualizes in the base this year. Regarding tariffs specifically, the net tariff impact is expected to be neutral on the full year. Our sourcing strategies build sequentially through the year, resulting in an approximately 150 basis point headwind to the first half gross margin that turns to an approximately 150 basis point tailwind in the second half of the year. Specific to the first half, we expect a 200 basis point headwind to Q1, which improves to approximately a 100 basis point headwind in Q2. Separately, as we conclude our multiyear program of rationalizing our store footprint and begin to reaccelerate our capital expenditures, we expect ROD as a percentage to sales to deleverage slightly. Moving on to SG&A. We expect adjusted SG&A as a percentage of sales to be roughly flat year-over-year. Our focus is on further improving our cost structure, aiming to achieve around $150 million in incremental savings by enhancing efficiency and effectiveness in 2026. These savings will help us manage inflation and reinvest in more valuable initiatives such as expanding into new categories and capabilities like beauty, accessories, Fashiontainment and technology, as Richard mentioned. We initiated our growth accelerator investments in 2025, particularly in the latter half of the year. These will continue into 2026, initially causing some SG&A deleverage in the first half. However, we anticipate SG&A to leverage in the second half as we lap the higher spend in the back half of last year. Taking this all into consideration, we expect an adjusted operating margin of about 7.3% to 7.5% for the full year. Interest income is expected to be approximately $10 million to $15 million, and we expect a tax rate of approximately 27%. Reported EPS is expected to be $2.71 to $2.86, which includes an estimated $0.51 benefit related to a legal settlement in the first quarter, net of the $50 million charitable donation. We expect an adjusted EPS of $2.20 to $2.35, representing growth of 4% to 10% year-over-year. Our healthy balance sheet supports our balanced capital allocation framework with the primary goal of enhancing long-term shareholder value. The framework remains as follows: our first priority is investing in the business through high-returning capital investments. In 2026, we expect to invest approximately $650 million, which relates primarily to our investments in stores, technology and supply chain. Second, we believe in paying an attractive dividend that grows with net income growth. In alignment with that principle, we recently announced that the Board raised the first quarter dividend by approximately 6% to $0.175 per share. And our third priority is focused on share repurchases. Previously, we aimed to simply offset dilution. We are now committed to executing a repurchase program with a goal of driving slight accretion. On that note, the Board has approved a new $1 billion share repurchase authorization that we expect to utilize to meet this goal. Now let me turn to our outlook for first quarter of fiscal 2026. The quarter is off to a good start, and our outlook contemplates our quarter-to-date performance. We expect net sales in Q1 to be up 1% to 2% year-over-year. This includes an approximately 150 basis point spread where comp outpaces net sales largely related to lapping last year's benefit from our credit card agreement, which continues into Q2, but does not impact the back half of the year. We expect first quarter gross margin to be down about 150 to 200 basis points compared to last year's gross margin of 41.8%, including an estimated 200 basis points of net tariff impact. This implies an underlying gross margin of flat to up 50 basis points. And we are planning for adjusted SG&A as a percentage of net sales to be about 35%, which reflects the timing of the growth investments I spoke to earlier. Reflecting on 2025, I'm proud of our accomplishments. Our consistent execution over the past 2 years has laid a solid foundation, driving our confidence as we advance in our transformative journey. As we transition into 2026, we're excited to amplify our core strengths while fostering new opportunities through strategic growth accelerators and innovative capabilities. Our balance sheet is giving us the ability to invest purposely in our business and accelerate cash returns to shareholders. With demonstrated progress and an exciting road map ahead, we are building a high-performing company that stays focused on delivering sustainable, profitable growth and long-term value for our shareholders. With that, we'll open the line for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Mark Altschwager with Baird. Mark Altschwager: Richard, you outlined several growth accelerators with beauty, accessories, fashiontainment, technology. Can you talk about how you're balancing investments to maintain momentum in the core while also seeding growth in these new areas? And how much can these accelerators move the needle in 2026 from a revenue perspective? Richard Dickson: Thank you for that question. Thanks for the question, Mark. First off, it's important to note we delivered a successful fourth quarter, marking another year of meaningful progress for the company. We achieved our second consecutive year of top line growth, and that's the eighth consecutive quarter of positive comparable sales. Now these are really important to acknowledge as we sort of zoom out and look at our transformation road map, which has 3 phases. The first phase was fixing the fundamentals. We're now moving into building momentum, and the third phase is accelerating growth. So over the past 2 years, during our fixing the fundamentals phase, the meaningful progress that we've made across our strategic priorities has really enabled us to consistently perform while we've been transforming, strengthening our financial model and essentially driving shareholder value. It's this performance that's giving me the confidence as we continue to move forward, and that means moving forward into the next phase of our transformation that we call building momentum. Now in this next phase, our primary focus is going to be growing our core apparel business. We've got to do it through continuous improvement. That means driven by disciplined execution, better product, better marketing, better storytelling, better in-store execution. Now in parallel to that, we're going to be thoughtfully seeding our growth accelerators, which you mentioned, and by the way, new capabilities. The first, which we've talked about is expanding our presence in lifestyle categories such as beauty and accessories. Now these are 2 underdeveloped categories in our portfolio that are meaningful to our consumers, but are also sizable in the industry. Second, we're rebuilding our fashion payment platform, and we're advancing our technology capabilities. Now when you combine the context of continuous improvement of our core business, delivering low to mid-single-digit growth with the accelerators, which begin to scale in 2027 and beyond, it really creates an exciting growth proposition. We are obviously very excited about where we are right now, and we'll look to provide updates on how this will evolve, not only from our business perspective, but the economic model in the long term. But overall, the aspirations remain very high, and I'm looking forward to all we can accomplish. And maybe Katrina has more to say on the balance of the question. Katrina O'Connell: Yes. I mean, Mark, I'm happy to talk about how we're thinking about the investments. This is really an exciting time for the company as we're balancing the rigor that we've put into the business that's driving real value with the growth opportunities that are really important to the long-term success of the company. So our guidance today reflect what we think is a very balanced approach where we're continuously improving the cost structure of the company. As I said, we're aiming to drive an incremental $150 million in savings and then we're looking to really repurpose those into making investments in these seed categories that Richard just talked about like beauty, fashiontainment, accessories and technology. And as a result, we think our outlook that we presented today has SG&A as a rate of sales flat year-over-year. I would say this is what it means to be a high-performing company that strives for continuous improvement. And maybe the last thing I'll add, Richard said, this is really early days. We're seeding. We're doing a lot of work to get teams in place and begin to get these in front of customers. But I think the bigger portion of these will start to deliver in '27 and beyond. Richard Dickson: Thanks, Mark. Mark Altschwager: A quick follow-up for Katrina on gross margin. Just with respect to the Q1 guide, you don't seem to be incorporating much in terms of offsets to the 200 basis point tariff headwind, whereas you have been able to offset much of that headwind through the back half of 2025. So I was hoping you could just walk us through some of the other gross margin puts and takes there. Katrina O'Connell: Sure, sure. Yes. Thanks, Mark. So for gross margin, as you say, in Q4, margin decreased 80 basis points year-over-year, and that was inclusive of a 200 basis point tariff impact, which implies that the underlying gross margin was much stronger. That was driven by AUR growth and our customer really responding to our product and our storytelling, which led to lower discounting and ultimately contributed to very strong underlying gross margin expansion. In addition to that, we saw ROD leverage in the quarter of about 10 basis points as a result of higher sales. As we move into Q1, I would say there are 2 things. We gave a guide of margin down 150 to 200 basis points. The outlook does include the net tariff impact of about 200 basis points, so very similar to Q4. I think you heard me say on the call, and we previewed this last time, our sourcing strategies are going to build sequentially throughout the year. So the 200 basis point impact in Q1 becomes about 100 in Q2 and actually flips to a tailwind, all net neutral on the full year. So there's a little bit of a cadencing of the tariff. And then maybe the two other things I'll call attention to in Q1 are that promotions right now are assumed to be relatively flat year-over-year, whereas we did see improvement in Q4. So we'll see. We're taking a balanced approach. And then maybe lastly, we saw leverage on ROD in Q4. And I think you heard in my prepared remarks, we'll see slight deleverage in Q1 on ROD. Operator: Your next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Richard, on the inflection at the Gap brand to growth mode that you cited, what do you see as the next leg or opportunity to accelerate market share in the next strategic phase? And then, Katrina, just to confirm, your 1% to 2% revenue growth forecast for the first quarter, so that embeds a 150 basis point headwind from the credit card adjustment. So underlying revenue growth would be 2.5% to 3.5% is actually an acceleration from 2.1% in the fourth quarter. Can you just break down the areas of underlying sequential acceleration that you're seeing in embedding and maybe elaborate on the strong start to the quarter at the Gap and Old Navy? Richard Dickson: Okay. Matthew, thanks for the question. I'll take the first part, and then Katrina will take the second. First off, thank you for calling out the Gap brand. It has been really exciting to see Gap, of course, our namesake brand, building on the success quarter after quarter. So to your point, we've already begun to comp the comp. I mean, achieving an impressive 7% comp on top of last year's 7%. The fourth quarter also marked the brand's ninth consecutive quarter of positive comps. So when you look at the last 2 years, Gap has consistently gained market share. Now it's through compelling product assortments, better marketing and in-store execution. And it's results like this that also increase our multigenerational appeal. We've seen growth across all income cohorts with more high-income customers choosing Gap. We've had strength in key categories like fleece, including logo. Denim has been outstanding. And of course, sleepwear drove the performance in the fourth quarter. And as brand relevance has increased, we've also meaningfully pulled back on discounting. I also want to add, it was really exciting to see the brand gain share in denim in 2025. We've increased our ranking to #6. Now that's up from #10 just 2 years ago. And overall, the brand's momentum is giving us the confidence to also accelerate the rollouts of our new store formats in the years ahead, which will also continue to just excite consumers. So all in all, Gap is firmly back in the cultural conversation as a true pop culture brand. Its product resonance is showing up on the red carpets to surprising collaborations, and I can guarantee you there's a lot more exciting moments to come in 2026. Katrina O'Connell: And then, Matt, as it relates to Q1 revenue, so yes, the guide was 1% to 2% revenue growth. And then as you say, we have about 150 basis point headwind that makes comps outpace total revenue. And so the implied comp guide is 2.5% to 3.5% for the quarter. The way I think about it is the midpoint of that at 3% is roughly in line with the 3% we just delivered in Q4. So largely a continuation of the trends in the business. As it relates to Q1 quarter-to-date, as I shared, the quarter-to-date comp is off to a good start, and that's built into the outlook that we provided today. This time of year, there's always weather dynamics at play in all this stuff, but we are largely trending in line with the guidance we just gave. And then as I think about the brands in the quarter, I guess to be helpful, I would say this. Old Navy, as Richard said, is proving to be a reliable growth brand and 2 years of delivering positive 3 comps. So we'll see where the quarters land, but I see them as a very consistent driver of value. Gap is firmly in growth mode. And Banana has 3 quarters of comp, and we're really excited to see BR deliver. And then as I said in my remarks, Athleta, we are expecting negative mid-to-high single-digit sales declines in the first half of the year, and the team is really working on the second half. Operator: Your next question comes from the line of Simeon Siegel with Guggenheim. Simeon Siegel: Richard, any color you can share on store sales by brand, how you're thinking about that going forward? I guess, basically, I'm curious if you think the culturally powerful campaigns you guys are running should bring more people into the stores next year. And I guess whether that's even something you're targeting or whether you're channel agnostic. And then I'd be curious to hear -- the beauty sounds really exciting. Curious to hear the learnings and the refinements that you were mentioning about Old Navy Beauty given that comment and whether you think this becomes a visitation driver or more of a UPT add-on. Richard Dickson: Sure. Simeon, thanks for the question. Let me start by saying fashion is entertainment. And today's customers are not just buying apparel, although, of course, our product has to meet and exceed their expectations, but they're buying into brands that tell compelling stories and drive cultural conversation. And as we continue to build our brands, we see this intersection of fashion and entertainment, our Fashiontainment platform as a powerful growth lever. The creative assets that you've been seeing and that we've been developing across our brands have evolved to specifically drive relevance and increase engagement. We've been leveraging music, art, dance, film. These are all forms of entertainment. And whether it's a music video with KATSEYE or a fashion show during the NBA All-Star weekend, these are great examples of Fashiontainment. We're serious about it. We appointed Pam Kaufman as our Chief Entertainment Officer, to lead our Fashiontainment platform as we take it to the next level. We're going to be adding incredible expertise, essentially extending our iconic IP into more experiences and product opportunities that drive relevance and revenue. These campaigns, as you call out, they're designed to drive interest. And the more interesting we become, the more exciting it becomes for consumers and the more traffic we drive each year to our omnichannel experiences. As we look at some of the ways that we think about stores, this is a really important way for consumers to experience our brands. They bring product and storytelling and service to life in ways that digital can't. And I would say we're now at a very pivotal point. The fleet is well positioned. We've been testing new formats and experiences, Gap Flatiron, Chestnut Street here in San Francisco, Banana Republic Soho. Given Gap's brand momentum, we have the confidence to start to accelerate the rollouts of our new store formats in the year ahead, which we believe will also really excite consumers. You asked about beauty. So this is also a really exciting extension. Beauty is one of the fastest-growing, most resilient retail categories in the U.S. and our consumer insights reinforce, strong demand across other fashion apparel retailers with the beauty offering, the category represents anywhere from between 5% to 20% of their sales, highlighting the meaningful potential that this category can represent within our core business over time. It's also important to recognize we have been in this category. We just have an underdeveloped beauty business. And based on the insights that we've learned, we have a lot of potential in this category. So in 2025, we announced our plans for strategic expansion into the category with a phased approach, starting with Old Navy in the fourth quarter, and Gap will be relaunching its fragrance later this year. The beauty collection was piloted in 150 stores in the fourth quarter. We had some select offering in dedicated shop-in-shops. The pilot validated strong consumer interest, confirmed that beauty really enhances the engagement, it's basket building and it's exciting our customers. And you'll hear a lot more about it as we move forward. Operator: Your next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Richard, Katrina, can you speak to the AUR versus unit growth trends that you're seeing at the Old Navy banner in fourth quarter and your expectations for net pricing growth at Old Navy for 2026? Additionally, Richard, I would be very curious to see if there's any apparel category initiatives that you have in place at that brand that could shift the Old Navy brand further into growth mode in 2026? Katrina O'Connell: Brooke, maybe I'll start off. I won't speak probably specifically to Old Navy, but I'll certainly talk at the corporate level. For both fourth quarter and fiscal year 2025, we saw average unit retail growth, which reflected the consumers continuing to respond to our product and our value and our storytelling. In addition to that, both for fourth quarter and the full year, units were flat to up slightly, and we also saw traffic positive. So exciting to see winning on all of those metrics. Maybe as I talk a little bit more broadly about pricing, we approach pricing as we always do. We consider all the various inputs while maintaining most importantly, the overall value proposition for our consumers. I think we know that we're doing this well as we evaluate the consumers' response to our value equation, which is showing up in 8 consecutive quarters of positive comp sales, continuing to gain share and winning across all income cohorts. So our ability to grow AUR in Q4 and for the full year really gives us confidence that our strategies are working. As I look into 2026, the AUR growth that's embedded in our 2026 plan is roughly in line with how we've been delivering in 2025. So it reflects a balanced plan of realizing higher AURs through better sell-throughs and lower discounting. Richard Dickson: And Brooke, I'll talk a little bit about the question related to the categories and potential growth accelerators. But first, I just want to reiterate, we delivered another strong quarter for Old Navy. And importantly, this has been consistent share gains over the last 2 years. It's a great reflection of the brand's strength and reliability. And we continue to win at the intersection of great product, quality and price, and we're winning across all income cohorts. Now even more specifically, we called out a couple of years ago that we were going to focus on category leadership in certain categories, denim, active and kids and baby. And these have really been driving the strength of the brand. In both denim and active, Old Navy gained share for the second year in a row. We rank as the #3 denim player in the country and the #5 in active. The broad-based selection and relevant denim offerings are really establishing Old Navy as a denim destination, and we believe that we've got a lot more room to grow. Our innovation and price value are really enabling Old Navy to win in the active space, which is already an enormous business, the #5 player in the space and growing share and outpacing the rest of the brand. And you're going to see a lot more excitement from us in this category going forward. And Kids and Baby. Old Navy continues to be the brand leader in kids and baby. We rank as the #2 brand in the country. I think I've shared our partnership with Disney is such a great partnership, but we recently became Disney's #1 apparel direct-to-consumer partner in the U.S. So from a licensing and strategic partnership perspective, there is enormous opportunity for us to continue to go after in relation to the kids and baby market using entertainment and entertainment properties as a lever. We are very well positioned to deliver the consistent performance that you've been seeing, building on the strength demonstrated over the past 2 years. And I think it's a very reliable brand with an aspiration to accelerate our growth longer term. We'll focus on these categories that I mentioned, but by no means are those the only categories that we intend on growing. Operator: Your next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: One of the interesting things is that with the return to growth this year, the commentary that it will be flat net store closures versus last year, I believe it was just over 30. And you mentioned in the CapEx investments, technology seem to be more front and center than stores. How are you thinking of the store portfolio and growth and the CapEx investments? And how does it differ by brand? Richard Dickson: Thanks, Dana. I'll start, and then Katrina can fill in a little bit. And as I mentioned before, stores are such an important way for our customers to experience our brands. Obviously, they bring great products, storytelling and service to life. It is an omnichannel experience as we connect the digital dialogue with our in-store dialogue. With a company like ours operating a fleet of nearly 2,500 stores, we are always optimizing our retail footprint. We're closing underperforming stores, as you know. We're repositioning some locations that are more relevant to our customers, and we're always evaluating new store openings. To your point, you know this well, we've closed over 350 stores that were unprofitable over the last few years. Last year in full year '25, we had approximately 35 net closures across our portfolio. And we expect net closures to be flat in fiscal '26. The majority, by the way, of those closures were at Banana Republic. Again, as I mentioned before, we're really at a pivotal moment now. Our fleet is really well positioned. We've been experiencing new formats and new experiences with our brands, particularly Gap and Flatiron and Chestnut and a variety of other locations, great success that is giving us the confidence that now we could accelerate these rollouts of new store formats in the year ahead, which we believe will continue to excite our customers and also essentially grow our business. As we've evaluated the store performances that we have tested new formats, we've really got confidence in the revenue and relevance and the strong returns they're driving. We're very much focused on the experience for our customers. And I do believe we're at a really exciting point again, in our transformation of fixing a lot of the fundamentals and now moving into continuous improvement to build momentum and celebrate these stores and new store formats. I'll turn it over to Katrina for the rest. Katrina O'Connell: Yes. And Dana, as it relates to capital, we are looking to increase capital expenditures this year. We're expecting to spend about $650 million this year. As you say, the big areas where we are spending capital are around technology on our stores, as Richard just said, and then also on our supply chain. The increase in capital year-over-year really is much more related to our stores and technology increases. And the store increases are very much related to a lot of these experiential things that we're starting to accelerate where the tech investments are really ratcheting up in some of these new capabilities that are AI-driven as well as RFID. So hopefully, that helps as we think about capital this year. Operator: That concludes our question-and-answer session. I will now turn the call back over to Richard Dickson for closing remarks. Richard Dickson: Thank you, operator. As we close the first chapter of our transformation and step into the next, we do so with a brand portfolio that is consistently growing, healthy gross margins, disciplined expense management, sustained bottom line performance and strong cash on hand. Looking ahead, we have a focused, energized team that believes in the future that we're building. Our aspirations remain high. We're positioned to deliver, and I'm excited about the opportunity ahead and confident in our ability to capture it. I want to thank our entire organization and all our partners for all of their efforts this quarter and throughout the year, and we look forward to our next call. Thank you. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon. Thank you for attending the Owlet Q4 and Full Year 2025 Earnings Conference Call. My name is Matt, and I'll be the moderator for today's call. [Operator Instructions] I'd now like to pass the conference over to our host, Jay Gentzkow, Investor Relations. Jay, please go ahead. Jay Gentzkow: Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet released financial results for the fourth quarter and full year ended December 31, 2025. I'm pleased to be joined today by Jonathan Harris, Owlet's President and CEO; and Amanda Twede Crawford, our CFO. Before we begin, please note that our financial results, press release and presentation slides referred to on this call are available under the Events and Presentations section of our Investor Relations website at investors.owletcare.com. This call is also being webcast live with a link at the same website. The webcast and accompanying slides will be available for replay for 12 months following this call. The content of today's call is the property of Owlet. It cannot be reproduced or transcribed without our prior consent. Before we begin, I'd like to refer you to our safe harbor disclaimer on Slide 3 of the presentation. Today's discussion will contain forward-looking statements based on the company's current views and expectations as of today's date. These statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those described in our most recent filings with the SEC and in the Risk Factors section of our annual report on Form 10-K as updated in the company's quarterly reports on Form 10-Q and other filings with the SEC. Please note that the company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. With that, it's my pleasure to turn the call over to Jonathan. Jonathan Harris: Thanks, Jay. Good afternoon, everyone, and thank you for joining. I'm excited to recap the significant progress we've been making as 2025 was the strongest year in Owlet's history, and we are positioned for continued outperformance in 2026. I'll begin on Slide #5. 2025 was truly a monumental and transformative year for Owlet, marked by significant growth and expanding our leadership and scale in pediatric health monitoring. The team achieved many milestones and accomplishments, and I'd like to highlight 3 of the most critical. First, the launch of our Owlet360 subscription service in January of last year proved to be a resounding success, fundamentally reshaping our relationship with our customers and our long-term business strategy. We're proud to announce that we have crossed 110,000 paying subscribers to begin March, a testament to the value and peace of mind our connected services provide to families. And we've recently launched our international subscription offering, opening new high-margin revenue streams and extending our ecosystem benefits across borders. The introduction of Owlet360 marked a major milestone in our evolution into a comprehensive pediatric data platform. By leveraging Owlet's massive data set of pediatric health, we're better able to deliver more advanced and personalized health and wellness information for our families. We're excited about the foundation we laid in 2025 for subscription and to capitalize on that momentum in 2026. Second, we launched our new Dream Sight camera in September last year, our next-generation video monitor. Dream Sight levels up our camera platform with greater reliability and security and future forward technologies, including onboard AI capabilities, all at a price point that makes sense. When paired with Dream Sock, it delivers a holistic view of a child's wellness that no other offering can match. We view the introduction of Dream Sight as an important strategic catalyst to expand our LTV as cameras remain in use past 3 years of age. We've seen outstanding momentum since Dream Sight launch, and we're thrilled to begin rolling out our new camera-specific subscription features in the coming quarters, yet another opportunity to increase subscriber growth. Third, in 2025, we achieved record annual revenue, gross margin and adjusted EBITDA, showcasing new heights of financial performance and operational efficiency despite the new tariffs. Last October, we simplified our capital structure via warrant exchange, followed by a successful offering to strengthen our balance sheet, support a path to cash flow independence and provide flexibility for opportunistic growth investment. Owlet's financial and operational health is stronger than ever, positioning us to well execute on our pediatric health growth opportunity and deliver long-term stakeholder value. Owlet's journey to date has been extraordinary, marked by innovation, strategic expansion and a relentless focus on our mission, reaching every baby. Our strategy is anchored in partnering with families during some of the most challenging but rewarding times in the parents journey. We are looking at a demographic of new parents, Gen Z and young millennials, where 60% of the women already own and rely on a connected wearable device. For them, biometric data isn't a novelty. It's a baseline expectation. Owlet is perfectly positioned to capture this audience by bridging the gap between the wearable tech they already use for themselves and the predictive care they want for their babies. Owlet is now a leading family wellness technology beyond just a monitor for parent calm. We use our product suite and massive pediatric data set to digitally translate safety, health, wellness and development patterns. This allows parents to make proactive, informed decisions and establishes a true biometric baseline for babies from night 1. With the rise of AI and advanced monitoring, Owlet's data and ability to deliver actionable insights will become increasingly valuable as children grow. From that larger vision, let' s zone into our fourth quarter 2025 performance on Slide 6. Owlet delivered another strong quarter to cap a record year. We achieved revenue of $26.6 million in Q4 2025, increasing 29.6% versus Q4 2024. Revenue strength was driven by broad-based growth across the Dream product suite and Owlet360 subscription. Q4 revenue concluded a record year for Owlet with total revenue of $105.7 million for 2025, 35.4% growth over 2024. Fourth quarter 2025 gross margins were 47.6%, including a 510 basis point impact from the cost of tariffs. Despite the tariff overhang, full year 2025 gross margins were also a record at 50.6%. Adjusted EBITDA was $0.1 million in Q4 compared to $0.5 million in the fourth quarter 2024. Tariff costs were the primary impact versus prior year's adjusted EBITDA. For full year 2025, adjusted EBITDA was another record for Owlet at $2 million, a $3.8 million improvement over 2024. The strength of our results in the fourth quarter and records across all key metrics for the full year 2025 underscore our confidence in strong performance and growth into 2026. Owlet is very well positioned as a company as we take last year's momentum and aim even higher in 2026. Turning to our strategic growth areas. Our strategy remains consistent from last year, and we have refreshed our priorities to reflect what is most critical in 2026. First, drive global adoption of Dream Sock. Second, expand the Owlet360 subscription platform; third, continue to grow the health care channels. Finally, launch the Owlet onCall Telehealth Platform. Beginning with our core business in the U.S., Dream Sock demand continues to be strong. Dream Sock and Duo demonstrated strong domestic year-over-year sell-through at 9% and 53%, respectively, driven by another strong holiday selling period. We observed an expected shift in sales of individual Dream Socks to the Duo package, which we're pleased to see as Duo represents an expanded LTV opportunity and increase for subscription, giving parents a holistic view of a child's wellness that no other offering can match. Strong customer satisfaction supports this growth as Dream Sock's NPS score to end Q4 was 77 and overall blended product NPS of 72. Registry trends continue to demonstrate Dream Sock is a priority for parents. Q4 showed a 23% increase in year-over-year Dream Sock additions across the registries we track, including Amazon, Babylist and Target. We also continue to gain market share at scale. According to Circana consumer Research and our own data, Owlet expanded our share of total dollars spent on baby monitors to 41% in Q4 2025, up 24% versus Q4 2024 and another record high for market share since we started tracking Circana data. The data also shows our overall category is growing with consumer spending on baby monitors in 2025 with the highest it's been in the last 5 years. Shifting to international. Q4 international revenue reached $3.9 million, closing a record year of $19.2 million, up 27% versus 2024. While Q4 revenue declined year-over-year, this was primarily due to transitioning Amazon U.K. to a direct import model. This operational shift moved the revenue recognition point from the collection to delivery, pushing a significant portion of U.K. sell-in revenue, our largest international market, from Q4 into Q1 2026. International sell-through remains strong with the U.K. up 58%, France up 41% and the Nordics up 80% versus Q4 2024. In Q4, we secured regulatory clearance for Dream Sock sales in India, a major step forward in our planned commercial launch in the first half of 2026. This market is massive with over 23 million annual births. The top 1% alone rivals the size of the United States or European opportunities. We are also pleased to announce that we have received regulatory approval for Dream Sock distribution in Israel, another exciting new sales channel. This gives us another layer of international growth as we plan to launch in the back half of 2026. Dream Sock is a universal product, now sold in 31 countries with 7 regulatory clearances. In 2026, with both India and Israel expected to be on board, we are focused on scaling our current geographies and consistently opening up new regulatory approved global sales channels as we ensure availability of Dream Sock to every corner of the globe. Turning to Owlet360. We continue to drive meaningful progress expanding the value of our subscription platform, which contributed to our fourth consecutive quarter of sequential growth across paying subscribers, MRR, attach rate and retention rate. January 28 marked our first full year since subscription launch and the reception from parents and the performance of the offering has exceeded our expectations. We're proud to report over 110,000 total paying subscribers to begin March. In Q4, we successfully launched Owlet360 in our first international markets, U.K., Ireland, Australia, New Zealand and South Africa. And we plan to continue rolling out subscription capabilities to the balance of our regulatory cleared countries in the coming quarters. As discussed last quarter, nearly all of our subscriber growth since launch has come from a focus around Dream Sock, and we see a significant opportunity to drive increased subscription adoption by layering differentiated camera-based features onto our latest AI-enabled camera platform, Dream Sight and Duo, to drive subscriber growth while extending customer LTV. For example, combining our proprietary biometric data from the Sock with computer vision from the camera to deliver increasingly personalized and proactive experiences for caregivers in upcoming feature releases. We are focusing intensely on integrating AI across all of our platforms, viewing it as a long-term investment to strengthen our competitive edge and better support parents. Our strategic partnership with webAI will accelerate the development of secure, specialized intelligence using our unique pediatric health data set. This enterprise-grade AI infrastructure aims to unlock value for personalized experience and better insights, which we believe will become increasingly differentiated as our data grows. We're excited about the future as we combine AI with our valuable pediatric data built on the foundation of Owlet 360. Turning to our third strategic growth area. We continue to make solid progress in growing Owlet's health care channels. In Q4, we sent our first Owlet monitors home from Children's Hospital of The King's Daughters officially launching this collaboration. Building on the success and foundation we established with CHKD, in the last few months, we have engaged 4 new hospital partnerships. Our work in establishing the consignment functionality and RPM integration with CHKD laid the groundwork to announce these next hospital collaborations soon. We're at various stages of integration and expect to share more information in the near term. We also continue to make important progress expanding our coverage network. We ended the year with 37 states on Medicaid reimbursement, up from 6 to end last year, and we now have 258 commercial insurance carriers, up from 105 from last year, now supporting over 90% of commercial U.S. births. And finally, our last strategic growth area, Owlet OnCall Telehealth. We believe the pediatric telehealth opportunity is a game changer. As we've detailed in the past, there are over $30 billion in pediatric health care costs every single year just in the U.S. and over 90% of those visits are treat in release. By leveraging real-time infant data from Dream Sock and Owlet 360 to provide more personalized actionable remote care, we believe we can make a meaningful impact, improving overall childhealth outcomes and reducing costs for families. We will launch the Owlet OnCall telehealth platform utilizing Dream Sock and Owlet360 to capitalize on this opportunity. This will enable parents to share health vitals, pulse rate, heart rate, oxygen saturation and the 30-day history from Dream Sock during a telehealth visit. This capability is expected to significantly enhance care quality and patient outcomes as traditional telehealth often relies on inadequate visual diagnosis without this crucial data. The first half of 2026 is the time to test, learn and expand on Owlet OnCall. We are still in the piloting stages for our telehealth offering as we want to get the experience right before a full launch scheduled later in the year in advance of the winter flu season. To wrap up, I want to thank and congratulate the Owlet team for a record 2025. I also want to thank our customers and investors for your confidence. The differentiation in our product platform and the leadership and expertise in pediatric health monitoring are a strong foundation to build from as we look to the future. We are laser-focused on sustaining our momentum and continuing to execute at a high level across our strategic growth areas. I'm confident this strategy will translate into long-term durable growth and value creation. Now I'll hand it over to Amanda to go over the financial highlights and our outlook for 2026. Amanda Crawford: Thanks, Jonathan, and thank you to everyone for joining. I also want to thank our employees for another successful quarter and for the terrific execution that delivered our record 2025 performance. I'll begin on Slide 12. Unless noted otherwise, I will be comparing fourth quarter 2025 to the fourth quarter of 2024. Financial results are preliminary prior to our 10-K filing. The fourth quarter was another strong quarter as the momentum continued for Owlet. Q4 revenue was $26.6 million, up 29.6% year-over-year. Revenue strength was driven by broad-based growth across the Dream product suite and Owlet360 subscription. Full year 2025 revenue was a record at $105.7 million, up 35.4% versus 2024, at the high end of our guidance range. Q4 gross margin was 47.6%, including a 510 basis point impact from the cost of tariffs. Full year 2025 gross margin was a record at 50.6%, exceeding the high end of our guidance. Tariff costs impacted our gross margin by 270 basis points for the full year 2025. Moving to the next slide. We have continued to maintain discipline with our operating expenses as we grow the business. Total operating expenses in the fourth quarter were $17.5 million versus $18.4 million in 2024, improving by $0.9 million. As a percentage of revenue, Q4 operating expenses were 66% compared to 90% in Q4 2024 as we continue to drive strong operating leverage. This has led to consistently strong operating efficiency as we manage investing operating expenses behind revenue growth. Our LTV to customer acquisition cost ratio of 4.4% remains low and is poised to improve as we layer on recurring revenues from subscription. From a revenue per full-time employee perspective, we're running a lean and efficient team at $1 million per average FTE. Q4 operating loss was $4.9 million compared to $7.4 million in the same period last year, improving $2.5 million. Net loss in the quarter was $9.2 million versus $9.1 million in the same period last year. Q4 adjusted EBITDA was $0.1 million compared to $0.5 million in Q4 2024. Tariff costs were the primary impact versus prior year. Full year 2025 adjusted EBITDA was a record for Owlet at $2 million and at the high end of our guidance expectations. 2025 adjusted EBITDA improved $3.8 million compared to 2024. Turning to our balance sheet. Cash and cash equivalents, excluding restricted cash as of quarter end December 31, 2025, were $35.5 million, up from $23.8 million in the third quarter 2025. With a portion of the proceeds from the equity offering in October, we paid down $12 million on our line of credit, decreasing to $7 million at the end of Q4. We had $10 million of undrawn availability on the line of credit at the end of Q4, increasing our total liquidity to $45.5 million as of December 31, 2025. The principal balance on our term loan was $7 million at the end of Q4 versus $7.5 million at the end of Q3. We began repayment on the term loan in November 2025, and we expect it to be paid off by January 2028. Shifting to our financial outlook on Slide 16. Following the most successful year in Owlet's history, our 2026 outlook is built on the scale and strength we established in 2025 and centered on continued execution on our strategic areas for growth. For the first quarter of 2026, we expect revenue in the range of $20 million to $21 million, gross margins of 50% to 52% and adjusted EBITDA of negative $2.5 million to negative $1.5 million. Reminder that the seasonality of the business positions the first quarter as consistently our lowest revenue contribution quarter. And also of note, when comparing Q1 '26 revenue to prior year Q1 '25, revenue was especially strong due to a heavy RSV and flu season. We also began investing post offering in Q4 and now in Q1 in additional R&D resources to drive software and services for our Owlet360 subscription and OnCall Telehealth. And for our full year 2026 outlook, we are expecting another record year of growth. For 2026, we expect revenue in the range of $126 million to $130 million, representing growth of 19% to 23% over 2025. Similar to prior years, we're expecting revenue contribution to be roughly 40% in the first half of 2026 and 60% in the back half as we observe our typical seasonality and as subscription revenue sequentially becomes a larger portion of revenue throughout 2026. For full year 2026, we expect gross margins in the range of 49% to 52% and adjusted EBITDA in the range of $3 million to $5 million, representing growth of 50% to 150% over 2025. There remains uncertainty surrounding the volatile tariff situation and the war in the Middle East. As a result, our 2026 guidance includes tariff cost impacts consistent with Q4 2025 at 510 basis points to our margin per quarter. With that, operator, can you please open up the call for questions? Operator: [Operator Instructions] First question is from the line of Andrew Brackmann with William Blair. Andrew Brackmann: Maybe we could start here on guidance. As I sort of look at the full year, it looks like you bracketed the Street sort of on key metrics. But for Q1, in particular, I think revenue was a bit below where the Street was. But also just as I look at sort of the percentage of the full year revenue expectation versus what we've seen in prior years, I think it's a little bit lower. So can you maybe just talk about why that is this year? And I guess, more importantly, can you just talk about your line of sight to that second half ramp that's sort of implied here? Amanda Crawford: Yes. Yes, that's a fair question, Andrew. And I wanted to provide some context for the Q1 guide. First, inherently, we've got seasonality in the business with Q1, which is historically the lightest revenue contributor. When we're looking at the year-over-year comparison, we're lapping an exceptionally strong Q1, which was driven by a heavy RSV and flu season. The other thing to look at is the current macro environment. We did observe some softness in consumer spending through the Q4 holiday period, whether it was influenced by the government shutdown or broader macroeconomic pressures, we have seen retailers respond by tightening their weeks of supply, which is reflected in the Q1 guide. Just to be clear, though, we are the leader in the category. The timing of when the revenue is going to hit within the quarters is coming up lighter in Q1. But fundamentally, we are in a strong competitive position, and this confidence is baked into the full year guide, which reflects the strong long-term demand that we're expecting. Andrew Brackmann: Okay. I appreciate all that color. And then, Jonathan, you talked about launching some generative AI insights here in the coming months. Can you maybe just talk a little bit more about that, give a little bit of color on what those offerings might look like? And then as you sort of think about increasing the stickiness to 360, how do those sort of play into that? Jonathan Harris: Yes. Yes. We see a massive opportunity to leverage AI to support and drive our evolution from a hardware company into a leading pediatric data platform. We see it a couple of different ways. We see product intelligence. We're evolving from a simple hardware monitoring to real-time personalized AI sleep coaching. AI Sleep Insight will convert static data into actionable daily plans for parents. We believe that this is also going to drive high-value subscription features in our audio and our vision, really driving the whole ecosystem across both the Sock and Dream Sight, our camera. Additionally, we're really driving and focused on AI-assisted engineering workflows to reduce turnaround times and across all functions of the business to streamline regulatory submissions to automate financial data entry to drive measurable productivity gains. And then we're in the early phases of our web AI partnership where we're really going to work on real-time actionable on the edge AI functionality that, again, is going to help parents with real-time data to help on their parenting journey. Operator: Next question is from the line of Jonah Kim with TD Cowen. Jungwon Kim: As it relates to the international expansion, when should we start to see some of the sell-in revenue for new markets there? And would love to hear any early learnings from the international subscription that you rolled out, how that progress has been and any early learnings there? And then just lastly, in terms of your guidance for the year, what is baked in, in terms of your expectation on the low end and high end? Just would like to get additional color on the expectations that you have embedded in your guide. Jonathan Harris: Great. I'll take the first half of that. So we expect further international expansion revenue to begin the first half of this year with rollout in the first half of these new markets. So we're very excited about that. We continue to see very strong sell-through success across our European markets and continue to grow. And we're still very, very early on our international subscription, but we are excited to drive that. Right now, it's only English-speaking countries, and we look to expand further European languages in the first half of this year as well. So very excited to see more subscription drive on a global basis. Amanda Crawford: All right. And then just regarding your question on what is baked into the low end and the high end. As far as revenue goes in our guidance, we have not baked in any like material contribution from our new countries or the telehealth opportunity. So we see that as upside in the guide. The high end versus the low end will depend on our hardware growth as well as the contribution from subscription. So within that range, the higher end would imply stronger growth in both of those areas. And then just from a cost of goods perspective, we said that in the remarks, but we are including tariffs that are consistent with what we saw in Q4. As everyone knows, the tariff situation remains volatile and is changing day-to-day. So depending on where those ultimately land, there can be a little bit of upside in the cost of goods as well. Operator: Next question is from the line of Owen Rickert with Northland Capital Markets. Owen Rickert: It looks like that OnCall Telehealth offering is launching in the back half of the year. I guess can you just walk us through the go-to-market strategy there? And more specifically, is this being positioned as a stand-alone paid tier? Is it a premium add-on to Owlet360? I it bundled into existing subscription plans? I guess, can you just give us more color on that offering? Jonathan Harris: Yes. I got that, Owen. Good to see you or hear you. So we began internally piloting a friends and family just recently, and we're continuing to grow that. So we're really flushing that out based on that real-world experience. And this will be an additional upsell, cross-sell, if you will, to Owlet360. It will be a separate platform. So we're really working on getting the experience right before launching in the second half of '26 and well ahead of the cold and flu season. So we're really excited and continue to build, and we're going to have this rolling out ahead of the second half of '26. Owen Rickert: Got it. And then second one for me. You surpassed 110,000 paying Owlet360 subscribers. How is the stickiness looking there monthly churn, how has that trended over the past few quarters? Jonathan Harris: Could you repeat the question? You were breaking up a little bit. Sorry. Owen Rickert: Yes, no problem. I was just asking about how it rates looking on Owlet360 monthly subscribers and maybe how that's trended over the past few quarters. Jonathan Harris: Yes. We continue to see Owlet360 grow. We'll be sharing more data on Owlet360 on our upcoming calls because we just hit our 1-year anniversary. But what we can share is the metrics are trending in all the right directions. We've had 4 consecutive quarter of sequential growth across paying subscribers, MRR attach rate and retention rate. We've also been tracking a cohort analysis that's showing retention continues to improve at a consistent basis. And this is also helping us identify a time period where there's opportunity to target rolling out specific features to improve retention even further. Great example of that is just adding the additional features that we're looking to launch on Dream Sight and really bring in both the Sock and the camera subscription and that holistic view for the parent. Operator: Next question is from the line of Ian Arndt with Lake Street Capital Markets. Ian Arndt: I'm on here for Ben. And I was just wondering how do you guys view international revenue longer term? There's statistics show that there's more babies born outside of the developed world, obviously. And just wondering where you guys kind of see international sales ending up as a percentage of revenue several years down the road... Jonathan Harris: No, no, go ahead, sorry. Ian Arndt: I was just going to add, if you had any thoughts on if there's a meaningful difference with the -- with adding subscription internationally or kind of what your thoughts are on that as well? Jonathan Harris: Yes. We continue to see this as a great opportunity. We have roughly 11% penetration in the U.S., meaning 11 out of 100 babies are actually wearing an Owlet sock. So we see that opportunity where in Europe, for example, we're closer to 3%. So if you just look at Europe, there's a tremendous amount of growth opportunity there. As we've mentioned before, there's 23 million babies born a year in India alone. So even if we look at the top strata, the top 1%, that -- just that top 1% is as large a market opportunity as both the United States and Europe. So we see that as a really strong opportunity, and they are English-speaking by and large, over there. So we're really excited to roll out more international subscription in various languages and provide the amazing success that we've seen on Owlet360 in the English-speaking countries and continue to expand and grow that. So we're going to continue to work on expanding and growing our adoption, both here in the U.S., in Europe and opening up new markets where we see strong opportunity and then layering on our subscription platform on top of that to drive a really nice high-margin reoccurring revenue stream. Ian Arndt: Okay. That's great. And then one more if you could comment on if there have been any additional follow-through from the FDA safety communication that went out last year? Jonathan Harris: Another good question. Yes, we have not heard anything further from that communication that went out in September of 2025. But there is quite a bit of turmoil going on within the FDA, but we have a really strong relationship with them, and we're continuing to dive in. Our market share continues to grow in the U.S. where that is most applicable. And we're over 41% of all dollars fit in the entire baby monitor category and feel really strong about our position with or without the FDA, and we're going to continue to drive, and that would be a really nice additional tailwind if and when the FDA actually do something. Operator: Currently no further questions registered. [Operator Instructions] There are no additional questions waiting at this time. So I'll pass the call back to Jonathan Harris for any closing remarks. Jonathan Harris: Thank you, operator, and thanks again to everyone for joining us and for your continued support. After a record-breaking year, our team is not taking the foot off the gas. We're entering 2026 ready to build on our performance and our massive long-term opportunity. Owlet is evolving into a comprehensive pediatric sleep, health and wellness platform. We are focused on executing this vision, which positions us as much more than just a baby monitor brand. Owlet is a sophisticated data platform designed to establish the gold standard for accurate infant biometric baselines from the very first night. Ultimately, Owlet is uniquely positioned to redefine modern parenting and become the essential wellness technology for families worldwide. Thank you again, and talk to you next quarter. Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Greetings. Welcome to a.k.a. Brands Holding Corp.'s Fourth Quarter and Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Emily Schwartz, Head of Investor Relations. Thank you, and you may begin. Emily Schwartz: Good afternoon. Thank you for joining a.k.a. Brands to discuss our fourth quarter and fiscal 2025 results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today is Ciaran Long, Chief Executive Officer; and Kevin Grant, Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will also contain non-GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin and constant currency net sales. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I'll turn the call over to Ciaran. Ciaran Long: Good afternoon, everyone. Thanks for joining us today to discuss our fourth quarter and full year 2025 results. I'm pleased to report that we delivered another year of growth, reflecting the continued strength of our brands and the power of our business model. Despite a dynamic environment, we executed on our strategic priorities, strengthened our foundation and entered 2026 positioned for accelerated growth and expanding margins. I want to thank our teams across the business for their focus and disciplined execution throughout the year. Their commitment and hard work were central to the progress we made and the momentum we carry into the year ahead. Let me start with a few highlights from the year. For the full year, we grew net sales 4.4% to $600 million, marking another consecutive year of growth. Our U.S. region, which remains our largest and fastest-growing market, delivered net sales growth of 7% to $394 million. On a 2-year stack, the U.S. is up 25%, further reinforcing our conviction in our U.S. expansion plans, and the U.S. now makes up 66% of the business. Princess Polly continued to deliver strong performance throughout the year, generating double-digit net sales growth and advancing its omnichannel expansion strategy. The brand opened 7 new stores in the U.S. in 2025 and launched its first location in Australia in the fourth quarter, ending the year with 14 stores globally. Wholesale continued to perform well across the portfolio, with our partnership at Nordstrom exceeding expectations with both Princess Polly and Petal & Pup delivering strong results. We also strengthened the leadership team, operations and go-to-market strategy within our streetwear brands. These actions improved merchandising discipline and inventory productivity, positioning Culture Kings and mnml for accelerated growth and stronger margin contribution in 2026. And importantly, we exited the year with inventory down 10% year-over-year, reflecting our continued disciplined approach to inventory management as we improve turns and transition our streetwear business to the test and repeat merchandising approach. In 2025, we also completed an important structural transformation of our supply chain. As discussed in prior quarters, given the rapidly evolving macro environment, we accelerated the diversification of our sourcing strategy to enhance long-term flexibility and resilience. That work is now substantially complete with approximately 50% of our U.S. sourcing from outside of China, in line with our targets, along with our ability to quickly move to different regions as necessary moving forward. Our test and repeat merchandising model and short lead times, while core to our agility and inventory efficiency, meant we couldn't prebuy inventory ahead of our elevated tariffs implemented in 2025. Despite the margin headwinds faced throughout the year as we source product at the higher tariff rates, we delivered 30 basis points of gross margin expansion to 57.3% for the year. We estimate that the tariff headwinds offset by our mitigation efforts negatively impacted fiscal 2025 gross margins by approximately 100 basis points. Looking ahead, we're better positioned to adapt quickly to any future trade policy changes while maintaining our competitive advantages in speed and inventory efficiency. The progress we've made over the past 2 years provides a strong foundation as we look ahead towards 2026 and beyond. In 2024, we stabilized the business and returned to growth. In 2025, we built on that momentum by growing the top line, strengthening our supply chain, expanding our omnichannel presence and continuing to invest in our brands. And as we enter 2026, we have improved operational discipline, stronger inventory health and a clear path to accelerating growth and expanding margins. I'm confident the momentum in our business is picking up with first quarter-to-date net sales growth of mid-single digits, driven by growth in our U.S. online channels. Our 2026 strategy remains focused on 3 core priorities: first, attracting and retaining customers through our direct-to-consumer channels with exclusive trend-driven merchandising and innovative marketing; second, expanding brand awareness and our total addressable market through physical retail and strategic wholesale partnerships; and third, we remain committed to streamlining our operations and strengthening our financial foundation. As part of this, we are actively embedding AI across the organization to enhance the customer experience and drive operational excellence. Our portfolio model and flexible asset-light technology stack enables us to rapidly test and refine solutions at the brand level, scale what works and unlock value across the entire platform. We're already seeing measurable impact in product imagery, marketing productivity and inventory and markdown optimization. These capabilities are already improving conversion, sharpening creative execution and enabling smarter, faster, data-driven decision-making across the business. We expect AI to be a meaningful driver of margin expansion in the coming years, and we're scaling these initiatives with discipline and speed. With that, I'll share highlights from each of our brands and the growth drivers for the coming year. Starting with Princess Polly, our largest brand, which comprises more than half of the portfolio. Princess Polly continues to resonate with next-generation customers through its trend-driven merchandising, authentic customer connections and disciplined social-first marketing approach. And I'm confident that there's tremendous runway ahead for continued global growth. As mentioned, in 2025, Princess Polly delivered double-digit net sales growth, driven by the success in both its direct-to-consumer business and its omnichannel expansion. The team continues to execute its test and repeat model with discipline, delivering consistent weekly newness that supports strong full price sell-through. Importantly, the improvements we made to our supply chain position the brand to operate with stronger in-stock levels and capture demand more efficiently in 2026. From a marketing standpoint, Princess Polly continues to meet its customers where they are, maintaining a presence across more than 20 social and digital platforms, complemented by in-store events and broader brand initiatives. TikTok remains an important demand generation channel. And in 2025, the brand increased its focus on TikTok Live, creator collaborations and search-driven discovery, driving stronger engagement and efficient customer acquisition. Beyond this online performance, Princess Polly continued to expand its retail footprint with results exceeding expectations from both a financial and brand awareness perspective. Princess Polly successfully opened 7 new stores in the U.S. in 2025, ending the year with a total of 13 stores in the U.S. And as mentioned, the brand opened its first store in Australia in Bondi Beach, Sydney in December. The Bondi store has been very well received and reinforces our confidence that Princess Polly's omnichannel strategy resonates well globally. Princess Polly's wholesale business also continued to perform well in the fourth quarter, further expanding brand reach and reinforcing our strategy of meeting customers wherever they choose to shop. Princess Polly will continue to expand and optimize its TikTok Shop and wholesale partnerships, ensuring strong brand presentation across key retail partners. Looking at 2026, Princess Polly has a clear runway for sustained global growth, supported by several strategic initiatives. The brand will continue to fuel e-commerce growth by refining its test and repeat strategy and reinforcing brand and product storytelling. Princess Polly will deliver consistent newness, focusing on proven best-selling party styles while also expanding its casual and basic categories to increase share of wallet. From a marketing perspective, the brand will prioritize influencer-led content and product storytelling across social platforms to drive engagement and full price demand. Princess Polly will continue expanding its U.S. retail footprint with 8 new store leases fully executed and additional locations expected to be announced throughout the year. As shared in our related press release today, store openings in the second half of 2026 include Houston and Frisco in Texas, Orlando, Florida; and Adena, Minnesota, and locations in Jacksonville and Boca Raton in Florida, Nashville, Tennessee; Charlotte, North Carolina planned for early 2027. While the existing fleet continues to meet our profitability and payback expectations, driving solid 4-wall profitability, each new opening provides an opportunity to further refine execution and enhance store productivity. And lastly, Princess Polly is beginning to lay the foundation for international growth to broaden reach and expand its global presence. Later this month, in partnership with a third-party logistics provider, Princess Polly would unlock distribution in the U.K., improving customer lead times and enhancing the overall experience in the region. This establishes the operational foundation for moderate growth in the U.K. in 2026 with further expansion in the coming years. Turning now to our other women's brand, Petal & Pup. The brand continues to resonate with its core customer through a curated assortment of trend-forward feminine occasion-driven styles at accessible price points. In 2025, Petal & Pup delivered solid performance, supported by continued strength in dresses and eventwear, while broadening its assortment to capture more everyday demand and repeat purchases. Brands growing wholesale presence, particularly at Nordstrom, exceeded expectations. Petal & Pup has established a meaningful presence within Nordstrom trend section across all categories, with particular strength in dresses and more casual styles, expanding brand awareness and introducing new customers to the brand. In the fourth quarter, Petal & Pup successfully launched on the rental platform, Nuuly, Nykaa Fashion in India and Australian department store, David Jones, with strong initial results out of the gates and plans to further expand on each of these platforms are already underway. Looking ahead to 2026, the focus remains on deepening product differentiation and strengthening brand equity. Petal & Pup will continue to expand its range with a clear emphasis on outfitting its core customer across every aspect of our life. This includes a stronger push in casual wear and elevated separates, particularly tops and knitwear to complement the brand's established strength in dresses. By building a more balanced and versatile assortment, the brand aims to drive increased repeat rate over time. This strategy will be underpinned by a continued commitment to enhance quality, compelling price points, effortless outfitting and trend-led perspective. Petal & Pup is also elevating its brand storytelling and community engagement, shifting beyond purely product-led campaigns towards more cohesive and authentic brand narratives. The recent refresh of its branding, website and visual identity supports this evolution alongside the launch of an evergreen brand campaign across social channels and key out-of-home placements this month. Omnichannel and international expansion also remains a key growth driver for Petal & Pup. In addition to continued expansion with Nordstrom, newly and existing partners, Petal & Pup will launch with Dillard's, Von Maur and select independent boutiques in 2026, further extending its reach and awareness in the U.S. market. I'm confident that Petal & Pup is well positioned for continued growth in 2026 as it strengthens its assortment and expands its reach. Turning now to our streetwear brands. Culture Kings remains one of the most distinctive experiential retail concepts in the market, blending global streetwear, music, sports and culture into a highly immersive customer experience. In 2025, the focus was on strengthening the fundamentals of the business in both the U.S. and Australia to position the brand for accelerated growth in 2026 and beyond. Culture Kings' exclusively designed in-house brands are a key differentiator and central to its growth strategy. In 2025, the company intensified its focus on this portfolio, including brands such as mnml, Loiter, 73 Studio, Carre, Saint Morta and American Thrift by evolving its merchandising approach, relaunching priority brands and elevating product quality. Investments in Loiter drove double-digit revenue and gross profit dollar growth in 2025, validating the strategy. Building on that momentum, 73 Studio and American Thrift were relaunched in the fourth quarter with a refined design direction and stronger go-to-market execution. Early sell-through and improved new style velocity from the refreshed brands has been encouraging, reinforcing confidence in the owned brand strategy heading into 2026. Owned brand penetration is expected to continue expanding, supported by faster product cycles, tighter assortment and a clear brand point of view. This more focused product strategy is designed to drive stronger full price sell-through and support margin expansion in the year ahead. In addition to the in-house brands, Culture Kings continues to enhance its third-party assortment from leading national headwear and footwear brands such as New Era, ASICS, Adidas and more to complete the streetwear outfit. Beyond its online channel, Culture Kings retail footprint and retailertainment ethos remains central to the model. The stores, including the Las Vegas flagship and 9 locations across Australia and New Zealand, serve as meaningful revenue drivers and powerful marketing engines. Each location delivers a differentiated and immersive experience that builds loyalty, drives customer acquisition and reinforces the brand authority in streetwear. In the fourth quarter, the team relocated the Brisbane store into a newly renovated 5,000 square foot format designed to serve as a more productive and repeatable model. While the store retains high-impact features such as the hot wall and hot basketball court, the format is being tested as a prototype for future U.S. expansion. Early results have been encouraging, and the learnings from Brisbane will directly inform the next phase of U.S. store growth. We're actively pursuing a location for the second U.S. store and we'll provide updates on future calls. Looking ahead to 2026, I'm confident that Culture Kings is set up for success with operational improvements in the rearview, a healthier inventory position, strong and accelerating performance at its in-house brands and more stores on the horizon. I'm encouraged by the progress and excited for the future. Before I turn it over to Kevin, I want to again express my gratitude to our incredible team. The past year acquired agility, resilience and an unwavering focus on execution. Our teams across all functions rose to the challenge, successfully navigating the supply chain transformation while continuing to deliver compelling products and experiences to our customers. I'm confident that we have the right operational foundation, the right team and the right strategic priorities to drive accelerating growth in 2026 and beyond. With that, I'll turn it over to Kevin. Kevin Grant: Thanks, Ciaran. Turning to our financial results for the fourth quarter. Net sales increased 3.1% to $164 million, in line with our guidance. As we noted on our third quarter call, due to the accelerated supply chain transition, we entered October with meaningful out-of-stock positions in key best-selling styles, which limited sales in the early part of the quarter, but inventory levels stabilized as we moved through the quarter, and we ramped up our marketing engine to regain sales momentum. Net sales in Australia were also in line with expectations, increasing 1.6% to $58.1 million. As Ciaran mentioned, we entered 2026 with strong momentum with first quarter to-date net sales growth in the mid-single digits. As a reminder, as we continue expanding across channels, the shape of the P&L will continue to evolve, though we expect overall margin dollars to increase as we pursue the growth opportunity ahead of us. Total orders were $2.2 million, up 6.4% year-over-year. Trailing 12-month active customers, excluding wholesale, were 4.18 million compared to 4.07 million a year ago. And average order value was $76, down 2.6% year-over-year. Turning to our profitability metrics. Gross margin declined 30 basis points to 55.6% compared to 55.9% last year, reflecting the impact of the out-of-stocks and best sellers in October, partially offset by a higher mix of retail stores. Selling expenses were $51 million or 31% of net sales, reflecting the retail footprint expansion and onetime fulfillment charges. Marketing expense was $20.5 million or 12.5% of net sales. General and administrative expenses were $30.3 million or 18.5% of net sales. G&A expenses increased year-over-year primarily due to charges for a nonrecurring legal matter as well as an increase in headcount to support our channel expansion strategy. And we delivered adjusted EBITDA of $2.5 million or 1.5% of net sales. For the full year, net sales increased 4.4% to $600 million, in line with our expectations and compared to $574.7 million a year ago. On a constant currency basis, net sales increased 5%. Adjusted EBITDA for the year was $19.7 million or 3.3% of net sales compared to $23.3 million or 4.1% of net sales a year ago as tariffs and inventory disruptions pressured results. As Ciaran mentioned, the tariff headwinds, partially offset by our mitigation efforts, negatively impacted margin by approximately 100 basis points. Turning to the balance sheet. We ended the year with $20.3 million in cash and cash equivalents compared to $24.2 million