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Operator: Good morning. Thank you for attending today's PageGroup full year results. My name is Sarah, and I'll be your moderator today. [Operator Instructions]. I would like to pass the conference over to your host, Nick Kirk, Chief Executive Officer. Please go ahead. Nicholas Kirk: Thank you. Good morning, everyone, and welcome to the PageGroup 2025 Full Year Results presentation. I'm Nick Kirk, Chief Executive Officer. On the call with me is Kelvin Stagg, Chief Financial Officer. The group produced a resilient performance despite continued market uncertainty. We saw variable market conditions across the regions with ongoing challenging conditions in Continental Europe and the U.K. However, we continue to grow in the U.S., and we saw improved conditions in Asia Pacific, particularly during the second half of the year. The conversion of interviews to accepted offers remained the most significant area of challenge as ongoing macroeconomic uncertainty continued to impact candidate and client confidence, which extended time to hire. As you know, we've taken robust action to optimize our cost base by simplifying our management structure, reducing our operational leadership team and improving the efficiency of our business support functions. We remain committed to our strategy, and I will update you on our progress later in the presentation. I will now hand you over to Kelvin to take you through our financial review. Kelvin Stagg: Thank you, Nick. Although I will not read it through, I'd just like to make reference to the legal formalities that are covered in the cautionary statement in the appendix to this presentation and which will also be available on our website following the call. In 2025, the group delivered gross profit of GBP 769.5 million, down 7.6% in constant currencies against 2024. Operating profit in 2025 was GBP 20.9 million, down from GBP 52.4 million, and our conversion rate was 2.7%. Earnings per share was 2.9p, and we ended the year with net cash of GBP 31.4 million. Today, the Board has proposed a final dividend of 3.21p per share. Combined with the interim dividend of 5.36p, this represents a total dividend of 8.57p. I will now take you through the financial review. Against the ongoing challenging trading conditions, we have taken robust action to optimize our cost base by simplifying our management structure, reducing our operational leadership team and further improving the efficiency of our business support functions. These initiatives incurred a one-off cost of around GBP 15 million in 2025, partially offset by savings of around GBP 5 million. This will deliver annualized savings of around GBP 15 million per year from 2026. Given the distortive effects of these one-off costs at a regional level, we have presented the conversion rates, both including and excluding these costs. Looking at each of our regions and starting with the largest, EMEA, our underlying conversion rate was 9.6%, down from 13.2% in the prior year. Profitability decreased on 2024 due to the tougher trading conditions seen in 2025. The Americas underlying conversion rate was broadly similar to 2024 at 4.4%. However, in Asia Pacific and the U.K., while our trading conversion was positive, after central cost allocations, both regions had a negative underlying conversion rate of minus 1.4% and minus 8.7%, respectively. The tax charge for the year was GBP 7.2 million, which represented an effective tax rate of 44.4%. The higher-than-normal tax rate is due primarily to the impact of irrecoverable overseas withholding taxes and permanent differences, which have a disproportionate effect due to the reduction in profits. In 2026, the effective tax rate is expected to be around 35%. The most significant item on our balance sheet was trade and other receivables of GBP 317 million, which decreased by GBP 11.4 million versus 2024. After returning a total of GBP 53.6 million to shareholders by way of ordinary dividends in 2025, net cash at the end of the year was GBP 31.4 million. Overall, net assets decreased by GBP 47.8 million from GBP 262.4 million to GBP 214.6 million. This slide shows the key movements in our cash throughout the year. Our EBITDA inflow was GBP 81.8 million, partially offset by an increase in net working capital of GBP 8.1 million. Tax and net interest payments were GBP 23.7 million and net capital expenditure was GBP 11.3 million (sic) [ GBP 11.4 million ], down from GBP 15.8 million in 2024. Payments made in relation to lease liabilities reduced cash by GBP 41.6 million. The group purchased GBP 8.3 million worth of shares into the Employee Benefit Trust to satisfy future committed obligations under our group share plans. The largest outflow of cash totaling GBP 53.6 million was dividends. The overall impact of these cash flows was to decrease the group's net cash position by GBP 63.9 million to GBP 31.4 million at the end of the year. The group aims to run the balance sheet in a position of net cash. We have a clear capital allocation strategy with 3 defined and well-established uses of cash. The first is to satisfy the operational and investment requirements of the group as well as the hedge liabilities under the group's share plans. Once the first requirement is met, the second is for payment of ordinary dividends, where our policy is to increase them at the long-term growth rate of the group, subject to affordability. Finally, any remaining cash surplus is to be distributed to shareholders by way of a supplementary return. While reviewing the group's current and future cash position, in light of the sustained challenging trading environment and the ongoing unpredictable nature of our markets, the Board believes it is prudent to declare a final dividend for 2025 of 3.21p per share. This action balances the group's current level of profitability and affordability with the desire to continue to invest in growth areas. The Board recognizes the importance of dividends to shareholders, and we'll continue to assess the level of dividend payments whilst considering the group's prospects. I'll now hand you over to Nick to take you through our strategic review. Nicholas Kirk: Thank you, Kelvin. We launched our strategy in September 2023 with 3 key strategic goals: delivering operating profit of GBP 400 million, changing 1 million lives and increasing our Net Promoter Score to over 60. Our primary financial goal is to deliver GBP 400 million of operating profit in the medium term. Despite the tougher market conditions, we have made progress with our strategy. We continue to reallocate resources into the areas of the business where we see the most significant long-term structural opportunities. I will talk about this in more detail later in the presentation. Against our social impact goal of changing 1 million lives, we performed strongly. Progress in this area is measured by the number of people whose lives we have changed by placing them into work as well as the number of people who access programs we run that support traditionally underrepresented groups accessing employment. In 2025, we changed over 140,000 lives, meaning that in total, we've changed over 790,000 since 2020. As a result of our continued commitment and success in this area, we are well on track to deliver our target by 2030. We also made excellent progress on our customer experience goal of achieving a client Net Promoter Score of over 60. From our pre-strategy baseline of 52, we saw improvements in 2023 and 2024. And in 2025, our score grew again to 66, rating us as excellent and exceeding our target for the second consecutive year. Our Net Promoter Score reflects the commitment we have to deliver for our customers. Our strategy prioritizes delivering what we are famous for, building on our existing strengths and leveraging our established global platform. To achieve our strategy, we have 4 pillars of growth: our core business, our technology business, Page Executive and Enterprise Solutions. Our core business is the main driver of group performance. We define our core business as Michael Page and Page Personnel, which covers all disciplines except technology. Technology recruitment is a scale play for the group, enabling us to build a high-volume, high-value business in what for us is already a significant market. Page Executive is a market gap play with a specialization in senior leadership search and recruitment as well as offering executive advisory services. Enterprise Solutions is a partnership play as we build out our capabilities and breadth of offering to create long-term mutual value with our strategic customers. I will now provide a brief update on the progress we've made within our 4 pillars of growth. Within our core business, despite the tougher market conditions, we've continued to reallocate resources to match activity levels as well as investing into business areas where we see the greatest long-term opportunities. Whilst the macroeconomic uncertainty continues to impact the majority of our geographies, in 2025, we saw a return to growth in our U.S. business and improved conditions in Asia Pacific. As we anticipated, this recovery has been driven almost entirely by an improvement in the conversion rate of offers to placements rather than increasing activity levels. As a reminder, in permanent recruitment, for every 5 offers a fee earner receives, in a normal trading environment, we would expect 4 to become placements. Over the past couple of years, this has fallen to around 3 out of 5. Reviewing our improved performance in the U.S. and Asia Pacific, what we have seen is a gradual return to a more normal level of conversion of offers to placements. This has been due to clients and candidates being more willing to engage in conversations and negotiations at the latter stages of the recruitment process. As has been widely reported in recent years, trading conditions in the technology sector have been challenging. Despite this, technology remains our second largest discipline at 12% of group gross profit. Within technology, we continue to see a more resilient performance from nonpermanent recruitment. We are reshaping this business from the pre-pandemic model, increasing our offering within contracting and interim roles. This is particularly evident in markets such as Brazil, Greater China, Colombia and Spain, which is now our second largest technology business after Germany. We've also been rolling out our proven contracting model from Germany into other markets in Northern Europe. Despite the tough conditions globally, we delivered a record performance in India, and we saw good growth across a number of individual markets, including the U.S., Colombia, Greater China and Japan. Page Executive continues to deliver strong results despite the challenging macro environment with gross profit down just 2% against a record comparator. Within this, our best-performing markets were Spain, Colombia, Greater China and Southeast Asia. A key element of our Page Executive strategy has been to focus on more senior leadership roles and as a result, increase the salary levels at which we place. This strategy continues to prove successful, and we've seen a notable increase in the median placement salary. Alongside this, the track record and the success of our well-tenured consultants in Page Executive has resulted in an increase in our median fee. We continue to believe that the market gap for Page Executive is a significant opportunity for the group and one that we are uniquely placed to exploit. Despite sector-wide challenges in recruitment outsourcing, Enterprise Solutions, which is our business focused on strategic customers, delivered an encouraging performance in 2025. Our well-established global platform across 34 markets allows us to consult with clients as they look to enter new territories. Our customer-centric approach highlighted by Net Promoter Score continues to make us the partner of choice for companies looking to go global. In 2025, against the backdrop of a difficult macro, we generated 12% more gross profit from our largest 20 clients than we did in our record year in 2022. Within Enterprise Solutions, our outsourcing business delivered growth of 18% and a record performance. We've also seen a strong increase in our sales pipeline as our strategic commitment to global customers gathers momentum. We remain focused on winning business that delivers conversion rates in line with our strategy. As many of you will know, I joined PageGroup in 1995. And over the last 31 years, I've seen huge changes in the sector and the technology that surrounds it. In more recent times, the proliferation of social media and 24-hour news has made the business world a very noisy and fragmented place with conflicting headlines, opinions and data points. When it comes to moving jobs or changing careers, it is now more important than ever for candidates to work with an expert who can filter out the noise and guide them through one of the biggest decisions they will make during their working lives. Our industry is built on human relationships, trust, judgment and insight, especially in white-collar professional recruitment. AI and technology will continue to accelerate the process, but it can't replace the conversations, trust and credibility our consultants bring. When it comes to AI at Page, we've talked before about the importance of building enterprise-wide platforms and having a globally aligned approach to data. We've told you how we've been working closely with major technology partners to build a single integrated data environment ready for AI-enabled products to be deployed quickly across markets. With these solid foundations now in place, we can be confident that we can exploit the wide range of AI that is available. Our strategy is not to replace the human element, but to augment it. For decisions on AI investment, the question that matters most for us at Page is, does it make money or will it save money? This mindset keeps us focused on tools that genuinely enhance consultant productivity, have a tangible benefit for our clients, and drive efficiencies in our business support functions. Companies that get this balance right will pull ahead of those that don't. Across the group, we put this strategy of augmentative AI into action and are already reaping the rewards. We're delivering qualified client leads through our AI-powered business development hub, which uses internal data and external feeds to help our consultants prioritize their time and focus their effort towards the roles we are most likely to fill. We are harnessing the power of Copilot with our consultants building the agents they need the most to transform how they research roles, prepare insights and craft follow-ups. We've also used AI to update over 7 million candidate records in 2025, saving our consultants from an otherwise manual task that equates to the equivalent of nearly 2,500 working days. We continue to see the benefits from AI tools we've highlighted to you in the past. Adverts created through our job ad generator delivered 48% more applications per job with double the number of candidates going on to shortlists compared to manually created adverts. To keep us looking forward, our established data and innovation lab gives us the ability to test and learn quickly, only the use cases that deliver clear commercial value move into production. Whilst AI will play an increasingly important role, we still see that as a supporting one. To repeat what I said earlier, our business is built on human relationships. It's about providing our clients and candidates with the kind of knowledge that comes from great questions and curiosity. Our focus is on using AI where it adds value and keeping people at the center of every meaningful interaction. I will now finish with a brief outlook. Whilst the market outlook remains uncertain due to the unpredictable economic environment, we will continue to control the controllables. We have a strong balance sheet. Our cost base is under constant review. And given our highly diversified and adaptable business model, we remain confident in the execution of our strategy. That concludes the formal presentation for this morning. Kelvin and I will now be happy to take any questions you may have. Operator: [Operator Instructions] Our first question is from Karl Green with RBC Capital Markets. Karl Green: First question just on the dividend. You've laid out a very clear capital allocation policy. But just drilling down into the potential balance over the medium to longer term between ordinary dividends and special dividends. Could you just elaborate on how you potentially see that unfolding, clearly subject to how trading unfolds in the meantime? And then the second question was just on CapEx. I mean, again, very controlled in the year just gone. Just wondered how you anticipate the CapEx budget developing over '26 and perhaps beyond? Kelvin Stagg: Yes. Certainly, on the dividend, it's really a question for us of affordability. We obviously have a high amount of operational gearing in the business, and we don't want to add financial gearing to that mix. So we're keen to keep the balance sheet with an element of net cash on it. We looked at the, therefore, affordability of a dividend in terms of our cash flow in June and felt that paying what amounts to GBP 10 million worth of dividend in June was the right amount to give us a fair balance of ending the year with enough cash to run the business. To probably reiterate what I said at the previous trading statement was that whilst we used to say that, that was probably around GBP 50 million of net cash to run the business, we now think we can run it on about GBP 25 million. Such is the efficiency of our cash management and processes nowadays. But I think in paying GBP 10 million, that will bring us in line with that sort of net cash and also allow us to make a decision on the interim dividend when we get to the interims in August. But I don't see that as a fundamental rebasing of the dividend. I feel that when we get back into affordability, i.e., we generate the cash that we need, we would move hopefully briskly back to the level of the dividends that we had in 2024, and that then would be the position that we would increase at the longer-term rate, which historically has been 4.5% per year. So this isn't a fundamental rebasing down to this level. It's a short-term affordability measure before we hopefully return back to the historical ordinary dividend levels. On CapEx, yes, well, historically, and by that, I mean, probably during the teens years, our CapEx spend was roughly GBP 24 million. And it would have been split pretty much GBP 12 million on software capitalization and GBP 12 million on leasehold fit-outs for two reasons, one being that largely, we finished all of our big software implementations. Our global finance system has been in place for 10 years now. We've got Salesforce in place, and that's been in place for at least 8 years now. We don't really have a huge amount of software implementation to do, coupled with the fact that now all of the software rollouts we're doing, including the HR system that we're rolling out at the moment, which is a relatively small expense in comparison to the two previous finance and operational implementations, are Software-as-a-Service. And Software-as-a-Service, you can't capitalize. So it's expensed through the P&L. So last year, 2025, the cost for software was about GBP 2 million. I'd expect that probably to be about the same going forward. We had very little leasehold fit-outs in '21 and '22 coming out of the pandemic as we look to try and better understand the ways of working and therefore, what the office of the future back then was going to look like. We realized that we didn't really need interview rooms. We interview all of our candidates pretty much online. And therefore, during '23 and '24 primarily, we spent quite a lot on office fit-outs as we moved out of the big offices that we had downsized, but also made them sort of places that people wanted to come to, break-out space, and different fit-out options. That peaked in 2024. Last year, 2025, that was about GBP 10 million. I'd probably expect current year and going forward, that will probably be around GBP 8 million. So my expectations for CapEx in 2026 are probably collectively about GBP 10 million, and I would expect that to go forward. Operator: Our next question is from Remi Grenu with Morgan Stanley. Remi Grenu: Just maybe 2 on my side. The first one, can you maybe tell us a bit more about the difference in performance between the brands, Page Personnel and Michael Page. So some kind of update on how the activity has trended within the 2 brands? And maybe an update as well on the progress that you're making in reallocating resources towards Michael Page and away from Page Personnel. I would like also to understand if it's a process that you're accelerating. So the first question on these 2 brands. And then the second one, any additional initiatives you think could be launched to further reduce the cost base? I'm trying to understand if we should think about potentially adding one-off costs to our forecast in 2026? Nicholas Kirk: Okay. Remi, thank you. I'll take the first one and Kelvin will take the second. I mean, your 2 questions are slightly kind of obviously linked, because it's quite hard to necessarily give you a fair view on the 2 brands because of the fact that we are moving business across from Page Personnel into Michael Page, and we're rebranding parts of the business. We're moving out of less profitable areas, maybe in lower level temp, and reassigning consultants into more senior contracting work or interim work. So it is distorted as a result of the work we're doing. So perhaps maybe it makes more sense to talk about what we are doing, which is as we move through the next few months, we're looking at the final 5 or 6 countries that we have that still run the Page Personnel brand and looking to sunset that brand and focus the business around Michael Page. We feel that, that's the right decision in terms of the job market and future trends around the pressure that you can see and will inevitably probably only grow at that level of admin heavy roles, clerical roles. So we don't want to be in that market. We want to be more focused around the Michael Page and Page Executive brands, which, as you know, are management roles, leadership roles, expert roles. So that's a very clear strategic decision, hence, the justification of moving towards those brand areas. And at the moment, the reason why it slightly distorts the results between the 2, and therefore, I'm not sure it would really help you in terms of making any particular decisions on those 2 areas. Kelvin Stagg: Yes, I can take the one on cost. I think I probably look at it in 2 different areas. One part of it is in operations. And so that's really about fee earner headcount. The challenge that we have at the moment is the issue in the business, if I frame it that way, is the conversion of offers into placements. So we need to have the fee earners there to work the jobs. If they're not working the jobs, then they don't have a percentage chance of converting it into fee rates. Obviously, if those job numbers come down, and we've seen that in parts of Europe, probably point towards France, you will see our fee earner headcount come down, and therefore, the cost will come down. But in other areas where fee earner headcount has been more static, that reflects the fact that the job numbers are relatively static, and it's the conversion of offers into placements and therefore, revenue that's become the problem. But expect to see fee earner headcount move during the year in line with that expectation. On the non-fee earner headcount, obviously, we will continue to align our transactional support staff in line with the activity that's going on. And you would see that in things like transactional finance, you'd see that in transactional HR, you'd see it in what we call middle office, which is non-perm administration for temps and contractors and the like. We have finished now the transition of our shared service center from Singapore into Kuala Lumpur. That's now very stable, but we obviously have the ability to improve the efficiency of that. Whenever we do one of these transitions, we slightly overstaff at the beginning and look to get efficiencies as things progress. We are right in the middle of the HR transformation, which is the implementation of an HR system, as I mentioned earlier, but it's also the transition of the HR transactional people from the local countries into primarily our shared service center in Kuala Lumpur. Whilst that will have a one-off cost, a small one-off cost, a couple of million in the current year, which is already accounted for in terms of where we are in consensus, that will deliver about a GBP 5 million annual saving kicking in partly during this year, but fully from next year. So yes, there are some strategic activity we've got at this point, I'm not going to announce any sort of large restructuring charge, but we'll continue to actively manage the cost base as we have done over the last few years. Remi Grenu: Understood. And one follow-up, if I may. Any trends or insights to take away from the first 2 months of trading in 2026? I mean, I appreciate these are smaller months, but anything to take away from that? Nicholas Kirk: Yes. No, you're right. They are smaller months. And I think on the basis that we're out again, Remi in about 5 weeks with our Q1 update, we'd rather see the big month of the quarter, which is March to get a complete picture. So that's what we decided to do. Operator: Our next question is from James Rowland Clark with Barclays. James Clark: Two questions, please. I was just curious as to the sort of operational practical difficulties of moving your recruiters from Page Personnel to Michael Page and moving upmarket into different sectors. Is there a sort of time lag to delivering full productivity for those individuals? And is that impacting the business today? And then also, how does that impact traction with clients as well, as you move different personnel into that relationship? And then secondly, on cash, I appreciate that GBP 25 million is now a level you're happy to run at. Are you comfortable to dip below that, I guess, as bonuses are paid out? Can you maybe elaborate on where you are with cash right now following sort of bonuses being paid out at the year-end? And how we should think about the sort of shape of that if market conditions remain as they are through the year? Nicholas Kirk: Thanks, James. As regard to your first question, I think your approach needs to be, with any significant change, to be very thoughtful, to be very careful, and to be patient. So we do it step by step, stage by stage. We've already been through this process in Asia, where we look to transition people across from Page Personnel to Michael Page. We've been through this process in the U.K., where we did exactly the same. So we've learned a lot of lessons from it. What you're likely to see is initially just a rebranding of operations from Page Personnel into Michael Page. And then steadily and slowly, we will move people upwards into more senior work, because the last thing we want to do clearly is disrupt relationships with clients, disrupt relationships with candidates, and just as importantly, disrupt the fee earners and their ability to earn and deliver for themselves and the company. So it's a process. It's not something that happens overnight where you come in one day and the working brand that you operate under has changed and your client base has changed and your candidates have changed and you've got a new market, that would be a ridiculous way of going about it. So as I say, it's something that's very intentional. It's very thoughtful. We're applying lessons that we've learned in other markets where we've done it already. We'll do it step by step, and we'll be careful to ensure that client relationships aren't impacted as a result, and the consultants' ability to earn remain. But the actual process of moving upwards into more senior work is actually a very normal one. I mean I think back to my time as a consultant. I mean, if you think about it, you start as, in my case, a 23-year-old, you're working on relatively junior jobs, entry-level jobs with candidates that are a similar age to you and you grow up with your candidates and your candidates become clients and you recruit them as clients and they become candidates again. So you move through a life cycle with them. And that happens to every single consultant. So this will actually enable us to more effectively do life cycle management of our candidates as they start to become more senior, because Michael Page obviously has that greater scope through those levels of roles. So yes, I mean, it's something I am very, very aware of, the team is very aware of, and we will be very thoughtful and intentional about the way we go about it. Kelvin Stagg: Yes, James, talking to cash. I mean, we operate with a philosophy of having net cash on the balance sheet. That's not a rule that we adhere to on a day-to-day basis. I mean, we have a number of facilities available to us, including an GBP 80 million revolving credit facility, we have a GBP 50 million invoice discount facility, and we have a GBP 20 million overdraft. So with a number of temp and non-perm businesses around the world, we need to be able to fund those. And we will and do dip into those facilities from time to time to fund working capital requirements for non-perm as well as dividends when we pay them out. So I'm not strictly adhering to having GBP 25 million in June for the dividend payment. I'm comfortable that we would dip into those for a short period of time. Our current cash balance would be less than GBP 25 million. But we're comfortable that we're forecasting to end the year without structural debt, and that's really the philosophy that we're trying to adhere to. Operator: Our next question is from Steve Woolf from Deutsche Bank. Steven Woolf: Just you mentioned earlier, Nick, about the level of median fees going up. Could I flip it to sort of fee rates if you look on a like-for-like basis year-over-year? How have you found those? Are they still at the record high levels you were speaking of before? Or has there been any sort of weakening in that over the past 12 months, I guess? Nicholas Kirk: No, I did that -- well, firstly, good morning, Steve. No, I did that assessment very recently actually just to compare '25 to '24. And no, they're pretty much flat. There might be the odd movement within a country where a country goes from, say, 30% to 29%, but that's offset by another country that goes from 25% to 26%. So the increase that we saw was within Page Executive, and that's really more through the levels that we're working at more senior roles, and also the ability to negotiate higher fee rates based on having well-tenured experienced consultants in a market where candidates are in high demand. So the fees naturally can be pushed up a little bit because clients need access to these individuals. But overall, to your question, no '24, '25, fees remain at record levels, little movements within countries, but as an overall figure, still at that same high level. Operator: [Operator Instructions] There are no questions waiting at this time. So I'll turn the conference back over to Kelvin Stagg, Chief Financial Officer, for the further remarks. Kelvin Stagg: Thank you, Sarah. As there are no further questions, thank you all for joining us this morning. Our next update will be our first quarter trading update on the 14th of April. Thank you very much. Operator: Thank you. That concludes PageGroup full year results. Thank you for your participation. You may now disconnect your lines.
Operator: Hello, and welcome to the Spire Healthcare Full Year Results for 2025. [Operator Instructions] I will now hand over to your host for today, Justin Ash of Spire Healthcare. Justin, over to you. Justin Ash: Thank you, and welcome, everybody, in the room and welcome, everybody, online. Very good to be here today. If you are joining for the first time, I'm Justin Ash, and I'm the Group Chief Executive of Spire Healthcare, and this is Harbant Samra, our CFO. So we're going to talk you through the results, and then we're going to leave lots of time for questions. So let me start with a review of our strategic progress in 2025, the market context, how we're thinking about 2026 and how we're prioritizing in response. So the results we're sharing with you today demonstrate a resilient performance in the face of significant cost challenges and changes in the NHS commissioning environment towards the end of last year. In response, we focused on consistent delivery of our strategic priorities. Our private focused multi-payor strategy, our transformation program that's delivering efficiencies through standardizing, centralizing and embedding digital and automation, our plan to grow in primary care, an area of accelerating demand and our continuous focus on care quality and innovation to drive an even better patient experience. Together, these priorities allowed us to respond with flexibility in 2025 while strengthening our foundations for the long term. So looking first at the market, we saw 4 key trends last year. The private market, as previously reported, saw low single-digit percentage volume decline for much of '25. However, I'm encouraged that we saw improving momentum in demand, especially self-pay during the second half of H2 as well as continued growth in primary care. However, we experienced significant labor inflation during 2025, driven by the increase in Employer National Insurance contributions. And of course, in the later parts of H2, there was a sector-wide slowdown in NHS volumes as we began to see the start of activity management plans as integrated care boards faced budget-free restrictions. We responded to these trends with focus in line with our strategic plans. Looking first at private patient growth. We ended the year with a return to positive volume growth in self-pay. As I said, I'm encouraged to see that is continuing now. There is no doubt some market effect here as the impact of NHS budget constraints both influence local waiting times and patient sentiment more generally. However, we've also spent 18 months building our efficiency and effectiveness in private patient acquisition and response, including actions to strengthen our brand, our speed of access and our mix. Next, transformation. 2025 was the biggest year of change yet for our business. We drove efficiency, and we delivered our plan of GBP 30 million savings, offsetting rising employment costs. The largest program was transitioning administration for incoming inquiries, bookings, preoperative assessments and self-pay sales into 3 patient support centers. This is already providing a platform to improve patient experience and deliver growth with further benefits to come. We've also been investing in our sites over a number of years, creating an estate which is attractive to patients and those who work there, and this enabled us to lower our CapEx spend in 2025 without compromising on quality. We made progress in primary care. Our clinic strategy is to open sites in new geographies to attract private patients we could not otherwise access, and in 2025, we opened 5, including in Kingston, Wimbledon and Kings Lynn. The larger hospital outpatient clinics generated downstream referrals to our hospitals worth GBP 3 million of EBITDA. We also made 2 small acquisitions of a physiotherapy business and an occupational health business, both of which are performing in line with plan. Lastly, we continued to deliver on our quality strategy, including a focus on reducing average length of stay across several procedures, saving just over GBP 1 million whilst improving patient access and recovery. We are now at 29 surgical robots across the estate, and we added 7 in 2025. These have increased our capacity to provide high-value private care, and they deliver improved outcomes and also contribute to faster recovery times. And our actions underpinned by focus on efficiency and CapEx discipline have resulted in strong adjusted free cash flow growth. I just want to take a moment to unpack some of the actions we've taken to leverage the self-pay opportunity, in particular, over the last 18 months. So I mentioned improving brand scores and marketing effectiveness on the previous slide. Our private focus targeted local marketing strategy is successfully driving demand and conversion in a competitive and predominantly online marketing environment. So if you look at the chart on the right, our latest data shows our brand scores now lead the market. More people are moving from simple brand awareness at the top to the next level direct service consideration. Our unprompted and prompted awareness are now at their highest levels ever of 35% and 80%, respectively. And consideration, which is key, has driven by 6% to 61%, which in turn drove record levels of inquiries to Spire during the year. We've continued to apply AI to optimize our pricing locally to ensure we are as competitive as possible versus our competitors whilst also protecting margin. And since moving self-pay sales and bookings to patient support centers, they are consistently delivering call answer rates of around 95% compared to 60% before we move to patient support centers and therefore, converting more inquiries to bookings and bookings on the same day. And finally, to meet rising demand for diagnostic MRIs, we applied again AI to increase image quality, throughput and capacity in scanners at 21 hospitals, halving the scan times to contribute over GBP 2.5 million EBITDA in 2025 through growth in activity. So all these activities are setting us up well with strong foundations from which to capitalize on the improving self-pay environment. As we look ahead to the rest of this financial year, I just want to take a moment to frame what is happening with NHS commissioning and the related effect in the private market. The NHS is going through a fairly fundamental restructure as it seeks to ensure financial discipline. You're all aware of the system-wide and well-documented NHS commissioning slowdown of both independent sector and NHS elective work, which is impacting hospitals in our first quarter of 2026. Patient demand remains high, but the budget is not there to fund the demand. And as a result, multiple integrated care boards have imposed activity management plans. I should mention that our primary care business is relatively insulated from this given the long-term nature of the contracting there. The net effect is we expect NHS revenue to be down about 25% in Q1. At the same time, as I've mentioned, self-pay is responding, partly a consumer reaction to the NHS slowdown as well as our own actions. And in Q1, we expect around 4% growth in private revenue with self-pay up around 6%. Looking ahead, the NHS financial year resets in April, and activity will undoubtedly bounce back from the lower levels of Q1. We are yet to have firm visibility on what activity plans for the period covering our Q2 to Q4 will look like or how they will be managed. So clearly, that is a material uncertainty for the year. And this should become clearer as commissioning discussions progress in the coming months. But with this in mind, we've developed some scenarios on which to base our 2026 plans for Q2 to Q4. Broadly speaking, these assume significant improvement in NHS activity relative to Q1 as budgets are reset. We've taken a balanced view of continuing NHS budgetary pressures alongside the need to reduce waiting lists. And we also expect faster private patient growth in response. So we also think this is a transitionary period for the NHS as it resets, whilst local relationships between Spire and commissioners remains strong. Therefore, as we look to the rest of 2026, our strategic priorities set us up well to control the controllables, respond flexibly to the market environment, and we will make delivering sustainable cash flow a priority. We will continue to intensify our focus on private payor growth, capturing the momentum we're seeing in self-pay through targeted local investment in marketing and price optimization. The next phase of our development in our patient support centers will further support self-pay inquiries through to conversion, which together with a new website and CRM system will deliver an even better experience for patients and consultants. And we'll continue to streamline hospital operations to make quick access and treatment for private patients a priority. In transformation, we'll continue to deliver more efficiency improvements. Our track record in delivering such programs has led us to accelerate our 2026 savings program, which will at least mitigate the Q1 NHS commissioning impact. In primary care, we've built a strong foundation across multiple services, spanning private GP, occupational health, mental health and physiotherapy. This year, we aim to accelerate integrating these services with our hospitals and leverage our existing base to drive organic growth. We anticipate limited M&A. We're also working on unlocking the opportunity for growth with employers, where the growing impetus behind employee health and productivity gives us a platform to provide a wider range of treatment solutions in addition to traditional occupational health. And we'll continue to open a small number of CapEx-light clinics in new geographies. Finally, of course, we will maintain our focus on care quality that underpins our growth. We aim to maintain or improve our already high ratings from regulators and patient and consultant satisfaction scores. So the Board announced in September 2025 that the company is actively evaluating actions to drive long-term sustainable shareholder value. That review is ongoing. So as part of this review, we're considering a range of potential options, which may include, but is not limited to, a potential sale of the company, value generation from the hospital property estate and adjustments to our operational and strategic plans. There can be no certainty that any offer will be made for the company nor as to the terms of any offer if made. Many of you will already understand that being in this process and therefore, subject to takeover panel rules means there are limitations to the statements we can make today about the strategic review, our forecasts and the assumptions that underpin them. The Board will make a further announcement on this matter in due course as appropriate. In the meantime, as you can see, we continue to focus on executing our existing strategy to grow our healthcare business. The management team and I are relentlessly focused on delivering our 2026 priorities. Finally, I'd like to take a moment to talk about the high standard of care that we provide. This is the foundation for our resilient performance, and I'm pleased to say that in 2025, 98% of our sites were rated good or outstanding or the equivalent by regulators. 97% of hospital patients rated as good or very good with a rise in very good ratings. 84% of consultants rated our care very good or excellent on par with last year and with a small increase in excellent ratings. So this is only possible through the hard work and commitment of our more than 17,000 employees and over 8,000 consultant partners. They have adapted to change as we have significantly transitioned the way we run our business to be more agile and responsive. It required their patience, their input, their professionalism. And I'd like to take this opportunity to thank them profoundly for their collaboration, partnership and professionalism. I've been really delighted to see this professionalism and dedication in action as I and fellow directors have visited sites throughout the year, meeting our DAISY and IRIS award winners for outstanding care and marquee moments such as the opening of our new clinics and the delivery of new surgical robots. Thank you very much, and I'll now hand over to Harbant. Harbant Samra: Thank you, Justin. Good morning, everybody. So I'll start by giving a high-level summary of the financial year. Total revenue for the group has grown 4.5% with hospitals up 4.3%. Underlying this, we saw a strengthening and improving private market, but the NHS business experienced slowing volumes in the second half due to their budgetary pressures. We also saw strong growth in revenue for our Primary Care business. Adjusted EBITDA was up 3.2% to GBP 268.6 million. This was supported by the successful delivery of our transformation savings target as well as price and mix management. These savings helped to mitigate increased cost pressures, a larger element of which related to the rises in National Insurance and National Minimum Wage from Q2 onwards. After deducting depreciation and finance charges, both of which were in line with guidance, the group reported an adjusted profit before tax of GBP 46.5 million, 7.4% down on the prior year. We have delivered our CapEx plan, investing in growth projects and transformation and have done so whilst reducing the overall spend by 30% year-on-year to GBP 78.5 million. As a result, I'm pleased to report that our adjusted free cash flow was up 64.9% to GBP 64.3 million. Finally, ROCE was 8% compared to 8.2% for 2024. On a comparable basis, excluding National Insurance and National Minimum Wage uplift during the year, ROCE increased by 30 basis points to 8.5%. Now turning to our Hospital Business. Total revenue grew 4.3% to GBP 1.5 billion and is reflective of our strategy where we have targeted growth across both private and the NHS. Overall, total volume across all payors was up 1.4%. Adjusted EBITDA for our Hospital Business rose by 3.9% to GBP 258.8 million, representing a margin of 17.9%, broadly flat to last year's 18%. EBITDA would have grown by more than 7%, excluding National Insurance and National Minimum Wage rises. And the GBP 30 million of new cost savings alongside tight management of price and acuity helped to mitigate the cost headwinds. Moving on to performance by payor. I will start with self-pay. Overall, revenue saw a minor decline, but notably year-on-year volume growth returned to positive by the end of 2025. This is reflective of our strategy to target this segment. We have invested in the start of the sales funnel with targeted marketing, and we have made big and important changes to our booking processes, centralizing teams into patient support centers. Bearing in mind the scale of these changes, it was not surprising that we saw some operational disruption early on during the summer. But the centers have now bedded down and are making a positive contribution to our self-pay and wider business. We've also continued to optimize price based on local market dynamics at an individual procedure level, resulting in ARPC growth -- growing by 3.9% during the year. Turning to PMI. The market has remained stable. As we flagged at the half year, insurers continue to manage claims access and issue tenders. Despite this context, we have grown PMI revenue by 3.1%. This is largely driven by our price and mix management towards higher acuity procedures, contributing to above-inflation ARPC growth of 5.3%. Overall, the signs for our private business for both self-pay and PMI are encouraging. Turning now to the NHS. In the second half of 2025, we saw the initial signs of sector-wide action from the NHS, where it slowed commissioning due to budgetary pressures. This was followed by further tightening in late 2025, where certain integrated care boards requested a stop in activity. The result of this was revenue growth for H1 reaching 16.2% before slowing to 6.8% in H2, taking us to revenue growth for the full year of 11.4%. We also continue to target high acuity procedures and thereby achieved a 3.2% uplift in average revenue per case, slightly ahead of the NHS tariff uplift of 3.1%. Orthopedics continue to account for over 60% of all NHS admissions. Moving on to our Primary Care business. Revenue increased 7.4% to GBP 133.7 million, driven by organic and new contract growth across talking therapies and occupational health. After including our recent acquisitions of Acorn and Physiolistic, revenue growth was 10.5%, and their revenue and profit contribution were in line with plan. Adjusted EBITDA for our Primary Care business as a whole was GBP 9.8 million, which whilst at a headline level is a reduction, the core business has grown by more than 5% year-on-year. Two of the 3 larger new clinics are already profitable. More importantly, these clinics have also generated GBP 3 million in EBITDA through referrals to our hospitals, which is encouraging given the relatively short period of time that they have been open. Looking at overall group EBITDA delivery, we can demonstrate the important role that the transformation savings played in our full year outturn with the business delivering on those things in our control. In addition to one-off cost headwinds, which includes National Insurance and Minimum Wage increases, there was also underlying cost inflation, half of which related to salary uplifts. Our transformation savings have mitigated around 2/3 of this cost inflation, which together with price and mix management has underpinned EBITDA growth. Turning to profitability. We incurred GBP 27.9 million of adjusting items with statutory profit after tax declining to GBP 17.2 million, stated after the impact of National Insurance and National Minimum Wage rises, partially mitigated by a reduction in taxation. This benefit arose from a review we initiated over qualifying capital investments for tax deductions and covers a number of years. 2025 was a significant year for our transformation program. As a result, the adjusting items included around GBP 13 million in one-off costs associated with delivery, covering, for example, redundancy costs and setting up the PSCs. Adjusting items also included certain fees linked to the ongoing strategic review of around GBP 7 million. Moving on to cash flow. We have grown adjusted free cash flow by around 65%. This outcome evidences our disciplined approach towards CapEx investment. We continue to focus on growth and returns with CapEx increasingly directed towards expanding the private patient business. Alongside this, our transformation program delivered GBP 30 million in savings, helping to support the overall strong cash flow outcome. Now a deeper dive into CapEx. Total CapEx was GBP 78.5 million, which is 30% lower than last year. We have made significant but targeted investment in our estate over the last few years. As a consequence of this, we have dealt with a backlog and importantly, have become a much more modern and attractive offering for private patients, which is clear from their feedback. This strategy has meant that in 2025, CapEx as a percentage of revenue decreased to 5% compared to 6% to 7% in prior years. Of our total CapEx outlay, GBP 50 million was directed towards our hospitals for maintenance and growth. We also invested GBP 20 million supporting our transformation program and GBP 8 million in primary care, which included new clinic openings. For 2026, we expect the underlying split across these categories will follow a similar pattern to that for 2025. Moving on to the balance sheet and returns. We have maintained our leverage at 2x, and this is stated after acquiring the Acorn and Physiolistic businesses during the year. We have also extended the maturity of our bank facilities by 18 months to August 2028. The underlying terms are unchanged. The strength of our balance sheet is further underpinned by the quality of our freehold base, where we have a valuable portfolio of 19 hospital properties. We know that this -- we note that the market appetite for healthcare assets remains strong. Having this asset base gives us a wide range of options in terms of strategy and generating future shareholder returns. Our ROCE was 8%. However, I will highlight that after adjusting for the impact of National Insurance and National Minimum Wage rises, our ROCE would have been 8.5%. Moving on to the outlook. As Justin has mentioned, private patient momentum has continued to improve in the first months of 2026. For the full year, we're expecting percentage growth of mid- to high single digit year-on-year. NHS volumes remain a material uncertainty across the sector and activity from April or the start of the commissioning year has yet to be agreed. As a result, there are a range of scenarios we are planning for, which means we are targeting an adjusted EBITDA outcome for 2026, which is broadly in line with 2025. Our base planning assumption is for Q2 to Q4 NHS revenue to be down between 5% and 10% year-on-year, a significant improvement versus the Q1 outturn, which will be down around 25% year-on-year. We think this planning assumption is plausible in the context of a new budget and commissioning year. And as a reminder, the provisional NHS tariff for 2026 is close to an annual uplift of 0%. On savings, we have an existing GBP 30 million target. Over half of this is already underpinned by rollover from programs deployed last year alongside head office restructuring that took place in January. We are planning to deliver ahead of this target to at least offset the impact of the Q1 NHS shortfall. Primary Care is expected to deliver strong organic growth. Finally, across all scenarios, we will continue to be disciplined around the deployment of CapEx, leading to lower CapEx as a percentage of revenue and maintain our focus on generating free cash flow. Thank you. With that, I'll now hand back to Justin. Justin Ash: Thank you, Harbant. Okay. So I'm just going to give a short summary, and then we will go to Q&A. So today's results demonstrate a resilient performance against the backdrop of increased employment costs, combined with the changes in the NHS commissioning environment. We've used the levers at our disposal to respond effectively. We focused on growing private and particularly self-pay. We delivered our biggest ever year of transformation, including our planned GBP 30 million in savings. And we improved cash generation while maintaining care quality, optimizing our pricing and exercising discipline across our activity mix and investments. In doing this, we have created a strong platform for improving patient experience and growth. So looking to the rest of 2026, we'll remain focused on using the levers of our strategy to deliver sustainable cash flow. We will respond to NHS uncertainty by growing private patient revenue, building on encouraging early momentum in self-pay, and this will be enabled by targeted investment and further improvements in our patient support centers. Actions are already underway to accelerate transformation cost savings this year, which will at least offset the Q1 NHS commissioning impact and more. Our transformation program will continue to create greater consistency and ensure that we maintain and improve our high-quality ratings. In Primary Care, we intend to focus on organic growth and integration in the year ahead. We'll leverage our multiservice platform, step up our engagement with the employer market and build on the momentum from our clinics to continue to drive new referral pathways into our hospitals. In all that we do, we will remain disciplined in deploying CapEx towards higher returning investment and benefit from our already well-invested estate. So we have a solid foundation to deliver sustainable returns as we continue our evolution to meet the U.K.'s growing healthcare needs. We remain excited by the private market opportunities ahead and confident in the medium-term outlook for Spire Healthcare. Thank you very much for listening. I'm now going to go and join Harbant and take Q&A, and we'll start with questions in the room. Thank you. Justin Ash: Question here. Can you please state your name and your organization? Sebastien Jantet: It's Seb Jante from Panmure Liberum. So 3 questions, if I may. I'll just start off with one on PMI. Obviously, kind of all of the operators are under pressure from NHS kind of volumes. And I'm guessing that, that kind of is flowing into the PMI kind of discussions on pricing. And I'm just wondering how those are kind of panning out? Are you finding it harder to get decent price increases through? And also in terms of the PMI, are they starting to ask you for broader offerings that go around physiotherapy and some of the more primary care stuff as part of that? Or are they still seeking that from other vendors? Justin Ash: Okay. So I'll take that. Thank you, Seb. So PMI, so I think we're pleased with our relations with PMIs. I think things have moved forward from the last time we talked. I think we think we'll see some of the impact in the NHS as well beginning to filter through in PMI as well. And yes, we have very broad -- Peter may add, but we have very broad strategic discussions. It depends a bit by insurer, but the broader offering is clearly where insurance is going. I mean patients generally by way of backdrop, one of the reasons for our primary care strategy is younger patients, in particular, are accessing both self-pay and PMI and they're accessing it typically through Primary Care. You can see insurers are interested in that, and we have very strong engagements with them on that. So I think overall, a pretty constructive environment. Peter, would you be happy with that? Peter Corfield: Yes. Justin Ash: Yes, it's a pretty constructive environment at the moment. Sebastien Jantet: Second question is on I guess, more the shape of the NHS volumes as the year kind of progresses. So we're kind of sitting here in March. You're still not really clear on NHS volumes and what they might be. Is there a risk that the NHS volumes don't end up being equally spread through the year, which would obviously cause you guys a headache in terms of costs and kind of -- and capacity? Justin Ash: Yes is the answer. I mean, first of all, we can't see the future here. And by the way, at this time of the year, we never quite know what it will be. It's just there's a bit more uncertainty than there was. So what are the scenarios around NHS? So I think we've picked a plausible scenario because they've got 2 pressures. If you read the press, let's do NHS generally, you can read a lot about the imposition of enforcement around deficits. So the NHS has clearly decided that it wants financial discipline. And that's the backdrop to this. I mean, just to be clear, we've not had a single message about relationship with the independent sector. This has been about financial discipline and therefore, looking for places to impose restrictions where they can to hit the fact they're under budgetary pressure. And we work with commissioners on that, and that's clearly important for the NHS. On the other hand, there's clearly pressure on commissioning boards where their waiting list get too high. So what we've seen in the first quarter is whilst we are down 25%, we're also seeing and a little bit more of what our spot contracts where a commissioning board of particularly a trust calls up and says, we've got to wait in this problem. Can you help us with this cohort of patients, okay? So I suspect the year is going to look a bit like that, which is overall, we think the effect will be what we've described, which is down mid-5% to 10%, but it will probably be made up of indicative activity plans, which are topped up with spot work, okay? Whether that will be lumpy during the year? I don't know. I really don't know. But remember, it resets 6th of April. So what will definitely happen is the volumes will go up. We know this partly because we've rebooked patients, right? So we've rebooked patients we had to cancel. So it will pick up. Will it bob around? Probably. But I think it's worth saying we do talk to local commissioners all the time. Whilst this may look like a big fracture at the very top level, locally, we're talking to commissioning boards and trust daily. Our hospital directors and our NHS commissioning team have super strong relationships with them. So as far as we'll have visibility, this team will be on it. Is there anything you'd add to that, Peter? Peter Corfield: No. Justin Ash: Is that a good description? Yes. So that's pretty much what it looks like. So maybe, but I think overall, our assumption is the numbers we've given you today. Sebastien Jantet: And then last question is just on self-pay. So obviously, it's always been a competitive area, but it's kind of even more competitive now that everyone is trying to make up the backlog, the kind of hole in the revenue line from the NHS. What makes you think that you're going to be able to outperform and accelerate in that market versus your peers when presumably they're all investing in this space as well and all pushing hard there, too? Justin Ash: So I think -- so if you look at our market shares locally, which we spend a lot of time looking at, we held share over the last couple of years, okay? And the truth is in the last couple of years, we weren't hugely differentiated in the way we brought ourselves to market, okay? I think we're differentiated on quality. But in terms of our business processes, they were quite local. They were a bit clunky. We had good teams, but we had 38 separate hospitals, okay? So what have we done? We've done quite profound research into what really matters to self-pay patients in particular, okay, which is being able to get through on the phone and being able to get booked in on the day they call and ideally get booked in within 2 days for their first consultation. If in particular, their MSK patients, they want to be able to get their MRI within 2 days or on the day that they're there. And that all leads to a high likelihood that they will then have their admission with us, okay? So what do we do? So that's one of the main reasons we put patient support centers in place because we've gone from -- we were holding share when we were answering 60% of calls. We're now answering 95% of calls, number one. Number two, one of the things which has happened because of patient support centers is that for the vast majority of consultants, we now are able to book directly into their diaries. And therefore, we can get people booked in quickly. And we can start tracking a KPI of how quickly people got their outpatient deployment as apart from it being an aspiration. And AI, which I mentioned a couple of times, is an interest and AI is actually delivering results in the business. Putting that in MRIs means that we literally have every day empty slots in our MRIs. We're able to deal with our underlying volume. But because we've got nearly 50% more capacity, it means that literally you can walk down the corridor and get your MRI if you need scanning. The hospitals have worked really hard on managing outpatient and theater availability. So I think the answer is we have lined ourselves up to be super effective in the things that matter to our patients as well as then delivering them a really outstanding service. And also, I would be able to say, I think we've probably got the best invested estate because we've been investing consistently. So when they come here, it looks really good and that matters to patients. So I think we've got all those things in place. And Harbant about to add something. Harbant Samra: I was going to say, I was going to go on the estates point as well, but I'll add a little bit more color. The look and feel of our estates, I mean, it's visible to anybody, right? It is a more competitive market. I agree with what you said. But in terms of the look and feel of our estates and our facilities, we are very proud of what we've achieved. We've also made a lot of tactical investments to support our consultants. So don't forget how important they are in that conversation as well in terms of where the patient is going to go as well. So a lot of the robotics, for example, that was done with that in mind. So we're moving confidently on that basis. Justin Ash: And then the final part is the marketing. We have really invested under Peter's leadership in super sophisticated digital online marketing. We have a partnership with Google. We know we're getting better hits. We know we're getting better flow through. And we're going to bring them -- our website is okay, but it's not brilliant. We're going to bring in a new website this year, which will make that patient journey much easier. And as it gets up and running, one of the ways you win, as you know, online is we're making your content super attractive so that people search on your site, okay? And that's before the CRM system, which will integrate across all patient types and between primary care and secondary care in time. So I think the answer is because we're super, super focused on this, and we've been working on it for the last couple of years. Kane Slutzkin: It's Kane Slutzkin from Deutsche. Just on the NHS sort of improvement through Q2 to Q4, what are you guys assuming for traffic there? Because I know usually, we sort of see a little uplift late on 0 is obviously pretty low. So just wondering what you... Harbant Samra: 0 is pretty low. You don't need me to tell you that. But... Kane Slutzkin: What do you -- is that in the 5% to 10%. Is that... Harbant Samra: Sorry. That is in the 5% to 10%. So the way to look at it is that they issued their consultation in December. It's not really a consultation. The only reason it will change if there is an exceptional pay award. They've already done their pay award recently. I think they -- was it 3.3%. 3.3%. So I mean that's essentially already factored into the tariff. There is an opportunity for us to continue to do what we've done in the past, which is to tap into higher acuity. And that's what we'll certainly seek to do in this environment if tariff is so, I guess, underwhelming. But the opportunity to outperform 0%, I mean it's not a great deal, but we will obviously do our best. Justin Ash: And by the way, Harbant showed it. We have really focused on hips and knees, and we have focused on higher acuity. And that continues, by the way. So that might give us a little bit of upside from mix on there. Although once you're at 60%, there's obviously a limit to how far you can go, but that focus continues. Kane Slutzkin: All right. Just on energy prices, I know we chat about it earlier, you're saying you're sort of hedged into Q1 now or Q1 '27... Harbant Samra: Next year and even beyond that. Kane Slutzkin: Yes. You were hedged partially for '26. I'm just wondering when did you initiate this? Harbant Samra: So it's a rolling arrangement we have. Most of that was fixed back in about October and November. We take a pretty conservative approach towards doing it. So all of our energy needs are now under fixed price arrangements through to the end of Q1 2027 and then it tapers down to 50% by the midyear. But clearly, we're watching developments closely, and we'll take more action to continue to work out whether we want to increase that sooner rather than later. We'll see. But we're in a good place. Kane Slutzkin: Great. And just finally, on the property, you guys usually do your sort of annual reevaluation. I assume it's still 1.4. Is there any sort of comfort -- I don't know, maybe you can't actually comment on this part of the review, but not... Harbant Samra: I'm looking at IDC. Justin Ash: The lawyers have all poked up in the call. Kane Slutzkin: Can ask just last one on the Primary Care. You mentioned you expect very little M&A this year. It's obviously quite a fragmented market. Is that just because you've got enough sort of going on? Justin Ash: So we may do a little bit. But having put in a number of businesses, the next stage is to integrate it because if you're doing M&A, it's really important you've got a platform, which is aligned to do it. So in order to then accelerate M&A in due time, we want to get the businesses which we've got, which are performing well fully integrated. This is partly to do with also bringing in systems, so CRM. So we have visibility. So one of the things that we don't have today is easy visibility from going into a clinic and then booking through to a hospital. We want to make that super easy because in order to have really successful M&A, you've got to be able to have all your systems set up smoothly to plug in. Secondly, we think there's quite a lot of organic opportunity that we're going to focus on it. So it's not a change of strategy. It's just we've got plenty to deliver within primary care. It's doing very nicely. We're just going to double down a bit on our organic opportunities for the next few months. Natalia Webster: Natalia Webster from RBC. Just a follow-up on the private side on PMI and self-pay. You've talked about sort of the various factors that give you confidence on improvement there, but just curious on what you're expecting in terms of the mix of improvement in volumes versus improvement in pricing and mix as well? And then secondly, on cost efficiencies, you say you're tracking ahead of plan of the GBP 30 million in 2026. While some of that will come from annualization of savings in 2025, are you able to talk a bit more on your plans for 2026 and where you're seeing those additional cost savings? Justin Ash: Sure. Thank you. Well, I would say on private, we won't go into the complete plan of volume versus mix, but we are starting to see volume improvement. So it's not just mix and price. We're definitely seeing volume improvement, particularly in self-pay, which is very encouraging. So I think that's the answer on that one. Harbant, cost efficiencies? Harbant Samra: Cost efficiencies. So how we're thinking about '26, I mean, the way I'd do that, Natalia, is break it down into probably 4 buckets. A big chunk of what we're going to deliver in 2026 is actually already linked to the action we took in 2025. So there's an annualization effect from all the actions we took last year. And if you recall some of the things we did in the middle of last year, the restructuring, et cetera, you'll see the full year impact of that. And then just more generally, we've also taken action in the center early this year in January, where we restructured some of our teams. So over half of the savings that we're currently targeting for this year is really underpinned by the actions we've taken. The other 2 buckets, the way I'd look at those is that we've clearly got our transformation activity, which is underway. So digitalization, for example, and that forms part of the number, which is more than GBP 30 million. Again, I can't give you a specific number, but it's more than GBP 30 million. And then lastly, we brought forward some of the operational efficiencies that are on our list for maybe back end of this year and into next year to help to underpin the overall savings target, which means that we can say with confidence we've got enough there to offset at least or even more than the NHS shortfall during Q1. Justin Ash: Thank you. Any other questions in the room? Let me just check first if there are online questions. Operator: Yes, we have a question from David Adlington. David Adlington: Can you hear me? Justin Ash: We can. David Adlington: Firstly, maybe just the government focus on reducing waiting lists. Obviously, I would have thought the private sector would be a key part in addressing those waiting lists. In the short term, at least it seems to have swung around to a bit of hiatus on the NHS commissioning side. I suppose a big picture question is what's more important to the government at the moment, budgetary pressures or waiting list? And do you expect that to change between now and the next election? And then a second one, just want to get your thoughts on the bone cement shortage in the U.K. and whether you thought you might have any impact from that? Justin Ash: Okay. So on the first one, I think you may have to ask the government if there's any. But look, seriously, it's obvious that financial discipline in the NHS is top of the agenda at least this year. That's clearly the case. That's what's happened. It's also clearly the case that waiting lists are of great importance. And waiting list comprises 2 things, right? There's 7.4 million people. Of that, just under 6 million are waiting for a consultation diagnosis and just over 1 million are in treatment, okay? Those over 1 million people in treatment will be very top of mind for the NHS. I know they are. And that's why we've given a balanced guidance because that pressure won't go away. There is financial pressure. I suppose our guidance says we think the financial pressure slightly outweighs the waiting list pressure. I think our view is that in the medium term, that waiting list pressure will be compelling for any government. And that's why we say we think this is a transitionary period. So I guess we've given our view, but I don't have an official view from anybody else. You'd have to talk to government or NHS. In terms of bone cement, we have multiple suppliers. We found alternative supply just to top up from that supplier, and we just carried on unaffected. Operator: Thank you very much. We have no further raised hands online. So I will hand back to Justin. Justin Ash: So I think we've got another question in the room, Seb. Sebastien Jantet: I'm going to try this one and see if you answer it. So just looking at how the first half might look versus the second half in terms of kind of profit splits. Normally, I'd be quite comfortable having a crack at it, but there's obviously quite a lot of moving parts going around this year in the first half and the second half. So I'm wondering if you're able to give us any sense of what that might look like in terms of shape of the first half versus second half. Harbant Samra: Yes, happy to. At a headline level, I would expect to be slightly more weighted towards the second half. One of the reasons for that is whilst we're confident about delivering all the savings, clearly, some of those will appear in the second half. But again, there are a couple of other pretty significant moving parts for NHS, the question you asked earlier in terms of the lumpiness of the commissioning will also determine how that weighting plays out. But that's what I would expect. Justin Ash: Anybody else for questions? Okay. Well, thank you so much for attending both in person and online. Thank you for your questions, and we'll close the session. Thank you very much. Have a good day.
