加载中...
共找到 18,260 条相关资讯
Nicolaas Muller: Good morning to everyone. Welcome here to all those present, the investment community, our own Implats people and for everyone who's dialed in as well, welcome. Always an honor to represent a very talented Implats team. Extraordinary times that we are living in. We had a presentation from one of the consulting firms the other day, and it was very clear that we are going through a shift in global order. It's a new era that is being introduced. We're seeing changes in international relationships, institutions, NATO, trade paths are changing, supply chains are changing. The move from globalization to multipolarity is accelerating. We just recently this weekend seen a new event unfold in the Middle East. And so all of this creates a number of consequences, one of which is uncertainty in future supply, particularly in natural resources and in our case, critical minerals and metals. And critical can be defined in many ways. But one is, if it's used in critical industries like in Europe, the auto industry is a very important employer. It affects politics. And so without our metals, there is a risk for the industry. But then also our concentrated supply globally with 80% of the world's PGMs being produced from Southern Africa and the uniqueness of our metals, as has been said many times over the past. And so given these pressures and the uncertainty in supply chains, where will this metal come from in the past, there's a major topic of critical minerals and the hoarding of that, we've seen, as an example, the $12 billion evolve program announced by the U.S. We certainly are having similar discussions with other jurisdictions or representatives of industry in other jurisdictions where similar concerns are being echoed where there's an engagement to determine the extent to which relationships can be formed to provide security for long-term supply. In addition to that, we've seen the flow out of the U.S. dollar towards hard assets such as gold. We've seen record gold prices and other precious metals like platinum has now followed suit. So that has in part been the driving force behind the extraordinary rise of the PGM dollar prices. On top of that, if you look at the market fundamentals, we do see continual downward revisions in the EV penetration rates. We have witnessed in recent times a shift in priority in decarbonization in general, particularly in the U.S. But we have seen relaxation in terms of expectations of where the world wants to be in terms of, for instance, the percentage of fleet contribution of electric vehicles by certain dates 2030 and 2035. And so that has resulted in an increase in demand for our metals. We have seen an increase in demand from Chinese jewelry and certain industrial customers as well. On the other side, we do have certain supply risks being acknowledged by the market. We have not seen the historical levels of investment in future supply. I had occasion to sit with the four CEOs -- the other four CEOs of PGMs. And even in February, we were unanimous that it's not the right time to consider large-scale greenfield capital projects at this stage. And so if you look at the global order shift in world uncertainty combined with shifts in the fundamental markets that has given cause to the increase in -- sorry, on the wrong slide, metal prices. As a consequence of where -- of the nature of the major forces, it is our contention that the price support that we're currently seeing is not a short-term one. This is not as a consequence of Donald Trump. It's the Trump effect. It will outlast the current administration. It's not reliant on who wins the next election. It's uncertainty -- once you've asked these questions, those questions remain relevant and you have to organize your country, your region very differently for a generation to follow. So it is our belief that this current upswing in prices will remain longer than has been the case in the past where we saw relatively short summers following very long winters. And so if you look at our results, it's dominated by two major points. One, the production performance, both at mine operational level as well as in the processing division and what we sold, it's more or less in line broadly. I mean, as I said in the video, if you look at all of those numbers, it's like 0% or plus 1% is around about there. So that's the one thing. The business has been in good hands. We have navigated through this period in a very stable fashion. The one red flag that we need to be cautious of is the increase in operating costs. Our unit cost increased by 11%. There are reasons for that, that will be addressed by Meroonisha and our COO, but it is something that we have to be aware of. So I think cost management is something that we have to take into consideration and the operating cost specifically. And then, of course, the other dominant factor has been this 40% increase in the rand basket price. And if you look through all of the financials, the entire industry is looking a lot more attractive than what it did in the previous period. Given the fact that we are where we are in terms of metal prices and then increase in EBITDA and revenue and cash flow, it does provide us with a really important opportunity, and that is to change our strategic focus in the company. During the lean years, we are very defensive. We focus on cost control, capital management. We even go as far as organizing or reorganizing labor and even do things like portfolio reviews to understand or to have a strategy if there is a further decline in prices. So at the bottom, that talks about an inflection point. So if I look at where the company is positioned now, the focus is different. We now have the opportunity to focus on how to strengthen the company. And our opportunities, there's like a funnel of a pipeline of opportunities, starting off at the most basic level, Patrick and his team with the support of Meroonisha and the rest of the executive have already implemented through Board support a number of early action programs to initiate life extension projects. They've occurred at -- two Rivers, at Marula, at some of the shafts at Rustenburg. One of them has already been converted to a fully fledged capital application that was approved, and that's at 14 Shaft for roughly ZAR 1 billion. And that will provide us with life extension project. I am very confident that some of these other early works programs that were initiated will result in approval of additional capital. And based on Patrick's information, roughly, we will look at a 3-year extension to our current steady-state 3.5 million ounces per year production profile. Thereafter, we will require additional initiatives. So that's the one part. The second part is that we do believe that there is room for optimizing of the industry through various actions. One, there is the sharing of infrastructure. We are constrained at the moment with our processing capacity, and we have excess ounces. But in future, I mean we do see a declining production profile. So that will open up some processing capacity to share in the industry. And we do believe it's critically important for Southern Africa to protect local beneficiation of the metals. And so I think that the opportunity to do so will increase as we go forward. Then there are the normal cross-boundary opportunities that always exist. And I can think about a few, but let me just raise one. And I'm not -- please don't interpret this as me announcing any action. I'm just saying one of the areas that we have battled with in the industry is the Eastern Limb as an example. So if you reimagine what the Eastern Limb could look like if it's operating as a greater unit, I think you can share concentrator capacity with mining capacity, but it will provide you with better muscle to create a more attractive area to get skill better -- a better range of skills in the area and to do better at your socioeconomic contribution to increase the license to operate. So I think there is an opportunity. If I look at Zim, there are a number of emergent producers, GDI, Karo's and so on. So I think that there is an opportunity not only for Implats, but for the industry to reimagine how it operates and to optimize to increase further efficiencies as an industry. And I do think Implats is very well positioned. I mean, we are represented in all the major producing -- PGM producing areas other than Russia. So I mean, we are in South Africa, Western Limb, Northern Limb, Eastern Limb, as well as in the Great Dyke as well as North America. So I do think that we're very well positioned. We do have a good track record in constructive partnerships, toll arrangements, joint ventures. We have been operating in Africa where we focus on long-term strategic relationships. So that's something that we think is quite valuable in considering future options. And then I mean, we can ask more questions about it, but then there would be the questions about greenfields, the Waterberg and the big other thing. As I said earlier, we remain cautious about introducing major new ounces to the market at this point. So we do not expect to make any announcements about that soon. On that note, I would like to hand over to our esteemed COO, Mr. Patrick Morutlwa. Patrick Morutlwa: Thank you, Nico. Yes. Good morning, everyone. It's really a privilege for me to present our group results. And I'll start with safety, health and environment, which underpins everything we do in our group. So for the past 18 months, we have been implementing our 8-point safety plan. And I'm glad to say it is starting to deliver a step change in safety that we've actually envisaged. And this is seen in some of the milestones we've achieved for the period. Our mining and processing division for the first time for the period actually went fatal-free. Similarly, so Rustenburg, one of our biggest operations achieved 5 million without the free shift in the period. And also, if you look at our key risks: fall of ground, winches and machinery, we saw a 12% reduction in injuries, which is all symbolizing and strengthening of career controls in those areas. So while we are building on this momentum, we are equally humbled and also grounded because of the two losses of life we incurred, one in the period and one post the period. So we are reflecting, we are learning, and we will be taking these lessons to make sure that we implement no repeat solutions. So we don't repeat this type of incidents. On the environmental side, our ESG programs continue to receive global recognition. As you've seen in the video, for the fifth year running, we have been included in S&P's Sustainability Yearbook. And during all the same period, you have seen that we have not recorded any Level 3 to Level 5 environmental incident. So we operate sustainably because this is the way we express our values of care, respect and deliver. And lastly, on the health side, also our health programs continue to deliver positive results. Our HIV and TB prevalence are well below the national averages. So the next thing for us for health really is to focus on mental health and psychological health of our employees because healthy employees are engaged, they are safe, but they are also productive. Then moving over to production. We have actually delivered a steady and consistent production, which was really buoyed by second quarter, which was much stronger than the first half. So what you also see that this has happened despite three of our operations having some serious strategic shift. At Marula, we focus on development. At Canada, we continue with the high-grade strategy as previously communicated. And lastly, Rustenburg 3 of our shafts are nearing end of the economic life. So we had to deal with labor movement in those shafts. So going forward, in terms of processing, we also have seen strong performance. And this is also on the back of the work we have done. We have upgraded our BMR at Springs, and we have also done some design and maintenance work in Rustenburg furnaces. So you will see that for our BMR, we have actually a record milling and also for this period, Rustenburg smelter performed very well above budget. And as a result, we were able to release 20,000 ounces of excess inventory. Usually, our release is gravitated towards H2. But because of this good work, we are able to release 20,000 ounces. Our furnace 4 have gone down for maintenance way ahead of schedule. We should be able to restart now in April. And as a result, very confident to release 100,000 of excess inventory as promised at the start of the year. As Nico spoke about the cost, we were about 5.5% above the mine inflation. This was a decision to strategically invest in our infrastructure, particularly some conveyor belt in Zimplats and also improving our maintenance fleet across the group. This will set us well for the future to make sure that we can maintain the current production, but we also deliver into the future expectations. So as I stand here, I can safely say we will meet our guidance on production, on cost and capital for the year. Thank you very much, and I'll hand over to Meroonisha. Meroonisha Kerber: Thank you, Patrick. And I'm checking the time still good morning, everyone. So clearly, the steady operational performance that you've seen enabled us to fully benefit from the 40% improvement in pricing. Let me just get there. Okay. So you'll see EBITDA up at ZAR 18.1 billion, headline earnings, ZAR 9.3 billion. But I think what is noteworthy is that we did not have any unusual non-recurring items in our earnings for the period. As Patrick and Nico spoke about, given the improved pricing and profitability, we were allowed to reinvest in the business. So you'll see some of that in our unit costs, where we took the opportunity with the improved cash flow to spend more on infrastructure and maintenance. And of course, some of that contributed to the 11% increase that you've seen. If you -- and that is particularly at two of our biggest operations, our Rustenburg operations and Zimplats. If you look at free cash flow for the period, we generated significant -- there was a significant improvement from ZAR 600 million in the previous year, up to ZAR 7 billion. And this was driven largely by the improved profitability, but some of this was offset by the buildup in working capital. I think what's important to note is that at the end of the period, there was an additional tax payment that was due of ZAR 1.4 billion, and we made this payment in January, and it basically was a top-up to our provisional tax. If you recall, there was quite a steep increase in prices in the month of December. And clearly, we worked our forecast that were done in November that didn't fully take into consideration the rapid improvement in pricing. If you look at the balance sheet, we used the opportunity of the improved free cash flow to repay some debt. So we repaid about ZAR 800 million worth of debt, mostly at Zimplats, and our gross debt declined from ZAR 1.8 billion down to ZAR 1 billion. Another very important thing we did in the period was our group revolving credit facility was almost -- I think it would have expired now in February. So we took the opportunity to refinance it in quarter 2. And basically, we upsized it from the -- just under ZAR 8 billion to ZAR 14 billion, and we managed to do this on very competitive terms. The new revolving credit facility is valid for -- well, extends for 3 years, and we've got two -- the reason that I mentioned the RCF is we've made some changes to our disclosure on net cash. So in line with the new RCF, we amended the disclosure and definition of net cash to align to the RCF. What this meant is that, we now exclude the deferred revenue from the gold stream from the net cash balance, but also we are not now including the cash held at Zimplats in local currency in our cash balance. And that really is because of the fact that, that currency is not -- you cannot use it outside of Zimbabwe. So on this basis, our net cash got adjusted -- our net cash increased from ZAR 8.1 billion to ZAR 12.1 billion. And with the undrawn revolving credit facility of ZAR 14 billion, we closed the year with headroom of just -- liquidity headroom of just under ZAR 29 billion. I think before I go on to the next slide, I just want to point out a few things. If I look forward, I think the company is really well poised to take advantage of the favorable metal price environment. And there's a few factors that I would like to highlight. Firstly, you've seen sustained operational delivery, and I have no doubt that the team will continue to deliver into H2. We have got a track record of good cost discipline, and it is something that will receive focus. But that -- but I think our teams will deliver on keeping the cost tight. Our capital intensity has normalized, but we've got the ability and the capacity to further strengthen the business and invest in progressing our life of mine projects. And I think the other point, which is very important, is that we have expanded processing capacity and the excess inventory. And I don't think we must underestimate the flexibility this gives us to manage any operational challenges that we might have along the way, and it does support free cash flow generation. If I can then move on to capital allocation. So after repaying about ZAR 800 million worth of debt and making provision for the ZAR 1.4 billion tax payment, the Board declared a dividend of ZAR 4.10 per share or ZAR 3.7 billion. This represents a free cash -- sorry, a payout ratio of 60%, about 60% of adjusted free cash flow, which is double our minimum policy. And if you take into consideration the tax payment that was due, it's about 80% of the available free cash flow. As a result of, obviously, prior capital allocation decisions as well as completing a number of our strategic projects, there was limited capital that was allocated to growth and investment. I think what the capital allocation should demonstrate is that overall, we have maintained our disciplined and consistent approach to capital allocation, and we have prioritized returns to shareholders. Lastly, as Patrick has alluded to, we will obviously end with the market guidance. We're very pleased that we keep our guidance intact. And I believe given where the business is, we are well on track to deliver within this guidance. So with that, I'd like to hand over to Johan. Johan Theron: All right. Thanks to the team. Happy to take some questions as normal. I think let's start in the room. There will be some roving mics. We will pass that along. Just for the benefit of people that might not see on the screen or the camera, just start just to raise your name, just so that everybody knows who's asking the question. We've got a couple of hands up here. Chris, let's start there with you. Christopher Nicholson: It's Chris Nicholson from RMB Morgan Stanley. A couple of questions, if I may. So you've provided a fairly optimistic outlook on the pricing environment. Maybe a bit of a surprise that you didn't accelerate, maybe some of the capital projects to the same extent. So here you're doing some early work. Could you maybe give us further details specifically on Marula? Is this akin to what was previously known as Phase 2? And what type of mine life extension you're looking to get there? Similarly at Impala Rustenburg, 14 Shaft and some of the other extensions, how long are you looking to extend mine life by there? And then kind of linked to that, should we expect ZAR 9 billion of CapEx going forward? Is that a good level into these prices? And then just second question, again, optimistic price outlook. I think some might be slightly disappointed with the dividend. You've seen another 2 months of very strong prices since year-end. Just thought process as to why you need to hold too much cash on balance sheet again. Nicolaas Muller: Okay. I think, Pat, if you don't mind. The first question is about the life mine extension projects, the specifics and that's what they are going to cost and the expected life extension. Patrick Morutlwa: Yes. Let me start first with Rustenberg. As Nico said, we have already approved 14 Shaft extension. It is taking the existing decline into the 18 shaft area. It will give us 4 additional years, which will maintain the current production for another 4 years. It is about ZAR 877 million. The early capital was approved the last quarter, so work is continuing there. Then again, there, we have Rustenberg 20 shaft, where we're now taking 20 shaft into the Styldrift ground. So that work, we're still validating the feasibility study. It should be coming to the board somewhere in August. So I cannot share the numbers now, but it will also extend life approximately 5 to 6 years there. Then the last one is BRPM North shaft, is just taking the existing decline further. So that one, it will give us a much more long life, anything between 10 and 15 years. And again, there early capital approved, so we're executing the final capital numbers not yet finalized. Then moving over to Marula. Marula Phase 2 was closed given that at the time we executing that project, the price did climate. So as part of cost preservation, we did stop that. But now with the new prices, we have restarted the work, approved ZAR 40 million of early capital. So it's not going to be the same as Phase 2. So we're actually doing small chunks. So this project is now divided in four phases. Phase 1 is taking the 11 shaft 2 level down, and there will be a big chunk of capital to secure infrastructure then further chunks of capital to take both Driekop and Clapham down. So we have designed in such a way that we've got proper off ramps through the price plan, we should be able to stop. So the first phase, I spoke about should give us additional 5 to 6 years on top of the existing 6-year life left at Marula. So that's more or less high level on this project that we have undertaken. Nicolaas Muller: And Patrick, the ZAR 9 billion capital, is that a fair expectation or... Patrick Morutlwa: All right. Thank you for that. So you remember, we gave you between ZAR 8 billion and ZAR 9 billion. With this bolt-on project, you can add a maximum ZAR 2 billion. So I think it makes ZAR 10.5 billion, because we will start very slow and just ramp up a bit. But I don't see it going beyond ZAR 11 billion, really. Nicolaas Muller: Chris, I want to -- sorry, I just want to add -- actually, maybe repeat Patrick's words, but in a different form because you asked is it Phase 2? And he said, no. I think it is. But the application of how we get there is different. In fact, the first time we did, we had a ZAR 5.5 billion single project and we had agreed off-ramp points whereas this time, we are saying there's no single ZAR 5.5 billion project. There are going to be a sequence of smaller projects. And so we will have like a consolidated assessment for the entire thing, which will be based on the valuation, but the implementation will have to meet certain performance hurdles as we go along for the next phase to be implemented. So essentially, it's Phase 2 wrapping different color. Patrick Morutlwa: And if I may just add one thing. Nico earlier said that with this project, they will push the 3.5 million ounces back out another 3 years. In addition to that, the old profile within 10 years' time, if we did nothing, we're going to lose 50% of our production. Now this project have also helped to slow down the decline. So within the same 10 years, if we do all this project, we will only be dropping by 15%. So they do actually extend life and the angle of decline. Nicolaas Muller: And sorry, I'm again butting in. But I think Tim will kill us if we don't talk about Canada because I really think that there's an opportunity there. I mean, we have already extended the life to April '27. But the technical team at Impala Canada is working on a novel technology for us in the group, which is called dry tailings, which makes use of the filtered tailing plant, which enables you to essentially to dry out the tailings and place that on existing tailings dams as opposed to creating a new greenfield tailing dam, which requires new licensing and permits and so forth. I mean the capital expenditure is quite intense, but that will provide Canada with not an incremental 1 year time life, but that will enable us to take a longer position subject to the palladium price remaining at above $1,600 or something like that. And then we haven't quite spoken about Mimosa. I mean, there's a few things to resolve in Zim specifically, but there is still the opportunity to consider some form of North Hill extension to life at Mimosa, which currently we're not speaking to because it's not currently in the works. It's being evaluated and we've got a partner that we need to consult them on that and so forth. Meroonisha Kerber: Sorry, the question on the cash. So I think there were two parts to it. So the one was around why the ZAR 10 billion and the other one was about the cash that we've made since year-end. So let me address the second part of it first. I mean our policy, and we've consistently applied it is when we look at the dividend, it's on the cash that was made in the 6-month period. So you can -- if you look at the trajectory of the price, you'll see December, we had the rapid increase and then January, February, we've enjoyed these very, very high prices. Also, you've got to take into consideration we have contracts that -- a lot of contractual sales, and we've obviously got the lag in the contractual sales. So that increase in December only really will flow through mostly in the second half of the year. So to the extent that, that flows through in the second half, that will be part of the free cash flow for the second half and it becomes available for distribution per our capital allocation framework in the next 6 months. And maybe just to add to that point is that if you just look forward at our capital allocation, there's a little bit of work to be done on the balance sheet, not a lot of debt. So even if we want to do it, it's not going to take a lot of capital. There's -- Patrick and Nico have talked about our life of mine extensions, but there's no greenfield projects that we're looking at. So there should be a fair -- all of that profitability should be available for distribution in the at the year-end. The second question was really around the ZAR 10 billion and why the ZAR 10 billion. So I mean, it's like running your bank account. Nobody wants to run on an overdraft. So here, what we do is we look at -- so what is the liquidity that we need for the group. And remember, we've got entities in different jurisdictions at different currencies. And so the view that we have is that all of our operations should be able to pay -- settle its working capital and be able to operate for 1 month without resorting to borrowing of money. And so, that's how we get to the ZAR 10 billion. And you can imagine that there's timing differences between sales, et cetera. And with IRS, there are big payments that need to be made. So we need to be able to hold enough money in the required currencies in the required jurisdictions to be able to manage all of the timing. So that really is how we -- there's no other signs to how we get to the ZAR 10 billion. Gerhard Engelbrecht: Gerhard Engelbrecht, Absa. Chris has asked the questions. So I'm not going to flog that horse any longer. Can you maybe give us an idea of any near future furnace maintenance projects, shutdowns that you have on the cards? Johan Theron: Adele is here, if she wants to speak to that. Nicolaas Muller: That's a good idea. Where's Adele? If she's at the back, you can perhaps just pass her the mic. Johan Theron: Adele, come stand quickly here in front of me. Adelle Coetzee: Good afternoon. Thank you for that question. Yes, we have furnace maintenance, furnace scheduling going on as per our normal maintenance philosophies and structures. And obviously, to make sure that our infrastructure is sustainable going forward. As Patrick already mentioned, we have #4 furnace that is currently in rebuild that we hope to get power on that furnace very soon. Also on schedule as what was planned. We also will be having at our Zimplats operation in the coming year, not in the next 6 months, in our new year, we will be doing our end walls also as per our internal maintenance strategic plan. And then going forward, as everyone should be knowing by, should know by now, we are planning the rebuild of our future furnace. And we will commence with our rebuild, our new design in Rustenburg come July 2027. And that will be on the furnace #5. Hopefully, that is answering the questions. Thank you. Johan Theron: Adele, just to put a final point on it. It's fair to say that we're back to normal furnace maintenance. The interventions are all behind us now. Nicolaas Muller: Sorry, Johan, if I can just add, as I do, just one more point to that. Historically, if we went into furnace rebuilds, we would have accumulated additional stock. So, the historical work that has been done on expanding the smelter capacity as well as the 10% expansion of our base metal refinery results in current capacity that prevents the buildup of stock. That's why, I mean, we've only released 20,000 ounces of the committed, I think it was. Johan Theron: 110,000 ounces. Nicolaas Muller: Yes. 110,000 ounces. 110,000 ounces is what we committed to the market. I see that's changed to 100,000 ounces only. I think we are on track, notwithstanding the maintenance on the smelter to release 110,000 ounces for the year. I think that is quite newsworthy. And also, I mean, as Adele, you didn't mention on the -- sorry, I'm expanding. But in base metal refinery, we have achieved record milling rates again, which prevents us from having to build up stock in front of the BMR. So the investments that we've made over the past three or four years has really paid off. Sorry, Johan. Johan Theron: No, all good. One more question, Arnold. After Arnold, I will given opportunity on Chorus Call. So if you're on Chorus Call, you can queue yourselves along, and then we'll move to Chorus Call after Arnold's question. Arnold Van Graan: It's Arnold Van Graan from Nedbank. Just want to go back to your capital projects which you're doing in phases. Look, I welcome that because the last thing we want is everyone jumping in and just bringing on excess capacity. But my question is, how efficient is it doing these projects piecemeal as opposed to the big projects? And what I'm thinking about is further down the line where you then ultimately will have to in any way do the whole thing. My concern is that interim, it creates inefficiencies in the system. And we're already looking at your cost number. You alluded to that it's -- it's under pressure. So, yes, how do you manage that? What is different? Why did you previously want to do all of it in one go, and now you're doing it in phases other than the balance sheet impact? Nicolaas Muller: So firstly, you can also contribute. So, you are 100% correct. I mean, I was just saying if you have got a 5-year mining contract, you can do that once, if you do it, break it up into different parts, you've got slightly establishment costs and all of that. I mean, I think that there are ways to mitigate that to ensure that the different phases are dovetailed. But there are performance conditions to the continuation. And that's where -- I mean, we need to see an improved Marula. I mean, Marula even at current prices, if I look at the cash contribution of Marula, it is -- if I have to be honest, it's below expectation. And so we want to incentivize ourselves and the operation and the project by making sure that the financial valuation on which these things are premised is, in fact, met. And so I am 100% convinced with all of the additional face length that is being created and the improvements in the infrastructure, we are going to get to a stronger position of confidence with Marula. But at the moment, we think in spite of the potential cost inefficiencies, it is better for us to have a cautious approach to investing large sums of capital in the projects that really requires some improved operating performance and project execution performance. Patrick Morutlwa: Yes. I think the only thing I can add, Nico, is that, I mean, as you said, that we do the evaluation of this project, the whole project. But then we divide into critical milestone to open all reserves, but also that milestone #1 should be able to pay for milestone #2. But also, again, like I said earlier, these are off ramps. So should the price plummet, you have not committed cash and have a lot of unfinished bits and pieces, because that's exactly what caught us the last time. So we want to make sure that when the price plummets, we've actually delivered phase then that can take the mine further. So it's literally just make sure that we don't commit cash all over and when the price plan is, we have got a lot of unfinished bits and pieces. Johan Theron: As high as you can. Nicolaas Muller: Yes. And one small last consideration, Marula has the option if we can navigate through farm boundaries of extending laterally. So we have just not been successful in achieving those agreements to the extent that we can. That will be a far more efficient capital investment per ounce generated, so we are hoping that between now and final execution at some point that we have an opportunity to settle on some of that potential and that will then typically replace some of the deepening as an interim and shift Phase 2 later components further down the path. Johan Theron: Okay. I'm going to queue to Chorus Call. I can see there's one question on Chorus Call. So I'm going to hand over to the coordinator. Operator: Thank you. The question comes from Nkateko Mathonsi of Investec Bank. Nkateko Mathonsi: Good afternoon, and thank you for the opportunity to ask questions. You've spoken about life of mine extension, and I'm referring to Impala Rustenburg. But I also just want to get a bit of a confirmation as to how we should think about life of mine for some of the shafts that have a shorter life, and that's Shaft #1, Shaft #6, and E/F. I think the last time I asked this question, you said 1.5 years, but prices have increased. You probably are able to keep these shafts going for a bit longer. So, if you can give us a little bit of guidance around that, that would be helpful. My second question is very much on costs. We've seen you spend close to ZAR 1 billion on technology around winders. Are there other areas that you're looking to do something similar in order to improve your asset reliability? And what does it actually -- what are the implications for cost beyond FY '26? Then I also have a question for Nico, and this is regarding Zimplats. And if Alex is there, he can also answer. I just wanna your experience of operating in Zimbabwe during your tenure. From headline news, it would what I'm seeing is the risk is not necessarily declining there. And the latest news was the ban on unprocessed raw material does not seem to affect you guys, but somehow it looks like the risk continues to actually escalate. And then there's also the financial issues. So, if you can just comment in terms of how you are experiencing Zimplats at this point in time, how we should think about it going forward? So those are my three questions. Johan Theron: Thank you, Nkateko. Moses, can we pass a microphone to you specifically on 1 E&F, #6 Shaft, and your view of prices now? Can we just get a microphone to Moses, please? Moses Motlhageng: Thank you very much, Nkateko. This time I've got your surname correctly. Regarding 1 Shaft, when we remember in this current business plan, we've got one year for 1 Shaft, we've got one year for 6 Shaft, we've got two years for E&F. We are currently evaluating that. As it stands, it appear that 1 Shaft will have additional year, and then 6 Shaft will remain on one year, and E&F will also remain on 2 years. There's not much of a change with the current blocks or reserves that we've got. It looks like 6 Shaft will be out, E&F maybe 2 years, and 1 Shaft, 2 years. That's for the shorter life shafts. Perhaps Johan, I can also just jump on the capital that we are spending on our infrastructure. Nico spoke about spending a little bit more capital on the infrastructure. Yes, it's correct. When we look at the longer shafts or the growth shafts, we are looking at spending, I mean, upgrading all those winders to make sure that in the long term, they do sustain us even if the prices goes down. So there's about a capital of just over ZAR 800 million, that we want to spend it on our winder infrastructure. We see that as an opportunity, especially during this price commodity that we find ourselves at. Thanks. Nicolaas Muller: Let's just talk about Zim and the perceived risk with the jurisdiction. In my opening, I did talk about our presence in Africa in difficult jurisdictions. We believe that long-term partnerships are absolutely critical. And that has proven very successful for Implats throughout its 25-year presence in Zim right now. Funny enough, we've actually had worse times. I can remember there were times, Johan, prior to any of us joining, I mean, we had to pay employees in not in money, in groceries and so forth. And so, difficulty in Zimbabwe is not new to us. And what I will say is that we've got an extremely cooperative relationship between Implats, Zimplats, as well as government and the communities. I mean, just as an example, now for the second time that I'm aware of, during the difficult times, employees agreed to a salary reduction to accommodate the fall in price. That, I mean, that's the kind of relationship that we have. So having said that, the big issue at Zim is the uncertainty of policy and the shifts that happen from time to time, and that scares foreign direct investors quite a lot. So, if it's difficult, that's one thing. If you're never certain what the rules are gonna be in the next year, that is a different kettle of fish. And I do find that at the moment, for us, there is elevated risk. And so we have -- we are navigating through a process with the government to address that because our perception of risk has materially shifted upwards over the last year or 2 years. And in part, it's the change in policies, but it's also got to do with the retention of local currency that is owed to Zimplats in exchange for the foreign currency retention in terms of the foreign -- the policy of Zim. And so, in fact, Leanne and I just had this morning an extensive meeting with Alex. We are scheduled to meet with SA government as well as with the Zim government. I have to believe that a successful outcome will be achieved. It has always been achieved in the past. And I'm very confident that we will get to a similar position right now. So our posture will not necessarily change with immediate effect. Johan Theron: I don't see further questions on the Chorus Call, so I'm gonna go to the webcast. I'm also conscious of time. I'll try and group the ones that can be grouped all together. There's a question here from Adrian. I think we've dealt with the two first parts of his question. The second one hasn't come up, which is, can you give us some color on some of your customer order trends in the auto space and some of the other minor metals? So, I guess with all the volatility in prices, how does your customers engage and buy your metals? Sifiso, you're probably best positioned to talk to that. Any news hot off the press from our customer base? Sifiso Sibiya: Thank you. Thank you, and good afternoon, everyone. From our customer side, we've seen increased requirements in terms of all the metals. The higher list rates are actually making our customers require metal earlier than they would normally do. So, we've seen this during our H1 FY 2026, and the trend is still continuing. Nicolaas Muller: And sorry, Kirt, I'm not sure if you would like. Sifiso spoke to you about the existing customers. But the conversations that you have been engaged in during Indaba and recently, and perhaps how the focus of potential consumers of the metal, I spoke earlier about some of the relationship requirements or expectations or hopes. Kirthanya Pillay: Yes. I think what we are seeing more broadly than I think the normal customer ongoing relationships is an increased focus from the OEMs and the end users to secure supply as well as price certainty for the future. So it's very much the story that was playing out in the BEV space a few years ago, where there is a requirement to create longer term relationships than just the normal short-term fixed price contracts and potentially for the OEMs to move upstream and create these longer term partnerships with the actual suppliers and the miners of the metal on more attractive pricing. But largely to secure supply, particularly linked into this ongoing issue, as Nico mentioned, of a more multipolarized world and creating security for each of the regions in which these OEMs are operating in. Johan Theron: Thanks, Kirt. Interestingly enough, there's two people asking exactly the same question. Rene Hochreiter, and David Fraser, specifically to Nico, and now that you're reimagining what an Eastern Limb could look like, any thoughts on the Waterberg project and, you know, whether it's a different way of imagining it fitting into the world, specifically given its palladium dominance? Nicolaas Muller: No. Johan Theron: All right. We've dealt with that one. Nicolaas Muller: Yes. So I mean, the Waterberg project is in the Northern Limb. We are acutely aware that it has got a strong palladium bias, and that's probably the metal that we have got the least confidence in long term. I mean -- well, our palladium and rhodium. I mean, I do believe that there will be a place for the Waterberg project. We do not see that as imminent right now. Johan Theron: Perfect. And then I can probably conclude there and to all of the questions, and to the extent that we don't get to them, we will make sure we come back. I think there's two or three that again specifically asks about the dividend and given the metal prices, the good operating performance, was there any consideration of higher payouts or other ways of returning value to shareholders? That question is repeated by a couple of people online. So maybe, we have answered it, I think, but maybe in conclusion. Meroonisha Kerber: Just -- so, I think -- I mean, clearly if you look, if you look forward, are we gonna generate substantial cash? And I have spoken about allocations to balance sheet and growth, and investment are not gonna be significant. So with that, there are gonna be increasing returns to shareholders. At the time when we look at the returns, we do have options. The one is to do what we've done in the past, which is to provide a sort of a special dividend by increasing the payout ratio. But there is also the option to look at a combination of these special dividends and potentially share buybacks. I mean, we haven't undertaken one in the past, but I think at any point when we look at these surplus funds to return back to shareholders, we will have to look at what the most effective way to return value to shareholders at that point in time. Johan Theron: So with those great prospects, probably a good time to end. We're really, really looking forward to spending some time with you on the road. For the people in the room, please join us afterwards. There is some snacks available. The whole management team is here, so a good opportunity to ask those other questions that perhaps we didn't get to. And then for people on the webcast and Chorus Call, thank you for joining us. We should see most of you on the road over the next week or 2 weeks. And to the extent that you have any questions, please reach out to the team and we'll endeavor to answer it as quickly as possible. 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.
Eamonn Crowley: Good morning, and welcome to our 2025 Full Year Results Presentation. I'm joined here today by our CFO, Barry D'Arcy. I'm going to cover the key highlights for 2025 and comment on the wider progress we have made through this first year of our 3-year strategy. I will then take you through how we see the financial performance of the bank evolving over the next few years before handing over to Barry, who will provide a more detailed review of our 2025 results. After this, we would be happy to take your questions. So if we just turn to Slide 5. 2025 was a transformational year for PTSB. The bank's balance sheet continued to grow as customers responded to the strength of our brand and product offering. We lent a total of EUR 3.4 billion during 2025, and this is the highest level in 18 years, with circa 17% of this lending in nonmortgage lending. Our deposits increased by 6% or EUR 1.5 billion. Our mortgage book grew by over 3%, and our business banking portfolio rose by 9%. Looking at our key financials, our total income reduced by 3% during the year due to the lower interest rate environment. However, it was a game of 2 halves with income in the second half of the year recovering 3% relative to the first half as margins stabilized, enabling volume growth to drive net interest income. Our operating costs also reduced by 2%, and I'm pleased to say that we achieved operating cost level of EUR 519 million, which is EUR 6 million less than what we guided a year ago and EUR 12 million less than 2024. In terms of profitability, our profit before exceptional items and tax was EUR 175 million, which was 3% or EUR 5 million lower than what we recorded in 2024 and this translated into a return on tangible equity at 7.3%. And as you know, we believe the bank is well positioned for this number to materially increase over the next few years. Moving to capital. Our Core Equity Tier 1 capital level was very strong at 17.5% at year-end on a pro forma basis. And the approval of our IRB mortgage models is transformational for the bank as it significantly enhances our competitiveness and will enable further sustainable business growth and returns for our shareholders now and into the future. And finally, I'm delighted to announce a proposed final dividend of EUR 10 million or approximately EUR 0.018 per share and this is another important milestone for the bank for a number of reasons. It's the first dividend since 2008. It is the first dividend payment as a stand-alone business and not under the Irish Life banner. It is regulatory approved after an extended period of time when the bank was subject to a dividend restriction or dividend blocker, and it clearly reflects the renewed strength of PTSB. If we turn to Slide 6. 2025 was a year of real delivery for PTSB. As you can see on Slide 6, we met or exceeded our guidance on every key metric, be it income, costs, impairment, capital or returns. If we turn to Slide 7. This time last year, I took you through our fresh 3-year business strategy. So I won't dwell on this slide again today. Our ambition is to be Ireland's best personal and business bank through exceptional customer experience. And the overarching goal of our strategy is to deepen customer relationships, diversify our income and differentiate through customer experience. And in parallel, the bank will drive greater operating efficiencies so we can continue to grow and generate sustainable returns for our shareholders. If we turn to Slide 8. On Slide 8, I would like to give you some sense of how this strategy comes through in the business on a day-to-day basis, and this is behind the headline financials. So a lot of points here, so I'll only pick up a few. In our Own My Home value stream, a key objective for us is to improve our digital mortgage sales and service internally for all our customers. And this would be good for our top line, but also for our cost base as we put more information and decisions into the hands of our customers through an online portal. Mortgage drawdowns through this portal were up 55% in 2025. And we've rolled out features through this portal, including balance availability and statements. And indeed, there are many more features to deliver in due course. In our Manage My Money value stream, we put a lot of investment into our app, and it is encouraging to see that the benefits of this investment is starting to come through. Customer ratings across iOS and Android have effectively doubled in the past year when measured on a monthly basis. We will continue to push hard on this front as the app is now most -- is how most of our customers interact with us today and it is key to us attracting more current account customers with low-cost funding. And I should also say that our core NPS -- relationship NPS score across consumer banking was up further 2 points to 24 in 2025. In our Grow & Run My Business value stream, our impact lending was up 16%, and we continue to widen our product footprint, such as the new higher purchase product line for companies at reduced rates, which are quite attractive. And we will also look to enter the PCP market in 2026, which is a very popular route for consumers when buying their car today. Finally, we've listed a number of achievements that come under the Transform the Bank and Strengthen the Foundations value streams. I will cover the IRB model transformation on the next slide, and I've mentioned the dividend payment already. But I would also point to a 10% reduction in FTEs in 2025 and the progress we've made in embedding sustainability within the bank as evidenced by the upgrade in the CDP rating from a C to a B. In addition, we are rolling out AI tools across the organization. We have initial AIB capabilities deployed in customer service and operational passes. And we are also targeting advanced solutions in fraud, AML and product innovation. So our AI adoption is progressing steadily with a clear focus on building the foundations needed to scale responsibly. And we continue to explore value-based use cases across priority areas and build our understanding of the benefits from AI tools as they become embedded. Let me just turn to Slide 9. We've been talking to you about our IRB story for a number of years, and it is fantastic to finally receive regulatory approval to use new and updated models, which better reflect where PTSB is today. As you can see in the chart on Slide 9, the risk weighting on our total mortgage book has reduced dramatically since the end of 2024. The first major reduction reflected the implementation of CRR3 on the 1st of January 2025. And if we pro forma at the end of 2025 number, the risk weight would fall another 4.6 percentage points to 30.7% and that is a significant fall of around 9 percentage points in just 1 year. We're not going to disclose specific numbers for our IRB book. But you've heard us talk about a risk weight on our new business of over 50% under the previous mortgage model. This has now reduced materially, which provides us with not only higher RAROC levels but increased optionality as to how we might want to compete in the market. As we said on the call in January, when we announced the news, the key point to understand here is that the risk weight and our overall book will continue to reduce in the years ahead as we write new business at lower risk weights and the older loans on the book, which have a higher risk weight roll off. And this fact supports our confidence that the bank's RWAs are now projected to be 10% lower than we originally penciled in our medium-term financial plan. In recent weeks, we've been working on updating this plan and feeding the new IRB models into our ICAP cycle. This work is not yet complete, but clearly, the bank's sustainable returns and distribution capacity are now a good deal higher than where they were. We are probably looking at a rate closer to the European average of around 50%, other things being equal, rather than the 40%, which is covered in our dividend policy today. However, at this time, we do not plan to make any changes to this policy or recommend further distributions due to the ongoing formal sales process. If we just turn to Slide 10. So as we leave legacy issues behind us that for so long have held us back as a bank, we believe the PTSB franchise is now well positioned to really show what it is capable of. However, the fortunes of any bank are tied to the economies in which they operate. And PTSB is truly fortunate to operate exclusively in the Republic of Ireland, which has been and continues to be one of the most vibrant and resilient economies in Europe. And notwithstanding all the geopolitical uncertainty over the past year and indeed over the past week, the Irish economy continues, as I said, to be resilient. And it is notable that our core market of mortgages -- apologies, it is notable that our core market, which is mortgages, new lending in 2025 surprised the upside with mortgage lending reaching EUR 14.5 billion for the year compared with a more conservative forecast of EUR 14 billion. And we took 20% of this larger market, which was in line with our expectations and our objectives. So if we just turn to Slide 11. We've laid out here our medium-term targets, which are unchanged from what we gave you a few weeks ago, and also our new guidance for 2026. In giving you this new guidance, we are somewhat constrained in what we can disclose due to the restrictions of the takeover panel rules. But looking out to 2028 and underpinning these numbers is an acceleration in lending growth from the current 4% rate, driven by an expansion in the mortgage market and an increase in the net interest margin to 2.3%. And it should be noted, we recorded a margin of 2.3% in 2023. So we regard this as not being overly aggressive. We also aim to keep costs well under control out to 2028, which will enable our cost income ratio to fall significantly to less than 60%. If you look at asset quality, we continue to see signs -- we continue to see no signs of strain in the book, and we are well provided for, but we prudently model for a cost of risk that moves upwards towards a 20 to 25 basis point range 3 years from now. So we put all this together, we believe we can drive a return on tangible equity towards 13% by 2028. And if you roll this forward a couple of years, we believe that number will be higher than 13% in that sense. So just to mention that. So I'd like to thank you at this stage. I'll now hand over to our CFO, Barry D'Arcy, who will take you through our financial performance in more detail. Thank you very much. Barry D'Arcy: Thank you, Eamonn, and good morning, everyone. Slide 13 sets out our financial performance for -- during 2025. Total operating income reduced to 3% during 2025, as while our balance sheet grew, our margins reduced reflecting lower ECB and mortgage rates and higher average deposit costs. However, as Eamonn said, it is important to note that income returned to growth in H2 with a rise of 3% relative to H1, and it was only marginally lower on a year-on-year basis. Total operating costs were EUR 519 million or 2% lower and this outturn was better than the EUR 525 million we had guided. Within this, regulatory charges came in at a lower-than-expected EUR 25 million as we had no charge for the deposit guarantee scheme. Given the gap between income and cost, cost growth, our cost-to-income ratio rose 1 point to 75%, albeit the ratio fell over the course of the year and was closer to 74% in H2. We've recorded an impairment release of EUR 39 million for the full year, reflecting the underlying health of our assets and the completion of a review of our IFRS 9 models for the mortgage book. To note, this is the fifth year in a row that the bank has recorded an impairment release, and this is testament to our low-risk balance sheet and a prudent approach to provisioning. Exceptional items were EUR 47 million, which is higher than the EUR 32 million we guided at the half year stage. This includes EUR 35 million for the voluntary severance scheme and EUR 12 million for other noncore items, which included some early cost for FSP or formal sales process. Stripping out exceptionals, our underlying profit before tax was EUR 175 million for the period, and our equivalent EPS came in at EUR 0.206 for the year. Meanwhile, return on tangible equity on the same basis was just over 7%. And finally, as Eamonn mentioned at the outset, we are delighted to be able to recommend a final dividend to shareholders of EUR 0.018 per share, our first in 18 years. On Slide 14, we show our net interest income, which was EUR 590 million for the year, which is 4% lower. The main negative driver behind NII was higher deposit costs. This is a function of higher average volumes relative to last year, particularly in term products and higher average rates. However, I mentioned at our interim results that our costs of our deposits had peaked. And indeed, the average rate we paid on both our term deposits and interest-bearing deposits in aggregate was lower in [Technical Difficulty] hedges in place to manage our IRRBB exposure within risk appetite. As rates came down, recorded gain on hedges linked to our MTNs and Tier 2 instruments, which helps lower wholesale funding costs. Our asset yield reduced 22 basis points year-on-year as income on our tracker mortgages and cash balances repriced. I'll talk about our lending income in more detail in a minute. Meanwhile, our average cost of funds having been up 3% at the halfway stage fell 4% -- 4 basis points year-on-year when measured after the hedging gain. Our net interest margin was 203 basis points for the year, consistent with our guidance of greater than 200. Our Q4 exit NIM was 208 basis points, and favorable rollover rates on both the asset and liability side are helping to raise margins as is a positive change in the mix. This puts us in a strong opening position relative to our guidance, which is for a NIM of greater than 210 basis points for 2026. Once again, this guidance is based on the assumption that the ECB deposit rates remain at 2% through the year. The bank's sensitivity to movements in interest rates has reduced materially in recent years and we have shown that latest number on the slide from movements both up and down from here. Moving to Slide 15. Our new lending performance -- our total new lending was EUR 3.4 billion in 2025, which was up 31%. In mortgages, we lent EUR 2.9 billion, and our market share was a strong 20% compared with the 16% level we recorded in 2024. New lending and business banking, which includes SME and asset finance was EUR 450 million, up 4%. And again, we were particularly pleased with the 10% jump in new SME lending, while asset finance was flat. And in response, we took steps in the fourth quarter to support a better position to compete across the different market segments. For a number of years, PTSB has not really been an active participant in consumer lending, and it only represents about 1% of our loan book today. However, we expect this to change. The 10% rise in payouts shown here hides what has happened since we refreshed our offering in September with lower rates, a simple product set and an easier online process. Since that refresh, average weekly applications are up 25% and drawdowns up 63%. On Slide 16, we'll give you some detail on our lending income and our mortgage book, in particular. Our performing mortgage book rose by 3.5% in 2025 to EUR 20.4 billion. Falling rates outweighed the benefit from this volume growth as our margin slide showed. You can see the different effect of falling rates in the chart at the bottom on the left. Our flow yield, which captures new to bank customers during the year was 3.62%, but it was still slightly higher than that for the stock, which was 3.53%. However, an important piece of our lending story is what's happening with our fixed rate maturities. Here, we have mortgages written when rates were much lower, such as in 2022 and '23, maturing on to higher rates today, and that is providing support to NIM as we go forward. For instance, nearly half of our fixed rate matures in 2026 and '27 and is coming off rates that were closer to 3% rather than the 3.5% for the book overall. We show you here the latest split of the mortgage book. And as before, fixed rate mortgages make up the majority of our performing book at 74%. The variable component of the book is now 15%, and the ECB tracker portfolio is down to 11% of the book. On Slide 17, net fees and commissions increased 5% to EUR 58 million, driven mainly by growth in current account income. Unlike our competitors, we charge a flat per monthly fee for our current account and provide a range of other benefits, including 2% cash back each month on your mortgage if that is with PTSB also. Growing this revenue line is not just about growing our customer base and improving cross-sell. It is also about managing our outgoing costs, particularly in the payments area, and this is something that we've been working very hard at. Other developments mentioned include the final implementation of SEPA instant, and we look forward to the imminent launch of Zippay in Ireland, which will make peer-to-peer payments easier between the local banks. Aside from fees and commissions, we also recorded EUR 7 million in other income, up from EUR 5 million last year, and we alluded to these customer-related FX and hedging gains in our Q3 statement. Moving to Slide 18 and looking at operating costs. These were EUR 519 million for the year, down 2%. This was better than our guidance of EUR 525 million. Regulatory charges came in at EUR 25 million. And excluding these charges, underlying costs were down 1%. Meanwhile, the bank's cost-to-income ratio at 75%. And as I said earlier, there was a reduction from over 76% in H1 to near 74% in H2. At the start of 2025, we committed to a reduction of 300 FTEs. Through our voluntary severance scheme and natural attrition, we have delivered a reduction of 329 to an overall FTE number of 2,918 for the year. The VS scheme will generate annualized cost savings of circa EUR 21 million per annum, less than half of which came through during 2025. And the carryforward benefit here will help offset general inflationary pressures. We also expect our depreciation charge to be lower this year. There was a one-off element relating to leased assets in 2025. For full year 2026, we're guiding a cost-to-income ratio of less than 70%. On Slide 19. Asset quality remains strong. And as a result, the bank recognized the EUR 39 million P&L write-back, the fifth year in a row we have done so. The main drivers behind this result were the continued benign macro environment and the conclusion of the review of our IFRS 9 mortgage models. This review covered staging, LGD and PD models and contributed significantly to the EUR 72 million decline you see in the total provision. Our provision stock ended the year at EUR 320 million or 1.4% of loans, down from EUR 392 million and 1.8% the previous year. Within the total, the main move that took place related to coverage of our Stage 1 loans. We previously held 64 basis points on these loans, which marked us as a significant outlier relative to peers, and this is now reduced to 18 points, which is still marginally more conservative than our peers on a like-for-like basis. On the other hand, coverage of Stage 3. Our NPLs is now higher than a year ago as part of our provision models program, a new approach to calculating ECL for longer-dated NPLs was developed and now uses a DCF-based formula. This approach resulted in higher coverage levels for NPLs on the books for greater than 3 years. We recently completed a small NPL sale and this also contributed to the reduction in our stock of provisions and a further fall in our NPL ratio to 1.4%. While the transaction completed after the year-end, these loans were held as receivable at the 31st of December '25. The average loan to value on our mortgage book is now 46%, while the figure for new business was 65%. Our review of IFRS 9 models for other loan books is well underway and should conclude later this year. In terms of guidance for 2026, we continue to believe we are well provided for currently. And again, we would point to a nil or 0 charge for the year. If I go to Slide 20 next, our approach to scenario forecasting has changed post our IFRS 9 models review, and we're now more in line with the approach taken by our peers. For instance, we now have 4 rather than 3 scenarios for mortgages. What has not changed, however, is that our forecasts are still on the conservative side relative to consensus. Our downside 1 scenario best captures the geopolitical developments that we're seeing play out right now with unemployment rising to 8.5% in 2027 and house prices falling to 8% -- or falling 8%. In the second table, we have provided you with a sensitivity showing how provisions would move if each scenario came to pass. On Slide 21, looking at our funding and liquidity. The picture here remains the same, that of the bank in a very strong position. You can see here that following over 5% growth during 2025, our balance sheet has now crossed the EUR 30 billion mark, which is a significant threshold from a regulatory perspective. The key driver behind this was customer deposits, which rose 6% year-on-year. And while this was slightly lower than the 7% we reported in the first half, we did flag this would happen after it was a very strong start to the year. Our retail term deposits rose EUR 0.9 billion, and the growth in balances slowed during the year as market rates came down. That meant less cannibalization from our current account balances, which were up 4%. I said at our interims in August that the average cost of interest-bearing deposits was plateauing. And this, indeed, the figure for H2 came in at 9 basis points lower than in H1. This should continue to fall going forward as our more expensive deposits in the 2.75% to 3% range starts to roll off. Meanwhile, our MREL ratio remains very strong at over 36%, which is well ahead of a requirement. And if we measure this on a pro forma basis using new IRB models, it would be even higher. It's no surprise, therefore, that we are reviewing our issuance needs over the next number of years. For instance, we have EUR 650 million in medium-term notes that have a call date in April 2027, with a coupon of 6.6%. Under normal circumstances, one might look to refinance that toward the end of this year, and such a bond will probably have a 3% handle today given where our rating and spreads are. On Slide 22, before I take you through our capital, I just want to give you some color on the various changes that have taken place on our RWAs. Eamonn mentioned earlier that the overall weight on our total mortgage book has fallen by almost 9 percentage points since the end of '24. If we pro forma for our new IRB models, that is a combined effect in addition to the movement on CRR3 on the 1st of January and the new models coming into effect 5 weeks ago. We've mentioned that if we applied the new IRB models to our June 2025 mortgage book, the average risk weight would fall from 36.4% to 32.8% or by 3.6 percentage points. Running this pro forma calculation again at the end of December '25 would reduce this weighting from 35.3% you see in the table here, to 30.7%. That's a reduction of 4.6 points. This translates to a pro forma drop in RWAs of over EUR 900 million or the equivalent of EUR 130 million in capital, and compares with the circa EUR 700 million reduction we spoke about just in January. If you look at the IRB book on its own, the reduction in average risk weights for the new models is larger at around 6 percentage points. Again, we expect this risk weighting to fall further over time as new lower-risk loans come onto the balance sheet and older, higher weighted loans roll off. For clarity, our core PTSB home loan book is now the only book we have on IRB. All our other loans, be the Ulster Bank mortgages we acquired, our legacy buy-to-let portfolio, our business banking and our consumer lending are now all unstandardized. This makes sense for us, and it's more efficient from a cost perspective, given the relatively small scale of these portfolios. Looking at Slide 23. Our CET1 was 15.9% at year-end. But on a pro forma basis, building in the benefit from the loan sale and the new IRB models, this would rise to 17.5%. In the chart here, we show the various moving parts in our CET1 over the last 12 months. And you can see that CRR3 and IRB approval have lifted our capital level into a completely new territory. The greater than EUR 900 million reduction in RWAs from IRB translates into a CET1 gain of 1.5%, while the loan sale added 0.1%. At this level, our CET1 is well in excess of our regulatory requirement with our 2026 SREP requirement of 10.69%. And while we are committed to optimizing our capital structure, as Eamonn said earlier, given the ongoing FSP process, the Board does not plan to recommend further distributions to shareholders at this time. And so to summarize, we are very pleased with the financial performance of the bank in 2025. Particular highlights for me were the return of revenue growth in H2, the absolute decline we achieved in costs and the very positive developments we saw in relation to our capital. I'll hand you back to Eamonn now for some concluding remarks, and then we'll open for questions. Thank you. Eamonn Crowley: Thank you, Barry. I would like to finish on Slide 24, to remind you of our guidance for full year 2026 and indeed, the medium-term targets. We see our return on tangible equity rising to over 9% this year and reaching around 13% in 2028. And underpinning this improvement in returns is a rising net interest margin combined with an acceleration in loan growth as the Irish mortgage market grows, and we continue to diversify our lending into business banking. With tight cost control, we believe our cost income ratio will fall below 70% this year and below 60% in 2028. And lastly, we prudently model for some modest deterioration in the cost of risk from a 0 charge this year to a range of 20 to 25 basis points in 2028. We believe PTSB is now in a really strong position to compete and win on the Irish market, which is one of the best banking markets in Europe, both from a growth and a structural perspective. In addition, with the bank now in a more level playing field from a capital perspective, we can grow while improving returns we generate for our shareholders. It's also important to note that 2026 represents our own birthday in that we are 210 years in existence, and we were set up primarily to help customers save and then use -- for the TSB to use those savings in order to help customers buy their own home. Our target, well, not much has changed in our approach since then, except to get a mortgage in 1816, it was a lottery for people who saved. So we have a much more sophisticated credit approval process these days rather than just a lottery. But in that sense, our core purpose and what we operate today around building trust with customers, helping them with their financial needs, helping them with their savings and indeed, helping more than 9,200 customers last year acquire a home has not changed in that sense. So thank you very much for joining us today, and we would be happy to take your questions. As before and as we mentioned, we restricted in the level of information we can provide about our formal sales process, but also our financial forecast in that sense due to takeover rules. And I should mention as well, once again, our financial advisers, Goldman Sachs are here with us today to ensure that all information we provide is permitted under these rules. So thank you very much for your attention, and we're happy to take your questions now. So thank you. Denis McGoldrick: Just a couple please, if I may. So one maybe, Barry, just in terms of the interest-bearing deposits. So you gave good color on how the cost of those reduced half-on-half. Maybe if you could provide a guide for 2026? And I guess what level of that continued reduction is supporting the higher NIM guidance? And then secondly, just on the risk weights and models, is it still your intention to move the Ulster loans on to IRB as presumably there would be a benefit there rather than staying on standardized? And if I could get in one more, maybe, Eamonn, just from a broader perspective in terms of the mortgage market and your own positioning. With the market share at about 20%, what is your level of ambition for that in light of, obviously, the new models? Barry D'Arcy: Thanks, Denis. So on the deposit front, what we've seen, as I mentioned earlier, our rates in previous years at 2.75%, more recently for 1 year and 3% for a 3-year -- more than 2 years ago are starting to roll off. Our current headline rate on term is 2%. We have a very favorable regular saver at 2.25% as well. So what we've seen is we did reduce rates in the fourth quarter. We saw volumes being maintained. It's an area that we keep a very close eye on and look at movements. But I think the broader piece that we see in the market is that the Irish consumer is in a very strong resilient position and we see those deposits growing, and our ambition there would be to follow the market in effect. So that's something that we'll keep a close eye on. Regarding the Ulster portfolio and IRB, one of the key points on that is that, that portfolio continues to pay down quite rapidly actually. The risk weights, we haven't disclosed the risk weights on that portfolio. A key challenge on that is, obviously, we're successful at concluding the IRB outcome on our core portfolio. There is some work to be done on that over the coming years. And the question is, which comes first. So we're looking at that, and we're having good regulatory engagement to ensure that we get the best outcome for the bank but also suit and support what the regulatory expectations are there. So that's a work in progress. Eamonn Crowley: So just on your question on mortgages. Obviously, mortgages continue to be a key part of our volume growth. But as I mentioned earlier on, 70% of our lending last year was nonmortgage. And it's not so long ago that it was only a [ 95.5% ] number. So we are trying to diversify into other areas, and we're doing it quite successfully and Barry gave an indication of the growth we're seeing in unsecured lending. But to come back to your core question. What the IRB models really allow us consider our positioning in the mortgage market and much more in a freer manner in that sense. And we've clearly indicated in our presentation that the risk weights and first-time buyer mortgage origination, which is about 60% to 70% of the market are lower. And therefore, our return in that segment of the market has improved significantly. And therefore, it gives us more optionality. And you would have seen in mid-January, we reduced our rates, particularly for higher LTV mortgages, which is a first-time buyer mortgage category. So we're not chasing any market share. It is our natural area of activity after 210 years of doing this very extremely well. And we have more optionality in that sense. We're happy with our 20% share in a growing market. But we can also consider competing more in various segments, given our new IRB modeling. So that's how I'll put it. Unknown Analyst: Just 2 questions on capital, if I may. First of all, the CET1 ratio of 17.5% on a pro forma basis seems a little bit higher than what was mentioned in the January statement. I was wondering if you could provide us some color there and then talk us through the moving parts of that change? And then secondly, on capital returns. If you can provide some details on the decisioning to pursue further capital returns at this time? Barry D'Arcy: I'll take the first question. Eamonn, you might take the second piece. So the 17.5%, obviously, greater than EUR 900 million RWA change with the IRB models equivalent in that is the back book versus front book mix. Eamonn mentioned earlier, great than 50% previously with the models that were developed back in 2017 versus now. We haven't -- we cannot actually share what the new number is, but it's materially lower. And in FX, what we've tried to do with the capital model is building our strategy. So we want to -- how we actually acquire current account savings and also the mortgage. So the broad customer relationship plays into that. So what we saw was a very strong second half year on mortgage acquisition, and that played into our numbers. As that progresses over time, we'll continue to see that evolve. Another feature of this as well with the model for those loans that actually have any arrears history or negative elements in terms of payment. The model is more penal as well. So we have to look and consider how things will actually look at over time. But all in, the number at June reflected the balances that were available. The December obviously reflected a strong second half, and that has played very positively through to the number. Eamonn Crowley: So to come back to your second question, the pro forma is based on the IRB model officially been approved in January. So we -- that pro forma is based on that number. But dividend payments are based off your financial statements. So it's the capital position as at the end of the year or expected capital position. And as Barry mentioned, the IRB models alone have added 1.5% to that CET1. We have to put this in the context of 2 aspects. One is it's our first dividend payment, where we've applied to the regulator. And that in itself is a momentous application for us because of where we've come from. And secondly, it has been absolutely the norm in the market that the first dividend payment that banks make at a slightly lower level than -- so as to ensure that there's a sustainable dividend payment going forward. That's the norm in the market. Indeed, we would have seen even Virgin Money issuing a dividend of 1p per share when they started to show that they could pay a dividend. That's really all I can say about it because we are in a formal sales process, and it is not our intention to make any distributions based on that process. So that's all I can say. But to reiterate, it's the formal position at the end of 2025. We look at not the pro forma, and we're following a normal path of how a bank thinks about distributions. And this is particularly relevant to us because we had a dividend restriction or a dividend blocker, 1 of only 2 banks in Europe to have such a blocker for such an extended period of time as well. So that's the background. Are there any questions online? Operator: [Operator Instructions] Our first question is from Dan O'Neill from Carraighill. Daniel O'Neill: Two from me. So firstly, your 20% mortgage market share versus the 16.5-ish in 2024. So I believe it's at least partly explained by disagreement between one of your competitors and the brokers. I don't think this caveat has been mentioned today. So basically, I'm wondering if there's a risk that this comes down going forward, even despite your improved ability to complete post IRB. And then the second question is to do with headcount. So I think you said that EUR 35 million of costs were related to the voluntary severance scheme. So the 300 FTEs that works out to about EUR 120,000 per head. So given that, it would appear that you've lost higher-paid employees. So looking forward, do we have falling FTEs as well as a falling cost per employee? Eamonn Crowley: Okay. So I'll pick up the first one. I won't comment on how competitors are competing in the market. The year before last year, so 2023, we had a 20% share of the market and it dipped in '24, primarily because of our -- the capital movement related to the Ulster deal, and we were cautious in the sense of how we allocated our capital as we settle that deal into the bank. We have -- you're referring to the intermediary market. We have a long-standing and very positive engagement with the intermediary market. The broker market, which now represents between 40% to 50% of volume, it's not so long ago it was only 20% of volume. And we actually have a positive and growing share in that segment because we've stuck with brokers and we supported intermediaries through thick and thin over many, many years. We're one of the fastest to, yes, and the fastest to cash, and brokers like that. So once we are competitive on price, we will win business through that channel. We've seen other competitors go in and out of that market over time, but we have been consistently there for brokers. So we're comfortable with our position. But in fact, when you stand back, our non-broker channel by way of mortgage origination is growing much faster than our intermediary channel. And that's related to our brand proposition. We are now 1 of 3 pillar banks in the market, and we're competing effectively. And the mention of IRB model review will now help us by way of our optionality with regard to how we will compete in that market with a much better return than we had here before. So overall, I'm not too worried about what others are doing. I'm actually concentrated in ensuring we fulfill broker needs, and we ensure we're growing our share in the nonbroker channel as well. So overall, that's our position. Barry D'Arcy: Thanks, Eamonn. Just on the FTE storyline and the EUR 35 million voluntary severance. What we did in DC, it was actually -- it was a longer service staff who took the option to take a voluntary severance. So in all, I think it was around 240 FTEs that have actually chosen to take that out of the 329 that we saw leave the bank at the end of 2025. There are some elements that will come through in the '26 results, as I mentioned earlier, about just under half of the savings of EUR 21 million that we expect on a full year basis came through in 2025, and we'll see the balance of that come through in the current year. Eamonn Crowley: But just to add to what Barry said, we have more longer term colleagues who have taken the availability of that. So it's a mixture of service, how that interacts with the severance payment and then their underlying salary costs as well. So it is -- it has worked for us. And indeed, all employees have contractual rights in that sense. And we've facilitated our colleagues and indeed, reduced our head count in a very professional manner, and that will continue to be our approach as we think about overall head count. We will manage it professionally. We'll manage it in an orderly fashion. And indeed, we are focused, as I mentioned earlier on in ensuring we drive efficiency. But efficiencies also, a flat cost and a growing volume by way of how we think about growing our business over time and a diversification of our business with a higher margin. So all of these things are coming together, and we can make sense to them. But we will continue to focus and manage our costs. And lastly, against our 2 players in the market, their costs have increased this year, our costs have reduced. So I think in that sense, we are also booking the trend of the wider market. So thank you. Operator: Our next question is from Aman Rakkar from Barclays. Aman Rakkar: We've got feedback on the line, so I'm going to try and ask the question anyway. On costs, I just want to check, I think the market is probably looking for cost to be down versus the '25 level. And I just wanted to check whether that's a realistic assumption. Obviously, you've done better performance on an underlying basis in '25, but it seems like the levy, for example, is unsustainably low. So I just wanted to check. You might not want to give us an exact number, but just in terms of the shape, is it reasonable to expect the kind of cost down from the '25 level from here? Or should we expect kind of some potential increase in that, mindful of the fact, the top line looks like it's growing pretty strongly from here. And then the second one, I appreciate the limitations that you're under right now and you might be constrained in terms of what you can say in terms of financial outcomes, but just would invite you, if you're able to comment at all on the formal sale process in terms of your experience to date or any color at all would be very helpful, if you're able to. Eamonn Crowley: So I'll pick up on the 2 questions. I'll take the second one first. So under the takeover panels, with panel rules, we are absolutely restricted in commenting with respect to the process, only to say that it's ongoing. And also to say because it's in the public domain, when we announced this program, we announced it in the sense of clearly saying to the market, we have a strong position. And these 2025 numbers underpin our position at that time around launching the sales process, which in itself was an open process, and invited anybody who had credibility and interest in acquiring the bank, as I say, 1 of 3 peer banks in the market, and that process continues. I can't comment any more than that. With regard to definitive comment on lower cost. Again, we're restricted in saying that. But we are very cost conscious. We are focused on managing our costs. I refer to aspects of human-assisted AI activity that we're working on and looking to embed in the organization over the next number of years. And indeed, the proof point around a 10% reduction in our head count in 1 year in the sense of enrolling that cost, annualized cost reduction forward is a very positive indication of how we think about cost, but I can't give you a definitive by way of it being lower. But if you add up all the comments I've made, you can come to your own assessment. Operator: Our next question is from John Cronin from SeaPoint Insights. John Cronin: I just want to come back to what's happening in the banking system more broadly. Your CET1 print is obviously very strong. I hear your comments in relation to the inaugural dividend and that being more of a signpost than necessarily a run rate. And that being said, you've stuck your CET1 target of 14%. I think I asked you about this back at the half year. And I know you can't comment now in relation to where that might trend, but we've seen one of your peers formally increased its target ratio to the surprise of markets. And I guess, look, theoretically, if you weren't in a sales process, like what are you thinking right now in terms of optimal levels for a bank like PTSB, if I can put the question like that? And is there anything we need to be thinking about in terms of the same? Eamonn Crowley: So thanks for your question, John. And nice to hear from you. So we're sticking to the 14% level. What you would have seen from the outcome from our SREP engagement with our regulator last year, our SREP demand reduced by 25 basis points. So after many years of increasing SREP demand, we're seeing some level of reduction. So in that sense, we believe 14% is the level. It's arguable. And John, we would have discussed this over many years. It's hard to go for a bank like ours, which has a more simplistic in the sense of a business model not only complicated with no level of additional complication around market making and trading and things of that nature, it's arguable that rate should be lower if you compare it to our competitors across Europe. But we know Ireland has a higher risk weight and has a higher capital demand. But we're sticking at 14%, but we've seen a downward trend in the sense of the request from a regulator based on our SREP outcome. So that's where we are, John. Operator: We currently have no further questions. So I will hand back to the management team for some closing remarks. Eamonn Crowley: Great. Well, thank you very much. 2025 has been a transformational year for us, not only by way of the results that we've produced, which clearly shows growth. Our balance sheet grew by 6%. It clearly shows that if there's credit growth in the market, we will get our fair share, if not more. And the diversification of our business model will assist us in driving on both our net interest margin, but also our volume in due course. So this is a very exciting time for us. And of course, it's transformational in the sense that we have put ourselves up for sale, and the process with regard to that is ongoing. So thank you very much, and thanks for your attention.