at the end of the fourth quarter of 2024. Debt at the end of the quarter was $111.1 million compared to $111.7 million at the end of the fourth quarter of 2024. As a reminder, we successfully refinanced our debt in October and extended the maturity to 2028. As Ciaran mentioned, we're really pleased with the progress we've made improving the quality and quantity of our inventory. We ended the quarter with $86.2 million in inventory, down 10% compared to $95.8 million at the end of the fourth quarter of 2024. Turning now to our outlook. We are entering 2026 with momentum and a stronger operating foundation. Our outlook is based on the tariff rates in place exiting 2025 and does not include the impact of any potential refunds as a result of the Supreme Court's decision to overturn the IEEPA tariffs. For fiscal 2026, we expect net sales to be between $625 million to $635 million, representing growth of 4.2% to 5.8%. We expect adjusted EBITDA of between $27 million and $29 million. For modeling purposes, we anticipate fiscal 2026 stock-based compensation of approximately $6.5 million to $7 million, depreciation and amortization expense of roughly $20 million to $21 million, interest and other expense of approximately $16 million to $18 million an effective tax rate of negative 10%, CapEx between $18 million to $20 million and weighted average diluted share count of approximately 11 million. For the first quarter, as mentioned, quarter-to-date net sales growth is tracking mid-single digits with strength on our online channels in the U.S. As a reminder, in March of last year, Princess Polly and Petal & Pup launched across all Nordstrom stores, creating a more challenging wholesale comparison as we progress through the quarter. For the first quarter, we expect net sales to be between $130 million and $132 million, reflecting a low single-digit growth rate. For modeling purposes, for Q2 through Q4, we expect high single-digit growth on a 2-year stack. Due to the timing of tariff impacts, adjusted EBITDA comparisons will be more challenging in the first quarter before normalizing in the second quarter. We expect adjusted EBITDA between $1.5 million and $2 million in the first quarter. For modeling purposes, for Q2 and Q3, we expect an EBITDA margin expansion of about 100 basis points and a larger expansion in Q4 compared to the same period last year. In closing, entering 2026, the business is operating from a position of greater strength. The progress we made in 2025 across supply chain diversification, inventory discipline and omnichannel expansion has positioned the business to accelerate growth and improve profitability in the year ahead. As a result, we believe 2026 represents an inflection point for the company with clear drivers to support top line growth and margin expansion. With that, we'll open the call for questions. Operator: [Operator Instructions] Our first question comes from Ryan Meyers with Lake Street Capital. Ryan Meyers: First off, just thinking about the EBITDA guide for 2026, obviously, a pretty significant step up here from what you guys reported in 2025. Can you just walk us through kind of the key drivers of that? Is most of that coming from the gross margin side? Are we seeing any operating expense leverage? And then are there any lower nonrecurring costs? Just kind of bridge that gap for us would be helpful. Kevin Grant: Yes. Thanks, Ryan, for the question. Yes, we're coming out of the quarter with good momentum. That strong performance for the year, over 4% growth, 5% on a constant currency basis. We've mentioned we've seen mid-single-digit growth so far in Q1. The guide for the year on the top line is that sort of mid-single digits. And then from a profit perspective, we mentioned EBITDA, we expect over the entire year about 120 basis points of EBITDA expansion. I would say the bulk of that, Ryan, comes from gross margin. We mentioned the headwind of 100 basis points in gross margin in FY '25. So we'll be moving past that in the year. We're finishing inventory in a really strong position, down 10% year-over-year and down 10% sequentially. So we're feeling great about that. We'll have some channel mix impact in the gross margin as well. The balance of the EBITDA improvement will come across the rest of the operating expense lines. As mentioned, we'll continue to see the shape of the P&L move, as the channels change shape of the P&L. But overall, I feel really good about that guidance. And then on the nonrecurring charges, no, not really anything of note for the guide for FY '26. Ryan Meyers: Okay. Got it. And then just switching to the retail business. Can you guys tell us what percentage of the revenue mix now does come from retail? Obviously, pretty significant store openings in 2025, expected again here in 2026. Is that starting to become a more meaningful percentage of the overall revenue mix? And then how should we think about the growth of the stores or the revenue growth at the stores relative to the direct-to-consumer business? Is the growth outpacing that there? Just any more details on that as it's becoming a larger portion of the business? Ciaran Long: Yes, Ryan, this is Ciaran. We are really happy with the store performance. And I think for us, seeing really good productivity on a square foot in the Princess Polly stores also really strong 4-wall profitability and I think really feel good about the opportunity that we have to continue to lean into stores. We've now 13 open in the U.S., which is great progress. As we mentioned, signed 8 more leases. And I would say kind of 4 to 5 of them will open in FY '26. So we're going to continue to lean into the opportunity that we have at the stores. I think tremendous growth. It's also great for us bringing in new customers. We're also seeing a nice halo effect from the online business or to the online business from the stores. So I think just kind of more and more ahead of us. Operator: The next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: As you think about the Princess Polly business and the opening of the 8 stores, how do you envision the business retail versus wholesale, your direct online? What do you want the complexion to look like? And can you talk about what the gross margin differential is between? Ciaran Long: Yes. Sure, Dana. Look, I think there is tremendous opportunity. And just as a reminder, Princess Polly is about half the revenue for the group at the moment, 13 stores open, also a great presence in Nordstrom across all Nordstrom doors in the U.S., just like the Petal & Pup brand has and seeing really good response rate really across all of the channels for new and existing customers. I think, look, from a long-term perspective, we're going to continue to grow the online business. We think we are -- still have a lot of opportunity there. But obviously, from a wholesale and stores perspective, we are extremely early. I think as it relates to those, I would see the more focus from the Polly team is on opening stores and building out that store footprint. I would say on the Petal team, they're more focused on the wholesale opportunity in front of them. And we mentioned a few of the new partners that they have this year and coming in 2026. From a margin perspective, I would say, look, it's all -- they're all profitable channels. They're all bringing new customers. We do see gross margins a little bit higher in the stores than online as the stores are a little bit less promotional at this stage. Obviously, gross margins lower in the wholesale channel, but very limited selling expenses, marketing in those channels as well. So kind of on a contribution profit basis, pretty similar across the mall and really gives us confidence to kind of our ability to push into the mall and that they'll all be margin accretive. Dana Telsey: Got it. And just lastly, the shaping of the year, how are you thinking of the cadence of top line and adjusted EBITDA given the lapping of tariffs and the supply chain transition that you had? Kevin Grant: Yes, Dana. So from a top line perspective, we've talked about that sort of mid-single-digit growth for the full year and the guide for FY '26. As you alluded to, there's definitely a lot of disruption with the tariffs and supply chain issues in FY '25 that sort of disrupts our normal cadence. So that's why we're guiding from a top line perspective the growth from Q2 through Q4 on a 2-year stack, it's sort of that high single-digit perspective. We mentioned EBITDA over the balance of the year expanding about 120 basis points with that really picking up in Q2. So Q2 and Q3 look very similar and will be about 100 basis points higher than FY '25 with a little bit of a larger impact in Q4. Operator: The next question comes from the line of Eric Beder with SCC Research. Eric Beder: Can you talk a little bit -- I know a little bit about the inventories here. So that's a really nice number, down 10%. I'm assuming given the tariffs and the SKU count, that's down even more. Is that something that -- what we should be thinking about that going forward for this year given the kind of ups and downs in the tariffs last year? Ciaran Long: Yes, Eric, I think really good to see kind of inventory down 10% and doing that in a period where we're growing the overall business up 4.4% for the year and in a period when such progress on diversifying our sourcing last year as well. I would say a big driver of that change in inventory is just the progress we've made at the Culture Kings business and moving them on to test and repeat. It's a slow build to change that and kind of such a transformational difference for the group. But I think the leadership team that's been in there now for 12 months and longer have just made huge progress, and that's a big driver of the inventory change. Look, I think philosophically, we always want to have lower inventory growth and sales growth, and that's how we're looking to go through this year. Eric Beder: Okay. And Australia and New Zealand, 4 quarters of growth here. Is this market back? And how can you leverage that even more now that pretty much the inventories have been cleaned up and some of the other positives have rolled through there? Ciaran Long: Yes. It is great to see 4 quarters in a row of growth in the Australia region. And I think, look, Petal & Pup and Princess Polly have been doing well there because they have been on that test and repeat model. I think now that Culture Kings is and the new leadership and kind of ways of working that the team has there, we're really seeing progress there. We're seeing real improvements in productivity for new products and new SKUs that we're bringing in. So I think back to growth there is great. Also, as we talked about, we opened -- we relocated a store in Brisbane for Culture Kings down at a 5,000 square foot kind of size. It's a new model that we can -- testing there, we can do that quickly and then leverage the rollout in the U.S. I think for us, we are expecting moderate growth in Australia, but I think glad that it's back to growth and will be consistently there. Eric Beder: And just a follow up on that. What is the average size of the Culture Kings stores outside of the Brisbane store in Australia and New Zealand? Ciaran Long: Yes. Traditionally, they were more in that kind of 80,000 square foot size. And as a reminder, the Vegas store in the U.S. bigger again. So for us, really figuring out as we look to scale in the U.S., how do we retain those key aspects of the retail payment that is just core to Culture Kings, sets it apart from anybody else out there and is really the opportunity for us to show off the great 1P brands that we have in that business. So look, we're fortunate that you can test a bit quicker down in Australia from the store side and also being the off-season there does give us a good view into what should be best sellers in the U.S. going forward. Operator: Our last question comes from Ashley Owens with KeyBanc Capital Markets. Ashley Owens: So maybe to start, and correct me if I'm wrong, but I believe I heard that the 1Q quarter-to-date growth has been mid-single digits. Could you just provide more detail as to what's shaping the key assumptions driving deceleration from current trends in the quarter and maybe from a brand perspective, where that moderation is coming from? Or if this is just general conservatism built in? Kevin Grant: Ashley, yes, good observation. Yes, we've seen strong mid-single-digit growth so far in the quarter, and that's largely coming from the U.S. online business, which is great to see. Just as a reminder, we launched in all the Nordstrom doors for both Polly and Petal in March of '25. And that's what's driving kind of that more difficult comp as we move through the quarter and kind of explains where we're guided for Q1. Ashley Owens: Okay. That's super helpful. And then maybe just to follow up, thinking about some of the other drivers of growth in 2026, how we should break this down or balance between order growth and AOV as the primary drivers. I know AOV was declining in through the first half of the year, and then we're also lapping really strong order volume in 2Q and then a little bit in 3Q as well. So just any insight there would be helpful. Kevin Grant: Yes, for sure. From a -- we're pleased really to see in the year that growth in our active customers as well as that strong growth in orders. Q4 order growth was over 6%, and that's really what drove the top line performance. Listen, like with our evolving channel mix, we're going to see some up and down in the AOV, and we've got channels like wholesale will drive the AOV up. We've got other channels like TikTok and new categories that will drive the opposite. We've modeled AOV flat for FY '26 with the top line growth really coming from growth in orders. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Thank you for your participation. Please disconnect your lines, and have a wonderful day.
Operator: Greetings, and welcome to the Guidewire Second Quarter Fiscal 2026 Financial Results Conference Call. As a reminder, this call is being recorded and will be posted on our Investor Relations page later today. I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. Thank you, Alex. You may begin. Alex Hughes: Thank you, Grace. Hello, everyone. With me today is Mike Rosenbaum, Chief Executive Officer; Jeff Cooper, Chief Financial Officer; as well as John Mullen, President, who will be available for the Q&A portion of today's call. Complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website. Starting this quarter and moving forward, we have also posted a quarterly earnings deck on the IR section of our website. Today's call is being recorded, and a replay will be available following its conclusion. Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national and geopolitical events on our business and other matters. These statements are subject to risks, uncertainties, and assumptions are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC, including our most recent annual report on Form 10-K and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. We will also refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability and expenses are on a non-GAAP basis, unless stated otherwise. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted at the end of the quarterly earnings deck on our IR website. And with that, I'll now turn the call over to Mike. Mike Rosenbaum: Good afternoon, and thanks, everyone, for joining us today. Q2 was another strong quarter with ARR growing 22%. We continue to see momentum and demand increasing and the results across the board this quarter reflect what we believe makes Guidewire a uniquely durable business. Before I go into the details, I want to take a step back and provide my perspective on the position Guidewire occupies in our industry, the role we play inside an insurance company and why that combination creates long-term durability even in periods of technology disruption and change. Guidewire is the stand-alone leader in delivering mission-critical core systems for the P&C insurance industry. We are now a SaaS company, but understanding what our solutions actually do inside an insurance company is essential to understanding our durability. Insurance is a highly regulated trust-based industry that evolves deliberately and depends on precision, resilience, compliance and accuracy at scale. Guidewire sits at the center of that environment as the operational backbone of the insurer, embedded across the core operating functions of underwriting, claims, finance and regulatory reporting. Our platform supports the complex financial and regulatory framework that underpins the industry, establishing reserves, tracking premiums collected and claims paid and enabling a highly regulated structure that spans hundreds of integrated systems, millions of insureds and trillions of dollars in transactions. At the transactional level, we serve as the system of record for risk when a policy is written, when a loss occurs, when a claim is filed and paid. Those commitments and outcomes are executed through Guidewire. And today, we don't simply provide that software. We operate it as a continuously improving secure, reliable and scalable cloud platform that strengthens over time. The complexity of replacing a core system in the insurance industry means deal cycles and implementation projects are almost always measured in years and require deep partnership. Success on a Guidewire project is the single most important KPI in our company. And you will often hear me say that there is nothing we won't do to ensure a customer is successful with Guidewire. That culture of customer success has produced gross ARR retention rates of over 99% for our InsuranceSuite and InsuranceNow customers. The trust we have earned serving some of the largest and most trusted insurance companies such as State Farm, Liberty Mutual, Zurich, AXA, Aviva, Travelers and USAA reflects decades of deep domain expertise, best-in-class enterprise security and deep productization of complex regulatory requirements. And while we focus on serving this Tier 1 and Tier 2 segment of the market, we can also support smaller insurers. In Q2, for example, we had wins at customers that reflected over $15 billion in direct written premium and under $50 million in direct written premium. It is also important to understand how we price our service. We sell recurring subscriptions to our cloud products and price them as a percentage of the direct written premium managed on Guidewire. We have never been a seat-based model. We align our pricing to the economic value we deliver to an insurer, the premium flowing through their business and not the number of users accessing the system. As insurers grow premium, expand lines of business and modernize their operations and become more efficient, our growth aligns directly with that value creation. There has obviously been a significant discussion across the market about the pace of generative AI advancement and its implications for the overall software category. What we are seeing in practice at Guidewire is increased demand for InsuranceSuite and InsuranceNow. The potential for generative AI in insurance is clear, and this is increasing the urgency for insurers to modernize legacy systems. This is because legacy mainframes were not designed for real-time data access, automation or AI-driven workflows. AI depends on clean data, trusted transactions and reliable systems of record. Generative AI will help us accelerate the value we deliver to our customers. We'll help our customers deploy agents that improve the service they provide to their customers, and it will also help us deploy and configure Guidewire faster and more efficiently. All of this AI-driven potential is increasing the momentum in our business. Q2 results illustrate this clearly. We closed another 15 InsuranceSuite Cloud deals and 2 InsuranceNow deals. And importantly, we are seeing insurers increase their commitment to Guidewire, both in terms of larger, fully ramped ARR outcomes and longer-duration contracts. The deal activity in the quarter included 3 new customer wins and healthy migrations and expansions. On the net new side, we signed one of Canada's largest private insurers who will be modernizing their legacy claims administration system to ClaimCenter. Our dialogue with this insurer dates back to 2008, so we are thrilled to start this program. This deal reflects a little over $8 billion in direct written premium, representing our largest new customer win in the quarter. Large customers are also choosing to expand and consolidate on our platform. Two of these customers will see their ARR grow to over $20 million during the committed period. And now let me turn to some notable deals in the quarter. Aviva U.K., the largest insurer in the United Kingdom, has entered into a long-term agreement with us, committing to move all of its Guidewire estate, including business acquired from DLG in 2025 to the Guidewire Cloud Platform. Aviva recognized that to focus on innovating, serving their customers well and driving material future growth for their business, they needed a modern cloud-based core platform. Similarly, Tokio Marine North America is preparing to migrate major elements of 3 U.S. carrier businesses and has expanded significantly above its previous baseline as it commits to more growth on Guidewire. And Donegal Insurance Group has selected Guidewire Cloud as the next step in its core system modernization strategy, migrating from on-premise InsuranceSuite to the Guidewire Cloud Platform. In addition, Donegal has aligned its strategic AI initiatives with Guidewire's rapidly evolving AI roadmap. Initial collaboration efforts focus on advancing claims capabilities, including intelligent first notice of loss and AI-powered agentic claims handling, which will be seamlessly integrated into ClaimCenter. Large customers are also building on their successful cloud deployments to add other lines of business and significantly step up their direct written premium commitments. For example, a top 20 commercial insurer extended ClaimCenter to more commercial and specialty lines for greater scale and efficiency, significantly increasing its DWP commitment as it works to consolidate the collection of legacy core systems that they currently support. And in Q2, we had another win at Zurich Germany, which is a direct result of the partnership and strategic framework agreement we have with Zurich. We have also worked hard recently to widen the breadth of our core offerings to address more of the insurance life cycle. With the addition of PricingCenter, we have an ability to uniquely address the growing demand for pricing and rating agility in insurance markets. I am encouraged by the high customer engagement for this new integrated offering and pleased to have closed our first PricingCenter deal in the second quarter. We've also worked over a long period of time to embed intelligence into our Guidewire Cloud Platform and InsuranceSuite applications, and it's great to see strong adoption momentum in our data and analytics portfolio. In the second quarter, we closed 25 deals that included one or more of our data and analytics offerings. Our new embedded AI solution, ProNavigator, also got off to an incredible start with 9 deals in the second quarter. Notable deals included Aviva Canada and Gore Mutual who want to leverage this agentic assistant to deliver answers, suggestions and ultimately, actions embedded right in our core UI. ProNavigator leverages InsuranceSuite data and insurance standard operating procedures to increase employee efficiency and minimize claims leakage. These results reflect demand not only for core modernization, but for the expanding application portfolio that surrounds it. Momentum in the quarter was phenomenal. And as I said previously, led to ARR growth of 22% Growth in fully ramped ARR continues to outpace reported ARR growth as it has over the past 3 fiscal years, and we expect that to continue this year. We are seeing larger deals and longer deal terms, reinforcing the durability of our platform and the strategic commitments customers are making. Broadly speaking, AI for us is immensely beneficial and driving an acceleration in our business. It's helping create demand for core system modernization. It's helping us accelerate our development velocity. It's helping us accelerate our implementation velocity and will accelerate everything that customers and partners do with Guidewire. We will incorporate AI-powered agents powered by ProNavigator into our applications and continue to support an open approach to the incredible ecosystem of partners building solutions in and around Guidewire. Guidewire is an indispensable part of a highly regulated global industry. We operate a mission-critical infrastructure with premium aligned pricing, core renewal rates above 99% and a culture built around customer success. That combination has produced 25 years of durability and predictability, and we believe it positions us well for decades to come. With that, I'll turn it over to Jeff to walk through the financial details and our updated outlook. Jeffrey Cooper: Thanks, Mike. Q2 was another tremendous quarter. We surpassed the high end of all of our financial outlook targets, and we are raising our full year targets across the board. Given the market backdrop, we thought it would be helpful to give a few incremental one-time disclosures to help investors understand the durability of our model. First, ARR ended at $1.121 billion and grew 22% year-over-year or 21% on a constant currency basis. Additionally, fully ramped ARR ended Q2 at $1.42 billion and fully ramped ARR growth continues to outpace ARR growth. Our market experience has taught us that we can maximize customer alignment and lifetime value by negotiating ramped subscription fees over a multiyear period. We quantify the impact of these ramps in our metric fully ramped ARR, which only quantifies the first 5 years of a contract. We typically disclose this metric annually, but thought it would be helpful to remind investors of the power of this dynamic this quarter. Second, we continue to see customers lean into longer-duration contracts and larger commitments. This shows up in a number of metrics. For example, the average contract term over the last 12 months for new InsuranceSuite deals is over 6 years if you look at the weighted average duration weighted by fully ramped ARR. We have seen this metric increase over the last 18 months as larger customers push for longer contractual commitments. As a reminder, our standard contract duration for new cloud arrangements is 5 years. This dynamic is further evidenced by RPO growth. RPO finished the quarter at $3.5 billion, representing 63% year-over-year growth. We generally do not talk too much about RPO because we tend to focus on the powerful recurring elements of our model, such as ARR and fully ramped ARR. But in the current environment, we do think RPO is a helpful reminder of the durability of the business. Third, large customers are one of our fastest-growing cohorts. We have seen customers with more than $5 million in fully ramped ARR grow from 35 in 2021 to 96 at the end of Q2. It is gratifying to see the largest insurers trust Guidewire to manage their mission-critical operations at an accelerating pace. Finally, as Mike noted, we see renewal rates at all-time highs. On a trailing 12-month basis, InsuranceSuite ARR retention, including all downsell activity was over 99%. More interestingly, I went back 5 years and I reviewed every customer churn event involving more than $1 million of ARR. It was easy to do because there's a very small number of these. Those churn events fall into three categories: First, customers that experienced financial distress or exited the line of business where they use Guidewire; second, a single instance where an acquisition drove churn; and third, a contract we terminated following our decision to exit Russia after the invasion of Ukraine. Importantly, over the last 5 years, we have not seen a single InsuranceSuite customer with more than $1 million of ARR choose to replace Guidewire with another system, except where that change was effectively mandated by an acquirer. Again, we thought it would be helpful to provide some of these incremental disclosures this quarter given the backdrop. Now let me turn to the results. Total revenue was $359 million, up 24% year-over-year and above the high end of our outlook. Subscription and support revenue finished Q2 at $237 million, reflecting 33% year-over-year growth and our continued InsuranceSuite Cloud momentum. Services revenue finished at $62 million, up 30% year-over-year and ahead of our expectations on strong demand for Guidewire-led services programs. This number includes an increase in field engineering activities delivered through our professional services organization. Now let me turn to profitability for the second quarter, which we will discuss on a non-GAAP basis. Gross profit was $243 million, representing 28% year-over-year growth. Overall gross margin was 68%. Subscription and support gross margin was 75% compared to 69% a year ago and continues to track well ahead of our expectations. Services gross margin was 9% compared to 6% a year ago. We finished Q2 with operating profit of $87 million. This finished ahead of our outlook as both gross profit was higher than expectations and operating expenses finished lower than expectations. We ended the quarter with over $1.35 billion in cash, cash equivalents and investments. Operating cash flow ended the quarter at $112 million. We repurchased $148 million of Guidewire shares in the quarter, and we obtained a new $500 million share repurchase authorization a few days before moving into our quiet period. We have $490 million remaining on this authorization, and we currently expect to complete this repurchase program before the end of our fiscal year. Now let me go through our updated outlook for fiscal year 2026. Starting with top line, given our performance in the first half and our continued healthy pipeline, we are raising our ARR outlook to $1.229 billion to $1.237 billion, which reflects growth of 18% to 19% year-over-year. For total revenue, we now expect between $1.438 billion and $1.448 billion. The midpoint of our revenue growth outlook is 20%, up from 17% growth assumed in our prior outlook. We expect between $962 million and $966 million in subscription and support revenue. This $16 million increase in our guide at its midpoint is attributed to the subscription line and is due to stronger-than-expected first half bookings, healthy direct written premium true-up activity, strong attach of new products and a robust pipeline in the back half of the year. We now expect services revenue to be approximately $255 million given the better-than-expected services revenue in the first half, our higher utilization rate and an uptick in demand for Guidewire-led key programs. Additionally, we are leaning into some field engineering programs where our services personnel are helping customers utilize Guidewire Cloud Platform and leverage newer agentic capabilities to solve business problems. This is an important motion as proximity to the customer has always been a strategic asset for us. Turning to margins. We are increasing our expectations for subscription and support gross margin to be approximately 74% for the year. We expect services gross margins to be approximately 13%. Overall gross margins are now expected to be 67% for the full year as higher subscription and support gross margins improve the overall gross margin. We are also lifting our outlook for operating income. We expect GAAP operating income of between $100 million and $110 million and non-GAAP operating income of between $293 million and $303 million for the fiscal year. This updated profitability outlook recognizes the higher revenue outlook and is partially offset by higher expenses as a result of increasing our annual bonus accrual due to expected outperformance on key financial metrics. We expect stock-based compensation to be approximately $185 million, representing 15% year-over-year growth. We are adjusting our expectations for cash flow from operations for the year to be between $360 million and $375 million. Our CapEx expectations for the year are between $30 million and $35 million, including approximately $18 million in capitalized software development costs. Turning to our outlook for Q3. We expect ARR to finish between $1.144 billion and $1.150 billion. As a reminder, the timing of ARR landing from backlog is more heavily weighted towards Q4 than Q3 this year. Our outlook for total revenue is between $352 million and $358 million. We expect subscription and support revenue to be between $239 million and $243 million and services revenue of approximately $60 million. We expect subscription and support margins of approximately 74%, services margins to be around 12% and total gross margins around 67%. Our outlook for non-GAAP operating income is between $59 million and $65 million. In summary, we had a tremendous Q2. Alex, you can now open the call for questions. Alex Hughes: Our first question is going to come from Adam Hotchkiss at Goldman Sachs. Adam Hotchkiss: I guess to start, Mike, I appreciate all the clarity on the core continuing to accelerate, but it would be great to understand how you think about what Guidewire's position in the broader AI stack looks like over the medium term. We hear a lot about competition outside of the core from forward deployed engineer models and disruptors deploying LLMs on insured data. So just maybe clear up for folks Guidewire's strategy as it relates to owning AI versus enabling AI and then how that impacts your revenue opportunity. Mike Rosenbaum: Great question. I appreciate it. And I would definitely say that it would be quite a bold statement for us to say we're going to own AI in the insurance industry. What we're going to own in the insurance industry is core systems that I am very confident in. We see that momentum, and we see that insurance companies need to modernize. They need these core stacks to work effectively. There's plenty of insurance companies that need Guidewire to own the outcome with respect to AI capabilities. But running an open model where we see other companies that are going to use other components from other AI technologies in and with Guidewire, it's absolutely part of the medium-term outlook. And I think that this is really very, very important to understand. I have had numerous conversations with Tier 1 CTOs and CIOs in our customer base over the past couple of months. And every single one of them stress to me that they expect there to be a mix of how they deploy these solutions in their environments. At the smaller companies and at the smaller divisions, more of this will come from Guidewire; at the larger companies, some of it will come from Guidewire and some of it will come from partners. This is going to -- this is an incredible time in technology. And I absolutely want to stress that where we are one of one, I think, is in the perspective that we're going to be the most trusted, scalable, reliable core system that you can do anything you want with respect to AI and Guidewire. Now like how do we -- how does -- what you say, what parts of this do we want to do very well and maybe someday own, I'll give you a little bit more detail. We're super excited about the momentum we have achieved with ProNavigator in the very first quarter that it's really been part of the company. We highlighted the deal activity. We highlighted the deal activity at pretty significant real customers that are deploying ProNavigator as a mechanism to deploy artificial intelligence-powered solutions directly to the place where people are using the systems. So we can provide this context from what they're accessing inside of Guidewire. We compare it with standard operating procedures and the recommendations that they would make to those end users, and we can use an LLM to serve that to the end user in a way that's helpful, in a way that like makes that person an expert, and we love the momentum that we've achieved there. As we said in the prepared remarks, we are seeing demand for and doing a lot of let's call it, forward-deployed services where we are working with our core customers to look at what's possible with respect to Guidewire technologies and these large language models that are available now and can be applied to insurance outcomes. We're super, super excited about this. But I would definitely stress like the two characteristics or maybe three characteristics of my answer. Number one, we're the right choice for core systems. There's no doubt about that. Number two, we will do more with AI and ProNavigator is a great example. We will do more with our services organization and technologies that come from Guidewire, but we will definitely be part of what I think will ultimately be a relatively complicated enterprise architecture that will be established at each insurance company based on their strategies and their goals. And no matter what, we will be open and we will provide a platform that gives our customers choice. Hopefully, that gives you a sense, Adam, of how we're thinking about this. Adam Hotchkiss: Okay. That's great, Mike. Really, really helpful. I wanted to then pivot to the core. I know we've talked about 25% or so of premium flowing through Guidewire today. And it feels like AI is may be moving customers into the cloud more quickly if your fully ramped ARR is accelerating off of the 22% in fiscal '25. So what's your updated view on the pace that premium moves into cloud and where Guidewire's penetration ultimately gets to over the medium term? Mike Rosenbaum: Thanks for the question. I would say it's definitely improving. And as you heard us talk about with respect to the results so far this year, the results in the quarter, the visibility that we see into the back half of the year, both for new business and expansions and specifically larger deals at large Tier 1 and Tier 2 insurance companies. This is just extremely positive for our business. that's what gives us the confidence to be able to update our outlook. How that relates exactly to the percentage points of global DWP that flow through Guidewire, it's very difficult for us to say or project that. I don't really run the business that way. We look at it more from a net new ARR and net new fully ramped ARR perspective and the specific workloads, the specific lines of business that exist at each of our customers in each of the geographies that we support. And then we look at it in the end of the year, and we report that out, obviously, kind of at a yearly basis, how we've done. But certainly, it's increasing. And certainly, we see demand increasing. And I think demand is increasing because of the potential that everyone sees in generative AI. They see what they can do. Like I think you guys have all heard me say this before. What's so startling, what's so special about this technology is every single person that wants to can see how powerful it is because we can all use it in our consumer lives. Like we can all touch it, we can feel it, we can ask it questions. And then you can just immediately see, "Oh, wow, I can use this in my company." But you can only use it in your company if you're running on a modernized core system. If you're running on a core system from Guidewire with APIs that you need, with the MCP servers you need, with the partnerships that you need, that's what really unlocks this, and that's what's driving the momentum in the business. That's what created the quarter that we saw. That's what's giving us the confidence to raise the guidance for the year. Alex Hughes: Our next question comes from Ken Wong of Oppenheimer. Hoi-Fung Wong: Fantastic. Very clear, very assertive statements on the AI front today, Mike. I think those were fantastic. I won't belabor the point too much since I'm sure my peers will. I wanted to maybe focus on new products. You mentioned good customer feedback on PricingCenter. You signed your first deal. Would love to get some early comments in terms of what you're seeing in those engagement, in those conversations. And then any update on whether or not there's some traction on the underwriting side? Mike Rosenbaum: Yes. Thank you very much for the question. So PricingCenter is super interesting because what we're seeing is people really leaning in and wanting to engage with us to talk about what's the vision and specifically, how is it going to be integrated into PolicyCenter. So for a Guidewire customer that's running PolicyCenter, there's just this obvious connection between the product model, the way that we define the product model and how that relates to what the actuaries are going to use to be able to create the products that they need, how it connects to our data platform and to be able to provide the data they need, to create the models they need, to stay current, to compete, to adjust to what's going on in the market. There's a lot of engagement there. This is a deal cycle that's kind of long, though, right? This is a thoroughly researched, thoroughly studied. Sometimes there's a POC associated with these deals. And so it's kind of more similar to our core sales process where, hopefully, as we said, we closed one deal that was like more than 10 years. Hopefully, those deals won't last 10 years. But it is something that's going to take us a little while to build. We were excited to get that first deal done, but we're also excited about the amount of pipeline and the amount of engagement that we're creating for PricingCenter and for us to start to participate in this segment of the market. It's very, very exciting. And then you asked about underwriting. Like on the underwriting side, we're still in the process of working with a small subset of customers that have expressed interest in really developing with them a solution that maps to what is really just honestly a very, very fast-evolving approach to agentic underwriting, let's call it, is what exactly does that need to do with respect to receiving submissions from brokers and how do we map that to risk appetites, and then how do we ultimately map that to PolicyCenter. Lots of excitement and engagement in the market around this. We're excited about the product. And I expect over the next couple of quarters to be able to start to get this into production with a couple of customers and learning fast and evolving from there. Hoi-Fung Wong: Fantastic. Really appreciate the color. And then, Jeff, just a quick question on the true-up comment, I think you mentioned still seeing some tailwinds from true-up activity. I think we on the outside probably worried a little too much that as DWP normalizes, you really wouldn't see any of that activity anymore. Help us kind of walk through the mechanics of kind of how that continues to be a tailwind for the business. Jeffrey Cooper: Yes. Thanks, Ken. Yes, we did see healthier true-up activity than we initially expected going into the quarter. That was a little bit of a tailwind in Q2. I think as we think about the remainder of this year, it's generally aligned with how we've talked about this over the last few quarters. We saw a very healthy backdrop coming out of the kind of high inflationary period that is tempering a bit, but we continue to see this activity. And the way it works is customers have premium baselines in their contract. And it's always been part of our model that as customers grow, they pass those baselines and then we have the right to effect a true-up order. It's not uncommon for some customers to buy a bit more premium than they initially need. So it may take and in certain cases, a few years to see a true-up order after an initial purchase. But we see pretty regular volume of this. We have enough of this in our model now that we can be pretty precise in our predictions. And this year, we do still expect it to temper a little bit off of the highs that we experienced a few years ago, but saw a bit of a tailwind in Q2 and the back half of the year looks pretty much aligned with how we expected it. Alex Hughes: Our next question comes from Rishi Jaluria from RBC. Rishi Jaluria: All right. Wonderful. Maybe I want to first start by following up on kind of the earlier question around perceived competition from AI. We've obviously seen both OpenAI and Anthropic announced kind of deals with some of the leading insurers. But at least on first glance, it seems like it's very much complementary and maybe even potentially additive to what Guidewire core and even some of the add-ons are doing. So I want to maybe understand how are you thinking about your ability to partner and work with the large LLM vendors and ultimately just drive greater customer success within the insurance industry? And then I've got a follow-up. Mike Rosenbaum: Super, super question. We absolutely see this as additive and helpful for Guidewire overall and the acceleration in the company. We have always run a very open approach to our products and to our ecosystem. We've always invited multiple parties to the ecosystem because we cannot and do not imagine that we're going to do everything for every insurance company everywhere in the world. Now obviously, Anthropic and OpenAI have this access to this incredible technology that has obviously changed and will continue to change the world. But we don't imagine that the work that they're doing is targeted at the deep, deep specific complexities associated with operating a core system in the insurance industry. And we think that leveraging the capabilities that these tools provide these LLMs or even these like desktop applications that sit on top of their LLMs, they're going to be most beneficial when connected to well-structured insurance processes running on modern core systems from Guidewire. And so we're very, very open to working with these companies. We're very open to working with our customers who have partnered with these companies around solutions that connect them to Guidewire. And like I said -- in the script, I said it a second ago, we see this as net beneficial to Guidewire because what you're going to be able to do with the Guidewire core system that's deployed, your operations are modernized, your operations have these connection points that these systems need. This is going to allow these companies to accelerate. This is going to allow these companies to become more efficient. And so we don't see this as competitive. We see this as additive to the overall demand in the industry for what we can provide. I think Rishi, John wants to say something here. John Mullen: Yes, I'll just add a quick point. There's -- tied to your question in all of that context is the fact that insurance carriers and leaders of insurance companies are under a tremendous amount of pressure to drive pace themselves. So the ability to differentiate in the market that they compete in and sustain differentiation is under a tremendous amount of pressure right now. So the ability to work more proximate with them, solve problems with them and increase pace of innovation on top of the service and also increase speed to value in the way that they get to that first cloud implementation and consume products and services that we deploy, and also, to Mike's point, have the open architecture where they can do things over the top of that at the pace that they want to and need to stay differentiated is really driving a conversation with these carriers and leaders in insurance companies that get us every day closer to them, and that's what I'm most excited about is continuing to drive that proximity. Rishi Jaluria: All right. Really helpful. Maybe just a quick follow-up. As we think about your kind of own internal AI development, your own kind of ability to bring AI to your customers, recognize you're dealing with a highly regulated industry where it could take a while to get that meaningful adoption. But the question I'd like to ask is, as you think about -- a lot of the focus is on efficiency, but do you see an opportunity to maybe even drive better revenue outcome and ultimately better customer outcomes for the insurers, leveraging AI? And what would that look like with your current roadmap? Mike Rosenbaum: Sorry, I want to make sure I understand. You mean better revenue outcomes for our customers? Rishi Jaluria: Well, specifically that the insurers can generate better revenue outcomes, right, whether it's being able to have better quotes or service more customers and ultimately, the end people being insured get net benefits as a result. Mike Rosenbaum: 1,000%, yes, okay? The insurance industry is an incredibly complicated thing, right, if you zoom out. It is structurally been sort of hamstrung by the amount of unstructured information and data that needs to be managed in order to effectively and efficiently conduct the art of insurance. And large language models attack this directly. They address this directly. So you can underwrite more efficiently, which means that you can look at more risk. You can evaluate more risk more quickly. You can manage claims, the input of the submission of documents and the conversations that you have to have with all the multiple parties can be analyzed more effectively. And so it's like those two examples are sort of like tiny little bits of why the underwriting process is going to become more effective and the claims management process is going to become more effective. And I think ultimately, the insurance industry, the insurance machine is going to become more efficient, which is beneficial to insurance companies and to the broader society and our economies. Like the insurance industry with generative AI, and I think this is why everyone is so excited about focusing on these kinds of partnerships with these big insurance companies is there is a significant potential to improve its efficiency overall, which, like I said, it will be -- I don't want to say revenue, but I would just say like the efficiency of these companies is going to improve. And we're excited to be a part of that, driving that and making that possible along with a lot of other companies, along with Anthropic, along with OpenAI, like there's going to be a lot of people that are focused on helping the insurance industry do this. Like John said, our customers are excited about the potentials here because for so long, you're sort of limited to the technology capabilities at hand. And now you have this new tool that understands natural language and can be taught to do things like underwriting and claims. It's really significant. So basically, 1,000%, yes. John Mullen: I'll just hit on the daisy chain of kind of product strategy because one part of your question was product strategy. So on top of the core operating system, if you think about the pressure points, our customers need pricing agility, therefore, PricingCenter. That's why we take that step. Product speed to market is the next thing in that daisy chain that drives competitive differentiation for them, therefore, advanced product designer. And broker efficiency and effectiveness is the thing that's probably up for the most amount of transformation and disruption and enablement given LLMs and the models available and therefore, UnderwritingCenter. So it ties very closely. The investments we're making in the product strategy ties very closely to those things that are driving differentiation for our customers that sit on top of the core processing environment. So the fact that the core processing environment has an opportunity to continue to gain market share by line of business specificity and geographic specificity because of the rate at which we can deploy products and the components that we're putting out over the top of it, I think, are really good proof points for our strategic resilience inside of our customers. Alex Hughes: Next up is Joe Vruwink from Baird. Joseph Vruwink: Great to hear about the urgency to modernize. I maybe wanted to ask about the pace around that modernization. And there's been a lot recently even COBOL got its time in the sun a few weeks ago on maybe AI tooling, making it easier to translate. I don't think necessarily the translation of COBOL is the challenging part, but I want to get your take on just modernization timelines more broadly and whether Guidewire has the ability to maybe accelerate time to value because of their AI usage. Mike Rosenbaum: Yes. I'll give you a quick take on this, and I think John is probably going to want to add some -- his perspective on it. Yes, we're definitely working hard to ensure that our teams that are working on these migrations, both from on-prem Guidewire to cloud, but also the modernization projects are more and more efficient. And we're starting to see the early results of this in the actual projects. There's like a whole litany of different steps that are involved in one of these programs, and many of them can be enhanced and potentially even completely automated with generative AI. And so reducing that time line, increasing the pace of that, therefore, reducing the cost of those programs also helps us make an argument about modernization now. This is definitely an exciting component of the story at Guidewire. I would caution, though, that there is a certain amount of, hey, this is running on legacy code and this is running on a system that we can't support anymore. So this like one-for-one translate into something that's more supportable. I think that's an okay step. But it really doesn't get to what is very often a major important part of the modernization, which is rethinking your business process, rethinking your products, rethinking your approach to doing business, which is often part of a modernization. And that's what you really need to engage with companies like Guidewire and our ecosystem of SIs to really help companies work through that and get to a system that's modern, but also an operation, a business workflow, a set of new standards that really kind of set the company up for their go-forward operating model. So it's more than just the conversion of the code, but it's really the modernization of all of the activities inside of an insurance company. John Mullen: Yes, I'll add the -- if we think about where we were maybe 2 quarters ago, and you got to think -- we have to think about this as the investments that Guidewire is making in our professional services team and multiplied by the investments that the SIs are making in their teams. And if we go back 2 quarters, there was a lot of investigation, a lot of discovery, a lot of proofs of concept, a very wide funnel of activity. That is starting to narrow over the last 2 quarters. We're starting to see some green shoots of some really impressive kind of percentage reductions of time to value. And the next step for us is to really continue to increase the velocity of those proofs of concept and early test cases to be rolled out as standard operating procedures in these programs. But there's an important additional step, which is rationalizing that with the SIs because I think, certainly, I've been in conversation with all of our SI partners. And there's no world where we want to be competing tool-based in what it takes to drive speed to value on cloud. So we'll be doing some rationalization with them and making sure that the tools are consumable by the customer base. Joseph Vruwink: That's great. And then, Jeff, one for you. I appreciate the midyear disclosure on fully ramped ARR. I'd have to imagine there's seasonality in that number, just given the deal volumes in 4Q creating some second-half weightedness. Can you maybe frame how much of a given year's net new fully ramped ARR happens in the first half versus the second half? Jeffrey Cooper: Yes. I think there's -- obviously, you guys understand our business. You know that our seasonality is 4Q weighted. 2Q historically is our second strongest quarter, and we saw a very strong 2Q for us, and that flowed through to some healthy additions on the fully ramped side. But you'll have to wait until Q4 to get full gratification on that question. So -- and we'll certainly talk about it in the fourth quarter call. Alex Hughes: Our next question comes from Parker Lane at Stifel. J. Lane: Jeff, I appreciate the disclosure on ARR retention rates and the commentary on how a few million dollar-plus churn events you've had in recent years. Looking at the remainder of this year and more importantly, maybe your midterm targets, what sort of assumptions do you make or cushion do you bake in around ARR churn? Do you anticipate that things remain relatively consistent with historical trends? Or are you accounting for some incremental conservatism there? Jeffrey Cooper: Yes. I appreciate the question. And given our business, this is an area of strength of ours. We -- the assumptions are as we go bottoms up in every single account and have really good visibility into any sort of potential downsell risk that exists in our accounts. And the team flags all of those throughout the year. Usually, when we start the year, we have a good read. And so we kind of do that. And we try to be pretty conservative and cast a wide net on kind of how we think about potential downsell events. And then we usually end up performing better than some of those -- that wide net that we initially cast. But this is not kind of a top-down model assumption exercise for us. This is a very bottoms-up, customer-by-customer, account-by-account exercise for us. J. Lane: Got it. And one quick one on ProNavigator. I believe last quarter, you said you were expecting $4 million of ARR and $2 million of revenue, 9 deals in the quarter. How is that trending relative to those expectations that you outlined last quarter around? Jeffrey Cooper: Trending positive to those expectations. I mean I was not expecting 9 deals in the first quarter. So we're thrilled with that progress. And we can think about how we will disclose that moving forward. But you should think about it as right now trending ahead of expectations. Alex Hughes: Our next question comes from Michael Turrin at Wells Fargo. Michael Turrin: I wanted to spend some time on the commentary on duration increasing. It certainly seems positive in terms of willingness of customers to commit to Guidewire. Maybe just speak more to what's leading to that longer duration. Are you finding core replacements show up as a prerequisite for some of the kind of longer-term AI-focused initiatives insurers might be looking at? Or what drives that? And as a small second part, Jeff, you referenced the backdrop is why you're giving some of the incremental disclosures, which we definitely appreciate. Is that just the software market backdrop you're referencing because your results seem generally unfazed here. So maybe just help frame why the incremental disclosures for us as well. Jeffrey Cooper: So on the first question, yes, this is 100% just because of the software market backdrop. And we felt that in that backdrop, some of the durability elements of our business were being missed. And so we thought it was a good time to lean into some of these disclosures that provide a bit more durability. I think Mike will probably jump in here. But on the contract duration, we always engage -- have always engaged in longer-duration contracts. There was a period of time when we transitioned to ASC 606, where we actually forced shorter contracts on our customers. And as we move to the cloud, our standard has been 5 years. In the early part of the cloud, if you look at duration, it was a little bit lower than 5 years. We saw testing the waters, wanting to explore smaller deals and see how it goes. And now with the maturity of the platform, kind of where we are on this cloud transition side of things, we have seen that willingness to lean in and make longer commitments, that trend has increased. And then if you look at the largest customers, in particular, the ones that are making really big bets on Guidewire, often that impulse is to move even beyond our standard 5-year terms and pursue a longer engagement. And we've seen that activity kind of more recently over the last 18 months increase. Mike Rosenbaum: Nothing to add. I think you got it exactly right, Jeff. Alex Hughes: Alex Sklar from Raymond James. Alexander Sklar: Mike or John, following up on Ken's question on PricingCenter and ProNav and some of the early success there. Can you just reframe how you expect the adoption curve to trend and sales cycles you've seen based on what you've seen to date? Were these particular deals in the pipeline prior to the acquisitions? And maybe, Jeff, how did those initial deals look like in terms of uplift on ARR? John Mullen: So I'll hit the -- I'll go on the first part and then Jeff can pick up the second. If I think about the ProNavigator deals, the adoption curve in claims, we're seeing the pipeline that's accelerated there has really been as that team came into the fold. And I just should say, while I'm on this call, I couldn't be happier with how that team has joined. The culture fit is great. The energy is exceptional. But as we think about our ClaimCenter customers that are on cloud, the receptivity to have the right conversations and start laying down tracks for what that looks like is what's really driving the acceleration there. There are conversations in underwriting as it pertains to ProNavigator, but the acceleration is really coming in the claims space. The PricingCenter piece, Mike mentioned a little bit earlier, which has a lot to do with those that are PolicyCenter customers and the integration of PricingCenter into PolicyCenter is something that drives a tremendous amount of value and a tremendous amount of appetite right now for the conversations. There are a lot of proof points. It is a big decision. Every one of these customers has some variation of pricing and rating inside their environment, whether it's ours or somebody else's. And so really testing the waters on that and pushing through some proofs of concept is important. But those customers that are driving pricing -- that are driving policy admin solutions that sit on Guidewire are really very interested in proving these things out and looking at potentially large and long-term commitments. There is going to be a lot of work to do to make PricingCenter fit all regions, all lines of business. So that's going to be something that we look at a lot of investment in over the next quarters as we go forward. Jeffrey Cooper: Yes. And on the ARR side, we haven't spoken too much on this topic other than to think about PricingCenter as a pretty meaningful ASP product. It's a little bit of a longer sales cycle. These are big investments that customers will make in that product. So we expect that pipeline to kind of build and transact a little bit slower, but be more meaningful and impactful. On the ProNavigator side, those are smaller price points at this point in time. But at this point in time, that tool or that product is primarily looking at standard operating procedures of an insurer. And it is our expectation to evolve that into other content areas that would increase the value of that product over time. So I think the price points that we're seeing today are nice starting points and when we should expect to grow those over time. Alexander Sklar: Jeff, maybe just a quick follow-up on Joe's fully ramped ARR question for you. I appreciate some of the unknowns around seasonality given the larger Tier 1 customer base. But in the first half of this year, was there anything in the fully ramped result outsized contributor either in terms of steeper ramps or larger migrations that kind of is abnormal for a first half for you? Jeffrey Cooper: It was an abnormal first half for us just in the fact that we -- the volume that we saw, some of the large deal volume that we saw was very, very exciting. We hope to continue to build on that. So I wouldn't say there was anything unnatural, but we are continuing to see the momentum build. There are a number of -- in the first half deals that were longer than even the 5 years. And so there's even some backlog that is kind of off of that fully ramped ARR metric. And all of this is just kind of continued momentum that we're seeing in the business. Last year, signing Liberty Mutual was a big event for us. And so that creates a somewhat difficult compare. But as we look at the pipeline for the remainder of this year, we have a lot of really interesting activity out there. So it's always hard to predict exactly when those larger deals will come in, but we're thrilled with the pace and we're thrilled with the traction, and we're thrilled with the pipeline. Alex Hughes: Our next question goes to Allan Verkhovski at BTIG. Allan M. Verkhovski: Mike, given the speed and innovation of what's possible from a coding perspective with AI, you've gone through a lot of investments over the years. You talked about demand for deployed services. Where are you making changes or leaning in more as it relates to your product roadmap? And how are you further adjusting it, if at all, your expected developer count growth over, call it, a multiyear basis? Mike Rosenbaum: Great question. So we're in the process, as you could probably imagine, of rolling out agentic development tools, call it, a harness that works effectively for Guidewire developers. And I should say for the folks in our professional services organization, the folks in our SI ecosystem and all the customer developers, we fully expect that these agentic development tools will be leveraged by our devs and everybody that touches Guidewire from a software development perspective. And -- for sure, we see this increasing pace over time for what we can deliver. We're a little bit early days to that approach, but the anecdotal feedback from the sort of first movers and the people that have really put their hands on these tools and figured out how to use them effectively is extremely positive and gives me a lot of confidence that the development velocity at Guidewire over time will increase, right? So then that brings up logical questions that like I had that you are asking me right now, which is, okay, well, what's our long-term backlog look like? And what are the ideas and things that we need to be putting into this product over time with this increased capacity? We've been in the process for the past few months is just reevaluating those roadmaps based on the assumption that possibly we will see this or likely we will see the throughput increase. I'm excited about the potential to increase this throughput. It's like a side benefit of all of the work we've done to move our customer base to our cloud. It's like now we have this -- we have a vehicle in the cloud-based installed base and the three releases we're doing every year to take the new functionality that we're building and put it in and get it into our customers' hands. It's like this incredible, I don't know, circumstance that this lines up, right, when we've got more than half of our customer base move to cloud. And I think that also provides another reason for the on-prem customers to think about accelerating their time lines to cloud. But the roadmap pretty vast, pretty long. You say, hey, I'm very confident in our position in the market today, but do we have a big BillingCenter roadmap? Yes. Do we have a big PolicyCenter and ClaimCenter roadmap? Yes. Are there a whole bunch of things that we could do to make the products better, to make the products easier to install and easier to configure and easier to integrate to other systems. There is so much more that we can do. And I wouldn't -- so I wouldn't say it's infinite, but I'm very confident that we have a product roadmap around the existing product portfolio that is very sufficient and is going to continue to deliver value to our customers now at a faster pace, but for years to come. And so the question about are we thinking about this from a -- are we thinking about generative AI from a software development perspective? Is it an efficiency play? Or is it a value play? Right now, I'm very much thinking about it as a value play. I think that we can take the developers that we have that know Guidewire, right? They know the technology stack and the cloud technology stack at Guidewire, and they know the insurance industry and they know what to do and we can accelerate. This is going to create more value for Guidewire, and it's going to help us continue the pace or maybe hopefully accelerate the pace that we've established with cloud. And so that's how I'm thinking about it in the short to medium term. Allan M. Verkhovski: Perfect. That's really insightful, Mike. And then, Jeff, just as a quick one for you. Can you just stack rank the areas of outperformance in the quarter as it relates to the ARR beat? Jeffrey Cooper: Yes, it's a good question. I mean I think in general, as I build my ARR model, there are the key elements that I need to see come to fruition. One is new deals in the quarter that then translated to ARR. The next is how much ARR is going to come off of the backlog. And the third is how much attrition events occurred. And we have really good visibility into the ARR that comes off of the backlog. We have really good visibility into those attrition events. And so those both performed largely in line with expectations. And then -- so then it's the new sales activity that we executed and delivered in the quarter is what drove that outperformance. A little bit of that we kind of called out was also some -- a bit higher true-up activity, but most of it was just the deal volume in the quarter, and then how that deal volume translated into year 1 ARR. Now within that, I think we saw a very healthy mix of kind of new customer wins, migrations, expansions into new areas within existing customers. And so that new sales momentum was pretty broad-based. John Mullen: The other dimension to look at is geographical. So geographical line of business. So good spread across personal lines and commercial lines, which we're happy that continues to be a nice balance for us. The team in Europe continues to drive really solid activity and influence in the market showing up every day in the culture and the business of the countries that make up Europe and the U.K. And then our Asia Pac business continues. We were in Sydney last week with a lot of customers, and I'll just go back to the ProNavigator question. The receptivity, so many of those customers have -- are in the process of or already on cloud. Therefore, their appetite for consumption is just really -- it's a really powerful conversation. And so the Asia Pacific team continues to drive, I think, really solid market activity as we build out that leadership team, and we're really seeing that connection get stronger every quarter. Alex Hughes: Okay. Great. We have time for a couple of more questions here. Next is Aaron Kimson from Citizens. Aaron Kimson: First one, there are about 90 Tier 1 P&C insurers today. Guidewire has 96 customers with fully ramped ARR greater than $5 million. How should we think about how many of your customers exceeding $5 million in fully ramped ARR today are Tier 1s? And how far down that TAM pyramid on Slide 5, do you actually have $5 million-plus FR ARR customers today? Jeffrey Cooper: Yes. I mean, I'll be honest, I haven't actually sliced it that particular way, but it is not -- it's very reasonable for us to have a number of Tier 2 and even Tier 3 customers that can cross that threshold. So that opportunity to see customers cross over that threshold is maybe broader than you might think. Aaron Kimson: Okay. That's helpful. Yes. And then, Mike, you mentioned strength with the analytics products. In F 3Q '25, you made your first Industry Intel sale within ClaimCenter. Can you provide an update on what you're seeing with Industry Intel, both from the standpoint of developing and validating models for more types of lines? And then also what John and team are seeing on the distribution side with Industry Intel? Mike Rosenbaum: Yes. We continue to make solid progress there. It's a process for -- and it's a little bit of a -- it's not a straightforward software development process. There's a little bit of have an idea about what we might be able to predict, go make sure that we can pull the data sets and clean the data sets and test whether or not there's appropriate signal that's in the data set and then validate that. And so there's a little -- it's a little bit more R&D and research than straightforward software engineering. But we continue to make great progress and steadily building momentum with that team. And so we're very, very happy. I would say we didn't call it out specifically, but sales momentum in the quarter continues to track as expected for the objectives on that team. And I'm very, very happy with that. So it's steadily building, and we continue to be happy with the progress. John Mullen: Yes, I'll just add from a market coverage and distribution standpoint, the ability to demonstrate what that team has built has really crystallized quite a bit over the last couple of quarters. So it really helps in the deal motion. The other side of it is we continue to invest in our account management motion. And when these -- when the Industry Intel deals aren't necessarily tied to a large deal event, we're getting much better at navigating the right buyers inside of our existing customers and now with the demonstrability of those assets to have the right conversations to trigger a much more healthy pipeline activity into existing customers. Alex Hughes: Our last question comes from Faith Brunner at William Blair. Faith Brunner: I know there's a lot of commentary on the pipeline in the back half of the year. But just wanted to touch on maybe how should we think about the different products flowing through the funnel as customers increasingly want to land larger with longer duration. Has there been any shift to the conversations you guys are having or typical sales cycle timelines as people seem to be more eager to standardize on the platform? Mike Rosenbaum: It's an interesting question. I would say, and I'd love for John to comment on this is what we're seeing that's driving the outperformance is more like broad-based larger deals across the board rather than any sort of product mix shift that you might be thinking about. We're just getting basically much more established and establishing much more confidence in this platform as the logical long-term home for core system operations at insurance companies. The AI story, like we talked about, is driving some urgency there and bringing this to the table. But I would really say like the improvement is about larger, longer-term deals rather than product mix shift. We still -- obviously, we called it out. We still see the product mix shift, but like that's not what -- it's really core system, larger core system wins and commitments that's driving the improved momentum. Anything to add, John? John Mullen: Time and stage is the same as it was, but we're starting now as we build out our portfolio, some of our portfolio will have a very different stage aging profile than the core processing space. Mike Rosenbaum: Okay. Well, thanks, everybody. It was obviously a great quarter. We're incredibly excited about it and look forward to talking to you all over the next few weeks and months. Otherwise, we'll see you at the end of Q3. John Mullen: Thank you.