Operator: Good day, ladies and gentlemen, and welcome to The Toro Company's first quarter earnings conference call. My name is Daniel, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today's call, Heather Lilly, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Lilly. Heather Lilly: Good morning, everyone, and thank you for joining us for The Toro Company's first quarter 2026 earnings conference call. I am Heather Lilly, Head of Investor Relations. On the line with me today are Rick Olson, Chairman and Chief Executive Officer; Edric Funk, President and Chief Operating Officer; and Angie Drake, Vice President and Chief Financial Officer. Rick, Edric, and Angie will provide an overview of our first quarter results, which were released earlier this morning, and discuss our priorities and outlook for the remainder of fiscal 2026. Following their remarks, we will open the phone lines for a question-and-answer session. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, including those described in today's earnings release, investor presentation, and most recent SEC filings, and may cause actual results to differ materially from those contemplated by these statements. Also, in our remarks, we will refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance. Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release, along with the first quarter presentation containing supplemental information that is posted in the Investor Information section of our corporate site. With that, I will now turn the call over to Rick. Rick Olson: Thanks, Heather, and good morning, everyone. Throughout 2026, our teams remained diligently focused on executing our strategic priorities. We capitalized on market opportunities and customer demand, drove operational excellence, and leveraged our portfolio of leading brands for profitable growth and competitive advantage. At the same time, we invested in value-creating technology and innovation. As a result, we beat expectations in both segments and increased consolidated net sales by more than 4% to $1.04 billion. Our outperformance was driven by strong execution in both our Professional and Residential segments, which allowed us to capitalize on incremental demand for snow and ice products and continued growth in underground and specialty construction. We reported better-than-expected adjusted earnings per share of $0.74, up from $0.65 a year ago, due to higher earnings in our Professional segment, which represents about 80% of our portfolio. We expanded our hydrovac excavation solutions through our acquisition of Tornado Infrastructure Equipment, further strengthening our capabilities. We continue to implement our multiyear AMP program, which is fueling sustainable productivity improvements and has contributed $95 million in cost savings toward our aggregate goal of $125 million. We generated free cash flow of $14.6 million, resulting in an impressive free cash flow conversion rate of 22% in a quarter where our seasonal preparations typically result in a net use of cash, and we repurchased approximately $95 million of common stock, reflecting our commitment to return value to shareholders. In summary, through strong execution of our strategic priorities throughout the first quarter, we drove favorable sales and earnings growth and further strengthened our financial position. During the first quarter, our teams were prepared to deliver snow and ice products and capitalize on incremental demand as a series of winter storms hit major population areas. This operational agility and strong execution not only contributed to excellent Q1 top-line growth but also positions us well for robust performance in these categories in the back half of this year. Adding to this optimism is our fresh line of BOSS plows with new Cold Front Technology, or CFT, which has been well received by customers. The innovative CFT system integrates plow and spreader functionality and is engineered for effortless connections, smart performance, and maximum efficiency. We also continue to invest in underground and specialty construction, reflecting our expectations of multiyear growth in these businesses. Our efforts underscore our focus on broadening our offering to drive both near- and long-term results. During the first quarter, horizontal directional drills like the innovative JT21, which launched last year, contributed to our sales upside. We expect customer demand to remain strong. We were very excited to welcome Tornado to The Toro Company during the quarter. As a natural adjacency to our existing businesses, its complementary offering enables us to expand our growth opportunities in this market. And this spring, we look forward to showcasing the recently launched Ditch Witch SK 1,000, a compact stand-on skid steer with increased lifting capacity and reduced maintenance, making it ideal for utility work as well as landscaping. To preserve our profit margins and remain price competitive, we continue to pursue deliberate strategies through our AMP program to drive sustainable productivity improvements, cost savings, and net price realization. Through the AMP improvements, we are working to moderate the effect of higher material and manufacturing costs and fully offset the effect of tariffs. We are also carefully managing inventory at all stages of production, as evidenced by our healthy net inventory position at the end of the first quarter. This was a key driver of working capital improvement. While external factors like the economy, geopolitical environment, and weather are ongoing considerations, we are committed to maintaining our discipline and aligning our inventories with expected demand as the year unfolds. These actions are strengthening our operations and driving improved financial results, and our teams and channel partners are highly motivated to build on this momentum. I want to thank them for their ongoing commitment to advancing our product and technology innovations, as well as our cost savings and productivity initiatives. Now Angie will share additional insights on our first quarter results and provide our outlook for the year. Angie Drake: Thank you, Rick, and good morning, everyone. Before getting into the details of our results, I will highlight three key takeaways from our first quarter performance. First, we delivered better-than-expected top-line growth in both our Professional and Residential segments through disciplined execution that enabled us to capitalize on seasonal demand opportunities. Second, we delivered adjusted EPS above expectations and prior year through deliberate productivity improvement initiatives that drove favorable operating leverage. And third, our positive free cash flow and strong balance sheet position underscore our commitment to financial discipline and returning cash to shareholders. In short, our consolidated first quarter results demonstrate the strength of our portfolio and market-leading innovation, our commitment to operational excellence, and our thoughtful strategic and financial stewardship. Now let's dig into some of the details. Consolidated net sales for the first quarter were $1.04 billion, up 4.2% from prior year and better than expected, as sales in both the Professional and Residential segments exceeded our guidance. Professional segment net sales in the first quarter were $824 million, while Residential segment net sales were $216 million. Both segments benefited from higher shipments of snow and ice products and net price realization. Strength in underground construction, including the successful integration of Tornado, and growth in our landscape business also contributed to top-line growth in the Professional segment. We delivered a 9.8% consolidated adjusted operating earnings margin in the first quarter, up from 9.4% a year ago. Both Professional segment earnings of $137.6 million and Residential segment earnings of $13.2 million exceeded our expectations. Year-over-year results in both segments reflect net price realization and the favorable impact of our ongoing productivity improvement and cost savings measures. This was partially offset by higher material and manufacturing costs. Finally, our first quarter adjusted EPS was $0.74, which exceeded both our prior year adjusted EPS of $0.65 and our previous outlook for this period. Now turning to our balance sheet and cash flow results. Our balance sheet continues to afford us meaningful strategic optionality, enabling us to focus our capital investments on initiatives that generate profitable growth. Our current leverage ratio of 1.5 times remains healthy and well within our stated target range. Our free cash flow for the quarter was $14.6 million, a year-over-year increase of more than $80 million, resulting in a free cash flow conversion rate of 22%. We achieved this performance through meaningful inventory improvement driven by our integrated business planning process and seasonal demand for snow products. As a result, our inventory turnover improved to 2.8 times in the quarter. Additionally, we returned $133 million to shareholders in the quarter through dividends and share repurchases, demonstrating continued confidence in our ability to generate cash. Looking ahead, we remain focused on capitalizing on top-line growth opportunities, thoughtfully managing our balance sheet and cash flow, and integrating AMP operating efficiency benefits that support our $125 million run-rate target by 2026. We are raising our sales and earnings outlook for fiscal 2026 based on our strong execution and the strength of our first quarter performance. We are increasing our expectation for total company net sales growth to 3% to 6.5%. This reflects, first, Professional segment net sales that are expected to grow mid-single digits and, second, Residential segment net sales that are expected to be flat to down 3%. This is an increase from our prior Residential segment net sales guidance, reflecting strong Q1 results and an improved outlook for the balance of the year. We are also raising our full-year 2026 adjusted earnings per share guidance to be in the range of $4.40 to $4.60. This outlook assumes a higher total year adjusted gross margin rate, consistent with our prior guidance and underscoring our ability to navigate cost pressure while investing in innovation; higher adjusted operating earnings margin, which reflects annual Professional segment earnings margin between 18.5% and 19.5% and an improved outlook for the Residential segment earnings margin between 6.5% and 8.5%; interest expense of approximately $60 million; an adjusted effective tax rate of about 21%; and capital expenditures of $90 million to $100 million. Furthermore, we now expect an improved free cash flow conversion rate of at least 120%. For the second quarter of 2026, we expect total company net sales to increase mid-single digits from the same period in 2025, with mid-single-digit net sales growth expected in both segments. Professional segment earnings margin in the second quarter is expected to be similar to a year ago, while Residential segment earnings margin is expected to approach double digits. For the total company, we are expecting mid-single-digit adjusted earnings per share growth in Q2. As a reminder, our second quarter is typically the largest of the year. As evidenced by our strong first quarter performance, we are managing our business to take advantage of our strengths as well as market opportunities, while mitigating external pressures. With our team's continued commitment to providing innovative solutions that create value for our customers and drive operational excellence across our business portfolio, I am confident in our ability to deliver sustainable, profitable growth for the long term. With that, I will turn the call over to Edric. Edric Funk: Thank you, Angie, and good morning, everyone. Our results in the first quarter demonstrate our competitive positioning and business resilience, our market-leading innovation, and our team's skillful execution of key initiatives. Together, these factors provide a solid foundation for future success. With our strong balance sheet and free cash flow, we continue to invest in technological innovations and growth markets that provide significant value for customers and The Toro Company. Let me share a few examples. We are actively pursuing opportunities to capitalize on the growing global demand for underground construction equipment, which is being fueled by aging infrastructure, new data centers, and a rise in energy and telecommunications projects. CONEXPO, which is North America's largest construction trade show, is taking place this week. At the show, we are exhibiting our broadest offering ever of underground and specialty construction solutions. With our recent acquisition of Tornado, which is a natural complement to our existing products, we are poised to extend our reach and impact within this category and beyond. In Golf, Grounds, and Irrigation, we are building a pipeline of innovations that help customers maximize workforce productivity and reduce costs. Last November, we introduced our AI-enabled Spatial Adjust software, which is proven to be, in the words of our customers, an absolute game changer. This water management system is simultaneously helping to preserve one of our most precious resources, delivering more consistent playing conditions, and bolstering subscription service offerings that provide incremental recurring revenue for The Toro Company. This spring, we are further expanding our water management suite with the launch of our new RXC irrigation controller. This reliable and contractor-friendly irrigation solution provides modular expandability, advanced flow monitoring, and smart features such as predictive weather-based scheduling, seasonal adjustments, and intuitive programming. Innovations like this enable our customers to better manage costs, conserve water, and maintain the condition of the ground in their care. And finally, by coupling targeted acquisitions and strategic partnerships with years of our own internal development, we are incredibly excited that we now offer the market's broadest range of autonomous turf maintenance solutions. We have accomplished this by leveraging multiple localization and navigation technologies across an array of high-energy and low-energy product platforms. While most of these innovations are still early in their growth life cycle, we are very optimistic about their future potential. At the same time, we are also excited about the near-term opportunities within our core businesses. For example, following the strong performance of our snow categories during Q1, given the current health of the channel, we are confident about the prospects for those product lines in the second half of this year. Finally, the team's commitment to operational excellence and optimization of our global supply chain will continue to help us mitigate increases in materials and manufacturing costs, streamline our supply chain operations, and manage our inventory with exceptional success. Through the steadfast engagement of our team, we are building strong momentum for future growth. I will now turn the call over to Rick for closing remarks. Rick Olson: Thank you, Edric. In closing, I want to underscore our confidence in The Toro Company's strategy and continued profitable growth. Our actions are enhancing our customers' performance, strengthening our competitive advantage, and increasing our operational efficiency. Through our disciplined approach to capital allocation and balance sheet flexibility, as well as our commitment to strong free cash flow, we are well positioned to deliver significant value to all our stakeholders for many years to come. We will now open for questions. Operator: We will now open for questions. Our first question comes from Samuel Darkatsh with Raymond James. Your line is open. Samuel Darkatsh: Good morning, Rick, Angie, Edric. How are you? Rick Olson: Good morning, Sam. How are you? Samuel Darkatsh: I am well, thank you. A few quick questions if I could. First off, Pro sales were up 7% in the quarter. Can you give us a sense of what that was organically, excluding the Tornado effects? Angie Drake: We also saw improved underground and Pro contractor shipments. And then, of course, you said Tornado. Excluding Tornado, it would be snow and then underground construction and Pro contractor. Samuel Darkatsh: So figure maybe 5% or so is organic and a point or two would be Tornado. Would that be fair? Angie Drake: That is probably close. What I failed to mention, though, is that we did see some of that offset by some softness that we saw in international. But overall, I think 1% to 2% is probably fair. What we had mentioned in Q4 is that Tornado would contribute about 2% growth for sales, so for inorganic growth will be about 2%, and their sales were we were expecting to be about $100 million for the year. So pretty well in line with what our expectations were for Q1. Samuel Darkatsh: Gotcha. And then on an all-in basis, what was snow and ice? I understand it is a relatively attractive margin category in both segments for you. Can you help us contextualize how much snow and ice was up in the quarter? Rick Olson: We did, as Angie said, have strength across our businesses. If you look at the two reporting segments, it was the largest portion of each of those segments. On the Residential portion, it would be the largest, but also offset by some shipments of spring products that will be a little bit later, rolling into the second quarter. So there was some offset there, but it was the largest portion of the increase there. Interestingly, on the Residential side, as we talked about, there was field inventory in place, so retail was even stronger than the shipments that we saw. Shipments, if you look at a ten-year average, were about on average on the Residential side. On the Professional side, a little different story. The shipments were well above the ten-year average, and in both cases, it just puts us in a very positive field inventory position as we go into the second half of the year. That gives us confidence in the preseason fills both for the Professional and the Residential side as we go into the third and the fourth quarter. So the largest portion of each of the segments was snow, but really strength across the businesses, and in the case of Residential, kind of back to a more normal snow shipment year for us. Samuel Darkatsh: Gotcha. Then my last question has to do with the annual guide. The 6.5% high end of your range, I am trying to first off, I am trying to get there with the Professional and Residential guide. Professional up mid-single, high end of the Residential is flat. Obviously, that does not get you to 6.5%. So in order to get to 6.5%, would Pro be closer to high single-digit growth, or would Resi turn positive? I am just trying to get a sense of how to think about the high end of the range, Angie. Angie Drake: Sam, I think what we can talk to are the pieces of that. As we think about the full year, expect to get a little bit more than our average 1% to 2% on net realized price, and then the balance of that will be driven by organic growth, and that will be largely in the Professional segment and in the categories that we talked about earlier: underground, Professional contractor, Golf and Grounds, and a strong second-half snow sell-in. Samuel Darkatsh: Okay. I will ask that offline. It is fine. Thank you all. Appreciate it. Very good stuff. Rick Olson: Thank you. Operator: Our next question comes from Tim Wojs with Baird. Your line is open. Tim Wojs: Nice job. Maybe just to kind of piggyback off Sam's question. I guess, you raised the Residential guide, but you did not raise the Professional guide. Is that just going from one end of the range to the other end of the range, or is there something in Pro that is offsetting some of the upside that you saw in the quarter in Q1? Angie Drake: I would say that for Pro, we probably saw a little more softness in international than we expected, so we are having to offset some of that. But the rest of it is really largely as we expected in the Professional segment for the year. We raised Resi because we did see some upside in snow that was a little higher than we expected in Q1 based on some of the snow events that we saw across the country. Tim Wojs: Great. And then I guess one question: when you look at your snow contractor base and your lawn-and-garden contractor base, do you have any sort of sense as to what the overlap between the two is, and if strong snow does help the Professional landscape business and vice versa? Rick Olson: There is a lot of overlap. I think what you are getting at is if you come into the spring season with contractors that do both snow and summer work, they are going to come in in a healthy position, and we would anticipate that that would be the case for the contractors. One thing to keep in mind is contractors have really been strong throughout the cycle. Where we had some softness was with the homeowners that were buying products. They have been pretty solid throughout. The current strength is also being bolstered by the new products that we are introducing. For example, in the Exmark area, the Lazer that was introduced two years ago and the Radius are both selling very strongly. So that puts those factors together, and it is a very positive position for landscape contractor on the pure Pro side. Tim Wojs: Gotcha. Tim Wojs: That is helpful. And then the last one I had, just as we did our Golf checks this quarter, we got back kind of an abnormally high response rate around autonomous adoption. Could you just review for us where you are in autonomous in Golf, and if there are any KPIs around how big autonomous is, how it is growing, the products that golf courses are adopting? I think that would be really helpful. Thanks. Rick Olson: Great question, Tim. The response you got is not surprising. There is a lot of interest, and that would not surprise any of us knowing that labor represents such a significant portion of golf course budgets, and that for a lot of golf courses, they are finding it difficult to find and attract the labor. That is clearly the driver and has been for some time. We have seen it is kind of difficult to find a golf course that has not at least experimented with some autonomous solutions. I think they are still looking for how that ultimately fits into their business. Some of what we are excited about—we have been investing in this category because of those drivers for a long time. As I mentioned in the prepared remarks, we are pretty excited now that we cover all the bases. So if somebody is looking for that traditional robot style, whether that is for around the clubhouse or smaller areas of the rough, we have that. If they are looking for still low energy but a more productive piece, we now offer that product as well. If they are looking to, rather than mow, collect balls on the range, we have a version of that platform that does that piece. Then we are also now offering products up in the higher-energy range. If they are thinking about mowing that longer turf that, again, you might find in the rough, but they are looking for an even more productive machine and one with the traditional mowing technology, we have a platform for that, and then all the way now to the fairway mower. We are pretty excited there. As we said, it is still early days on people being all-in across the board, but we only expect additional interest and growth in that area. Tim Wojs: Awesome. Thank you. Thanks for the detail, and good luck, guys. Angie Drake: Thank you. Operator: Our next question comes from David MacGregor with Longbow Research. Your line is open. Joe Nolan: Hey, good morning. This is Joe Nolan on for David. I was just wondering, with the bottlenecking investments and other investments you have made in the Ditch Witch business, can you talk about how much improvement you are seeing on margins today in that business and how much more improvement we could see in 2026? Rick Olson: We continue to see, really from the time of the acquisition in 2019, steady growth in our profitability in that business. It is from a number of factors, obviously leveraging across the scale of The Toro Company, but also the continued improvement by that business. We are back soundly in the range of the Professional profitability at this point, and the investments that you mentioned, like the new paint system and others within the facility, are helping us to continue to fuel the growth that we see across a lot of drivers within that business. The business continues to be healthy, we have continued to make solid profit improvements, and we are very optimistic about the outlook for that business going forward with the long runway. Joe Nolan: Got it. That is encouraging. And then on the international business, you mentioned some weakness there. Could you expand on what markets that is in and how that is factoring into your guidance? Rick Olson: Broadly across our businesses, that is the one area that is a little bit behind where we would expect them to be at this point in the year, just through the first quarter. I just looked at that detail this morning, and it is kind of broadly across a number of areas, both in Europe and in Asia across multiple categories. It is more just kind of a general economic environment sort of situation. Our team is still optimistic that they will be on track for the year, but we just see some softness there so far this year that we wanted to pass on as commentary. Joe Nolan: Got it. And then just one last one for me quickly. On M&A, can you talk about what you are seeing in terms of valuations and also update us within the existing where you see the greatest opportunity to build within organic growth? Rick Olson: Our approach to M&A has remained pretty consistent through the years. The activity has always taken place, building opportunities for M&A. We stay pretty focused in areas where we know we can compete and win, so it is close to our existing businesses. If you pick those out, it is going to be likely on the Professional side, and we see opportunities within, as evidenced by the Tornado acquisition, the underground and specialty construction particularly, but also opportunities for technology investments and adjacencies that might be there as well. The key point is the process continues on an ongoing basis. Valuations have been high, but there are some signs of moderating a little bit—just recent data points. Nothing necessarily statistically valid there, but valuations may be moderating a little bit. Joe Nolan: Great. Thank you for answering my questions. I will pass it on. Rick Olson: Thank you. Operator: Our next question comes from Eric Bosshard with Cleveland Research Co. Your line is open. Eric Bosshard: Thanks. A couple of things, if I could. First of all, with leverage at 1.5, I am curious how you are thinking about the next 12 to 18 months, as there have been a handful of tuck-in acquisitions and some bigger ones. As we move forward, what is the strategy with the leverage opportunity? Is it buying more stock, or more acquisitions? If you could just start on that, it would be helpful. Rick Olson: Thanks for the question. Our capital allocation strategy remains the same. We first invest in research and our new products and innovations. We invest in opportunities for productivity improvement and technology within our facilities. We obviously look for opportunities with M&A, and then, of course, we fund our dividends and typically would buy back stock at the end of that list. With regards to M&A, we have the capacity and we have the interest in M&A of all sizes. It is really, for us, the process that we go through and the discipline that we maintain in that process. We are always open to M&A, but it is really the process and the opportunities and the timing for potential sellers that is the gauging factor. Did that answer your question? Eric Bosshard: Yes, that helps. The second question is from a field inventory perspective on both the Pro and Residential side. Curious what that looks like presently and also the appetite for loading in both the Pro and the Residential side from your partners? Rick Olson: We are actually in a very healthy position from a field standpoint. Even in a normal situation, there will be differences by businesses, so some a little high, some a little low, and those businesses are working to adjust those with the normal flow. I would say we are pretty normalized at this point, and with regard to your question about channel, it really, as we mentioned earlier, helps us and gives us confidence in the second half of the year with the snow. In particular, the Professional products would be going into the preseason in the third quarter and the Residential products in the fourth quarter. So it does give us confidence in the second half to derisk some of those factors in the second half. Eric Bosshard: Okay. Thank you. Rick Olson: Thank you. Operator: Our next question comes from Mike Shlisky with D.A. Davidson & Co. Your line is open. Mike Shlisky: Hi, good morning. Thanks for taking my questions. I am not sure if people on your staff track this, but does the heavy snowfall that we saw most of this winter lead to a potential greener spring, assuming temperatures are somewhat normal? Rick Olson: It does, Mike. Snowfall leads to early spring moisture that gets the growth started early in the spring, so it is typically a positive. We have seen solid snowfall in the U.S. Interestingly, on average, a little bit below, just because of the extremes. The West had little snow, if you think about some of the ski locations. The Midwest was kind of mixed relative to normal, and then you experienced on the East Coast a really exceptional winter. That would also influence the effect that you talked about, so less snow in the West would be less positive going into the spring. Mike Shlisky: Got it. Thanks for that. Turning to CONEXPO, I really enjoyed—I checked out the booth the other day at CONEXPO, the Ditch Witch booth. I was curious about something I saw there called the Orange Intel system, which looks like an interesting fleet management, telematics-type system. The other brands that you have have similar systems like the Horizon 360, for example. I was curious how you feel about your offerings compared to the competition—both those and other offerings on shared infrastructure that maybe other people cannot really replicate. Are there any other digital offerings on the way, like getting Tornado added to it or other digital offerings that might have good subscription tailwind here? Rick Olson: Great observation, Mike, and thanks for the question on that as well. We get more excited every day with the progress of those things. In addition to the ones you referenced, Intelli360 would be another one that we are using on the Golf and Grounds side of the business. Some of those grew up in different places. Orange Intel is something that has existed with the Ditch Witch brand and the Charles Machine Works company even prior to the acquisition by The Toro Company. But now all of those teams are working together. We execute something within the company that we call our Technology Forum that brings all of our technology practitioners together to share and continue to co-develop. Going forward, what you hinted at is absolutely likely—that you will see more and more commonality and ability for customers who work across different segments of our product lines to be able to use some common infrastructure. Lots of good stuff going on now and excitement for the future there. Mike Shlisky: Great. Maybe one last one for me on the Golf business. I think last quarter, you said that Grounds would be a little bit more of a growth area than Golf, just with Golf having such tough comps. The Grounds has been a little bit of a—it was harder to meet that demand when Golf was so strong. A quarter later, do you still feel that way? Are golf courses—is Grounds still going to be a bigger driver than it was before? I would also be curious about the outlook for international golf courses versus domestic. Rick Olson: Another good question. I would say we are probably feeling a bit more optimistic on both fronts in Golf and Grounds. Our efforts in Grounds are showing benefits. Remember that was something that we were intending to put more energy toward. On the Golf side, we have done some recent research that is showing actually continued growth in equipment purchase expectations and the budgets to support that. We were prepared for some softening off the incredible growth trajectory that we have been on, seeing that normalize more, and it has. But the incoming orders have been a bit more brisk than we probably anticipated. So I would say we are probably more optimistic than we were three months ago in that regard. Mike Shlisky: I guess just your thoughts on global Golf as opposed to domestic. Any differences there? Rick Olson: Connecting back to my earlier comment, things have not been as strong internationally. Participation internationally has been really good, just as it has been in the U.S. There is still money going into the industry, but we have seen a bit more softness there. Development remains pretty strong. Some of the geopolitical things that are going on in the world—we were prepared that that may slow and defer some of the projects in certain regions. Generally, we think things are just connected back to the macroeconomic environment not being quite as strong and maybe a bit less investment internationally than we are seeing in the U.S. Nothing that we are alarmed about, but something that we are watching closely. Mike Shlisky: Thanks for that. I appreciate it. I will pass it along. Operator: This concludes the question-and-answer session. Ms. Lilly, please proceed to closing remarks. Heather Lilly: Thank you, everyone, for your questions and interest in The Toro Company. We look forward to talking with you again in June to discuss our second quarter 2026 results. Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
Operator: Greetings and welcome to the Viemed Healthcare, Inc. Fourth Quarter Year End Quarterly Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trae Fitzgerald, CFO. Thank you. You may begin. Trae Fitzgerald: Thank you, and good morning, everyone. Ryan M. Langston: Please note that our remarks on this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company’s current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the securities regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The fourth quarter financial supplement and financial news release, as well as the related financial statements, are available on the SEC’s website. I will now turn the call over to our CEO, Casey Hoyt. Casey Hoyt: Thank you, Trae, and good morning, everyone. I appreciate you joining us. Today, we will recap our 2025 performance, discuss the progress we achieved strengthening the platform, and outline how we see the business evolving as we enter 2026. 2025 was a milestone year for us. We delivered record revenue and record adjusted EBITDA, generated significantly higher free cash flow, and made real progress diversifying the business in ways you can clearly see in our results. We are building Viemed Healthcare, Inc. into a cash-generating home care platform with multiple growth engines, and we continue to differentiate ourselves through our high-touch clinical model and technology-enabled approach as we scale. As we move into 2026, we are doing it from a position of strength. We continue to execute well. We are seeing good early signals in the business, and we feel great about the long term in front of us. You can see that in the momentum continuing to build in sleep and resupply, the progress we are making in maternal health, and the way our technology investments are helping us operate at a higher and more capable level across the platform. None of it happens without our people. I want to thank our team for the compassion, professionalism, and commitment they bring to patients every day. We continue to build our workforce in a disciplined way, including developing talent pipelines through Viemed Healthcare, Inc. staffing and integrating new team members from acquisitions. We ended the year with 1,382 employees across the country, and I am proud of how consistently they deliver high-quality care and execute with integrity. That level of commitment matters most when caring for chronically ill patients in the home, and it is at the core of our complex respiratory offerings. In-home ventilation drives real and significant outcomes for patients, and we continue to see a meaningful long-term opportunity here given the underserved and underpenetrated population coupled with the increasing clinical demand. During the fourth quarter, we did see some moderation in ventilator patient growth; it is largely what we expected. The industry is continuing to work through the updated national coverage determination, and the changes are twofold. First, there is a natural operational effort when implementing new documentation and process requirements under the NCD. Our team and processes at Viemed Healthcare, Inc. were well ahead of the curve and proactively addressing the new requirements. The Engage patient platform, which is our proprietary technology deployed in the homes of our patients, has played an instrumental role in providing data that helps our therapists manage and report on real-time compliance metrics. We have also spent significant time in the field re-educating our physician referral sources and patients on how these new requirements affect qualification and ongoing care. Second, the updated criteria mean some patients who previously may have qualified under the prior framework may not qualify today. What is critical to understand is that the underlying demand and clinical need remain strong. This is primarily a coverage and execution transition, and throughout 2025, we invested in the infrastructure to navigate it well. That includes strengthening our compliance capabilities, supporting physician education, and tightening our internal workflows to align with the updated requirements so we can serve the right patients the right way under the current criteria. More importantly, the move toward more objective criteria is something we have long supported. Our view is that, over time, the new NCD changes will reduce uncertainty across the system and ultimately put scale providers like Viemed Healthcare, Inc. in a stronger position. We are already seeing progress entering 2026. A number of patients who previously were denied coverage under more subjective Medicare Advantage criteria are now qualifying under the new NCD standards. Under the new NCD, we have had a 100% success rate at the administrative law judge level on the Medicare Advantage denials we have appealed, which reinforces the appropriateness of the patients we serve and the strength of our documentation. We are also seeing denials resolved earlier in the Medicare Advantage appeals process, which improves reimbursement timing and reduces uncertainty. January was one of the strongest new ventilator setup months in our history. That gives us confidence that, as referral partners get more comfortable with the criteria and our execution continues to improve, we will establish a more consistent growth cadence. So, in summary on the NCD, while there has been some short-term friction as the industry adjusts, the work we have completed early positions us well going forward and supports a long runway for growth in our complex respiratory market. More broadly, as we think about the regulatory environment, I also want to briefly address the recent CMS update regarding the next round of competitive bidding. Based on the categories identified by CMS, we do not expect the announced round of competitive bidding to apply to any of our current product offerings, including ventilators, or to have a material impact on our business. That said, the broader compliance and program integrity elements included in the update continue to favor scale providers with strong documentation, operational controls, and national infrastructure—areas where we have been tested for many years and we know we are well positioned. As regulatory clarity continues to improve, it creates a stable foundation for growth across the platform. That stability is allowing us to progressively move into areas that are scaling quickly, particularly sleep and resupply. What started as a complementary service has become a meaningful and accelerated growth driver for Viemed Healthcare, Inc. As of 12/31/2025, our PATH therapy patient count reached 34,528, which represents growth of 62% year over year. During 2025, new sleep patient setups increased 70% compared to the prior year. That growth reflects strong execution by our sales and operational teams and solid demand in the market. It also translates into a strong pipeline for future residual sales. We ended the year serving 36,561 resupply patients, up 49% year over year. As the patient base grows, more patients move into long-term resupply relationships, which creates recurring and predictable revenue over the life of the patient. We are encouraged with the progress, and we still see room to improve conversion rates and deepen patient engagement, which gives us additional runway heading into 2026. We are also experiencing real tailwinds behind this category. Obstructive sleep apnea remains significantly underdiagnosed, clinical awareness continues to increase, and broader conversations around metabolic health and GLP-1 therapies are bringing more patients into screening and treatment. Sleep is and will continue to be an important pillar of our growth strategy. That progress in sleep is a good example of how our platform is evolving. The Lehan’s Medical Equipment acquisition is another strong example of that continued evolution in action as we expand into maternal health. Since closing the acquisition of Lehan’s Medical Equipment on July 1, the business has performed well and integrated smoothly. The transaction has been accretive out of the gate, generating positive net income contribution in both quarters since closing. What excites us going forward is the ability to scale maternal health beyond Lehan’s original footprint. Lehan brought deep expertise in the category and a strong operating team. Viemed Healthcare, Inc. brings a national infrastructure we have built over many years, including payer relationships, clinical operations, intake, billing, and compliance. Together, that allows us to take what Lehan does well and expand it through the Viemed Healthcare, Inc. platform to reach more patients in more places. We began billing our first maternal health claim outside of the Lehan footprint late in the third quarter, and early signs have been very encouraging. In 2025, approximately $9,000,000 of our revenue was associated with maternal health products across existing Lehan markets and new Viemed Healthcare, Inc. markets. Maternal health further strengthens our diversification. It broadens our payer mix, reduces our concentration in Medicare, and adds another recurring DME category, making our overall revenue base more balanced and resilient. As we continue to build payer relationships, referral pathways, and operational capacity, we expect maternal health to become a more meaningful contributor as we expand in 2026. We view maternal health as a scalable extension of our platform and an important long-term growth opportunity for Viemed Healthcare, Inc. As we have scaled the business at a high growth rate, we are pleased with how well our forecasting process has performed. In particular, our adjusted EBITDA performance has consistently tracked in line with our expectations. The key driver has been the reliability of our highest-margin offerings, which have continued to perform to plan and provide a stable earnings foundation. While lower-margin offerings such as staffing can move around from period to period, that variability is inherent in the model and does not change the underlying earnings profile of the business. Overall, we view our track record of delivering against our adjusted EBITDA outlook as a highly valuable strength as we continue to grow Viemed Healthcare, Inc. into an integrated platform. Reflecting on our success, the reason we can grow and diversify the way we have is because of the processes we built over time and the strength of our operations every day. For nearly two decades, we have proudly focused on execution, clinical quality, and doing things the right way. At the center of that execution is our high-touch clinical model. Our respiratory therapists and clinical teams stay closely connected to patients in the home through frequent touch points, education, and monitoring. We support that with our proprietary clinical platform, which connects devices, clinicians, and workflows so we can improve patient adherence, clinical outcomes, and efficiencies as we scale. We also benefit from embedded relationships through our staffing business, which sustains relationships with hospitals and discharge pathways and supports a steady flow of opportunities across our service lines. We have invested heavily in the capabilities that matter in this industry—especially documentation, compliance, and reimbursement—so that we can operate effectively as coverage criteria evolve and scale new categories such as behavioral health with confidence. The other critical piece is our payer platform. We built a nationwide network of payer relationships and reimbursement capabilities over many years, and that foundation is difficult to replicate. It is a big reason we can expand into areas like sleep and maternal health and scale them more efficiently because the contracting relationships, operational processes, and reimbursement expertise are already in place. Put all the pieces together and we have a differentiated in-home-based care platform. That is what gives us extreme confidence we can keep growing, keep diversifying, and keep expanding cash flow over time. I will now turn the call over to William Todd Zehnder to walk through our financial performance and capital allocation priorities in more detail. William Todd Zehnder: Thank you, Casey. I will begin with a review of our financial performance for the quarter and the full year, and then provide additional context around margins, cash flow, and capital allocation. In reviewing the financial results, all figures are in U.S. dollars, and our full results have been filed with the SEC. I will be referencing information available in our quarterly financial supplement, which can also be found on our Investor Relations website. For the fourth quarter, revenue was $76,200,000, an increase of 26% over the prior year. For the full year, revenue totaled $270,300,000, up approximately 21% compared to 2024. The growth was broad-based, reflecting continued organic expansion across our core service lines and the contribution from the Lehan acquisition during the third and fourth quarters. Looking at the components of that growth, equipment and supply sales were the largest contributor, increasing by $19,400,000, or approximately 63% year over year. That growth was driven primarily by continued expansion in sleep resupply and the addition of maternal health following the Lehan acquisition. Ventilator rentals increased $12,200,000, or roughly 10%, reflecting higher patient volumes and solid demand. Our other non-vent HME rentals increased by $9,700,000, or 20%, supported by growth in PATH, oxygen, and airway clearance therapies. Services revenue increased by $4,800,000, or about 24%, driven mainly by continued growth in healthcare staffing. From a mix perspective, the diversification is clear. Ventilation moved from 56% of revenue in 2024 to 51% in 2025 as other categories scaled at a faster rate. Sleep increased from 16% to 20%, and maternal contributed approximately 3% of revenue in 2025. Outside of those areas, mix was relatively stable. So, while ventilation remains a significant component of the business, revenue is becoming more balanced across multiple service lines, consistent with our strategy. For the fourth quarter, adjusted EBITDA totaled $18,200,000. For the full year, adjusted EBITDA was a record $61,400,000, representing a margin of approximately 22.7%, which has remained stable and is expected to remain at a similar level as we move into 2026. Gross margin for the year was just under 58%. We are not seeing structural margin deterioration as the business diversifies. While sleep and maternal health have a different margin characteristic than ventilator rentals, those differences are being offset by operating efficiencies, scale benefits, and disciplined expense management. We continue to see operating leverage within SG&A as revenue scales, even as we invest in technology and platform expansion. Turning to cash flow, performance improved meaningfully in 2025. Net cash provided by operating activities was $51,900,000 for the year. After net CapEx of approximately $23,800,000, free cash flow totaled $28,100,000 compared to $11,600,000 in 2024, more than doubling year over year. In the fourth quarter alone, free cash flow was $10,800,000. Net CapEx represented approximately 10% of revenue for the quarter, and we continue to expect net CapEx to be in the 10%–11.5% range for the full year 2026. As the revenue base continues to diversify, a larger portion of growth is coming from categories that are less capital intensive. Over time, that supports lower capital intensity and continued expansion in free cash flow as we scale. Turning to the balance sheet, we ended the year with $13,500,000 in cash and approximately $46,000,000 available under our existing credit facilities. Long-term debt totaled $11,300,000 at year end. Net of cash on hand, we effectively had no net debt, which provides us with significant financial flexibility. Following the Lehan acquisition, we have already begun reducing the associated debt, supported by ongoing cash generation. The combination of low leverage, strong operating cash flow, and manageable capital intensity provides us with meaningful financial flexibility as we allocate capital across growth initiatives and shareholder returns. This brings me to capital allocation. As announced yesterday, our board has authorized a new share repurchase program for 2026. This authorization reflects our confidence in the durability of our cash flows and our long-term outlook. At current operating levels, we are generating meaningful free cash flow after capital expenditures, and we believe it is appropriate to return a portion of that capital to shareholders while maintaining flexibility for strategic investments. Our approach remains balanced. First, we will continue to prioritize organic growth investments that enhance our competitive position. Second, we will evaluate disciplined, accretive acquisition opportunities that expand our platform and meet our return thresholds. And third, when appropriate, we will return capital to shareholders through share repurchases. We view share repurchases as an opportunistic and value-oriented component of our capital allocation framework. Given our cash generation profile and modest leverage, we believe we can execute this balanced strategy without compromising growth. Current market dynamics present an attractive opportunity to execute on this buyback. Overall, we believe our capital structure and capital allocation priorities position us well to drive long-term shareholder value. Turning to our outlook for 2026, we are guiding to full-year net revenue in the range of $310,000,000 to $320,000,000. At the midpoint, that represents approximately 17% year-over-year growth, excluding any contribution from potential acquisitions. We are guiding adjusted EBITDA in the range of $65,000,000 to $69,000,000. EBITDA growth is expected to trail revenue growth on a percentage basis. That largely reflects the fact that 2025 adjusted EBITDA benefited from non-recurring items, including the $2,200,000 gain from the vent buyback program. On a normalized basis, the 2026 outlook reflects healthy growth in core EBITDA dollars and continued margin stability within our recurring revenue base. As we have discussed, we expect the quarterly cadence to be uneven. We anticipate the first quarter to be relatively flat to slightly down sequentially, reflecting the continued transition in complex respiratory documentation and the normal seasonality of the business. Beginning in the second quarter, we expect to return to a more normalized quarterly growth pattern with sequential growth in the range of approximately 3% to 5% throughout the remainder of the year. Our guidance assumes continued investment in technology, compliance, infrastructure, and platform expansion alongside disciplined expense management. We are not assuming a material change in our margin profile, and we are not building in aggressive operating leverage beyond what is supported by the current cost structure and our operating plan. Overall, our 2026 outlook reflects solid growth, stable margins, continued improvement in free cash flow, and disciplined capital allocation. With low leverage, strong liquidity, and a scalable operating model, we are in a very strong financial position as we enter 2026. While we do not currently guide to a free cash flow amount, we are comfortable saying that we expect to continue to generate a significant amount of free cash