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Fourth Quarter 2025 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, I would now like to turn the conference over to Evan Mapes, Investor Relations. Please go ahead. Evan Mapes: Good morning, everyone. Thank you for joining us to discuss Intrepid Potash, Inc.'s fourth quarter 2025 results. With me today is Intrepid's CEO, Kevin Crutchfield, and CFO, Matt Preston. During the Q&A session, VP of Sales and Marketing, Zachry Adams, and VP of Operations, Rick Kim, will also be available. Please be advised that comments we will make today include forward-looking statements as defined by U.S. securities laws. These are based upon information available to us today and are subject to risks and uncertainties as described in the reports we file with the SEC. These could cause our actual results to be different from those currently anticipated, and we assume no obligation to update them. During today's call, we will also refer to certain non-GAAP financial and operational measures. Reconciliations to the most directly comparable GAAP measures included in yesterday's press release, along with our SEC filings, are available at intrepidpotash.com. I will now turn the call over to our CEO, Kevin Crutchfield. Kevin Crutchfield: Thanks, Evan, and good morning, everyone. We appreciate your interest and attendance for today's earnings call. Intrepid again delivered strong results in the fourth quarter, with adjusted net income and adjusted EBITDA of $6.5 million and $18.1 million, respectively, both of which were significant improvements compared to last year. For 2025 as a whole, our adjusted EBITDA of $63 million is one of the best prints since 2016, and represents an almost 80% improvement compared to 2024. We are very proud of these results, which we also accomplished with best-in-class safety performance with just one recordable incident in 2025 across over 1.1 million hours worked. I would like to thank and congratulate our site and all of our team members for their hard work and dedication, and want to encourage them to continue to stay focused and continue to deliver good results in 2026. Our solid 2025 performance was driven by several factors. First, steady demand for our core fertilizer products drove strong sales volumes. In 2025, our combined potash and Trio sales volumes of just over 590,000 tons were 20% higher compared to 2024, with 303,000 tons of Trio sales being a company record. Second, we again delivered solid unit economics from higher overall production, with our 2025 potash COGS per ton improving by approximately 5% versus last year, and our Trio COGS per ton improving by over 10%. And third, we benefited from increasing pricing. This was most pronounced in Trio, where fourth quarter average realized price of $379 per ton was 20% higher than 2025. The solid sales volumes and pricing have continued into 2026 ahead of the spring application season, and agricultural markets have also shown signs of optimism. For corn, year-to-date domestic exports are up almost 50% versus last year. And for soybeans, recent trade deals have improved the outlook with futures for both crops up by about 15% since the August lows. Moreover, the $12 billion in government bridge payments to farmers are expected in the coming weeks, which should help further support solid fertilizer demand this spring. For the broader potash market, global supply and demand remain mostly balanced, where demand in key international markets has been resilient. In 2025, global potash shipments were estimated at roughly 75 million tons and 2026 is expected to see additional growth of about 1.5 million tons. Moreover, by the end of the decade, third parties are forecasting global potash demand to be about 6 million tons higher than it was in 2025, which should help absorb additional supply coming from some of the larger-scale potash projects like Jansen. Before passing the call to Matt, I will end my remarks with a couple key project and operational updates. In potash, we have deferred a decision on our Amex cavern into at least 2027 as we continue to evaluate the project. Since we have never mined this cavern, which still requires additional investment, we want to be very sure we completely understand the mineralogy and the geology and feel it is most prudent to continue to demonstrate strong capital discipline until this evaluation is complete. In addition, we feel confident we can sustain our HB production over the next several years even without Amex. For Trio, our operational performance continues to be very strong, and we recently placed another new continuous miner into service, which should further improve our mining rates and continue our trend of year-over-year production increases. For 2026, we expect our Trio production to be in the range of 285,000 to 300,000 tons, which represents a year-over-year increase of about 7% at the midpoint. This will help offset what should be flat to slightly down potash production in 2026, which is primarily due to the below-average evaporation at HB over the summer. Moving on to our lithium project in Wendover. We have published quite a bit of detail in recent press releases, but I will provide a quick summary. For those new to the story, one of our key byproducts after producing potash at Wendover is magnesium chloride brine. This brine also contains lithium, but requires a highly technical direct lithium extraction process. We have looked at various DLE options over the past several years, and just recently, new technologies have made significant strides which should now make the project viable at scale. As for project updates, in January, we announced that we have a joint development agreement in place with Aquatech and Adionics whereby our partners have already produced a sample of battery-grade lithium carbonate from our brine. As we noted in yesterday's press release, we will be providing an updated technical report summary for Wendover along with our 2025 10-K, which will include maiden resource estimates for lithium and will show a measured and indicated resource of approximately 119,000 tons of lithium carbonate equivalent. At the current estimated production capacity of 5,000 tons per year, this would support a project life of roughly 25 years. There is still plenty of work to be done, but we have high confidence in our partners and we are optimistic we can move quickly, with a goal for a definitive feasibility study later this year. Lastly, we are now under exclusivity with a potential buyer for the South Ranch. Negotiations are ongoing and subject to confidentiality provisions, but we are holding an $8 million deposit from the potential buyer, which demonstrates their very serious intent. Although we are still negotiating definitive agreements, we believe the potential deal will likely close sometime in 2026 and we will update the market as appropriate. Overall, it is an exciting time for Intrepid. We are delivering strong results and remain constructive on the outlook. With very strong support for critical minerals in the United States, there has probably been no better time to be a domestic producer of potash and Trio, while lithium provides significant potential upside. In addition, we want to highlight that our core products have long-term staying power, which is further enhanced by our multi-decade reserve lives, and we look forward to capitalizing on our unique positioning in 2026 and beyond. So with that, I will now turn the call over to Matt. Please go ahead. Matt Preston: Thank you, Kevin. To echo Kevin's remarks, 2025 was a great year for Intrepid, where our total fertilizer sales volumes of 592,000 tons were almost 100,000 tons higher than 2024 and reached a level not seen since 2018. Our number one focus is driving higher production to increase our revenues and improve our unit economics, and it is very encouraging to see our hard work pay off with strong results. For segment highlights, in potash, our fourth quarter gross margin of $4.6 million was in line with the prior year as a higher average net realized sales price of $387 per ton was offset by a slight decrease in sales volumes due to a compressed fall application season and limited engagement on spring potash needs in the latter part of the quarter. Full-year 2025 segment gross margin of $18.2 million was modestly higher compared to last year as the higher production that started in 2024 allowed us to sell 289,000 tons, a 20% increase from 2024, which offset a pricing decline of about $25 per ton. As we noted on our third quarter earnings call, our fourth quarter potash production was impacted by a delayed start-up at HB, which resulted in our full-year 2025 production coming in at 280,000 tons. For 2026, we expect our annual potash production to be in the range of 270,000 to 285,000 tons, and we do expect a slight degradation in our unit economics this year. That said, looking beyond 2026, we expect a recovery in our HB production and more tons out of our Wendover facility, and project our 2027 potash production will be in the range of 300,000 to 310,000 tons, which puts us back on track for our key potash production goal. Moving on to Trio. The very strong performance continued as our fourth quarter and 2025 production, sales volumes, and pricing were all higher compared to the respective prior-year periods due to strong operational execution, modest market share gains, and supportive sulfate values. This led to $10.5 million in gross margin in the fourth quarter, and $33.4 million in gross margin for 2025. Outside of the significantly elevated pricing in 2022, this is the best Trio performance in our history. In 2026, as Kevin mentioned, we expect to produce 285,000 to 300,000 tons of Trio and anticipate our cost of goods sold per ton to show modest improvements from 2025 as consistent production increases continue to improve our overall unit economics. Our forecasted Trio production, coupled with continued strong pricing due to both the expected solid nutrient demand for spring application and supportive Trio component valuations, should continue to result in strong Trio segment performance in 2026. Turning to first quarter guidance. In potash, we expect our sales volumes to be between 95,000 to 105,000 tons at an average net realized sales price in the range of $345 to $355 per ton. For Trio, we expect our sales volumes to be between 105,000 to 115,000 tons at an average net realized sales price in the range of $380 to $390 per ton. For our 2026 capital program, we expect our capital investment will be in the range of $40 million to $50 million with most of our spend related to sustaining capital, specifically at our East Mine, and for the beginning of a new primary pond at Wendover. We expect this will begin contributing to Wendover's production in 2028. In summary, 2025 was a great year for Intrepid, and we look forward to carrying this momentum into 2026. Overall fertilizer production and sales volumes look to be on par or slightly ahead of 2025, and pricing continues to be supportive. Production improvements in our Trio segment, going from 216,000 tons in 2023 to nearly 300,000 tons in 2026, are sustainable, and we see further upside as we continue to focus on improved mining and recovery rates. We will work through the recent weather and evaporation setbacks in potash during the 2026 spring season, and remain confident in eclipsing 300,000 tons of potash production in upcoming production years. Operator, we are now ready for the Q&A portion of our call. Operator: We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star, then 1. We will pause for a moment as callers join the queue. The first question comes from Lucas Beaumont with UBS. Nicole Greenberg: Hi. This is Nicole Greenberg on for Lucas. Firstly, I was just wondering if you can walk us through current potash demand dynamics, how your order book is looking for 1Q. Have you seen any evidence of demand disruption due to affordability issues? Zachry Adams: Yes. Thank you for the question. This is Zachry. We are almost fully committed for first quarter right now on potash, and we have not seen any significant demand destruction at this time. Potash remains a very good value for the grower at the current price point, and we expect stable demand for the spring season amid strong acres of corn expected to be planted. Nicole Greenberg: Great. Thanks. Nicole Greenberg: And then just on the lithium project, can you walk through the unit economics there? What cash cost of production would you expect on a per-ton basis? Kevin Crutchfield: We are not prepared to address that at this stage. We will continue to provide updates to the marketplace as the engineering work progresses, and we will start laying those metrics out in the future. Nicole Greenberg: Got it. Yep. And then last one for me. So oil and fuel sales were down meaningfully in 2025. What is your outlook there going forward compared to this year? Are you expecting growth or further declines from here? Kevin Crutchfield: Given the nature of the asset and lots of inbounds and interest in the oilfield services business, we felt like testing the market for valuation of our asset was appropriate, which we did, which is why we entered a letter of intent with the prospective buyer. So I think any comment that I would have beyond that would be speculation and almost irrelevant, given that it is our intent to transact on this asset. Nicole Greenberg: Great. Thank you. Operator: Once again, if you have a question, please press star, then 1. Your next question comes from Vincent Andrews with Morgan Stanley. Justin Pellegrino: Good morning, everybody. This is Justin Pellegrino on for Vincent. Congratulations on the results. My first question is kind of around sulfur prices. Given the conflicts in the Middle East, we have seen a significant increase in sulfur prices there. And I know it is fairly recent, but could you just discuss any sort of increased interest you have had in Trio over the last few days? Any type of real-time update that you have seen there would be very helpful. And then likewise, can you just discuss expectations for prices relative to the potash products, how that will trend throughout the year? Thank you. Zachry Adams: Justin, on the sulfur component and what that has led to on Trio interest, we are right in the heat of our main Trio application season, so we are seeing a really good response. I would say, from the demand perspective for the rest of first quarter out into second quarter at this point, we have not seen those prices roll through on sulfate values just yet, but that is something we are watching closely as we move into the spring. And then as far as potash pricing throughout the rest of the year, I am not prepared to project what the second half looks like, but I think globally we are in a very balanced potash market, and particularly here in the U.S. The U.S. potash prices are trading at a discount to almost all global benchmarks, so we think that supports stable pricing here in the U.S. and certainly some room for upside to get in line with where other global markets are currently trading. Justin Pellegrino: Great. And then just one more from me. If the South Ranch deal does go through, can you give us an update on any capital allocation priorities? Any idea what you would do with the proceeds? Any thoughts there would be helpful. Thank you. Kevin Crutchfield: Sure. Thank you. Assuming the sale goes through, I think my answer would be the same whether the sale goes through or not that I have referenced on pretty much every call since I took the mantle of the CEO here 15 months ago. Our first priority is an intense focus on our core operations. We are restoring those back to a predictable, resilient state, making sure that they are generating consistent free cash flow and that we can appropriately capitalize them to continue that predictability and reliability into the future and perhaps even grow production volumes modestly over the coming years. From there, we obviously need to maintain sufficient liquidity to allocate capital internally to our operations and address any sustaining and growth capital requirements, and internally also to withstand any sort of body blow or shock that we take to the system on the pricing front. Then once we have satisfied those criteria, I think it is a very appropriate discussion for the board to begin to think about the capital allocations beyond that that just entail the internal needs. So to the extent that the sale does go through, you can rest assured that discussion is top of mind and top of the agenda with the board. I do not want to front-run our board any further than those comments, but that is our point of view on that. Justin Pellegrino: Great. Thank you for all the commentary. Operator: Thank you. Operator: This concludes the question and answer session. I would like to turn the conference back over to Kevin Crutchfield for any closing remarks. Kevin Crutchfield: Thanks to everybody again for attending today’s call, and I would like to again thank all of our employees across all of our sites for a really great year and especially thank them for just an outstanding safety performance, and we look forward to continuing to keep you updated in the coming quarters. Thanks for attending today. Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good day, and thank you for standing by. Welcome to the Rigetti Computing Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, CEO, Dr. Subodh Kulkarni. Subodh Kulkarni: Good afternoon, everyone, and thank you for joining us for Rigetti's Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm pleased to be joined today by our Chief Financial Officer, Jeff Bertelsen, who will walk you through our financial results in more detail following my overview. Also with us is our Chief Technology Officer, David Rivas, who will be available to participate in the Q&A session following our prepared remarks. We appreciate your continued interest in Rigetti, and we look forward to answering your questions at the conclusion of our remarks. Before we begin, I would like to remind everyone that today's call along with our fourth quarter and full year 2025 press release contains forward-looking statements. These statements reflect our current expectations, objectives and underlying assumptions regarding our outlook and future operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties are described and discussed in greater detail in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025, and other periodic reports filed by the company from time to time with the SEC. We encourage you to review these filings for a comprehensive discussion of these risks and uncertainties, that could cause actual events and results to differ materially from those contained in the forward-looking statements. Rigetti undertakes no obligation to update any forward-looking statements made during this call, except as required by law. During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating results. Please refer to today's earnings release on Rigetti's website at investors.rigetti.com. Also the 8-k furnished with the SEC today after the close. Now turning to the business. 2025 was a year of technical validation and disciplined execution for Rigetti. We advanced materially across Fidelity, Scale and Architecture, while remaining realistic about time lines and commercialization. Our focus remains reaching true commercially meaningful quantum advantage, not headline milestones. I want to begin by grounding today's discussion in how we think about quantum computing at Rigetti, because that perspective is centered to how we operate, how we invest and how we measure progress. Quantum Computing is not about replacing classical computing. It is about enhancing it. CPUs will continue to handle sequential workloads, and GPUs will continue to handle parallel workloads, where quantum computing becomes powerful is in simultaneous computation, problems where thousands of variables interact at once and classical systems struggle to converge. That is the problem space we are building for. Our strategy has consistently focused on superconducting, gate-based quantum computing because it offers two fundamental advantages that matter at scale, speed and scalability. We are working with electrons, not atoms or ions, which gives us gate speeds measured in tens of nanoseconds. And because this technology is grounded in semiconductor fabrication, we believe it offers the most realistic path to building large-scale systems over time. Over the past year, we made great progress towards what we define as true quantum advantage. I'm excited to share that Rigetti recently achieved a 2-qubit gate fidelity as high as 99.9% at 28 nanosecond gate speed on a ProDrive platform using our new proprietary Adiabatic CZ scheme. We are still maintaining 99.9%, 1 qubit gate fidelity, and we have also reported median 2 qubit gate fidelities of 99.7% on our 9-qubit system, 99.6% of our 36-qubit system and 99% on our 108-qubit system, what we call Cepheus-1-108Q. Together, these milestones are a testament to our ongoing progress in materials, fabrication and system level design. They're helping us further narrow the fidelity gap between superconducting systems and other quantum modalities, while delivering speeds that are about 1,000x faster than some approaches like trapped ion or pure atoms. We successfully deployed multiple systems to the cloud, including an 84-qubit monolithic chip system and a 36-qubit chiplet base system. More importantly, we demonstrated that chiplet timing works in practice. That matters because scaling to thousands of qubits on a single die is not realistic. Chiplets are how we believe quantum systems will scale in the real world. As we pushed beyond 100-qubits, we gained important insights. On our 108-qubit system, we identified tunable coupler interactions that emerge at higher scale. We made a deliberate decision to delay general availability and address the issue. The executed architectural refinements that successfully improved system stability and control. That decision reflects our discipline and increases our confidence in our 108-qubit chiplet-based system, as we move towards customer readiness. That experience underscores why we have our own foundry. Rigetti operates Fab 1, the industry's first dedicated and integrated quantum device manufacturing facility, which allows us to tightly couple design, fabrication and testing under one roof. This enables faster innovation cycles as we scale beyond 100-qubits and drives proprietary advancements rather than incremental work arounds. We see Fab 1 as a durable competitive advantage that accelerates our road map and create a meaningful barrier to entry as quantum systems grow in scale and complexity. That combination of scale, control and execution is also what our customers and partners are responding to. We are also seeing increased demand for on-premises quantum systems, particularly for national governments and research institutions seeking direct access to hardware for hybrid computing and systems-level R&D. In January of this year, we announced an $8.4 million order from India's Center for Development of Advanced Computing or C-DAC, for a 108-qubit on-premises quantum computer scheduled for deployment in the second half of 2026. This system will be integrated into C-DAC's supercomputing environment and is based on our chiplet architecture, which is central to our scaling strategy. That order builds on the memorandum of understanding we signed with C-DAC to explore the co-development of hybrid classical quantum systems. Taken together, these efforts reflect how customers are engaging with us not just as a hardware vendor, but as a long-term technology partner in hybrid computing environments. At the smaller end of the spectrum, late last year, we also announced purchase orders totaling approximately $5.7 million for 2, 9-qubit Novera on-premises systems. These systems are being used as test beds for quantum hardware research, error correction and internal capability development. Importantly, they are upgradeable, which allows customers to grow with the platform as their needs evolve. Our Novera QPU also continues to be an ideal solution for customers who want to integrate our technology with their existing cryogenics and controls. We are pleased to announce that we have secured a purchase order for our Novera QPU from a Japanese research organization, which is scheduled to be delivered in April 2026. This will be Rigetti's first QPU to be located in Japan, and we are excited to be expanding into this new geographic region. A core differentiator for Rigetti is our open modular architecture. We do not believe the future of quantum computing will be built by any single company attempting to own the entire stack. Instead, we have designed our platform to integrate best-in-class partners where they can move faster or deeper, than we can alone. We are partnering with Riverlane to advance real-time quantum error correction capabilities, as it is foundational to achieving fault-tolerant quantum computing. Riverlane has demonstrated capabilities that we believe will meaningfully advance that goal. We are also working closely with NVIDIA to support NVQLink, an open platform designed to integrate quantum systems with AI supercomputing. This collaboration reflects our shared view that quantum computers will coexist with CPUs and GPUs in data centers as part of future hybrid computing environments. Another example is our collaboration with QphoX and the U.K.'s National Quantum Computing Center on optical readout of superconducting qubits. This work addresses a fundamental scaling bottleneck by reducing cryogenic heat load and wiring complexity. While this remains early-stage research, it illustrates how our architecture allows us to incorporate novel technologies that could materially improve scalability over time. This ecosystem approach gives us flexibility, accelerates innovation and reduces execution risk as the industry evolves. The quantum computing market today remains research driver. Most systems are deployed to government labs, national research centers, universities and early commercial researchers. That is not a limitation. It is a reflection of where the technology is in its life cycle. I want to be very clear about how we define quantum advantage because this frames our road map and our timelines. For Rigetti, quantum advantage meets outperforming classical systems on practical workloads in real computing environment for commercial applicability. We believe achieving quantum advantage requires several things to come together, scale, fidelity, speed and error mitigation. Specifically, systems on the order of 1,000-qubits, 2-qubit gate fidelity approaching 99.9%, gate-speeds below 15 nanoseconds and integrated error mitigation. Based on what we know today, we believe we are roughly 3 years from reaching that point. That may sound conservative, but in a technology as complex as quantum computing, prescription and credibility matter more than bold claims. Looking ahead, 2026 is about execution and scaling. Our near-term priority is completing deployment of the 108-qubit system at 99.5% median 2-qubit gate fidelity, which we expect around the end of March. Beyond that, our focus is to deploy a system with more than 150-qubits with an anticipated 99.7% median 2-qubit gate fidelity around end of December 2026. As far as we know, no one has demonstrated systems at that scale and fidelity using chiplet based architecture. In parallel, we'll continue advancing our chiplet architecture as the foundation for scaling toward a system of more than 1,000 qubits with an anticipated 99.8% median 2-qubit gate fidelity by or around the end of 2027. Chiplets are central to our strategy and represent the most practical path to large-scale systems. We also will continue working to integrate error correction into the stack. Our work with Riverlane demonstrates ongoing progress in this area. From a market perspective, we expect 2026 to remain focused on delivering on-premise systems across government, national labs and academic institutions with select commercial customers engaged in quantum research. Finally, we strengthened our balance sheet. We exited the year with approximately $590 million in cash, providing us with the flexibility and runway to execute our road map through the quantum advantage time frame. Our investment focus remains organic. We will consider M&A only if it meaningfully accelerates our road map, but we do not need acquisitions to execute our core strategy. To close, quantum computing is a long cycle opportunity. It requires patience, technical rigor and capital discipline. We are not building for next quarter or next year. We are building for a meaningful durable impact over the next 5 to 10 years. Rigetti's strategy is deliberate. We focus on speed, scalability and fidelity. We leverage a strong ecosystem. We define success rigorously, and we invest with a long-term view. Thank you for your continued support. I'll now turn the call over to our CFO, Jeff Bertelsen, for a review of our financial results. Jeff? Jeffrey Bertelsen: Thank you, Subodh, and good afternoon, everyone. I'll spend a few minutes walking through our fourth quarter financial results, our balance sheet and how we are thinking about capital deployment as we continue to execute the road map you've just heard about. For the fourth quarter of 2025, revenue was $1.9 million, compared to $2.3 million in the fourth quarter of 2024. As investors have seen over time, our quarterly revenue profile continues to be influenced by the timing of system deliveries and government contract activity. That dynamic remained true in the fourth quarter, while we saw contributions from our contracts with NQCC and AFSOR (sic) [ AFOSR ], revenue variability at this stage of the market is expected and does not change how we manage the business or allocate capital. Gross margins for the fourth quarter were 35% compared to 44% in Q4 of last year. Margin performance continues to be driven primarily by contract mix. Certain strategic contracts particularly with government and national lab customers carry lower margin profiles, but play an important role in advancing system validation, ecosystem integration and long-term positioning. Total operating expenses for the fourth quarter were $23.2 million compared to $19.5 million in the same period last year. Spending remains concentrated in research and development, including engineering headcount, fabrication and system integration. Stock-based compensation was $5.6 million for the quarter compared to $3.4 million a year ago. Operating loss for the fourth quarter was $22.6 million compared to $18.5 million in Q4 2024. Our GAAP net loss for the fourth quarter of 2025 was lower than the GAAP loss for the fourth quarter of 2024, primarily due to the noncash change in the fair value of our derivative warrant and earn-out liabilities. On a non-GAAP basis, net loss was $11.3 million or $0.03 per share compared to a net loss of $14 million or $0.06 per share in the prior year quarter. I want to briefly address the time line for revenue recognition with respect to the $5.7 million of Novera sales we announced late last year and the $8.4 million C-DAC order we announced in January. Regarding the 2 Novera sales for $5.7 million, we expect a little less than half of that revenue to be recognized in the first quarter with the balance recognized in the second quarter of 2026. Both Novera sales included lower margin dilution refrigeration systems. Therefore, we anticipate significant first quarter year-over-year revenue growth driven by a portion of the $5.7 million Novera on-premises system purchase orders expected to ship in Q1. Importantly, while individual quarters can move around, these contracts support a growing base of recurring and multiperiod activity. Regarding the C-DAC order, we expect to recognize the revenue from that sale in the second half of 2026, following testing to validate that the system meets its specifications. The C-DAC order announced in January 2026 did not include ongoing maintenance or support. We expect to receive an additional PO for those services later in the year. Turning to the balance sheet. We ended the year with approximately $590 million in cash, cash equivalents and available for sale investments compared with approximately $217 million at the end of 2024. We continue to operate with no debt. At our current operating profile, we believe our capital position provides sufficient runway to execute against the milestones Subodh outlined, including continued progress on scale, fidelity and system integration. Our approach to capital allocation remains disciplined and deliberate. The majority of our spending is directed towards core R&D activities that directly advance our technology platform. We are not managing the business around short-term revenue optimization. We are managing it around credible long-term progress towards quantum advantage. We continue to evaluate longer-term fab and R&D capital needs, including the need for dilution refrigeration as qubit counts scale. Any future investment decisions will be driven by capability requirements and evaluated carefully against alternatives, including partnerships or shared infrastructure. Our currently disclosed road map does not depend on near-term changes to our fab footprint. Our execution path remains primarily organic. We believe we have the available technical depth and internal capabilities required to deliver on our road map. At the same time, we maintain flexibility to evaluate selective opportunities that could accelerate progress in targeted areas, discipline and alignment with our strategy remain the filter. To close, our financial strategy is straightforward. We are focused on maintaining flexibility, funding innovation responsibly and aligning capital deployment with long-term value creation. While quarterly results will continue to reflect the early stage nature of the market, our balance sheet position us to execute with patience and control. With that, I'll turn it back to the operator who will open the call for your questions. Operator: [Operator Instructions] Our first question comes from Kevin Garrigan with Jefferies. Kevin Garrigan: Thanks for letting me ask a few questions. So I guess just first, on the 108-qubit system, you made some significant progress on the QPU, but what are the key remaining gating items to deliver that as a customer-ready system? Subodh Kulkarni: Yes. Thanks for your question, Kevin. So as we said in our press release, we are on track to deploy the 108-qubit system around the end of March, with about 99.5% 2-qubit gate fidelity and 99.9% 1-qubit gate fidelity. As we mentioned in our prior press release, we intentionally delayed because of some interactions between tunable-couplers that happened at that scale, and that's what we are addressing. We have done that. We feel pretty good about deploying the system here soon. Hopefully, that answers your question. Kevin Garrigan: Yes, it does. And then as a follow-up, as the quantum supply chain kind of -- or just as the quantum industry scales, manufacturing capacity could become a pretty big constraint. And given Fab-1 is a key differentiator for you guys. Would you ever consider offering foundry or manufacturing capacity to others in the quantum computing industry? Subodh Kulkarni: Well, actually, we do offer Fab-1 as a foundry to select customers, specifically the DOE, DoD and The U.K. National Government. So these are our customers, they use our systems, they have deployed our systems over there. And as part of the overall technology partnership package, we do allow them to run experiments where we become the foundry. So we already do that, and we will continue to do those kinds of arrangements with, for select customers who have interest in developing their own chip architecture, chip designs and so on. Operator: Our next question comes from Troy Jensen with Cantor Fitzgerald. Troy Jensen: Congrats on all the progress and milestones achieved last year. But maybe just Subodh for you, I just want to make sure I get this correct, there's been a few different numbers kind of quoted in your press release about the single and dual gate fidelity. So when you launched this chip at the end of March, can you just clarify exactly what you think the fidelity levels will be for single and dual mode or dual gate? Subodh Kulkarni: So when we deploy this 108-qubit systems towards the end of March, our 1-qubit gate fidelity will continue to be at 99.9%, and our 2-qubit gate fidelity, the median number is expected to be about 99.5%. The reason we started clarifying 1-qubit gate fidelity, frankly, because there are many other quantum computing companies that are confusing everyone by reporting 1-qubit gate fidelity instead of 2-qubit gate fidelity. Historically, as you know, we have always focused on 2-qubit gate fidelity because that's really the most important metric when it comes to entanglement and so on, but some of the other quantum computing companies are routinely reporting 1-qubit gate fidelity and then comparing their 1-qubit gate fidelity our 2-qubit gate fidelity numbers. So to avoid that confusion we have started reporting both numbers right now, so again, I'll reiterate our 1-qubit gate fidelity has consistently been at 99.9% or better for a few years now. Its the 2-qubit we monitor closely, and that's what will be about 99.5% median when we deployed the 108-qubit system by the end of March. Troy Jensen: Awesome. If I could toss in two more quick ones. But 28 nano second gate speed, where were you guys at previously? And then also just an update on DARPA, where you guys stand with that? Subodh Kulkarni: So sure. So probably one of the most exciting parts about our press release this afternoon is the achievement of 99.9% 2-qubit gate fidelity, along with 99.9% 1-qubit gate fidelity and 28 nano second gate speed with our proprietary what we call Adiabatic CZ gate. CZ is a standard that many of us use in quantum computing for general purpose quantum computing. And this proprietary version of CZ gate us allows to get this incredible performance. We really believe this is a great milestone to -- for us to follow because now we know it is possible to get 99.9% 2-qubit gate fidelity with our current designer architecture. So very important milestone that takes us with the confidence that we will be able to deliver a 1,000 plus qubit system in a couple of years with 99.8% or that kind of 2-qubit gate fidelity. So we're really proud of that accomplishment. Regarding DARPA, specifically, we continue to work with them. We are confident that we'll get into Phase B. As we have discussed in the past, its an open-ended program. Once we reach certain milestones, they will get us into Phase B. They have given us a list of things that we have to address, mostly related to error corrections and a few other things. And we are working on them as we speak. So we feel pretty good that we should be in Phase B by the end of this year or thereabouts. Operator: Next question comes from Quinn Bolton with Needham & Company. Quinn Bolton: I guess just wanted to come back on the 108 qubit system. Obviously, the end of March is just a few weeks away. Are you guys already at the 99.5%, meeting 2-qubit gate fidelity in the lab and you're just sort of going through the process of getting the system online? Or is there still work to do on chips -- fabbing chips and tuning the process to get to that 99.5% 2-qubit gate fidelities? Subodh Kulkarni: Quinn, It's a little more complicated than that to give a simple answer like that, partly because when we bring up a new system, there's a lot of qubits obviously, 108 qubits is a lot of qubits and we bring different parts of the grid up, look at different edges and internal parts of the grid. So yes, there are multiple areas where we already are at 99.5% or better, but obviously, the whole grid is not at 99.5% median. Otherwise, we would have deployed it right away. So we are -- we did a chip redesign to address the coupling issues. We are collecting data, verifying that all the data is consistent. So when we deploy, we will be confident that this is the right system to deploy. Just a little context. 108-qubit system at that level of fidelity and that gate speed, about 50, 60 nano-second is a really good system. I mean when we look at the overall industry right now, as far as we can tell, the only one who has anything in that league or better would be IBM at 120 qubits with their tunable coupler. They used to have 156-qubit and 6 coupler, but they moved to tunable coupler and they're at 120. Everyone else is much more than that. And certainly, when you see announcements from companies like trapped ion or pure atom companies, as far as we know, nobody has even approached 100 qubits yet. There's a lot of press releases that go out, but when we go and see actual deployments, from any of these companies, no one is in that range. So we will be only the second company as far as I can tell, to reach 108 qubits deployed on a cloud. Just wanted to put that perspective in place. Quinn Bolton: I appreciate that. The second question is for Jeff. Jeff, you gave us some sense that the gross margin on the 2 Novera sales in the $5.7 million purchase orders, we're going to be carrying lower gross margins because of dilution refrigerators. Can you give us any sense what level of gross margin would you expect on the $5.7 million? And then I guess a similar question on the C-DAC 108-qubit system. What type of gross margin would you expect on that system? Is that also low because of the dilution refrigerator? Or is that expected to be a higher gross margin sale? Jeffrey Bertelsen: Yes. I guess the way I would answer that one is, I don't know that we want to get into quoting exactly what the gross margins are for, competitive reasons and whatnot. Our typical Novera systems without the dilution refrigeration have very high margins, definitely higher. With the dilution refrigeration, it's a resold item, you really can't mark that up. So they are going to be lower than maybe what we would see with some of our other Novera sales. And regarding the C-DAC system, again, I think for competitive reasons, we won't comment on the gross margin profile specifically. I mean, it is a very important strategic account for us, and we're happy to have it. And it will definitely contribute to our sales growth next year, but don't want to get into the margin specifics. Quinn Bolton: Got it. And then just a final clarification on the C-DAC order. It sounds like, does the entire $8.4 million rev rec once validation testing has been complete? Or is there a possibility that the $8.4 million could be rev rec'd over a couple of quarters in the back half of the year? Jeffrey Bertelsen: No, it won't be spread over time. It will be rev rec'd all at once at a point in time once we've -- once it's been installed and we're able to demonstrate that it's meeting its specs. So it will be more like a traditional system hardware sale as opposed to rev rec over time. Operator: Our next question comes from David Williams with StoneX. David Williams: I guess maybe first, if you think about what you're doing with NVIDIA on the NVLink there. Can you talk maybe a little bit about the progress and anything that's maybe developed over the last quarter in that regard? Subodh Kulkarni: Sure. Thanks for the question, David. So our view is that quantum computing is not going to exist in a silo. It will be part of a hybrid ecosystem. So as we have said multiple times and even in this press release, we believe that CPUs will continue to be in data centers doing sequential computing, addition, subtraction, that kind of stuff. GPUs will continue to be in data centers, doing parallel computing. What quantum computing will take over is simultaneous computing part that is currently handled by GPUs. So effectively quantum computing becomes an accelerator to a GPU for select applications where you have simultaneous computing. That view is consistent with NVIDIA and some other companies, that's where we are partnered with NVIDIA on the NVQLink. A critical part where we think it gives us huge advantage to be doing hybrid computing with superconducting gate-based quantum computing, which is what we do, is it gets to the speedy area. Because we are dealing with tens of nanoseconds in gate speeds, as you can see, our standard product is in the 50, 60 nanosecond and with this new gate that we announced, we are talking about sub-30-nanospeed gate speed. That commensurate with CPU and GPU gate speeds, and that really allows a practical hybrid quantum ecosystem to evolve. When you compare that with some other modalities like trapped ion or pure atom, they're talking about hundreds of microseconds. In fact, if I recall this correctly, the most recent number from IonQ is 600 microseconds. So that's 30,000x slower than where we are. Just to repeat, I mean, we are talking tens of thousands of times lower speed with trapped ion type modalities. And that creates a significant challenge for them to talk about a hybrid quantum ecosystem. So that's a huge advantage superconducting gate-based quantum systems have, where we have tremendous gate speeds commensurate with CPU and GPU allows us to do that kind of stuff. So that's why we have partnered with NVIDIA, we demonstrated at GTC in October last year, how a concept would look like. And we'll continue to do that with them. They are not only a company from the HPC environment that shares this view. Other HPC builders are also sharing similar views. So you are going to see more and more companies talk about hybrid quantum computing environment with HPC and quantum computers, particularly superconducting gate-based quantum computers coexisting together. Hopefully, that answers your question. David Williams: Yes, it certainly does. And then maybe secondly, just kind of looking at the landscape for M&A or acquisitions, it seems like there's a fairly ripe environment of different enabling type technologies that are out there. So maybe just discuss the landscape, how you see it, and if there's areas of the stack where you could benefit maybe that could help accelerate your roadmap? Subodh Kulkarni: Yes. As we mentioned, we would certainly be open to M&A if it helps accelerate our roadmap. Our roadmap, again, to repeat, we are talking about more than 1,000 qubit system at sub-50 nanosecond gate speed and 99.8% median 2-qubit gate fidelity in a couple of years. As far as we can tell, that's a very impressive system that we may be one of the only ones, if not the only ones to be able to get a system to that level of performance. So to get a system there and to try to find accelerating points where we can acquire someone to help us accelerate that roadmap, at least we haven't seen what exactly is out there that would help us accelerate that roadmap. Right now, clearly, our chiplet strategy is a critical component of us getting to 1,000 qubits. And there we are the pioneers. We have the IP. We have the know-how. As far as we can tell, we are the only ones who are practicing chiplets in real life. So really, no one else can help us to accelerate that one. When it comes to the other components of the stack on the control system, as we have already disclosed, we are partnered closely with Quanta Computer in Taiwan, and they are a top player in CPU, GPU servers in the cloud, and they fully understand that control system part of the stack. So we feel pretty good about who we have partnered with. I've already mentioned NVIDIA for NVQLink and the distribution layer software like CUDA Quantum. Other areas, we have Riverlane for error correction, QphoX for optical signaling, those kinds of partnerships. So we will continue to monitor the situation. And if we believe that someone can help accelerate our roadmap faster, we are certainly open, but at this point, our roadmap clearly is dependent on just executing our plan. So that's what we have said that most of our plan is organic right now, not contingent on M&A. Operator: Our next question comes from Krish Sankar with TD Cowen. Sreekrishnan Sankarnarayanan: I have two of them. So first one, if I remember right, I think by end of next quarter or so is your time line for making the decision of maybe building another fab or outsourcing it. So I'm kind of curious where we are in that and have the recent acquisition by your competitors kind of changed that decision-making thought process? Subodh Kulkarni: Well, we already have our own fab that is existing in Fremont, that's what's producing our wafers every day right now. Regarding the need for a new fab, we have mentioned that there may be a potential possibility that we may have to invest in a new fab, but we have been very clear, Krish, that we do not believe we need a new fab to get to quantum advantage. So we are -- certainly, for the next 3 years, we think our existing fab is capable of getting us to quantum advantage, which is 1000 qubit 99.9% type fidelity. The fact that we just disclosed a 99.9% 2-qubit gate fidelity performance with our existing fab is a proof point that our existing fab is clearly capable of taking us there. Regarding our competitors buying CMOS foundry for a quantum fab, we are not quite sure why they did that when they had already -- I believe you're referring to IonQ buying SkyWater. We are not quite sure why they did that because as far as we knew, IonQ had already invested in a separate fab in Washington State 3 years ago, and them purchasing SkyWater, we are not quite sure and SkyWater's primary business, most of their business is CMOS foundry obviously. So we are not quite sure what exactly the rationale was, you need to talk to them. But we certainly do not believe that we need to be using any other fab except our fab for the near term. Longer term, obviously, we have said there is potentially a need for a fab to -- there are multiple initiatives being looked at right now, including there are foundry options out there, and we'll certainly take a look at foundry options, other initiatives that are being looked at and decide what is the next step. But again, to repeat, we feel pretty good about our existing fab and feel confident that it will take us there to quantum advantage, which is about 3 years from now. Sreekrishnan Sankarnarayanan: Got it. Very helpful. And so just as a quick follow-up, kind of curious on the government funding thing. Last year, we had DOE announced new funding. Have you seen any activity from them? There's also any latest thoughts on the U.S. NQIRA? And any of the sovereign initiatives that you're seeing that could benefit Rigetti? Subodh Kulkarni: Well, certainly, there's a lot of initiatives being discussed at the U.S. government level to support quantum computing. But as we can all see, there is no bill that has been signed and appropriated yet. There seems to be bipartisan support for this NQI Reauthorization Act different, both the House and Senate, there seems to be in support, but it hasn't yet led to a bill that is signed and appropriate, which we are all eagerly awaiting for. It looks imminent. Everything suggests that such a bill should be signed here soon, and that will significantly help companies like us, but along with us other companies that play in this ecosystem too. So we certainly are supportive of those kinds of initiatives and hopefully, they happen. DoD funding continues. As you can see, we clearly are already getting funded from places like Air Force Research Lab part of DoD, and we'll continue to look at other opportunities with DoD and other areas of the government. We certainly are a critical part of the U.K. government's initiative in quantum computing and there are multiple new initiatives being discussed by the U.K. government right now, and we certainly will take a look at those kinds of opportunities. And of course, we announced that, we are the first company that the Indian government has really chosen to get their quantum computer installed. We are really proud of that accomplishment. So when the first quantum computer is procured by the government of India, we believe it will be ours before the end of this year. So we feel pretty good about being closely affiliated with U.S., U.K., and now the Indian government, and we'll continue to monitor different initiatives and funding activities going on. Operator: Our next question comes from Craig Ellis with B. Riley Securities. Craig Ellis: Subodh, in your prepared comments and in the press release, there was a note of Novera QPU sale to a Japanese research entity. I'm wondering if you could just tell us a little bit more about that. And then use that to elaborate on what the pipeline is looking like as you engage more broadly with other international entities? Subodh Kulkarni: Yes, sure. Thanks, Craig. So as we disclosed, we did get an order for a 9-qubit Novera from a Japanese research organization. We always ask their permission if we can disclose their name. In this case, they didn't want to for confidentiality reasons on their side. But it is a premium -- premier Japanese organization. And once they give us permission to disclose, we'll be happy to disclose. Overall, we feel pretty good about interest increasing to get on-premises quantum computing. As we have already disclosed, we have 2 upgradable 9 qubit systems that we are going to deliver in the first half of this year and on 108-qubit system to the government of India in the second half of this year. We have disclosed this Novera order and there a few more Novera potential orders here in the pipeline, and we'll disclose them when we get them. And if they give us permission to disclose their name maybe we will obviously do that. We are certainly talking to different government entities within U.S., U.K., India and some other countries too. And we believe the demand for on-premises system will continue to grow. As you can see, just by adding the numbers that we have disclosed, we want going to see significant year-over-year increase in sales this year by just delivering the systems that we have already received orders for, and we'll continue to see that in the future. We believe that as we get closer to quantum advantage, which is about 3 years from now, you are going to see significant spike in interest as we get closer to that milestone. And that makes sense because that's really when people start seeing practical benefits with quantum computing, and you will definitely see more and more commercial authorization starting to show interest in on-premises quantum computing. Hopefully, that answers your question, Craig. Craig Ellis: Yes, that's very helpful. And it's nice to see the revenue momentum on the Japanese research sales, Jeff, are you expecting those to rev rec this year? And if so, can you give us a sense for whether that would be in the first half of the year or the second half of the year? Jeffrey Bertelsen: Yes. The Novera to the Japanese organization, we expect that to ship in April and to rev rec in Q2. Operator: Our next question comes from Richard Shannon with Craig Hallum Capital Group. Tyler Perry Anderson: This is Tyler on for Richard. To the Japanese organization that purchased your system, did they already have multiple [ dilution ] fridges installed? And are they just testing different components in the stack or different combinations of components in the stack? And I have one more follow-up. Subodh Kulkarni: Well, certainly, we know they have 1 dilution refrigerator because they have ordered core Novera QPU and not a whole 9-qubit upgradeable system. We are not sure of what other modalities they have tested and within superconducting, if they have looked at any competitive solutions. As you probably know, Tyler, IBM really doesn't offer something like a 9-qubit system, Google doesn't offer a on-premises qubit quantum computing system. There is an organization -- a couple of organizations in Europe like IQM and QuantWare, they can offer smaller qubit count systems. But frankly, our performance is significantly better than those kinds of competitors. So we believe the Japanese organization did their homework and decided superconducting quantum computing is an area they want to invest in. And within superconducting to get started, Novera is a perfect solution to get your researchers familiar with quantum computing and starting to learn about quantum computing ecosystem and work on algorithms and applications and stuff like that. Tyler Perry Anderson: Got it. And you had mentioned you're doing work with -- sorry, I'm at the airport. You're doing work with Riverlane on the scalability of error correction. Could you just elaborate on what that means? Subodh Kulkarni: Sure. What we have disclosed is that we have partnered with Riverlane based in Cambridge, U.K. It's a company of probably our size, about 150 employees, excellent quality work they do in error correction software, and we have published some papers that anyone can take a look at. We showed some concepts of how real time error correction will work. We have shown a path to how their error correction hardware will closely integrate with our hardware. So they will be a core part of our stack, if you will, and how that will scale up as we go up to 100 and then 1,000 qubits and beyond 10,000 qubits. So our roadmaps are well aligned. We work very closely with their team. So effectively, we view the error correction as a key part of our stack going forward. Hopefully, that answers your question. Tyler Perry Anderson: Yes. Is there just any update on like number of qubits for one of their systems? Is there any change in that? Subodh Kulkarni: Not in that sense. I mean number of qubits and the raw fidelity, obviously, that all those things come from us. Where they start coming in, is error mitigation and error correction area. Obviously, that's the layer that is critical when you start talking about quantum advantage. So really, the benefit that our customers are going to see with Riverlane error correction is when we start approaching quantum advantage. Right now, they can test it. Riverlane will offer them their services. They have physical products to ship, if you will, and we can demonstrate that our systems are closely working well together. But clearly, we are not at a point of 1,000 qubits at 99.9% type fidelity where error correction can really be demonstrated to show practical benefits. So we need to get closer to quantum advantage before end users will start seeing the real value of error mitigation and error correction. Operator: Our next question comes from John McPeake with Rosenblatt Securities. John McPeake: Thanks, that's on getting to the error rate that you need to get to by the end of the quarter. Question on the 150-plus qubit system that you guys had originally planned for by the end of this year at 99.7% 2-qubit gate fidelity. Is that still on cards? Subodh Kulkarni: Yes, absolutely. That is our roadmap. We will deploy this 108-qubit system soon and then plan is to get to 150-plus qubit around the end of this year. We want to be careful. I mean, any time you say by the end of year, it always creates a challenge for December 31st and so on. I mean, these are extremely complex systems. These are extremely complicated technologies that we are developing. So what we have said is more than 150 qubit, about 99.7% median 2-qubit gate fidelity around the end of this year. That's our next milestone. The bigger one that we are really excited about, and we are focusing very much on that is more than 1,000 qubits, closer to 99.8% median 2-qubit gate fidelity, less than 50 nanosecond gate speed in about a couple of years. So that's where a lot of our work already has started. So we'll certainly get 150 plus delivered around the end of this year, but most of the effort right now has already started on the 1,000 plus qubit in a couple of years. And as I mentioned earlier, I mean, even 150 right now, there is no one our with 150-plus qubit system with the exception of IBM's old technology, where they had 156 qubit and certainly 1,000 is going to be a big milestone for the whole industry, certainly for us, but for the whole industry. We don't see how other modalities, even though they claim they will be there, you look around trapped ion or pure atoms or any other modalities, none of them, as far as I can see, have reached even 100 qubits or even anywhere close to that. So when they have the roadmaps talking about getting to 1,000 and tens of thousands, it's a roadmap. In the case because we are using chiplet technology and because we have semiconductor fabrication, and we know how to stack up the chips, we feel pretty good about our executability of our roadmap. So yes, to answer your question, absolutely, 150 plus around the end of this year and more than 1,000 around the end of next year. That's the plan. John McPeake: Great. So the issues you're resolving around the 108, are those critical to reaching these roadmap milestones? Is that -- is that the way I should think about it like once you resolve this tuneable coupler? Subodh Kulkarni: Yes, absolutely. I mean, the issue that we are resolving as we speak with the tuneable coupler and that's why we did the chip reiteration, it's critical to not only 108, but 150 and everything beyond that. So every time we advance to a certain level, we take advantage of all that when we go with the next systems. That's why, I mean, when we hear some companies talk about how they are going to get to 1 million qubits without demonstrating even 10 qubits, we are very skeptical of those kinds of claims. And frankly, I mean, even if you look at some companies trapped ion companies like IonQ, who acquired Oxford Ionics technology at a couple of qubits. And that's where they are right now, at a couple of qubits and to certainly say we'll be at 1 million qubits next year. We remain skeptical of those kinds of claims. I mean, unless you can demonstrate 10 and then 100, we just don't see how you can go from 2 qubits or 5 qubits to certainly a couple of million qubits in a year or 2 years. John McPeake: Okay. And then just last one, if I could. The 1,000 qubit machine by the end of 2027. Can you give us some kind of sense as to how many logical you might be able to squeeze out of that? I don't know if you're thinking about the Riverlane error correction solution or some other error correction? How should I think about that? Because it's a great physical number, certainly 99.8% on that one. Subodh Kulkarni: Yes. So really to start talking logical qubits, you need to get to closer to 99.9%, which is the quantum advantage point that I've talked about. In general, in the superconducting gate-based quantum computing technology space, we are in, typically, the number that we use is roughly 10 to 50 physical to logical qubit, depending on the exact fidelity and stuff like that. Maybe 10 to 100 in the worst case. But that's the ratio. So you have to divide that number by 10 to 100, to get the number of logical qubits. Once you approach 99.9% level. Now, I know that there's a confusion going around right now in the industry because, again, some trapped ion and pure atom companies have started reporting physical to logical qubit ratio of 2:1 and in some aggressive cases, 1:1, I just want to caution you that they are using a very weird definition of logical qubit in that case. They are not talking about the logical qubit as a perfect qubit. They're talking about logical qubit having a fidelity, and in some cases, their logical qubit fidelity is actually lower than the physical cubic gate fidelity. So it doesn't make any sense that they are using that language, but they are and that's unfortunately confusing a lot of people as to logical qubit and what does it mean and stuff like that. Hopefully, that answers your question, or maybe I confused you some more. Operator: Our next question comes from Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Well, my question was kind of answered. But I guess I'm curious, Subodh, if you can touch on or elaborate on either in Japan or India your customers, what the evaluation process was like. I think you said in Japan, maybe you weren't sure of the other modalities. But what was the competitive landscape in time? Subodh Kulkarni: Well, certainly, almost every national lab, university or any potential -- even commercial customers, they are fully aware of different modalities, the pros and cons. And once they decide to choose superconducting gate-based modality, and usually, the reason is for the obvious things that we have been saying, which are scalability and gate speed. Those are the huge benefits with superconducting modality. Everyone understands that fidelity is the main challenge in superconducting modality. So usually, that part, most customers that we talk to have done on their own. Usually when we talk to them, they have already gone through that process, but then they are starting to look at different competitors within superconducting gate modality. Obviously, IBM is always there in the fray. Sometimes we deal with companies like IQM from Finland or QuantWare from Holland or some other companies around the world. I mean, the main thing that differentiates Rigetti is our open modular architecture. We have this innovative way of incorporating third-party solutions that allow us to come up with innovative solutions faster. Examples being Quanta Computer for control system or NVIDIA for NVQLink or distribution layer software like CUDA Quantum or Riverlane for error correction. Most customers like that kind of an open approach because usually they have some ideas on what other things they would like to try with quantum computing because they're also doing research at this point. And the other part where we really outshine our competitors is chiplet. Everyone sees that chiplet is a very, very possible way to scale up long term. We allow our customers to upgrade as you can clearly see our current 2 orders that we are fulfilling are upgradable 9-qubit systems. So once they get 9-qubit up and running, we fully expect them to ask us to upgrade them to up to 108-qubit, sometime next year because of the same dilution refrigerator with some changes in cables and connectivity will be able to handle 108 qubits or even more in the future. So main differentiator, the reason they choose us are our open modular approach and our chiplet approach and a few other things, but those are the customers that end up choosing Rigetti. Hopefully, that answers your question. Operator: I would now like to turn the call back over to Dr. Subodh Kulkarni for any closing remarks. Subodh Kulkarni: Thank you for the thoughtful discussion today. We are excited about the momentum we are building across our technology roadmap, our partnerships and growing engagement from customers around the world. Our team is focused on executing with discipline and delivering systems that enable meaningful progress in quantum and hybrid computing. We appreciate your continued interest and look forward to sharing our progress in the quarters ahead. Thank you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to BBVA Argentina's 4Q '25 and Fiscal Year 2025 Results Conference Call. Today with us are Mrs. Belén Fourcade, Investor Relations Manager; Diego Cesarini, IRO; and Mrs. Carmen Morillo, CFO, who will be available for the Q&A session. This presentation and the 4Q '25 earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2024 filed with the U.S. Securities and Exchange Commission. [Operator Instructions] I will now turn the call over to Mrs. Belén Fourcade. Please go ahead. María Belén Fourcade: Good morning, and thank you all for joining us today. After a third quarter that was marked by political instability with its consequent monetary and exchange rate tensions, the results of the midterm legislative elections reaffirmed support for the government's fiscal reform and order policy. This translated into a rapid normalization of financial variables, which returned to pre-event levels. BBVA Argentina continues to consolidate its growth strategy, reflecting its commitment to being a key player in Argentina's recovery of activity. This was achieved despite a year ultimately marked by interest rate volatility in the second half and the progressive deterioration of credit quality within specific segments of the retail portfolio. In this line, on December 22, 2025, the bank secured a credit line of up to $150 million from the International Finance Corporation. These funds allow BBVA to expand its financing capacity for small- and medium-sized enterprises, thereby reaffirming its commitment to the productive sector. BBVA Argentina's non-performing loan ratio on private loans reached 4.18% as of December 2025, a figure that remains below the system average of 5.29% for the same period. The bank stands out for having consistently lower delinquency ratios than the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. Before diving into numbers, it is important to mention that on December 10, 2025, the transaction through which BBVA Argentina acquired 50% of the share capital of FCA Compañía Financiera has been closed. This had a ARS 1 billion impact in the P&L and all balance sheet figures include FCA, including loans and deposits. Nonetheless, market shares expressed in this report and on this call do not include FCA as the consolidation was made as of the last day of December. Moving to Slide 2 to 5 of the webcast presentation, I will now comment on the bank's fourth quarter 2025 and 2025 fiscal year financial results. BBVA Argentina's inflation adjusted net income in 2025 was ARS 267.4 billion, decreasing 43.2% versus 2024. This implies an accumulated ROE of 7.3% and accumulated ROA of 1.1%. The year-over-year decline in results is mainly explained by the deterioration of loan loss allowances in a context of high delinquency ratios in the financial system. Also, in spite of observing a 29.4% lower net interest income as a result of lower interest rates and inflation, this should be considered in comparison to lower losses from the net monetary position, which more than offset the lower NII. It is worth noting the 36.9% increase in net fee income, thanks to a proactive approach in improvements, and also in foreign currency and gold gains, the latter explained by an increase in activity after the partial lift in FX controls on April 14, 2025. In the fourth quarter of 2025, net income was ARS 59.3 billion, increasing 44.5% quarter-over-quarter. This implied a quarterly ROE of 6.5% and a quarterly ROA of 0.9%. Quarterly results were mainly explained by higher income along with lower expenses. The increase in income is mainly due to: one, better net interest income; and two, an increase in results from write-down of assets at amortized cost and OCI. The latter due to the sale of bonds classified in the OCI model. Expenses improved mainly on the side of personnel expenses and administrative expenses. These were negatively offset by, one, loan loss allowances; two, an increase in operating expenses mainly due to turnover tax; and three, lower net fee income in the quarter. Net income from the net monetary position was 32% higher quarter-over-quarter, explained by a higher quarterly inflation. Net interest income in the quarter was ARS 758.9 billion, increasing 20.2% quarter-over-quarter. After the uncertainty surrounding the midterm elections were off, average market interest rates declined. With the liabilities repricing at a faster pace than assets, we observed the reverse effect from the one seen in the third quarter of 2025, with income from public securities and loans increasing and expenses from funding increasing, but to a much lower extent. In the year, net interest income decreased 29.4%, as mentioned before, more than offset by the lower losses on the side of the net results from the net monetary position. Loan loss allowances increased 31.3% in the quarter and 181.2% accumulated year-over-year, explained by the deterioration of non-performing loans, in particular, on the retail book, which implied higher provisioning. The effect of loan loss allowances can be observed in the evolution of the cost of risk, which reached 8.11% in the fourth quarter of 2025 and 5.54% on an annual basis. During 2025, personnel and administrative expenses decreased by 11% and 12.6%, respectively. This was achieved, thanks to the active pursuit of efficiencies during the year. During the fourth quarter of 2025, in particular, total operating expenses were ARS 537.5 billion, remaining stable quarter-over-quarter. Both the efficiency ratio as well as the fee to expenses ratio evidence the stability and the improvements that are taking place on these lines of the income statement, and we expect them to improve even further for 2026. Going on to Slide 6 and 7. Private sector loans as of the fourth quarter of 2025 totaled ARS 14.8 trillion, increasing 7.6% in real terms quarter-over-quarter and 47.6% year-over-year. In the quarter, growth was mainly driven by an increase in loans in pesos. In total currency, the products that increased the most were mostly commercial loans such as financing of projects and exports and discounted instruments. On the peso portfolio, discounted instruments, pledged loans and credit cards stood out. Pledged loans are mainly affected by the introduction of FCA into the loan book. In the case of consumer loans, prudency policies taken in a context of higher deterioration of non-performing loans were noticeable on this line with a 2.2% quarter-over-quarter decline. BBVA Argentina's consolidated market share of private sector loans reached 11.91% as of the fourth quarter of 2025, improving 64 basis points from 11.27% a year ago. As for asset quality, the NPL ratio of BBVA Argentina on private loans reached 4.18% as of December 2025. As mentioned before, BBVA is renowned for presenting delinquency ratios spread consistently below the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. By the end of 2025, total gross loans and other financing over deposit ratio was 88%, above the 78% in December 2024. Participation of total loans over assets is 57%, the highest since 2020 and above the 51% recovery in 2024. As of the fourth quarter of 2025, the total NIM was 17.5%, higher than the 15.2% in the third quarter of 2025 and below the 20.2% in the fourth quarter of 2024. While the NIM in pesos increased by 277 basis points to 20.2% quarter-over-quarter, the NIM in dollars fell 91 basis points to 4.8%. In the quarter, the increase in NIM is mainly explained by a better yield on public securities and loans in pesos, while the drop in dollar NIM is explained by a higher volume and rate of interest-bearing liabilities. In the accumulated annual comparison, although the total NIM presents a considerable drop, it should be understood that this is a consequence of the rapid decrease in inflation and therefore, the level of rates and is more than offset by the lower cost of inflation adjustment. This can be seen in the adjusted NIM, which dropped from 17.30% to 13.75%. On the funding side, as of the fourth quarter of 2025, total private deposits reached ARS 16.7 trillion, increasing 3.1% quarter-over-quarter, and 29.7% year-over-year. The bank's consolidated market share of private deposits as of the fourth quarter of 2025 reached 10.04% from 8.60% a year ago. Private non-financial sector deposits in pesos, totaled ARS 10.5 trillion, a decrease of 1.4% quarter-over-quarter, explained by a decrease in time deposits and in other deposits, including interest-bearing checking accounts. This effect was partially offset by an increase in savings accounts. Private non-financial sector deposits in foreign currency expressed in pesos increased by 11.6% quarter-over-quarter. This is mainly due to an increase in savings accounts and in time deposits. In hard currency, U.S. dollar loans increased 12.7% quarter-over-quarter and 26.6% year-over-year. As of the fourth quarter of 2025, capital ratio reached 18.3%. The quarterly increase in the ratio was due to a 9.4% increase in Common Equity Tier 1, mainly impacted by the recovery in the value of government bonds at fair value through OCI. Public sector exposure, excluding Central Bank totaled ARS 3.9 trillion, implying a 15.5% exposure, below the 16.4% recorded in the third quarter of 2025 and 17.9% in the fourth quarter of 2024. For the year, the drop in exposure is mainly explained by the increase in assets led by the growth of loans over that of financial instruments. It is important to highlight that more than 90% of the National Treasury's public debt portfolio in pesos is at TAMAR floating rate. These bonds represent approximately 65% of the bank's sovereign portfolio and in the context of higher real interest rates in the second half of the year added value to the financial margin. In the quarter, the liquidity ratio reached a level of 44.2%. The liquidity ratio in local and foreign currency reached 37.7% and 55.2%, respectively. In line with our commitment of generating value for our shareholders, the bank continued the payment of dividends corresponding to the 2024 fiscal year in 10 installments, having paid 9 of the 10 installments required by the Central Bank's regulation up to the date of this report. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Tito Labarta with Goldman Sachs. Daer Labarta: I guess my main question is really on asset quality and how that continues to evolve and what that could mean for loan growth for 2026. We kind of expected already that you're still not out of the credit cycle, but it seems provisions jumped a bit more than expected. NPLs went up a bit. I mean do you still think 1Q, 2Q should be the worst of it? Do you think that can get delayed and the credit cycle can last a bit longer? I just want to understand how comfortable you feel on credit quality stabilizing and potentially improving? And what could that mean for loan growth? You have pretty good loan growth in the quarter, but is there some risk to your ability to grow loans if credit quality does not improve? Carmen Arroyo: Tito, good morning. Hi, everyone. This is Carmen Morillo. Thank you for your question. Related to asset quality growth and yes, we think that these are the main questions for this year. So first of all, I would like to highlight that during 2025, we have been able to gain market share in a quite solid way, this 11.91% market share that means 60 basis points increase in market share is quite solid. And in terms of credit risk, we've been under the system ratios. Having said that, we believe that first quarter will be also a tough one. But from then on, what we believe is that credit indicators should go downwards. So for us, the peak should be in the first quarter in terms of NPLs for sure, and in terms of cost of risk also. In terms of growth, maybe it's too soon to answer this question. What we believe is that depending on what the financial system growth is. And what we still believe is that we are -- so our strategy is to gain market share. So we see the credits in the system growing around 18% in real terms. So we should be growing above that. So our guidance was to grow between 25% and 30% for the 2026. And we think it's too early to change our guidance. So we would maintain these figures. So yes, around -- so to grow faster than the system. And also in terms of deposits. So we believe that our strategy is the good one in that sense. We've been growing also in deposits during 2025. We've been able to gain -- to be more -- so to have a better participation in the transactionality of our clients. And in that sense, we will be also beating the system in deposits. So I hope I could have answered your question. Thank you. Daer Labarta: Yes. No, that's helpful, Carmen. I guess how do you think that then translates to profitability for 2026? I mean, do you think you can achieve a double-digit ROE? Can you start getting to like the low teens by the end of the year? Or does that also get delayed a bit and we could see some pressure on profitability? Carmen Arroyo: Okay. So I think we have been very consistent in our guidance in terms of ROE. We were talking about low to mid-teens for the last quarters. It's -- as I mentioned, and all of you know, the environment is not so easy to predict. But we think it's early to change this guidance. So we are confident we will be able to achieve a better profitability than the one we have done this year, which, by the way, is much better than the systems one and other peers. So we are happy with that performance in relative terms. Of course, we have faced a lot of difficulties this year. And I think it -- so the year is a very positive one in this environment. And for next year, we hope to be above, so low to mid-teens, it's too early to say low or mid-teens, but I believe we should be achieving this goal. Operator: Our next question comes from Brian Flores with Citi. Brian Flores: Carmen, I wanted to maybe expand a bit on deposits because I think your market share gains were very relevant. You're above the double digit maybe for the first time in some time. So I think it's a very important point. Just wanted to see your strategy, right? Because I think given the conditions that are very tight, maybe the competition for funding intensified. So I just wanted to ask you what's your strategy here? And how do you prevent maybe a spike in the cost of funding? Diego Cesarini: Brian, this is Diego Cesarini. I will take this question. Well, it's true. We have been growing on deposits much faster than the system. Last year, we grew 32% in real terms, while the system grew around 12%. So our gains in market share have been huge. Here, we have been working on many fronts. On one side, we have seen a recovery on retail deposits. Retail term deposits, for example, represented a couple of years ago before Milei took cover. And below -- before the 2023 presidential elections represented around 30% of our deposits in pesos. And after 1.5 years, they just represented 10%. Last year, we started to see a recovery in the investors' appetite for bringing that kind of deposits. So we put a lot of focus on trying to make them grow faster. Now they represent around 15%. We have also been very active on companies on SMEs deposits. We were out of that market a couple of years ago because we didn't need that funding. So we are back on that market. We are putting a lot of aggressive targets to our work in our commercial forces. And we have also succeeded a lot in growing very fast on SMEs deposits. And the last -- I guess, that the last leg of this strategy wholesale deposits. Institution, as you know, they still represent a huge amount of Argentinian market. And again, 2 years ago, we didn't need those deposits after we started growing, well, we were going for them again. So we are on every front. And of course, in dollar deposits, we have also been growing market share. We are also active on that market. And we still think that we have room to keep growing there. Brian Flores: Super clear. And then a follow-up on Tito's question. Just to summarize, basically, you're envisioning growth as Carmen was saying, 25% to 30% in real terms, I don't know if you could elaborate a bit on the composition because I know you're a bit more on the commercial side in terms of the mix, right? The deposits, do you think they grow above or in line with loans? ROE, you mentioned already maybe low double digits. And then I have maybe another question on asset quality. Do you think cost of risk could be at some point, maybe at the end of 2026, closer to the end of 2024, which is closer to the 5% rather than the 7%, we are now? Diego Cesarini: Starting with your latest questions. Yes, we think that by the end of this year, it could be reaching the 2024 levels. Of course, it will start at levels that are similar to the end of last year, as Carmen said before. And regarding the composition of our portfolio, I think that maybe in general terms, it will be similar to the one that we have right now. But of course, at the beginning of the year, probably during the first semester, we will be much more focused on big corporations because for obvious reasons, that the retail market is still not recovering. So probably consumer loans or credit card loans could suffer a little during the first part of the year and probably in the second semester, things will return to normality. Carmen Arroyo: Yes. The point is when the situation in the retail side is safe enough to come back to credit cards and personal loans and all that. But having said that, we will be addressed -- we will be in mortgages, in pledged loans. So in the retail side, we see these products as the main ones in our strategy at the beginning of the year. Then, of course, as the situation gets better, we will be back in all products as we used to be. And in the commercial side, we are not expecting a higher deterioration, and that's why we think we will maintain, as we Diego was mentioning, in the mix we have nowadays. Brian Flores: Super clear. And on deposits, just to clarify, do you expect to grow above or below the loan growth? Carmen Arroyo: Below, so... Diego Cesarini: Below what? Carmen Arroyo: The loan growth? Diego Cesarini: No, I guess the below loan growth... Carmen Arroyo: Above the system. Diego Cesarini: Yes. Above the system, probably. But below loan growth just because, well, of course, equity also grows. There are other liabilities that also grow. So we need to grow less in percentage terms in deposits than in loans. That's just mathematics. But as I said before, we still think that we have room to grow. Even if deposits were behaving not so good this year, we still have liquid. We still have bonds in excess. We have a public sector portfolio in excess of what we need to comply with reserve requirements. So we still could use some liquidity in order to keep growing. Brian Flores: Perfect. So if I -- if we think of, let's say, a 20% real terms in deposits, that makes sense, right? Diego Cesarini: Yes, between 15% and 20% could make sense in a scenario where we grow in loans between 25% and 30%. Carmen Arroyo: And in both cases, gaining. So the strategy is to gain market share. So it will depend on what the system does. Operator: Next question from Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: Carmen, Diego, Belén. First, congratulations on the good result and the gains in market share, which is what you wanted to achieve and the stability of the results. So to ask a few things which are different. First, the dividend for 2025, do you expect it to be able to pay in a single or a discrete number of payments? Or will you still have these 10 different payments that you have had in 2024? And what level of payment are you thinking of doing? Second, on taxes. So when you look at the last 3 years, you've been paying about 34% on average over the last 3 years. Is that a level that you expect for the future? Or should we go back to the statutory rate around 30%? And finally, can you give us an update about when we might move away from inflation accounting? Is that 2028? Or do we have to wait longer? Carmen Arroyo: Carlos, thank you for your words. Then related to your question. So first one was dividends. So we still don't know what -- so how are we going to be able to pay the dividend. So I don't have an answer on that question. So we believe we need to have information in the following -- yes, during March, I would say. So we will know that soon. Related to the amount, as we -- so we ended in -- so this capital ratio of 18.3%, 2025. As I mentioned, we want to grow for the next years. So we prefer to pay a small -- so we will be paying dividend, but it will be something similar to what we did last year. So to maintain a lower payout ratio and grow faster. Then your second question... Carlos Gomez-Lopez: It was on the taxes and inflation. And by the way, what was the payout, in the end last year? Carmen Arroyo: Sorry? Carlos Gomez-Lopez: The payout, last year? Diego Cesarini: Last year payout was around 25% of our 2024 net income. Carlos Gomez-Lopez: 25%. Diego Cesarini: That was last year dividend. Carmen Arroyo: Yes. Then inflation. A couple of months ago, we were thinking about 2027, so by the end of 2027, to be the end of this adjustment. Now we changed a little bit our projections of inflation. So I think it would be prudent to say that 2028 should be the year to go out of this adjustment, but it will be, yes, in 2027, beginning of 2028, something like that. Diego Cesarini: Carlos, just to add a piece of information, according to the FX regulation that is in place, we could access in theory to the official FX market to pay dividends this year. Carmen Arroyo: Okay. And then in terms of taxes, you were asking. So I don't see a reason why they should come back to -- so other percentages. But I don't have here the information. So let me take a look on that and come back to you. Carlos Gomez-Lopez: Sure. Carmen Arroyo: Yes. So I believe -- so we should be at that levels but if -- so if we see something else, I will come to you. Carlos Gomez-Lopez: So at that level, meaning the 30% statutory? Because as I said, this year, almost every quarter, you have had 34% to 41% in my numbers, maybe I'm doing something wrong. Carmen Arroyo: No. I mean 35%. So around 35%, yes. Carlos Gomez-Lopez: Around 35%? Diego Cesarini: Correct. It should be around 35%. Operator: Next question from Pedro Offenhenden with Latin Securities. Pedro Offenhenden: I wanted to ask on cost, how should we think about personnel and administrative expenses during this year? Carmen Arroyo: Pedro, thank you for your question. This year, meaning 2026, I believe? Pedro Offenhenden: Yes. Carmen Arroyo: So the improvement we've seen during this year, we believe we will be also improving in 2026. So the trend should continue, not only in terms of being quite aggressive in not growing in expenses, but also due to our better net interest margin, fees and commissions and so on. So the efficiency ratio should go downwards. Pedro Offenhenden: Okay. Do you have a target on the efficiency ratio for the year? Carmen Arroyo: Around 46%. Operator: Our next question comes from Marcos Serú with Allaria. I believe you're having some technical issues. We're going to go ahead with the next person in the queue, which is Matías Cattaruzzi with Adcap. Matías Cattaruzzi: I have a question about the -- as we have seen in the first quarter, dollar liquidity in the system is improving. And government is signaling to probably changing regulation in dollar lending to non-dollar producing clients. How do you see [indiscernible] in this field, do you intend to lend in USD to non-dollar producing clients? And which sectors do you think would be best? Diego Cesarini: Matías, this is Diego. Well, first of all, I would like to say that in the case of BBVA, we are pretty comfortable with the amount of lending we are producing in dollars right now with the current regulation. We are growing. We have a lot of demand in our pipeline. So if you ask me, by the end of this quarter, even if we are growing a lot in deposits and other kind of dollar funding, we are -- we would really be short of liquidity. We are gaining market share in loans. And everything is being done under current regulation. So we are not in the need of a change in this regulation. Having said this, if regulation changes and opens to more sectors, of course, we have to evaluate very carefully the sectors. It's difficult to establish a general policy because we all have in mind what happened in Argentina 25 years ago where dollar lending was open for anyone. That kind of -- and hedge are very difficult to manage in case of devaluation. So this is basically our view of the situation. The regulation changes, we will analyze if there are any sectors specifically or special cases where we can relax a little our policy. But I think that the most important is that we are really lending at full with the current policy. We don't -- right now, we don't need a change in our case, we don't need a change in regulation. Besides, it's -- when you look at the loan-to-deposit ratios in foreign currency, you will see that in our case, it's around -- right now, it's around 55%, probably will be 60% in a couple of months. But then reserve requirements are really high in this currency at around 23%. We also have to keep some banknotes in our branches. We have faced -- of course, it's a public information that we have faced -- banks have faced a very sudden and deep runs on our deposits many years ago. So we still have to be very careful regarding our customers' behaviors in this kind of deposits. So we still have to keep important amounts of liquidity in dollar terms. Of course, Central Bank cannot lend dollars to banks in case of meat. So this is our approach to this subject. Matías Cattaruzzi: Okay. And a follow-up question. What's -- do you have a guidance in net interest margin for 2026? Diego Cesarini: We don't have a formal guidance on net interest margin, but we think that -- we like to measure this indicator in real terms, because, of course, if you compare 2024 to 2025, the net interest margin fell, but of course, because inflation fell and interest rates also decreased very sharply. But on the other side of our balance sheet, and our net income, you see that the cost of inflation also decreases a lot. So you have to see this in net terms. In general terms, we have seen that last year, we didn't lose -- we didn't lost margin. It was -- our net margins were similar to the previous year. And for next year, for 2026, we are seeing a similar situation. We are -- probably, our net interest margin will fall a little in real terms. That will be offset by growth in activity. So this is not an issue for now for the bank. Operator: Our next question comes from Marcos Serú with Allaria. Marcos Serú: Sorry, I was having trouble with my microphone before. I wanted to ask in first place about personnel expenses. How is -- explain the decrease in this quarter, while the headcount has increased? And then about your guidance. I wanted to know if you could share the assumptions behind that guidance about inflation, GDP growth in 2026 and effects. And the last one is, do you know about how much of the growth in loans and deposits is in pesos and in dollars? Carmen Arroyo: Okay. Thank you, Marcos, for the questions. Related to the first one, personnel expenses. Yes, so there are some provisions we decided to return. And that's why you see this is true, that you see a different evolution between headcount and expenses. So it's a one-off. This is the short answer for that. Then related to the guidance, I think... Diego Cesarini: Regarding inflation, we are expecting right now, our research department is expecting a 22%, regarding GDP, 3% growth, regarding FX, around 1,700. And regarding the mix in growth in loans, in pesos and dollars, we are still expecting dollar loans to grow a little above peso loans. Dollar loans right now represent around 23% of our book. Probably that will reach 25%, 27%. So dollar growth should be around 40% probably in real terms or a little more. Marcos Serú: Okay. Just one question. So do you think that the personnel expenses charged-off this quarter can be adjusted by inflation in order to project the followings or which number could be a normalized number? Carmen Arroyo: I'm not sure if I get your question right, Marcos, sorry. Marcos Serú: If you think that the personnel expense charge-off, this quarter in order to project it, will it growth as inflation growths or which growth do you expect for that charge? Carmen Arroyo: So I would say that you -- so first, efficiency ratio is going to be lower than this year. And second, the growth in expenses as a whole should be very linked to inflation. So with this couple of -- okay. Operator: Our next question comes from Brian Flores with Citi. Brian Flores: I just wanted to ask you because everyone, I think, not only you, but other peers have been mentioning about the potential recovery of the consumer. Just wanted to ask you, in your view, what are the catalysts here for us to see a recovery and also for them to start, as you mentioned, recovering not only in the demand of credit, but also maybe on deposits, I think that would be a great color. Carmen Arroyo: So thank you for the question. So the short answer should be, so interest rates need to be stable and lower, that's one issue, which is important. And the other one is the micro, the stability. So macro policies are going in the right direction, and we believe that this is also in the right path, but we still need to see what happens with the companies, with the retail, with the salaries in real terms. So it's more complicated than only interest rates. So we believe something else needs to be happening in the country to go back to consumer loans. Brian Flores: Carmen, anything on the regulatory side that you think could really help on either side, either supply or demand of credit? Diego Cesarini: A lot of the bad regulations have already been addressed. But of course, everybody is aware that last year, Central Bank monetary policy was very restrictive. Our reserve requirements skyrocketed. So I think that what probably we will need some flexibility on that side from Central Bank in order to keep growing. And we think that, that will come with time. I think that right now, of course, the inflation has gone a little above the expected levels. But once that issue is again under track, I think that Central Bank is going to act and start to be less restricted. I think that's the main issue right now. Operator: Our next question from Ignacio with Invertir en Bolsa. Ignacio Sniechowski: Can you hear me? Operator: Yes. Ignacio Sniechowski: Okay. Carmen and Diego, well, my question was regarding reserve requirements, but Diego answered that. So it was -- if you are expecting or seeing the Central Bank lowering those that you mentioned that it will depend on the evolution of inflation. So sorry, it was already answered and... Diego Cesarini: Yes, I can elaborate a little more. Let me tell you that in the case of reserve requirements, what Central Bank did last year, they raised, of course, these levels, but we can comply those requirements in bonds. So it doesn't represent a cost for our NIM. It's not affecting our net income, of course. But of course, we need those funds in order to keep growing in loans if there is enough demand. Besides that, we need a little more -- we are asking for a little more flexibility because last August, we had to comply with those requirements on a daily basis. That was from the operational side, it was very difficult for us. They have relaxed somewhat those daily requirements. But still, there are some minor issues that we think that should be addressed. We are asking, but that doesn't have really an impact on net income. So that's the general view on the subject. Ignacio Sniechowski: Okay. And Diego, one more question. Do you think that wallets and fintechs that -- well, banks already won the battle of salaries and being deposits in banks. But do you think that they will eventually strike back to that -- to potentially reverse that? Diego Cesarini: Anything can happen, but I think that the main issue is that the biggest one, Mercado Pago has already asked for a banking license. So we should guess that in any time in the future, they will get that banking license and they will be able to offer the product. So we need to be ready, our products need to be competitive and have a good user experience in order to be in a good position to keep our share. We've been growing on wallet on pay per share. We have around 15% of the total market. And we have been growing consistently through the past year. So I think that we have a good offer for our customers. Operator: The Q&A session is over. And now I would like to pass the word back to BBVA's team for final remarks. Carmen Arroyo: Thank you. Thank you all for attending the conference. And just to highlight that despite the challenge of the environment, we've been going through this year. We believe BBVA Argentina has proven resilience and effective management in the year. So credit growth and non-performing loans levels below the system average and a very solid position in solvency and liquidity are the key issues of our strategy, and we are committed to keep growing in the following quarters and to maintain our efficiency and generate profitability for our shareholders. Operator: Thank you. This does conclude today's presentation. You may now disconnect, and have a nice day.