Operator: Good morning. My name is Natalia, and I will be your operator today. Welcome to Ecopetrol's earnings conference call, in which we will discuss the main financial and operating results in 2025. [Operator Instructions] Before we begin, it is important to mention that the comments in this call by Ecopetrol's senior management include projections of the company's future performance. These projections do not constitute any commitment as to future results nor do they take into account risks or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Ricardo Roa, CEO of Ecopetrol; Juan Carlos Hurtado, Executive Vice President of Hydrocarbons; Camilo Barco, CFO; and Bayron Triana, Executive Vice President of Transition Energies. Thank you for your attention. Mr. Roa, you may begin your conference. Ricardo Barragan: Good morning. Thank you for joining us today for Ecopetrol Group's Fourth Quarter and Full Year 2025 Results Call. Last year, we achieved our goals, maintained financial discipline, stable operations, maximizing value management, drivers that reflect the strength of our strategy and the group's ability to operate in challenging environment. We consolidated a 44% 3-year success rate in exploration the industry average and exceeded our 2025 target by 60% drilling 16 wells. [ This team ] achieved the second highest net profit in history. In production and refining, we met our targets within the announced range and achieved a reserves replacement ratio of 121%, the highest in the last 4 years. In 2025, we marketed in advance 100% of the Sirius gas and moved forward with new supply alternatives. On the other hand, we declared the well Lorito to be commercially viable. Also, we surpassed our renewable energy capacity goal, reaching 951 megawatt, initially set by 2030 and strategic milestone for diversifying the company's energy metrics. But in ISA, we executed investments 31% higher in 2024 with projects of a total amount of $664 million. I would like to highlight how our efficiency program delivered history result in 2025 accumulation more than COP 16 trillion over the past 3 years, strengthening our financial position and supporting business sustainability. 2025 was a year of reliable execution. We maintained the group's long-term sustainability and met the goals announced to the market. Let us move to the next slide. Average production reached 745,000 barrels per day. Transportation exceeded 1.1 million barrels per day and refining throughput reached 417,000 barrels per day. Both operational performance and the efficiency program mitigated the impact of one adverse environment, considering a reduction of nearly 15% in crude prices. Despite this, we maintained an EBITDA margin in line with expectation, demonstrating discipline and resilience. On the commercial front, we achieved the best crude differential of the past 4 years. We closed 2025 at $4.6 per barrel, an improvement of $2 compared to 2024, driven by market diversification, basket optimization and effective coordination among our trading companies. Finally, to our shareholders. In 2025, we transferred COP 35 trillion to the nation in dividends, taxes, and royalties. This result ratifies Ecopetrol's role as a fundamental pillar for national economic development. The Board of Directors will propose to the general assembly on March 27 a dividend of COP 110 per share equivalent to 50% of net income under the dividend distribution policy of Ecopetrol. This proposal reaffirms our commitment to responsible, sustainable and value-oriented dividend distribution. Let's move to the next slide. At the end of 2025, Ecopetrol reached 1.944 billion barrels of oil equivalent improving 1P reserves, supporting the long-term sustainability of our operations. This result was mainly driven by organic growth, which added [ 314 ] million barrels through enhanced recovery, the largest reserves incorporation in the history as well as operational optimization that contributed with 19 million barrels helping to offset external variables such as Brent prices, exchange rates and inflation. In addition, according to Law 2056 of 2020 and Resolution 164 of 2015, reserves associated with crude royalty securitization were incorporated. This practice is recognized by the SEC and has been applied to gas royalties since 2014 for Ecopetrol Group. The total crude incorporation amounted to 314 million, 1.6x the year's production, allowing the company to reach historic highs in one peak crude reserves volumes, reaffirming the resilience of the field, both national and internationally. In gas, natural decline led to a reduction of 4.7 million barrels of oil equivalent partially offset by results at Pauto and Pauto fields, where pressure reduction techniques and hydraulic improvements were implemented to extend wells' life. We expect this trend to be reversed in the medium term as we progressively enable volumes discovered in Sirius and KG. Internationally, we continue to advance in the Orca Brazil Gas to the Market project after the commerciality declaration in 2025. Once the development plan gets the approval by the National Agency of Petroleum, Natural Gas, and Biofuels of Brazil, resources will gradually be progressed as reserves. Let us move to the next slide. In 2025, we also advanced firmly in ESG indicators by strengthening our environmental, social and governance commitments. On the environmental side, we reduced 561,000 tons of CO2 equivalent 165% of the annual target. We also received the Gold Standard recognition for methane management from the United Nation, validating our technical and transparent approach based on environmental protection. Ecopetrol consolidated its leadership in Colombian's aviation energy transition by supplying co-processed jet [indiscernible] with renewable feedstocks for the operation of more than 700 LatAm flights. Regarding water management, we reused 181 million cubic meters, equivalent to 82% of water used in operations, a 10% increase compared to 2024, positioning us as a global benchmark in the sector. In energy transition at the Cartagena Refinery, we began installing the largest PEM electrolyzer in Latin America, capable of producing 800 tons of green hydrogen per year and avoid up to 7,700 tons of CO2 equivalent annually. In 2025, we consolidate our leadership in Works for Taxes in Colombia. Since 2018, we have accumulated 154 projects, worth COP 1.4 trillion equivalent to 35% of the national total. Only in 2025, we completed 21 projects worth COP 109 billion, benefiting more than 49,000 inhabitants in 31 municipalities across 12 departments. On corporate governance, we highlight the approval of the statutory reform that incorporates an employee representative on the Board of Directors, strengthening diversity participation and best governance practices. With this, I hand over to Juan Carlos, who will present the details of the Hydrocarbon business performance. Juan Carlos Parra: Thank you, Ricardo. On the exploration front, we continue to strengthen our portfolio. By the end of the 2025, we drilled 16 wells, exceeding our target of 10. Of these 16, 7 were successful, 5 are under evaluation and 4 failed, achieving an average success rate of 44% over the last 3 years, placing us at competitive levels within the industry. In 2025, we promote the maturation of discoveries towards the development phase with a potential of over 455 million barrels of crude equivalent to 24% of the current reserve of the Ecopetrol Group, highlighting one first commercial declaration of 4 exploration areas of Orca Brazil, Lorito, Toritos and Saltador. Second, the extension of the commercial area of the Terecay field, reaffirming the potential of Los Llanos Centrales. These volumes will gradually be incorporated into 1P reserve as their development progress. Environmental license is currently underway for the Lorito project and the development plan for the Orca asset is awaiting approval from the Brazilian National Ports Administration. In the Sirius project, the delineation stage of the discovery was completed, confirming the potential of the 6 trillion cubic feet. Furthermore, the ANH approved the extension of the 10 exploration and production contracts and agreements with additional terms between 1 and 4 years and authorized the transfer of 50% of the participation and operation, the Parex Resources Colombia in the Farallones E&P agreement. By 2026, in association with Parex, we expect the drilling of 2 exploratory wells in the Pedemonte as well in Farallones extension agreement. Next slide, please. On the production front, we reached a total accumulated production of 745,000 barrels of oil per day, in line with the established target at levels comparable to those of 2024. This result was largely driven by national crude production, which reached 517,000 barrels, the highest level in the last 5 years. Thanks to, first, the enhanced recovery strategies to increase production in major fields and mitigate natural decline. Second, growth in production from the Caño Sur fields, and third, the acquisition of a 45% stake in the CPO09 block. We highlight that this production level was achieved with a 10% optimization at the initial planned investment, and we achieved efficiencies of more than $139 million in drilling and completion activities. The 2026 organic investment plans has a simply breakeven of $40 per barrel, positioning this a competitive portfolio given current market conditions. Of this portfolio, 88% of the investment will be concentrated in growth projects. Among the milestones to be achieved in [ 2026 ] increased the number of development wells to be drilled in the country compared to 2025 and extending the development plan in Midland with Oxy until July 2027. Jointly defined with the price framework, the interest of both and aligned with the reduction in activity. Next slide, please. By the end of 2025, the Transportation segment posted one of its best historical performance in EBITDA and net income, affirming its flexibility and operational efficiency amid a challenging environment. Regarding transport volumes, the segment through the strategic investments and operational adjustments managed to expand evacuation options to capture volumes outside the network and respond actively to the needs of both the business growth and the market. In the context, the following milestone stand up, which enable us to transport volumes above 1,100,000 barrels through the network. First, expansion of evacuation capacity in oil pipelines by more than 122,000 barrels. Multiproject pipelines by more than 10,000 barrels and additional storage capacity by 323,000 barrels, thanks to the commissioning of the new tanks in Pozos Colorados. Second, commissioning of the crude oil import scheme from Coveñas to our Barrancabermeja refinery to mitigate and respond of the third-party impact on the infrastructure monitoring schemes, operational control and the interinstitutional coordination were strengthened in the Caño Limón - Coveñas system. The time line activation of alternative evacuation routes together with flexible operating schemes and the use of the technology allowed us to preserve system continuity, avoid deferred production and maintain refinery supply. From a financial standpoint, prioritization of cost optimization neutralizing external effects such as the exchange rate and maximizing the use of infrastructure among other measures enabled the segment to achieve an EBITDA of COP 11 trillion and net income close to COP 5 trillion, one of the highest results in the history of the segment. Continuing with the refining segment results, solid operational execution and commercial decisions allow us to capture better international price differentials, strengthening profitability reservations of the business for 2025. We highlight the historical record of [ 113,000 ] barrels per day of integrated throughput in the fourth quarter of 2025, reflecting operational stability and high unitability after major maintenance for first half of the year. The results contributed to the annual total of 470,000 barrels. The gross refining margin increased by 32% in 2025 compared to 2024, increasing from $9.9 to $13.1 per barrel, thanks to production focus on higher value and higher quality fuels, crude basket optimization, prioritizing the processing of crudes with greater economic contribution and acting opportunity to capture international price differentials. EBITDA reached COP 2.7 trillion, 20% higher compared to 2024, driven by prioritizing operational and energy efficiency, which keep refining costs under control and strengthen competitiveness and resilience in the face of energy and price conditions. In practice, each barrel contribute more supported by the system capacity to take advantage of international price differentials, control and unit costs and energy use efficiencies. Regarding electrical reliability in Cartagena, efforts continued throughout 2025 to manage and decrease risk with a projection of reaching a tolerate risk level in 2026. In 2025, progress reached 81%. 3 out of the 13 out of the 16 milestones complete and connection to the national interconnecting system was secured. 70 megawatts of backup, reducing exposure to grid events and supporting establish operation. Next slide, please. During 2025, the efficiency program was consolidated as a key driver for value generation in the hydrocarbons line. We implemented decisive actions to maintain competitive unit costs, which have allowed us to offset exchange rate and inflationary impacts. At the end of 2025, the total unit cost of the Hydrocarbons line was $46 per barrel, a significant decrease of $1.7 or 3.4% compared to 2024, mainly driven by the synergies implemented in crude oil purchasing and strict cost-executing discipline. The lifting cost stood at $12.2 per barrel, $0.3 less than in 2024, marking 2025 as an important turning point in the indicator trend. Efficiencies played a fundamental role by contributing $0.96 per barrel in optimization. The refining cash cost and transport barrel costs remained stable during 2025, closing at $5.75 per barrel and $3.41 per barrel, respectively. This reflects the effective mitigation of inflation and exchange rate pressures as a result of the established operational discipline and efficiency materials throughout the year. Despite the impact of the exchange rate on costs expressed in dollar, the trend in local currency confirmed operation control, financial discipline and our commitment to ensuring and downward trajectory in our key cost indicators. Now I will give the floor to Bayron, who will discuss the main milestone of the energy transition line. Bayron Triana Arias: Thank you, Juan Carlos. 2025 was a year of disciplined execution in the energy transition business line. We made progress in strengthening energy security, scaling our renewable portfolio and capturing efficiencies with operational and financial impact. In relation to natural gas, the Ecopetrol Group remains committed to generating value and contributing to the growth of the country's supply with Ecopetrol being the only producer to market long-term volumes during 2025 for the period 2026 to '29. As a result, in December, we closed the sale of gas from the Sirius field together with Petrobras, selling the entire volume up to 249 GBTUD, a key step forward for its entry in 2030. Similarly, for 2026, the Ecopetrol Group has signed gas sales contracts for an average of 326 GBTUD to mainly serve the residential and commercial segments, reaching an estimated coverage of 76% of its demand, 6 percentage points more than in 2025. In terms of gas supply optionality, complementary to offshore development in 2025, we will market 60 GBTUD of reclassified gas through Buenaventura with deliveries scheduled for 2026. Additionally, in February, we began marketing 2 products with an offer between 126 and 370 GBTUD, which will be delivered through Sociedad Portuaria Puerto Bahía, starting in December 2026. Let's move to the next slide, please. In terms of electricity, by the end of 2025, we reached nearly 951 megawatts of capacity incorporated into the renewable energy portfolio, exceeding the target of 900 megawatts. This growth contributes to reducing the unit cost of our electricity supply. Within this portfolio, operating capacity grew by 94% from 186 megawatts at the end of 2024 to 381 megawatts at the end of 2025. This growth is explained in part by the acquisition of Statkraft's asset portfolio, which included the Portón del Sol solar farm, the first asset operating in Colombia under the remote self-generation scheme as well as the entry into operation of the La Cira and La Iguana projects. The combined operation of the group's solar farms and the Cantayús small hydroelectric plant avoided the emission of approximately 47,000 tons of CO2 equivalent and generated savings of around COP 55 billion in 2025. In addition, in December 2025, the 205-megawatt Windpeshi wind farm reached its FID. This project will be the first wind project built and operated 100% by Ecopetrol as well as one of the largest in the country. I would like to highlight that during 2025, these efforts enabled us to reduce the electricity supply tariff for Ecopetrol Group by approximately 4%, contributing among other things, to mitigating pressures on lifting costs. Ecopetrol Group's electricity demand is equivalent to 10.25% of the energy in the national interconnected system. This demand was covered 92% through self generation, both conventional and renewable and through contracts in the wholesale energy market, MEM as it is known in Colombia. When contracting in the MEM, the group seeks to mitigate variations in the cost of electricity supply through planning supported by risk policies. To this end, it plans energy contracting with horizons of between 1 and 3 years, considering the expansion of the system, the evolution of demand and climate effects. Next slide, please. Now I would like to highlight our efforts in energy efficiency, which is a structural level of competitiveness for Ecopetrol Group. 2025 closed with 4.79 petajoules of energy optimization, 1.6x the annual target, generating significant emissions reductions and savings. This result led us to achieve 99% of the goal of 25 petajoules of cumulative energy optimization between 2018 and 2030 ahead of schedule. The improvements were achieved through 80 initiatives comprising operational control of production processes, investments in technological upgrades of high consumption equipment and energy management systems in the Transportation segment. Finally, in terms of our contribution to energy justice in the regions, in 2025, the gas social project achieved its historical peak, completing more than 114,000 cumulative connections in 21 departments across the country. And in energy communities, we reached 3.8 megawatts accumulating in operation and construction, helping more than 58,000 people with centralized renewable solutions that strengthen energy autonomy and expand access to affordable energy. I now give the floor to Camilo Barco to detail the financial performance for the period. Alfonso Camilo Munoz: Thank you, Bayron. 2025 results confirm that Ecopetrol Group delivered performance in line with the annual investment plan reported to the market. The company operated with financial strength supported by an improved OpEx reduction target and CapEx flexibility, which boosted efficiencies across all segments and business lines, even in an environment marked by lower crude prices compared to 2024, higher tax burden and inflationary pressure. In 2025, we achieved an EBITDA of COP 46.7 trillion with a stable EBITDA margin aligned with the annual target of 39%, driven by the gradual recovery of the refining segment, the stability of the Transportation segment and the significant contribution of the profitability and efficiency program. The exploration and production segment contributed approximately 51% of the EBITDA, while the Transportation and Transmission and Road segments jointly contributed 43% and refining accounted for the remaining 6%. It is worth highlighting the continued recovery of the downstream segment, which delivered a 20% increase in EBITDA compared to 2024, supported by favorable market conditions for product differentiation. Likewise, portfolio diversification through the contribution of the transportation business and ISA has been key to the group's performance in periods of high volatility. During 2025, the profitability and efficiency programs delivered a record target of approximately COP 6.6 trillion, exceeding the adjusted annual target of COP 5 trillion by 1.3x and reaching nearly COP 23 trillion over the past 5 years. These results reflect our commitment to financial discipline, value creation and sustained contribution to the group's performance. In 2025, this efficiency plan enabled optimizations with an effect on EBITDA of approximately COP 3.6 trillion. In CapEx, we achieved COP 2 trillion in efficiencies through the successful execution of the investment plan, driven by upstream optimizations, particularly in surface facilities, drilling and completion activities. In OpEx, we achieved COP 1.8 trillion in efficiencies, thanks to improvements in energy, maintenance and digitalization. These efforts contained cost in an inflationary environment and improved key indicators such as lifting costs, which decreased by $0.9 per barrel, maintained the Barrancabermeja refinery conversion index near 91% and reduced energy consumption by 4.8 petajoules equivalent to COP 130 billion. These results not only support the 2025 performance, but also consolidate a more competitive basis to face the challenges of 2026. Additionally, our financial flexibility, operational strength and cash management contributed to a total shareholder return of 24% for local investors when combining dividends and share price variation and 39% for our shareholders in the United States. Likewise, our focus on capturing efficiencies enabled us to reach a net income breakeven close to $50 per barrel, reaffirming the competitiveness and resilience of our diversified portfolio. Regarding investments, we closed the year with $6.3 billion in organic investment execution within the range outlined in the investment plan. We highlight the following investments: Hydrocarbons, $3.9 billion, 63% of the total with focus on Meta, Piedemonte, Permian and Brazil. Energy transition and gas, $750 million, 12% of the total for advancing infrastructure to ensure medium-term supply for the country and complementing our energy matrix through renewable energy. And transmission and road, around 25% of the total investments were allocated primarily to the power transmission project. Brazil accounted for the largest share of investment followed by Colombia, Chile and Peru. In total, ISA advanced on 26 transmission projects, 183 reinforcements and upgrades in Brazil and 3 road concession projects which together will add approximately 4,988 kilometers of transmission lines and 296 kilometers of roads once they enter into operation. Let's move on the next slide. Net income for the year totaled COP 9 trillion, a level close to the target established in the financial plan despite a lower average of Brent price of USD 5 per barrel versus the initial estimate of USD 73 per barrel. The outcome is mainly explained by the following factors. First, nonrecurring effects recorded in 2024, such as the valuation of CPO-09 and the reversal of impairment, which generated a positive impact of COP 1.6 trillion. Those were not perceived during 2025. It is important to highlight that these nonrecurring factors did not represent cash outflow nor affected our cash flow results. Second, market factors, including the 15% annual decline in Brent prices, which went from $80 in 2024 down to $68 per barrel in 2025. Inflationary effects on cost and expenses and the revaluation of the Colombian peso against the U.S. dollar had a combined impact of 7.2 trillion. Third, external events such as blockades at production field, a tax on infrastructure and new taxes derived from the state of internal commotion decree and the nondeductible VAT on fuel imports reduced our net income by COP 1 trillion. These effects were partially offset by the improved performance of crude and product differential, which contributed COP 2.6 trillion as well as OpEx optimizations and our commercial strategy, which contributed an additional COP 1.3 trillion. External factors altogether amounted COP 5.6 trillion and explained nearly 95% of the decline in net income between 2024 and 2025. Operational and commercial activity compensated for approximately 22% of the variation. Let's move on to the next slide, please. In terms of liquidity, we closed December with a consolidated cash position of COP 12.7 trillion, maintaining a solid stance supported by operating cash generation and working capital optimization. Free cash flow for the year reached COP 11 trillion, driven by operating cash generation, boosted by the early collection of COP 7.7 trillion from FEPC and cost and expense reduction measures and also the disciplined execution of CapEx in line with the estimates established in the plan. In working capital management, we strengthened liquidity by reducing the FEPC balance to its lowest levels within the last 5 years and by offsetting COP 6.9 trillion in tax credit. To manage foreign exchange risk, we executed hedges using financial instruments that protected between 6% and 16% of monthly dollar-denominated revenue. Likewise, to mitigate Brent price volatility, we carried out hedging operations during the second half of 2025 to cover between 8% and 20% of export volume. For 2026, working capital management will focus on the collection or offsetting of the 2025 tax credit balance, which closed at COP 11.4 trillion as well as on the collection of the FEPC receivables around COP 3 trillion. We have also initiated execution of the hedging plan to mitigate market risk associated with price and exchange rate volatility in 2026. Regarding the ongoing process with DIAN concerning import VAT on fuels for the period 2022 to 2024, the administrative stage has concluded for 3 cases, one in Ecopetrol and the other 2 in Reficar, amounting to approximately COP 9.6 trillion, including estimated penalties and interest. The company maintains its position not to record the provision based on the opinion of external legal advisers and in accordance with the accounting standard. Now let's move on the next slide. 2025 was a key year in consolidating our financing strategy and ended with an adequate debt structure, a controlled maturity profile and a gross debt-to-EBITDA ratio of 2.3x, below the maximum level of 2.5x established in the company's strategic framework. Excluding ISA, this ratio stood at 1.6x, reflecting a healthy leverage level comparable to the oil and gas industry peer. During the year, the following achievements stand out: the renegotiation of bank debt, resulting in rate reduction of up to 80 basis points for U.S. dollar-denominated loans and 85 basis points for Colombian peso denominated loan, the securing of a new committed line of up to COP 700 billion available under any market scenario and the structuring of financing mechanism to support inorganic growth opportunities with the energy transition strategy. To highlight the fact that the group's liquidity remained fully secured throughout the year without the need to increase long-term debt to finance Ecopetrol's organic investment plan even in an environment of lower-than-expected revenues relative to the investment plan. During the year, the group's incremental debt reached approximately $1.8 billion equivalent. Around 70% corresponded to ISA, mainly due to the conversion of its pesos-denominated obligations into U.S. dollar, while the remaining 30% corresponded to Ecopetrol specifically allocated to inorganic business opportunity. In 2026, we plan to continue strengthening the company's capital structure and do not expect definitive incremental debt to finance Ecopetrol organic capital. Our focus is on optimizing the financial cost and debt structure while reinforcing liquidity and flexibility in working capital management. Should we identify inorganic growth opportunities, this may require additional debt always under the principle of maintaining a control leverage level. We will continue monitoring market conditions and will be prepared to respond and adapt to different scenario. Finally, let's move on the next slide to detail this year's investment plan. The investment plan projected for 2026 ranges between $5.4 billion and $6.7 billion. These align with our historical execution levels and allocated to strengthening the traditional business while advancing strategic priorities in the energy transition. The plan is based on an average Brent price expected of $60 per barrel and an exchange rate of COP 4,050 per dollar within a price range that allows us to adapt to different scenarios, maintaining strict capital discipline and ensuring competitive return with a target EBITDA margin of 40%. With approximately 70% of total investments, the Hydrocarbons business will continue to be the core driver, considering a production target between 730,000 and 740,000 barrels of oil equivalent per day, refinery throughputs between 410,000 and 420,000 barrels per day and more than 1,100,000 barrels transported per day. This performance is supported by enhanced oil recovery technologies that optimize resource, increase crude production in Colombia and offset the natural decline of gas. Likewise, we expect to drill between 380 to 430 development wells and up to 10 exploratory wells prioritizing the most profitable opportunities within our portfolio. In transportation and refining, investments will strengthen the integrity and reliability of the group's critical infrastructure. The remaining 30% of investments will deepen diversification into low emission business, including transmission and road, the integration of renewable energy and sustainability projects that enhance portfolio resilience. As part of the 2026 plan, we expect to capture approximately COP 5.7 trillion in efficiencies and deliver COP 28 trillion in transfers to the nation. Additionally, we aim at maintaining a net income breakeven close to $47 per barrel. In renewable energy, we expect to incorporate an additional 750 megawatts of projects in operation, construction and execution. Our goals reflect financial discipline, a focus on profitability and a measurable impact in our energy transition strategy. During 2026, we will continue executing with discipline, prioritizing investments that strengthen our portfolio and ensuring that each decision contributes to a more competitive, resilient and results-driven group. Now I will turn it over to the President, who will present the conclusion. Ricardo Barragan: Thank you, Camilo. In 2026, we will maintain a clear strategic focus, a strict capital discipline, strengthening traditional business, and ensuring the group's long-term sustainability. Natural gas is a strategic lever. We are advancing offshore projects and maintaining continuous exploration activity as a pillar to progress resources into reserves. At the same time, we will proactively manage supply sources to ensure reliability and flexibility. We continue progressing in the energy transition with the start of civil works at the Windpeshi project, community responsible compensation, and the launch of green hydrogen production at the Cartagena Refinery in coming months. We manage working capital, securing liquidity, and reducing cash flow pressures in a volatile environment. We delivered the plan presented for 2025 and expect to comply with the one defined for 2026. With this, we open the question-and-answer session. Thank you very much. Operator: [Interpreted] [Operator Instructions] Daniel Guardiola is online with a question. Daniel Guardiola: [Interpreted] I have a couple of questions. One is about [ Permian ], and I'd like to know if you could give us more light of why there was a sequential fall of the production. And if this result is because of less intensity in the drilling or what happened? And considering what you have been doing in [indiscernible]. Camilo, could you tell us what's the total production at Permian and Delaware? And overall, how many wells do you think that you will be drilling this year to reach those 11,000 barrels per day? And the second question has to do with dividends. Looking at the figures of 2025 of the company, you could see that the cash flow of the company was hurt. And Camilo, could you give us more light of the dividend, which was approved by the Board of Directors? Is it subject or not to the collection of the fiscal -- and the fiscal and the ISAPEC? Juan Carlos Parra: [Interpreted] This is Juan Carlos Parra, Vice President of Hydrocarbons. Regarding your first question, you have to keep in mind that in 2024, we had about 94,000 barrels per day and for 2025, 122,000. So this year, today, we can say that we are above 91,000 barrels in the first year -- first months of the year. And this is basically agreed in the development plans of the agreement that we have in term -- and it depends on the activity as everybody knows and of the prices because it's the type of field that we work on really depends on the prices right then. So it's related to that. For this year, we estimate that we will have 38 to 40 wells. But while the price of the barrel moves, we can start looking at our investment plan. Daniel Guardiola: [Interpreted] I'm sorry. Can I ask you something else about this? Those 78,000 barrels include Delaware or what? Because it said only Midland. Juan Carlos Parra: [Interpreted] It includes everything. All of the basin or the fields that we have. The topic of the reduction of activity is reflected throughout the premium about -- from '24 to '25, we see a 12% reduction in the number of drills in 2024, 309 throughout the basin to 273, and we moved from 4 to 2. Alfonso Camilo Munoz: [Interpreted] This is Camilo Barco. On your question about dividend, there are several aspects. First and very important for everybody that's joining us today. The distribution of dividends is given by the authority of the shareholders' meeting. So it's important to keep in mind that this is the recommendation preapproved by the Board of Directors to be given to the shareholders' meeting. It's a recommendation of 5.1% of the activity available for shareholders, which is COP 110 per share. And if it's related to the [indiscernible] it's important also to mention that the cash flow of Ecopetrol has an important impact on certain accounts that are crossed with those of the nation in favor and against, not only [indiscernible], but also the balance of taxes in favor are things that have an impact on the cash flow. And we hope that as we've seen in prior years to have a discussion in which we agree with the Ministry of Treasury. We can reach agreements on the timetable of payments of [ ETEC ], which determine the timetable of payments of dividends indeed. Operator: Next question from Katherine Ortiz from Corredores Davivienda. Katherine Ortiz Sogamoso: [Interpreted] I have 2 questions. No, 3. One, along with what Daniel asked, I'd like to understand, could you give us a guide of the tax on equity that Ecopetrol will be paying, understanding that the proposition of dividends is only one payment in April. And could you give us a guide to see -- I believe it's close to COP 1 billion. And I'd like to also understand how you will manage the liquidity and the resources to make these payments understanding, of course, the level of cash flow you have today. And also to understand on a short-term basis with the leverage indicators. That's my first question. Second question relates to the reserves. This report surprises us because of the change in the agreements with the National Agency of Hydrocarbons. So I'd like to understand why did you make a change in the contracts, especially in that aspect? And how can this really benefit Ecopetrol because it's an accounting change really that makes the added value to look higher. But from another viewpoint, do you really see a benefit? And if there is one, what percentage of the contracts are currently tied to royalties in sample and in money? And my third and last question relates to the breakeven profit. The gap between the breakeven and the EBITDA is wider. And if we look at the end of 2025, there is a difference that's quite big, about $18 per barrel. So I'd like to understand if that difference in the total what proportion is explained by the higher taxes that we've observed that Ecopetrol is paying and if it obeys to other reasons? Those are my 3 questions. Alfonso Camilo Munoz: Camilo Barco. On your question related to the equity tax, the calculation that you mentioned is correct. What we estimated to pay by Ecopetrol is between COP 1 billion and COP 1.3 million calculated as the rate of COP 1.6 million over the liquid equity. This payment will be made in April. How does it relate to the liquidity? It's important to say that we have tax balances in favor that ended at a high level in 2025, close to COP 11.5 billion, which give us good space to compensate part of that tax. Otherwise, the cash flow and the liquidity of the group is in healthy conditions and robust as we saw COP 12.7 billion consolidated total cash, and that gives us the capability to maneuver and make all the payments of dividends and the debt on a timely basis. Also, we have to keep in mind here. When it comes to the tax equity and other taxes, there are discussions constantly made with the Ministry of Treasury that allow us to have agreements on the availability of the group's cash flow and the requirements of treasury and also allow us to align the time lines of payments of these. So we're talking about an item to compensate the accounts payable and receivable to the Ministry of Treasury. Ricardo Barragan: We can continue with the question on reserves. My name is Ricardo Roa and I'm the CEO. I'm going to answer your question on the explanation you need on the changes of agreements with ANH. But I'd like to clarify, there were no changes in the contracts between Ecopetrol and the National Agency of Hydrocarbons. Secondly, this is legal situation that we've been experiencing for some years. But what did happen is that a decision was made as a result of the change of title on the royalties that instead of being made in things, it was -- they were made in money, paid in money. And we incorporated these reserves to the resources of the company on the balance. We're talking about 9 fields that are subject to this application, the scheme. This is validated not only by SEC, but other methodologies that audited these reserves. We are talking about 100 fields in which we are working on, but we are looking at 9. And we're going to continue consolidating in our balance the disposition of reserves that we have. These are valid in the methodology and create more stability to the expectations of production that the company has in time. We also have to add in terms of the report or the role played by the incorporation of reserves, we could say that this is the highest in the history of the company and the participation with the appropriation of reserves in the fields in Colombia was big. We're talking about 20%. Logically, when we look at this incorporation, we could say in short that we have consumed in production 248,000 barrels. We've incorporated 200,000 barrels, and this is the result that shows the 121% reposition of reserves. Katherine Ortiz Sogamoso: Ricardo, I'm sorry, thank you for the answer, but also that potential of 100 would then allow to add how many reserves as well. If that's made -- please correct how I'm saying this because we're talking about contractual agreements according to what you wrote in the report. Juan Carlos Parra: This is Juan Carlos Hurtado, Executive VP of Hydrocarbons. To add more fields is an analysis underway? Yes. But really, the benefit -- one of the biggest benefits is to ensure the commercial basket because it's our oil, and we can ensure in 2 ways: one, because we're in charge of the refineries and in the basket. So it really depends on the analysis we make year after year. And as the President said, it also depends on the analysis we make every year depending on the conditions. Alfonso Camilo Munoz: Okay, Katherine. Let's talk about the breakeven of profit. It's important to mention that indeed, in 2025, we ended with a breakeven close to $50 per barrel. For 2026, aligned with the goals that we have set out, we estimate that the breakeven will be closer to $46 per barrel. And within that -- those $46, there's a tax component of $9 to $10 per barrel. Operator: [Operator Instructions] Thiago Casqueiro from Morgan Stanley. Thiago Casqueiro: I have 2 questions and one follow-up here. The first question is related to lifting costs. We have seen a strong Colombian peso recently. So if the FX remains around current levels, what would be a reasonable assumption for lifting costs in 2026? I'm trying to get a sense here if there is room to further reduce it in dollar basis? And the second question is related to the commercialization front. The company reached the best crude differential in 4 years. So how do you see this going forward, especially considering the current developments in the Middle East? And then the follow-up is related to Permian. If you could remind us when exactly does the Delaware contract expire in 2027? Is it also in -- during the midyear or it's earlier or later than that? Alfonso Camilo Munoz: [Interpreted] This is Camilo Barco. I'd like to refer to the effect of the exchange rate on the lifting cost. Indeed, as you mentioned, the exchange has a significant impact on the lifting cost because this metric is expressed in dollars per barrel. So it is evident that in revaluation periods, the exchange rate has a pressure when there is a higher lifting cost. When this trend changes, which we are starting to see, just keeping this trend of devaluation we're seeing, surely, we will see a significant impact that will allow us to foresee and meet our goal to have a lifting cost below $12 per barrel. Julián Fernando Lemos: This is Julián Fernando, Corporate Vice President of New Businesses. Regarding your question on the agreement with Oxy in Delaware, it's in effect until December 31, 2026. Thank you for your question. Unknown Executive: Thank you for your question. We have had a successful commercial strategy that has allowed us to report better differentials between the last quarter of 2024 and last quarter of 2025. When it comes to what's happening in the Middle East, part of the answer depends on how long the conflict will last. There are several countries involved, not only Iran, now we have Saudi Arabia and countries close by. There are 15 million barrels that are -- that do not -- cannot pass through the Hormuz Strait. We see that this will strengthen the company, meaning it will position us to have a lower differential than the demand will be higher for Colombian oil, not only for oil, but refined products as well. Two days ago, what happened, one of the refineries in Arabia, Aramco, which processes 550 barrels per day was attacked. And this, of course, has to do with gasoline and diesel in the Middle East. So when it comes to oil, we see an enhancement, although now it all depends on the durability of this crisis. Arabia reported its inventory for today of 75 million barrels. It will last a week. China already said it closes its exports. So although right now, we do not see it, we do believe that this will help the company. Operator: Ricardo Sandoval from Bancolombia. Ricardo Andres Sandoval Carrera: [Interpreted] I have 2 questions. One, on the reserves. We have high ambition to see reserves entering or incorporated in Brazil. However, I'd like to have more details, if possible, if these reserves were incorporated or not? If -- or what could be the potential of the reserves that we can see incorporate? And what do we need to materialize this? Could you give us more light on this? Second question is on DIAN, the tax authority in Colombia. And the report, the big risk because DIAN has the power to continue with the fine. So in terms of risks, have you been talking with rating firms? What do they say to you about this? And could you give us any comments, the covenants or what borrowers say about these future fights with DIAN. Could you give us more color on this? Ricardo Barragan: This is Ricardo Roa, the CEO. Thank you for your questions. Let me share with you that, indeed, that was one of the expectations to incorporate the reserves that we had with the Gato do Mato asset in Brazil. But because of the proceeding of the national agency of oil, which is equivalent to that of hydrocarbons in Colombia, we could not incorporate about 70 million barrels in our balance of reserves of the year before. But it is the initial foundation for this year. I would say in a couple of weeks, we can incorporate those reserves in the significant reserves in our balance. Alfonso Camilo Munoz: Ricardo, this is Camilo Barco. On your question on the DIAN, there are major developments made that we'd like to share with you. With regards to the controversy or the difference of the interpretation with this authority, several advances have been made. And today, we can say that we have completed the administrative phase, and we are within the jurisdictional path. We have filed different cases on the official payments, and this makes us compete, especially with the administrative contentious courts where the process will take place in the terms that are foreseen in the law. We insist since this is a controversy that's more tax related, the statute clearly states that once these actions are presented, with the cautionary measures, especially those related to the provisional suspension, the coactive charge would have to be part of the discussion within the judicial process. And this is one of the elements that's being discussed. But we trust that the jurisdictional instances will know how to protect the interest of the company in this sense. When it comes to the terms, we are within the terms of this process. And in similar cases or similar events, we're talking about terms of 3 to 6 years long. These are long processes. When it comes to discussions held with the rating firms, of course, as we've done it with the market. This is something that we've discussed with them. We've disclosed this with details to them. And we haven't seen major concern from these rating firms on this controversy. And specifically, it's worth mentioning on your question of covenants, we have no covenants included in our mechanisms of financing. We don't see a risk -- an imminent risk. But let me go back. In 2026, we do not see any risk in terms of liquidity or any effect. There is no likelihood that this controversy will be resolved on a short-term basis. So there is no incidence on Ecopetrol. And there is no impact on the provision, either on the accounting. Our external counsel say that there is very low risk to lose this controversy or again, there is no -- there is likelihood to have success. It's very, very high, the likelihood. And this will have very little, if any, impact on our balance sheet. Operator: We have from Hugo Beltrán from Acciones y Valores. Hugo Beltrán: [Interpreted] I'd like to ask about the gap between the real production of oil and the goal that was established for the year. And you mentioned several factors like the climate and blockades. Could you please elaborate more on those settings? And if you overcame some of these reasons for lower production and which were the fields were affected? And the maintenance aspect last year, you said that this reduced the supply of natural gas in some refineries of Ecopetrol. If there is a similar scenario in 2026, do you have a contingency plan different that could help you with the natural gas problem? Or are we still exposed to a similar scenario? Juan Carlos Parra: Good morning. This is Juan Carlos Hurtado, Executive VP of Hydrocarbons. When it comes to the gap that you were asking about, I can say that when it comes to the settings this year, especially in the last 1.5 months, we had events that did hit our production levels. And because of the rainy season, we still have factors related to weather, not only the stability because of thunderstorms, but we also had the slide of an electric tower, and that stopped us from operating a station from working with the field, and this also affected and restricted partially the production of those fields. This has been restored now, of course, but that did have an impact. So when it comes to Rubiales, Caño Sur, Castilla, Chichimene and [ Casix ], those are the fields. Bayron Triana Arias: Good Morning. Bayron Triana, VP of Energies for Transition. When it comes to the [ SPAC ] question, and we always carry out the overhaul, the maintenance. And what differs from last year is that the import project from Buenaventura is already in operation. So it gives more capability and resilience to the transport of natural gas system in Colombia. So now we see the coordination of all the agents, so that in October, we can surpass this event. Operator: We have Andrés Duarte from Corficolombiana Andres Duarte: I have 2 questions. And maybe later, I have time for a third one. My questions are, the first one is related to Venezuela. I'd like to know what opportunities do you see? And in what cases or what type of opportunities do you see with the investments planned that you already have approved already? Or in the future, would you go from self-generation to sell electricity to Venezuela? Second question is a follow-up to what you already explained on the reserves and the ANH. You paid for some fields, the royalty in money, right? And that, to me, will imply that the production related to those reserves, which are about 5% of the total today, that production will necessarily -- no, the profit per barrel will decrease for those barrels because it's like if you paid the lifting cost twice. On the one hand side, you're paying royalty and on the other side, you're paying the lifting cost of those barrels. So please clarify if I'm correct. Ricardo Barragan: Andrés, this is Ricardo Roa, the CEO. Allow me to talk about the opportunities we've identified and the chances to make transactions of energy with Venezuela. First, Venezuela needs electricity to reactivate its economy and the exploitation of the hydrocarbons in higher volumes to those that we've seen recently. And we need gas for the past 10 years, we've needed. So we can exchange resources of products or light crude oil, which we see a lot in Venezuela. And after identifying these opportunities, we have talked with OPAC last week to give -- to make an assessment and to make transactions of this nature with Venezuela. When it comes to the amount of energy that we could sell to Venezuela, or yes, electricity or to improve the concept of self-generation to sell energy to Venezuela. Remember, the transactions are not -- of this type are not physical, they're financial. We have to go through the wholesale market, and these contracts are financial. And today, Ecopetrol cannot do this because when it purchased ISA, it was forced to do it. But ISA can do it. It has no restrictions to commercialize energy with Venezuela. The core of the business of ISA is to develop these interconnections for years, and it's done so with Venezuela before. So there's an opportunity there. So today, the regulation allows us to have projects and to record that energy for our consumption. That's a premise that we can do today. So the energy that Venezuela needs and Colombia having good sources based on hydroelectricity, I would say that we can enable those connections without any problem to Venezuela provided the restrictions are raised. And from there, we can carry out the transactions, energy transactions with that country. Meaning... Andres Duarte: So you mean Ecopetrol generates it according to your new strategic plan? Yes. But it would be for the system and the system with any surplus, part of that surplus would be sold to Venezuela, right? Ricardo Barragan: Yes. Any generator in the country can place the energy in the system. And with the transactions held according to the boundaries and the agreements with boundaries made, Yes. We've -- this is the way that we've been doing transactions for many years. We have generations in the system. We have what's called the boundary or frontier systems. And according to what's agreed with those frontier systems, any generator, any self-generator can place a surplus in that system and the energy is taken from other buyers. Alfonso Camilo Munoz: Andrés. Good morning. I would like to answer your question related to the treatment, the accounting treatment and financial treatment given to the royalties. The most important part here is to repeat that the monetization of the royalties is that today, the volumes are no longer of the ANH but become volumes of barrels owned by Ecopetrol. This isn't a big cost for Ecopetrol, but there is a reconversion or reclassification of the cost. Before, what we did was to provide the barrel to the ANH and the ANH would give it back to us to commercialize it. So then we would register a sales cost, a higher sales cost over those volumes of royalties. However, today, since it's owned by Ecopetrol, the sales cost to purchase those barrels is transferred to the operating cost, as you stated. And as so, this increases the total cost of the lifting cost, yes. But we have to keep in mind, when you produce more barrels, which are incorporated in the production of Ecopetrol, the unit cost per barrel drops. So what we can say is that the effect is neutral -- and it's more a reclassification of the sales cost and the operating cost with the effect, yes, that when you divide the total cost -- lifting cost by number -- a higher number of barrels, you can record a lower lifting cost per barrel. Andres Duarte: Yes, Camilo. So when you look at these fields, when it comes to royalties, those barrels and those fields are not being commercialized by ANH, but with the mechanism that you've explained through Ecopetrol, right? Alfonso Camilo Munoz: Until before this monetization of royalties, that's how we did it, yes. ANH would give it to us to be commercialized by Ecopetrol with the risk that any other commercializer could do it. But today, since it's owned by Ecopetrol, we eliminated that risk. We ensured the crude slate and 100%, we are commercializing those barrels. Operator: Next question from Juan Felipe from Credicorp. Juan Felipe: I'd like to make 2 questions. One, what's happening in Iran today and the impact it has on the higher crude oil prices and on the margins, do you see any changes on your strategy for this effect because it will hurt surely the profitability levels? And second question, during this quarter, we see in the midstream volumes transported compared to the last quarter of last year, but we see a decrease in revenue. Since these are tariffs regulated, could you give us more details of this negative variation? Unknown Executive: Thank you for your question. When it comes to the Iranian conflict, there are impacts on the 15 million barrels, of course, that cannot pass the Hormuz Strait. And that, of course, will increase the price of oil. When it comes to refined products, as of today, the report says is that in the Middle East and Iran and Arabia, you can see a shortage of diesel because when it comes to load, so for these enhanced in the past 48 hours. Also in naphtha, we see a cut in exports. Remember, there are countries like Qatar, Dubai, Iran, Saudi Arabia, Iraq and others that exported last year, 1.2 million barrels in naphtha. And that naphtha went to countries in the East. And most likely, that naphtha now will have to go from the U.S. and rebalance all the market. The gasoline market right now does not export a lot of gasoline and jet. We see also a cut in exports. So to conclude, we can foresee that if this war is extended, there was a spike in prices. But we have to keep in mind the following. The freight are at astronomical prices, 150%, 160% higher. So we can have a better price that will be mitigated by transport cost of those oils or products, and we have to see the impact on this. But if the situation will continue like this, surely, it can be a good time for the downstream in many parts of the world. Unknown Executive: This is the [ President of Senate. ] Regarding your question, as you can see in the report, the increase or higher volume transported was of oil. And you have to remember that the transport rates are in dollars. Therefore, because of the exchange rate, there was a reduction in revenue. The total reduction is COP 512 billion, of which a good percentage is because of the lower exchange rate. In addition, there is COP 131 million owed because when you compare the semester of '24 to '25, there was a chip boy for the transport, which in '25 is not there. Still, I'd like to highlight that of the COP 512 million through efficiencies, we reduced the impact to COP 179 million. So in the report, you can see there is an improvement of the EBITDA margin to 61%. Operator: [Operator Instructions] Joao Barichello from UBS. Joao Barichello: I have 2 from my side. So my first question is a follow-up on the 2026 investment plan. So the company raised all its guidance and operational financial figures based on a $60 per barrel Brent, but oil prices have been supporting higher levels since the beginning of the year, and it's right now above the $80 per barrel level following all the recent geopolitical events. So could the company consider an update on the plan if oil prices remain at these levels for longer? Could the company also higher production levels or accelerate investments? And also, I have another question on M&A activity. So in the last few months, there was some news link in Ecopetrol for potential acquisition of upstream companies in Brazil. So could you elaborate further on how the company has been seeing M&As opportunity in the industry? Is this being under discussed as a way of strengthening Ecopetrol reserves replenishment? That's it from my side. Ricardo Barragan: This is Ricardo Roa, the CEO. The plan is elaborated now for 3 years. We have a long-term planning plan for the next 3 years, first. Secondly, when it comes to the maintenance that we are observing today, now we see prices above $80. We will make the corresponding assessments like we did last year in April in another process when we saw that the barrel price dropped significantly, and we changed our investments for the rest of the year. And we got more into our savings and efficiency program. If in the next weeks or months, we will see changes, of course, we will be making a revision of better bets to increase production and to look at the relocation of our CapEx with our different assets. to be more profitable with the conditions we're seeing today. Joao, if you allow me to complement with several figures, we'd like to -- we announced to the market an investments plan between COP 22 billion and COP 27 billion. And this plan that was announced, we incorporate what we call an option. And we believe that while we see the Brent increasing its value and to have more flow. And in turn, we see more -- the possibility to make more investments under the stringent capital management systems that we have. We will be more on the higher range of the investments plan close to COP 27 trillion. And of course, thinking about the investments with the capability to increase production on a short-term basis. Julián Fernando Lemos: This is Julián Lemos. I'll talk about your question of Brazil. Ecopetrol constantly evaluates growth opportunities, inorganic growth opportunities in these operations are almost always covered by confidentiality agreements. And once we make a lot of the technical economic analysis and we have the approvals, we will be reporting these to the market. Operator: Next question from Alejandra Andrade from JPMorgan. Alejandra Andrade Carrillo: There are 2. First, in a higher Brent price scenario, are you going to review your investments plan or the opportunities that you see now are the highest? Second, what type of opportunities, inorganic opportunities do you see when it comes to A&P? Ricardo Barragan: Thank you, Alejandra. This is Ricardo Roa. With regards to your first question, when there are conditions of an uptrend on the price of oil, we will be, of course, reviewing these. And according to the figures obtained, we'll be reviewing the allocation of the CapEx and investments that we have for this year of COP 22 billion to COP 27 billion. Remember, in past years, we have been investing $20 billion with our strategic business, the traditional one. So we'll be doing the same thing we did last year like we did in April of last year when the Brent dropped so much. So once we see a sequence of the conditions that we see today, we, of course, will be reviewing the plan for the rest of the year, and we'll be looking at the possibility of increasing the production of our assets. Let's hear what Julián can answer on the type of opportunities, inorganic opportunities we see. Julián Fernando Lemos: Thank you, Mr. President. This is Julian Lemos, Julián. As I said before, the group recurrently analyzes opportunities that contribute to the growth -- inorganic growth of reserves and production. When we have announcements to make, we will let the market know. Operator: Let's continue with Guilherme Costa from Goldman Sachs. Guilherme Costa Martins: I have 2 quick ones, actually more as a follow-up of recent questions. The first one on the higher freight prices. Could you please remind us of the share of your production that is actually exported overseas and hence would be exposed to the volatility in freight prices? And my second question, we saw some increase in discount for heavy oil in the global markets given the higher availability of Venezuelan crude oil in the market. Could you please remind us as well what percentage of your output is similar to Venezuelan crude and is also exported overseas. Also, have you seen any impact in pricing so far?RECELL. Ricardo Barragan: Thank you so much for your 2 questions. With regards to the follow-up of the wells, yes, of course, these are high. We export 35% of the Colombian production, 11 million barrels a month to the U.S. 45% is exported to Asia and the residual part to Europe. The exposure right now has been mitigated with actions like contracting a time charter, which are vessels contracted at a fixed rate. We recently -- we have one vessel between Coveñas and the U.S. and that allows us to have a better price and helps us right now. in times of volatility. We're looking at similar options also for Asia. That exposure also is seen by us, especially looking at offers with clients and if we and if we can provide everything in Coveñas. And this is how we've been working to not be exposed to the volatility that we are seeing globally. With regards to your second question, when it comes to the discount of the heavy crude, it's true that we expect a weakening of prices because no restrictions of Venezuela, yes. But this is more a perception of oversupply. We moved crude in a nonformal market to a formal market. So there is no incremental production now. We can refer to increases before 2019 when we took to the U.S., 40% of the Colombian production, we exported to there. And also remember that the bad crude oil from Venezuela has an effect on the Middle East. Before we said therefore that we are also working on a s-commercial strategy. And let me tell you what we're doing to mitigate all this. We have clients and markets, and we have fixed-term contracts. So the increases of discounts are being managed through these agreements. We also have commercial offices in Asia and the U.S., which allow us to mitigate that exposure to that potential discount we may have. And our crude oil compared to those of Venezuela, those oils with lower content of metals and acidity levels are better. And I'd like to end, yes, there is a discount of heavy crude has been seen. But we believe that with our commercial strategy, we can mitigate this soon. Operator: Next question from Badr of Barclays. Badr El Moutawakil El Alami: I had a quick question on the FEPC and the downstream pricing policy. As we're seeing, obviously, with the unfortunate in the Middle East, we're seeing crack margins going up, especially for diesel. And I was wondering, can you remind us what is Ecopetrol downstream pricing policy? How fast do you adjust downstream prices? And how are you thinking about the potential pressure from the FEPC that could start materializing in the second quarter this year? Ricardo Barragan: We have seen factorizing the conversation we've had today that there is a potential in prices, and we made a sensitivity analysis at $80, what would be the impact on the FEPC. If we continue in the same conditions, we had a discount of gasoline prices of almost COP 1,000, and we could close the FEPC that covers the part of gasoline and diesel more or less at COP 5 million. If we were at $80 and we had an increase of prices, we think that, that number could be [ COP 7.98 million. ] So short answer, we would have an increase in FEPC with high prices. But it's still early, but you're right, there could be an impact on the FEPC depending on how high are those prices and the international price. Alfonso Camilo Munoz: I would like to add, this is Camilo Barco. I'm the CFO. I'd like to -- I'd like to say conceptually on the performance of prices and FPEC is very important. Of all the downstream policies and prices, these are determined by the ministry. So this has -- really depends on what this ministry determines. We're talking about sales prices and prices for the producers. And what we do envision is that with this new level of prices, while the current conditions take place, we could have a reverse in the FPEC according to what we see in our financial plan, I would say, for the national government of about COP 2 billion more than what Julio already mentioned as well. Operator: We don't have any live. Now we're going to read the questions. Juan Pablo Ramirez from Davivienda asks, what could be the impact by closing the Hormuz Strait on the gas price imported by Colombia, understanding that it's imported from the U.S. and Trinidad and Tobago, what is the development of the regasification system in Coveñas? When will it begin operations? Bayron Triana Arias: This is Bayron Triana, with regard to the questions on the impacts of importing gas in Colombia, I'd like to highlight that import is made by a company that's not Ecopetrol. The duration -- we have to see the impacts that will take place in this company. But we can say that in the spot, when it comes to purchases of Ecopetrol for the infrastructure of the Pacific and the Caribbean, the contracts are all long term to mitigate the effects of what's taking place now. When it comes to the development of the Coveñas plant, this plant has all the permits now, the environmental permits. We are working now with the carrier. The initial phase of 110 million cubic feet was canceled, and we have a phase of 400 million cubic feet, and we expect that by the end of 2028, it will be in operation. Operator: Declan Hanlon from Banco Santander asks, "Could you update -- give us an update on the strategy and plan related to the joint venture in [ Permian ] in terms of rights and obligations and in the strategy of the company to political pressure to sell this asset? Julián Fernando Lemos: I am Julián Lemos, the Corporate VP of Strategy and New Businesses. Today, we have an agreement in force with Occidental. As I mentioned in another question, one of the contracts is in force until December 31, 2027, the one of Delaware, the one of Midland is a joint venture agreement in force while the partners decide. And as Juan Carlos said before, the level of activity and therefore, of investments made the analysis of what's happening macroeconomically in the market. And to -- that way, we can agree with our partner how we can develop that basin. Operator: Nelson Bocanegra from Reuters asks, "Does Ecopetrol keep in mind compete to keep the resources upstream that Parex has -- since Parex has already given its offer? Julián Fernando Lemos: Julián Lemos, Corporate VP of Strategy and New Businesses. Since these processes usually are covered by confidentiality agreements, we cannot state anything on this. But again, as I've said before, Ecopetrol constantly evaluates inorganic growth opportunities to incorporate reserves, and these will be announced to the market. Thank you. Operator: Nicolas Bourgeois from [indiscernible] Capital asks, the bonds in dollars of Ecopetrol are quoted at levels that seem disconnected from the fundamentals. Do you -- would you consider to have a tender offer for any of these bonds? Unknown Executive: With regard to the operations to handle debt or to financing in Ecopetrol, we'd like to take this opportunity to indicate several aspects. First, Ecopetrol, we monitor constantly the market, the banking financial markets and that of capitals. And we evaluate carefully the different windows and performances. Right now, we have several purposes in terms of handling debt. And the goal is to decrease the cost of that financing. And secondly, to reduce or mitigate the refinancing risks. So consequently, we evaluate all the possibilities. And it's important to clarify that right now, we do not have any refinancing risks associated. Our next maturities, major maturities are closer to the end of the year of 2029. And our average mean life is over 8 years. So with this said, we will be carefully evaluating all the possibilities and the performance of the market. Initially, we do not see any windows. But as they open, we are going to be prepared to look at them closer. Operator: Alfredo Jaramillo from REDD asks, what are the -- what's the likelihood that Ecopetrol will be purchasing the assets of Canacol this year? Julián Fernando Lemos: Alfredo, thank you for your question. This is Julián Lemos. This is a competitive process. As I said before, covered by a confidentiality agreement. So we cannot tell you the likelihood. But we can say that when Ecopetrol analyzes and will conclude that these operations are proper and gets the approvals, this will be shared with the market. Operator: Felipe Gomez from Ashmore asks, how much do you expect CapEx from Sirius? When will this be disbursed? And when will it be financed? What happens when -- if you do not reach the production levels in 2030? Unknown Executive: Allow me from the financial area to answer the questions regarding the CapEx and the financing schemes that we have. And let's give the microphone to Bayron to talk about the expectations and the commercialization we have for that. Bayron Triana Arias: The consortium will invest about $1.2 billion in the exploration phase and $2.9 million more for production development. This major CapEx investment will have different financing schemes. Of course, these are being evaluated according to the best practices to finance these types of projects. Especially we are emphasizing the possibility to develop structures of balance to -- for this particular project Unknown Executive: With regard to the question of what happens with the commercial part of gas by 2030, this has been financed with flexibility for the seller provided the project is in operation. So when the project is in operation, the contracts are firm and become mandatory for us beforehand, there is no obligation to deliver the gas. Still, Ecopetrol has projects until Sirius is in operation to import gas back that level of gas needed. Operator: There are no more questions. Now let's listen to Ricardo Roa, the CEO, for final remarks. Ricardo Barragan: Thank you all for attending this earnings call. We appreciate your questions, which have allowed us to clarify the aspects that you were wondering about regarding the results of the last quarter of 2025. We'd like to say finally that there is absolutely no aspect or parameter that has not been protected duly by the hundreds and thousands of employees of Ecopetrol. They have devoted their intellect and their smartness. So for all of our shareholders and creditors, we have sound robust results that allow us to continue showing you that we have a great company in Colombia that does create value for shareholders and for the country. Thank you all. Operator: Thank you all. This concludes our earnings call for the fourth quarter of 2025. Thank you for attending. You can disconnect now.