flow even after the aggressive growth that we are guiding. Before we open the line up for questions, I will briefly summarize what 2025 represented financially and how we are positioned going forward. We delivered record revenue and record adjusted EBITDA, maintained margin stability through a shifting revenue mix, and more than doubled free cash flow year over year. We ended the year in which we bought back 5% of the outstanding shares at an average price of $6.69 with effectively no net debt and significant liquidity, providing flexibility to invest in organic growth, pursue accretive opportunities, and once again return capital to shareholders. As we look to 2026, the combination of diversified revenue streams, stable profitability, improving free cash flow conversion, regulatory stability, and a strong balance sheet positions us well to continue executing our strategy. With that, operator, please open the line for questions. Operator: Thank you. We will now be conducting a question-and-answer session. The first question is from Dave Storms from Stonegate. Please go ahead. Dave Storms: Good morning. Just wanted to start with the expansion from the Lehan acquisition. Just curious as to what is at the top of your to-do list there. Is that going to be expanded payers? Is that going to be improving the sales force? What do you think is your priority number one to maintain that expansion? Casey Hoyt: I will start that, and, Todd, you can fill in wherever you want to. Basically, all of those initiatives are important to us. I would say the payer initiative is more important. Getting the Lehan network expanded into the Viemed Healthcare, Inc. network of payers is underway. It is not as simple as just turning on each individual payer. There is a lot of research that goes into reimbursement rates for certain states, and we are strategically picking out the correct states to expand into. From there, it is onboarding that into the technology piece, which executes the breast pump sales. The second piece is yes, we are going to train some boots-on-the-ground sales folks. That is the Viemed Healthcare, Inc. way, if you will, and that is already underway. We are cross-training some of our sleep reps that are out and about and have the bandwidth to expand their referral sources. We will look to do that concurrently with building up the payer network. I would say the other thing that we are working on is this is a significant growth area. We are confident, on a percentage basis, it will be the fastest-growing product line for our company. We are making sure the back-office support from fulfillment and onboarding of patients can keep up with the rapid growth that we are putting around the country. There are a few different prongs, and we are proactively working on all of that with the Lehan management team, who are really guiding us around the country. Dave Storms: That is great commentary. I appreciate that. You mentioned in there just expanded boots on the ground and cross-training sleep folks. Just curious, zooming out a little bit, what your thoughts are around your overall sales force and comfortability with training. Are you going to need to expand that, do you think? Any commentary there around your current sales force? Casey Hoyt: That is correct. We have already begun cross-training our sleep reps. Our sales force at Viemed Healthcare, Inc. is somewhat segmented into complex respiratory, in which that sales rep would sell a vest, oxygen, and a combination of therapies, and would typically call on case management and pulmonologists, whereas we have another sales force for sleep calling on cardiologists and family practice, internal medicine—those types of contacts. It is really easy to bolt on OB-GYNs while they are out and about to call on the breast pump leads. Once it is the type of business that is turned on, it does not require much ongoing management. You just have to check in, make sure things are going well, and make sure your customer service is in line, and off you go. To circle back to your question, the training is underway. We have already got some reps out in the field in certain states where we are good to go with our payers. We will continue to expand that. Dave Storms: Understood. Appreciate that. Last one for me. You mentioned that margins are expected to remain stable throughout the year. As your mix diversifies into more diversified revenue streams, how many more levers do you think you have available to pull to keep margins stable? Or do you believe that some of that margin stability is just going to come from increased volumes? William Todd Zehnder: I think, at a net level, we have the continued opportunity to push on scalability in SG&A and the fixed costs there, really probably more than anything from a technology standpoint. Obviously, transactional volumes are going up with the evolution of diversifying this business. They do not have a per-dollar amount like the revenue from a vent patient, but the volumes are going up. So we have to get more efficient from a technological standpoint, and that would really be through the SG&A world. On the gross margin, our intent is to reduce expenses at a labor level that would keep gross margins relatively flat. That is an uphill battle, as vent gross margins carry a higher percentage amount, albeit with a higher CapEx amount that goes with it. At the end of the day, what we are really looking at is EBITDA margins and net income margins, and our goal is to try to keep gross margin as close to flat as possible. Dave Storms: That is great color. Thank you for that, and I will get back in the line. Casey Hoyt: Thanks, David. Operator: The next question is from Ilya Zubkov from Freedom Broker. Please go ahead. Ilya Zubkov: Good morning. Thank you for taking my questions. My first question is related to the guidance. Could you just elaborate on the key assumptions underlying your current revenue guidance across the business segments? William Todd Zehnder: Our overall view is that we are not forecasting rapid growth this year as we are working our way through the NCD. We are not saying that vents are going to grow at the historical level that they have. With that being said, like Casey said in his prepared remarks, we are seeing a significant benefit in the first one to two months of new patient starts, so that is encouraging. But just with the uncertainty of the NCD, we are not forecasting an aggressive amount there. We are forecasting a pretty aggressive amount when it comes to sleep, a notional amount that is probably even larger than we forecasted last year. And then, like I said on the last question, maternal from a percentage standpoint is by far the largest, partially because we have a full year of the Lehan acquisition, so that is naturally going to give you a boost there. We are also modeling pretty significant growth within the Viemed Healthcare, Inc. contracts around the country, like Casey talked about a little while ago. To summarize it, the growth is across all product lines. It is going to be split between organic and a little bit of acquisition just because Lehan is there for the full year. If we get back to our historical growth rates, then that is just upside for us. And this assumes no net new acquisitions. Ilya Zubkov: Thank you. This is helpful. I also noticed a sequential decline in the number of respiratory therapists during 2025. Could you walk us through how you determine when to add or reduce RT capacity and how the reduction in the last quarter may affect service revenue in 2026? William Todd Zehnder: RTs are really driven by patient volumes, and sometimes that number will ebb and flow depending on whether we are going into new areas that do not carry as large of a patient-per-RT value. I do not know the exact sequential decline—it may be off a little bit—but it could be because we had more of our RTs in areas that have significant volumes, our established cities. Vent patients were relatively flat quarter over quarter with the adoption of the NCD. We would expect that number to continue to stay relatively in line on a patient-per-RT basis, and the hope is that those numbers both start growing again in 2026. That is the plan. Ilya Zubkov: Great. Thank you very much. William Todd Zehnder: Thanks, Ilya. Operator: There are no further questions at this time. I would like to turn the floor back over to Casey Hoyt, CEO, for closing comments. Casey Hoyt: Thanks, everyone, for joining us. We appreciate your trust in Viemed Healthcare, Inc. We will continue this positive momentum and look forward to a wonderful 2026. Everyone have a good day. Thank you. Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to the Ring Energy, Inc.'s fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Al Petrie, Investor Relations Coordinator. Please go ahead, sir. Al Petrie: Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy, Inc. We will begin our call with comments from Paul D. McKinney, Chairman of the Board and CEO, who will provide an overview of key matters for the full year. We will then turn the call over to Rocky Kwon, Ring Energy, Inc.'s VP and Chief Accounting Officer, who will review the details of our fourth quarter 2025 and full year financial results. Paul will then return to discuss our 2026 guidance and outlook with closing comments before we open up the call for questions. Joining us on the call today are Sanu Joel, who recently joined Ring Energy, Inc. as its Executive Vice President, Chief Financial Officer, and Treasurer; Alexander Dyes, Executive Vice President and Chief Operations Officer; James Parr, Executive Vice President and Chief Exploration Officer; and Shawn D. Young, Senior Vice President of Operations. During the Q&A session, we ask you to limit your questions to one and a follow-up. You are welcome to reenter the queue later with additional questions. I would also note that we have posted an updated corporate presentation on our site. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy, Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our filings with the Securities and Exchange Commission. These documents can be found in the Investors section of our website located at https://www.ringenergy.com. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I will now turn the call over to Paul D. McKinney, our Chairman and CEO. Paul D. McKinney: Thanks, Al, and good morning, everyone. We appreciate you joining us today. Before we begin our discussion, I would like to introduce Executive Vice President, Chief Financial Officer, and Treasurer, Sanu Joel, who joined our senior management team last Friday. Sanu brings more than 20 years of experience across upstream oil and gas investment banking, corporate finance, and strategic advisory roles with deep expertise in mergers and acquisitions, capital markets, valuations, and financial strategy. For the last six years, Sanu was Managing Director and Co-Head of Energy Investment Banking at Raymond James & Associates, Inc., where he advised public and private E&P companies doing business in the Permian Basin as well as other major U.S. onshore basins. We are very pleased to welcome Sanu, who we got to know well while he was at Raymond James. Sanu, welcome aboard. Sanu Joel: Thank you, Paul. I am excited to be here. I want to start by thanking you, the Board, and the entire leadership team for entrusting me with this important role as we begin what I truly believe is an exciting next chapter for Ring Energy, Inc. and for our stockholders. As a banker, I have known the company and many of you in the investment community for quite some time, and I am genuinely thrilled to now be on the inside working alongside you, Paul, and the rest of this leadership team. We have a very exciting future at Ring Energy, Inc. I look forward to contributing as we continue to execute our strategy and create long-term value for our stockholders. Paul D. McKinney: You are welcome, Sanu, and we are equally excited for you to be a member of our executive team. Like I said earlier, welcome aboard. Regarding the task at hand, what a difference a week can make, right? Up until the Iranian crisis began to unfold last weekend, our focus was on raising the floors of our oil hedges to help ensure our future realized prices would be adequate to fund our 2026 capital program. Things certainly look different today. We will talk more about 2026 and the future later in this call, but for now, Rocky and I are going to reflect on what happened last year, the conditions we faced in 2025, and our fourth quarter and full year results. 2025 was a year that demonstrated the strength and resilience of Ring Energy, Inc.'s value-focused, proven strategy. When combining the flexibility afforded by our strategy and the discipline demonstrated by the management team to quickly adjust capital spending in the face of post Liberation Day oil prices, Ring Energy, Inc. delivered strong performance throughout the year 2025 and in the fourth quarter. Perhaps one of the more important successes was that we increased adjusted free cash flow by 15% year-over-year, setting a new company record despite 18% lower realized commodity prices, and we delivered our 25th consecutive quarter of adjusted free cash flow, a track record we are very proud of. We also increased sales volumes by 3% year-over-year, our total proved reserves by 14%, our proved undeveloped inventory by 17%, which pushed our identified total locations to 500 or more, representing over 10 years of drilling inventory. This is significant because we have demonstrated for the third year in a row our ability to organically grow our reserves beyond merely replacing our production. We decreased capital spending by 35% year-over-year, reducing our reinvestment rate by 18% to 53% of our 2025 EBITDA. We improved our drilling capital efficiency by 19% since 2023 and 3% year-over-year to $500 per lateral foot, keeping our capital costs under control. We also reduced our year-over-year per BOE all-in cash cost by 4% and our lease operating expense during the last six months by 18% or $1,400,000 per month over the pro forma run-rate prior to closing the Lime Rock asset acquisition. This is significant because our lease operating cost run-rate per month is less today than it was before the Lime Rock acquisition despite the fact that we are operating more wells and more production. And finally, we reduced our debt by $40,000,000 since the closing of the Lime Rock asset acquisition in addition to making the $10,000,000 deferred payment in December. The $40,000,000 debt reduction represents almost 60% of the debt incurred at closing of the Lime Rock acquisition in only three quarters, and all of that done in a low price environment. Although 2025 will be remembered by Liberation Day and challenging oil prices that followed, Ring Energy, Inc. stepped up to the challenge and delivered strong operational and financial performance. Now, with that, I have completed my intro. I am going to turn it over to Rocky to go over the numbers and the details of the fourth quarter and the full year, and then Sanu, me, and the rest of the team will follow up afterwards to review our outlook and guidance for 2026 and discuss rapidly changing conditions affecting our industry and what they may mean for our stockholders. Rocky? Rocky Kwon: Thanks, Paul. Good morning, everyone. We are pleased with our outcome for the fourth quarter. In addition to the results that met our overall guidance, the fourth quarter capped off another successful full year for Ring Energy, Inc. Similar to past calls, I will take a few minutes to cover some additional color detailing the most significant sequential quarterly results. Starting with production, in the fourth quarter we sold 20,508 BOE per day, down from 20,789 BOE per day in the third quarter, a slight decrease of 1%. A portion of the decrease was attributable to a third-party gas plant being shut in due to a fire, which affected our sales volumes. Our fourth quarter total sales volumes were above the midpoint of our guidance range and contributed to a record full year 2025 sales volume of 20,253 BOE per day. The year benefited from nine months of production from our Lime Rock acquisition, which closed in March 2025. As Paul discussed, another successful drilling campaign across our asset base with a continued focus on our highest rate-of-return inventory also materially contributed to our record full year 2025 sales volumes. Turning to the fourth quarter 2025 pricing, our overall realized price declined 14% to $35.45 per BOE from $41.10 per BOE in the third quarter. The overall sequential decline was driven by 11% lower realized pricing for oil in the fourth quarter 2025. Our fourth quarter average crude oil differential from NYMEX WTI futures pricing was a negative $1.66 per barrel versus a negative $0.61 per barrel for the third quarter. This was mostly due to the Argus WTI-WTS that decreased negative $0.14 per barrel offset by the Argus CMA roll that decreased a negative $0.92 per barrel on average from the third quarter. Our average natural gas price differential from NYMEX futures pricing for the fourth quarter was a negative $6.04 to $7.00 per Mcf compared to a negative $4.22 per Mcf for the third quarter. Our realized NGL price for the fourth quarter averaged 9% of WTI compared to 8% in the third quarter. Oil revenue decreased by $9,500,000 due to a negative $8,300,000 price variance and a negative $1,200,000 reduction. Gas and NGL revenues, on the other hand, increased by $2,200,000 quarter-to-quarter, for a combined total of $2,500,000 in the fourth quarter compared to $300,000 in the third. This resulted in fourth quarter revenue of $66,900,000 compared to $78,600,000 for the third quarter, a 15% decrease. Fourth quarter LOE of $18,900,000 was 8% below third quarter. On a unit basis, fourth quarter LOE was $10.02 per BOE, which was 7% below the low end of our guidance range. Third quarter LOE was $10.73 per BOE. Cash G&A, which excludes share-based compensation and transaction-related costs, was $3.46 per BOE for the fourth quarter versus $3.41 per BOE for the third quarter. Our fourth quarter 2025 results included a gain on derivative contracts of $17,500,000, up from $400,000 for the third quarter, primarily due to lower relative pricing at the end of the fourth quarter. Finally, for Q4, we reported a net loss of $12,800,000, or $0.06 per diluted share, which includes $35,900,000 of non-cash ceiling test impairment charges. Excluding the estimated after-tax impact of pre-tax items, including share-based compensation expense, non-cash ceiling test impairment and non-cash unrealized gains/losses on hedges, our fourth quarter adjusted net income was $3,600,000, or $0.02 per diluted share. This is compared to a third quarter 2025 net loss of $51,600,000, or $0.25 per diluted share, and adjusted net income of $13,100,000, or $0.06 per diluted share. We incurred $24,300,000 in CapEx in the fourth quarter, in line with the midpoint of guidance. We maintained D&C CapEx at $14,000,000 in the fourth quarter compared to the third quarter. We incurred costs of approximately $500,000 for facility upgrades, which contributed to our year-over-year reduction in emissions. Also included in our fourth quarter CapEx was over $400,000 in leasing cost, approximately 23% of our full year leasing, which added to our reserve replacement and organic inventory growth. In 2025, we generated $5,700,000 of adjusted free cash flow and paid down $8,000,000 in debt, resulting in debt reduction of $40,000,000 since completing the Lime Rock acquisition in March 2025. In addition to the paydown, we made a $10,000,000 deferred payment in December 2025 related to the Lime Rock acquisition. For full year 2025, we paid down $35,000,000 of debt and generated $50,100,000 in adjusted free cash flow. We will continue to utilize our free cash flow to improve our long-term financial profile through further debt repayment, which we expect will be fueled primarily by growth in cash flow driven by the successful execution of our targeted 2026 development program. Our primary focus remains the same: utilizing our substantial free cash flow to primarily reduce debt and better position ourselves to ultimately provide a meaningful return of capital to shareholders. At year-end 2025, we had $420,000,000 drawn on our credit facility. With the borrowing base of $585,000,000 that was reaffirmed in December, we had $165,000,000 available net of letters of credit. Combined with cash, we had liquidity of $166,000,000 and a leverage ratio of 2.2 times. Moving to our hedge position, for 2026, we currently have approximately 2,300,000 barrels of oil hedged, or approximately 48% of our estimated oil sales based on the midpoint guidance. We also have 4.7 Bcf of natural gas hedged, or approximately 66% of our estimated natural gas sales based on the midpoint. For a quarterly breakout of our 2026 hedge positions, please see our earnings release and presentation, which includes the average price for each contract type. I will now turn it back to Paul to review the outlook and guidance for 2026. Paul? Paul D. McKinney: Thank you, Rocky. Before turning to our outlook and guidance for 2026, we want to take a moment to directly compliment our field personnel. Once again, a January winter storm brought extremely cold temperatures and icy conditions to our operations. To our pumpers, maintenance crews, contractors, and our field supervisors, your dedication kept our people safe and our assets protected. We know what it takes to operate in those temperatures, and the executive team and board are incredibly grateful for your grit and hard work. Now, looking ahead to 2026, we intend to follow a similar disciplined approach as we have in the past. Our strategy is to invest enough capital to maintain or slightly grow our production and allocate the remaining portion of our cash from operations to reduce debt. Our budget and plans this year are based on $60 per barrel WTI and $3.50 per Mcf Henry Hub. We expect our average annual sales to range between 19,500 to 20,800 barrels of oil equivalent per day, for a midpoint of 20,150 barrels of oil equivalent per day. We expect our average annual oil sales to range between 12,500 and 13,400 barrels of oil per day, with a midpoint of 12,950 barrels of oil per day. Both ranges are essentially flat with 2025 sales volumes after taking into account the recent divestiture of approximately 200 barrels of oil equivalent per day of non-operated production and the impact of the January winter storm that temporarily reduced production by 500 to 540 barrels of oil equivalent per day. Supporting our production estimates, we expect full year capital spending of $100,000,000 to $130,000,000, with a midpoint of $115,000,000. We anticipate drilling, completing, and bringing online approximately 23 to 32 wells during the year. First quarter spending is projected to be between $28,000,000 and $34,000,000, with a midpoint of $31,000,000. This capital program provides optionality and the potential to add new benches to our drilling inventory, offering a compelling avenue to expand our development, deepen our opportunity set, and further demonstrate the strength and longevity of our asset base. Our ongoing advancements in capital efficiency through longer laterals, optimized completions, and continued constant improvements are already generating tangible benefits and are expected to serve as a strong foundation for sustainable free cash flow generation. With our continued focus on capital efficiency, our full year LOE is currently expected to range between $10.15 and $11.50 per BOE, for a midpoint of $10.65 per BOE. I believe it is important to point out that we are projecting an LOE midpoint below what we achieved in 2025, which emphasizes our continued commitment to further cost reductions. This is important because it contributes directly to the bottom line by increasing margins and creates further optionality for the company. In summary, our 2026 program follows the same proven playbook: disciplined capital allocation, relentless focus on reducing our LOE and cash costs, increasing the capital efficiency of our drilling program, which collectively maximizes free cash flow generation and furthers our ability to reduce debt. As mentioned earlier, our 2026 budget and plans assume WTI oil prices of approximately $60 per barrel and Henry Hub natural gas prices of approximately $3.50 per Mcf. Now with that, we have covered the 2026 guidance. I believe we, as a team, should spend a little more time talking about the Iranian crisis, Ring Energy, Inc.'s strategic advantage, our recent stock price performance since last fall, and what all this can mean for our stockholders. Additionally, people want to get to know you, Sanu, and understand why you chose to leave the investment banking world to join Ring Energy, Inc. Sanu? Sanu Joel: Paul, as you know, I spent nearly two decades as a banker advising E&P companies, and what became increasingly obvious to me over that time is that the U.S. shale model is maturing. Core inventory across the industry is being drilled up, decline rates remain steep, and the market today is far more selective about which companies deserve long-term capital. Against that backdrop, Ring Energy, Inc. stands out. What initially caught my attention was the durability of the asset base. Ring Energy, Inc. operates conventional assets with shallow declines, long-life reserves, and high margins, characteristics that are unique to Ring Energy, Inc. and increasingly rare in today's E&P landscape. A 20-plus year R/P ratio and more than 10 years of identified drilling inventory is something I do not think many other companies can say, especially in the small- to mid-cap space. What also truly differentiated Ring Energy, Inc. for me was its consistency of execution. Ring Energy, Inc. has generated resilient free cash flow for 25 consecutive quarters through multiple commodity cycles. Over the last three years, Ring Energy, Inc. has organically grown reserves, not just replaced production. The company has also been active at M&A, successfully integrating multiple accretive acquisitions, all while simultaneously improving capital efficiency, lowering costs, and reducing debt. From a capital allocation standpoint, Ring Energy, Inc. is doing exactly what the public markets are asking for today: living within cash flow, reinvesting prudently, strengthening the company, building towards sustainable returns of capital, and maintaining optionality for growth. There are very few companies, especially at this scale, that can demonstrate this level of discipline and repeatability. Looking ahead, I am excited to be part of the team. My focus as CFO will be straightforward: protect the balance sheet, enhance free cash flow durability, strategically position us for growth, and help position Ring Energy, Inc. to ultimately return capital to stockholders from a position of strength. With our asset quality, inventory depth, and proven operating and financial discipline, I believe Ring Energy, Inc. is exceptionally well positioned for the next phase of this industry. Paul, I hope this gives investors a better sense of why I am so excited to be working at Ring Energy, Inc. Paul D. McKinney: Thank you, Sanu. Yes, I believe it does, and reinforces why we are so excited to have you. Now turning to James. How about you? What do you believe are some of the more important issues our stockholders should know about Ring Energy, Inc. and in light of the current events? James Parr: I am glad you brought that up, Paul. The value of being a Permian-focused company has never been greater given the potential for international supply disruption. Our over 96,000 net acres footprint in the heart of the Permian has been primarily focused on the San Andres, however, we have proven through our vertical drilling program that we have a robust inventory of additional attractive targets, which have been and continue to be de-risked by us and others in our industry horizontally. Ring Energy, Inc.'s exploration mindset has led to organic growth over the last three years. We do not see any reason why we cannot continue this performance in 2026 and beyond. We began testing previous vertical targets last year horizontally with excellent results. We will continue to test these intervals to determine repeatability and are confident that successful outcomes will result in increased inventory, capital efficiency gains, and future organic growth. More to come. Paul D. McKinney: James, that was great. Alex, what do you believe are some of the important issues our stockholders should know about our company, our operations, and also in light of the current events? Alexander Dyes: Thanks, Paul. Let me walk through how our strategy has delivered real, measurable value for our shareholders and set us up for future value creation. First, we have built a clear track record of executing acquisitions that are not only immediately accretive but strategically complementary. These deals added scale to our business, provided operational synergies, and most importantly, expanded our future drilling inventory. What truly differentiates us is our execution after close. In our two most recent acquisitions, Founders and Lime Rock, we have exceeded expectations in the first year across key metrics, including increased production, lowering lift costs, lowering drilling capital per well, and increasing proved reserves. That performance is tangible proof of value creation, as shown in our 2025 performance. Beyond near-term results, these acquisitions, along with the Stronghold in 2022, have meaningfully deepened our inventory across the Central Basin Platform. Second, increased scale and operational control have enabled a more durable cost structure. Over the past three years, we have consistently improved capital efficiency and reduced operating costs, driving approximately a 10% improvement in finding and development costs to $10.40 per BOE since 2023. That improvement is not cyclical; it is structural. They are driven by disciplined capital allocation, technical optimization, and a strong cost control culture, as demonstrated in our three-year track record of improvements. Our LOE reductions are long-term in nature and further enhance the value of our already long-life, low-decline reserves. Our culture is one built to last, not one for just short-term gains. Finally, looking ahead, we are focused on extending this momentum into 2026, investing in infrastructure that supports the next phase of development as we transition from verticals and predominantly one-mile laterals to multi-bench, longer laterals, meaning laterals longer than 1.5 miles, and co-development opportunities where applicable. Proving our shift to horizontals in 2026, our drilling program midpoint increased the horizontal mix to 85%, or 23 horizontals, versus 67% in 2025. By drilling longer laterals, proving up multi-bench inventory and advancing co-development across stacked pay zones, we are unlocking more capital-efficient inventory and positioning the company for a stronger, more durable free cash flow profile over the long term. Paul, I will turn it back to you. Paul D. McKinney: Thanks, these are all great points. Another point worth discussing, though, is that since the exit of our former largest stockholder in August of last year, our stock price has nearly doubled. If you recall, their exit put additional selling pressure on our stock, causing our stock to trade below $1 and disqualifying our Russell 3000. We believe these two events were instrumental in driving our stock price down to $0.72 a share and our trading multiples at the lower end of our peer group. Another point I want to make is associated with our pursuit of growth through acquisitions. Given our current debt and leverage ratio, we are not in the best position to pursue a sizable acquisition. Having said that, though, we are always looking for the next great deal. And this is where it is good to have more ways to win, so to speak, or more growth tools in the toolbox. We do not only depend on M&A for our future growth because we have demonstrated that we can grow organically as well. Having said all that, this brings us to the end of our prepared remarks, so I will sum things up by saying we scaled the business, expanded high-quality inventory, lowered our cost structure, and are investing today to drive sustainable returns and long-term value creation. We are excited about the opportunities ahead in 2026 and believe we can deliver meaningful long-term stock price appreciation now that our overhang on our stock is behind us. Since the new year, our share price has increased 62%, reflecting renewed investor confidence, our stronger operational execution, and a clear alignment between our stock price performance and our valuation. With that, we will turn this call over to the Operator for questions. Operator? Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please follow the instructions provided. If you would like to withdraw your question, please follow the prompts. And the first question will come from Jeffrey Woolf Robertson with Water Tower Research. Please go ahead. Jeffrey Woolf Robertson: Thanks. Good morning. Paul, you talked about the organic growth in inventory set through the 2026 drilling program. Are you testing any new zones in the 2026 program, or is expanding the inventory related to high-grading zones that you may think are, with additional drilling data points, you determine those could be economic targets? Paul D. McKinney: Good morning, Jeff. Yes, it is a good question. Very much so. And so with respect to new zones, you have to remember that we have been drilling what we call inexpensive verticals and completing the stacked pays in Crane County and also in Ector County for quite some time. North of that, we focused on the San Andres. But all these zones have been producing in many of our wells for a long time. What is new is that we have taken a serious look at our inventory across our entire acreage position. We have identified the zones that we believe are commercial or can be commercial horizontally, and we began last year testing a few of those. And so we are not yet ready to come out with which zones that we are specifically targeting and where. But we are very encouraged by the results. And this year's program is designed to test the repeatability of that, and with that, we will come out with a lot more information about which of these zones that we are targeting, how meaningful it will be for our stockholders in terms of the number of sticks that we are adding into our inventory. And so we are really excited for 2026. I think the point that you are driving to right here is the key reason why we are so excited, because we do believe that our capital program this year, even though a modest one, is going to generate a lot more information about the sustainability of our current asset set in terms of developing future horizontal wells, going from verticals to horizontals. And with that, James, is there anything more you would like to add to that? James Parr: Yes. No. Those are all good points. And Jeff, we paused our original budget at the beginning of the year. What it changed this past week has been, but we are going to stay disciplined towards paying down debt and feathering in these additional tests for these other horizons so we can still meet our financial objectives of paying down debt and remaining disciplined, and then get some data behind us. But we view our previous acquisitions setting us up perfectly with a great inventory of deeper potential that we are in the process of testing. So more to come on this, but as Alex mentioned, we are investing a little in infrastructure to be able to capitalize on converting the program into horizontal wells. And the neighbors surrounding us have been testing some of the zones very successfully too. So we are going to have a disciplined approach to doing this, but we are very excited by the potential we have ahead of us. So thanks for asking. Paul D. McKinney: Yes, and like I said a little earlier, Jeff, although we are not planning to grow our production appreciably this year, it is my belief anyway that the results of the work program that the geoscience and engineering teams are pursuing will inventory more horizontal sticks, and we should emerge from 2026 with an inventory that we can actually develop and lead to significant organic growth without the need to pursue M&A. And, of course, you know that we love M&A, and we like pursuing the acquisitions, but we have more than one way to win, so to speak. And this program, although not designed to develop production growth, it is designed to develop, potentially, additional inventory for drilling locations and also reserve growth. Jeffrey Woolf Robertson: To your point on horizontal wells, Paul, do you have a lot of land work to do to get those leases positioned to accommodate the length of lateral that you think will be most efficient as you look at these zones? Paul D. McKinney: Yes. We began those efforts actually as much as two years ago, positioning our land so that we can drill the longer laterals. So this year, we will be drilling our first two-mile well. And we are focused on, just like the rest of the industry, organizing our leases, preparing things so that we could take advantage of the benefits of additional capital efficiency. We have learned now that going to longer laterals, we have also learned that employing some of these newer latest and greatest completion techniques and the evolution of our completion designs, is just leading to more reserves per dollar spent, more production per dollar spent, more capital efficiency. And so this is also another part of what we are doing. Yes, it takes a little bit of capital to invest in some of the infrastructure, like the ability to store enough water so you can complete these longer wells. But these investments are going to pay off in the long term. We will incur some of those costs this year, but they will have benefits in the years to come as we fully develop our acreage down there in Crane County and Ector County and all that kind of stuff. Thank you. Operator: And our next question will come from Charles Kennedy Fratt with Alliance Global Partners. Please go ahead. Charles Kennedy Fratt: Hey, great presentation. Just a quick one. I noticed that you sold some non-op properties, I think earlier this year, after the end of the year. Can you quantify what you are going to bring in there? I am not sure I heard that. And then secondly, are there other opportunities to sell assets or non-core production? Paul D. McKinney: Yes. Good morning, Poe. Yes, that is a very good question. We did close—we began a disposition process last year of some non-operated assets in Yoakum County. And yes, we closed on that in January. It represented about 200 BOE per day net of our non-op production, and that is what we subtracted out of our forecast for this year. And there are a few more details that we can share with that. I mean, Alex, I think maybe you ought to cover all of that for us. Alexander Dyes: Yes. Thank you, Paul. So, Poe, yes, we sold 200 BOE per day, and we sold it at $4.5 million, so about 4.5 times next 12 months cash flow using a December strip price. So that is actually what we sold. Charles Kennedy Fratt: Great. Thank you. Paul D. McKinney: And with respect to the rest of our inventory, we are always looking for ways to accelerate value to help us pay down debt. But as you know, we have been pretty, over the last five years, selling the assets in the portfolio that really do not meet our criteria. And so if the undeveloped opportunities are not competitive with our current portfolio, it is kind of hard to justify keeping those. You can sell those to someone else who is willing to invest in those types of opportunities and bring that value forward, and we have been paying down debt, or primarily allocating those funds to paying down debt. So we will continue to do that in the future. I will say, though, that the cupboard is kind of bare. We probably need to do another acquisition or two because every time you make an acquisition, you will end up picking up assets that do not fit our criteria to stay within our portfolio, and so we tend to monetize those when that occurs. And so right now, I am not sure that we really have an inventory that is meaningful that would be coming to market from us anyway because we have basically already cleaned out the cupboards. Did that answer your question, Poe? Charles Kennedy Fratt: It did. Thank you, Paul. Operator: As there are no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Paul D. McKinney for any closing remarks. Please go ahead. Paul D. McKinney: Thank you, Chuck. On behalf of the management team and the Board of Directors, I want to once again thank you for your interest in joining today's call. We appreciate your continued support of the company, and we look forward to keeping everyone updated on our progress in the future. This ends the conversation. Thank you. Operator: Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp. fourth quarter 2025 financial and operational operating results conference call. As a reminder, after the presentation, there will be an opportunity for analysts to ask questions. You may also submit questions in writing at any time using the form in the lower section of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. 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, Ashiya. Good morning. Welcome to Baytex Energy Corp.'s fourth quarter and 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 to 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. 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 Thomas Greager: Thanks, Brian. Good morning, everyone. 2025 was a defining year for Baytex Energy Corp. 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 it marks a significant upshift in our trajectory. Baytex Energy Corp. 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 disciplined, 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 remains uninterrupted. I have complete confidence in Chad's leadership and ability to drive our next chapter. I am proud of the foundation we have built together. Baytex Energy Corp. is in excellent shape, and I look forward to its continued success under Chad's leadership. I will now turn the call over to Chad Lundberg for his remarks and a detailed operational overview. Chad E. Lundberg: Thank you, Eric. I appreciate the Board's confidence, and I am excited to lead Baytex Energy Corp. 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. 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 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 onstream this year, a 50% increase over 2025. We currently have one rig drilling a four-well pad on our southern acreage. Completion operations are scheduled for the second quarter, with the wells expected to be onstream by midyear and the remaining two 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 twelve years of drilling at our current pace of development. In total, we expect to bring 91 heavy oil wells onstream in 2026. We are pleased with the expansion of our Northeast Alberta acreage where we are currently targeting seven discrete horizons in the Mannville stack. Recent success includes two multilateral wells in the Sparky and a five-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 two waterflood pilots at 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 will turn the call over to Chad Kamilcoff to discuss our financial results. Chad L. Kalmakoff: Thank you, Chad, and good morning, everyone. Our 2025 financial results demonstrate 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 $270 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 US $9 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 a $148 million impairment on our Viking assets. These non-cash adjustments have no impact on our cash flow generation outlook for 2026. Turning to the balance sheet, we exited 2025 with the strongest financial position in Baytex Energy Corp.'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 over $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 are maximizing 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 will now turn the call back to Eric for closing remarks. Eric Thomas Greager: Thanks, Chad. To build on those points, this focused, high-return Canadian company is the next chapter for Baytex Energy Corp. For 2026, our operations are on track, and our annual guidance of 67,000-69,000 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 am proud of the trajectory we have established. We are now positioned to demonstrate the true potential of this Canadian portfolio. Operator, let's open the call for questions. Thank you. Operator: We will now begin the analyst question-and-answer session. You will hear a tone acknowledging your request. To submit your question in writing, please use the form in the lower right section of the webcast frame. If you are using a speakerphone, please pick up your handset before pressing any keys. The first question comes from Menno Hulshof with TD Cowen. Please go ahead. Menno Hulshof: Good morning, everyone, and congrats to the both of you on the transition. I will start with a question on the growth outlook. You are 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 E. Lundberg: Thanks, Menno. It is Chad. I will take a crack at answering your question. So, on growth, yes, I mean, we have 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 are actively monitoring the macro picture and situation right now, and we would expect to make any decisions on increased growth at the breakup timeframe. 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, you know, we will look at it 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, you know, potentially another pad in the Duvernay that may look like a drill that gets DUCed into next year and completed. Or continued expansion in that Northeast Alberta fairway where we utilize the two 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 have 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 are not moving it too fast, but those will come as decisions through breakup. Menno Hulshof: Terrific. Thanks for that, Chad. 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. 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, call it, twelve to eighteen months? Chad E. Lundberg: So, we are deploying two pilot projects this year. One is into the kind of part of the play that we have been actively drilling to this point. So, you can expect that, you know, we produce barrels out of the well that is going to be converted ultimately into an injector. What we are 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 are actually drilling the producers and the injectors simultaneously with each other, and we will turn them on together at the same time. So, what does all this mean? I mean, certainly, the waterflood has been doing great things for our industry. We are not sure what happens with our rock. That is why we have 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 is really a part and parcel to the incremental pressure that we have in situ in the rock itself. So, there are 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 are 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 eighteen months? I think, you know, we are going to work very hard to try and understand this through 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 are just going to have to wait and see, Menno, where we go. Menno Hulshof: Can you remind me? I should know this. But when was the last time Baytex Energy Corp. dabbled in waterfloods, if at all? Chad E. Lundberg: Yeah. So, I mean, waterflood is not new to Baytex Energy Corp. at all. We have actually been at it for two decades. Waterflood and then also polymer floods. It just depends on the quality of rock and oil that we are working with. But you could think about it this way, Menno. Approximately 10% of our heavy oil production, so 43,000 barrels a day in 2025, is waterflood-derived production. So, not new to the story, and it is not foreign to us. We have the technical capacity and teams to really, we think, advance this forward. Menno Hulshof: Terrific. I will turn it back. That was very helpful. Thank you. Operator: That is 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: Great. Thank you. Yes, there are a few questions coming through in the webcast, so I will try and run through those with you here, Chad. Menno spoke to the current WTI price environment, maybe optionality and growth. But another question comes in around, I think it is referencing breakeven prices. Is there a WTI price that we would pause the growth scenario, Chad? Chad E. 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 then certainly the flexibility, as we have built the program, to pull that back below $60 oil. I think that is how we think about it, think about our growth. And, again, we are just really observing the macro climate right now. Obviously, it is incredibly dynamic, and we are taking it in and are 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 can you speak to the capital efficiencies you see in the business generally, Chad, and steps we can take to continue to work on the cost of production and efficiency of the world. Chad E. Lundberg: Yeah. You know, Brian, I think that gets into how we have laid the budget for 2026. We have started with 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 will just give an example in the Duvernay. The infrastructure spending is at a higher and elevated pace for the next three years and then falls off, you know, post three years to a much lower rate. That flows right through the capital efficiencies and excess free cash flow to the shareholder. If you look in our investor pack, we have done it 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 their capital cost by 11%. So, both of those flow straight through to capital efficiency. Maybe just a little bit on the heavy oil program, touched on the $50 million that is allocated to exploration. This is absolutely intended to enhance and lengthen our inventory position. And I think, you know, some of the wells that we released through Q4 of last year up in the Sparky in the Suggton area, some of our Upper Waseca wells as we step through that Northeast Alberta area and the seven different layers in the Mannville stack, we are pretty excited about what it is doing for capital efficiency. I would make this motherhood statement, though, to end the conversation. We are 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: Thanks, Chad. Let's shift gears to a couple of questions and conversations around the net cash balance sheet that we have. It is around $800 million and, Chad, just, I know we have talked a little bit about the insight in the prepared remarks, but how do we see allocating that $800 million going forward? Chad E. Lundberg: So, we have been pretty clear that a good portion of that is going to be returned to the shareholders by way of a buyback. Chad, Kamilcoff in his prepared remarks talked about the NCIB as the preferred vehicle over an SIB at this point in time. But we have 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 are still committed to that. Brian Ector: Maybe along those lines and just when you look at buybacks, how would we evaluate the market price, the value, and where we see value in the buyback program itself. Chad E. Lundberg: Yeah. So, you know, I would start here that 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 are three things we look at. One is the macro commodity environment, and we would like to think about really acting countercyclically and respecting where we are at in the cycle. The second, though, is just how we are trading to our peers. And so, as we evaluate that, it looks like we have 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 are 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, you know, all three 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. Okay. One question I will turn over to Chad Kalmacauper, CFO. Chad, can you just talk to our existing hedges in place, maybe WTI and WCS, and what the policy will look like going forward. Chad L. Kalmakoff: Sure. We have hedges in place through the back half of last year, collar structures with a floor at 60. Through the transaction, we maintained those, so we would be roughly, you know, I will call it 60% hedged on WTI in Q1 and about 45%-50% hedged in Q2. Nothing has changed policy-wise. I think we always talked in the past about a strong balance sheet being the best hedge you can have. So, going forward, I think we obviously have a very pristine balance sheet. I would not 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 are 5% hedged on WCS this year at about $13. We still think that is an important piece of business to keep hedging to prevent any financial impact from major blowouts. So, in summary, WTI, those will be rolling off here at June. I would not expect us to be that active in the hedging market on WTI, maybe in specific circumstances. We will continue to hedge differentials. Brian Ector: Okay. Great. I think that is 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 did not get to address, please reach out to our Investor Relations team and we will respond directly. Again, thank you for your time today. 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.