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Azimut Group Full Year 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Giorgio Medda, CEO of Azimut. Please go ahead, sir. Giorgio Medda: Thank you very much. Good afternoon, everyone, and thank you for joining us today for the Azimut Full Year 2025 results presentation. I'm Giorgio Medda, CEO of the group, and I'm pleased to be here with Alessandro Zambotti, CEO and Group CFO; and Alex Soppera, Head of Investor Relations. So this past year has been a truly defining one for Azimut and likewise, a very exciting one. As you know, it was a year marked by change in leadership, yet our growth not only continued, but actually accelerated. The defining step in our growth journey reflects both the strength of our business model and the dedication of our people across all our markets. So let's dive right into the presentation and move to Slide 3, please. So the year 2025 continued to be one where we executed a deliberate results, and we closed by achieving a record EUR 32 billion in net inflows and a net profit of EUR 526 million, both above the Street expectations. Most notably, our recurring net profit grew by an impressive 20%. That is a best-in-class result. During the year, we also anticipated some key guidelines for our Elevate 2030 strategic plan. This plan will drive the next stage of growth for Azimut, defining an even more ambitious trajectory that we showcase the full potential of our diversified global platform and reinforce our position as a leading global independent player. Beyond these exceptional operating numbers, we are thrilled to discuss our concrete commitment to creating shareholder value, including a proposed raised dividend of EUR 2 per share and a strategic capital allocation framework that aims to return roughly 25% of our current market cap over the next 18 months through dividends and share buybacks. Finally, while the process has taken longer than we originally envisaged, we continue to make progress on the TNB transaction. And let me tell you that this represents a transformational step for the group that will unlock significant value and, certainly Alessandro will discuss it more in detail later during the presentation. We are moving full steam ahead, carrying the strong momentum into our 2026 targets and the execution of our Elevate 2030 strategic plan. And with that, let us please move to Page 4, where we can look at the key financial and operating highlights for the full year. First of all, total assets reached an impressive EUR 145 billion at the end of January '26, marking an excess of 30% increase per year in terms of assets, a new absolute record for the group. This was fueled by a spectacular EUR 32 billion in net inflows during 2025, which represents the strongest annual performance in our company's history. More importantly, 66% of these flows came from our global operations. This clearly demonstrates how the continued expansion of our international platform is successfully driving growth beyond our core markets in Italy, which remains strong and continues to be the foundation of our success. Furthermore, looking at our current trading for 2026, we are off to a very strong start and continue to see excellent momentum across the board. On the financial side, at a very high level, revenues reached EUR 1.4 billion, supported by a solid 9% increase in recurring revenues, and that confirms the high quality and resilience of our business mix, while the operating profit stood at EUR 649 million with our recurring EBIT also up 9% year-over-year. Group net profit reached EUR 526 million, and the recurring net profit grew by a very strong 20% compared to last year. This reflects the steady expansion and scalability of our core business. Finally, let me highlight that net profit from our global operations reached EUR 101 million, which now represents 19% of our total net profit. This consistent growth across our regions confirms the effectiveness of our international strategy. And these figures, let me tell you, put us in a highly robust position to continue executing our long-term growth agenda and creating tangible value for our shareholders. Now turning to Slide 5. We want to put our exceptional performance into a clear perspective. And these numbers, I think, speak volumes. Our recurring net profit growth of 20% is not just strong. It completely dominates the sector when compared to our Italian peers. And the difference is quite striking. While our competitors reported profit growth ranging from negative 1% to a maximum of 11%, Azimut delivered a robust 20% increase. This significant outperformance directly reflects the resilience and high scalability of our diversified global model and a factor that, in our view, is not fully appreciated by the market. Moving to slide 6, we look at the as we normally do at the bridge between our 2024 and 2025 net profits. As I mentioned earlier, the group net profit reached EUR 526 million compared to EUR 568 million last year. However, as this chart clearly illustrates, the difference main reflects lower performance fees and capital gains below the operating profit line, while recurring profitability continued to grow strongly. Finally, under other items below EBIT, we see a negative variance of EUR 57 million and it's important to note that the 2024 baseline was significantly elevated by the capital gain from the sale of our stake in Kennedy Lewis. While in 2025, this block includes some non-recurring write-offs onto investments reflecting conservative valuation assumptions, which were partially offset by the growth of Nova, lower taxes, including a one-off tax refund and gains on our own investments. Because of this moving part below the operating line, the truest measure of our success is highlighted in the lighter blue columns, and the already mentioned 20% recurring net profit growth to a phenomenal EUR 479 million. Now, let us turn to slide 7 and 8, where we look at the economics behind our different business lines and regions. Because the underlying drivers of our business remain highly consistent with what we presented during our 9-month update, I will keep this section very brief. On slide 7, looking at our business line, you can see that Integrated Solutions continues to act as a powerhouse for the group. This core vertical commands superior stable recurring margins of 70 basis points. And at the same time, Global Wealth and our Institution and also divisions are experiencing strong commercial momentum and have become incredibly robust contributors to our net profit, making up about 20% of the overall net profit. And let me tell you that our strategic affiliates remain in a very active phase of growth and consolidation, with investments ramping up as planned to expand their platforms. Moving to Slide 8 and zooming in by region, the results really confirm the strength and diversification of our global strategy, with Italy that continue to show exceptionally robust earnings, maintaining obviously a stable operating development even when factoring in lower performance fees and some TNB-related costs. And obviously, globally, we are, you know, our underlying profitability is accelerating thanks to asset growth and strong operating leverage with a very strong and impressive momentum in the Americas, driven by the U.S. and Brazil. And when you look at the contribution of the global business, I mean, this is summing up to a very healthy recurring net profit margin of 41 basis points. Now moving to the next few slides, we are incredibly excited to share a new level of detail and transparency with all of you today. For the first time, we are providing a deeper look under the hoods of our key business verticals to truly showcase the underlying power of our platform. Let us start with Slide 9 and look at Integrated Solutions, which represent the DNA of the firm and remains a massive growth engine for the group. This core vertical is built on a powerful vertically integrated business model that combines our proprietary product factories with our exceptional network of top-tier financial advisors. This is what's made Azimut succeed in Italy out of a very pioneering business model. Today we have been able to say that we successfully exported the same model to key high growth markets such as Brazil, Mexico, Turkey, and Taiwan. Here, we are disclosing the average assets per advisors across our key countries. And as you can clearly see, our network is highly productive. In Italy, excluding the TNB perimeter, average assets per advisors stand at a very strong EUR 29 million. However, when you look at the global figures, I mean, these are even more striking. In Brazil, average assets per advisor reach EUR 32 million. And in Turkey, pretty impressive results of EUR 66 million per advisor. This proves that our model of combining proprietary product factories with top-tier financial advisors is highly scalable and remarkably effective across different global jurisdictions. Turning to slide 10, we want to spotlight our Global Wealth Solutions division and the productivity that we are seeing across our key international hubs. To give a brief overview of this business, Global Wealth Solutions connects our extensive network to deliver exceptional investment ideas and products worldwide, where we offer a true multi-asset proposition across both public and private markets, all supported by a unified custody set up with the world's leading banks. Our solutions range goes from personalized advisory and discretionary portfolio management services to highly customizable, actively managed certificates and bespoke structured products as we aim to cater to high-net-worth to ultra-net-worth individuals, families, and institutions around the world. In Monaco, for example, we combine a bespoke private banking heritage with sophisticated asset management solutions. In Switzerland, we leverage a unique local model to serve our clients. And our U.S.-based Azimut Investment advisers provide neutral client-focused advisory portfolio consolidation for both domestic and Latin American investors. And in Dubai, Singapore, and Hong Kong, we act as a premier global partner for individuals and institutions. A major competitive advantage for our high net worth clients is our capability to facilitate offshore investing as we leverage our Luxembourg idea factory as a central hub for product generation, as we provide a unified financial services offering with multi-booking capabilities across different jurisdictions. Our regional figures are truly exceptional. In the United States, our relationship managers oversee an average of $260 million individually. Monaco and Switzerland are also highly productive, managing $140 million and $138 million per adviser respectively. Also we are seeing fantastic scale in the UAE, Singapore and Hong Kong that are coming up and showing very high growth rate. The average book of business relationship manager globally has increased by a solid 8% year-over-year, reaching an impressive $104 million. And we grew our team with 12 new additions throughout the year. That obviously proves that as we expand our footprint and grow our team of relationship managers, we are just not adding headcount, but also productivity. When you look at slide 11, you see how our total assets for this division, for this distribution line reached $9.4 billion by the end of 2025. And You know, $1.3 billion was essentially addition during the year, the result of organic business development that is a very robust 18% growth rate, and we see this accelerating as we have started the year in a great fashion. We continue to attract new assets and scale our overall book of business, cross-selling our high-quality proprietary solutions to these existing portfolios, and we are incredibly excited for what, you know, lies ahead for us in the future. And finally, on slide 12, we detail our institutional and wholesale division. This segment has grown into a globally diversified platform, with now more than EUR 41 billion in total assets. And you know, the mix is exceptionally well-balanced, with 42% institutional clients and 58% wholesale. We wanted also to provide here more details about the institutional business by region to give more color about our activities that go beyond our domestic market. And certainly to note here is the weight and the significance of our U.S. business from a regional standpoint, and that is the result of certainly the consolidation of the recently acquired North Square Investments. And then turning to slide 13, we want to highlight a selection of our most significant client wins. I'm not gonna go through every single win, although each one is certainly a big testament to our ability to perform and to have now the credentials to grow beyond our home market, but you can see here that certainly we display the power of a very well-diversified product factory across both public and private markets. Now turning to slide 14, I think, you know, this is the best slide to perfectly translate everything that we just discussed in terms of our global platform into tangible bottom-line numbers. Historically, some market observers have been very skeptical about the true profitability and value of our international expansion, certainly over the last decade, where we have been very focused and committed to grow the business. But finally, we can see that these are very exceptional data that, you know, prove, in my view, in a very sort of indisputable way that those skeptics were very, very wrong. Over the years, we have strategically deployed approximately EUR 660 million in net M&A investments to build our international footprint. Today, this platform accounts more than EUR 73 billion of total assets and generates more than EUR 100 million of net profit. That itself translates on a 15% return on investment. That, you know, compared to any cost of capital you can estimate for the business, we believe our cost of capital is 10%, proves a very meaningful and sizable value creation that we see expanding in the short and long term. And as I said, it clearly demonstrates what has been the effectiveness of our capital allocation strategy. In slide 15 is just a very quick but powerful reminder of our ambitions through the Elevate 2030 targets that we already published in November. And just make one point very clear, our growth story is far from over, and our fundraising efforts of EUR 5 billion to EUR 8 billion a year will lead to effectively double our average total asset. It translates into a remarkable EUR 180 to million-EUR 280 million in net profits generated strictly from our global operation by the end of this decade. In the following slide, we just summarize what are the different product initiatives, you know, driving growth in the short term across public markets, our Luxembourg mutual fund range, our financial planning franchise with our life insurance solutions. Certainly here, we have been moving very, very aggressively when it comes to the launch of a brand-new product such as active ETFs in the U.S. market courtesy of the distribution reach of NSI. And the strong push that we are making for our Global Wealth Solutions business around the world. And then let me touch very briefly upon something that has been very, say important topic of interest in the market over the last few weeks, the state of, private credit and private markets in general, aside from the news flow that we see particularly overseas. I wanna just give a brief update on our 2026 product pipeline when it comes to private markets. First of all, we are in the market now with a significant number of funds that are currently raising a commitment. Overall, we have a target over the next 12 to 18 months for EUR 2.1 billion of commitment to be raised for a very wide range of strategies. As I mentioned, we already covered almost, you know, 30% of this target. But what is important to appreciate from slide 17 is the diversified offering that we have, certainly diversified in terms of investment verticals, and likewise in terms of geographies now with Europe, U.S., Latin America and Turkey, you know, showcasing a very strong product development activity in this respect. In page 18, we show where is for our Italian business, the exposure of our retail clients to illiquid strategies. Here what is remarkable is essentially, there are two things that actually they are probably noteworthy. The first one is that we started talking to our clients and, you know, explaining the merits of diversification across liquid assets well before many of our competitors did. Actually, this is an exercise that started 6 years ago in 2019. Today, we have achieved an exposure of almost 9%. That is remarkable in absolute. Certainly is the, you know, proof of the very hard work that we put and the trust of our clients into this investment diversification effort, but also proves how we are ahead looking at our global competition. We are using here data coming from a McKinsey report. But what is striking is that we have an average exposure that is 4x larger than what you have globally. And even when you look at the long-term target, there is a target forecasted and projected by McKinsey of 10% exposure of retail to private market investments, but we keep our long-term target of actually achieving 15% to 20%. And this can only be done with, as I mentioned, diversification. We have read a lot of things over the last couple of weeks, as I mentioned. What we want to show in slide 19 is the approach that we have, particularly when it comes to our Italian franchise. And here is just a deep dive into a subset of our Italian private market strategies that amounted to approximately EUR 5.5 billion overall. Here we are focusing on 3.1, and we are only focusing on private equity and direct lending strategies. And what we want to show here is the very high level of diversification, both in terms of assets and sectors, essentially reducing any geographic risk that comes from very large exposure to a single sector or to a very concentrated portfolio of investments. And in slide 20, and I think that is the most important of all these slides, you know, highlighting our success across private markets is, you know, the result, the performance that we are generating. There are a lot of figures in this slide, but let me focus on a few metrics. First of all, you see here what we have raised across the different verticals. Obviously, we are looking at different asset classes in a way. And let's look at some performance metrics such as total value to paying investments. That is a measure of the performance as it is accounted in our NAVs. Let me tell you that the NAV calculation rules are pretty tough in Europe, and we are not really allowed to assume or to take any sort of mark to market beyond what is really proven by the actual accounting of the businesses and what has been achieved. So these are very reflective measures of performance embedded into the funds and obviously when we come to these portfolios, we come to, you know, realization of the value out of exits, we will be able to distribute reasonably higher performance to our investors. Let's see, what is the average vintage of all these strategies, and certainly compare also to our, you know, to the benchmark. These are very remarkable, they say proof of our ability to generate even over a short period of time, value out of illiquid portfolios. And then last but not least, I mean, certainly, meaningful when you look at the news flow that I mentioned just now, what is the ratio of distributions to our investors that in certain instances for private equity, private debt and a number of club deals has achieved almost, you know, between 15% and 20% of capital being returned to our investors. That is certainly considered a very average young vintage, a very important element appreciated by clients who have started familiarizing with this illiquid investments only recently. I will now turn to Alessandro for a detailed review of our financials for 2025. Alessandro Zambotti: Yeah. Thank you, Giorgio, and good afternoon to everyone. Moving to slide 21, let us take a step back and look of the fantastic track record that we have built over the past 7 years. Since 2019, we have expanded our footprint and compounded our growth, driving our total asset to continuous new all-time high and growing at a remarkable 16% CAGR to about EUR 145 billion as of today. So over this time, over this same period, we captured EUR 94 billion in cumulative net inflows with an highly strategic EUR 10 billion flowing directly into private market. And our success goes hand-in-hand with the success of our clients as we generated a net performance for clients of about 28% after cost. And for our shareholders, the numbers are also speaking for themselves. The group generated EUR 3 billion in net profit, distributing EUR 1.3 billion to shareholder, including the actual this year proposed dividend of EUR 2, and fully repaid close to EUR 1 billion in debt and transforming to cash position of over EUR 800 million. So these are important numbers and are a direct reflection of our discipline, execution and the structural resilience of the entire Azimut Group. So then turning to slide 22, we want to highlight the exceptional quality of the revenues that are driving these record results. I mean, historically, some market observers question our reliance on performance fees, that this slide definitely demonstrates we have completely transformed our earnings profile. It's a clear strategic choice that has led us to have a P&L driven mainly by highly stable recurring revenue. And today, only a small fraction of our revenue base remains exposed to variability. With about 95% of our total revenue now coming from this stable income stream, and we have built a robust engine that delivers a highly predictable value year after year. So now moving to slide 23, we once again review our ability to generate value and recurring profit, confirming for 2025 the solidity of the recurring net profit margin. But above all, as you can clearly see from the chart, 2025 marks a new all-time high in the history of our firm. We deliver an outstanding EUR 479 million in recurring net profit, constantly growing year after year. And to put this, I mean, this into perspective, this figure is more than two and a half times larger than in 2019. Let's now also go into the details as we always do, in particular on slide 24, where we have the revenue breakdown. The revenue grow by a solid EUR 71 million thanks to the continuous growth of the recurring revenues, which offset the lower contribution from variable fees from both the open-ended and the insurance funds. Looking more closely to the components, so at the level of the recurring fees increased by EUR 82 million year-over-year. This was supported by the continuous expansion of global business. EUR 42 million is coming from our international business and mainly driven by the contribution from U.S., U.A.E., Brazil, Singapore and Monaco. In Italy, we deliver broad-based growth across all business lines, spanning mutual funds, alternative investment, pension funds, and also our Nova partnership is becoming more significant. Regarding also performance fees, we recorded a year-over-year decrease of EUR 17 million. However it is important to highlight the EUR 24 million positive global momentum, driven by Brazil, Turkey, Monaco, and Switzerland. In Italy, we sustain strong alpha in our domestic discretionary portfolio management, which help us to offset a negative fulcrum effect. Finally, looking at the insurance revenue, while the total was down at EUR 11 million compared to last year, the underlying quality of this revenue stream improved. We achieved a 5% increase, representing EUR 5 million in recurring insurance revenue due to the solid growth and the optimization of our product mix. The overall decrease was entirely driven by a EUR 60 million drop in the insurance performance fees, reflecting a softer, first half performance compared to the exceptionality, coming from the strong figures we saw in 2024. No less important, I mean, when looking to the first two months of 2026, we are off to a solid start. At the level of the other revenues increased by EUR 70 million, compared to last year, mainly driven by structuring fees related to our growing Brazilian private infrastructure business that we already commented for the previous quarter. So then we are back to, let's say, to a normal evolution of the, I mean, of this line. On the next slide, we analyze the cost, where we note an increase of EUR 55 million in total. Here, we try to give you so some more detail as well. At the level of the distribution cost, we have an increase of EUR 29 million compared to last year. This is partially explained by the direct correlation with recurring revenue growth in Italy and abroad, particularly in the areas of Singapore and Monaco. And it also reflects the higher provision for variable incentive to Italian FA, alongside the strategic marketing and TNB related costs that we already mentioned during the year 2025. Moving to personnel and SG&A, we recorded a EUR 25 million increase. This is primarily a perimeter effect driven by our successful M&A activities, and in particular I'm referring to Kennedy Capital and HighPost, while domestically we maintain cost discipline. A few words on the fourth quarter increase. This is strictly tied to performance linked compensation that align with the strong alpha and that our team and portfolio manager deliver. D&A and provision, I would define it as broadly flat. And in general, it is always important to emphasize that acquisition costs are mainly driven by the Italian business. You see about 90% contribution, while the administrative costs are split 60/40 between Italy and the international business. We close with the next slide, which instead tries to detail the results below our EBIT. First, thanks to the geographical diversification of the group, recurring EBIT grew by 9% to EUR 578 million. Moving below the operating line, finance income amounts to EUR 41 million for the year. This was primarily driven by a positive EUR 37 million contribution from our own investment and related portfolio performance, along with EUR 8 million in net interest earned, and another EUR 8 million in dividends from our GP stakes and strategic affiliates. It is worth noting that this line item was impacted during the quarter by EUR 25 million, non-recurring, write-off on specific investments. We are talking about VC proprietary investment. And achieving, I would say, looking also to the fantastic results, an extremely conservative approach, we define it as a better and conservative approach to make more, you know, confident on the future numbers of the group. Regarding our tax position, we're recording an adjusted tax rate of 21.5% for 2025 and excluding our EUR 27 million of one-off tax refund related to the infra-group foreign dividends. Looking ahead, we are guiding for a normalized tax rate of approximately 25% for the full year 2026. And then ultimately, this brings us to the bottom line and the recurring net profit of EUR 479 million as already mentioned, with an impressive 20% compared to last year. Moving to the slide 27. Here we have, as usual, our net financial position. Today, the group has no debt and the net financial position is, it's around EUR 813 million, with an increase compared to the previous year. The change of, I mean, the increase of EUR 63 million compared to last year is mainly due to the contribution, obviously, of the net profit before tax. So I'm referring to the EUR 673 million, then we have the contribution, the positive contribution coming from our proceeds from our disinvestment in Australia and the exit of RoundShield that is contributing EUR 121 million. And then let's say we have an observation of cash coming from the M&A for EUR 60 million, advanced taxes for EUR 275 million, dividend for EUR 323 million, and buyback of EUR 62 million. So this should reconcile the variation compared to previous year. Moving to slide 28. We highlighted our continual commitment to delivering substantial tangible returns to our shareholders based on our record recurring profitability and our highly resilient cash generation. The Board of Directors is proudly to propose a dividend of EUR 2 per share with an increase of 15% compared to the previous year and dividend yield of approximately 6%. This proposed dividend perfectly aligned with our stated capital return strategy that we will elaborate into more detail shortly. Moving to slide 29. We want to detail our capital return strategy, which reflects our concrete commitment to create value for our shareholders. So as you can see from the headline, we are targeting an optimal capital structure to allow us to distribute approximately EUR 1.3 billion in cash over the next 18 months. To put this into perspective, this represents roughly 25% of our current capitalization. Looking at the bridge chart, this plan is fully supported by our strong financial position. We start with EUR 379 million in distributable cash and EUR 434 million in committed equity at the end of 2025. A significant portion of this commitment is tied to our expansion in the United States, most notably our acquisition of NSI. And as you may recall, this strategic transaction involves a minimum purchase price of $110 million, which will be paid through a combination of cash and Azimut shares. Furthermore, this commitment equity covers our recent transaction in Brazil and includes provisions for future potential turnout, commitment, and options to increase our shares in transaction done across our global platform. We have set aside approximately 30% to cover our operating cash and net working capital needs. And then there is another 15% specifically reserved to meet our global regulatory capital requirements. Finally, the remaining 10% is deployed into our proprietary investment, as are referring to open-ended fund are included in the net financial position and are directly support our product generation and co-investment strategies and provide potentials for outside returns, such as the one we achieved with Kennedy Lewis in 2024. Looking ahead over full year, I mean, the year 2026 and 2027, we expect to generate approximately EUR 650 million in free cash flow available for distribution. And along with roughly EUR 250 million in proceeds from our strategic disinvestment, most notably the upfront cash from TNB transaction. This is basically give us about EUR 1.3 billion, as I mentioned at the beginning, to return to our shareholders. We plan to execute this return through two main channels. First, a share buyback program of up to EUR 500 million, which includes the full cancellation of the repurchase shares. Second, the distribution of between EUR 715 million and EUR 800 million in dividends during 2026 and 2027. To conclude on this slide, we want to reiterate that our capital return strategy is the ultimate testament to our ongoing value creation. With the comprehensive plan we have laid out today, we are decisively addressing and resolving any doubt regarding our use of cash and our capital allocation policies. So moving to slide 30, for a quick update on TNB project. The project is ongoing and the TNB division, with the support of the FSI, the fund is proceeding with a good growth result. Robust numbers for total asset growth, which at the end of January already exceed EUR 29 billion. Also at the level of the revenues and the net profit, they are continuing to expand. Although the net profit is penalized by directly affiliated marketing and project costs, that is as well mentioned at the beginning when we comment our evolution of the administrative costs. Regarding the transaction timeline, as you know, we are extending the agreement with FSI substantially until the end of the year, and we continue to work together on the IT separation and all the operational setup necessary to complete our migration and, you know, to conclude our important project. Finally, I want to provide a brief update regarding the Bank of Italy remediation plan of Azimut Capital Management. At the end of February, we successfully concluded the remediation activities. This has been completed also maintaining a constant alignment with the regulator. We are now entering the final phase, which involves the internal audit verification of all the implementation related to the remediation plan. This internal verification will conclude, we expect to conclude it at the end of March. So then concluding this phase, we expect then the regulator will formally validate the outcome. This keeps us fully on track on the officially complete the action plan by our target that was defined with the regulator at the end of April 2026. But as well as I mentioned, we are achieving it 1 month before. This we know that is 1 of the prerequisite steps to receiving the necessary regulatory approvals from the regulators for the overall TNB transaction. So we are confident that we will have conclude this project before the end of the year. With this, I hand over to Giorgio, thank you. Giorgio Medda: Thank you, Alessandro. So turning to the last slide, Slide 31. I'd like to conclude today's presentation by looking at our guidance for 2026. We are building on a fantastic commercial momentum that we have generated across our global platform. And we can only confirm our targets for the year that I remind you are as follows: under normal market conditions, we are targeting EUR 10 billion in total net inflows and a core net profit of EUR 550 million, excluding extraordinary items. I mentioned at the beginning of the call, we are already off to a very strong start. And as you can see on this slide, based on the preliminary February figures in just the first 2 months of the year, we have already achieved over EUR 3 billion in net inflows. And at the beginning of next week, we will provide a more detailed review of how we got there. This early momentum gives us a very solid foundation and the confidence in our ability to deliver another year of robust and profitable growth. So to sum it up, our platform is accelerating also in 2026, -- our growth path is clearly defined, and we remain entirely focused on executing our strategy, creating outstanding value for you, our shareholders. So thank you all for your time today, and we remain very excited about the future of Azimut, and we will now open the floor to your questions. Thank you. Operator: [Operator Instructions] First question is from Gian Luca Ferrari, Mediobanca. Gian Ferrari: Three for me. I would start with TNB. I understood that the first part of the process has almost been completed. I was wondering more on the second part of the process. Will be you guys in charge of it or FSI will step in and will, let's say, discuss with the regulators about the final approval of the project. The second is -- and the third actually are both on Page 29 on the new capital management policy, a couple of clarifications. The first one is the EUR 250 million proceeds divestments -- is this related to the first part of the upfront of TNB that if I recall correctly, was EUR 240 million. Are you referring to the distribution of that part of the cash you should receive? And secondly, going forward, after 2027, how should we think about this new capital management policy? Are you going to provide us with a dividend payout on the cash flows you generate plus are you still -- will you still go for a sizable big buyback program with cancellation or you will shift to annual buyback programs? And if you elaborate a bit on what will be over time the approach? Alessandro Zambotti: So I'm going to take the first 2, and then Giorgio will elaborate on the third one. So in relation to TNB and the other way around, we are running, let's say, both sides in the discussion with the regulator because, as you said, at the level of total capital management, we are running the remediation. And as I mentioned, we finalized the remediation at the end of February. And this is our main focus as Azimut, obviously. On the other way around, the fund, so FSI is dealing with the other division, I would say, of Bank of Italy responsible of the authorization or at least the preliminary presentation before it goes to the European Central Bank. So we are splitting the activity in 2 parts. And obviously, the fund is the main reference for Bank of Italy to finalize the regulatory process of the authorization on their side. For the EUR 250 million, it's like surrounding amount linked to the EUR 247 million of proceeds. So I'm absolutely referring to TNB just with the rounding to make the numbers easy to read it. Giorgio Medda: So Gian Luca, let me pick up your third question. Obviously, we are providing here visibility until the end of 2027, that is more than 18 months from now. And let me tell you that you can certainly tell how something will go by how it begins. So obviously, we set the tone for the next 18 months and the future, we will certainly stick to a principle of optimal capital structure. The reason why we are not saying anything more than what we are saying today, although it's pretty substantial, is that we still have the TNB transaction that is pending, and we would like to have any shareholder remuneration policy or capital allocation strategy to be elaborated within a very clear set of financial objectives for the group for the next 4 to 5 years. We have already, I think, covered a long distance over the last 6 months, pending the uncertainties related to TNB. But today, you see our capital allocation strategy, the way it defined as a very strong commitment to create value through as we called it an optimal capital structure. Operator: Next question is from Alberto Villa, Intermonte SIM. Alberto Villa: I have 3. One is back on Slide 14, where you show more details about the international business and you give us more details, and that's obviously very helpful. Can you maybe give us also an indication of revenues and operating costs related to this business in 2025 to have some more details there? And the second question is on the private markets. Thanks here again for giving us more visibility. At the same time, maybe you can elaborate a little bit on the amount of funds that will start to mature in the next, let's say, 2, 3 years and how it works if there are sort of grace periods or anything that can eventually accommodate any situation in which you -- the fund need more time or anything that could give more, let's say, details on that would be helpful. And finally, on one line item in the P&L, the financial income going forward, how should we look at it? Because maybe that's fueled by the investment of the liquidity you have in your balance sheet. So given that you are going to distribute, that's nice. But maybe -- is that fair to assume that financial income will be probably less supportive on the P&L side in the future? Giorgio Medda: Okay, Alberto, I'll take the first 2 questions. Regarding the breakdown of our, let's say, P&L by region or business line, I would encourage you to look at our Slide 7 and 8. I mean, I think we tried to summarize what are the key underlying drivers of our business at all levels, revenues, cost and certainly margins. Also with this presentation, we are providing a look-through in terms of KPIs such as advisers or assets under management by single distribution lines. I wouldn't probably bore you now with all the details. And certainly, we are available for a follow-up call to discuss more what has been driving the business country by country or business line by business line. But in general, the business has been growing, average assets per adviser increasing scale effect across businesses and now have become pretty sizable, and we are able to extract operating leverage benefits. And you see that in terms of margins on assets or margins on revenues. As far as the private markets business is concerned, let me tell you something. Funny enough, we were the very first to start promoting private markets investments with individual or private clients -- but we have really been very cautious when it comes to offering evergreen funds to the same clients. I think the market has been inundated by what I call effectively an evergreen washing in the offering of these products. People really try to entice clients with providing them the dream of liquidity when actually there's no liquidity in the underlying portfolios. If that liquidity is sort of possible, maybe it comes at the expense of lower returns because obviously, funds they need to retain a meaningful cash buffer to honor the call for redemptions. We have really started probably with the most complicated part with our clients, explaining them the merits of diversifying across illiquid strategy, the possibility to enjoy what is the so-called illiquidity premium, patient capitals and within a diversified portfolio, certainly seeing how to create, let's say, a segmentation or diversification of the portfolio using different time horizons. On that basis, we have not relied on evergreen funds. And I can tell you, considering what is our average vintage that we would expect the first liquidations of the funds that we have launched over the last few years to start in '28, '29. And our clients, they are waiting for '28, '29 to get their money back and portfolios have been built with that specific purpose. So we are not planning and we do not see any need whatsoever to ring-fence or to gate or to sort of promote continuation funds because things are being done the proper way. Alessandro Zambotti: Well, referring to your point on finance income, I mean, it's obviously, let's say, to take the point, considering, first of all, let's say, the different contributors on this finance income line. As I mentioned during the details of the evolution for referring to this year, we were talking about portfolio performance. We were talking about net interest turn, dividend from GP stakes. So there is a mix of things that they are contributing below EBIT. Obviously, compared it to last year where there was the benefit and the positive gain on Kennedy Lewis, we cannot compare the 2 here in a, let's say, fair like-for-like way. But at the same time, over the last 3 years, I would say that the finance income line is contributing on our net profit. Therefore, I would expect also for the next year to be at least in line with our EUR 40 million, but probably even more due to the fact that also there, we have the contribution of our partnerships our equity participation that are generating dividends. So again, a mix of things that make us confident to maintain a nice level of contribution on this line. Alberto Villa: If I can follow-up question on the net inflows target. You started very well the year. Of course, as you did in the past, maybe you will adjust the estimate later on during the year. Is there any particular flavor you can give us in terms of what is happening in terms of contribution? Any area of particularly strong indications coming from the net inflows of the early months of the year? Giorgio Medda: No, Alberto, we can tell you that it's a very balanced contribution from all the business lines, all the geographies. When you look at 2025, the global business was accounting for 66% of total net inflows, certainly and sign the U.S. took the lion's share for that. This year, we start 50-50 kind of balanced. And I think we are firing on all cylinders consistently across all the business lines and geographies. I mean, I think this is the beauty of the platform today. We see, particularly when it comes to emerging markets, what I call a synchronized growth, something that has not been always the case in the previous years where it can happen is a mixed bag. You have geographies doing very well, others slowing down. But now we see -- right now, we see really strong momentum across the board. Operator: Next question is from Hubert Lam, Bank of America. Hubert Lam: I've got a few questions. Firstly, on your excess capital, which you're focused on in terms of paying dividends and buyback, does this mean that in the near term over the next 18 months, you don't plan on doing any M&A? That's the first question. Second question is on private markets. Do you expect any slowdown in fundraising for the private markets, just given the noise in the sector, specifically on Slide 17. So will the rest of the fundraising target take longer than the first EUR 800 million that you've raised? And next question is also on private markets. I just want to double check what you said about redemptions. Do the funds actually have redemption features or not? And if they do have redemption features, can you remind us what the redemption profile is? And if I could squeeze in one more on your investment write-down that you had in Q4. I just -- sorry, maybe I missed it, but can you remind us or just elaborate what's related to? And any relation to any co-investments you may have with clients or not on the write-down? Giorgio Medda: I will take your question on private markets. First of all, we are not expecting a slowdown. As I mentioned, we have a number of strategies that are actively fundraising right now, EUR 2.1 billion overall. We are kind of almost 1/3 -- more than 1/3 of that target. And we don't see any slowdown. I have to tell you that although we have been expanding globally, this franchise Italy still remains the most important market. And most of the things that we read today in the press, they are very much geographically isolated apart from our investors reading what's happening in the U.S., but this is the U.S. is not Italy and people -- they are not concerned. Certainly, we have our advisers that is the value of the Azimut's business model. We sit down with clients and they explain the differences and provide all the comfort they need with constant updates on the portfolio and providing all the reasons why if more investments are, let's say, possible, then these are effectively and efficiently placed into other private market strategies. In terms of liquidation or let's say, realization of investments and distribution to clients, as I said, we are expecting now, particularly for our private credit strategies, the first liquidation starting '28, '29. By nature, these are closed-ended funds. When it comes to private credit, think about direct lending, these are loans that have a term that is consistent with the fund life or the fund terms. We do not have any cockroaches. We have been always implementing very tight and disciplined investment policies, and it's not always working for every single investment the way we want. But overall, we are delivering and you see that from the performance of the different verticals, in average, a better performance than we have sort of discussed with clients when they came -- when they have come to the portfolio. So in general, as I said, unaffected by what's happening away from Italy, clients are very well catered in terms of being informed and explained what's happening, and we are growing. That means that at the end of the day, people they understood the differences and they put more trust in us. Alessandro Zambotti: So I mean, looking to the capital structure, so probably going back to Slide 30, you can probably see where -- I mean that we put -- we put an amount of money that we commit for the '26 and '27 of EUR 300 million. This is -- I mean, it doesn't mean that we are going to do M&A with this amount. Obviously, it's a group that is growing. Therefore, we have to look back also again to regulatory requirements, look back to the operational cash needs because, again, we are present in 80 company. Therefore, we need to maintain the right level of the operating cash. As well, we are investing in general on the IT, on the AI. So we have a bulk of CapEx that we have to support to grow our business and to support internally, but also our financial adviser, our distribution network with the right instruments to proceed with the right way to meet and target the market. So all in all is an amount that as well as different view and different elements to consider. This cover, let's say, the portion of cash that we would expect to keep for this. Moving to the point of the investments, as I was referring during the explanation, again, we decide -- I mean, we evaluated the opportunity to be very conservative on 2 VC proprietary investments. Therefore, this approach help us to look again to the forward-looking of the numbers more confident on the future results. So we take advantages on that. Giorgio Medda: And just to add one thing about investments, Alessandro said it all, but just also to link to what we said in the past. As opposed to the past, we are really putting at a same level growth and shareholder remuneration. What we are targeting is an optimal capital structure. Azimut is and it will always be a growth company. We will certainly consider should anything come to our attention, external financing for a transaction. What we are putting here is a clear statement in terms of giving the right and the same importance to shareholders and to growth opportunities. But it's a pretty unique proposition that we want to promote in the market. And hopefully, the market will appreciate it. Operator: Next question is from Elena Perini Intesa Sanpaolo. Elena Perini: The first question is on Slide 30, again -- 29, sorry, again, on your capital distribution strategy. Because I read from the press release and then the slide also confirms it that you are going to distribute EUR 750 million to EUR 800 million in dividends over the next 18 months. So this, I suppose, also includes the dividend that you propose now and is going to be paid in May, just for a confirmation. And then you mentioned that the dividend starting from next year will be split in 2 tranches. But I was wondering whether this would imply an interim dividend already in November this year and then the balance in May next year? Or on the contrary, you will have the first tranche referring to '26 earnings in May '27 and then the second tranche in November, just to clarify. Then going to Slide #30 on TNB transaction. Considering that June now is quite close and you are still waiting for the approval of the Bank of Italy is on your -- on the effectiveness of the remediation measures that you have taken. I mean, is it more likely to see the finalization of the spin-off in the second half? Just to have some flavor about the potential time line. And then finally, I have a question on your tax rate for next year. As you mentioned recurrent taxation for this year at around 21.5%. But if I remember well, you mentioned in the past a higher level of taxation for the future, but just for a confirmation. Giorgio Medda: Elena, I will answer your question on the dividend. So 2026 dividend paid against the 2025 earnings will be fully paid at the end of May. And we will propose to the general assembly of shareholders to switch to installment dividend payment starting with 2027 against 2026 earnings. That is a transition to a new system that is in line with what now a very large number of financial services companies do, but has become now a standard. And I have to say that we see a strong merit to adopt the same policy as we have over the years, noted a behavior of the share price around the dividend payment that has been disturbing us creating unnecessary volatility. We want to offer very smooth and predictable cash flow generation for shareholders, hence, the decision to move to May and November payment against the previous year earnings. Alessandro Zambotti: Well, taking your point of TNB and the expectation, well, as you know, we built the renewal of the binding agreements and the exclusivity in a way that there will be no additional pressure in the market and as well to the regulator in a way that it automatically the date of June can be postponed to the end of December without any additional negotiation or whatever. So basically, our attention now is on the remediation, as I was saying before, the funds and the FSI -- so FSI is focused on the regulatory side. And I would say both of us are concentrated to be in the right way, the migration process of this transaction because as you probably remember when also we discussed together, it's something that we cannot do not consider because it's significant and it's important tomorrow when the client will migrate and operate correctly starting from day 1. So this is our focus for the 2026, considering also, obviously, the objective to get there within the end of the year. At the level of the tax rate, if you recall Slide 26, -- we have mentioned the benefits, so the lower tax rate for this year, but also we confirm our guidance at 25% for 2026. Operator: Gentlemen, there are no more questions registered at this time. Giorgio Medda: Well, great. Fantastic. Thank you, everyone. Hopefully, we will catch up in person soon. Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Azimut Group Full Year 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Giorgio Medda, CEO of Azimut. Please go ahead, sir. Giorgio Medda: Thank you very much. Good afternoon, everyone, and thank you for joining us today for the Azimut Full Year 2025 results presentation. I'm Giorgio Medda, CEO of the group, and I'm pleased to be here with Alessandro Zambotti, CEO and Group CFO; and Alex Soppera, Head of Investor Relations. So this past year has been a truly defining one for Azimut and likewise, a very exciting one. As you know, it was a year marked by change in leadership, yet our growth not only continued, but actually accelerated. The defining step in our growth journey reflects both the strength of our business model and the dedication of our people across all our markets. So let's dive right into the presentation and move to Slide 3, please. So the year 2025 continued to be one where we executed a deliberate results, and we closed by achieving a record EUR 32 billion in net inflows and a net profit of EUR 526 million, both above the Street expectations. Most notably, our recurring net profit grew by an impressive 20%. That is a best-in-class result. During the year, we also anticipated some key guidelines for our Elevate 2030 strategic plan. This plan will drive the next stage of growth for Azimut, defining an even more ambitious trajectory that we showcase the full potential of our diversified global platform and reinforce our position as a leading global independent player. Beyond these exceptional operating numbers, we are thrilled to discuss our concrete commitment to creating shareholder value, including a proposed raised dividend of EUR 2 per share and a strategic capital allocation framework that aims to return roughly 25% of our current market cap over the next 18 months through dividends and share buybacks. Finally, while the process has taken longer than we originally envisaged, we continue to make progress on the TNB transaction. And let me tell you that this represents a transformational step for the group that will unlock significant value and, certainly Alessandro will discuss it more in detail later during the presentation. We are moving full steam ahead, carrying the strong momentum into our 2026 targets and the execution of our Elevate 2030 strategic plan. And with that, let us please move to Page 4, where we can look at the key financial and operating highlights for the full year. First of all, total assets reached an impressive EUR 145 billion at the end of January '26, marking an excess of 30% increase per year in terms of assets, a new absolute record for the group. This was fueled by a spectacular EUR 32 billion in net inflows during 2025, which represents the strongest annual performance in our company's history. More importantly, 66% of these flows came from our global operations. This clearly demonstrates how the continued expansion of our international platform is successfully driving growth beyond our core markets in Italy, which remains strong and continues to be the foundation of our success. Furthermore, looking at our current trading for 2026, we are off to a very strong start and continue to see excellent momentum across the board. On the financial side, at a very high level, revenues reached EUR 1.4 billion, supported by a solid 9% increase in recurring revenues, and that confirms the high quality and resilience of our business mix, while the operating profit stood at EUR 649 million with our recurring EBIT also up 9% year-over-year. Group net profit reached EUR 526 million, and the recurring net profit grew by a very strong 20% compared to last year. This reflects the steady expansion and scalability of our core business. Finally, let me highlight that net profit from our global operations reached EUR 101 million, which now represents 19% of our total net profit. This consistent growth across our regions confirms the effectiveness of our international strategy. And these figures, let me tell you, put us in a highly robust position to continue executing our long-term growth agenda and creating tangible value for our shareholders. Now turning to Slide 5. We want to put our exceptional performance into a clear perspective. And these numbers, I think, speak volumes. Our recurring net profit growth of 20% is not just strong. It completely dominates the sector when compared to our Italian peers. And the difference is quite striking. While our competitors reported profit growth ranging from negative 1% to a maximum of 11%, Azimut delivered a robust 20% increase. This significant outperformance directly reflects the resilience and high scalability of our diversified global model and a factor that, in our view, is not fully appreciated by the market. Moving to slide 6, we look at the as we normally do at the bridge between our 2024 and 2025 net profits. As I mentioned earlier, the group net profit reached EUR 526 million compared to EUR 568 million last year. However, as this chart clearly illustrates, the difference main reflects lower performance fees and capital gains below the operating profit line, while recurring profitability continued to grow strongly. Finally, under other items below EBIT, we see a negative variance of EUR 57 million and it's important to note that the 2024 baseline was significantly elevated by the capital gain from the sale of our stake in Kennedy Lewis. While in 2025, this block includes some non-recurring write-offs onto investments reflecting conservative valuation assumptions, which were partially offset by the growth of Nova, lower taxes, including a one-off tax refund and gains on our own investments. Because of this moving part below the operating line, the truest measure of our success is highlighted in the lighter blue columns, and the already mentioned 20% recurring net profit growth to a phenomenal EUR 479 million. Now, let us turn to slide 7 and 8, where we look at the economics behind our different business lines and regions. Because the underlying drivers of our business remain highly consistent with what we presented during our 9-month update, I will keep this section very brief. On slide 7, looking at our business line, you can see that Integrated Solutions continues to act as a powerhouse for the group. This core vertical commands superior stable recurring margins of 70 basis points. And at the same time, Global Wealth and our Institution and also divisions are experiencing strong commercial momentum and have become incredibly robust contributors to our net profit, making up about 20% of the overall net profit. And let me tell you that our strategic affiliates remain in a very active phase of growth and consolidation, with investments ramping up as planned to expand their platforms. Moving to Slide 8 and zooming in by region, the results really confirm the strength and diversification of our global strategy, with Italy that continue to show exceptionally robust earnings, maintaining obviously a stable operating development even when factoring in lower performance fees and some TNB-related costs. And obviously, globally, we are, you know, our underlying profitability is accelerating thanks to asset growth and strong operating leverage with a very strong and impressive momentum in the Americas, driven by the U.S. and Brazil. And when you look at the contribution of the global business, I mean, this is summing up to a very healthy recurring net profit margin of 41 basis points. Now moving to the next few slides, we are incredibly excited to share a new level of detail and transparency with all of you today. For the first time, we are providing a deeper look under the hoods of our key business verticals to truly showcase the underlying power of our platform. Let us start with Slide 9 and look at Integrated Solutions, which represent the DNA of the firm and remains a massive growth engine for the group. This core vertical is built on a powerful vertically integrated business model that combines our proprietary product factories with our exceptional network of top-tier financial advisors. This is what's made Azimut succeed in Italy out of a very pioneering business model. Today we have been able to say that we successfully exported the same model to key high growth markets such as Brazil, Mexico, Turkey, and Taiwan. Here, we are disclosing the average assets per advisors across our key countries. And as you can clearly see, our network is highly productive. In Italy, excluding the TNB perimeter, average assets per advisors stand at a very strong EUR 29 million. However, when you look at the global figures, I mean, these are even more striking. In Brazil, average assets per advisor reach EUR 32 million. And in Turkey, pretty impressive results of EUR 66 million per advisor. This proves that our model of combining proprietary product factories with top-tier financial advisors is highly scalable and remarkably effective across different global jurisdictions. Turning to slide 10, we want to spotlight our Global Wealth Solutions division and the productivity that we are seeing across our key international hubs. To give a brief overview of this business, Global Wealth Solutions connects our extensive network to deliver exceptional investment ideas and products worldwide, where we offer a true multi-asset proposition across both public and private markets, all supported by a unified custody set up with the world's leading banks. Our solutions range goes from personalized advisory and discretionary portfolio management services to highly customizable, actively managed certificates and bespoke structured products as we aim to cater to high-net-worth to ultra-net-worth individuals, families, and institutions around the world. In Monaco, for example, we combine a bespoke private banking heritage with sophisticated asset management solutions. In Switzerland, we leverage a unique local model to serve our clients. And our U.S.-based Azimut Investment advisers provide neutral client-focused advisory portfolio consolidation for both domestic and Latin American investors. And in Dubai, Singapore, and Hong Kong, we act as a premier global partner for individuals and institutions. A major competitive advantage for our high net worth clients is our capability to facilitate offshore investing as we leverage our Luxembourg idea factory as a central hub for product generation, as we provide a unified financial services offering with multi-booking capabilities across different jurisdictions. Our regional figures are truly exceptional. In the United States, our relationship managers oversee an average of $260 million individually. Monaco and Switzerland are also highly productive, managing $140 million and $138 million per adviser respectively. Also we are seeing fantastic scale in the UAE, Singapore and Hong Kong that are coming up and showing very high growth rate. The average book of business relationship manager globally has increased by a solid 8% year-over-year, reaching an impressive $104 million. And we grew our team with 12 new additions throughout the year. That obviously proves that as we expand our footprint and grow our team of relationship managers, we are just not adding headcount, but also productivity. When you look at slide 11, you see how our total assets for this division, for this distribution line reached $9.4 billion by the end of 2025. And You know, $1.3 billion was essentially addition during the year, the result of organic business development that is a very robust 18% growth rate, and we see this accelerating as we have started the year in a great fashion. We continue to attract new assets and scale our overall book of business, cross-selling our high-quality proprietary solutions to these existing portfolios, and we are incredibly excited for what, you know, lies ahead for us in the future. And finally, on slide 12, we detail our institutional and wholesale division. This segment has grown into a globally diversified platform, with now more than EUR 41 billion in total assets. And you know, the mix is exceptionally well-balanced, with 42% institutional clients and 58% wholesale. We wanted also to provide here more details about the institutional business by region to give more color about our activities that go beyond our domestic market. And certainly to note here is the weight and the significance of our U.S. business from a regional standpoint, and that is the result of certainly the consolidation of the recently acquired North Square Investments. And then turning to slide 13, we want to highlight a selection of our most significant client wins. I'm not gonna go through every single win, although each one is certainly a big testament to our ability to perform and to have now the credentials to grow beyond our home market, but you can see here that certainly we display the power of a very well-diversified product factory across both public and private markets. Now turning to slide 14, I think, you know, this is the best slide to perfectly translate everything that we just discussed in terms of our global platform into tangible bottom-line numbers. Historically, some market observers have been very skeptical about the true profitability and value of our international expansion, certainly over the last decade, where we have been very focused and committed to grow the business. But finally, we can see that these are very exceptional data that, you know, prove, in my view, in a very sort of indisputable way that those skeptics were very, very wrong. Over the years, we have strategically deployed approximately EUR 660 million in net M&A investments to build our international footprint. Today, this platform accounts more than EUR 73 billion of total assets and generates more than EUR 100 million of net profit. That itself translates on a 15% return on investment. That, you know, compared to any cost of capital you can estimate for the business, we believe our cost of capital is 10%, proves a very meaningful and sizable value creation that we see expanding in the short and long term. And as I said, it clearly demonstrates what has been the effectiveness of our capital allocation strategy. In slide 15 is just a very quick but powerful reminder of our ambitions through the Elevate 2030 targets that we already published in November. And just make one point very clear, our growth story is far from over, and our fundraising efforts of EUR 5 billion to EUR 8 billion a year will lead to effectively double our average total asset. It translates into a remarkable EUR 180 to million-EUR 280 million in net profits generated strictly from our global operation by the end of this decade. In the following slide, we just summarize what are the different product initiatives, you know, driving growth in the short term across public markets, our Luxembourg mutual fund range, our financial planning franchise with our life insurance solutions. Certainly here, we have been moving very, very aggressively when it comes to the launch of a brand-new product such as active ETFs in the U.S. market courtesy of the distribution reach of NSI. And the strong push that we are making for our Global Wealth Solutions business around the world. And then let me touch very briefly upon something that has been very, say important topic of interest in the market over the last few weeks, the state of, private credit and private markets in general, aside from the news flow that we see particularly overseas. I wanna just give a brief update on our 2026 product pipeline when it comes to private markets. First of all, we are in the market now with a significant number of funds that are currently raising a commitment. Overall, we have a target over the next 12 to 18 months for EUR 2.1 billion of commitment to be raised for a very wide range of strategies. As I mentioned, we already covered almost, you know, 30% of this target. But what is important to appreciate from slide 17 is the diversified offering that we have, certainly diversified in terms of investment verticals, and likewise in terms of geographies now with Europe, U.S., Latin America and Turkey, you know, showcasing a very strong product development activity in this respect. In page 18, we show where is for our Italian business, the exposure of our retail clients to illiquid strategies. Here what is remarkable is essentially, there are two things that actually they are probably noteworthy. The first one is that we started talking to our clients and, you know, explaining the merits of diversification across liquid assets well before many of our competitors did. Actually, this is an exercise that started 6 years ago in 2019. Today, we have achieved an exposure of almost 9%. That is remarkable in absolute. Certainly is the, you know, proof of the very hard work that we put and the trust of our clients into this investment diversification effort, but also proves how we are ahead looking at our global competition. We are using here data coming from a McKinsey report. But what is striking is that we have an average exposure that is 4x larger than what you have globally. And even when you look at the long-term target, there is a target forecasted and projected by McKinsey of 10% exposure of retail to private market investments, but we keep our long-term target of actually achieving 15% to 20%. And this can only be done with, as I mentioned, diversification. We have read a lot of things over the last couple of weeks, as I mentioned. What we want to show in slide 19 is the approach that we have, particularly when it comes to our Italian franchise. And here is just a deep dive into a subset of our Italian private market strategies that amounted to approximately EUR 5.5 billion overall. Here we are focusing on 3.1, and we are only focusing on private equity and direct lending strategies. And what we want to show here is the very high level of diversification, both in terms of assets and sectors, essentially reducing any geographic risk that comes from very large exposure to a single sector or to a very concentrated portfolio of investments. And in slide 20, and I think that is the most important of all these slides, you know, highlighting our success across private markets is, you know, the result, the performance that we are generating. There are a lot of figures in this slide, but let me focus on a few metrics. First of all, you see here what we have raised across the different verticals. Obviously, we are looking at different asset classes in a way. And let's look at some performance metrics such as total value to paying investments. That is a measure of the performance as it is accounted in our NAVs. Let me tell you that the NAV calculation rules are pretty tough in Europe, and we are not really allowed to assume or to take any sort of mark to market beyond what is really proven by the actual accounting of the businesses and what has been achieved. So these are very reflective measures of performance embedded into the funds and obviously when we come to these portfolios, we come to, you know, realization of the value out of exits, we will be able to distribute reasonably higher performance to our investors. Let's see, what is the average vintage of all these strategies, and certainly compare also to our, you know, to the benchmark. These are very remarkable, they say proof of our ability to generate even over a short period of time, value out of illiquid portfolios. And then last but not least, I mean, certainly, meaningful when you look at the news flow that I mentioned just now, what is the ratio of distributions to our investors that in certain instances for private equity, private debt and a number of club deals has achieved almost, you know, between 15% and 20% of capital being returned to our investors. That is certainly considered a very average young vintage, a very important element appreciated by clients who have started familiarizing with this illiquid investments only recently. I will now turn to Alessandro for a detailed review of our financials for 2025. Alessandro Zambotti: Yeah. Thank you, Giorgio, and good afternoon to everyone. Moving to slide 21, let us take a step back and look of the fantastic track record that we have built over the past 7 years. Since 2019, we have expanded our footprint and compounded our growth, driving our total asset to continuous new all-time high and growing at a remarkable 16% CAGR to about EUR 145 billion as of today. So over this time, over this same period, we captured EUR 94 billion in cumulative net inflows with an highly strategic EUR 10 billion flowing directly into private market. And our success goes hand-in-hand with the success of our clients as we generated a net performance for clients of about 28% after cost. And for our shareholders, the numbers are also speaking for themselves. The group generated EUR 3 billion in net profit, distributing EUR 1.3 billion to shareholder, including the actual this year proposed dividend of EUR 2, and fully repaid close to EUR 1 billion in debt and transforming to cash position of over EUR 800 million. So these are important numbers and are a direct reflection of our discipline, execution and the structural resilience of the entire Azimut Group. So then turning to slide 22, we want to highlight the exceptional quality of the revenues that are driving these record results. I mean, historically, some market observers question our reliance on performance fees, that this slide definitely demonstrates we have completely transformed our earnings profile. It's a clear strategic choice that has led us to have a P&L driven mainly by highly stable recurring revenue. And today, only a small fraction of our revenue base remains exposed to variability. With about 95% of our total revenue now coming from this stable income stream, and we have built a robust engine that delivers a highly predictable value year after year. So now moving to slide 23, we once again review our ability to generate value and recurring profit, confirming for 2025 the solidity of the recurring net profit margin. But above all, as you can clearly see from the chart, 2025 marks a new all-time high in the history of our firm. We deliver an outstanding EUR 479 million in recurring net profit, constantly growing year after year. And to put this, I mean, this into perspective, this figure is more than two and a half times larger than in 2019. Let's now also go into the details as we always do, in particular on slide 24, where we have the revenue breakdown. The revenue grow by a solid EUR 71 million thanks to the continuous growth of the recurring revenues, which offset the lower contribution from variable fees from both the open-ended and the insurance funds. Looking more closely to the components, so at the level of the recurring fees increased by EUR 82 million year-over-year. This was supported by the continuous expansion of global business. EUR 42 million is coming from our international business and mainly driven by the contribution from U.S., U.A.E., Brazil, Singapore and Monaco. In Italy, we deliver broad-based growth across all business lines, spanning mutual funds, alternative investment, pension funds, and also our Nova partnership is becoming more significant. Regarding also performance fees, we recorded a year-over-year decrease of EUR 17 million. However it is important to highlight the EUR 24 million positive global momentum, driven by Brazil, Turkey, Monaco, and Switzerland. In Italy, we sustain strong alpha in our domestic discretionary portfolio management, which help us to offset a negative fulcrum effect. Finally, looking at the insurance revenue, while the total was down at EUR 11 million compared to last year, the underlying quality of this revenue stream improved. We achieved a 5% increase, representing EUR 5 million in recurring insurance revenue due to the solid growth and the optimization of our product mix. The overall decrease was entirely driven by a EUR 60 million drop in the insurance performance fees, reflecting a softer, first half performance compared to the exceptionality, coming from the strong figures we saw in 2024. No less important, I mean, when looking to the first two months of 2026, we are off to a solid start. At the level of the other revenues increased by EUR 70 million, compared to last year, mainly driven by structuring fees related to our growing Brazilian private infrastructure business that we already commented for the previous quarter. So then we are back to, let's say, to a normal evolution of the, I mean, of this line. On the next slide, we analyze the cost, where we note an increase of EUR 55 million in total. Here, we try to give you so some more detail as well. At the level of the distribution cost, we have an increase of EUR 29 million compared to last year. This is partially explained by the direct correlation with recurring revenue growth in Italy and abroad, particularly in the areas of Singapore and Monaco. And it also reflects the higher provision for variable incentive to Italian FA, alongside the strategic marketing and TNB related costs that we already mentioned during the year 2025. Moving to personnel and SG&A, we recorded a EUR 25 million increase. This is primarily a perimeter effect driven by our successful M&A activities, and in particular I'm referring to Kennedy Capital and HighPost, while domestically we maintain cost discipline. A few words on the fourth quarter increase. This is strictly tied to performance linked compensation that align with the strong alpha and that our team and portfolio manager deliver. D&A and provision, I would define it as broadly flat. And in general, it is always important to emphasize that acquisition costs are mainly driven by the Italian business. You see about 90% contribution, while the administrative costs are split 60/40 between Italy and the international business. We close with the next slide, which instead tries to detail the results below our EBIT. First, thanks to the geographical diversification of the group, recurring EBIT grew by 9% to EUR 578 million. Moving below the operating line, finance income amounts to EUR 41 million for the year. This was primarily driven by a positive EUR 37 million contribution from our own investment and related portfolio performance, along with EUR 8 million in net interest earned, and another EUR 8 million in dividends from our GP stakes and strategic affiliates. It is worth noting that this line item was impacted during the quarter by EUR 25 million, non-recurring, write-off on specific investments. We are talking about VC proprietary investment. And achieving, I would say, looking also to the fantastic results, an extremely conservative approach, we define it as a better and conservative approach to make more, you know, confident on the future numbers of the group. Regarding our tax position, we're recording an adjusted tax rate of 21.5% for 2025 and excluding our EUR 27 million of one-off tax refund related to the infra-group foreign dividends. Looking ahead, we are guiding for a normalized tax rate of approximately 25% for the full year 2026. And then ultimately, this brings us to the bottom line and the recurring net profit of EUR 479 million as already mentioned, with an impressive 20% compared to last year. Moving to the slide 27. Here we have, as usual, our net financial position. Today, the group has no debt and the net financial position is, it's around EUR 813 million, with an increase compared to the previous year. The change of, I mean, the increase of EUR 63 million compared to last year is mainly due to the contribution, obviously, of the net profit before tax. So I'm referring to the EUR 673 million, then we have the contribution, the positive contribution coming from our proceeds from our disinvestment in Australia and the exit of RoundShield that is contributing EUR 121 million. And then let's say we have an observation of cash coming from the M&A for EUR 60 million, advanced taxes for EUR 275 million, dividend for EUR 323 million, and buyback of EUR 62 million. So this should reconcile the variation compared to previous year. Moving to slide 28. We highlighted our continual commitment to delivering substantial tangible returns to our shareholders based on our record recurring profitability and our highly resilient cash generation. The Board of Directors is proudly to propose a dividend of EUR 2 per share with an increase of 15% compared to the previous year and dividend yield of approximately 6%. This proposed dividend perfectly aligned with our stated capital return strategy that we will elaborate into more detail shortly. Moving to slide 29. We want to detail our capital return strategy, which reflects our concrete commitment to create value for our shareholders. So as you can see from the headline, we are targeting an optimal capital structure to allow us to distribute approximately EUR 1.3 billion in cash over the next 18 months. To put this into perspective, this represents roughly 25% of our current capitalization. Looking at the bridge chart, this plan is fully supported by our strong financial position. We start with EUR 379 million in distributable cash and EUR 434 million in committed equity at the end of 2025. A significant portion of this commitment is tied to our expansion in the United States, most notably our acquisition of NSI. And as you may recall, this strategic transaction involves a minimum purchase price of $110 million, which will be paid through a combination of cash and Azimut shares. Furthermore, this commitment equity covers our recent transaction in Brazil and includes provisions for future potential turnout, commitment, and options to increase our shares in transaction done across our global platform. We have set aside approximately 30% to cover our operating cash and net working capital needs. And then there is another 15% specifically reserved to meet our global regulatory capital requirements. Finally, the remaining 10% is deployed into our proprietary investment, as are referring to open-ended fund are included in the net financial position and are directly support our product generation and co-investment strategies and provide potentials for outside returns, such as the one we achieved with Kennedy Lewis in 2024. Looking ahead over full year, I mean, the year 2026 and 2027, we expect to generate approximately EUR 650 million in free cash flow available for distribution. And along with roughly EUR 250 million in proceeds from our strategic disinvestment, most notably the upfront cash from TNB transaction. This is basically give us about EUR 1.3 billion, as I mentioned at the beginning, to return to our shareholders. We plan to execute this return through two main channels. First, a share buyback program of up to EUR 500 million, which includes the full cancellation of the repurchase shares. Second, the distribution of between EUR 715 million and EUR 800 million in dividends during 2026 and 2027. To conclude on this slide, we want to reiterate that our capital return strategy is the ultimate testament to our ongoing value creation. With the comprehensive plan we have laid out today, we are decisively addressing and resolving any doubt regarding our use of cash and our capital allocation policies. So moving to slide 30, for a quick update on TNB project. The project is ongoing and the TNB division, with the support of the FSI, the fund is proceeding with a good growth result. Robust numbers for total asset growth, which at the end of January already exceed EUR 29 billion. Also at the level of the revenues and the net profit, they are continuing to expand. Although the net profit is penalized by directly affiliated marketing and project costs, that is as well mentioned at the beginning when we comment our evolution of the administrative costs. Regarding the transaction timeline, as you know, we are extending the agreement with FSI substantially until the end of the year, and we continue to work together on the IT separation and all the operational setup necessary to complete our migration and, you know, to conclude our important project. Finally, I want to provide a brief update regarding the Bank of Italy remediation plan of Azimut Capital Management. At the end of February, we successfully concluded the remediation activities. This has been completed also maintaining a constant alignment with the regulator. We are now entering the final phase, which involves the internal audit verification of all the implementation related to the remediation plan. This internal verification will conclude, we expect to conclude it at the end of March. So then concluding this phase, we expect then the regulator will formally validate the outcome. This keeps us fully on track on the officially complete the action plan by our target that was defined with the regulator at the end of April 2026. But as well as I mentioned, we are achieving it 1 month before. This we know that is 1 of the prerequisite steps to receiving the necessary regulatory approvals from the regulators for the overall TNB transaction. So we are confident that we will have conclude this project before the end of the year. With this, I hand over to Giorgio, thank you. Giorgio Medda: Thank you, Alessandro. So turning to the last slide, Slide 31. I'd like to conclude today's presentation by looking at our guidance for 2026. We are building on a fantastic commercial momentum that we have generated across our global platform. And we can only confirm our targets for the year that I remind you are as follows: under normal market conditions, we are targeting EUR 10 billion in total net inflows and a core net profit of EUR 550 million, excluding extraordinary items. I mentioned at the beginning of the call, we are already off to a very strong start. And as you can see on this slide, based on the preliminary February figures in just the first 2 months of the year, we have already achieved over EUR 3 billion in net inflows. And at the beginning of next week, we will provide a more detailed review of how we got there. This early momentum gives us a very solid foundation and the confidence in our ability to deliver another year of robust and profitable growth. So to sum it up, our platform is accelerating also in 2026, -- our growth path is clearly defined, and we remain entirely focused on executing our strategy, creating outstanding value for you, our shareholders. So thank you all for your time today, and we remain very excited about the future of Azimut, and we will now open the floor to your questions. Thank you. Operator: [Operator Instructions] First question is from Gian Luca Ferrari, Mediobanca. Gian Ferrari: Three for me. I would start with TNB. I understood that the first part of the process has almost been completed. I was wondering more on the second part of the process. Will be you guys in charge of it or FSI will step in and will, let's say, discuss with the regulators about the final approval of the project. The second is -- and the third actually are both on Page 29 on the new capital management policy, a couple of clarifications. The first one is the EUR 250 million proceeds divestments -- is this related to the first part of the upfront of TNB that if I recall correctly, was EUR 240 million. Are you referring to the distribution of that part of the cash you should receive? And secondly, going forward, after 2027, how should we think about this new capital management policy? Are you going to provide us with a dividend payout on the cash flows you generate plus are you still -- will you still go for a sizable big buyback program with cancellation or you will shift to annual buyback programs? And if you elaborate a bit on what will be over time the approach? Alessandro Zambotti: So I'm going to take the first 2, and then Giorgio will elaborate on the third one. So in relation to TNB and the other way around, we are running, let's say, both sides in the discussion with the regulator because, as you said, at the level of total capital management, we are running the remediation. And as I mentioned, we finalized the remediation at the end of February. And this is our main focus as Azimut, obviously. On the other way around, the fund, so FSI is dealing with the other division, I would say, of Bank of Italy responsible of the authorization or at least the preliminary presentation before it goes to the European Central Bank. So we are splitting the activity in 2 parts. And obviously, the fund is the main reference for Bank of Italy to finalize the regulatory process of the authorization on their side. For the EUR 250 million, it's like surrounding amount linked to the EUR 247 million of proceeds. So I'm absolutely referring to TNB just with the rounding to make the numbers easy to read it. Giorgio Medda: So Gian Luca, let me pick up your third question. Obviously, we are providing here visibility until the end of 2027, that is more than 18 months from now. And let me tell you that you can certainly tell how something will go by how it begins. So obviously, we set the tone for the next 18 months and the future, we will certainly stick to a principle of optimal capital structure. The reason why we are not saying anything more than what we are saying today, although it's pretty substantial, is that we still have the TNB transaction that is pending, and we would like to have any shareholder remuneration policy or capital allocation strategy to be elaborated within a very clear set of financial objectives for the group for the next 4 to 5 years. We have already, I think, covered a long distance over the last 6 months, pending the uncertainties related to TNB. But today, you see our capital allocation strategy, the way it defined as a very strong commitment to create value through as we called it an optimal capital structure. Operator: Next question is from Alberto Villa, Intermonte SIM. Alberto Villa: I have 3. One is back on Slide 14, where you show more details about the international business and you give us more details, and that's obviously very helpful. Can you maybe give us also an indication of revenues and operating costs related to this business in 2025 to have some more details there? And the second question is on the private markets. Thanks here again for giving us more visibility. At the same time, maybe you can elaborate a little bit on the amount of funds that will start to mature in the next, let's say, 2, 3 years and how it works if there are sort of grace periods or anything that can eventually accommodate any situation in which you -- the fund need more time or anything that could give more, let's say, details on that would be helpful. And finally, on one line item in the P&L, the financial income going forward, how should we look at it? Because maybe that's fueled by the investment of the liquidity you have in your balance sheet. So given that you are going to distribute, that's nice. But maybe -- is that fair to assume that financial income will be probably less supportive on the P&L side in the future? Giorgio Medda: Okay, Alberto, I'll take the first 2 questions. Regarding the breakdown of our, let's say, P&L by region or business line, I would encourage you to look at our Slide 7 and 8. I mean, I think we tried to summarize what are the key underlying drivers of our business at all levels, revenues, cost and certainly margins. Also with this presentation, we are providing a look-through in terms of KPIs such as advisers or assets under management by single distribution lines. I wouldn't probably bore you now with all the details. And certainly, we are available for a follow-up call to discuss more what has been driving the business country by country or business line by business line. But in general, the business has been growing, average assets per adviser increasing scale effect across businesses and now have become pretty sizable, and we are able to extract operating leverage benefits. And you see that in terms of margins on assets or margins on revenues. As far as the private markets business is concerned, let me tell you something. Funny enough, we were the very first to start promoting private markets investments with individual or private clients -- but we have really been very cautious when it comes to offering evergreen funds to the same clients. I think the market has been inundated by what I call effectively an evergreen washing in the offering of these products. People really try to entice clients with providing them the dream of liquidity when actually there's no liquidity in the underlying portfolios. If that liquidity is sort of possible, maybe it comes at the expense of lower returns because obviously, funds they need to retain a meaningful cash buffer to honor the call for redemptions. We have really started probably with the most complicated part with our clients, explaining them the merits of diversifying across illiquid strategy, the possibility to enjoy what is the so-called illiquidity premium, patient capitals and within a diversified portfolio, certainly seeing how to create, let's say, a segmentation or diversification of the portfolio using different time horizons. On that basis, we have not relied on evergreen funds. And I can tell you, considering what is our average vintage that we would expect the first liquidations of the funds that we have launched over the last few years to start in '28, '29. And our clients, they are waiting for '28, '29 to get their money back and portfolios have been built with that specific purpose. So we are not planning and we do not see any need whatsoever to ring-fence or to gate or to sort of promote continuation funds because things are being done the proper way. Alessandro Zambotti: Well, referring to your point on finance income, I mean, it's obviously, let's say, to take the point, considering, first of all, let's say, the different contributors on this finance income line. As I mentioned during the details of the evolution for referring to this year, we were talking about portfolio performance. We were talking about net interest turn, dividend from GP stakes. So there is a mix of things that they are contributing below EBIT. Obviously, compared it to last year where there was the benefit and the positive gain on Kennedy Lewis, we cannot compare the 2 here in a, let's say, fair like-for-like way. But at the same time, over the last 3 years, I would say that the finance income line is contributing on our net profit. Therefore, I would expect also for the next year to be at least in line with our EUR 40 million, but probably even more due to the fact that also there, we have the contribution of our partnerships our equity participation that are generating dividends. So again, a mix of things that make us confident to maintain a nice level of contribution on this line. Alberto Villa: If I can follow-up question on the net inflows target. You started very well the year. Of course, as you did in the past, maybe you will adjust the estimate later on during the year. Is there any particular flavor you can give us in terms of what is happening in terms of contribution? Any area of particularly strong indications coming from the net inflows of the early months of the year? Giorgio Medda: No, Alberto, we can tell you that it's a very balanced contribution from all the business lines, all the geographies. When you look at 2025, the global business was accounting for 66% of total net inflows, certainly and sign the U.S. took the lion's share for that. This year, we start 50-50 kind of balanced. And I think we are firing on all cylinders consistently across all the business lines and geographies. I mean, I think this is the beauty of the platform today. We see, particularly when it comes to emerging markets, what I call a synchronized growth, something that has not been always the case in the previous years where it can happen is a mixed bag. You have geographies doing very well, others slowing down. But now we see -- right now, we see really strong momentum across the board. Operator: Next question is from Hubert Lam, Bank of America. Hubert Lam: I've got a few questions. Firstly, on your excess capital, which you're focused on in terms of paying dividends and buyback, does this mean that in the near term over the next 18 months, you don't plan on doing any M&A? That's the first question. Second question is on private markets. Do you expect any slowdown in fundraising for the private markets, just given the noise in the sector, specifically on Slide 17. So will the rest of the fundraising target take longer than the first EUR 800 million that you've raised? And next question is also on private markets. I just want to double check what you said about redemptions. Do the funds actually have redemption features or not? And if they do have redemption features, can you remind us what the redemption profile is? And if I could squeeze in one more on your investment write-down that you had in Q4. I just -- sorry, maybe I missed it, but can you remind us or just elaborate what's related to? And any relation to any co-investments you may have with clients or not on the write-down? Giorgio Medda: I will take your question on private markets. First of all, we are not expecting a slowdown. As I mentioned, we have a number of strategies that are actively fundraising right now, EUR 2.1 billion overall. We are kind of almost 1/3 -- more than 1/3 of that target. And we don't see any slowdown. I have to tell you that although we have been expanding globally, this franchise Italy still remains the most important market. And most of the things that we read today in the press, they are very much geographically isolated apart from our investors reading what's happening in the U.S., but this is the U.S. is not Italy and people -- they are not concerned. Certainly, we have our advisers that is the value of the Azimut's business model. We sit down with clients and they explain the differences and provide all the comfort they need with constant updates on the portfolio and providing all the reasons why if more investments are, let's say, possible, then these are effectively and efficiently placed into other private market strategies. In terms of liquidation or let's say, realization of investments and distribution to clients, as I said, we are expecting now, particularly for our private credit strategies, the first liquidation starting '28, '29. By nature, these are closed-ended funds. When it comes to private credit, think about direct lending, these are loans that have a term that is consistent with the fund life or the fund terms. We do not have any cockroaches. We have been always implementing very tight and disciplined investment policies, and it's not always working for every single investment the way we want. But overall, we are delivering and you see that from the performance of the different verticals, in average, a better performance than we have sort of discussed with clients when they came -- when they have come to the portfolio. So in general, as I said, unaffected by what's happening away from Italy, clients are very well catered in terms of being informed and explained what's happening, and we are growing. That means that at the end of the day, people they understood the differences and they put more trust in us. Alessandro Zambotti: So I mean, looking to the capital structure, so probably going back to Slide 30, you can probably see where -- I mean that we put -- we put an amount of money that we commit for the '26 and '27 of EUR 300 million. This is -- I mean, it doesn't mean that we are going to do M&A with this amount. Obviously, it's a group that is growing. Therefore, we have to look back also again to regulatory requirements, look back to the operational cash needs because, again, we are present in 80 company. Therefore, we need to maintain the right level of the operating cash. As well, we are investing in general on the IT, on the AI. So we have a bulk of CapEx that we have to support to grow our business and to support internally, but also our financial adviser, our distribution network with the right instruments to proceed with the right way to meet and target the market. So all in all is an amount that as well as different view and different elements to consider. This cover, let's say, the portion of cash that we would expect to keep for this. Moving to the point of the investments, as I was referring during the explanation, again, we decide -- I mean, we evaluated the opportunity to be very conservative on 2 VC proprietary investments. Therefore, this approach help us to look again to the forward-looking of the numbers more confident on the future results. So we take advantages on that. Giorgio Medda: And just to add one thing about investments, Alessandro said it all, but just also to link to what we said in the past. As opposed to the past, we are really putting at a same level growth and shareholder remuneration. What we are targeting is an optimal capital structure. Azimut is and it will always be a growth company. We will certainly consider should anything come to our attention, external financing for a transaction. What we are putting here is a clear statement in terms of giving the right and the same importance to shareholders and to growth opportunities. But it's a pretty unique proposition that we want to promote in the market. And hopefully, the market will appreciate it. Operator: Next question is from Elena Perini Intesa Sanpaolo. Elena Perini: The first question is on Slide 30, again -- 29, sorry, again, on your capital distribution strategy. Because I read from the press release and then the slide also confirms it that you are going to distribute EUR 750 million to EUR 800 million in dividends over the next 18 months. So this, I suppose, also includes the dividend that you propose now and is going to be paid in May, just for a confirmation. And then you mentioned that the dividend starting from next year will be split in 2 tranches. But I was wondering whether this would imply an interim dividend already in November this year and then the balance in May next year? Or on the contrary, you will have the first tranche referring to '26 earnings in May '27 and then the second tranche in November, just to clarify. Then going to Slide #30 on TNB transaction. Considering that June now is quite close and you are still waiting for the approval of the Bank of Italy is on your -- on the effectiveness of the remediation measures that you have taken. I mean, is it more likely to see the finalization of the spin-off in the second half? Just to have some flavor about the potential time line. And then finally, I have a question on your tax rate for next year. As you mentioned recurrent taxation for this year at around 21.5%. But if I remember well, you mentioned in the past a higher level of taxation for the future, but just for a confirmation. Giorgio Medda: Elena, I will answer your question on the dividend. So 2026 dividend paid against the 2025 earnings will be fully paid at the end of May. And we will propose to the general assembly of shareholders to switch to installment dividend payment starting with 2027 against 2026 earnings. That is a transition to a new system that is in line with what now a very large number of financial services companies do, but has become now a standard. And I have to say that we see a strong merit to adopt the same policy as we have over the years, noted a behavior of the share price around the dividend payment that has been disturbing us creating unnecessary volatility. We want to offer very smooth and predictable cash flow generation for shareholders, hence, the decision to move to May and November payment against the previous year earnings. Alessandro Zambotti: Well, taking your point of TNB and the expectation, well, as you know, we built the renewal of the binding agreements and the exclusivity in a way that there will be no additional pressure in the market and as well to the regulator in a way that it automatically the date of June can be postponed to the end of December without any additional negotiation or whatever. So basically, our attention now is on the remediation, as I was saying before, the funds and the FSI -- so FSI is focused on the regulatory side. And I would say both of us are concentrated to be in the right way, the migration process of this transaction because as you probably remember when also we discussed together, it's something that we cannot do not consider because it's significant and it's important tomorrow when the client will migrate and operate correctly starting from day 1. So this is our focus for the 2026, considering also, obviously, the objective to get there within the end of the year. At the level of the tax rate, if you recall Slide 26, -- we have mentioned the benefits, so the lower tax rate for this year, but also we confirm our guidance at 25% for 2026. Operator: Gentlemen, there are no more questions registered at this time. Giorgio Medda: Well, great. Fantastic. Thank you, everyone. Hopefully, we will catch up in person soon. Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JDL Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] I will now turn the call over to Mr. Zhang Sean, Head of IR team at JDL. Please go ahead, Sean. Sean Shibiao Zhang: Thank you, operator. Good day, ladies and gentlemen. Welcome to our fourth quarter and full year 2025 results conference call. Joining us today are our Executive Director and CEO, Ms. Wang Zhenhui; and our CFO, Mr. Wu Hao. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 2025, issued earlier today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statement in the original language will prevail. I would like to turn the call over to Mr. Wang Zhenhui. Please go ahead, sir. Zhenhui Wang: Dear investors and analysts, welcome to JDL Fourth Quarter and Full Year of 2025 Earnings Call. This is Wang Zhenhui, CEO of JDL. Thank you for joining us today. Reflecting on 2025, against the macroeconomic backdrop characterized by steady, progressive momentum in China's continued transition towards high-quality, innovation-led growth, JDL maintained -- committed to strengthening our core capacities. We focused on enhancing delivery timeliness, accelerating our network expansion and further deepening the application of cutting-edge technologies. We continuously solidified our operational capacities as well as the competitiveness of our products and services, leveraging ISC solutions, premium services and leading technologies to drive high-quality growth. In both the fourth quarter and the full year, we delivered a double-digit revenue growth, sustaining our high-quality development momentum. Specifically in the fourth quarter of 2025, total revenue reached RMB 63.5 billion, representing a year-over-year increase of 21.9%. Non-IFRS profit for the quarter amounted to RMB 2.4 billion, up 5.7% year-over-year with non-IFRS profit margin of 3.7%. For the full year of 2025, total revenue was RMB 217.1 billion, increased by 18.8% year-over-year. Non-IFRS profit reached RMB 7.7 billion with non-IFRS profit margin of 3.6%, maintaining stable and resilient. Now I'd like to highlight the three core differentiators that JDL continued to strengthen in 2025: our ISC capacity, supported by a comprehensive network and diverse product portfolio; our high-quality customer experience and our application of automation and AI technologies. There are three in totality. First, consistent cultivation of our ISC capacities remains a core strategic priority. Leveraging our nationwide network with expanding global reach together with deep industry insights, we provide customers with reliable and efficient integrated supply chain solutions. By the end of 2025, our warehouse network covered nearly all countries and districts in China, with over 1,600 warehouses and aggregated GFA exceeding 34 million square meters. Notably, the integration of our on-demand delivery service in 2025 further strengthened our last-mile capacity, completing our high-timeliness delivery network. This enhancement not only improved our fulfillment efficiency and customer experiences, but also increased broader opportunities for future business expansion. Leveraging our increasingly comprehensive network coverage, we remain committed to providing end-to-end ISC solutions to our customers. While effectively helping customers reduce cost, refine efficiency and enhanced competitiveness, we've also achieved a healthy growth in our own business in 2025. Revenue from ISC customers reached RMB 116.2 billion, representing a 33% year-over-year growth. Of this amount, revenue from external ISC customers was RMB 35.9 billion, sustaining a trajectory of high-quality growth. Through differentiated solutions such as omni-channel supply chain service model as well as reverse [ restoration ] services, we continue to deepen our presence in industry-specific services and expand our service scenarios to meet the evolving demands of our growing customer base. As a result, the number of external ISC customers served reached 91,161, representing 13% of yearly growth. Through extensive industry experience, we have established a series of successful cases that have become benchmarks. For example, in the consumer goods sector, leveraging our high-standard end-to-end service capacity, we achieved breakthrough in luxury segment by securing great warehousing and distribution partnership with a global renowned luxury brand and travel retailer. To meet the luxury industry's stringent logistic requirements, we established temperature-, humidity-controlled zones with our warehouses; implemented insured storage solutions for high-value items covering the full range of operation service, including B2C integrated inventory and reverse quality inspection. To address the pain points previously faced by this customer, specifically scattered inventory across multi downstream channels and low management efficiency, we deployed intelligent warehousing solution that enables centralized, consolidated management for dozens of sales channels within a single warehouse. This approach ensured both product security and service experience while reducing customer overall logistics cost by approximately 20%. This partnership further validates our operational capacity in high barrier, complex scenario and marks the establishment of our end-to-end service capacity in the luxury and high-end retail sector, laying a solid foundation for deeper market penetration moving ahead. In the home appliance sector, we extended our collaboration with a leading brand, creating a closed loop spanning forward logistics to reverse recycling and packaging refurbishment. By leveraging our differentiated capacities and expanding service scenarios, revenue generated from this customer's small appliance business achieved triple-digit growth. While steadily strengthening our leadership in China's ISC market, we also actively expanding our overseas footprint, aiming to replicate and scale up a mature supply chain model developed in China. In 2025, we achieved our goal of doubling the area of self-operated overseas warehouse, opening multiple new warehouses in U.S., U.K., France, Saudi Arabia and other countries, further enhancing our global warehousing network. By the end of 2025, we operated nearly 200 bonded warehouses, international direct distribution warehouses and overseas warehouses, covering aggregate GFA of nearly 2 million square meters. At the same time, we continue to strengthen our last-mile fulfillment capacities in overseas markets. In 2025, we launched our first self-operated express delivery brand, JoyExpress, in multiple overseas countries. Saudi Arabia, JoyExpress provides high-standard services such as to-door delivery and cash-on-delivery, among others, while in key regions of U.K., France, Germany and Netherlands, we offer 211 time-definite delivery services. This has established a comprehensive logistics network encompassing warehousing, sorting, transportation, last-mile delivery, significantly improving fulfillment timeliness and service reliability. The global deployment of our warehousing and distribution integrated supply chain services has also strengthened our strategic partnerships with more leading industry customers, driving rapid growth in our overseas business. For example, in the Middle East, leveraging our bonded warehouse cluster in the Jebel Ali Free Zone, we efficiently serve neighboring markets, including the GCC countries, Africa and South Asia. Through our warehouse for multiple countries and bonded upon entry, duty payment upon exit from the zone model, we enable customers to centralize inventory management, effectively avoiding redundant stock across multiple countries, significantly reducing inventory costs while improving inventory turnover efficiency. As a result, we have become the preferred supply chain partner in the Middle East for numerous Chinese go-global automotive brands as well as leading cross-border e-commerce platforms, we're the preferred partner. Secondly, delivering a high-quality customer experiences is not only foundation for earning customers' trust, but also a key driver for sustainable growth in our express and freight delivery services. In 2025. Our revenue from the customers primarily include express and freight delivery services reaching RMB 100.9 billion, representing year-over-year growth of 5.7%. We remain committed to drive high-quality growth by focusing on high-value services and continuously strengthen both our timeliness and service capacity. We continue to increase our investments in upgrading our timeliness logistics network. By the end of 2025, JD Airlines expanded its self-operated all-cargo fleet up to 12 planes. The recent introduction of the first A330 wide-body cargo airplane marks a significant breakthrough in our cross-border transportation capacities and long-distance route capacity in 2025. We launched multiple new international cargo routes, including Shenzhen, China to Bangkok, Thailand and Chengdu, China to Yangon, Myanmar. Our gradually expanding fleet not only enhances the timeliness and reliability of our air cargo transportation, but also provides exceptionally stable capacity support for products requiring high timeliness. Our continuously enhance timeliness capacities also drove growth in our high-value fresh products business. In 2025, revenue from key fresh products such as lychees, hairy crab and beef and lamb saw substantial year-over-year growth. For example, for beef and lamb originating from Qinghai, we launched a dedicated all-cargo airplane route, enabling as fast as the next-morning delivery from Qinghai to dozens of cities in key economic regions, including Beijing and Shanghai. This initiative addressed the pain points such as low efficiency and preservation challenges in traditional transport models, supporting cross-region sales growth for special agricultural products from production zones. In addition to that, we are committed to delivering reliable services to our customers. The dedication was particularly evident in our response to the national consumer goods trade-in program, which fully demonstrate JDL's service capacity and value. To meet the high standards for verification and risk control during the policy implementation, we leveraged our service capacities and deeply integrated technology empowerment. Using AI image recognition and other cutting cutting-edge technologies, we achieved intelligent monitoring and evidence collection for the entire process of delivery, installation, dismantling of old appliances. This initiative not only provided the regulatory authorities with accurate and traceable verification evidence, but it also demonstrated our professional capacities in high-complexity logistics scenarios. As a result, we effectively supported our customers, particularly in key home appliances and 3C categories in capturing policy-driven opportunities. Finally, I would like to highlight our third core advantage, our technology-driven approach. We have always regarded technology innovation as the fundamental driver of long-term efficiency gains and margin improvement. Supported by a professional R&D team of thousands of engineers, we continue to invest in the innovation and development of cutting-edge technologies. Leveraging the most extensive operational scenario and the most comprehensive operational chain in the industry, we built a proprietary end-to-end intelligent operation system covering all stages, including warehousing, sorting, transportation and delivery. The field of intelligent warehousing, we have achieved scale replication in the domestic market and implemented benchmark projects overseas. In 2025, our self-developed Smart Wolf goods-to-person automated warehousing solution was deployed in nearly 20 cities, with more than 20 Smart Wolf warehouses. Benefiting from in-depth application of the GTP model, we have achieved high-density storage and ultra-fast picking for millions of SKUs, significantly boosting the warehousing operation efficiency. In the fourth quarter of 2025, the first Smart Wolf was officially put into operation in U.K. Powered by the efficient operation of hundreds of Smart Wolf robots, this project supported local operation, delivering ultimate fulfillment experiences. In autonomous delivery, our solutions have progressed into standardized, large-scale operations. Today, we have deployed thousands of unmanned vehicles across over 20 provinces nationwide, improving labor efficiency in the transfers between delivery stations and delivery zones while continuously unlocking cost reduction potential emerging scenarios such as direct warehouse-to-station delivery. At the same time, we have extended our autonomous delivery classes to overseas low-altitude logistics. In December 2025, JDL successfully completed the first overseas drone trial flight in Saudi Arabia, validating our aerial last-mile fulfillment capacities in the overseas market. Looking ahead, we'll continue to center on experience, cost and efficiency, fully leveraging these three differentiators to drive high-quality growth. Building on our increasingly robust integrated supply chain capacities, we work hand-in-hand with our partners to help customers reduce costs, enhance efficiency and achieve sustainable business growth, while at the same time, advancing to the next stage of our own development. We will continue to uphold our original aspiration of customer first, delivering reliable high-quality customer experience in response to evolving market dynamics. We further strengthen our end-to-end intelligent capacities, translating tech excellence into tangible operational gains, steadily delivering on our strategic commitment to long-term efficiency improvement and margin enhancement. Welcome Wu Hao to give us the discussion on the financial performance. Thank you. Hao Wu: Thank you, Zhenhui. Dear investors and analysts, I'm Wu Hao, the CFO of the JDL. It's my great pleasure to share with you the fourth quarter and the full year of the financial report. Looking back to 2025, the Chinese macro economy is growing steadily with high quality, and we are seeing a lot of growth. The JDL relying upon the ISL (sic) [ ISC ] platform, improving our solutions as well as our long-term metrics, improve our service quality, customer experiences. In the quarter -- fourth quarter of 2025, we are achieving the [ three digital ] growth. To be more specific, the total revenue is CNY 36.5 billion (sic) [ CNY 63.5 billion ] in the fourth quarter, representing year growth of 21.9%, extending the high growth momentum over the entire year. CNY 217.1 billion was the total year revenue, up 18.8% year-over-year. This growth trajectory reflects our customers' strong recognition of our service value. In terms of profit, since the beginning of the year, we have invested deeply in core resources and capacities to build long-term competitive barriers, solidifying our growth momentum for healthy, long-term development. In the fourth quarter, our IFRS profit was RMB 2.0 billion with a margin of 3.1%. Non-IFRS profit was RMB 2.35 billion with a margin of 3.7%. In 2025, our IFRS profit was RMB 6.9 billion with a margin of 3.2% and non-IFRS profit was RMB 7.7 billion with a margin of 3.6%. Looking ahead, emerging efficiency gains from our resource investments, along with the deep empowerment from automation and AI algorithms will form the groundwork for driving continued profitability optimization. Now let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 36.0 billion in the fourth quarter, increasing 44.5% year-over-year. Of this total, ISC revenue from JD Group amounted to RMB 26.7 billion, up 68.1% year-over-year due to the incremental revenue generated by our full-time riders providing delivery services for JD food delivery and acquisition of the on-demand delivery services from JD Group as well as the steady growth of the general merchandise category in the JD Retail. Revenue from external ISC customers was RMB 9.3 billion, maintaining healthy growth momentum. Leveraging our extensive network coverage and in-depth industry insights, we continue to refine and upgrade our end-to-end supply chain solutions to meet the diverse needs of customers across various industries. For instance, our advanced algorithm systems and high-standard integrated warehousing and distribution classes have helped premium retail brands achieve multichannel centralized management within a single warehouse, effectively improving warehouse utilization and reducing costs. In addition, leveraging our overseas bonded warehousing system with regional reach, we have built logistics solutions featuring bonded upon entry and one warehouse for multiple countries for automotive and other customers, helping them reduce inventory cost while improving inventory turnover efficiency. These high-quality end-to-end service and solutions have earned us widespread market recognition and trust. In the fourth quarter, the number of external ISC customers amounted to 68,000, up 9.7% year-over-year. In the fourth quarter of 2025, our revenue from other customers, primarily including express and freight delivery services, was RMB 27.6 billion, up 1.3% year-over-year with fluctuations primarily attributable to the impact of the Deppon product metrics adjustments. Excluding Deppon's business, revenue from other customers achieved double-digit growth, maintaining a steady trajectory. In express delivery services, we continue to refine our ultimate timeliness experience with a strategic focus on expanding high-value categories. In freight delivery services, leveraging a tiered, targeted and scenario-rich [ product portfolio, ] we effectively meet the differentiated needs of various customers, maintaining our industrial-leading position in both freight volume and revenue scale. Moving towards cost and profitability. In the fourth quarter of 2025, our gross profit margin was 9.3%. We continue to focus on enhancing customer experience and delivery timeliness while solidifying our operational capacity to drive JDL's long-term, high-quality business growth. Now let's turn to the key components of the cost of sales revenue. Firstly, employee benefit -- were RMB 23.1 billion in the fourth quarter, up 34.9% year-over-year. This was primarily due to the addition of full-time food delivery riders compared with the same period of last year as well as year-over-year increase in number of front-line operational employees in the delivery and warehouse operations. The number of operational employees grew from approximately 480,000 at the end of the fourth quarter last year to approximately 660,000 at the end of the fourth quarter of 2025, while quite stable. Since the beginning of this year, we have invested in our own employee in core areas such as delivery and warehousing. By strengthening our control over the delivery process, we have effectively optimized the customer experiences. Driven by this initiative, core operational metrics such as on-time delivery rate and cost satisfaction have achieved steady over -- year-over-year growth. In the fourth quarter, employee benefit expenses accounted for 36.3% of revenue, up 3.5% year-over-year. Second, our outsourcing cost was RMB 22.7 billion in the fourth quarter, up 14.9% year-over-year. Our outsourcing costs accounted for 35.7% of total revenue in the fourth quarter, a year-over-year decrease of 2.2%. Over the operational account, we leveraged digital intelligent dispatching system to precisely match capacity resources with transportation demand while optimizing our capacity resource structure by increasing the proportion of self-owned vehicles, effectively enhancing resource control and operational efficiency. Meanwhile, on the business side, the ongoing optimization of Deppon's freight product structure was -- also contributed to further reduction of outsourcing costs. Thirdly, our total rental cost was RMB 3.3 billion in the fourth quarter, up 6.5% year-over-year as we promoted site integration and optimized network structure. [ We ] continue to improve utilization efficiency of our sites. Our total revenue -- rental costs accounted for 5.2% of our total revenue in the fourth quarter, year-over-year decrease of 0.8%. Apart from major costs mentioned above, our ongoing business expansion was -- resulted in improving economies of scale, driving down our depreciation and amortization costs as a percentage of total revenue by 0.1%. In terms of expenses, our operating expenses in the fourth quarter were CNY 4 billion, up 23.2%, accounting for 6.3% of total revenue, year-over-year increase of 0.1%. Among them, sales and marketing expenses increased by 17.9% year-over-year to RMB 1.8 billion, accounting for 2.8% of the total revenue, down 0.1 percentage point. Specifically, sales and marketing expenses accounting for 4.8% of revenue from external customers, up 0.7 percentage points year-over-year. This was mainly due to our moderate investment in sales and marketing personnel to drive business growth. In the fourth quarter of 2025, our R&D expenses were RMB 1.2 billion, up 28.9% year-over-year and accounting for 1.9 percentage of the total revenue, up 0.1 percentage point year-over-year. We've always positioned the technology innovation as a core development engine, building an end-to-end intelligent operation system covering all stages, including warehousing, sorting and delivery. In the warehousing stage, we are accelerating domestic and international deployment of our self-deployed Smart Wolf automated warehousing solution, enhancing both storage density and fulfillment efficiency. In the sorting stage, we continue to iterate and upgrade our automation levels, significantly improving the accuracy and operational efficiency of the sorting process. In the delivery stage, we've deployed thousands of unmanned vehicles, empowering multi-scenario operations to reduce costs and increase efficiency. Our general and administrative expenses were RMB 1 billion, up 26.8% year-over-year, accounting for 1.6% of total revenue, a year-over-year increase of 0.1 percentage points. In terms of the profit, please also consider non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA exclude items that we believe are not indicative of our core operating performance to help investors and other users of financial information better understand and evaluate our core operating results. In the fourth quarter of 2025, our non-IFRS profit was RMB 2.4 billion, up 5.7% year-over-year. Non-IFRS profit margin was 3.7%. Non-IFRS EBITDA for the fourth quarter was RMB 5.8 billion, increase of 8.9% year-over-year with a non-IFRS EBITDA margin of 9.1%. We continue to monitor the health of our cash flow to ensure adequate funding for business expansion operations. In the fourth quarter, excluding lease-related payments, we recorded a free cash flow of RMB 3.3 billion. Of this total operating cash flow, excluding the lease-related payments, was RMB 5.3 billion, a year-over-year increase of nearly RMB 0.2 billion, primarily benefiting from proactive measures to improve accounts receivable turnover and accelerate collections. Capital expenditure was RMB 1.9 billion, mainly directed towards investments in automation equipment and self-owned vehicles, driving consistent improvements in operational efficiencies through efficient resource allocation. Before we wrap up, I'd like to express my gratitude to all the stakeholders for your [ long-standing ] support and trust. Looking ahead, we're focused on achieving a balance between business growth and profit stability. Over the growth front, we'll emphasize both the speed and quality of the business growth, continuously deepening our strategic focus on ISC capacities to empower our customers' business development while also preparing ourselves towards a new level of high-growth momentum. On the profitability front, we will increase technology investment, optimize our network layout and deepen refined management to enhance resource utilization efficiency. We are confident that through ongoing operational efficiency improvements across the entire chain, we can drive sustainable cost optimization and drive long-term sustainable value creation to our shareholders. Thank you. That concludes my prepared remarks. We can begin the Q&A session. Unknown Executive: Thank you, Mr. Wu Hao, for your prepared remarks. This is the end of the prepared remarks in Chinese, and we are going to start the Q&A session. [Operator Instructions] Now let's get into Q&A. Operator: [Operator Instructions] The first question is from Goldman Sachs [indiscernible]. Unknown Analyst: I'm from the Goldman Sachs. I want to share with you my comments on two questions. In 2025, you are speaking about the delivery services with very good growth momentum. So how we are going, looking to 2026? What will be the internal and external customer growth momentum? And what will be the CNY 20 billion incentive for the merchandise, what will be the impact? The next about the overseas market. We have already seen the express as well as the total GFA area in the overseas market, very good growing momentum, and you are sharing with us a lot of milestones. So my question is, how could you take JDL's footprint in the overseas market in 2026 as well? Hao Wu: Thank you for the question. About the growth momentum prospects, in 2026, we are having strong confidence in seeing the growth momentum in 2026. About the real-time delivery, we're going to do a lot of things. You have already seen that over the last few years, we are seeing very good and positive growth momentum. But still, in terms of infrastructure, we did a lot of fundamental work. We laid out a solid foundation. And we want to take a breakthrough in building, expanding the customer bases. We want to have -- we have already achieved [ three digital ] growth in 2025. And you are checking about the incentive, the business incentive of RMB 20 billion. For JDL, I believe this will be creating a positive business loop. The JD [indiscernible] is covering different products with a wide range of product portfolio, which will giving us a lot of chances to deliver our services and with [ also ] improving the efficiency in the overall manner. Most of the products have high requirements on the delivery efficiency and timeliness. JDL is in a good position to deliver the promises. And we will continue investing our resources, reducing last-mile abruption, and we have already done a lot of improvement work. I believe that with that being said, with all the efforts being done, we could improve the efficiency continuously in 2026, and we could also improve the satisfaction rate. I want to welcome the CEO to share with us the practice in Europe. Zhenhui Wang: Thank you for the questions. Thank you for staying with us. In 2025, we have briefed on you the work report. JD Logistics is prioritizing the European business. We continue to carry our logistic deepening as well as upgrade of the products and services. In 2020 -- in U.K., Germany, France and Netherlands, those are the major markets. In their major cities, we will ensure the highly efficient timeliness in terms of delivery. We have the to-door services, we have the free-of-charge exchange and refund services. At the end of the day, we could work together with local buyers as well as partners. I want to -- we could also attract more customers out there. As of now, we also have a lot of good partners such as DHL. By working with them, we could cover the terminal services. We could get into the client conversion in the European local market, and we are also working together with our customers to ensure the cross-border [indiscernible] pick-up by working with the core local partners, we would have a faster process, including the cross-border delivery as well as the customer clearance, et cetera. The purpose is to have the terminal-to-terminal ISC system in place. It is expected that by 2026, the European business will be growing very fast. This trend will be maintained. Thank you again for your question, and thank you very much for your attention to our overseas market and business. Operator: We are going to have Citibank, Brian Gong. Brian Gong: I have two questions. The first question, for the ISC, I want to check with -- about the internal growth region, except for the real-time delivery, what will be the number in 2025, what will be the growth momentum in 2025? The next is in 2025, you did some investment, Deppon, is having further impact on your profit? And what will be the trend for the profit in 2026? Unknown Executive: Thank you, Brian, for your questions. For the internal business growth ratio, for the long run, we are seeing positive growth momentum. Generally speaking, we are collaborating with JD Retail for the long run. We are also receiving benefits due to expansion of the JD Group so that we have seen very fast growth in our internal orders. For the second question, about margin in 2025, you saw a dip. So how will be the outcome in 2026 because we have considered the impact of Deppon. I believe that over the last year, through our measures of efficiency improvement and technology optimization, we could have better opportunities to receive return. Meanwhile, for Deppon, in 2025, we [ expected ] limited impact from Deppon. There are some data from Deppon. The trend is the profitability is gradually moving into a normalized and stable circle. In the second half of 2025, we saw a positive improvement from Deppon. Deppon is gradually picking up their business. So in 2026, in terms of the profit, I believe there will be positive improvement. Operator: Next question, [ Tom Chong ]. Unknown Analyst: My question is as follows: for the AI strategy, can you share with us the 2026 autonomous driving strategy as well as automation strategy or practices? The next question is about the general performance in 2026 in terms of the revenue, what will be the trend? Unknown Executive: For the AI and automation technologies, as we have already discussed, a part of the strategies, JBL is prioritizing the technologies. We know how important they are in the implementation in the past. For the wolf robot and for the unmanned devices, you are seeing a lot of implementation and utilization with very good outcome. And we also have certain AI technologies to improve scheduling of the vehicles, the dispatching of the [ ride path ] when we are using AI, especially for the robots. We have the warehousing, sorting, transportation, different steps. In 2025, over 20 cities and their warehouses are equipped with AI. In terms of the sorting, 90% of the sorting devices are equipped with automation technologies and the sorting amounts are over millions. In terms of the delivery, over thousands of -- over 1,000 vehicles, unmanned vehicles, and in 2026, we'll expand their presence. In China, we could improve the efficiency by using and driving the unmanned vehicles. The operators, the delivery man could improve their work efficiency as well, reducing the risk of delayed [indiscernible] delivery at certain steps, we could further reduce our cost while improving the efficiency. The next is about the future prediction. Through our vehicles and the drivers as well as development, we could optimize our routes through AI preparation. In terms of the scheduling of the vehicle resources as well as exploration of passes in one vehicle, we could improve the efficiency and reducing the cost. Thank you. Unknown Executive: I want to say a few words about the two questions. And we are developing our AI technologies back years ago. In 2026, the investment will be continuously down. I believe the investment will be higher than that of 2025. In terms of the automation of sorting, we have had very mature technologies. And in 2025, we did invest continuously in the unmanned vehicles as well as warehousing network. And we have launched more than 1,000 unmanned vehicles through 1-year trial. Our technologies have further been improved. The investments in 2026 will be picked up further in terms of the sorting machines. As we are reducing the cost and improving efficiency, we will continue to invest strongly. I believe that they will contribute to our increased profit in 2026 as well. Operator: Next question from [indiscernible]. Unknown Analyst: I'm [indiscernible]. I have two questions, of course, topic one: the previous speaker talked about the progress, I want to share with you my -- comments on your investment of the cross-border delivery and what will be the right maneuver for next year? And what will be the profitability? For instance, you'll be fairly high in the industrial profit level. Next about the recruitment, the delivery man. What will be the coordination plan between them and the traditional recruitment? I want to confirm with you about [ MA ], right? The acquirement of Kuayue, as we have understood that in last quarter, you have acquired Kuayue and you have done something. So I want to check with you more about the performance. Unknown Executive: For the Kuayue, we did a great job in acquiring the business. And so we are seeing a smooth business conduction and we also received a profit return. And we're also seeing the future growth momentum. In terms of the revenue growth, we are seeing continuous increase, and we are collaborating with the Kuayue management, optimizing their timeliness, their orders being traced and the online preparation. And we are still seeking more opportunities to reduce their operational cost. Every year, we continuously invest on Kuayue year-by-year in terms of the revenue, in terms of the profitability. I see very good chances. So your question is about the differences between the delivery man and recruitment. Now we have the new business of food delivery. We are ensuring the real-time and immediate delivery services. At the same time, we have to manage the rider. When we are receiving the food order, we have to manage the riders in the good metrics, and we want to optimize the people scheduling, improving the efficiency so that we could also boost up the profitability. But of course, we have to consider about the early promotion. And now we are also managing the free time or different time slots of the [indiscernible] to maximize the human efficiency. Now we are also including some of the [indiscernible] into the rider, turn them into the rider. That is what we call the [indiscernible] to rider initiative. It helps us reduce the peak time congestion, improving the efficiency on both sides. Thank you. Operator: Due to time constraint, that concludes today's question-and-answer session. At this time, I will now turn the conference back to Zhang Sean for additional or closing remarks. Sean Shibiao Zhang: Thank you once again for joining us today. If you have additional, further questions, please contact our IR team directly. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, everyone, and welcome to BBVA Argentina's 4Q '25 and Fiscal Year 2025 Results Conference Call. Today with us are Mrs. Belén Fourcade, Investor Relations Manager; Diego Cesarini, IRO; and Mrs. Carmen Morillo, CFO, who will be available for the Q&A session. This presentation and the 4Q '25 earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2024 filed with the U.S. Securities and Exchange Commission. [Operator Instructions] I will now turn the call over to Mrs. Belén Fourcade. Please go ahead. María Belén Fourcade: Good morning, and thank you all for joining us today. After a third quarter that was marked by political instability with its consequent monetary and exchange rate tensions, the results of the midterm legislative elections reaffirmed support for the government's fiscal reform and order policy. This translated into a rapid normalization of financial variables, which returned to pre-event levels. BBVA Argentina continues to consolidate its growth strategy, reflecting its commitment to being a key player in Argentina's recovery of activity. This was achieved despite a year ultimately marked by interest rate volatility in the second half and the progressive deterioration of credit quality within specific segments of the retail portfolio. In this line, on December 22, 2025, the bank secured a credit line of up to $150 million from the International Finance Corporation. These funds allow BBVA to expand its financing capacity for small- and medium-sized enterprises, thereby reaffirming its commitment to the productive sector. BBVA Argentina's non-performing loan ratio on private loans reached 4.18% as of December 2025, a figure that remains below the system average of 5.29% for the same period. The bank stands out for having consistently lower delinquency ratios than the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. Before diving into numbers, it is important to mention that on December 10, 2025, the transaction through which BBVA Argentina acquired 50% of the share capital of FCA Compañía Financiera has been closed. This had a ARS 1 billion impact in the P&L and all balance sheet figures include FCA, including loans and deposits. Nonetheless, market shares expressed in this report and on this call do not include FCA as the consolidation was made as of the last day of December. Moving to Slide 2 to 5 of the webcast presentation, I will now comment on the bank's fourth quarter 2025 and 2025 fiscal year financial results. BBVA Argentina's inflation adjusted net income in 2025 was ARS 267.4 billion, decreasing 43.2% versus 2024. This implies an accumulated ROE of 7.3% and accumulated ROA of 1.1%. The year-over-year decline in results is mainly explained by the deterioration of loan loss allowances in a context of high delinquency ratios in the financial system. Also, in spite of observing a 29.4% lower net interest income as a result of lower interest rates and inflation, this should be considered in comparison to lower losses from the net monetary position, which more than offset the lower NII. It is worth noting the 36.9% increase in net fee income, thanks to a proactive approach in improvements, and also in foreign currency and gold gains, the latter explained by an increase in activity after the partial lift in FX controls on April 14, 2025. In the fourth quarter of 2025, net income was ARS 59.3 billion, increasing 44.5% quarter-over-quarter. This implied a quarterly ROE of 6.5% and a quarterly ROA of 0.9%. Quarterly results were mainly explained by higher income along with lower expenses. The increase in income is mainly due to: one, better net interest income; and two, an increase in results from write-down of assets at amortized cost and OCI. The latter due to the sale of bonds classified in the OCI model. Expenses improved mainly on the side of personnel expenses and administrative expenses. These were negatively offset by, one, loan loss allowances; two, an increase in operating expenses mainly due to turnover tax; and three, lower net fee income in the quarter. Net income from the net monetary position was 32% higher quarter-over-quarter, explained by a higher quarterly inflation. Net interest income in the quarter was ARS 758.9 billion, increasing 20.2% quarter-over-quarter. After the uncertainty surrounding the midterm elections were off, average market interest rates declined. With the liabilities repricing at a faster pace than assets, we observed the reverse effect from the one seen in the third quarter of 2025, with income from public securities and loans increasing and expenses from funding increasing, but to a much lower extent. In the year, net interest income decreased 29.4%, as mentioned before, more than offset by the lower losses on the side of the net results from the net monetary position. Loan loss allowances increased 31.3% in the quarter and 181.2% accumulated year-over-year, explained by the deterioration of non-performing loans, in particular, on the retail book, which implied higher provisioning. The effect of loan loss allowances can be observed in the evolution of the cost of risk, which reached 8.11% in the fourth quarter of 2025 and 5.54% on an annual basis. During 2025, personnel and administrative expenses decreased by 11% and 12.6%, respectively. This was achieved, thanks to the active pursuit of efficiencies during the year. During the fourth quarter of 2025, in particular, total operating expenses were ARS 537.5 billion, remaining stable quarter-over-quarter. Both the efficiency ratio as well as the fee to expenses ratio evidence the stability and the improvements that are taking place on these lines of the income statement, and we expect them to improve even further for 2026. Going on to Slide 6 and 7. Private sector loans as of the fourth quarter of 2025 totaled ARS 14.8 trillion, increasing 7.6% in real terms quarter-over-quarter and 47.6% year-over-year. In the quarter, growth was mainly driven by an increase in loans in pesos. In total currency, the products that increased the most were mostly commercial loans such as financing of projects and exports and discounted instruments. On the peso portfolio, discounted instruments, pledged loans and credit cards stood out. Pledged loans are mainly affected by the introduction of FCA into the loan book. In the case of consumer loans, prudency policies taken in a context of higher deterioration of non-performing loans were noticeable on this line with a 2.2% quarter-over-quarter decline. BBVA Argentina's consolidated market share of private sector loans reached 11.91% as of the fourth quarter of 2025, improving 64 basis points from 11.27% a year ago. As for asset quality, the NPL ratio of BBVA Argentina on private loans reached 4.18% as of December 2025. As mentioned before, BBVA is renowned for presenting delinquency ratios spread consistently below the sector average, which reflects the quality of its credit risk management and its prudent approach to portfolio origination. By the end of 2025, total gross loans and other financing over deposit ratio was 88%, above the 78% in December 2024. Participation of total loans over assets is 57%, the highest since 2020 and above the 51% recovery in 2024. As of the fourth quarter of 2025, the total NIM was 17.5%, higher than the 15.2% in the third quarter of 2025 and below the 20.2% in the fourth quarter of 2024. While the NIM in pesos increased by 277 basis points to 20.2% quarter-over-quarter, the NIM in dollars fell 91 basis points to 4.8%. In the quarter, the increase in NIM is mainly explained by a better yield on public securities and loans in pesos, while the drop in dollar NIM is explained by a higher volume and rate of interest-bearing liabilities. In the accumulated annual comparison, although the total NIM presents a considerable drop, it should be understood that this is a consequence of the rapid decrease in inflation and therefore, the level of rates and is more than offset by the lower cost of inflation adjustment. This can be seen in the adjusted NIM, which dropped from 17.30% to 13.75%. On the funding side, as of the fourth quarter of 2025, total private deposits reached ARS 16.7 trillion, increasing 3.1% quarter-over-quarter, and 29.7% year-over-year. The bank's consolidated market share of private deposits as of the fourth quarter of 2025 reached 10.04% from 8.60% a year ago. Private non-financial sector deposits in pesos, totaled ARS 10.5 trillion, a decrease of 1.4% quarter-over-quarter, explained by a decrease in time deposits and in other deposits, including interest-bearing checking accounts. This effect was partially offset by an increase in savings accounts. Private non-financial sector deposits in foreign currency expressed in pesos increased by 11.6% quarter-over-quarter. This is mainly due to an increase in savings accounts and in time deposits. In hard currency, U.S. dollar loans increased 12.7% quarter-over-quarter and 26.6% year-over-year. As of the fourth quarter of 2025, capital ratio reached 18.3%. The quarterly increase in the ratio was due to a 9.4% increase in Common Equity Tier 1, mainly impacted by the recovery in the value of government bonds at fair value through OCI. Public sector exposure, excluding Central Bank totaled ARS 3.9 trillion, implying a 15.5% exposure, below the 16.4% recorded in the third quarter of 2025 and 17.9% in the fourth quarter of 2024. For the year, the drop in exposure is mainly explained by the increase in assets led by the growth of loans over that of financial instruments. It is important to highlight that more than 90% of the National Treasury's public debt portfolio in pesos is at TAMAR floating rate. These bonds represent approximately 65% of the bank's sovereign portfolio and in the context of higher real interest rates in the second half of the year added value to the financial margin. In the quarter, the liquidity ratio reached a level of 44.2%. The liquidity ratio in local and foreign currency reached 37.7% and 55.2%, respectively. In line with our commitment of generating value for our shareholders, the bank continued the payment of dividends corresponding to the 2024 fiscal year in 10 installments, having paid 9 of the 10 installments required by the Central Bank's regulation up to the date of this report. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Tito Labarta with Goldman Sachs. Daer Labarta: I guess my main question is really on asset quality and how that continues to evolve and what that could mean for loan growth for 2026. We kind of expected already that you're still not out of the credit cycle, but it seems provisions jumped a bit more than expected. NPLs went up a bit. I mean do you still think 1Q, 2Q should be the worst of it? Do you think that can get delayed and the credit cycle can last a bit longer? I just want to understand how comfortable you feel on credit quality stabilizing and potentially improving? And what could that mean for loan growth? You have pretty good loan growth in the quarter, but is there some risk to your ability to grow loans if credit quality does not improve? Carmen Arroyo: Tito, good morning. Hi, everyone. This is Carmen Morillo. Thank you for your question. Related to asset quality growth and yes, we think that these are the main questions for this year. So first of all, I would like to highlight that during 2025, we have been able to gain market share in a quite solid way, this 11.91% market share that means 60 basis points increase in market share is quite solid. And in terms of credit risk, we've been under the system ratios. Having said that, we believe that first quarter will be also a tough one. But from then on, what we believe is that credit indicators should go downwards. So for us, the peak should be in the first quarter in terms of NPLs for sure, and in terms of cost of risk also. In terms of growth, maybe it's too soon to answer this question. What we believe is that depending on what the financial system growth is. And what we still believe is that we are -- so our strategy is to gain market share. So we see the credits in the system growing around 18% in real terms. So we should be growing above that. So our guidance was to grow between 25% and 30% for the 2026. And we think it's too early to change our guidance. So we would maintain these figures. So yes, around -- so to grow faster than the system. And also in terms of deposits. So we believe that our strategy is the good one in that sense. We've been growing also in deposits during 2025. We've been able to gain -- to be more -- so to have a better participation in the transactionality of our clients. And in that sense, we will be also beating the system in deposits. So I hope I could have answered your question. Thank you. Daer Labarta: Yes. No, that's helpful, Carmen. I guess how do you think that then translates to profitability for 2026? I mean, do you think you can achieve a double-digit ROE? Can you start getting to like the low teens by the end of the year? Or does that also get delayed a bit and we could see some pressure on profitability? Carmen Arroyo: Okay. So I think we have been very consistent in our guidance in terms of ROE. We were talking about low to mid-teens for the last quarters. It's -- as I mentioned, and all of you know, the environment is not so easy to predict. But we think it's early to change this guidance. So we are confident we will be able to achieve a better profitability than the one we have done this year, which, by the way, is much better than the systems one and other peers. So we are happy with that performance in relative terms. Of course, we have faced a lot of difficulties this year. And I think it -- so the year is a very positive one in this environment. And for next year, we hope to be above, so low to mid-teens, it's too early to say low or mid-teens, but I believe we should be achieving this goal. Operator: Our next question comes from Brian Flores with Citi. Brian Flores: Carmen, I wanted to maybe expand a bit on deposits because I think your market share gains were very relevant. You're above the double digit maybe for the first time in some time. So I think it's a very important point. Just wanted to see your strategy, right? Because I think given the conditions that are very tight, maybe the competition for funding intensified. So I just wanted to ask you what's your strategy here? And how do you prevent maybe a spike in the cost of funding? Diego Cesarini: Brian, this is Diego Cesarini. I will take this question. Well, it's true. We have been growing on deposits much faster than the system. Last year, we grew 32% in real terms, while the system grew around 12%. So our gains in market share have been huge. Here, we have been working on many fronts. On one side, we have seen a recovery on retail deposits. Retail term deposits, for example, represented a couple of years ago before Milei took cover. And below -- before the 2023 presidential elections represented around 30% of our deposits in pesos. And after 1.5 years, they just represented 10%. Last year, we started to see a recovery in the investors' appetite for bringing that kind of deposits. So we put a lot of focus on trying to make them grow faster. Now they represent around 15%. We have also been very active on companies on SMEs deposits. We were out of that market a couple of years ago because we didn't need that funding. So we are back on that market. We are putting a lot of aggressive targets to our work in our commercial forces. And we have also succeeded a lot in growing very fast on SMEs deposits. And the last -- I guess, that the last leg of this strategy wholesale deposits. Institution, as you know, they still represent a huge amount of Argentinian market. And again, 2 years ago, we didn't need those deposits after we started growing, well, we were going for them again. So we are on every front. And of course, in dollar deposits, we have also been growing market share. We are also active on that market. And we still think that we have room to keep growing there. Brian Flores: Super clear. And then a follow-up on Tito's question. Just to summarize, basically, you're envisioning growth as Carmen was saying, 25% to 30% in real terms, I don't know if you could elaborate a bit on the composition because I know you're a bit more on the commercial side in terms of the mix, right? The deposits, do you think they grow above or in line with loans? ROE, you mentioned already maybe low double digits. And then I have maybe another question on asset quality. Do you think cost of risk could be at some point, maybe at the end of 2026, closer to the end of 2024, which is closer to the 5% rather than the 7%, we are now? Diego Cesarini: Starting with your latest questions. Yes, we think that by the end of this year, it could be reaching the 2024 levels. Of course, it will start at levels that are similar to the end of last year, as Carmen said before. And regarding the composition of our portfolio, I think that maybe in general terms, it will be similar to the one that we have right now. But of course, at the beginning of the year, probably during the first semester, we will be much more focused on big corporations because for obvious reasons, that the retail market is still not recovering. So probably consumer loans or credit card loans could suffer a little during the first part of the year and probably in the second semester, things will return to normality. Carmen Arroyo: Yes. The point is when the situation in the retail side is safe enough to come back to credit cards and personal loans and all that. But having said that, we will be addressed -- we will be in mortgages, in pledged loans. So in the retail side, we see these products as the main ones in our strategy at the beginning of the year. Then, of course, as the situation gets better, we will be back in all products as we used to be. And in the commercial side, we are not expecting a higher deterioration, and that's why we think we will maintain, as we Diego was mentioning, in the mix we have nowadays. Brian Flores: Super clear. And on deposits, just to clarify, do you expect to grow above or below the loan growth? Carmen Arroyo: Below, so... Diego Cesarini: Below what? Carmen Arroyo: The loan growth? Diego Cesarini: No, I guess the below loan growth... Carmen Arroyo: Above the system. Diego Cesarini: Yes. Above the system, probably. But below loan growth just because, well, of course, equity also grows. There are other liabilities that also grow. So we need to grow less in percentage terms in deposits than in loans. That's just mathematics. But as I said before, we still think that we have room to grow. Even if deposits were behaving not so good this year, we still have liquid. We still have bonds in excess. We have a public sector portfolio in excess of what we need to comply with reserve requirements. So we still could use some liquidity in order to keep growing. Brian Flores: Perfect. So if I -- if we think of, let's say, a 20% real terms in deposits, that makes sense, right? Diego Cesarini: Yes, between 15% and 20% could make sense in a scenario where we grow in loans between 25% and 30%. Carmen Arroyo: And in both cases, gaining. So the strategy is to gain market share. So it will depend on what the system does. Operator: Next question from Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: Carmen, Diego, Belén. First, congratulations on the good result and the gains in market share, which is what you wanted to achieve and the stability of the results. So to ask a few things which are different. First, the dividend for 2025, do you expect it to be able to pay in a single or a discrete number of payments? Or will you still have these 10 different payments that you have had in 2024? And what level of payment are you thinking of doing? Second, on taxes. So when you look at the last 3 years, you've been paying about 34% on average over the last 3 years. Is that a level that you expect for the future? Or should we go back to the statutory rate around 30%? And finally, can you give us an update about when we might move away from inflation accounting? Is that 2028? Or do we have to wait longer? Carmen Arroyo: Carlos, thank you for your words. Then related to your question. So first one was dividends. So we still don't know what -- so how are we going to be able to pay the dividend. So I don't have an answer on that question. So we believe we need to have information in the following -- yes, during March, I would say. So we will know that soon. Related to the amount, as we -- so we ended in -- so this capital ratio of 18.3%, 2025. As I mentioned, we want to grow for the next years. So we prefer to pay a small -- so we will be paying dividend, but it will be something similar to what we did last year. So to maintain a lower payout ratio and grow faster. Then your second question... Carlos Gomez-Lopez: It was on the taxes and inflation. And by the way, what was the payout, in the end last year? Carmen Arroyo: Sorry? Carlos Gomez-Lopez: The payout, last year? Diego Cesarini: Last year payout was around 25% of our 2024 net income. Carlos Gomez-Lopez: 25%. Diego Cesarini: That was last year dividend. Carmen Arroyo: Yes. Then inflation. A couple of months ago, we were thinking about 2027, so by the end of 2027, to be the end of this adjustment. Now we changed a little bit our projections of inflation. So I think it would be prudent to say that 2028 should be the year to go out of this adjustment, but it will be, yes, in 2027, beginning of 2028, something like that. Diego Cesarini: Carlos, just to add a piece of information, according to the FX regulation that is in place, we could access in theory to the official FX market to pay dividends this year. Carmen Arroyo: Okay. And then in terms of taxes, you were asking. So I don't see a reason why they should come back to -- so other percentages. But I don't have here the information. So let me take a look on that and come back to you. Carlos Gomez-Lopez: Sure. Carmen Arroyo: Yes. So I believe -- so we should be at that levels but if -- so if we see something else, I will come to you. Carlos Gomez-Lopez: So at that level, meaning the 30% statutory? Because as I said, this year, almost every quarter, you have had 34% to 41% in my numbers, maybe I'm doing something wrong. Carmen Arroyo: No. I mean 35%. So around 35%, yes. Carlos Gomez-Lopez: Around 35%? Diego Cesarini: Correct. It should be around 35%. Operator: Next question from Pedro Offenhenden with Latin Securities. Pedro Offenhenden: I wanted to ask on cost, how should we think about personnel and administrative expenses during this year? Carmen Arroyo: Pedro, thank you for your question. This year, meaning 2026, I believe? Pedro Offenhenden: Yes. Carmen Arroyo: So the improvement we've seen during this year, we believe we will be also improving in 2026. So the trend should continue, not only in terms of being quite aggressive in not growing in expenses, but also due to our better net interest margin, fees and commissions and so on. So the efficiency ratio should go downwards. Pedro Offenhenden: Okay. Do you have a target on the efficiency ratio for the year? Carmen Arroyo: Around 46%. Operator: Our next question comes from Marcos Serú with Allaria. I believe you're having some technical issues. We're going to go ahead with the next person in the queue, which is Matías Cattaruzzi with Adcap. Matías Cattaruzzi: I have a question about the -- as we have seen in the first quarter, dollar liquidity in the system is improving. And government is signaling to probably changing regulation in dollar lending to non-dollar producing clients. How do you see [indiscernible] in this field, do you intend to lend in USD to non-dollar producing clients? And which sectors do you think would be best? Diego Cesarini: Matías, this is Diego. Well, first of all, I would like to say that in the case of BBVA, we are pretty comfortable with the amount of lending we are producing in dollars right now with the current regulation. We are growing. We have a lot of demand in our pipeline. So if you ask me, by the end of this quarter, even if we are growing a lot in deposits and other kind of dollar funding, we are -- we would really be short of liquidity. We are gaining market share in loans. And everything is being done under current regulation. So we are not in the need of a change in this regulation. Having said this, if regulation changes and opens to more sectors, of course, we have to evaluate very carefully the sectors. It's difficult to establish a general policy because we all have in mind what happened in Argentina 25 years ago where dollar lending was open for anyone. That kind of -- and hedge are very difficult to manage in case of devaluation. So this is basically our view of the situation. The regulation changes, we will analyze if there are any sectors specifically or special cases where we can relax a little our policy. But I think that the most important is that we are really lending at full with the current policy. We don't -- right now, we don't need a change in our case, we don't need a change in regulation. Besides, it's -- when you look at the loan-to-deposit ratios in foreign currency, you will see that in our case, it's around -- right now, it's around 55%, probably will be 60% in a couple of months. But then reserve requirements are really high in this currency at around 23%. We also have to keep some banknotes in our branches. We have faced -- of course, it's a public information that we have faced -- banks have faced a very sudden and deep runs on our deposits many years ago. So we still have to be very careful regarding our customers' behaviors in this kind of deposits. So we still have to keep important amounts of liquidity in dollar terms. Of course, Central Bank cannot lend dollars to banks in case of meat. So this is our approach to this subject. Matías Cattaruzzi: Okay. And a follow-up question. What's -- do you have a guidance in net interest margin for 2026? Diego Cesarini: We don't have a formal guidance on net interest margin, but we think that -- we like to measure this indicator in real terms, because, of course, if you compare 2024 to 2025, the net interest margin fell, but of course, because inflation fell and interest rates also decreased very sharply. But on the other side of our balance sheet, and our net income, you see that the cost of inflation also decreases a lot. So you have to see this in net terms. In general terms, we have seen that last year, we didn't lose -- we didn't lost margin. It was -- our net margins were similar to the previous year. And for next year, for 2026, we are seeing a similar situation. We are -- probably, our net interest margin will fall a little in real terms. That will be offset by growth in activity. So this is not an issue for now for the bank. Operator: Our next question comes from Marcos Serú with Allaria. Marcos Serú: Sorry, I was having trouble with my microphone before. I wanted to ask in first place about personnel expenses. How is -- explain the decrease in this quarter, while the headcount has increased? And then about your guidance. I wanted to know if you could share the assumptions behind that guidance about inflation, GDP growth in 2026 and effects. And the last one is, do you know about how much of the growth in loans and deposits is in pesos and in dollars? Carmen Arroyo: Okay. Thank you, Marcos, for the questions. Related to the first one, personnel expenses. Yes, so there are some provisions we decided to return. And that's why you see this is true, that you see a different evolution between headcount and expenses. So it's a one-off. This is the short answer for that. Then related to the guidance, I think... Diego Cesarini: Regarding inflation, we are expecting right now, our research department is expecting a 22%, regarding GDP, 3% growth, regarding FX, around 1,700. And regarding the mix in growth in loans, in pesos and dollars, we are still expecting dollar loans to grow a little above peso loans. Dollar loans right now represent around 23% of our book. Probably that will reach 25%, 27%. So dollar growth should be around 40% probably in real terms or a little more. Marcos Serú: Okay. Just one question. So do you think that the personnel expenses charged-off this quarter can be adjusted by inflation in order to project the followings or which number could be a normalized number? Carmen Arroyo: I'm not sure if I get your question right, Marcos, sorry. Marcos Serú: If you think that the personnel expense charge-off, this quarter in order to project it, will it growth as inflation growths or which growth do you expect for that charge? Carmen Arroyo: So I would say that you -- so first, efficiency ratio is going to be lower than this year. And second, the growth in expenses as a whole should be very linked to inflation. So with this couple of -- okay. Operator: Our next question comes from Brian Flores with Citi. Brian Flores: I just wanted to ask you because everyone, I think, not only you, but other peers have been mentioning about the potential recovery of the consumer. Just wanted to ask you, in your view, what are the catalysts here for us to see a recovery and also for them to start, as you mentioned, recovering not only in the demand of credit, but also maybe on deposits, I think that would be a great color. Carmen Arroyo: So thank you for the question. So the short answer should be, so interest rates need to be stable and lower, that's one issue, which is important. And the other one is the micro, the stability. So macro policies are going in the right direction, and we believe that this is also in the right path, but we still need to see what happens with the companies, with the retail, with the salaries in real terms. So it's more complicated than only interest rates. So we believe something else needs to be happening in the country to go back to consumer loans. Brian Flores: Carmen, anything on the regulatory side that you think could really help on either side, either supply or demand of credit? Diego Cesarini: A lot of the bad regulations have already been addressed. But of course, everybody is aware that last year, Central Bank monetary policy was very restrictive. Our reserve requirements skyrocketed. So I think that what probably we will need some flexibility on that side from Central Bank in order to keep growing. And we think that, that will come with time. I think that right now, of course, the inflation has gone a little above the expected levels. But once that issue is again under track, I think that Central Bank is going to act and start to be less restricted. I think that's the main issue right now. Operator: Our next question from Ignacio with Invertir en Bolsa. Ignacio Sniechowski: Can you hear me? Operator: Yes. Ignacio Sniechowski: Okay. Carmen and Diego, well, my question was regarding reserve requirements, but Diego answered that. So it was -- if you are expecting or seeing the Central Bank lowering those that you mentioned that it will depend on the evolution of inflation. So sorry, it was already answered and... Diego Cesarini: Yes, I can elaborate a little more. Let me tell you that in the case of reserve requirements, what Central Bank did last year, they raised, of course, these levels, but we can comply those requirements in bonds. So it doesn't represent a cost for our NIM. It's not affecting our net income, of course. But of course, we need those funds in order to keep growing in loans if there is enough demand. Besides that, we need a little more -- we are asking for a little more flexibility because last August, we had to comply with those requirements on a daily basis. That was from the operational side, it was very difficult for us. They have relaxed somewhat those daily requirements. But still, there are some minor issues that we think that should be addressed. We are asking, but that doesn't have really an impact on net income. So that's the general view on the subject. Ignacio Sniechowski: Okay. And Diego, one more question. Do you think that wallets and fintechs that -- well, banks already won the battle of salaries and being deposits in banks. But do you think that they will eventually strike back to that -- to potentially reverse that? Diego Cesarini: Anything can happen, but I think that the main issue is that the biggest one, Mercado Pago has already asked for a banking license. So we should guess that in any time in the future, they will get that banking license and they will be able to offer the product. So we need to be ready, our products need to be competitive and have a good user experience in order to be in a good position to keep our share. We've been growing on wallet on pay per share. We have around 15% of the total market. And we have been growing consistently through the past year. So I think that we have a good offer for our customers. Operator: The Q&A session is over. And now I would like to pass the word back to BBVA's team for final remarks. Carmen Arroyo: Thank you. Thank you all for attending the conference. And just to highlight that despite the challenge of the environment, we've been going through this year. We believe BBVA Argentina has proven resilience and effective management in the year. So credit growth and non-performing loans levels below the system average and a very solid position in solvency and liquidity are the key issues of our strategy, and we are committed to keep growing in the following quarters and to maintain our efficiency and generate profitability for our shareholders. Operator: Thank you. This does conclude today's presentation. You may now disconnect, and have a nice day.
Operator: Good morning, and welcome to The Kroger Co. Fourth Quarter Earnings Conference Call. My name is Alex. I'll be coordinating today's call. [Operator Instructions] Please note that this event is being recorded. I'd now like to turn the conference over to Rob Quast, Vice President, Investor Relations. Please go ahead. Rob Quast: Good morning. Thank you for joining us for Kroger's Fourth Quarter and Full Year 2025 Earnings Call. I am joined today by Kroger's newly appointed Chief Executive Officer, Greg Foran; Chairman, Ron Sargent; and Chief Financial Officer, David Kennerley. Before we begin, I want to remind you that today's discussions will include forward-looking statements. We want to caution you that such statements are predictions and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. The Kroger Company assumes no obligation to update that information. After our prepared remarks, we look forward to taking your questions. [Operator Instructions]. I will now turn the call over to Ron. Ronald Sargent: Well, thank you, Rob, and good morning, everyone. Thank you for joining our call today. Before we start, I'd like to just take a moment to welcome Greg Foran as Kroger's Chief Executive Officer. Greg is a strong leader with a proven track record of driving growth in large and complex businesses. He has spent most of his career in food retail, and he understands what it takes to run great stores and build a strong e-commerce business. His priorities align closely with the work we've been doing over the past 12 months, putting the customers at the center, moving with urgency, strengthening our e-commerce business, accelerating media and improving productivity to invest in lower prices. Many of you will know his background. He started as a store associate at Woolworths in New Zealand and eventually led Walmart U.S. where he was responsible for thousands of stores as well as over a million associates. During his tenure, the business delivered consistent sales growth while improving store operations and building e-commerce capabilities. Most recently, Greg led Air New Zealand during the pandemic, one of the most challenging periods in the history of the airline industry, helping position the company for a solid recovery and leading their digital transformation. Greg is the right person to lead Kroger, and we're excited to have him. He will close our prepared remarks today with his early impressions and focus areas, as he steps into the new role. Now turning to the fourth quarter. We're pleased to report another quarter of strong results, capping off a strong year for Kroger. Importantly, in the final period of the year, we achieved positive market share growth for the first time this year. For the full year, we nearly doubled our identical sales without fuel from 1.5% to 2.9% and grew earnings per share by 9%, which was at the high end of our earnings expectations. This performance speaks for itself. We're executing on our priorities and delivering results. This year, we've been intentional about focusing on what matters most to our customers, and this work has laid the foundation for long-term growth. Today, I'll talk about the things we got done and the proof points of our progress. In the fourth quarter, we continue to make meaningful progress on our core priorities; improving the customer experience, simplifying our business and ensuring we have the right talent in place to move with speed. These actions are strengthening our competitive position today and are building a more efficient customer-focused company for the future. Serving our customers better starts with delivering value and making the customer experience easier. This quarter, we again made price investments to lower everyday prices and to offer more promotions, and this improved our value perception with our customers. We also added store hours during the holidays, particularly in high traffic departments, so more associates were available when customers needed them most. These changes improve checkout times and contributed to positive trends in customer satisfaction. As part of simplifying the business, we announced the sale of Vitacost and plan to close nearly 50 underperforming little clinic locations. We also continue to review all noncore assets to determine their ongoing contribution and role within the company. These decisions reflect our commitment to running a more efficient company and focusing on priorities that add the most value. A strong leadership team is also essential to moving faster and executing our strategy. This quarter, we promoted Victor Smith to Senior Vice President of Retail divisions, along with new division presidents in Atlanta, Fry's and Ralphs, each with deep operational experience and a track record of running great stores. These leaders were developed within our organization, which speaks to the depth of talent we have across the company. This week, we also elevated Milen Mahadevan for a newly created role to lead artificial intelligence work across the company, reinforcing the priority that we're placing on AI. Milen most recently served as President of 84.51°. We see AI as a meaningful opportunity to both improve the customer experience and drive productivity across our business. We're already seeing results from more competitive pricing, improved shrink to faster fulfillment and tools that help our associates work more efficiently. As we move forward, we plan to expand these capabilities, including Agentic shopping on our digital properties. Milen's appointment ensures we have dedicated leadership to accelerate this work. As we look back over the full year, we took several important steps to position Kroger for future growth. We lowered prices on thousands of products making it easier for customers to see the value we offer. Customer price perception improved across the company, and we maintained our competitive positioning against our major competitors. We created a dedicated e-commerce team and completed a comprehensive strategic review of our e-commerce operations, that led to an updated hybrid fulfillment model, which will better meet customer expectations. These changes will make our e-commerce business profitable in 2026. We delivered substantial cost savings across the organization through operational efficiencies and modernizing how we work. We then reinvested those savings directly into lower prices and improved customer service. We made difficult, but necessary, decisions to close underperforming stores and reduce corporate headcount to create a more agile and focused organization. We accelerated our new store investments in 2025, completing 29 major projects. And in 2026, we expect to increase new store openings by 30% with plans to expand into 2 new regions including Jacksonville and Kansas City, 2 high potential markets that will support our long-term growth. Collectively, these actions simplify how we operate and sharpen our focus on the core business. They also position us to reinvest in the areas that matter most to our customers, more value and best service. We've made strong progress, and there's more to do, which Greg will touch on later. This is how we're building a stronger foundation for sustainable growth in the years ahead. Before walking through the quarter, I want to briefly comment on the customer environment. Customers remain focused on value in the fourth quarter, which was consistent with the trends that we've seen throughout the year, and we are continuing to invest in price to make sure we're delivering the value customers expect. Now turning to our results. Identical sales without fuel grew 2.4% this quarter, which includes nearly a 40 basis point headwind from the Inflation Reduction Act. Weather had a neutral impact on a year-over-year basis. For the full year, identical sales without fuel grew 2.9%, in line with our full year guidance. We saw continued strength in e-commerce and pharmacy, along with solid performance in key areas of the store like Fresh. Importantly, food volumes improved and grocery sales were a larger portion of our sales mix, which is a positive sign going forward. Our market share trends improved in the fourth quarter, and for the full year, and I'm pleased to report that on our final period, we delivered positive share gains, our strongest share performance since 2021. We believe the price investments we've made throughout the year are resonating with customers and are contributing to these results. And we made these investments while still improving our full year gross margin rate, excluding fuel and adjustment items by improving shrink and productivity. We're committed to this balance, investing in lower prices while being disciplined in our margin management and the work we're doing to find efficiencies across our business allows us to do both. David will speak to these factors in more detail. Our brands had a solid quarter. Excluding the impact of egg deflation, sales continued to outpace national brands. Simple Truth and Private Selection, again led our growth with customers continuing to choose these products because they deliver high quality at an affordable price. Innovation continues to be a priority. This year, we introduced more than 1,100 new Our Brands products, up from more than 900 last year. A growing number of these products are focused on health, an area where customer demand is growing and Our Brands portfolio is well positioned to lead. Our e-commerce business continued to be an important growth driver and one of the key ways we attract new households. Adjusted e-commerce sales grew 20% this quarter and we've now built this into a $16 billion business. We also continue to make meaningful improvements in e-comm profitability. As this business grows, the profitability improvements we're seeing become increasingly significant to our P&L. E-commerce growth also fuels our media business. More customers shopping online means more impressions, more data and more value for our advertising brands. That connection between e-commerce and media is key to how we accelerate profitability, and we see significant runway ahead. The early results from our new relationship with DoorDash and Uber Eats have exceeded what we originally planned. They have extended our reach to customers and shopping occasions we wouldn't otherwise capture. They're incremental, and they are profitable. Together with Instacart, we expect our convenience offerings to deliver over $1.5 billion in sales in 2026, which will help us accelerate our e-commerce growth. Before I turn it over to David, I'd like to take a moment to reflect on the progress we made this year. We took important steps to strengthen Kroger for the long term; lowering prices and improving store execution to better serve our customers; enhancing our e-commerce business to deliver growth, while improving profitability; accelerating our store footprint; taking meaningful action on our noncore assets; and strengthening our leadership team with key appointments. These actions reflect our focus on serving customers better, running great stores and simplifying the company so we can move faster. And to our associates listening in, thank you. I'm proud of what this team has accomplished. The work you delivered has built a stronger, more focused company, and I'm confident in where we're heading. It has been a privilege and I'm honored to continue serving on the Board as we enter this next chapter. And with that, I'll turn it over to David. David John Kennerley: Thank you, Ron, and good morning, everyone. Kroger delivered another strong set of results this quarter in an environment that remains dynamic. We executed well, delivering solid e-commerce growth, maintaining cost discipline and achieving our profitability goals. From a financial perspective, this was a year of both strong performance and deliberate investment in the future. We invested in price while improving our FIFO gross margin rate, excluding fuel and adjustment items. We accelerated e-commerce profitability, and we improved our cost structure to redeploy those savings into areas that drive growth. These actions strengthen our financial foundation and support sustainable performance going forward. The momentum in our business gives us confidence in our outlook for next year. Today, I'll start by covering our Q4 results in more detail and highlight some key full year metrics and then share our guidance for 2026 and the key drivers behind it. We achieved identical sales without fuel growth of 2.4%, a strong result that includes a nearly 40 basis point headwind from the Inflation Reduction Act. On a 2-year stack basis, identical sales without fuel grew by 4.8%. Growth was primarily driven by improving trends in units. As Ron mentioned earlier, our share trends improved in 2025 with fourth quarter trends again improving and culminating in positive share gains in our final period of the year. Sales growth was led by e-commerce and pharmacy, along with strong performance from Fresh. As Ron mentioned, what's encouraging is the underlying composition of that growth. We saw continued improvement in food volumes with grocery sales representing a larger portion of our overall sales mix. Pharmacy had another strong quarter led by growth in both core scripts and GLP-1s. That said, Pharmacy contributed nearly 50 basis points less than in the third quarter reflecting the impact of the Inflation Reduction Act and an accelerating shift from brand to generic beginning in January. Food inflation moderated further in the quarter, down approximately 90 basis points compared to Q3, with egg deflation a significant headwind, partially offset by beef inflation. Our FIFO gross margin rate, excluding rent, depreciation and amortization and fuel was flat in the fourth quarter compared to the same period last year. This result was primarily attributable to sourcing improvements, lower supply chain costs and lower shrink offset by price investments and the mix effect from growth in pharmacy sales, which has lower margins. When we provided our second half outlook, we updated our FIFO gross margin rate expectations, excluding fuel and KSP, to be relatively flat for the full year. We delivered better than that, and as our rate improved in the second half of the year, primarily driven by our performance in the fourth quarter with favorable mix and better shrink results. For the full year, excluding the effect of KSP, fuel and adjustment items, we improved our rate by 14 basis points, while investing more in price, reflecting the balance we are focused on achieving between delivering value and maintaining margin discipline. The operating, general and administrative rate, excluding fuel and adjustment items, increased 21 basis points in the fourth quarter compared to the same period last year. The increase in rate was primarily attributable to cycling real estate gains from a year ago and labor investments to improve customer experience, partially offset by lower incentive plan costs and improved productivity. We continue to make progress on improving our cost structure and importantly, we're generating more durable cost savings, which we are reinvesting into stores and the customer experience to deliver better service and more value to customers. With that said, we believe we are still in the early stages of what we can achieve. Sourcing and procurement remains a significant opportunity together with modernizing our ways of working, we see substantial runway for cost savings ahead. Our LIFO charge for the quarter was $11 million compared to a LIFO charge of $30 million last year. On a full year basis, our LIFO charge was $157 million in 2025 compared to $95 million last year, resulting in a $0.07 headwind to EPS. We expect our LIFO charge in 2026 to be similar to 2025. Our adjusted FIFO operating profit in the quarter was $1.2 billion. Q4 adjusted EPS was $1.28, reflecting 12% growth compared to last year. For the full year, adjusted EPS was $4.85 and grew by 9%, coming in at the top end of our long-term growth expectations. Fuel results were better than expected this quarter, driven by strong fuel margin performance even as gallon volumes declined. Q4 fuel profitability came in ahead of last year. Fuel continues to be an important part of our strategy, building loyalty through our fuel rewards program and providing another source of value for our customers. I'd now like to turn to capital allocation and financial strategy. We delivered strong adjusted free cash flow of $3.9 billion this quarter (sic) [ for full year ] , exceeding our expectations. This was driven by the strength of our operating performance, good progress on a range of working capital initiatives and favorable year-end timing. Our balance sheet remains healthy with our net debt to adjusted EBITDA ratio still below our long-term target range. This gives us the financial flexibility to pursue growth investments and other opportunities to enhance shareholder value. Over time, we expect to move back towards our target leverage ratio. During the year, we completed our $7.5 billion share repurchase authorization. This included a $5 billion accelerated share repurchase program, followed by open market repurchases, which completed our remaining authorization in Q4. In December, our Board approved an additional $2 billion share repurchase authorization, and we expect to complete these repurchases by the end of fiscal 2026. Our capital allocation framework remains consistent. We are focused on investing in opportunities where we can generate the highest long-term returns and improving ROIC remains a core priority. We are encouraged by the progress we're making on our major store projects and our recent remodels are delivering higher-than-expected returns. These investments will be important to driving ROIC improvement over time. I'd now like to share our guidance for 2026 and walk through the key factors shaping our outlook. We expect identical sales without fuel growth in a range of 1% to 2%. It is important to note that the Inflation Reduction Act will create an approximately 130 basis point headwind to identical sales without fuel this year, reflecting the impact of lower reimbursement rates on key medications while having no impact on gross profit dollars. Excluding the IRA impact, we would expect identical sales without fuel growth in a range of 2.3% to 3.3%. In terms of quarterly cadence, we expect Q1 identical sales without fuel to come in near the low end of our full year range, driven primarily by continued egg deflation. As this headwind eases, we expect sales trends to improve. A few other dynamics to keep in mind as we think about the year. We expect overall inflation to be lower than it was in 2025. Within Pharmacy, we expect sales growth to moderate to low to mid-single digits, reflecting the impact of the Inflation Reduction Act on reimbursement rates and the ongoing shift in brand to generic mix, which is currently greater than we've seen in the past, partially offset by continued GLP-1 adoption and script growth. We'll also continue to regain ESI households, though progress remains gradual, and we do not expect to fully recover the business we previously lost. We expect e-commerce to accelerate from 2025 growth rates with continued strength in delivery and increased store-based fulfillment through our third-party delivery providers. We're also enhancing our loyalty program in 2026. This includes updates to our rewards program and a revamped Kroger credit card, both designed to deepen customer engagement and drive increased shopping frequency across our in-store and e-commerce channels. Total sales without fuel should be slightly lower than identical sales without fuel, reflecting an approximately $350 million headwind from the closure of our Florida fulfillment center and $300 million headwind from the sale of Vitacost partially offset by new store openings. We expect adjusted FIFO operating profit in a range of $5 billion to $5.2 billion. We will continue to drive greater value for our customers by investing in price, both in everyday value and through promotions, and we expect these investments to increase compared to 2025. We are also investing in the customer experience, particularly in service and labor hours, ensuring our stores are well staffed. Even with these increased investments, we expect our FIFO gross margin rate, excluding fuel and adjustment items, to improve in 2026. These investments will be funded through increased productivity and cost savings. We expect to exceed our 2025 cost savings with increased contributions from 2 areas, in particular, e-commerce and procurement. In e-commerce, we will lower our cost to serve by fulfilling more orders out of stores, closer to our customers and by leveraging our third-party delivery providers. In procurement, we are going after both cost of goods sold and goods not for resale with a level of intensity that reflects the scale of the opportunity. In Fresh imports, national brands and Our Brands, we are renegotiating supplier agreements, going direct where we have historically used intermediaries and ensuring that every dollar of Kroger's purchasing power is working for us and our customers. The savings we generate flow directly into lower prices for our customers. We have dedicated teams focused on these areas, and we are confident in our ability to deliver. Our Media business delivered solid results in 2025, and we expect to build on that momentum. Our merchandising and Media teams are working more collaboratively, which is improving the quality of our activations and outcomes for brands. In 2025, our alternative profit businesses, which include Media, Kroger Personal Finance and Insights, delivered $1.5 billion in operating profit, and we expect Media to deliver double-digit growth in 2026. To support our modernization efforts, we are launching the Kroger Global Capability Center. This initiative is designed to streamline decision-making, improve productivity and increase the speed at which we execute on behalf of our customers. It complements the work already underway across the organization to modernize how we operate. Work has started and is progressing with speed. We expect modest benefits in 2026 with more significant benefits expected in 2027 and 2028. Turning to capital allocation. We will continue taking a disciplined approach focused on long-term shareholder value. We expect capital expenditures of $3.8 billion to $4 billion with increased investments in new store growth. These new locations are strategic investments in our future. They follow a natural maturation curve. It takes time to build customer awareness, establish traffic patterns and reach profitability. In early months, we absorbed start-up costs and elevated labor expenses as we staff up and invest in training. This is expected, and it reflects the same disciplined approach we have executed successfully for many years. These stores will drive volume growth, expand our customer base and strengthen our presence in key markets. We are confident they will deliver meaningful long-term returns. As part of our new store strategy, we're also