Operator: Greetings, and welcome to the Full House Resorts Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Adam Campbell. Thank you. You may begin. Adam Campbell: Thank you, and good afternoon, everyone. Welcome to our fourth quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal security laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of risks that may affect our results. Also, we may reference -- we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as previous press releases that we issued. Lastly, we are also broadcasting this conference at fullhouseresorts.com, where you can find today's earnings release as well as our SEC filings. And with that said, we're ready to go Lewis. Lewis Fanger: Well, good afternoon, everyone. It was a very good fourth quarter, but the comparisons versus last year aren't very straightforward. So we'll take you through those really quick. Revenues rose to $75.4 million, up from $73 million in the fourth quarter of 2024. Keep in mind that the fourth quarter of 2024 included $1.5 million of revenue from Stockman's, which was sold in April of 2025. So revenue growth on an apples-to-apples basis was 5.6%. Adjusted EBITDA in the fourth quarter of 2025 rose to $10.7 million. Adjusted EBITDA for the fourth quarter of 2024 was $10.4 million. That included quite a bit of noise, including the benefit of a $1.2 million recovery settlement and the reversal of about $0.5 million of accruals at corporate. Those 2 figures increased the fourth quarter of 2024's adjusted EBITDA by $1.7 million. Backing those 2 items out of the prior year's fourth quarter, the increase was about 23%. At American Place, our temporary casino continues to show significant growth. Revenues increased by 11% to $32 million in the fourth quarter of 2025. Adjusted property EBITDA rose 29% to $8.7 million. For the full year, revenues and adjusted property EBITDA rose to $124 million and $34.3 million, increases of 13% and 17%, respectively. Interestingly, the pace of growth actually increased as the year progressed. We fully expect adjusted property EBITDA at American Place to continue to climb in 2026 and the year is off to a good start. We have long said that the temporary American Place facility on its own should eventually be able to achieve about $50 million of run rate EBITDA and that it's much larger permanent facility should be able to earn double that amount or about $100 million. We continue to believe that our market remains under-penetrated. Some quick facts. Our permanent casino will not only be nicer, but in terms of square footage, it will be about twice the size of our temporary. We are the closest casino to more than 1 million people. We are located in one of the wealthiest counties in the entire country. Our closest casino competitor is 45 minutes to the south and they make $0.5 billion a year in gaming revenue. Our second-closest casino competitor is about an hour to the north, and they make more than $400 million a year in gaming revenue. And we're sandwiched not just midway between those 2 very successful casinos, but also between 2 of the major north-south traffic arteries in Northern Chicagoland. Those facts, combined with our 3 years of operating experience in the market are what gives us so much conviction in what we think American Place can achieve in the long term. Turning to Chamonix. For the first time in recent memory, we have a fully formed management team. That began with a new General Manager in March of 2025, new Directors of Marketing and Group Sales in July and August of 2025, the promotion of a talented pastry chef to lead the food and beverage department in January of 2026, a new Finance Director last month and a new Assistant General Manager this week. Here's an interesting stat to look at. If you look at just the second half of 2025 under the new management team and compare it to the second half of 2024, revenues increased by $1.2 million or about 5%. Adjusted property EBITDA in those 6 months jumped by $4.2 million. The new team is making great strides and we believe our Colorado operations will be a significant positive contributor to adjusted EBITDA in 2026. Specifically for the fourth quarter of 2025, we had a small, adjusted property EBITDA loss in the seasonally weaker winter season, but that was a significant improvement versus the much larger loss in the fourth quarter of 2024. After several quarters focusing on the cost side, the new team has redoubled its marketing and awareness efforts. If you look at any of our marketing collateral, it has been completely reenergized after transitioning to a new marketing agency during the fourth quarter of 2025. In January and February of 2026, we had a modest amount of construction disruption as we replaced the carpet and installed new ceilings in Bronco Billy's. The incremental spend was extremely modest in the low 6 figures, but the result was outsized. It used to be quite jarring to walk from Chamonix into the Bronco Billy's Casino. Today, while Chamonix is certainly more elevated, the 2 casinos now complement each other quite nicely. We also just opened our Mexican restaurant at Bronco Billy's with an inspired new menu as we prepare to head into the busy summer season. Looking at our database, we've been especially focused on driving loyalty and growth in the top 2 segments of our database. For the first 2 months of 2026, our top segment has seen unique guest counts increase by almost 20% and the total number of visits from that segment is up 36%. For the segment under that, unique guests are up 12%, and total visits are up 24%. Awareness is expanding and loyalty is expanding, which both bode well in our efforts to continue growing revenue and improve profitability. Regarding our group business at Chamonix, that continues to pick up steam. At this point, we have a couple of thousand room nights on the books, with a couple of thousand more that are close to commitment or with decent prospects. As we mentioned last quarter, our ideal group size is between 100 and 150 attendees. Within 500 miles of us, we estimate that there are up to 4,000 conferences that fit that profile. Groups of this size tend to book years ahead of time. When we have a fully ramped group business in a couple of years, we think it will consist of about 55 events per year or about 1 per week. That is the key to improving our midweek occupancy. Among our smaller properties, Silver Slipper and Rising Star declined slightly for the quarter. Similar to Chamonix, we've upgraded most of the management team at Silver Slipper, and they are gearing up for growth in 2026. Grand Lodge, which is a pretty small part of the company at this point, continues to be adversely affected by renovation disruption at the Hyatt Lake Tahoe that houses our casino. The Hyatt Resort will be beautiful when that renovation is complete. But in the meantime, we're trying to manage through the disruption. That includes proactive efforts to find new casino guests in advance of completion of the renovated amenities in 2027. On the balance sheet side, we had about $51 million of liquidity at the end of the quarter, including the undrawn portion of our revolver and we're about to enter that part of the year where we generate meaningful cash flow. We amended our revolving credit facility a few days ago. That was a simple amendment to extend the maturity date of our revolver to August 15, 2027. And we've said this several times, but our Illinois operations alone pay for the interest expense on our current debt. And of course, Illinois continues to ramp, as does Colorado. Lastly, an update on our continuing progress for our permanent American Place Casino. In real time, our architects are putting the finishing touches on our foundation drawings. Those drawings should be done imminently. With those drawings in hand, we'll be able to officially break ground on the casino's foundations. We expect that to occur sometime in the coming weeks. The foundation work does not take a lot of money, but it does take several months to complete. By getting it done now, we can accelerate our time line to construct the permanent facility. Meanwhile, we are making good progress with respect to the financing of the American Place facility. We have received several proposals for the construction of the permanent facility at attractive rates, including proposals that fully fund its construction without the issuance of equity. We're not quite able to provide details just yet, but we hope to do so in the next several weeks. As we have noted previously, we are currently allowed to operate our temporary casino until August of 2027. In conjunction with our anticipated financing, a bill was recently introduced into the Illinois legislature to extend that operations stay by 18 months. Typically, items in the legislature don't get voted on until the end of the session, so we expect it to pass in April or May. Passage of the bill will allow us to transition smoothly from the temporary casino in [ 18 to 20 months ]. Bally's has a similar bill in front of the legislature for the same reason. I covered a lot there, Dan. What did I forget? Daniel Lee: I don't know. I think you got it all. And we'll get to questions. So if we forgot something, it will almost certainly come out in the questions. Lewis Fanger: Very true. Operator: [Operator Instructions] Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Ryan Sigdahl: I want to start with Chamonix, though, for the first question. So appreciate the improvement kind of on a full year basis, especially on the cost side. If I look at revenue, 19% growth in the first half of the year. Year-over-year, 7%. In Q3, 2%. In Q4, flipped to a loss. I get the seasonal aspect of that. But I guess, just walk through, I guess, what's going on there specifically just given kind of a decel from a trend standpoint and considering it's still very subscale or early stage in its maturity? Daniel Lee: Ryan, if you recall, last year, when we reported the third quarter, we pretty bluntly said we had run some marketing programs in I think it was principally September of 2024, which were non-economical. In other words, we induced people to come down, gave them free rooms and they didn't gamble, and it actually cost us at the bottom line quite a bit. But it did puff up the top line. Then in the fourth quarter, we had a big grand opening party, and it was a very expensive party to have, we had Jay Leno, et cetera, et cetera. And remember, looking around and realizing that the people who were there were the same people we'd always had when it was a golden opportunity to try to get new customers and people down from Denver and so on. And it was about that time, I realized that we had the wrong management team, and we had to make a bunch of changes. And we have now. But the prior year numbers were kind of artificially inflated by inefficient marketing in those 2 quarters. And -- but now we have a new advertising agency, we have a Chief Marketing Officer here. We have new marketing people at the property. They've been getting organized and all that stuff is coming into play now, and Lewis gave you some of those numbers. And so I think you'll see revenue growth pick up going forward. But the reason it looks like such a small year-over-year growth was the promotional stuff we did last year that kind of boosted revenue but not income. Ryan Sigdahl: Quick follow-up on that, and then I do have another question. Have you seen any re-acceleration thus far in Q1 of '26? Daniel Lee: We have with the caveat that it was pretty torn up back in January. We renovated the west part of Bronco Billy's and putting down the carpet and ceilings. And frankly, I was surprised it didn't have more disruption than it did because we are showing better revenue numbers. I think if we hadn't had that disruption, we'd be doing even better than that. I mean at the end of the day, this is one of those where you open it, it's not performing as well as you thought it would. And you start looking at it and saying, first, did we make a mistake? And I've gone back several times now and gone through the numbers again of how many people live in Colorado Springs, Denver and competition and everything else, and I'm absolutely convinced we did not make a mistake. And in fact, I can underline that by the fact that Monarch's EBDIT (sic) [ EBITDA ] for the year was $199 million. Now they only have 2 casinos. They don't break out the one from the other. But the smaller one, which is in Reno made $40 million to $50 million a year for a long time before they opened in Black Hawk. And so Black Hawk has only been around 3 years, I think, in their portfolio. So they must be making significantly north of $100 million a year in Black Hawk. And it's a good property and frankly, a well-managed company, and they opened far more smoothly than we did. And I look at it and say, well, they're there with 500 rooms, we are equivalent in quality, we have 300 rooms. There are aspects of ours that are nicer than theirs. Now they are an hour from Denver, we're an hour from Colorado Springs, but from Southern Denver, we're about equal distance. But they also have significant competitors there. I mean they not only make a lot of money, but so does Ameristar, the Horseshoe and the Lodge and then there's a bunch of smaller ones. There's a lot less competition in Cripple Creek and the competitors are not anywhere near as good as the quality of ours. So I think we are in the right place. I think we've built the right product. I think fixing up Bronco Billy's makes it quite a bit nice. So we didn't spend a whole lot of money, but it really made a pretty big difference, just changing the carpet and drop -- putting in a drop ceiling. And now we have the right management team all put together, and there's a lot of blocking and tackling that we need to do. I mean there's simple stuff like the housekeeping department there cleans 9 rooms a day. At our other properties, they clean 14 rooms a day. 9 rooms a day is pretty ridiculous. We have a new Assistant GM, who has a strong background in hospitality, and that's one of the first tasks, he'll try to figure out. And we do it through an outside company and we probably need to adjust that. And that factors in all the way down because if you're only cleaning 9 rooms a day, the cost to turn a room is like $50 or $60 when it should be $30 or $35. In other words, the cost of renting a room that would otherwise sit empty, when I say the cost of turning a room. So that factors into who you're willing to comp a room for. And if we can get the cost of turning the room down, then we could be a little more generous with who we comp rooms for. And so there's a lot of blocking and tackling, which we are doing. We had a Mexican restaurant, for example, that had terrible food, to be honest. And it's been closed for about 6 months. We promoted a very talented chef to be the food and beverage manager, and it was kind of funny to persuade him to take the job because he was hesitant. He came back and said, I really want to promote some people and then get rid of some deadwood. And I said, well, that's exactly why I want you to take the job. I too want to promote good people and get rid of deadwood. And so he stepped up and the quality of the food in the reopened Mexican restaurant is 10x what it used to be. And it was just last weekend it opened. And that's important going into the summer. So there's a lot of little blocking and tackling that we are doing at that property. And if you get into the minutia, just about every parameter is trending the right way. No, I wish it were trending faster, but at least it's going the right way. And I'm convinced it will eventually be a very significant profit generator for us. And even this year, it will be significant, but significant like 10% to 15%, and it might be significantly above that next year and then the year after. I mean we built the rate property. We're there for the long haul. And it's a little more -- it's a different marketing task than we have at American Place. At American Place, we are in the middle of 1 million people, they drive by us all the time, but we're in a strong structure. And so it looks like where the Department of Motor Vehicle store salt for the winter. I mean it has absolutely no curb appeal, but a lot of people driving by. And if you go up to Colorado Springs, we have fantastic curb appeal. The building looks fantastic, but nobody is just driving by. So we have to persuade people from Colorado Springs to drive up there. It's just under an hour, but to come up and see it. And once they do come up and see it, we get very good repeat visitation and that's how you build the business, but it doesn't happen overnight. Lewis Fanger: Yes. I mean the most promising thing that we're seeing behind the scenes is that those upper segments, which this property was built for. And when I say upper segments, I don't mean someone that's gambling $10,000 a day. I'm talking about someone that might go in and gamble a couple of hundred dollars a day. That is a very ripe customer that's an abundance that is our biggest group. It's a customer that's finding the building now for the first time. And as I kind of hinted at, or said actually, didn't hint that, in my opening comments, that group is where we're seeing significant growth in loyalty. Daniel Lee: In my experience, I remember Beau Rivage in Mississippi opened slowly. They went through the same sort of things. And then eventually, it found its stride, and it's led Mississippi now for 20 years. Similar in Las Vegas, Luxor opened slowly and then found its stride, and it's been very successful for a long time now and so on. And thinking back, there's things we should have been smarter about. We should have hired a sales [Technical Difficulty] while we were under construction. We didn't. But we're fixing those things now. So... Ryan Sigdahl: Well worth the visit, I can personally attest to that. For my second question, and maybe I'll try and ask this in a shorter way. Indiana bill, it originally included a fair value payment to you guys if you were not the winning bid for relocation. Now it appears like it's just a new license that you can apply for. Just give us an update there on the future of Rising Sun? If you guys are interested kind of under the current structure. Daniel Lee: Listen, this is a long process and a rapidly evolving one. I mean that bill get changed many times in the last week that it was in the legislature. We'll continue to watch it and see. We make money in Rising Sun. We always have, not a lot of money, but we make money. We're the ones who said to the state, we think we -- the state would be much better off if it relocated to an urban center. When they legalized casinos along the Ohio River, you didn't have casinos in Ohio and Kentucky and you do now. And so the original locations where they legalized were the wrong locations, and the independent study that the legislature called for that was done underneath the Gaming Commission said exactly that, that there would be significantly higher revenues to the state with the casino in Indianapolis and in Fort Wayne. Now they chose to widen it out. It's not just Fort Wayne. It's 3 different counties. They're all going to have a referendum in November. I think it's going to be a challenging referendum because the way they did it, there's 3 different counties that are going to have a referendum. And let's say, all 3 pass it then the Gaming Commission is supposed to choose from the 3 and then run a process to figure out a development. So you actually have like it would be problematic for us or anyone else to try to fund the pro side of any county. And yet there's very clearly well-funded opposition. Just look at the website, savefw.com. It's clearly well-funded by somebody. And I'm guessing it's an Indian tribe in Southern Michigan or something along those lines, somebody who might be hurt by this. So you're going to have 3 referendums where the opposition is probably well funded. And the pro side probably isn't. And so will it pass or not? I don't know. I think normally, these things do pass because it produces jobs and tax revenues and so on. But the way the legislature has set this up, and I think it's inadvertent, but I think the way they've set it up, those are going to be very challenging referendums. And we will watch the process and see what happens. And legislature meets again next year. We know where it meets. Meanwhile, we continue to make money in Rising Sun. And we will continue to do that are good for our shareholders as well as good for the state. And that's about it. Operator: Our next question comes from the line of David Bain with Texas Capital Bank. David Bain: Great. First, congratulations on the progress on the American Place financing. I understand you're not giving a ton of detail, but one, I think you reiterated no equity will be sold. And I'm sure you looked at multiple options from whatever asset sales to high yield to REITs as the financing environment involved. If you could help us process that, balancing your thoughts as you went through that process, that could be very helpful for us. And then does that financing come in tandem or include the refinancing or extension of the existing debt? Daniel Lee: David, as I'm sure you'll appreciate, when you're going through one of these processes, you reach out for a lot of people and you find people who are most interested in working with us. And then there's a point where you say, okay, fine, we want you to invest in the due diligence to start working on the legal documents and we will keep it confidential. And I would argue that's about where we are. And until we have a real deal to announce, I really can't go into any of the details, but we are pretty comfortable that we are going to have a deal that will allow us to be open there in 2 years. And we've always said that we're not going to issue equity at anywhere close to these prices, and we're confident that we could get there. But anything further than that, I can't tell you yet. I wish I could, David. Obviously, it's an all-encompassing. I mean it's -- it does involve refinancing the existing bonds. Lewis Fanger: Yes. We're looking at an all-encompassing solution. And I think the only thing to add to what Dan said is, again, not only no equity, but also, we view the financing cost is attractive as well. So we're excited to give you more details. I guess I wish we could. Just can't quite yet. Daniel Lee: Attractive. I think, I would say, acceptable. Attractive would be 5%. We're not 5%, right? But it's also not 15%. And I think it's acceptable. And just on refinancing the existing bonds, they mature in February '28. They become a current liability on February '27. So you pretty much have to refinance them. I think anybody would look at it and say, of course, you have to do that. And so -- but we're -- we've had some really good proposals and we've kind of zeroed in on one formula that we think works and we're trying to nail that down. David Bain: And then I guess my other question, I got to keep you here. I guess I would go with the Chamonix. You gave some encouraging data points on penetration. I think the last call, you mentioned 15% of Colorado Springs visits Colorado -- Cripple Creek once a year, something you intended to tackle. It sounds like the biggest feeder lever. If you could speak to some of the progress specific to the penetration of that market? I know you have a marketing group, but anything, whether it be buses or new forms of advertising and anything that we can look for in terms of impact that's been fruitful so far would be helpful. Daniel Lee: Yes. Well, you mentioned buses. We've looked at buses. We've looked at working with the one company that's in Cripple Creek. We've looked at working with other bus companies. We've even looked at buying our own buses. But at the end of the day, that's not one of the bigger levers. Most people drive themselves, and that's true even in the markets like Atlantic City that traditionally has had a lot of busing, the bus customers still drive themselves. And so -- but there's -- it's a very complicated algorithm because at the same time, we're trying to figure out how to attack these different markets. The whole world of advertising is changing, right? And so like far more people watch TV shows now through YouTube than on the networks. And ultimately, that's good because we can target it. Like we don't have to be buying ads for all of the Denver metropolitan area. We can target those who live on the south side, which is closer to us. We're much less likely to get somebody from Fort Collins because they're quite a bit closer to Black Hawk than to us. But Castle Rock is pretty much equal distance. And so it's about targeting the people in Castle Rock. And then if you can go further and target those people who might have a proclivity to gamble, and so we're getting -- we've hired a bunch of good people who have experience in this and a new advertising agency that is experienced in this to try to make our dollars be most efficient in different markets. Now in Colorado Springs, you can be in more general advertising, right, because anybody in Colorado Springs is a potential customer. And whereas in Denver, if you bought a Denver-wide ad, probably the people who live on the north side of Denver, half the people whose eyeballs you're paying for are less -- not likely to come to us. Whereas in Colorado Springs, everybody is a potential customer. So there's a lot of that parsing and trying to understand it. And even like trying to reduce direct mail we send and trying to do more e-mails, because it's so much more cost effective. Like we don't send any direct mail anymore out of American Place, and we want to get to that point in Chamonix. And so David, honestly, I've got a chief marketing guy who could spend all afternoon answering this question for you. But I guess from our point of view, it's like we've hired people who we think are very confident in this area, and they are working on it full time, and we're seeing some results, and we're confident we're going to get there. Lewis Fanger: Yes. I mean, look, the penetration in the Colorado Springs is creeping up. The percentage coming out of Denver is still an extremely high number. And ultimately, I think those are -- that's a good setup because I think as more and more people that are closer to us experience our brand, we're finding out they're enjoying it. And -- but to have the reach as far as Denver was never in the original model. It was always viewed as overflow. And so to the extent that, that number continues to flourish, it's all to the better as well. So we're set up well. Daniel Lee: And there's some other little blocking and tackling, like Cripple Creek is in the middle of some of the best fly-fishing in the world. I mean there's fantastic fly-fishing around it. And there's fly-fishing guides, fly-fishing camps and everything. So it's like, okay, we need to have a high roller weekend where everybody gets to go fly-fishing, and we have a fly-fishing tournament and people will gamble in the evening. And in the same way the hotels in Las Vegas have golf tournaments. The fly-fishing around Las Vegas isn't so good. So you have golf tournaments, right? And there's no golf, of course, in Cripple Creek, so we can have fly-fishing tournaments, right? And so there's a lot of stuff like that, that we're looking at. And frankly, for a fly-fishing tournament in, say, July, we can get gamblers to fly in from Texas for that. I mean there are nonstop flights from Dallas and Houston into Colorado Springs. It's a pretty easy trip actually. And so for the right high roller, now we have to find the high roller in Dallas who likes to fly-fish. But there are ways to find those people. Operator: Our next question comes from the line of Jordan Bender with Citizens. Jordan Bender: I think you kind of characterized Chamonix as -- the investment thesis there was to focus more on the higher end customer, the luxury customer. Is there a point maybe this year where if you're not starting to see the revenue start to tick up, that you could start to shift some of your focus into that middle or lower end given that the cost structure is fully baked? Lewis Fanger: And apologies. My -- I didn't mean for you to think that we're not focused on the other tiers. We certainly are. I'm looking at my list for January and February, and I'll tell you, we had meaningful growth across every segment. The most growth is in that top tier, but down the line, we're seeing pretty meaningful growth. If you think of the product that we have, it's certainly -- if you bring an upper tier customer into town, they are extremely likely to go to us and only us. If you bring in a lower tier customer, you have the potential and likelihood of sharing that customer around another place or 2. So all things to keep in mind. But ultimately, we've got half of the room product in town. And so long as we see people adding to the bottom line, we will market to them. What naturally happens in these processes is kind of year 1, year 2, you focus on getting customers in general and finding customers that are additive to the bottom line. And fast forward a year after that, then you start cycling and you say, all right, this customer used to get a Friday, free Friday room. Now he does not. Now we've got more customers in the database. We know what people spend. That person doesn't want a Friday room, but they might get a Wednesday room. And so -- and then a year after that, you continue to cycle that database and just optimize it. So we're early in the optimization process, and we're kind of taking people up and down the line. Jordan Bender: And then just switching to Silver Slipper. It's a property that, I guess, we don't really talk about all that much on these calls anymore. But just curious how you view maybe the '26 outlook there? And then just in general, how does that property maybe fit into the overall portfolio as we move forward? Daniel Lee: Year-over-year, the EBDIT (sic) [ EBITDA ] there was about -- it was off a little bit, almost flat. And it was -- in '24, it's a bit above 12%, and then '25, it was a bit below 12%. It should be in the high teens. I mean if you look at the margins, it did $70 million of revenue, and if you take $70 million and apply a normal regional gaming margin, you'd be in the high teens, maybe even in the low 20s. And so we've made quite a few management changes there as well, including a new GM and a new food and beverage manager, a new table games manager, a new HR Director, new Finance Director and whereas it had the same management team since it opened 15 years ago. And so we've made a lot of changes in the past year. And the intent is to get it up to the sort of income it should be having. Now we're not ignoring revenue either, but this is a pretty saturated market. The people in this part of the country gamble more per capita than most areas, and it's not a particularly wealthy region. So I think the upside will be being more efficient on stuff, and we'll get some revenue upside as well. It's a good property. It's kind of a cash cow for us, but it's a cash cow that should make a little more money than it's making. And I think we'll get there in 2026. Lewis Fanger: Not to the high teens in 2026, but I think... Daniel Lee: I'd be disappointed if we don't get to 15%, but -- that's not 19%, but 19% is not out of the question. When you look at what you should be bringing to the bottom line with $70 million of revenue and in a state where the gaming taxes aren't particularly high. And we're on the same page. Operator: Our next question comes from the line of Chad Beynon with Macquarie Asset Management. Chad Beynon: Wanted to ask about your Sports Wagering business supporting over around $7 million of EBITDA this year. I guess talking about a cash cow, that's certainly a good one with pretty high margins there. Can you talk about how that contract looks, if there's any risk to that in '26 or if we should continue to assume the same amount for the year? Daniel Lee: Most of that is with Circa in Illinois, and I think they're pretty happy with what they have. They also operate the sportsbook in the temporary casino and well in the permanent. Illinois has a big population and a limited number of licenses. So that's by far the most valuable license we have. Now we have other licenses that are available. And one of them was markets who paid us upfront for several years. So there's an amortization of deferred revenue which is why you get a little bigger than $5 million. We did do a little change that got approved by the Gaming Commission last week. We've had a sportsbook in the Grand Lodge Casino up at Tahoe for many years. And it was pretty small and the guys were -- it was leased to an outside operator. And the guys who were running it never really did much, right? And it was pretty insignificant for us. And there's a new start-up company that came to us and said, hey, we'd like to take that over and put some money in and try to make it something meaningful. And it's not material to the whole company, but they're paying us significantly more rent than we were getting. And perhaps more importantly, they're paying attention to it better. So it's one of those -- not material to the company as a whole, but I think it's a step in the right direction of changing that to a different operator. We tend not to operate these ourselves because we're not diverse enough to spread the risk. In other words, I think we have a sportsbook at the Silver Slipper, if the Saints get into the Super Bowl, our customers are all going to be betting on the Saints and we won't have bets on the other side. And so it's better to leave it to somebody who's in that business, and we tend to just get license fees for it. Lewis Fanger: If you're thinking about what the number should be on an ongoing basis because there's always -- there has been a lot of noise in that line over the last year or 2. The right number for EBITDA is roughly 6 -- it's like $5.9 million if you're assuming the minimums on the existing contracts. Daniel Lee: No, there's always risk. I mean if Circa decides to cancel and leave the business, there's some limitations in the contract on their ability to do that. But it's not like a treasury bond, I mean it could happen. Lewis Fanger: Yes. I will say, though, Circa is -- more than most companies, Circa has sports in their DNA. They love that sportsbook in Illinois, you'll see that they really -- I mean look, I'm looking at Adam as I say this. I think there's still the patch on the Chicago hockey team, the Blackhawks. And so they continue to fully embrace the sports side. I'd be surprised if there are any changes anytime soon there. Daniel Lee: And frankly, the permanent casino has a sportsbook that's kind of modeled after the one at Durango Station, and that should be good for both us and Circa. Chad Beynon: And then Lewis, yes, looking forward to some of the financing details, hopefully in the next couple -- in the next several weeks. You talked about an 18- to 24-month construction period for the permanent. If that deal is executed and you do decide to kind of push forward on some of the heavier lifting, heavier spending parts of the project, I mean, will there be a meaningful amount of CapEx in '26? Maybe some of that comes in the fourth quarter? Or is it safe to assume that a lot of the permanent spending, kind of the real outflows will come in '27? Just any parameters around that would be helpful. Daniel Lee: Most of it's '27. Lewis Fanger: '27, yes. Daniel Lee: I mean some may even spill into '28. Some of the construction payments are made in arrears, for example. Lewis Fanger: A big portion will be made in arrears, yes. Daniel Lee: But how much is -- falls in this year depends a lot on exactly when we get going. The foundation isn't a big number, but it does take time. So you literally have a guy moving a bulldozer around and then they dig trenches and pour some concrete, which is the foundations for the building that will go up. If you had the pause after doing that, like let's say, the debt markets just weren't cooperating and we had to pause for several months, it's okay. The concrete doesn't go bad. It's still there, right? And you can come back and finish. Now hopefully, we don't have to. Hopefully, we have the financing arranged. And so by the time we're done with the foundations, we can move into the other stuff. But you don't really want to go into the heavier spending until you know you have the money to finish it. And so we're willing to start on the foundation so that we can speed up the opening date and that we can fund with our existing resources, while we try to nail down the financing. Lewis Fanger: I will say that we talk about -- Dan and I talked about this at lunch day. We talk about an 18- to 24-month build. But one thing to keep in mind is the build itself is on the simpler side. In terms of -- there's nothing subterranean, there's no parking garages. It's kind of a basic -- no high-rise exactly. It's a basic 2-story building. And it's the basic rectangular building. On the inside, the fit-out is quite fanciful, but in terms of getting that actual structure up and close and then starting work on the inside, it's relatively -- it's one of the easier pads that we've seen in our lifetimes. And so... Daniel Lee: Actually, only a small part of it is 2-story. Most of it's 1-story. Lewis Fanger: Exactly right. So we talk about 18 to 24 months, but it's -- we'll keep you in the loop, but we feel good -- it is an easier project to build as maybe the right thing to say. Daniel Lee: We'll go as fast as we can, but we don't want to incur a lot of overtime. Operator: Our next question comes from the line of John DeCree with CBRE. John DeCree: Just one from me on Waukegan. I think if I'm not mistaken, just kind of hit the 3-year anniversary couple of weeks ago and 11% growth in the fourth quarter, so still growing double digits. I know you talked a little bit about it in your prepared remarks, but I don't know, Lewis or Dan, if you could give us a little bit more insight as to kind of what's driving the growth there? Is it bigger database? Are you still growing the database? Or is it more spend per the existing database? I'm guessing that double-digit growth, it's probably a little bit of both. But 3 years in still growing double digits is pretty great. So if you could give us a little more color on what's going on there, that would be helpful. Daniel Lee: Well, actually, I want to give credit to the team we have there. I mean where we kind of stubbed our toe in Colorado and had to put together a new team. We had a great team from day 1 in Illinois and that they've just every month, every quarter, figured out a way to increase our penetration, increase our -- not only our number of customers, but the satisfaction levels of the customers. We have the only casino in the whole region that made the list of the Chicago Tribune's best employers. I mean they list, I think, 50 employers and who are the best employers in the region, there's 50 of them. And 2 years in a row now, we've been the only casino on that list. And that trades into very low turnover, which helps. I mean -- and so the team has done a very good job and every month, they're trying to figure out, okay, how do we do better? How do we do better? And had we had an equivalent team in Colorado, we would be much better in Colorado. And people matter. And we've had a great team in Illinois. And now we also have the right demographics. I mean we're the closest casino to 1 million people. We are easy to see. While the outside of the building looks like Department of Motor Vehicles storage place, once you're inside, it feels like a real casino. And even though we did it without spending a lot of money, when you go in, people are like, wow, we didn't expect this. It's wonderful. And so I think we have the right product and the right market. Year, I mean, it was very fast, but equally important, we had the right team, and they've done a great job. Lewis Fanger: And I think to answer to, it's a little bit of both, John. It's -- the database in terms of adding new names to it, it continues to grow at a pace meaningfully similar to what it was 3, 6, 9 months ago. It really hasn't slowed down in terms of the number of people that go into that database. We've crossed 121,000 names or closing in on 125,000 names in the database and not showing signs of slowing down. So -- but it's a little of both. Daniel Lee: And we've done it without hurting the competition. I mean most of it is increased gambling by people in Lake County, which is what we expected. And I guess I should also give a tip of the hat to Alex who forecasted that this is exactly what would happen, and he's been right. Operator: Thank you. We have reached the end of the question-and-answer session. I would like to turn the floor back over to President and Chief Financial Officer, Lewis Fanger, for closing remarks. Lewis Fanger: I'll turn it over to Dan. Any last words? Daniel Lee: No. Listen, it's been kind of a challenging year fixing Colorado while we try to figure out how to finance the permanent American Place. But I think we now have the team in place, and this stuff is trending the right way in Colorado, and I think we're on the cusp of having the financing arranged for American Place. So it doesn't happen overnight. I mean I think the financing would be in place in May or June, which is approximately when we would also have the extension that we mentioned and the legislature. But hopefully, by the time we're having this call for the next quarter, we have a lot more concrete stuff we can talk about. So thank you very much, everybody. Operator: This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Myers 2025 Fourth Quarter and Full Year Results Call. [Operator Instructions] I will now hand the conference over to Meghan Beringer, Senior Director of Investor Relations. Meghan, please go ahead. Meghan Beringer: Thank you. Good morning, everyone, and welcome to Myers Fourth Quarter 2025 Earnings Review. Joining me today are Aaron Schapper, President and Chief Executive Officer; and Sam Rutty, Executive Vice President and Chief Financial Officer. After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our fourth quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted. Those documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event. Now please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Further, information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings. Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call. Now please turn to Slide 4 of our presentation as I turn the call over to Aaron. Aaron Schapper: Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our fourth quarter, then I will review full year 2025, which was a clear inflection point in Myers' history with both the Focus transformation program and the significant decision to sell Myers Tire Supply. Overall, we believe these actions will unlock substantial value, enhancing the company's long-term growth profile. Following my comments, Sam will provide a detailed review of fourth quarter and full year financials and our outlook for the year. Turning to Slide 5. Fourth quarter sales were essentially flat year-over-year. Excluding the impact from our decision to exit low-margin products with the idling of 2 rotational molding facilities, sales would have been up 3% as infrastructure, industrial and food and beverage growth was partially offset by soft consumer and vehicle demand. We expanded margins in the fourth quarter, demonstrating our ability to improve profitability as we grow the business in high-margin applications and align our operating footprint with customer needs. Both gross and operating margins improved with adjusted operating margins expanding 230 basis points. SG&A was lower as we are benefiting from our focused transformation objectives. As a result, fourth quarter adjusted EPS improved 63% year-over-year. Looking at full year 2025, Material Handling sales increased while distribution demand declined. With Material Handling, growth in industrial and infrastructure markets was offset by lower consumer and vehicle demand. We achieved higher profitability with operating and net income increasing on both a reported and adjusted basis. We're encouraged by the improved earnings as it demonstrates the ability of our team to control what we can control and achieve good results in a challenging demand environment. In addition to improved earnings, we increased cash flow in 2025 with free cash flow up 23%, further strengthening our balance sheet. We invested in growth, reduced debt and returned cash to shareholders, all while increasing our cash balance. This is a testament to the performance of our team and gives me confidence that we are well on our way to achieving our long-term strategic goals. It has been 1 year since my first earnings call as CEO. While I had only been in the role for about 3 months, that initial period confirmed for me the great team and potential at Myers. I was confident that we could create a company that delivers consistent and reliable results by building on our strong foundation. We launched a focused transformation to energize our team and accelerate our progress. After meeting and engaging with our leadership team and many employees, I knew we were up for the challenge. Over the last year, we have taken actions to improve business performance and drive shareholder value. It's still early days, and we have a lot of work to do, but I'm encouraged by the progress we have made. In our first year, our Focus transformation program was formed around 4 objectives shown on Slide 6. Our first objective was to establish a culture of execution and accountability to drive performance. We revised our core values, adding a focus on delivering results and continuous improvement. We aligned our incentive plans to drive business unit performance and create accountability across the organization to ensure we generate long-term shareholder value. We emphasized lean principles to drive clear and efficient processes. These actions are helping us to build a culture that consistently outperforms. Second was to create clear strategies to improve the profitability of our entire portfolio. We engaged with a broad group of employees, including our executive management team to dive deep into each of our businesses, understand their value propositions and create action plans. We developed strategic plans and implemented KPIs to drive organic growth, expand margins, track progress and create accountability. One significant outcome of this activity was the completion of a strategic review of MTS, resulting in the decision to sell the business. Once complete, this will result in a portfolio that is focused on growth platforms that drive improved margin profiles. Our third objective was to deliver consistent and reliable results across the organization by effectively controlling what we can control. In 2025, we delivered annualized cost savings of $20 million, primarily in SG&A, structurally reducing expenses while also optimizing organizational efficiency. We exited low-margin products and idled 2 of our 9 rotational molding facilities to improve utilization and reduce costs. We formalized and launched a strategic deployment tool to drive disciplined planning and empower businesses to convert long-term goals into annual objectives. This tool is being implemented across all levels of the organization, and we are beginning to see results. Finally, we have deployed a disciplined capital allocation framework, allowing us to invest in growth while returning cash to shareholders. We grew free cash flow 23% through improved earnings and prudent cash management, providing additional flexibility to fund our organic investments. We continue to invest in growth, targeting CapEx of 3% of sales, focusing on high-growth opportunities with superior returns, and we returned $23 million to the shareholders to enhance their total return. Sam will expand on our capital allocation framework later in the call. To summarize, in 2025, we moved Myers forward with purpose and urgency, made significant progress on our transformation and deliver results with a continuous improvement mindset, providing a strong catalyst for 2026. Looking ahead, I would now like to discuss how focused transformation approach is shifting in 2026 as our strategy evolves as shown on Slide 7. One thing that remains the same is our resolve and commitment to achieve real transformation. We are continuing our deliberate process to create a transformed organization focused on delivering consistent and reliable, profitable growth. To do this, we are shifting our priorities to reflect the progress and evolution of our strategy. With this new approach, we have established 3 strategic priorities or focus areas that will guide us in 2026. Within each focus area, we have identified transformation objectives to drive performance. Our first priority is to focus on our core markets and the customer value we deliver. We will invest to gain a deeper understanding of our markets and customers, informing our value proposition and positioning us to lead in our categories. This knowledge is gained through commercial excellence skills that strengthen customer relationships and deepen market insight. We are simplifying our portfolio to intentionally focus on serving prioritized markets that align with our competitive advantages as we provide products that protect. Our second priority is to focus on instilling operational excellence and cost leadership across the organization to drive a culture of high performance. We delivered measurable progress against this priority last year. For 2026, we want to make sure that we do not lose ground by standardizing the improvements we made in workflows. We want to work smarter and ensure our processes are repeatable year after year. When needed, we will make changes to refine our organizational structure and optimize our operating footprint. Last year, we put this into practice with the idling of facilities and changes in the organization to ensure that we have the right talent. The culture of continuous improvement will continue to be fostered across the organization. Our third priority is to focus on investments that maximize profitable growth. This is a disciplined capital allocation approach to invest in growth platforms where returns are highest. As we align with markets where we add the greatest value, we can invest in innovation and pursue business development activities that enhance and strengthen our ability to provide differentiated solutions for our customers' challenges. We believe that these focus areas and the related transformation objectives will drive desired strategic outcomes such as deliver revenue growth, EBITDA margin expansion, free cash flow conversion and the acceleration of Myers to a company that achieves world-class performance. This is all built upon our foundational set of core values that dictate how we operate and what unites us. At this time, I'll turn the call over to Sam for a review of our financial results. Samantha Rutty: Thank you, Aaron, and good morning, everyone. Let me start by reviewing our fourth quarter and full year results and then wrap up with the outlook by end market for the year. Please turn to Slide 9. Fourth quarter net sales were $204 million, essentially flat year-over-year due to our decision to exit low-margin products with the idling of 2 rotational molding facilities. Excluding this, sales would have been up 3%. Adjusted gross margin increased 140 basis points to 33.6% due to favorable mix and higher volume, partially offset by unfavorable price. Adjusted operating margin improved 230 basis points to 11% as SG&A was lower year-over-year, driven by focused transformation savings. As Aaron mentioned, we achieved $20 million in annualized cost savings, primarily in SG&A, improving our margins in 2025 and positioning us well for 2026. Going forward, we will continue to focus on cost reductions and operating efficiencies to drive sustainable improvement in profitability. Turning to segment results on Slide 10. Material Handling net sales decreased $0.4 million. Excluding the impact of idling our rotational molding facilities, sales increased 3.4%. By end market, food and beverage, infrastructure and industrial growth was offset by soft consumer and vehicle demand. Adjusted EBITDA margin was 25.6%, expanding 290 basis points with the benefit of our focused transformation savings plus improved mix and higher volume, partially offset by unfavorable pricing. Distribution net sales increased 0.9% and adjusted EBITDA margin improved 160 basis points. Turning to Slide 11. Full year 2025 net sales was $825.7 million, down 1.3% year-over-year. Excluding the impact from idling our 2 rotational molding facilities, sales decreased 0.6%. Material Handling growth was offset by distribution softness. Within Material Handling, sales in Industrial and Infrastructure increased while consumer and vehicle sales were lower. Adjusted gross margin increased 30 basis points to 33.7% due to lower material costs, favorable cost productivity and favorable mix. Adjusted operating margin improved 30 basis points to 10.3% due to benefits from our focused transformation program. Turning to Slide 12. Fourth quarter operating cash flow was $22.6 million and CapEx was $3.6 million, resulting in free cash flow of $18.9 million. For the full year, free cash flow improved 23% to $67.2 million. We reduced net debt by $44.2 million in 2025, resulting in net leverage ratio of 2.4x within our target ratio of 1.5x to 2.5x. We plan to further reduce debt in 2026, bringing our net leverage ratio closer to the midpoint of our target range. We ended the year with a cash balance of $45.1 million and total liquidity at $289.8 million, providing us with ample flexibility to support our capital allocation priorities. Working capital as a percentage of sales increased slightly, primarily due to higher receivables from infrastructure project delivery timing, partially offset by lower inventory. We continue to focus on working capital management as a priority. Please turn to Slide 13. Our capital allocation framework balances investing in growth while returning cash to shareholders. In 2025, we spent $19.6 million in CapEx, approximately 2.4% of sales. In 2026, we expect to be close to our target of 3% of sales as we continue to invest in organic growth platforms. We are also open to opportunistic acquisitions with a disciplined approach to support our growth platforms, now that our leverage ratio is within our target range. We returned $23 million to shareholders in 2025 through the combination of dividends and share repurchases. Returning cash to shareholders is an important element of our objective to create value for our shareholders. Turning to Slide 14. We are providing our market outlook for 2026. Due to the planned divestiture of MTS, we are not providing an outlook for automotive aftermarket. Related to that, MTS is expected to qualify for discontinued operations accounting treatment beginning in the first quarter. We still see both risks and opportunities for our end markets as we continue to monitor geopolitical conditions, including energy markets, tariffs or other factors that may influence demand trends. Also, our market outlook excludes the impact from exiting low-margin products and idling 2 rotational molding facilities in Alliance, Ohio that occurred in Q4. This represents approximately $5 million in revenue per quarter, primarily industrial and consumer markets with a favorable impact to earnings. Let me review our expectations by market. For industrial, we expect moderate growth as we are seeing modest recovery in manufacturing capital expenditure trends from our industrial customers. Militaries around the world are replenishing their inventories and demand for military products continues to increase. In Infrastructure, strong ongoing spend for large construction and utility projects supported by conversion from wood to composite matting should continue to drive strong growth. The current backlog for matting products is now the largest in the history of this business, giving us confidence in our 2026 outlook. We expect the vehicle end market to be stable overall with mixed demand indicators. For RV and marine, we expect flat sales as consumer sentiment is stabilizing. For commercial vehicles, we expect recovery starting in the second half of 2026. For automotive OEMs, the volume of new and updated vehicle program launches over the next 12 to 18 months is expected to drive demand for new component packaging. In consumer, we now anticipate sales to be stable. Strong winter storms across most of the U.S. at the start of 2026 created a sharp increase in demand for fuel containers. While this event drove demand in Q1, it is still early to determine full year storm impact. However, we are planning for the average of 3 landed storms in the Continental U.S. this year. Our food and beverage end market is forecasted to be slightly down for the year, reflecting the agricultural market position at the low end of its cycle. I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron? Aaron Schapper: Thank you, Sam. In closing, I'm pleased with the meaningful progress we are making on our focused transformation to become a company that consistently delivers reliable financial results. There is still room for improvement, but our overall trajectory is encouraging. Margins are improving and cash flow is increasing as we begin to see early benefits from focused transformation. Supporting this is our capital allocation framework that balances investment in growth and returning cash to shareholders to create sustainable value. And as we invest, grow and simplify our portfolio, we are aligning our operations with markets that are growing and offer higher returns as we deliver products that protect. With that, I'd like to turn the call over to the operator for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Christian Zyla with KeyBanc Capital Markets. Christian Zyla: Congratulations on the quarter and the full year. My first question is on broader end market sentiment. Industrial production has been strong for the last 14 months. PMI has been strong to start 2026 and sentiment on the industrial side seems to be improving after a few years of weakness. With your opening remarks, it sounds like you're seeing something similar. I know your outlook is moderate growth for your industrial bucket, but can you help break that down between the subcategories like Akro-Mils, Buckhorn sector, et cetera? Just kind of what you're seeing across those lines. Aaron Schapper: Sure. Yes. So in general, if you look at the PMI, it's a broad spectrum, right, across manufacturing here in the U.S. So yes, that helps, right? So if you're looking at some of our products that specifically supply to those larger industrials such as Akro-Mils, then yes, that tracks closely. So as you see that strength, it does translate over. Then there's other product lines that are a little more specific to the end markets in those industries, automotive and what Buckhorn will do for automotive. There's also then if you look at the -- basically construction and a lot of utility and kind of data center mega build-outs, those track strongly to what we do with our ground protection product at Signature. So although PMI gives us kind of a broad based scope, you kind of look at -- we look at each of the end markets and say, okay, well, how is the construction industry, data centers, utility, kind of the AI investing of infrastructure pulls along Signature. Automotive pulls along Buckhorn. Agriculture will pull along of seed box business. And right now, agriculture is still at a cyclical low [indiscernible]. And so those are kind of -- that's where you get some of that mix. So the moderate growth story is there, but you have to look into some of the end markets to understand what our application is in those end markets. Sam, do you have anything to add? Samantha Rutty: Yes. Yes, overall, I think you made the right comments there. I mean, obviously, militaries as well, as we commented earlier in the pre-read is a big driver as well on the industrial side. Aaron Schapper: Yes. I think, Christian, we've talked about that. And obviously, with new geopolitical issues coming out, it's becoming -- I think it has been an important focal point for the last year. It certainly will continue to do so. So as we look at militaries that are looking to rearm and make sure that they have the stockpiles they need to go the distance in any conflict. Christian Zyla: Yes. Got it. That actually goes nicely into my next question. I remember at the Investor Day a few years ago, your team highlighted U.S. qualification for your defense products along with NATO orders. Are you selling to the U.S. Dow now? And are you anticipating or seeing a pickup in demand from your programs given just what's unfortunately happening across the world? It just seems like your product is a great complement of consumables in the end market. So just any broad thoughts there and kind of how you see that shaping up through the year and maybe how you size that full business? Aaron Schapper: Yes. So if we look at kind of the arc of that business, really we split it into kind of 2 sides. So one, we do sell directly to the U.S. military, and that's kind of one of our customer sets. And the other one is the NATO customer set, which is going to obviously be more European-based and more internationally based. So we sell to both sides on that. NATO has made it a more of a strategic priority to have a supply chain that's independent -- more independent of the U.S. in the past. And so as a result, that's given a great opportunity for us. As you know, we have Canadian operations that dovetail well with the needs of NATO. And then we also have operations here in the U.S. for injection molding to meet the needs of the U.S. government. So what we plan on doing is we use both our supply chain in both Canada and the U.S., and we're looking for opportunities globally. As NATO grows, we want to grow with that business. So we're always happy to look for those opportunities internationally. For us, look, the product dovetails very well with what's needed. As you know, we focus on the ammunition side. So as they bring up these complex weapon systems, the ammunition was really shown during the conflict in Europe between Ukraine and Russian war, how quickly ammunitions go -- get consumed in a near-peer conflict. So as a result, that's really helped drive not only business for the last year, business this year, but also real solid plans on growth in the future and making sure -- so from our side, on the Myers side, we just want to make sure that our capital follows those growth vectors and that we make sure that we have great organic growth opportunities, and we have the capital spent to service our customer as they grow. So we're bullish on that business in the future, and we remain confident that we'll do well, and we're positioned well in the future. Christian Zyla: That's great. If I could sneak one last one in. Just a very nice result in Material Handling margins really for the full year, given the changes that you've made throughout 2025. Was there anything unusual in the fourth quarter and then assuming volume absorption benefits and maybe some uptick in your end markets and volume absorption, just given all the changes you've made with your capacity, is there any reason why this new 18% level can't be the new baseline? Just kind of like puts and takes there. Samantha Rutty: Yes. I mean, yes, a really great quarter for Material Handling. A lot of what we've been doing around focused transformation. I mean, we've talked a lot about the idling of the roto facilities, right? But that was when we started to see the real benefit of those actions there. But as said, we're not done around focused transformation. There is more to be done. There's a lot of focus on continuous improvement broadly across our businesses. And so I would say good mix helped some in Q4. That's always a factor, right? We're seeing, as Aaron mentioned, good strong backlog around our matting products as well as some of the good tailwinds at the end of the year, even, I would say, a slight pickup in the fourth quarter for volumes on the roto side as well, which helped after our restructuring activities. And obviously, we continue to see the impact of our SG&A reductions as well, which helped a lot as well, and that continue as we've made that structural change in our cost base. So there's no reason to suggest that it wouldn't continue, although obviously, with recent activities in the world, we'll be continuing to look at risk and material costs as we think about resin prices and things like that, we'll have to continue to adapt. Operator: [Operator Instructions] Your next question comes from the line of Bill Dezellem with Tieton Capital Management. William Dezellem: Congratulations on meeting your $20 million cost reduction goal in '25. How much of that $20 million is going to be incremental to '26 because you did not have it all as of January 1, '25? Samantha Rutty: Yes. I mean there will be some incremental. We've obviously got things that was a factor of some of those savings were within our distribution business and obviously, dependent upon the sale of that business, it's going to impact how much of that carries forward within the RemainCo. But again, as we mentioned, we're not done, and we'll continue to look for more opportunities within Material Handling and build upon those in 2026. William Dezellem: And Sam, would you please put some numbers behind both that incremental that flows through in '26 and the additional target that you're looking at for this year? Samantha Rutty: I don't think we're at a place that we can talk about a specific target for 2026. And we've got actions and work to do depending upon the timing of that sale as we -- as that business splits off. Operator: There are no further questions at this