Operator: Ladies and gentlemen, welcome to the publication of the consolidated Annual Report 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead, sir. Herbert Juranek: Good afternoon, ladies and gentlemen. Let me welcome you to the presentation of the results of the business year '25 of Addiko Bank on behalf of my colleagues, Ganesh, Tadej, Edgar and Stefan. We have prepared the following agenda for you. I will start with the key highlights and the related achievements of '25. After that, I will pass on to Ganesh, who will update you on our results on the business side. In the second chapter, Edgar will share insights into our financial performance, while Tadej will outline the progress made in the risk area. At the end, I will present to you the cornerstones of our new midterm specialization program and our updated guidance 2026. After that, we will move on to Q&A. So let's begin with the highlights. I'm confident to inform you that despite negative influences coming from the legislative changes in several countries, we were able to close '25 with a net profit of EUR 44 million. These results includes a net profit for the fourth quarter of '25 of EUR 8.7 million, which is EUR 1 million higher than the result of EUR 7.7 million in the fourth quarter of 2024. Our earnings per share for '25 amount to EUR 2.28 and our return on average tangible equity comes in at 2.5 -- sorry, 5.2%, also influenced by the increased equity base. Overall, 2025 was a challenging year for Addiko because of reasons we will come back later on. Nevertheless, we were successful to achieve a 20% growth rate on new business in consumer lending and finally, to return to a positive trend in SME with an 11% growth rate on new business. Net interest income was with 1.8%, slightly lower year-on-year, driven by the impact of the lower interest environment on our back book and on our national bank deposits. A key positive is that thanks to our strong sales performance and the strategic cooperation agreement in our insurance business, we were able to increase our net commission income by 7.6% year-on-year. Altogether, we managed to slightly improve our net banking income by 30 basis points despite a significantly lower rate environment. Ganesh will give you more insights into the business development during his presentation. Because of our strict cost management, we accomplished to limit the increase of our administrative costs below inflation to only 1.6%. Nonetheless, due to the factors mentioned before, our operating result ended up at EUR 109.8 million compared to EUR 112.3 million in '24. Let's briefly comment on our positive risk performance. We successfully reduced NPE volume further to EUR 125.5 million compared with EUR 144.7 million at the end of 2024. Consequently, our NPE ratio also improved to 2.5%, down from 2.9% in the previous year. On top of that, our coverage ratio continued to improve to 81.7% from 80% at the end of last year. Ultimately, the cost of risk on net loans ended up at 0.96% or EUR 35.2 million compared to EUR 36 million last year. Tadej will give you more details on the risk development later. Our funding situation remained quite solid with EUR 5.3 billion deposits and a loan-to-deposit ratio of 70%. Our liquidity coverage ratio is currently comfortable above 300% at group level. And finally, our capital position gets even a bit stronger with 22.4% total capital ratio, all in CET1 based on Basel IV regulations compared to 22% based on Basel III in the previous year. Next page, please. As mentioned earlier, Addiko faced interventions from regulators and governments that negatively impacted the bank's performance in several of our markets. Croatia introduced a 40% debt-to-income cap for nonhousing loans effective 1st of July '25 and required banks to provide essential banking services free of charge since January '26. Serbia, Republika Srpska and Montenegro introduced interest rate caps, fee restrictions and debt caps. Overall, these measures are having a significant negative impact on our core revenues. Consequently, we have introduced initiatives to counterbalance the income reductions and to develop new income sources. Going forward, all regulatory effects, as known of today, are already reflected in our updated guidance. As reported in our earnings calls last year, we entered the Romanian market via our Slovenian bank through EU passporting, offering a fully automated digital lending solution for consumers. In the second half of '25, we launched several marketing campaigns to build awareness and strengthen our brand positioning. Although we achieved our recognition and recall targets, the conversion rates were below our expectations. Consequently, we refined our marketing approach. The new marketing campaign supported by an Addiko Song with life-size Oskar combined with targeted brand-building initiatives was launched in mid-February. We will keep you updated on the progress and will conduct a results-driven review in the second half of this year. Now with regards to our ESG program, I can confirm that all initiatives remain on schedule and are advancing in line with plan. Additional information is set out in the appendix of this presentation. Let me briefly touch on our regulatory sustainability disclosures. As part of the updated EU taxonomy framework, the commission has introduced a temporary opt-out for financial institution. In our case, this is fully aligned with our business model. Addiko made use of its opt-out as we do not engage in taxonomy-relevant lending activities. This approach avoids unnecessary administrative burden while maintaining full transparency in our ESG reporting. Next page, please. Let me briefly comment on our share performance and the scheduled changes to our listing. Addiko's share price increased noticeably during 2025, closing the year at EUR 22.5 and continued to rise further in 2026 to EUR 27.4 as of yesterday evening. At the same time, trading volumes and overall liquidity has remained persistently very low, making professional market making difficult and not economically viable for providers. As a consequence and in line with the Vienna Stock Exchange rules, our shares will be reclassified from the Prime Market to the Standard Market with effect of 1st of April 2026. This reclassification has no impact on our strategy or operations, but better reflects the liquidity profile of the stock. Let me now address the regulatory concerns regarding our shareholder structure. Following the sanction imposed by the European Central Bank in 2024 for exceeding the 10% ownership threshold without prior approval, certain regulatory uncertainties continue to persist. Although the voting restrictions applicable to a specific shareholder group were lifted in early February 2025, the supervisory authorities continued to identify residual uncertainties concerning the bank's shareholder structure. The bank remains fully committed to maintaining a transparent, cooperative and constructive relationship with all relevant regulatory bodies and we continue to engage actively with them to address the outstanding supervisory considerations. In this context, I need to mention that the current shareholder situation continues to create significant additional efforts and a severe distraction for the bank. Nevertheless, we will carry on to do our best to fulfill the increasing related demands put upon us by our regulators. In line with supervisory expectations and regulatory requirements, the dividend distribution for the financial year 2025 remains suspended, taking into account regulatory considerations related to the shareholder structure. From the perspective of the bank's long-term stability and in the best interest of all stakeholders, the Management Board maintains its position that dividend payments will not be resumed until the share -- until the ownership structure has been conclusively clarified and the related concerns raised by the supervisory authorities have been fully resolved. Now let me briefly outline how we performed against our '25 guidance. The positive message is that despite headwinds, we delivered on our '25 guidance. In income and business, our loan book grew by 7% year-on-year, supported by strong consumer demand and the renewed pickup in SME in the fourth quarter. Our NIM ended up at 3.7% and net banking income held stable. Costs were managed well with OpEx at EUR 195.4 million, coming in below guidance. In risk and liquidity, performance remained fully in line with expectation. We kept the cost of risk below 1%, achieved an NPE reduction to a level of 2.5% and closed the year with a loan-to-deposit ratio of 70%. In profitability, we reached a return on average tangible equity of 2.5% (sic) [ 5.2% ]. Overall, these results reflect our disciplined approach in a demanding environment. Now let me hand over to Ganesh for further insights into the business development. GaneshKumar Krishnamoorthi: Thank you, Herbert, and good afternoon, everyone. Moving to Page 7. As Herbert mentioned, 2025 has been a challenging operating environment. Credit demand remained resilient across our markets. However, interest rates declined rapidly during the year. This intensified competition and created significant pricing pressure. As a result, loan book retention also became more challenging as customers increasingly refinance their loans at the lower rates. At the same time, unexpected regulatory interventions also affected market dynamics. The most notable example is Croatia, where a 40% debt-to-income cap was introduced on July 1. In Serbia, authorities mandated lending rate caps, which led to interest rate reduction. These measures tightened our lending conditions and also affected our pricing in both the markets. Nevertheless, despite these headwinds, our continued focus on digital-savvy customers, the micro SME segment and point-of-sale financing combined our strategy of offering lower-ticket, high-margin loans with speed and convenience while maintaining prudent risk discipline enabled us to deliver strong growth. Consumer new business strongly increased by 20% year-over-year, resulting in 10% growth of our consumer loan book with an attractive new business yield of around 7%. In the SME segment, the new business grew 11% year-over-year with a yield of around 5%. Overall, our focused loan book expanded by 7% year-over-year with a blended yield of 6.4%. As a result, the focus book now represent 92% of our total portfolio, demonstrating the resilience of our specialized strategy, even in a more competitive and regulated environment. Please turn to Page 8 for a more detailed outlook. Looking more closely to our Consumer segment, the strong double-digit growth we delivered was driven by several key factors. First, we benefited with solid market demand across our core geographies. Second, we successfully launched full digital end-to-end lending with zero human interventions in 3 of our core markets, clearly differentiating our offerings from competitors and significantly improving speed and customer convenience. Third, our point-of-sale proposition continues to perform well, delivering 14% year-over-year growth, further supported by the launch in Bosnia and Herzegovina. Fourth, we identified a sweet spot between growth and pricing, allowing us to proactively retain customers and protect the loan book through disciplined repricing actions. In addition, we launched newly redesigned mobile app with the introduction of new card features, including Google Pay and Apple Pay integrations, which contributed to a 12% year-over-year increase in net commission income. Finally, in response to evolving regulatory environment, we are already implementing mitigating measures, including downselling, introducing co-debtor structures and focusing on high-quality customer segments with larger ticket size. We are confident that these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward in 2026. Let's turn into SME segment. Our core business model remains unchanged, to be the fastest provider of unsecured lower-ticket loans to underserved micro and small enterprises through our digital agents platform. As mentioned earlier, the market environment remained challenging due to aggressive pricing, which has created some pressure on our loan book retention. However, with improving market demand, we implemented several targeted initiatives to reignite the growth. First, our turnaround plan in Serbia supported by new leadership team delivered strong momentum with 43% year-over-year growth in new business. Second, we placed a strong emphasis on retaining quality clients and protecting the loan book through more targeting pricing, loan prolongations and enhanced service delivery. Third, while maintaining our core focus on unsecured lending, we broadened our product offering by placing also greater focus on slighter larger tickets and secured lending, supported by experienced and high-quality teams to ensure continued risk discipline. This resulted in double-digit year-over-year growth in investment loan volumes. Finally, we launched a new digital SME tool designed to process high ticket loans, faster and with greater simplicity, providing a clear competitive advantage. Overall, we believe these initiatives will position us well to return to sustainable growth in the SME segment going into 2026. Lastly, let me briefly touch on our progress in AI adoption last year. We are actively investing in AI technologies to enhance both operational efficiency and customer experience across the organization. The 2 AI applications are already live, one supporting employees by handling HR-related inquiries and others assisting our call center by analyzing customer inquiries and generating response recommendation. In addition, we are currently exploring further AI use cases across IT, risk and marketing with the aim of strengthening operational efficiency and enabling core data-driven decision-making across the bank. To summarize, while 2025 presented a challenging operating environment, it also pushed us to further refine our specialist business model and adapt our pricing approach. Most importantly, we launched several new propositions that enhance speed, convenience and value for our customers across Consumer and SME segment, positioning us well for continued growth going forward. Looking ahead to 2026, we will continue to focus on profitable growth while implementing measures to mitigate the impact of the recent regulatory restrictions, in particular, we aim to accelerate growth in Romania through a refreshed marketing approach and strengthened broker partnerships, and we will launch our point-of-sale lending business in Croatia. At the same time, we will further enhance our end-to-end digital value proposition and refine our dynamic pricing capabilities to better balance growth and profitability. In parallel, we are developing a new specialized program focused on new lending products aimed at deepening customer engagement and further expanding our fee-driven income streams. Herbert will provide you more details on this later. Please let me hand over to Edgar. Edgar Flaggl: Thank you, Ganesh, and good day, everybody. Let's turn to Page 10 for an overview of our performance for the full year 2025. Despite a challenging interest rate environment and cost pressures, we delivered stable results, supported by a resilient consumer lending, strong fee income and a robust capital position. Now let's take this one by one. Our net interest income came in at EUR 238.4 million, a slight year-on-year decrease of 1.8%. This reflects the lower rate environment, which weighed on income from our variable back book, so circa 13%, 1-3%, of our book and the income on National Bank deposits. At the same time, balanced treasury and liquidity management activities as well as lower funding costs acted as a stabilizer. As a reminder, the rate backdrop shifted materially throughout the year with 4 rate cuts totaling 100 basis points during 2025, which also pressured pricing on new loans and elevated early repayments of higher-priced parts of the back book. On the business side, as Ganesh pointed out already, momentum in our Consumer segment remained quite strong, with interest income up 6.3%, driven by the 10% growth in the Consumer loan book. Overall, the focus book grew 7% year-on-year, showing also a slight improvement during the last quarter of 2025. On the fee side, we delivered solid growth. Net fee and commission income rose 7.6% to EUR 73 million, driven by bancassurance, accounts and packages and card business, which altogether grew 13%, 1-3%, year-on-year, with bancassurance as a key contributor. Looking into the year 2026, those new regulations in Croatia limiting fees on banking products already have an impact on fee generation today and we'll keep having an impact going forward. Putting it together for 2025, net banking income came in at EUR 316.9 million and was broadly stable year-on-year despite a challenging environment. Our general administrative expenses, in short OpEx, increased slightly to EUR 195.4 million, up 1.6% year-on-year, mainly due to wage adjustments, targeted operational investments and general indexation increases. When excluding the EUR 3 million in extraordinary advisory costs related to the takeover offers in the year 2024, operational costs were up just 3.2% year-over-year. Our cost-income ratio came in at 61.7%, which is a tad higher than last year. The operating results landed at EUR 109.8 million, down 2.3% year-on-year. The other result, which includes costs for legal claims as well as for operational banking risks remained manageable for the full year. We have allocated some additional provisions for new legal claims in Slovenia and made a rather small top-up in Croatia as part of the year-end closing also to reflect increased lawyer costs. The main point in Slovenia remains what the higher courts will rule upon regarding the applicable statute of limitation and if that will be in line with the currently dominant legal opinions. When it comes to risk costs, our expected credit loss expenses were EUR 35.2 million, which translates into a cost of risk of just south of 1% on net loans for the full year. Tadej will provide more insights in just about a moment. All in all, we delivered a net profit after tax of EUR 44 million, which translates into a return on average tangible equity of 5.2%. So while operating in a lower rate environment and managing cost pressures and new regulatory constraints, our focus business remained resilient with solid momentum in consumer lending and continued support from fee-generating activities last year, while also SME lending started to pick up again during the fourth quarter last year, specifically also in Serbia. Turning to Page 11 and our capital position which remains a real strength. Our CET1 ratio came in at a very robust 22.4% at year-end 2025. For context, that's slightly up from the 22% at year-end 2024, which, however, was based on Basel III. While as we all know, for 2025, the new Basel IV or call it CRR3 rules apply. This CET1 ratio now includes the audited profit for the year with no dividends being deducted in line with supervisory expectations and taking into account regulatory considerations related to the current shareholder structure. You will also notice that our risk-weighted assets increased and that's mainly driven by changes in risk weighting under Basel IV as well as the new interpretation of EBA guidelines on structural FX, which we discussed in previous earnings calls. Looking ahead, we have already reported on the final SREP for 2026, which includes a small increase of our Pillar 2 requirement, so up by 25 basis points to 3.5%, while the Pillar 2 guidance remains unchanged at 3%. So in short, our capital is strong and our buffers are ample, supporting controlled growth while we navigate the evolving and not often straightforward regulatory landscape. With that, I will hand over to Tadej for more on risk management. Tadej Krašovec: Thank you, Edgar, and good afternoon, everyone. Let me provide an overview of our credit risk performance for the year 2025. As indicated on the chart to the left, one of our key risk management initiatives was reducing of NPE volumes. We achieved this through proactive portfolio management, portfolio and forward flow sales, write-offs, targeted restructuring and collections. The result is clearly visible. We achieved a significant EUR 19 million reduction in NPE volume compared to the end of the previous year. Out of that, as illustrated on the right-hand side of the slide, the NPE portfolio decreased by EUR 14.5 million in the last quarter alone, driven by high NPE outflow and a well contained inflow. Consequently, we concluded 2025 with an NPE volume of EUR 126 million and attained a record low NPE ratio of 2.5%. Throughout the year, we placed significant emphasis on developing statistically driven credit risk steering approaches and enhanced monitoring tools. This allowed us to promptly identify subsegment and channel developments that did not align with our expectations, enabling swift implementation of risk restructures or also relaxations to positively influence the bank's portfolio quality. Particularly in declining interest rate environment, rigorous oversight of our risk profile and optimization of risk return balance remain essential to operate within our risk appetite, mitigate adverse selection and ensure the resilience of the bank's balance sheet. However, not all regions performed entirely in line with our forecasts. The micro segment posted ongoing challenges in Croatia, Serbia and Slovenia. And furthermore, the SME sector in Slovenia exhibited variances from our 2025 outlook, necessitating additional controls within the credit process. We are confident that the refined risk criteria and enhanced controls introduced will help mitigate further adverse selection. Moving to Slide 13. Loan loss provisions totaled at EUR 35.2 million in 2025, resulting in a cost of risk of minus 0.96% on net loans, both figures notably better than anticipated. This positive outcome was largely attributable to exceptional late collections, an area we have improved as part of our acceleration program during '24, which exceeded even our ambitious targets. The segment's breakdown for '25 is as follows: the Consumer segment recorded a negative 0.79% cost of risk; SME segment, minus 1.9%; while the nonfocus segments contributed to provision releases with a positive cost of risk of 1.88%. In the final quarter, that means Consumer provisions were EUR 1.7 million; SME segment, we generated EUR 8.6 million; and in nonfocus segment, we saw a release of provisions in the amount of EUR 1.4 million. The SME segment figures were impacted by a single large case in Slovenia, I elaborated on in previous earnings calls already. The post-model adjustment was slightly reduced from EUR 1.4 million to EUR 1.2 million. To summarize, Addiko's portfolio position remains robust and resilient, supported by strong collection performance and active portfolio management. Our focus remains on decision models, intelligent risk rules, advanced and automated statistical monitoring and rapid response when every critical risk indicators or the risk return balance require attention. Thank you. And with that, I'll go back to Herbert. Herbert Juranek: Thank you, Tadej. Now I would like to present the highlights of our new specialization program to you. The new specialization program has just been launched and is designed as a 3-year program running from 2026 to 2028. It supports the execution of our specialist banking vision and aims to unlock additional value through a focused performance and transformation agenda. The first pillar is business expansion. Here, we will broaden our product stack and strengthen our ecosystem, meaning we will enhance our core offering, add relevant adjacent products and create a more connected experience for our customers. In addition, we will explore selective new market opportunities in a measured and disciplined way, focusing on areas where our digital lending capabilities can be applied effectively, where fee-based revenues can be expanded and where we see sound risk-adjusted potential. The second pillar focuses on our engine and platform. We will upgrade our platforms and decisioning capabilities with AI-enabled tools to further strengthen analytics, risk processes and service excellence, supporting greater efficiency and competitiveness. The third pillar is competencies and people. We'll continue to invest in skills, training and development while ensuring the right capacity and efficiency across our teams to support the next phase of our strategy. We consider this an important investment in order to enable the successful implementation of our ambition on Pillar 1 and Pillar 2. Overall, our approach is to expand our offering, grow fee-based revenues, strengthen customer engagement and continue optimizing costs through automation and AI-assisted processes. This program sets the foundation for scaling our specialist model and supporting sustainable growth in the year ahead. We will present more details of the program in our presentation of our Q1 results on the 13th of May. Now let's move on to the final page. Before I walk you through our updated guidance, let me briefly outline the context behind our assumptions. Despite the fact that the global economic environment has become increasingly unpredictable, our CSEE markets continue to show comparatively resilient performance. We expect our region to deliver higher growth rates over the next 2 years than the European Union average. Nevertheless, the combination of regulatory fee and rate restrictions, aggressive pricing behavior by several competitors and cost pressure driven by governmental-related factors such as increases in minimum wages requires us to further strengthen our operating model. This is precisely why our specialization program will play a key role. It is designed to enhance efficiency, strengthen competitiveness and improve risk-adjusted performance in the coming years. Now let me walk you through our operating guidance, starting with loan growth. We expect our loan book to continue expanding at a healthy pace with a CAGR of more than 6% over the period from '25 to '27. This reflects the momentum in our core segments and the continued scaling of our specialist model. Looking ahead, looking at our interest margin, for the coming years, we anticipate the NIM to remain above 3.6%, taking into account the regulatory environment, interest rate caps and a more moderate rate trajectory. Based on impacts resulting from the latest regulatory-driven measures, we expect NBI to remain broadly flat in 2026, before returning to growth above 5% in 2027 as our business mix evolves and the effects of our specialization program begin to materialize. Operating expenses. Our focus on efficiency continues. We keep our OpEx below EUR 205 million in both '26 and '27, while still investing selectively to support our transformation agenda and competitiveness. Cost of risk and risk -- and asset quality. We expect a cost of risk of around 1.3% going forward, reflecting prudent underwriting and disciplined risk-adjusted growth. At the same time, we aim to keep the NPE ratio below 3%, which remains our guiding principle for portfolio quality. Capital and liquidity. We expect the total capital ratio to remain above 18.8%, subject to the yearly SREP outcome. Our capital strength provides a solid foundation for controlled growth. Accordingly, we plan to gradually increase the loan-to-deposit ratio towards 80%, supporting loan expansion while maintaining a conservative liquidity profile. Based on this assumption and the higher capital base, we expect the return on average tangible equity to be around 4.5% in 2026, rising towards 6% in 2027, supported by growth, efficiency measures and the contribution from the specialization program. Regarding the dividend, I addressed the situation earlier. However, in this context, I would like to stress again that the current shareholder situation continues to create significant additional efforts for the bank, which is a severe distraction. Nevertheless, we will carry on to do our best to cooperate and to fulfill the increasing related requests put upon us by our regulators. The management of the bank is fully focused on protecting the bank and acting in the best interest of all stakeholders. In this spirit, we will continue working with full energy to make Addiko the leading specialist bank in Southeast Europe, creating value for both our clients and our shareholders. With that, I would like to conclude the presentation. Our next events are the Annual General Meeting on the 20th of April 2026 in Vienna and the presentation of our Q1 results on the 13th of May. Thank you very much for your attention. We are now ready for your questions. Operator, back to you. Operator: [Operator Instructions] The first question comes from the line of Dodig, Mladen from Erste Bank. Mladen Dodig: It's not Madlain, it's Mladen. Congratulations on the results, and I particularly congratulate on the revamped growth and movements finally in SME, that where my first question comes. If I look at the guidance and the last year update for '25, '26, it appear a little bit conservative, if I remember correctly. Actually, I'm looking at it, it was more than 7% CAGR, and now it's more than 6%. I mean it's a small tweak, but would you consider that a little bit conservative considering the effect that you have started -- finally started to catch up with the market and competitors? And just for the moment, I will forget now about the whole situation right now, we have geopolitically. Herbert Juranek: So first of all, thank you very much, Mladen. Before I hand over to Ganesh, I would say we looked at it. And I mean, you call it conservative, but we also need to see the restriction put upon us coming from the regulatory front in several markets, which are also influencing the overall growth potential. But Ganesh, you want to comment this? GaneshKumar Krishnamoorthi: Yes. Mladen, so I think we believe the 6% CAGR is a reasonable growth, considering all the restrictions what we have. We do have some challenges also in SME in some other countries, which we need to work on. So yes, I mean, considering all these facts, that's why we revised from 7% to 6% CAGR. Mladen Dodig: And a little tweak on return on average tangible equity, I would say that also comes from the fact that your equity now keeps growing without chance to moderate it, right? Herbert Juranek: That's right. That's right. So I mean, as long as -- as I said, as long as the shareholder situation does not change and the regulatory fuel to that, we will not pay out the dividend. And consequently, the equity base will increase. Mladen Dodig: Of course, yes. And second question or third, 0.96 basis points risk versus 1.3 guidance, do you think that this might still go lower below this 1.3 in '26? GaneshKumar Krishnamoorthi: I think today speaking here, I think, yes, I think it will be below 1.3. This is our expectations also, also driven by coming back to the limitations in each individual country, right? They protect us to play in the subsegments that are a bit more risky, but where we achieve higher interest rate. But of course, cost of risk at the end will also be lower due to that. It will be below 1.3% is expectations, I can estimate, yes. Mladen Dodig: Just looking also on net banking income last year, the guidance, '26, you just molded to '27, the growth more than 5%. And for '26, you expect flattish development. Of course, I would say, as you mentioned in the call, aggressive pricing from the competitors too. But do you expect that there might be some more decreasing interest rate environment, although now it's very difficult to make such a statement as we already these days are seeing the inflationary pressures coming from the Middle East conflict? I mean probably I would like to see in outlook '26 some percentage for the net banking income growth, but as you stated flat, perhaps this is kind of a global explanation, right? Edgar Flaggl: Mladen or Modlin whatever you prefer. This is Edgar speaking. So a straight answer, our rate assumptions are flat. So as you rightfully say, who knows what the reality will be what's going on in the Middle East. But we assume a flat environment, so deposit facility rate 2% throughout our guidance. When you compare also movements in terms of net banking income, please don't forget that all these regulatory and legal restrictions that have been put in place either last year or starting this year, for example, the Croatian topic on free accounts, et cetera, et cetera, this has a full year 2026 impact of EUR 10.5 million on the top line alone. So you will... Mladen Dodig: EUR 10.5 million only in Croatia? Edgar Flaggl: No, no, not only Croatia. Mladen Dodig: No, fee and income, okay. Edgar Flaggl: Yes. Croatia would be roughly 70% if you take the NCI and the DTI restriction. I think we disclosed that in the Q3 earnings call. So you will probably find this in the script as well. Mladen Dodig: Okay. And a final question from my side, again, of course, about dividend. So let's assume that some situation gets resolved and you get a nod from the regulator to pay out something, what do you think how that might look like? And what would be your -- where will you be leaning to paying a lot immediately or some gradual payments, of course, provided that a regulator would agree to that, too? Herbert Juranek: Well, so first of all, we will decide it when this situation is here. I mean our clear ambition as a general comment as a management is to pay a dividend. I mean that's the whole purpose of the thing. And we had this -- our guidance was around about 50% before this was introduced. So I think this is an area we are aiming for. You also know that if you want to pay out a dividend, which is above the yearly profit, you need -- so out of equity, you need the approval of the regulator for that. So what we would do is when the situation is solved, we will look at it. We will look at the state of the bank, what is healthy and what we can do and then we will judge and decide on that. But for the time being, we don't want to comment it. We feel also obliged vis-a-vis our supervisors, and we share with them the view that currently, we will not pay out something. Operator: There are no more questions on the phone at this time. Herbert Juranek: Okay. Do we have any other questions? Edgar Flaggl: We also have no questions on the webcast. Herbert Juranek: Okay. So as there are no further questions, we thank you for your attention and wish you all the best. Thank you for dialing in. Goodbye.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Inc. 2025 Annual Results Conference Call. [Operator Instructions]. I will now turn it over to [indiscernible], Head of Investor Relations. Unknown Executive: Thank you, operator. Good day, ladies and gentlemen. Welcome to the JD Health 2025 Annual Results Conference Call. Joining us today are JD Health's Executive Director and CEO, Mr. Dong Cao; and CFO, Ms. Deng Hui. Before we start, we'd 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. In 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 the reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 2025, issued 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's statements in the original language will prevail. I would like to turn the call over to Mr. Dong Cao. Please go ahead, sir. Dong Cao: Hello, everyone. I'm Cao Dong, CEO of JD Health. It is a pleasure to share with you our 2025 full year results. In 2025, China's economy maintained a steady and resilient momentum in industrial foundation for company's continued development. The government actively promoted development of new quality productive forces in the health consumption sector and encourage the standard adoption of AI across the health care sector, charting a clear path for long-term sustained growth. 2025 marked the return of JD Health's return and profit to a trajectory of rapid growth, further reinforcing our positioning as a market leader. As industry-leading health care service provider, we continue to deepen our presence across key health care segments through our omnichannel, super pharmaceutical supply chain infrastructure, comprehensive AI-powered online health care service capacities and the full life cycle health care management ecosystem. We remain committed to delivering accessible, convenient, high-quality and affordable health care products as well as our solutions. In 2025, we continued to capitalize our super pharmaceutical supply chain advantages and industrial direct sales capacity building AI-enabled full-scenario healthcare services ecosystem that supported sustainable high-quality growth. In fourth quarter, revenue reached RMB 21 billion, representing year-over-year increase of 27.4%. Non-IFRS reached RMB 1.1 billion, up 13.5% year-over-year with margin of 5%. For 2025, our revenue reached RMB 73.4 billion, representing year-over-year about 26.3%. Non-IFRS profit totaled RMB 6.5 billion, up 36.3% year-over-year with our non-IFRS profit margin 8.9%. Notably, we delivered revenue growth of more than 20% year-over-year for 4 consecutive quarters, while our full-year non-IFRS profit margin reached its highest level ever since IPO in the pharmaceutical sector. Leveraging our supply chain strength, we continue to gain from partnership with pharmaceutical companies as the first online marketplace for new and specialty drug launches. We introduced more than 100 new drugs during the year, a significant growth from 30 in 2024. Taking the DAYVIGO as an example, this flagship collaboration between Eisai and JD Health exceeded 20,000 orders in launch month alone. At the same time, by working closely with pharmaceutical companies to promote innovative integrated consultation, pharmaceutical and service closed-loop model, we are strengthening those partnerships and establishing a novel health care ecosystem that supports comprehensive collaborative relationship. For instance, we established strategic collaboration with Novo Nordisk, drawing on omnichannel expertise in chronic disease management and treatment solutions together with JD Health [indiscernible] in healthcare service. We jointly established a dedicated public health hub on obesity. This initiative supports a one-stop diagnosis and treatment and medical solution for diabetes and drug [indiscernible]. We also formed a strategic partnership with Eli Lilly to promote the innovative digital health solutions for patients in China who are living with obesity and type 2 diabetes or alopecia areata. Those solutions integrate patient education, live consultation, medical supply and long-term disease management. In health supplement, we fully harnessed our direct sales capacity, actively engaging in product co-development, supply chain structuring, professional service enhancement and industry standard setting to reinforce our platform central role across our value chain. By focusing on the senior nutrition, child development, beauty supplements and ready-to-consume nutrition products, we have helped the brand partners to achieve sustainable long-term growth. For instance, while the standard deep-sea fish oil market strategy matured, we identified the growing consumer demand for high-purity, high adoption products with significant untapped potential. Based on this insight, we worked with [indiscernible] to develop a premium fish oil product tailored to market needs to tap the high-end segment, featuring 97% of high-quality EPA. The product garnered over 15 billion impressions on its launch date on JD Health's platform. In medical device, we fully integrated our supply chain strength to build a seamless online-to-offline service loop, driving industry-wide upgrades through the ongoing technological innovation, for instance, in collaboration with Yuwell Medical, we launched the JD brand continuous glucose monitoring on our platform, which can be connected directly to JD Health's app via Bluetooth to deliver integrated blood glucose management experience, covering monitoring, analysis, intervention and tracking. For users who require device setup or configuration systems, we offer in-home support with health care professionals providing hands-on guidance through the process. In response to national initiatives to foster new quality productive forces in the health, we provide the capacities and medical AI solutions to a wide range of ecosystems. We aim to enable high quality and sustained development such as the Dr. Da Wei and a suite of multi-role intelligent service agents, AI doctor digital twins, and AI health chatbot, Kang Kang. At the end of 2025, Dr. Da Wei has completed hundreds of millions of interactions. The JOY DOC 2.0 version comprehensive management solution spanning 3 key areas: clinical nutrition, pharmaceutical services and weight management. This product provides health care institutions with standardized traceable and highly efficient digital intelligent support. We work together with the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College to cover 5 million patients in 2025. Our on-demand retail business also achieved breakthrough through the year. We continued to expand the online medical insurance payment services as well. We have been expanding coverage to 29 key cities. By 2025, we have established more than 300 self-operated pharmacies nationwide. By integrating those stores with our on-demand retail business, we have further differentiated our product offerings and enhanced the overall user experience. Additionally, we continued to strengthen our integrated online and offline medical services. JDH's at-home rapid testing service maintained strong growth momentum with full year order volume increasing by 81.9%. Our at-home rapid testing service pioneered a hospital-grade home testing service during the year, extending the professional practice of hospital laboratories into the home setting, processing for cities including Beijing and Shanghai. This service exemplifies the deep integration we have achieved across our supply chain and digital platform strength and the professional medical expertise of the public hospitals during the peak respiratory seasons. It effectively eases hospital congestion, shortens patient visit time and lowers the risk of cross infection caused by JD Health service basket and digital coordination system. The process from sample collection to delivery takes an average of 3 hours and can be completed seamlessly with the app. Looking ahead, we will continue to strengthen our super pharmaceutical supply chain advantages centering on user experience, cost and efficiencies. By capitalizing our direct sales capacities and deepening collaboration with brand and ecosystem partners, we further cement our leadership in the health care retail market and reinforce user awareness of JD Health as a go-to platform for online health product services. At the same time, we will continue to advance technological innovation in AI applications, empowering our integrated consultation, examination, diagnosis, pharmaceutical service, closed-loop through an AI plus supply chain strategy and supporting the high-quality growth and sustained development of the broader health care sector. By steadily expanding our health care ecosystem service scope and consistently enhancing our integrated online and offline medical services, we will share better experiences to the business. Now please welcome CFO, Ms. Deng Hui, to share details of financial performance. Deng Hui: Good to see you. Thank you for attending and joining the JD Health earnings conference call. This is Deng Hui. It is my pleasure to provide you update on our fourth quarter full year 2025 financial performance. In 2025, China's macroeconomic landscape continued to show a cost recovery trend, showing new development opportunities. For AI-driven health industry, JD Health actively responded to a policy directive of fostering new quality productive forces in the health consumption sector. Achieving sustained and high-quality growth in 2025, the revenue reached RMB 73.4 billion, representing a year-over-year increase of 26.3%. Non-IFRS profit amounted to RMB 6.5 billion, up 36.3% year-over-year with a profit margin of 8.9%. It's worth noting that our revenue growth rate has maintained above 20% for the consecutive quarters, while our non-IFRS profit margin reached its highest level since its listing. In the fourth quarter of 2025, revenue totaled RMB 21 billion, up 27.4% year-over-year. Non-IFRS profit for the quarter reached RMB 1.1 billion, increased by 13.5% year-over-year with a profit margin of 5%. As of December 31, 2025, our annual active user accounts for the past 12 months stood at approximately 220 million with a net addition of 34 million compared to December 31, 2024. Among other revenues, direct sales revenue reached RMB 60.9 billion in 2025, representing year-over-year increase of 24.8% and accounted for 82.9% of total revenue. This growth was primarily driven by increased sales of chronic disease related drugs and expanded first launch partnership for innovative drugs as well as health supplements, where we focused on strengthening our direct sales capacities and cultivating growth in high-quality segments and sales of new created medical devices. Meanwhile, service revenue reached RMB 12.6 billion for the full year of 2025, up 34.1% year-over-year and accounting for 17.1% of our total revenue, an increase of 1 percentage point year-over-year with platform commissions and advertising services maintaining strong growth momentum. During the year, we prioritized the onboarding of emerging brands, significantly increased resource allocation to merchant support, and expanded the merchants access to our omnichannel infrastructure and resources, fostering growth for both the platform and our merchant partners. We continue to advance our on-demand retail business in 2025 to be more efficient and accessible on-demand services to our users by continuously strengthening synergies among supply fulfillment, payment and expertise experiences. In health care services, we further deepened our Internet plus health care service ecosystem through AI empowerment this year, achieving scaled deployment of AI technologies across consultation, examination, diagnosis, pharmaceutical scenarios. We launched a series of AI-based solutions tailored for users, doctors, hospitals, primary health care institutions, including AI Jingyi and JOY DOC, establishing the industry's most comprehensive AI enhanced health service matrix. Our AI agent, Dr. Da Wei, has completed hundreds of millions of user interactions with a 98% satisfaction rate. Meanwhile, JOY DOC has served over 5 million patients across several hospitals, including the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College. From the profitability level, JD Health's gross margin was 24.8% in 2025, up 1.9 percentage points year-over-year. The improvement highlights the core strength of our supply chain as well as the ongoing enhancement of our direct sales capacity. Our direct sales mode effectively drove gross margin expansion through economies of scale, while empowering our professional procurement and sales teams to identify industrial trends and capitalize high potential subsegments, boosting overall operational efficiency. At the same time, we encourage a greater resource investment from merchants fulfilling growth in higher-margin business such as advertising services on a non-IFRS basis. Our fulfillment expense ratio was 10.4% in 2025, up 0.2 percentage points. Our selling and marketing expense ratio maintained largely flat at 5.2% in 2025 compared with last year with [indiscernible] hitting the road this year, promoting awareness of our quality standards for nutrition products while helping drive sales growth in the health supplement segment, although selling and marketing expenses rose by 26.9% year-over-year. Our R&D expense ratio was 2.2% in 2025, up (sic) [ down ] slightly by 0.1 percentage point year-over-year as a result of our ongoing investment in AI technologies. As of the end of December, we had over 880 R&D personnel, increased compared with the previous year. As revenue continued to grow, the proportion of fixed R&D expenses will decline accordingly, while the productivity of our R&D team will also improve. We remain committed to investing in health AI technologies and have launched a suite of AI-powered products, serving users, hospitals and primary health institutions across multiple health care scenarios. Moving ahead, we will continue to deepen our efforts in these areas. The G&A expense ratio was 0.8% for the full year of 2025, flat with 2024. Our back-end staff and operational management efficiency levels continue to lead the industry. Finance income was RMB 1.5 billion in 2025, attributable to increased cash balance. Other income and gains, net was approximately RMB 1.6 billion (sic) [ RMB 0.77 billion ] in 2025, mainly reflecting fair value changes in wealth management products. Excluding share incentive, our non-IFRS profit for 2025 increased by 36.3% year-over-year to RMB 6.5 billion with a margin of 8.9%, up 0.7 percentage points from last year, reaching its highest level ever since our IPO. Our cash flow from operating activities reached RMB 10.2 billion for the full year of 2025. As of the end of December, cash and cash equivalents, restricted cash, term deposits and wealth management products measured at fair value through profit or loss at amortized cost totaled RMB 96.5 billion (sic) [ RMB 69.5 billion ], a net increase of RMB 10.1 billion compared to December 31, 2025 (sic) [ 2024 ]. In summary, JD Health delivered high-quality growth in 2025, underpinned by continuously optimized operational capacities and steady profitability growth. Our strong performance highlights our persistence, enhancing user experience, while improving cost and efficiency by developing and refining AI-powered health service scenarios. We broadened our business scope, further validating the distinctive value propositions of our dual-engine business model. That concludes our prepared remarks. We are now open for questions. Operator: [Operator Instructions] Now we are going to welcome Miranda Zhuang from American Bank. Xiaomeng Zhuang: In 2025, you achieved a faster growth, and you had very good growth momentum with better profit margin. That is great news. I have a question to you. Can you share with us the near term and the 3-year middle-term prospects, what will be the main growing points? And what will be your strategies? Dong Cao: Thank you for the question. You're my old friend, Miranda. I want to share with you the general directions about the track for the future growth. We know that pharmaceutical sector, health products and medical devices are belonging to one community. The market size is around RMB 3 trillion to RMB 4 trillion. This is the size of the total market share, and we have to check different proportions. So you could fully understand, in the entire year, the revenue is RMB 17 billion (sic) [ RMB 73.4 billion ]. Compared to the potential of the market, we are still having a big room to grow, which means that we have a lot of opportunities to grab. Currently, we could achieve more than one digit growth potential. I believe that this is a huge market. Despite the fact that JD Health is a huge pillar, we could also go faster and we could go deeper. That is our inspiration, and that is our commitment to go deeper and go faster built on our existing advancements and results. The next point is from the perspective of the users. Currently, around 220 million users were out there and the total number is still growing, and we have a lot of active users, but not as big as the total user base of the JD Group. Because we are JD Health, we could still have a big room to grow. So I'm just sharing with you the size of the sector as well as the users of JD Health. I believe that from both fronts, we could do a lot of things to grow our potential. To be more specific, for the next 1 to 3 years, what will be happening and what will be the key drivers. To start off, I want to go back to the product portfolio and what will be the growing momentum. I'm going to speak about the pharmaceutical products. For the long run, we are in the leading position and we are growing very fast. We continue to improve our performance in 2025. The new drugs are taking 15%, and we are growing very fast compared to the velocity of 2024. You could feel the change and you could feel the transformation. Built on the mindset of JD Health, more brands, more pharmaceutical companies and more manufacturers will come to us. They will finally realize JD Health is a huge platform. We could help them, we could empower them. We could bring to them additional value. The new products, the special drugs could have very good sales at our platform, driving us to embrace a larger number of new drugs on their first sales. This is a very positive trend and I am very happy to share with you. I believe that in terms of the pharmaceutical companies, we will continue to grow. I believe that this market will grow, of course. We have the in-hospital and off-hospital market and off-hospital market will be moved to the online setting at even faster manner. Those are the trends we could observe on the market. That's why I'm so confident in sharing with you our growing potential and growing [indiscernible]. In terms of the health supplements, I know that you've followed us for long-term. When we are discussing the pharmaceutical companies and health supplements, you can know we are offering the best quality products. We could offer you very good user experience as well. We go very fast and we are highly efficient in delivering our services and offerings. We are doing more than selling. We are also providing the evidence-based solutions. It's like we are collaborating with GNC. We are jointly releasing the white paper, providing better service and educational resources to the users. We are also providing a premium fish oil, improving the user experiences in the overall manner. We want to add to user experiences, and we want to add user value. We are not selling products in an efficient manner. We're also helping the users to select the best ever products. And we are also an online platform having huge integrated logistics chain advantages, which means that we are having this pillar and we will grow this as well. The next topic is about medical devices. I want to give you a case. We're collaborating with Yuwell to offer customized products. The monitoring of the glucose device. It is well set. And for the next step, we have more plans. In terms of the sales, we will provide software, hardware as well as integrated chronic disease management plan. If you tried our products, you can know how well it is. It is very unique and it's very special. If you try the Yuwell glucose monitoring device, you can know how good it is, you could know which food is good for you and what are the foods bad for your health. I believe that is the best collaboration model. You could manage your food, you could manage your diet, and you could complete all those processes for our product. And we are now promoting AI-empowered health management device. This will be the new ecosystem. AI is keyword, very popular. In 2025, we launched the AI doctor, Dr. Da Wei, completed hundreds of millions of interactions with online users with a high level of satisfaction ratio. The AI matrix includes the 2B, 2C and 2H front with very good performance separately. Those performances are not yet fully matured. They are not translating directly into sales revenues. However, we can safely say that they will be the future drivers, helping JD Health to garner potential profits. In the long run, they will be our long-term drivers. I'm just sharing with you those highlights for reference. Thank you, Miranda. Thank you for the rest of investors. Now please start your second question. Operator: The next question comes from UBS, Henry Liu. Henry Liu: Thank you for the prepared remarks, the management, and thank you for having my questions. Can you say a few words about the competition landscape of the company. For instance, we have the e-commerce platform, we have the brick-and-mortar physical stores. How you can stay competitive among all those competitors? Dong Cao: For the long term, I'm confident in standing out of all those competitors and market players. If you are watching and following us for the long run, you know we are a company with a lot of pragmatic mindset and behaviors. You know how we check and observe this market landscape, you know how we view our competitors. From the perspective of JD and JD Health, we are good at managing the supply chains. We are good at managing our own brand products, because we want to manage the quality of the products, we want to ensure the best efficiency on this market. In terms of health care market, those elements are maturing. We want to manage the health of the users, and we have a strong mindset. That is why we are standing out compared to other competitors. That is in our DNA, that is in our blood veins, and we are maximizing our DNA. In the company, the revenue is growing very fast, of course. And our market penetration rate is not as good as we expected. In the future, the market will be highly fierce, of course. But this market is not yet fully competitive. It's not receiving full competition. Every company could have their own proportion and share. You could manage your supply chain, you could play up your strengths and you could do somethings with a lot of pragmatic behaviors and you could improve the health. So we could extend our strength in the long run, and we could further extend our market scale. That is my general impression, and that is my short answer for your question. Next question, please. Operator: The next question comes from Haitong International, Meng Kehan. Kehan Meng: I'm from Haitong International. Congratulations. Thank you for sharing with us the great results in 2025. I have some questions to you. For the next few years, what will be your plan to start the brick-and-mortar stores? And what will be the impact for the online practices? And for the ILC, what will be your future plan? Would there be any change? Would there be any large M&A plans? Dong Cao: I want to take those questions with more elaboration. I believe a lot of investors are very interested in those points. First of all, we don't have the plan to have a large-scale M&A. But it doesn't mean that we don't care about the offline practices and offline maneuvers. The efficiency, the cost of running the brick-and-mortar stores is one of our key strengths, of course. I talked about the medical insurance policy. This is very key in managing the brick-and-mortar store, the pharmacy. 35% of the gross margin will be the bench line. It's not that high, of course. And we have a lot of good chances. We are not relying 100% on the medical insurance, and we could ensure the security of the business. Of course, the gross margin was not as high as we expected when we are running it online, but still very satisfactory, but still satisfied with those results. When we are running the offline stores, we prioritize. We also care about their practices, because around RMB 2 trillion -- in terms of the market share, RMB 2 trillion belong to the offline practices, and some of them belong to the in-hospital market, around 7% to 8%. It matters. I don't think the online business can 100% replace the offline business. Still, we have to watch closely to the development of the offline business, but how we are going to maximize our strength. There are 2 sets of practices. The offline pharmacies for one thing. We are running 300 offline pharmacies up to now, 300. Those pharmacies are serving their neighbors. We are consistent in promoting the offline pharmacies. Those offline pharmacies are good at delivering immediate service requirements and demand. In terms of the data, they are accounting for 10% in terms of market share. Some patients want to have immediate medical products. The size of the pharmacy is not big. Our priority is on B2C business to customer. But this is a very important scenario for us to manage the customer relationship, and we would do a good calculation, how we are going to manage the stores, how are we going to manage the operator or the users. And this is a platform with a lot of openness, and we are collaborating with the chain pharmacies as well. Those are our business patterns and business scenarios to better serve the users, bring them the premium experiences. So I don't think we're going to have a large-scale M&A to cover the offline pharmacies. I don't think so. We may maintain the structure, the size. And offline pharmacies in terms of number is too many. Altogether, 700,000 in totality. I believe that we can do more to improve their overall efficiency. The next is about the checkup centers. I believe that checkup centers are providing us a new area to grow our business range. We can do a better job improving the quality, and that will be the new entry to collect different dots. I believe that the offline checkup centers will be the entry point to manage the health. Now we have several checkup centers in operation. We're not in a hurry to duplicate the model. We want to maximize the JD DNA, be pragmatic. We'll be patient, we'll be accepting the market changes. We will never go too fast. We are having a long-term vision to be the guardian of the people's health in China, and we want to do a good job. That is our practices for the offline business. We will never do it overnight. We'll not complete all the business over the short term. We will be stable and we'll be cautious. It's a step-by-step manner. All in all, the business here will be extended and there will be no obvious shock to our core business. So we believe that whatever we are doing, the AI-empowered practices, the offline pharmacies, we will go very steadily, step-by-step, improving the users experiences. Before each step we are marching on, we'll find out what will be the long-term mission, what will be our purposes before we are taking up this step. Now we are using a lot of AI technologies. We are improving the general efficiencies very positively. The AI nutritionist is also a good practice. The conversion rate is even higher than the real person nutrition practitioner. I believe that the offline pharmacies will also be greater scenario, faster use and to administer the AI practitioners. So don't worry about large M&A from JD Health. We will do everything step-by-step with very good reason. Operator: Next question from Goldman Sachs, Lincoln. Lincoln Kong: Congratulations for you to have the 2025 outcome. I have a question on the progress of AI+. Please share your opinions about the supply chain, about your practices for the future. Dong Cao: Again, I want to give you our overall planning. There are several directions ahead of us. The first is the 2C, to customer direction. You could check what happens in JD application. On JD Health application, we have the doctor, Kang Kang. We have the JOY DOC. For the 2C side, you have the Jingyi. They are doctors, Dr. Da Wei. We have the pharmacists, we have the nurses. They are AI bots, they are AI twins. A lot of consultation services are out there, the shopping services, the before and after sales services are out there. The conversion rate, the satisfaction rate, the user experiences are very positive. The online consultation is booming, empowered by the AI technologies. Those are the good outcomes from the 2C front. However, it's not right time for us to commercialize all those practices and assets, but still we're in a good position, we're in a good direction to have the commercialization. Now we have the Jingyi. We have the 2H to hospital front. In the future, I hope that we could get connected to the hospitals. We are speaking about 70% of the resources of the 2 trillion market size will be in different hospitals. We want to expand our market share, rely upon the partnership with different hospitals. The hospitals will help us to manage the patients. For instance, we could do the pre-consultation, helping the patients to check in the right departments. Those are some things we could down before the hospital entry. For the post-operation diet and nutrition, we could also have the AI to help those patients, and we can collaborate with the hospitals. In the future, we could manage this business with incremental growing momentum. And for the 2B side, the 2B side is operated for the doctors totally free of charge. However, how we are going to set up a good business model, how we're going to have the final commercialization, we are still in the process of pondering on. In China, it's very special for the doctors to pay. Still, I believe that as long as the products and the services are excellent, we could have sort of some method to charge. Still, it's a very complicated value chain in the medical sector. There will be the right payer. That is the question we have to keep thinking. And we have to avoid the homogeneous competition. No matter what, those are the directions we are embarking on, and we are seeing a much more clear directions and light at the end of the tunnel. In the near future, I believe that we could see more frequent AI application with positive outcome. If there's any feedback, I will let you know, and we will keep a close eye on this market. But please keep it in mind. JD Health has very good AI innovation practices, and we go very steady by collaborating with the stakeholders, and we will continue to promote innovative drugs. When we are checking the market, it looks very dynamic, it looks very popular, but we will be the one who speak deeper to this market, and we will give you good solutions, because all in all, we want to serve the patients, we want to serve the users with good experiences. We are more than observer, we are a practitioner. Thank you. Operator: For time's sake, we are going to close the Q&A session. Now I'm going to welcome you give us the closing remarks. Dong Cao: Thank you once again for joining us today. If you have further questions, please contact the IR team directly. Thank you.