testing different formats and bringing fresh thinking to the in-store experience. That means evaluating new concepts, making sure every element of the store is relevant, productive and aligned with how customers want to shop today. Beyond new stores, our capital investments will support technology and AI, where we are investing aggressively. These investments serve 2 purposes: improving the customer experience and driving productivity throughout the company. This year, we're introducing Agentic AI shopping for our customers, which will help them discover items, build baskets, plan meals and stay within budgets, all in a personalized way. We're also investing in supply chain modernization with more automation and expanded capacity. And we'll also continue investing in our remodels to ensure our stores deliver a consistently strong experience. We expect adjusted free cash flow of $2.7 billion to $2.9 billion and adjusted net earnings per diluted share of $5.10 to $5.30. I will now turn the call over to Greg. Gregory Foran: Thank you, David, and good morning, everyone. I'm excited to be here and grateful for the opportunity to lead this great company. It's been about a month since I started, and I've spent that time learning Kroger from the inside out. I've been spending time with Ron and the leadership team, having one-on-one conversations with leaders across the organization and getting out to visit stores, distribution centers and manufacturing facilities. And importantly, also watching how our customers shop. I've begun working with the team to review our strategic plan, and I'll share more as that work progresses. What I've seen so far has reinforced my belief that Kroger has tremendous strengths to build on. We have a loyal customer base, dedicated associates, a strong store network and real momentum in areas like Fresh, e-commerce and Our Brands. I've also been impressed by the energy I've seen in the stores, associates taking ownership of their work and taking pride in serving customers. The team has done excellent work, particularly over the past year to strengthen the business. And my focus is on how we operationalize our strategy to make us even better. It starts with the top line. We need to grow sales faster. And in my experience, that comes down to giving customers a compelling reason to shop with you by offering great value, great products and a great experience. Price is an important part of that equation. Customers need to trust that they're getting a fair deal every time they walk into our stores. We've made progress on price, and I want to keep pushing by pulling unproductive costs out of the business, investing in everyday value, sharpening our promotions and making sure customers see and feel the difference when they shop with us. When you combine competitive prices with strong Fresh and a well-run store, you drive traffic, you grow baskets and you gain share. That's what I want to accelerate at Kroger. I've spent my career in food retail and running great stores is how you make that happen. It's about delivering a great experience consistently in every store on every visit, with a shopping in store or online. Fresh is a good example. Customers develop a lasting impression based on the quality of fresh foods, which is incredibly important as we accelerate e-commerce, get those right and we earn their confidence. My focus will be on continuing to improve execution and ensuring our associates have the tools and support they need to serve customers well. To invest more aggressively in the customer experience, we have to be disciplined and aggressive on costs. I see significant opportunity here, and we're going after every available margin dollar across the business. Some of that is buying better, improving how we source and procure products. And some of it is improving productivity by streamlining processes and modernizing our ways of working. The savings we generate will be reinvested directly into lower prices and better service for our customers. That's how we will fund our growth. Customers want convenience and are increasingly shopping online to buy food. We have the assets to meet that demand and e-commerce is a key focus area for us. We've built this into a more than $16 billion business with 7 consecutive quarters of double-digit growth. There's a strong foundation, but we need to accelerate it. Our stores are central to how we serve customers online. Our refreshed hybrid fulfillment model, which better leverages the stores and delivery providers like Instacart, DoorDash and Uber Eats, positions us to accelerate growth while reaching profitability next year. By using our stores as fulfillment hubs, we get inventory closer to customers, reduce last mile costs and offer the speed and convenience that customers are looking for. Our Media business is closely tied to this e-commerce momentum. We have the data, we have the customer relationships, and we have the platform. As e-commerce grows and our digital capabilities expand, we see a long runway to accelerate growth. My goal is to do all of this while protecting our margins. The investments we're making in price and the customer experience are funded by the cost savings and efficiencies I described and by growth in Media. That discipline is essential. We will grow the top line and gain share, invest in the customer and deliver long-term value for shareholders. I've been in food retail a long time, and I know what good looks like. It starts with the customer. It's built on strong execution in our stores and online. And it requires a team that wants to win and is willing to move fast. That's what gives me confidence. Kroger has all the ingredients to win, and my job is to bring it all together. We'll now open it up for questions. Operator: [Operator Instructions] Our first question for today comes from Krisztina Katai of Deutsche Bank. Krisztina Katai: Welcome, Greg, to the Kroger family. I wanted to focus on your initial assessment. You obviously emphasized the need to grow sales faster. You talked about offering great value. So beyond price investments, can you dig a bit into the initiatives or the strategic shifts you envision to significantly accelerate the top line growth? And we think about a potentially softening or more price-intensive environment, protecting the margin that you talked about. Just how much runway do you see for further improvements in sourcing and procurement? Gregory Foran: Look, Krisztina, it certainly is pretty early for me. I'm just into my fourth week here. What I would say is that the foundation that Ron and the team have built is incredibly solid. So decisions that have been made, particularly in the last year set us up. Do we need to do more in price? For sure. But the work is underway on that. I need to spend more time to get into the math that is around that. But as David has pointed out in his remarks, we see opportunities. We see opportunities in cost of goods sold. We see opportunities in doing a better job with imports. We see opportunities in the Kroger capability center. And then there'll be the normal ones around shrinkage and other areas in the business that we can lean into. So as I work through this over the next sort of 90 to 100 days, I'm working with the team closely. We'll pull this together. and see how the numbers come out and at an appropriate time before the end of the year, we'll share some real detail with you. Now on top of that, we know the inherent strengths we have in the business. We've got a great Fresh business. We need to make sure that it's consistent right across every store every day. We know we've got a great Own Brands Business. We know that we can accelerate e-commerce and the decisions that have been made by Ron and the team put us in a great position. As you accelerate that, you can accelerate Kroger Precision Marketing. So look, 3.5 weeks in, I'm still doing lots of homework, but I'm feeling good about what we've got in front of us. So lots of runway. Krisztina Katai: That's great. And then if I could just have a follow-up. I mean you have a newly created AI role. Can you maybe for Kroger as a whole, just talk about maybe the talk through 2 to 3 specific quantifiable targets for AI's impact on the customer experience and productivity that you would expect to achieve in the next 12 to 24 months? David John Kennerley: Krisztina, it's David. Let me take that one. Listen, we see AI as a big opportunity, and it's an area we're excited about. Obviously, Ron talked in his remarks about the appointment of Milen to lead this work. And I think that, that makes a big statement about how serious we're taking this. And we have significant investment dollars in 2026 and beyond targeted at making sure that we crystallize this opportunity. What I'd say is, like many other companies, we're at the early stages. We've made some good progress, but we've got a lot more to do. And I think we've got already some emerging good proof points of the work that we're doing. I think if you look at areas like operations, some of the shrink results that you've been seeing from us are driven by technology and AI. And that's an area where I'd expect us to continue to invest. In the people space, we've got some really good tools that are improving the employee experience, helping us manage labor better, help us schedule labor better. And I think, of course, there's then Agentic shopping. We've got our own digital shopping assistant live in a couple of divisions. That's on the Kroger platform, and we'll expand that later this year to all divisions. We've obviously announced the partnership with Google. And I think there's a lot more to come in the Agentic space, leveraging the advantages that we have on quality, freshness, et cetera. So I think a big area of focus for us, some good early proof points, the organizational and foundational investments we're making super critical and much more to come, both from a customer experience and what I'd call productivity experience. Operator: Our next question comes from Michael Lasser of UBS. Michael Lasser: Welcome back, Greg. My first question is, can you contextualize the absolute dollar level of investment that was made in the fourth quarter in order to stabilize the market share? How does that inform how you're going to invest over the next several quarters? And how do you balance this need to improve value perception without sparking a response from your discount-oriented competitors that results in a race to the bottom in terms of profitability. David John Kennerley: Michael, it is David. Let me take that one. So I think as we've been talking about, value perception, closing price gaps has been an important priority for us all year. And we've been deliberate about investing in promotions, giving consumers ways to stretch their budgets. And as we built our plans for 2026, it was a very, very deliberate area of focus for us, that we needed to do more. So whilst we're making progress on everyday price gaps and what we call the all-in price gap, it's an area where we know we need to be more competitive. So as we think about next year, it is an area where we've put more dollars candidly than we have really over the last several years. But we've done that and they're going to be focused on this, doing this in a very deliberate way to balance the margins. As I talked about in the preprepared remarks and as Greg has already touched on as well, we see a very big opportunity for us to optimize the cost structure of the business. And I think about -- as we think about this going forward, we want to be able to take those unproductive costs, and we want to be able to, number one, invest those back into the -- both pricing and store experience whilst balancing the margins. I think as you sort of talk about the response from competitors, I mean, candidly, we're focused on what we can control. We're certainly not interested in starting price wars, but we know that we want to make sure that when consumers walk through the door of a Kroger store or any one of our banners, they walk in and can get good affordable prices. So that's the way we're thinking about it. Gregory Foran: And Michael, let me just add to that just briefly. As you can guess, we monitor our competitors all the time, and we certainly have a healthy respect for all of our competitors. But when you look at our share trends, we have improved share trends 5 quarters in a row, and we're happy they turned positive in January. And as I said before on this call, this is not a zero-sum game. At Kroger, we're playing to our strengths, whether it's Fresh categories or Our Brands or deep first-party data, our growing omnichannel business with e-commerce growing 20% last quarter. And these are not easy things to replicate in a hurry. And when you look at our focus, it's really to be a consistent and trusted local grocery retailer, whether a customer shops in-store or online. Greg recently said it very well. He said, we want to be the best Kroger we can be. Michael Lasser: Got you. Very helpful. My follow-up question is on the outlook for free cash flow. Your CapEx is going to be similar to what it was last year. Free cash flow is going to be down a bit. So a, can you explain the moving pieces there? And b, what is the distribution of the CapEx going to look like? With more new stores, how much will be invested in supply chain and the digital business to remain competitive, especially as you're leaning on some of these third-party providers for more of your incremental market share within the digital arena? David John Kennerley: Yes, Michael, let me take that one. So on free cash flow guidance, let me comment first on the cash flow number that we delivered this year. I mean we delivered a really, really strong cash flow performance in 2025 that came in ahead of the expectations. The way I'd characterize that overdelivery is kind of in 2 buckets. Number one, we've been working on a range of working capital initiatives around AP, AR, in normal buckets that you'd expect. And candidly, we delivered really well on those. And so we're really, really proud about those. And candidly, it will be an area of focus as we head into 2026 and beyond. But there's another bucket where we had a number of timing-related items that as we built the guidance and the plans for 2026, we don't think we're going to be able to kind of lap those. So they'll effectively reverse, which is what influenced the guidance range that we've offered. On CapEx, spent a lot of time on our CapEx, making sure that we're prioritizing investments in the right areas. The big area that kind of really steps up year-over-year is candidly on our storing program, both on new stores and remodels. And it was important for us to make sure that we had the right level of investment against that. But we went through a very, very deep prioritization exercise against all of the other areas. And I'd say the biggest area where I think we were able to optimize, it's kind of what we call sort of run the business maintenance CapEx. And I think we have an opportunity there to both optimize the returns, but also we had some things that candidly, we just didn't need to spend on. Now that doesn't mean that we're not doing the right things, not investing in the right areas, but we were able to optimize that area or spend while making sure we had the right investment on storing, supply chain, e-commerce. So hopefully, that gives you a good sense of the makeup and the priority choices that we made. Operator: Our next question comes from Leah Jordan of Goldman Sachs. Leah Jordan: Congrats, Greg, on the new role. I'll start with my first question for you. I know it's early days. You're still reviewing the business. But maybe if you could provide more detail on the opportunities you see regarding the in-store experience. Any color on maybe opportunities to accelerate remodels there or how you're thinking about labor hours? Gregory Foran: Yes, sure. It is very early days. I think I have been out in stores 3 days. I've gone to manufacturing facilities, one of them and also a distribution center. So I need a little bit more time to get around the business. I'm getting out, obviously, whenever I can. And clearly, a lot of the stores I'm getting to at the moment are probably announced visits and that people are expecting me to show up. So I won't necessarily be seeing the full unvarnished Kroger at this point, but that will happen. Look, I like the fact we're in the supermarket business. I like the fact we are primarily in the food business. When I go into stores that are sort of 50,000 square feet trading area or 70,000 square feet trading area or 90,000 square feet trading area, I like those. I think they're working really well. Now the marketplaces do too. But we're in the food business. And we generally, when we get it right, are anchored around a pretty good fresh offering, whether that's produce or meat or bakery, deli or seafood, really extensive grocery assortment. Some may argue, in some cases, too extensive. But early days, we will work our way through that. Our Brands are powerful, and we've seen the growth in those. So you start to pull this together, and I like the mousetrap that I see at Kroger and its associated brands. But let's be clear, it's only the beginning of my fourth week, and I've only got out there 3 days plus got to 1 DC plus manufacturing facility. But I like what I'm seeing, and I see plenty of upside. Now the obvious one, which we've picked up on the call is we've got to continue to work on price. And part of the focus that I'm going to have over this next 100 days is working with Ron and David and Mary Ellen, and [ Gia ] , all the team. It's got to be a team effort here. What else do we need to do in order to get ourselves going? Because at the end of the day, what does success look like? It looks like us selling more units. It looks like us gaining market share, and that turns into better identical sales or comp sales. And we've got some good progress. I think Ron and the team, as I said, have done a great job building some momentum. My job now is to see whether we can operationalize that and move even faster. But the basics, I like what I see. I don't think this is about Kroger coming up with a completely different strategy. I think we've got a good strategy. It is about executing well, and it is about moving faster. So those are the sort of things that strike me after 24, 25 days. Leah Jordan: That's very helpful and a lot we'll look forward to. Maybe just for a quick follow-up from David on the guide. For the ID sales guide, maybe just more detail on your embedded assumptions as we think about the drivers as we move through the year, especially around tonnage and market share, given Greg's comments. I came away from your earlier comments that, hey, once we get past 1Q, it's more inflation-driven, but anything else to call out there? David John Kennerley: Yes. I mean I think inflation Leah, is kind of moderately lower than last year. So maybe let me kind of talk about the units, which I think is at the root of your question. Obviously, as Greg just said, I mean, unit growth is critical. And it's a big priority for us to improve. And as I reflect back on last year, it did improve sequentially as we went through the year, and Q4 was the best quarter that we had in terms of units. But nonetheless, units remain slightly down. So I think as we think about the cadence for next year, the priority is keep improving and keep improving quarter-on-quarter. Our expectations are, I still think we'll see negative units in the first half of the year. But as we move sequentially through the balance of the year through a combination of our price investments, which will ramp up, new storing, accelerated e-commerce growth, there's a possibility that we move into better territory on units. But that hopefully gives you a sense of the cadence as we move through the year. Operator: Our next question comes from Simeon Gutman of Morgan Stanley. So Greg, it's early. Simeon Gutman: Greg it is early. So you mentioned early gotten out a few weeks. Great. I want to push on this self-funding idea. It sounds like it's a goal. Curious how nonnegotiable it is, meaning that's the only way you're looking at the business? Or do you reserve the right after you've given your own time to review the plans and the business to decide if the level of savings is commensurate with the amount of value that you want to achieve? Gregory Foran: It's a good question, Simeon, and one that I've been asking myself, obviously. When you write these things in the script, you got to be reasonably comfortable. I would say to you that I have a degree of comfort at the moment that what I've seen indicates that we will be able to do this. I think what's probably going through your mind is 2014 and Walmart. 2014, at Walmart, we were paying, I think, about $7.63 an hour, and we were losing a lot of our associates. So I knew that we would have to do something in terms of fixing that. I knew we had a lot of work to do around fresh, and we wanted to roll out online grocery. So that would require some investment. I knew we would have to get in and do remodels and those sort of things. So I formed a view some 10-odd years ago of what was going to be required. Obviously, I've been able to get up to speed as quickly as I can here with Ron and David and the team. They haven't been sitting on their hands. They've been hard at it and made, I think, some really good decisions around Ocado, around getting new stores up and running, around getting remodels back underway. So I'm coming in here with a business that has a good foundation, and I'm very thankful for that. And my early view, when I look at things like imports, and we don't tend to import very much in Kroger directly. So we're a big business, $150 billion. So we need to start changing our approach and start going direct to the source. Generally, any business I've been in, Simeon, there's opportunities around COGS and my sense is that's not a lot different in this business. I have now walked 2.5 of the 4 offices that we have in Cincinnati, every single floor, meeting any associate who is on track. I've got about 6 more floors to do in this actual office here and one more building to do, but I've done another building, most of this and all of 84.51°. On top of what we're doing in the Kroger Capability Center, we can continue to look at how we take cost out. But we need to get into that Kroger Capability Center, and we need to get in there in a reasonably serious fashion, sensible, but serious and execute. So after 20-odd days, I'm sitting here and I'm saying "I'm comfortable with what I've said in the script." And of course, will know a lot more over the next 90, 100 days and as we do, my commitment, David's commitment, Ron's commitment is we're going to go and present that to you and share with you what's on our mind and that will happen well before the end of the year. But at this stage, I'm feeling okay. Simeon Gutman: And the follow-up is that if you track the improvement throughout the year in share, which culminated in share gains in Q4, is it resulting of e-commerce or stores? I mean, I think we're indifferent. And then is there any categories in particular that it was concentrated? And if you can talk about the movement about through the year? David John Kennerley: Yes. Simeon, it's David. So just to clarify, we didn't gain share in Q4. So we still lost share in Q4, and it was a sort of -- we gained share in period 13. So I just want to clarify that. As I -- as you think about the categories where we did, in my mind, a little bit better relative to where we've sort of seen trends running, we did better in areas like meat and seafood, particularly meat, that was an area. We did substantially better in the deli and in bakery. Those were probably the 2 big areas that stood out. And I think meat, in particular, was an area where we deliberately made investments given the inflation that consumers are facing to drive units. Gregory Foran: The churn on grocery was better. Operator: Yes. Our next question comes from Michael Montani of Evercore ISI. Michael Montani: Congratulations. I'll echo to Greg. Good to have you back. If I could, I had a question for David and then a follow-up for Greg. So maybe just to start with David, could you talk a little bit about the quarterly cadence you see playing out for EPS relative to the Street. So in 1Q, you mentioned comps could be at the lower end. Does that mean we need to kind of commensurately look at the earnings growth, which is 13% there? And then anything on gross margin for the year relative to G&A? And then the follow-up I had for Greg was just about if you think over the next several years, you've got competitors who are known for kind of winning on price, others for kind of online delivery. What do you think will be the hallmark of Kroger that allows you not just to compete, but actually to win on unit volume longer term? David John Kennerley: So let me take that first question. So I think the only quarter that we're going to -- we've sort of specifically kind of guided on beyond the full year is on Q1. So we do expect Q1 ID sales to come in towards the lower end of our full year guidance range. Specifically, that's really mainly to do with the headwinds that we're facing on lapping eggs. And so I think the cadence in Q1 is primarily driven by that. I think as you then think about gross margin, you'll see a similar thing. I think our gross margin will be lower in Q4, again, as a result of some of that egg deflation that we're seeing and then be broadly consistent throughout the year. but still positive to be clear, still positive in Q1, but slightly below the full year expectations. And then I think EPS guidance or EPS, again, slightly lower towards the lower end of the range in Q1 and then fairly consistent as you head through the year. Gregory Foran: Thanks, David. Michael, to your second part of your question, I guess there are 5 things that come to mind as to why I am excited. I actually think I've got the best retail job on the planet. I'd begin by saying and echoing the point that Ron made, this is about being the best Kroger we can be. It's not about us trying to be someone else. And what I like about Kroger, I guess, are 5 things. I like the fact that we've got a business which is pretty well anchored in fresh foods. We've got a business that can be very convenient and fast for shoppers, size of our stores, where they're located. I like the fact that as we work hard to get affordable, customers are going to have a choice. They can go to a really low-price discounter and not get quite as much assortment, maybe not get as good a fresh or they can go to Kroger or a Kroger banner and they're going to get a better experience. And for them, that will represent better value because we are affordable. I like the fact that we are local. Now I haven't got all around the country, obviously, after 20-odd days, but I know a little bit about it. I've been to all parts of America previously. And I like the fact that Kroger has different brand names and it's seen as being local in the community. And then finally, having spent a bit of time down at 84.51° and seeing what we can do there and the caliber of the people, I like the fact that we can be pretty personal. And as you think about digital and where that's going, and we had the question previously on AI. I like the fact that we can be for you. We can deliver things for customers, that are specific to those customers. So I'm pretty excited about how the business is positioned. I think it's a great business. We'll be the best Kroger we can be. Operator: Our next question comes from Ed Kelly of Wells Fargo. Edward Kelly: Welcome, Greg. I wanted to ask, as you think about pricing and price gaps, and there's been a lot of talk about investment in price today. And I think Kroger has historically said, you don't need to be on top of Walmart. You just need to be close enough to win in a lot of your other competitive advantages. Can you talk about where the gap is today and where you think this gap needs to go? And then specifically, Greg, for you, my big picture question, I think, is there are a lot of cost saves in the business that you can attain. You want to keep a balanced approach, but the industry is moving rapidly. And are you moving fast enough with these initiatives? Or maybe better said, why not go faster? David John Kennerley: Ed, it's David. Let me take this initially, and then I'll ask Greg maybe to kind of come in on sort of more on sort of core principles. So I think when we think about price spreads relative to the competition, we look at a number of things. Number one, we're looking at this from an item perspective. So there are certain items that you want to make sure that you are right there with the competition on. And then there are certain items that philosophically, we think it's okay to operate within a certain spread. So we also then look at this from -- we obviously track every day price spreads, so kind of nonpromoted. But given we're a high-low retailer, it's also very, very important that we look at this all in. So we've been seeing this kind of improve throughout the year. And that is why we are putting a significant amount of money into this next year because we want to make sure that we're continuing to ensure that consumers have good value both on an everyday basis, but also when you look all in on a promotional basis. So I think, listen, our objective is, as you said, it's not necessarily to be right there with the competition every day, but there are a certain set of items that are important from a basket perspective that we do need to be there right there with the competition. I think the other thing, Ed, that's really important for us, and we hear consistently from our consumers is about simplicity. And one of the things consumers tell us is, "hey, it's just really complicated to figure out whether I'm getting the best price at Kroger" just because of the way some of our offers are structured. And so we're also doing work to make sure that we structure our offers in a more simple way so that they get good prices and they can understand them. And that's really important because not only is the price important and the value that they get is important, but also the value perception. And I think there's certainly many arguments to suggest that price perception is equally as important as the price itself. So those are our focus areas, and I don't know whether Greg or Ron, you want to add anything. Gregory Foran: Look, I think you said it extremely well. It is a combination of some KPIs, and it's also making sure we get the basket where we need to be. And there are some added value things that occur when you shop at Kroger that mean you don't have to necessarily match Aldi or anyone else in every single price point. The customer works out what the value equation is and our job is to make sure that we deliver that. Great question on speed. And I've said this a couple of times already, but I'm coming into a business where Ron and David and the team have already got a momentum shift in the organization. There's been a lot of work over the last year already on price. There's a lot of work that's been done on store execution. There's a lot of work done around e-commerce. And these have been very difficult but important decisions. There's work underway on accelerating the store footprint. There's work that's been done on getting out of noncore assets and of course, some good leadership appointments, not mine, other good appointments in the business. So I'm well aware that you get 1 point for talking and 9 for doing. And part of what we're doing over the next sort of 90, 100 days is we're working hard now to take what we've got here as a strategy and building that out some further and then making sure that we've got the math around that so that we're comfortable with it. We'll talk about that with Ron and the Board in detail. We'll then make sure that we've got it all buttoned up internally with our own team. And then we've got the people in place to execute this at speed. And that's going to be important. You're right that our competitors don't stand still. At the moment, they're going around that racetrack at a pretty good pace. We not only have to catch up to the pace that they're going, but we actually have to learn to go faster so that we can pull back on where they were. I'm looking forward to that challenge. I've never been more excited about the opportunity. And I think we have the assets, most importantly, in our people to deliver that. Ronald Sargent: And Ed, I'm just piling on a little bit, but our research would indicate that customers are really looking for value. And each customer defines that a little differently. And obviously, rewards is part of our offering, whether it's fresh categories, store conditions, great service, all those things are part of the equation. And I think it's more than just price. Operator: Our next question comes from Robert Ohmes from Bank of America. Robert Ohmes: Greg, congrats. I look forward to seeing you again. And maybe for David and Ron, the -- actually, 2 questions. Just the first is just on accelerating e-commerce. I know it's early days, but any drivers to that beyond DoorDash and Uber Eats? I mean, are there other things that you guys are looking at, new strategies in either delivery or things that you're not doing? And then the other question, just maybe for David, fuel sales and profitability in 2026 might be tricky given what's been going on with oil prices. I would just -- any guide on what you guys are assuming in the guidance for the fuel business sales and profit headwinds? Ronald Sargent: Yes. I'll just start with the e-commerce. We're really excited about 20% growth in the fourth quarter. I said in the script that we plan to be profitable during 2026. The reality is we plan on being profitable in the first half of '26. In terms of how we're doing it, basically, we're working on a lot of different areas to just improve the experience with our customers. And whether that's the refreshed website, whether that's a lot of initiatives around AI and Agentic shopping. In-stock is a big focus, delivery service. So all of those things, those nuts and bolts things are really important to the growth of e-commerce this quarter. Obviously, the new partners help and will continue to help. And we are growing e-commerce business much faster than the market. And then as we mentioned, I think the third-party partners are on track to be over $1.5 billion on top of our organic growth in e-commerce this year. David John Kennerley: Yes. Robert, let me take the question on fuel. So in the guidance and our plans for next year, we are expecting fuel gallons and profits to be slightly down year-over-year, a combination of gallons and margins. Operator: Our final question for today comes from John Heinbockel of Guggenheim. John Heinbockel: Two quick things. David hit on value perception. So when you think value perception as a lead indicator for food volume, your thought on that and by how much might it lead because I suspect your value perception is better than reality today. Thoughts on that. And then secondly, center store SKU rationalization, right, and the ability to tighten that up and then for what you do sell to have sharper, simpler prices, those 2 topics. Gregory Foran: Yes. It's a very good question and one that I could spend a long time on. And hopefully, we will get some time and I can spend a bit more time than what I'm going to at this stage. As David said, it's going to be a combination of KPIs and basket and making sure that we hit the right value equation, which is a combination of what the actual cost is and the quality perception that customers have. So we're working on that at the moment. That's a homework assignment, which is happening right now in the business so that we can put some math against exactly where we need to be. And we're not going to be able to do whatever we want to do in a matter of months. It needs to be a little bit like a glide path and the analogy that I've been using is it's a bit like a Boeing 787 coming into JFK, you're at 42,000 feet, you burned off all your fuel, and you've got to get down to basically sea levels. So you start at about 30 minutes out and your glide path your way in. So that's how we'll think about it, but the glide path can't go on forever, and we'll come back to you with the timing and how that looks. In terms of it all, it is a bit of an ecosystem when you think about it. If you want to improve your e-commerce business and you're going to do more picking from stores, you need to make sure that you've got the right assortment on your website, but just as importantly, that, that assortment fits comfortably on the shelf because you want your first-time pick rate to be really good and you need that to be efficient. So the team that are doing center of store need to make sure that the planograms are where we need them to be. So my comment around we need to think carefully is based on sort of 3 to 4 days out in stores where at times, we're probably trying to put 4 pounds of sugar in a 2-pound bag and it makes it a bit difficult to get all that assortment on the shelf comfortably. That in turn means that your top shelf comes under a bit of pressure. In turn, that makes picking for online grocery a bit harder. The associates find it a bit more difficult. There's a bit more stock sitting in the back room. So it all starts to become the sort of virtuous loop. And part of what we're starting to think about now is how we go about getting to a situation where you optimize the individual components, but really what you're doing is that you're optimizing the total ecosystem. And that requires everyone to play together in a team and do that quickly. So that's the sort of thing that we're now thinking about. Lots of detail that I could put into that because I haven't even spoken about what does that mean in terms of promotions, and you heard from Ron and David that there's some complexity around that. And I've picked that up just already in the 20-odd days that I have been around the place. So we've got to think about how we gradually take this Boeing 787 at 42,000 feet and just glide path it in and keep everyone on an even keel and land this plane safely. But the objective is to do that and to win. We didn't come and invest in all this so that we can come second. So that's on my mind as well. I will wrap up, if that's okay. Thank you all for the questions. And just as I close, I would like to share a few comments with our associates listening in. I have spent time visiting stores, as some of you have seen, also distribution centers and a manufacturing facility and of course, getting around our offices. And I just want to tell you that I've seen the energy and the pride that all of you are bringing to work every day. So from the associates stocking our shelves and helping customers to the teams in our supply chain support centers, keeping this business running, you are what make Kroger great. So thank you for what you do. I'm incredibly excited to be on this team, and I'm looking forward to getting out and visiting more locations and meeting more of you in the weeks ahead. Thank you, everybody, for joining us on this call this morning. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead. Sean Shibiao Zhang: Thank you. Good day, everyone. Welcome to JD.com's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results, then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results from the comparable period of 2024. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on our IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measure in the earnings press release. Please also note, all figures mentioned in this call are in RMB, unless otherwise stated. Now let me turn the call over to our CEO, Sandy. Xu Ran: Thank you, Sean. Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. We closed Q4 with results in line with expectations as we navigated short-term challenges while delivering on solid overall full year performance for 2025. During Q4, despite a high year-on-year comparison base in electronics and home appliances, our top line remains resilient, thanks to the continued strong momentum in both our general merchandise categories and marketplace and marketing revenues. Our profitability, our core business, JD Retail achieved a notable gross margin expansion in Q4 as we further leveraged our supply chain advantages. We strategically invested some of these gains into our price competitiveness, particularly in electronics and home appliances categories as well as in R&D capabilities and talent to secure a long-term edge. This slightly tempered retail's margin expansion in the quarter, but the impact was well absorbed by our increasingly diversified profit streams, including high-margin marketplace and marketing services and margin improvement in categories such as supermarket and health care. Beyond core retail, our new businesses continued to report steady efficiency gains and a sequential decline in total investments. Beyond the quarterly fluctuation, 2025 remained a year of solid execution where we delivered on our full year expectations. We have made encouraging strides across our key long-term growth drivers. User base and engagement gained significant momentum and our core retail segment accelerated back to double-digit top line growth. Notably, we achieved this while expanding JD Retail operating margin for the sixth consecutive year, despite a highly competitive landscape, and we are expanding our TAM with several promising new business initiatives. This solid progress is rooted in our deepening supply chain capabilities, which remain the engine for delivering superior user experience, optimized and enhanced operating efficiency. This is the backbone of our business model, not only supporting our core retail business, but also fueling our expansion into the new markets, our strategic initiatives. We are confident that these strategic pillars position us for more sustainable and profitable growth. Moving into our operational highlights. I'd like to share 3 highlights from Q4 and full year 2025 as well as our thoughts for 2026. First, our user base expanded in both scale and depth [Technical Difficulty]. Our quarterly active customers grew by 30% year-on-year in Q4, capping a year where we exceeded 700 million annual active customers. This growth was powered by the organic user growth of our core retail business and further accelerated by new strategic initiatives, including JD Food Delivery and Jingxi. High-value users also hit a new milestone. Our active JD Plus user base sustained double-digit [Audio Gap] surpassing [Audio Gap] by year-end. What is even more encouraging is the quality of user growth. User shopping frequency surged by over 40% year-on-year for the full year with broad-based gains across all user groups, including new and existing users as well as Plus members. In addition to user acquisition, JD Food Delivery also played an important role in this frequency lift. We view the expansion of user base and engagement as a long-term strategic driver for our business and expect it will further amplify in 2026 and beyond. Second, our core retail business demonstrated remarkable resiliency in Q4, maintaining stable margin in the quarter despite short-term top line headwinds. On a full year basis, JD Retail delivered strong double-digit growth in both revenue and operating profit with operating margins expanding by 52 bps to 4.6%. Viewed through a long-term lens, this consistent trajectory of JD Retail's growth and margin expansion over multiple years stands as a powerful testament to the resilience of our supply chain-driven model. While Q4 revenue edged down to 1.7% year-on-year due to softness of electronics and home appliance categories, we have proactively strengthened our supply chain capabilities and deepened user mind share. These efforts are already paying off with improved momentum year-to-date in 2026. Furthermore, we expect to be benefiting from the resumed trade-in program this year, which will provide a constructive backdrop for industry growth. Turning to general merchandise. Its performance remained strong with revenue up 12.1% year-on-year in Q4 and 15.3% for the full year. Supermarket revenue maintained double-digit growth in Q4. For the full year, supermarket growth reached mid-teens, accompanied by steady growth and operating margin expansion. Our fashion categories also achieved significant gains in both top line and user mind share expansion throughout 2025, with healthy growth across user base, shopping frequency, ARPU and ticket size. These results were driven entirely by the team's execution rather than external tailwinds. We are confident in sustaining the general merchandise momentum as our category mix continues to evolve towards a more diversified structure. Another exciting emerging growth driver for JD Retail is advertising revenue, which boosted our marketplace and marketing revenues to grow 15% in Q4 and 18.9% year-on-year for the full year. The robust growth was fueled by our optimized traffic allocation, enhanced conversion efficiency and the roll out of our AI-powered algorithms and agents for our suppliers and merchants. We are also seeing a strategic shift where advertisers are reallocating budgets towards platforms like JD as we are regarded as the most consistent daily sales platform, the premium designation for brand building and the platform that offers the highest return throughout a product's entire life cycle. Notably, the synergy with JD Food Delivery is starting to bear fruit, contributing an incremental 2% to 3% to ad revenue in Q4. We remain confident in sustaining our advertising revenue momentum in 2026. The third highlight is the solid progress of our new businesses. Within the segment, JD Food Delivery continued to drive healthy progress in Q4. We maintained steady order momentum while further optimizing our investment, further reducing the total investment scale by nearly 20% quarter-on-quarter. Since its inception, JD Food Delivery has sustained sequential loss reduction every single quarter, a direct result of our relentless focus on improving operating efficiency and an ROI-driven investment framework. In Q4, JD Food Delivery loss rate over GMV narrowed significantly compared to a quarter ago while maintaining the scale momentum. More importantly, the strategic synergies with our core retail business are deepening. Beyond the strong user momentum mentioned earlier, both cohorts cumulative cross-selling rate and shopping frequency trended upward in Q4. Additionally, total active merchants have increased by over 270%, which was also partially contributed by the high-quality restaurants that onboarded our platform. Looking ahead, JD Food Delivery will continue to prioritize healthy volume growth while improving its unit economics at a greater level. We expect investment efficiency in food delivery to improve further this year compared to 2025 levels. Regarding our other new business initiatives, both Jingxi and international business are progressing on track. Jingxi continues to successfully penetrate lower tier markets, expanding both our user base and user mind share. Furthermore, we are excited to announce that Joybuy, our online retail business in Europe, will officially launch this month. We are committed to redefining the local shopping experience by providing same-day and next-day delivery services, a move that opens up greater growth horizons for JD. We will continue to invest in these higher potential segments in a prudent and controlled matter to build our long-term sustained development. While executing our core strategies, we are equally inspired by the transformative potential of AI. By leveraging our deep supply chain capabilities, we are embedding AI across our entire value chain, identifying and stimulating demand, sourcing 1P and 3P supply and pioneering autonomous logistics. Let me share a few samples of our AI initiatives. First, proprietary intelligence. Our large language model, JoyAI, now supports over 1,000 real-world applications across customer experience, procurement, merchant services and operations. In 2025, JoyAI's total token invocations surged nearly 100-fold from 2024, fueling faster, smarter decision making throughout the company. Second, demand cultivation. We are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendations. Jingyan, our AI agent, surpassed 150 million annual AAC in 2025 with over 20% user penetration driven billings in GMV. We expect to double this user base in 2026. Third, logistics automation. Parallel to the digital intelligence is our leadership in autonomous logistics. In 2025, JD Logistics continued to redefine logistics efficiency. As of the year-end, it deployed over 20 flagship LangzuTech warehouses across China. We also launched this capacity internationally, launching our first LangzuTech facility in the U.K. to efficiently support a premium 211 same day and next day fulfillment experience locally. Furthermore, services and innovation. Our multimodal AI customer service handled over 4.2 billion user inquiries during the 11.11 promotion, achieving higher satisfaction with lower human intervention. Beyond operations, we are unlocking new consumption potential through JoyInside, our AI agent for hardware, which has partnered with 40 hardware brands to introduce a range of AI products. Sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion. By harnessing AI to redefine our competitive edge, we are further equipped to enhance our user experience, lower costs and improving operating efficiency. We are well positioned to capture the opportunities arising from AI to unlock new growth frontier for 2026 and beyond, ultimately placing us at the forefront of AI commerce. In summary, 2025 was a year of constructive progress and strategic fortitude. Despite navigating short-term macro environment and high base comparison, we remained steadfast in sharpening our supply chain edge and fortifying our foundation for the future. As we enter 2026, we are already seeing a consistent upward trend. Our user momentum remains robust and the growth trajectory of our general merchandise and the marketplace and marketing services has carried over seamlessly into the new [Audio Gap]. In the meantime, we have continued to strengthen our competitiveness advantages across product supply, price competitiveness and fulfillment experience. This operational strength, combined with our technological advances and disciplined ROI-focused approach to new businesses gives us great confidence in our 2026 outlook. We remain fully committed to driving sustainable, profitable growth and creating long-term value for our shareholders. With this, I will turn the call over to Ian. Ian Su Shan: Thank you, Sandy. Hello, everyone, and thanks for joining the call today. In Q4, our total revenues grew by 2% year-on-year, and non-GAAP net profit came in at RMB 1.1 billion. While we faced short-term headwinds in electronics and home appliances categories, our overall performance remained resilient. This stability was driven by our strategic focus on diversifying growth drivers and profit streams alongside disciplined investments in our new business. On a full year basis, we achieved meaningful progress across our core retail segment, new businesses and user growth and engagement, reinforcing our long-term sustainable development. As we drive business development, we remain firmly committed to delivering shareholder returns. Our Board has approved a total annual cash dividend of approximately USD 1.4 billion for 2025, representing USD 0.05 per ordinary share or USD 1 per ADS. Furthermore, we remained active in terms of share buybacks. In 2025, we repurchased about 6.3% of our outstanding shares for a total of USD 3 billion. All of the repurchased shares have been canceled. These efforts underscore our confidence in long-term development. Now let's go through our Q4 and full year 2025 financial performance. Total net revenues for Q4 increased by 2% year-on-year to RMB 352 billion. On the full year basis, total net revenues increased by 13% to RMB 1.3 trillion in 2025. Breaking down the mix, product revenues faced a 3% dip in Q4, mainly due to a high trading base, but grew by 10% for the full year. By category, revenues of electronics and home appliances was down 12% in Q4, but up 7% for the full year. We have navigated this high base challenge in close collaboration with our partners and are encouraged by the improved momentum year-to-date in 2026. On the other hand, general merchandise delivered robust results with revenues up 12% in Q4 and 15% for the full year, led by sustained momentum in our supermarket, fashion and health care categories throughout 2025. We believe this momentum will continue in 2026 as we further build our strength in these high-potential sectors. Service revenues grew by 20% year-on-year in Q4 and 24% for the full year. Notably, marketplace and marketing revenues were up 15% and 19% for the quarter and full year, respectively. A key driver of this was advertising revenues, which achieved double-digit growth across every quarter of 2025. We have enhanced advertising efficiency of our platform through leveraging technology as well as our surging user traffic and engagement. Looking into 2026, we expect marketplace and marketing revenues to maintain solid growth momentum, contributing to both top line growth and profitability. Additionally, logistics and other service revenues grew by 24% year-on-year in Q4 and 27% for the full year, mainly driven by the incremental delivery returns revenues from our food delivery business. Now let's turn to our segment performance. JD Retail revenues down 2% year-on-year in Q4, but up 11% for the full year of 2025. The quarterly decline was primarily due to the high trading base for electronics and home appliances, which was largely mitigated by growth in general merchandise and advertising revenues. It's important to note that JD Retail is no longer a single growth driver business. We have successfully built a diversified growth metric that provides the business with multiple engines and strong resilience across different market conditions. Notably, JD Retail's gross margin increased by 1.1 percentage points year-on-year in both Q4 and full year 2025. This consistent improvement has sustained across multiple years despite changes in the competitive landscape, reflecting our enhanced supply chain strength and a favorable mix shift. JD Retail's non-GAAP operating income in Q4 was down 2% year-on-year with operating margin holding steady at 3.2%. The temporary pause in margin expansion this quarter was a strategic choice. We deployed supplementary subsidies for electronics and home appliances to offer competitive price and maintain market leadership while increasing OpEx through targeted investments in R&D and employee compensation to fuel future growth. On a full year basis, JD Retail's non-GAAP operating income in 2025 grew by 25% year-on-year, with operating margin improved by 52 bps to 4.6%. Taking a long-term view, JD Retail's margin trajectory remains very healthy, climbing consistently from 2.7% in 2019, when we initiated this segment reporting, to 4.6% in 2025. As we continue to emphasize high-margin advertising business and realize efficiency gains in categories such as supermarket, we remain on a steady and successful path towards our long-term margin targets. Moving to JD Logistics. Its revenues grew by 22% year-on-year in Q4 and 19% for the full year with incremental contribution from food delivery. On the profitability front, JD Logistics' non-GAAP operating income was down 17% year-on-year in 2025, but up 3% in Q4. JD Logistics remains committed to investing in elevating customer experience, expanding service capabilities in both domestic and overseas markets, and advancing AI and robotic technologies. We view this as essential investments that pave the way for JDL's long-term sustainable growth in both top and bottom line. New businesses' revenue surged by 201% year-on-year in Q4 and 157% for the full year driven by the rapid scaling of food delivery, Jingxi and international business. The segment's non-GAAP operating loss narrowed to RMB 14.8 billion in Q4. This sequential improvement was primarily driven by the narrowing loss at JD Food Delivery, which achieved a notable reduction of about 20% in loss compared to the previous quarter, continuing its consistent trend of improvement since launch. As we enter 2026, our priority for food delivery remains to drive healthy order volume while deepening synergies with our core retail business. We believe investment in food delivery has peaked in 2025 and will trend downward this year if market competition trends towards becoming more rational. Beyond food delivery, we will continue to explore promising opportunities in Jingxi and international business with financial discipline to ensure long-term value creation. Moving to our consolidated profit performance. Group level gross margin expanded by 32 bps year-on-year to 15.6% in Q4 and rose 18 bps to 16% for the full year. This improvement was primarily driven by the consistent gross margin expansion of JD Retail. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 1.1 billion in Q4 and RMB 27 billion for the full year, representing a non-GAAP net margin of 0.3% and 2.1%, respectively. Our near-term profitability mainly reflects our strategic investments in new businesses. We believe these initiatives will broaden the group's growth potential, driving both sustainable growth and margin improvement over the long term. Our free cash flow for the full year of 2025 was RMB 6 billion compared to RMB 44 billion last year. This primarily reflects cash outflows associated with the trade-in program alongside fluctuations in operating income. Our accounts receivable also recorded a sequential decline for 2 consecutive quarters, primarily due to the healthy recovery of the trade-in related receivables. We conclude the year with a robust liquidity position with cash and cash equivalents, restricted cash and short-term investments totaling RMB 225 billion as of year-end. In summary, 2025 was a year of solid strategic progress. We achieved strong growth in our user base, accelerated core retail top line with margin expansion fueled by increasingly diversified drivers. Furthermore, our new businesses are now on a healthy, promising operating track. We have built a more resilient ecosystem. While our business segments operated with increasing synergies, our focus remains clear. We will continue to focus on enhancing user experience, lowering costs and improving operating efficiency to deliver strong performance across our retail business top line and profitability while advancing our new business initiatives with a long-term perspective. With that, I will turn it back to Sean. Thank you. Sean Shibiao Zhang: Thank you, Sandy and Ian. For the Q&A session, analysts are welcome to ask questions in Chinese or English. Our management will answer your question in Chinese and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language. Operator, we can open the call for Q&A session now. Operator: [Operator Instructions] Your first question comes from Ronald Keung with Goldman Sachs. Ronald Keung: [Interpreted] First is on JD Retail 2026 growth, as electronic appliances return to a more normalized base from the second half, the general merchandise remains very healthy. So how should we think of the growth rate for JD Retail in 2026 for the first half and second half and the differences given the base? Second is on the on-demand and food delivery. How should we think of the path to further unit economics improvement? Compared with the bigger competitors, how are we differentiating ourselves through supply chain, supply chain-driven business models? And how should we think about your determination and commitment to this business? And with the regulations and investigations on the food delivery industry, would that also contribute to the unit economics improvement? Xu Ran: [Foreign Language] Sean Shibiao Zhang: [Interpreted] Okay. Thank you, Ronald. So for your first question, first, our general merchandise category continues a very healthy, robust growth trajectory. Looking back at 2025, the category achieved growth faster, even factoring in the impact of trade-in program on the other category. So general merchant category served as a primary growth engine for JD Retail. Categories such as -- subcategories such as supermarket, fashion and health care all achieved very strong results. Looking into 2026, we remain very confident in sustaining this healthy momentum. Supermarket category still has significant untapped potential in terms of user penetration and expansion of the subcategory. Fashion category, we have completed many infrastructural work such as merchant recruitment last year and will further build growth momentum on this very strong foundation. Health care category, we expect to continue maintain its industry-leading position and user mind share. Regarding electronics and home appliance category, it continue to face high base effect in the short term. In 2026, the government trade-in program will continue, but we have to bear in mind that the government-backed cash subsidy were consumed much faster and more in first half 2025 compared to the second half 2025. So for our electronics, home appliance category, including home appliances, cell phones, computers and digital products, will remain affected by a high base in the first half this year. However, we anticipate a sequential improvement in growth compared to the last quarter, fourth quarter of 2025 with more robust recovery expected in the second half 2026, and our market share remains very resilient. Furthermore, we have to bear in mind that memory chip costs keep rising. So prices of mobile phones, digital products are expected to increase across the board. This may dampen consumption and affect sales volume. But at the same time, the rise of AOV will partially offset the impact of lower sales to a certain extent. We'll continue to strengthen our user mind share and drive sales by further reinforcing our supply chain capability, expanding our proactive off-line presence and enhancing overall service experience. Meanwhile, AI and emerging technologies are creating numerous opportunity for innovation and new product categories further demonstrating our strength of supply chain. While initial data contribution from this new AI-related products remain modest relative to our -- the current scale of this category, but we see significant opportunities and shifts. And we will work closely with brand owners and suppliers to respond rapidly and develop new products and meet evolving user needs through the swift application of new technology. Looking ahead to 2026. First, our growth drivers are becoming more diversified. General merchandise category maintains a healthy growth trend, while service revenue, including advertising will also sustain rapid growth momentum. Second, we expect electronics and home appliance category to remain impacted by a high base in the first half this year and with growth in the second half to accelerate better than the first half. Overall, we will maintain our market share and user mind share. At the same time, we'll continuously leverage technological innovation to drive industry progress. Third, supported by the steady improvement in JD's traffic, user base and shopping frequency, we are confident to achieving -- in achieving healthy and high-quality growth for the full year 2026. Xu Ran: [Foreign Language] Sean Shibiao Zhang: [Interpreted] Regarding your second question. So while food delivery business -- our food delivery business remains in its early stage in 2025, we actively invested in both operations and R&D. Looking at this year 2026, we'll continue to strengthen our capabilities and onboard more quality merchants and products and enhance user experience. At the same time, we'll begin generating revenue through offering merchant services, achieving an orderly and rational monetization. So our goal is to sustain healthy scaling of this business while continuously improving operational efficiency. We expect total investment in food delivery to decrease in 2026 compared to 2025. Well, that also, of course, depends on the market competition dynamics. How we do this? First, JD Food Delivery's differentiating advantage includes our commitment to our positioning in high-quality food delivery. Second, superior service quality driven by full-time riders. Third, the synergetic integration across JD ecosystem, leveraging on our strong supply chain advantage. In terms of improving UE, we have clear drivers. First, more diversified revenue streams; second, continuous optimization of subsidy efficiency, including targeted subsidy tailored to different users and regions; third, enhanced delivery efficiency driven by economic scale that accompany healthy order volume growth. It's also worth noting that our Seven Fresh Kitchen, which is a highly innovative and differentiated business model, is progressing well. It's deeply integrated with JD supply chain capability, leverage strong synergy with our on-demand retail business. As of the end of February, Seven Fresh Kitchen operational footprint has expanded to over 50 kitchen locations and we welcome analysts and investors to try it out. Regarding the long-term positioning, food delivery and on-demand retail is a long-term strategy for JD, will drive our strategic progress with a long-term perspective, continuously enhancing operational efficiency to drive profitability improvement. At the same time, we'll continue to unlock potential synergy between food delivery and our core retail business, fueling the company's long-term healthy growth. In 2025, our food delivery provided -- proved to be a strategic engine for user growth, effectively acquiring new users and significantly boosting purchase frequency across our platform. In 2026, we expect to see a further unlocking of synergies driven by robust cross-selling and incremental growth in advertising revenue. Lastly, regarding the food delivery regulation, first, we support and welcome regulatory oversight that maintains a fair and competitive market environment as they foster a healthy development of the industry. Second, we remain steadfast in our opposition in evolutionary competition within the sector. Third, we are committed to driving high-quality -- evolution of quality food delivery, high-quality food delivery through continuous innovation in our supply chain model. Thank you. Next question, please. Operator: Your next question comes from Kenneth Fong with UBS. Kenneth Fong: [Interpreted] My first question is about the profitability and investment in new business. Under the backdrop of macro uncertainties and yet the accelerated investment in overseas and Jingxi business, how should management balance the growth as well as the profitability? What level of investment should we expect for 2026 for this new business? And how should it affect the group earnings? And my second question is about the overseas business. Can management share some update on the CECONOMY acquisition progress time line and the impact on financials post consolidation? From the strategic angle, how would Joybuy position? And what kind of benefit or synergy should we expect from the group level, i.e., retail, logistics and the whole supply chain point of view? Ian Su Shan: [Interpreted] Regarding our thoughts on investment and profitability, from a long-term perspective, we are confident in the prospects of the China market and our own business development. Based on our views of the market opportunities, we have made long-term strategic investments, including in our international business, lower tier markets and on-demand retail. At the same time, we have been committed to investing in R&D and technologies. By enhancing our foundational capabilities and expanding our service scope, we believe we will continue to unlock new growth opportunities, which will also drive our long-term profitability. JD's high single-digit long-term margin target remains unchanged. In terms of JD Retail, we expect to see healthy growth of retail's profit in 2026 and our long-term target for JD Retail, which is high single-digit profit margin, also remains unchanged. Key growth drivers of this, including improvement in product sales, gross margin brought by our enhancing supply chain capabilities, robust growth in high-margin business, such as advertising, as well as continued margin improvement in categories, including supermarket. JD Retail's flow benefit will also continue to play out and its operating efficiency will have further room to improve as we increasingly adopt AI technology. In terms of our investments in new businesses. For JD Food Delivery, its loss narrowed by nearly 20% quarter-on-quarter in Q4. We continued to maintain its healthy scale expansion while narrowing its loss ratio with improved operating efficiency and revenue growth during the quarter. Looking at 2026, we will continue to drive healthy scale growth of the food delivery business and further unlock its synergies with core JD Retail. If the industry competition trends towards more rationality, we expect our investment in JD Food Delivery in 2026 to decline from the 2025 level. For international business, we will gradually increase our investment on a controlled scale. We will maintain financial discipline in the investment. For Jingxi, it has focused on lower-tier markets and a nonbranded product supply. It has made a meaningful penetration improvement, particularly in Tier 6 and lower cities. This has helped expand our user growth boundaries as it offers differentiated product offerings from our main apps. We expect to increase our investment in Jingxi a little bit, but we believe its UE to continue to improve in 2026, delivering healthy and sustainable business growth. As to your question about the CECONOMY deal, at the current stage, it is under regulatory review. We will update the market in due course. Joybuy is our full category online retail platform in Europe. It is scheduled to officially launch in March. Building overseas supply chain capabilities is a long-term initiative that takes time and continued efforts. Based on its trial operations, Joybuy has received a very positive user feedback, especially on the performance side. Logistics experience will be a key differentiator for Joybuy. We are building our own delivery network in Europe, and the JoyExpress has been launched recently. It provides same and next-day delivery in major cities across the U.K., Germany, France and the Netherlands along with services such as door-to-door delivery. We welcome all analysts and investors to try out our services. As for synergies, first, on supply chain capabilities, while helping Chinese brands expand globally, we also aim to bring more high-quality European brands into the Chinese market, further strengthening our global supply chain capabilities. Second, on logistics, as Joybuy expands in Europe, the synergy between retail and the logistics in our overseas business will be further strengthened, reinforcing Joybuy's competitive edge. Third, on the technology front, JD's long-standing expertise and robust infrastructure will continue to empower our international business. Sean Shibiao Zhang: Next question, please, operator. Operator: Your next question comes from Alicia Yap with Citigroup. Alicis a Yap: [Interpreted] So in light of the potential slower retail sales growth outlook this year, what is the growth rate management have in mind for your general merchandise GMV and revenue growth? How can JD continue to grow faster in this category amid the competitions and also slower consumption? And what are the specific differentiated areas JD is able to drive sales in this segment? And second question is that can management share your thoughts on how JD might prepare and position to embrace the upcoming threats and opportunity from the agentic commerce? Xu Ran: [Foreign Language] Sean Shibiao Zhang: [Interpreted] Thank you, Alicia. For your first question on the general merchandise category, we shared in the opening remarks that the category is maintaining healthy momentum. So looking back at our track record, the general merchandise category have maintained double-digit growth for the past 5 consecutive quarters and notably outperforming the industry. This is driven by our evolving supply chain capability and a remarkable improvement in operation efficiency expertise. This lay a solid foundation for continued growth in this category. So we are -- we remain very confident in the healthy momentum of general merchant category in 2026. The sustained growth driver includes, first, huge market potential with ample room for growth in categories such as supermarket, fashion and health care. Second, user growth. So new business, including food delivery, Jingxi, have brought growth in traffic, user and shopping frequency on JD platform. So we are also accelerating internal synergy and we have observed healthy cross-selling trends in category like supermarkets. Third, continuously strengthen supply chain capability and user mind share. So from a category perspective, our supermarket category leverages JD's unique 1P model to deliver an excellent user experience and at the same time, competitive pricing. Meanwhile, our fashion category has seen notable improvement in building underlying capability, including search and recommendation in 2025 as well as attracting more high-quality brands to deepen their collaboration with us. We are also applying AI to achieve more precise and personalized matching in search and recommendation. In Q4 '25, we recorded double-digit growth -- year-on-year growth in both sports and outdoor apparel revenues. In terms of our differentiated advantage in this category, first and foremost, the core moat of JD 1P model is the key. This includes more diverse product selection, more competitive pricing and more rigorous quality control. Second, leveraging on the core capability of JD Logistics, we offer high-quality fulfillment experience of faster, more accurate and door-to-door delivery service. Third, from the brand standpoint, JD is the most consistent daily sales platform. JD is the premier destination for brand building and the platform that offers the highest returns throughout our product's entire life cycle. So we provide brands with stable and efficient sales performance. Xu Ran: [Foreign Language] Sean Shibiao Zhang: [Interpreted] For the second question, we see AI and agentic commerce as a greater opportunity for JD evolution than a challenge. First, agenetic commerce is still in early stage and mainly affect the front-end user traffic. Our view is that no matter how traffic patterns change, the core retail business remains as user experience, cost and efficiency. So as we stay focused on optimizing product price and service, JD supply chain strength will yield even greater synergy, further widening our competitive moat in the agentic era. At the same time, we are accelerating our technology investment while driving the adoption of our in-house large language model, we remain committed to an open ecosystem, actively collaborating with industry-leading external AI LLM providers. We are evolving into a leading technology commerce company, spending entire spectrum from supply chain to customers. As JD run a 1P business model with in-house fulfillment logistics service capability, the technology and AI application scenario is abundant. So this really differentiates us from platform business model. I'll briefly give some examples. On the demand side, we are reshaping the shopping journey and enhancing user experience through AI-driven search and recommendation. On the supply side, we leverage AI to continuously enhance operational efficiency in AI in areas such as sourcing, pricing, inventory management, replacing manual labor. We are also expanding our application in the physical world in terms of fulfillment, automation and after-sale services. Beyond operation, we are unlocking new consumption potential as well through applying AI, such as JoyInside, our AI agent for hardware. As I mentioned before, the sales of JoyInside-integrated products surged 20-fold during 11.11 compared to the June 18 promotion. So you can see we are leveraging -- we are very proactively leveraging AI to reshape our competitive advantage and continue to optimize our user experience, at the same time, drive cost efficiency. Looking ahead, we are very confident and believe we are well positioned to capture the strategic AI opportunity to solidify our leadership in AI-driven e-commerce. Next question, please? Operator: Your next question comes from Thomas Chong with Jefferies. Thomas Chong: [Interpreted] I have 2 questions. First, can management share about the latest developments on shareholders return? And second, can management talk about any changes to the regulatory environment for Internet platform companies and how should we think about it? Ian Su Shan: [Interpreted] Thank you, Thomas. Despite the long-term strategic investment we made in 2025, we remain committed to shareholder returns through both dividends and share buybacks. We declared the 2025 annual cash dividend of USD 1 per ADS, stable compared to last year. The total dividend amount is USD 1.4 billion. This underscores our commitment to delivering consistent cash returns to shareholders based on our sustainable profitability and cash flow in the long term. In addition, we repurchased USD 3 billion worth of shares in 2025, representing 6.3% of total outstanding shares as of the end of 2024. All the repurchased shares have been canceled. We remain firmly committed to shareholder returns through healthy business development, dividends and share buybacks. At the same time, we will remain focused on the healthy growth of our business scale, profitability and cash flow and make strategic investments for the long term while creating value and sharing JD's long-term success with our shareholders. Xu Ran: [Foreign Language] Sean Shibiao Zhang: [Interpreted] I'll take the last question. Regulators continuously promote the standardized development or the healthy development of the platform economy, ensuring sector's long-term sustainability. So we welcome regulatory guidance. The government's commitment is to support compliance, corporate development rather than -- remain unchanged. We believe regulatory oversight is not a constraint, but rather a catalyst for driving healthy, high-quality industry growth. So JD has always prioritized compliant operation as the cornerstone of our business. Whether it is antimonopoly measures, tax standardization or preservation of evolutionary competition -- prevention of evolutionary competition, this effort aligns perfectly with JD long-standing philosophy of compliance. So under a normalized regulatory environment, fair growth opportunity are created as we prevent bad money drives out good. So as a result, over the long term, the advantage of JD compliant and sustainable business model will become increasingly prominent. Thank you. Operator: We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks. Sean Shibiao Zhang: Thank you for joining us on the call today, and thanks for all your questions. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, everyone, and welcome to Acorn Energy's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, today's event is being recorded. I'd now like to turn the conference call over to Tracy Clifford, CFO of Acorn Energy and COO of its OmniMetrix subsidiary. Tracy Clifford: Thank you, operator, and thank you all for joining our call today. First, I'd like to remind you that today's remarks, including responses to questions contain forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. Factors that may impact our future operating results and financial performance include general risk such as potential disruptions to business operations or changes in consumer or customer demand as well as specific risks related to our ability to execute our operating plan, maintain strong customer renewal rates and expand our customer base. Additional risks that may arise from changes in technology, competition or shifts in the macroeconomic or financial environment. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's current beliefs, assumptions and information that is available as of today. There can be no assurances that the company will meet its growth targets or other strategic goals and objectives. The company undertakes no obligation to update or revise such forward-looking statements to reflect future events or specific circumstances that may occur after today. For a more detailed discussion of risks and uncertainties that may affect our base -- our business, please refer to the Risk Factors section of our Form 10-K, which is available online at www.sec.gov or on our own website at acornenergy.com. Now I'll turn the call over to Jan Loeb, CEO of Acorn and OmniMetrix for further comments. Jan? Jan Loeb: Thank you, Tracy, and thank you all for your interest. In 2025, Acorn achieved record revenue, improved operating income, higher cash flow and our third straight year of profitability. Our performance benefited from a 22% increase in high-margin monitoring revenue, driven by continued growth in our installed base of remote monitoring endpoints. Our year-over-year Q4 and full year comparisons reflect the benefit of a national cellphone provider contract, the largest in our history. The bulk of hardware revenue for this contract was recorded between Q3 of 2024 and Q2 of 2025, contributing to lower year-over-year hardware revenues in the second half of 2025. The contract also includes one year of monitoring services ratably over 12 months, following each hardware units commissioning. Importantly, we earned very favorable feedback from this customer regarding our technology, managing capabilities and customer service, resulting in what we believe is a solid relationship with future potential. Our 2025 hardware revenue was also tempered by an $885,000 decrease in noncash deferred revenue amortization from units sold prior to September of 2023 when the majority of our hardware sales were deferred and amortized over 3 years. Acorn's 2025 results reflected $956,000 in revenue from amortization of deferred hardware revenue, a 48% decrease from the $1.84 million recorded in 2024, but with no impact on cash generation. This revenue impact will end this year as we expect the balance of deferred hardware revenue of $168,000 to be fully amortized by August of 2026. Lastly, our 2025 revenues were also impacted by an industry-wide slowdown in residential generated deployments, which we and other industry participants attribute to high interest rates, fewer major power outages related to hurricanes and other weather events in 2025 as well as inflation and economic uncertainty that impacted consumers' ability or willingness to invest and backup generator security at a cost of approximately $15,000 per installation. Our belief is that consumer generated demand is likely to return to more historic levels as impending factors moderate. Turning to our strategies for growth. We reviewed five complementary core initiatives in today's press release on which I'd like to provide a little more color. One is larger commercial industrial opportunities, which our internal sales teams continue to pursue across various sectors that include health care, telecom, real estate, retail grocery, hospitality, government and financial institutions. We have a range of ongoing discussions. However, the most significant opportunities with more large organizations that require budget compliance and also longer, more complex sales cycle. Two is the pursuit of strategic relationships to integrate our technology with OEMs or other strategic partners, for example, through white labeling our products for the OEMs. We have ongoing dialogues with a few industry OEMs to bundle OmniMetrix Solutions with their product offerings. Currently, our monitors are installed by the dealers in the aftermarket. However, our technology, service leadership and support for all generated brands puts us in a strong position to partner with one or more OEMs. Their core business isn't providing monitoring services and by working with us, they can offer a superior solution that offers greater value to their customers, while also providing the potential to reduce or eliminate their overhead and investment in an in-house solution. We believe this is the direction our industry is going, and we continue to work to advance OEM discussions. However, it's difficult to predict the potential or timing of these efforts. Three is expanding our penetration of the residential and small business markets through our network of 600-plus generator dealers. While the retail market was slow in 2025, as I mentioned, we are optimistic for a rebound in 2026, given the potential stimulus to secure backup power provided by recent winter storms as well as moderating interest rates. One of the larger generator manufacturers has publicly stated they expect a 10% increase in residential generated sales in 2026, so we expect to benefit if this does indeed occur. Four is our ongoing investment in research, development and engineering to enhance existing OmniMetrix products and develop new products. These investments are essential to maintain competitive -- our competitive position and expand our value proposition and addressable market. Tracy will review our recent product launches momentarily. Five is our ongoing pursuit of accretive opportunities to expand our product offerings, market reach and customer base with a focus on businesses that have a meaningful monitoring components to their businesses. The nature of the M&A process is that it takes a lot of work, research and negotiations to get to the point where you have a solid opportunity and acceptable price. We are highly motivated to identify and execute on an acquisition to enhance our growth, operating leverage and monetization of our NOLs, but balance this with a disciplined approach to managing deal terms and risk for our shareholders. Our recent strategic partnership with AIO, which stands for all in one, emerged through our M&A dialogues. AIO is the global leader in remote monitoring and control solutions for critical infrastructure but had no business operations in the U.S. They provide best-in-class technology and cloud-based business intelligence platforms that have successfully deployed at over 110,000 sites in 15 countries. In this case, we found the best path was to secure exclusive North American rights to their proven product suite for what amounts to a modest commitment to invest in building out the business. AIO solutions target the full cell phone tower campus as well as solutions for data centers and utility operations. Their monitoring control solutions deliver actionable insights to advanced analytics, machine learning and comprehensive monitoring of environmental conditions, battery health, security breaches, energy optimization, microgrids and more. The technology reduces downtime, streamlines maintenance and provides measurable cost savings and ROI, made the logical choice for smarter, safer and more profitable operations. The partnership is a perfect fit for Acorn and our OmniMetrix brand, as it substantially expands our product offerings and addressable market by integrating AIO Solutions with our industry-leading remote monitoring and control technology, our 20-plus year reputation and established U.S. customer base. We see exciting growth potential starting with our existing telecommunication customers and then expanding to data center and utilities to strengthen our ability to serve rising demand for data-driven infrastructure management with solutions that protect against power issuance, theft and environmental and other risks while maximizing energy utilization. We anticipate that the average sale of OmniMetrix labeled AIO products will be approximately 5 to 6x the average current omni sale. As we will be sharing SaaS revenue with AIO, it is too early to project what our margins will be. We will be selling AIO technology solutions under the OmniMetrix brand and from our market research, there are no better existing technologies in the industries they serve. This partnership has the potential to transform our company by expanding the respective OmniMetrix brand into new end markets with a product that would take us many years and significant R&D dollars to develop. We expect to have our first demo unit installed by the end of the month with a large existing telecom client. AIO has been in existence for 18 years. As we have stated, we do not expect any revenues from this partnership until the second half of 2026. We see secular tailwinds that should support our growth in the coming years as business and consumers take action to ensure uninterrupted access and support for their energy infrastructure management and regulatory compliance needs. Energy demands for AI, data centers, electric vehicles, electrification of buildings and reshoring of industry are all strain the aging U.S. electrical grid, which is also being disrupted by extreme weather events, forest fires and other natural disasters. Despite the relatively benign year in 2025, we've already seen a rebound in power outages from winter storms so far this year, including severe ice storms across 12 states in the Southern Appalachian in early January, resulting in over 1 million customers without power, many of them for days and some for weeks amidst winter weather. Even if the nation changed course and started massively investing in energy resources and infrastructure today, we are so far behind. It would take many years if not decades to meet our rapidly growing energy and reliability needs. Given the substantial unmet needs of the markets we now serve, we continue to believe 20% average annual revenue growth over the coming 3 to 5 years is an achievable target. Further, given the efficiency and scalability of our model, we believe approximately 50% of each incremental revenue dollar from our existing business should flow through to operating income. As a small company peaks and valleys in purchasing cycles for major hardware orders will persist, but we believe that our high-margin capital-light business model positions us very well for the future. With that, I'll turn the call over to Tracy for financial and operational insights. Tracy? Tracy Clifford: Thank you, Jan. The key takeaway from our 2025 results is the solid growth we are achieving in our annual recurring monitoring revenue stream, which achieved a 95% gross margin in 2025 and was driven by the ongoing expansion of our installed base of monitored endpoint. We view a steadily growing base of annually recurring high-margin revenue as the core value driver for our business, fueled by new hardware deployment, which could continue to be more regular in nature leading to some variation in year-over-year comparisons. We've provided a fair amount of detail in today's news release, so I'll just touch on a few key highlights. Revenue rose 4.5% to $11,478,000, thanks to the diligent efforts of the entire OmniMetrix team. Monitoring revenue grew 22% due to the expansion of monitored endpoint. Total hardware revenue declined 8% due to the timing of deliveries for our large cell phone customer and an $885,000 decrease in the amortization of deferred hardware revenue. Excluding the impact of declining amortization of deferred hardware revenue, new hardware revenues rose approximately 8% in 2025 compared to prior year. Gross margin improved to 76.8% versus 72.8%, an increase of 400 basis points, reflecting the increase in higher-margin monitoring fees as a percentage of revenue and hardware margin improvements related to the cost efficiency of the next-generation products that deliver more value. Diluted earnings per share was $0.99 in 2025, including an $0.18 per share deferred income tax benefit compared to diluted EPS of $2.51 in 2024, which included $1.77 per share of deferred income tax benefit. Cash flow from operations more than doubled to $2.090 million in 2025 or an increase of 131% year-over-year. Consequently, our year-end cash position improved by $2.1 million to $4,450,000, and we've maintained a strong cash position of $4,131,000 as of March 3, 2026, following our investment of $250,000 since December for the AIO OmniMetrix partnership in North American product launch. We also remain debt free. I think it's important to note that Acorn was able to release an additional $464,000 of its valuation allowance against our deferred tax assets in 2025 as a result of the big beautiful bill, which allowed us to treat certain R&D expenses in a more favorable way for tax purposes. This compares to $4.4 million released in 2024, both of which were reflected in our bottom line results. We now maintain a $10.3 million or greater than 70% valuation allowance, against $14.4 million in NOL and capital loss carryforwards. Most of our NOLs expire in 2031 or later. So we still have plenty of time to utilize them through growth in our existing operations via potential M&A initiatives. In late 2025, we launched our next generation and generator monitors to omni for the residential market and OmniPro for commercial and industrial applications. In addition to significant upgrades and new features, design innovation have reduced installation time and service costs while enhancing the liability. We also launched RADEX, an enhanced version of our RAD, remote alternating current mitigation disconnect, product for the Pipeline segment. These next-gen product launches enhance our value proposition, expand our technology leadership and will contribute to our growth in 2026 and beyond. We're very excited about the potential AIO opportunities ahead as well as the other growth opportunities that Jan discussed in his remarks, and we look forward to updating you on our progress. Operator, you may now prepare the lines for questions. Thank you very much. Operator: [Operator Instructions] And our first question today comes from Jason [indiscernible]. Unknown Analyst: I have a few questions. I want to follow up a few things from the AGM, if you don't mind. The first one I wanted to hit was you guys had mentioned that you're talking to three OEMs, and you don't think you'll get three OEMs. It's a very long sales cycle, and you kind of mentioned that you certainly would get one. Is that kind of still the status on that front? Jan Loeb: I believe that is still true. Unknown Analyst: Okay. And then the next follow-up from AGM would be, in terms of acquisitions, you had said that you had three acquisitions in mind and three term sheets out. It seems like the AIO is one of those. Can you give an update? Is there still two outstanding, or where does that stand today? Jan Loeb: We've had discussions with the other two. Firstly, you're right, AIO is one of them. We've had discussions with two others. As of right now, they're still available, but the price, we have not come to any agreement on price, too far apart on price. Unknown Analyst: Okay. And then my final question is a bit more open ended. I'm curious if you could kind of discuss the bottlenecks for each of the growers -- each of the growth drivers. So for instance, is the lack of personnel, or is it sales? What's kind of like the bottlenecks, and what are you guys doing to try to relieve those bottlenecks? Jan Loeb: So I think the #1 bottleneck is the customer base that we are trying to bring in-house. So on the residential side, and small commercial side, usually, it's one decision maker is making the decision to get monitoring and not monitoring, the head of the household or the owner of the small business, the doctor's office, et cetera. And going after bigger customers, we're just finding that the sales cycle is much longer. And there are other extraneous factors that come into play, the economy, tariffs, layoffs, et cetera, that impact bigger customers. So to me, our internal team is excellent. And I don't think adding more personnel is an answer. It's just staying on top of these customers, and hopefully, we reel them in because we feel very confident about our product, and how we can help them. So I think that to me is the #1 bottleneck that we have. Operator: Our next question comes from Richard Sosa. Unknown Analyst: Great to see the results this year. I'm excited about the AIO partnership and looking forward to hearing more about it. But just a really quick question. I joined late, so you might have addressed it on the call. But in terms of the monitoring revenue in the fourth quarter, I thought it was like slightly below what it was in the third quarter. Is it -- was it a timing issue, or was it something else? Tracy Clifford: Hi, Richard, thanks for the question. No, the decrease in monitoring revenue in 4Q '25 compared to 3Q '25 was actually due to the positive impact of the nonrecurring revenue recognition related to a policy that was made effective in 3Q '25 of recognizing first year of monitoring revenue on any units that have been shipped into which the first year monitoring had already been paid, but the unit had been outstanding for 24 months or longer and had not yet been installed. So that there was an impact that would be nonrecurring in the third quarter of 2025. Jan Loeb: Okay. But the actual ongoing -- Unknown Analyst: The third quarter was much higher than it should have been, really, I guess it was a onetime benefit in the third quarter. Tracy Clifford: Correct. That's correct. Jan Loeb: And then on an ongoing basis, Richard, the fourth quarter was above the third quarter in monitoring revenue. Operator: And our next question comes from Joel Sklar. Joel Sklar: Excited about the future for Acorn. A couple of questions. One, Jan, can you give us a little bit more flavor for the market receptivity to AOI. Obviously, you have one telecom customer who is least interested in getting a model in there and seeing how it works out. But can you give us some more -- I know it's still in the very early stages, but a more general flavor for the market receptivity to the product. And then the second one was anything new on demand response. Jan Loeb: Okay. Good morning, Joel. So on AIO, it's just too early to tell about market receptivity because we haven't really gone out and shopped it or sold it. Obviously, you're right. One of our telecom customers has agreed to put up everything on their demo -- in the demo site. And so we've obviously talked to them about it. And so they're certainly interested in. But I would think -- and this goes kind of beyond a little bit beyond your question, but I would think the -- any telecom tower company would be interested in the product. I'm not saying that they would buy it or -- but they would certainly be very interested in it. You have to recognize and then this also kind of goes to why we were interested in AIO, and where we see the future going. And remember, AIO has put in over 110,000 sites with their equipment. So -- and they know what they're doing and their equipment really works. But what's interesting about the equipment is, besides monitoring everything in a cell tower site, for example, whether it be locks, cameras, battery, HVAC, lots of stuff that are monitored that we don't monitor, we just monitor the generator. So obviously, it's a very good fit for us. But their products, because it's so AI-based, for example, depending on which is the cheapest form of energy at any particular time, whether it's solar, battery, fuel, they can switch. They have the technology to switch the uses depending on the cheapest source of power at that particular time. So we think it's a big -- it could turn into a big cost savings for the tower operators. Another thing we know is that security of cell phone tower is pretty lack of physical. I mean they're in remote sites. With the price of copper where it is today, we think that security has to be hardened at cell tower sites. And so they have the #1, at least what we believe to be the #1, security system in place. And then just if you think about it because it's the way we think about it, the industry is spending billions and hundreds of billions of dollars on AI based on reports that we've seen today, roughly 40% of AI is delivered through mobile apparatuses, which obviously needs cell towers. So we think sub towers are going to be -- are an important site, and we'll continue to be a growing part of the infrastructure that's needed. And we think we have, with AIO product, the best solutions for towers. And so we think there'll be great receptivity once we have a proof of concept. We have one up and showing. We have the software that we can show people. So we think it will be a very big item. But again, we're saying nothing for right now. Let's see what happens towards the second half of the year. Have I answered your question, Joel? Joel Sklar: Yes. I remember I also had on demand... Jan Loeb: Okay. On demand response, there's nothing new. We continue to have discussions with utilities that, as a matter of fact, we have one coming up in a week on their interest in demand response. The issue is how it gets structured. For example, this particular utility can only give demand response payments to their end customer by law. So how do we work that Acorn gets the money that they deserve. So the concept continues to be an important concept, the actual operations is unclear yet because it's too new as to how the money will flow. But there's certainly a lot of interest, and we are in the midst of it. Joel Sklar: Okay. Great. Can I have one quick follow-up on AOI, Jan? Jan Loeb: Sure. Joel Sklar: Okay. So the decision to -- you're going to be -- you have terms to share the monitoring revenue, and of course, we value that a lot more, it's ongoing. Recurring revenue is a great thing, like the razor-blade model. But the -- but from my understanding, and please correct me if I'm wrong, we're not going to get any revenue from the hardware sales even though it's going to be branded OmniMetrix. And I assume there are going to be some costs associated with selling the hardware, including maybe commissions. So could you tell us a little bit more what went behind the thought that we would be sharing in the monitoring, but not directly in the hardware sales. Jan Loeb: So let me correct you on that. No, we are definitely getting the hardware sale. So we are getting a hardware sale. And what we're doing is we're sharing in the monitoring. So the way I look at it, it's like a semi acquisition of the North American rights for AIOs product line. So we have given a relatively small upfront fee, which requires them to do a bunch of things, for example, putting up a demo site and providing personnel, et cetera. And then we're sharing in the ongoing monitoring. So I view that as kind of like an earn-out. So a small upfront acquisition fee and then an earn-out in terms of the ongoing monitoring fee is how I look at it, and why I think it's such an interesting structure, and again, it takes out a significant amount of risk for shareholders and leaves us with a significant amount of upside. We're going to go to market with a product in two different ways. We'll have a CapEx model. We have an OpEx model. But in all situations, we are getting paid for hardware. We're not in the 3B business. Joel Sklar: Okay. Great. Wonderful. And then at the risk of being greedy, I'm going to pose one more question. So I saw a part of the announcement with AIO is the right to forget what technically is called not right of first refusal or something to their South America, Central America to business there. And you may wonder why am I asking about that when you're just getting your toe in the door with North America, but the reason I asked there is I saw that AOI has some important existing customers. I think maybe in a SouthTower company that has expansive operations in South America. And if you could -- so that may be some low-hanging fruit if that was something that you could execute and get the rights to their South America business. So I was just curious about that. Jan Loeb: Yes. So we built that into our contract because, as you say, there's some interesting opportunities in South America. But also, we wanted so to speak. We didn't want to have our flank with somebody else. So growing up, I played a lot of risk. So I figured if we're having North America, I want to have South America as well. It's a growing area, and it's easier for us to service South America than AIO from where they're located. So it made sense, and we negotiated for it, and we got it. So we'll see -- we see what happens. But again, as you said, first, let's get North America going the way we expect it to happen and then we can see what happens with South and Latin America. Operator: And at this time, I'm showing no additional questions. I'd like to turn the floor back over to Jan Loeb for closing remarks. Jan Loeb: Thank you all for joining today's call. We appreciate the continued support from our shareholders. If you have any follow-up questions, please feel free to reach out to myself or our IR team, whose contact information is provided in today's press release. We look forward to updating you again on our Q1 call upcoming. All the best. Operator: And with that, everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Scandinavian Tobacco Group Full Year 2025 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Torben Sand. Please go ahead. Torben Sand: Thank you, and good morning, and welcome to Scandinavian Tobacco Group's webcast for the Full Year and Fourth Quarter 2025 results. My name is, as said, Torben Sand, and I'm Director of Investor Relations and External Communications. And I am today, as usual, joined by our CEO, Niels Frederiksen; and our CFO, Marianne Rorslev Bock. Please turn to the next slide for today's webcast agenda. Niels will start the presentation by giving you a brief overview of the highlights, including a snapshot of the key financial data. Niels will also summarize a few of the highlights from our new strategy that we launched last year, Focus2030. Then Niels will move on to share more details on the performance of our product categories before Marianne takes over and give you an update on the financial performance in our 3 reporting divisions. Marianne will also give more details about the financial performance, including comments on cash flow, leverage and capital allocation. Niels will conclude the call by giving some insights into the expectations for the full year 2026. After the pre-prepared presentation, we will conduct a Q&A session where we will be pleased to take any questions you might have. Before we start, I ask you to pay special attention to our disclaimer on forward-looking statements, which can be found on Page #3 in this slide deck. Now please turn to Slide #5, and I leave the word to our CEO, Niels Frederiksen. Niels Frederiksen: Thank you, Torben, and welcome to the call. 2025 became a challenging year for Scandinavian Tobacco Group with a combination of external disruptions and internal operational issues. Tariffs and lower consumer sentiment in the U.S. directly impacted our handmade cigar business and the category experienced fierce price competition, both in retail and in the online distribution channels. Our machine-rolled cigar business continued to be under pressure, while our investment in our nicotine pouch business delivered good contributions to the group's financial performance. Throughout the year, we have concentrated our efforts on protecting our market positions, integrating Mac Baren and growing our handmade and nicotine pouch businesses. And given the difficult circumstances, I am satisfied with our results for the year despite having to reduce our full year expectations in May as a consequence of the increased tariffs. 