time. I will now turn the call back to Meghan Beringer for closing remarks. Meghan Beringer: Thank you for joining us today. If you'd like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a good day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Welcome to the Lineage Cell Therapeutics Third (sic) [ Fourth ] Quarter 2025 Conference Call. [Operator Instructions] An audio webcast of this call is available on the Investors section of Lineage's website at www.lineagecell.com. This call is subject to copyright and is the property of Lineage. And recordings, reproductions or transmission of this call without the expressed written consent of Lineage are strictly prohibited. As a reminder, today's call is being recorded. I would now like to introduce your host for today's call, Ioana Hone, Head of Investor Relations at Lineage. Ms. Hone, please go ahead. Ioana Hone: Thank you, Jamie. Good afternoon, and thank you for joining us. A press release reporting our fourth quarter and full year 2025 financial results was issued earlier today, March 5, 2026, and can be found on the Investors section of our website. Please note that today's remarks and responses to your questions reflect management's views as of today only and will contain forward-looking statements within the meaning of federal securities laws. Statements made during this discussion that are not statements of historical fact should be considered forward-looking statements, which are subject to significant risks and uncertainties. The company's actual results or performance may differ materially from the expectations indicated by such forward-looking statements. For a discussion of certain factors that could cause the company's results or performance to differ, we refer you to the forward-looking statements section in today's press release and in the company's SEC filings, including its most recent annual report on Form 10-K filed today. We caution you not to place undue reliance on any forward-looking statements, which speak only as of today and are qualified by the cautionary statements and risk factors described in our SEC filings. With us today are Brian Culley, our Chief Executive Officer; and Jill Howe, our Chief Financial Officer. I'll now hand the call over to Brian. Brian Culley: Thank you, Ioana, and good afternoon, everyone. We appreciate you taking the time to join us on the call today. We have a great call planned highlighted by recent warrant exercises that further extend our runway and a positive result for our initial go/no-go development milestone in our islet cell research initiative. I want to start by reminding everyone that we have a significant number of employees who live and work in Israel. And while our manufacturing facility is not located near a metropolitan center, some of our staff do commute from larger cities. Their safety is our top priority, and we are, of course, monitoring the situation. To date and as expected, a few employees and employee spouses have been called into military service, which is similar to what we've experienced and successfully navigated in 2023. We cannot know what the future holds, but thanks to the incredible dedication of the team we've hired, our operations are continuing, and we expect things will continue to progress. Thank you also for the many messages of concern and support I've received from our colleagues and shareholders alike. Moving ahead, as many of you know, cell therapy has revolutionized oncology saving lives and creating tremendous shareholder value. But the use of cell therapy in oncology is maturing, while the application of cell therapy the fields outside of cancer remains in the early stages. For this reason, we are focused on delivering the next wave of innovation and value creation in this emerging branch of medicine. We'll begin with the exciting results seen from our lead program in geographic atrophy as a testimonial to what cell therapy is capable of. And as that program matures, we have begun turning our focus to how we can apply our manufacturing success and the lessons we have learned from the OpRegen program to evaluate other medical conditions that also arise from the loss of critical cellular function. Our focus on replacing cells that have become dysfunctional or destroyed may fundamentally reshape many treatment and recovery paradigms. And based on our conviction that the OpRegen program has the potential to drive future value, we believe we are uniquely positioned to capitalize on opportunities to develop other kinds of mature differentiated cells for patients, which, in our view, could lead to clinical outcomes currently beyond the reach of conventional approaches. Our work was productive last year, highlighted by us achieving the first milestone under our Roche and Genentech alliance, entering into a funded research collaboration for preclinical development of ReSonance, which is our first internally developed product candidate, and more recently, the launch of our new islet cell research initiative, something which I will provide an update on later in the call. But first, I want to discuss 2 developments in particular from last year that reinforce our confidence in the company's long-term outlook and which helped shape our plans for 2026. First, after relying on just 7 clinical sites for more than 2 years, Roche and Genentech have somewhat suddenly opened 10 new clinical sites in the GAlette study in the past 9 months, including one announced earlier this week at Duke Eye Center. While we don't have any guidance to share on the timing of any additional trials or data disclosures, we view this surge of site openings as a favorable sign because this activity could support preparations for later-stage trials. And as I've shared on prior calls, there are other actions and readouts that have occurred in the past year that similarly suggest positive forward progress of OpRegen could be underway. The second item we enjoyed last year were the enhancements and milestones we hit with our manufacturing platform, AlloSCOPE. AlloSCOPE purposefully stands for Allogeneic, Scalable, Consistent, Off-the-shelf, Pluripotent Cell Engineering. This acronym highlights the key elements of our core technology. Many of you are familiar with the challenges of autologous cell therapy, such as its high manufacturing cost and donor variability. But with AlloSCOPE, we address those challenges by using the same source cell line for all patients built on a platform we believe is capable of scaling into millions of doses and trillions of cells. This is something that has long been aspired to or sometimes even promised by the field of allogeneic cell therapy. But to our knowledge, very few companies, possibly none, have actually shown that they can perform a large-scale pluripotent cell production process in a GMP setting and use that resulting material in an FDA-cleared clinical trial. But here at Lineage, we successfully established a GMP master cell bank from which we established a GMP working cell bank and generated product that has been used in the clinic. And because the hundreds of vials, which comprise those banks are identical, we are confident that we can successfully repeat the process as many times as needed. We believe this achievement provides credible evidence that the AlloSCOPE cell banking system we built is capable of generating millions of vials of our product candidate. This is no small achievement because it's easy to say you plan to rely on the self-renewing capability of pluripotent cells to generate Phase I trial material. But with complex biologics like cell therapies, the process is the product. So if your early clinical process isn't capable of satisfying commercial scale, then you're developing product candidate that won't be able to supply the market. This is an essential but often overlooked aspect of cell therapy product development and requires certain investments and commitments to occur in the early stages. As a company with many years of experience in this field, we have had the time to make these investments. This also explains why we embrace the mantra of better from the beginning. We strive to only initiate programs that have a clear line of sight to commercial scale and other critical product features. And from these 2 significant developments, specifically, the evidence supporting OpRegen's potential advancement by Genentech, along with the successful demonstration of commercially viable pluripotent cell production, we have developed the conviction to apply our platform to the furtherance of developing other cell-based products with the potential to treat various diseases and conditions. I will say a few things about our recent and planned pipeline development later in the call. But first, I want to briefly review the status of our lead programs, OpRegen for dry AMD with geographic atrophy, OPC1 for spinal cord injury and ReSonance for hearing loss. OpRegen is the most advanced program in our pipeline and serves as a critical case study for our approach to cell transplantation. Dry AMD with GA is an increasingly established indication but suffers from underwhelming treatment options. Initial reports from our Phase I/IIa clinical study included improved anatomy, halting of atrophic progression and improved vision in patients with dry AMD and were unprecedented at the time. And from Roche and Genentech's additional analysis of our Phase I/IIa data, it has been observed in a single dose of OpRegen cells can provide visual improvement lasting for at least 3 years among patients who received the cells at the target location. This is an exceptionally promising finding because dry AMD is a condition that has not been shown to self resolve and only leads to worsening vision. Equally importantly, 3 independent groups pursuing RPE transplants have recently reported short-term outcomes similar to ours, providing further evidence in support of this novel mechanism. Although data remains forthcoming from GAlette, Roche and Genentech's ongoing Phase IIa study, it is encouraging to see that our partners have continued to expand the retinal communities exposure and experience with OpRegen. As a reminder, GAlette is a surgical optimization study designed for approximately 60 patients. This study has been running for 3 years and is an open-label study for which all primary and secondary outcome measures are captured in 90 days. So we infer that Roche has collected and reviewed long-term data from patients treated in that trial, which we expect has informed their recent site expansion decisions. Specifically, after adding only a single site in 2024, Genentech suddenly increased its pace and opened 9 new clinical sites in 2025, bringing this study to a total of 17 unique locations, including the new site just added last week. In addition, Genentech previously acquired novel and proprietary surgical delivery devices from a competitor and sought and received RMAT designation for OpRegen. We believe these are all positive indicators that support our expectation of Roche and Genentech's continued advancement of the OpRegen program. And in December, Lineage received its first $5 million payment from the achievement of a development milestone, highlighting our contribution to this process. When you aggregate these and other publicly available actions, we believe they point to a positive future. And while OpRegen reflects a new technology, we believe we have a set of attributes including scalable manufacturing, proprietary delivery tools, long-term safety and efficacy data and a world-class partnership that adds abundant clinical insights and commercial capabilities. For these reasons and others, I hope you'll appreciate why we are so bullish on the potential for OpRegen to capture the multibillion and still largely unaddressed GA market. And also, while we are taking steps to try to recreate this promise with other cell types. Moving to our next cell type, oligodendrocyte progenitors, we are developing OPC1 an off-the-shelf cell transplant designed to increase mobility for people who suffered from a spinal cord injury. OPC1 has been administered in 2 Phase I/IIa -- excuse me, Phase I/II safety trials in sub-acute patients and the long-term safety and efficacy data we have collected so far is both promising and worthy of further investigation. We currently are enrolling patients in the DOSED study, the third clinical study of OPC1, which is evaluating the safety and novel -- of a novel and proprietary system to deliver ourselves to the area of injury without stopping patient ventilation. In addition to testing the safety and performance of the new device, we also will be collecting functional assessments on all patients, giving us the opportunity to investigate any signals of efficacy that may arise. This is important because last year, we treated our first ever chronic SCI patient. That was an important milestone because chronic injuries represent an additional and larger potential addressable population for this experimental therapy. And unlike subacute patients, many chronic patients have reached a functional plateau, making any physical improvement easier to detect and rely upon. DOSED is an open-label study and that first participant, I mentioned recently had their 6-month safety follow-up visit with no significant safety events reported following treatment. Equally important, the device performed as planned, which provides significant derisking of the device that we plan to employ in a larger trial. Last month, we expanded DOSED to the Greater Los Angeles area by opening our second clinical site at the Rancho Research Institute in conjunction with Rancho Los Amigos National Rehab Center. Jill and I have the pleasure of hosting Dr. Charles Liu, the principal investigator and his team for dinner a few weeks ago, and we are extremely excited to have their group involved with the OPC1 program. Moving next to ReSonance. This is an auditory neuronal cell transplant being developed to treat hearing loss and also marks our first internally developed program. One of our goals during 2025 was to strike deals which partly or completely funded existing product candidates. We accomplished this goal through the partnership we announced with William Demant Invest, which is expected to fund all planned preclinical development for the ANP1 program up to the IND stage. ReSonance was an important test for our business model because it demonstrated that we could conceive of and successfully manufacture a completely new cell-based product candidate on our AlloSCOPE platform in a rapid and efficient way. With a modest investment, we were able to generate new intellectual property and advanced ReSonance into preclinical testing within one year. This early data was sufficient to establish a partnership with a world-leading hearing health care company, which also brought us access to specialized technology, auditory experience and a network of hearing health leaders. We believe this collaboration was an important demonstration of the speed, efficiency and return on investment that the AlloSCOPE platform can provide and evidence of our ability to replicate our OpRegen collaboration success with another cell transplant program. I next will spend just a moment on AlloSCOPE to provide context to my upcoming remarks about our new islet cell initiative. AlloSCOPE describes a platform on which we can bank and scale pluripotent cells to great numbers before differentiating those cells into discrete types of cells of the human body. It delivers what we consider to be the table stakes necessary to create a commercially successful allogeneic cell therapy, and it is being applied by us across multiple programs and cell lines. AlloSCOPE is a proprietary differentiation and production platform on which our cell-based products are derived from a single initial cell line, conferring consistent, cost-effective and scalable production. These features should enable us to support the production of millions of doses of a consistent and cost-effective cell-based product. Using AlloSCOPE, we have successfully completed a cGMP production run from our 2-tiered cell banking system for 2 of our product candidates, one of which has been utilized in the clinic. This achievement is notable because it demonstrates our ability to scale a process with the purity, potency and regulatory quality required to support clinical use, a standard, which we believe sits beyond the reach of many companies and which can become a valuable differentiator for Lineage. With that background provided, I'll remind you that the human body is comprised of about 200 discrete cell types. And because pluripotent cells can become any of those 200 cell types, we have many choices about where to deploy our resources into the development of additional potential product candidates. When thinking about where we might generate the greatest value from our process development and directed differentiation expertise, we recently announced a new research initiative in Type 1 diabetes and specifically, an opportunity we saw to address a major obstacle to a successful Type 1 diabetes cell transplant treatment. We've been getting a lot of questions about our entry into this space. So I'm going to take your time today to walk you through our plans in some detail. The headline is that we met our initial internal go/no-go development milestone, which means we will continue to our next phase of internal development. Now I need to explain why that's important. We already know that islet cell transplants can work. Dozens of patients are functionally cured each year using islet cells from cadavers, meaning they can regulate -- patients can regulate their blood sugar without proactive and daily disease management. However, a major unsolved problem is supply. Cadavers cannot support a commercially viable source of islet cells. Immunosuppression, patient eligibility and hypoimmunity are all additional hurdles that need to be overcome, but we believe the elephant in the room is that we know of no company that can make islets at the scale required for a commercial product. And we believe the greatest value in the islet cell transplant space will accrue to whoever solves that scale problem. The explanation for this gap is that the required dose of islet cells may be as high as 1 billion cells per patient, but mature islets do not expand readily in culture. Meanwhile, our calculations indicate that commercial viability begins in the range of thousands of doses per batch, implying that commercially relevant processes will have to be done on the scale of at least an 80-liter bioreactor. But carrying out a differentiation process in an 80-liter vessel requires feeding that vessel with billions of undifferentiated stem cells, which retain their full flurry potency capability and their genetic stability. And that is the problem. Conventional 3D expansion introduces excessive passaging, risking loss of control and genetic aberrations but generating billions of cells required from conventional 2D approaches, demands in practical surface areas and high aseptic risk. There is unavoidable conflict and trade-off between having reproducible control and scale. Our strategy has 2 aspects. The first is to use the AlloSCOPE platform to combine the control advantages of 2D culture with the volumetric efficiency of 3D systems or what we refer to as 5D engineering. And I'm proud to report today for the first time that we have actually achieved this milestone and reduced it to practice multiple times at 0.5 liter scale, successfully reaching our first go/no-go decision point with this initiative. We're now evaluating whether we can translate this capability to the next step up into a multi leader vessel. Demonstrating reproducible performance at an even larger scale is the next step on the path to feeding 80-liter bioreactors of scale, which should be capable of producing thousands of therapeutic doses of islet cells per run. Importantly, this work is all being done pre-differentiation, which means this stage of development is not dependent on finalizing our immune suppression strategies. The second important aspect of our strategy is that we are looking to tackle the bioreactor feeding problem first. We are inverting the traditional development paradigm by focusing on the scale-up of undifferentiated cells, first, because once you've shown that you can actually produce your material at scale, we believe the risk profile for the rest of the islet cells project changes materially. That's because we already know that islet can be an effective intervention and have been shown by multiple groups to be successful in preclinical and clinical settings. Similarly, editing strategies and differentiation protocols already exist and provide risk-reducing information in those areas. And we may be able to leverage that information if our scale initiative is successful. But no one yet has shown that they can scale islets. We think it's far more prudent to focus first on the unresolved scale problem rather than performing years of expensive studies and deferring the issue of scale for later. Our strategy doesn't fit easily onto a bumper sticker. But if we wanted to print one, it might say better from the beginning. That is how I describe our development philosophy. We enter fields only when we can see the entire path from cell banking through commercial delivery. We look to identify clear go/no-go decision points along the way and we strive to include improvements or solutions to existing methods, processes, delivery or to the cells themselves in order to have the best overall product profile. I'll conclude by saying that our platform generates assets which share certain essential traits in common, so that each dollar we spend on innovation may apply across multiple programs. While each product candidate is, of course, intended for a different condition and each cell line behaves in a unique manner, the early steps of banking, process development, control purity and scale have somewhat common features in the way we apply them, which allows us to expand the scope of our pipeline without losing the focus required to succeed in each indication, and uses our capital in an efficient way. I hope that it helps explain our exciting business update. And with that, I'll turn things over to Jill for a review of our financials. Jill Howe: Thanks, Brian. Before presenting our financial results, I want to address some points that may have caught your attention. The reported net loss for the full year is approximately $45 million higher than in 2024, this increase is mainly due to noncash charges linked to our rising stock price over the year, which resulted in higher warrant liability. Additionally, we incurred a noncash charge relating to an asset we acquired in 2019, which we elected to no longer develop. You may have also noticed that the reported cost for -- OpRegen costs are higher this year. This is due to a standard accounting treatment applied when recording the expense associated with our downstream obligations after we received the first milestone from Roche and Genentech. If you look at the expenses without this cost, the OpRegen developmental expenses were lower year-over-year. As of December 31, 2025, our overall cash position was $55.8 million, which together with the approximate $5.4 million in proceeds from warrants exercised this March is expected to support our planned operations into Q2 of 2028. This is a significantly higher runway than we guided to during our last call, with the biggest contributors being the $21 million in gross proceeds received from an ATM block trade in November, the warrant exercise of $5.4 million this week along with the achievement of the first $5 million milestone under our Roche collaboration. This revised guidance also does not take into account any other potential sources of funding, including additional milestone payments we are eligible for under our Roche collaboration, or any additional partnerships, which we may elect to enter into in the future. Separately, a large additional source of potential capital is the approximately $32 million remaining of underlying warrants priced at $0.91 per share, which is below our current trading price and which gets accelerated if Roche or Genentech publicly disclosed their intent to advance OpRegen into a clinical trial with the comparator arm. Now I will review our fourth quarter and full year results. Total revenues for the fourth quarter were approximately $6.6 million, a net increase of $3.7 million as compared to the same period in 2024. The increase was primarily driven by higher collaboration revenue recognized under our collaboration and license agreement with Roche, following the achievement of the first milestone, along with the new research collaboration agreement with WDI. Total operating expenses for the fourth quarter were $13.2 million, an increase of $5.2 million as compared to the same period in 2024. R&D expenses for the fourth quarter were $8.2 million, an increase of $4.8 million as compared to the same period in 2024. The net increase was primarily driven by $2.1 million for our OpRegen program expenses and $2.7 million for our preclinical and other undisclosed programs. G&A expenses for the fourth quarter were approximately $4.8 million, an increase of $0.4 million as compared to the same period in 2024. The net increase was primarily driven by personnel costs. Loss from operations for the fourth quarter was $6.5 million, an increase of $1.4 million as compared to the same period in 2024. Other income expenses for the fourth quarter reflected other income of $2.2 million compared to other income of approximately $1.9 million for the same period in 2024. The net increase is primarily driven by exchange rate fluctuations related to Lineage's international subsidiaries. No warrant-related financing transaction costs incurred as compared to the prior year's quarter, and this was partially offset by the noncash quarterly fair value remeasurement expenses of the warrant liabilities. The net income loss attributable to Lineage for the 3 months ended December 31 with a net income of $0.9 million or $0.04 per share compared to a net loss of $3.3 million or $0.02 per share for the same period in 2024. Next, I'll spend a few minutes reviewing the full year operating results. Total revenues for the year were $14.6 million, an increase of $5.1 million as compared to the same period in 2024. This increase was primarily driven by higher collaboration revenue recognized under the Roche agreement following the achievement of the first milestone along with new research collaboration agreement with WDI. Total operating expenses for the full year were $51.2 million, an increase of $20.2 million as compared to the same period in 2024. This increase is primarily driven by $14.8 million of expenses recognized during the year for the loss on impairment of the intangible asset related to the VAC platform. R&D expenses for the full year were $17.7 million, an increase of approximately $5.2 million as compared to the same period in 2024. The increase is primarily driven by $1.6 million for our OpRegen program, $0.7 million increase for ANP1 program and $0.2 million for our OPC1 program and $2.8 million for our preclinical programs and other undisclosed programs. G&A expenses for the full year were $18.5 million, an increase of approximately $0.3 million as compared to the same period in 2024. The net increase was primarily driven by $0.2 million in personnel costs and $0.1 million for services provided by third parties. Loss from operations for the full year was $36.6 million, an increase of $15.1 million as compared to the same period in 2024. Other income expenses for the full year reflected other expenses of $32 million compared to other income of $2.9 million for the same period in 2024. The net change of $34.9 million was largely attributable to the noncash fair value measurement expense of the warrant liabilities of $37.9 million, primarily due to an increase in our share price as compared to the prior year period. This increase in expense was partially offset by exchange rate fluctuations related to Lineage's international subsidiaries and lower warrant-related transaction costs incurred as compared to the prior year in connection with the November 2024 financing. The net loss attributable to Lineage for the year ended December 31, 2025, was $63.5 million or $0.28 per share compared to a net loss of $18.6 million or $0.09 per share for 2024. The difference was primarily driven by the noncash fair value remeasurement of the warrant liabilities and the loss on impairment expense related to a 2019 acquisition. Our financial results continue to reflect our ongoing dedication to responsible fiscal management, and we remain focused on balancing our cost of capital with the investments we make to grow and strengthen our pipeline. Let me hand the call back to Brian for concluding remarks. Brian Culley: Thanks, Jill. I'll quickly summarize by repeating 2 key themes. First, we continue to remain confident in the potential for OpRegen to drive positive clinical outcomes in dry AMD and we're encouraged by our partner signs of commitment to the program. We also believe the independent evidence generated by others RPE cell transplant trials supports and elevates our replace and restore philosophy. Second, we're preparing for a successful future by making new investments in our cell transplant platform and using our recent manufacturing innovations as a foundation from which additional pipeline programs can be advanced either by a funded partnerships or independently. We believe our approach offers powerful optionality, which we consider essential for a company at our stage of growth and development. We appreciate your support and belief in our vision. With that operator, we are prepared to take analyst questions. Operator: [Operator Instructions] Your first question comes from the line of Joe Pantginis with H.C. Wainwright. Joseph Pantginis: Actually, Brian, I have 3 questions, a strategic one, a technical one and probably a question you can't answer. So first, on the strategic question, I mean, you have many ongoing programs now with specific cell types, and you also have this broader AlloSCOPE program with pluripotent cells ready to go. How do you look to potentially translate, say, over the longer term with regard to business development strategy around all your various options? Brian Culley: Thank you, Joe, for the first of those 3 questions. Again, excellent business development team. Clearly, I can point to the Roche and Genentech transaction. I can point to the Demant deal. And of course, these are just things that you've seen. It is normal and common for us to have other interactions, maybe deals that could come together but don't for various reasons. So they're a reliable and productive group. What we can do, what we have the opportunity to do is to take the AlloSCOPE platform and apply it in different ways to generate a basket of assets. And then we can make some decisions that are good for the company in terms of partnering or retaining. We don't have a particular objective to launch any of the products we manufacture, although that's certainly not off the table either. We are really being mindful of our cost of capital, the spending, the risk and our own capability to make decisions about what and whether to partner and what time, assuming that there is an appropriate economic arrangement to be struck at all. So I think the way to maximize the value of the platform that we have developed is in part to generate new assets that can be partnered fairly early and to use some of that capital to offset our needs to rely on traditional capital markets and through that mix of creating assets that are funded by others as well as adding programs and taking them a little bit further. I think we may be solving to optimize for the best return on invested capital that we can with the technology that we have developed here at Lineage. Joseph Pantginis: That's extremely helpful. And then I guess my technical question is without giving away the secret sauce here. For the islet cell component that you're working on here, what would you consider to be the rate-limiting step or steps with regard to moving beyond the 0.5 liter scale? Brian Culley: That's an excellent question and the very nature of the exploratory work is that we do not know. So we cannot predict the linearity of going from half liter to multi liter to ultimately up in the neighborhood of 80-liter or 300 liters. There are incredible new technologies that are available that help companies with this work, but it's very difficult to say. I would say this, though, I do think going from 0 to a 0.5 liter was a much larger achievement than what I expect going from a 0.5 liter to 2, 3, 4 liters will be. And the reason for that is that it hadn't been done before and as I explained earlier on the call, it's very hard to get the control that you want from a 2D process and apply it into the scale of a 3D process. So to be clear about one thing here, AlloSCOPE describes our basic platform, our banking or manufacturing. AlloSCOPE 5.0 is the application where we're essentially tricking cells to think that they're being grown in a 2D environment while actually putting them in a 3D environment. So quite simply 2 plus 3 equals 5, perhaps the additional dimensions are scale and cost in that situation. But I think what's really exciting about the next step is that if you do have control in the lower mid-leader scale, you really could begin to have discussions about pooling that output and feeding maybe an 80-liter reactor or it could give you some insights and confidence about the linearity as you scale. Not every cell line is going to be amenable and can adapt to these larger scales and perhaps some of the technologies don't fit well depending on the cell type that you plan to differentiate. So it's very much unexplored territory, which is why I wanted to spend a lot of time talking about it today. Joseph Pantginis: Very helpful. And then I think we're essentially done because I think the next one is unanswerable, as I said. But with regard to the GAlette study, I'm sure you get questions on this all the time. But is there any visibility or anecdotes you could provide with regard to the types of deliveries that Roche might be testing or methods? Brian Culley: There have been some presentations at conferences where images of different devices have been provided. I don't know in every case whether those presentations have been made available to the public online or are they exclusive to the registrants of these conferences. But what I would say as a general matter is that the 2 big chunky approaches are to deliver [ transvitreally ] through the front of the eye or via a suprachoroidal approach, which is going around the eye and accessing the subretinal space from below. They have trade-offs. I won't go through all of the trade-offs right now, but that is just one basic way of looking at delivery to the subretinal space. Within that, there, of course, are more refined approaches regarding the kinds of needles or the methods that one uses. But if you were to pull up or request from us the 2025 CTS desk -- slide deck, I think some examples of some of the technologies that Genentech acquired are available. But this is an important reminder. This is not -- the study that they're doing is a surgical optimization study. So they're going to be looking at different cohorts of patients and evaluating what works well. So they may try some things that don't go well and abandon those, and that's appropriate. They may find some things that seem to go well and want to push the envelope, and that's also appropriate. In fact, desirable. But this is not a responder analysis. So there -- it's not some number out of 60 is a success threshold. We know that you get the best results if the cells go to the subretinal space. So of course, it is obvious and appropriate to try and simplify that as much as you can before moving into and committing to larger trials. So we're hopeful that everything that has happened is an indication that, that work is going well. I think if that work we're going clearly poorly, they've had abundant time to abandon this initiative, but we also remain confident that our partners know best how to find the right level of risk and reward moving as quickly as they can while not jeopardizing their leadership position in the space. Operator: Our next question comes from the line of Jack Allen with Baird. Jack Allen: Congrats to the team on all the progress made over the course of 2025. Looking forward to a productive 2026. Just 2 quick questions from my end. The first one is on the OPC1 program. I was hoping if you could provide some more color on the timing of the functional measures? And anything you can also add as it relates to the baseline characteristics of that first participant in the study there being a chronic participant. I'm curious as it relates to their baseline functionality. And then secondly, on OpRegen. I know you guys have presented 3-year data in the spring of 2025. I'm curious if 4-year data could be on the docket as it's been great to see the continued durability response as it relates to OpRegen. Brian Culley: Thank you, Jack. I will ask your second question of our partner. I do not know their plans for 4-year data. But obviously we are excited by the fact that the benefits that we're seeing in year one did continue into year 2 and year 3, which mechanistically makes sense for a transplant that is not rejected. We think that's a great sign, especially because the untreated eye in the same patient continues to lose letters of vision. So the delta, the clinical benefit and the confidence in that benefit only seems to get better with each passing year. With respect to OPC1, we do -- I do want to remind everyone that the OPC1 study is a safety and performance study of a device. So it is not an efficacy design. So we have a more limited set of function measurements that we are collecting. But we are collecting things like an E-ISNCSCI exam and quality of life measures, SCIM is one of the tools that we've -- one of the assessment tools that we've employed in this trial. So we collect baseline data or screening data prior to the cells being administered and then we have some early functional assessments probably too early to see anything. So these are functional assessments that occur in the first 90 days. They provide some reinforcement or reliability about your baseline measures and ensure that the patient isn't experiencing any decline. And then we wait until a year in most cases because we aren't looking every 30, 60, 90 days at these patients because, again, that's not what the study was designed to do. But when we collect the 1-year functional assessments, if we do see some changes, those are things that perhaps would be more meaningful if they're occurring at 12 months versus occurring at 3 months or even 6 months. There is, quite interestingly, there has been some information. We view this information as coming from a reliable source, but there was some information about the chronic patient having some improvement in certain measures. This is anecdotal. This is not part of our conveyance of clinical data to the public, but people are free to talk about their own experiences on clinical trials. So you may find some evocative information out there. We don't confirm or refute it. We will only be communicating actual data from our trial when it becomes available. But I would add only to your specific question that the patient fits within our specific criteria as being ASIA Impairment A. And I guess I could add to that, that we had some difficulty finding the next patient in the stagger. And we recently went through an expansion of the protocol to allow a second impairment level of A for the second patient enrolled in this study. So to the extent that we hadn't enrolled a second patient yet, I can tell you that it was because it was really hard to find the stagger that had been agreed to with FDA. So we went through the steps to amend that protocol stagger to broaden it to allow for another A to be treated, and we have someone who has been identified and may get treated here in the coming weeks this month. So I think we're going to be back on track with this trial, but very good and appropriate questions, Jack. Thank you for them. Jack Allen: Awesome. Maybe if I can just follow up one more on AlloSCOPE. But before I do, it's great to hear about the anecdotal progress of the OPC1 program, while it's not necessarily well-vetted clinical data. There's a high unmet need in spinal cord injury. So that's great to hear that there's some enthusiasm there. On AlloSCOPE, I just wanted to ask very briefly how you think about ramping expense of that program as you move up from the half liter bioreactor, I know if you get more expensive as you move into larger reactors, how are you planning to contain cost there? Brian Culley: Yes. It's not too difficult. The cells are eating the media that we feed them, and we have done a lot of batches and the multi-liter batch size, I've spoken frequently about OpRegen already being manufactured at a 3-liter scale. So we have abundant experience at that scale. I think where it starts getting really exciting is when you go up one level beyond, I don't want to get ahead of myself at this point. There still are risks and uncertainties associated with this. But one of the really powerful attributes of our approach of inverting our development plan and focusing on manufacturing is that we are able to put a relatively modest amount of capital to work to get answers as to the scalability of these lines. If we were doing it the other way, if we were doing expensive animal studies or very expensive human studies, and we were deferring the important questions around scale, we would be spending a tremendous amount of money running studies that others have already shown can be successful and not necessarily proving anything about our viable product candidate in terms of its ability to meet the commercial demand. But if instead, you follow the Lineage approach and you say, well, I'm going to answer the question of scale first, then you are looking at the risk profile of your subsequent preclinical and preclinical studies with a little bit of a different view because you already know you can make a lot of your material. So I really like the overall approach. I think it's prudent. I think it's investor friendly. And from our perspective, we have experienced a lot of experience already at a single leader or multi leader scale production. So we have a well-trained team that can fill and finish vials out of that scale in a GMP environment. So we'll have to see. But as Jill said, we're very committed to high returns on our invested research dollars and trying hard to maintain something close to our historic investment of capital on an annual basis. Operator: Next question comes from the line of Mayank Mamtani with B. Riley Securities. Mayank Mamtani: Thanks also to your company employees and their families in Israel. So Brian, just to piggyback on the last -- kind of framing you had on this inverted risk framework you have on the scale-up of the manufacturing first for this islet cell research initiative. Could you maybe just double-click on what have been the learnings to date from the OpRegen work since inception and also as part of specifically the Roche partnership? And maybe also if you could recap what milestones should we be watching for potential candidate being identified here? Or is this being used by a strategic partner since obviously this would draw a lot of interest? And then I have a follow-up. Brian Culley: Thank you, Mayank, for that multipart question. Yes, the inverted risk, I think, as I say, attractive because we're putting what I believe is the least expensive and most challenging step first. And so we're trying to invert the risk profile of islet cell transplant product initiative or campaign. The specific learnings and lessons from the OpRegen program are coupled with independent learnings and lessons we have because, of course, we have other programs that we've had to solve different problems for whether that's our hearing loss program or our spinal cord program. Altogether, a lot of these have taught us some clever and sometimes patentable material and insights. Overall, I would say that AlloSCOPE is comprised of 3 components. There are physical or engineering-type components. So these are the physical properties of how we do the manufacturing. There are biological aspects to it, i.e., exactly what we expose the cells to and when. And then you have an engineering component, which is a little bit more of like the know-how. So it is not that there's a magical molecule that makes AlloSCOPE work or a special coding of plastic or type of plastic that makes everything click. It is the combination through years, in fact, decades of experience coming together, finally being able to show that this capability can legitimately make millions of vials, as I said, trillions of cells and then applying it in a very unique way to solve a specific problem in the setting of islet cells. I don't envision that being a fee-for-service business of our company. I'll never say never because our job here is to create value, it's not necessarily to make medicine. So if we see an opportunity and it makes sense, we may pursue it. But what we would envision with AlloSCOPE in partnerships is always enjoying significant ownership of any program that's going forward. We are bringing tremendous value to partnerships. We're a healthy company that can carry its own weight in development. And so we want to make sure that we're never viewed as a CDMO, not that there's anything wrong with that business, it's just very hard to price that kind of product when the probability of success is unknown as you go into those alliances. And we also have limited GMP space, a very highly trained team. This is not up the shelf skill set that we just grabbed from some recent college grads. So it is something that we have to be very selective where we apply our technology. But you also asked a very important question in there, which is additional programs, and it occurs to me now in this moment that I have previously said that we had some additional cell types that we are going to talk about and it didn't even make it into my prepared remarks, which gives you a sense of how much exciting stuff is happening here. But we do have plans to reveal another new cell type, that could be as early as in the next 3 to 6 weeks. It's coming together. It's maturing. I'm very excited about it. But it is as yet undisclosed. But hopefully that is something that we could have out into -- out for public consumption prior to our next quarterly call. Mayank Mamtani: Yes. No, that new cell type would be great to learn about that. Thank you for that level of detail. And then on the OpRegen program, if that was to theoretically start a Phase III tomorrow, like, what's your capacity for the amount of doses you can provide because these could be like very large trials, at least historically that have been done. And do you have any visibility of regulatory interaction that has occurred beyond the RMAT designation that was secured last year or 2 years ago? Brian Culley: Thank you for that additional question. Unfortunately, again, that's a question that really can only be answered by Roche and Genentech. I am not a party to regulatory strategy discussions or regulatory interactions that they have regarding OpRegen. So I cannot say because I do not know. Mayank Mamtani: Okay. And one last for Jill. In your cash runway, how much of the additional warrants are factored in? If you could just clarify. Jill Howe: Yes. So of the existing runway that we talked through today, it only includes the $5.4 million in warrants that we collected this week on an exercise, sort of, the $32 million remaining is not factored into our future runway at this point. Brian Culley: Mayank, I neglected to answer the remainder of your question. And I'm happy to say that perhaps one of the least of my concerns at this company is being able to manufacture sufficient material. It really speaks to the power of our technology. We literally are manufacturing more OpRegen than we can reasonably fill and finish in a day's work. So I do not think that supply of clinical material will be gating because the 2-part banking system and then the production vessel scale that we're at, really does generate a very large number of cells on each run that we perform. Operator: Next question comes from the line of Albert Lowe with Craig-Hallum. Gum-Ming Lowe: I was wondering how you'll be applying the hypoimmune cell line that you recently received from the partnership with Factor? And I believe this is an iPSC line. Can you please also speak on some advantages of using induced pluripotent stem cell line? Brian Culley: Albert, thank you for that question. The hypoimmune line that we obtained through our Factor alliance is a line that we designed for a neurological indication. That indication is as yet undisclosed. I may or may not -- I think I'll probably just say that I cannot confirm that it is even the same indication that I suggested could be coming out in the next 3 to 6 weeks. But you're correct that it is an iPSC line. I don't know if there are advantages of iPS over ES or vice versa. Our view is that it is appropriate to follow the data and the behavior of these lines. I do think that there is an important discussion that occurs about various attributes that may make one or the other more attractive but there simply have not been enough approved agents to be able to definitively say one is superior. Typically, what one finds is it when you work with one form of a line, that is the line type or source that you defend for us, we are indifferent. We have both types of -- excuse me, we have both types of pluripotent lines. But in this case, the experience that Factor had with gene editing, with iPS, with hypoimmunity and we also engineered in an additional functional, hopefully, relevant edit into that line. That is about us accessing capabilities that we think are valuable, but that we didn't want to build in-house. And because ourselves are always fully characterized before they go into a patient, we can be confident that there are a number of different editing technologies that could be applied because we can always confirm [ materially ] as it was designed to be before we utilize it and before we invest in the scale-up of that material. Gum-Ming Lowe: And looking forward to hearing about this new cell type that's coming soon. Operator: Next question comes from the line of Sean McCutcheon with Raymond James. Yang Chen: This is Yang for Sean. We have one quick question. Could you speak to the process of getting a new OPC1 formulation into the DOSED study? And how much do you think that may shorten the time line versus bridging study? And are you in dialogue with FDA on that front? Brian Culley: Thank you, Yang. Very appropriate question. We elected to separate the new device that we are testing from the new cells that we have manufactured. So we have completed the manufacturing -- the new process by which we manufacture those cells. We have completed the comparability testing including in-life comparability testing and all the other features that go into a meeting package with FDA, but we have not yet presented or delivered that information to FDA to request us to bridge in those studies. We thought it would be prudent to get a little bit of experience with the new device so that then the focus could shift away from the new device and into the new cells. So what we are hopeful for is that the new device will perform as it was designed to be performing in the first 4, 5, 6 patients and then proposed to FDA that we would switch over to the lineage new process in the last handful of patients in the DOSED study. If successful with that endeavor, that would save a lot of time. It would prevent us from having to establish and conduct a separate safety cohort with our new cells. So you can imagine that the bioinformatics data, the animal data, all of the analytical work that we have done to propose that switch has been exhaustive in order to give us the best probability of success in accelerating that process because it is correct that in order to run a larger study, our view is that we need to have this superior device deployed and we need to use our higher quality, higher purity, higher scale and better control OPC1 cells. And so that is our plan. And when that is complete, then I believe we would be in a position to run a larger study, either ourselves or in a partnership but a larger study of spinal cord injury patients. Operator: There are no further questions at this time. I will turn the call back over to Brian Culley, CEO, for closing remarks. Brian Culley: Thanks, everyone. I know it was long and complicated, but it's very important, and I think also very exciting. So stay tuned. Clearly, we have some exciting stuff coming up not too far away. Thank you for your interest and support of the company, and we'll talk again soon. Operator: That concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Rumble Inc.'s Q4 2025 Earnings Call -- Conference Call. [Operator Instructions]. This call is being recorded on March 5, 2026. I would now like to turn the conference over to Shannon Devine, Investor Relations for Rumble. Please go ahead. Shannon Devine: Thank you, operator. I'm here today with Chris Pavlovski, Founder, Chairman and CEO of Rumble; and Brandon Alexandroff, CFO. A press release detailing our fourth quarter and full year 2025 results was released today and available on our Investor Relations website. Before we begin the formal presentation, I would like to remind everyone that statements made on this call may include predictions, estimates or other information that might be considered forward-looking. All forward-looking statements are made only as of the date of this call and should be considered in conjunction with the company's cautionary statements in our earnings release and the factors included in our filings with the SEC. Future company updates will be available via press release and the company's identified social media channels. I will now turn the call over to Rumble's Founder, Chairman and CEO, Chris Pavlovski. Christopher Pavlovski: Good afternoon, everyone, and thank you for joining us. 2025 was a year where my team went heads down building and expanding the Rumble product, building out our sales operation and putting together assets that would transform Rumble into an impactful player in cloud. I'm happy to say we've successfully executed on these initiatives. As we enter 2026, we have reached a critical inflection point and Rumble is now primed for a new era of aggressive growth. I'm going to start with 3 Rumble video product initiatives that have been completed and a growth update. First, we addressed user feedback to make the platform more resilient. Our design, interface, stability and features are now far more competitive with YouTube and even exceeding in specific areas. Second, launching Rumble Wallet with Tether to become the first major platform to allow tipping in Bitcoin, USD Tether and Tether Gold was another key initiative that we brought to the public in the first week of 2026. By leveraging Tether's stablecoin technology, we now have a solution for creators to bypass the friction and predatory fees of traditional payment rails. Third, Rumble Shorts. After carefully listening to our community, we introduced Rumble Shorts to deliver better user discovery of content. Rumble Shorts are short vertical videos that play in a continuous swipeable feed, which introduces a fast, engaging way to watch and interact. Users can easily consume shorts from their favorite content creators, discover new ones and send tips through Rumble Wallet, which fuels platform growth and enables monetization. After being in a nonelection year and moving into a midterm election year, early signs are showing that growth is back. In Q4, MAUs are up quarter-over-quarter, driven primarily by international growth. And more recently, less than 10 days ago, Rumble hit a new all-time high of concurrent streamers on the platform. Dan Bongino is back as of February, and Asmongold, a top Twitch streamer, expressed that he is going to be joining Rumble. But it doesn't end there. After only a month since the launch of Rumble Shorts on the web and only a little more than a week or 2 on Android and iOS, the results are staggering. Rumble Shorts has been delivering records. And to quantify that, as of this past weekend, it broke the 1 million unique video views milestone in a single day, up from 669,000 only 1 week prior. It's still very early, but our teams are blown away with the success we've seen so far. We plan to market Rumble Shorts heavily given the stickiness and early response from our core audience. Now on to sales. Regarding our sales organization, as we have mentioned many times, prior to the 2024 election, brand sales faced significant headwinds. Since the '24 election, some of those headwinds have shifted into distinct tailwinds as we captured several brands, including Netflix, Morgan and Morgan, Perplexity, Crypto.com, and most recently, we've added Paramount, Amazon Prime and Fox Nation. To capture this opportunity, we appointed Greg Sherrill as President of Sales, who has had senior leadership positions at Magnite, AT&T and Comcast. Greg has already made strides in repositioning Rumble within the advertising ecosystem, improving our product as we seek to build meaningful integrations across demand-side platforms and supply side platforms and building a professionalized sales operation capable of converting our massive reach into high-value brand partnerships. While we work through the product development cycles, partnership and sales pipelines, we expect to see the returns in the back half of '26 and primarily into 2027. In the meantime, our content teams have been working diligently to capitalize on our recently announced $50 million per year advertising deal with Tether over the next 2 years. The strategy is simple: use the $100 million commitment as the advertising anchor to bring in incremental major influencers and podcasters to the platform. It's an incredible opportunity for the company, and we have been laying the foundation in recent months to capture this revenue opportunity. We expect this to materially ramp in the second and third quarter. The excitement for Rumble as a video platform and the sales infrastructure being put into place is at the highest we've seen it. Growth is back and the platform has never been more ready to capture the moment as we move into the midterm election year. Now let's talk about cloud, which is equally as exciting, but even more transformative. We continue to expect that our acquisition of Northern Data will close in the second quarter of this year, and we are as excited as ever about this transaction. Specifically, earlier today, Northern Data announced they are on pace for roughly 85% GPU utilization by the end of February 2026, which is an incredible accomplishment. This utilization represents the incredibly strong demand in the market. Since finalizing the definitive agreement on November 10, 2025, we have met with several GPU-as-a-Service customers and presented the industrial logic for the acquisition. The reception has been quite positive, not only from a variety of such customers, but also key strategic suppliers in the GPU ecosystem. These market participants see significant value in Rumble's Northern Data acquisition and have expressed keen interest in Rumble delivering Blackwell generation GPUs. Furthermore, many of these customers and suppliers have expressed the desire to begin working together as soon as possible. The pace and size of this growing pipeline, including strong Blackwell demand has been extremely encouraging. The pipeline in Northern Data's improved utilization demonstrates the level of growing GPU-as-a-Service demand, and Rumble couldn't be better positioned to serve it. As I said when we announced we're going public, Rumble's ambition was to compete with YouTube, Google Ads and all the hyperscalers. With the addition of Rumble Shorts, we can now add TikTok to the list. Every day our team continues to build is 1 day closer to realizing that vision. As we move through 2026, I think it's important to contextualize the hand we have. Midterm elections are around the corner, and our video platform is in the best state it's ever been to capture the potential audience growth. Second, our sales team is energized by a favorable ad market. Third, we expect Tether's advertising commitment to materially start to ramp in the second and third quarter. Fourth, we expect our acquisition of Northern Data to close in the second quarter of 2026, which we strongly believe will be transformative and redefine our revenue profile. Fifth, as detailed in Northern Data's announcement earlier today, Northern Data is nearing 85% GPU utilization, evidencing extremely, extremely high GPU demand. Sixth, multiple customers and suppliers have expressed interest in working together on GPU-as-a-Service opportunities as soon as possible. And seventh, Rumble Shorts is on absolute fire. I have to say it's never been more exciting to be at the helm of this company, and I cannot wait to see what this company looks like later in the year. Unknown Executive: I will now take you through our fourth quarter and full year 2025 financials at a very high level before turning the call over to the operator for Q&A. For the full year 2025, we reported revenues of $100.6 million, an increase of 5% compared to $95.5 million in 2024. Our first time achieving this $100 million milestone. For the fourth quarter, we reported revenues of $27.1 million, a sequential increase of 9% from $24.8 million in the third quarter of 2025 and a year-over-year decrease of $3.2 million, of which $2.8 million was attributable to a decrease in audience monetization revenues and $0.4 million to lower other initiatives revenues. The fourth quarter year-over-year decrease in audience monetization revenues was driven by a $5.5 million reduction in advertising, tipping and platform hosting fees, partially offset by a $2.7 million increase in subscription and licensing fees. The decrease in other initiatives revenues was due to a $0.5 million reduction in advertising inventory monetized by our publisher network, partially offset by a $0.1 million increase in cloud services. ARPU increased to $0.46 for the fourth quarter, up 2% sequentially from the third quarter of 2025, a continued positive indicator of our monetization progress. Average global MAUs reached 52 million for the quarter, an 11% sequential increase from Q3, driven primarily by our initial investment in international expansion. Cost of services in the fourth quarter decreased 26% year-over-year to $25.6 million, primarily from an $8.8 million reduction in programming and content expenses. For the full year, cost of services decreased by $31.1 million to $107.4 million, primarily from a $33.9 million reduction in programming and content expenses, offset by an increase in other cost of services of $2.8 million. Adjusted EBITDA loss for the fourth quarter was $16 million compared to a loss of $13.4 million in the fourth quarter of 2024. For the full year of 2025, adjusted EBITDA loss improved to $74.3 million compared to a loss of $92.1 million in '24, an improvement of $17.8 million, primarily driven by the reduction in programming and content expenses and revenue growth. You will see in our financial statements a net loss for the fourth quarter of $32.7 million, which compares to a net loss of $236.8 million in the fourth quarter of 2024. I want to note that the prior year figure included $184.7 million in the change in fair value of derivative liability related to the Tether strategic investment. We ended the quarter with total liquidity of $256.4 million, including $237.9 million in cash and cash equivalents and $18.5 million in Bitcoin holdings. Our Bitcoin holdings are carried at fair value and remeasured each quarter. For the full year, net cash used in operating activities was $70.4 million, an improvement from $87 million in 2024. As Chris described, we entered 2026 with momentum across video, advertising and cloud. The Tether advertising commitment, the build-out of our sales operation under Greg Sherrill and the pending Northern Data acquisition all represent meaningful catalysts for revenue growth. We have the liquidity, the strategy and the team to capitalize on each of them. That concludes my prepared remarks. Before I turn the call over to the operator, I invite you all to join Chris this afternoon at 6:30 p.m. Eastern Time in an exclusive post-earnings interview with Matt Kohrs to be streamed live on the Matt Kohrs Rumble channel. That concludes my prepared remarks. Operator, we're now ready to open the line for questions. Operator: [Operator Instructions]. Our question comes from Thomas Forte, Maxim Group. Thomas Forte: Great. So first off, Chris and Brandon, congrats on the broad-based momentum. I have 3 questions. I'll go one at a time. The first question I had is, how is the addition of Greg Sherrill as your first President of Sales for Rumble Advertising expected to change your go-to-market strategy? Christopher Pavlovski: Tom, this is Chris. Thanks for the question. So traditionally, Rumble prior to the 2024 election was not pursuing brand dollars for various different reasons, mostly because we are boycotted and weren't able to work with a lot of the agencies prior to the 2024 election. That has completely changed post 2024 election. So the environment is much different. And as I stated earlier, a lot of brands have started to work with us that I previously mentioned. And the idea with Greg now is to finally go on the offense to those agencies and start bringing the ad dollars not by taking phone calls, but by going and being proactive and going to the