Anthony Kirby: Good morning, everyone, and thank you for joining us for the Presentation of Serco's 2025 Full Year Results. I'm Anthony Kirby. I'm the Group Chief Executive, and I'm extremely proud to lead what I believe is one of the best companies in the world. My more than 50,000 great colleagues deliver mission-critical services in some of the most demanding environments globally. And their commitment, skill and resilience continues to inspire us every day. Nigel Crossley, our Group CFO, and I are delighted to be able to present the strong set of results on their behalf. But before we begin, it would be remiss of me not to recognize Nigel's outstanding contribution to Serco at this stage, more than 11 years of dedicated service as well as 5 as the Group Chief Financial Officer. And on behalf of the Board, the Executive Committee and all of his colleagues across Serco, I want to offer my sincere thanks and wish you, Nigel and Lorraine a very happy, long and safe retirement. I'd also like to take this opportunity to introduce Mark Reid, who is with us in the room this morning, who will succeed Nigel as the Group CFO, joining the Board in the coming days. But before we go on, I must refer you to the disclaimer, which is in the presentation pack. As ever, the running order will start with me giving you an overview of our 2025 performance, the key themes that shape the year, the highlights and the progress that we've made and the momentum that we're carrying into 2026. I'll then hand over to Nigel, who will take you through the financials in more detail. And after that, I'll return to talk about how we're sharpening Serco's strategic focus and strengthening our platform for future delivery. We'll then open up for Q&A. So let me begin with an overview of what has been a strong year for Serco. 2025 was a year that was defined by disciplined execution, strong operational delivery and continued strategic progress. Across the organization, be that in Defence, Justice & Immigration or Citizen Services, we delivered with professionalism, pride and purpose. Our full year performance in 2025 has been strong and positions us well for '26. We delivered robust revenue and profit performance. And critically, we've done so while maintaining our focus on competitiveness, operational excellence and growth. You've heard me speak previously about our focus on safe, sustainable, profitable growth. That focus remains absolute and is clearly reflected in our results. Our deliberate multiyear investment in Defence expansion has proven effective. We've deepened our strategic intent, and it's a sector where our momentum is unmistakable. Alongside Defence, we have sharpened our attention on Justice & Immigration and Citizen Services, and I'll come back to talk about more in detail on those 3 sectors following Nigel. But turning to the headlines for a moment. Revenue for the year was GBP 4.9 billion, up 3% at constant currency. Underlying operating profit was GBP 272 million, delivering a margin of 5.6%. Cash conversion was again exceptional, reflecting disciplined working capital management. And our order intake was GBP 5.5 billion, representing a book-to-bill of 114%, with more than 2/3 coming from our Defence business. This performance demonstrates the trust our customers place in us and reinforces the momentum that we carry into 2026. We continue to drive progress across our 3 strategic mutually reinforcing pillars: growth; competitiveness; and operational excellence. Starting with growth, our new business win rate for the year was over 30%, reflecting disciplined bidding and a strong competitive position in our core markets. In particular, we secured around GBP 3.5 billion of defense contracts, underlining both the strength of our Defence platform and our ability to deliver complex mission-critical services. We also ended the year with a GBP 12.1 billion pipeline, the highest we've seen in a decade and which again reinforces the strength of the opportunities that we see ahead. Turning to competitiveness. We've strengthened our delivery quality and our efficiency. Margin progression reflects that discipline as do the partnerships that we've secured such as with Mubadala in the Middle East. In Asia Pacific, our portfolio optimization and productivity performance, along with the disposal of our Hong Kong business has made the region sharper and more competitive, helping to grow margins year-on-year despite the end of the Australian immigration contract. Under operational excellence, the rapid integration of MT&S has been a major achievement in 6 months. We've transferred almost 1,000 new colleagues into the organization, aligned systems, embedded common ways of working and begun to win new work together. MT&S has strengthened our Defence platform with deep simulation, mission training and satellite ground and network capability. Across the wider portfolio, our contract retention rate remains high at over 90%. At the same time, we're building a safer, more engaged organization with safety incidents reduced by 22% year-on-year. Colleague engagement sustained at 70 points for the third consecutive year as well as continued colleague engagement. And these results reinforce the quality and dedication of our people. Supporting them, investing in their safety and well-being and ensuring that they have what they need to succeed remains a core business imperative. It's central to how we deliver for our customers and how we will retain more business. This focus on our people, our culture and how we operate is also being recognized externally. During the year, our performance has been acknowledged by a range of independent organizations, but the standout for me was being named as Britain's Most Admired Companies. That recognition reflects, not just what we deliver, but how we deliver it, the strength of our leadership teams, our culture and the trust we build with our customers and the communities in which we work. Ultimately, it reinforces that we are building a business. Our colleagues are proud to work for, our customers are proud to partner with and our investors can have confidence in, grounded in strong performance and responsible delivery and doing the right thing always because it's always the right thing to do. Our performance in '25 demonstrates consistent progress across key financial metrics. Over the last 5 years, we've delivered revenue CAGR of around 5% and profit CAGR of around 11%. Over the period, we've doubled earnings per share to 16.93p. And over the same 5-year period, we've also demonstrated disciplined capital allocation. Of the GBP 1 billion of cash generated, we've invested in targeted M&A and returned surplus cash to shareholders, again, as demonstrated this morning with the announcement of a further GBP 75 million share buyback. Not only does this reflect our approach to good capital allocation, but it also showcases the sustained progress that we've made over the last 5 years. As a business, we are more increasingly predictable, more competitive and well positioned to convert opportunities into sustainable long-term growth over the years ahead. And with that overview, I'll now hand over to Nigel. Nigel Crossley: Thank you, Anthony, and good morning to everybody. Let me take you through the financial -- sorry, let me take you through the performance for 2025, a year in which the group has demonstrated strong momentum despite a number of anticipated headwinds. Revenue increased to GBP 4.9 billion, up 3% on a constant currency basis, reflecting good underlying performance and the benefit of the MT&S acquisition. Organic revenue growth was up 1%, in line with where we guided the market. And it's been led by double-digit organic growth in Defence, partially offset by a reduction in U.K. and Europe and Australia immigration revenues. Underlying operating profit was GBP 272 million, which is up 1% on a constant currency basis. The margin of 5.6% remains in the middle of our target range of 5% to 6% and reflects execution discipline and productivity improvements, offsetting the Australian immigration contract exit and higher national insurance costs in the U.K. And return on invested capital continues to be strong at 26%. It's worth remembering that the significant part of invested capital relates to goodwill and acquisition intangibles. And we run the business using just GBP 0.1 billion of operational invested capital, which emphasizes the capital-light nature of our business model. And I'll now move on and provide more color on the operational performance for each of the regions. So starting with North America, who delivered another strong performance and continues to be an important contributor to the group's growth targets. Revenue increased by 10% to GBP 1.46 billion, driven by 4% organic growth and a 9% contribution from the MT&S acquisition, partially offset by a 3% adverse currency movement. Organic growth was led by defense, where significant order intake achieved in 2024 is flowing through to this year's revenue. We saw higher activity across defense personnel services, mission training and increased demand for IT network and infrastructure services for the U.S. Navy. Underlying operating profit increased 5% to GBP 144 million, including a 3% negative impact from the weaker dollar. The margin stayed around 10% despite the impact of mobilization of new defense contracts and the one-off MT&S transaction integration costs of GBP 6 million. These costs were anticipated and as the contracts mature, margins will recover, supported by increased efficiency and portfolio mix. Order intake was GBP 1.4 billion, of which 90% was from defense, which is a robust outcome after the exceptional order intake in the second half of 2024 and the temporary delay in contract awards caused by DOGE and the U.S. government shutdown. Win rates remained healthy, 37% of new business, reflecting our customer relationships and competitive positioning. Our rebid win rate was a bit lower than normal due to the loss of a low-margin air traffic control contract. The pipeline in North America has more than doubled to GBP 5 billion. And once again, defense continues to represent the majority of the pipeline of new business opportunities. Integration of MT&S has been successful and is delivering early benefits. In the first 7 months of ownership, it contributed GBP 9 million of operating profit after absorbing transaction integration costs. The strategic fit is proving to be exactly as expected, expanding our defense footprint by deepening customer access and enhancing our mission training and satellite communication capabilities. So moving on to U.K. and Europe, our largest division, which delivered another strong performance. Revenue increased 6% to GBP 2.58 billion, driven by 5% organic growth and a further 1% contribution from the acquisition of EHC, our German immigration services business. Organic growth was supported by the mobilization and ramp-up of several major Defence and Citizen Services contracts, including Armed Forces Recruitment, marine services for the Royal Navy, continued progress on electronic monitoring and some complex case management contracts. As expected, we have seen lower revenues in our Immigration business from harder borders in Europe and the ongoing shift in accommodation mix in the U.K. although revenues in the U.K. have not reduced the rate we expected at the start of 2025. Underlying operating profit was GBP 149 million, flat on last year, and margins remained healthy at 5.8%. While there were anticipated headwinds from Immigration and higher U.K. national insurance costs, these were offset by improved contract performance elsewhere in the division, including stronger contributions from Citizen Services and Defence. Order intake was excellent at GBP 3.7 billion, delivering a book-to-bill ratio of 145%. Win rates were also very strong, winning 60% of new business bids and 97% of rebids. The wins included several strategically important long-term awards, particularly in Defence, which accounted for 60% of the order intake. Finally, the U.K. have done a good job of not just winning new business, but also rebuilding the pipeline back to similar levels to what we saw at the end of the year at GBP 5.8 billion -- end of last year, sorry, at GBP 5.8 billion. The pipeline includes a broad range of opportunities across Defence, Justice & Immigration and Citizen Services. So turning to Asia Pacific, where the division delivered a resilient performance with good cost control, improving contract performance and some early progress on growth. This resulted in an improved margin despite the expected reduction in revenue following last year's Australian immigration contract exit. Revenue for the year was GBP 655 million, down 18%, recognizing the 12% organic decline associated primarily with immigration contract exit and the disposal of our Hong Kong business and some adverse currency movements of 5%. Underlying operating profit was GBP 24 million, up 3% on a constant currency basis. The margin increased to 3.7%, up about 60 basis points. And the improvement demonstrates the effectiveness of disciplined cost control to rightsize the organization and improved operational performance. We also delivered some important new business wins across the region. Notably, we secured a 6-year contract for Justice Transport Services in Victoria. Rebid win rates were strong at 91% and Defence performed particularly well with key extensions, including the Royal Australian Navy's warfare training contract. There were also some important rebid and extension wins in Citizen Services. And looking ahead to 2026, we have a good pipeline of both new business opportunities and rebids and extensions of existing work across Defence, Justice and Citizen Services. There's still work to do during 2026 to further build the APAC pipeline, but we're encouraged by the progress made in 2025. And turning now to the Middle East, where we have restructured the business in Abu Dhabi by entering into a strategic partnership with the sovereign wealth fund, Mubadala. This involves transitioning facilities management contracts into the new joint venture and combine Serco's capability and Mubadala's network in the Middle East to expand access to large, high-quality opportunities across the UAE. Whilst it's still early, we are encouraged by the breadth and scale of opportunities we are seeing. Revenue for the year was GBP 177 million, a reduction of 18%, driven by 12% organic decline, a 4% drop from accounting impact of Mubadala partnership and a 2% adverse currency. The organic revenue reduction primarily resulted from the conclusion in 2024 of our low-margin air navigation services contract in Dubai and lower variable project work compared with the prior year. Underlying operating profit decreased to GBP 13 million from reduced organic revenue with margin decline to 7.1%. We continue to focus on operational efficiencies, disciplined bidding and improving the commercial resilience of the region. During the year, order intake was GBP 150 million, and we've rebuilt a GBP 0.5 billion pipeline of new business opportunities. So now let me move on to cash and cash generation in 2025 was again strong with cash flow of GBP 219 million, representing trading cash conversion of 112%. And this maintains our track record since 2019 of averaging over 100% of profit converting into cash. And the result reflects the disciplined approach we take to timely and accurately billing to our customers, enabling them to pay us promptly. Our 2025 cash flows also benefit from a higher-than-usual level of mobilization activity and the associated deferred revenue. Adjusted net debt increased to GBP 206 million from the GBP 100 million at the end of last year. This increase reflects the GBP 245 million acquisition of MT&S, along with capital we've allocated to buybacks and dividends, partially offsetting the strong cash flow. The group continues to maintain a very strong financial position with year-end leverage of 0.7x EBITDA, below our target range of 1 to 2x. So on that, let me turn to capital allocation, which is in the context of strong cash generation, capital-light business model and the maintenance of a strong financial position. Our #1 priority continues to be to invest in organic growth. We further strengthened our business development capabilities and our operational delivery platform and mobilized major new contracts across Defence, Citizen Services and Justice & Immigration. These investments contributed to our record GBP 12.1 billion pipeline and strong order intake for the year. Reflecting our confidence in the group's financial position and outlook, today, we are recommending a full year dividend of 4.5p per share, an 8% increase on last year. And our third priority is M&A. This year, we saw the successful completion and integration of the MT&S acquisition, and we continue to assess additional strategic bolt-on M&A opportunities where they enhance our capability, expand our customer access and strengthen our competitive position. And finally, where we have surplus capital, we commit to return this to shareholders promptly. We completed a GBP 50 million share buyback in the second half of 2025 and today announced a GBP 75 million buyback to be executed in the first half of 2026. Inclusive of this newly announced buyback, Serco will have returned in total around GBP 650 million to shareholders through buybacks and dividends since 2021, demonstrating our commitment to disciplined capital returns when our balance sheet strength allows. So let me finish off with our updated guidance for 2026, which is largely unchanged from our pre-close statement. We expect revenue to be around GBP 5 billion for 2026, resulting in organic growth of 3%. The increase in revenue reflects a full year contribution from MT&S, ramp-ups of major contracts and the impacts of new businesses won in late 2024 and throughout 2025. These upsides offset the expected reductions in the immigration activity in both U.K. and Australia, which we expect to account for around a 3% organic headwind. We expect underlying operating profit of around GBP 300 million, over 10% higher than this year. This includes the continued positive impact of MT&S, productivity improvements across the group and the full year effect of multiple contract ramp-ups transitioning into steady-state operations. This result in a margin of around 6%, placing us at the top end of our medium-term target range. And net finance costs are expected to increase to around GBP 52 million, reflecting the annualized impact of interest on the new debt issued to fund the MT&S acquisition and the cost of the new GBP 75 million share buyback. We expect free cash flow of around GBP 160 million, which is unchanged from our pre-close statement and remains consistent with our medium-term ambition to convert at least 80% of our profit into cash. And finally, adjusted net debt is expected to finish 2026 at GBP 165 million, which is slightly different to the initial pre-close guidance of GBP 150 million and reflects the new GBP 75 million buyback, offset by the better-than-expected closing net debt position at the end of 2025. And with that, I'll hand back to Anthony. Anthony Kirby: Nigel, thank you. Let me now turn back to the strategic and operational progress that we've made during the year and the opportunities that we see ahead. As you know, '25 has been a year where we've taken a much more deliberate approach to the areas where we see the greatest opportunity. We've refined our strategic direction to prioritize the geographies and sectors where Serco can deliver the most value, achieve the best growth and where our capabilities are strongest. The underlying demand for the essential services that we deliver remains remarkably robust at a time where external environments can often feel volatile. Across all of our geographies, we continue to see strong structural drivers that reinforce the need for trusted partners like Serco. In North America, budget in the sectors in which we operate continue to grow. We've remained resilient but not complacent through the changes in administration priorities, including the impact of the U.S. shutdowns. However, some short-term slowness in the system could persist into the first half of '26. But to remind you, we have more than doubled our pipeline in the U.S. to more than GBP 5 billion this year. In the U.K. and Europe, financial pressures remain acute, but demand drivers will endure, including rising Defence spending and sustained pressure on the asylum and migration systems, which reinforce our view of the long-term demand drivers. In the Middle East, modernization plans are creating new opportunities as well as likely increases in defense capability and security protections. And in Asia Pacific, encompassing the Indo-Pacific region, defense and infrastructure needs remain significant, albeit balanced against tighter budget conditions. But these dynamics point to an addressable market of over GBP 900 billion. Whatever the precise figure is, it is a large and growing market with clear opportunity for us to increase our share over the years ahead. In Defence, investment pledges remain substantial. The U.S. has proposed a defense budget of over $1 trillion. The U.K. has committed to 3.5% of GDP and European nations continue long-term multiyear rearmament and capability improvement programs. In Immigration, volumes may fluctuate, as Nigel has just alluded to, but long-term global pressures, conflicts, geopolitical uncertainty, climate-related displacement and economic instability continue to drive underlying demand. And in Citizen Services, technology is driving efficiency, yet the services that we deliver still depend on people, which means our exposure to displacement from automation is limited more than you might expect. Instead of eradicating our work, technology gives us an opportunity to enhance our offering further, making our services more efficient and improving the services to the citizens who depend and rely on them. And finally, to labor the point in this context, our role is to deliver critical mission public services. It helps shield us from sudden political policy reversals. Even during dynamic shifts in government policy or legislation changes, our operational roles remain essential for the delivery of critical services. So while the headlines may suggest rapid change, the reality is demand for what we do is anchored in long-term structural demand. So when you look across our international platform, the picture is clear. I said that we needed to become more focused on the areas with the greatest opportunities, being more selective and deliberate about the capabilities that we're developing and clearer about the geographies and sectors where those capabilities can best be deployed. North America, the U.K. and Europe remain our most addressable and scalable markets. The U.S. federal government is the largest buyer of goods and services in the markets in which we operate in the world. In the U.K. and Europe, governments face sustained financial pressure and are looking for partners who can deliver better outcomes more efficiently. And whilst those markets do offer us the greatest growth potential, that does not mean that we don't value our presence in Asia Pacific or the Middle East. We absolutely do, and we expect both of those regions to grow over the coming years. But we will be disciplined about where we deploy our capital and focus our growth attention. Across the group, we're therefore doubling down on the sectors where structural demand is the greatest and where our capabilities, track record and recent progress positions us well for sustainable growth. Our enhanced Defence platform, our deep operational expertise in Justice & Immigration and our breadth of services across the Citizen Services portfolio gives us a greater level of differentiation. Over the past year, we focused the organization on removing some inefficiencies, reducing complexity where we can and sharpening our ways of working. This has laid the foundations to make us more agile, more focused and more competitive for the years ahead. I also said we needed to make more progress in systemizing the sharing of best practice across the group, enabling us to leverage capability, learning and execution at scale, and I'll touch on some of the examples of those shortly. But at its core, Serco delivers mission-critical services where outcomes matter most, deploying people, technology and partners to perform at scale. So I'm now just going to touch on 3 of those growth sectors. So turning to Defence, the area where we see our greatest long-term opportunity. Defence now accounts for around 40% of the group's total revenue, inclusive of our joint venture operations. We're deeply embedded in the armed forces of the U.K., the U.S. and Australia. And we deliver critical services in the Middle East for the Australian Defence Force and provide essential training in New Zealand and Canada. We also deliver naval capability in Europe, including the maintenance of the minehunter vessels in Belgium. We bring over 60 years of proven delivery supported by increasing technological capability to Defence. In fact, that journey began at RAF Fylingdales where today, we operate and maintain the U.K. early warning radar, a critical part of both the U.K. and U.S. missile detection system. Our teams provide 24/7 uninterrupted support to this national security asset, demonstrating the depth and experience of Serco's expertise and long-standing credibility. And we're also working in Greenland, modernizing and maintaining assets for the U.S. Space Force. And we're active across all Five Eyes nations and throughout several NATO countries where Defence spending continues to rise with 24 members of NATO now exceeding or meeting the 2% of GDP spend targets. So whether it's training, personnel readiness, platform modernization or future-focused autonomous capabilities such as our USX-1 Defiant vessel, Serco is a critical partner to governments as they deliver on their national security ambitions. So a core differentiator for Serco is our ability to support the full life cycle of personnel services for the military from recruitment, to health, fitness and readiness to training, housing and family support through to veterans transitions. In the U.K., we're the prime contractor for the Armed Forces Recruitment program. The program brings together a set of best-in-class partners under a single Serco delivery model, and it's a flagship example of where our capability in program management, governance, stakeholder engagement and operational delivery truly differentiates us. In the United States, we continue to deliver the Army's Holistic Health and Fitness program, H2F. Mobilize last year is the largest human optimization and soldier readiness program ever fielded at scale. In Australia, we train the ADF Maritime Officers in a simulated environment at HMAS Watson's Bay, leveraging our MT&S capability alongside the established expertise of our broader defense teams. And through our joint venture, VIVO, we maintain 27,000 military family homes and more than 20,000 defense buildings across the U.K., a vital part of the personnel experience and family ecosystems of the military. All of this reflects, I believe, the strength of our personnel services platform that we've built, a platform that is increasingly cross geography, increasingly tech-enabled and increasingly central to the defense strategies of our customers around the world. And this platform of capability allows us to take our end-to-end offering to customers internationally. Turning now to Justice & Immigration, a sector where Serco brings deep operational expertise and a scale of delivery that is critical to government in the U.K., Europe, Australia and New Zealand. Across the countries where we do operate our Immigration business, we support and accommodate over 100,000 asylum seekers and refugees, reflecting the breadth of complexity of demand in which we help governments manage. That demand is driven by long-term global pressures, sustained migration flows, rising complexity in case management and the need for safe, high-quality and efficiently run detention facilities. While policy decisions can cause short-term fluctuations in migration volumes, the underlying demand signals remain strong. Border crossings remain a challenge and governments need agile, experienced operators as they seek innovation across both immigration and justice services. Our position across the criminal justice system is equally strong. Our unique role gives us a comprehensive understanding of the current and future likely challenges. This year, we operationalized additional prison capacity in the U.K., helping to alleviate pressures across the custodial estate. We also now monitor 28,000 individuals in the community on behalf of the Ministry of Justice in the U.K., which is a scheme that has proven to reduce reoffending by around 20%. So in a sector where trust and safety and performance matter profoundly, our operational track record positions us well. One of Serco's real strengths is our ability to operate an international platform of best practice, taking what works well in one part of the world and applying it elsewhere to lift performance, efficiency and outcomes across our global operations. A good example of our -- a good example of this is our prisoner escorting contract by moving expertise from the U.K. to help our colleagues in AsPac win the Justice Transport Services contract in Victoria, Australia, demonstrating how our capabilities can be deployed internationally. More broadly, our end-to-end role across justice from courts and secure transport to custody and prison management to electronic monitoring in the community gives us a system-wide insight that a few other providers can match. That perspective enables us to transfer proven operating models across geographies with confidence. The same platform approach applies in Immigration. Across Europe and the U.K., our teams have built deep capability in complex case management, safeguarding vulnerable people and running high-performing detention facilities. These learnings now shape how we design and deliver services globally, creating the consistency that customers expect across borders. The platform approach combines people, processes and technology developed in one geography, strengthened with lessons from another and deployed wherever needed, giving us the scale and assurance our government customers rely on to evolve their systems of management. Moving on to Citizen Services. Demand is often driven by budget pressures, the need to modernize infrastructure, digital integration and rising public expectations. Delivering services directly to the citizens remains an important part of our strategy. Its breadth gives us the agility to respond to shifting government investment priorities and to direct our capability towards the areas of greatest demand. Across this sector, we deliver directly services that touch millions of people's lives every day. We support people navigating complex welfare and employment systems, helping long-term unemployed individuals back into work. We also run high assurance citizen operations, including helping people access much needed health insurance in the United States, delivering essential services with speed, accuracy and compassion. So while Citizen Services can be considered to be broad by nature, I consider that, that breadth and diversity is a strength. It enables us to adapt quickly, respond to evolving customer needs and bring our capabilities to the areas where we can add the greatest value. As we look across the Citizen Services portfolio, the defining strength of our ability is to blend delivered impact with technology-enabled efficiency. In North America, our work for the Centers for Medicaid and Medicare Services shows what this looks like at scale. For more than a decade, we've operated that business, and we've now deployed advanced automation and digital tooling to improve the quality and speed of the essential services, managing around 10 million customer notices a year, embedding AI technologies and completing complex case management 3x faster with compound efficiency of more than 500%. And in the U.K., we're applying the same innovation and those services that we depend on to help people through the Restart program. That employment program, we've piloted our technology to equip job coaches with new AI-enabled case management tools. It's reduced administration time by around 75%, improved case note quality by nearly 20% and most importantly, allowed our people to provide human-centered support to help the people back into sustainable employment. That combination of people who deliver with care, expertise, which is coupled with technology that accelerates important and impactful outcomes is what makes our model distinctive. It's how we help governments deliver better outcomes at lower cost and how we will continue to transform essential public services that millions of citizens depend on. So bringing that together, the market dynamics across our sectors remain compelling. Structural demand is intensifying, driven by geopolitics and Defence postures, fiscal pressures and the need for innovation, and those forces show no sign of easing. Against that backdrop, Serco's platform is well aligned to our customers' priorities. On the whole, we operate at scale in mission-critical services that governments rely on, which provides resilience and underpins long-term opportunity. We've sharpened our focus on the geographies and sectors where demand is strongest and where our capabilities are most differentiated. And that gives me confidence that Serco is well positioned to capture the growth opportunities in the years ahead. So to conclude, let me just reiterate my key messages. Our 2025 performance was strong and leaves us well positioned to deliver against our '26 guidance. We're advancing the organization to achieve our goals and doing so with the same rigor that has underpinned our success over the past 5 years. That discipline across growth, competitiveness and operational excellence is what will continue to drive our performance in '26 and beyond. We're prioritizing our investment in key growth markets and doubling down on the sectors where our differentiated capabilities and technical depth align with the strong structural drivers. So we're advancing the systems and leadership needed to scale our business for success, building a stronger executive team and aligning our leaders around a growth and performance culture. This gives me confidence in our ability to maintain well-governed momentum, confidence that we are well placed as ever to seize on the opportunities ahead and confident that Serco will deliver as an agile, well-governed business able to course correct when needed and to deploy the best talent to drive better outcomes for our customers, our colleagues and our shareholders. And I think we'll now move to Q&A. Arthur, do you want to go first? Arthur Truslove: Arthur Truslove from Citi. So 3 for me, if I may. So the first one, are you able to just talk about the notable contract implementation costs? So what were the sort of big ones in '25 versus '24? And then what are you expecting in '26 to just sort of get a feel for what the impact of that will be going forward and indeed last year? Second question on competition. So I just wondered sort of how the competitive landscape, particularly in the U.K. is evolving, especially in the context of better margins? And if you could sort of comment on how that's evolved in the last few years as well, that would also be interesting. And then finally, on U.K. migration, I guess, migration more broadly. I guess my question really is, we've all seen these sort of large centers being suggested. What do you -- how do you think the model potentially evolves? I know it's a difficult question in terms of what happens with migration and kind of what are the sort of best and worst case scenarios for you? Anthony Kirby: Arthur, thanks for the message. Nigel, do you want to take the cost of mobilization? Nigel Crossley: Yes. Anthony Kirby: Shall I start with the competitive landscape? Nigel Crossley: Yes. Anthony Kirby: Yes. So in the U.K., we haven't really seen that much of a change in the competitive landscape, probably over a number of years actually. I think the competitive landscape has remained pretty stagnant. I think we've -- typically, when we're -- depending upon what it is, we are bidding in the sector we're bidding in, we typically bid between 5 and 6 competitors dependent upon what the services are that are being procured. So we've not really seen any significant change in that space. In terms of migration, let me take the conversation more broadly first, which is, migration flow is likely to continue to exacerbate. I've run through the reasons why we think those structural drivers will endure. In terms of your specific point on the U.K., look, we stand really clear side-by-side with the customer. When they ask us to provide good quality, innovative solutions, we -- it's our job to provide those solutions to them. So medium and large sites, we're working with the customer. It's the customer that decides where those medium and large sites are. Our job is to make sure that we can stand those facilities up once the customer has procured them. But I will just make the point again that we've made previously. There is a priority to come out of hotels where our hotels were 50 -- just over 50% less now than where they were 12 to 18 months ago. So this is a program that we have been working with the customer on to achieve their priority. Nigel Crossley: And then on the contract mobilization costs, we've obviously had a busy year because we've had some big wins. Most of those costs are probably in the U.K. And we've seen probably a protracted mobilization on the electronic monitoring for various reasons. We know that we've got the Armed Forces Recruitment contract that we started earlier this year. So those are the kind of things that are probably higher than we'd ordinarily expect to see, maybe to the tune of about GBP 20 million in the year. Anthony Kirby: I think what we'll do is, we'll start with David and then we'll go right across that row where all of the questions. David Brockton: It's David Brockton from Deutsche Bank. Can I just ask 2 just around pipeline, 1 contract pipeline and 2 acquisition pipeline. Within that contract pipeline, are there any opportunities we should be aware of that are capped in terms of size? So any bigger ones in there? And if you could just talk about how you see that evolving over the course of the year as well? And then secondly, in respect to the acquisition pipeline, can you just give us an update on how that looks given that you've -- I guess, you've only committed to a buyback for H1, so clearly keeping some powder dry there. Anthony Kirby: Yes. Shall I do acquisitions, Nigel, you do the pipeline? So in terms of acquisitions, we're in a really strong position where we have the optionality that when we look at opportunities that present themselves or we go looking for. We're in a strong financial position from a balance sheet perspective to be able to execute and pull that key part of our capital allocation policy. I'm obviously not going to go into detail in terms of things that we're looking at, at the moment. But it is a liquid market, particularly in the growth sectors that we are looking to grow and in the regions that we're looking to expand our businesses in. And I think we've said previously, the U.S., Europe and the U.K. remain at the top of that list. But that doesn't mean that we preclude anything in other parts of the world as well. So there are some things in the pipeline that we're looking at. It's clear that we've said in the stock exchange announcement that we'll review the capital allocation policy at the half year again. But I think our track record of returning surplus cash to shareholders if we've got no M&A in the pipeline -- in the foreseeable pipeline is something that we will continue to do as we move forward. Nigel Crossley: Yes. And then on the pipeline, look, we've got a good mix of new opportunities across our pipeline. And we've got a couple that are at the top end of our range of up to GBP 1 billion where we cap them. One is a training contract in North America, actually in Canada. And the other one is a logistics contract for the U.K. MOD, which we are potentially looking at. Those are both not going to start until -- for some time yet. They're a bit further out. And then there's a big -- over half of our contract -- over half the pipeline is on contracts that are less than GBP 300 million. So there's a good spread of cover across all the sectors and of various sizes. Christopher Bamberry: Chris Bamberry, Peel Hunt. Three questions, if I may. You're obviously sharpening the focus on Defence, Justice & Immigration and Citizen Services. What does that mean for health and transport? Secondly, can you talk a little bit more now you're 9 months into MT&S, the positives and the negatives against your original expectations? In particular, can you give us any concrete examples on synergies on the pipeline? And the final one, when you talked about -- Nigel, about the margin in North America, I mean, parking integration being absent this year, you said that the margin would improve as contracts mature. I guess given the profile of your stuff you're winning, is that more kind of -- is there going to be see much of that in '26 or is it more kind of '27 or further out? So if you keep winning stuff, is it -- is that kind of portfolio effect kind of dilutes that benefit? Anthony Kirby: Do you want to do the last one first? Nigel Crossley: Well, I'll do the first. So on margin in North America, yes, you're right, there's GBP 6 million of integration costs. So that's not 40, 50 basis points of the margin. So that gets you back over 10%. When we look at what we're bidding, there's a range of what we're bidding actually. So there's some stuff that's cost plus that tends to be slightly lower margin. There's some stuff at the higher end, which is fixed price and above our average. So I think over time, we'll see broadly -- our profile broadly stays similar. I think we'll get more economies of scale as we continue to grow. And certainly, when we bring -- we brought MT&S on, we've got economies of scale in our fixed costs there as well. So we're leveraging our fixed costs well. I think all those things will contribute to at least keep that margin at 10%. Anthony Kirby: Thanks, Nigel. So if I just pick up, Chris, your point on Health and Transport. So Health and Transport fall under Citizen Services, particularly because we're delivering services directly to the citizen. We're not actively growing in our Transport business in the majority of the world. We will retain and rebid our contracts that we currently operate in Transport. We think we operate some really good transport businesses, be that our joint venture with Merseyrail or NorthLink Ferries up in the Highlands and the Islands and also some transport businesses in the Middle East and the U.S., but they're quite small. And then in health, our health FM, which is a soft and hard FM business in -- predominantly in the U.K., we're looking at FM across our horizontals where we deliver FM services. So if an opportunity presents itself for us to go and bid, we will, but we're not actively deploying our growth capital into those lower margin area businesses. In terms of MT&S, I think we said at the outset, we wanted them to concentrate on the business that they had in their current pipeline that they brought across with them at the time of the acquisition. And then we looked at the second area of the pipeline, which is where can we bring MT&S' capability and our North America capability together in order to go and win and retain contracts with the benefits of both organizations combined. And then we talked about what we call our Horizon 3 pipeline, which is the international opportunities that MT&S and the wider Serco organization can bid collectively on. In the U.S., we've started to win some new business that was in the pipeline in MT&S, some small deals. The team are just rescrubbing the pipeline for the North America business, and we'll look to move internationally as we get further down the line this year. Alex Smith: So Alex Smith from Berenberg. Just 2 from me. Just one more -- first on the U.S. market following kind of the slowdown or pause late last year and kind of how you're seeing activity kind of restart? Or kind of is there a lag effect of starting again following that kind of like pause or slowdown in activity? And then second is just on the APAC business. You kind of mentioned some potential cost savings, but also some new contracts coming through. I guess it's still early days post Australian immigration contract, but any update here on outlook for that business would be helpful. Anthony Kirby: Shall I do the U.S. and you do Asia Pacific? Nigel Crossley: Yes. Anthony Kirby: Okay. So in the U.S. again, drawing attention to, we've doubled the size of our pipeline. We had some significant wins towards the end of 2024. Our win rate at the end of the second half of '24 was very good in the U.S. So we had to replenish the pipeline. We've done that. It's now twice the size it was. In the U.S., in terms of the shutdown, there's been limited impact. We haven't actually seen too much of an impact in the second half of '25 other than some decisions are slightly slower to be made. There's no degradation in what's coming to market. There's no degradation around the timing at which opportunities are being presented to the market. What is slowing slightly in the system, which all of our U.S. peers have said as well, is the decision -- the amount of people making the decisions is less now because of what -- because of the impact of DOGE and the reduction in the federal government employee numbers. So fundamentally, there are just fewer people making the same amount of decisions, but we're not seeing the number of decisions being reduced. And we probably expect that to continue for a little bit into '26, just as people get back to work and feet under the table. Nigel Crossley: And then in Asia Pacific, I mean, I largely said this in my presentation, but we set an objective to rightsize the infrastructure of the organization. We've made really good progress on that over the last 2 years. And I think that is under review, but is largely done, but ongoing under review. There's some contracts that were underperforming. We have made progress on those. I think there's still a bit further to go. But the big one is really growth. And we know that the lead time in this business between finding an opportunity, bidding it, winning it, mobilizing it and making it profitable is long, and we have to hold our patience on that. But we do feel encouraged by some of the progress we've made this year. Our rebid win rate has been strong this year. We've won some stuff. And we feel quite good about some stuff that's coming up in the first half of this year. So there's early signs, but not yet done. I think there's more work to be done. And I think it's really getting that business back to the scale that we need it to be and the margin needs to be -- needs a little bit of patience to win those new pieces of business, but an encouraging start, I would say. Michael Donnelly: It's Michael Donnelly from Investec. Just one for me, Anthony. We've spoken in the past about the revenue profile of the U.S. naval contracts and that there are some, I think, transactional revenues in there that are dependent on the fleet being in harbor or base ported. If the U.S. fleet is in for a potentially very extended period of operational deployment, can you, first of all, tell us how much of the $1 billion of North American defense revenues would conform to that revenue profile? And then what, if any, offsetting revenue items there might be as a result of such an extended deployment? Anthony Kirby: Okay. Can I just take the strategic part of your question and Nigel might be able to give you the detail on the specifics. We do generally operate in one part of our Defence business in ship modernization, maintenance, asset engineering, refitting of navigation systems, radars, et cetera. That is generally done in port in the U.S. However, we also operate on behalf of the U.S. military in other parts of the world where their ships are in port, where we see that they have agreements with other countries where asset and engineering activity can take place outside of the U.S. And we also have a number of cleared individuals that can undertake that work in different parts of the world, which run into the hundreds of employees, not into the tens. So if there is a requirement for us to undertake more work outside of the U.S. ports, then we've got experience of doing that, and we're currently doing that at the moment. And if we need to we will continue to grow that. Nigel Crossley: Ironically, 2025 was one of our best years for that kind of transactional task order work is what we call it around ship modernization. So we've seen good momentum there. We continue to have stuff that we're bidding and is live and we're waiting for decisions on. So I think it's too early for us to call. Where does it sit in our portfolio? It is of a reasonable size, but it's less than GBP 100 million. And it is cost-plus short-term, cost-plus work, so it's margin tends to be at the lower end. So from a delivering financial targets, I'm probably less worried about that. And it's always something that we've had a little bit of variability in as you look over each of the years. Jane? Jane Sparrow: Jane Sparrow from JPMorgan. Just a couple of follow-ups on the electronic monitoring and Armed Forces Recruitment contracts in the U.K. On the first one, you said you'd have the extended mobilization period. Can you talk about if that contract is now where you want it to be following that extended period, where it is relative to your original expectations? And on Armed Forces Recruitment, how that is ramping up, if there's sort of been any either pleasant or unpleasant surprises as you've started to mobilize it? Anthony Kirby: Okay. Well, thanks very much for the question. Shall I lead off and then Nigel can help with any of the finances on electronic monitoring? So electronic monitoring operationally is in a very strong place. Our KPIs for a number of consecutive periods now have been above where our expectations were and where our customers' expectations were in terms of the performance of that contract. We now have -- it's around 1,000 people working on electronic monitoring. They do a superb job every day of the week, making sure that we can work with the customer to monitor the 28,000 people that I said we've currently got in trade. You will have seen the changes in sentence and legislation may mean that more people will be monitored in the community, which the government have previously communicated. We stand ready to be able to stand up to meet those changes in volumes. There's no issues there as we look through the pipeline for the rest of this year. But I'm exceptionally proud of the position that electronic monitoring is now in operationally and strategically. In terms of AFR, Armed Forces Recruitment, interestingly, I was down at Army headquarters only 2 weeks ago to have a full day review of the program. So your question, Jane, is quite timely. But look, the Armed Forces Recruitment is probably one of the most complex procurements the MOD have ever procured. It's the first time since the Second World War that the tri-services will be recruited across all branches of the U.K. military. So that is a privilege that we hold dear that we've been entrusted to deliver this through the support of the 8 subcontractors that we've got going. Everything is going according to plan at the moment. Of course, we were going through each of the milestones, there are hundreds of milestones. There's always going to be 1 or 2 that are moving to the left or to the right. But I came away from that conversation with confidence that the authority and team Serco are working collectively and collaboratively to make sure that we can achieve the mobilization, which is important to note is not until 2027, so we don't become responsible until 2026. On EMS, anything on the numbers? Nigel Crossley: Look, we're very clear on what the operational metrics are that we have to improve on, and we track them really closely, and we're making really good progress. And I'd say we are where we expect to be. There's a bit further to go, but I think we've made a lot of the progress that we wanted to make, and we will see a material improvement in 2026 versus what we saw in 2025. Andy? Andrew Brooke: It's Andy Brooke from RBC. Nigel, you've gone out on a high again on the free cash generation. I think GBP 50 million better than you guided to in December. What sort of drove that? I know we had this very conversation, I think, 12 months ago, but is there any more structural improvement to come, especially on the debtor side? Nigel Crossley: Yes. So we're improving our free cash flow. We've been 100% focused on our debtors. We've done nothing on our creditors. In fact, if anything, we pay our creditors even more promptly now than we did previously. And over the last 5 years, we've knocked 20 days off our DSO. So that's been worth GBP 250 million of improvement in working capital over 5 years. And we've done that, as I said in the presentation, by just getting more disciplined at getting sales invoices out quickly, accurately, so our customers can sign them off quickly. And once they've done that, that pay us really promptly. So that's good. So we've made progress there. I have to say I'm handing over to Mark a barrel that's pretty empty on opportunity there. I think we've done a good job, and I'm not sure how much more there is to go. As far as the year-end is concerned, look, we have some big invoices that are coming at the end of the year. They're going to pay us the last week of December, the first week of Jan. We don't know. We're probably a little bit cautious with that guidance, and we consistently do a bit better than that. So that's the difference between December and what we're saying today. Andrew Brooke: And while I've got the mic, could I just say on behalf of everyone in the analyst community, a massive thanks. You've been a pleasure to deal with over the last number of years. You've done a phenomenal job helping to turn the company around. Huge congrats on what you've achieved and all the best for the future. And I hope your golf handicap comes down a bit more. Nigel Crossley: You and me, too. Anthony Kirby: Any questions on the line? Operator: [Operator Instructions] Our first question comes from the line of Joe Brent with Panmure Liberum. Joe Brent: Just 2 questions from me, please. Firstly, in the outlook statement, you referenced elevated geopolitical tension is likely to remain a feature of the market. Could you just elaborate on how you expect that to impact your business, recognizing it's a fluid situation? And secondly, I think you talked about Defence revenues being around 40% of the business, which I presume includes MT&S on a sort of pro forma basis. Can you give us the same number from a profit perspective? I expect it to be quite a lot higher than that. Anthony Kirby: Do you want to do the second one? Nigel Crossley: Why don't I do the second -- Joe, we're not going to give a specific profit number. I think what we would say is that, the average margin across Defence is above our average margin across the group, and we expect that to continue to improve. Anthony Kirby: Thanks, Nigel. That's quite a heavy hand you've got on your keyboard there, Joe. But just coming back to your second -- your first question, sorry, in terms of the outlook for geopolitical instability to continue. Look, the world in terms of geopolitics is probably likely to endure in its current form for some time to come. We don't know how long that will be. One thing I think we can be sure of is, through recent events and through events that have been happening for the last 5 to 6 years, you can see that countries around the world are suggesting increasing in defense spending and increases in spending on critical national infrastructure to secure their borders. One of the outcomes of geopolitical uncertainty and instability is greater defense spending. And the second structural driver are around migration flows. So typically, you would see following instability and geo instability, the migration flows continue to change, move and diversify around the world. So that is the point that we were making in terms of as those structural drivers continue to endure, we stand ready to support our customers in those 3 major sectors that we've spoken about. Joe Brent: So it's meant to be sort of positive for your business, not a negative? Nigel Crossley: Yes. Anthony Kirby: I think, Joe, the summary answer to that is yes. I think whenever we've seen an increase in geopolitical instability, you see greater defense spending, you see greater spending in immigration and migration services, et cetera. So the answer to that question is yes. Operator: There are no further questions on the conference line. I will now hand over to the management for closing remarks. Anthony Kirby: Fantastic. Well, look, just to thank everybody for your time. I know it's been a very busy day of announcement. So thank you all very much for making the effort to come and see us. Reiterate Andy's comments to Nigel. Nigel will be with us for a bit of the road show, and then we will close it there, I think. Nigel Crossley: Very good. Anthony Kirby: Thank you all very much. Nigel Crossley: Thank you. Anthony Kirby: Have a good and safe day.
Anthony Kirby: Good morning, everyone, and thank you for joining us for the Presentation of Serco's 2025 Full Year Results. I'm Anthony Kirby. I'm the Group Chief Executive, and I'm extremely proud to lead what I believe is one of the best companies in the world. My more than 50,000 great colleagues deliver mission-critical services in some of the most demanding environments globally. And their commitment, skill and resilience continues to inspire us every day. Nigel Crossley, our Group CFO, and I are delighted to be able to present the strong set of results on their behalf. But before we begin, it would be remiss of me not to recognize Nigel's outstanding contribution to Serco at this stage, more than 11 years of dedicated service as well as 5 as the Group Chief Financial Officer. And on behalf of the Board, the Executive Committee and all of his colleagues across Serco, I want to offer my sincere thanks and wish you, Nigel and Lorraine a very happy, long and safe retirement. I'd also like to take this opportunity to introduce Mark Reid, who is with us in the room this morning, who will succeed Nigel as the Group CFO, joining the Board in the coming days. But before we go on, I must refer you to the disclaimer, which is in the presentation pack. As ever, the running order will start with me giving you an overview of our 2025 performance, the key themes that shape the year, the highlights and the progress that we've made and the momentum that we're carrying into 2026. I'll then hand over to Nigel, who will take you through the financials in more detail. And after that, I'll return to talk about how we're sharpening Serco's strategic focus and strengthening our platform for future delivery. We'll then open up for Q&A. So let me begin with an overview of what has been a strong year for Serco. 2025 was a year that was defined by disciplined execution, strong operational delivery and continued strategic progress. Across the organization, be that in Defence, Justice & Immigration or Citizen Services, we delivered with professionalism, pride and purpose. Our full year performance in 2025 has been strong and positions us well for '26. We delivered robust revenue and profit performance. And critically, we've done so while maintaining our focus on competitiveness, operational excellence and growth. You've heard me speak previously about our focus on safe, sustainable, profitable growth. That focus remains absolute and is clearly reflected in our results. Our deliberate multiyear investment in Defence expansion has proven effective. We've deepened our strategic intent, and it's a sector where our momentum is unmistakable. Alongside Defence, we have sharpened our attention on Justice & Immigration and Citizen Services, and I'll come back to talk about more in detail on those 3 sectors following Nigel. But turning to the headlines for a moment. Revenue for the year was GBP 4.9 billion, up 3% at constant currency. Underlying operating profit was GBP 272 million, delivering a margin of 5.6%. Cash conversion was again exceptional, reflecting disciplined working capital management. And our order intake was GBP 5.5 billion, representing a book-to-bill of 114%, with more than 2/3 coming from our Defence business. This performance demonstrates the trust our customers place in us and reinforces the momentum that we carry into 2026. We continue to drive progress across our 3 strategic mutually reinforcing pillars: growth; competitiveness; and operational excellence. Starting with growth, our new business win rate for the year was over 30%, reflecting disciplined bidding and a strong competitive position in our core markets. In particular, we secured around GBP 3.5 billion of defense contracts, underlining both the strength of our Defence platform and our ability to deliver complex mission-critical services. We also ended the year with a GBP 12.1 billion pipeline, the highest we've seen in a decade and which again reinforces the strength of the opportunities that we see ahead. Turning to competitiveness. We've strengthened our delivery quality and our efficiency. Margin progression reflects that discipline as do the partnerships that we've secured such as with Mubadala in the Middle East. In Asia Pacific, our portfolio optimization and productivity performance, along with the disposal of our Hong Kong business has made the region sharper and more competitive, helping to grow margins year-on-year despite the end of the Australian immigration contract. Under operational excellence, the rapid integration of MT&S has been a major achievement in 6 months. We've transferred almost 1,000 new colleagues into the organization, aligned systems, embedded common ways of working and begun to win new work together. MT&S has strengthened our Defence platform with deep simulation, mission training and satellite ground and network capability. Across the wider portfolio, our contract retention rate remains high at over 90%. At the same time, we're building a safer, more engaged organization with safety incidents reduced by 22% year-on-year. Colleague engagement sustained at 70 points for the third consecutive year as well as continued colleague engagement. And these results reinforce the quality and dedication of our people. Supporting them, investing in their safety and well-being and ensuring that they have what they need to succeed remains a core business imperative. It's central to how we deliver for our customers and how we will retain more business. This focus on our people, our culture and how we operate is also being recognized externally. During the year, our performance has been acknowledged by a range of independent organizations, but the standout for me was being named as Britain's Most Admired Companies. That recognition reflects, not just what we deliver, but how we deliver it, the strength of our leadership teams, our culture and the trust we build with our customers and the communities in which we work. Ultimately, it reinforces that we are building a business. Our colleagues are proud to work for, our customers are proud to partner with and our investors can have confidence in, grounded in strong performance and responsible delivery and doing the right thing always because it's always the right thing to do. Our performance in '25 demonstrates consistent progress across key financial metrics. Over the last 5 years, we've delivered revenue CAGR of around 5% and profit CAGR of around 11%. Over the period, we've doubled earnings per share to 16.93p. And over the same 5-year period, we've also demonstrated disciplined capital allocation. Of the GBP 1 billion of cash generated, we've invested in targeted M&A and returned surplus cash to shareholders, again, as demonstrated this morning with the announcement of a further GBP 75 million share buyback. Not only does this reflect our approach to good capital allocation, but it also showcases the sustained progress that we've made over the last 5 years. As a business, we are more increasingly predictable, more competitive and well positioned to convert opportunities into sustainable long-term growth over the years ahead. And with that overview, I'll now hand over to Nigel. Nigel Crossley: Thank you, Anthony, and good morning to everybody. Let me take you through the financial -- sorry, let me take you through the performance for 2025, a year in which the group has demonstrated strong momentum despite a number of anticipated headwinds. Revenue increased to GBP 4.9 billion, up 3% on a constant currency basis, reflecting good underlying performance and the benefit of the MT&S acquisition. Organic revenue growth was up 1%, in line with where we guided the market. And it's been led by double-digit organic growth in Defence, partially offset by a reduction in U.K. and Europe and Australia immigration revenues. Underlying operating profit was GBP 272 million, which is up 1% on a constant currency basis. The margin of 5.6% remains in the middle of our target range of 5% to 6% and reflects execution discipline and productivity improvements, offsetting the Australian immigration contract exit and higher national insurance costs in the U.K. And return on invested capital continues to be strong at 26%. It's worth remembering that the significant part of invested capital relates to goodwill and acquisition intangibles. And we run the business using just GBP 0.1 billion of operational invested capital, which emphasizes the capital-light nature of our business model. And I'll now move on and provide more color on the operational performance for each of the regions. So starting with North America, who delivered another strong performance and continues to be an important contributor to the group's growth targets. Revenue increased by 10% to GBP 1.46 billion, driven by 4% organic growth and a 9% contribution from the MT&S acquisition, partially offset by a 3% adverse currency movement. Organic growth was led by defense, where significant order intake achieved in 2024 is flowing through to this year's revenue. We saw higher activity across defense personnel services, mission training and increased demand for IT network and infrastructure services for the U.S. Navy. Underlying operating profit increased 5% to GBP 144 million, including a 3% negative impact from the weaker dollar. The margin stayed around 10% despite the impact of mobilization of new defense contracts and the one-off MT&S transaction integration costs of GBP 6 million. These costs were anticipated and as the contracts mature, margins will recover, supported by increased efficiency and portfolio mix. Order intake was GBP 1.4 billion, of which 90% was from defense, which is a robust outcome after the exceptional order intake in the second half of 2024 and the temporary delay in contract awards caused by DOGE and the U.S. government shutdown. Win rates remained healthy, 37% of new business, reflecting our customer relationships and competitive positioning. Our rebid win rate was a bit lower than normal due to the loss of a low-margin air traffic control contract. The pipeline in North America has more than doubled to GBP 5 billion. And once again, defense continues to represent the majority of the pipeline of new business opportunities. Integration of MT&S has been successful and is delivering early benefits. In the first 7 months of ownership, it contributed GBP 9 million of operating profit after absorbing transaction integration costs. The strategic fit is proving to be exactly as expected, expanding our defense footprint by deepening customer access and enhancing our mission training and satellite communication capabilities. So moving on to U.K. and Europe, our largest division, which delivered another strong performance. Revenue increased 6% to GBP 2.58 billion, driven by 5% organic growth and a further 1% contribution from the acquisition of EHC, our German immigration services business. Organic growth was supported by the mobilization and ramp-up of several major Defence and Citizen Services contracts, including Armed Forces Recruitment, marine services for the Royal Navy, continued progress on electronic monitoring and some complex case management contracts. As expected, we have seen lower revenues in our Immigration business from harder borders in Europe and the ongoing shift in accommodation mix in the U.K. although revenues in the U.K. have not reduced the rate we expected at the start of 2025. Underlying operating profit was GBP 149 million, flat on last year, and margins remained healthy at 5.8%. While there were anticipated headwinds from Immigration and higher U.K. national insurance costs, these were offset by improved contract performance elsewhere in the division, including stronger contributions from Citizen Services and Defence. Order intake was excellent at GBP 3.7 billion, delivering a book-to-bill ratio of 145%. Win rates were also very strong, winning 60% of new business bids and 97% of rebids. The wins included several strategically important long-term awards, particularly in Defence, which accounted for 60% of the order intake. Finally, the U.K. have done a good job of not just winning new business, but also rebuilding the pipeline back to similar levels to what we saw at the end of the year at GBP 5.8 billion -- end of last year, sorry, at GBP 5.8 billion. The pipeline includes a broad range of opportunities across Defence, Justice & Immigration and Citizen Services. So turning to Asia Pacific, where the division delivered a resilient performance with good cost control, improving contract performance and some early progress on growth. This resulted in an improved margin despite the expected reduction in revenue following last year's Australian immigration contract exit. Revenue for the year was GBP 655 million, down 18%, recognizing the 12% organic decline associated primarily with immigration contract exit and the disposal of our Hong Kong business and some adverse currency movements of 5%. Underlying operating profit was GBP 24 million, up 3% on a constant currency basis. The margin increased to 3.7%, up about 60 basis points. And the improvement demonstrates the effectiveness of disciplined cost control to rightsize the organization and improved operational performance. We also delivered some important new business wins across the region. Notably, we secured a 6-year contract for Justice Transport Services in Victoria. Rebid win rates were strong at 91% and Defence performed particularly well with key extensions, including the Royal Australian Navy's warfare training contract. There were also some important rebid and extension wins in Citizen Services. And looking ahead to 2026, we have a good pipeline of both new business opportunities and rebids and extensions of existing work across Defence, Justice and Citizen Services. There's still work to do during 2026 to further build the APAC pipeline, but we're encouraged by the progress made in 2025. And turning now to the Middle East, where we have restructured the business in Abu Dhabi by entering into a strategic partnership with the sovereign wealth fund, Mubadala. This involves transitioning facilities management contracts into the new joint venture and combine Serco's capability and Mubadala's network in the Middle East to expand access to large, high-quality opportunities across the UAE. Whilst it's still early, we are encouraged by the breadth and scale of opportunities we are seeing. Revenue for the year was GBP 177 million, a reduction of 18%, driven by 12% organic decline, a 4% drop from accounting impact of Mubadala partnership and a 2% adverse currency. The organic revenue reduction primarily resulted from the conclusion in 2024 of our low-margin air navigation services contract in Dubai and lower variable project work compared with the prior year. Underlying operating profit decreased to GBP 13 million from reduced organic revenue with margin decline to 7.1%. We continue to focus on operational efficiencies, disciplined bidding and improving the commercial resilience of the region. During the year, order intake was GBP 150 million, and we've rebuilt a GBP 0.5 billion pipeline of new business opportunities. So now let me move on to cash and cash generation in 2025 was again strong with cash flow of GBP 219 million, representing trading cash conversion of 112%. And this maintains our track record since 2019 of averaging over 100% of profit converting into cash. And the result reflects the disciplined approach we take to timely and accurately billing to our customers, enabling them to pay us promptly. Our 2025 cash flows also benefit from a higher-than-usual level of mobilization activity and the associated deferred revenue. Adjusted net debt increased to GBP 206 million from the GBP 100 million at the end of last year. This increase reflects the GBP 245 million acquisition of MT&S, along with capital we've allocated to buybacks and dividends, partially offsetting the strong cash flow. The group continues to maintain a very strong financial position with year-end leverage of 0.7x EBITDA, below our target range of 1 to 2x. So on that, let me turn to capital allocation, which is in the context of strong cash generation, capital-light business model and the maintenance of a strong financial position. Our #1 priority continues to be to invest in organic growth. We further strengthened our business development capabilities and our operational delivery platform and mobilized major new contracts across Defence, Citizen Services and Justice & Immigration. These investments contributed to our record GBP 12.1 billion pipeline and strong order intake for the year. Reflecting our confidence in the group's financial position and outlook, today, we are recommending a full year dividend of 4.5p per share, an 8% increase on last year. And our third priority is M&A. This year, we saw the successful completion and integration of the MT&S acquisition, and we continue to assess additional strategic bolt-on M&A opportunities where they enhance our capability, expand our customer access and strengthen our competitive position. And finally, where we have surplus capital, we commit to return this to shareholders promptly. We completed a GBP 50 million share buyback in the second half of 2025 and today announced a GBP 75 million buyback to be executed in the first half of 2026. Inclusive of this newly announced buyback, Serco will have returned in total around GBP 650 million to shareholders through buybacks and dividends since 2021, demonstrating our commitment to disciplined capital returns when our balance sheet strength allows. So let me finish off with our updated guidance for 2026, which is largely unchanged from our pre-close statement. We expect revenue to be around GBP 5 billion for 2026, resulting in organic growth of 3%. The