2025 was a year where we launched our new strategy, Focus2030, and we released new financial ambitions, and we adapted a new more flexible shareholder return policy. At our Capital Markets Day on November 20 last year, we unfolded the new strategy but today, we will also provide a few highlights on this later in the call. We expect 2026 to be a year where geopolitical uncertainty will remain a market condition and economic growth will be challenging. For Scandinavian Tobacco Group, this means that our main priorities in the year will be to stabilize earnings in our machine-rolled cigar and smoking tobacco business and inject new energy and growth into our strong handmade cigar business. We will also continue to grow our promising nicotine pouch business. Now please turn to Slide #6. Let me now share a few financial highlights for the year. Marianne will give more details about the financial performance and the quarterly development later in the presentation. But reported net sales were DKK 9.36 billion compared with our guidance of DKK 9.1 billion to DKK 9.2 billion, and the EBITDA margin before special items was 19.8% compared with our guidance of 19.5% to 20.5%. Overall, this results in an EBITDA before special items in line with our expectations. The free cash flow before acquisition came in more than DKK 200 million below our guidance due to a delay in the collection of certain receivables due to the SAP implementation in Europe. The issue has been solved and as the deviation is a phasing issue, the free cash flow will be equally positively impacting 2026. Marianne will give you more details in her part of the call. Adjusted earnings per share were DKK 10.8, in line with our guidance of DKK 10 to DKK 12 per share. Please turn to Slide #7. On 20th November, we launched our new 5-year strategy in connection with the Capital Markets Day, and you can find a recorded version of the event on our website. The purpose of Focus2030 is not only to create value by executing the strategy but also to develop a company that is even better positioned to deliver value beyond 2030 and we are confident that we can do so. We've defined 3 strategic priorities, each important for us to deliver on the ambitions for Focus2030. Firstly, to create a sustainable and stable machine-rolled cigar and smoking tobacco business, primarily focused on Europe. Secondly, to grow our attractive handmade cigar business anchored in the U.S. but with a stronger global footprint. And thirdly, to build a larger nicotine pouch business with even more upside in an attractive category. And in the process, we intend to turn the declining earnings trend around and we have -- sorry, in the process, we intend to turn the declining earnings trend around that we've seen over the past 3 years and create value for consumers, employees and shareholders. The new strategy is anchored in our strong brands and strong market positions across our diversified portfolio. However, the market conditions and the strategy call for us to allocate resources differently going forward to ensure that we focus on and capture what we see as the largest growth opportunities. And our power brands strategy is tailored to facilitate this. The strategy addresses the areas that we need to fix because they are not performing up to expectations, but also the areas where we do well and where we need to push further to deliver even better results, all with a combined ambition to build a sustainable and growing company with more potential beyond 2030. We also introduced new financial ambitions, which are to significantly improve the return on invested capital from about 7.9% in 2025 to more than 11% in 2030, to deliver an incremental increase in EBIT and a free cash flow generation exceeding DKK 1.2 billion in 2030. Acquisitions as well as divestments of less core assets will continuously be evaluated, assuming these potential transactions support our strategy as well as our financial ambitions. The shareholder return policy has been adapted to be more -- to a more flexible dividend payout ratio policy based on 40% to 60% payout ratio against adjusted earnings per share, supplemented by share repurchases when the projected leverage ratio allows. Please now turn slide to Slide #8. To meet our financial ambition and the objectives in Focus2030, we need to deliver on 3 strategic priorities. Growing handmade cigars will be defined as growing net sales as well as delivering incremental profit growth to the group. The key growth drivers are expected to -- the key growth drivers are expected to be delivered by a combination of increasing our market share of own brands in the U.S. from approximately 13% to more than 15% in 2030 as well as through an expansion in our retail network. This expansion will be driven by our power brands, which in 2025 have 5% overall market share. Stabilizing the machine-rolled cigar business requires a focus on protecting profits and cash flow. The path to success is offsetting the structural volume decline in the categories through price management and market share gains. Mitigating structural market trends through intensified market share focus is reflected in the ambition to increase volume market share in key European markets from 26.8% in 2025 to more than 29% in 2030. And a key component to the profit growth will also be through simplification of our portfolio by almost 50%. Finally, accelerating our nicotine pouch business is expected to deliver important contributions to the group's growth in net sales and profits in Europe. We expect to build on existing market share positions in Sweden and in the U.K. but also in other markets where our capabilities within distribution and access to the market provide us with an advantage. Now let's turn 2 slides -- to Slide #10. Machine-rolled cigars and smoking tobacco comprised 50% of group net sales in 2025 with handmade 35%, nicotine pouches at 5% and others at 10%. Others include accessories and bar sales, amongst others. For the full year, organic net sales growth was minus 3%, where handmade cigars delivered flat organic net sales, machine-rolled cigars and smoking tobacco minus 1% and nicotine pouches a negative 17% growth. However, the organic growth for nicotine pouches does not reflect the underlying progress of our power brand, XQS, which delivered a high double-digit organic growth. The negative growth for the category was significantly impacted by the discontinued online distribution of ZYN from the second half of 2024. For the first time, we are giving details on the gross margin structure for our product categories. For the group, the gross margin before special items was 44% for the full year of 2025. The product category machine-rolled cigars and smoking tobacco delivered a 51% margin, handmade cigars, 41% and our nicotine pouch business, 36%. Going forward, we intend to share these details in order for you to get a sense of the progress we make in our strategic priorities. Now let's move on to each of the categories, and please turn to Slide #11. The market for handmade cigars in the U.S. continued to contract in 2025 by an estimated mid-single-digit percentage. For 2026, we expect a 4% total market volume decline rate. We still estimate the underlying longer-term decline rate to be a lower single-digit number. For the full year 2025, reported net sales decreased by 4% for the category with organic net sales being broadly unchanged. Reported growth was impacted by the development in currencies. Increasing organic net sales in retail and pricing were offset by underlying volume declines in the U.S. market and by international sales. Gross margin before special items have been on a declining trend for the past 2 years. For 2025, the margin was 41.4%, with the main drivers for the decline being fierce competition in our online distribution channel, and negative impact from increasing tariffs and consumers trading down. The data illustrated in the chart show the development in the last 12 months data, not the specific quarterly data. For the fourth quarter, our category performance was 1% organic net sales growth and was positively impacted by business-to-business sales in the U.S. and continued growth in our retail stores. The sales of handmade cigars to U.S. wholesalers and distributors, the business-to-business market continued to recover in the fourth quarter and delivered a 6% increase following a low single-digit growth in the third quarter. Sales in our retail stores continued to increase, driven by new store openings, although the same-store sales were slightly down due to a temporary rebuild of our largest store in Dallas, Texas. And finally, our online sales of handmade cigars were broadly unchanged, where sales to our international markets decreased during the quarter. Now please turn to Slide #12, and we'll talk about machine-rolled cigars and smoking tobacco. For machine-rolled cigars and smoking tobacco reported growth in net sales was 2% for the full year. The growth was impacted by the acquisition of Mac Baren from the second half of 2024, while organic growth in net sales was slightly negative by 0.5%. The gross margin before special items was 50.8%, broadly in line with the full year of 2024. But as the graph also indicates the last 12 months margin declined -- sorry, the last 12 months margin declined significantly throughout 2024, primarily as a result of the high volume decline rates we experienced in machine-rolled cigars throughout 2024. In that context, the stabilization of the category margin is encouraging, although still not satisfactory. The current margin level remains negatively impacted by changes in product and market mix as well as disruptions caused by our SAP rollout in Europe. With the financial ambitions we have communicated, we need to protect and improve the margin, not only for machine-rolled cigars but also for smoking tobacco. For the fourth quarter, organic net sales for the category were unchanged, comprised by a low single-digit growth in machine-rolled cigars and a low single-digit decline in smoking tobacco. Now let me give you an update on the market share development in our machine-rolled cigars. The total market for machine-rolled cigars in Europe is estimated to have declined by 1.2% in the full year of 2025 based on preliminary data for our 7 key markets and with the decline rate for the fourth quarter estimated to be 2.8%. The data can deviate somewhat quarter-by-quarter and year-by-year from the underlying trends, and we don't regard 2025 market development as an indication of a sustainable improvement. Our base scenario of 2% to 3% structural decline rate is maintained, and for 2026, we expect a 3% market decline in Europe. Measured by our market share, we experienced a stabilization in the fourth quarter compared with the third quarter. The market share index was 26.3% for the fourth quarter and 26.8% for the full year of 2025. As mentioned with the Focus2030 strategy, we will invest in strengthening our positions as stronger market share positions are crucial to deliver long-term value in the category. With this, please turn to the next slide. So moving on to next-generation products, which comprises our nicotine pouch business and currently accounts for 5% of group net sales and slightly less of gross profits. For the full year 2025, reported net sales growth was 2% and organic growth was minus 17%. However, these data points do not give the full picture of the positive development we experienced for the category. The full year growth was significantly impacted by the discontinued distribution of ZYN in the U.S. but the reported growth rates were also impacted by the nicotine pouch portfolio we acquired from Mac Baren in the middle of 2024 and the ongoing streamlining of the brands, ACE and GRITT now being sold in fewer markets. Importantly, our brand XQS delivered 55% organic net sales growth and the market share in Sweden increased from 7.8% in 2024 to 12.3% in 2025. And by the end of 2025, the market share was above 13%. Our market share in the U.K. also improved during the year, although it is still only close to 1%. The category gross margin before special items was broadly unchanged at the level of 35% for the full year 2025 compared to 2024. As a result of the continued expansion of XQS to new markets and with investments to increase market positions, the EBITDA margin was only slightly positive for the year. During the fourth quarter, our nicotine pouch business delivered 42% reported net sales growth and 37% organic net sales growth. XQS -- the XQS brand delivering 87% organic growth, driven by a strong performance in the U.K. and Sweden. With this, I will now leave the word to Marianne for more details on the financial performance, please turn 2 slides to Slide #15. Marianne Bock: Thank you, Niels. In 2025, the commercial division Europe Branded comprised 36% of group net sales, North America Branded & Rest of the World, 33% and North America Online & Retail 31%. For the full year, organic net sales growth for the group was minus 3%. Europe Branded delivered minus 1%; North America Branded & Rest of the World, minus 5%; and Online & Retail, minus 4%. For Online & Retail, growth was impacted by the discontinued distribution of ZYN from the second half of 2024. In the table, we have shared an overview of the margin structure for each of the divisions measured by gross margin before special items as well as EBITDA before special items. For Europe Branded, the gross margin before special items was 48%. North America Branded & Rest of the World delivered 46% and Online & Retail, 38%. These differences in margin by division reflect product and market mix and for Online & Retail business being a direct-to-consumer business, whereas the 2 other divisions are business to business. The group margin was, as already mentioned, at 44%. Measured by EBITDA, the margin differences are even wider with Online & Retail delivering the lowest margins, while North America Branded & Rest of the World delivered the highest margin, primarily as these markets do not have own sales organizations. We'll now move to each of the divisions. So please turn to Slide #16. I will begin with Europe Branded. For the full year, reported net sales grew by 6%, largely due to the acquisition of Mac Baren in the third quarter of 2024. Organic net sales growth was slightly negative as increased sales of nicotine pouches were offset by declines in machine-rolled cigars and smoking tobacco. During the year, our gross margin before special items decreased from nearly 49% in '24 to 48% in '25. The decline was driven by changes in product mix with a strong growth in net sales of our nicotine pouch brand, XQS and lower sales of smoking tobacco. The same factors contributed to a decrease in the EBITDA margin, which fell from 21% in '24 to 19.8% in '25. Overall, profit margins for Europe Branded are affected by shifts in product and market mix as well as disruption in product availability. Reported and organic net sales growth for the fourth quarter was 6%, driven by both nicotine pouches and machine-rolled cigars. However, declines in both gross margin and EBITDA margin were due to the rapid growth of nicotine pouches compared to other product categories. Now please turn to Slide #17. For the full year, reported net sales decreased by 4% and organic growth declined by 5%. The acquisition of Mac Baren contributed positively to reported growth, while the weakening of U.S. dollar against the Danish krone has a nearly equal negative impact. The full year gross margin before special items decreased from almost 51% in '24 to 46% in '25, primarily due to changes in product and market mix. This was most notably affected by lower sales of high-margin machine-rolled cigars and smoking tobacco products. For the fourth quarter, reported net sales for North America Branded & Rest of the World fell by 12%. Organic growth was negative by 7% as growth in handmade cigars could not offset a high single-digit decline in machine-rolled cigars and smoking tobacco. The category other, which includes sales of accessories and similar items, also experienced negative growth during the quarter. The decline in the gross margin during the fourth quarter was even steeper compared to the full year decrease as the quarter was compared to a particularly strong fourth quarter in 2024. Additionally, lower sales of machine-rolled cigars were primarily driven by reduced sales in our high-margin markets in Australia and Canada. These dynamics were also the main factor behind the significantly lower EBITDA margin before special items during the fourth quarter, impacting not only North America Branded division but also the group margin for the period. Now please turn to Slide #18. For the full year, North America Online & Retail reported growth in net sales decreased by 8%. Organic growth was down 4% but excluding the discontinued distribution was slightly positive. Underlying organic growth included gains in our retail stores, while our online business experienced a slight decrease. In retail, we are seeing the benefits of opening new stores over the past year. However, same-store sales were marginally lower due to a renovation of our largest store in Fort Worth, Texas, as Niels mentioned earlier. Competitive pressure remains strong in the online channel but our pricing strategies are gradually improving our market share. Throughout the year, both gross margin and EBITDA margin were affected by the intensified promotional activities aimed at expanding our market position. For the fourth quarter, reported net sales decreased by 8.6%, primarily due to currency fluctuation. Organic growth was down 0.5%, with retail achieving 7% growth and online business showing a slight decline. Gross margin and EBITDA margin before special items in the fourth quarter were impacted by the high level of promotional activities, which have continued into 2026. I'll now move to an update on group financial performance. Please turn 2 slides to Slide #20. Throughout the presentation, details regarding developments in net sales, gross margin, EBITDA margin have already been given. Now I would like to provide a few additional comments on select financial details and key metrics. In 2025, special items amounted to negative DKK 200 million compared to DKK 279 million in '24. These costs can be divided into DKK 130 million for the SAP implementation and DKK 70 million for reorganizations and the integration of Mac Baren. We expect special costs in '26 will total approximately DKK 275 million before gradually tapering off in '27. Higher net financial costs were driven by both increased net debt and the refinancing of our corporate bond, which took place in September '24. We refinanced our existing EUR 300 million bond, which matured in '24 with a new facility of similar DKK 300 million. However, the new bonds were issued with a coupon interest that was almost 3.5 percentage points higher, reflecting the prevailing market rates at that time. Financial costs, including exchange losses, increased by nearly DKK 100 million compared to 2024. We have already addressed the effect of the discontinued distribution of the ZYN nicotine pouch product, which negatively impacted group organic net sales by 1.3%. This implies that the underlying decline for the year was 1.8%. Finally, I'd like to address the decline in return on invested capital, which is a key KPI for us as we strive to meet our new financial ambition. Return on invested capital decreased to 7.9% from 9.4% in '24, while our ambition is to achieve a return on invested capital above 11% in 2030. Excluding the impact of special items, which are included in the calculation, return on invested capital was 9.3% in 2025, almost similar to '24. The decline in return on invested capital for the year was primarily due to lower EBIT as invested capital remained broadly unchanged at DKK 14.5 billion. Please turn to Slide #21. Niels mentioned in his opening remarks, the free cash flow before acquisitions was approximately DKK 200 million below our guidance. The free cash flow was DKK 595 million compared to DKK 931 million in '24, and our guidance range was DKK 800 million to DKK 1 billion. In the fourth quarter, free cash flow before acquisitions was DKK 147 million compared to DKK 604 million in the fourth quarter of '24. The lower cash flow during the quarter relative to our expectation was due to delays in collecting of receivables associated with our ERP implementation in Europe. This issue has now been resolved. Payments are beginning to be recovered, and we anticipate working capital will return to normal levels during the coming months. The delayed payments are expected to have a positive effect on cash flow during the first half of 2026. The effect on working capital during the fourth quarter resulted in an unusually negative contribution from changes in working capital with a reduction of DKK 17 million in the quarter, which was DKK 180 million lower than the positive contribution during the fourth quarter of '24. Typically, working capital changes are positive in the fourth quarter of the financial year. Other factors contributing to the lower cash flow in the fourth quarter included a reduced EBITDA and higher taxes paid, which in the illustration is included in investments and other. Now please turn one slide to Slide #22. In the fourth quarter, the leverage ratio increased from 2.9x by the end of third quarter to 3x by the end of 2025. The increase is due to a decline in EBITDA before special items compared to the fourth quarter of last year. Compared to '24, the leverage increased from 2.6x. Throughout '26, we remain fully committed to lowering the leverage ratio and working towards our target ratio of 2.5x. This is a top priority for us this year, and if our earnings come under greater pressure than anticipated, we will take necessary steps to ensure the leverage ratio is reduced. Now please turn to Slide #23. In November, we announced our capital -- new capital allocation policy, which is guided by a leverage target of 2.5x. This target determines the level of investments and shareholder payout, giving us the financial flexibility to pursue growth opportunities while delivering shareholder returns. It also emphasizes our commitment to maintaining an investment-grade credit rating. We transitioned to a payout ratio-based dividend policy, ensuring dividend distributions are closely aligned with our underlying financial performance. The dividend payout ratio is set between 40% to 60% of adjusted earnings per share. This approach will take effect with dividend allocation related to the '25 financial results and will impact the dividend proposal for the upcoming Annual General Meeting in April. Since our listing in 2016, we have consistently delivered on our shareholder returns and intend to continue doing so. Given the current leverage ratio, we believe it is prudent to propose a dividend payment of 2025 in the low end of the payout range. The Board of Directors plan to propose a dividend payout per share of DKK 4.5 corresponding to a payout ratio of 42%. As we normalize our leverage in the coming years, we intend to create greater capacity for share buybacks, which continue to be an essential component in our overall capital allocation policy. With this, I will now hand the presentation back to Niels. Please turn 2 slides to Slide #25. Niels Frederiksen: Thank you, Marianne. For 2026, we expect the consumer trends to be unchanged for most of our product categories and markets and broadly similar to historic trends. We do appreciate that uncertainties are elevated and the risk for external disruptions remain high. However, we believe we have established good control of our internal processes and operations following the implementation of the SAP solution throughout Europe, and we are now well prepared to execute on our new strategy. For 2026, we expect group net sales growth at constant currencies to be in the range of minus 2% to plus 2%. The expectation reflects that total market volumes for machine-rolled cigars in Europe will decline by 3% and consumption of handmade cigars in the U.S. will decline by 4%. Improving our market shares, growing our U.S. retail and nicotine pouch businesses are expected to offset the volume declines in our core combustible categories. For 2026, we expect the EBIT margin before special items to be in the range of 13% to 14.5% compared with the 14.9% in 2025. The expectation reflects that 2026 will be a year of stabilization and where we will continue investing to facilitate our long-term ambitions in Focus2030. Pricing is not expected to fully offset the impact from cost increases, changes in product and market mix as well as our increased promotional activities to protect and improve our market share positions. On a more technical note, an increase in the amortization of trademarks of approximately 1 percentage point on the EBIT margin before special items is expected to be largely offset by an expected higher income from certain duty refunds. The increase in amortization reflects the group's new strategic direction with stronger focus on power brands, implying that brands outside the scope of power brands going forward are classified with a finite useful lifetime. For 2026, the free cash flow before acquisitions is expected in the range of DKK 950 million to DKK 1.2 billion, reflecting the expectations for net sales and margins as well as the delayed payments from trade receivables, which Marianne talked to, impacting cash flow positively in 2026 with an expected effect on cash flow during the first half of this year. Now this concludes our presentation for today's call. I'll now hand the word back to the operator, and we are ready to take questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question over the audio lines. And the question comes from the line of Niklas Ekman from DNB Carnegie. Niklas Ekman: First question is regarding the guidance for 2026 because at the Capital Markets Day in late November, you talked about an ambition for a low single-digit growth of EBIT. And it looks now like even the upper end of the full year guidance suggests a decline and the low end, a quite significant decline. So can you elaborate a little bit on this? Is there anything that has worsened since the Capital Markets Day in November? Marianne Bock: Thanks for the question. So when we talk about a low single-digit increase in EBITDA, it is over the strategy period. We are believing that 2026, which we also said at the Capital Markets Day is what we call a year of stabilization. We need not only to stabilize the internal disruption that we have seen in '25 but we also need to stabilize both our handmade cigar business and our machine-rolled cigar business. And that will entail investments into regaining market share but also in promotions. So we still believe that over the strategy period, we will see low single-digit growth in EBIT. But in '26, we could see a decline. Niklas Ekman: Can I also ask about your view on margins and potential cost reductions and particularly given the quite steep margin decline we've seen in recent years. You've now have margins that have dropped below pre-COVID levels and the guidance for '26 suggests a further decline. Are you in a stage now where you are looking more actively at your cost base again and maybe at initiating more significant cost reductions in order to curb the margin decline? Or what's your view on that? Marianne Bock: Yes. Thanks again, Niklas. So if we talk margins in '26, margins in '26 will also be impacted by mix, which means that our nicotine pouch business, we expect to grow but we are also seeing declines in our fine-cut business that has very high margins. When we talk about cost programs, we announced at the Capital Markets Day a cost program of DKK 200 million over the coming years. We are, as we speak, executing on these cost programs. We have full plans in place for those DKK 200 million, and we will see that coming in, during '26 and also '27. I would also say that if we see markets are worsening compared to our expectations, we will, of course, look at our cost levels. Niklas Ekman: Okay. Very clear. I'm also curious, when I look through the report, you used to talk a lot about the growth enablers. And now you talk more specifically about next-generation products and the retail stores. Is this a definition that you have removed? And is this because you don't -- you no longer see the international handmade business as a major growth driver? Niels Frederiksen: Yes, it's a good question, Niklas. I think that with the new strategy, you can say that retail expansion and nicotine pouches still play a central role. But the growth in international handmade cigars is still important to us, but we have prioritized doing well in handmade cigars in the U.S. more. So referring to the growth enablers as we originally defined them makes less sense. We now want to be more focused on stabilizing earnings in the machine-rolled cigars, smoking tobacco, growing the handmade with a focus on the U.S. and growing nicotine pouches. So we will try to articulate the degree to which we succeed with these things in a different way than referring to the growth enablers. Niklas Ekman: Very clear. And just a final question. Am I right to assume that buybacks are quite unlikely in '26. When I look at your leverage ratio and your aim to get net debt below 2.5x EBITDA, I guess the only way to get there is if you stick to dividends and not buybacks. So buybacks are unlikely in '26. Is that a right assumption? Marianne Bock: I think the short answer is yes. Operator: Now we are going take our next question, and the question comes from the line of Sebastian Grave from Nordea. Peter Grave: I apologize for those being broadly in the same line of Niklas. But I'll start off with a question on the margin here. So for the guidance of '26, you're guiding for quite steep margin declines compared to '25, even from a fairly low starting point in '25. And I know you talked about increased investments in market shares. But I mean, on the flip side, I would assume that you should see some tailwind from Mac Baren synergies. There should also be some SAP efficiencies and cost takeouts as highlighted in the Capital Markets Day. So at least in my view, it looks like underlying the margin pressure here is way more pronounced than what is -- we can see from the highlighted numbers here. So could you maybe help me understand how this works and how exactly this aligns with your articulated ambitions of protecting earnings in the short term? Marianne Bock: Yes. Yes. Let me start out, Sebastian. And first of all, thank you for asking questions, and then Niels can also elaborate. But if you look at our guidance range, both when we look at top line and also margins, it is quite wide ranges if you compare to our business. And it is a signal of uncertainty on our total markets, how they're going to develop but also uncertainties in the external world. So we are anticipating a slight decline in margins in '26 due to the reasons that I mentioned to Niklas. We are on track on the synergies for Mac Baren. You talk about SAP synergies. There will also come synergies in on the SAP implementation. But as we are still rolling out, we're focusing on that rather than executing on those synergies for now. Niels Frederiksen: Yes. I can add, Sebastian. I think when you look at Europe and machine-rolled cigars, you have the area where you have a lot of mix of product and market. The thing that is, let's say, not new but is more sustained and we can also see it continuing into 2026 is the promotion pressure applied across all sales channels in the U.S. So even though we take price increases and we continue to have a high focus on that, margins are under pressure simply to stay competitive, both on a, let's say, a brand level to regular retail and on an online level competing in the U.S. So these are some of the key dynamics that are in play and which we are obviously working very closely to improve but that is what is reflecting the margin pressure that Marianne also referred to. Peter Grave: Okay. So what I'm hearing you saying, Niels, is that you are in a difficult consumer environment in a structurally declining category with fierce competition. And hence, is there any reason to believe that invest in these currently elevated investments in market shares that they should taper off in the near term, i.e., in '27, '28? Niels Frederiksen: Yes. I think that the way to think about this is that market conditions have intensified, if I can put it like that. And our strategy aims at protecting and enhancing market shares, and that comes with a higher promotion pressure. Our job over time is to let's say, improve or lower that promotion pressure and still do well on market shares but it requires the market conditions to improve. So you can see the combination of total market declines and the -- let's call it, the fight for market share is what is putting the pressure on the market. And we have, of course, an expectation that over time, that will normalize. We've not seen promotion pressure like this and downtrading on this for some time. Peter Grave: Okay. That is fair. And my last question is going back to the ambitions of harvesting some DKK 200 million efficiency gains as you talked about in the I understand that some of these ambitions have already translated to initiatives but can you maybe help explaining how much of the DKK 200 million is already reflected in the '26 guidance and how much we should expect beyond that? Marianne Bock: Yes. So I would -- for the '26, I would think it in the level of around DKK 100 million. Peter Grave: Okay. Okay. So half of the efficiency gains... Marianne Bock: Sorry, Sebastian, then going into '27, we'll be closer to DKK 200 million but probably not fully, and we'll see the last part coming in, in '28. Operator: [Operator Instructions] And we're going to take our next question on the audio line. And it comes from the line of Damian McNeela from Deutsche Numis. Damian McNeela: The first one is on Canada and Australia because I think in the press release last night, you called out challenging conditions there and the impact that, that's had on the business. You did mention in the presentation. Can you talk a little bit about what's happening in those markets and what the outlook for this year is, please? That's my first question. Niels Frederiksen: Thank you, Damian. And if I start with Australia, for those that follow the industry closely, it's maybe no surprise that we have seen an explosion in illicit trade. So a lot of tobacco companies, including ours, have seen earnings decline by quite a bit in Australia. And this is, let's say, increased for us in the sense that we had because of regulatory changes, a relatively higher sales in 2024 than in 2025. So the net impact of Australia on our profitability is quite distinct. So Australia is very much about a total market that is going illicit. And we are not losing market share, but basically losing volume simply because the legitimate market is lower, and it's a high profit market as we debate that will be discussed. For Canada, the situation is a little different. Also here, our market share position is strong and broadly unchanged. But in Canada, there is a -- from time to time, a larger sales into the Indian districts and the government have restricted some of those licenses they issue for selling in Indian districts, and that has affected our sales in Canada in 2025. So those are the 2 main explanations around Canada and Australia and them being among our highest margin markets does affect the average margin and total costs. Damian McNeela: Yes. And just as a follow-up on that Canada point, that's likely to remain the case for the medium term, is it? Niels Frederiksen: It's been -- over the years, this has been an on and off issue. So there's nothing wrong with selling in the Indian districts but they need licenses and sometimes the government takes it away from them and then a period passes and they get reinstated. So we are still of the view that they may come back but there's no guarantees around it. Damian McNeela: Yes. And so the guidance assumes no return for those... Niels Frederiksen: Yes. Yes. Damian McNeela: Yes. Okay. And then in MRC Europe, it looks like margins have stabilized, but market share losses have continued. I was just wondering whether you could sort of call out some of the competitive dynamics in your -- a couple of the bigger markets that you operate in. Just to give us a sense of how the business is performing now that the sort of ERP system is up and running and fully implemented? Niels Frederiksen: Yes. Let me try to give a few examples. So 2 of the key markets in our strategy is France and Spain. And as we have been resolving the inventory availability issues up until the end of 2025, we are seeing that market share is responding positively into 2026 but it's also us recovering from a low level. So we are still saying we have to be patient around how fast we can regain market share into 2026. But at least in these 2 markets, you can say that we have inventory availability back to where we would like to have it. When you look at other key markets in Europe, the situation is a little different. We have markets like the U.K. where there is a higher decline rate of machine-rolled cigars, and there's also a shift from regular machine-rolled cigars where we are strong to increasingly small cigars where we are competing up against some of the larger tobacco companies. So even though those categories grow, the mix in margin become again a net negative. When you then look to the Central European markets of Benelux and Germany. Here, we are, again, still concentrating on getting customer service levels back to where they need to be. And also here, you have in certain markets, this new dynamic of consumers shifting between what we call mainstream small cigars and little cigars, which are also cigars but sold at a lower price and typically in 10-pack cigarette type packaging formats. So it's -- what I'm really saying is it's quite a complicated picture when you look across the markets. What's important to remember is we have really strong market positions in many of these places, France, Spain, Benelux, U.K., and that's what we're trying to leverage to get the market share back. Marianne Bock: And then you were also asking about the competitive situation. And here, we are seeing -- which we've also seen over the years that our competitors are reluctant to take the same level of price increases, which we think is necessary to cover both volume decline and cost increases. Damian McNeela: Okay. So that hasn't changed at all. Marianne Bock: No. Niels Frederiksen: No. Damian McNeela: No. Okay. And then just on -- I guess this is a slightly more philosophical one. You've changed guidance from EBITDA to EBIT margins. I was just wondering if there was anything behind that decision to do that. Torben Sand: Yes, maybe I can answer that. First of all, we believe also now where we have a more distinct and clear focus on return on invested capital, it goes more in line with giving a guidance on EBIT. Secondly, the EBIT level also includes what we have seen in the past few years, increased investments and therefore, depreciation in especially our retail business. And then we have also noticed from kind of studies we have made with the market that it's a more common practice to guide on the EBIT level. So that's the key reasons for us changing that. Damian McNeela: Yes. Okay. That's clear. And then perhaps if I may, one last one, just on the XQS brand. Can you just sort of give a sense of the areas of focus for growth? I mean, obviously, Sweden is pretty strong already. Do you see increased investment behind the brand through the course of '26? Niels Frederiksen: We are seeing increased investments behind the brand, Damian. If you look at the geography, we talk a lot about Sweden. We talk a lot about the U.K., which are 2 important markets for us but we also consider, let's say, Scandinavia at large, and we are opening a new subsidiary in Norway later in the year. They will, of course, also include nicotine pouches in their portfolio. Finland is also in the focus area and certain Eastern European countries. So we are focusing on the European geography to build momentum also outside of Sweden. Operator: Thank you. Dear speakers, I have no further questions. Please continue. Torben Sand: Okay. Yes. Thank you. And I was simply just going to close off the call now. Thank you for listening in. Thank you for the questions. And yes, we will meet again in May after our first quarter results. Thank you, and have a good day. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Guy Gittins: Good morning, everyone, and thank you for joining the Foxtons' 2025 Full Year Results Presentation. I'm joined, as always, by Chris Huff, our Group CFO, and we will answer any questions at the end of the call. This morning, I will take you through some of the highlights of 2025, provide an update on the London property market. Chris will then talk you through the financials, and I will finish with an update on our operational progress in the year, followed by some detail on the outlook for 2026. We delivered 5% revenue and EBITDA growth in the year, driven by incremental acquisitions revenue and operational progress in areas such as Lettings, cross-selling and financial services. These higher revenues offset the challenging operating environment, including a volatile sales market and cost headwinds to deliver flat operating profit. These results highlight the resilience of our business as a result of our strategy to position Foxtons firmly as a Lettings-led business. Our portfolio now exceeds 32,000 tenancies, which is up over 50% over the last 5 years, and these tenancies generate highly valuable reoccurring revenues. In 2025, these revenues generated over 2/3 of group revenue. We delivered 8% Lettings market share growth through improved landlord attraction, retention to build on our position as London's largest agent. And impressively, for a London-focused business, we are also the U.K.'s largest Lettings brand. We continue to execute our strategy on acquisitions. In 2024, our acquisitions in Reading and Watford made a significant contribution to revenue growth. Recent acquisitions in Milton Keynes and Birmingham create strong platforms in high-value markets that complement our London base. And operationally, we haven't stood still. The business has embraced a culture of continuous improvement and that mindset is cascading through the organization. We're focused on unlocking the next stage of growth by driving revenue and improving productivity and efficiency right across the business. On Slide 6, you can clearly see our strategy in action. The business has made great progress since I returned in 2022. Over that period, we've reset the strategy with a focus on Lettings-led growth, rebuilt our operational capabilities and delivered significant market share gains. The result is consistent year-on-year revenue growth with an 8% CAGR over the last 5 years. And with a sharp focus on costs, we've maximized operating leverage across the business. As a result, profit growth has outpaced revenue growth, delivering a 23% CAGR over the same period. So while profits were flat in 2025, I remain confident that we can return to our growth trajectory over the coming years. Turning now to Slide 8 and an update on the London Lettings market. On the chart on the left-hand side, you can see the number of renters per property back to 2021, highlighting supply and demand dynamics in the market. The market was resilient in 2025. Tenant demand remains strong and supply levels were healthy. We did see a softening in supply in the run-up to the autumn budget, reflecting speculation around potential tax changes for landlords. But with no major tax reforms announced, supply picked up in December and we delivered a record December for both deal volume and revenue. Rental prices were broadly flat as the market balanced flat supply and demand dynamics with affordability limits for tenants. Even so, the market has delivered a 7% CAGR since 2021. And over the medium term, we expect a return to inflation-linked rental growth. Over the next 2 slides, I will take you through an update on the Renters' Rights Act, one of the biggest changes in the Lettings industry over the last 25 years. On this slide, we've outlined the key provisions in the act. The Renters' Rights Act will come into effect on the 1st of May and brings England broadly in line with the rest of the U.K. There are several key changes. Fixed term tenancies will end, meaning all existing and new rental agreements will move to open-ended periodic agreements. Rent increases will become available to landlords annually, although will require evidence that any increase is in line with the market. This is a shift from the current system where rents are typically fixed for the duration of the contract. And local authorities will have stronger enforcement powers, including the ability to impose higher penalties for non-compliance. So what does this mean for landlords? The vast majority of landlords who provide good quality homes and want to keep good tenants in situ for as long as possible, very little changes to their investment. What does matter is staying on top of the new compliance requirements and working with an agent who can manage those requirements on their behalf. It's incredibly easy to fall foul of the legislation, which is fragmented across local authorities and often overly complex. Even the Chancellor was caught out last year, a reminder of just how difficult it is for ordinary people to navigate the rules. Slide 10. As these new requirements come into force, we expect to see some shifts in the market and opportunities for Foxtons. These fall across 4 main areas. The first is increasing the total addressable market for Foxtons as increasing numbers of DIY landlords opt to use an agent to let and manage their property. Over 50% of landlords fall into this DIY category today, highlighting the size of the opportunity ahead. The second is by increasing Foxton's market share of the Lettings market. We expect landlords will increasingly turn to high-quality agents who can protect their investments and navigate the growing compliance burden. And as the leading agent in our markets, this creates significant opportunity to grow share and also the cross-sell of high-margin property management services. Thirdly, we expect more portfolio stability. With fixed terms removed, we expect longer occupancy lengths as tenancies become more stable. Annual inflation-linked rent increases are also expected to become the norm, creating a more predictable income profile. And fourthly, we expect the estate agency sector to consolidate further. The industry is still highly fragmented with 66% of the market made up of small independent agents. The new regulation will place real pressure on these businesses requiring significant investment in people, training, technology and compliance. Many simply won't be able to make these investments, accelerating consolidation. This dynamic plays directly to our strengths. We are well positioned to lead consolidation in our markets and have a strong track record of delivering attractive returns on capital when we do so. Finally, structurally, we anticipate little change in the size of the sector to remain broadly stable over the medium term based on the experience of similar legislation in Scotland. Turning now to Slide 11 and an update on the London sales market. The sales market was highly volatile in 2025. Across the year, volumes in our London markets were up 2%, in line with our own performance. Q1 volumes were around 30% higher than Q1 2024, driven by a large number of first-time buyers competing ahead of the stamp duty deadline. As expected, Q2 volumes were materially lower, reflecting the pull forward of the transactions into Q1. In the second half, activity was impacted by the delayed autumn budget. The wider economic uncertainty and weak consumer confidence was compounded by the intense speculation around potential tax changes, including the abolition of stamp duty and the implementation of mansion taxes for most properties in London, which really dampened the market. You can clearly see the impact on buyer demand on the bottom chart. New offers agreed, ahead of the budget were subdued, sitting at levels similar to those seen in 2023 shortly after interest rates spiked following the September 2022 mini budget. And with the average transaction taking 4 to 5 months to complete, this slowdown in late 2025 will naturally impact volumes in the first half of this year. In the end, the actual policy changes were fairly limited. Stamp duty remains unchanged and continues to act as a major barrier to improving affordability for buyers. The new mansion tax coming into effect in 2028 only impacts properties over GBP 2 million. While this may create some drag at the very top end of the market, that segment represents only a small share of transactions. This change reinforces our strategic focus on the volume segment of the market, particularly properties priced below GBP 1 million where Foxtons is strongest and where volumes are more resilient. Looking further ahead, it's worth noting that buyer demand in early 2026 is still being held back. For vendors looking to sell in this environment, pricing is absolutely crucial. There are buyers in the market, but they are focused on the right properties at the right price. And when we see homes coming to market competitively priced, buyer interest and offer levels remain strong. I'll now pass over to Chris for a run-through of the financials. Christopher Hough: Thank you, Guy, and good morning, everyone. 2025 saw the group deliver revenue growth despite a challenging operating environment, highlighting the financial resilience we've built into the business over the last 4 years. Financial highlights are set out on Slide 13. Incremental revenues from acquisitions and improved cross-selling of high-value Lettings property management services drove a 5% or GBP 8.6 million increase in revenues to GBP 172.5 million. We delivered GBP 22.2 million of adjusted operating profit, which is flat on the prior year. This represented a robust performance in the context of a challenging operating environment due to a volatile sales market and external cost pressures, in particular, from employer national insurance and living wage increases. Adjusted operating profit margin decreased by 60 basis points to 12.9% as margin growth in Lettings partially mitigated some of these external cost pressures. I'll provide more detail in the segmental reviews. Adjusted EBITDA, which is defined on the same basis used to calculate the group's RCF covenants grew by 5% to GBP 25.3 million. Statutory profit before tax was GBP 16.9 million and net free cash flow grew by 14% to GBP 11.2 million. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, unchanged from the prior year. The group also bought back 5.5 million shares in the year via the buyback programs announced in April and September. Now turning to Slide 14, which provides an overview of the income statement and key changes. Group revenue increased by 5% to GBP 172.5 million, reflecting 5% growth in Lettings revenue, 6% growth in sales revenue and 10% growth in financial services revenue. Group revenue continues to be underpinned by Lettings revenue, which represented 64% in the year. Lettings revenue is non-cyclical and recurring in nature and delivers high levels of consistency and earnings visibility. Direct costs were GBP 3 million higher, reflecting additional acquisition-related headcount, increased revenue-linked staff commissions and GBP 1.1 million of additional employment costs. Contribution margin was flat at 64%, including margin growth in Lettings. Overheads were GBP 4.2 million higher, primarily driven by incremental acquisition operating costs, targeted marketing investments, higher employment costs and GBP 1 million of non-recurring overhead costs. Depreciation, amortization of non-acquired intangibles and share-based payment charges were GBP 1.2 million higher. Together, these movements delivered adjusted operating profit of GBP 22.2 million. Profit before tax was GBP 0.6 million lower than the prior year, reflecting broadly flat adjusted operating profit and GBP 0.5 million higher amortization of acquired intangibles. Cost control continues to be high on our agenda. This included delivering a material cost saving by negotiating an early exit from the Chiswick Park head office lease and rightsizing head office space. This move unlocks GBP 1.5 million of operating cost savings from January 2026 onwards, providing some protection from cost pressures in 2026. Through 2026, we are redoubling our focus on costs to protect profitability in the context of current market conditions. Turning now to Slide 15 and performance in Lettings. Lettings revenue grew by GBP 5 million or 5% to GBP 111 million as a result of GBP 5.2 million of incremental revenues from Lettings acquisitions in Reading and Watford, GBP 0.6 million higher like-for-like revenues, which reflects property management revenue growth with a like-for-like increase in uptake of 7% delivered in the year. This progress will continue to benefit the group in 2026 as revenues annualize and GBP 0.9 million lower interest earned on client monies due to lower Bank of England rates. Revenue per transaction increased by 1%, reflecting the improved cross-sell of property management services, partially offset by the move into higher volume commuter markets and the lower interest on client monies. Contribution grew 6% to GBP 82.9 million off the back of revenue growth, whilst the contribution margin grew by 100 basis points, which is primarily due to margin accretive property management and cross-sell of related ancillary services. Adjusted operating profit grew 9% to GBP 29.8 million and adjusted operating profit margin grew 100 basis points to 26.9%, reflecting the strong contribution margin and the delivery of acquisition-related synergies. Moving to Slide 16, where we have presented detail on the returns from our Lettings-focused acquisition strategy. We have an industry-leading operating platform that delivers high levels of returns from acquisitions by delivering high levels of landlord retention, organic growth from acquired databases and cost synergies. Our operating platform is highly scalable and can power a significantly larger portfolio than we operate today for limited incremental cost. Historic acquisitions in London deliver EBITDA margins above 50% and return on invested capital above our 20% target rates as we maintain a tight focus on ensuring returns through a portfolio's life cycle. Acquisitions are our primary route into new geographies, combining acquired Lettings income to underpin profitability with organic Lettings and sales growth. Under our buy, build and bolt-on strategy, we focus on acquiring platform businesses in high-value markets and enhancing them through high ROI bolt-ons, targeting aggregate returns of at least 20%. In October 2024, we acquired 2 leading businesses in Reading and Watford, completing the group's first acquisitions outside London. Both have performed well, delivering organic revenue growth and first year returns on capital above the target level of at least the group's weighted average cost of capital. The Watford business was integrated onto Foxton's operating platform in 2025 with Reading planned for 2026. Returns are expected to grow as synergies are delivered in Reading and be annualized in Watford. In February 2025, we completed the bolt-on acquisition into the Watford platform. This bolt-on was rapidly integrated and is delivering annualized returns on capital above our 20% target, which highlights the growth we can rapidly deliver in new markets. In January 2026, we acquired leading businesses in Milton Keynes and Birmingham. Over the next 12 to 18 months, we will focus on integration, deploying the Foxtons toolkit to drive organic growth, deliver synergies and support further high ROI bolt-on acquisitions. Moving to Slide 17 and an update on the sales business. Sales revenue grew GBP 2.7 million or 6%, reflecting GBP 3.4 million of incremental revenue from our Reading and Watford acquisitions and GBP 0.8 million lower like-for-like revenues. On a like-for-like basis, revenue was 2% lower, reflecting 3% growth in transaction volumes, broadly in line with the market and 5% reduction in average revenue per transaction, primarily reflecting the higher proportion of lower value first-time buyer properties transacting in Q1 ahead of the March stamp duty deadline. In total, volumes were 19% higher and revenue per transaction was 11% lower. The reduction in revenue per transaction primarily reflects the expansion into commuter markets, which typically display lower revenue per transaction, but higher volumes. The acquisitions in Reading and Watford delivered 9% revenue growth in the first year of Foxtons' ownership, driven by market share growth. Average market share across Foxtons London markets was robust at 4.8%. The adjusted operating loss in sales increased to GBP 5.7 million as the profitable contribution from new commuter town acquisitions only partially mitigated increased operating costs and a strategic decision to maintain bench strength despite weaker H2 market conditions. Improving the profitability of sales remains a key priority for us, and Guy will provide more detail later in the presentation. Moving on to Slide 18 and Financial Services. Revenue in Financial Services was 10% higher at GBP 10.3 million. Specifically, volumes were 13% higher, reflecting the stronger refinance pipeline, higher estate agency cross-sell rates and improved adviser capacity and productivity. 2% reduction in average revenue per transaction, reflecting the change in product mix towards refinance activity. In the year, 42% of revenue was generated from non-cyclical refinance activity and 58% of revenue from purchase activity and other ancillary sources. Adjusted operating profit was broadly flat, primarily reflecting investment in fee earner headcount in H1 as we scale up the business. New fee earners supported revenue growth in the year and typically break even around the 12-month mark. Moving now to Slide 19 and cash flow. There was a 14% increase in net free cash flow to GBP 11.2 million. The operating cash to net free cash flow bridge on the left-hand side shows the key items of note. Operating cash before working capital movements was GBP 36.4 million, 3% higher than the prior year and including GBP 1.9 million of non-underlying cash outflows primarily relating to closed branch costs. There was a GBP 4.4 million working capital outflow, reflecting the ongoing transition to annual billing across the Lettings portfolio to improve competitiveness and landlord retention and position the business ahead of the Renters' Rights Act becoming effective. We expect the portfolio to be fully transitioned to annual billing by 2027 with an estimated GBP 10 million working capital investment across 2026 and 2027. The group paid GBP 4.3 million of corporation tax and made GBP 13 million of lease liability payments in the period. GBP 3.5 million of CapEx spend primarily relating to our new H2 fit-out costs and internally generated software development. Looking at the opening to closing net cash bridge on the right-hand side. Net debt at 31st December was GBP 16.9 million. This reflects GBP 11.2 million of net free cash flow, GBP 5.3 million of acquisition spend and GBP 9.1 million of total shareholder returns. In the year, we increased the RCF to GBP 40 million and extended it by 12 months to June 2028. The interest cover and leverage covenants have remained unchanged. And at the year-end, the leverage covenant ratio was 0.7x, which was below our covenant limit of 1.75x. And the interest cover ratio was 24x, which was above our 4x covenant. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, which is unchanged from the prior year. The proposed dividend will be paid on 15th of May, 2026 to shareholders on the register at 10th of April, 2026, subject to shareholder approval at the AGM. Moving to Slide 20 and an overview of the group's capital allocation framework. The framework aims to support long-term growth and deliver sustainable shareholder returns through organic growth, making accretive Lettings-focused acquisitions, paying a progressive dividend whilst maintaining strong dividend cover and delivering other shareholder returns, namely share buybacks. We continually evaluate the effective uses of capital, including comparing acquisition returns versus those achievable through share buybacks. We consider factors such as expected return on investment, earnings per share accretion, borrowing capacity and leverage. The group seeks to utilize its balance sheet and revolving credit facility to best effect and to maintain a leverage ratio of net debt to adjusted EBITDA of less than 1.25x at the year-end position. I'll now hand back to Guy, who will take us through the operational update. Guy Gittins: Thank you, Chris. Over the next 2 slides, I will lay out operational progress we've made in our business areas and our focus for 2026, followed by the operational upgrades we've delivered across the group. In Lettings, we continued to make progress with our organic growth strategy, delivering against our formula of growing the portfolio and driving the cross-sell of high-margin services. Over the year, we increased our London market share by 8% and maintained high levels of stability across our tenancy portfolio. Revenue and margin growth was supported by a 7% increase in cross-selling property management and the proportion of the portfolio that is actively managed now stands at 43%, up from 32% at the end of 2021. Our focus over 2026 is to continue delivery of our growth formula to continue to grow this highly valuable business. Organic growth is complemented by acquisitive Lettings growth. In the year, we delivered good returns from our Reading and Watford acquisitions with returns above our initial targets. In Watford, we have integrated the business into the operating platform, rebranded to Foxtons and boosted with a bolt-on acquisition that is delivering returns at our 20% target level. We are now the largest Lettings agent in Watford with more than 3x the market share of our nearest competitor. And in January 2026, we expanded into 2 new complementary high-growth markets in Milton Keynes and Birmingham. Milton Keynes is well connected to London, home to a large number of corporate headquarters and has one of the highest levels of GDP per capita in the U.K. Birmingham has undergone a significant regeneration and continues to attract major investments, including a growing number of banking and professional services roles, a trend set to accelerate with the opening of HS2. Both cities have strong pipelines of build-to-rent and new homes developments. And we have already linked these businesses with our corporate customer base. These acquisitions are not part of a plan to become a national agent. This is a targeted strategy focused on markets where Foxtons can create real value. Our priority over the next 12 to 18 months is maximizing returns from these deals through the delivery of organic growth, cost synergies and high return on investment acquisitions. Moving to sales. We operate through a highly volatile market last year, and our market share held broadly flat. In November, we appointed a new Managing Director, James Stevenson, who has a fantastic track record of delivering turnarounds over his 20-year career at Foxtons. And we now have an operational plan to reposition the business to reflect current market environment, and in doing so, improve profitability. It's worth remembering that whilst we are a Lettings-focused business, sales is an integral part of our full service proposition and is highly complementary with Lettings. Our offer is built around supporting customers through their entire property life cycle and sales plays a critical role in helping landlords expand or reposition their portfolios. By delivering this full service approach across sales and Lettings, we significantly strengthened landlord loyalty, enhanced revenue repeatability and increased customer lifetime value. And as Chris highlighted earlier, sales delivered a positive financial contribution before the allocation of shared costs. In Alexander Hall, our Financial Services business, we delivered a 10% revenue growth driven by increasing the operational productivity of our advisers and improving the efficiency of our processes. This included a 13% uplift in mortgage deals per adviser and a 5% improvement on the conversion of leads to mortgage applications. Continuing to build on these upgrades will support further growth. And underpinning all of this is a consistent focus on cost and productivity to maximize the operational leverage across the business. As Chris mentioned, we forensically review our cost base on an ongoing basis, taking costs out wherever we can, including our recent HQ move, which generated GBP 1.5 million of annualized savings. And we're focused on leveraging our technology stack and data capabilities to drive efficiency right across the organization. Turning now to Slide 23. Over this slide, I will present the key group-wide operational upgrades we're delivering to support our growth plan. Customer lifetime value is a key focus for the business. We aim to support customers through their property life cycle, becoming their trusted property partner. And in doing so, we can generate high-quality recurring revenues and earnings. To do this, we need to deliver best-in-class service. We've made significant progress in this area, and I'm pleased to say that we now achieve customer satisfaction scores of over 80%, a double-digit uplift since we launched these programs. In 2025, we continued to enhance the customer experience by further embedding our real-time feedback system across the full customer lifecycle, enabling us to measure service throughout the journey and resolve any issues quickly. Combined with AI-powered sentiment analysis, this allows us to identify the drivers of exceptional service. It embeds insights into training and delivers consistently high standards. Supporting this focus on service are our brand and marketing initiatives. Our focus this year was on strengthening customer attraction and retention in a competitive market. Foxtons has always had a distinctive level of brand awareness. We do things differently. And in 2025, we built on that by launching an exclusive partnership, which makes us the only U.K. estate agent where customers can earn Avios points. It's a differentiated position designed to attract new customers, reward loyalty and drive uptake of our higher-margin services. Turning now to our technology and data capabilities. Our in-house technology and data stack creates the flexibility to develop and deploy AI and data solutions at pace without the constraints of an off-the-shelf system. Our approach is very clear. We only invest in AI where it makes a meaningful difference to our financial results. It's not AI for AI's sake. In 2025, we made strong progress. We expanded our AI-driven sentiment analysis, giving us far deeper insight into customer interactions. We also advanced our data-led lead scoring models, ensuring our people focus their time on the highest value opportunities. And we introduced AI-powered training tools that help new agents reach their full performance faster. Together, these improve efficiency, drive higher productivity and ultimately, enhance profitability. We will continue to identify areas across the platform where embedding AI can deliver an operational and financial impact. These upgrades are a key part of the continuous improvement culture that now runs throughout the entire business. Finally, and most importantly, our people and culture. It is my fundamental belief that a state agency is a people business, having the right talent, developing great leaders and embedding and really demonstrating our core values is critical to our success. This year, we worked with external partners to assess our strengths and opportunities, enhance our employee proposition and introduced our Getting It Done. Together. framework to align recruitment, development and well-being across the organization. The response from our people has been really encouraging. 81% believe Foxtons is well positioned to succeed over the next 3 years, and 85% believe we truly value diversity and build diverse teams. We remain committed to building a collaborative culture that enables our people to deliver exceptional service for our customers. And finally to Slide 25 and the outlook for 2026. In Lettings, we expect the market dynamics we saw throughout '25 to continue with consistent levels of stock and strong tenant demand. The Renters' Rights Act represents a significant growth opportunity for Foxtons as landlords increasingly need professional support to navigate the new regulations. In addition, the 2 acquisitions we completed in January 2026 will generate incremental Lettings revenues. Our plan for 2026 is focused on maximizing the returns from the deals we have completed over the last 18 months, driving organic growth, delivering cost synergies and progressing targeted bolt-on acquisitions to strengthen our market positions. Turning to sales. Buyer activity continues to be held back by weak consumer confidence, macroeconomic concerns and policy decisions. In response, we are repositioning the business for the current market conditions to improve profitability. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and cost continued discipline. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and continued cost discipline. Importantly, profitability across the group remains underpinned by our substantial base of non-cyclical and reoccurring Lettings revenues, giving us confidence in our ability to deliver against our growth strategy. That concludes the formal presentation. Thank you all for joining us today. Chris and I look forward to meeting with many of you in the coming weeks. I'll now pass to the operator for any questions you may have. Operator: [Operator Instructions] Your first telephone question today is from Robert Plant of H2 Radnor. Robert Plant: Three questions, please. Post the acquisition in Birmingham -- the acquisition is in the center of Birmingham. How much of the Birmingham market are you targeting geographically? Secondly, the period of repositioning in sales, how long do you think that will take? And lastly, what are the working capital implications of the Renters' Rights Act? You mentioned investment in working capital. I'm sure there's a difference between when you collect and when you bill for sales. So, can you just talk us through that, please? Guy Gittins: Well, thank you very much for those questions, and welcome, everybody. Thanks for tuning in. Firstly, if I talk about Birmingham, the business that we bought as we do when we're targeting new locations, we always use data to lead the decision and we look for high-volume, high-value rental markets. And obviously, Birmingham is a superb area for this. There's also still, we believe, good growth left in the Birmingham market, both for sales and for Lettings. So, really highlights the reasoning behind looking outside of London as well in conjunction with our continued focus on talking to businesses within London that would be bolt-on. The business that we bought is a Central Birmingham specialist with leading market share within the city center. And we are talking already to other agencies in the nearby vicinity that would allow us to continue our bolt-on strategy to quickly grow revenues and continue to grow that portfolio of Birmingham properties to give us a slightly larger geographic area. So yes, always, we look to buy the hub, which is the business that we bought FleetMilne, and we are wanting to add to that to turbocharge the growth as quickly as possible, and that helps us really drive those profits in the years after. Second question was around repositioning of sales and how quickly does that happen. We're fortunate, as you know, to have huge amounts of data, huge volumes of data and using the data platform that we've built over the last couple of years. Chris and I, and the rest of the senior leadership look at this data on a daily basis to really give us a view of where we think the sales market is heading and allows us to be able to dial up or dial down resource in certain areas. And last year is a great example of that. Prime Central London, the volumes were considerably subdued. However, in our Southwest offices, the market was actually really quite buoyant and that allowed us to be able to apply resource meaningfully to grasp the opportunity in those higher volume areas. And that's really what our plan will be across this year as we sit here looking at the outlook today for what we feel the rest of the sales market will look like in London is different to how it looked 6 months ago and different to how it looked 3 months ago. So, that is an always-on process, but we're perhaps a little bit less excited certainly looking with some of the things that are happening in the Middle East about what may happen around inflation and interest rates. So, we're just making sure that we're always ahead of that. I'll pass on the RRA -- the Renters' Reform Act question over to Chris. Christopher Hough: Yes. The question was around our working capital changes in this area. So, Renters' Rights Act, that will see the removal of fixed terms tenancies. And what we'd expect to see there is an average reduction in the billing period start those tenancies. So, we're making a change here to improve our competitiveness and indeed increase landlord retention. And we've been reducing our billing terms since 2023 as it happens. We estimate that over the course of 2026 and 2027, there's a GBP 10 million investment in working capital required as we fully transition our portfolio. Transitioning portfolio takes time, hence, why there's a 2-year period there. Operator: The next question is from the line of Greg Poulton from Singer Capital Markets. Gregory Poulton: Three questions from me, please. Firstly, obviously, the move to more fully managed tenancies has been an important trend for the Lettings business. Could you just talk about the level of uplift in fees you see from a fully managed versus a letting-only tenancy? And second, can you talk about the expected cadence of acquisitions for the rest of the year? I'm not asking for a forecast on that, but just to sort of guide as to what we could expect to see throughout the remainder of the year? And thirdly, linked to that, how much capital expenditure do you think you will allocate to acquisitions in the remainder of the year? Guy Gittins: All right, Greg. Thanks for those questions. Yes, look, we're really proud of the improvement that we've seen over the last 2 or 3 years with the upsell of our property management service, and that really has come from a fantastic cross-business effort, particularly driven by the Head of Letting working very closely with the Head of Property Management. And that means that we've seen a 7% uplift in that cross-sell of property management services, which ultimately delivers around about a 6% additional fee, which is charging for that premium fully managed service. And of course, as we extrapolate that over a longer period of time, that 7% uplift of the volume of services that we're transferring into that premium service for new deals over time massively helps us grow the overall number of properties that we have under management. And that really is a key KPI that we drive within the business and lots and lots of remuneration is linked to that, lots of the KPIs we talk about across the business is focused on it. So, we're proud of that movement, and it's certainly a very big focus across the business. And I think that as we've mentioned, the change into the Renters' Reform Act does, we believe, increase the likelihood of non-managed landlords wanting to take the fully managed service. As we saw and we mentioned in our presentation, it's really easy to fall foul of some of the rule changes and you need a very, very capable agency who's got large teams of compliance, making sure that your property is fully compliant and looked after at every stage along this journey. And that's why we are seeing more people choose that service through Foxtons. Acquisition cadence, look, we've made 2 great acquisitions at the start of this year. We're watching very carefully what the outlook looks like. And of course, our capital allocation is always very much under review, both with our Board and internally. I'll perhaps let Chris talk to that a little bit later. But acquisitions very much are a function of opportunity. We're talking to agencies both inside London and outside London. And really, we want to make sure that we make the right acquisitions, not just any acquisition. We're pleased with the 2 acquisitions outside of London in Milton Keynes and Birmingham that we've made at the start of this year in January. And really, I suppose my preference now is to try to make sure that those new acquisitions are settled in that we can drive the synergies, that we can make them more profitable and hopefully, find some bolt-on acquisitions to make in the near future. Christopher Hough: Finally, Greg, from a quantum perspective on CapEx and acquisitions, we've done 10 already, and I'd be thinking about that 15 number we put out there previously. So, I expect that additional quantum being the target and the ambition for the remainder of '26. Operator: [Operator Instructions] The next question comes from Adrian Kearsey from Panmure Liberum. Adrian Kearsey: I will say, thank Rob and Greg, for asking the questions I was initially going to ask. But in terms of sales, you've got an average property price last year of GBP 574,000. Can you perhaps sort of give us an indication of the range of the types of properties that you sell to give us a sense of how broad or how narrow your market focus is? Back to also to the second question. Back to Birmingham, currently one site. In order to take advantage of that huge opportunity in Birmingham, when you make further acquisitions, do you think you'll end up having multiple offices in Birmingham? Or will you have a single office in the center? Guy Gittins: I'll take the first question around sales. Our average price around GBP 574,000, look, we want to be in the volume market across the markets that we operate in. And the reason for that is we know that they're more resilient, and we are a volume efficiency machine at Foxtons in sales and particularly in Lettings as well. The spread of properties that we sell, we actually have a minimum fee of GBP 6,000 in London. Now, that means that we don't end up selling many short lease garage spaces, which we were doing a little bit of prior to my arrival. But we do across all price points. I mean, we've just agreed something, a bulk deal in an area in the east of London that's nearly GBP 10 million. And so we're operating in all markets. But absolutely, our sweet spot is that volume piece right in the middle of where the average pricing is across London, and that's really by design. Now, we have been making some efforts to try to increase over time the average. And when I say increase, just a very small increase in that average sales price does make a meaningful difference to us, but we don't want to ever turn our back on that volume market. And the second question was Birmingham one site or multi-sites. Well, I think certainly today, we view the value, the biggest opportunity is to continue to grow from the center to the more affluent areas of the residential areas around Birmingham. And as I've mentioned, we're talking to multiple agencies around those locations at the moment already. And we can also bring, of course, the Foxtons Operating Platform, which really does help grow the businesses. And we've seen fantastic examples of that in both Watford and Reading last year where we've actually delivered some really solid growth once we've layered in the kind of Foxtons' toolkit of marketing, brand productivity and operational excellence. And that doesn't happen overnight. That takes a little bit of time to bed in, and that's what we're very busy doing with both our business in Birmingham and in Milton Keynes at the moment. Operator: There are no more questions from the telephone anymore. We can now read the questions from the webcast. Unknown Executive: First question is from Robin Savage at Zeus. It says, the impact of the Renters' Reform Act this year is interesting. Are there any early market signals that we or any other lettings agencies are seeing that might indicate an uptick in DIY landlords moving towards professional lettings management? Guy Gittins: Great question. Thank you, Robin. Yes, absolutely. Look, we've seen this trend starting to kind of infiltrate the London market over the last 18 months really. We've seen obviously market share increases for Foxtons, and we've seen this increase in our property management cross-sell. And as I've mentioned at the start, that's been a major focus of what I wanted the business to deliver over the last 2 or 3 years, and I'm really proud of the delivery of that. And I don't see it slowing down. We really do offer and believe the offering of the service that we can give to our landlords is best-in-class. And what we are trying to do is deliver the very best service for our landlords, but also making sure that they remain fully compliant and clear of any issues that may be happening and being ahead of those legislation changes as we know they can come in very quickly and catch people out. So, very pleased with what that looks like and definitely are seeing that within London. Unknown Executive: Second question from Robin. Foxtons has built a significant competitive advantage through decades of structured proprietary data and a highly analytical approach. How do you see advances in artificial intelligence and large language models further strengthening that advantage, both in how Foxtons generates market insights and how it manages the business and delivers differentiated services relative to competitors with less developed data capabilities. Guy Gittins: Great question. Thanks, Robin. Well, you've been a beneficiary of coming and seeing the operation in-person here at Foxtons. And I'm sure that you'd agree that there isn't another data system, there isn't another database like Foxtons has across the London market and as far as we're aware, across the whole of the U.K. market. And we've been really utilizing that database, cross-referencing it already with early machine learning over the last 12 months and some AI functionality to help us improve productivity. Great example of that is we have 100 people who sit at Foxtons' head office who are calling into a huge database of nearly 4 million people to drive new listing opportunities. Now the old way of doing that would be just randomly picking a street and calling from A to Z, but our new system uses AI and has machine learning so that it filters up to the top and surfaces the most likely leads that we think we'll convert in the next 3 months. And that's had a meaningful impact on the productivity of that team. We're also using AI to help us improve the speed of new recruits under training to get them to be able to build for the business quicker by helping them through the training flow where we've got AI platforms that have really improved that speed of service during that initial training period. And we're using AI in other areas as well. And as we said in the presentation, we're not -- we are definitely not using AI for AI's sake. It has to have a meaningful impact to the bottom line. And we keep a very, very close eye on lots of technologies that lots of people are working very hard to try to deliver across the industry. And because of our structure of that data and the way that we've built the database, we're able to loop in these functionalities very, very, very quickly. Thanks for that question, Robin. Unknown Executive: One from Andy Murphy at Edison. Given the number of recent deals outside London, are you no longer focusing on London M&A? Guy Gittins: Great question. We absolutely are still very focused on London opportunities. But given where we've seen the growth in the marketplace when we were presented with the deals that we could have done this year and last year, it just totally made sense to look at the Birmingham and the opportunities in Milton Keynes. But it doesn't stop us from looking and continuing to speak to other agents as roll-ins within the London environment. But as I said before, they need to be the right deal for Foxtons, and we need to be paying the right prices for them. And yes, that search is still an always on. So, certainly not turning our back on London-focused acquisitions. Thanks, Andy. Unknown Executive: One from Robert Sanders at Shore Capital. What are the multiples in the market at the moment for Lettings portfolios? And how much consolidation do we see likely in the sector after RRA? Guy Gittins: Yes. I think the RRA opportunity is more likely to create even further consolidation. But actually, I'll let Chris take the questions on the multiples. Christopher Hough: Yes. The multiples really depends where we're buying, what we're buying, the balance of sales versus Lettings. But broadly speaking, a range from 2 to 3x Lettings revenue is a sort of multiple we're seeing, which is actually pretty consistent with what I see in both '24 and '25. So, there's been no significant change there. And for us, now we've got 2 new platforms, which we're building into, i.e., Milton Keynes and Birmingham. That gives the bandwidth and the opportunity to launch into new areas, which is really exciting for us. Unknown Executive: And a question on the sales market from [ Donald ]. How impactful is the lack of overseas buyers in London and the alleged exiting of high-net-worth individuals from the London sales market? Guy Gittins: We touched on earlier, our average sales price across London is GBP 574,000. The super prime market, we know very clearly, particularly last year, felt the pain of the exiting of high-net-worth individuals and certainly, lots of reports, as I'm sure you will have read from the super prime agents really having a torrid year last year. Did that impact our volume market? I mean, ultimately, it does have a very small effect on the movement up and down chain. But the reality is that's why we are in the high-volume market because we know that those transactions overall are less impacted by these big swings of where Netwealth may decide to spend their money this summer versus the next summer. So yes, we haven't been impacted by it. But certainly, super prime agencies, we know really felt the pinch last year. Unknown Executive: And the following question, what are the -- essentially, what's the catalysts that are required to drive volumes in the sales market? Guy Gittins: Well, ultimately, the biggest barrier to returning back to those 145,000 sales transactions that we historically used to see going back before the financial crisis is stamp duty. Last year, we think there were somewhere in the region of 90,000 sales transactions. The year before that, probably 85,000 sales transactions. We always believe that the market would return to its 5 or 6-year average of around about 100,000 sales transactions, but that looks very unlikely this year. And that's the reason that we are ahead of the market really thinking about what we want to do with the sales business this year so that we are rightsizing everything across all of the different regions that we're in. But if you also look at sales being agreed this year already, we know that year-to-date, the number of sales in London is circa down in total around about 6%, whereas pretty much the rest of the U.K. market is up year-on-year on sales agreed. So hopefully, another good reason to point to our acquisitions outside of these locations. Unknown Executive: And that's the end of the questions from the web. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Guy Gittins for any closing remarks. Guy Gittins: Firstly, thank you for joining us this morning. As you know, Chris and I will meet many of you over the coming weeks. We are really focused on continuing to deliver the medium-term targets that we set out in our CMD in last year. We've got a very good business. We've taken a lot of costs out last year, and we're laser-focused on making sure that we can continue to pull all of the different growth levers to achieve those targets in the medium term. I appreciate everybody joining the call this morning, and look forward to seeing you all soon.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp Fourth Quarter 2025 Financial and Operating Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Brian Ector, Senior Vice President, Capital Markets and Investor Relations. Please go ahead. Brian Ector: Thank you, Ashida. Good morning, and welcome to Baytex's fourth quarter full year 2025 results conference call. Joining me today are Eric Greager, our CEO; Chad Lundberg, our President and COO; and Chad Kalmakoff, our CFO. Before we begin, please note that our discussion today contains forward-looking statements within the meaning of applicable securities laws, I refer you to the advisories regarding forward-looking statements, oil and gas information and non-GAAP financial and capital management measures in yesterday's press release. On the call today, we will also be discussing the evaluation of our reserves at year-end 2025. These evaluations have been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects between the United States or other disclosure standards. Our remarks regarding reserves are also forward-looking statements. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified. And after our prepared remarks, we will open the call for questions from analysts, webcast participants can also submit questions online. So with that, let me turn the call over to Eric. Eric Greager: Thanks, Brian. Good morning, everyone. 2025 was a defining year for Baytex. With the closing of the Eagle Ford sale in December, we successfully completed the repositioning of this company into a focused, high-return Canadian oil producer. This is our first call since that milestone and a significant upshift in the trajectory. Baytex is a technically driven organization with an industry-leading balance sheet by exiting the year in a net cash position, we have established a premier platform built for discipline, long-term value creation. We are entering 2026 with a clear strategy and the financial flexibility to navigate any market environment. With this strategic pivot now complete, it is the right time to formalize our leadership transition. As we announced yesterday, Chad Lundberg will succeed me as CEO following our AGM in May. Chad has been a valuable partner to me and to this organization and his promotion is the result of a deliberate structured succession process to help ensure our positive momentum remain interrupted. I have complete confidence in Chad's leadership and ability to drive our next chapter. I'm proud of the foundation we've built together. Baytex is in excellent shape, and I look forward to its continued success under Chad's leadership. I now turn the call over to Chad Lundberg for his remarks and a detailed operational overview. Chad Lundberg: Thank you, Eric. I appreciate the Board's confidence, and I'm excited to lead Baytex and our team into the next chapter. My focus as we move forward is simple. We remain committed to technical leadership and disciplined capital allocation to create value. We will continue to build our business by prioritizing our heavy oil and Duvernay assets with an enhanced focus on exploration and new play development, all of which is underpinned by a balance sheet that is in great shape and we will prioritize a competitive return through a combination of organic growth, share buybacks and dividends. Let's turn to our operational performance. In 2025, our Canadian portfolio delivered annual production of 65,500 BOE per day, which, excluding dispositions, represented 6% organic growth year-over-year. We invested $548 million in Canada in a highly efficient capital program and delivered solid reserves growth, low F&D costs and healthy recycle ratios across all reserve categories. Our Pembina Duvernay and heavy oil development contributed significantly to this performance and continued a strong track record of value creation. This demonstrates the long-term resiliency and sustainability of our business. Importantly, we have significant running room across our portfolio and are excited about our business going forward. First, let's talk about the Duvernay. We have assembled a 91,500 net acres and identified approximately 210 drilling locations. 2025 was a breakthrough year. We validated the resource potential, reduced well costs on a per foot basis and improved our characterization of the play. We grew production to 10,600 BOE per day in the fourth quarter, a 46% increase over Q4 2024. We are now transitioning to full commercialization with plans to bring 12 wells on stream this year, a 50% increase over 2025. We currently have 1 rig drilling a 4-well pad on our southern acreage. Completion operations are scheduled for the second quarter with the wells expected on stream by midyear and the remaining 2 pads in the third and fourth quarters. Shifting to heavy oil, we continue to see strong, predictable performance across the portfolio. Our heavy oil assets comprise 750,000 net acres and 1,100 drilling locations, supporting 12 years of drilling at our current pace of development. In total, we expect to bring 91 heavy oil wells on stream in 2026. We are pleased with the expansion of our Northeast Alberta acreage, where we are currently targeting 7 discrete horizons in the Mannville stack. Recent success includes 2 multilateral wells in the Sparky and a 5-well pad in the upper Waseca. Our 2026 program will also see increased exploration activity, including stratigraphic tests, step-out wells and 3D seismic to expand our development inventory and test new play concepts across our extensive heavy oil fairway. In addition, we are advancing 2 waterflood pilots Peavine blending the attractive capital efficiencies of multilateral primary development with the potential for enhanced recovery and moderated decline rates. Thank you to our teams for executing safely through 2025 and into 2026. And with that, I'll turn the call over to Chad Kalmakoff to discuss our financial results. Chad Kalmakoff: Thanks, Chad, and good morning, everyone. Our 2025 financial results demonstrates the cash-generating power of our Canadian assets and the transformative impact of the Eagle Ford divestiture. For the full year, we generated $1.5 billion in adjusted funds flow and $275 million in free cash flow. In the fourth quarter, we delivered $262 million of adjusted funds flow and $76 million in free cash flow, which included $35 million of nonrecurring expenses related to the Eagle Ford disposition. This was achieved despite a softer commodity backdrop with WTI averaging USD 59 per barrel during the quarter. The 2025 net loss of $604 million reflects the nonrecurring loss on the Eagle Ford disposition, a deferred tax expense related to the restructuring from the sale and $148 million impairment on our Viking assets. These noncash adjustments have no impact on our cash flow generation outlook for 2026. Turning to the balance sheet. We exited 2025 in the strongest financial position in Baytex's history. We eliminated our net debt and ended the year with $857 million in cash less bonds and our $750 million credit facility fully undrawn. We remain committed to returning a significant portion of the Eagle Ford proceeds to our shareholders and believe the NCIB program is the most efficient approach. Since reinitiating our buyback program in late December, we have repurchased 30 million shares, nearly 4% of the company for $141 million. Our current NCIB remains active through June, and we intend to launch a renewed NCIB in July. As we monitor the broader macro environment, we continue to assess the pace and mechanism of our buybacks to ensure we're maximizing the long-term value for our shareholders. We have considered an SIB or substantial issuer bid, but at this time, we believe we can meet our shareholder commitments through our NCIBs in 2026, while maintaining our annual dividend of $0.09 per share. I'll now turn the call back to Eric for closing remarks. Eric Greager: Thanks, Chad. To build on those points, this focused, high-return Canadian company is the next chapter for Baytex. For 2026, our operations are on track and our annual guidance of 67,000 to 69,000 BOE per day remains unchanged from December, with the high end of that range representing 5% organic growth year-over-year. We have significant inventory depth and optionality across our portfolio to support our current plan and potentially accelerate growth beyond these levels. I'm proud of the trajectory we've established. We are now positioned to demonstrate the true potential of this Canadian portfolio. Operator, let's open the call for a line of questions. Operator: [Operator Instructions] The first question comes from Menno Hulshof with TD Cowen. Menno Hulshof: Congrats to both of you on the transition. Yes, I'll just start with the question on the growth outlook. You're currently guiding 3% to 5% for 2026. But if we assume that oil prices remain elevated for longer than expected. Is there a scenario where growth exceeds the top end of the current range. And then has your overall thought process in terms of high-level deliverables for 2027 changed at all within the last several weeks. Chad Lundberg: Thanks, Menno. It's Chad. I'll take a crack at answering your question. So on growth, yes, I mean, we've guided to a capital program of $550 million to $625 million, delivering 67,000 to 69,000 barrels a day which represents 3% to 5% production growth. We're actively monitoring the macro kind of picture and situation right now and we would expect to make any decisions on increased growth at the breakup time frame. We certainly have the optionality within the portfolio depth and quality to go a little bit harder this year and to your point, into 2027. As I said, that will come. We'll look at that through breakup and make the decisions accordingly. Maybe just a little bit of an example of where we could look to expand the program. So potentially another pad in the Duvernay that may look like a drill that gets ducked into next year and completed or continued expansion in that Northeast Alberta Fairway where we utilized the 2 drill rigs that are drilling there today and potentially continue with that second rig. We could also pivot, though, just, again, an example of the depth of the inventory, pivot up into Peace River, where we've got some of the exploration work happening and elect to allocate capital up into that region as well. So lots of optionality currently on our radar. We're not moving it too fast, but those will come kind of decisions through breakup. Menno Hulshof: Terrific. And then maybe I guess my second question relates to your opening comments on some of the comments that you made on the Peavine waterflood opportunity. Like how material could that be? How do you plan to tackle this relative to some of your peers who are already well down that track? And what could that look like over the next -- in terms of deliverables, what could that look like over the next, call it, 12 to 18 months? Chad Lundberg: So we're deploying 2 pilot projects this year. One is into the kind of part of the play that we've been actively drilling to this point. So you can expect that we produce barrels out of the well that's going to be converted ultimately into an injector. What we're looking for there is just how fast can we fill it up to then pressure support the entire system around it to ultimately drive a lower decline and more barrels out of the ground. The second pilot is in a new development area where we're actually drilling the producers and the injectors simultaneously with each other, and we'll turn them on together at the same time. So what's all this mean? I mean, certainly, the waterflood has been doing great things for our industry. We're not sure what happens with our rock. That's why we've committed to pilots at this point in time. As a reminder, our primary development is very strong, holding 48 of the top 50 wells in the play, and that's really part and parcel to the incremental pressure that we have in situ in the rock itself. So there's various factors that are maybe unique to our situation that are potentially different from others. If you extrapolate that out though to the big picture, we're pretty excited for what it could do if it were to work with respect to base declines and driving more oil out of the ground. What does that mean for the future in the next 18 months? I think we're going to work very hard to try and understand this through kind of end of the year and into the budget process. And then how does that translate into our program next year? It could mean incremental waterflood injector activity in 2027. It could mean leaving gaps in our drilling program in between primary producers for the future. And we're just going to have to wait and see Menno where we go. Menno Hulshof: Can you remind me, I should know this, but when is the last time Baytex dabbled in waterfloods, if at all? Chad Lundberg: Yes. So I mean waterflood is not new to Baytex at all. We've actually been at it for 2 decades. Waterflood and then also polymer floods. It just depends on the quality of rock and then oil that we're working with. But you could think about it this way Menno, approximately 10% of our heavy oil production so 43,000 barrels a day is waterflood derived production. So not new to the story, and it's not foreign to us. We've got technical capacity and teams to really, we think, advance this forward. Operator: That's all the questions we have from the phone lines. I would like to turn the conference back over to Brian Ector for any questions received online. Please go ahead. Brian Ector: Yes, there are a few questions coming through the webcast. I'll try and run through those with you here, Chad. Menno spoke to sort of the current WTI price environment and optionality and growth. But another question comes in around, I think it's referencing sort of breakeven prices. Is there a WTI price that we would sort of pause the growth scenario, Chad? Chad Lundberg: Well, we set the budget out 3% to 5% centered at $60 oil, guiding to the high side, more than 5% at $65. And certainly, the flexibility is we've built the program to pull that back below $60 oil. I think that's how we think about our growth. And again, we're just really observing the macro climate right now. Obviously, it's incredibly dynamic. And we're taking it in and not going to make any knee-jerk moves. But I would remind that we have the optionality and flexibility to move harder if so desired. Brian Ector: Another question on the operations around our cost of production. And just can you speak to the capital efficiencies, meaning that you see in the business generally chat and steps we can take to continue to work on the cost of production and efficiencies overall. Chad Lundberg: Yes. Brian, I think that gets into how we've laid out the budget for 2026. We've started a sustaining capital at $435 million, add the $50 million in growth, $50 million in infrastructure and then $50 million in exploration. I think when you look into each one of those buckets, they are designed to improve capital efficiency. So I'll just give an example in the Duvernay. The infrastructure spending is at a higher and elevated pace for the next 3 years and then falls off post 3 years to a much lower rate. That flows right through to capital efficiencies and excess free cash flow to the shareholder. If you look in our investor pack, we've done again centered on the Duvernay, a pretty good job of delineating the asset, improving the characterization and then also reducing cash costs. Specifically, in 2024, we improved by 11% on the characterization and then equally so, dropped our capital costs by 11%. So both of those flows straight through to capital efficiency. Maybe just a little bit on the heavy oil program, touched on the $50 million that's allocated to exploration. This is absolutely intended to enhance and lengthen our inventory position. And I think some of the wells that we released through Q4 of last year, up in the Sparky in the southern area, some of our upper Waseca wells as we step through that Northeast Alberta area and the 7 different layers in the Mannville stack, we're pretty excited about what it's doing for capital efficiency. I would make this motherhood statement, though, to end the conversation. We're not done. This is something that we do as a company. This is something that our teams are tremendously good at, and this is a huge focus and priority of mine as I step into this role, and we move forward into the future from here. Brian Ector: Chad. Let's shift gears to a couple of questions and conversations around the net cash balance sheet that we have. It's around $800 million and Chad just I know we've talked a little bit about the NCIB in the prepared remarks, but how did we see allocating that $800 million going forward? Chad Lundberg: So we've been pretty clear that a good portion of that is going to be returned to the shareholders by way of buyback. Chad Kalmakoff in his prepared remarks, talked about the NCIB as the preferred vehicle over an SIB at this point in time. But we've also been very clear about utilizing some of the proceeds for greenfield, tuck-in, land acquisition, bolt-on style activity in our key and core focus areas. We're still committed to that. Brian Ector: Maybe along those lines then, Chad, just when you look at buybacks, how would we evaluate kind of the market price, the value and where we see value in the buyback program itself. Chad Lundberg: Yes. So I would start here about this company is going to be all about value going forward and an intense focus on how we deliver that value. When we evaluate the buyback specifically, I think there's 3 things we look at. One is the macro commodity environment. And so we'd like to think about really acting countercyclically and respecting where we're at in the cycle. The second though is just how are we trading relative to our peers. And so as we evaluate that, it looks like we have a good potential to grow with respect to how our peers are trading today. And then lastly, and equally as important is just the intrinsic value of the business. We're constantly running models at different price scenarios, with different enhancements that we can put on top of the plan, speaking to the optionality that we have in the deep portfolio set in front of us. And that would inform us on an intrinsic value that all 3 of those combined would anchor the conversation for how we proceed forward with buybacks. I guess when we look at those altogether today, it would still signal that we are focused on the buybacks and continuing forward from here. Brian Ector: Excellent. One question I turn over to Chad Kalmakoff, our CFO. Chad, can you just talk to our -- the existing hedges in place, maybe WTI and WCS, what the policy will look like going forward? Chad Kalmakoff: Sure. We have hedges in place kind of through the back half of last year, collared structures put for us at 60. Through the transaction, we maintain those. So we'd be roughly, I'll call it, 60% hedged on TI Q1 and about 50% -- 45% to 50% hedged in Q2. Nothing has changed policy wise. I think we always talked in the past about a strong balance sheet is the best hedge you can have. So going forward, I think we obviously have a very pristine balance sheet. I wouldn't expect us to be looking to hedge WTI contracts really in the future, given the balance sheet we have today. That being said, I think we can still look at hedging WCS contracts. We're 45% to 50% hedged on WCS this year at about $13. We still think that's an important piece of business to keep hedging to kind of prevent any financial impact from major blowouts. So summary, WTI, those will be rolling off here at the end of June. I wouldn't expect us to be that active in the hedging market on WTI, maybe in specific circumstances continue to kind of hedge differentials. Brian Ector: Okay, great. I think that's going to wrap up the large portion of questions coming in from the webcast. I would like to thank everyone for joining us. For those who submitted webcast questions that we didn't get to address, please reach out to our Investor Relations team and we'll follow up directly. Thanks again for your time today. And have a great day. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Joseph Hudson: Good morning, everyone. Nice to see everybody. Great. So good morning, and welcome to Ibstock's 2025 Full Year Results Presentation. Joining me today is Simon Bedford, our interim CFO. So turning to the agenda. After I provide an overview and market context, Simon will walk us through the financials and cover divisional performance. I'll then focus on how we're thinking about shareholder value creation, specifically through the lens of five strategic drivers. Having covered the summary and outlook, Simon and I will then be very happy to answer your questions. So turning first to the overview. As you'll know, 2025 was a tough year. We started well with strong volume growth in the first half coming mainly from new build residential demand. Market uncertainty in the second half resulted in progressively tougher conditions. Revenues for the group increased by 2% to GBP 372 million with EBITDA at GBP 71 million, in line with the guidance issued in Q4 '25, but a reduction of around 10% versus '24. Despite the challenges in the market, this is a business that does not stand still, and I'm proud of the progress our teams have made at our major investment projects at Atlas and Nostell, both of which are now coming to their conclusion. At the same time, we've taken decisive action on costs and flex capacity where needed. We've also remained disciplined in how we allocate capital. In Q4, we made the decision to dispose of our Forticrete roofing sites and we now completed a number of land disposals releasing about GBP 30 million of capital. With major CapEx program largely complete, volume recovery and continued opportunities to release capital from our land bank will lead to an acceleration in free cash flow, and this will provide optionality on growth opportunities and shareholder returns as we move forward. Before handing over to Simon and to provide a bit more context on our financial results, I'd like to recap on how our markets developed in 2025. As we entered 2025 with market momentum continuing from Q3 in '24, we took steps to reactivate network capacity to meet the recovering demand. It was promising double-digit growth volume in the first 2 quarters, followed by a deceleration to 4% growth in quarter 3 and as you can see from the chart, the final 3 months were challenging with brick volumes actually falling to 2% year-on-year. Ultimately, with the initial momentum proving a false dawn, our capacity moved ahead of demand and looking back, I acknowledge that we went too early on this. Given the progressively tougher market demand dynamics in the third quarter, we readjusted capacity and acted on costs, which will position us better for the near term. Overall, in 2025, the total brick market grew 6% to 1.83 billion. And encouragingly, our market share was ahead of the market and ahead of the prior year. And with that context, let me now hand you over to Simon to go through the financials. Simon Bedford: Thanks, Joe, and good morning. Turning to cover the financial summary with Joe having already covered detail on our revenue and adjusted EBITDA performance. I will focus on three key metrics. Looking first at our EBITDA margin, this is reduced by 260 basis points to 19.1% as a result of inflationary pressure and increased cost as capacity is reactivated in clay. In addition, we experienced adverse product mix with lower volumes in higher-margin concrete categories of rail and infrastructure. EBITDA margin improved in H2 to around 20% as incremental costs from bringing capacity back tapered and also decisive cost management starts to kick in. Now considering the balance sheet strength, although leverage has increased marginally from a year ago to 2x, net debt of GBP 120 million has reduced both marginally from last year and significantly from the June position despite the trading environment. This is a result of our disciplined approach on to capital allocation and a focus on priority markets, generating around GBP 30 million of proceeds through the disposal of noncore assets. Return on capital employed at 5.8% remains well below our targeted level and reflects recent capital invested in both core and diversified platforms combined with earnings that continue to be impacted by markets well below normalized levels. With the recovery in market demand, combined with anticipated returns from our growth investments, we expect return on capital employed to revert to our targeted level of at least 20% over the medium term. Finally, the Board has recommended a final dividend of 1.5p, bringing the total dividend to 3p, which is a payout ratio of 53%, in line with the prior year. We set out on this slide, group revenues compared to the comparative figures in 2024. Group revenue for the year was up 2% to GBP 372.1 million. Within this context, clay revenues increased by 5% to GBP 260 million, driven by strong new build growth in H1 with H2 flat year-on-year. However, these numbers mask the contrast between the quarters as the year progressed, which I won't go through again. However, we also saw regional variation with growth more concentrated in Midlands and the North with the London and Southeast markets more subdued. Futures delivered revenues of GBP 9 million compared to GBP 10 million in the prior period as a result of our glass reinforced concrete business being closed in Q1 2025. Concrete revenue of GBP 117 million was 5% below the comparative period, largely as a result of the weakness in the U.K. rail infrastructure market. Turning to cover the divisional financial performance in more detail, starting with the clay division. As already seen, the clay division delivered a resilient performance against a tough market backdrop. We saw growth in wire cut bricks, which are favored in new build housing markets whilst demand for soft mud bricks, which are more exposed to RMI and specification markets and more concentrated in the Southeast and London regions was more muted. A more competitive environment constrained pricing, which, together with a negative shift in sales mix led to average pricing slightly below the comparative period. We took the decision to reactivate parts of the clay factory network during the first half of 2025. And whilst this has led to higher-than-expected incremental costs in the period, we saw these costs taper in the second half. This, combined with the cost actions taken, meant margins improved in H2. The facade product categories within Ibstock Futures move forward with broad-based growth across the portfolio. We expect EBITDA to build from 2027 after a year of ramp-up in 2026 as our major investment in Nostell start to deliver positive returns. Turning to cover concrete. Here, revenues decreased by 5% to GBP 112 million. Overall, residential new build sales volumes were tempered by lower growth in the RMI market and falling infrastructure sales volumes, as the U.K. rail infrastructure markets continue to be impacted by control period spending constraints. Similar to clay, we saw strong volume growth in many of the residential product categories in H1, partly offset by lower infrastructure volumes. In H2, market uncertainty resulted in progressively tougher conditions with flooring and infrastructure categories particularly affected. Sales pricing in the residential categories mirrored the market dynamics seen in the clay brick division. It is important to note that spending in the U.K. rail network has reduced to historically low levels. We have seen some pickup recently, but this constitutes a high-margin part of the concrete division, adversely impacting both mix and profitability. Whilst EBITDA margins remain well below historic levels achieved within our concrete business, as markets recover, we believe the division is well positioned to benefit with strong growth in both volumes and margin over the medium term. Moving now to cover cash flow performance. Inventory levels grew as demand weakened in the second half of the year, resulting in a net working capital outflow of around GBP 14 million. Capital expenditure was in line with last year with GBP 21 million our growth projects and around GBP 24 million of sustaining spend, with major capital expenditure programs largely complete, we expect total CapEx to fall to around GBP 25 million to GBP 30 million in 2026. It is important to note that the noncore disposals of around GBP 30 million proceeds are treated as exceptional and are therefore not included in the adjusted free cash flow. Moving to the balance sheet. Net debt reduced marginally to GBP 120 million by year-end, resulting in a leverage of 2x up on the prior year. The group has GBP 225 million of committed borrowings comprising the GBP 100 million private placement loan notes and GBP 125 million revolving credit facility, which we successfully refinanced in Q4 at improved terms. These borrowings contain leverage covenants of no more than greater than 3x tested semiannually. Based on the covenant definition, leverage at the 31st of December 2025 totaled 1.7x and the group had over GBP 100 million of available liquidity. I will now outline the refinements we've made to our capital allocation framework to better reflect our choices for excess cash after considering balance sheet strength, organic investment considerations and dividends. This shows the balance choice between inorganic investment and shareholder returns in accordance with our strategic and financial investment criteria and they are, of course, not mutually exclusive. With our major capital expenditure program is now largely complete, a high cash drop-through on incremental volumes and strategic options, which Joe will discuss later, this will provide significant optionality with respect to excess cash and capital allocation. For those looking for the technical guidance for 2026, this is now included in the appendix, with Joe covering how we will see 2026 developing in the summary and outlook section. And with that, Joe, I'll hand back to you. Joseph Hudson: Thanks, Simon. So turning now to our market drivers and strategic progress. As set out on the screen, we see continuing shareholder value creation being built around these five clear strategic levers. You can see here that our leadership in our core markets remains key and has significant bearing on our financial performance. However, crucially, the remaining four levers are more within our control and are already driving progress through new market sectors, product innovation, operational efficiencies and the strategic value embedded in our land and clay reserves. . This unique balance gives us resilience today and will be important to underpinning our midterm targets. I'll now walk through each in turn. With a 200-year heritage, we enjoy a leadership position in our core markets, and over recent years, we've been -- we've deliberately brought our brands, people and capabilities together under a single unified Ibstock. That wasn't a branding exercise. It was about how we show up for our customers. Today, that leadership position allows us to support customers across clay, concrete and specialist building products alongside our design and technical services supporting national and regional housebuilders, the RM&I market and increasingly infrastructure and nonresidential applications. I've talked in the past about engaging with customers across multiple categories, and that shift has picked up momentum in the last 18 months as both national and regional customers have seen the breadth of our offer and our technical capabilities. Looking ahead, we also see a clear opportunities to grow in the 10% infrastructure and other sectors where our capabilities, assets and relationships position us well. That sector represents a significant share of the overall construction market where we are underrepresented today. And it's a space that lends itself to innovation and new products and new solutions. I'll give more details on this later. Before I come on to the other areas, let's look at those core markets and what we're seeing on the ground. At a structural level, the long-term fundamentals that underpin demand in these housing and RMI markets remain firmly intact. The U.K. continues to face a significant housing shortage, household formations have been outstripping housebuilding for years, and we have an aging housing stock that requires ongoing investment and renewal. Demand for social and affordable housing remains strong, supported by promising new funding allocations. Against that backdrop, we're starting to see some more supportive signals emerging. Inflation is easing from its peak and expected mortgage rates cuts should over time, help improve confidence. Government reforms and planning initiatives are also welcome steps. However, the pace of delivery and affordability, especially for the first-time buyer on major issues. We're set to have a third year below 150,000 housing starts way off the run rate of getting to 1.5 million homes. Even where starts are improving, build-out rates remain firmly controlled, housebuilders are prioritizing cash and aligning build programs to sales rates. As a result, we continue to take a cautious view in the near term with industry forecasts, including those from the CPA pointing to a continued subdued market conditions over the short term, and that remains consistent with what we're seeing. However, the market will turn at some point. And importantly, we don't need to get to 300,000 housing starts to see a material improvement for our business. As a reminder, the U.K. brick fully installed capacity is around 2.1 billion. So even when we get close to this range, which equates to around 107,000 housing starts, we'll see a big improvement in industry utilization levels. This slide shows why we're well placed to capture volume recovery by looking at our clay capacity evolution. As you can see on the slide, we break out the total network into three components: volumes manufactured in the period, further active capacity available, that's incremental volumes available through higher push rates or increasing shift patterns. And finally, an active capacity where capacity is mothballed or idled. As we've outlined, the progressively tougher market conditions we saw in 2025 meant we build inventory and therefore, in 2026, we'll be actively managing production and inventory. This will give a margin headwind, but benefits overall cash flow generation. We've done that by adjusting soft mud capacity at our Leicester sites, which have much more operational flexibility. However, our active clay network gives us the ability to ramp up by more than 20% with very low cost additions and therefore, compelling drop-through to the bottom line. With this network and stock levels, we're very well positioned to capture the upside as the market conditions improve. Outside of our core market exposure, there's significant medium-term opportunity in other construction market sectors. If stock is increasingly aligning with three growth market sectors, infrastructure, social and affordable housing and mid- to high-rise buildings that require cladding remediation. We're doing this by developing tailored sector solutions, broadening both our existing and new product ranges and working directly with the contractors delivering these major projects. The challenge is well understood the U.K. is under-invested in recent years in schools, hospitals and public sector buildings. And that's why the government's 10-year infrastructure strategy includes an identified GBP 725 billion pipeline, covering work in departments such as the MOD, Department of Education and Ministry of Justice. Now that's not just theoretical opportunity for us. Over the last 12 months, we've undertaken additional product testing and assurance to enable delivery into these programs. That includes testing new products for the MOD's GBP 3 billion a year work program as well as other key public sector customers including the GBP 15 billion schools capital investment program. Around half of the GBP 39 billion in social housing is expected to be delivered through Homes England. Housing associations are partnering with developers to unlock wider scheme, and we're already seeing this translate into activity. For example, we've received initial orders on our regeneration project in Birmingham a GBP 1 billion long-term master plan that will ultimately deliver about 3,500 homes. In addition, challenges around the cladding remediation and the Building Safety Act requirements are creating new opportunities where Ibstock is exceptionally well positioned. Our high-quality, high-performing products in both our established ranges as well as the new innovations coming through at Nostell directly support safe, compliant and even more sustainable construction. With that context, let me move on to our new product development pipeline and investment and how that positions us for future growth. You can see on the screen that over the last 8 years, an increasing proportion of our revenue now comes from new and sustainable products. This creates real value for our customers and helps sustain our margins. By working closely with our key customers, it's important to understand their strategic priorities, whether it's speed of build, low carbon, design flexibility or efficiency, and we focus our innovation on helping them to deliver against those aims. Alongside our major strategic projects, we continue to strengthen and modernize our core clay and concrete product ranges through continuous product development and performance improvements. Today, I'll just focus on the Nostell redevelopment and on FastWall, which you'll have seen in the opening video. FastWall has been designed to support both existing and new markets. For existing customers, particularly housebuilders investing in panelized construction and timber frame, it delivers higher productivity and reduced weight, both critical drivers for customers adopting modern methods of construction. Alongside FastWall, our new ceramic facade facility at Nostell is creating a further wave of innovation, delivering new facade solutions with a greatly expanded architectural range and almost unlimited design flexibility. It's the first facility of its kind to bring all of these things together in one place and initial customer interest has been really positive. We see these solutions as complementary, not competing with our core products. If there are skill gaps to meet the challenges of growing construction targets, this will be part of the answer. To fully appreciate it, you have to really see it in operation, and we look forward to hosting another factory event similar to the one we did in Atlas last year, and we'll share more details about that soon. Moving now to focus on our factory estate. Over the last 8 years, as already alluded to, we have invested more than GBP 325 million across our clay and concrete manufacturing network, creating a safer, more automated, more efficient and lower-cost estate. The Atlas factory is the latest of these investments, and we'll add 105 million bricks per year at full capacity, strengthening reliability, reducing cost and delivering the same high-quality, high-performing but more sustainable products, the way that we manufacture today. In addition, we've -- having done two capital investments projects in our Concrete division recently, we see further options to invest in process automation to reduce cost. These projects are relatively capital light with quick payback. Our new multiyear operational excellence program is also well underway at our pilot factory at Aldridge and will drive further competitive advantage, improving operational performance and strengthen our ability to service our customers. More efficient, modernized asset base positions us for higher margins, stronger cash generation and greater operating leverage as the market recovers. You'll see me reference this later as the network efficiencies are a key underpin for our midterm targets. Moving on now to look at our fifth strategy lever, which delivers further optionality in centers on our land and clay reserves. To give some context, we manage over 2,700 acres of land across the U.K., spanning our factory estate, clay quarries and significant natural estate. From an Ibstock perspective, a large part of this asset base is not fully utilized. We then have options to drive value through three complementary routes. Firstly, Calcined clay commercialization. This is now a proven low carbon cementitious replacement capable of materially reducing embodied carbon when used in blended cements and in concrete. And you'll know we've been exploring the commercialization of Calcined clay at scale turning an existing asset into a strategic growth option. I'm pleased to confirm that commercial discussions with a preferred partner to get to an agreement is well advanced, and we expect to share a further update on this at the half year. Secondly, as noted before, our disciplined land disposal program will ensure capital is released where land is no longer supports long-term strategic or operational priorities. To that end, we expect to generate GBP 20 million to GBP 30 million in the next 3 to 5 years. And thirdly, the expansion of our existing land-based income streams. Our land already generates material long-term revenue alongside core manufacturing with land-based income from quarry restoration through landfill delivering approximately GBP 2 million to GBP 3 million per year. This demonstrates the commercial value of well-managed nonoperational land. Taken together, these three routes create a diversified platform for value creation. So to conclude, these five leaders together define our value creation strategy. And while market conditions will continue to influence near-term performance, the actions were taken across these levers are firmly within our control. In 2026, we are focused on the execution of our customer experience work, expanding into new market segments, progressing operational excellence, including pilot at our Aldridge site, fully commissioning Nostell and finalizing our Calcined clay project. So bringing that all together, as you can see on this slide, we have the potential for significant earnings growth over the coming years. As I've said, to a large extent, this will be driven by market recovery, but it will also be supported by our market independent initiatives, including the points we've made today. We remain confident that our revenue target of GBP 600 million when markets recover to historic levels is achievable. This should drive margins up from 19% today to 28% in the future. The dynamics -- these dynamics should ensure a strong earnings growth in the years ahead. And as Simon has said earlier, the improved cash flow from improved earnings, the strategic land disposal program and lower capital investment will provide more optionality for value creation for shareholders. So finally, looking at the -- taking a look at the outlook. After a weather-impacted start to 2026, near-term demand remains challenging. We expect modest year-on-year volume growth in H2 2026, with volume recovery in new build and RMI markets dependent on activity gaining momentum in the spring. Price increases implemented in February 2026 should enable us to offset anticipated cost inflation for the year. Although the timing of the market recovery is uncertain, we're confident that the long-term market fundamentals are intact. Therefore, with a well-invested, lower cost, more efficient and sustainable network, we expect to benefit from meaningful operational leverage and cash generation across the business. And with that said, Simon and I will be happy to take your questions. If you could state your name and institution before asking the questions. Aynsley Lammin: Aynsley Lammin from Investec. Just two for me, please. On the production and kind of management and stock level management for this year, maybe if you could elaborate on that a bit more where stock levels are, where you'd like them to be? And would you be kind of thinking of mothball in any plants? Or is it just stopping production and therefore, that's why you get the kind of margin headwind? And then secondly, I guess just on the energy side, I think it's sort of 80% hedged. When does that become a concern if [indiscernible] continue and natural gas prices remain elevated, you have to be pretty confident for the next 6 to 8 months of time. Joseph Hudson: Yes. Yes. Look, we will be managing stock this year quite carefully. We're not anticipating to mothball any other sites at this stage. We've got -- part of the reason for the, the sort of headwind on the margins is the overhead recovery. We've got more shutdowns, so you just don't get the leverage, but we produced around 40 million to 50 million bricks more than we needed at the end of last year. So we're going to manage that carefully this year. Obviously, we've got stockyards, they are limited as well. So -- we've done this. Obviously, we've had a bit of a partner of this in the last few years, so we sort of know how to do things, and I think we're well positioned. The main thing is if the market comes back faster, we can respond very, very quickly. Energy, do you want to take energy Simon? Simon Bedford: Yes. So in terms of energy, we've said in the statement, we're about 80% hedged. That is actually more front-end loaded. So the first 3 quarters were hedged higher than that. So really, we're more exposed in Q4. We don't see at the moment, an issue with that, and we have other options when we actually get to Q4. Priyal Mulji: Priyal Woolf here from Jefferies. I've just got two questions. Firstly, you talked about price increases, I think, from February. I think one of the issues we've had in previous years is different players going at different times and sort of having to reverse on that. Do you have any color on whether the magnitude and the timing across the market has been fairly consistent so far this year? And then the second question is just the whole shift from soft mud to wire cut last year. Do you think that's done? Or is there sort of more to go as an incremental headwind? Joseph Hudson: Good. Yes. I think we're a better place this year for sure, on pricing. Last year it was difficult. People went at different times. And frankly, it didn't stick. This year most of the industry went in February, 1. And we think that there's been a lot more discipline in that approach. So we're confident that we can cover inflation this year with our price increases around sort of 3%-ish margins. And then soft wood, wire cut dynamics. I mean, obviously, as you had greater new build residential growth last year and more subdued RMI, it was a mix shift. So we're probably about -- the industry is about 70% wire cut, 30% soft mud. We're obviously have a greater weighting towards soft mud ourselves. I don't think that's a long-term structural change. I think it's largely because of the fact that the RMI market subdued and the southeastern London are very, very weak. So I think -- as I said earlier on, you've got an industry that only -- can only -- when it's -- when all the mothballed capacity is back on, you can only produce 2.1 billion bricks anyway. So all of the brick capacity will be used soft mud and wire cut in the U.K. Clyde Lewis: Clyde Lewis with Peel Hunt. I think I've got four. So apologies. I'll do them one at a time. Could you update us as to where you think sort of merchant levels are in terms of sort of brick stocks? Second one, again, it can useful to get an update on imports as to what you're seeing on that front? Third was on, I suppose, stock futures and slips within that as to how you're seeing the market develop for those products, and particularly the slips, how much activity is going on there with architects and designers in particular? And then the last one was on rail. Obviously, a tough year last year. How does the rail outlook look for 2026? Joseph Hudson: I'll let you take the rail one. So merchant stocks at the moment, I think, are quite healthy. Merchants -- most merchants that we talk to are managing their balance sheet carefully, and they know they can call on stocks from the manufacturers when needed. So I'd say they're not overstocked. There's a normalized stock level at the moment, but certainly not stocking up at this stage. Imports last year were about 350 million. So they actually -- if our markets, we went ahead by about 8%. The imports went ahead by a little bit more than that. But actually, if you look at import brick levels, they're quite consistent. They're about 19%. I think they went to about 22% in 2022, but they've been about 18% to 19% consistently. We do need imported bricks when the market comes back. And I think a lot of importers including a major player here has a mothballed bit of capacity and has got a pan-European strategy. So we're bringing a bit more of the bricks in still. And obviously, they're still quite sticky. They want to maintain our position. And there's not much going on in Europe. So they've been a little bit more competitive last year. I think we're excited about the growth in slip systems, ceramic facade systems. It's still coming from a low base. So it's still -- but it's -- the CAGR is very good. The growth is very good. Whether it's mechanical rain screen buildings, high-rise going up, whether it's panelized construction volumetrics with bricks going on the outside or whether it's some of the stuff like FastWall, we alluded to there on, there's a lot more change in that. We see our own -- this year, we expect about a 40% uplift in our volumes. And in 2 to 3 years' time, we expect that to triple. I think the -- this year at Nostell, obviously, we're commissioning the factory. There's a longer lead time for these products because they're specified in their systems. So they have to be tested and there's a specification period from the time it's signed up by the developer and the architect to when actually the project gets delivered. It's not like a brick just going off the yard. So there's a bit of a lead time there, which is probably about, I'd say, 8 to 12 months, but we're excited about it. That's why we invested in it. We think it's not going to like cannibalize our core business. We think this is the -- these products are going to be what brings additionality to get you to the higher build rates that we need to do given the skill shortages. So we think there's room for both the cavity wall and traditional building as well as some of these new systems, but we're very excited. And the infrastructure sector as well, is very excited by them. They're very open to -- they're more open to sort of faster change. So we're working with a lot of the big contractors infrastructure people. Rail? Simon Bedford: Yes. And if I just pick up rail, so we've suffered with rail volumes over the last few years, we reached the historical low level in 2025. We have seen recent data points which suggest that is actually turning, and therefore, we would expect some growth in 2026. It's off a low base, but it is also a high-margin business for the concrete business. Robert Chantry: Rob Chantry, Berenberg. Just three questions from me. I guess, firstly, on the concrete business. Could you just give us an update on the weighting towards the different subdivisions within that and that the margin profile, i.e., kind of what are we actually taking a view on the next 2 to 3 years around what's going to drive the recovery there? And secondly, affordable housing. I know a lot of the contracts have talked about building up big mixed-use development pipelines looking at affordable housing as a huge driver in the next few years and some of the contractors this week, last week saying it -- it's been quite slow, but it's starting to pick up. Just what's your kind of on the ground experience of affordable housing build rate dynamics. And then thirdly, obviously, the Southeast London market has been exceptionally weak in terms of new starts and volume, a lot of discussion around gateway, other planning type of regulation. Can you -- again, can you give us some on the ground insight around quite the bottleneck there from your point of view and if that is looking to be released at any point? Joseph Hudson: Good. I mean our concrete business has got quite diversified. As you know, we divested the roofing business. That was a relatively small part and lower market share. But we have leading positions in most of our other categories. So we have walling stone, which is a reconstituted sort of natural stone that goes into a lot of areas, reasonably good margins there, double-digit margins. We've got leading fencing and building business, landscaping business with very, very good margins. We've got the rail business, which obviously has rail and infrastructure business, which has suffered, but again, it's very high margins with leading positions. What else have we got, Simon? Simon Bedford: I think that covers it. Joseph Hudson: That's the main focus of it. We think that -- and we've got a large flooring business. Flooring is -- we've got about 25% market share of the flooring business. So we think that when you put the concrete business with some of the brick business, we're seeing a lot more uptake from especially contractors and people interested in these big infrastructure projects, schools, prisons, hospitals because we can do hollowcore floors, we can do the walls. We can do lots of retaining walls, applications like that. So it's quite complementary as well, our concrete business. Affordable housing, I mean, everyone is talking about this GBP 39 billion and it being back-end loaded. There was some news at the beginning of this year around funding allocations of about GBP 2 billion. That's promising. We're doing a lot of work with housing associations themselves and getting quite close to them. It is going to take time, but we will see some -- I mean, if you look at the stats this year, public housing has got a sort of a slightly higher growth rate than the private house building. So we're seeing some momentum there already. But it's -- again, how much, how quick, it's not going to go crazy this year. But I will -- I do think that the sustained improvement in social housing in the U.K. is much needed and is going to create a much flatter sort of less oscillation in cyclicality for us. The Southeast in London, I think there are a lot of things that are causing issues around the Southeast in London. The main one is affordability and building safety. I think the building safety regulator has got a much more proactive approach. They're releasing projects much faster now, and I think that will start to unwind much faster this year. But affordability is a big issue. If you think about buying a house in London and the Southeast compared to other parts of the country, there's a real issue there. And I think that's where we need some support. I think it will get a little bit better this year, but I don't think it's going to improve until we see some support for the first-time buyer. Benjamin Pfannes-Varrow: Ben Varrow from RBC. I'll do three as well, please. First on guidance, in terms of volumes. I understand that's H2 weighted, I guess, what gives you confidence in that at the moment and the sort of spring selling season picking up? Second is on Forticrete the disposal there. Can you give a bit more color on if there's anything else in the portfolio that could go the same way, infrastructure, just so I understand correctly. Is that mainly then focused on the concrete side of the business? And do you need any investment there? And how big could that be for the group? Joseph Hudson: Good. Do you want to do the guidance one? Simon Bedford: Yes. So just talk about volumes. So with the weather impacted first couple of months, we're sort of seeing the first half of the year to be more in line with the H2 2025 volumes. So that would mean slightly down on the comparative period, H1 '25. And then more growth in H2 2026. And based on the spring selling season, the elements, which give us confidence is affordability metrics are looking better. Inflation is stabilizing, and we could look at further interest rate cuts. And that gives us confidence that the macro look better. And then some of the housebuilders are giving more positive updates on what the site visits are, how that's looking. So we have confidence based on the sort of demand dynamics in quarter 2 the spring period, getting better, and therefore, growth will be realized in the second half of the year. Joseph Hudson: Yes. And I think if you look at last year, I mean, we had this wonderful consumer confidence crisis with what's going to happen to tax, what's going to happen to the budget. The budget was pushed out I think that the budget was a bit of a clearing event, and I think you'll see more clarity going forward unless we get further noise from that side. So I think there'll be more confidence and people will be building a bit more this year. But it will take some time because the second half of last year affects the first half of this year, in particular, but I think you'll start to see improving build rates. Let's see what the spring selling season does. Look, we do -- we always look at capital allocation and what a business needs in terms of capital going forward. Our Forticrete business was a very good business, but we've had some performance challenges that I gave them some time to look at. And on low volumes where it was at the moment, we felt that with someone else who could be a better custodian of that business, it's relatively low market share, and we want to have positions where we have high market share, leading #1 or #2 positions. So we felt it was the right thing to do. And there's not really anything else that we're thinking about right now at the moment other than land disposals, as I've mentioned. And then on the infrastructure stuff, it's not just concrete. Actually, when you look at it's concrete, it's the facades and it's bricks. So when we're going to talk to contractors, they're looking at the whole package now, and that's what's quite exciting about it. So it's not just that. The construction infrastructure market is about GBP 35 billion, GBP 40 billion in this country. So it's something that we really need to be more aggressive. And I'd like to see that donor 10% going to 20% very soon. Alastair? Alastair Stewart: Alastair Stewart, from Progressive. A couple of related questions. First of all, you displayed refreshing candor, if I might say so, for a CEO and personally acknowledging you moved too quickly last year. In terms of this year, irrespective of -- you're saying you're able to ramp up capacity. Is there a psychological -- once bitten twice shy feeling. You're going to have to wait longer to see positives from the house builder before moving today. So that's question one. And question two, related to that, on Slide 17, the production volumes and active capacity available, how quickly would it take to turn that gray into blue should the market pick up more convincingly? Joseph Hudson: Good. Thanks, Alastair. I thought all CEOs were very candid. Alastair Stewart: No, no. Some of them [indiscernible] Joseph Hudson: Okay. Look, I think you have to -- you have to be honest, and we're dealing with a very tough market situations. And I think we've got a lot of trust from shareholders in this community, and you've got to be open about things. I think look, you saw the graphs here. So you saw the movements. And then you saw -- so I would have done it change my mind. I think we made the decision we felt was right at the time. And of course, I'll be very cautious about bringing new capacity back and new cost back, especially with this market. But the good thing is that gray area, we can convert that very quickly. Even the blue area on that graph, which is 65% utilization, that's got shutdowns in it, yes. We can -- if the market comes back, we can produce a lot more, and also, we've got plenty of stock on the ground. So the industry levels at the moment, there are about 550 million bricks, which is not massive, but it's healthy, and we've got a healthy share of that. So we can deploy that stock very quickly, which will be great for free cash flow generation. So we'll eat into the stock first, then we'll reduce shutdowns and then we'll bring on a bit more capacity. Unknown Analyst: Max from [indiscernible] Asset Management. Just a regional outlook. So you see London and the South is potentially being weaker in 2026 than the rest of the country. Is that correct? Joseph Hudson: London and the Southeast have been weaker from a residential housing point of view for some time. I think, as I mentioned earlier on, there are some reasons for that. Some of them are building safety, but the main one is affordability. I think it will get better. But I think until we saw at the affordability issue. That's both for buying and for costs for builders to build with land and things like Section 106, it will stay behind other areas in terms of growth. But I think it will improve a little bit this year. Unknown Analyst: So the outlook for RMI then is slightly weaker than residential construction. Is that also correct? Because I'm looking at your U.K. well, at the market U.K. construction forecast. Joseph Hudson: Yes. I mean we go on what the BNS say, we go on what the CPA says. So at this stage, it looks like it's a bit of a decline this year of about 1% on RMI markets. Unknown Analyst: What do you think is causing that on the RMI side? Is it the interest rate? Joseph Hudson: RMI is really around consumer confidence. So let's go to Stephen. Stephen Rawlinson: Stephen Rawlinson from Applied Value. Two for me if you don't mind. Firstly, with regard to reach market, could you just talk us through the way in which the channels to size are altering and how that might play through in the next few years to particular reference to our margins, i.e., what's going through merchants, what's actually going direct to site and the implications for margin that might have happened over the last few years and are present in these numbers, but may potentially how they may progress in the future. And the second question is with regard to brick slips, off-site construction. Do you anticipate that you'll be doing that yourselves and is an industry emerging, you believe can absorb the capacity that you're creating for the slips production such that actually there will be -- you'll be able to satisfy that demand. How is that going to play out? Is that something that's going to be at your cost on your sites? Or is there an industry merging the satisfactory from your point of view to actually absorb the capacity you've created? Joseph Hudson: Yes, good. So our routes to market. Look, I think with infrastructure, there's definitely people are coming to talk to us because they want looking at the whole package. So I think you might see a little bit of a shift in more direct relationships with contractors than we have in the past. But the merchant industry, for example, creates a great sort of service for the U.K. because it stocks and it takes credit risk and it redistributes breaks book. So we think there's a real value in that route to market in that supply chain. We've got great partnerships with merchants. We've got great margin with brick specialists, and we've got direct relationships with housebuilders. There's no doubt more people want to talk to us directly because they're seeing now as we've been marketing all of our product capabilities, not just bricks, oh, well, we'd like to have all of this as a package, please. And that's where we see probably more direct relationships going forward. But we have to think about cost to serve as well. So we're not going to have a myriad of millions of relationships we've got and got to think about that. And then the whole ceramic facades there's a whole ecosystem there where you've got installers, you've got contractors, subcontractors. We won't be doing that in store ourselves. We want to provide the product and the solutions that go into -- with the installers, the developers and the contractors. We're not going to start installing ourselves. That's not our core business. It's not something I'd get into. We don't know enough about the risk factors and all outside of the market. But they are waiting to see -- this Nostell factory, they're waiting to see it because they've never seen it before. So that's why it's going to pick up momentum, and we've got the capability to really make a big Change, I think, in MMC in the U.K. with our factory. Christen Hjorth: Christen Hjorth from Deutsche Bank. Two, hopefully, pretty quick ones. Just on net debt, you normally see that the increase as you move to the half 1 stage with working capital investment, but it sounds like you're quite well invested in inventory. So just a sense of what we should expect in terms of net debt as we move through H1? And then second, I was following up on the volume phasing piece. What's your current thinking around the EBITDA phasing H1, H2 because there's a few moving parts in terms of capacity and things like that. So those are the two for me, please. Simon Bedford: Okay. So in terms of net debt, we would see a normal seasonal working capital build, but less so in inventory. It will be more debtors related as we have more sales in those periods versus like in November, December last year. So we see that. And then in terms of EBITDA, yes, I think we're going to be more weighted to the second half. We've got production shutdowns and producing less inventory in the first half of the year, which gives us that margin headwind. So we're thinking about our weighting probably being between 40% and 45% in the first half of the year. Harry Dow: Harry Dow from Rothschild & Co. I think just two questions, if possible. So first on the concrete business, how should we think about the operating leverage as that kind of volumes recover maybe for railway comes back. I think the drop-through this year is quite high in terms of , I think we lost GBP 5 million of revenue and then GBP 5 million EBITDA. So maybe also just what happened in 2025 for such a high drop-through maybe. And then just also just a comment on other operating costs, so sort of expected wages inflation or distribution costs, things like that? Joseph Hudson: Yes. I think operating leverage in the rail business has quite a big bearing on our margins and that moving forward will really help margin improvement this year. Concrete is a little bit different to clay. Clay, you've got high fixed costs, and the deal concretes more of a batch. You've got more flexibility with it. So really, it's around volumes and it's around margin in specific categories, and that's why we believe there's reasonable momentum in concrete this year. Other costs, Simon, do you want to talk about that? Simon Bedford: Yes. So our major cost really is around labor. So we'd expect a low single-digit sort of impact around that, which is in line with the industry and the wider positions. And then in terms of variable costs, we'd expect a similar number. We'll wait to see how things like oil pans out, how is that working? How that feeds through to say haulage costs, but I think we've got a little while to see how that's actually going to pan through. Charlie Campbell: Charlie Campbell, with Stifel. Just one. You haven't really mentioned planning as a potential opportunity this year. Clearly, there is hope that after 2 years, we -- the planning system has started to free up a bit. Just wondering what your view on that is and whether you've noticed any change in the rate of site openings maybe in the last few months or projections in the next few months? Joseph Hudson: Yes. Planning is still not great, if I'm honest. I think what is promising is that there's a focus on it. And what I think where we have seen improvements is if there's a decision on a large site, the decision -- there are people coming from above saying, let's do it. But we still have a long -- too long a time gap from planning permission to build out rates. It's really taking too long. So I think it's an opportunity. It's an opportunity. There's definitely proactivity from the government getting involved to make decisions about it, but it's not going to -- we haven't seen any major changes in terms of site openings in the last few months. . Okay. Do we have any questions from the Ita? No? Operator: No. I think all the questions have been covered in the room. So Joe, I'll hand back to you for any closing remarks. . Joseph Hudson: Good. So thanks, everyone. Look, it's very -- it's a crazy time in the world. It's a difficult market that we're navigating carefully. But this is a real high-quality business, 200 years old, and we will get some recoveries soon, and when it comes, we're really well positioned, and I'm excited about that, and I'm looking forward to it greatly. But really good to see you, and we can have a chat afterwards. But thanks very much for coming today.
Operator: Good morning, and thank you for standing by. At this time, I would like to welcome everyone to the Parex Resources 2025 Operational and Financial Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mike Kruchten, Senior Vice President of Capital Markets and Corporate Planning. Please go ahead. Michael Kruchten: Good morning, everyone, and welcome to Parex Resources Fourth Quarter 2025 Conference Call and Webcast. My name is Mike Kruchten, and on the call with me today are our President and Chief Executive Officer, Imad Mohsen; our Chief Financial Officer, Cam Grainger; and our Chief Operating Officer, Eric Furlan. [Operator Instructions] As a reminder, this conference call includes forward-looking statements as well as non-GAAP and other financial measures with the associated risks outlined in our news release and MD&A, which can be found on our website or at sedarplus.ca. Note that all amounts discussed today are in U.S. dollars unless otherwise stated. I will now turn the call over to Imad. Please go ahead. Imad Mohsen: Thank you, Mike, and good morning, everyone. As we reflect on 2025, I'm pleased to say that this year was defined by disciplined execution, meaningful strategic progress and strong shareholder returns, all of which further strengthened our foundation and position Parex for sustained long-term value creation. During the year, we delivered full year average production of approximately 45,000 barrels a day to achieve our budgeted guidance range. This outcome reflects our strong asset base, consistent operational uptime and ability to grow efficiently with [indiscernible] . At our Cabrestero and Block-34 assets, enhanced recovery initiatives continue to perform as designed. Optimized waterflood patterns combined with polymer injection programs are enabling us to effectively manage decline rates and maximize recovery enforcing the long-term life nature of these assets and reducing our year-on-year sustaining capital requirements. At Block 32, the Frontera acquisition completed early last year has been highly successful. Since assuming full control, we increased peak production to more than 3x pre-acquisition levels, have added significant reserves and recently drilled a complex multilateral well, the first in Colombia. This is a clear example of our execution capability where we acquired a high-quality asset was identified upside, applied our basin operational knowledge and scaled efficiently. On the exploration front, our high-quality prospect funnel continues to generate strong results. Our 2025 near field exploration program delivered a 75% success rate, reflecting strategic refinements to our exploration approach and our ability to deliver repeatable near-field successes. With our strategic partner, Ecopetrol, we made clear progress to strengthen our alignment and grow future production. In the Putumayo, we successfully gained operational access and started drilling activities. These blocks are sizable and underexplored. With more than 1.8 billion barrels of oil in place, our strategy is already seeing promising results and positioning us for significant inventory growth by moving from vertical production to multilaterals. Eric will touch on this further giving its importance and potential. In the Llanos Foothills, we formalized our strategic alliance and strengthened our position in a truly world-class basin with predrill work underway. With all of the puzzle pieces now in place, we are excited to start our first foothill well later this year. A high impact growth opportunity and alignment with our gas and exploration strategies. On the financial front, we remain focused on shareholder returns. We returned USD 134 million in 2024, '25, bringing total capital return over the last 8 years to CAD 2 billion. Additionally, through ongoing share repurchase programs, we have reduced the diluted share count by over 40% with significant achievement that enhances per share value and sets our long-term track record apart from our peers. I'll hand over to you. Eric Furlan: Thanks, Imad. In the fourth quarter, production averaged 48,606 BOE per day, achieving our planned growth profile for the second half of the year and enabling us to meet our guidance. This was driven by strong results from our base assets in addition to successful growth in the Llanos 32, in Llanos Block 32 and Block 74. With a front-end weighted activity plan for 2026, we currently have 6 rigs running, 5 operated by Parex and one on Block 34. Our year-to-date production is roughly 46,000 BOE per day with additive operations coming out of LLA-32, where a multilateral horizontal well was just drilled and completed and in the Putumayo region, where we are seeing encouraging results across multiple plays. At Block 32, we have successfully drilled Columbia's first four-leg multilateral well, representing a major technical milestone for Parex. This well is expected to deliver strong production by maximizing reservoir contact and driving enhanced capital efficiency. Beyond its immediate production contribution, this success serves as proof of concept to be used in the Putumayo region where it has the potential to unlock significant value. Let me expand. Today in the Putumayo, we are advancing work across 3 distinct blocks, achieving results that exceed our expectations and provide a clear line of sight to substantial additions for development inventory. Firstly, at the Orito block. Our initial well has 1,700 feet of horizontal length and is currently producing 600 barrels of oil per day gross. A second horizonal injection wells has just been completed and will begin injection shortly. Importantly, what makes this 600-barrel per day rate exciting is that this is a shallow horizontal well, meaning it is low cost. Leveraging a combination of our horizontal multilateral drilling experience. We're optimistic that we can draw an established North American plays, such as the Clearwater formation, to design and implement multilateral producer injection patterns to unlock this block. This block has over 1 billion barrels of oil in place with relatively low recovery factor, implying strong torque to enhance recovery initiatives with any gains in recovery providing an opportunity to meaningfully expand recoverable reserves. The next phase will involve drilling a multilateral producing well to test this concept. Secondly, at the Area Sur block, we are targeting efficient low-cost recompletes. Our most recent success has produced at a strong initial rate of 1,500 barrels per day gross. These types of opportunities are what drew us to this farming area, and we are excited by the potential we see. And thirdly, at the Occidente block, our first well has delivered encouraging logging results. Further confirmation of the down dip oil extension will translate into incremental locations and development upside. Across all 3 blocks, we are pleased with the progress to date and look forward to building this momentum into our next update. Switching gears on the near-term exploration front, we are building our near-field exploration success with programs such as Llanos 111 where we are using a streamlined, cost-efficient rig to minimize capital intensity. We have had positive log results on the first well of the program and we'll be testing in the near term. Success here could provide even more visible inventory ahead of 2027. Turning to our 2025 reserves report. The assessment was positive with the results reinforcing a sustainable outlook. Across all categories, PDP, 1P and 2P, we grew reserves per share, realized over 100% reserves replacement, including notable 152% in 2P, and realized FD&A recycle ratios that were 2x or higher. In addition to the standard reserves auditor price deck, we asked our reserves auditor to evaluate our after-tax net asset value per share using a constant $70 per barrel Brent price, equivalent to approximately $65 per barrel WTI. Under this pricing scenario, the resulting Canadian dollar net asset values per share are $23 on a PDP basis, $28 on a 1P basis, and $39 on a 2P basis demonstrating the strong underlying value of the asset base. It has been a solid start to 2026 for us operationally, and I'm confident in our plan that has multiple independent projects to add high-quality inventory and grow reserves. With that, I'd invite Cam to please go ahead. Cameron Grainger: Thanks, Eric. We generated strong financial results in 2025 despite a softer commodity price environment than seen in years past. For the quarter, funds flow provided by operations or FFO, was $123 million or $1.28 per share. Despite a Brent oil price in the low 60s, we had fourth quarter production growth as well as improving production expense and lower current tax relative to the prior quarter that helped FFO. Compared to the prior quarter, production expense benefited from new production that improved fixed cost absorption in addition to corporate efficiency initiatives that were implemented to reduce fixed and variable costs as well as a low amount of absolute current tax. Regarding commodity pricing, in short order, Brent has moved to over $80 per barrel due to global issues compared to our budget, which was released at $60 per barrel. While our core benchmark price has improved, part of this gain is being offset by wider heavy oil differentials with Vasconia being at upwards of $8 per barrel. This widening reflects ongoing expectations around incremental heavy oil supply, primarily from Venezuela. Further, any reassessment of our guidance would require commodity prices to be sustained at these higher levels. In the meantime, our operational and capital programs are progressing as planned, and our full year 2026 production and capital guidance remains unchanged, underpinned by higher commodity prices and the strength of our balance sheet. I will now pass it over to Imad for his final remarks. Imad Mohsen: Thank you, Cam. As we look ahead to 2026, I'm pleased with the progress we are making across our portfolio, which is inventory rates and supported by strategic acreage expansion and ongoing prospect replenishment that we have done. I am particularly excited about the ongoing development in the Putumayo with results to date surpassing our expectations. And I can add 111 to that. As Eric mentioned, our farming strategy has been validated. Our technical thesis strengthened and our view of the meaningful upside potential into clearer focus. Today, we have a compelling combination of low-risk development, near-field exploration and selected step-out opportunities all supporting based production stability with modest growth potential. Overlaying this foundation, we retain exposure to some of the most attractive onshore exploration opportunities globally in the Llanos Foothills. This is where we plan to spud the well that's on trend with existing discoveries, a milestone that has been in the making for years and provides an undeniable high-impact growth opportunity for Parex. With a strong start to 2026 and a constructive operating backdrop, we see Parex approaching a compelling inflection point. On that note, I want to sincerely thank our employees, communities and shareholders for their continued support which plays a crucial role in driving our shared success. To conclude my final remarks, I would like to comment on our recently announced M&A activity and more importantly, why we believe Parex is uniquely positioned to acquire and optimize Colombian assets. For example, when we consider Frontera Energy's Colombia E&P assets, it is Parex's view that our existing partnership with Frontera provides valuable insights. Through our partnership at VIM-1, we have direct experience with Frontera's assets and capable people, particularly across basins where our operations overlap. In addition to our long-standing partnership with Ecopetrol reinforces our confidence that we can create a win-win outcomes for the future of joint assets like Quifa combined with our proven track record of applying technology and technical excellence. A successful combination will position us to unlock the full potential of the combined portfolio. Our clean balance sheet position is a competitive advantage. This provides us with access to a competitive cost of capital and the flexibility to deploy leverage opportunistically. And our robust foundation to access across operations, marketing, tax and other key functions, which should enable us to capture the highest amount of potential synergies. We are positioned to drive meaningful upside through operational efficiencies, streamlined administration as well as optimized marketing and tax strategies to maximize shareholder value. In summary, a portfolio combination would immediately create the largest independent Columbian [focused] energy company, delivering greater scale, enhancing capital efficiency and achieving accretion across all key metrics. It would also optimize capital allocation further strengthens the resilience of our platform for sustainable long-term growth and strategic exploration. We view M&A in Colombia as a natural extension of our strong position there. And we are confident in our ability to unlock significant value for all shareholders. I'll now turn it over to Mike to make a short legal comment before the Q&A session. Go ahead, Mike. Michael Kruchten: Thank you for your attention today. Before we move to the Q&A portion of the call, I want to reiterate that we are committed to maintaining transparent and timely communication with the investment community regarding strategic opportunities, including potential M&A activity. That said, given the current circumstances, we will not be providing additional commentary or taking questions on our proposal to acquire Frontera Energy's Colombian E&P assets at this time. This concludes our formal remarks. I would like to turn the call back to the operator to start the Q&A session for the investment community. Thank you. Operator: [Operator Instructions] And we'll take our first question from Jamie Somerville at ROTH Canada. James Somerville: With regards to differentials I know there's a lot of moving parts there, but I'm wondering if you could give your view on what a reasonable outlook is for the rest of the year whether you think those differentials will come back in again? Cameron Grainger: Jamie, it's Cam. It's really hard to say. Before the Iran crisis, we were seeing differentials as we said, around $8 per barrel. It's still early. We haven't -- we don't really have any visibility at this time on how the Iran situation is going to impact things going forward. We don't really have that clarity right now. James Somerville: Okay. We will make our own assumptions and stay in touch. Maybe on a different subject, operationally, I'm curious about the multilateral targets. I guess, Colombia traditionally has produced a lot of oil from high porosity, high permeability, lighter oil reservoirs, including in the areas like Llanos 32 and Orito but these are multi-zone areas. And I'm just kind of guessing that maybe you're targeting some of the zones that have the more difficult reservoirs. I'm wondering if you can kind of comment on how you -- why you see an opportunity for multilaterals from a technical point of view? How much improved drilling speeds contributes to that and what you're seeing that gives you confidence from contractors globally and in Colombia? And what you think the size of the prize that you're going after is maybe? Eric Furlan: Okay. Thanks, Jamie. It's Eric here. You're correct in your first statements. Columbia is generally known for really high-quality reservoirs that are supported with a water aquifer and produce at high rates. But there are very large opportunities in some of the reservoirs that are slightly lower quality. So the one we're specifically referencing is in the Putumayo and the Orito area. It's the uphole [ Patino ] reservoir. It's at about 2,500 feet TBD on average. It's a fixed sandstone package. It has an area that was historically produced the highest quality area in this entire play, which represents about 1/3 of the entire play through vertical development. And those were very prolific wells. It did recover about 30 million barrels from that limited development. And so we're approaching this [Patino] from 2 perspectives. One, that original area that was developed was never waterflooded. It was essentially primarily produced and shut in. So we are going to waterflood, repressure that and get that online. And then the so-called halo area where 2/3 of the oil is in place has many penetrations that tested oil rates from vertical wells. Not fantastic oil rates. So what we were trying is to try the first single horizontal well to test how a horizontal may be able to be used to exploit this halo area that contains a larger component of the oil in place. The first well is performing exceptionally well with the rates that we're discussing here. It's a very easy well to drill. Our next step is to try and approach -- it's a different type of play than something like the Clearwater, where they're targeting higher-quality reservoir with very, very heavy oil. And here, we're targeting lower quality reservoir but with very good quality oil, 25 API type oil. But we're trying to look at the same kinds of technique where we're going to go ahead and drill multilateral wells, expose the reservoir with single wellbores to 5,000, 10,000, 15,000 feet of exposed area. And this first well that's producing 600 barrels a day has about 1,700 feet exposed. So we're at the early stages. We need to delineate what is a very large area and a very large oil in place. But it's very exciting for us. The drilling -- the first concept to test was the drilling of the well. It went very, very well and showed that we could drill these wells for very low cost. The next step is we -- as we said, we've got a horizontal well now on injection or about to commence injection. And we're going to spud shortly a multilateral well, all open hole with a similar type of well style as the Clearwater, but see if we can exploit this reservoir. So we see that throughout the Putumayo. Sure, the best of the low-hanging fruit was captured early on. But we're talking not Tier 3 or 4 reservoir here. We're talking still high-quality reservoirs here with what we're chasing. Definitely -- and we're quite excited about the whole opportunity here and in the rest of the Putumayo. Imad Mohsen: Thanks, Eric. Let me add a couple of things here to the logic. If I take the multilateral in Azogue for example, the productivity is just gigantic. We're talking about thousands of barrels with minimum drawdown, yes, less than 2% draw down. So the reason we're doing it, for example there, is not to increase productivity as such, is to be able to drain a large area of the reservoir with limited number of wells. To give you an order of magnitude, I don't know, it takes maybe close to $5 million to get to the 12,000 feet target in Azogue and every lateral cost of less than $1 million. So having 4 laterals there is much cheaper than drilling 4 horizontals, yes? So it's capital efficiency driven. In the Putumayo, as Eric said, the core area is very decent. In fact, Ecopetrol produced more than 1 million barrels per well at rates starting above 1,000 barrels when the well field was fully pressurized. That's not Clearwater like productivity with vertical wells. That's really very good quality. Now we are -- once we do repressurize the reservoir back to close original with waterflood, your productivity goes up. The one we drilled right now was to test what would productivity now be before pressurization starts and exceeded our expectation and also prepares us to going outside the core area, which has produced so far 35 million barrels, close to maybe 10% recovery. I don't know the exact places. But you go to outside that to what -- the extension area is like monetizes bigger than this one. So if we -- and it's never been produced commercially. So if we can unlock that with very high capital efficiency, multilaterals that creates an additional economic incentive to do it. Again, these are, I would say, if I combine the reservoir quality and productivity, these are still conventional reservoirs. We're not talking anything that's in conventional realm, but we do want to increase the capital efficiency. Does that make sense, Eric? Eric Furlan: Yes. Operator: And there are no further questions at this time. I will now turn the conference back over to Mike for closing remarks. Michael Kruchten: Thank you very much for joining us on our Q4 call. If you have any further questions, please feel free to contact us at Parex. Have a great day. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Prada Group Full Year 2025 Results Presentation. [Operator Instructions] And please note that today's conference is being recorded. I would now like to turn the conference over to Mr. Andrea Bonini, Group CFO. Please go ahead, sir. Andrea Bonini: Good afternoon, everyone, and thank you for joining Prada Group's Full Year 2025 Results Conference Call. This is Andrea Bonini Group Chief Financial Officer, and I'm delighted to be with you again. I'm joined by Mr. Andrea Guerra and Mr. Lorenzo Bertelli. The agenda for today's presentation is on Page 4, and as always, it will be followed by Q&A. As a reminder, during today's call, we may discuss forward-looking statements, which are subject to risks, uncertainties and factors beyond our control that could cause the actual outcome and returns to differ materially from such statements. Please refer to the disclaimers included on Slide 2 of our presentation. With that, I will hand over to Mr. Guerra. Andrea Guerra: Hello, and welcome also by my side. Obviously, we are here today during a very peculiar moment, a period of turmoil in Middle East. We do not know what will happen, but we hope it will be short. And let me be -- let me say something. Let me be very close to all our associates and all our people on the ground today in Middle East to all our stakeholders in the region in this specific moment of pray, reflection and community, we're very close to all our people in the region. Having said so, and I think this is paramount. I would love to start off saying that 2025 for our industry has been a very challenging year. I can state, and we can state that during the last 3, 4 years, the industry lost something like 1 consumer out of 5. In this long period, the Prada Group has been very solid and not only for the past years, but also in 2025. Retail sales in 2025 have grown again throughout the year, mostly or mostly entirely again, like-for-like, marking another plus 8% at the end of the year. We have been able against strong comps of 2024 to keep Prada on a breakeven like-for-like and most importantly, a sequential improvement through second half compared to first half. Miu Miu finished Q4 at a plus 20% on a plus more than 80% of a year ago. And it's obvious looking to the trend in the last 4 quarters that we have begun our growth normalization journey that will continue during 2026. 