top and the largest agencies in the world and getting those ad dollars into the Rumble advertising center, both for video, for our publishers, for eventually our new Rumble Shorts product, et cetera. So the strategy going forward is it's going to be very much on the offense, and it's going to be going and getting net new ad dollars from big brands. Thomas Forte: Excellent. And then you sort of teased my second question there. So how might a new content type such as Rumble Shorts serve as a catalyst for advertising revenue? Christopher Pavlovski: So in this stage right now, in this quarter and in the next quarter, we're going to keep advertising off Rumble Shorts and really kind of just press as hard as we can on the growth and see how far we can push that. Obviously, we're seeing some pretty amazing internal results that I already went through. But coming later in the year in Q3 and Q4, my teams have already kind of developed what that is going to look like and how we're going to start inserting that. We're looking at taking a very similar approach to Instagram and TikTok in terms of integrating ads that will all come through RAC and maybe we might use some other partners to help us with that. But in the very short term, we're going to just kind of keep the ad load off until we get into the third quarter and kind of evaluate there. The last thing we want to do is kind of hinder this growth that we're seeing. So we're going to push that as high as we can and see where that takes us before integrating the ads. But the ad is definitely a component that is very important. We're going to need to monetize for the creators, and that is going to be something that we must do. I see us doing that by the end of the year. Thomas Forte: Excellent. And then last one for me. So can you briefly explain how your current relationship with content creator and former Deputy Director, FBI, Dan Bongino, is similar to and different from your prior relationship before you left the platform to join the FBI. Christopher Pavlovski: Yes. So I can't get into the specifics of agreements, but I will say that prior to him going to the FBI, he brought his content onto the platform, and that was his choice. Post FBI, we now have his content exclusively, the video podcast exclusively on the platform. That's as much as I could say without getting into the details, but it is -- the video podcast is exclusive to Rumble as it stands right now, and it was not contractually exclusive prior to that. Operator: Our next question comes from Jason Helfstein from Oppenheimer. Jason Helfstein: Definitely always keeping it interesting, not boring. I'll ask 3 and then I'll jump back in the queue and then follow up. So first, I think you made a point that engagement kind of benefited from international. And so if you would strip that out, like the ARPU would have actually increased more on a quarter-to-quarter basis. I don't know if there's more color you can give us there. Christopher Pavlovski: Jason, this is Chris. So yes, we saw some -- we saw international growth. We've obviously been pushing the international in the last quarter by launching a bunch of new languages. Our monetization in the international markets is very negligible, very low in comparison to the U.S. market. So if you were to look at it on a U.S. basis, then yes, I would say that would be correct. But at this point right now, we're kind of still testing the international markets. And whether or not we peel that out and kind of look at ARPU in different countries, it remains to be seen, but we just kind of want to see what really sticks internationally and what works internationally. And then obviously, what markets are going to be easiest for us to monetize internationally and then kind of go from there before we peel out those ARPUs with different countries. Jason Helfstein: Okay. And then on Northern Data, what still needs to happen for the close in the second quarter? Just take us through what's left in the process. Christopher Pavlovski: So at this point right now, we're on track to close in the second quarter. It's -- that's kind of been the schedule since the very start. So everything is running on schedule and on track to close for the second quarter. Obviously, there's -- we still got to go through the tendering process, et cetera. And that's all on schedule to close up by the end of the second quarter. Jason Helfstein: Okay. So like literally like outside of some like, I don't know, procedural or document or something, like is there any way at which any Northern Data shareholders could block the transaction at this point by not tendering? Christopher Pavlovski: No, not that, no. Jason Helfstein: Okay. And then I guess, congrats on the positive gross profit in the quarter. It looks like the minimum guarantees were down like another $1 million-ish sequentially. I mean, Brandon, do you see the pattern that pattern of like lower minimum guarantees continuing into '26? Or do you plan to reinvest the [ Tether Ed ] commitments into like more content and kind of almost like start again with the minimum guarantees? Brandon Alexandroff: Yes. If you kind of take a step back to where we were a year ago, we talked about kind of reducing those minimum guarantees and moving materially towards breakeven. But with the Tether investment and the opportunity we have there with the Tether contracts, I think we said we're going to kind of hit the gas again and start investing again. So I think you'll see some of those investments continue to grow over 2026. And -- but at the same time, we've learned a lot from a lot of those contracts. And we would like to and we plan on moving more towards having profitable agreements. So you'll see continued increase in cost, but we expect the revenue to be increasing at the same time. Operator: Our next question comes from Rohit Kulkarni from ROTH Capital Markets. Rohit Kulkarni: A couple of big picture ones. One on just the drivers behind kind of the advertising sales growth, maybe break down ARPU versus audience growth. What are the next 2 to 3 quarters given the org that you have and the new ad units and new ad surfaces. Maybe just break down how are you thinking about the algorithm behind ad sales growth? Would love to get your thoughts. And then I have a couple of follow-ups. Christopher Pavlovski: Thanks, Rohit, for the question. So when it comes to ad sales, we're anticipating that Greg and his team will start to ramp up later in 2026. Obviously, the ad sales cycle is -- can range from like 6 months to a year with the big brands. You got to get to the upfront, then you got to get your bookings, the RFPs, place the orders in and then get them out the door. So we see that as like a 6-month to a year cycle with the big brands for any kind of meaningful spend. Obviously, with RAC, we have a significant amount of inventory to monetize. So we're very ready on the technology deployment side of the ad sales. And on the sales front, Greg just recently started in the last -- I believe, in January. So he's only been on the ground for a couple of months. So it's been a lot of initial meetings. And then once those initial meetings conclude, he goes into basically getting the bookings and then we go from there. But I see this all kind of materializing in late '26 and then primarily in 2027. But like you mentioned, we do have some other upcoming ad units like with Rumble Shorts later in the year, there is possibility that this can make an impact in the '26 here in Q3 and Q4 as well. Rohit Kulkarni: Okay. And then I guess to the extent -- just on the AI cloud and Northern Data, to the extent you can provide any more color on like how should we think about just the return on investment and kind of how much CapEx do you feel you would need to do over the next kind of 12 months, 24 months? And how do you keep up with a space that is increasingly fragmented and probably getting very competitive? Christopher Pavlovski: Yes. So this is actually a great question. What we've seen in the last couple of months is the demand is unbelievable in this space. The demand for GPUs, even for the H100s and definitely for the Blackwells, the GB300s, it's off the charts from our perspective. And as Northern Data continues to get their utilization up and as you saw, around 85% by the end of this quarter, we're really in a position where we're going to have to invest and really grow this business. And obviously, that is the intent here is to grow it and grow it rapidly. So we're meeting with a lot of customers. The way in which we want to execute on that is we want to secure the contracts in hand from these customers and then go out and purchase the GPUs. So that way, everything is set up in a very good way for the company in a way that will provide us really good returns. So we're out there meeting these customers as we speak every day, and we're really kind of setting up the future here for when this transaction closes. And also, even if it happens prior to the transaction, Rumble Cloud will -- is very open to doing deals prior to the transaction closing as well because we do have the capital on hand and these investments look to have really good returns. So we're very keen on moving as quickly as possible, potentially with some of the clients we've already met with. Rohit Kulkarni: Okay. Great. And one specific one on the AI cloud, if you could. Is there a specific kind of amount of megawatts or number of GPUs that you feel you could scale up to by end of this year or in 12 months after the transaction closes, that's the metric that investors would love to track? Christopher Pavlovski: That's more of a Northern Data question. But what I can say is that there is capacity to scale immediately in some of their data centers with the GB300s, and that is something that we're very much looking into. There's an immediate scaling that we could do with the current data center set that they have. And then obviously, they have other sites like Maysville that require development and have a lot of megawatts potential there. But yes, there is immediate capability to scale with some of their current sites. Operator: We have a follow-up question from Jason Helfstein, Oppenheimer. Jason Helfstein: Like 2 more. So on the $150 million that Tether has committed to spend for data center usage, how are you thinking about prioritizing them? So is it like if you have more demand than you can fulfill with the $150 million, do you -- does Tether get prioritized lower for outside clients or they get prioritized first or TBD? Just any color there. Christopher Pavlovski: Thanks, Jason. So yes, we're going to treat Tether like any other customer, any other paying customer with their demand and the commitment that they have, we're going to have to obviously expand and provide them and invest and provide what we are committed to providing them. And obviously, depending on their needs and the way they scale, we'll accommodate that as well. But our -- my philosophy here is that, obviously, there's a lot of demand in this AI space. There's a lot of people that want to make commitments and pay for H100s or Blackwells and whatnot. We're here to just kind of step on the gas pedal and really grow this business. That's the intent. That's why we're acquiring Northern Data. And we obviously have a lot of potential customers even outside of Tether, and we're looking at all of them, and we want to service as many as we possibly can. And obviously, Tether is one that we definitely want to service as well. Jason Helfstein: And then just on your comments about like the Browns, the Dolphins, the Buccaneers, the NFL you've been signing up, I mean, we can kind of see what the other initiatives line in the model as far as revenue. I mean, it doesn't look like at least so far, any of these teams have been meaningful to revenue. I guess like when they scale up, it's almost like, I guess, like placehold it like is it like, okay, each team -- are these like a few hundred thousand dollars, $0.5 million just kind of when I look at it, right, like other initiatives has revenues gone down by $400,000 from the beginning of the year to the end. Obviously, some clients have moved in, some moved out. But I guess, like how big, for example, could like this NFL business be just as an example? Christopher Pavlovski: Well, I can't speak to specific contracts and deals on our current cloud side. But the way we look at sports as a category is that they're very kind of new in the cloud space. They're really just starting to use video in terms of like keeping all that data and analyzing all that data for plays. And we see this as a pool that will grow quite significantly in the later years to come as they continue to keep more content in the cloud and scale with us and do more things. So that's just like one segment. For us, it's -- we're looking at all different segments, not just NFL teams, but we're looking in various different other areas as well. But yes, in terms of sports, we do see like long-term potential there to grow them. Operator: Ladies and gentlemen, there are no further questions at this time, and this concludes today's conference call. Thank you for your participation. You may now disconnect.
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: Good morning, and welcome to PROREIT's Fourth Quarter and Annual Results Conference Call for Fiscal 2025. [Operator Instructions] For your convenience, the results release along with fourth quarter and fiscal 2025 financial statements and management's discussion and analysis are available at proreit.com in the Investors section and on SEDAR+. Before we start, I have been asked by PROREIT to read the following message regarding forward-looking statements and non-IFRS measures. PROREIT's remarks today may contain forward-looking statements about its current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements or other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors may cause actual results, level of activity, performance, achievements, future events or development to differ materially from those expressed or implied by the forward-looking statements. As a result, PROREIT cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking statements contained in PROREIT's MD&A dated March 4, 2026, available at www.sedarplus.ca. Forward-looking statements represent management's expectations as at March 4, 2026, and except as may be required by law, PROREIT has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The discussion today will include non-IFRS financial measures. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from the REIT's IFRS results. For a description of these non-IFRS financial measures, please see the fourth quarter and fiscal 2025 earnings release and non-IFRS measures section of the MD&A for fiscal 2025 for additional information. I will now turn the call over to Mr. Gordon Lawlor, President and Chief Executive Officer of PROREIT. Please go ahead. Gordon Lawlor: Thank you, Sylvie. Good morning, everyone, and welcome. Joining me today is Alison Schafer, our CFO and Corporate Secretary. Zach Aaron, Vice President of Investments and Asset Management, is not joining us today as he has a new bouncing baby girl as of last week. Congrats Zach and Julia on his proud new parents. I'll begin with an overview of our fiscal 2025 and fourth quarter performance before turning the call over to Alison for a more detailed review of our financial results. We're very proud of our performance in 2025, which marked a major milestone for PROREIT as we completed our transition to a pure-play industrial REIT focused on small and midday properties. I want to commend our entire team. Achieving this strategic objective established 3 years ago reflects the disciplined execution and commitment of our employees. Over the course of the year, we repositioned our portfolio, strengthened our balance sheet and enhanced the overall quality of our platform to support sustainable long-term growth. At year-end, our portfolio comprised 105 investment properties, totaling 6.4 million square feet of gross leasable area. Weighted average lease term to maturity was 4.3 years compared to 3.8 years at the same time last year. In line with our capital recycling strategy, we sold a total of 17 noncore properties during the year for gross proceeds of $71.2 million. We also acquired a portfolio of 7 high-quality industrial properties in Winnipeg, Manitoba from Parkit Enterprise, Inc. for $101.9 million. By the same token, we struck a strategic partnership with Parkit to pursue future growth opportunities. As part of the transaction, we also successfully raised $42.1 million of equity, further enhancing our financial flexibility and positioning the REIT for future growth. As of year-end, industrial assets represented 90.5% of our base rent compared to 80.8% a year ago. The enhanced earnings profile of our industrial-focused portfolio is reflected in our financial performance. NOI rose by 9.6% in the fourth quarter and 8.4% for the year despite owning 10 fewer properties. Turning to the portfolio transactions during the year. We completed the sale of a noncore office property located in St. John, New Brunswick, totaling approximately 51,000 square feet for gross proceeds of $7.2 million. We continue to manage that property on behalf of the purchaser. And the sale of our noncore retail property in Rocky Mountain House, Alberta, totaling approximately 5,000 square feet for gross proceeds of $400,000. Net proceeds for these sales were used to repay related mortgages, credit facilities and for general corporate purposes. Leveraging our partnership with Parkit, we purchased an industrial property in Winnipeg from them for $5.4 million as we continue to increase our presence in this market. Purchase price was financed through $3.2 million of the non-revolving credit facility and approximately $2.1 million of PROREIT equity priced at $6.20 per unit to Parkit. Subsequent to year-end, we engaged in 2 additional transactions. First, we sold our 50% interest in a noncore industrial property in Dartmouth, Nova Scotia, totaling approximately 65,000 square feet with our share of gross proceeds of $5.7 million. Second, we're in the process of acquiring a 100% interest in a single-tenant 2024 built 10-year leased industrial building in Milton, New Brunswick, totaling approximately 60,000 square feet of GLA for $12.3 million. Our focused presence in robust secondary markets continues to deliver compelling results. According to CBRE, our core markets of Halifax, Winnipeg and Ottawa all outperformed the national average in terms of market rent growth in 2025. Turning to leasing activity. Our leasing momentum was sustained throughout the year, driven by contractual rent escalations as well as stronger renewal rates and higher rents on new leases. As of today, we've secured 80.1% of GLA maturing in 2025 at a positive average spread of 34.2%. Excluding the St. Hison property, which I'll address shortly, we've renewed 95% of our 2025 GLA. We've also secured renewals on 68.2% of GLA maturing in 2026 at a 33.8% positive average spread, reflecting one of the strongest leasing cycles at this stage in our history and providing meaningful embedded growth heading into 2026. This includes, among other transactions, 5 leases renewed starting in 2026 with rent increases ranging from 40% to 45%. Overall portfolio occupancy was 95.4% at year-end compared to 97.8% a year earlier. As noted on previous calls, our occupancy rate was impacted by a single vacancy in a 176,000 square foot property located at 6375 Picard Street in Saint-Hyacinthe Quebec. On February 27, we entered into a nonbinding offer to lease for approximately 74,000 square feet at this property to a new tenant for a term exceeding 10 years at a market rent. Subject to the completion of the binding lease, rent commencement is expected mid-2026. Including this property, our portfolio occupancy would have been approximately 98.1% at year-end. With that, I'll now turn the call over to Alison. Alison, over to you. Alison Schafer: Thank you, Gordie, and good morning, everyone. We are pleased with our fourth quarter and full year results. In the quarter, property revenue totaled $26.2 million. That's up 5.4% year-over-year despite owning 10 fewer properties. The increase is mainly driven by contractual increases in rent and higher rental rates on lease renewals and new leases. For the full year, property revenues amounted to $104.1 million, up 4.9% year-over-year. Net operating income, or NOI, was $16.1 million, an increase of 9.6% compared to last year due to the same factors. For the full year, NOI amounted to $63.4 million, which was up 8.4% year-over-year. Fourth quarter same-property NOI, representing 98 of our 105 properties reached $14.1 million. That was up 8.1% year-over-year, driven by robust 9.1% growth in our industrial segment. The increase reflects contractual rent escalations, stronger renewal rates and higher rents on new leases. This was achieved despite a decline in overall average occupancy related to the single tenant vacancy Gordie mentioned earlier. For the full year, same-property NOI reached $53.0 million, up 8% year-over-year. Our funds from operations, or FFO, amounted to $7.8 million for the quarter, which was up 14.3%. This was driven by increases in contractual base rent, higher rates on renewals and higher rental rates on new leases. This was offset by an increase in interest and financing costs. Basic AFFO payout ratio was 99.1% in Q4 compared to 96.1% for the same quarter last year. This is primarily driven by the timing of the sale of 17 properties we completed in 2025, an increase in interest and financing costs and the issuance of equity in connection with the Parkit transaction in Winnipeg. We expect improvement on our payout ratio, creating some financial flexibility and some room for future acquisitions. The weighted average capitalization rate of our portfolio was stable year-over-year at approximately 6.7% at December 31, 2025. Moving on to our balance sheet. Adjusted debt to annualized adjusted EBITDA ratio came in at 9.0x at December 31, 2025. That was down from 9.2x at the previous year-end, while our adjusted debt to gross book value decreased to 48.8% from 50.3% at the same time last year. Our midterm goal is to reduce our adjusted debt to adjusted EBITDA ratio and adjusted debt to gross book value further as we continue to grow the business. At year-end, our total debt, including current and noncurrent portions, totaled $525 million compared to the $531.1 million at September 30, 2025, and $499 million at December 30, 2024. Looking at our upcoming maturities. In 2026, we have $157.1 million maturing. We are actively engaged with lenders on these maturities and expect to secure refinancing on competitive terms with robust refinancing proceeds. In 2027, we have another $48.7 million maturing, mainly tied to high-performing industrial assets in Burnside Industrial Park. And for 2028, we have $59.8 million of maturities. The weighted average interest rate on these mortgages is 3.7% for 2026. 4.8% for 2027 and 3.5% for 2028. Finally, our distribution of $0.0375 per unit was maintained for the fourth quarter of 2025. That wraps up our financial review. Gordie, back to you for closing remarks. Gordon Lawlor: Thank you, Allison. We're entering 2026 with a clear strategy and a focused industrial platform, supported by disciplined financial management. Our priority remains the pursuit of high-quality opportunities aligned with our prudent value-driven approach to growth. Fundamentals across our small and midday portfolios remain healthy, and we're seeing signs of improving market conditions as we move through 2026. With this strong foundation, we are well positioned to strengthen our leadership position in the Canadian light industrial sector and create sustained long-term value for our unitholders. Thank you. Sylvie, back to you for the question-and-answer period. Operator: [Operator Instructions] And your first question will be from Sam Damiani at TD Cowen. Sam Damiani: [Operator Instructions] Just on your comments, Gordie, and I guess, Allison, too, just with the NOI growth being very strong and you're seeing improving market conditions as you enter the new year, your leverage did tick down below 49% with the asset sales that you've completed. I mean, are you seeing a better path, an easier path, I guess, to bring that leverage toward those midterm targets now than, let's say, was the case a year ago? Like are we -- should we be building in some expectations for that leverage to stay further below 50% going forward? Gordon Lawlor: Thanks, Sam. I think where we are right now, I mean, I like us being around the 50%. I know we have that 45% target -- to [indiscernible] fully get there, we need to tie it into a larger deal with some equity. So really, what we're focused now is just staying around the $50 million. When we talk about where we are, I mean, we have room for about $40 million in acquisitions right now, and we'd like to see if we could execute on that. We announced a $12 million -- great $12 million asset here. So probably room for another $25 million or $30 million. So you'd probably see that before we focused on the debt reduction. We've been so focused on the debt reduction since 2022, and we just want to have this opportunity. We see a lot of assets right now in the market. So there's some opportunities here to add about another $40 million to the math. And then we're still mindful of the 50%, we wouldn't go above that other than if it was on a short-term basis or anything. But the 48.8% is where we ended up the year, but we'd probably pick that up a little bit if there were some good acquisitions. Sam Damiani: That's helpful. Just looking at the lease expiry schedule, you've got 17% expiring in 2027. I assume the government is a decent chunk of that. I mean, do you have any early prospects on extending those? Are there any larger expected departures within that cluster of leases? Gordon Lawlor: I mean we're reaching out to everybody in 2027. It's a little early on that basis. We have no real inclinations of any big spaces coming back at this point in time for 2027. And we have A big chunk of that is under market rent as well. So we don't really have a negative view of anything on as far as 2027 goes at this point in time. But obviously, we're just getting going on it. Sam Damiani: Okay. All right. That's helpful. Last one for me, just on Picard Street and St. Haison. You've got, I guess, that lease that's almost across the finish line. I'm just wondering what's left to finalize there with that? And also any update on prospects for the remaining 100,000 square feet of that property? Gordon Lawlor: Yes. So I mean I just signed the LOI like Friday night. So that's fresh, but we've been dealing with this tenant for 3 or 4 months. So we're well through that. We're crossing lease drafts and things like that. And if all things move well, they'll be into the building in April for some setup of some work to be done. So it's nonbinding, but everybody in good faith is working towards this one. It seems like a very good group we have here. So -- and backs off for a couple of weeks. So it's landing on my plate. So pushing it through to get it across the line, obviously. And as far as other prospects, nailing that piece down, if you were to look at the building, that's the half of the building facing the 20, the TransCanada Highway there. That leaves another 100,000 in the back of the building. There's good shipping in the back right of that building and then a little bit of shipping in the back bottom of the building. So it can be split in 2 more pieces. We're in initial discussions with another 60,000 square foot tenant right now, maybe short-term or midterm type storage. opportunity on one piece of the space without having to do anything to the building. But literally, we just started that this week because we've kind of secured the other piece. Sam Damiani: Okay. And you're getting rents that's sort of in line with the kinds of numbers you were talking about last quarter? Yes, higher than 9%, lower than 11%. Operator: Next question will be from Mark Rothschild at Canaccord. Mark Rothschild: Just following up on the discussion of same-property NOI growth and leases. You started answering or talking about 2027. To what extent do you believe that this wide leasing spreads that you're achieving will continue past 2026? Gordon Lawlor: So we have 5-year cash flow, Mark. I think we told you that before. So we still see the 7% to 9% cash flow growth across '26, '27 and '28 at this point in time when we -- when you get out to '29 and '30 and you're 4 and 5 years out, you're in other leasing assumptions and terms. But we see good strength for '26, '27 and '28 for sure. Mark Rothschild: When you just say cash flow growth, do you mean same-property NOI growth? Or do you mean actual cash flow FFO? Gordon Lawlor: Cash flow FFO. Mark Rothschild: Okay. Great. And maybe just one more for me, quite a bit of debt maturing this year. Can you just give a little more clarity on what rates you're seeing now and what we should expect based on the current market? Gordon Lawlor: Yes. I mean it's a great time to have debt coming due it seems other than all the terrible things going on in the world, like 3 lenders are a big piece of that. We're trying to secure some of that now. We've got good competition among the lenders. So I think we'd be -- and we just signed a $29 million 7-year brand-new piece with a new lender at $158 million over 7 years. So I mean that's a pretty solid rate for us. I think $155 million over is the best rate we've ever had on a margin basis. So I think we'd be -- depending on when we pick the terms, we're trying to break this $150 million up in the next number of years. So we may take some 3-year piece of this some 5, obviously, and then there was an attractive 7% here. So we're trying to split this one up a little bit more. We bought $300 million of assets in '21, which got us to the point where it was mostly all 5-year money that was available then. So we're trying to split that up. So the long story short, I'd say we'd be at about 4.5% on all of it. We'll probably get some 4.3s and then 4.6s is for the longer-term stuff. Operator: Next question will be from Brad Sturges at Raymond James. Bradley Sturges: Just maybe switching gears a bit. The asset sale that you completed to start the year in Halifax, just curious to get a bit more color in terms of the decision around or what drove that decision to sell that asset? Is it kind of a one-off? Or do you see potentially more rebalancing within the industrial portfolio? Gordon Lawlor: Yes, that's give or take, a one-off. I mean that's a joint venture asset with our partner who has a view on the portfolio, obviously. This asset was a little lower ceiling height than the rest of it, kind of orphaned in a different spot in the park. And so which we agreed with at the time just because I've known the asset for several years. We've got it secured now with some longer-term leases, so kind of full value. So I thought it was a good time to see if we could sell it. And we sold it just a slight premium above our IFRS value. I think it was $175 a foot or something like that. So we don't have significant discussions with towing of assets out of the JV. I mean we sold a small $3 million, $4 million retail asset, that type of thing. So it's just calling on the edges more than a sale program on the JV entirely, Brad. Bradley Sturges: Great. And can you comment on what the exit cap rate might have been? Gordon Lawlor: Don't exactly know. I would say it would have been slightly below 7. I don't have Zach here today with the math on it. But it was -- I'd say it would have been just below a 7 from 3 quarters perhaps. Bradley Sturges: And then obviously, you bought something in Moncton. Maybe just expand on the opportunity you see there with that acquisition. And then maybe what else could be in the pipeline from an acquisition opportunity? Gordon Lawlor: Yes, that's an asset, brand-new build asset that we've been monitoring. I think we gave our first offer on that back in April of '24, and we couldn't agree on a price. So it came up again, there was a rent step that happened, which made it easier to make the math work. So that was just a one-off asset that we've been watching and saw it being built and leased, and we like it a lot, and that's a long-term hold for us. As far as other assets, the -- publicly, the RFA Artis has 1.2 million square feet portfolio came out here a month ago. There's Winnipeg assets in there, which is obviously be of interest to us. I bid on an asset in single-tenant asset in Quebec City last week, just a quiet offer. So there's -- like there's a couple of million -- hundred million of real estate kind of sitting around my desk that we're getting quiet looks at or things like that, that some of it will stick. So it's a very interesting time actually. It seems like things are loosening up, and we're going to see some real estate come on here in the next 6 months, which is positive. Operator: Next question will be from Tal Woolley at CIBC Capital Markets. Tal Woolley: Apologies if you answered this before, but just any significant dispositions planned for 2026? Gordon Lawlor: No, not for 2026. We're I just looked it out and can't keep track of what's coming in and out the door anymore. Alison Schafer: No, we don't have any. Gordon Lawlor: No, no, we don't have any plans. I mean what we have left on the retail basis is grocery anchored on our line of credit, honestly. So it's like, honestly, just a pain to sell it. You'd have to replace it with other things. We might have one more office building towards the end of the year, small office. You can figure that one out. And then we're still holding the 60,000 square foot Ottawa office building. That's got debt on it at 2.9% until 2029. Good solid asset. I think it's still 80% occupied. I think we leased a floor but there were some other tos and fros. So it's still performing very well. And we have no need to fire sale that. That's a good asset. So yes, nothing big planned at this time. Like I said, we're going to try to put a few more assets on the books here with a little bit of room we have and then let the cash flow growth to keep these buildings leased obviously. Tal Woolley: Got it. And then maybe you can talk just a little bit about -- there's been a lot of chatter around defense spending, and that matters a lot in markets in the East. I'm just wondering, are you seeing sort of anything really translate on the ground yet in terms of demand? Or how should we think about that tailwind maybe coming to the market over the next few years? Gordon Lawlor: Yes, I sat in on the Burnside leasing call Tuesday. Every 2 weeks, we have a detailed call where you go through every 2,000 feet. It is a bit painful, but and Zach's absence. I think there's some RFPs out there for some larger space and that I go around the country talking about the defense spending, too. I think where it will help Halifax is the construction around all of that. That's what Burnside is construction related. They're going to let more people back in this country again, and they'll land in Halifax as well. So I think it's really the defense spending because of what will go on around it versus a specific defense contractor taking space from our small base standpoint at least, right? So I think [Killam] would probably have that same view on that. I didn't listen to their call. But I think that's the piece of it. And then just the defense spending in general, I mean, we have 128,000 square foot leased in Canada, Ontario, that's Thales, a French contractor. That's related to the Halifax project, but they're in Ontario. So it's not specific to Halifax. It's just in general, it could help defense contractors across Canada taking more space, I think it will be helpful. Tal Woolley: Okay. And then just lastly on -- are you looking at any sort of developing more new nodes? I think it's something like Quebec City, where I think you've got one property right now. Any interest in building out other sort of nodes within the portfolio over the next couple of years? Gordon Lawlor: Yes. I mean Quebec City has been on my list for like 15 years. It's just been hard to buy there. And for those of you who have followed, you know that through the Cominar deal, Blackstone Pure has like 3 million square feet there. So we have an interest in getting into that market eventually as we think some of that real estate will come to fruition. So that's definitely an area that we're interested in. I've been on a single tenant building here just last week. The ask was ridiculous. So I don't suspect we'll get anywhere. But yes, we're cognizant of that market. We've been trying to understand the market rent in the last 3 to 6 months because the rents were pushed there for a while. And we think we've got that figured out now. So we're happy to look there a little more. Tal Woolley: Okay. And anywhere else across the portfolio, Western Canada? Gordon Lawlor: Yes. I mean I was out West. I was in Calgary for a few days last week, like the Calgary small Bay market, spent the whole day driving that. There's some big bombers there in Balzac area north, all very fancy, all very shiny, but kind of not our real estate. But the Calgary small Bay market seems to be doing quite well. I've got a trip plan to Edmonton in the next couple of weeks as well to just test that back out. So the concept, as I said, at the Board yesterday, if we're trying to get to $2 billion in assets, we have to look at some of these other secondary markets. If you call Calgary and Edmonton, secondary in Quebec City, you do, I guess. So yes, we're just looking at those opportunities to see if any of it fits in our wheelhouse. So it's an interesting time. Operator: [Operator Instructions] Next is Demon Liu at Desjardins. Unknown Analyst: So on 2026 lease maturities, so very encouraged to see the strong leasing spreads so far for almost 70% of those maturities. So do you expect to achieve similar spread for the rest of the 2026 maturities? And do you see any material nonrenewal risks? Gordon Lawlor: I think we're going to -- I mean, if I look back to '24, '25, '26 yesterday, we've had plus 30% across all of those years. we don't see any indication of that changing significantly. The 70% that's done, a big piece of that is -- I think it comes in, in September. It's about 325,000 square feet from single-tenant temperature controlled building. So that would be more September that we'd see that cash flow. I think we may get 80,000 square foot back in a building in Woodstock, Ontario, probably in Q2. That's just recent. That's great space. We've already got some interest in it already, some tours like just in the last number of weeks. So that would be the only thing that's hitting us right now, probably mid-Q2. Unknown Analyst: Okay. So lastly, just on the acquisition, like what's your acquisition pipeline look like this year and in 2027? And like which markets and type of assets that you are targeting, if any? Gordon Lawlor: Yes. I mean, so we're a small mid-Bay folks. So that's what we're targeting. I mentioned briefly, there's some Winnipeg assets in the market right now. We're going to look at that. Quebec City is an area that's of interest. It's 2.5 hours down the road from our head office here in Montreal. Halifax, we look more -- we have 35-plus percent of the market there with our partners. So no need to do too much unless there was something interesting there. We have room for about $40 million in acquisitions right now. And then we announced a brand-new asset, $12 million in Moncton at a 7 cap. So that's really attractive brand-new building for us. So it's just a mix of small and mid-bay assets around our regions. Ottawa is of interest. It's just hard to get assets there. So we're -- there's a lot of real estate that's going to come out, I think, here in '26. So we're going to be poised and looking at it all. Operator: Ladies and gentlemen, this concludes our question-and-answer period for today as well as the conference call. We would like to thank you for attending and ask that you please disconnect your lines. Enjoy the rest of your day.
Operator: Good afternoon, everyone, and thank you for your patience. Welcome to the BioLargo 2025 Annual Report and Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Loper, Investor Relations at BioLargo. Brian, the floor is yours. Brian Loper: Great. Thank you, operator. So the 10-K has been filed and this call is being webcast and available for replay. In our remarks today, we may include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-Q, 10-K, Form 8-K and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. And with that, I now hand the call over to BioLargo's Chief Executive Officer, Dennis Calvert. Dennis Calvert: Brian, thank you very much. Good morning, everyone. We're excited to present BioLargo's 2025 Annual Report Earnings Call. We're at a time of pivotal transition, moving decisively from development into commercialization across our key technologies. We'll detail how our strategic focus has positioned us for significant growth and value creation, and we're eager to share the progress we've made and our vision for the future. Before we dive into the details, take a moment to review our safe harbor statement. Brian covered that quite well. This presentation does contain forward-looking statements, and the actual results may differ. We encourage you to always look at our periodic filings with our 10-K and our quarterly reports to get a comprehensive understanding of the risks and uncertainties and we believe in transparent communication with our investors and this statement underscores that commitment. Now let's look at the concrete actions that we took in 2025 and up to today. Our journey is marked by disciplined execution, where we've delivered and are delivering on key commitments. We've successfully installed our AEC technology at the municipal site, launched Clyra Medical commercially and presented exceptional clinical data for our ViaCLYR products. We also have advanced critical battery factory partnerships, secured third-party validation of the Cellinity Battery technology, and we've taken decisive action to protect our intellectual property. Our engineers have continued to grow their services business while continuing to support our various technologies through their validation and commercialization journey. This disciplined approach ensures a strong technical and commercial foundation for our future growth. This focused execution has significantly strengthened our diverse portfolio, which we'll explore next. Our portfolio contains 4 distinct platforms addressing massive market opportunities through one-of-a-kind technical solutions that have each been validated for their performance. Each platform, Clyra Medical, Cellinity Battery, AEC water treatment and ONM Environmental targets very large commercial markets. We hold a significant stake in the ownership of these companies ranging from 49% to 100%, in these -- what we consider to be high potential ventures. In addition, BioLargo receives a 6% royalty on sales helping ensure a consistent revenue stream for the corporate office as these businesses grow. The structure also creates an attractive investment framework for both BioLargo and our investment partners to participate directly in the growth of our subsidiaries. The model helps us diversify our risk from things that are simply out of our control, leverage our core competencies, attract diversified investors and also help future liquidity events for each business and its investors including BioLargo with the goal of rewarding our shareholders and our co-investors. This diversified approach allows us to sustain an impressive team of scientists, engineers and business development professionals while advancing each business unit through the commercialization process with a highly specialized team members for specific industries. Clyra Medical is now entering its commercial stage. We want to do a cheer. It's a great moment of excitement. It's been a long time coming. It's very exciting. It's a significant milestone after years of dedicated development. It's ViaCLYR product, a wound irrigation solution, which is FDA 510(k) cleared and delivers a superior antimicrobial kill rate and sustained efficacy, making it both safe and effective for all wound types. We've secured an exclusive distribution agreement with Advanced Medical -- Advanced Solution, providing access to thousands of hospitals and clinics focused on wounds and burn care. Our first commercial stocking order has already been shipped and paid for and a compelling -- and the compelling clinical data that was recently presented at the 48th Annual Boswick Symposium, the world's leading wound and burn symposium. It's a big deal. This commercial momentum is further supported by recent infusion of capital of $1.7 million all in the last few weeks, actually, positioning Clyra for substantial revenue growth. As you may know, we also have a major industry strategic distributor preparing to launch products in the near future. We're extremely excited about this development and we look forward to sharing more details, including their identity and the innovative products involved, when the time is right, which is now in the final stages of preparation. We can see the starting gate and we've done quite a bit of preparation for this moment. It's also worth noting that direct investments into Clyra over the past 14 months which concludes 2025 up to present, now total about $7.5 million. BioLargo has invested about $1.7 million approximately over the last 2 years. In addition, Clyra's CEO, Steve Harrison, and I, Dennis, as the Chairman of Clyra Medical, have also invested from our personal estates approximately $320,000. We're going to dig a little deeper into the clinical evidence next. Our clinical data for Clyra Medical speaks volumes about ViaCLYR's effectiveness. For me, personally, this is a full circle story for BioLargo. I've had the honor to work with Ken Code, the original inventor who first shared with me the story of his discovery and his belief that it would impact the world for good. It was the origin story of our beginning and to see it come full circle is extraordinarily gratifying. Our work with the FDA help me understand just how special the technology is. As we were told by the reviewers, they've never seen results like we had proven in the data submissions. Now we have leading professionals in the field -- experts testified to their peers about the remarkable results is simply amazing and extraordinarily gratifying. To note that our work can now be showcased around the world, to help professionals avoid infections and assist in healing wounds is just awesome. We believe the combination of claims that Clyra can now present to the field to the market are unmatched. The strong clinical validation with more in the works on a continual basis, supports our commercial launch and future product expansion. We believe that our Clyra products can become known as the new standard of care for infection control and wound care around the world. Next, we'll talk about the progress in solving the PFAS problem. Our first municipal deployment of our AEC system in Lake Stockholm, New Jersey is up and running, and it validates our commercial readiness. The AEC is better than other technologies. It treats long and short chain as well as ultra short chain molecules, all in the PFAS family, and it generates at the same time, minimal waste, which is crucial for municipalities. The AEC at Lake Stockholm is now under a 12-month monitoring program with the U.S. EPA and the department -- the New Jersey Department of Environmental Protection. We're also advancing industrial pilots of key partnerships. We're engaged in active discussions with major partners around the world, and we have an extraordinarily robust pipeline of projects in consideration. Moving on, we're going to talk about the Cellinity Battery. The Cellinity Battery represents a superior solution for the $1 trillion dollar energy storage market, which is expected to grow 6x to 7x its current size over the next 15 years. This sector is widely considered one of the most significant growth opportunities in the energy industry as batteries are critical for data center development, grid resiliency and renewable energy storage. The performance metrics of Cellinity Battery are unmatched. The world needs better batteries. Lithium ion and even the emerging field of sodium ion have significant drawbacks. Our liquid sodium technology offers superior energy density in a 20-year life cycle. Crucially, it has no thermal runaway risk and uses earth-abundant materials, no rare earth elements, allowing to manufacture domestically in almost any region in the world. Our business model focuses on selling factories through joint venture structures on simply selling batteries. We've executed 4 MOUs and are actively negotiating joint venture partnerships around the world. Each gigafactory is forecasted to generate approximately $80 million to $90 million in annual net operating income based on a total capital investment of approximately $170 million. In that structure, we're seeking a minority interest and a royalty, again, in line with our model. It's also important to understand the significant incentives available in this sector, including energy credits, workforce development incentives, economic development incentives, a host of financial incentives to encourage the development of just this sort of strategy. These incentives create a compelling opportunity to develop joint venture project financed ventures globally, and we're excited to advance the prospects into definitive agreements. Now let's turn to ONM Environmental and the Pooph situation. Regarding ONM Environmental, our Pooph proprietary technology is proven at scale. The Pooph brand was built on our IP and achieved national recognition with over 60,000 positive Amazon reviews and impressive top line revenue, and it validated our business model. This effort validated the commercial power of the underlying technology. We took decisive actions in September 2025 revoking Pooph's license after they failed to pay $3.85 million owed. In November, we filed a federal lawsuit for patent infringement and false advertising and breach of contract. We're actively seeking new partners for pet products, and we're also active in these business dealings to hope to secure the right partner soon to see our technology find its rightful place in the market, eliminating troublesome odors, while remaining safe for people, pets in the planet. We believe this will reposition well, and we'll find commercial success again. So please stay tuned. I'm going to let Charlie Dargan, who's joined us, Charles, take this section. Charlie, you're up. Dennis Calvert: Thanks so much, Dennis. I appreciate it. And thank you, listeners and stakeholders, we at BioLargo, really do appreciate your support. I won't pull any punches. This was -- 2025 was a very difficult year for us. But I do want to give you some pointers and some proper context as to actually what happened. Now the raw numbers, which you see where our revenues declined to $7.8 million. Our loss was $15.2 million and our stockholders' equity declined to $1.5 million. But I do want to point out that throughout the process, throughout the year, we maintained our cash position, and you can see, we ended up at $3.9 million, which we continued. And we were liquid for the entire year, access to capital markets, other operations. So we were liquid and in a good cash position. So the big gorilla in here, and Dennis just mentioned it, of course, is the termination of the Pooph licensing agreement. That did create the majority of the decline in the revenue and of course, the increase in our loss. And just to point out because sometimes people miss it, but you'll see that we booked a credit loss, which is on top of the reduction in revenue of $3.9 million, so significant. I think on the other side, and this is a good thing. We did spend more or Clyra spent more but that is an increase in its staffing and development costs. And it's because it's prepping for this upcoming national product launch with a leading -- an industry-leading distributor, and Dennis mentioned that as well. We're very excited about that, and it's been a long time coming. I think the other thing I'd like to point out, and again, people kind of run over it is our service revenues because we've always -- we talked very heavily on our products. Our service revenue pretty much doubled. It went from $1.0 million -- $1 million in 2024 to approximately $2 million in 2025. And that just demonstrates not just with our engineering services, but our other services and products that our core business has organic growth. And I'd like to conclude and circle back to remind everyone that we maintained a strong cash position. We avoided having to raise any type of toxic debt and we maintained our liquidity throughout last year. I think that's part of just the discipline in our financial and our operational management. So what we've done is we've laid a solid foundation and it positions us very well for the commercialization efforts this year and in the future years. Dennis, I'm going to turn it back to you. Dennis Calvert: Thank you. Thank you very much, Charlie Excellent. So building on our disciplined execution in 2025 and to present, our current outlook for the future points to a significant inflection point for BioLargo. We anticipate multiple catalysts converging across the portfolio, driving meaningful revenue and market validation. Clyra Medical will see its commercial rollout accelerate with ViaCLYR, reaching a national network and an expanded product line. For the AEC water treatment, we expect critical validation data from Stockholm that could establish our technologies and industry standard. Our work with EPA will continue. It's important that validation really expands our presence throughout the world. We also have growing strategic alliances in development. Our Cellinity Battery is poised to secure its first definitive joint venture contract. We're working hard on that. Transitioning from MOUs to concrete factory engineering. Recall that in the business model, when we start, we make money. Finally, ONM Environmental is expected to announce new partnerships that will further expand our reach. Together, this convergence of milestones positions 2026 as a transformative year for BioLargo. So why now, right? Why invest in BioLargo now? We used the words off and we say we paid a price to be here. It's a pretty steep price and it's certainly tested everyone's patience. We've done the work. That's a common theme you'll hear come out of my mouth often. How do you get this done? You have to do the work. You have to do "all the work" to reach the remarkably good position we're in today, poised for massive success in multiple markets. We believe there is a substantial valuation gap between our current market capitalization in this potential of the portfolio. At this moment, however, we have significant benefit from powerful structural tailwinds. Increasing PFAS regulation combined with a level of dissatisfaction with old technologies like carbon. They have experience now. They're experiencing the weaknesses of the carbon solution in the current market. And even current installations with carbon are looking for a change out. It's remarkable. There's a growing demand for energy storage driven primarily by the AI boom, energy boom, and really widespread dissatisfaction with some outdated technology. In the medical field, old technologies that have been used to control infection and wound care, are often harsh and ineffective, short-acting. They don't have the same claims. There's also, of course, the persistent rise in hospital-acquired infections that now claim more than 100,000 lives in America alone. The timing for our solutions coming to market as the world is looking for better technical solutions to some of the most pressing issues like these creates a perfect storm. What's truly changed about the company is our transition from development to commercialization. There's examples all around us. Clyra Medical secured its first commercial revenue. The AEC has achieved its first municipal installation. Our battery technology is technically derisked. It's been reviewed by third parties and now has joint venture partnerships under development and demand for our solution in the world is an all-time high. Equally important, we have the basic capital foundation and structure needed to expand with partners, customers and maybe most importantly, non-dilutive capital providers. The recent clear raise in our strong cash position at this stage, especially in light of some of the adversity we had to overcome in the last 6 months is remarkable. As always, we remain committed to transparent communication, disciplined capital deployment and focused execution on near-term revenue milestones. The foundation of BioLargo is solid and unwavering, impact-driven leadership, a great team of highly trained professionals, best-in-class technologies and a capital conserving strategy. As we always say, we're on a mission. We believe our investments and they are investments, investments of money, time, energy, are well positioned to deliver both meaningful impact for a greater good but financial returns of great significance. So with that, I'm going to turn this back over to Brian for the Q&A. Brian Loper: All right. Thank you, Dennis. Thank you, Charles. On the financial front, do you guys expect to renew the Lincoln Park agreement or establish any new ATM agreement? Dennis Calvert: Yes. It's a good question. Yes, as referenced in our 10-K, the Lincoln Park agreement has expired on its terms and at this time, we have no intent to renew it. We do believe, however, the safety net that a facility like that can provide for the company is critical. It's critical not only in time of necessity but also as a tool to provide comfort for significant investment partners who are really looking for that kind of stability as we enter into dramatic commercialization. So yes, we do intend on pursuing that strategy, and we have commitments in place that we will continue to pursue and bring to conclusion and Lincoln Park is no longer providing that service for the company. Brian Loper: All right. Switching gears, why is the U.S. EPA in New Jersey monitoring the Lake Stockholm installation? Dennis Calvert: So there's a -- yes, it's a good question. We think it's really great, by the way. So I just want to make sure everybody got the tone of that. The federal -- so recall, the federal -- last year, we had a government shutdown, and we had a reorganization, if you will, of all these agencies. So the fact that the EPA has really focused in on our AEC is just awesome. The idea that the regulator itself is participating in the proving up of the technology and the validation work is extraordinarily valuable. So we're pleased to have them. As a normal process when new technology comes to market, you often secure what's called a temporary use permit. What that means is as long as you continue monitoring, they'll let you to install your technology in the field and go to work serving clean water to the constituents and the customers in the local market. So this is all normal. Using the state and the federal is awesome, really good for us. And as we've mentioned sometime before, there's even indication that the EPA would like to move forward with additional testing for validation purposes over an extended period of time in which they would actually purchase through the requisition equipment and tools to do that work. So it's all really good. And so we're thankful to have EPA on side with us to validate this technology. If you think about its importance in the field, the first installation is not a huge installation, but it is of reasonable scale and it demonstrates efficacy and its commercial viability. And there's a huge market for the smaller installations. Now we are moving upstream and what's amazing in our journey is to now see the very, very large customers who are looking at our solution as a scaled design. And so that does present supply chain and all sorts of work to do to make sure that we can compete at that level. It drives us to want to form alliances with larger companies that already have supply chain and scaled engineering and implementation in place. So I think that's a real driver as we look at those relationships to be able to compete at the very highest level. And again, we used to say the project should be $0.5 million to maybe $2.5 million. And we thought the big ones would be $5 million to $10 million, and we're now involved in bidding and quoting and scaling for projects in the $20 million and $25-plus million range. So we believe our technology will find a significant home in the market, and we believe it's a really great opportunity to find corporate alliances of significance to not only assist us in the growth that's required to support those customers, but the confidence and peer mass that can go literally all over the world. So we're pretty excited. Brian Loper: Great. Great. And then any insight as to why Garratt-Callahan has started actively promoting the AEC as the best PFAS solution? Dennis Calvert: Yes. I think it's a really great move. We've always had Garratt-Callahan in great favor. We're anxious to find success with our AROS system for sure. I know that's been a subject to frustration for everyone, including Garratt-Callahan, I'm sure, right? Because everybody wants to see that technology kind of sway the market. In the meantime, because of our work with them, there's a growing sense of comfort and confidence, which is all very good. And so to me, it's a little bit speculative, but I would chalk that up to real simple. Our AEC has commercial validation now. It has a demonstration site now. It has relationships with the regulators now. And the industry is evolving to more rapid adoption because of regulatory advancements. And the trend of that is not going to change, and everybody now accepts it as the future. And so my hunch is Garratt-Callahan smells business opportunity just like a lot of other people, which is really awesome. So I think that's the way to think about it. Brian Loper: Great. So let's talk more about Clyra. So Dr. Gitterle, recently did a presentation. Seems like a great guy. But is there a recording to watch of that presentation? Dennis Calvert: No. That venue is not our venue. So that's a production of the conference, and that's -- and it's not available for rebroadcast. We do have additional KOLs and Dr. Gitterle also preparing some of that work and presentation materials and also interviews. So there's going to be a number of tools that will come available for that information to be viewed by everyone in the public. And so standby for that to happen. We're also rededicating ourselves to more social media and really distribution of that kind of content. So it's not that it's a secret. It's that -- it's in production and it's moving fast, and we're really busy, but it's coming. So there you go. Brian Loper: Great. And then how many insiders invested into Clyra? Dennis Calvert: Well, let's see, I think we've got -- let's see insiders is funny. So we have employees that are not necessarily insiders, so because of their corporate position. But I think if you said -- if I say it a little differently, people that are closely tied to ongoing work with the company. I think there's 4 or 5 investors who come in. So something like that. Maybe more, but, yes, it's nice. For all reasons, it's good because our people do see it, and it's also good for outside investors to see it. But really, I would comment for everybody. We've always known the significance of the technology involved in the Clyra asset, the whole plan. We've just always known it. And it's -- when -- in the darkest hours when you're looking at the abyss charting your course, you're reminded of the significant impact that that's going to make all over the world. And it's kind of like this driving passion of impact that keeps us going to see it now come full circle is huge and see the clarity of the commercial strategy with all the tools being put in place. Steve Harrison has done a remarkable job, and I've got to commend his entire team. He's grown quite a professional staff. They're highly trained in the field. It's not inexpensive. Takes a lot of money. I always say in the medical field for med device like this, especially something going into the surgical suite, being used for inside the body, right, I'm sure we know that. It's a pretty technical thing and everything is expensive. Everything. Like tests and materials and production. So we've been able to capitalize that in a pretty effective way. That's also remarkable, a testimony to the technology and the team and our strategy, the way we played this out. So having co-investors for insiders is awesome. We're thankful. Brian Loper: Yes, absolutely. And how about so far this year, how much is Clyra rate? Dennis Calvert: I think we just reported in the deck, $1.7 million in the last -- basically last month for the post-effective subsequent events as disclosures in the K. We've got commitments for more cash, but that's not reportable until it's in the door. So we'll keep you posted. Brian Loper: All right. A lot of momentum with Clyra. That's what I'm hearing. Dennis Calvert: Yes. Brian Loper: Excellent. Well, that concludes all the questions we have from our investors. Thank you very much, Dennis. Dennis Calvert: Yes, I'll wrap it up here real quick. I want to thank everybody for the support of course. I know it's tested the patient level. But rest assured that we are steadfast and sure, and we're anxious to get some of these technologies repositioned, and we're looking forward to a great year. So thank you very much. We look forward to talking to you soon. Operator: Thank you very much. This does conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.