increase in revenue reflects a full year contribution from MT&S, ramp-ups of major contracts and the impacts of new businesses won in late 2024 and throughout 2025. These upsides offset the expected reductions in the immigration activity in both U.K. and Australia, which we expect to account for around a 3% organic headwind. We expect underlying operating profit of around GBP 300 million, over 10% higher than this year. This includes the continued positive impact of MT&S, productivity improvements across the group and the full year effect of multiple contract ramp-ups transitioning into steady-state operations. This result in a margin of around 6%, placing us at the top end of our medium-term target range. And net finance costs are expected to increase to around GBP 52 million, reflecting the annualized impact of interest on the new debt issued to fund the MT&S acquisition and the cost of the new GBP 75 million share buyback. We expect free cash flow of around GBP 160 million, which is unchanged from our pre-close statement and remains consistent with our medium-term ambition to convert at least 80% of our profit into cash. And finally, adjusted net debt is expected to finish 2026 at GBP 165 million, which is slightly different to the initial pre-close guidance of GBP 150 million and reflects the new GBP 75 million buyback, offset by the better-than-expected closing net debt position at the end of 2025. And with that, I'll hand back to Anthony. Anthony Kirby: Nigel, thank you. Let me now turn back to the strategic and operational progress that we've made during the year and the opportunities that we see ahead. As you know, '25 has been a year where we've taken a much more deliberate approach to the areas where we see the greatest opportunity. We've refined our strategic direction to prioritize the geographies and sectors where Serco can deliver the most value, achieve the best growth and where our capabilities are strongest. The underlying demand for the essential services that we deliver remains remarkably robust at a time where external environments can often feel volatile. Across all of our geographies, we continue to see strong structural drivers that reinforce the need for trusted partners like Serco. In North America, budget in the sectors in which we operate continue to grow. We've remained resilient but not complacent through the changes in administration priorities, including the impact of the U.S. shutdowns. However, some short-term slowness in the system could persist into the first half of '26. But to remind you, we have more than doubled our pipeline in the U.S. to more than GBP 5 billion this year. In the U.K. and Europe, financial pressures remain acute, but demand drivers will endure, including rising Defence spending and sustained pressure on the asylum and migration systems, which reinforce our view of the long-term demand drivers. In the Middle East, modernization plans are creating new opportunities as well as likely increases in defense capability and security protections. And in Asia Pacific, encompassing the Indo-Pacific region, defense and infrastructure needs remain significant, albeit balanced against tighter budget conditions. But these dynamics point to an addressable market of over GBP 900 billion. Whatever the precise figure is, it is a large and growing market with clear opportunity for us to increase our share over the years ahead. In Defence, investment pledges remain substantial. The U.S. has proposed a defense budget of over $1 trillion. The U.K. has committed to 3.5% of GDP and European nations continue long-term multiyear rearmament and capability improvement programs. In Immigration, volumes may fluctuate, as Nigel has just alluded to, but long-term global pressures, conflicts, geopolitical uncertainty, climate-related displacement and economic instability continue to drive underlying demand. And in Citizen Services, technology is driving efficiency, yet the services that we deliver still depend on people, which means our exposure to displacement from automation is limited more than you might expect. Instead of eradicating our work, technology gives us an opportunity to enhance our offering further, making our services more efficient and improving the services to the citizens who depend and rely on them. And finally, to labor the point in this context, our role is to deliver critical mission public services. It helps shield us from sudden political policy reversals. Even during dynamic shifts in government policy or legislation changes, our operational roles remain essential for the delivery of critical services. So while the headlines may suggest rapid change, the reality is demand for what we do is anchored in long-term structural demand. So when you look across our international platform, the picture is clear. I said that we needed to become more focused on the areas with the greatest opportunities, being more selective and deliberate about the capabilities that we're developing and clearer about the geographies and sectors where those capabilities can best be deployed. North America, the U.K. and Europe remain our most addressable and scalable markets. The U.S. federal government is the largest buyer of goods and services in the markets in which we operate in the world. In the U.K. and Europe, governments face sustained financial pressure and are looking for partners who can deliver better outcomes more efficiently. And whilst those markets do offer us the greatest growth potential, that does not mean that we don't value our presence in Asia Pacific or the Middle East. We absolutely do, and we expect both of those regions to grow over the coming years. But we will be disciplined about where we deploy our capital and focus our growth attention. Across the group, we're therefore doubling down on the sectors where structural demand is the greatest and where our capabilities, track record and recent progress positions us well for sustainable growth. Our enhanced Defence platform, our deep operational expertise in Justice & Immigration and our breadth of services across the Citizen Services portfolio gives us a greater level of differentiation. Over the past year, we focused the organization on removing some inefficiencies, reducing complexity where we can and sharpening our ways of working. This has laid the foundations to make us more agile, more focused and more competitive for the years ahead. I also said we needed to make more progress in systemizing the sharing of best practice across the group, enabling us to leverage capability, learning and execution at scale, and I'll touch on some of the examples of those shortly. But at its core, Serco delivers mission-critical services where outcomes matter most, deploying people, technology and partners to perform at scale. So I'm now just going to touch on 3 of those growth sectors. So turning to Defence, the area where we see our greatest long-term opportunity. Defence now accounts for around 40% of the group's total revenue, inclusive of our joint venture operations. We're deeply embedded in the armed forces of the U.K., the U.S. and Australia. And we deliver critical services in the Middle East for the Australian Defence Force and provide essential training in New Zealand and Canada. We also deliver naval capability in Europe, including the maintenance of the minehunter vessels in Belgium. We bring over 60 years of proven delivery supported by increasing technological capability to Defence. In fact, that journey began at RAF Fylingdales where today, we operate and maintain the U.K. early warning radar, a critical part of both the U.K. and U.S. missile detection system. Our teams provide 24/7 uninterrupted support to this national security asset, demonstrating the depth and experience of Serco's expertise and long-standing credibility. And we're also working in Greenland, modernizing and maintaining assets for the U.S. Space Force. And we're active across all Five Eyes nations and throughout several NATO countries where Defence spending continues to rise with 24 members of NATO now exceeding or meeting the 2% of GDP spend targets. So whether it's training, personnel readiness, platform modernization or future-focused autonomous capabilities such as our USX-1 Defiant vessel, Serco is a critical partner to governments as they deliver on their national security ambitions. So a core differentiator for Serco is our ability to support the full life cycle of personnel services for the military from recruitment, to health, fitness and readiness to training, housing and family support through to veterans transitions. In the U.K., we're the prime contractor for the Armed Forces Recruitment program. The program brings together a set of best-in-class partners under a single Serco delivery model, and it's a flagship example of where our capability in program management, governance, stakeholder engagement and operational delivery truly differentiates us. In the United States, we continue to deliver the Army's Holistic Health and Fitness program, H2F. Mobilize last year is the largest human optimization and soldier readiness program ever fielded at scale. In Australia, we train the ADF Maritime Officers in a simulated environment at HMAS Watson's Bay, leveraging our MT&S capability alongside the established expertise of our broader defense teams. And through our joint venture, VIVO, we maintain 27,000 military family homes and more than 20,000 defense buildings across the U.K., a vital part of the personnel experience and family ecosystems of the military. All of this reflects, I believe, the strength of our personnel services platform that we've built, a platform that is increasingly cross geography, increasingly tech-enabled and increasingly central to the defense strategies of our customers around the world. And this platform of capability allows us to take our end-to-end offering to customers internationally. Turning now to Justice & Immigration, a sector where Serco brings deep operational expertise and a scale of delivery that is critical to government in the U.K., Europe, Australia and New Zealand. Across the countries where we do operate our Immigration business, we support and accommodate over 100,000 asylum seekers and refugees, reflecting the breadth of complexity of demand in which we help governments manage. That demand is driven by long-term global pressures, sustained migration flows, rising complexity in case management and the need for safe, high-quality and efficiently run detention facilities. While policy decisions can cause short-term fluctuations in migration volumes, the underlying demand signals remain strong. Border crossings remain a challenge and governments need agile, experienced operators as they seek innovation across both immigration and justice services. Our position across the criminal justice system is equally strong. Our unique role gives us a comprehensive understanding of the current and future likely challenges. This year, we operationalized additional prison capacity in the U.K., helping to alleviate pressures across the custodial estate. We also now monitor 28,000 individuals in the community on behalf of the Ministry of Justice in the U.K., which is a scheme that has proven to reduce reoffending by around 20%. So in a sector where trust and safety and performance matter profoundly, our operational track record positions us well. One of Serco's real strengths is our ability to operate an international platform of best practice, taking what works well in one part of the world and applying it elsewhere to lift performance, efficiency and outcomes across our global operations. A good example of our -- a good example of this is our prisoner escorting contract by moving expertise from the U.K. to help our colleagues in AsPac win the Justice Transport Services contract in Victoria, Australia, demonstrating how our capabilities can be deployed internationally. More broadly, our end-to-end role across justice from courts and secure transport to custody and prison management to electronic monitoring in the community gives us a system-wide insight that a few other providers can match. That perspective enables us to transfer proven operating models across geographies with confidence. The same platform approach applies in Immigration. Across Europe and the U.K., our teams have built deep capability in complex case management, safeguarding vulnerable people and running high-performing detention facilities. These learnings now shape how we design and deliver services globally, creating the consistency that customers expect across borders. The platform approach combines people, processes and technology developed in one geography, strengthened with lessons from another and deployed wherever needed, giving us the scale and assurance our government customers rely on to evolve their systems of management. Moving on to Citizen Services. Demand is often driven by budget pressures, the need to modernize infrastructure, digital integration and rising public expectations. Delivering services directly to the citizens remains an important part of our strategy. Its breadth gives us the agility to respond to shifting government investment priorities and to direct our capability towards the areas of greatest demand. Across this sector, we deliver directly services that touch millions of people's lives every day. We support people navigating complex welfare and employment systems, helping long-term unemployed individuals back into work. We also run high assurance citizen operations, including helping people access much needed health insurance in the United States, delivering essential services with speed, accuracy and compassion. So while Citizen Services can be considered to be broad by nature, I consider that, that breadth and diversity is a strength. It enables us to adapt quickly, respond to evolving customer needs and bring our capabilities to the areas where we can add the greatest value. As we look across the Citizen Services portfolio, the defining strength of our ability is to blend delivered impact with technology-enabled efficiency. In North America, our work for the Centers for Medicaid and Medicare Services shows what this looks like at scale. For more than a decade, we've operated that business, and we've now deployed advanced automation and digital tooling to improve the quality and speed of the essential services, managing around 10 million customer notices a year, embedding AI technologies and completing complex case management 3x faster with compound efficiency of more than 500%. And in the U.K., we're applying the same innovation and those services that we depend on to help people through the Restart program. That employment program, we've piloted our technology to equip job coaches with new AI-enabled case management tools. It's reduced administration time by around 75%, improved case note quality by nearly 20% and most importantly, allowed our people to provide human-centered support to help the people back into sustainable employment. That combination of people who deliver with care, expertise, which is coupled with technology that accelerates important and impactful outcomes is what makes our model distinctive. It's how we help governments deliver better outcomes at lower cost and how we will continue to transform essential public services that millions of citizens depend on. So bringing that together, the market dynamics across our sectors remain compelling. Structural demand is intensifying, driven by geopolitics and Defence postures, fiscal pressures and the need for innovation, and those forces show no sign of easing. Against that backdrop, Serco's platform is well aligned to our customers' priorities. On the whole, we operate at scale in mission-critical services that governments rely on, which provides resilience and underpins long-term opportunity. We've sharpened our focus on the geographies and sectors where demand is strongest and where our capabilities are most differentiated. And that gives me confidence that Serco is well positioned to capture the growth opportunities in the years ahead. So to conclude, let me just reiterate my key messages. Our 2025 performance was strong and leaves us well positioned to deliver against our '26 guidance. We're advancing the organization to achieve our goals and doing so with the same rigor that has underpinned our success over the past 5 years. That discipline across growth, competitiveness and operational excellence is what will continue to drive our performance in '26 and beyond. We're prioritizing our investment in key growth markets and doubling down on the sectors where our differentiated capabilities and technical depth align with the strong structural drivers. So we're advancing the systems and leadership needed to scale our business for success, building a stronger executive team and aligning our leaders around a growth and performance culture. This gives me confidence in our ability to maintain well-governed momentum, confidence that we are well placed as ever to seize on the opportunities ahead and confident that Serco will deliver as an agile, well-governed business able to course correct when needed and to deploy the best talent to drive better outcomes for our customers, our colleagues and our shareholders. And I think we'll now move to Q&A. Arthur, do you want to go first? Arthur Truslove: Arthur Truslove from Citi. So 3 for me, if I may. So the first one, are you able to just talk about the notable contract implementation costs? So what were the sort of big ones in '25 versus '24? And then what are you expecting in '26 to just sort of get a feel for what the impact of that will be going forward and indeed last year? Second question on competition. So I just wondered sort of how the competitive landscape, particularly in the U.K. is evolving, especially in the context of better margins? And if you could sort of comment on how that's evolved in the last few years as well, that would also be interesting. And then finally, on U.K. migration, I guess, migration more broadly. I guess my question really is, we've all seen these sort of large centers being suggested. What do you -- how do you think the model potentially evolves? I know it's a difficult question in terms of what happens with migration and kind of what are the sort of best and worst case scenarios for you? Anthony Kirby: Arthur, thanks for the message. Nigel, do you want to take the cost of mobilization? Nigel Crossley: Yes. Anthony Kirby: Shall I start with the competitive landscape? Nigel Crossley: Yes. Anthony Kirby: Yes. So in the U.K., we haven't really seen that much of a change in the competitive landscape, probably over a number of years actually. I think the competitive landscape has remained pretty stagnant. I think we've -- typically, when we're -- depending upon what it is, we are bidding in the sector we're bidding in, we typically bid between 5 and 6 competitors dependent upon what the services are that are being procured. So we've not really seen any significant change in that space. In terms of migration, let me take the conversation more broadly first, which is, migration flow is likely to continue to exacerbate. I've run through the reasons why we think those structural drivers will endure. In terms of your specific point on the U.K., look, we stand really clear side-by-side with the customer. When they ask us to provide good quality, innovative solutions, we -- it's our job to provide those solutions to them. So medium and large sites, we're working with the customer. It's the customer that decides where those medium and large sites are. Our job is to make sure that we can stand those facilities up once the customer has procured them. But I will just make the point again that we've made previously. There is a priority to come out of hotels where our hotels were 50 -- just over 50% less now than where they were 12 to 18 months ago. So this is a program that we have been working with the customer on to achieve their priority. Nigel Crossley: And then on the contract mobilization costs, we've obviously had a busy year because we've had some big wins. Most of those costs are probably in the U.K. And we've seen probably a protracted mobilization on the electronic monitoring for various reasons. We know that we've got the Armed Forces Recruitment contract that we started earlier this year. So those are the kind of things that are probably higher than we'd ordinarily expect to see, maybe to the tune of about GBP 20 million in the year. Anthony Kirby: I think what we'll do is, we'll start with David and then we'll go right across that row where all of the questions. David Brockton: It's David Brockton from Deutsche Bank. Can I just ask 2 just around pipeline, 1 contract pipeline and 2 acquisition pipeline. Within that contract pipeline, are there any opportunities we should be aware of that are capped in terms of size? So any bigger ones in there? And if you could just talk about how you see that evolving over the course of the year as well? And then secondly, in respect to the acquisition pipeline, can you just give us an update on how that looks given that you've -- I guess, you've only committed to a buyback for H1, so clearly keeping some powder dry there. Anthony Kirby: Yes. Shall I do acquisitions, Nigel, you do the pipeline? So in terms of acquisitions, we're in a really strong position where we have the optionality that when we look at opportunities that present themselves or we go looking for. We're in a strong financial position from a balance sheet perspective to be able to execute and pull that key part of our capital allocation policy. I'm obviously not going to go into detail in terms of things that we're looking at, at the moment. But it is a liquid market, particularly in the growth sectors that we are looking to grow and in the regions that we're looking to expand our businesses in. And I think we've said previously, the U.S., Europe and the U.K. remain at the top of that list. But that doesn't mean that we preclude anything in other parts of the world as well. So there are some things in the pipeline that we're looking at. It's clear that we've said in the stock exchange announcement that we'll review the capital allocation policy at the half year again. But I think our track record of returning surplus cash to shareholders if we've got no M&A in the pipeline -- in the foreseeable pipeline is something that we will continue to do as we move forward. Nigel Crossley: Yes. And then on the pipeline, look, we've got a good mix of new opportunities across our pipeline. And we've got a couple that are at the top end of our range of up to GBP 1 billion where we cap them. One is a training contract in North America, actually in Canada. And the other one is a logistics contract for the U.K. MOD, which we are potentially looking at. Those are both not going to start until -- for some time yet. They're a bit further out. And then there's a big -- over half of our contract -- over half the pipeline is on contracts that are less than GBP 300 million. So there's a good spread of cover across all the sectors and of various sizes. Christopher Bamberry: Chris Bamberry, Peel Hunt. Three questions, if I may. You're obviously sharpening the focus on Defence, Justice & Immigration and Citizen Services. What does that mean for health and transport? Secondly, can you talk a little bit more now you're 9 months into MT&S, the positives and the negatives against your original expectations? In particular, can you give us any concrete examples on synergies on the pipeline? And the final one, when you talked about -- Nigel, about the margin in North America, I mean, parking integration being absent this year, you said that the margin would improve as contracts mature. I guess given the profile of your stuff you're winning, is that more kind of -- is there going to be see much of that in '26 or is it more kind of '27 or further out? So if you keep winning stuff, is it -- is that kind of portfolio effect kind of dilutes that benefit? Anthony Kirby: Do you want to do the last one first? Nigel Crossley: Well, I'll do the first. So on margin in North America, yes, you're right, there's GBP 6 million of integration costs. So that's not 40, 50 basis points of the margin. So that gets you back over 10%. When we look at what we're bidding, there's a range of what we're bidding actually. So there's some stuff that's cost plus that tends to be slightly lower margin. There's some stuff at the higher end, which is fixed price and above our average. So I think over time, we'll see broadly -- our profile broadly stays similar. I think we'll get more economies of scale as we continue to grow. And certainly, when we bring -- we brought MT&S on, we've got economies of scale in our fixed costs there as well. So we're leveraging our fixed costs well. I think all those things will contribute to at least keep that margin at 10%. Anthony Kirby: Thanks, Nigel. So if I just pick up, Chris, your point on Health and Transport. So Health and Transport fall under Citizen Services, particularly because we're delivering services directly to the citizen. We're not actively growing in our Transport business in the majority of the world. We will retain and rebid our contracts that we currently operate in Transport. We think we operate some really good transport businesses, be that our joint venture with Merseyrail or NorthLink Ferries up in the Highlands and the Islands and also some transport businesses in the Middle East and the U.S., but they're quite small. And then in health, our health FM, which is a soft and hard FM business in -- predominantly in the U.K., we're looking at FM across our horizontals where we deliver FM services. So if an opportunity presents itself for us to go and bid, we will, but we're not actively deploying our growth capital into those lower margin area businesses. In terms of MT&S, I think we said at the outset, we wanted them to concentrate on the business that they had in their current pipeline that they brought across with them at the time of the acquisition. And then we looked at the second area of the pipeline, which is where can we bring MT&S' capability and our North America capability together in order to go and win and retain contracts with the benefits of both organizations combined. And then we talked about what we call our Horizon 3 pipeline, which is the international opportunities that MT&S and the wider Serco organization can bid collectively on. In the U.S., we've started to win some new business that was in the pipeline in MT&S, some small deals. The team are just rescrubbing the pipeline for the North America business, and we'll look to move internationally as we get further down the line this year. Alex Smith: So Alex Smith from Berenberg. Just 2 from me. Just one more -- first on the U.S. market following kind of the slowdown or pause late last year and kind of how you're seeing activity kind of restart? Or kind of is there a lag effect of starting again following that kind of like pause or slowdown in activity? And then second is just on the APAC business. You kind of mentioned some potential cost savings, but also some new contracts coming through. I guess it's still early days post Australian immigration contract, but any update here on outlook for that business would be helpful. Anthony Kirby: Shall I do the U.S. and you do Asia Pacific? Nigel Crossley: Yes. Anthony Kirby: Okay. So in the U.S. again, drawing attention to, we've doubled the size of our pipeline. We had some significant wins towards the end of 2024. Our win rate at the end of the second half of '24 was very good in the U.S. So we had to replenish the pipeline. We've done that. It's now twice the size it was. In the U.S., in terms of the shutdown, there's been limited impact. We haven't actually seen too much of an impact in the second half of '25 other than some decisions are slightly slower to be made. There's no degradation in what's coming to market. There's no degradation around the timing at which opportunities are being presented to the market. What is slowing slightly in the system, which all of our U.S. peers have said as well, is the decision -- the amount of people making the decisions is less now because of what -- because of the impact of DOGE and the reduction in the federal government employee numbers. So fundamentally, there are just fewer people making the same amount of decisions, but we're not seeing the number of decisions being reduced. And we probably expect that to continue for a little bit into '26, just as people get back to work and feet under the table. Nigel Crossley: And then in Asia Pacific, I mean, I largely said this in my presentation, but we set an objective to rightsize the infrastructure of the organization. We've made really good progress on that over the last 2 years. And I think that is under review, but is largely done, but ongoing under review. There's some contracts that were underperforming. We have made progress on those. I think there's still a bit further to go. But the big one is really growth. And we know that the lead time in this business between finding an opportunity, bidding it, winning it, mobilizing it and making it profitable is long, and we have to hold our patience on that. But we do feel encouraged by some of the progress we've made this year. Our rebid win rate has been strong this year. We've won some stuff. And we feel quite good about some stuff that's coming up in the first half of this year. So there's early signs, but not yet done. I think there's more work to be done. And I think it's really getting that business back to the scale that we need it to be and the margin needs to be -- needs a little bit of patience to win those new pieces of business, but an encouraging start, I would say. Michael Donnelly: It's Michael Donnelly from Investec. Just one for me, Anthony. We've spoken in the past about the revenue profile of the U.S. naval contracts and that there are some, I think, transactional revenues in there that are dependent on the fleet being in harbor or base ported. If the U.S. fleet is in for a potentially very extended period of operational deployment, can you, first of all, tell us how much of the $1 billion of North American defense revenues would conform to that revenue profile? And then what, if any, offsetting revenue items there might be as a result of such an extended deployment? Anthony Kirby: Okay. Can I just take the strategic part of your question and Nigel might be able to give you the detail on the specifics. We do generally operate in one part of our Defence business in ship modernization, maintenance, asset engineering, refitting of navigation systems, radars, et cetera. That is generally done in port in the U.S. However, we also operate on behalf of the U.S. military in other parts of the world where their ships are in port, where we see that they have agreements with other countries where asset and engineering activity can take place outside of the U.S. And we also have a number of cleared individuals that can undertake that work in different parts of the world, which run into the hundreds of employees, not into the tens. So if there is a requirement for us to undertake more work outside of the U.S. ports, then we've got experience of doing that, and we're currently doing that at the moment. And if we need to we will continue to grow that. Nigel Crossley: Ironically, 2025 was one of our best years for that kind of transactional task order work is what we call it around ship modernization. So we've seen good momentum there. We continue to have stuff that we're bidding and is live and we're waiting for decisions on. So I think it's too early for us to call. Where does it sit in our portfolio? It is of a reasonable size, but it's less than GBP 100 million. And it is cost-plus short-term, cost-plus work, so it's margin tends to be at the lower end. So from a delivering financial targets, I'm probably less worried about that. And it's always something that we've had a little bit of variability in as you look over each of the years. Jane? Jane Sparrow: Jane Sparrow from JPMorgan. Just a couple of follow-ups on the electronic monitoring and Armed Forces Recruitment contracts in the U.K. On the first one, you said you'd have the extended mobilization period. Can you talk about if that contract is now where you want it to be following that extended period, where it is relative to your original expectations? And on Armed Forces Recruitment, how that is ramping up, if there's sort of been any either pleasant or unpleasant surprises as you've started to mobilize it? Anthony Kirby: Okay. Well, thanks very much for the question. Shall I lead off and then Nigel can help with any of the finances on electronic monitoring? So electronic monitoring operationally is in a very strong place. Our KPIs for a number of consecutive periods now have been above where our expectations were and where our customers' expectations were in terms of the performance of that contract. We now have -- it's around 1,000 people working on electronic monitoring. They do a superb job every day of the week, making sure that we can work with the customer to monitor the 28,000 people that I said we've currently got in trade. You will have seen the changes in sentence and legislation may mean that more people will be monitored in the community, which the government have previously communicated. We stand ready to be able to stand up to meet those changes in volumes. There's no issues there as we look through the pipeline for the rest of this year. But I'm exceptionally proud of the position that electronic monitoring is now in operationally and strategically. In terms of AFR, Armed Forces Recruitment, interestingly, I was down at Army headquarters only 2 weeks ago to have a full day review of the program. So your question, Jane, is quite timely. But look, the Armed Forces Recruitment is probably one of the most complex procurements the MOD have ever procured. It's the first time since the Second World War that the tri-services will be recruited across all branches of the U.K. military. So that is a privilege that we hold dear that we've been entrusted to deliver this through the support of the 8 subcontractors that we've got going. Everything is going according to plan at the moment. Of course, we were going through each of the milestones, there are hundreds of milestones. There's always going to be 1 or 2 that are moving to the left or to the right. But I came away from that conversation with confidence that the authority and team Serco are working collectively and collaboratively to make sure that we can achieve the mobilization, which is important to note is not until 2027, so we don't become responsible until 2026. On EMS, anything on the numbers? Nigel Crossley: Look, we're very clear on what the operational metrics are that we have to improve on, and we track them really closely, and we're making really good progress. And I'd say we are where we expect to be. There's a bit further to go, but I think we've made a lot of the progress that we wanted to make, and we will see a material improvement in 2026 versus what we saw in 2025. Andy? Andrew Brooke: It's Andy Brooke from RBC. Nigel, you've gone out on a high again on the free cash generation. I think GBP 50 million better than you guided to in December. What sort of drove that? I know we had this very conversation, I think, 12 months ago, but is there any more structural improvement to come, especially on the debtor side? Nigel Crossley: Yes. So we're improving our free cash flow. We've been 100% focused on our debtors. We've done nothing on our creditors. In fact, if anything, we pay our creditors even more promptly now than we did previously. And over the last 5 years, we've knocked 20 days off our DSO. So that's been worth GBP 250 million of improvement in working capital over 5 years. And we've done that, as I said in the presentation, by just getting more disciplined at getting sales invoices out quickly, accurately, so our customers can sign them off quickly. And once they've done that, that pay us really promptly. So that's good. So we've made progress there. I have to say I'm handing over to Mark a barrel that's pretty empty on opportunity there. I think we've done a good job, and I'm not sure how much more there is to go. As far as the year-end is concerned, look, we have some big invoices that are coming at the end of the year. They're going to pay us the last week of December, the first week of Jan. We don't know. We're probably a little bit cautious with that guidance, and we consistently do a bit better than that. So that's the difference between December and what we're saying today. Andrew Brooke: And while I've got the mic, could I just say on behalf of everyone in the analyst community, a massive thanks. You've been a pleasure to deal with over the last number of years. You've done a phenomenal job helping to turn the company around. Huge congrats on what you've achieved and all the best for the future. And I hope your golf handicap comes down a bit more. Nigel Crossley: You and me, too. Anthony Kirby: Any questions on the line? Operator: [Operator Instructions] Our first question comes from the line of Joe Brent with Panmure Liberum. Joe Brent: Just 2 questions from me, please. Firstly, in the outlook statement, you referenced elevated geopolitical tension is likely to remain a feature of the market. Could you just elaborate on how you expect that to impact your business, recognizing it's a fluid situation? And secondly, I think you talked about Defence revenues being around 40% of the business, which I presume includes MT&S on a sort of pro forma basis. Can you give us the same number from a profit perspective? I expect it to be quite a lot higher than that. Anthony Kirby: Do you want to do the second one? Nigel Crossley: Why don't I do the second -- Joe, we're not going to give a specific profit number. I think what we would say is that, the average margin across Defence is above our average margin across the group, and we expect that to continue to improve. Anthony Kirby: Thanks, Nigel. That's quite a heavy hand you've got on your keyboard there, Joe. But just coming back to your second -- your first question, sorry, in terms of the outlook for geopolitical instability to continue. Look, the world in terms of geopolitics is probably likely to endure in its current form for some time to come. We don't know how long that will be. One thing I think we can be sure of is, through recent events and through events that have been happening for the last 5 to 6 years, you can see that countries around the world are suggesting increasing in defense spending and increases in spending on critical national infrastructure to secure their borders. One of the outcomes of geopolitical uncertainty and instability is greater defense spending. And the second structural driver are around migration flows. So typically, you would see following instability and geo instability, the migration flows continue to change, move and diversify around the world. So that is the point that we were making in terms of as those structural drivers continue to endure, we stand ready to support our customers in those 3 major sectors that we've spoken about. Joe Brent: So it's meant to be sort of positive for your business, not a negative? Nigel Crossley: Yes. Anthony Kirby: I think, Joe, the summary answer to that is yes. I think whenever we've seen an increase in geopolitical instability, you see greater defense spending, you see greater spending in immigration and migration services, et cetera. So the answer to that question is yes. Operator: There are no further questions on the conference line. I will now hand over to the management for closing remarks. Anthony Kirby: Fantastic. Well, look, just to thank everybody for your time. I know it's been a very busy day of announcement. So thank you all very much for making the effort to come and see us. Reiterate Andy's comments to Nigel. Nigel will be with us for a bit of the road show, and then we will close it there, I think. Nigel Crossley: Very good. Anthony Kirby: Thank you all very much. Nigel Crossley: Thank you. Anthony Kirby: Have a good and safe day.
Operator: Good day, and welcome to Bilibili Fourth Quarter and Fiscal Year 2025 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead. Juliet Yang: Thank you, operator. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties including those mentioned in our most recent filing with SEC and Hong Kong Stock Exchange. The non-GAAP financial measure we provide are for comparison purpose only. The definition of this measure and the reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer. I will now turn the call to Mr. Chen. Rui Chen: Thank you, Juliet, and thank you to everyone for joining us today. 2025 was a marquee year for Bilibili. We delivered standout results across both our community growth and financial performance. Throughout the year, our user growth regained its momentum while engagement and stickiness consistently hit new record highs. We also made incredible strides on the commercial front and achieved our first ever full year of GAAP profitability. Looking at our community, momentum really picked up speed toward year-end. DAU growth accelerated every single quarter year-over-year, up 4% in Q1, 7% in Q2, 9% in Q3 and 10% in Q4, hitting 113 million users. Q4 MAUs also grew by 8% year-over-year to 366 million. While much of the Internet is still flooded with fast food content, more and more people are gravitating toward depth and quality. They're spending more time on high-quality PUGV content and the authentic community interactions that Bilibili is known for. In Q4, average daily time spend continued to rise, up 8% to 107 minutes. This strong momentum reinforces our conviction that users are elevating their content consumption, and we believe the shift gives us a massive long-term runway ahead. As our users dive deeper into the content they love, their willingness to spend continues to rise. This is reflected in our MPUs, which surged 21% year-over-year to a record 36 million. Users growing spending power is also extending beyond direct payments. Bilibili has become a trusted destination for consumption decisions where users don't just watch but actively research and embrace new products. AI is a prime example. A growing number of AI advertisers now view Bilibili as the go-to platform to reach curious young minds. By leveraging our interactive community, they can turn exposure into real user conversion and lasting influence. These strengths combined with our refined ad infrastructure, drove a 27% year-over-year increase in advertising revenue in Q4, once again exceeding expectations. The power of our community and commercialization engine and its potential is also showing up in our financial results. 2025 marked a major milestone as we reached our first full year of GAAP profitability alongside solid revenue growth. For the year, total revenues grew to RMB 30.3 billion, up 13% year-over-year and we reported a GAAP net profit of RMB 1.2 billion. In Q4, total revenues increased by 8% year-over-year to RMB 8.3 billion, gross profit grew 11% and gross profit margin rose to 37.0%, marking our 14th consecutive quarter of margin expansion. With disciplined cost management and stronger operating leverage, our adjusted net profit nearly doubled to RMB 878 million, and our adjusted net profit margin expanded to 10.6%. By the start of 2026, the average age of our users reached 26.5. They are moving into higher income brackets with greater spending power and more diverse needs. As they move into new stages of life, we are growing with them, expanding our commercial opportunities and unlocking more value across every touch point in our ecosystem. To better serve our evolving community, we are integrating AI into every corner of Bilibili. To us, AI isn't just a buzzword. It's a practical tool that expands human creativity, increases connection and boosts distribution efficiency. By leveraging from tier LLMs, we've made our content discovery and ad targeting sharper than ever. We are also providing AIGC tools that help creators and advertisers get started more easily while AI translation is helping our best content to reach a global audience. The more we invest in these capabilities the more confident we are that AI will take our ecosystem and our business to the next level. With that, let me walk you through our core pillars of content, community and commercialization. Starting with content and community. The biggest takeaway from our 2025 story is that, in a world full of short and disposable content, demand for high-quality content and authentic community connection is only getting stronger. We've leaned into this trend by deliberately allocating more resources to promoting high-quality content and fostering welcoming interest-driven communities. The results are clear. In Q4, average daily time spent reached 107 minutes, up 8% year-over-year, while watch time for videos longer than 5 minutes grew by more than 20%. Our commitment to quality content across categories is driving higher user engagement and time spent. In Q4, watch time of lifestyle content grew by more than 30%, while Chinese anime and game-related content increased by 56% and 24% year-over-year, respectively. Notably, in July 2025, we officially launched video podcast initiative and quickly established an early lead in this impactful format. Our highly engaged community played a key role in driving its rapid adoption, sparking more meaningful discussions among users. In the second half of 2025, total watch time for video podcast exceeded 8 billion minutes. In 2025, AI became a powerful amplifier of our content ecosystem, driving engagement, unlocking creativity and accelerating the discovery of high-quality content. Total watch time for AI-related topics surged 53% year-over-year in Q4, cementing Bilibili's position as the go-to platform for AI learning. Beyond consumption, AI is streamlining the creative process and even reshaping how content is made. A great example is AI music. Creators are now turning simple ideas into professional great music videos with ease. In the fourth quarter, the number of AI music videos reaching the million view milestone, grew over fivefold year-over-year. At the same time, AI-driven distribution helps high-quality work find its audience much faster. This is especially beneficial for emerging creators. In Q4, the number of creators with over 1,000 followers increased by more than 30% year-over-year. As creators build larger audiences and stronger connections, that engagement is increasingly turning into monetization on Bilibili. In 2025, nearly 3 million creators earned income on our platform across advertising in VAS channels. And with improved commercialization efficiency, average income per creator grew 21% year-over-year. Just as importantly, users are demonstrating more and more willingness to pay for content they genuinely enjoy and creators they truly value. Last year, more than 10 million users supported high-quality PUGV content and creators through fan charging. Turning to our core community metrics. In Q4, each active user followed over 90 creators on average, up from 81 a year ago, reflecting strengthening network effects within our community. By the end of 2025, we had over 284 million official members and their 12-month retention rate remained stable at around 80%. Our creator ecosystem also balances longevity with fresh energy. This is evident in the 2025 up 100 list, where creators have been active on Bilibili for 7 years on average, while nearly 40% were first-time honorees compared with the last year. Beyond daily activity, Bilibili continues to reinforce its role as a cultural home for young generation. Our Signature New Year's Eve Gala delivered its best commercial performance to date and has grown into an annual ritual for young audiences. During the recent Chinese New Year, we once again partnered with CCTV as the exclusive bullet chat platform, enabling young viewers to celebrate the festival together online. On the day of the broadcast, more than 133 million bullet chats were shared and DAUs reached a record high, up 16% compared with last year. Now let's talk about our commercial businesses and their progress. First, we were very encouraged to see our advertising business deliver better-than-expected results in Q4. Advertising revenues accelerated to RMB 3.0 billion, up 27% year-over-year and full year advertising revenues increased by 23% to RMB 10.1 billion. This industry-leading growth reflects both the rising value of our user base and our continued progress in improving ad efficiency. As users spend more on the platform, Bilibili is becoming an even more compelling destination for advertisers. In Q4, the top 5 ad verticals were games, digital products and home appliances, Internet services, e-commerce and automotive. Home decoration was a standout with ad spend jumping over 80% year-over-year, another strong signal that our users are maturing and seeking more lifestyle-focused upgrades. AI advertisers also ramped up with AI-related ad budgets climbing nearly 180% year-over-year in Q4, and that momentum has carried into 2026. In 2025, we pushed AI even deeper into our commercial algorithms, boosting traffic value without compromising the user experience. The precision paid off. Ad spend aimed at deeper conversions grew by more than 40% year-over-year and negative user feedback was cut by over 50%. We also made the performance advertising faster and easier. Our smart ad delivery system and AI-powered creative tools, now streamlined campaign setups lifting cold start success rates by nearly 300% from last year. On top of these efficiency gains, we broadened our ad inventory across the ecosystem, new openings in search. PC and OTT drove ad revenue in these scenarios, up by over 60% year-over-year. This rapid growth shows untapped potential we have across our multiscreen multi-scenario ecosystem and we still have plenty of runway to expand further. Looking ahead to 2026, we are confident in the outlook for our advertising business. That confidence comes from rising user value and plenty of room to drive more efficiency, especially as we continue applying AI to strengthen monetization capabilities. At the same time, demand from gaming and AI advertisers remain strong, with both sectors eager to reach Bilibili's young high-value user base with stronger tools and the supportive market backdrop, we are set to capture even more of the opportunities ahead. Turning to our game business. Game revenues were down 14% year-over-year to RMB 1.5 billion in Q4, reflecting the high base set by San Mou, San Gou: Mou Ding Tian Xia, in the same period of last year. Even so full year game revenues still grew 14% to RMB 6.4 billion. In Q4, Season 11 of San Mou held steady, and we're focused on extending the title's life cycle by elevating the user experience and maintaining balanced monetization. On the global front, we launched the traditional Chinese version in January and plan to roll out the game across more Asian markets later this year. Meanwhile, our Evergreen titles, FGO and Azur Lane, remain stable and continue to generate reliable revenues. Our biggest surprise of 2025 was Escape from Duckov [Foreign Language]. This self-developed title was a real dark course. It sold over 3 million copies in the first 3 weeks of its October debut and went on to become the best-selling domestic single-player game of the year and now ranks among the top 3 of all time. This success is a clear example of how we spot unmet demand and turn it into breakout hits. As AI continues to reshape the digital landscape, strong IP is becoming even more valuable. It can migrate across platforms and spawn new experiences. That is why Duckov is now moving to consoles and mobile, widening its reach and deepening its growth runway. Looking ahead, our pipeline is strong, including our exclusive casual card game NCard, San Gou [Foreign Language] and our self-developed simulation game, Lumi Master [Foreign Language]. Our pipeline of jointly operated games for 2026 is also shaping up well, giving us a broad and diversified slate. Our strategy is straightforward, build and scale high quality genre-defining games that have lasting appeal for the gamers of tomorrow. As for our VAS business, users are showing a stronger willingness to pay directly for the content and services they care about. That demand drove revenues up 6% year-over-year to RMB 3.3 billion in 4Q and up 8% to RMB 11.9 billion for the full year. In 2025, our live broadcasting business maintained steady growth and gross margin continued to expand. Premium memberships reached 25.3 million by year-end, up 12% year-over-year supported by a strong performance from our Chinese anime slate led by our hit production, Mortal's Journey to Immortality, [Foreign Language], annual subscriptions and auto renewals remained around 80%, highlighting the loyalty and long-term commitment of our core community. Other VAS products delivered strong momentum in 2025. Revenues from our fan charging program was particularly strong, doubling for the full year with more than 10 million users directly supporting creators and high-quality content throughout the year. In closing, our progress this year underscores the strength of our content and community. Our flywheel is working. High-quality PUGV attracts and retains young users. Deeper engagement creates more value for creators and that energy is translating to a healthier and more sustainable commercialization. AI is also reshaping our industry, and we see it as a powerful accelerator of this cycle. We will continue investing in AI to reinforce our position as the platform of choice for China's most engaged young audience. With profitability achieved and momentum building, we will stay focused on what defines Bilibili, great content, a strong community and disciplined execution that creates lasting value. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead. Xin Fan: Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time on today's call, I will review our fourth quarter highlights. As Mr. Chen's remarks have already covered our full year results at a high level. We encourage you to refer to our press release issued earlier today for a closer look at our full year results. In the fourth quarter, we continued to deliver solid top line growth while expanding margins and strengthening our profitability profile with gross margin improving for the 14th consecutive quarter and operating leverage continuing to build across the business. We entered 2026 with much greater financial resilience to build on. Total revenues for the fourth quarter were RMB 8.3 billion, up 8% year-over-year. Our total revenues breakdown by revenue stream was approximately 39% VAS, 37% advertising, 18% mobile games and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 6% year-over-year to RMB 5.2 billion in the fourth quarter while our gross profit rose 11% year-over-year to RMB 3.1 billion, our gross profit margin reached 37.0% in Q4, up from 36.1% in the same period last year, showing the strength of our business model as we continue to scale. Our total operating expenses were down 3% year-over-year to RMB 2.6 billion in the fourth quarter. Sales and marketing expenses decreased by 9% year-over-year to RMB 1.1 billion, mainly due to decreased marketing expenses for our games. G&A expenses increased 4% to RMB 528 million, and R&D expenses were flat at RMB 921 million. Our operating profit was RMB 504 million, up 299% year-over-year. Our adjusted operating profit was RMB 838 million and our adjusted operating profit margin reached 10.1%, improving from 6.0% in the same period a year ago. Net profit was RMB 514 million versus RMB 89 million in Q4 2024. Our adjusted net profit was RMB 878 million, and our adjusted net profit margin expanded to 10.6% from 5.8% in the same period last year. Cash flow-wise, we generated about RMB 1.8 billion in operating cash flow in the fourth quarter and RMB 7.1 billion for the full year. As of the 31st of December 2025, we had cash and cash equivalents, time deposits and short-term investments of RMB 24.2 billion or USD 3.5 billion. Under our USD 200 million share repurchase program approved by the Board in November 2024, we had repurchased a total of 0.6 million shares in Q4 for a total cost of USD 14.7 million. As of the 31st of December 2025, we have repurchased a total of 7.0 million shares at a total cost of USD 131.2 million, leaving about USD 68.8 million available for future buybacks. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead. Operator: [Operator Instructions] And now we'll take our first question from the line of Lincoln Kong of Goldman Sachs. Lincoln Kong: [Foreign Language] And congrats on the very strong finish. My question is about the community. In 2025, we have seen accelerating growth of our user and time spent. Do the management elaborate [indiscernible] and how should we think about the future user and time spent growth potential? And when we're thinking about -- among all the competition, how would Bilibili to maintain our creators and users? What's our strategies behind it? Rui Chen: [Interpreted] The core driver behind Bilibili growth is the continued increase in supply those high-quality content on our platform. I've mentioned this before, in the content industry, the end game of competition is about quality. That's to say, platform come -- that can consistently deliver great content will be the ultimate winner. This is especially true today where there is a clear oversupply of industrialized fast full content. In this environment, true high-quality content become even more precious and more powerful in shaping users' mind share. The reason why Bilibili has the ability to unlock the supply of high-quality content is because we have both the soil and the seeds to grow the high-quality content. First, our community is that very fertile soil. Bilibili has a large base of user who knows how to appreciate, recognize and spread great content. They are the group of people who have the ability to identify high-quality content at their early stage and spread it across our community. And that group of user not just watch content, they actively provide feedback that defines a good content. And our content creator relies on their input, their feedback to create even better content. That's why content creators on Bilibili can create content not only for Bilibili's user to appreciate, come to the whole society, those are still the top quality content. Well, this type of community is essentially important to content creator. You might argue that for a very top content creator, their experience across multiple platforms may be similar. But for the much larger group of middle or emerging creators, they really truly relies on the community's feedback, telling them what is a good content. What direction they should be aiming for. And this is very, very important for creator community. That's why you've seen that on Bilibili, there's continuous supply of new content creators that has grown and thrive on our platform. Every year when we publish our top hundred top content creators, about 1/3 of the content creator are the newly emerged content creator that was never nominated before. That is the power of our community. Soil -- the fertile soil that can cultivate and grow a very large number of new talented content creators. And what we have done in the past is staying focused for the past 17 years cultivating and building this kind of community and this relies on every single real users contribution and feedback. And this is very -- we need patience, we need time to build this very tight community and this is our biggest moat of this defensive mechanism of having this community [indiscernible] in our business. And when it comes to industrialized pure traffic-driven model, it's very hard for this type of model to build a community. And the creator are the seeds on the soil. At its core, we believe the high-quality content is the result of creators uniqueness. They're one of a kind soul combined with their strong production capabilities is because we have this unique creators and they entrust our platform, and they entrust us to witness their growth and unleash their creativity. That's why we have a very unique ecosystem. We are very confident about our future user growth. As we mentioned in the past, we've witnessed that there was a clear content consumption upgrade trend that is happening and this type of consumption upgrade is just a one way straight. Once people start to experience truly great content, it's very hard for them to go back. And we've seen that oversupply of short content as people start to consume more and more content, and it's just very natural for them to start to appreciate this high-quality content that Bilibili has to offer. We also have that user mind share. So we are seeing that our high-quality content is attracting more and more users onto our platform. And then on top of that, our average age of our user ages come to 26 and 27, as they move into their next stage of life, their content will continue -- content consumption will continue to evolve, and their purchasing power will grow as well. For us, that represents a long-term structural opportunity for growth. When it comes to competition, we'll focus on 2 things. First, we'll stay very clear about our positioning around high-quality content and make sure the platform continues to be the place for deeper expression and interest-based high-quality content community. And secondly is that we'll be focusing on our creators, make sure this is a platform for their long-term creation as well as improved monetization potentials. In terms of their creation period, we are quite happy with the results what we have seen now. We have a large number of content creator who's been creating content on our platform for 5 to 10 years, and they continue to gain followers in creating lasting values on the platform. On the monetization-wise, we continue to cultivate more avenues for content creator to make more money and in the last year in 2025, there are about 3 million of content creator received income on our platform, and their average income also grew by 21% year-over-year. And on top of that, the number of content creators with 10,000 follower, 100,000 followers, 1 million followers, they all grew over 20% year-over-year. And those 2 factors combined will position us very well in this competitive landscape and continue to thrive. Operator: We will now take our next question from Xueqing Zhang from CICC. Xueqing Zhang: [Foreign Language] And congratulations on the strong advertising growth in the first quarter. My question is also about advertising. Could the management share which industries and products were the main drivers behind the strong performance in Q4? We have also noticed that many AI applications have been ramping up their marketing spending recently. How does management see this trend benefiting your advertising business. And could management also provide some color on the advertising growth outlook for the first quarter and the full year of 2026? Unknown Executive: [Interpreted] The performance of our advertising business in fourth quarter and for the full year 2025 was in line with our internal expectations. Growth actually accelerated quarter-by-quarter throughout the year from 20% year-on-year growth in the first quarter to 27% year-on-year growth in the fourth quarter. And we continue to gain larger share of overall ad budgets. The results reflect both rising value of our user base as well as the continuous improvement in our monetization efficiency. Look at the drivers behind our stronger than market expectation performance in Q4. First, we credit that to the on-top ad inventory. Within our multiscreen and multi-consumption products, we continue to release more ad inventories on top of the feed scenarios. Areas such as search, PC and OTT, they all grew more than 60% year-over-year. And for some certain scenarios, they even grow over 200% year-over-year in terms of ad consumption. Secondly is that we continue to improve our ad efficiency. This was mainly driven by the integration of AIGC tool with ad creative campaign, deeper conversion penetration and our AI-backed smart delivery ad delivery system. And all combined together is helping us to improve the overall ad efficiency and recommendation efficiency. Thirdly, looking at the industry contribution in addition to our strong verticals like Internet services, digital products and home appliances and e-commerce. We are benefiting from the AI application competition as well as the rapid growth of instant retail in the fourth quarter. And at the same time, we are also seeing strong growth from education sector, automotive sector and the home and furnishing sector, they all delivered a double-digit growth. Whenever an industry goes through a boom or sees a intensified competition, it usually leads to a search and advertising budget in the short term and AI sector is no exception. But what we see different here is over long term, we also see opportunities when the industry go through reshuffling and real allocation of budgets, but they're still very long way ahead in both short term and long term in terms of the budget gains for us in the AI industry. Let's just focus on the short-term impact for the AI sector now. Well, for sure, the AI sector is bringing incremental ad budget to Bilibili. Companies in area like AI applications, large language models and AI tools are all significantly increasing their budget spending, and this is becoming a clear growth driver for advertising platforms, including Bilibili and other platform. But at the same time, Bilibili is a very natural fit for AI advertiser. This goes to our young and highly tax savvy young user base with a strong openness to embrace new AI applications, new AI knowledges and the platform itself is because it's an interest-based community centered around high-quality content. The advertising on Bilibili is more likely to translate from the spending into real user mind share. And also when it comes to the branding and performance outcome is much strong -- delivers much stronger results compared to pure traffic play. When it comes to the Q1 and to 2026 outlook, what we have witnessed is that the overall market environment is still very much about competing for the existing market shares. And the advertisers are becoming more demanding when it comes to performance and efficiency. But at the same time, what we're seeing is that advertisers are paying more attention to the quality of conversion after the delivery, not just the scale of the number of exposures, that's where availability can deliver real value for our clients. And our users are on average around 26 to 27 years. So which is the stage, both of their purchasing power and the decision-making influence is rising rapidly. So this is the exact kind of consumer bracket that all advertisers are eager to reach. As our CEO mentioned, Bilibili is our community built around high-quality video content. And as AI technology continues to evolve, the line between good content and good advertisement will blurt. That is to say, good ads can feel like a good content and good content can also function very well as effective ads. We believe this model can scale up very quickly on Bilibili. And over the past 2 to 3 years, our advertising products and algorithm capabilities has already reached a very solid mid- to high-upper level compared to the overall industry, and we still see quite significant room for further improvement going forward. As for the growth outlook for Q1 and full year of 2026, we remain confident about continuous growth and further expansion in terms of market share. Operator: Next question comes from Alex Liu of Bank of America. Alex Liu: [Foreign Language] I will translate myself. So the company's key game title San Mou has been operating steadily for 1.5 years. And we saw last year the self-developed game Escape from Duckov has got a lot of traction among users -- gamers last year. So can the management share some high-level strategic game business into 2026? And what will be the operational focus for San Mou and any recent colors on the -- any color on the recent growing trend for that game. And for game pipelines, can you share a little bit more about thoughts and expectations for, for example, 3 Kingdoms and Cars and Lumi Master. Rui Chen: [Interpreted] For San Mou, our goal and strategy is very clear. We're focusing on its long life cycle of this game. And secondly, as to make this game continue to be the top among the strategy game genre. Naturally strategy game is very suitable for a long-term operation and that we have planned for this year for this game as to focus on the iteration of different game seasons and focus on the gameplay and different storylines of different seasons to make sure that our user, our gamers have brand new and interesting gaming experience when they are playing this game. At the same time, we'll organize a more structural brand and community activities around the key moments to encourage players' participation and the discussion to further strengthen the user mind share of a community sense by playing this game. And while maintaining a robust Chinese fan base, we will continue to expand this IP's influence on a global scale. In January, we already launched this game in the Hong Kong, Macau, Taiwan region and we do plan to further push this IP into Korea and Japan market and other Asian markets to further expand influence and the power of the IP. As for Escape from Duckov, we are very encouraged by the results they deliver on the PC front, and we are already on the process of converting this game on a console version. And at the same time, we're exploring more possibility of this IP on the mobile devices. And we believe this IP has the potential to become a very influential game overall in the China's gamer market. And in terms of the pipeline, NCard is designed to be a lightweight strategy competitive game. And it's very fun, it's very light. It's a 3 minutes per round type of poker game designed very well to bid into the short fragmented play session. And the game as a result of our strategy of rate inventing gains for young generation. We have created this one-of-a-kind gameplay that combines casual poker with unique card hero system. And this fits this generation's game preferences and their demand for casual, but different game experience. As a result of our beta testing, we also have discovered this game has been widely accepted and welcomed by the young generation. Because this is a very innovative game, our team has spent a lot of time in focusing on polished game to its best quality. We've already conducted 2 rounds of beta testing. We plan to conduct another round of paid beta testing in March this year, and we do plan to roll -- officially roll out this game around mid this year. Our goal is to through long-term operation, make this game as large DAU as possible. And at the same time, we'll be very patient about the process. Lumi Master is a self-development game. The game is very casual cozy style with semination game element and the PAT, nurturing and catching element of game. This is another product of our game strategy of reinventing games for the new generation of gamers. So this game combines essential gameplay of both pet nurturing and as well as simulation. It's also very one of a kind and a unique gameplay. And for this game, we were already obtained approval end of last year, and we do plan to launch our paid beta testing in the second quarter and to officially launch this game globally within this year. And as we look into 2026, there are 2 areas we'll be focusing on. One is long-term operation. As I mentioned before, this is a competition within the existing market. And the long-term operation will provide a solid foundation for our game business. Currently, we have about 70% of the game revenue comes from our long-term operating games, including San Mou, FGL and Azur Lane. And this provides a very stable income inflow for the game business. And on the other hand, we will continue to explore new projects with a genre-defining potential and we are a principal as whether to be -- either to be #1 in this genre or be the first of its kind in this genre and this will be our incremental game revenue contribution source. And this is guiding the projects such as NCard, Lumi and many other games in our pipeline. And we are quite confident about this strategy will guide us to an even brighter future. And the biggest advantage of Bilibili and game business is that we are the platform that is staying the closest to the young gamers in China. As at the same time, the company has the commitment and the gene and focusing around high-quality content. We have the consensus and have the patience. Those 2 factors combined will eventually help us to find and develop the best games that we can offer. That concludes this question. Operator: We will now take our next question from Felix Liu of UBS. Felix Liu: [Foreign Language] And congratulations on the strong Q4 result. My question is on AI. We noticed that we -- there is a continued development in Video Gen AI, which has made creating video content more and more easy. How do management see your opportunities and challenges from the recent developments in Video Gen AI? And what are looking ahead into 2026, what are your key investment priorities around AI? Rui Chen: [Interpreted] The essence of AI creation tools is about improving the productivity of high-quality content compared with short-form vertical content which is already oversupply. The benefit of creating even more short content is limited. But on the contrary, where Bilibili is standing for as the long-form high-quality content, where AI is essentially helping a small number of high-quality talented content creator to create high-quality content at a much faster pace that essentially is increasing the supply of what is known for scarce of the quality content. So fundamentally benefiting our platform in terms of empowering talented content creator to create more high-quality content. And we are already starting to see early signs of how AI creation tool is helping us to improve the supply of high-quality content. AI music is a perfect example, with the help of AI music tools, even music lover without formal training can turn good their good ideas into professional quality music works and the same thing goes with categories such as auto-tune remix. In the past, it's very hard to produce a good auto-tune remix video. But now with a good sense of humor and creativity, this is helping our creators to produce high-quality content at a much faster pace. We've seen this on the video views and video watch time growth within the help of AI or content creation tools, those contents, watch time and video views is growing multiple folds year-over-year in the fourth quarter. And I'll talk about a few points that will enhance our investment on the AI, how AI is helping our community. First of all, is leveraging the large language model to enhance our ability to understand the content and user intent especially for platforms like Bilibili that offers a very long-form high-quality content. In the past, it's very difficult to truly comprehend the full meaning of that content and match it with the right users. But now we're leveraging the AI capability. We can truly understand the meaning to comprehend the high-quality content and better understand our user at the same