2025 has been for our both brands, a very interesting journey. Why interesting? Because we were able to showcase a lot of novelties, a lot of new ways of doing things, utilizing new tools, really upgrading our capability on digital technology and artificial intelligent tools to do what, to become closer, to upgrade significantly product intrinsic value, to be sure to allow all our consumers to understand and therefore, to tell them the stories around products that were coming out of the market, upgrading significantly our hospitality inside the stores and outside the stores and in the redefinition of new stores, flows. On the other side, always in this new normal we have been very clear and very focused on enterprise products and ranges. During this year, we did not only perform solidly, but we continued investing on our people on their know-how on their motivation. We have continued investing on our strategic digital plans and AI tools. We continued investing over proportionally on desirability and awareness of our brands. And we have continued to invest over proportionally versus sales on our stores to upgrade aesthetics and even more important to increase our hospitality standards. And even if the level of investments on all these cost lines have been overproportionate, we were able to keep a steady profitability, which means that what we committed upon which was being more productive and be more efficient, we have been able to do it in all other profit and loss lines. And do not forget, and Andrea will be obviously much more detailed of me on this, the amount of FX headwinds, we have been leaving and we will continue to experience in 2026. Last but not least, we began during December, our journey, closing the acquisition of the Versace brand. What does all this mean? We have been talking about a new normal. We have been talking about digital tools really coming to a standard use. We have been discussing about hospitality. It's obvious that we are entering a new journey now together with Versace. And this means that on one side, we have new achievements to be accomplished during 2026, '27 and '28. And on the other side, also the commitment to constantly grow over market range. During this next period, we feel that the Prada performance will be solid and to really reaping all benefits of desirability first and all actions and investments in place. We are consolidating Miu Miu's success, enhancing awareness and driving growth through 2026 with very different weights on the 2 halves. The first half is more challenging because we were yet in a plus 40%, 45% range a year ago. Therefore, we expect a first half to be in the single-digit growth, but yet being able to show a much solid trajectory for the full year. We are beginning the journey with Versace, a year of consolidation, a year of synergies and a fantastic start to shape the creative vision. The journey will go through a first phase of channel repositioning, supporting high-quality full prices and distribution. And we will see what this means for the numbers of Versace and for the overall performance of the group. I will now turn the word to Lorenzo and Andrea to give you a full view of Prada and Miu Miu brands, numbers, performance and also an initial view of Versace first steps in 2026. Lorenzo Bertelli: Good afternoon. Thank you, Andrea. First of all, I would like to highlight how Prada continues to strengthen its position as a cultural and creative leader, not only by setting trends but also by consistently elevating the brand experience across all touch points. All the core of this performance is authentic creativity. Throughout the year, our fashion shows reaffirmed Prada's ability to anticipate and shape contemporary culture, translating a deep understanding of the present into a clear, distinctive aesthetic language. This creative strength was equally evident in our communication. We delivered highly impactful campaigns that combined cultural relevance with strong brand desirability. At the same time, we continue to build a multifaceted brand universe throughout unique experiences and long-term partnerships. A key milestone was the opening of Mi Shang Prada Rong Zhai, our first stand-alone restaurant in Asia, considered by renowned director Wong Kar-wai. This project perfectly represents our approach to hospitality as a cultural expression where fashion, cinema and lifestyle intersect in a meaningful way. Enhanced retail concept contributed to strengthening the client engagement. New hospitality venues in Shanghai and Singapore, the landmark retail opening in New York and the refined setting of Prada Alexandra House in Hong Kong are some of the key milestones in the evolution of the store footprint over the year. In parallel, our long-standing partnership between Prada Linea Rossa and Red Bull allowed us to engage new audiences through high-performance sportswear projects, reinforcing the brand's connection to innovation, performance and contemporary lifestyle. Finally, Prada continued to play an active role in shaping the contemporary cultural debate with signature initiatives in London, Osaka, Abu Dhabi and Milan. These events were complemented by special projects and activations such as Days of Summer and The Sound of Prada, which further expanded the brand reach. All of this reflects our ongoing commitment to creativity as a strategic driver of value. This slide illustrates how Miu Miu continues to stand out as one of the most desirable and relevant brands in the luxury landscape, driven by a language that is both distinctive and highly distinctive. At the heart of Miu Miu's performance, is a vibrant disruptive creativity, which consistently fuels the brand desirability. Throughout the year, Miu Miu maintained an exceptionally high level of buzz supported by fashion shows that were widely acclaimed and strongly resonated with both the fashion community and broader cultural audiences. This creative energy was amplified by our campaign, which features the diverse and influential cast of talent reinforcing Miu Miu connection with the new generations of consumers. Special projects played a key role in engaging and expanding Miu Miu's ever-growing community such as our collaboration with New Balance and the American Tennis Champion, Coco Gauff as well as the exploration of new creative territories through Catherine Martin's Upcycled collection accompanied by her directorial debut short film, Grande Envie. In addition, the launch of Miu Miu's first fragrance with L'Oreal Miutine marked an important step in expanding the brand's universe. Experiential activations such as the Atheneum and Gymnasium pop-ups further enriched Miu Miu's signature codes, transforming retail into spaces of discovery and cultural exchange. In parallel, Miu Miu continued to reinforce its distinctive cultural positioning throughout event initiatives that deepens its long-standing dialogue with arts. Finally, all the initiatives were accompanied by a mix of openings and renovations that elevated the store network for enhanced customer journey. One, London and Tokyo were among the most significant projects embedded over the period. Overall, Miu Miu's strength lies in its ability to combine strong desirability with authentic cultural relevance, a balance that continues to fuel growth and engagement. Let's move now to ESG. Over the past year, we continued to execute our sustainability strategy across our 3 pillars: planet, people and culture. On the environmental front, we made tangible progress across both our operations and supply chain. Investment in green energy and low impact solutions enabled us to exceed our approved science-based target for Scope 1 and 2 greenhouse gas emissions, a result that confirms the strength and discipline of our decarbonization pathway. At the same time, we advanced our raw materials conversion plan, strengthened environmental data collection across the supply chain, expanded our water stewardship initiatives and further improved responsible chemical management. Equally important is our commitment to people. During the year, we reinforced our efforts to foster a fair and inclusive workplace. We achieved the gender equality certification in Italy, rolled out our worldwide people culture forums and delivered D&I awareness training programs in line with our global D&I road map. This year also marked the 25th anniversary of the Prada Group Academy, a milestone that reflects our long-standing dedication to preserving artisanal excellence and supporting generational transitions. Culture remains a defining element of our identity. Through our partnership with UNESCO and SEA BEYOND projects, we further strengthened our commitment to ocean education, opening the first Ocean Literacy Center in Venice, launching a dedicated Multi-Partner Trust Fund and Ocean Educational Exhibition in Shanghai. We also renewed important partnerships supporting Urban biodiversity and cancer research. Overall, the year reflects consistent progress and a clear commitment to creating a sustainable long-term value. I will now leave the floor to Andrea for the financial review. Thank you. Andrea Bonini: Thank you, Lorenzo. Before we dive into the numbers, let me remind you that we completed the acquisition of Versace on December 2, and therefore, we consolidated one month of contribution from the brand into our financials. In the presentation, we will also provide growth rates excluding this impact, to which we refer as organic growth. With this in mind, let's now move to the key financials. The group reported net revenues of EUR 5.7 billion, up 9% versus fiscal year '24 at constant FX. On an organic basis, revenues grew 8% year-on-year. This performance delivered against high comps throughout fiscal year '24, marks the fifth consecutive year of growth at group level. Exchange rates had a negative impact of 380 basis points on revenues and the increase at current exchange rates is therefore plus 5%. Retail sales for the period totaled EUR 5.1 billion, up 8% organic versus fiscal year '24 and up 28% versus fiscal year '23 at constant FX. EBIT adjusted reached EUR 1.32 billion in fiscal year '25 with margin of 23.2%, including the dilutive impact of Versace. Pre-Versace consolidation, EBIT-adjusted margin was steady versus 2024, in the context of significant investments across functions and FX headwinds. On a constant currency basis, EBIT adjusted margin improved year-on-year. Finally, thanks to the significant cash generation we maintained a healthy balance sheet, closing the year with a net debt position of EUR 466 million after EUR 620 million of CapEx cash out, including real estate, EUR 1.2 billion for Versace acquisition and EUR 420 million of dividends. Moving on to the next slide. Retail continues to be the key driver of the top line performance, up 9% versus fiscal year '24 at constant FX, 8% on an organic basis, driven by like-for-like full price sales and with a positive contribution from both average price and full price volumes. The fourth quarter delivered a solid performance, up 6%, notwithstanding the challenging comparison base. As a reminder, in 2024, retail channel growth was remarkably consistent at plus 18% in all quarters. Contribution from space remains limited in the low single-digit region. Wholesale was up 4% year-on-year, 3% on an organic basis, reflecting the usual selective approach with independents. Q4 at minus 1% organic was impacted by our cautious stance on shipments to Saks Global, and we are pleased that business with this important strategic partner has now resumed. Royalties were up plus 19% year-on-year, plus 14% organic, supported by both eyewear and fragrances. Turning to next slide, retail sales by brand. We are pleased with the performance of our brands as they continue to enjoy high desirability and relevance in a challenging context. Prada showed good resilience, closing the year at minus 1%, with Q4 delivering further sequential improvement and turning positive despite the more difficult comps supported, in particular, by Mainland China, Korea, Japan and Americas. Miu Miu delivered sustained growth throughout the period against exceptionally high comps. Retail sales grew by 35% to reach EUR 1.6 billion. Growth was well spread across all product categories and regions. Q4 sales were up by 20% against plus 84% in 2024, with growth remaining well balanced. As a result, the brand contribution to group retail sales increased to 31% against 25% in fiscal year '24. As for Church's, the strategic efforts of the past years continue to keep the brand on a positive trajectory, driven by like-for-like sales. Moving to the next slide, retail sales by geography. We are pleased to report that the group achieved growth across all regions. Asia Pacific showed a good progression over the year at plus 11%, plus 10% organic with Q4 broadly in line with Q3, notwithstanding the higher comps. Positive performance in Europe, up 5% over the year, plus 4% organic. We saw softer trends in the second part of the year with strong multiyear comps and lower tourism weighing on the region. Consistent double-digit growth in the Americas, with sales up 18% plus 15% organic, driven by local demand. Japan delivered growth notwithstanding the exceptionally high touristic flows of the last year, closing the year at plus 3%. Q4 showed some improvement versus Q3, driven by both solid local demand and increased traveler flows, notwithstanding the geopolitical tensions in the region. And lastly, the Middle East also delivered a solid performance at plus 15%, we're moderating trends in the second part of the year on high comps. Turning to the next slide. Gross margin reached 8.3% in fiscal year '25, up by 50 basis points, thanks to operating leverage and channel mix, while the dilutive impact from Versace consolidation for only one month was negligible. Excluding the consolidation of such and strong FX headwinds, EBIT adjusted margin improved, driven by slightly higher gross margin. G&A savings coming from efficiencies and operating leverage which more than offset higher marketing and selling costs. Including the dilutive impact of Versace consolidation, as shown in this page, EBIT adjusted reached EUR 1.32 billion, corresponding to an EBITA adjusted margin of 23.2%. And finally, net income reached EUR 852 million, an increase of 2% versus fiscal year '24. Moving to the next slide. CapEx for fiscal year '25 was EUR 617 million, EUR 535 million excluding real estate as we continue to invest across retail, industrial capabilities and technology. On the retail side, as you've heard from Andrea, investments were concentrated on the enhancement of the store presence with renovation projects and control new openings and enlargements at both Prada and Miu Miu in line with the objective of furthering the relationship with clients. Aside from retail, we continue to strengthen our industrial capabilities, investing into our infrastructure and to progress on the digital evolution journey as we started to reap the benefits from our multiyear system upgrade plan. We expect CapEx as a percentage of sales to start reducing from the current fiscal year. Moving to the next slide. We are very pleased with the evolution of net working capital and the control of the inventory, showing further improvement year-on-year on an organic basis, with incidents on net sales declining from 15% to 14%. And lastly, we retain a healthy balance sheet post acquisition with net debt of EUR 466 million. The Board of Directors has proposed a dividend per share of EUR 0.166, which compares to EUR 0.164 last year, which would result in a total dividend of EUR 425 million and a stable payout ratio of 50%. I'll now pass it back to Lorenzo for an update on Versace. Lorenzo Bertelli: Thank you, Andrea. As we have said in the past, we are very excited about this new chapter. With Versace, we welcome a brand that has made the history of fashion and glamor as we know it today. It's estate is bold unique, represent modern elegance and constitutes highly complementary addition to Prada Group's existing portfolio. We started this journey being able to count on a lot of strengths. First of all, remarkable and long-standing awareness; second, resonance across a diversified client base, which has limited, if not overlap with our customer base. Third, strong legitimacy in haute-couture and across product categories, balanced across men and women. Lastly, strong cultural relevance, rich archive and solid brand equity. Because of this, we believe the brand offers multiple untapped levers of growth. We are aware that this won't be an overnight task, but a passionate journey towards the brand's full potential, and that's why the timing of our initiatives will be of the essence. In terms of priorities, the following slide highlights the key actions we are going to implement in the next months. Creativity will be the foundation of our work, and we have taken a first important step into this direction with the appointment of Pieter Mulier as Chief Creative Officer. Pieter will join in July, and we are very excited to have him on board. In the meantime, we will continue to assess the core collection and product lines to identify areas of improvement in terms of quality and structure. The second building block of our plan will be a gradual channel repositioning. We will progressively shift the focus towards quality, full-price sales and distribution. At the same time, instilling a retail excellence mindset will be essential for improving in-store execution. In parallel, we will progress with the integration process across functions, and we expect to complete the separation from Capri Holdings in H2. Looking at 2027 and beyond, we will essentially bring all of these areas to the next level as we lay down the basis for the building long-term desirability. At the beginning of the year, we'll present Pieter's first collection showcasing the new creative vision rooted in the brand's original spirit and DNA. The collection will also continue to evolve as we progressively reposition the brand and relaunch special project like Atelier Versace. We also continue with the network optimization as we progressively rationalize the off-price channel and the markdown practices while focusing on driving in-store productivity with self-help initiatives in terms of retail execution. All these actions will be supported by a further integration of activities and processes across the organization to unlock synergies opportunities. Now back to Andrea for some financial considerations. Andrea Bonini: Thank you, Lorenzo. In terms of financials, as already explained, we consolidated only one month of the business in 2025. On a full year basis, the brand generated revenues of approximately EUR 680 million. Looking ahead, 2026 will be a year of transition for the brand as we navigate the change in creative leadership. We also want to commence the path towards a healthier, more sustainable and more profitable business conscious that we have to move back to go forward. Therefore, we will further clean up the collections discontinuing Versace Jeans Couture and leaving no sub-brands in existence in ready-to-wear and other core categories. At the same time, we will start to implement a greater discipline in terms of discounting while remaining mindful of the commercial needs. On the wholesale front, we expect progressive stabilization, and we will start implementing some actions to rebalance the commercial relationships on healthier terms. All in all, we expect this to translate into a mid-single-digit top line contraction at constant FX, which is likely to become high single digit at current FX. Turning to profitability. First of all, let me point out that the company's initial margin is at a good level in relative terms to our industry. However, we believe that quality must be improved and also that initial margin is diluted by significant discounting. Therefore, we'll progressively invest in quality. On the other side, we will start implementing greater discipline on discounting. All considered, in fiscal year '26, we expect gross margin to be relatively stable with a caveat on duties as the situations remain fluid. In terms of OpEx, we have acted decisively, and we will see the benefit of initial synergies and savings. This will be partially reinvested in strategic areas like visual merchandising and marketing, while we maintain cost discipline on all other nonstrategic items. All in all, we expect to be able to mitigate the negative impact coming from the top line reduction, and the EBIT loss will not be too dissimilar from the one incurred in fiscal year '25. The target is to limit that to a 2-digit figure. Now moving to the next slide. Let's translate that into a group view. On top line, for 2026, our ambition is to continue to generate solid, sustainable organic growth at Prada, Miu Miu and group level. Prada turned positive in Q4, and our expectations are for a solid year. Miu Miu is now lapping the fourth consecutive year of very significant growth, and we have continued to observe normalization. As Andrea mentioned at the beginning of the call, H1 is particularly challenging with Q1 at plus 60%, and Q2 at plus 40%. Nonetheless, we aim for another year of growth. We already discussed Versace in the previous slide, so it doesn't require any further comments. Last point on top line. We expect to continue facing meaningful FX pressure in fiscal year '26, similar to 2025. Turning to profitability. Let me first discuss expectations excluding Versace. We remain committed to continue to deliver some degree of organic margin progression on a yearly basis. Marketing spend will slightly increase as a percentage of sales, and we expect to continue to achieve efficiencies in labor, rent and G&A. So leaving aside the impact of Versace, as long as the group top line growth in reported terms remains in mid-single-digit territory, we can deliver a steady EBIT margin without acting more drastically on investments or costs. Versace's consolidation will result in EBIT margin dilution in fiscal year '26, and our target is to resume progressive improvement from 2027. With that, I'll hand over to Andrea Guerra for closing remarks. Andrea Guerra: We're very happy to have shared with you our 2025 performance and to share with you our initial thoughts on future journey. Years ago, we committed to an upgrade an evolution of our ability to have a stronger and more proactive relationship with all our clients and potential clients, to be more efficient and productive in our retail network and overall in our company, to empower and upgrade our people, wherever they are in the group, aligning them constantly to their brand missions. We achieved solid constant growth. We significantly improved in all our consumer-faced activities. We have seen profitability increase year-by-year, working capital sequentially improving and therefore, cash flow. So obviously, we are pleased for all these achievements and all these activities. Now we're entering a new journey, which is made by all the things that we have already talked about in constant evolution plus Versace. We are committed. We're working hard. We will be patient to have the right pace. Obviously, in this new normal world, agility and efficiency remain nonnegotiable. I will try to anticipate some of your questions now. How are these first months? Trajectory for Prada is improving. As Andrea said, we are expecting a solid year for Prada. And we had a solid Chinese New Year full period, like-for-like on last year's and in the whole Asian region, except Japan, where Chinese tourists were much less present. But on the other side, fortunately, in Japan, we are winning with our beloved Japanese local clients. Europe started January slow and improved with Milan Olympic Games and Fashion Weeks. Obviously, Europe for Prada and Miu Miu are challenged by very high double-digit comps for the past years, not year. Korea is still strong. North America is still very strong. And obviously, I will repeat that we are here to challenge ourselves to keep a growth rate higher than market average with trajectories which are different from our different brands as stated during our presentation. With this, I would like to thank all of you for listening and we are now open to your questions and comments. Operator: [Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Ed Aubin from Morgan Stanley. Edouard Aubin: So the first one is going to be on top line to Andrea Guerra. So you mentioned that you expect -- or sorry, maybe it was Andrea Bonini mentioning that you expect a solid growth for Prada in 2026. Could you please kind of define solid? Should we understand that you expect to grow kind of low single digit at constant FX for Prada after a minus 1 in '25 or would that be even higher than that? And if so, what kind of is going to drive the reacceleration from '25 to '26 and then regarding Miu Miu, do you think a double-digit growth at constant FX is something which is achievable or given the difficult comp that might be difficult to achieve? So that would be question number one. Andrea Guerra: Hello. Yes, we -- you're asking for a guidance, and we are not giving guidance, especially in this world today where, I mean, in the last -- only last 6 months, we have been living any positive and negative and side effects. So I hope that we use the proper words. We have been very careful on adjective we were using, and I will not comment further. The only comment I would do is that if everything goes well, we will be double digit on Miu Miu. But with this world, things could be different. Edouard Aubin: Got it. But maybe Andrea, if I can just follow up. Not asking for a guidance, but again, you talked about your expectation for a solid growth for Prada brand in '26. Again, without quantifying you were down 1% in '25. So if you could please elaborate on why you think you're going to reaccelerate in '26 versus '25? Andrea Guerra: Sure. We had a peak down in central months of the year and the central months of 2025 or else we would have been pretty positive in 2025 as well. I think that we can cover those months with a positive rate. We have been positive since August. August, September, October, November, December were positive. In December, it's a question sometimes of calendar where a year, you've got a couple of days gift a year, you got a couple of days back. And this was a case where we gave it back or else in a kind of organic manner, we were a little bit more positive. Having said so, I think we have a rhythm of product innovation, of product evolution of activities, of events. We -- I think we have reached a level of maturity on a number of retail activities and hospitality activities. And we're also beating our own sometimes mind effects on very high transactions. So these are all the reasons why I feel solid as we said. Edouard Aubin: Got it. And my second and last question, and maybe for Lorenzo on Versace. So you've been appointed Executive Chairman. Congratulations. You also mentioned that you've hired Pieter Mulier, which is -- who is obviously very well regarded in the industry. Is the team in place now? And did you hire mostly from the Prada Group, you had transfer? Or did you hire external people. And again, how fast it seems that you want to not rock the boat, so to speak, too quickly with the rationalization of the store estate and the outlets. But how do you -- how fast are you ready to move on kind of shrinking to grow the business longer term, yes? Lorenzo Bertelli: Thank you for the question. No, I would say it will be balanced. Let me start from the end of your question, then I go back to the other. So the priority for sure is at the full price in the retail network and then also the rationalization of the outlet also thinking that with the new collection coming out from Pieter from next year, you will have previous collection that, of course, they will need to accelerate to the outlet. So outlet will come later for sure, for the full price. Then regarding to the question organization, I think it's quite a hybrid because we have some of the functions that have been absorbed in the group function typical back office function like IT and others. And so it's more like efficiency, poor efficiency, other function. We simply had streamlined a bit the organization, so not like key significant outside role except that you heard on journal like the shift of the supply chain that was coming from Valentina was a former Prada historic employee. So external but let's say, part of the family in the past. And at the moment, more or less, we are happy like this also with Emmanuel and a CEO. So -- then we will take for sure, the next 6, 8 months to even better understand the organization and we will see. But at the moment, we are for sure happy. Of course, with Pieter, we will have some changes in the design offices, but I would say, normal stuff and that's it. Operator: We are now going to proceed with our next question. And the questions come from the line of Thomas Chauvet with Citi. Thomas Chauvet: I have two, one on revenue and one on the Middle East. The first one on Versace revenue contraction that you anticipate for this year from EUR 680 million last year. We understand it's largely self-inflicted due to the channel repositioning. Can you give us an idea of the magnitude of the store closures you are planning? Are there also some wholesale rationalization or is it just retail closures through '26 and '27? And you said earlier, the expected operating loss won't be much higher than '25. Can you indicate what was the Versace EBIT loss in calendar '25, it seems to be around EUR 10 million, EUR 20 million, if my math is correct, if we assume, as you said that the Prada Group -- the old Prada Group EBIT margin was flat at 23.6% ex Versace. That's my first question. Lorenzo Bertelli: Thomas, [Foreign Language]. So on revenue, I said it that the expectation is for mid-single-digit constant FX, which is likely to become high single digit or we will be because, I mean, with the FX, you never know on a reported basis. That's on the top line of Versace. And on the second question, likewise, I mean, not much to add to what I already said. The -- I said that the -- our target is to limit the operating loss to a 2-digit figure. And if the number you were referring to, i.e', the -- I think you mentioned EUR 10-ish million for fiscal year '25, I assume that number is for -- you were referring to a number that is the one that we consolidated for the fact of December into our numbers, and it's not of mile, let's say that it's a single-digit number, but it's around there. Is that clear? Thomas Chauvet: Yes, that's very clear. And my second question on the Middle East, which you disclosed separately in your segment reporting 5% of your sales. Can you remind us how many Prada and Miu Miu stores you operate in the region? And how many of them are currently closed, given the complex situation? And what is your overall exposure to the Middle Eastern clientele, if you take into account the sales to locals in the Middle East, but also sales to Middle Eastern tourists traditionally in Europe and other markets? Andrea Guerra: Regarding Middle East, in terms of opening and closing stores, it's a daily evolution and a daily activity. The most difficult situations are in Qatar, in Bahrain and in Kuwait. Having said that Middle East is very different places, very different regions because, I mean, basically, Saudi nothing happened and it's, I would say, 100% local clientele. The Emirates, I would say, is 1/3 locals, 1/3 expat, 1/3 tourists. And I mean, we will see what's going on. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Gao from CLSA. Chris Gao: Yes. I have two. So firstly, regarding the progressive improvement in 2027 regarding Versace, I just want to follow up a bit on that. So does it mean that we expect Versace will go back to a growth territory? And also for the margin, can we expect turnaround or... Andrea Guerra: Excuse me, your line is very, very disturbed. We can't -- there's a huge noise. Chris Gao: Can you hear me now? Andrea Guerra: Hopefully, let's see. Chris Gao: Can you hear me now? Okay. So first question is about Versace improvements in 2027... Andrea Guerra: Excuse me. No, your line is a mess. Try later, please. Thank you. Operator: We are now going to proceed with our next question. And the questions come from the line of Oriana Cardani from Intesa Sanpaolo. Oriana Cardani: The first one is on the wholesale channel. What are your expectations for this year? And my second question is on the retail network. Can you give us an idea on the store openings you expect this year and the perimeter effect you expect due to these openings? Andrea Guerra: Yes. On wholesale, more or less, we're having the same kind of percentage growth in these last years, and more or less, we will keep on with the same percentages. As we said, we had the necessity to keep back some inventory not to be shipped to Saks at the end of 2025. And we resumed and Andrea was saying our shipments beginning of '26. This is also why in Q4, we were a little bit less in our normal standard average. So I would say that we will keep on having more or less the same average growth that we had in these years. In terms of retail network, for Prada, I would say it will be between some pluses and negatives, some opening and some closures. We will remain with the same kind of square meters, but I think we will close more stores than what we will open during 2026. With Miu Miu, we will add another 5 to 10 stores during 2026. And then as we said 2 years ago, and we will also close some with Miu Miu. But at the end of 2026, the big progression in terms of space expansion for Miu Miu is basically over. That is we will be with something around 170, 175 stores, and we will remain there for a while. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Huang from UBS. Chris Huang: I have three, if I may. Starting with the first one, just a clarification on the Prada brand cluster. I think in the previous calls, you always provide some color. So if you can do the same for Q4 in terms of Americans, Europeans, Chinese cluster trends for Prada brand retail, please? Andrea Bonini: Chris, so clusters for the Prada brand, the Chinese -- starting from Chinese cluster, there was a significant quarter-on-quarter improvement which is driven by positive domestic consumption and better travel spending. Europeans was flattish for the year, slightly softer in Q4 versus Q3 with local demand remaining more resilient than travel spending. The North Americans was positive mid-single digit for the year and further improved in Q4 to positive, I'd say, high single-digit, mostly domestic. And Japanese was positive low single digit in Q4 and full year with no major differences versus Q3, mainly solid local demand. Chris Huang: Okay. Perfect. And then secondly on Miu Miu, if I caught it correctly, you were saying that given the very tough comps, I guess, on a multiyear basis, you're expecting single-digit growth in H1 before an acceleration into H2. I'm just trying to square the math here because in theory, we do start to see more meaningful space contribution from 2026. I think you were mentioning 10 to 15 stores. So going from 20% in Q4 to single digit, and if you can also quantify a bit if it's going to be like a low, mid-, high single digit. Are you assuming very cautious volume assumptions to get to that kind of guidance target, please? Andrea Guerra: Yes, we are. Exactly what you're saying. Chris Huang: So you're assuming volumes decline in H1 for Miu Miu? Andrea Guerra: No, no, no. We are being cautious. Chris Huang: Okay. So you don't rule out the potential scope for positive surprises. That's what you're saying? Andrea Guerra: I think that time has arrived, and we are happy with the journey we have done and with the journey we have in front of us. But we are now in an everyday competition and gaining our opportunities and wins and battles. I think it's a journey that it's especially the first 1, 2, 3, 4 months pretty complicated because we were in a plus 60% range last year. And then it's a little bit easier. Obviously, on the other side, when you open a store, you also need to allow the business to go where it has to go. So we're extremely happy of the new stores we opened. I think that we didn't really make any real mistake. And let's go. I mean this is -- I think this is a very important year for Miu Miu and we are into it and on to it every single day of our life. Chris Huang: Okay. Perfect. That's very helpful. And last but not least, on Versace. I think in the press release, you mentioned that 2026 obviously would be dilutive to the group, and you expect '27 onwards to start to see some gradual improvement. If I remember correctly in the past, when you were executing the Prada turnaround, I think the EBIT margin pressure kind of lasted for a longer period of time because of the acceleration in investments. But is it fair? Or can you kind of outline the underlying assumptions you have here for Versace to already start to see margin improvement in 2027, unless I'm misunderstanding anything here? Andrea Bonini: Well, first, I mean, I would start -- it's Andrea Bonini. I would start saying that the two situations are very different. So comparing the Prada turnaround to Versace, and so would not really take that as a comparable. As we look forward, there's an element, of course, of reinvestment into the business, into the brand and accelerating on certain areas of spending that will move margins in a certain direction. At the same time, I mean, we will continue to look for synergies and efficiencies that should help in the opposite direction. And most importantly, as we always say, a lot depend from the top line. And on the top line, we will see from '27 on really the results of the actions that we will be taking. On retail, at the same time on wholesale, you know that we already talked about the fact that we already said, we anticipate some sort of stabilization already starting from '26. So there's elements going in the two directions that make us believe that things are going according to plan. Yes, we can indeed start seeing an improvement from '27. Operator: We are now going to proceed with our next question. And the questions come from the line of Daria Nasledysheva from Bank of America. Daria Nasledysheva: This is Daria from Bank of America. I actually just have one. On Versace, when will Pieter Mulier present his first collection for the brand? And what will be the time line of collections change given currently Dario Vitale collections, I think, have started to arrive online and in stores so that we just understand the cadence of the collection rollout. Lorenzo Bertelli: As we said, the first show of Pieter will be beginning of next year. And on the collection first has to arrive and has to work on it, so I cannot answer to that question. Honestly, for sure, it's going to be different from the one of Dario. Operator: We are now going to proceed with our next question. And the questions come from the line of Anne-Laure Bismuth from HSBC. Due to no response, we are now going to carry on with the next question. The questions come from the line of James Grzinic from Jefferies. James Grzinic: Yes. I just had two quick ones. The first one is, Andrea, can you be perhaps a little bit more specific on what keeping losses at Versace to double digit in '26 looks like? Are you basically gaining for EUR 80 million, EUR 90 million of losses basically? That would be helpful. And secondly, perhaps more fundamentally, you seem to have gone a huge supplier rationalization process in recent weeks. Can we perhaps understand what comes out of that process? What you'll gain out of that dynamic, please? Andrea Bonini: If I -- thank you. And Andrea, you always have to be more specific, but I suppose it's for me, it's Andrea Bonini. On the Versace, did I understand correctly the question that what's keeping it at that level? James Grzinic: No, it's more, if you can be a little bit more specific on what double digit -- keeping at double-digit level means. I mean, I appreciate you gave us that, the 1 month was a minus 8%, minus 9% contribution. But are we basically looking for '26 keeping that loss at EUR 80 million, EUR 90 million. Is that the quantum of magnitude? Andrea Bonini: Yes, no, but not going to be. I think we said a lot, and I'm not going to be more specific than that for today. And second question, Andrea. Andrea Guerra: So regarding our -- what you said about supplier rationalization, I think this is a journey that really began with COVID. And this has gone in parallel on one side in creating more internal manufacture infrastructure. We created three factories from that moment to today, and we are working on two other, one is renovation and one is a new one. And on the other side, I think that in our journey, we have cut the weaker. We have given more work to more organized players. And I think this is the journey that has been the characteristic of our history since we were born. So I wouldn't consider this as a special year or a special moment. No, it's the journey we're doing. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Gao from CLSA. Chris Gao: And hope the sound looks better now. So first question from me is regarding the performance during Chinese New Year, we have seen a very solid one. So just wondering if you see any differences between high net worth consumer as well as aspirational consumer? Do you see which category of consumer group can drive the growth more? Or actually they are both performing very well. And we can see you have been launching quite a good line of product expansion into home categories, et cetera, with entry level price. So we wonder if we actually are expanding more categories that can maintain the dialogue with aspirational customers in the coming year. Andrea Guerra: So first of all, I take the opportunity to say that we have been really happy and grateful to all our Chinese and Asian teams during this last 6 weeks. They worked day and night. And I think that we have been successful on all lines. This is what I'm happy about. I mean, we have been very successful on new customers, which is something that we were not seeing for quite a while in China. So that was a good one. And we improved on all our segments from VIC to aspirational customers. And what was good about this Chinese New Year is that we had a positive outlook from travelers and from locals before Chinese New Year. So I don't want to say that China is back. I don't want to say that, but the steps and the progression have gone in the proper direction. Chris Gao: So my second question is still about Versace. So it is actually about the progressive investment -- improvement in the year of 2027. So just want to understand more about this progressive improvement. Does it mean that Versace brand will go back to the positive growth trajectory in terms of sales? Or will we actually see the profitability improving to breakeven or actually profit making? So how can we expect a mid-term outlook, especially regarding the improvement in 2027? Lorenzo Bertelli: I think at the moment, honestly, to have a clear outlook on the next year, Versace, especially in China's market is too early. And as we said, we are looking to reduce losses next year and to improve marginality and for sure, start the journey of steady pace to grow with Versace. But at the moment, it's too early to have more precise outlook than that. Chris Gao: Okay. So congratulations on the new journey with Versace. Andrea Guerra: I think we have one last question and then -- so let's move with that. Operator: We are now going to proceed with the next question. And the questions come from the line of Paola Carboni, Equita SIM. Paola Carboni: Most are about Versace. I will start asking you if you can touch base on what are your plans in terms of supply chain for the brand? What are you going to change in this respect and the possible integration with your supplier base? And the second question still on Versace. If you can elaborate on what are your plans in terms of category mix, if you envisage any change in the architecture of collections already with Pieter next year? And the third one, on the profitability of Versace, whether your stance on margins for full year '26 also takes into account of some write-down of inventories which would clearly not be probably repeated to the same extent in full year '27. Then I have another one on Miu Miu. I will go ahead after your answers. Andrea Guerra: So it's obvious that we will follow with Versace the same attitude we follow with our two brands. So a vertical integration -- vertical organization for what regards all face activity -- clients face activities. So total independence and verticalization and responsibility from that point of view. And we will use our Prada Group platform for all potential and possible manufacturing. Obviously, we have already started planning it and probably even first step of execution it will take time because, I mean, nonetheless, we also have some IT things to be done as well. So it will take some time. But for sure, all the supply chain will be integrated inside the Prada Group facilities. In terms of categories, I think that it's too early. I mean, it's obvious that Versace is incredibly strong and has a huge heritage on ready-to-wear. So -- I mean, to improve on the other categories, from a theoretical point of view, it's easy because we are really starting from small numbers, and we will see how and when -- how the different collections will evolve. In terms of margins, Andrea, I don't know if you want to answer. Andrea Bonini: No, but I wouldn't add anything in the sense that, look, when we wanted to give an order of magnitude and the order of magnitude is that also take into consideration, as we always do and when we budget and so on, I mean, what we need to do on the inventory. At the same time, there may be other one-offs that come up or not. But the point was more to give you, as I said, I mean, an order of magnitude of what we're talking about. I believe you had, Paola, an additional question, correct? Paola Carboni: Yes. Another question is about Miu Miu. My feeling is that you have turned a little bit more prudent on the expansion of the network. My understanding before was that the pace of new opening could have continued for maybe a few years more. If my feeling is right, I'm just wondering what is probably driving this stance from your side? Is a matter of overall market conditions? Is a matter of competitive environment in... Andrea Guerra: No, no. I will -- I think you got it wrong at the beginning. No, no. We gave you the opportunity that we had and we still have and we wanted to have an increase last year of a 10 to 15 stores and closing some and the same thing we're going to do this year and closing some and enlarging others. So nothing has changed. I think we are finished now. So thank you, everyone, for attending. And hopefully, next time, we will discuss in a more peaceful world. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Prada Group Full Year 2025 Results Presentation. [Operator Instructions] And please note that today's conference is being recorded. I would now like to turn the conference over to Mr. Andrea Bonini, Group CFO. Please go ahead, sir. Andrea Bonini: Good afternoon, everyone, and thank you for joining Prada Group's Full Year 2025 Results Conference Call. This is Andrea Bonini Group Chief Financial Officer, and I'm delighted to be with you again. I'm joined by Mr. Andrea Guerra and Mr. Lorenzo Bertelli. The agenda for today's presentation is on Page 4, and as always, it will be followed by Q&A. As a reminder, during today's call, we may discuss forward-looking statements, which are subject to risks, uncertainties and factors beyond our control that could cause the actual outcome and returns to differ materially from such statements. Please refer to the disclaimers included on Slide 2 of our presentation. With that, I will hand over to Mr. Guerra. Andrea Guerra: Hello, and welcome also by my side. Obviously, we are here today during a very peculiar moment, a period of turmoil in Middle East. We do not know what will happen, but we hope it will be short. And let me be -- let me say something. Let me be very close to all our associates and all our people on the ground today in Middle East to all our stakeholders in the region in this specific moment of pray, reflection and community, we're very close to all our people in the region. Having said so, and I think this is paramount. I would love to start off saying that 2025 for our industry has been a very challenging year. I can state, and we can state that during the last 3, 4 years, the industry lost something like 1 consumer out of 5. In this long period, the Prada Group has been very solid and not only for the past years, but also in 2025. Retail sales in 2025 have grown again throughout the year, mostly or mostly entirely again, like-for-like, marking another plus 8% at the end of the year. We have been able against strong comps of 2024 to keep Prada on a breakeven like-for-like and most importantly, a sequential improvement through second half compared to first half. Miu Miu finished Q4 at a plus 20% on a plus more than 80% of a year ago. And it's obvious looking to the trend in the last 4 quarters that we have begun our growth normalization journey that will continue during 2026. 2025 has been for our both brands, a very interesting journey. Why interesting? Because we were able to showcase a lot of novelties, a lot of new ways of doing things, utilizing new tools, really upgrading our capability on digital technology and artificial intelligent tools to do what, to become closer, to upgrade significantly product intrinsic value, to be sure to allow all our consumers to understand and therefore, to tell them the stories around products that were coming out of the market, upgrading significantly our hospitality inside the stores and outside the stores and in the redefinition of new stores, flows. On the other side, always in this new normal we have been very clear and very focused on enterprise products and ranges. During this year, we did not only perform solidly, but we continued investing on our people on their know-how on their motivation. We have continued investing on our strategic digital plans and AI tools. We continued investing over proportionally on desirability and awareness of our brands. And we have continued to invest over proportionally versus sales on our stores to upgrade aesthetics and even more important to increase our hospitality standards. And even if the level of investments on all these cost lines have been overproportionate, we were able to keep a steady profitability, which means that what we committed upon which was being more productive and be more efficient, we have been able to do it in all other profit and loss lines. And do not forget, and Andrea will be obviously much more detailed of me on this, the amount of FX headwinds, we have been leaving and we will continue to experience in 2026. Last but not least, we began during December, our journey, closing the acquisition of the Versace brand. What does all this mean? We have been talking about a new normal. We have been talking about digital tools really coming to a standard use. We have been discussing about hospitality. It's obvious that we are entering a new journey now together with Versace. And this means that on one side, we have new achievements to be accomplished during 2026, '27 and '28. And on the other side, also the commitment to constantly grow over market range. During this next period, we feel that the Prada performance will be solid and to really reaping all benefits of desirability first and all actions and investments in place. We are consolidating Miu Miu's success, enhancing awareness and driving growth through 2026 with very different weights on the 2 halves. The first half is more challenging because we were yet in a plus 40%, 45% range a year ago. Therefore, we expect a first half to be in the single-digit growth, but yet being able to show a much solid trajectory for the full year. We are beginning the journey with Versace, a year of consolidation, a year of synergies and a fantastic start to shape the creative vision. The journey will go through a first phase of channel repositioning, supporting high-quality full prices and distribution. And we will see what this means for the numbers of Versace and for the overall performance of the group. I will now turn the word to Lorenzo and Andrea to give you a full view of Prada and Miu Miu brands, numbers, performance and also an initial view of Versace first steps in 2026. Lorenzo Bertelli: Good afternoon. Thank you, Andrea. First of all, I would like to highlight how Prada continues to strengthen its position as a cultural and creative leader, not only by setting trends but also by consistently elevating the brand experience across all touch points. All the core of this performance is authentic creativity. Throughout the year, our fashion shows reaffirmed Prada's ability to anticipate and shape contemporary culture, translating a deep understanding of the present into a clear, distinctive aesthetic language. This creative strength was equally evident in our communication. We delivered highly impactful campaigns that combined cultural relevance with strong brand desirability. At the same time, we continue to build a multifaceted brand universe throughout unique experiences and long-term partnerships. A key milestone was the opening of Mi Shang Prada Rong Zhai, our first stand-alone restaurant in Asia, considered by renowned director Wong Kar-wai. This project perfectly represents our approach to hospitality as a cultural expression where fashion, cinema and lifestyle intersect in a meaningful way. Enhanced retail concept contributed to strengthening the client engagement. New hospitality venues in Shanghai and Singapore, the landmark retail opening in New York and the refined setting of Prada Alexandra House in Hong Kong are some of the key milestones in the evolution of the store footprint over the year. In parallel, our long-standing partnership between Prada Linea Rossa and Red Bull allowed us to engage new audiences through high-performance sportswear projects, reinforcing the brand's connection to innovation, performance and contemporary lifestyle. Finally, Prada continued to play an active role in shaping the contemporary cultural debate with signature initiatives in London, Osaka, Abu Dhabi and Milan. These events were complemented by special projects and activations such as Days of Summer and The Sound of Prada, which further expanded the brand reach. All of this reflects our ongoing commitment to creativity as a strategic driver of value. This slide illustrates how Miu Miu continues to stand out as one of the most desirable and relevant brands in the luxury landscape, driven by a language that is both distinctive and highly distinctive. At the heart of Miu Miu's performance, is a vibrant disruptive creativity, which consistently fuels the brand desirability. Throughout the year, Miu Miu maintained an exceptionally high level of buzz supported by fashion shows that were widely acclaimed and strongly resonated with both the fashion community and broader cultural audiences. This creative energy was amplified by our campaign, which features the diverse and influential cast of talent reinforcing Miu Miu connection with the new generations of consumers. Special projects played a key role in engaging and expanding Miu Miu's ever-growing community such as our collaboration with New Balance and the American Tennis Champion, Coco Gauff as well as the exploration of new creative territories through Catherine Martin's Upcycled collection accompanied by her directorial debut short film, Grande Envie. In addition, the launch of Miu Miu's first fragrance with L'Oreal Miutine marked an important step in expanding the brand's universe. Experiential activations such as the Atheneum and Gymnasium pop-ups further enriched Miu Miu's signature codes, transforming retail into spaces of discovery and cultural exchange. In parallel, Miu Miu continued to reinforce its distinctive cultural positioning throughout event initiatives that deepens its long-standing dialogue with arts. Finally, all the initiatives were accompanied by a mix of openings and renovations that elevated the store network for enhanced customer journey. One, London and Tokyo were among the most significant projects embedded over the period. Overall, Miu Miu's strength lies in its ability to combine strong desirability with authentic cultural relevance, a balance that continues to fuel growth and engagement. Let's move now to ESG. Over the past year, we continued to execute our sustainability strategy across our 3 pillars: planet, people and culture. On the environmental front, we made tangible progress across both our operations and supply chain. Investment in green energy and low impact solutions enabled us to exceed our approved science-based target for Scope 1 and 2 greenhouse gas emissions, a result that confirms the strength and discipline of our decarbonization pathway. At the same time, we advanced our raw materials conversion plan, strengthened environmental data collection across the supply chain, expanded our water stewardship initiatives and further improved responsible chemical management. Equally important is our commitment to people. During the year, we reinforced our efforts to foster a fair and inclusive workplace. We achieved the gender equality certification in Italy, rolled out our worldwide people culture forums and delivered D&I awareness training programs in line with our global D&I road map. This year also marked the 25th anniversary of the Prada Group Academy, a milestone that reflects our long-standing dedication to preserving artisanal excellence and supporting generational transitions. Culture remains a defining element of our identity. Through our partnership with UNESCO and SEA BEYOND projects, we further strengthened our commitment to ocean education, opening the first Ocean Literacy Center in Venice, launching a dedicated Multi-Partner Trust Fund and Ocean Educational Exhibition in Shanghai. We also renewed important partnerships supporting Urban biodiversity and cancer research. Overall, the year reflects consistent progress and a clear commitment to creating a sustainable long-term value. I will now leave the floor to Andrea for the financial review. Thank you. Andrea Bonini: Thank you, Lorenzo. Before we dive into the numbers, let me remind you that we completed the acquisition of Versace on December 2, and therefore, we consolidated one month of contribution from the brand into our financials. In the presentation, we will also provide growth rates excluding this impact, to which we refer as organic growth. With this in mind, let's now move to the key financials. The group reported net revenues of EUR 5.7 billion, up 9% versus fiscal year '24 at constant FX. On an organic basis, revenues grew 8% year-on-year. This performance delivered against high comps throughout fiscal year '24, marks the fifth consecutive year of growth at group level. Exchange rates had a negative impact of 380 basis points on revenues and the increase at current exchange rates is therefore plus 5%. Retail sales for the period totaled EUR 5.1 billion, up 8% organic versus fiscal year '24 and up 28% versus fiscal year '23 at constant FX. EBIT adjusted reached EUR 1.32 billion in fiscal year '25 with margin of 23.2%, including the dilutive impact of Versace. Pre-Versace consolidation, EBIT-adjusted margin was steady versus 2024, in the context of significant investments across functions and FX headwinds. On a constant currency basis, EBIT adjusted margin improved year-on-year. Finally, thanks to the significant cash generation we maintained a healthy balance sheet, closing the year with a net debt position of EUR 466 million after EUR 620 million of CapEx cash out, including real estate, EUR 1.2 billion for Versace acquisition and EUR 420 million of dividends. Moving on to the next slide. Retail continues to be the key driver of the top line performance, up 9% versus fiscal year '24 at constant FX, 8% on an organic basis, driven by like-for-like full price sales and with a positive contribution from both average price and full price volumes. The fourth quarter delivered a solid performance, up 6%, notwithstanding the challenging comparison base. As a reminder, in 2024, retail channel growth was remarkably consistent at plus 18% in all quarters. Contribution from space remains limited in the low single-digit region. Wholesale was up 4% year-on-year, 3% on an organic basis, reflecting the usual selective approach with independents. Q4 at minus 1% organic was impacted by our cautious stance on shipments to Saks Global, and we are pleased that business with this important strategic partner has now resumed. Royalties were up plus 19% year-on-year, plus 14% organic, supported by both eyewear and fragrances. Turning to next slide, retail sales by brand. We are pleased with the performance of our brands as they continue to enjoy high desirability and relevance in a challenging context. Prada showed good resilience, closing the year at minus 1%, with Q4 delivering further sequential improvement and turning positive despite the more difficult comps supported, in particular, by Mainland China, Korea, Japan and Americas. Miu Miu delivered sustained growth throughout the period against exceptionally high comps. Retail sales grew by 35% to reach EUR 1.6 billion. Growth was well spread across all product categories and regions. Q4 sales were up by 20% against plus 84% in 2024, with growth remaining well balanced. As a result, the brand contribution to group retail sales increased to 31% against 25% in fiscal year '24. As for Church's, the strategic efforts of the past years continue to keep the brand on a positive trajectory, driven by like-for-like sales. Moving to the next slide, retail sales by geography. We are pleased to report that the group achieved growth across all regions. Asia Pacific showed a good progression over the year at plus 11%, plus 10% organic with Q4 broadly in line with Q3, notwithstanding the higher comps. Positive performance in Europe, up 5% over the year, plus 4% organic. We saw softer trends in the second part of the year with strong multiyear comps and lower tourism weighing on the region. Consistent double-digit growth in the Americas, with sales up 18% plus 15% organic, driven by local demand. Japan delivered growth notwithstanding the exceptionally high touristic flows of the last year, closing the year at plus 3%. Q4 showed some improvement versus Q3, driven by both solid local demand and increased traveler flows, notwithstanding the geopolitical tensions in the region. And lastly, the Middle East also delivered a solid performance at plus 15%, we're moderating trends in the second part of the year on high comps. Turning to the next slide. Gross margin reached 8.3% in fiscal year '25, up by 50 basis points, thanks to operating leverage and channel mix, while the dilutive impact from Versace consolidation for only one month was negligible. Excluding the consolidation of such and strong FX headwinds, EBIT adjusted margin improved, driven by slightly higher gross margin. G&A savings coming from efficiencies and operating leverage which more than offset higher marketing and selling costs. Including the dilutive impact of Versace consolidation, as shown in this page, EBIT adjusted reached EUR 1.32 billion, corresponding to an EBITA adjusted margin of 23.2%. And finally, net income reached EUR 852 million, an increase of 2% versus fiscal year '24. Moving to the next slide. CapEx for fiscal year '25 was EUR 617 million, EUR 535 million excluding real estate as we continue to invest across retail, industrial capabilities and technology. On the retail side, as you've heard from Andrea, investments were concentrated on the enhancement of the store presence with renovation projects and control new openings and enlargements at both Prada and Miu Miu in line with the objective of furthering the relationship with clients. Aside from retail, we continue to strengthen our industrial capabilities, investing into our infrastructure and to progress on the digital evolution journey as we started to reap the benefits from our multiyear system upgrade plan. We expect CapEx as a percentage of sales to start reducing from the current fiscal year. Moving to the next slide. We are very pleased with the evolution of net working capital and the control of the inventory, showing further improvement year-on-year on an organic basis, with incidents on net sales declining from 15% to 14%. And lastly, we retain a healthy balance sheet post acquisition with net debt of EUR 466 million. The Board of Directors has proposed a dividend per share of EUR 0.166, which compares to EUR 0.164 last year, which would result in a total dividend of EUR 425 million and a stable payout ratio of 50%. I'll now pass it back to Lorenzo for an update on Versace. Lorenzo Bertelli: Thank you, Andrea. As we have said in the past, we are very excited about this new chapter. With Versace, we welcome a brand that has made the history of fashion and glamor as we know it today. It's estate is bold unique, represent modern elegance and constitutes highly complementary addition to Prada Group's existing portfolio. We started this journey being able to count on a lot of strengths. First of all, remarkable and long-standing awareness; second, resonance across a diversified client base, which has limited, if not overlap with our customer base. Third, strong legitimacy in haute-couture and across product categories, balanced across men and women. Lastly, strong cultural relevance, rich archive and solid brand equity. Because of this, we believe the brand offers multiple untapped levers of growth. We are aware that this won't be an overnight task, but a passionate journey towards the brand's full potential, and that's why the timing of our initiatives will be of the essence. In terms of priorities, the following slide highlights the key actions we are going to implement in the next months. Creativity will be the foundation of our work, and we have taken a first important step into this direction with the appointment of Pieter Mulier as Chief Creative Officer. Pieter will join in July, and we are very excited to have him on board. In the meantime, we will continue to assess the core collection and product lines to identify areas of improvement in terms of quality and structure. The second building block of our plan will be a gradual channel repositioning. We will progressively shift the focus towards quality, full-price sales and distribution. At the same time, instilling a retail excellence mindset will be essential for improving in-store execution. In parallel, we will progress with the integration process across functions, and we expect to complete the separation from Capri Holdings in H2. Looking at 2027 and beyond, we will essentially bring all of these areas to the next level as we lay down the basis for the building long-term desirability. At the beginning of the year, we'll present Pieter's first collection showcasing the new creative vision rooted in the brand's original spirit and DNA. The collection will also continue to evolve as we progressively reposition the brand and relaunch special project like Atelier Versace. We also continue with the network optimization as we progressively rationalize the off-price channel and the markdown practices while focusing on driving in-store productivity with self-help initiatives in terms of retail execution. All these actions will be supported by a further integration of activities and processes across the organization to unlock synergies opportunities. Now back to Andrea for some financial considerations. Andrea Bonini: Thank you, Lorenzo. In terms of financials, as already explained, we consolidated only one month of the business in 2025. On a full year basis, the brand generated revenues of approximately EUR 680 million. Looking ahead, 2026 will be a year of transition for the brand as we navigate the change in creative leadership. We also want to commence the path towards a healthier, more sustainable and more profitable business conscious that we have to move back to go forward. Therefore, we will further clean up the collections discontinuing Versace Jeans Couture and leaving no sub-brands in existence in ready-to-wear and other core categories. At the same time, we will start to implement a greater discipline in terms of discounting while remaining mindful of the commercial needs. On the wholesale front, we expect progressive stabilization, and we will start implementing some actions to rebalance the commercial relationships on healthier terms. All in all, we expect this to translate into a mid-single-digit top line contraction at constant FX, which is likely to become high single digit at current FX. Turning to profitability. First of all, let me point out that the company's initial margin is at a good level in relative terms to our industry. However, we believe that quality must be improved and also that initial margin is diluted by significant discounting. Therefore, we'll progressively invest in quality. On the other side, we will start implementing greater discipline on discounting. All considered, in fiscal year '26, we expect gross margin to be relatively stable with a caveat on duties as the situations remain fluid. In terms of OpEx, we have acted decisively, and we will see the benefit of initial synergies and savings. This will be partially reinvested in strategic areas like visual merchandising and marketing, while we maintain cost discipline on all other nonstrategic items. All in all, we expect to be able to mitigate the negative impact coming from the top line reduction, and the EBIT loss will not be too dissimilar from the one incurred in fiscal year '25. The target is to limit that to a 2-digit figure. Now moving to the next slide. Let's translate that into a group view. On top line, for 2026, our ambition is to continue to generate solid, sustainable organic growth at Prada, Miu Miu and group level. Prada turned positive in Q4, and our expectations are for a solid year. Miu Miu is now lapping the fourth consecutive year of very significant growth, and we have continued to observe normalization. As Andrea mentioned at the beginning of the call, H1 is particularly challenging with Q1 at plus 60%, and Q2 at plus 40%. Nonetheless, we aim for another year of growth. We already discussed Versace in the previous slide, so it doesn't require any further comments. Last point on top line. We expect to continue facing meaningful FX pressure in fiscal year '26, similar to 2025. Turning to profitability. Let me first discuss expectations excluding Versace. We remain committed to continue to deliver some degree of organic margin progression on a yearly basis. Marketing spend will slightly increase as a percentage of sales, and we expect to continue to achieve efficiencies in labor, rent and G&A. So leaving aside the impact of Versace, as long as the group top line growth in reported terms remains in mid-single-digit territory, we can deliver a steady EBIT margin without acting more drastically on investments or costs. Versace's consolidation will result in EBIT margin dilution in fiscal year '26, and our target is to resume progressive improvement from 2027. With that, I'll hand over to Andrea Guerra for closing remarks. Andrea Guerra: We're very happy to have shared with you our 2025 performance and to share with you our initial thoughts on future journey. Years ago, we committed to an upgrade an evolution of our ability to have a stronger and more proactive relationship with all our clients and potential clients, to be more efficient and productive in our retail network and overall in our company, to empower and upgrade our people, wherever they are in the group, aligning them constantly to their brand missions. We achieved solid constant growth. We significantly improved in all our consumer-faced activities. We have seen profitability increase year-by-year, working capital sequentially improving and therefore, cash flow. So obviously, we are pleased for all these achievements and all these activities. Now we're entering a new journey, which is made by all the things that we have already talked about in constant evolution plus Versace. We are committed. We're working hard. We will be patient to have the right pace. Obviously, in this new normal world, agility and efficiency remain nonnegotiable. I will try to anticipate some of your questions now. How are these first months? Trajectory for Prada is improving. As Andrea said, we are expecting a solid year for Prada. And we had a solid Chinese New Year full period, like-for-like on last year's and in the whole Asian region, except Japan, where Chinese tourists were much less present. But on the other side, fortunately, in Japan, we are winning with our beloved Japanese local clients. Europe started January slow and improved with Milan Olympic Games and Fashion Weeks. Obviously, Europe for Prada and Miu Miu are challenged by very high double-digit comps for the past years, not year. Korea is still strong. North America is still very strong. And obviously, I will repeat that we are here to challenge ourselves to keep a growth rate higher than market average with trajectories which are different from our different brands as stated during our presentation. With this, I would like to thank all of you for listening and we are now open to your questions and comments. Operator: [Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Ed Aubin from Morgan Stanley. Edouard Aubin: So the first one is going to be on top line to Andrea Guerra. So you mentioned that you expect -- or sorry, maybe it was Andrea Bonini mentioning that you expect a solid growth for Prada in 2026. Could you please kind of define solid? Should we understand that you expect to grow kind of low single digit at constant FX for Prada after a minus 1 in '25 or would that be even higher than that? And if so, what kind of is going to drive the reacceleration from '25 to '26 and then regarding Miu Miu, do you think a double-digit growth at constant FX is something which is achievable or given the difficult comp that might be difficult to achieve? So that would be question number one. Andrea Guerra: Hello. Yes, we -- you're asking for a guidance, and we are not giving guidance, especially in this world today where, I mean, in the last -- only last 6 months, we have been living any positive and negative and side effects. So I hope that we use the proper words. We have been very careful on adjective we were using, and I will not comment further. The only comment I would do is that if everything goes well, we will be double digit on Miu Miu. But with this world, things could be different. Edouard Aubin: Got it. But maybe Andrea, if I can just follow up. Not asking for a guidance, but again, you talked about your expectation for a solid growth for Prada brand in '26. Again, without quantifying you were down 1% in '25. So if you could please elaborate on why you think you're going to reaccelerate in '26 versus '25? Andrea Guerra: Sure. We had a peak down in central months of the year and the central months of 2025 or else we would have been pretty positive in 2025 as well. I think that we can cover those months with a positive rate. We have been positive since August. August, September, October, November, December were positive. In December, it's a question sometimes of calendar where a year, you've got a couple of days gift a year, you got a couple of days back. And this was a case where we gave it back or else in a kind of organic manner, we were a little bit more positive. Having said so, I think we have a rhythm of product innovation, of product evolution of activities, of events. We -- I think we have reached a level of maturity on a number of retail activities and hospitality activities. And we're also beating our own sometimes mind effects on very high transactions. So these are all the reasons why I feel solid as we said. Edouard Aubin: Got it. And my second and last question, and maybe for Lorenzo on Versace. So you've been appointed Executive Chairman. Congratulations. You also mentioned that you've hired Pieter Mulier, which is -- who is obviously very well regarded in the industry. Is the team in place now? And did you hire mostly from the Prada Group, you had transfer? Or did you hire external people. And again, how fast it seems that you want to not rock the boat, so to speak, too quickly with the rationalization of the store estate and the outlets. But how do you -- how fast are you ready to move on kind of shrinking to grow the business longer term, yes? Lorenzo Bertelli: Thank you for the question. No, I would say it will be balanced. Let me start from the end of your question, then I go back to the other. So the priority for sure is at the full price in the retail network and then also the rationalization of the outlet also thinking that with the new collection coming out from Pieter from next year, you will have previous collection that, of course, they will need to accelerate to the outlet. So outlet will come later for sure, for the full price. Then regarding to the question organization, I think it's quite a hybrid because we have some of the functions that have been absorbed in the group function typical back office function like IT and others. And so it's more like efficiency, poor efficiency, other function. We simply had streamlined a bit the organization, so not like key significant outside role except that you heard on journal like the shift of the supply chain that was coming from Valentina was a former Prada historic employee. So external but let's say, part of the family in the past. And at the moment, more or less, we are happy like this also with Emmanuel and a CEO. So -- then we will take for sure, the next 6, 8 months to even better understand the organization and we will see. But at the moment, we are for sure happy. Of course, with Pieter, we will have some changes in the design offices, but I would say, normal stuff and that's it. Operator: We are now going to proceed with our next question. And the questions come from the line of Thomas Chauvet with Citi. Thomas Chauvet: I have two, one on revenue and one on the Middle East. The first one on Versace revenue contraction that you anticipate for this year from EUR 680 million last year. We understand it's largely self-inflicted due to the channel repositioning. Can you give us an idea of the magnitude of the store closures you are planning? Are there also some wholesale rationalization or is it just retail closures through '26 and '27? And you said earlier, the expected operating loss won't be much higher than '25. Can you indicate what was the Versace EBIT loss in calendar '25, it seems to be around EUR 10 million, EUR 20 million, if my math is correct, if we assume, as you said that the Prada Group -- the old Prada Group EBIT margin was flat at 23.6% ex Versace. That's my first question. Lorenzo Bertelli: Thomas, [Foreign Language]. So on revenue, I said it that the expectation is for mid-single-digit constant FX, which is likely to become high single digit or we will be because, I mean, with the FX, you never know on a reported basis. That's on the top line of Versace. And on the second question, likewise, I mean, not much to add to what I already said. The -- I said that the -- our target is to limit the operating loss to a 2-digit figure. And if the number you were referring to, i.e', the -- I think you mentioned EUR 10-ish million for fiscal year '25, I assume that number is for -- you were referring to a number that is the one that we consolidated for the fact of December into our numbers, and it's not of mile, let's say that it's a single-digit number, but it's around there. Is that clear? Thomas Chauvet: Yes, that's very clear. And my second question on the Middle East, which you disclosed separately in your segment reporting 5% of your sales. Can you remind us how many Prada and Miu Miu stores you operate in the region? And how many of them are currently closed, given the complex situation? And what is your overall exposure to the Middle Eastern clientele, if you take into account the sales to locals in the Middle East, but also sales to Middle Eastern tourists traditionally in Europe and other markets? Andrea Guerra: Regarding Middle East, in terms of opening and closing stores, it's a daily evolution and a daily activity. The most difficult situations are in Qatar, in Bahrain and in Kuwait. Having said that Middle East is very different places, very different regions because, I mean, basically, Saudi nothing happened and it's, I would say, 100% local clientele. The Emirates, I would say, is 1/3 locals, 1/3 expat, 1/3 tourists. And I mean, we will see what's going on. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Gao from CLSA. Chris Gao: Yes. I have two. So firstly, regarding the progressive improvement in 2027 regarding Versace, I just want to follow up a bit on that. So does it mean that we expect Versace will go back to a growth territory? And also for the margin, can we expect turnaround or... Andrea Guerra: Excuse me, your line is very, very disturbed. We can't -- there's a huge noise. Chris Gao: Can you hear me now? Andrea Guerra: Hopefully, let's see. Chris Gao: Can you hear me now? Okay. So first question is about Versace improvements in 2027... Andrea Guerra: Excuse me. No, your line is a mess. Try later, please. Thank you. Operator: We are now going to proceed with our next question. And the questions come from the line of Oriana Cardani from Intesa Sanpaolo. Oriana Cardani: The first one is on the wholesale channel. What are your expectations for this year? And my second question is on the retail network. Can you give us an idea on the store openings you expect this year and the perimeter effect you expect due to these openings? Andrea Guerra: Yes. On wholesale, more or less, we're having the same kind of percentage growth in these last years, and more or less, we will keep on with the same percentages. As we said, we had the necessity to keep back some inventory not to be shipped to Saks at the end of 2025. And we resumed and Andrea was saying our shipments beginning of '26. This is also why in Q4, we were a little bit less in our normal standard average. So I would say that we will keep on having more or less the same average growth that we had in these years. In terms of retail network, for Prada, I would say it will be between some pluses and negatives, some opening and some closures. We will remain with the same kind of square meters, but I think we will close more stores than what we will open during 2026. With Miu Miu, we will add another 5 to 10 stores during 2026. And then as we said 2 years ago, and we will also close some with Miu Miu. But at the end of 2026, the big progression in terms of space expansion for Miu Miu is basically over. That is we will be with something around 170, 175 stores, and we will remain there for a while. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Huang from UBS. Chris Huang: I have three, if I may. Starting with the first one, just a clarification on the Prada brand cluster. I think in the previous calls, you always provide some color. So if you can do the same for Q4 in terms of Americans, Europeans, Chinese cluster trends for Prada brand retail, please? Andrea Bonini: Chris, so clusters for the Prada brand, the Chinese -- starting from Chinese cluster, there was a significant quarter-on-quarter improvement which is driven by positive domestic consumption and better travel spending. Europeans was flattish for the year, slightly softer in Q4 versus Q3 with local demand remaining more resilient than travel spending. The North Americans was positive mid-single digit for the year and further improved in Q4 to positive, I'd say, high single-digit, mostly domestic. And Japanese was positive low single digit in Q4 and full year with no major differences versus Q3, mainly solid local demand. Chris Huang: Okay. Perfect. And then secondly on Miu Miu, if I caught it correctly, you were saying that given the very tough comps, I guess, on a multiyear basis, you're expecting single-digit growth in H1 before an acceleration into H2. I'm just trying to square the math here because in theory, we do start to see more meaningful space contribution from 2026. I think you were mentioning 10 to 15 stores. So going from 20% in Q4 to single digit, and if you can also quantify a bit if it's going to be like a low, mid-, high single digit. Are you assuming very cautious volume assumptions to get to that kind of guidance target, please? Andrea Guerra: Yes, we are. Exactly what you're saying. Chris Huang: So you're assuming volumes decline in H1 for Miu Miu? Andrea Guerra: No, no, no. We are being cautious. Chris Huang: Okay. So you don't rule out the potential scope for positive surprises. That's what you're saying? Andrea Guerra: I think that time has arrived, and we are happy with the journey we have done and with the journey we have in front of us. But we are now in an everyday competition and gaining our opportunities and wins and battles. I think it's a journey that it's especially the first 1, 2, 3, 4 months pretty complicated because we were in a plus 60% range last year. And then it's a little bit easier. Obviously, on the other side, when you open a store, you also need to allow the business to go where it has to go. So we're extremely happy of the new stores we opened. I think that we didn't really make any real mistake. And let's go. I mean this is -- I think this is a very important year for Miu Miu and we are into it and on to it every single day of our life. Chris Huang: Okay. Perfect. That's very helpful. And last but not least, on Versace. I think in the press release, you mentioned that 2026 obviously would be dilutive to the group, and you expect '27 onwards to start to see some gradual improvement. If I remember correctly in the past, when you were executing the Prada turnaround, I think the EBIT margin pressure kind of lasted for a longer period of time because of the acceleration in investments. But is it fair? Or can you kind of outline the underlying assumptions you have here for Versace to already start to see margin improvement in 2027, unless I'm misunderstanding anything here? Andrea Bonini: Well, first, I mean, I would start -- it's Andrea Bonini. I would start saying that the two situations are very different. So comparing the Prada turnaround to Versace, and so would not really take that as a comparable. As we look forward, there's an element, of course, of reinvestment into the business, into the brand and accelerating on certain areas of spending that will move margins in a certain direction. At the same time, I mean, we will continue to look for synergies and efficiencies that should help in the opposite direction. And most importantly, as we always say, a lot depend from the top line. And on the top line, we will see from '27 on really the results of the actions that we will be taking. On retail, at the same time on wholesale, you know that we already talked about the fact that we already said, we anticipate some sort of stabilization already starting from '26. So there's elements going in the two directions that make us believe that things are going according to plan. Yes, we can indeed start seeing an improvement from '27. Operator: We are now going to proceed with our next question. And the questions come from the line of Daria Nasledysheva from Bank of America. Daria Nasledysheva: This is Daria from Bank of America. I actually just have one. On Versace, when will Pieter Mulier present his first collection for the brand? And what will be the time line of collections change given currently Dario Vitale collections, I think, have started to arrive online and in stores so that we just understand the cadence of the collection rollout. Lorenzo Bertelli: As we said, the first show of Pieter will be beginning of next year. And on the collection first has to arrive and has to work on it, so I cannot answer to that question. Honestly, for sure, it's going to be different from the one of Dario. Operator: We are now going to proceed with our next question. And the questions come from the line of Anne-Laure Bismuth from HSBC. Due to no response, we are now going to carry on with the next question. The questions come from the line of James Grzinic from Jefferies. James Grzinic: Yes. I just had two quick ones. The first one is, Andrea, can you be perhaps a little bit more specific on what keeping losses at Versace to double digit in '26 looks like? Are you basically gaining for EUR 80 million, EUR 90 million of losses basically? That would be helpful. And secondly, perhaps more fundamentally, you seem to have gone a huge supplier rationalization process in recent weeks. Can we perhaps understand what comes out of that process? What you'll gain out of that dynamic, please? Andrea Bonini: If I -- thank you. And Andrea, you always have to be more specific, but I suppose it's for me, it's Andrea Bonini. On the Versace, did I understand correctly the question that what's keeping it at that level? James Grzinic: No, it's more, if you can be a little bit more specific on what double digit -- keeping at double-digit level means. I mean, I appreciate you gave us that, the 1 month was a minus 8%, minus 9% contribution. But are we basically looking for '26 keeping that loss at EUR 80 million, EUR 90 million. Is that the quantum of magnitude? Andrea Bonini: Yes, no, but not going to be. I think we said a lot, and I'm not going to be more specific than that for today. And second question, Andrea. Andrea Guerra: So regarding our -- what you said about supplier rationalization, I think this is a journey that really began with COVID. And this has gone in parallel on one side in creating more internal manufacture infrastructure. We created three factories from that moment to today, and we are working on two other, one is renovation and one is a new one. And on the other side, I think that in our journey, we have cut the weaker. We have given more work to more organized players. And I think this is the journey that has been the characteristic of our history since we were born. So I wouldn't consider this as a special year or a special moment. No, it's the journey we're doing. Operator: We are now going to proceed with our next question. And the questions come from the line of Chris Gao from CLSA. Chris Gao: And hope the sound looks better now. So first question from me is regarding the performance during Chinese New Year, we have seen a very solid one. So just wondering if you see any differences between high net worth consumer as well as aspirational consumer? Do you see which category of consumer group can drive the growth more? Or actually they are both performing very well. And we can see you have been launching quite a good line of product expansion into home categories, et cetera, with entry level price. So we wonder if we actually are expanding more categories that can maintain the dialogue with aspirational customers in the coming year. Andrea Guerra: So first of all, I take the opportunity to say that we have been really happy and grateful to all our Chinese and Asian teams during this last 6 weeks. They worked day and night. And I think that we have been successful on all lines. This is what I'm happy about. I mean, we have been very successful on new customers, which is something that we were not seeing for quite a while in China. So that was a good one. And we improved on all our segments from VIC to aspirational customers. And what was good about this Chinese New Year is that we had a positive outlook from travelers and from locals before Chinese New Year. So I don't want to say that China is back. I don't want to say that, but the steps and the progression have gone in the proper direction. Chris Gao: So my second question is still about Versace. So it is actually about the progressive investment -- improvement in the year of 2027. So just want to understand more about this progressive improvement. Does it mean that Versace brand will go back to the positive growth trajectory in terms of sales? Or will we actually see the profitability improving to breakeven or actually profit making? So how can we expect a mid-term outlook, especially regarding the improvement in 2027? Lorenzo Bertelli: I think at the moment, honestly, to have a clear outlook on the next year, Versace, especially in China's market is too early. And as we said, we are looking to reduce losses next year and to improve marginality and for sure, start the journey of steady pace to grow with Versace. But at the moment, it's too early to have more precise outlook than that. Chris Gao: Okay. So congratulations on the new journey with Versace. Andrea Guerra: I think we have one last question and then -- so let's move with that. Operator: We are now going to proceed with the next question. And the questions come from the line of Paola Carboni, Equita SIM. Paola Carboni: Most are about Versace. I will start asking you if you can touch base on what are your plans in terms of supply chain for the brand? What are you going to change in this respect and the possible integration with your supplier base? And the second question still on Versace. If you can elaborate on what are your plans in terms of category mix, if you envisage any change in the architecture of collections already with Pieter next year? And the third one, on the profitability of Versace, whether your stance on margins for full year '26 also takes into account of some write-down of inventories which would clearly not be probably repeated to the same extent in full year '27. Then I have another one on Miu Miu. I will go ahead after your answers. Andrea Guerra: So it's obvious that we will follow with Versace the same attitude we follow with our two brands. So a vertical integration -- vertical organization for what regards all face activity -- clients face activities. So total independence and verticalization and responsibility from that point of view. And we will use our Prada Group platform for all potential and possible manufacturing. Obviously, we have already started planning it and probably even first step of execution it will take time because, I mean, nonetheless, we also have some IT things to be done as well. So it will take some time. But for sure, all the supply chain will be integrated inside the Prada Group facilities. In terms of categories, I think that it's too early. I mean, it's obvious that Versace is incredibly strong and has a huge heritage on ready-to-wear. So -- I mean, to improve on the other categories, from a theoretical point of view, it's easy because we are really starting from small numbers, and we will see how and when -- how the different collections will evolve. In terms of margins, Andrea, I don't know if you want to answer. Andrea Bonini: No, but I wouldn't add anything in the sense that, look, when we wanted to give an order of magnitude and the order of magnitude is that also take into consideration, as we always do and when we budget and so on, I mean, what we need to do on the inventory. At the same time, there may be other one-offs that come up or not. But the point was more to give you, as I said, I mean, an order of magnitude of what we're talking about. I believe you had, Paola, an additional question, correct? Paola Carboni: Yes. Another question is about Miu Miu. My feeling is that you have turned a little bit more prudent on the expansion of the network. My understanding before was that the pace of new opening could have continued for maybe a few years more. If my feeling is right, I'm just wondering what is probably driving this stance from your side? Is a matter of overall market conditions? Is a matter of competitive environment in... Andrea Guerra: No, no. I will -- I think you got it wrong at the beginning. No, no. We gave you the opportunity that we had and we still have and we wanted to have an increase last year of a 10 to 15 stores and closing some and the same thing we're going to do this year and closing some and enlarging others. So nothing has changed. I think we are finished now. So thank you, everyone, for attending. And hopefully, next time, we will discuss in a more peaceful world. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.