B. Bazin: Good morning. It is my pleasure today to present our 2025 results together with Maud Thuaudet, our CFO. Once again, we delivered a very strong performance in 2025. 2025 was the last year of our Grow & Impact plan, which has been a very clear success. We have demonstrated our capacity to execute year after year and deliver on strategic initiatives, value creation, margin and cash. Saint-Gobain is now an attractive business profile, thanks to our decisive portfolio optimization, which will, of course, will continue. We are positioned Saint-Gobain as the leader in sustainable construction, and we have achieved all the financial targets that we had set at our 2021 Capital Markets Day. Here are a few examples of Saint-Gobain solutions being used around the world in iconic residential or nonresidential buildings, such as this inspiring resort in Saudi Arabia. On infrastructure also, we have provided, for instance, 17 solutions at the new Noida airport in Delhi in India, bringing clear benefits in terms of climate resilience, regulatory compliance and fire safety. In 2025, our teams have once again delivered very well against very different market backdrops. Europe improved in the second half, returning to growth. In North America, as expected, we outperformed, and we delivered a broadly stable margin in the second half. In Asia and emerging markets, we delivered strong growth, up 12.6% in local currencies. And finally, we have taken new strategic steps in construction chemicals with Cemix and FOSROC acquisitions, in particular, achieving almost 16% sales growth in local currencies. Let me congratulate and thank very warmly all our talented and very engaged teams all around the world. Now moving to our financials. In 2025, we have delivered a strong set of results despite contrasted markets. Growth in sales up 2.1% in local currencies with over proportional growth in profit, both EBITDA and operating income, a robust EUR 3.3 billion recurring net income and a 4.5% increase for our proposed dividend at EUR 2.3 per share. We also continued to deliver strongly on free cash flow with a 58% conversion ratio. So a very strong set of results and very, very strong execution. Now, Maud the floor is yours to go through all the financial metrics. Maud Thuaudet: Thank you very much, Benoit. Good morning to all of you, and I'm very happy to share with you our strong 2025 results this morning. I'll start with the top line. We achieved sales growth of 2.1% in local currencies. On a like-for-like basis, sales were virtually stable. They were supported in H2 by good growth in Asia Pacific and Latin America, a return to growth in Europe despite the decline in North America. Volumes were down 1.3% over the year, reflecting these mixed market trends by geography. Prices were up 0.8% and with a positive 0.7% effect in H2 in a softer inflationary environment, inflation was broadly stable in H2. This actually reflects the added value of our solutions and disciplined execution from our local team. Currency effect was minus 2.3% for the year. It became more negative at minus 3% in H2 with the depreciation of most currencies against the euro. And we expect similar impact in Q1 2026 of around minus 3% on sales. We had a positive scope impact of 2.6% and reflecting our continued portfolio rotation and in particular, Cemix, FOSROC, Bailey and CSR. Regarding operating income and margins, we delivered overproportional operating income growth, up 3.8% in local currencies and slightly up like-for-like. We were able to deliver a stable operating margin despite the environment and the negative currency impact. This was driven by our ability to proactively adapt our operations throughout 2025 as market conditions shifted from our initial scenario. We had a greater impact from FX on the operating income at minus close to 4%, close to double the impact on sales. This is because the depreciation versus the euro was particularly seen in regions where the group -- where the margins are above the group's average. This strong margin performance reflects a very good operating performance, including a slight positive price/cost spread. Moving now to EBITDA and EPS. EBITDA rose 3.4% in local currencies with the EBITDA margin stable at 15.5%. Nonoperating costs remain below our group guidance of around EUR 250 million on average per year. And as explained in July, there were more in H2 than in H1. Net financial expense was up, reflecting the rise in gross debt and less interest earned on cash placements. The tax rate on recurring net income was stable at 24%. Last, EPS increased 2.5% and 6.4% in local currencies. Now looking at cash and balance sheet. We generated free cash flows of EUR 3.8 billion with a cash conversion ratio of 58%, above our target of 50%. We continue to dynamically optimize the operating working capital, reducing by 1 day to 11 days sales at the end of 2025 despite the dilutive effect of our portfolio rotation. And in terms of CapEx, we remain stable at around 4.5% of sales and planned for the same this year. We also maintained in 2025, a strong financial discipline and a strong balance sheet. Our net debt-to-EBITDA ratio was stable at 1.4x and we made clear capital allocation decisions toward value creation for our shareholders with notably 95% of our gross investment either through gross CapEx and M&A put in our high-growth markets and EUR 1.5 billion returned to our shareholders through dividends and share buybacks. Now let us look at the results by region, and I'll start with Europe overall, where we saw a return to sales and operating margin growth in the second half sales were up 1.1% in local currencies and up 0.6% like-for-like. The margin held up well despite the lower sales in H1 driven by firm price and cost management. In terms of local dynamics in Northern Europe, a contrasted situation from one country to the other with the U.K. reporting further growth with a strong outperformance, thanks to our specified sales and our full solutions offering in the country. Eastern Europe was slightly up even if Poland was impacted by weaker Industrial Solutions, Germany remained down ahead of the stimulus plan in a wait-and-see attitude and the Nordics remained mixed overall, but we won several large infrastructure projects there. Lastly, it's worth noting that we are well placed to capitalize on major infrastructure and defense spending in Central and Eastern Europe, thanks to a network of 100 plants and representing over 10% of our sales of the group sales. Now moving to Southern Europe, Middle East and Africa. We improved noticeably because in the second half, sales were up 1.7% in a market that remains uncertain, France stabilized in the second half and reported growth in the fourth quarter, driven by the rise in permits and housing starts, which should continue to support new construction. We outperformed the market in both new construction and renovation. Spain and Italy continued to show growth with particular market share gains in Interior Solutions and the Middle East and Africa achieved double-digit growth, supported by the successful integration of FOSROC, in construction chemicals and major infrastructure project in Saudi Arabia and Abu Dhabi. Moving now to the Americas. Sales in North America were down 4.2% over the year and by 7.3% in H2 with Q4 down 8.2%. U.S. roofing volumes remained low as expected in Q4, down 17% given the lack of major weather events. The new construction market was down, impacting Interior Solutions, but construction chemicals accelerated throughout the year with market share gains. Despite this challenging environment, our North American teams outperformed the market and delivered a very good operating performance, maintaining a positive price effect and optimizing production cost and industrial plant maintenance. As a result, margins held firm for the full year and in the second half. Latin America delivered a strong performance, up 13.5% in local currencies and 6.9% like-for-like. Growth was slower in H2 on a tougher comparison basis and with prices slowing at the end of the year due to lower energy costs. The integration of Cemix in Construction Chemicals has been a great success with 15% growth in local currencies and clear spillover effect in Central America for the full Saint-Gobain solutions offer. The Americas region delivered a slight increase in its operating margin over the year to 17.2% and held firm at 16% in H2, as we said last October. Turning lastly to Asia Pacific, we delivered 17% growth in local currencies and 2.4% like-for-like. The operating margin reached a record supported by volume growth and good pricing management. India saw double-digit growth and further market share gains with our comprehensive range of solutions, we were awarded new projects in nonresidential and infrastructure with increased share of wallet, thanks to our leadership in construction chemicals and the successful integration of FOSROC. Southeast Asia saw growth with a widened range of specified solutions and the delivery of 20 data centers in Indonesia and Malaysia during the year. The integration of CSR is going well, both in operational performance and in the enhancement of the solutions offering for the local market. The Australian construction market remains lackluster but leading indicators are improving. And last, China was down slightly over the year, but progressed in H2 with market share gains despite continued market weakness. So in a nutshell for Saint-Gobain, 2025 was a strong year focused on discipline and execution despite a contrasted environment. And for 2026, I can tell you that all the teams are fully committed. Priorities are crystal clear, outperformance, margin, cash portfolio rotation and we are all set to deliver. Benoit, I'll leave it to you for the conclusion. B. Bazin: Thank you, Maud. Let me now update you on our strategy. Saint-Gobain is opening a very exciting new chapter with our strategic plan, Lead & Grow that we announced at our Capital Markets Day last October. We benefit from strong supportive megatrends in sustainable construction, population growth and urbanization, notably in Asia and emerging countries, job site productivity and energy efficiency renovation, notably in Europe and the adaptation of buildings and infrastructure to extreme weather, especially in North America. We have an unmatched breadth of addressable markets across residential, nonresidential and infrastructure totaling EUR 500 billion. And to capture this, we are rolling out a value-enhancing solutions approach and leveraging the well-established growth compounding country platforms. Let's start with our solutions. We are the only provider of a comprehensive solutions set delivering performance and sustainability. We have everything for buildings and infrastructure from roofing to facades, flooring, partitions, ceilings and so on. And our solutions bring thermal, acoustic, air quality, visual performance and even productivity benefits project sites. This is altogether a very crucial competitive advantage for Saint-Gobain. A key part of Lead & Grow relies on our expansion of these solutions into nonresidential and infrastructure markets where we have many growth opportunities and where we can tailor and specify our Technical Solutions segment by segment. If I take the hospital segment, for instance, where hygiene, safety, air quality, comfort are crucial, we have a full range offer, including easy to clean floors and ceilings, X-ray protection plasterboard, antibacterial wall finishings and so on. We provide technical support in high performance and code-compliant materials and we have dedicated local teams for the health care market. Similarly, data centers have their own specific requirements centered around construction speed, thermal performance, fire safety, sustainable construction. And here also, we have a full catalog of technical, specific what we call hero products that address these needs. With our global key account management, we are currently working on an active pipeline of more than 600 data center projects in 26 countries around the world. In infrastructure, airports have their own specific requirements in terms of customer experience, regulatory compliance and climate resilience. We have also tailored comprehensive solutions to address both the billings, which, on average, is 60% of the CapEx for an airport and the infrastructure part of airports. As you know, we are growing fast on infrastructure, thanks to our attractive leadership in construction chemicals, which has been a very dynamic buildup in the last years. Our EUR 6.5 billion leading platform across 76 countries can address all critical parts of infrastructure and buildings. As we highlighted at our Capital Markets Day, we plan to continue our acquisitions and also our CapEx to reach more than EUR 9 billion of sales by 2030 on construction chemicals. This is a bit of a highlight by segment. Now let's look at how we deploy our solutions by region. In Europe, we see improving leading indicators with strong commitments from government, even the EU level to address the housing crisis, also some rising affordability and better housing starts. On the renovation side and energy efficiency, we see policies supportive of energy-efficient renovation and green value is increasingly reflected in real estate prices. We are well placed to benefit from the improving leading indicators, thanks to our solutions approach across the board that brings share of wallet, cross selling and margin benefits for Saint-Gobain. We also have very attractive digital solutions. One example is for architects on facade specification, we are the clear leader. The second one as a go-to partner for thousands of craftsmen in France, we have a full suite of digital tools enhanced by AI that bring to them speed and value on quotes, regulations, invoices, deliveries and, therefore, attractive, stickiness and volatility of those contractors to Saint-Gobain. In North America now, we work also on strong contractor engagement and loyalty to drive and enhance our brand reputation across our multiple products and solutions offer. We are the #1 position in North America on interior and exterior solutions. This allows us to further roll out cross-selling actions and more importantly, to build up and strengthen win-win partnerships with the top national distributors across the country. In North America, we are the best player to address the increasingly extreme weather conditions with the most comprehensive climate resilient offer on the market. But the core of that offer is our leadership in roofing across U.S. and Canada. And I'm convinced that it will continue to benefit from strong fundamentals. Although, as we know, the 2025 storm season was unusually calm with no hurricanes for the first time in 10 years, there is an increasing number of extreme climate events in the U.S. Second, more than 12 million homes built in the early years of 2000, need renovation -- aging of the roof. And third, we have this structural housing shortage that persists in the U.S. and in Canada. To build up on that momentum and the strong fundamental drivers of roofing, we are replacing a nearly 50-year old line with a modern, highly competitive roofing capacity in the undersupplied region in the Southeast. Altogether, I'm confident that this positions us altogether on climate resilient offer, including, of course, roofing, to outperform and continue to outperform in North America, like we have demonstrated again last year as one of the only 3 meaningful national players in roofing in North America. In North America, we're also expanding in nonresidential and infrastructure. We are well positioned to serve fast-growing segments such as data centers, airports, I mentioned hospitals a bit earlier on. We have dedicated sales teams and we differentiate with highly technical products like our Sage electrochromic glass. We are the only in the world to provide that, that has been specified in 29 U.S. airports over the last 2 years. Altogether, I'm confident about the structural growth drivers and outperformance of Saint-Gobain in North America and what will continue to grow in North America across the board in the coming years. Let's now look at how we are deploying our solutions in Asia and emerging countries, a very important profit tool and growth tool for Saint-Gobain. In India, we are the undisputed #1 on buildings, and we are expanding on infrastructure, already 2,200 major infrastructure projects in '25. In Southeast Asia, we systematically complete our offer country by country. And we differentiate like in China, differentiate ourselves with high value-added solutions that represent 45% of our sales, which brings good resilience and margin also in China. In this region, we are significantly increasing our penetration on nonresidential markets also through specification. Take the fast-growing hospitality market in the Middle East we are very well placed to service this market with our leadership positions in the Middle East and Turkey. In Mexico, nearly 30% of our sales stem for specification, and we are leveraging our widened offer, including our construction chemicals offers, thanks to the very strong profitable Cemix acquisition. So this is the view by region, after the view by segment. And as you know, to roll out our strategy, of course, quality of execution, which we have demonstrated day in, day out in the last 5 to 6 years, quality of execution is crucial. And this is what we have delivered consistently and will continue to do so. We benefit from our country-led operating model, which is well suited to our markets, of course, but well suited as well to our current geopolitical environment. This Saint-Gobain operating model has been tested and proven with proactive and empowered CEOs very close to their teams and customers. They work -- we work on all levers, commercial excellence, I highlighted quite a lot of examples by systematically tracking the rollout of our solutions, margin by proactively driving cost and productivity gains as well as positive price/cost price based on the value that our solutions bring to our customers and cash, of course. This operating model by country is a great growth and value creation compounder for Saint-Gobain. A few examples of what we have done in the last year, take, for example, North America, where our teams have increased our sales by 60% since 2019. Mexico, India, the Middle East, which are meaningful size for Saint-Gobain, not only in sales, but of course, in profit where we have more than doubled our turnover over the same period. And in all these countries, Saint-Gobain has significantly outperformed the market. As you know, one of the strong, very strong pillars of Lead & Grow is that we have done in the past, our ongoing portfolio optimization that has brought a lot of successes. So we continue to actively steer our portfolio optimization. I'm happy to say that the integration of FOSROC and Cemix in construction chemicals are going very well with 11% organic sales growth in local currencies and 20% combined EBITDA margin. We have created a lot of value in the past acquisitions, such as Chryso, GCP and Continental, and we are on track to deliver value for our most recent acquisitions. In 2025, we rotated EUR 1.2 billion of sales, and our country platforms are nurturing an active pipeline as we speak. As you know, we intend to rotate through acquisitions and disposals more than 20% of our sales by 2030, keeping a strong value and continue to work, of course, under value creation for our shareholders. Indeed, our strategy is delivering attractive shareholder returns. In '25 total return to our shareholders from dividends and share buybacks amounted to EUR 1.5 billion. If I take the last 5 years, we have returned over EUR 7 billion to our shareholders. In 2026, the Board we had yesterday proposed -- will propose to the AGM, a dividend of EUR 2.30 per share. Shareholder returns will continue to be a very important part of our capital allocation framework. From '26 to 2030 we plan buybacks of around EUR 2 billion and dividends of around EUR 6 billion. So EUR 8 billion altogether for our shareholders. Now let me finish and turn to our outlook. You can see our expectations for each geography here on the slide, in a contrasted macroeconomic environment and still uncertain geopolitical landscape, Saint-Gobain expects an EBITDA margin of more than 15% in 2026 with the first half affected by the extreme weather conditions in Europe and North America that we have seen since the start of the year. As a conclusion, we have established a very strong track record over the last 5 years. Lead & Grow gives us a very exciting and very powerful road map, very clear for the teams, for the customers, for the shareholders over the next 5 years, deepening our value-enhancing solutions, expanding them across nonresidential and infrastructure; and second, sharpening the group's business profile through portfolio rotation. All this being delivered with ongoing excellence in execution supported by our proven operating platform country by country. So I'm very confident that all this will continue to deliver strong momentum, strong value creation for all our stakeholders. Thank you very much. And we now turn to your questions for Maud and myself. B. Bazin: As always, we start with the questions in the room, and then we will go on the call or Internet. So Elodie wants to... Elodie Rall: Elodie Rall from JPMorgan. Maybe I'll ask them one at a time. First of all, could you give us some color about your expectations about volume and pricing for '26? And I assume you confirm price/cost positive. I'll continue then. Second, you're guiding for a weaker H1. Does that mean that we should prepare for -- prepare for margin in H1 to be down before recovering in H2? And overall, do you think you can defend 2025 margin, noting that consensus is already a bit above? Third question is actually on the difference between EBITDA margin and EBIT margin. So I know you confirm at the CMD that more than 15% EBITDA margin equals more than 11% EBIT margin. But what we've seen in H2, is that actually EBITDA margin was down 40 bps when EBIT margin were flat. So maybe you can give us a bit of color what's going on in D&A and other nonoperating costs and how we should forecast that in '26? And just 2 quick ones more. Northern Europe, I think the disappointment was that volume was sequentially lower there versus Q3, and we were expecting some improvements. So when should we expect volume to turn positive in the region? And lastly, well done on North America margins, indeed flat in H2. But I think you indicated tougher comps in H1 '26. So what is the magnitude of decline that we should prepare for H1? B. Bazin: So we took notes because it's a long list. Do you want to take the technical one, the third one. Maud Thuaudet: Yes. So difference in EBITDA and EBIT. So what we said at the CMD, 15% equivalent to 11%. That doesn't change. Then you have indeed some H1, H2. End of July, we had said that we had lower nonoperating costs. They were at that time around EUR 50 million. And then you have overall for the full year, EUR 230 million. So you have had that mix in terms of semester on nonoperating costs. And especially, of course, that has weighed on the EBITDA margin in Northern Europe, where we have done a bit more in H2 of restructuring and nonoperating costs, therefore, being a bit up in Northern Europe in H2, especially. So the message remains the same, which is EBIT plus 4% and then EBITDA. And then in terms of depreciation, we anticipate more or less the same figures in terms of depreciation. B. Bazin: Maybe we'll go back to the first one. So yes, we continue to target positive price/cost spread like we have done last year on H1, full year and H2. Now let me clarify a bit the -- your question on volume and price and notably on Q1 weather because I'm sure it's a question I hate, and it's the first time I mentioned weather, but it's a fact that we have a very significant weather impact. If you take France, we have -- we have seen snow, but more importantly, we have seen a lot of floods in the last weeks. First time ever in the last 50 years, we have so much rain, and we have half of our regions, which are down double digit. So it's significant. You have seen also all the huge snowstorms in the U.S. with, I think it's 24 states on emergency status in North America. So all this has an impact. So we are assuming, of course, the normalization in Q2 because we think the weather will normalize. So Q2 and second half normalization improvement, as I highlighted in the outlook. So it's a transition, weaker volume. We think we'll have bottom actually on Q1 in North America, assuming the weather will normalize in the second quarter. So all in all, when you take the impact on North America and U.S. we should expect a low to mid-single-digit volume down in Q1 because of this weather. It's unfortunate. But that's the fact that we see in France and North America. And from there, normalization, improvement. We expect a lot of the green shoots we have seen in Europe to continue. France turned positive in Q4. And outside of this weather impact, it should continue. We have seen some positive momentum in the U.K. You have seen some very strong performance in Asia and Latin America. All that will continue. But yes, there is this volume impact on the first quarter, which has again, low to mid-single digit impact on Q1 volumes, minus 3 to minus 5, it's too early to tell because. We are not completely out of the woods. But that's the magnitude of the impact. And to sum up, on Q1, we were expecting Q1 to continue like Q4 outside of the weather impact, but the weather impact has been significant notably for France and the U.S. Overall H1 margin, we don't guide again margin by half. As you know, we are ambitious on the margin. We will stay ambitious. So there is, I think, a different seasonality to expect this year on the margin like on the operating profit because it's about the same. Don't forget these exceptional items last year that we are different in H1 and H2. So that's the slight difference between operating profit and EBITDA. But we might see a seasonality different this year between H1 and H2 on the margin because of this weather impact and because of the fact that we will see improving trends in our end markets starting in Q2. But more importantly, in H2. So it will be a bit of 2 halves of the year with a different momentum. I think your other question was on North Europe volume, take that one? Maud Thuaudet: Yes, sure. So Northern Europe, it's really a story of mixed and contrasted evolution country by country. Again, U.K. outperforming clearly. Then Germany still down. And we are quite happy to see that finally, the stimulus plan, you see some money starting flowing into the economy, but not yet into clear spending in construction at least. That's not what we're observing. So ahead of that, for sure, we have done some restructuring. We have optimized our setup in Germany, and we are ready to capture. The teams are already -- have key accounts in place discussing with all the major customers and with all the major people in charge of this public spending to prepare for the project and to get the impact. But it is slow, and it is taking a little bit of time. Then looking at Nordics, again, within the Nordics, mixed and contrasted dynamics. Norway is still difficult. Finland and Denmark are in a better shape. So we will see how that evolves, but that's the overall... B. Bazin: And if I take the last question on North America. As you have seen, Q4 was a bit softer than Q3. So we outperformed the market when you look at our self-delivery and margin in the second half. We don't have the carryover. Therefore, effect that we had starting Q1 of '25, [ because Q4 ] was a bit softer. So all in all, H1 '26 margin in North America will be below H1 '25, no surprise. And I think in terms of magnitude, the better indication is more the H2 '25 margin, than H1 '25 margin because of the volume momentum we have seen in H2 that we will continue to see at the start of the year, notably in Q1. And then it will progressively normalize. So as a reference, it's H2 margin, H1 margin that we expect for H1 margin in North America. Elodie Rall: So that's 200 basis points decline then? B. Bazin: You know the figures. But that's -- of course, it's too early to tell, but the order of magnitude is more the reference of '25 second half than first half, second half, where we had this carryover from late '24 expecting again in Q2 a normal weather pattern, which is what we expect, and we'll see the replenishment of the inventories from the distributor. And keeping in mind that roofing is 35% of our total exposure in the U.S. We grew in siding in Q4. We are growing as we speak in siding. So we gained market share on construction chemicals. So I think we should not overemphasize the roofing picture, which as we have seen on the slide I shared with you, a very abnormal hurricane season. And on top of that, even on the storm from hail storms, we were 13% below the last decade. So I think it was a transitory weaker volumes in North America due to weather impacting roofing, weather impacting across job sites in Q1. I think we can say too early, but we have bottomed in Q1 in North America. And from there, it will improve. You have seen that you take collective housing, the starts and the figures are moving in the right direction. I think the affordability even if it's a bit slow, is improving versus where we were some months ago, and we have delivered very well on our commitment in North America and all the teams are hands-on how to continue to [Technical Difficulty]... Ebrahim Homani: Ebrahim Homani, CIC CIB. I have 3, if I may, a follow-up on the roofing business in North America. -- if the weather conditions are more normal than last year, what could be the organic growth and the margin in 2026, especially in H2. My second point on your CapEx and the investment strategy for 2026. And do you expect an increase in free cash flow to EBITDA? And my last question is on Europe, price and volume dynamics that you expect, especially in Southern Europe? B. Bazin: I take the first. You may conclude. I repeat again, Roofing is a very strong business in North America. We are the only, the 3 only national players. So when you talk to the large distributors that are consolidating the market, they need national payers. So you win because you are national player across U.S. and Canada. I had a chance to meet the top 3 national distributors we have in December. I can tell you they are happy to continue to win with Saint-Gobain. I know that some competitors thought about entering the market. They may have realized, it's not easy to be a meaningful player on residential roofing in North America across the board. So it's a very good business, driven by strong fundamentals. Again, you have seen the multiplied by 4 of the weather patterns. If I take the last 30, 40 years, it's not going to diminish. It's accelerating with an exceptional low year in 2025. We have also all the aging of the roof. And on top of that, the housing shortage that everyone is working on it across all the states of the U.S. and also in Canada. So yes, we expect the weather to normalize. You may have seen -- we are not the only one to say it, Home Depot, which is a good proxy of the U.S. market, said it beginning of this week. So all this is there. We could expect -- again, it's too early to say that all the ice and snow storms we have seen across the board in the last 2 months would trigger some additional above and beyond renovation. By how much? It's a bit early to tell, but yes, the momentum in roofing will continue to be good, assuming, of course, a normal weather pattern starting in Q2 and H2. So yes, we will find it back in the second half. And that's the equation that we have computed because all the fundamentals drivers of roofing are still there, and we are happy that we have this Georgia competitive plant ready to go. Again, it's a 2% addition on the market, which had been sold out in the last 5 years. And even the region of Florida and Southeast today are pretty busy. So we are happy to be the first to have a competitive plant ready to go when the market will improve, and it's very meaningful for the national distributors when you continue to invest on your roofing business, like when you invest on your plasterboard, siding business and when you have the complete offer. So I'm not worried at all about 8% new capacity additions that we have seen over the next 3 years on the market and again, 2% coming from Saint-Gobain. We shut down a plant, which was 50 years old. We didn't ask you to visit, and we'll be happy to ask you to visit the new one, but happy to have a new one recent one in Georgia, which is a very busy [ Southeast ] region. Maud Thuaudet: Yes. So in terms of CapEx, 2025, we were around 4.5% of sales. We will be the same for next year. 80% of our growth CapEx were in those high-growth markets, as you might have seen. It's very important that we allocate those CapEx to growth. And there are clear allocation on this topic. And we are, for example, in India, building clearly very fast our footprint to grow in the country, and it's working extremely well. We are enlarging the offer, and we are gaining shares as well in the categories where we are already. In terms of free cash flow generation, our target is to be above 50%. You have seen the results this year. We will obviously remain there and continue to optimize all the elements of the free cash flow. B. Bazin: You had a question on price and volume in Europe. Yes, we expect what we started to see in the second half of last year to continue. Now keep in mind that it has been 4 years in Europe with a negative trend. So I was happy that for the first time in H1 '22, if I'm correct, we had growth in Europe in local currencies in H2 of '25. We should continue to see that bearing in mind, notably in France, the negative impact of the flood in the last 2 months. So yes, it should continue. We have announced some price increase at the beginning of the year in Europe across multiple geographies, be it in France, in the U.K., in Germany. So that should continue and progressive evolution as well in Europe. We have seen all the green shoots of new build. If you take France, the starts are up 5% to 7%. The permits up double digits. So all this will trigger some additional activity going forward. Another question in the room. So, we may turn questions to the call, who wants to start? Is it Goldman Sachs? So go ahead, please. Unknown Analyst: I just had 2, please. I guess, thanks for the comments on the U.S. margin impacts in the first half. If we're thinking about the European margin impacts, is it right to think they're less significant than the 200 basis points you expect for margin pressure in Americas? And I guess the second question would just be on portfolio rotation, in light of the 20% target by 2030. I'd be interested, do you see 2026 as a year where you can make more progress than average on -- against that target? And I guess do you see the upside more from divestments or acquisitions this year? B. Bazin: You take the first, and I take the... Maud Thuaudet: So EU margins, they will continue. You've seen what we have delivered this year, and we will continue maintaining the positive price cost spreads at group level, obviously, and focusing on strong pricing. And we will continue delivering on the margins. Of course, we will have some benefit from volumes when volumes are back, and that's what we have said in the past about operating leverage of around 25% when you have some kind of significant volume uptake. B. Bazin: And on the portfolio, so yes, we are active. You have seen that we announced on Tuesday or Wednesday, 2 small acquisitions on Construction Chemicals, that's part of the add-ons and bolt-ons we are happy to say and to deliver. We will continue to do that. We are working, as we speak, on acquisitions and divestitures. Depending on your average, I don't know what it is. If you take the last 5 years, we rotated 40%. So roughly 10% per year. We want to rotate 20% in the next 5 years. So is it going to be 10% just this year? It's a bit on the high side. But yes, we will be active on portfolio rotation in '26, both in terms of acquisitions and divestitures. On acquisitions, we have a very solid balance sheet. So we are ready to capture the good opportunities, but we are always extremely conscious about the value creation that we have delivered in the past, integrating well when you have double-digit growth on Cemix and FOSROC, that means it's a very good solid acquisition and delivery. So yes, we will be active in '26, and we will show more progress, as you asked on the portfolio rotation to continue to strengthen the business profile. And you know the criteria, financial criteria and also the strategic criteria, growth and acquisitions and CapEx in high-growth geographies, construction chemicals and divestitures in the businesses which are a bit far from the strategy or a bit far from the financial performance of the group. Unknown Analyst: Excellent. And Maud, maybe just coming back on the margin question. Just thinking about the French weather impacts that we could expect on margins in the first half. Is there any way to quantify what kind of headwind that might pose against, obviously, the improving volume outlook and positive price contribution? Maud Thuaudet: So you've seen that in the past we've been able to manage quite well the margins in Europe. And we will be, again, always very demanding with our teams who deliver really well on the margins. B. Bazin: Next question is from Cedar, Morgan Stanley. Cedar Ekblom: Just 2 questions from me. Can you talk about your relative performance in the U.S. market in the fourth quarter? It does look like your volumes outperformed Owens Corning and outperformed the broader ARMA data from a roofing perspective. Do you think that, that's just a comp effect? Or do you think that there is something to say there in terms of how you're engaging with the customer? And then can you help us put some numbers around how to think about energy cost inflation into 2026? Obviously, energy markets have been quite volatile, but is there a potential for a tailwind on energy costs as we move into 2026? Or should we still be thinking about an inflationary backdrop? B. Bazin: I'll take the first and you take the second one. There are multiple reasons for this outperformance in the second half. Clearly, I think the fact that we have a full breadth of offering, when you talk to the big distributors, they are happy to have -- because a lot of them, they have now exterior and interior solutions, take the Home Depot, SRS, GMS, you take Lowe's and FBM. So they are happy to have the full set of solutions, exterior and interior. And we are the only one to provide all this when you compare to the roofing or to the other players. So that's part of the equation. Like I would say, when you look at our construction chemicals overperformance, we delivered almost 3% in the second half. Of course, the other set of product lines have a pull effect on our construction chemicals performance and [indiscernible] a pure-play silo business, yes, the fact that we have the full breadth is meaningful. We have also enhanced our contractor customer engagement on the ground that helps on the delivery. After that, yes, there is a bit of outperformance versus ARMA statistics, and we hope we are working hard to continue to do that going forward. There was also -- if you take the gypsum performance in the U.S., we did much better than some of the public figures, we have seen because we were in a mid-single-digit decline in the kind of minus 5%, minus 6% decline in North America in the second half when I have seen some other figures being down double digit. That means you can have this win-win effect on exterior/interior solutions. Maud Thuaudet: Energy. So energy, as always, we have our hedging policies, which are in place. Indeed, it's a volatile market. We don't see much inflation. We anticipate around stable energy inflation for this year with, of course, volatile situation, but no particular point on energy. And overall, for inflation, we anticipate stable to slightly positive inflation. And of course, we will keep this positive -- slight positive price cost spread for the full year. B. Bazin: I think the next question is from Bank of America, Arnaud. Arnaud Lehmann: Three questions, if I may. Firstly, you -- Maud you just commented on energy. Can you -- could you please comment on raw materials? We've seen industrial metals moving higher. I guess cement could be moving higher. So do you see meaningful inflation on the raw material side? That's my first question. My second question is coming back on U.S. residential roofing. Sorry about that, but we've seen some price increase announcement from the industry for April. Are you confident that this could happen? Or are you trying to be a little bit defensive, trying to prevent price decline and you expect prices to be stable? And lastly, in France, we've seen quite a few headlines around housing targets, boost to social housing. We've seen MaPrimeRenov coming back after the budget. Could you try to frame things a little bit for us in terms of what's going on in France in terms of housing activity? Unknown Executive: You start with the first one. Maud Thuaudet: So raw material, again, stable to slight inflation. We have some categories which are seeing inflation, sand, paper, raw material -- sorry, packaging and transportation are seeing some slight inflation. Coming to your specific point, you mentioned cement. So cement, we are substituting quite a lot of our cement input. For example, we inaugurated a plant in Finland that enabled us to actually substitute cement with other raw materials. So we are quite stable on this one. But overall, stable to slight inflation for the group on raw material as well. B. Bazin: And on your second question, yes, we have in mind, it's a bit too early to say, but we have in mind and our teams are preparing for that, a kind of price increase around April for roofing. You may have noticed, but we can tell you that we were still positive on Q4 pricing in North America in Q4. So we have been very disciplined. That helps also the margin on top of all the cost actions we took in the second half. We have been very disciplined on the pricing momentum for our different product lines, which were all exterior or interior positive in the second half. On France, well, Arnaud, we have seen in the last year that France is not an easy read on multiple fronts. So I will be a bit cautious because it could change. But for me, if I step back, over the last 3, 4 years, clearly, and we have been advocating for it, not only for Saint-Gobain but just for our overall society, the housing topic, the energy efficiency in homes is becoming more and more as a top political priority, even to the point, even to our surprise that the EU Commission, which is not in their perimeter, decided to take on the housing crisis across Europe. So yes, in France, there are some increased momentum, 400,000 homes and start we should build in the coming years, more emphasis on social housing. So we see a clear momentum on new build in France as we speak, again, single digit in starts, double digit in permits. The political willingness is there. We will see a positive momentum there in '25. It's a bit too early to see a bullish scenario for housing in France. But yes, the momentum is there. All the players are pushing for that. MaPrimeRenov, as you said, is back. So energy efficiency is a factor. I highlighted the green value of what it means for the real estate value, not only the comfort and the purchasing power on the energy bill, but also the real estate value. So all those parameters are moving in the right direction. Let's not fool ourselves on the total momentum. But as you have seen, we are turning the corner in France, and I'm confident that we are outperforming in France across new build and renovation, thanks to our full presence, and it should continue throughout the year '26 and beyond. We are at the beginning of the large housing recovery in Europe because there are big needs. We are at the beginning of that, which will be a multiyear process. Next question is from Yassine, On Field. Yassine Touahri: First question on -- there is a debate currently in Europe around competitiveness versus potentially a revision of the EU ETS. I guess decarbonization is a big theme for you. What do you think of this debate? And what does it mean for the strategy of Saint-Gobain and your investment plan? That would be my first question. And my second question, coming back to the U.S. pricing. Have you announced any price increase in gypsum or insulation? Or is it too early in the context where the volume are a bit subdued? B. Bazin: No, it's too early to say on gypsum and insulation. So we will see how the year develops, but it's too early. We start the year slightly above where we were last year because we ended the year on a positive note, but it's a bit too early to say on all this topic about competitiveness and decarbonation, keep in mind that within building materials, the light side is the solution. And all the strategy of Saint-Gobain on light sustainable construction has been to accelerate the rollout of solutions towards low-carbon construction and low-carbon buildings. We are not the problem. We are the solutions in terms of lowering the carbon content of construction. So we are not part of the CBAM scope, and we don't need that. We don't rely on that. We have some quotas of CO2. We are actively decarbonating our plant. We dropped by 35% of our CO2 content within Saint-Gobain in terms of footprint, Scope 1 and 2. So we are, I think, pioneering on that with only 2 plasterboard electrified in the world, Norway and Canada. So it's not only Europe, it's across the board. So we are making nice progress, and it's a competitive advantage for Saint-Gobain. So we don't have the volatility of what it means for us because we are not relying on CBAM, and we are on the solution to bring forward low carbon content in materials on buildings, be it new or be it renovation. So for us, it's a good momentum, and we will continue to accelerate and differentiate on that. We have the full scope almost of Saint-Gobain covered with EPDs, Environmental Product Declaration. We have the full suite of products [ Infinae ] for low-carbon gypsum, [ Enae ] for low carbon mortar substituting cement, [ Rinnai ] for low-carbon insulation. So all this is already a commercially available offer for Saint-Gobain and doesn't rely on CBAM type of measure. Next question is from Julian, UBS. Julian Radlinger: So 2 from me, please. So first of all, can you talk about Europe and specifically Northern Europe? So I remember in summer 2025, you were still assuming positive growth but then sort of turn to flattish and now it ultimately ended up being negative more than 2%. I mean what was the main driver versus your own expectations here aside from the market just staying tough? And I guess what gives you the confidence now that, that will turn after the difficult weather in Q1? Next question, it's 3 actually. You said the Americas margin in H1 could be around 16%. So can I just ask, so for that kind of scenario, what kind of volume and price would you need to see to achieve that? And what could be the upside or downside? And then last one, and most importantly, maybe if I take everything together that you said on this call, weaker first half than second half, the margin comment on Americas, et cetera. For the full year, do you think EBIT or EBITDA should reasonably be up year-on-year in absolute terms for the group? Is that kind of a fair base case? B. Bazin: So on Northern Europe, I answer that. As Maud highlighted, we have been a bit disappointed by the momentum in Germany and in Nordic countries. Sweden was slightly better, like Denmark, but Norway a bit down. So that has been the reason behind last year. It's improving. We have also, keep in mind, divested a business, which was a tough one for us in Germany, which was commodity mortars. That was part of the negative like-for-like last year, which we are not going to see going forward. We outperformed clearly in Switzerland. We have a nice growth in Switzerland. Because we are from Switzerland, so I'm happy to say that. We have growth in the U.K. We have growth in Eastern Europe. So it was the size of the Nordic countries and Germany below the momentum and the expected momentum we had last year. It's again improving, and we will see that in '26 on -- anything you would like to... Maud Thuaudet: No. B. Bazin: On Americas, again, I've been clear on how you should compare the margin overall for Americas. We expect, and there is no reason not to say that, a normal weather in Q2 and starting the season, like always, for all the job sites, be it renovation, be it new build, be it roofing or gypsum. So that's what we expect, and there is no reason to think differently. We will have this negative impact in Q1, which I highlighted. We have seen that across all the competitors. Outside of that, we will continue to deliver on a normal year and do well on our margin overall for Americas, H1 being lower than what we expect in H2. And the full year, well, we have given a very clear guidance for the full year, like we do every year at the beginning of the year. We are ambitious on the margin. We have a very powerful plan for the next years. You have seen that we delivered every single year, every single year, and it was not walking the park in the last 5 years, be it inflation, energy crisis, Ukraine war, COVID, whatever, we delivered. So this is what Saint-Gobain showed you in the last 5 years. We deliver on portfolio optimization. We deliver on execution and operational excellence. We have a fantastic growth avenues on nonresidential and infrastructure, where we gained share. We have seen that on construction chemicals clearly in North America and across the board last year. So happy to continue, and we will have a nice momentum in '26. Keeping in mind that, yes, there is a transition on weather at the beginning of the year. But I think we have bottomed in Q1 in North America because of this weather pattern and no carryover of roofing from last year. So from there, in Europe, in North America, I think we will show some attractive momentum. From Bernstein now. Unknown Analyst: So I had one question on working capital. And again, you've got another year where the working capital days has reduced by 1 day. So could you help us in trying to get a sense of how we should think about it going forward? I mean, obviously, there has to be one range where you're comfortable, but how much lower can you go from here on? And my second question, sorry for going back to North American roofing and the North American margins in general. So I think it was -- it's quite commendable that you were able to maintain the margins despite the huge decline in volumes in roofing, and you also highlighted some weakness in the Solutions business. So could you help us unpack the offsetting drivers which allowed you to offset the impact of the weaker volume in some parts of the business so that you were able to maintain the margins? B. Bazin: I'll take your second one, and Maud will take the first, quickly again on North American roofing, there is -- we have a lot of lovely businesses within Saint-Gobain. It's not only North American roofing. Stay with us and stay tuned. We are growing a lot in double digits in Asia and emerging markets. And with -- now based on the exchange rate, we have more profit from Asia and emerging markets than Western Europe and than North America. So stay tuned on how fast we grow double digit in Latin America. No one talked about the 7% almost organic growth we delivered in Latin America, but I can tell you it's stellar and way, way above the market without mentioning the double-digit volume growth that [indiscernible] has delivered, [indiscernible] very well on volume in India last year. But coming back to our interesting piece of roofing, we took a lot of actions in the second half. Of course, pricing. We have shown a very strong pricing discipline. As I said, it has been up altogether in H2 and also in Q4. We took some short-term actions that you can take. You cannot take that forever. You're dropping some shifts, working on your maintenance cost. So there are some short-term actions that we took deliberately in the fourth quarter, in the second half to deliver on our commitment. You cannot take that forever because at some point, you have to rebuild the inventory to service your customers. So yes, there were a lot of the full range of short-term actions that we took across the board in North America last year and not only in roofing, our Siding business accelerated in the fourth quarter. We had a nice delivery on gypsum. We took some one furnace down in insulation in the U.S. Altogether, sometimes, I should maybe emphasize that more, but we have taken a lot of cost actions within Saint-Gobain last year. If I were to tell you that we had over the last 2 years, 4,000 headcount reduction in Europe, that's the fact. That's how proactive we have been on cost management within Saint-Gobain. Last year, we did shut down 20 plants across Saint-Gobain in the world, we did open 24, but we did shut down 20 old plants, including 6 in the U.S. So a lot of those actions are behind the margin protection, the margin focus. And all this is being delivered by country CEOs, being proactive, hands-on and incentivized on their margin. So all those parameters helped us to deliver nicely on our commitment in the margin. Maud Thuaudet: Yes. On the working capital, yes, indeed, we improved by 1 day this year in 2025. I think we are at the range where we can stabilize the working capital -- the operating working capital. It's where we are at ease to service the customers in a good way. So clearly -- and we have guided during the CMD for a working capital below 15 days. So that's the order of magnitude where we will navigate going forward, again, from where we are today and navigating within the range of our CMD objective. So that is what you should expect. But again, as for the margin, remaining ambitious in terms of cash generation and ambitious in terms of how we are able to optimize all our operations, as Benoit explained, for the margins. We do the same for the cash. We optimize everything. B. Bazin: Thank you, Maud. Next question from Ephrem, Citigroup. Ephrem Ravi: Sorry, going back to the working capital again. The -- given the weather events in the first half, should we expect a change in trajectory at least in the short term on the working capital in terms of holding higher inventory at your sites or at your distributors given the potential kind of bounce back in demand in the second half? So i.e., should we see a big or a sizable pickup in the first half in terms of working capital versus the second half? Secondly, in terms of free cash flow and net debt. So basically, your net debt remained relatively stable despite your acquisitions and increased dividends. So again, do you see scope for the balance sheet to be stretched a little bit more in terms of acquisitions beyond sort of the EUR 2.5 billion range that would get you to about sort of 1.7, 1.8x net debt to EBITDA? Maud Thuaudet: So in terms of working capital, of course, it will depend how the season goes and when actually the weather normalizes, et cetera. So we will see how it evolves. It's a bit early to say. We will manage that very tightly, being a bit strategic as well in building the right inventory so that we can service the spikes in demand that we typically see whenever there are some hailstorms, for example, in the U.S. coming back to the Roofing business. So we are strategic in maintaining the right level of inventory to capture the demand and the spike in demand. So we will manage that very tightly, and you should expect something to be normal. You've seen what we've done last year, and we continue managing that. In terms of net debt, yes, we have room for acquisitions. Does it mean that because we have room, we are going to go on major moves that -- so again, we have some clear criteria. We have a good balance sheet. We have optionality to do nice deals. We have a good pipeline. But then again, being very picky on the quality of the company and the quality of the business and what value it brings to Saint-Gobain to the shareholders. B. Bazin: Next question from Bill Jones, Rothschild. William Jones: Three, if I could, please. First, just generally around synergies. Clearly, you're still integrating some large deals from the recent years. So just whether you could talk a bit more about the revenue and cost synergy benefits that might lie ahead this year and where they could be most impactful. Second was on the Distribution businesses, France and Nordic particularly. Perhaps you could just talk on the performance in '25 there, particularly around gross margins and any comments for '26, maybe that is aside from just the macro? And then maybe just Asia Pacific lastly, slightly stronger volume growth in H2 than H1 at kind of 3% to 4%. Do you think that run rate can continue? And any country-related comments there would be great. B. Bazin: So maybe I'll take the one and three, you take the second. On Asia and emerging markets, yes, we have seen a better momentum, stronger momentum in H2. We have stellar growth in India, and it will continue. We have a good start -- a very good start of the year in this part of the world. Southeast Asia, be it Indonesia, Philippines, Thailand, Vietnam, all those countries are strong. So that will continue. In China, we have seen some positive momentum lately. So then we are with a high-added value positioning in China, keeping in mind that we have a sizable part of Industrial Solutions in China, competing on innovation. So that should bode well. So yes, I'm confident that the momentum in Asia will be positive and even increase in '26 versus what we have seen in '25 in the second half. On the -- I take the first question, yes, synergies and how we integrate. You have seen the value we created, if I take our gypsum position in North America, the first with Continental Building Products. We have seen very good momentum. Let's take the second half of last year, we were down single digit on gypsum versus the public figures, I've seen some -- from peers down double digits, 14 or 15 when we were down in volume, minus 6 or minus 7. So I put that on the background of how we can deliver on synergies, not only on plasterboard, but across the full spectrum because every single of the top distributors in the U.S. You take A, B, C, they have exterior, they have interior with L&W. So all of them, they ask for interior and exterior solutions. You take our strong momentum in Latin America. Cemix, of course, has a nice pull effect across Mexico and Central America. I went to Saudi Arabia and Middle East in December together with Thierry Bernard. We have a 30% growth in the Emirates. And it's thanks to FOSROC, Gyproc, all the momentum. So all this is part of the -- not only cost synergies on purchasing and all the logistics and the raw materials we can deliver, but more importantly, on the top line. So yes, we are happy about the synergies we have been delivering on all those acquisitions and more to come because we have now the country platform to integrate well and to accelerate the momentum. You want to take the... Maud Thuaudet: Yes, sure. For distribution performance, well, you see the margins in Southern Europe, in particular, and in Northern Europe, which shows that those businesses are performing well in terms of margin despite, again, a tough environment in terms of volumes when you compare to 2019, for example, in France, it is down 15%. In Nordics, more around the 20%. So those businesses are doing well. We had given -- they are a bit below what we had said at the previous CMD of this range, 6% to 8%, but they are doing well. They are clearly leading on all the digital side, and they are providing great insight for the rest of -- great pool for the rest of Saint-Gobain. If you think about AI applications, if you think about digital suite, digital tools, those businesses are really spearheading those topics and we're creating some nice spillover on the rest of the group. So good performance, and we will continue on this one with very mobilized, of course. B. Bazin: Next question from Harry Goad, Berenberg. Harry Goad: I've got 2, please. First, if I could just come back to Europe, I guess, with a more specific question with your thoughts on 2026. Do you expect to see positive volume growth in France, Germany and the U.K. in the year? And then the second one is just with regards to the evolution of the portfolio when you talk about this 20% turnover of the revenue base, should we think of that as sort of half acquisitions, half divestments? Or is it right to think of it as much more skewed to acquisitions driving that 20% evolution in the next few years? B. Bazin: The 20%, if I understand correctly your question, it's both acquisitions and divestitures, and we measure it like we have done in the last 5 years on turnover. So that gives you the magnitude. Also you take EUR 50 billion turnover of Saint-Gobain, depending on the exchange rate, that's around EUR 10 billion of sales we will have rotated in the next years. And to your first question on '26, yes, we have seen some green shoots moving in the right direction on those countries. So putting aside the weather impact at the start of the year, and again, if we -- don't be surprised on Q1 organic growth because of this negative effect coming from the weather. I say it again, you may have seen some pictures at least for the French ones with half of France being totally flooded. So it's not only that you cannot work because you have to dry the building, but you cannot even access to the job sites. France, we have 6,000 truck drivers on the road every single day. So that's a double-digit impact at the beginning of the year. But bearing that aside, putting that aside, yes, we expect the countries you mentioned to turn on positive volumes in '26. Now we move to the questions on the Internet on the website, and I will start with a question from [ Paul Roger from Exane. ] I guess I will read your question, Paul. I will not have your perfect accent. It will be my French accent, but keep with us, stay with us. Did the group lose any market share in Northern Europe, Germany and Nordics? And why did H2 EBITDA margins decline in this region? I'll take the first half. I don't think we lost market share, but it's not regions where we have a clear outperformance. If I take France, Spain, Italy, U.K., U.S., Canada, Brazil, India, all those countries, we beat the markets. In Germany and in the Nordics, we have been working on the quality of the assets. If I take Germany specifically, as I said, we divested last year -- it was kind of EUR 100 million of sales. Our great commodity mortars, which, frankly, was not high-end part of our solutions. We did also shut down a large flat glass facility in Herzogenrath in September, October because of the overcapacity. So we thought it was the right action to take. So it was not fishing for volumes. It was working on the quality of the assets. And therefore, no outperformance in terms of market share, notably in Germany. But I think we have now a better portfolio. We have a new manager in place, Christian Bako, who used to be the Head of Saint-Gobain marketing worldwide. So it will, for sure, bring a nice dynamic in Germany going forward, plus all the expected momentum we see on the infrastructure and... Maud Thuaudet: There was a second part of the question, and I'll take it, which was about H2 margin decline in this region. So we talked about it. It's mostly due to nonoperating costs, which were higher in H2 in that region because of the actions that Benoit just mentioned. B. Bazin: Next question from Laurent Runacher. No, sorry, there was another question. Will depreciation step up this year as the group increases capacity? You answered that question... Maud Thuaudet: Yes. B. Bazin: Already, Maud, right. Does the group's high market share limit further M&A opportunities in U.S. construction products? The overall answer is no, of course with some exceptions. If you take roofing, as I said, residential roofing, we have only 3 national players. So it's hard to buy one of them, but that would be one exception. And as you remember from what Mark Rayfield presented at the Capital Markets Day, the direction of travel in North America is more towards nonresidential and infrastructure markets because we have a very meaningful #1 position on residential roofer, both interior and exterior. So if any, target and effort, it's more organically and inorganically towards nonresidential and infra where we have plenty of space. This is why we have done some acquisitions on construction chemicals in the U.S. and in Canada last year. We will continue to look at that. We have some targets as we speak. So that's the direction of travel to expand our Saint-Gobain presence in construction products across North America, U.S. and Canada. Next question is from Laurent Runacher. With the last rotations of the portfolio, what can we now expect in terms of organic growth for the group over the cycle? Well, we answered that on October 6 on the Capital Markets Day. So I think you have the answer, and we highlighted it region by region and also saying that on non-resi and infra, we expect that to be above the group average. So please... Maud Thuaudet: Yes. And we also highlighted the fact that our acquisitions on average have 4 points of organic growth additional versus the group average. So clearly, portfolio rotation changes the growth profile of the group. B. Bazin: A question from Glynis at Jefferies. You talked about win-win relationship with top U.S. distributors. Can you provide some additional color on this? Well, there is a bit of commercial insight, of course, behind that. But maybe one easy answer is to say, when you are a national player with hundreds, if not thousands of outlets across U.S. and Canada, you want to make deals and bring eye-to-eye top CEOs, CEO to CEO across the country. You don't want to have a deal because there is a new plant in Alabama or a new plant in Minnesota. You need to partner altogether. And this is the kind of -- I talk to the natural players. And if they can deliver to me not only 1 product category in 50 stores, but 6 different categories across 800 stores, I'll partner with them. So that's the kind of high-level strategic discussion and long-term partnership we have been building with the top distributors. They have been consolidating. And when you consolidate, yes, you need an even bigger player on the partnership side. So that's what we have been seeing. And one example, I'm not sure we gave it on my slide, we have increased by 10% the number of stores on those distributors where we are cross-selling. And for us, cross-selling in the U.S., we measure it when we cross-sell more than 6 product lines. So that's true that last year, we increased by 10 points the cross-selling point of sales with the national distributor. So that's the kind of initiative. Another initiative, they are all working on digital solutions on AI. They partner with the big players that can offer that. So it's important. And they are happy when you can tell them, we invested $7 billion in the U.S. in the last 5 years. That means we are committed to the country, and we are a meaningful player to you. So that's the kind of -- and with those top players, I can tell you, Mark Rayfield, myself, we have top-to-top meetings every single year and deepening the relationship. As you have seen, Continental Building Products years ago helped us to accelerate in retail. The fact that some retail players bought some Merchanting businesses, will continue to help us accelerate in retail, and we have seen some good initiatives as we speak. So that's the kind of win-win partnership we will continue to move forward. This is also what we experienced in France. In France, when you are 6x bigger on your Merchanting business than any other player, you partner with the best players on the manufacturing side, which are the Saint-Gobain manufacturing brands. So that's the kind of win-win snowball effect we will continue to push forward. There is a question now from RBC, if I'm correct. Some energy efficiency tax credit programs are expiring in the U.S. this year. Therefore, how are you thinking about U.S. renovation demand and volumes within your Interior Solutions segment going into '26? But frankly, I don't look at it like that. I look at it as acceleration of the climate, extreme weather patterns, take a multiyear view. We have seen that across the board. It could be fire risk. It could be flood. You have multiple states today where there is no more insurance. If you have a fortified home because of your roof, because of waterproofing, because of siding, so the need for climate-resilient building is accelerating in the U.S. So that's clearly an important momentum that should continue because, as I said multiple times, sustainable construction just means better buildings, better real estate value. You take the average statistics in the U.S. on offices, we have 25% higher real estate value when you have the right performance on energy efficiency, regardless of any tax credit. So be it the real estate value, be it climate-resilient offer. This is driving the U.S. market, and it will continue. We are not going to rebuild Los Angeles the same way it was built. We are not to rebuild homes that have been destroyed with heavy storms the same way they were built 20 years ago. You need more wind-resistant shingles and it goes on and on like that, and we'll continue to see that. I think some last questions from Davy. Can you provide an estimated percentage of revenues that currently relate to data centers? And how big is the growth strategy. Maud, do you want to take this? Maud Thuaudet: Yes. It's -- we had highlighted this topic at our CMD where there had been this study of who is the most present in terms of building material towards contractors and the answer from contractors at 34% was Saint-Gobain. So we have a strong offer in data centers, and Benoit just showed it. We are working currently on 600 projects, and we are talking about projects which take place everywhere in the world. And the way it happens is we partner with some consultants. Sisk, for example, in Ireland is one of them. We develop the offer. We co-develop the offer with those players. And then, of course, we have the ability to provide that offer everywhere in the world because the construction sites are then local in every country. When we deliver 20 data centers in Indonesia and Malaysia, it's because we produce in Malaysia and Indonesia part -- large parts of the offer. And then, of course, we can ship some additions, which make the complete data center offer. So we are quite uniquely positioned. And I think we had said, Benoit, last call that data centers is -- we can expect to triple sales in that area, and it's some hundreds of millions. B. Bazin: I think we are exhausted, the last question. No regrets, Elodie Rall from JPMorgan. I -- Not, I can hear you, Elodie, and I will repeat the question for everyone. So questions from Elodie Rall, JPMorgan is the scope and FX estimate for the full year and the tango of margins of roofing in North America where the -- if I understand well, where the H2 margin will be more -- H2 '26 will be more comparable with H1 '25 when we said that H1 '26 will be more comparable with H2 '25. So you take the first one Maud and I will take the... Maud Thuaudet: Yes. So FX, we anticipate at current spot rate because it's a little bit of a complex exercise, but at current spot rate, about minus 3% on sales for first quarter. H1 would be around minus 2%. But again, keep in mind that this is very volatile, and we've seen that last year. And then in terms of scope, if -- things will move, but as of now, around stable scope effect, maybe a bit negative, but around stable. B. Bazin: And to your second question, the overall answer is yes, because we expect the weather to normalize in -- starting in Q2 and therefore, in H2. Let's see how strongly the momentum will develop, notably the proportion of the additional business we could get from the snow ice storms we have seen at the beginning of the year because we will not have the carryover that we had in H1 '25 from '24. So -- but I'm confident that H2 will be a normal year for roofing, and we should see that starting in Q2. So in general, high-level answer is yes to your question. Thank you. I think we are short on time. Last question from [ Christophe, mic, ] and then we will finish, [ Christophe Lefevre-Moulen. ] Unknown Analyst: To come back to U.S. insulation and plasterboard, we -- so main issue for your competitor, Owens Corning was not roofing, but this business line, gypsum and insulation, what was the case for Saint-Gobain over the second half? Was the margin strongly down as it was the case for your competitor? Or are you able to maintain it? B. Bazin: Well, we have delivered a flattish margin in the second half in North America. So we could not have done it if one of the big businesses, be it exterior or interior would have been down. So the overall answer because I'm not going to give you the details on all this that we delivered well on the margin, both exterior and interior across North America in the second half with some cost actions. So insulation was tougher, and we decided to shut down one furnace in Kansas City. So there has been some ups and downs, but we delivered quite well on the margin overall being broadly stable in the second half in North America. So I think we covered all your questions. Thank you again. As a conclusion, again, a big thank and a big congratulations to all the Saint-Gobain teams for another year of very strong delivery, consistent delivery like we have shown in the last 5 years of Grow & Impact. And happy to say that we have nicely concluded Grow & Impact, and we are opening a very exciting Lead & Grow. I can tell you the teams are running and didn't wait for January 1. We have been running since we launched it in October. Lead & Grow is simple -- powerful and simple. It's deepening our solutions, which are proven to be very relevant, expanding those solutions on infrastructure and nonresidential markets where we have a lot to play and to win. Rotating the portfolio. We are active, and we have been -- that we can deliver well on that in terms of value creation, and we have clear plans and clear projects as we speak to do some meaningful moves in '26. And of course, continue to rely on super engaged, powerful operating model at Saint-Gobain driven by country CEOs. So many thanks to all of them. Many thanks to all of you, and we will deliver a strong performance in '26. Thank you very much.