time. This is also helping us to identify high-quality content at a much earlier stage and push it to more people. And if you look at the Q3 and Q4 user matrix, the AI comprehension of context is truly helping us to drive the user engagement, drive the user growth, that's the area we'll be focusing on. That's one. And as Carly mentioned earlier, AI is also helping us to better match the advertisement with the right user. This has been done through the content comprehension at the same time, understand our users' needs and their desire and need on the platform to better match the right advertisement with the right users. Secondly is on AIGC tools that help content creators to create content more efficiently. We have already launched a few products, but this year, we'll be upgrading that AIGC tools to really enhance the productivity of creating videos, leveraging these tools. And we believe this will be a big efficiency stepping up for our content supply and for the overall content creation process. And that AIGC tool also includes the translation function. It's not just pure soft title translation. It's a very native translation of the context of the meaning as well as lip thinking and also the creator's voice. We believe we already master the ability to translate Bilibili content into all the mainstream languages across the world. This will help our content creators to bring their high-quality content to a global stage. And based on what we have done and observed, we will be focusing on those 2 areas. One is improving the productivity of our content creator. And number 2 is improve the recommendation efficiency to better understanding our content and our users' needs. And our investment focus will be strictly aligned into those 2 areas that we believe in the longer term, generating much larger value for our overall ecosystem. That concludes this question. Operator: Next question comes from the line of Yiwen Zhang of China Renaissance. Yiwen Zhang: [Foreign Language] First, congrats on your whole year GAAP profitability. The question is regarding financials. We noted 4Q last year, adjusted operating margin has reached 10.1%, a step closer to our near-term guidance of 15% to 20%. So how should we think about revenue and profitability outlook in 2026? Additionally, do we have any update on the medium to long-term target? Xin Fan: Thank you. I will take this question. Looking ahead to 2026, we remain confident in the continued growth of our community. At the same time, we will keep improving our monetization efficiency and more effectively translate this growth in high-quality user to the commercial value. Among our business, advertising is where we see the clearest growth opportunity. Our operating leverage will also continue to come through. We expect gross profit will improve slightly quarter-over-quarter in the first quarter and our adjusted operating margin should continue to improve year-over-year in Q1. We are steadily progressing to our mid- to long-term target that 40% to 45% of gross profit margin and 15% to 20% of adjusted operating margin. At the same time, in 2026, as mentioned by Chen Rui, we will modestly increase our investment in AI and reinvest partial of our incremental profit into AI applications that are closely aligned with our core business. This investment will help us further improve the supply of high-quality content, drive the user growth and enhance monetization efficiency, ultimately, we're delivering strong returns over the long term. Thank you for your question. Juliet Yang: Operator, that concludes all the Q&A session. Operator: Thank you. And that concludes the question-and-answer session. Thank you once again for joining Bilibili's Fourth Quarter and Fiscal Year 2025 Financial Results and Business Update Conference Call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director of Piacente Financial Communications. Contact information for IR in both China and the U.S. can be found on today's press release. Well, thank you, and have a great day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to the Kinaxis Inc. Fiscal 2025 Fourth Quarter and Year-end Results Conference Call. [Operator Instructions] I'd like to remind everyone that this call is being recorded today, Thursday, March 5, 2026. I will now turn the call over to Rick Wadsworth, Vice President, Investor Relations at Kinaxis Inc. Please go ahead, Mr. Wadsworth. Rick Wadsworth: Thanks, operator. Good morning, and welcome to the Kinaxis earnings call. Today, we will be discussing our fourth quarter and year-end results, which we issued after close of markets yesterday. With me on the call are Razat Gaurav, our Chief Executive Officer; and Blaine Fitzgerald, Chief Financial Officer. Some of the information discussed on this call is based on information as of today, March 5, 2026, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set out in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release as well as in our SEDAR filings. During this call, we will discuss IFRS results and non-IFRS financial measures including adjusted EBITDA. A reconciliation between adjusted EBITDA and the corresponding IFRS result is available in our earnings press release and MD&A, both of which can be found on the IR section of our website, kinaxis.com and on SEDAR+. The webcast is live and being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations section of our website. Neither this call nor the webcast may be rerecorded or otherwise reproduced or distributed without prior written permission from Kinaxis. We have a presentation to accompany today's call, which can be downloaded from the IR homepage of our website. We'll let you know when it change slides. Over to you, Razat. Razat Gaurav: Thanks, Rick. Turning to Slide 4. I'd like to start by saying how thrilled I am to be a part of the Kinaxis team. It's a company I've admired and competed against for several years. Here are my top 3 reasons for joining Kinaxis. One, getting back to my roots in supply chain software, where I've spent over 20 years in my career, particularly at this time when organizations are experiencing unprecedented levels of demand and supply volatility; two, to build and scale a company that is already a market leader in AI-powered supply chain planning and orchestration; and three, the tremendous talent and culture in the organization that is rooted in innovation and customer success. I am truly excited to build and scale the business while delivering unprecedented value to our customers. Turning to Slide 5. I couldn't have joined Kinaxis at a better time. The team performed really well, and we had a record-setting fourth quarter and year with ongoing momentum in 2 key growth metrics. Our SaaS revenue grew by a healthy 19% in Q4 and 17% for the year, significantly higher than our initial guidance range of 11% to 13%. Perhaps more importantly, our ARR balance grew by 20%, accelerating from 12% growth at the end of 2024. Incremental bookings hit record levels in the quarter and year. This momentum sets us up really well to target higher SaaS revenue growth in 2026, as Blaine will explain and speak soon. This growth momentum combined with operating efficiency also translated to significantly improved profitability. Full year adjusted EBITDA was at a record level and grew by 30%. The margin in Q4 was 26% and was 25% for the year, at the high end of our initial guidance range and a year early at our midterm target. We see room for ongoing improvements in coming years. Moving on to Slide 6. The new business we won in the quarter and year demonstrates excellent execution on important go-to-market strategies. Let me give you some color. In Q4 and in fiscal 2025, we won roughly 1/3 more new business than in any previous quarter and year in our history, measured by the total average annual contract value in the period or ACV. The number of contracts with $1-plus million in average ACV was at record levels in Q4 and the year. We won 21 deals over $1 million in the year versus 6 in 2024 and over 30% higher than the closest result. When looking at total contract value or TCV over the committed term, we won over 100 deals above $1 million. Our pipeline suggests that 2026 could be another strong year in this regard. Together, these metrics reflect the growing market need for companies to develop agility and adaptability as they navigate unprecedented levels of supply and demand volatility. We continue to be the market providers, the go-to-market providers for AI supply -- for AI-powered supply chain planning, decision-making and orchestration for the world's largest and most complex supply chains. Going to Slide 7. We won some world-class companies in Q4, which are distinguished not just by their size, but also by the role they play in the global AI transformation. As investments increase in the build-out of data centers and related AI infrastructure, Kinaxis Maestro is becoming the default choice for supply chain planning and orchestration across the value chain. During Q4, we won a top 5 global semiconductor foundry, which manufactures highly advanced GPUs for the world's AI infrastructure leaders, mobile device leaders, massive players in the digital economy and others. You'll recall that in the first quarter of 2025, we also won another global leader in the semiconductor ecosystem. In Q4, we also won a major player in the global storage business, serving the world's largest cloud providers, consumer electronics companies and other device makers. Last quarter, we talked about winning a material science company that is also a key part of the global data center infrastructure. We have continued our amazing run in the oil and gas sector by earning the business of Marathon Petroleum Corporation, a leading integrated downstream and midstream energy company headquartered in the U.S. and operating the nation's largest refining system. The AI economy is energy hungry, so our success in oil and gas continues to position us really well. We're also seeing increasing demand from energy utility companies that are expanding their operations to service the surge in data center needs. We're performing very well in other growing markets like aerospace and defense. Companies in the sector are seeing significant growth in demand while leading with complex bill of materials, engineer-to-order operating models and capacity constraints. In the fourth quarter, we won one of the world's largest aerospace engine makers, which powers defense, civil and business aircraft worldwide. We already support Honeywell, Lockheed Martin, Raytheon, L3Harris and several other leaders in the aerospace and defense space. In consumer goods, we won the Magnum Ice Cream Company with revenues of roughly EUR 8 billion in 2025, the Magnum Ice Cream Company is present in 80 markets around the world and is home to icons like Magnum, Ben & Jerry's, Cornetto and the Heartbrand. If that wasn't enough, we also won a top 5 global chocolate company in Q4. At the end of 2025, roughly 85% of our ARR is split between our top 4 vertical markets: life sciences, high-tech, consumer products and industrial manufacturing, including aerospace and defense. Maestro's ability to offer comprehensive AI-powered supply chain planning and orchestration for such a diverse set of major manufacturing markets, all without custom coding is unparalleled. There are still 14,000 prospects remaining in our markets, and we have never been in a better position to win them. Moving on to Slide 8. Despite outsized success winning major new accounts in Q4, 55% of gross additions to ARR came from expansion business with existing customers. For the year, that number was 53% compared to 45% in 2024. It was our biggest year ever for expansion business. We revamped the structure and goals of our installed account teams at the end of 2024. The impact has been meaningful, immediate and lasting. The contribution of expansion business from applications hit an all-time high with newer products like enterprise scheduling, machine learning-based forecasting and supply optimization making notable progress. We have over 400 customers and a growing set of capabilities to take to market to them. There is still massive room for growth within the installed base. Going on to Slide 9. I'm excited to tell you more about our ongoing journey with AI, the commercial launch of Maestro Agent Studio. This is a next-generation capability that gives supply chain teams a no-code way to compose AI agents grounded in their real operating context to reimagine the ways of working and delivering the next level of value outcomes. The agents are proprietary -- use proprietary data, workflows, resources and tools in our Maestro platform and can leverage the context of the most comprehensive digital representation of the complex and interconnected physical supply chain. Working within Maestro's trusted supply chain planning environment, the agents help teams concurrently evaluate trade-offs and coordinate decisions and actions as business conditions change, and the business conditions are changing at unprecedented levels as we speak. Maestro Agent Studio embeds leading large language models, including OpenAI, ChatGPT and Google Gemini with others like Anthropic's Claude in testing and keeps agent behavior anchored in Maestro's trusted data intelligence and governance. The agents call on and complement our existing decision automation capabilities that are anchored in decades of deep domain expertise and sophisticated mathematical models that LLMs aren't designed to replace. This includes advanced machine learning capabilities, deep optimization algorithms and heuristics algorithms. Together, these capabilities create a practical foundation for more autonomous supply chain operations that deliver faster, better decisions with confidence and trust. To date, early innovator customers are using Maestro Agent Studio for exciting use cases. For example, a major global electronics manufacturing services company is autonomously analyzing forecast quality and outside-in demand signals across business units to recommend improved forecast quality. A prominent consumer fashion company is analyzing demand changes to help planners understand the impacts on production and distribution and determine mitigation strategies. A global life sciences company is eliminating steps in inventory risk assessment to surface insights in seconds instead of hours. And several early adopter customers are streamlining reporting processes to reduce manual effort and tons of hours per month. Our progress is exciting, but the best is yet to come. So far, Maestro Agents are focused on working with data within our own platform. As we continue our AI journey going forward, we are expanding Maestro's reach to the broader ecosystem with an expanded data fabric and an abstracted semantic layer to enable composable agentic orchestration right across the supply chain. In 2026, our plans are the following: orchestrator agents that coordinate and sequence multiple agents across concurrent supply chain workflows, securing connections between Maestro Agents and external agents and systems through emerging protocols like MCP and A2A, expanded data context and semantics with an extensible ontology layer, enabling agents to reason consistently across larger data sets and analytical environments beyond Maestro. Through agentic connections to other systems that can provide relevant data and insights, we can leverage our context-sensitive real-time concurrent planning engine to help customers make better, more informed decisions and achieve unprecedented positive outcomes. Moving on to Slide 10. Maestro Agent Studio and our prebuilt Maestro Agents are fully available today. Monetization will happen through our next-generation pricing structure, an evolution that we've launched with customers and which introduces the Maestro activity units. Our new pricing structure remains subscription-based and still reflects a platform fee based on customer size and fees for individual functional modules like supply and demand planning, inventory optimization, production planning, enterprise scheduling and so on. However, now a subscription also includes bundles for Maestro activity units or MAUs, which expand the basis for usage-based pricing in our structure. Customers will commit for the full term of the contract to a quantity of MAUs bundles that reflect anticipated usage. The size of MAU commitment grows with a number of scenarios, AI tasks and automations and plan calculations and data exports a customer expects to engage through our MCP server. This more fulsome notion of usage achieves some very important goals. First, over time, we anticipate a bigger share of Maestro work to be conducted by AI agents. So our pricing needs to reflect that important value. If efficiencies result in fewer users, we are compensated by the growth in AI tasks and automations. Second, since we expect Maestro to interact more with a broader network of interoperable agents, we need to capture the value of the intelligence and analysis we share at. The data export aspects of MAU compensates us for that. Finally, embedding plan calculations in the MAU better reflects the value that customers receive and the costs we incur through normal plan iterations. Maestro now has the instrumentation to track MAU usage and persistent overages require additional MAU subscriptions. We will learn a lot more about MAU usage and our next-generation pricing model over the next few quarters and fully expect some tweaking along the way. I am confident that it better aligns pricing with the value we create for customers in an even more AI-forward world. The new pricing model is getting thoughtfully rolled out in a phased approach. I see AI as meaningfully expanding our TAM in the long run. As with all meaningful innovation, we encourage you to both avoid overestimating its impact in the short term and underestimating it in the long term. Our customers run the world's most important, complex and innovative supply chains. By necessity, they move carefully and thoughtfully, but they undeniably move forward. I'll pass the call to Blaine to discuss Q4 and 2025 results and our 2026 outlook. Blaine Fitzgerald: Thank you, Razat, and good morning. Q4 was a great record-breaking quarter for Kinaxis, and 2025 was also beyond expectations in key areas. We are positioned well for even more progress in 2026. I'll start with Slide 11. As we look at the numbers for the fourth quarter and compared to Q4 2024 results, total revenue was $144.2 million, up 16% or 14% in constant currency, driven largely by very strong SaaS revenue growth. SaaS revenue was $97.2 million, up 19% or 16% in constant currency, thanks to strong momentum winning new business throughout 2025, including record levels in Q4. Subscription term license revenue was $1.7 million, up 8% and consistent with expected renewal cycles for on-premise customers. Professional services revenue was $40 million, up 14% and stronger than expected due to higher realized rates as we work to ensure that pricing fully reflects our premium services. We continue to successfully ship work to system integrator partners, and we'll continue to focus on that in 2026. In 2025, partners participate in almost 70% of new customer implementations won by our direct sales team. Maintenance and support revenue was $5.4 million level with comparative period. Our gross profit was up by 26% to $94.3 million or a 65% gross margin, greatly improved from 61%. Our software margin was 78%, up substantially from 73%, largely due to more efficient delivery of our software. We see room for ongoing improvement as we complete our migration to the public cloud. Professional services gross margin was 32% compared to 29%, reflecting the higher realized rates in the quarter, as mentioned. Adjusted EBITDA was up 19% to $37.6 million, a record level. This reflects strong revenue growth, a higher gross margin and strong control over operating expenses. Adjusted EBITDA margin was 26%, up from 25%. Our profit in the quarter was a record $19.5 million compared to a loss of $16.3 million in the fourth quarter last year, which, as you remember, reflected some onetime items. Cash flow from operating activities was $29.9 million, up 24%. Cash, cash equivalents and short-term investments were $324.7 million, up $26.2 million from last year despite a very active share buyback program. Moving to Slide 12. Key aspects of full year results were beyond our expectations. SaaS revenue, our most critical GAAP measure, grew 17% compared to the initial guidance of 11% to 13% and came in at the top end of our most recent guidance range. Constant currency SaaS revenue grew 16% versus initial guidance of 12% to 14% and at the top end of our most recent guidance range. Total revenue was $548 million, up 13% and at the top end of our guidance range despite shifts from subscription term licenses to future SaaS revenue as well as lower professional services than expected as we shifted more work to partners and faced a challenging pricing environment earlier in the year. In constant currency, total revenue was $540 million, in line with recent guidance. Adjusted EBITDA grew an impressive 30% from 2024 to a record $138.4 million. The 25% margin is the highest since 2019 and a big step from 22% in 2024. Our adjusted EBITDA margin was at the top end of guidance and hit our midterm profitability goal of full year ahead of target. We're pleased with the progress. On Slide 13, our trailing 12-month free cash flow margin remains strong -- onetime payments we made in the first quarter relating to tax planning and litigation settlement reduced the results by 5.1 percentage points. So the normalized result is 25.6%, similar to our adjusted EBITDA margin for the year and trending positively. If you flip to Slide 14, annual recurring revenue growth in 2025 was impressive, growing by 20% year-over-year compared to 12% in 2024. In constant currency, ARR growth was 18% compared to 14% in 2024. We added $73 million to our ARR balance in 2025 with $26 million of that coming in the fourth quarter, both records. This dramatic progress reflects improvements in go-to-market strategies and personnel over the last year as well as the benefits of an increasingly differentiated and AI-centric product. As Razat already mentioned, some drivers of growth included many more deals above $1 million ACV, more large enterprise accounts wins and more focus and execution on expansion business. On Slide 15, SaaS and total RPO balances and growth remain very robust. Both measures show a healthy 3-year CAGR of 18%, and our total RPO is rapidly approaching $1 billion. This metric continues to highlight robust growth in our subscription business. Loyal customers driving gross revenue retention over 95% and is also influenced by normal renewal cycles. Looking at Slide 16, I am very pleased to introduce 2026 guidance. Given our strong momentum, we expect SaaS revenue growth of 17% to 19% in 2025, which at the midpoint is consistent with our constant currency ARR growth rate exiting 2025. We expect total revenue of $620 million to $635 million. Underlying this guidance, we assume that professional services revenue will grow in low single digits as we expect success enabling partners to handle more work, which is a key strategy to achieve scale in the business overall. Maintenance and support revenue should be flat to slightly down from 2024, given the recent conversions on-premise contracts to SaaS. The remainder of total revenue will be made up by subscription term license revenue, which should see growth in the 60% range versus 2025 and then decreasing to 2027 by roughly 25%. For 2026, approximately 60% of subscription term license revenue will be recognized in Q1, roughly 1/4 in Q4 and the remainder in Q2. Ongoing demand from on-premise customers who are moving to our hosting infrastructure could change the assumptions, and we will advise if that happens. We view 25% adjusted EBITDA margin as a new floor for the foreseeable future and are guiding to an adjusted EBITDA margin of 25% to 26% for 2026 as we make strategic investments in the year, primarily to drive exciting growth initiatives in AI and go-to-market activities that Razat will speak to shortly. Our business model and strategy allows for even higher margins in the coming years. I'll add some other color to help you with your models. We expect our total gross margin rate to continue its steady growth in 2026, driven by a more favorable revenue mix and a slightly improved professional services margin. We expect our subscription revenue margin in 2026 to be similar to 2025 as the benefits of moving North American customers to public cloud will be offset by onetime costs related to those transitions in the year. With respect to operating expenses, we expect sales and marketing to grow by high single digits relative to 2025. We expect research and development to grow in the high 20 percentage range versus 2025. And excluding stock-based compensation, we expect roughly 10% growth in general and administrative expenses compared to 2025. Including stock-based comp, we expect growth to be above 25%, reflecting some senior hires. Finally, we expect CapEx will be in the $8 million to $10 million range as we make office improvements to support growth in Japan and undergo internal IT refresh. I'll leave you with Slide 17. As we exit our quiet period, we will be maximizing the size of our normal course issuer bid by roughly doubling the repurchase limit to approximately 2.8 million shares or 10% of our float by October 31, 2025. We've already invested $54 million under the buyback and repurchased roughly 440,000 shares. At the average price paid for those shares, our new commitment put in an additional investment of up to approximately $284 million throughout the term of the buyback. We see tremendous value in maximizing our share buyback while public markets continue to misvalue complex AI-enabled software companies like ours. Kinaxis business has never been in better shape over my 6 years here. ARR growth has reaccelerated, and we are winning more industry leaders than ever, including in markets that have huge AI and other tailwinds. We have room to improve SaaS revenue growth and adjusted EBITDA margin in the coming years. We have a revitalized go-to-market team and the market's best product that continues to lead the AI transition in our space. All this made my personal decision to take a new opportunity extremely difficult. I'll be joining an exciting private company with a path to go public ahead, which is a really exciting place to be for a CFO. I'm sure my departure raises questions as senior management changes always do. Let me address them right now. First, I believe Kinaxis will be a huge AI winner, and we have a great new pricing model to monetize the inevitable evolution of how Maestro will be used. Second, Razat will be a fantastic leader for Kinaxis, and I truly wish I could have partnered with him a lot longer. There is no better time to have an industry veteran CEO with such impressive qualifications on the product side of the business as well as such strong go-to-market and overall leadership job. Finally, 2026 is set up to be a great year, and overall, the future looks exceptionally bright. So I'll be cheering from the sidelines. I want to thank the entire senior team for their support over my time here, including past leaders like John Sicard, Richard Monkman and Bob Courteau. They taught me a lot and created a truly special culture. And thanks to you, our shareholders and analysts for years of partnership as well. I've learned a great deal from you and enjoyed getting to know you all. We may meet again. For now, I'll let Razat make some concluding remarks. Razat Gaurav: Thanks, Blaine, for your countless contributions to Kinaxis. We've strengthened our business foundation, built a great finance team and successfully steered the company through great growth, opportunity and change to leave us in tremendous shape today. I wish we could work together longer, and I hope our paths cross again soon. I'm very pleased that Blaine will be with us through our Q1 earnings call in early May. In the meantime, we're actively searching for a new CFO to fill his big shoes. Going on to Slide 18. Kinaxis has a long history balancing rapid growth with strong profitability, and that will not change. A 25% adjusted EBITDA margin represents a solid floor and will also allow us to invest in exciting growth opportunities. We are focused on accelerating the transformation of Kinaxis from a supply chain planning solution provider to an AI-driven supply chain decision-making and orchestration platform. I'll highlight 4 key areas of investment in 2026. First, we're going to accelerate our road map for building out our core planning capabilities and turbocharging the leverage of agentic AI, including an extensible data fabric and semantic layer to enable our fulsome supply chain orchestration vision. Second, we're going to keep our foot on the gas for even greater go-to-market success. We will add quota-carrying capacity to expand account coverage and develop the go-to-market operating model for our new and exciting agentic capabilities. Third, we'll increase the leverage of key partners to both give us bigger edge in winning new business and to scale and help deliver the customers successfully with an increasing share of the implementation services. We are expanding our investments in training and enablement of our partner ecosystem and ensuring strong collaboration with solution assurance during implementation cycles. Finally, we are mobilizing a team of forward deployed engineers to accelerate the go-to-market usage, adoption and value realization from our agentic capabilities. This team will work across the life cycle of our relationship with customers with a mix of deep supply chain domain knowledge, data science and data engineering skill sets to compose agentic solutions architected to deliver valuable outcomes while still leveraging the core foundation of Maestro. We've already hired a leader for this group, a highly respected executive who rejoins Kinaxis after roles leading go-to-market and customer engagement teams for supply chain at Palantir and Celonis as well as senior roles at Cooper and Llamasoft. I couldn't have asked for a better person to spearhead our agentic solutions initiative. Internally, we have a company-wide program to identify use cases for AI to transform our ways of working in an effort to gain velocity and productivity as we scale up the business. In our product teams alone, roughly 90% of all requests, which is the way that new code goes into testing -- goes from testing into live environments, includes AI-assisted code, helping us gain speed and freeing up more time for innovation. Roughly 80% of engineers and growing are using AI in their work and half of those are power users. I hope these priorities give you a sense of how strongly Kinaxis continues to lean into the AI transformation opportunity. Evolving from a market-leading supply chain software solution to a composable agentic supply chain orchestration platform is a unique opportunity for Kinaxis and is why I am here. As you know too well, there is a lot of confusion in the public markets about who the winners will be in a more AI-forward world. We are working hard to prove that all the innovations in AI, data and agentic architectures are a significant tailwind for Kinaxis as we build the future of supply chain decision-making and orchestration. In the meantime, we are focused on delivering quarter after quarter as we did in Q4 and throughout 2025. Thank you for your ongoing support. I will now turn the line over to the operator to start the Q&A session. Operator: [Operator Instructions] Your first question comes from the line of Richard Tse with National Bank Capital Markets. Richard Tse: Great results, guys. Just before, Blaine, congratulations and all the best in your new job. It's a pleasure working with you over the years. Razat, like really great color on AI. And against that, I've got a really sort of basic question I'll ask here because we're getting a lot of inbounds on this. And so when you think about Kinaxis, why is it that a sort of high-powered sort of small team could not come in and build an AI native platform to compete directly with Kinaxis here. I know it's a basic question, but it's certainly one that we're getting a ton of inbounds on. Razat Gaurav: Yes, Richard, thanks for asking that question. And we think about this very deeply. And I think the underlying facts are what are the types of problems we are solving for our customers. The types of problems we're solving for our customers requires a very deep understanding of the supply chain domain. And the supply chains that our customers operate are highly complex, highly interconnected. And you need to understand the physics of the supply chain before you can use AI or agents to do anything with it, right? And that's what we've built in Maestro over decades long. And that platform is the single richest representation of that complex interconnected supply chain that our customers operate. And then on top of that, we, like everyone else in the enterprise software space, are leaning in, in leveraging generative AI to transform the user interface to a more conversational interface, which is democratizing the usage of our solution. But also we are leaning in on all the new data architectures and the semantic architectures to create a composable agentic platform, right? So when you think about the kinds of customers we have, these are customers like Ford Motor Company and Unilever and Schneider Electric and Merck, they rely on the trust and the robustness and the industrial strength and the understanding of the physics of the supply chain on our underlying platform. And then we are layering the intelligence and the automation and the prediction layer with agents and with AI. So we feel very confident in our ability. We're clearly seeing the demand for it in our customers, and we have every intention to continue performing to prove that out. Richard Tse: Okay. Great. I have just one follow-up question, and I'll pass the line after that. So with respect to the new pricing model, is sort of, I think, the bias here that it will be sort of incremental to the existing growth profile here of the company because obviously, it sounds like that's kind of what is happening here. And when it comes to profitability, can you maybe just provide us a bit of color because, obviously, it's sort of transaction based and there's a lot of sort of things with tokens, like I imagine the costs won't be fixed. There'll be obviously sort of variable. So how are you thinking about sort of those two things? And then I'll pass the line. Blaine Fitzgerald: Yes, Richard, I'll start. As we're going through this, it's somewhat exciting in terms of -- we think this is a potential to accelerate growth in revenue while keeping our costs actually at the same levels. As you know, there are some like AI modules that we have that are a little bit more costly than others. But overall, what we've done is we covered that with this actual almost variable cost that is actually committed. And that's the one thing that I think people need to realize for what we're doing here is that although it's consumption and usage based, we are obviously going forward with a committed revenue scheme. So at the end of the day, it won't look too much different from what we have today. However, there are areas of revenue opportunities and value that we're giving to our customers that we think that we should be monetizing on. And so we think this is going to be both beneficial to overall EBITDA, but also very much the revenue side. I will say that in any of our guidance that we've given today because it's early days, we have not put any of that upside in our guidance at this stage just because it's too early to tell how that's going to play out. Razat Gaurav: Yes. Let me just add a little bit to that as well. So the biggest driver for us to really evolve to a usage-based pricing structure is to better align our offering going forward and the substance of the value we're bringing to our customers going forward to the way we price our offering, right? And so a lot of the metrics that form the basis of the MAUs, the Maestro activity units are anchored on those usage patterns. I fully expect that the initial phase of adoption, and we're seeing this with early adopter customers right now is really around making the key personas that interface with our applications, whether it's a planner or it's an extended part of the supply chain organization or even senior executives within supply chain organizations. It makes them more productive. It makes them leverage our platform and gain insights from our platform and take actions on our platform in a far, far more efficient way in a far easier and simpler way as well. So that's the first phase of adoption. As we keep building out our platform and we get into a more expanded agentic orchestration layer, I fully expect we'll be getting into more and more use cases that are developing digital personas, right? And so we don't want to tie our pricing to just users because I think we're going to scale across our customers' organizations in a very nonlinear way from a user perspective. And so that's the whole emphasis and the thrust behind our MAU structure. Operator: Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Thanos Moschopoulos: I'll echo the congrats to Blaine on the opportunity. Maybe starting off with a question for Blaine. When I look at your SaaS backlog at year-end relative to your SaaS revenue guidance, it's a higher coverage ratio with respect to the backlog than we've seen in prior years. Is that conservatism? Or is there some other dynamic? Blaine Fitzgerald: Yes, it's a good observation. So we're -- our CRPO is about 80% of what our midpoint on our guidance is, which is a good thing to point out. I think we are having a healthy amount of confidence in what we're landing at 17% to 19%. I think there is always opportunities. I just mentioned one of them with NGP where we could start next on pricing, which could show that we could maybe potentially beat that. Obviously, if you look at our past and look at 2025, in particular, we did much better than that 88 percentage points. And I think that's something that we are continuing to evaluate. And I'm hoping we'll be putting some smiles on people's faces throughout the rest of the year and beating that 17% to 19%. But right now, I'd say 10 months, I guess, 9 months to go in the year, it's a long way to go. We'll see how things play out. Hopefully, you'll be hearing some increases in that guidance over the year. Thanos Moschopoulos: Great. And then for Razat, how would you characterize the near-term spending environment? Clearly, you had strong bookings in the quarter, but is that a function of better execution, better competitive performance on your part against the stable markets? Or has there been some improvement in the demand environment with supply chain being more topical with tariffs and the like? Razat Gaurav: Yes, I think it's a good question. Look, I think it's a few reasons. I'll put it in sort of three buckets there. First, I do think there is growing levels of supply and demand volatility, which creates a better need -- even a bigger need for our platform, right, for our customers because customers are trying to gain agility, gain adaptability and through sort of high degrees of uncertainties and volatility, they need a platform like Maestro that enables scenario planning, enables intelligent decision-making while incorporating all the physics of the supply chain. So I think the overall macro environment has been a tailwind for us. The second is definitely our execution has improved significantly. Our go-to-market execution in the last 12 to 18 months has significantly improved. We have revamped the makeup of our go-to-market engine. The way we are engaging with customers has been significantly improved. And then we're going to continue to add capacity and coverage in the field to make sure we can continue to scale up. So that's the second big reason. And then I think the third big reason is I think there's a deeper interest in organizations that have had legacy systems and processes and supply chain planning and decision-making to really look for the next wave of productivity improvements, right? And that's causing a significant replacement cycle of old legacy systems, right? And we are one of the preeminent providers that is replacing older legacy systems right now in an effort to really architect processes and operating models and applications that help companies get the next wave of improvement in working capital efficiencies, next wave of improvement in supply chain operating cost efficiency. So these are the three big reasons, I would say, that is driving the growth momentum we're seeing in the company. And by the way, as we come into this year, we continue to see our pipeline growing along the same dimensions. Operator: Your next question comes from the line of Kevin Krishnaratne with Scotiabank. Kevin Krishnaratne: Congrats, Blaine, great working with you and good luck on the future. Question on your R&D. Did I hear that you plan to grow that line 20%? And if so, can you just comment on the moving pieces there? I noticed in your slide deck, you talked about the addition of forward deployed engineers. I'm just wondering sort of what you're seeing? Is that driven by customers? Are some of the decisions taking a bit longer on their side requiring you to kind of step up your -- the FTEs and to help drive that adoption. Just wondering if you can unpack the growth in R&D. Blaine Fitzgerald: Yes. Great question. And so what I said is that we'll be in the high 20 percentage range for that growth year-over-year. And there's a great reason. I mean we're seeing unprecedented momentum in the business at this stage. We had -- in 2025, we had the biggest deal ever. We had the biggest day ever. Every quarter had the biggest amount that we've ever seen for the demand coming in and the wins that we had for every single region. We had adjusted EBITDA, net income, basic EPS, like everything was off the charts records for us. That demand makes us believe there's a bigger opportunity that we could actually go after at this stage. In R&D, with the innovations that we see in front of us with agentic AI, with what's happening on trying to get access to the machine learning that we have in place and the tool that we have that our product has built, we just see that there's so much more than this. What -- a lot of the discussions we're having right now between Razat and myself and the other leaders of this team is that we're not okay with just being a supply chain planning company. What you're probably going to see is a company that may not even have supply chain in it at some point in the future and be more focused on enterprise AI. I think that is the eventual vision of where Kinaxis will do extremely well. And I think we have now this leadership team that -- which is part of the reason why this decision is so tough is that we have a leadership team that's all coming together and creating a huge opportunity. So the R&D spend, yes, it's going up. It's going up because there's a huge, huge opportunity, and we're seeing that today from every single customer that's asking for more and more and more. Razat Gaurav: Yes. Maybe just add a little bit more color to that. So look, our R&D investments are growing in 2026, and that's a very deliberate approach to this, right? And I would say that it's in two big buckets. One, investing in our core Maestro platform. Given the new architectures, given the new performance and scale expectations of our customers, we need to continue to expand and build on the core platform that we have and build out further the broader planning footprint that we have with our customers. So that's an important area. There's a lot of investments happening there. In addition to that, as I talked about earlier, there's a new architecture evolving with agentic AI. And we want to be leaning in and shaping what that means to the world of supply chain decision-making and orchestration, right? And so we are leaning in and building out this data fabric, abstracting the semantic layer, building out the agentic infrastructure around it and working with early adopter customers in faster cycles. So these things are important investments to really future-proof a sustained growth path for us in the coming years. On your question about the forward deployed engineers, look, this is a really important operating model that we're putting in place because unlike taking our traditional planning footprint, where the customers had a strong understanding of the feature functions requirements, and then we would be evaluated by those customers based on the fit of our platform against those feature function requirements. In this new world of agentic AI, it takes a different shape and form where the customers are more anchored on their pain points and outcomes. And then we together formulate what is the solution set required and how to architect the feature set required with the combination of our Maestro platform and agentic architectures to create a tailored and composable solution. That requires a very different engagement model, and that's where the forward deployed engineering skill set becomes really, really important. We're going to be investing in that. We've hired the leadership for that. We've got some internal skill sets. We're going to be hiring additional resources in this mix to really scale this business in a discovery-led consultative model so that we can really harness the power of the platform we're building out and deliver the outcomes throughout the life cycle of our customers. Operator: Your next question comes from the line of Paul Treiber with RBC Dominion Securities. Paul Treiber: A question for Razat. You talked about one of the reasons that you joined Kinaxis is building and scaling the company that you see as a market leader. What do you -- as you look forward in the next couple of years, what do you see as the largest challenge to scaling that you're looking to address as you grow? Razat Gaurav: Yes, it's a good question. And what I'll say is it's a unique moment in time for Kinaxis and frankly, for me to come in and to really build and scale. And I'm very bullish on the market need on the market opportunity, the market size. I'm very bullish on the domain problems that we're solving and the hard complexity and the value generation potential of those problems. I think the biggest barrier for a company like us would be to continue to scale in terms of retaining and attracting the talent that is required for us to realize the potential we have and to realize the expectations our customers have. That continues to be the biggest sort of thing to focus on is the talent. What doesn't keep me up at night is the market potential. I'm not too worried about the competition because we really have some amazing customers, and we have a lot of momentum. It's really allows -- really about scaling the business in every dimension with the best talent because we solve hard problems. We're not solving easy problems for our customers. And so we need the top caliber talent. And so you're going to see us continue to expand the talent. We've got -- we're anchored with some amazing talent in Ottawa, Toronto, Dallas. We've got a rapidly growing team in India, in Chennai and Bangalore. You can fully expect us to create new hubs of talent as we continue to scale up the business. Paul Treiber: And an interesting point you made that you're not worried about competition. You mentioned earlier the new hire from Palantir. The -- and I think this is one of the first times I've heard Kinaxis mentioned Palantir. Can you speak to like the competitive environment, if you're seeing these new entrants get traction in the market? Or is it still -- do you just see the traditional competitors? Razat Gaurav: It's -- the net story there is it's a very fragmented market. You've got a mix of a lot of old legacy players, including some of the ERP players, where we're actually driving replacement cycles. You've got some players that have emerged more so in the last 10, 15 years that we see in different cycles in different industries or different verticals or different geographies. And then you've got some new entrants that are coming in, right? But through all of that, our win rates have been very high throughout 2025. And maybe Blaine can talk a little bit more about the win rates there. Blaine Fitzgerald: Yes, that's a great point. Obviously, the -- it's a common question is the competitive landscape changing? The short answer is yes, but only slightly. SAP, o9 and Blue Yonder are still the main competitors we see. We have extremely high win rates. I think we've talked about in the past over 60% against those 3, which we can say is the same. I would say one of those, they almost landed the goose egg in terms of trying to win dollars from us, which is a pretty incredible, I guess, achievement to be almost 100% against one of those big 3 competitors. But those are the big 3 that we continue to see over time. I think there's going to be more new entrants that are going to come in. But at this stage, it's a very, very small percentage of the competitors that we do see. Operator: [Operator Instructions] Your next question comes from the line of Lachlan Brown with Rothschild & Co. Redburn. Lachlan Brown: Congrats on the strong results. And Blaine, congrats on an excellent tenure as CFO. I would like to dive into the regions. Asia was pretty successful throughout 2025. Europe was a good driver of growth, while North America was a laggard. Could you run us through why we're seeing different outcomes in the different regions? The recent bookings over the last couple of quarters tell a different story? And just any initiatives you're doing to push growth into the North American market? Blaine Fitzgerald: Yes, sure. Well, number one, I'll just reiterate, we had records every quarter, every -- for the full year for every region. I would say though, the one that outperformed by a significant, significant amount was EMEA. It was well beyond our expectations. I won't say the percentage, but they were extremely much higher than their target they had. The APAC team also did extremely well. They had a Q1 and Q2 that was much higher than our expectations. And then North America, they set the all-time record right now. They are the ones that are the champion for us in terms of those records for the full year. So it's one of those situations where I don't -- people look for the bad news. We don't have the bad news in any region at this stage. We're very proud of those regional leaders and how they performed. If there's one that kind of stuck out as way over the targets that we had, that was EMEA. They did extremely, extremely well. Razat Gaurav: Yes. And look, North America is our largest region in terms of bookings and ARR and revenue, and we have tremendous momentum in North America right now. I think we're going to be off to a great start this year, and we ended obviously Q4 at a very, very strong level as well. So actually, I'm super excited about the momentum in our North America business. Operator: Your next question comes from the line of Stephanie Price with CIBC World Markets. Stephanie Price: Congratulations, Blaine and Razat, looking forward to working with you. My question is on the Maestro Agents. They've been available more broadly to your customer base. Just curious about early feedback on the consumption bundles for the agents and what customers are saying about the pricing strategy that you discussed? And maybe more generally, how customers are kind of thinking about the pace of AI uptake here? Razat Gaurav: Yes. Look, it's a good question. First, on the early adoption with customers, right? So we were very deliberate in curating a mix of customers from various industry verticals that we play in to make sure we could work with those early adopter customers in a very iterative agile way and continue to improve the underlying Agent Studio that we've developed now. And the results are exciting. Clearly, there's a lot of learning cycles on the customer side and our side as we go through that. And what we're finding is the use cases fall in sort of or 2 or 3 different buckets, right? There are use cases that are very straightforward and are easy to compose and deploy, and they add additional intelligence and insights and create a much simpler experience for the users that are already interfacing with Maestro today. That's sort of the low-hanging fruit, if you would, and provides a lot of quick hits. The second category are use cases that are really oriented around creating a different way of working in creating automation capabilities in being able to rethink how planning gets done in the enterprise, right? And those, while our platform is an important enabler to that, they also require changes in operating models, in governance structures, in underlying processes for our customers. And that's where we're working with our customers and our partners very closely in not just enabling it through a system, but also surrounding it with the operating model shifts and the process changes that are required to truly transform how business gets done, right? So that's the second category. And the third category, we are just about to sort of embark on, which is the broader orchestration scope, which goes well beyond just the Maestro platform and the data sets that reside in Maestro and go into the extended supply chain, the extended enterprise, right? So I'm very encouraged by the early results. We are working very closely on this. This is a big priority for us as a leadership team and for our customers. And what I'm finding is I've talked now in the last 8 weeks to roughly 25 customers, there's a big appetite for customers to really co-innovate. They're looking for the next wave of efficiencies. They're looking for use cases where AI can authentically create value as opposed to just following the hype. And we're very fortunate to work with many organizations that want to be leaning in and be on the front foot on that. So really encouraging on that. On the pricing side, it was a very thoughtfully curated pricing structure where we leverage third-party experts. We benchmarked ourselves on what other companies are doing. We got some feedback and input from various existing customers. And that's what has resulted in the MAU structure. As we roll this out, by the way, the rollout of this just started last month, right, in February, we're getting additional feedback and input from our field teams, from our customers. And I fully expect that we'll go through those iterative learning cycles in evolving that pricing structure and refining it -- so it's something that works for our customers and for ourselves going forward. Operator: Your next question comes from the line of John Shao with TD Cowen. John Shao: Razat, you mentioned semiconductor is a new win. So just curious if this industry is any different from a supply chain planning perspective. Any specific pain points you're helping them to address that's just unique to them? And how should we think about your expansion with this new vertical, as you mentioned, top 5 global foundry? Razat Gaurav: Yes. Look, the semiconductor industry has a very interesting supply chain. I've had the fortune of working with semiconductor companies for many years now. If you think about the high-tech value chain, the semiconductor companies are at sort of the top tail end of that in some ways, right? And so as shifts happen in demand in downstream demand for various products, right, whether it's chips required in powering data centers, which are on an upswing or in consumer electronics products like mobile phones and iPads and servers, et cetera, the shifts in demand downstream impact the semiconductor industry in very massive ways. That's the bull effect that how demand propagates upstream through that value chain. So -- and then semiconductor companies are always trying to grapple with big swings in demand by the time it gets to them with the capacity that they have. And capacity is not easy to mobilize. They require heavy capital investment. So it's a unique supply chain problem. We're very familiar with it. We're very excited and very fortunate to work with several semiconductor companies, and we're seeing a significant need and demand for really allowing semiconductor companies to develop a more agile paradigm because as demand is shifting downstream, they're having to figure out how to service that demand with supply and capacity in a profitable and sensible way. And that's what Maestro is helping them do. Operator: This will end the Q&A session. The Kinaxis team will reach out to those who did not have a chance to ask questions. I will now turn the call back to Rick Wadsworth, Vice President of Investor Relations at Kinaxis, Inc. for closing remarks. Please go ahead. Rick Wadsworth: Thanks, operator. Thank you, everyone, for participating on today's call. We appreciate your questions and your ongoing interest and support of Kinaxis. As the operator mentioned, we've run out of time here, but I will reach out to folks who didn't get a chance to ask their question here, and we look forward to speaking with you all again when we report first quarter results. Bye for now. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Automotive Property (sic) [ Properties ] REIT's 2025 Fourth Quarter and Year-end Results Conference Call and Webcast. [Operator Instructions] Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the REIT's current views with respect to future events. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties and assumptions relating to forward-looking information, please refer to the REIT's latest MD&A and annual information form, which are available on SEDAR+. Management may also refer to certain non-IFRS financial measures. Although the REIT believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please refer to the REIT's latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on March 5, 2026. I would now like to turn the conference over to Milton Lamb. Please go ahead, Mr. Lamb. Milton Lamb: Thank you, Morgan, and good morning, everyone. Thank you for joining us. With me today on the call is Andrew Kalra, our Chief Financial Officer. 2025 was an instrumental year for Automotive Properties REIT. We acquired 13 automotive properties, including our first 3 properties in the United States for an aggregate purchase price of approximately $200 million. These acquisitions contributed to our significant growth in rental revenue, cash NOI, AFFO per unit in 2025, which supported our distribution increase effective August of 2025. Compared to 2024, our property rental revenue increased by 8.5%. Cash NOI was up 8.4% and AFFO per unit diluted increased to $0.998 from $0.932. As the majority of our acquisitions were completed in the second half of the year, our Q4 results show even greater growth with property rental revenue up 19.3% compared to Q4 a year ago. Cash NOI grew 18.6% and AFFO per unit diluted increased to $0.251 from $0.232. Our $57.1 million equity offering in the quarter, which helped finance our acquisitions impacted our Q4 AFFO per unit but we still generated nearly $0.02 increase to AFFO per unit. Supported by our contractual fixed or CPI adjusted rents -- annual rent increases, our same-property cash NOI increased by 1.9% and 2.1% for Q4 2025 and the full year, respectively. During Q4, we deployed approximately $57.3 million for the acquisition of 4 dealership properties in Greater Montreal, including a portfolio of 3 properties located in Dorval consisting of a full-service Subaru, Honda and VW dealership properties tenanted by affiliates of Dilawri, and a full-service Honda dealership in Ile-Perrot tenanted by an affiliate of Group Auto Force, which adds to the sixth property portfolio we previously acquired in Q3, which is also tenanted by affiliates of Group Auto Force. We expect to benefit from the full impact of our 2025 acquisitions in 2026. Subsequent to year-end, on January 1, we completed the acquisition of a full-service 40,000-foot Hyundai dealership situated on 6 acres of land in Quebec City for a purchase price of $13.25 million. And yesterday, we announced that we've waived conditions for the purchase of the real estate underlying automotive and service property located at 3280 Corporate View in Vista, California from a third party for a purchase price of USD 16 million. Vista is located in Northern San Diego County. The Vista property is tenanted by Rivian under a midterm net lease that includes contractual fixed annual rent increases with renewal options. The Vista property consists of a 60,000-foot Rivian delivery and service facility that is situated on approximately 3.7 acres of land. The acquisition is expected to close during the first half of 2026, and we expect to fund the purchase price by drawing on our revolving credit facilities. We expect these property acquisitions to drive continued growth in our AFFO per unit, and we are entering 2026 with solid growth momentum. I'd now like to turn it over to Andrew Kalra to review our Q4 financial results and position in more detail. Andrew? Andrew Kalra: Thanks, Milton, and good morning, everyone. Our property rental revenue for the quarter increased to $27.9 million from $23.4 million in Q4 a year ago, reflecting growth from the properties we acquired during and subsequent to Q4 last year and contractual annual rent increases partially offset by the reduction of rent from the sale of our Kennedy Lands property in October 2024. Total cash NOI, same-property cash NOI for the quarter totaled $23.2 million, $19.6 million, respectively, representing increases of 18.6% and 1.9% compared to Q4 a year ago. Interest expense and other financing charges for the quarter were $7.5 million, a $1.9 million increase from Q4 last year, reflecting additional debt incurred to acquire properties during and subsequent to Q4 2024 and increased interest rates. Our G&A expenses were $1.8 million for the quarter, a decrease of $0.4 million from Q4 last year, in line with our expectations. Net income and other comprehensive income was $13.9 million compared to $12 million in Q4 last year. The increase was primarily due to higher NOI and a change in noncash fair value adjustments for interest rate swaps, partially offset by higher interest costs and changes in noncash fair value adjustments for investment properties and for Class B LP units and unit-based compensation, partially offset by a foreign exchange loss of $1 million. FFO and AFFO increased by 20.4% and 18.4%, respectively, compared to Q4 last year, reflecting higher rental revenue from acquisitions, contractual rent increases, partially offset from the reduction of rent from the sale of the Kennedy Lands. On a per unit basis, FFO increased to $0.259 diluted in the quarter, up from $0.236 in Q4 last year, and AFFO per unit increased to $0.251, up from $0.232. We paid unitholders distributions of $11.32 million or $0.206 per unit, representing an AFFO payout ratio of 82.1% compared with 86.6% in Q4 last year reflecting the positive impact of the properties acquired during and subsequent to Q4 last year and contractual rent increases, partially offset by the reduction of rent from the sale of the Kennedy Lands and the increase in our monthly cash distributions effective August 2025. The cap rate applicable to our portfolio was 6.75% at year-end, which is essentially flat quarter-over-quarter. The $6.8 million fair value adjustment for the year was primarily related to write-off of closing costs, including land transfer taxes associated with the new acquisitions. We continue to be proactive with our debt strategy to limit our exposure to interest rate fluctuations, enhance our financial flexibility. During the quarter, we renewed or entered into $25 million of floating to fixed interest rate swaps for a term of 5 to 6 years at a rate or under 4.5%. We increased the amount of the non-revolving portion of Facility 3 by $40 million and extended the maturity to March 2028 at the same credit spread. At year-end, we had a debt-to-GBV ratio of 49.9%, providing further acquisition capacity. Subsequent to year-end, we entered into floating to fixed interest rate swaps within Facility 3 in the amount of $45 million for terms ranging from 5 to 7 years with interest rates between 4.45% and 4.59%. And we increased the amount of the revolving portion of Facility 1 by $25 million and extended the maturity from June 2027 to June 2029. As at the date of this MD&A, on a trailing 12-month basis, the borrowing capacity under our 3 credit facilities increased by an aggregate $140 million, and we extended maturities. We have a well-balanced level of annual maturities with less than $40 million of swaps maturing over the next 12 months. We have a weighted average interest rate term and mortgage remaining of 4.1 years at year-end. As at March 4, 87% of our debt was fixed through interest rate swaps and mortgages, and we had approximately $102.3 million of undrawn capacity under our revolving credit facilities and 10 unencumbered properties with an aggregate value of approximately $130.2 million. I'd like to turn the call back to Milton for closing remarks. Thank you very much. Milton Lamb: Great. Thanks, Andrew. 2025 marks our 10th anniversary since the creation of the REIT. And over that period, we've established ourselves as an important partner to major automotive dealership groups and OEMs in Canada and now in the United States. As a result, we've successfully diversified our tenant base, market presence and brand representation while more than tripling the value of our investment properties. We further built upon this progress in 2025 and strengthened our position for growth through the acquisitions of 13 properties for an aggregate purchase price of approximately $200 million. Our entry in the U.S., combined with our entry into a heavy equipment dealership vertical late last year has broadened both our revenue base and our potential acquisition pipeline. We are successfully executing on our key objectives, including driving AFFO per unit to build value for unitholders. We're pleased to have implemented a 2.2% increase to unitholder distributions this past year. And looking ahead, you can expect us to continue to build on these positive factors to drive unitholder value supported by a growing property portfolio, featuring essential retail and service properties with 100% rent collection since our IPO over 10 years ago, prime metropolitan markets anchored by GDP and population growth, high-quality tenants with resilient business models, attractive single-tenant net lease structures and embedded fixed or CPI-adjusted rental growth. We look forward to benefiting from a full year of the financial impact of our 2025 acquisitions in 2026. That concludes our remarks. Now I'd like to open it up for questions. Morgan, please go ahead. Operator: [Operator Instructions] Your first question comes from Sairam Srinivas with ATB Cormark Capital Markets. Sairam Srinivas: Congratulations on a good 2025. Obviously, 2025 has been very active for the acquisitions pipeline and it looks like 2026 is pretty active as well. So can you comment on the outlook ahead and what you're seeing developing in your markets? Milton Lamb: Yes. I mean we experienced during COVID and just after a bit of euphoria where some of the pricing on these properties went to a level that we were not comfortable proceeding at. That's now normalized to what we've traditionally seen where we can buy properties in that, call it, 6.5 to low 7s and put financing in place in the mid-5s -- sorry, in the mid-4s. That allows us to be at a number of opportunities that are appealing to us. We're still being selective. And as you can tell, looking at Florida and California plus Montreal, these are markets that are very healthy for real estate and the economy overall. Sairam Srinivas: That's definitely the case. And maybe just a follow-up there. Looking at the U.S., you essentially been focusing on Rivian and Tesla tenanted dealerships there. Is that part of your broader strategy as well in terms of the U.S. market? Milton Lamb: As a broad strategy, we certainly believe. We watched Tesla for a while before we did our first. And then currently, we have 7. We're excited about what Rivian is doing with the R2 that will launch shortly. So there tends to be some merchant developers in the states that are providing long-term leases with Rivian and Tesla in major markets that when we underwrite the real estate, both for the existing tenet and for the actual dirt building an area that we're excited about. It is not our sole strategy. We still believe that we will look for and be able to complete some automotive traditional dealership properties as well. It's early days, but we still think there will be a diversified portfolio that we end up building out. Operator: Your next question comes from Jonathan Kelcher with TD Cowen. Jonathan Kelcher: I guess just continuing on that last line of questioning. Pro forma, when this close -- when this deal closes, what percent of your net rents will come from Rivian? Milton Lamb: We don't give forward-looking exact, but it's going to be under 5%. I mean it may be 3 properties but these are not very large properties. And again, we certainly underwrite it for the dirt underneath. We like the assets, and we like the tenant. Jonathan Kelcher: Okay. Helpful. And then just, I guess -- well, second follow-up/second question. Just on the balance sheet, you talked about pushing $45.9 million post quarter into fixed rate. Like what -- Q4, you were 20% floating. What would you be pro forma right now? Andrew Kalra: In terms of our swaps coming due over the next 24 months, we've got about $40 million. We're going to push -- we're going to -- with the acquisitions, we use our revolving balance, so our revolver will go up. And then with respect to as at the date of the MD&A, our overall non-revolving is 87% fixed. Okay. We're in a comfortable zone, and we ended up doing swaps in an opportune time in the beginning of February and got some good rates as well. Operator: [Operator Instructions] Your next question comes from Jimmy Shan with RBC Capital Markets. Khing Shan: So just in terms of the acquisition pace this year, do you expect it to be as active as last year? Milton Lamb: I think we're building some momentum both in Canada and the U.S. and the -- we went through some of the math a few moments ago. So that works. I think we have to be selective, and we continue to be selective. So for us, it's a cost of capital balancing with the opportunities that we see. So it will be -- we expect to see some opportunities and it will be an interesting year. But we still believe that our multiple reflects a bit of a hangover of USMCA affecting auto, and they don't finish that sentence that says auto manufacturing. So I think we're caught in the word scramble of a title of 6 words versus 7 words, making a big difference in how we're viewed. So once that dissipates, I think our cost of capital will come back in line, and we're pretty excited on what our pipeline can and should be. Khing Shan: Okay. As you build out the U.S. portfolio, so how are you thinking about the markets you want to be in? Do you want to build a critical mass first? Or are you now just looking at the credit and you're kind of market agnostic? Milton Lamb: Yes. No, we're not -- we've never been market agnostic. So I guess I'd answer that in 2 ways. One is the underlying kind of philosophy of the REIT has always been metropolitan with population growth and GDP growth. Certainly, there's more markets in the U.S. than in Canada, just by the sheer size that fit that category. The good news is on a net lease business, we don't have those operating need for capabilities, risk management. It tends to be a bit more of an asset manager as opposed to a property manager leasing level. But we still do like, call it, that Southeast market. And then as you kind of move over into the Arizona, Texas and California. We like to see the dirt and the underlying economy and population supporting the real estate that we buy. It helps our tenants and it helps the dirt. Khing Shan: Okay. Sorry, just one last. Do you have any update on the Pfaff, the Audi space there in Vaughan, what you plan to do there? Milton Lamb: It's early days. It's a bit of a balancing act. I mean it's a great property. I keep on saying dirt but it's also got a great building on it. So the combination is the demand now for leasing income versus there is higher and better use, good density there. But in today's market, you're not getting paid for the density. So it's a balancing act of how long do we want to commit on that property versus how long until we get access to potentially the underlying value. And that's what we're going through right now and looking at different opportunities and different structures. It's early days but it's a high-quality property. Operator: Your next question comes from Giuliano Thornhill with National Bank. Giuliano Thornhill: Just a question. How do the cap rates compare for the Rivian deals compared to just regular kind of dealerships in their areas? Are they on similar like same ballpark? Or are they different? Milton Lamb: It really depends on the market. But I would think the Rivians, it's -- they haven't been around as long as some of the other dealerships or Tesla. So that's reflected a bit. But again, it's the -- what I find interesting is that they're at market rates or at numbers that we are -- I shouldn't say it overall. The ones that we've been doing are at market rates that we're very comfortable with. We've seen a number across our desk at a high number per square foot that makes us extremely uncomfortable. So it is a bit of a balancing act between the actual real estate and the tenant in place. But I would say, Rivian, with their upcoming R2, we could expect to see some cap rate compression going forward, assuming that, that launch goes as well as people anticipate. Giuliano Thornhill: And do you think of the EV transition more of like a risk or an opportunity for your kind of your existing tenant base? Milton Lamb: I think it's opening up more demand for the real estate that is zoned for automotive in Canada, whether that's including potential new Chinese entrants or just overall. I think for the existing, call it, traditional dealership base, a lot of them are going to have to have the service capabilities and the delivery capabilities for both -- well, for 3 for ICE, hybrid and for EV. So I think that broadens out their needs. But it's really going to be consumer preference, and there's going to be some investment that has to occur. But I don't see this being a hard pivot. I think it's going to be gradual over the next 15 to 25 years. And they're going to have to continue to service ICE vehicles and at the same time, move up the chain through hybrid and ICE -- sorry, hybrid and EV. Operator: This concludes the Q&A session. I would like to turn the call back over to management for any further remarks. Milton Lamb: We appreciate everyone's time, and we look forward to talking to you shortly. Have a good day, everyone. Operator: This concludes today's call. Thank you so much for attending, and have a wonderful rest of your day.