Operator: Good morning, and welcome to Harbour Energy 2025 Full Year Results. Today's presentation will be hosted by Linda Cook, CEO; Alexander Krane, CFO; and Nigel Hearne, COO. After the presentation, we will take your questions. Linda, please go ahead. Linda Cook: Great. Thank you, Dan. Good morning all, and welcome to our 2025 full year results call. I'm Linda Cook, the CEO of Harbour Energy. And as Dan said, joining me for the presentation today are Alexander Krane, our CFO; and Nigel Hearne, the Chief Operating Officer. Before we turn to results, I do want to first just acknowledge recent geopolitical events, which are driving extreme commodity price volatility and raising concerns over energy security. In some ways, similar to where we were just about the same time last year with Liberation Day upon us, governments and businesses around the world coming to grips with the impacts of a wide range of new tariffs and trade agreements. And of course, not that long ago, before that, we had the Russian invasion of Ukraine, a conflict that continues to this day and before that, a global pandemic, all in the last 5 to 6 years. These are all reminders that we live and make decisions within an uncertain and at times volatile global environment. In response, it's important in a business like ours that we balance the short term with the long term and that we remain focused on the things we can control, operational excellence, capital discipline, managing risk and creating value for our shareholders. So turning to the agenda. I'm going to start by taking you through the highlights from what was a very good year for Harbour Energy in 2025 and some changes to our portfolio. Nigel will then cover operations, including how we're driving performance. Alexander will follow with the financial results, 2026 guidance and the cash flow outlook for the near to midterm, all updated for our recent transactions and also an outline of our new distribution policy. And then it's back to me to wrap up, leaving plenty of time for questions. So turning to my first slide. Harbour has grown from 0 to more than 450,000 barrels per day over the last decade, driven by disciplined M&A and reinvesting in the acquired assets to add value. During that time, we repeatedly demonstrated our ability to identify and secure strategic transactions and after completion, to safely and successfully integrate the acquired businesses and organizations. While past acquisitions, including Wintershall Dea in 2024, we're focused on building scale and diversification. Our more recent ones have been targeted towards strengthening the portfolio, making it more resilient and enhancing longevity. Perhaps the best example is the acquisition of LLOG Exploration in the U.S. Gulf completed ahead of schedule just a few weeks ago. The LLOG assets, oil weighted and all under operational control, helped to secure Harbour's overall production at between 475,000 to 500,000 barrels per day to the end of the decade. And while overall production stays broadly stable, as you'll see later, replacing the declining U.K. volumes with growth in the U.S. with its attractive fiscal framework means that we'll see a significant increase over time in cash flow. So turning first to look back to 2025. As I said, another strong year for Harbour Energy operationally, financially and strategically. We achieved record production at 474,000 barrels per day. It was up more than 80% on the prior year. And with unit OpEx at $13 per barrel, our margins were strong. This, along with strong capital discipline and cost control, resulted in materially improved free cash flow and demonstrated our ability to navigate volatile commodity prices. We also had good momentum on our growth projects, including the transfer of operatorship of the major Zama development in Mexico from PEMEX, the national oil company to Harbour. And we continue to improve the overall quality of the portfolio through M&A. And let me just turn to that now. In December, we announced 3 transactions, each of which advances our strategy and strengthens our portfolio. First, we agreed the sale of our mature higher-cost Indonesian producing assets and the stalled Tuna development project for $215 million, improving our portfolio quality and accelerating value. We also announced the $170 million acquisition of Waldorf, a small U.K. producer that brings around $900 million of value through tax losses. In addition, we unlocked $350 million of trapped cash upon completion, more than covering the purchase price. Combining the benefits of Waldorf with the great work by our team in Aberdeen to reduce costs and improve efficiency means we've materially enhanced the resilience and free cash flow outlook of our business in the U.K. The proceeds from the Indonesia sale, along with the near-term cash flow uplift from Waldorf helped fund our entry into the U.S. Gulf through the acquisition of LLOG. As we said in the announcement at the time of this transaction, we're really excited about the addition of a strategic position in the U.S. deepwater. With LLOG, we get a high-quality growth portfolio in one of the most prolific oil and gas producing basins in the world, along with one of the best teams in the Gulf, and we're more than thrilled to have them join our Harbour team. So each transaction was strategic in its own way. And collectively, they have a material impact on the overall quality of our portfolio. So the next slide takes us to a snapshot of Harbour today, and I'll illustrate that point about the improved quality of the portfolio here. With the divestment of Vietnam in 2024, the announced sale of most of our Indonesia assets and our entry into the U.S., our geographic footprint is shrinking and the portfolio center of gravity is shifting to the West. We've divested from mature positions in Southeast Asia with declining production and high unit costs acquired 5 years ago through the Premier Oil transaction and added strategic positions in Norway, Mexico, Argentina and now the U.S., all with significant running room from a subsurface point of view, demonstrating, I think, that portfolio management is alive and well within Harbour. Like in the past, if we can't see a route to scale or the assets can't compete for capital in our portfolio, they become divestment targets. And with the LLOG acquisition, the bar to compete internally for capital has got that much higher. The outcome is a higher quality portfolio with higher margins and as Alexander will show, increasing free cash flow over time. He'll also talk about the new distribution policy details, which aim to strike a balance, enabling a sustainable dividend and resilient balance sheet across commodity price cycles while supporting investment in future production and enabling shareholders to benefit as that cash flow growth materializes or if like today, we have an unexpected spike in commodity prices. Turning to my last slide. I've mentioned our shrinking geographic footprint, meaning that today, we're focused on 5 key countries: Norway, the U.K., Argentina, Mexico and the U.S. As you can see, these account for 90% of our company, however you cut it: production, cash flow, reserves, resources. As Nigel will explain, each of these countries has its role to play in Harbour. And while together, they support flat production over the coming few years, the portfolio evolution continues, and that's hinted out in the bars on this page. While the U.K. is responsible for 1/3 of our production today, it represents only a bit over 10% of our combined reserves and resources. With Norway production expected to be flattish, the U.K. decline is replaced by investing in projects in the Americas: the U.S., Mexico and Argentina. And this, over time, has positive implications for after-tax margins and cash flow. So now over to Nigel, and he'll take you through each of these countries in more detail, followed by Alexander. A. Hearne: Good morning, and thank you, Linda. Today, our portfolio is more focused, competitive and resilient. Across the business, we're aligned on delivering against 4 key priorities to drive total shareholder return: operating safely and reliably, expanding our margins through cost and capital efficiency, converting our resources into reserves and into production profitably and competitively and growing our free cash flow sustainably. I will shortly take you through how each of our core business units is delivering against those priorities and how the actions we've taken over the past year has put us on a path to stronger, longer, higher quality cash generation. First and always first is safety. Nothing matters more than protecting our people, our assets and the communities in which we operate. We did see a slight increase in our recordable injury rate in 2025 as we expanded into new countries, but we continue to be a top performer in personal safety. In process safety, we delivered a reduction in Tier 1 and Tier 2 loss of containment events, but unfortunately, recorded one Tier 1 event in Mexico. Safety is an area we will never be satisfied. We actively promote the learnings from our incidents and are strengthening our focus on risk assessment, prevention and assurance activities. We've also delivered a step change reduction in our greenhouse gas emissions intensity, creating a more resilient portfolio. 2025 was a year of record production, delivering at the very top of our guidance. This reflects a full year's contribution from Wintershall Dea, but also a strong year of execution across our expanded portfolio. We brought new wells online and completed new projects ahead of schedule in Norway, the U.K. and Argentina. Reliability across our asset base continued to be high at greater than 90%. And we made structural improvements in our cost base with unit OpEx down 20%, driven by lower cost barrels from Wintershall Dea, actions taken in the U.K. to reduce our cost by 10%, our exit from the higher cost Vietnam volumes, and we captured early synergies as we leveraged our increased scale. Together, these actions improved our earnings and cash margins, strengthening our competitiveness and resilience. Turning to our core business units. As the second largest Norwegian gas exporter to Europe and Harbour's largest producer, our Norway business is central to our long-term cash flow. Our strong pipeline of infrastructure-led developments sustain profitable production into the next decade. At the end of 2025, we completed the Harbour operated Maria Phase 2 project, the first of 6 developments due online in the next 24 months. This project was delivered on time and within budget and is performing well. Our operated Dvalin North is on track for completion mid-2026. All subsea infrastructure was successfully installed in 2025 and development drilling is underway. We're also maturing our next set of projects, and we continue to explore. Earlier this week, we announced the Omega Sor discovery, where we have a 24.5% share. The estimated size of the discovery is between 25 million and 89 million barrels of oil equivalent of gross recoverable volumes, exceeding our pre-drill estimates and extending the Snorre field's lifetime beyond 2040. Our Norway business continues to exemplify our ability to profitably and efficiently turn resource, to reserves, to production. Despite continued fiscal headwinds, the U.K. delivered a strong performance in 2025. This was underpinned by high production efficiency and strong turnaround execution at our operated assets, structurally lowering our cost base. We shortened cycle times through near-field development and delivered best-in-class capital efficiency through the 2025 wells program. Joscelyn South was brought on stream in March, just 3 months after discovery. Strong subsurface performance at Talbot and successful intervention campaigns led to the J-Area producing at rates not seen for over a decade. We are now bringing that same level of focus and discipline to our U.K. decommissioning program. In addition, the Waldorf acquisition, as Linda said, once completed, will deliver meaningful financial synergies. As a result of these actions, we've materially strengthened the U.K.'s cash flow outlook. Now turning to the Americas. Argentina provides both low-cost and long-term production, underpinned by our significant reserves and resource position. Today, the majority of our production comes from the conventional CMA -1 license. Phoenix is a great example of the tieback opportunities that supports a stable, low-cost production from this asset. We hold over 700 million barrels of oil equivalent of 2C resources, primarily in the vast of Vaca Muerta shale play. We are progressing the unconventional oil license at San Roque with a 16-well program expected to start later this year. We are scaling up gas drilling at APE and our gas resource development will be optimized through our participation in the Southern Energy LNG project, where export permits and incentives are secured, 80% of the first vessel offtake is now contracted and the fabrication of the spur line and conversion of the second vessel is underway. First LNG production remains on track for the end of 2027. We continue to focus on drilling and completions efficiency as we increase the scale and pace of our Vaca Muerta development. Argentina is a cornerstone for future flexible and capital-efficient reserve replacement. Our newest core business unit, the Gulf of America, add scale and growth through to the end of the decade. It is a 100% operated oil-weighted portfolio centered around 3 deepwater hubs at Who Dat, Buckskin and Leon-Castille. Production is expected to double by 2028, supported by low breakeven drilling targets at our production hubs and ramp-up at Leon-Castille. Combined with the attractive fiscal terms, we are adding high-margin barrels that fuel free cash flow growth through to the end of the decade. And with more than 350 million barrels of oil equivalent of 2P reserves and 2C resources, plus 0.5 billion barrels of prospective resources and success in the recent bid round, we have lots of running room in this prolific oil and gas basin. Our team have a proven track record of profitably and competitively converting resource to production, ranking best-in-class among global peers when it comes to development cycle time. They're also responsible for 1/3 of all discoveries made in the Gulf since 2014. Over the next 3 years, we expect to allocate around $400 million a year with 10 to 15 wells planned. This includes development wells with internal rates of return in excess of 40% and low-risk infrastructure-led exploration wells with a short cycle time to production, if successful. The Gulf of America business unit is transformative and raises the bar for capital competition within Harbour. Finally, Mexico represents one of our most material long-term growth opportunities. Through the Zama and Kan shallow water hubs, we are building a scaled advantaged business with tieback potential. As newly appointed operator of Zama, we've submitted a simplified phased development plan designed to lower breakevens, improve returns and lower risk. At Kan in 2025, resource was upgraded by 50% to 150 million barrels of oil equivalent gross. Together, Zama and Kan have the potential to deliver reserves equivalent to more than 2 years of group production. As operator of both hubs, we have the opportunity to capture synergies across design, drilling and operations. Both projects are expected to enter FEED this year. Subject to partner alignment, securing FPSOs and regulatory approval, we're targeting both to be FID ready within an 18-month horizon and possibly one project as early as year-end. We also see additional upside through the alignment with our Gulf of America business unit, using key capabilities and talent that we now have to help successfully deliver Zama and Kan. Mexico builds long-life, high-margin oil exposure with strong operating control. So putting this all together, what does it mean for our CapEx and production outlook? We expect to spend $2 billion to $2.3 billion per year from 2027, which we believe is the right level given our portfolio and opportunity set. With over 3 billion barrels of oil equivalent of 2P reserves and resources, we will prioritize the most competitive projects, continuing to high-grade the portfolio. This level of investment allows us to sustain production between 475,000 and 500,000 barrels of oil equivalent per day through the end of the decade. During this period, operated CapEx rises to 60%, giving us more control over cost, schedule and performance. And while overall production remains stable, we are replacing the declining higher cost U.K. production with higher margin growth in the U.S. and over time, Mexico. We have a strong history of reserves replacement, and we expect that to continue. For 2026, we anticipate at least 150% reserves replacement, supported by the LLOG and Waldorf additions. Historically, we've grown reserves through M&A. Going forward, more will come organically from our large, diverse 2C resource base. The quality of our reserves also improves, more oil-weighted, more operated and increasingly positioned in lower cost, lower tax basins. In summary, we are and will continue to have a laser focus on operating safely, reliably and with discipline, expanding margins, lowering breakevens and improving capital efficiency, converting resources into production profitably and predictably and building a portfolio with scale, longevity and rising free cash flow. This is how we continue to strengthen Harbour. I will now hand over to Alexander for the financial review. Alexander Krane: Great. Thanks, Nigel. And again, good morning to everyone dialing in this morning. We've delivered another strong set of financial results, reflecting a full year's contribution from Wintershall Dea, excellent operational performance and strict capital discipline. As a result, we improved our operating margins. We generated $1.1 billion of free cash flow, beating our guidance for the year, and we reduced our net debt. At the end of last year, as Linda mentioned, we announced the Indonesia divestments and the U.K. Waldorf and U.S. LLOG acquisitions, materially improving our free cash flow outlook. We increased 2025 declared shareholder distributions to approximately $0.5 billion and also announced in December our intention to update our distribution policy, better aligning distributions to our cash flows. 2025 was marked by significant geopolitical and macroeconomic volatility, driving uncertainty in commodity markets. 2026 is proving no different. Recent events in the Middle East have pushed spot prices higher, but concerns around oversupply persists with the possibility of materially lower prices from here. Against this backdrop, Harbour is well positioned, particularly following the LLOG and Waldorf transactions. We have a large scale, diverse portfolio, including by product with 40% of our production exposed to Brent and 40% to European gas, a structurally lower cost base, greater operational control and investment-grade credit ratings, supported by our prudent financial policy. As a reminder, we hedge 2 years forward, targeting 50% of economic exposure in year 1 and 30% in year 2, targeting even split between swaps and collars. This protects around half of our downside exposure while preserving meaningful upside participation. And we continue to hedge through the recent volatility this week, securing attractively structured colors, especially for European gas. Turning now to the income statement. Thanks to the hedging results, we realized prices broadly in line with global benchmarks for oil despite slight grade differential on liquids and above benchmarks for our European gas. Revenue and adjusted EBITDAX increased by 65% and 77%, reflecting higher production and stronger gas realizations, partly offset by lower realized oil prices. Now as Nigel outlined, we lowered our unit operating cost by 22% to $12.8 per BOE despite the significantly weaker U.S. dollar. Net financial items reflected $0.5 billion of foreign exchange losses, partly offset by $0.2 billion of FX hedging gains. Profit before tax increased to $2.8 billion or $3.4 billion on an adjusted basis. While we reported a loss after tax of $0.2 billion, driven by a more than 100% effective tax rate, adjusted profit after tax increased to $0.6 billion, up over 60%. Adjustments reflected 3 main items: $0.4 billion of impairments, including as a result of license exits and write-offs in our Mexico, North Africa and CCS portfolios; $0.2 billion of intercompany FX losses; and $0.3 billion related to the U.K. EPL extension to 2030, the latter 2 already reported at our half year results. The adjusted effective tax rate was 82% compared to 106% reported, more in line with the 78% statutory tax rates we now have in Norway and the U.K. Turning to cash flow. During the period, we generated $7.3 billion of operating cash flow, invested $2.3 billion on total capital expenditure, and we paid $3.5 billion of cash taxes, substantially in the U.K. and Norway. This resulted in free cash flow generation of $1.1 billion, materially higher than in 2024 and significantly above what we expected at the outside of the year once normalizing for commodity prices. This increase was driven by strong operational execution and rigorous capital discipline. Now turning to net debt on the next slide. Net debt reduced over the year to $4.4 billion. This reflects strong free cash flow of $1.1 billion, of which approximately $0.5 billion was returned to shareholders with the balance going towards debt reduction. The impact of the weaker U.S. dollar, which increased the value of our pre-swap euro-denominated bonds by $0.6 billion was partially offset by net $0.4 billion increase in cash balances from the issuance and repayments of subordinated loans. Post period end in February 2026, we completed the $3.2 billion LLOG acquisition funded through a combination of $0.5 billion of equity and $2.7 billion of cash, including a $1 billion bridge facility and a $1 billion 3-year term loan with existing relationship banks and a few new banks joining our syndicate. Now as a result, net debt increased to $7.2 billion on completion. Having prefunded 2026 maturities through senior and hybrid bond issuances in 2025, we now have greater flexibility around the timing of the bridge takeout. Consistent with our approach on previous acquisitions, we aim to delever using cash flow to repay the term loan over the next 3 years. We have updated our 2026 guidance to reflect LLOG completion in February and the expected closing of the Waldorf and Indonesia transactions by end Q2. Production guidance is increased to between 475,000 and 500,000 BOE per day, while unit OpEx is expected to be slightly higher at approximately $14.5 per BOE with LLOG and Waldorf increasing near-term unit OpEx. Here, LLOG OpEx is expected to be $19 per BOE in 2026, then expected to decline to approximately $12 per BOE by 2030, primarily as a result of production increase impacting unit operating costs. Total CapEx is expected to increase to $2.2 billion to $2.4 billion, driven mainly by LLOG with also approximately $0.1 billion related to Waldorf. At $65 Brent and $11 European gas prices, we expect to generate approximately $0.6 billion of free cash flow, reflecting investment in the LLOG portfolio and Waldorf synergies starting in 2027. Post completion of the LLOG acquisition, we are now more sensitive to oil prices. A $5 per barrel move in the average oil price for the full year impacts free cash flow by some $170 million, while a $1 change in European gas prices impacts free cash flow by approximately $150 million. Forward curves are moving a bit this week. But if I use today's curves for the entire year, we would expect free cash flow to be closer to $1.4 billion. Now looking through to the end of the decade, we expect materially increasing free cash flow, driven by the continued transformation of our portfolio. Higher cost Southeast Asia exits and declining production in the U.K. are being replaced by higher-margin volumes, primarily in the U.S. Gulf alongside Norway and Argentina and over time, Mexico. We expect our effective tax rate to fall quite significantly, reflecting a strategic shift in profitable production towards lower tax jurisdictions. In the U.S. Gulf, a 23% tax rate and the ability to depreciate the log purchase price means we expect to pay very little tax there in the coming years. In parallel, we expect CapEx to reduce to around $2.0 billion to $2.3 billion from 2027, reflecting continued portfolio high grading and disciplined capital allocation. As a result, free cash flow is expected to increase to $1 billion in 2028, mainly supported by increasing production in the U.S. Gulf and significant financial synergies from the U.K. Waldorf acquisition from 2027. Beyond that, we see further cash flow margin upside towards the end of the decade, driven by continued growth in the U.S. Gulf and as our Mexican projects come on stream. Let's turn now to the shareholder distributions and our revised policy. We communicated our intention to update our distributions policy in December and believe that now is the right time to pivot, linking shareholder distributions directly to cash flows and strengthening our capital allocation framework across the commodity price cycles. In the past, we've returned on average around 40% of free cash flow to shareholders each year. We are now target returning 45% to 75% of annual free cash flows, including an initial base dividend of $0.161 per voting ordinary share equivalent to approximately $300 million. By tying distributions directly to our cash flows, the new policy builds in the opportunity for shareholders to benefit from the growing cash flow outlook I just showed and from periods of higher oil and gas prices like the ones we're experiencing today. So how will this work? Well, when leverage is above 1x, we expect the payout will be towards the lower end, enabling us to prioritize debt reduction. However, when leverage is below our target of 1x, we expect distributions to be at the upper end of the payout range. As such, our new policy supports a sustainable base dividend across the commodity price cycles and allows us to share the upside with our shareholders alongside near-term deleveraging and disciplined investment for future growth. In line with the new policy, the Board has proposed a final dividend of $0.0805 per share, equivalent to $150 million, representing a 45% free cash flow payout for 2025. For 2026, at $65 per barrel Brent and $11 per Mcf European gas, we'd expect to distribute $300 million to shareholders. Then just to illustrate the benefits of this updated policy. If we again use $75 per barrel and $14 Mcf for the full year, closer to today's forward curve, a 45% minimum payout would get us to around $600 million of distributions. My final slide is a reminder of our 3 capital allocation priorities, which we look to balance through the cycle. First, we remain committed to maintaining an investment-grade balance sheet. Following every major transaction, we have consistently prioritized debt reduction and with the additional leverage from recent transaction, we intend to do so again. Under our outlook price forecast by 2028, supported by stronger free cash flow, we'd expect to have repaid $1 billion of debt with leverage returning below our through-cycle target of less than 1x. We also aim to maintain a robust and diverse portfolio. By investing $2 billion to $2.3 billion per year, we expect to be able to deliver increasingly high-margin, cash-generative production through the end of the decade. And thirdly, we will continue to deliver attractive shareholder returns through the cycle. And as you heard today, at current forward prices, there is clear potential for significantly higher distributions this year. And over time, we expect to deliver material distribution growth in line with our growing free cash flow profile. So with that, thanks for everyone's attention, and I will hand you back to Linda for close. Linda Cook: Thanks, Alexander. So in summary, we've had an excellent year operationally, financially, strategically, and we've carried that momentum into 2026 with the completion of the LLOG acquisition and with production off to a good start. Our portfolio actions have transformed the outlook for Harbour, and we're seeing the benefits of our increased scale and resilience. And now the organic opportunity within the portfolio means we can sustain production and generate material and growing free cash flow to the end of this decade and possibly beyond. Looking ahead, our portfolio, our team and our track record give me confidence that we'll deliver against these capital allocation priorities, including maintaining the strong balance sheet and delivering competitive shareholder returns through the cycle. So it's now time for Q&A. Alexander, Nigel and I were joined by Alan Bruce, EVP of Tech Services, and we look forward to answering your questions. So now I'll hand it back to Dan. Operator: [Operator Instructions] Our first question comes from Lydia Rainforth of Barclays. Lydia Rainforth: I actually have 3 questions, if I could. I'm sorry for quite many, but there's a lot to go through. The first one was just on the cash return structure. Obviously, you said in the past, you've done a combination of buybacks plus dividends. And you've now gone with the base dividend. And then when you're looking at sort of why go for 100% base dividend? And when you're going forward, when you look at sort of where the current cash prices are, do you split it between a special dividend plus buyback just to give us an idea of how you're thinking about that? The second question was on the LLOG integration. I just wonder if you can just walk us through a little bit more of that, whether culturally how that works and how that -- you feel like that's going at the moment? And then the third one, is that just more of a how do we actually work today question. So obviously, we've got a lot of volatility. Just in terms of when you're seeing this level of volatility, how as Harbour do you react? Are there things -- the levers that you can pull in terms of additional production? Are you seeing conversations with customers? I'm just kind of working through what -- how you're actually seeing practical impacts of the current disruption? Linda Cook: Lydia, thanks for the 3 questions. I'll turn to Alexander first to just say a few words about how we think about buybacks in the context of our distribution policy. And then I'll take the last 2 about log and then the -- yes, how we deal with volatility. So Alexander? Alexander Krane: Yes. Thanks for the question, Lydia. Yes, I think when it comes to the distribution policy, we've tried to strike a good balance here between a base dividend that we're comfortable through the cycle and then what the added shareholder distributions are going to be on top. You've seen us in the past do quite a bit of share buybacks when we thought that was timely and a good thing to do. And going forward, it's probably going to be a mix of both higher dividend levels and share buybacks. And we and the Board will probably assess closer to time which of the 2 and what that mix is going to be. But I think for today, our point here is to set that base dividend level, the percentage of how do we think about sharing the extra free cash flow that we expect to see. And also how would you -- how do we balance this with debt levels. So hopefully, the guidance that we've provided today and what I talked through is helpful in that regard and gives a bit of insight into our thinking. But yes, it's probably going to be a mix of the 2. Linda Cook: Yes. Thanks, Alexander. I agree with that. I think it will just depend on the circumstances at the time, what's going on with commodity prices, our outlook for cash flow, et cetera, et cetera. So a bit hard to answer hypothetically, I think. Going to the other 2 questions. So LLOG integration, going really, really well, I think. And one of the reasons why I think we were successful landing this transaction was the fact that both sides saw what we believe will be and so far has proven to be true, a good cultural fit between their organization and ours. And that always helps make an integration go more smoothly, and we're just 3 weeks in and so far, so good. It's not that complex of an integration for us if we compare it to the Wintershall Dea transaction where we had, I don't know, 7 countries we were adding and multiple different onshore and offshore production, operated assets and nonoperated assets, dealing with works councils in Germany, et cetera, buying a single business unit, if you will, in a country where we don't currently have operations. So there's no overlap. We're not dealing with 2 different offices who's going to do what. This one from that standpoint is actually fairly straightforward. I was there a couple of weeks ago. We have staff there. This week, we call them ambassadors. It's part of our integration toolkit where we send people more experienced in Harbour to new locations, and they just sit there and answer questions for 2 or 3 weeks so that people say, how do I get X, Y or Z done, somebody can tell them who to call or where to look, et cetera. So all going really smoothly. The staff there seem excited to be part of Harbour and curious to see what's going to come next. Volatility. Well, never a dull moment in our industry, Lydia. It wasn't -- even as recent as last week, right, there were new reports coming out from experts trying to convince everyone that oil is headed to $50 per barrel. I know you weren't one of those, Lydia. So you were a bit of an outlier there, which we've always appreciated. But you know now here we are with oil, I don't know where it is right now, but $80. So I think it's just another proof point that we live in a volatile world and our sector, in particular, can be quite buffeted by that. And when that happens, we just have to focus on controlling what we can control. In terms of what we do this year, I mean, production this year, CapEx this year, these are things that have largely been decided months or even years ago or driven by decisions we've made in the past. So not a lot actually to do, in particular, with production this year. There are some knobs we can play on CapEx. But no one believes that the conflict is going to be long-lived or at least we can't assume that in our planning. And so what we have to assume is that at some point, prices come back to a more normal range. What is that? Who knows? But we're certainly not making any decisions today that assume prices are going to be $80 or higher for years to come. Operator: Our next question comes from Alejandra Magana of JPMorgan. Alejandra Magana: Excellent. As a follow-up to how you're responding to the Middle East developments, would you consider any changes to your hedging program to potentially accelerate your path to sub 1x leverage? Or does maintaining cash flow stability remain the priority? In your prepared remarks, you gave illustrative examples of what the cash flows could look like on today's forward curve, which were encouraging. So I'm curious how you're thinking about that trade-off today? And my second question is on your portfolio. You've discussed 5 core countries, which implies regions like Germany and North Africa could ultimately be candidates for disposals. How are you thinking about those assets today? What are market conditions like for potential divestments? And does your deleveraging time line assume any disposals? Or would these just simply accelerate the path? Linda Cook: Yes. Thanks, Alejandra. I'll turn to Alexander first to talk about hedging. I mean you know the phrase, never waste a crisis, kind of comes to mind. So I'll say a few words about that, and then I'll talk about divestments. Alexander Krane: Yes. Thanks for the question, Alejandra. Yes. So on hedging, I mean, the starting point is that we've I think, now for several years, had a fairly consistent hedging policy where we do try to get to 50% and then 35% hedged for the following year. Then what's developed over the last year or 2 is just how we think about the mix here. Instead of doing consistently swaps, we've transitioned into doing more and more of these collar structures. So trying to lock in a floor typically above what the rating agencies are using in their cash flows and then without giving away too much of the upside. So what are we doing today? Well, we are, as you would expect, actively engaged looking at sensible structures in today's environment as well. What has been quite unique is when you get this type of volatility, it impacts the pricing of color structures. So what we call the SKU on the put and the call. And one thing is on the crude side, where there's been, for us as producers, a positive SKU here, but also -- and more impactful is the skew here on natural gas. And what we've been doing this week is putting quite a bit of structures in place here on the gas side, not enormous amounts, but we're putting quite a bit of hedges in place where we saw the opportunity to lock in $15, $14 type dollar puts and then participating in the upsides, way up in mid-20s or so. So the skew on what we've seen here has been, how should I say, unusual and something we've been trying to benefit from. So yes, we remain very active monitoring this, but of course, not participating and doing way too much as you shouldn't do at the point risk point in time. But yes, those -- volatility impacts those type of opportunities, and we try to be awake and see what's possible to do there. Linda Cook: Thanks, Alexander. Now coming to your question, Alejandra, about divestments. So we do have active track record of portfolio management, and we expect that to continue. It's just a foundation or one of our keystones of our strategy. Given what we've announced today, we will have nearly exited Southeast Asia. That leaves, as you said, Europe and Americas as core, the bigger producers there at least. And then what's outside of that ring would be Germany and MENA. So a small position in Libya, also relatively small in Algeria and then in Egypt. And we have really good assets in those countries and fantastic teams that do amazing things and they generate positive cash flow for us. So today, certainly doing no harm and providing some benefit to the portfolio. But we look at the portfolio rather dispassionately and the criteria remain the same. If we can't get to scale in a country, we don't see -- if we're not at scale today and we don't see a profitable path to scale or if investments in the country are struggling to compete for capital, then it may be more valuable in someone else's hands, and we would consider divesting. And that remains the case. So what does that have to do with the forecast we presented today? The production forecast only really includes transactions that have been announced more or less. So there's none built into the forecast. That doesn't mean we won't continue active portfolio management, but there's none actually built into that. And in terms of proceeds, the free cash flow forecast that we give excludes divestment proceeds. But if there are some, I think what we -- the question was what we would do with them, and I think it just depends on the circumstances at the time. What's leverage -- as you said, what's leverage at the time we get those proceeds? What are oil and gas prices doing? What's our outlook for free cash flow at the time? And then depending on the circumstances and the amount of the proceeds, the Board will decide what the best use of those are and whether they go towards leverage or shareholder distributions or some other use. Thanks for the question, Alejandra. Operator: Our next question comes from Chris Wheaton of Stifel. Christopher Wheaton: Two questions, if I may. Firstly, can I come back to the point on 2027, 2030 CapEx. Guidance there of $2 billion to $2.3 billion at DD&A rates of $15, $16 a barrel. That doesn't suggest you're replacing all your production in that period of the late 2020s. And that then suggests to me that you're going to see decline post 2030, which is kind of in forecast already as you see Norway roll over. I just wondered why a CapEx number that low because that doesn't seem enough to sustain this business post 2030. And my second question was on G&A cost. The G&A cost now $470 million for 2025. Yes, there's $70 million odd of transaction costs in there, but it feels those restructuring costs are a feature of your business year-on-year. Comparing you to, example, for Woodside, that's a pretty similar number to Woodside, but Woodside is 25% bigger. What are you doing about controlling G&A costs? Because it feels like the business is getting more complex, not less, and G&A costs seem to be rising -- risen quite substantially. I was going to throw in a third question on windfall tax. But after this week chaos, I'm not going to bother. I think I'll stop there. Linda Cook: Thanks, Chris. Let me turn to Alexander to talk about the CapEx levels. I think what we did lay out was our projection around reserve replacement ratio over the coming years and our current forecast that includes that CapEx projection or range that you talked about and does support a reserve replacement ratio during that period of over 100%. So we feel good about that and flat production towards the end of the decade. But Alexander, do you want to say a bit more about that in G&A? Alexander Krane: Yes. No. Thanks, Chris. I was almost expecting a question on EPL. So I'm not going to say I'm disappointed, but we can take that offline. Yes. So on CapEx, I mean, the point today, Chris, is to show what this enlarged portfolio is now capable of doing. And how can we sustain production through the decade with these assets on hand. And also what you've seen from Nigel's bit is a very significant 2C basket as well. And there's also some exploration in here, which is, of course, not necessarily booked in any of these categories. And we'd expect to do exploration both in Norway and the U.S. Gulf. So I mean, again, we think this is sort of the right level of CapEx to keep production at these rates. And the point is here that we do think that we can high grade this and margins will increase over time as well with the new jurisdictions, with lower cash taxes coming there as well. So fairly flat production, but margins increasing, and that's what we expect, and that's why we are making the statements about free cash flow growing over time as well. Linda Cook: And on G&A, anything to add, Alexander? Alexander Krane: Yes. I mean I appreciate the comments around this and how G&A has been increasing. And there's obviously a few one-offs in terms of being acquisitive and going through all of this process that we are. So I think our target remains the same to get to $2 per BOE or hopefully lower. Yes, we have been and we will be hard at work to ensure that we're operating just as efficiently as we can, not having too much overhead or too much process and losing the agility that we think we still have in this company. So I mean that is the target, and we'll be hard at work to keep that under control and hopefully reduce that as well. Linda Cook: I would just add that the Wintershall Dea integration was a particularly complicated and therefore, expensive one to do and that we had a 12-month TSA in place that we were paying almost every month last year, at least 9 months last year. And so that's now gone away. And in fact, we're getting a bit of rebate on that because we had overpaid. So if we adjust last year's G&A for that, I think $30 million or something comes off of that, Chris, but that will be helping us this year. And as Alexander said, targeting to get to $2 per barrel by 2027. And believe me, there is pressure from at least one person in the organization to get there before then. And if we think about -- your comment about are we going to continue to see those kind of costs in our G&A, the Waldorf and the LLOG transactions are both very simple, as I already commented when it comes to an integration standpoint. Waldorf, we already have a U.K. BU. It's all nonoperated. So that's very little to be done there. And then in the U.K., as I commented earlier, a single country where there's no overlap with existing operations. So that's -- I wouldn't say plug and play, but relatively simple. And then there's still scope for all of this to come down as we continue to rationalize IT systems, and everything else over time. That doesn't happen overnight. And we're trying to be very thoughtful about does it really make sense to replace certain systems or to change operations in one country onto a system we might be using elsewhere? Does it make more sense to just keep it simple and build an interface between the 2. So we're doing that over time as it makes sense to, but should drive down costs over time. And then EPL, yes. Well, thanks for not asking the question. Thanks, Chris. Operator: Our next question comes from James Carmichael of Berenberg. James Carmichael: Just going back to the distribution policy in terms of the base dividend. I appreciate it feels quite far away given where commodity prices are at the moment. But if there was a period of weakness and free cash flow dipped below $400 million, let's say, does that $300 million sort of base still hold? Or would the sort of 75% be the ceiling so potentially go below that? Just on the U.S. quickly as well, I guess if we look at the production growth chart, there's a lot of focus on Who Dat, Buckskin and Leon-Castille, but the other bucket looks to be driving quite a bit of the production growth as well, maybe more than Who Dat and Buckskin combined. So maybe just wondering if you could give a bit of color on what's driving that or underlying in that other bucket? And then I probably seeing as we here probably will ask about the EPL, I'm afraid. So there's obviously been a lot of discussion headlines, et cetera, around that this week's statement didn't really provide any color, but then stories around the meeting, which I guess you guys were in yesterday. So just wondering what, if anything, you sort of can say around where you think the government's head is at your level of confidence that, that comes forward, et cetera. Linda Cook: Great. Thanks, James. I'll turn to Alexander to talk about kind of the sustainability of the $300 million in different price environments, then to Nigel to talk about other fields where the growth might be coming from in the U.S.? And then thank you for asking a question about the EPL, and I'll be happy to take that. So Alexander? Alexander Krane: Yes. No. Thanks, James. Yes, I mean the base dividend -- I mean, we set it at a level which we're comfortable and we think this will hold through the cycle. And we view that as an initial base dividend level. And when we're having -- again, back to Alejandra's question earlier, when we're having this type of volatility in markets, we do try to be mindful here of doing hedging, doing other things, which protects that as well. So trying to do hedging into future years to, yes, protect free cash flow there just to ensure we are above that minimum level as well. Linda Cook: Nigel? A. Hearne: Sorry, you didn't come off mute fast enough. Sorry about that. James, thanks for the question. Look, we have an active program. We're just working through right now potentially adding a second rig line in the Gulf of America. We clearly are focused on our existing hubs to grow production. There are other opportunities that you referred to in here are really around [indiscernible], which is 100% owned and then potentially beyond that post 2028 is really where we think to think about our short-cycle exploration program. But the other bucket you referred to on that chart is really driven by [indiscernible] production. Linda Cook: Great, James, and then the EPL. Well, Alexander had the honor of representing Harbour Energy at the meeting yesterday with the Chancellor. So after I answered, if he wants to add some color, we'll give him the chance to do that. But I guess we'd say we welcome the opportunity to engage with the Chancellor on the topic, and we welcome the statement from our office yesterday saying she'd like the EPL to come to an end and that she had hoped to announce it this week, but geopolitical events gotten the way, if you will. And certainly, there's a lot of overlapping interest and common ground between Harbour and the Chancellor's office and between industry in general and treasury. So investment, jobs, growth, all priorities for all of us. The problem is the current fiscal environment for the U.K. oil and gas sector supports none of those things and actually has led to the opposite over the past few years, lower investment, job reductions, falling domestic oil and gas production. That's meant more imports with higher emissions, lower energy security. And now we see that it's all come in another bad time with European gas storage levels well below 5-year lows and now 20% of the world's LNG disrupted -- LNG supplies disrupted. So we continue to believe in the potential of the U.K. North Sea. We certainly believe in our team in Aberdeen and have seen them do amazing things when it comes to recovering oil and gas in what can be a sometimes challenging environment. And we do hope to continue to work with the Chancellor now to make the removal of the EPL happen sooner rather than later, especially at this time when energy security is unfortunately back on the radar. Alexander Krane: Yes. Thanks for the question, James. And I mean, you know that we have been one of the vocal companies who said the EPL has very negative effect for the U.K. and how we think about energy policy and security here. We've spent quite a bit of resources in engaging with the U.K. government and helping us to get to a new regime in place, which was announced last year. Now this regime would not come into play until 2030. And again, we've been vocal in saying, well, why wait. If we have a future-proof fiscal system, why wait until 2030. We believe it's in the best interest of the sector here and the country, quite frankly, to implement this sooner. I mean we have been working quite a bit with the U.K. government, and we will, of course, continue to do that and support as best we can. And we do also think that the efforts now from the Chancellor's office do seem genuine, and we are hopeful to see some progress over here in hopefully, the not-too-distant future. Linda Cook: I think we have one more question maybe, Dan. Operator: Our last question comes from Matt Smith of Bank of America. Matthew Smith: I'd love to turn to projects a bit in LatAm in particular. So first of all, on Argentina, Vaca Muerta specifically, is there any update you could give us as to production performance versus expectations and the latest on licensing there as it relates to the oil and gas side. That would be interesting. And then second question, turning to Mexico and Zama specifically. Could you give us some more details on the latest development plan that you're working on, I guess, the overarching improvements versus the old. And I'm just wondering also how many phases we could be looking at to exploit the full Zama resource, please? Linda Cook: Great, Matt, and thanks for the questions, and it's nice to get questions from time to time about the project. So I'm going to turn this over to Nigel. A. Hearne: Matt, thanks for the question. So I'll start with Argentina. Our base production today is around 70,000 barrels a day. Bulk of that comes from our CMA-1 license. We completed a project early and ahead of schedule last year at Phoenix to plateau that production through to 2040, and we did actually extend the license. The real growth opportunities in our resource position is in the APE gas window, where we have about 22.5% equity and in the San Roque oil window. We did complete a successful pilot in the unconventional license to San Roque last week -- last year, and we've got a 16-well program started -- scheduled for the end of this year. We're working with our key stakeholders down there and our partners really to secure the unconventional oil license towards the end of the year. So once that -- once we have clarity there, we will be progressing that program with our partners. In APE, today, our production is around 20,000 barrels a day from 80 wells. I would say that we've got a significant number of well locations potentially to materially increase the resource. We're not going to drill for the sake of drill and grow production. It's about generating a margin. Today, the gas market has softened a little bit, and we've got less offtake and we've got more market penetration from associated gas. So that's one of the key reasons why we've invested in SESA. I think it gives us another avenue to secure a better gas price and give us options on pricing, which allows us to optimize and then underpin our development in APE. So as you know, the LNG project is an FID we took last year with several partners. That project is underway, and that will, I think, open up avenues to continue to develop our dry gas window. You asked a question around Zama and Kan, we have actually spent a lot of time focusing on what we want our business to look like in Mexico over time. It is about creating 2 advantaged hubs. We have actually taken some deepwater assets out of the portfolio, which we won't invest in and we will not be advancing those projects. So we're focused on Zama and Kan. We'd like to get both of those projects to FID ready over the next 12 to 18 months. The concepts are nearing completion, and we'll be entering FEED this year on both projects. We've reoptimized the Zama development for a phased development, which we'll see $1 billion to $2 billion investment in the first phase with potentially a small waterflood, but we're really finalizing that scope. So we'll see a phased development, small number of wells to generate some early production, and then we'll come back with a more second phase on Zama. Now we're operator, we have more control and are focused on really optimizing that design and that concept. And we'll know more as we get to FEED this year and have clarity around the FID and first oil timing sometime later this year, early next year. We're looking to secure FPSOs for both Kan and Zama. We have line of sight to narrowing the options on both of those. So it's an exciting time to be in Mexico. Both projects have matured a lot in the last 12 months. We're getting close to finalizing the concept for each. Optimizing our well locations as part of driving down our breakeven costs. We are focused not necessarily just on schedule, but just driving down our breakevens. These will be long-lived projects. We need to make sure they compete and compete over time. So a lot of focus on maturing the projects and on driving capital efficiency into both of them. We do see some synergies if we can run them somewhat in parallel where we can optimize rig schedule, service vessels, engineering support. So a lot to get worked through this year, but both projects are now getting clearer and clearer on their path forward. Linda Cook: Great. Thanks, Nigel. And thanks, everyone, for joining. We really appreciate the fact that you've spent some time with us today. And as I've said, I'm really proud of what the teams delivered last year, and it's good to see that we're off to a solid start for 2026. So thanks again for joining, and have a good rest of your day.