Operator: Hello, ladies and gentlemen, and welcome to the Deutsche Pfandbriefbank Analyst Call Regarding the Publication of the Preliminary Annual Results for 2025. [Operator Instructions] Let me now turn the floor over to your host, Kay Wolf, CEO of Deutsche Pfandbriefbank. Kay Wolf: Thank you very much. And ladies and gentlemen, a warm welcome from my side, from our side, Marcus, our CFO, here as well. And thanks very much for taking the time joining our first analyst call in 2026. Before Marcus and I will take you through the preliminary effects and figures for 2025 and also a prolonged view on the outlook for 2026 to 2028. As usual, we are doing that based on IFRS figures for the Group. I would like to take the opportunity to inform you that we are going to slightly amend this call going forward. And we have decided we're starting into a New Year to develop a bit further in the setting here. And going forward, not only our equity analysts, but also sell-side credit analysts who are covering pbb on a regular basis are invited to ask questions. This is clearly aiming for even further broadening the communication and the dialogue with the community that is covering us in great detail. And I'm really looking forward together with Marcus to your questions that are coming from both of you, from our equity analysts as well as our debt analysts, both from the sell side. And as always, there will be sufficient time left on our side for questions and answers at the end of the session. Ladies and gentlemen, 2025 was a landmark year for pbb. We made far-reaching decisions that go well beyond what we presented to you on our Capital Markets Day back in 2024. The transformation of pbb is more intense and therefore, more time-consuming than originally anticipated. In addition, the market recovery remains sluggish, providing us with less momentum in the new business than expected and in some countries with additional regulatory headwinds. This makes it more difficult to achieve our strategic goals and limits our flexibility and also latitude for action. However, we remain fully convinced that we are on the right track. We are working hard to make the bank more resilient, profitable and diversified. We are not losing sight of our strategic goals. Despite difficult conditions, we have already made good progress. As a result, we succeeded in significantly reducing the bank's risk profile in 2025. Repayments totaling EUR 1.4 billion and the EUR 1.7 billion significant risk transfer transaction at the end of last year enabled us to substantially reduce our risk exposure in the U.S. This represents a major step forward in our withdrawal from the U.S. market. We were also able to reduce the risks associated with the existing nonperforming loans in our development portfolio. With that, we deem the shielding and risk coverage of the U.S. and the development books as in general completed. At the same time, we are encouraged by the significant increase in new business to EUR 6.3 billion, including prolongation larger than 1 year. In a challenging market environment, we were able to increase new business volume by 23% compared to the previous year. In doing so, we are consistently tapping into new asset classes in order to diversify our portfolio. Nevertheless, in 2025, we remain below our original goal of between EUR 6.5 billion to EUR 7.5 billion. However, our key indicator of profitability, return on tangible equity was around 8% for the new business, which is already in line with our strategic ambition level. We have also made progress in diversifying our income streams. The acquisition of Deutsche Investment will broaden our business model. In 2026, Deutsche Investment will make its first notable low-capital binding contribution to pbb's overall results with its commission income. However, despite our efforts, we have not succeeded yet in placing our first own investment product in what is a difficult real estate investment market. But we continue to see the great market potential and remain committed and confident to make progress in the future. The decisions we made last year to put the bank on a more sustainable foundation for the long-term had a significant negative impact on our 2025 annual results. With costs of around EUR 366 million the decision to exit the U.S. market and the derisking of the nonperforming development loan contributed significantly to the negative pretax result of EUR 250 million. Due to this significant negative pretax result, the bank will not pay a dividend for the financial year 2025. With regard to AT1, the conditions for servicing instruments are currently well met. However, as you know, for regulatory reasons, we are not allowed to comment at this time on whether we will pay the AT1 coupon in April as we always -- we have always done in the past. With the CET1 ratio of 14.9% at the end of 2025, the bank remains solidly capitalized. The SRT transaction resulted in a significant RWA reduction of EUR 1.1 billion. However, this was offset by necessary regulatory loss given default adjustments to capital requirements in our foundation IRBA regime. These adjustments are linked to country-specific and backward-looking loss developments in the respective commercial real estate markets. They are completely independent of the performance of our portfolio or individual pbb loans. In addition, the embedded threshold and trigger mechanism increases the volatility and procyclicality of the F-IRBA capital regime for commercial real estate in the current market environment. In Q4 2025, the effects are primarily caused by the loss rate development in the countries of Poland and Finland. And we will discuss these effects in more detail later. For 2026, we expect pretax earnings to be in the range of EUR 30 million to EUR 40 million. The U.S. exit, in particular, will continue to have a significant negative impact with SRT costs of around EUR 44 million. Additionally, sluggish market recovery will not offer significant support. The most important KPI for us remains the improvement of the return on tangible equity to 8%. For the whole bank, we expect to achieve this profitability target in 2028, 1 year later than originally planned. Ladies and gentlemen, we are not satisfied with our 2025 results or the outlook for 2026. The transformation of pbb is more intense and therefore, more time consumed. Even more in the current market environment, it requires more resources than we had originally anticipated. Still, it remains the right thing to do, and it is necessary on this scale. Let us now take a brief look at market developments on Page 5. We can all observe the high level of volatility at the macroeconomic and in particular the geopolitical level on a daily basis. And just last weekend, a new armed conflict broke out in engulfing the entire region, the Middle East. This volatility as well as the associated uncertainty and unpredictability are likely to remain with us for the foreseeable future. At the same time, unstable economic outlooks and volatile tariff policies continue. We, therefore, expect growth in Europe to remain at the low level. Inflation is stable at around 2% within the ECB's target range. So interest rates in the Eurozone are not likely to fall in 2026. In economic and interest rate terms, therefore, no or only minor stimulus are to be expected. The European real estate market remains in the phase of growth. We do not expect further continuous -- we do expect further continuous improvement, albeit at a rather modest level. In line with the consensus among many market experts and their forecast, we do not anticipate a breakthrough in 2026. Sentiment remains subdued and investors remain cautious. However, we intend to leverage our good momentum in the new business of the fourth quarter of last year and continue to grow this year as well. However, attractive financing opportunities that meet our risk return profile remain rather underrepresented and are therefore highly competitive. This is clearly evident in the transaction volumes in commercial real estate financing in Europe, as you can see on Page 6. In line with the significant rise in interest rates, the volume of transactions slumped by almost half. Since then, the markets have been recovering steadily but hesitantly. We expect transaction volumes in Europe in 2026 to remain notably below the 2022 level. Although the ECB's key rate has normalized, it remains well above the level seen during the historically low interest rate phase. Everything, therefore, points to a continued sluggish market recovery in an unstable environment from which pbb can itself not completely decouple. Let me now turn to our business segments, starting with Real Estate Finance Solutions, our core business pillar on Page 7. As already mentioned, we significantly increased our new business volume by 23% to EUR 6.3 billion. We had a stronger-than-expected fourth quarter with a high proportion of January new business commitments, which grew to 63%. The return on tangible equity in new business remains at around 8%, thus meeting our profitability requirements. We are also making progress in diversifying our book. Our growth asset classes with hotels, data centers, student and senior housing now accounts for around 7% of our new business with a stable pipeline of just under 20%. Before I move on to Real Estate Investment Solutions, I would like to give you a deeper insight into the progress of our withdrawal from the U.S. market, all on the next 3 pages. As you can see on Page 8, we have made strong progress in reducing the U.S. portfolio in 2025. Within the last 12 months, we were able to reduce our performing book by 1/3 from EUR 3.3 billion to EUR 2.2 billion. Of the remaining EUR 2.2 billion, the SRT covers a portfolio of EUR 1.7 billion. This leaves an economic risk position of only EUR 500 million in our performing portfolio. You can see the rundown of our book in the top right corner of the slide. We aim to have almost completely wound down of our U.S. exposure by the end of 2029. Let me give you on Page 9, some more detailed information regarding the SRT transaction in our U.S. business, which is of strategic importance for us. It is certainly a unique transaction for this market, both in terms of our strategic decision to exit the U.S. market and in terms of the transaction parameters. The transaction covers a performing U.S. portfolio with a volume of around EUR 1.7 billion. It comprises only 26 loans and has, therefore, a significant higher risk concentration compared to other transactions in the market. In addition, 92% of the portfolio is concentrated in office loans. pbb retains the First Loss Piece of around EUR 51 million and is fully protected -- this is fully protected by existing Stage 1 and Stage 2 risk provisioning. The Mezzanine tranche of EUR 247 million was taken over by Oaktree, protecting pbb against future losses to this extent. The SRT portfolio is expected to gradually reduce until 2029, aligned with expected maturities of the loan portfolio, reducing interest income over time. At the same time, the cost for the Mezzanine tranche will also decrease. The SRT transaction provided for an RWA relief in the amount of EUR 1.1 billion and a positive CET1 effect of 120 basis points. Finally, on the U.S. book on Page 10, some remarks regarding our NPL portfolio. At the end of 2025, our NPL book in the U.S. stands at EUR 900 million. In the fourth quarter, we were able to reduce NPLs by around EUR 100 million and have built some momentum. Currently, 5 further loans totaling EUR 300 million are already in advanced exit process for the first quarter of 2026. We are able to exit these loans within our existing valuation. Hence, no further material risk provisions were required. This makes us confident that we will be able to further reduce the NPL portfolio in 2026. The coverage ratio for the U.S. NPL book has increased significantly from 20% to 36%, a solid protection. Let me now, on Page 11, give you an update from our Real Estate Investment Solutions division, which will become pbb's second business pillar from 2026 onwards. The integration of Deutsche Investment with assets under management of around EUR 3 billion is well advanced. Following the first-time consolidation, we expect commission income of around EUR 40 million in 2026. Together, we want to continue to grow in the investment management area, both with equity products and with debt capital markets -- debt capital solutions in the form of funds or mandates for institutional investors. In our Originate & Cooperate business, we are currently finalizing our rollout. We have an established partner network. The sales and origination teams at our locations in London, Paris and Munich are in place. The focus in 2025 was on developing the business model. We are now well-positioned to tap into this completely new business area for pbb. Ladies and gentlemen, let's go to Page 12. The transformation of our business model requires a transformation of the bank organization itself. We are making good progress here. And with that, we continue to reduce our operating cost base. We have been able to reduce management positions by around 20%, thereby streamlining our organization. The new target operating model lays the foundation for a more efficient and profitable setup of the bank. We are also focusing on new technologies aligned with market and customer requirements. At the same time, the expansion of our new production hub in Madrid is also making good progress. We successfully hired 27 colleagues, and we want to continue to grow these to around 85 by 2028. In everything we do, we will continue to keep a close eye on our costs. By 2028, administrative expenses in our business area Real Estate Finance Solutions are expected to fall by a further 7%. At the same time, we are investing in the expansion of our new businesses in Real Estate Investment Solutions. And at this point, I would like to hand over to my colleague and our CFO, Marcus, who will now guide you through the most important developments and key figures for the Group. Marcus Schulte: Thanks, Kay, and good morning, and welcome also from my side. As usual, I will now guide you through more detail on 2025 results, portfolio developments, capital and funding. Let me start with the operating and financial highlights. The operating overview on Slide 14 illustrates the ongoing portfolio transition quite well. Kay has already discussed the pleasing profitability contribution from the REF new business. The key good news is that the overall strategic approach works as designed. Maturing business in the back book is continuously replaced by more profitable RoTE accretive new business in the front book, thus step-by-step increasing profitability towards the target of 8% for the portfolio as a whole. However, even though new business volume has been up by 23% in '25 year-over-year, the slower-than-expected market recovery still weighs on volume. New business is not yet enough to compensate for pre and repayments and the significant derisking of the U.S. and development exposures. Hence, the REF portfolio declined by EUR 1.7 billion in '25 to now EUR 27.3 billion. We expect this to stabilize from here as new business is expected to further improve gradually over time from here. At the same time and as intended, the noncore portfolio has come down by EUR 1.2 billion to EUR 8.5 billion year-over-year, including against some opportunistic asset sales and liability buybacks also in Q4. This brings me to the financials overview on Slide 15. The key P&L figures reflect both the financial impact of our strategic transition and the significant derisking of the U.S. and development book. With this said, operating income is down by EUR 122 million year-over-year, EUR 57 million lower NII and EUR 65 million lower realization and other income. NII is down due to the reduced portfolio value as well as our funding cost position and capital optimization. As you remember, among others, we optimized our capital structure with a successful EUR 300 million Tier 2 issuance in June last year, which, of course, came at a cost. Also, realization and other income was significantly down due to meaningful one-off effects. First, operating income 2025 was negatively impacted by minus EUR 32 million one-off fair value risk charges due to our strategic U.S. exit decision. Second, realization income was down EUR 57 million year-over-year as '24 has benefited particularly strongly from significant noncore asset sales and liability buybacks. As already mentioned before, we expect realization income to remain at such lower levels, now supported mostly by ordinary REF prepayment income. As expected, general and administrative expenses are down year-over-year by EUR 9 million, while investments into our strategic transformation are ongoing. This demonstrates our ongoing strict cost discipline. But above everything else, 2025 was burdened by the sharp increase of loan loss provisions to minus EUR 410 million. This unusually high LLP were dominated by minus EUR 334 million that were set aside for the derisking of the legacy U.S. and development exposures. To be precise, minus EUR 235 million for the U.S. exits in the second quarter and minus EUR 99 million for German legacy development NPLs, which were meaningfully derisked further in the fourth quarter. Rather moderate loan loss provisions of EUR 68 million or 30 basis points were put aside for the European investment loan portfolio, reflective of a solid asset quality in our strategic core portfolio. All-in-all, this resulted in a highly unsatisfactory pretax loss of minus EUR 250 million, which is, however, within our latest adjusted guidance of minus EUR 210 million to minus EUR 265 million and which has to be seen in the context of our substantial derisking. After total risk costs for the U.S. and derisking of the legacy portfolio, these were at minus EUR 366 million across all income lines. This would then bring me to the quarterly deep dive. And first, I'm now on operating income on Slide 16. If looking at the quarterly development of operating income, also here, the impact of the portfolio and funding transition become clear. However, in the fourth quarter, NII and NCI stabilized at EUR 99 million as further increased portfolio profitability almost compensated for the slightly lower portfolio volume. Funding in turn, now provided for a moderate tailwind as previous funding access normalized in Q4 and costly funding vintages get substituted by gradually cheaper funding. Realization and other income is in sum slightly down by EUR 4 million quarter-over-quarter as other income in the previous quarter had benefited from a significant positive one-off. All-in-all, operating income thus has come down moderately by EUR 4 million quarter-over-quarter to EUR 106 million. On the back of EUR 4 million higher total expenses, pre-provision profit, therefore, declined by a total of EUR 8 million quarter-over-quarter to EUR 39 million. And that brings me to the next deep dive on operating expenses, and I'm here on Slide 17. Operating expenses, including depreciation, remain well managed, being down year-over-year by EUR 9 million or 3% in 2025 from EUR 266 million to EUR 257 million, while investments into our strategic transformation are ongoing. Actually, expenses for the running bank operations in '25 have been reduced by EUR 17 million or 7%. That said, operating expense in the fourth quarter increased very moderately as envisaged. Due to EUR 5 million higher one-off costs, especially in connection with the implementation of the target operating model, while again, expenses for the running bank operations were down by EUR 1 million. Although the cost base has been well managed, the cost/income ratio for '25 appears somewhat elevated at 61%. This is, however, more a reflection of the operating income transition, including the minus EUR 32 million one-off fair value risk charges for the U.S. exit, which has, as you know, to be shown in operating income. And now to our deep dive on the risk provisioning, I'm on Slide 18 here. Risk provisioning of minus EUR 54 million in the fourth quarter is especially driven by a further derisking of our German legacy development NPL. With that said, net additions of minus EUR 86 million in Stage 3 result from minus EUR 55 million for derisking measures for idiosyncratic legacy development NPL and minus EUR 29 million for European investment NPL. Only marginal minus EUR 2 million had to be booked for U.S. Stage 3 in Q4 as the substantial one-off U.S. derisking measures in Q2 again proved to remain adequate. This was partly offset by EUR 31 million net releases in Stage 1 and 2. EUR 50 million release of U.S. management overlay due to the SRT and ordinary repayment, Kay has explained that, was partly counteracted by EUR 19 million additions, mainly from market-wide macroeconomic scenario and parameter updates. I will mostly skip Slide 19 as the development of the stock of loan loss allowance is more or less just a reflection of the risk provisioning I just explained and usage, of course, from existing stock. Just one brief comment. The REF NPL coverage ratio overall remained stable quarter-over-quarter at around 30%, up from around 22% as per year-end 2024. This brings me then to the portfolio. As the U.S. portfolio is on exit and was already covered extensively by Kay at the beginning, I will focus on our strategic core portfolio, the European portfolio. I'm starting with the European performing portfolio on Slide 21. With the significant derisking and [indiscernible] markets gradually but slowly recovering, the quality of the performing European portfolio further stabilized with an ongoing improvement of risk KPIs for the performing investment loans since end of '24. The average LTVs have stabilized at 55%, a solid level in view of the property price correction seen in the last 2 years. The 12-month rolling valuation adjustments have gradually improved and continued to do so in Q4. And also when looking at the exposure at risk or layered LTVs, we see a decline by 16% in '25 and 4% alone in the fourth quarter. With that said, I will leave the further details on the performing European REF portfolio, which you can find on Slide 22 for your own reading. And I will therefore continue with Slide 23, where we discuss the European NPL portfolio. The European NPL portfolio predominantly consists of German development loans, which account for almost half of the NPL. The remaining 20% in Germany and 11% in France are mainly driven by some selective office properties of 2 new office loans with a total volume of EUR 239 million in the fourth quarter. 15% come from the U.K. and consists of legacy shopping centers known. The European NPL portfolio is solidly covered by 31%, up from 29% as of third quarter end and 27% as of year-end 2024. This brings me to our deep dive on the development portfolio on Slide 24. The development portfolio has been significantly derisked in 2025 and in particular, also in Q4. The total portfolio has been reduced by EUR 400 million or 16% to EUR 1.8 billion, while NPL has been kept largely flat with no new NPL rising in 2025. However, legacy NPL have required focused attention with dedicated derisking and support measures of the exit strategies through the entire year. In Q4, we decided to receive particularly demanding legacy developments in the final finishing phase and put aside EUR 55 million Stage 3 loan loss provisions for those. This brings the coverage ratio for development NPLs further up to solid 29%. All-in-all, the portfolio is now substantially derisked, and we feel comfortable with the existing coverage. And with that, I move to capital on Slide 26. With the CET1 ratio of 14.9% as per year-end, our capitalization remains solid. This is slightly down from 15.4% as of fourth quarter end. Let me explain the various effects in regulatory capital in particular RWA. RWA stayed flat at 17.5% -- EUR 17.5 billion, sorry, reflecting 2 opposing effects. While the SRT transaction provided for a leaf of EUR 1.1 billion RWA as per year-end, a change of applicable regulatory LGD levels in F-IRBA resulted in an offsetting effect of the same amount. I will come to this on the next slide in quite some detail At the same time, in the numerator, there was a slight reduction of regulatory capital by circa EUR 100 million in Q4 due to increased prudential backstop such as the expected loss shortfall and the NPL backstop as well as the fourth quarter loss and the preemptive AT1 coupon reduction from regulatory capital. All-in-all, our CET1 ratio of 14.9% stays solid. SREP requirements remain well exceeded with more than 500 basis points buffer over the CET1 ratio requirement and more than 400 basis points over the own fund ratio requirement as per year-end 2025. I would also like to take this opportunity to provide some further context. When looking at capital ratios, it is worthwhile to note that our F-IRBA RWA are procyclically elevated so that the F-IRBA CET1 ratio of 14.9% at year-end now stands below the pro forma standardized credit risk standard approach CET1 ratio of 15.3%, which by many is seen as a regulatory floor. Also, when looking at our capital on a simplified nominal level, we observed a steady increase of our leverage ratio, now close to a healthy 8%. This is, of course, down to robust capital and consistent ongoing deleveraging. Taking into account our substantial deleveraging and derisking and our future focus on core European markets only, we now define our long-term minimum CET1 ratio at 13% through-the-cycle, still providing ample of buffer to MDA. At this point, let me also reiterate that the conditions for the AT1 coupon payment are clearly met, as Kay said, with a buffer of MDA of more than 500 basis points and available distributable items of around EUR 2 billion. I also want to be very clear here that we continue to see debt capital and its investor base as a key cornerstone of our wholesale-led funding strategy. This then brings me to Slide 27, where I would like to explain the aforementioned change of applicable LGD levels for commercial real estate for certain countries in F-IRBA. In the F-IRBA regime, the LGD is dependent on the country-specific eligibility for preferential collateralized treatment. How does this work? The European Banking Supervisory Authorities of each country collect and publish the average CRE market loss rate from their national supervised banks on a regular basis. If the commercial real estate market loss rate in a respective country exceeds 0.5%, trade transactions no longer qualify for preferential collateralized LGD levels in the computation of F-IRBA RWA. In the fourth quarter, consideration of new loss rates for Poland, Finland and Austria meant loss of the preferential collateralized LGD treatment in these countries, even though some of these countries only very marginally exceeded the loss hurdle rate of 0.5%. Given the somewhat meaningful overall pbb footprint in these countries, the underlying RWA increased by EUR 1.1 billion. In effect, this means that the RWA relief from the SRT has been entirely consumed by the loss of the preferential collateralized LGD treatment for the aforementioned countries. In this context, I would like to make a few things clear. Number one, this development is not about pbb's own economic portfolio quality having deteriorated, but rather down to overall market-induced impact amplified by the digital nature of the F-IRBA LGD regime that I explained. Given that Poland and Finland have only marginally exceeded the hurdle rate, a digital reversal is possible when the banking authorities in the respective countries publish updated data. With regards to portfolio volume, 3/4 of the countries pbb operates and remain eligible for preferential collateralized LGD treatment and loss rates remain far below the 0.5% hurdle rate, as you can see in the last column of the table on Page 27. However, there has been another more recent development. On February 27, 2026, the EBA communicated its position that U.S. loss data published by the U.S. Federal Reserve is not viewed equivalent even the U.S. themselves are deemed an equivalent regime under the CRR. If applicable, preferential LGD treatment of real estate located in the U.S. would no longer apply in principle when calculating current RWA for these countries going forward. pbb will carefully review this assessment, but if applied, this would result in a pro forma reduction of our CET1 ratio of circa 135 basis points for our entire U.S. portfolio. When also taking the envisaged first-time consolidation effect from the acquisition of Deutsche Investment into account, which is minus 26 basis points and becomes effective in Q1 2026, the pro forma CET1 ratio as of year-end 2025 would be 13.3%. Even at this harsh pro forma level, the buffer to MDA would still be comfortable at around 340 basis points. And finally, a few remarks on the funding and liquidity side. I'm now on Slide 28. All-in-all, we maintained a resilient and balanced funding mix with ongoing focus on efficiency and cost optimization. With EUR 2.1 billion Pfandbrief issued, a successful EUR 750 million senior and our successful EUR 300 million Tier 2 issuance, we completed our funding agenda '25 already in summer and provided for comfortable funding access. With an LCR of 379% and EUR 5 billion liquidity at year-end, we maintain a solid liquidity in line with our reduced balance sheet needs. But most important, issuance costs have come down on all instruments, slightly on Pfandbrief, more strongly on senior preferred as well as deposits. All-in-all, we expect this, in combination with moderate funding needs to provide some ongoing tailwind on funding costs going forward. This is, of course, looking through current noise as we have no current need to issue anything. In 2026, we plan for a moderate EUR 1.75 billion in Pfandbrief issuance, of which more than 40% have already been done on further reduced costs. In addition, we plan for a maximum [indiscernible] preferred issuance of EUR 500 million. The retail deposit volume is planned to stay largely stable at around EUR 7 billion, in line with our reduced balance sheet needs, catering for a 50-50 split in unsecured funding, 50 for each wholesale and deposit funding. With that, Kay, I hand over back to you. Kay Wolf: Thank you, Marcus. Ladies and gentlemen, let me now on Page 30, turn to the future. We have a challenging year 2026 ahead of us. And the overall situation hasn't gotten any easier with the recent developments since last weekend. Our full focus is on increasing operating income in our 2 core business areas: Real Estate Finance Solutions and Real Estate Investment Solutions. However, operating income in Real Estate Finance Solutions will be affected by the cost of the SRT. Furthermore, we have to cater for lower positive one-off effects in 2026 compared to last year. We continue to exercise strong cost discipline. We continue to make our core business, real estate finance solutions more cost efficient. The initial consolidation of Deutsche Investment and the further development of our business activities account for higher operating expenses in Real Estate Investment Solutions. In fact, we are reinvesting cost savings into our new business activities. Nevertheless, the cost/income ratio will temporarily increase to between 70% and 75%, mainly due to the development in the operating income. We expect a normalization in risk provisioning. With the U.S. and development book largely shielded last year, we anticipate in 2026 risk costs of 25 basis points to 30 basis points in our core markets in Europe. What does that mean specifically for 2026? Let's go and move to Page 31. We want to keep our growth momentum in the new business and achieve a volume of between EUR 7.5 billion and EUR 8.5 billion in real estate financing. We expect the portfolio volume between EUR 27 billion and EUR 28 billion. In Real Estate Investment Solutions, we expect to grow assets under management to be between EUR 3.3 billion and EUR 3.7 billion. Operating income is targeted to be in the range of EUR 357 million to EUR 425 million. Cost/income ratio between 70% and 75%. The share of fee income is expected to rise to more than 10% in 2027. As announced, pretax profit is expected to be between EUR 30 million to EUR 40 million. Moving to Page 32 and looking further ahead, we remain committed to our strategic goals and key performance indicators. Return on tangible equity is our main KPI. We are already at around 8% in new business. We want to achieve this for the whole bank by 2028. Operating income shall amount to around EUR 600 million towards 2028. In Real Estate Finance Solutions, 3 key levers should increase the return on tangible equity. First, SRT costs will decline with the reduction of the U.S. portfolio. Second, more profitable new business will substitute less profitable existing portfolio. And third, a more cost-efficient liability and equity side will improve refinancing costs. In Real Estate Finance Solutions, we target to grow assets under management to EUR 7 billion to EUR 8 billion. The share of operating income is expected to grow well above 10% in 2028. We have already significantly reduced the risk profile of our portfolio. In 2028, risk costs are expected to normalize to around 15 basis points to 25 basis points. We remain focused on an efficient cost base and we continue to execute our cost measures in a disciplined manner. Cost savings in our Real Estate Finance Solutions business will be reinvested in the development of real estate investment solutions. Overall, broadly stable operating expenses help to bring the cost/income ratio back to target level of 45% to 50% by 2028. And that brings me to our last page that summarizes our targeted key developments until 2028. Ladies and gentlemen, pbb is in the middle of its transformation to a more resilient, profitable and diversified European commercial real estate bank. We have to acknowledge that we will not be able to achieve our ambitious goals we set in 2024 within the planned timeframe. Also, the market environment economically and geopolitically has not developed as we had expected. But we are making progress. In challenging times, we are acting decisively as our exit from the U.S. market underpins and we sustainably reduced risks in our books. We have the momentum to grow our new business volume even in a currently sluggish CRE market, and we are doing so profitably. And in 2026, we start to see notable first capital accretive contributions from our new businesses. We are on the right track with this fundamental transformation even if it will take more time. Thank you very much for your attention. Marcus and I are now looking forward to your questions. Operator: [Operator Instructions] The first question is from Tobias Lukesch from Kepler Cheuvreux. Can you hear us, Mr. Lukesch? Tobias Lukesch: Yes. Can you hear me? Yes. It takes 10 seconds until I'm in talk mode. Sorry for that. On the capital, the first question regarding the EBA communication of the U.S. LGD equivalents and may we see or will we see the 135 basis points negative core Tier 1 ratio impact? And if we will see it, what is the timeline for that? Then secondly, on dividends, what is the projection for the future? I mean, yes, there were moving parts. Yes, you're cleaning up the business. You say you're on the right track for '28, but you haven't touched on dividend projections. So I was wondering what this means for capital distribution going forward, especially since you lowered the through-the-cycle threshold to 15%, even so you highlighted we might get closer to that level if we see the U.S. LGD impact. And then on the U.S. NPL portfolio, this was now reduced to EUR 0.4 billion. What is the projected development here over the next 3 years? And maybe could you please quantify the impact on risk provisioning -- on the risk provisioning guidance you have provided, which will be lower for this year and then further lowered for the years to come? Marcus Schulte: Hello Mr. Lukesch, good to hear you. Thanks for your clarifying question on the very new statement that came out by the EBA just a few days ago, actually Friday last week. So I think the Q&A are quite clear in that they say that the EBA sees in principle that the computations as done by the Fed don't mean that the computations are eligible for the European regime, even though, again, as I said, the U.S. fundamental principle are, of course, an equivalent regime. It's very new. So we are carefully assessing this. But at this point in time, I would expect clearly that it will happen. And I cannot rule out that this will be a Q1 effect already. And let me again say this would be 120 basis points for the commercial real estate and another 10 basis points roughly for the residential so stated that 135 basis points that you see. And that is something we expect to happen, but we have to carefully assess it, and we will update you then on Q1, but I would expect it to be reflected in Q1. Kay Wolf: Yes, Mr. Lukesch, then I take the other 2 questions. On dividend, thanks for the clarifying question. We are sticking to our distribution guidelines that we have put out with our strategy on 2024. And thanks for raising that question. So we want to distribute 50% of our profits, and we want to use the tool of dividends on the one hand side, but also share buybacks on the other side. And to your last question on the U.S. NPL, yes, you see we have quite a good momentum built also based, of course, on the provisioning that we did and the shielding to reduce the book. We will more than half reduce it in 2026. And we see over the next 2 to 3 years, a full exit on that book. However, as we speak, we continuously watch and see whether we can value preserving exit those NPLs earlier. But current projection with regard to your question should be then towards '28 and '29 in line with the rundown also of the performing book. Operator: Mr. Lukesch, does that answer your question? Do you have a follow-up? We can hear you. Then we are moving on to the next question. The next question is from Miriam Killian of Deutsche Bank. Miriam Killian: I hope you can hear me all right. So my question would be surrounding the tax expenses that we saw in the fourth quarter that were quite a bit higher than we anticipated. If you could maybe just provide some color surrounding this. That would be my only question for now. Marcus Schulte: Yes. So as you say, for the full year result pretax minus EUR 250 million post-tax, minus EUR 284 million. Essentially, this is DTA reversals, which you have to mostly see in the context of risk provisioning, but also more importantly, in the context of the lower business projections that we have for future years, which basically mean that we have this impact from DTAs that cater for the EUR 34 million in addition to the EUR 250 million pretax loss. Operator: The next question is from Domenico Maggio from Jefferies. Unknown Analyst: I have 4. On the expected capital erosion from Deutsche Investment acquisition, is that going to be 26 bps or 30 bps in the next quarter? Second one will be, what do you mean exactly with pro forma credit risk standardized approach? Is this pro forma for some adjustment or is this a normal standardized approach? And if the standardized model results in higher capital, then why did you transition in the foundation model? Third question would be, are you able to switch your capital model again in the future? I assume the ECB would need to approve that. I'm asking this clearly given the unfavorable capital development and your previous transition to different capital models. And the last one, what would be the impact to RWA if all countries were to lose their preferential LGD level? Marcus Schulte: Okay. So good to hear you, Domenico. So to your first question, we've been indicating previously on the signing of the transaction in the summer that the capital effect could be around minus 30 basis points. That's the number you have in your memory. And the precise figure that I gave you is minus 26 basis points now. So it's a clarification of an estimate that you've been hearing with Q2 results. The second point is that you were asking about the nature of the pro forma numbers we were giving. So these numbers are basically under the assumption that the bank will apply credit standardized approach in its entirety instead of the F-IRBA model computation with PDs out of the model and LGDs out of a matrix. So it's a substitution of the entire book pro forma into standardized KSA in German, CRSA in English. And it is, of course, a pure exercise to illustrate the very high RWA density that we now have and the capital compression that we face because obviously, a lot of people who are looking at the capital ratios see the standardized capital ratios as a floor to where it would be. And the point we are trying to illustrate that at this point, and this is the last answer to your question, at this point, at the bottom of the cycle, it happens to be that with what is happening in these digital LGD hurdle rates that I mentioned for these countries that even the standardized approach is better than the F-IRBA in this part of the cycle. But of course, you would choose capital models through-the-cycle and it was a very conscious decision to move to F-IRBA because essentially the old IRBA, advanced IRBA, as you remember, is essentially not suited for low default portfolio. And that's, I think, why we and others moved from an IRBA approach in our case to an F-IRBA approach. And we have to look at that on a through-the-cycle basis, on a through-the-cycle basis, the F-IRBA from our point of view is advantageous. Right now, at this part in the cycle with the few digital events that we have seen, it is not. But as I said, Domenico, what we always have to bear in mind, the pro forma numbers that I gave, right, adding everything together, U.S. CRE, U.S. residential, the acquisition that will happen, of course, no modificating effect including, as I mentioned, that, of course, digital event, one can also flip into the other side, for example, for these countries. And lastly, what would be the RWA effect? You see that on this table that we provided on Page 27. At the end of the day, from my point of view, the very key message of that slide is that for the vast part of the portfolio, 75% portfolio that we have in the F-IRBA, the green dots that you see, the actual losses are far, very far below the hurdle rates. What we try to illustrate there that currently, we don't foresee at all that these countries that you see would move into such a digital situation that we've experienced, for example, in the fourth quarter with Poland, Finland and Austria, you can see how far they are away from the 0.5%. Unknown Analyst: Yes. Helpful. I was asking that just to assess the worst-case scenario. And just a quick follow-up. You mentioned that the banking supervisory authority of respective countries collect the data and then they updated during the year. Is that an annual exercise or does it occur more frequently? Just I mean. Marcus Schulte: Typical annually. Unknown Analyst: Annually. Operator: The next question comes from Jochen Schmitt from Metzler. Mr. Schmitt, can you hear us? Jochen Schmitt: It took some time until I got unmuted. I have 2 questions, please. Firstly, again, on the CET1 ratio, your new target of above 13%. How much of this change versus previously was driven by SRT and how much by the possible changes in regulatory treatment, which you mentioned on Page 27 or to ask the question in a slightly different way. If the pro forma CET1 ratio, which you mentioned were to realize, would you possibly again review your CET1 ratio minimum target again? And secondly, very briefly on the EUR 40 million fee assumption for Deutsche Investment in '26, what is the pretax earnings contribution, which you expect from that? Kay Wolf: Mr. Schmitt, good to hear you. Thanks for having you around. Let me take the 2 questions. And let me start with your question on CET1. The strategic adjustments around the minimum level is not driven by the capital regime under which we are reporting. It's driven by the risk profile of the firm. I think we have outlined that always in the calls and have said originally, we set it at 14%. Now we are moving it to 13%, and that is purely driven by the risk profile of the portfolio. When we were at 14% we had still a much higher position on the U.S. portfolio, which we now have completely derisked from our perspective or nearly completely derisked economically. And we have also shielded our development portfolio next to our strategic position to focus on the European core markets, most of which you see on Page 27, where we have allocated, and we are focusing on those markets. So overall, strategically, the steering of the capital levels for the firm for us, is not driven by the capital regime, but it's driven by the risk profile of the portfolio and how that portfolio behaves through-the-cycle. I remember -- I would like to reiterate what Marcus said, it's a 13% through-the-cycle. And we all know here that commercial real estate markets are volatile. And that's a reflection on the 13%. With regard to your second question on the Deutsche Investment Group, we would provide, of course, way more detail when we communicate on our quarter 1 figures because there is where we first time will provide way more detail on it. But for 2026, it's a profit before tax of around EUR 4 million. And you will have to deduct then, but we will provide more details on that, the PPA, the purchase price adjustment as well so that you should look around EUR 3 million for the Deutsche Investment Group for 2026. Operator: Next question is from Corinne Cunningham, Autonomous. Corinne Cunningham: Thanks very much for letting fixed income people speak on the call. Just a couple of quick clarifications and a few questions from me, please. When you said the 13.3% assumes the whole book moves to standardized, the calculations seem to suggest that that would include the U.S. moving to standardized and the acquisition of DIG, but not all of your core European lines of business. Can I just? Marcus Schulte: What I said was the whole U.S. book, meaning the commercial real estate book, which is in detail described on Page 27, but also the very limited residential exposure that we have that is also subject to a similar but slightly different regime and the same principle. And with that in principle decision or wording of the EBA, we assume that we will lose the preferential treatment for LGDs for both the commercial real estate and the residential portfolio in the U.S., so the total U.S. portfolio. Corinne Cunningham: That's clear. And then just you mentioned on the dividend policy, 50% distribution policy. Is that expected to apply to 2026 or not until you get to the end of your planning period? Kay Wolf: Corinne, thanks very much, and thanks for having you. Good to hear you. It applies for the year 2026 and the coming years. So that's the dividend policy that we have set. So it's for the future years that we want to deploy and have this policy in place. Corinne Cunningham: Then the other question was about the way the SRT is working in the U.S. And can you explain why it doesn't help you with the change from F-IRB to standardized given that you've now got a fairly chunky first loss cover, why are you not protected against that change out of F-IRB in the U.S. portfolio? Kay Wolf: I can answer that in 2 ways. First of all, our -- not our entire U.S. portfolio is covered under the SRT. So there are remaining pieces and as well the 5% size of the SRT portfolio is not covered, yes. So you will see that effect. The second point, Corinne, I would make is that the SRT does provide protection for the change in the regime. However, the loss of the preferential treatment, of course, reduces the positive effect that we mentioned of EUR 1.1 billion. It doesn't remove it completely because the other offsetting elements that you see when you look at the quota of EUR 135 million, you need to bear in mind the portfolio components that are not yet in the -- that are not covered by the SRT. I hope I was clear. Corinne Cunningham: The is not covered, totally get that. So the rest is it just the senior layer that's being hit or basically the SRT is giving you less protection than you budgeted when you set it up? Kay Wolf: I think the overall structure, the way it works from a capital regime perspective, Corinne, on the SRT, you cannot separate the senior and the math. You need to look at the entire capital structure and the entire capital structure defines the capital that needs to be put aside under the respective regimes, be it F-IRBA or standardized. So it's not simple saying it is to be deployed on the unprotected side. It needs to be deployed on the entirety of the portfolio and the amount of capital that you have to put aside depends on the structure at the point in time. As you know, that this structure, when it starts winding down, is also starting to shift and change, and that has always an impact on the respective capital that you need to put aside. Unfortunately, not a very straightforward mechanism, but the mechanism of how to deploy it, I think there is clearly defined rules of how the structures need to be taken into consideration when calculating under the respective rules. Corinne Cunningham: Okay. And then maybe a more fundamental question about the revenues. So your revenues, you're targeting to basically increase them by 1/3. What are the main building blocks of that? I know you talk about, obviously, the cost of the SRT should fade away, but that's still a very significant revenue build with a flat loan book. Is it based on increasing interest rates? Just very keen to hear how you would expect to build to that EUR 600 million revenue number. Kay Wolf: Yes. I would, Corinne -- I would start with that, and I would kindly ask Marcus to chip in as well if I might not touch on all the aspects. I would probably, Corinne, draw your attention for that on Page 30, where we have the walks on the operating income side for the respective business units through 2026. But those walks give a good indication in the direction of travel that we are going for the year 2028. First of all, on the Real Estate Finance Solutions business, you see already in 2026 positive impacts from the rebuild of the book, putting more profitable new business on, substituting less profitable business. You see that here with EUR 15 million-plus EUR 35 million in the range, take that as a consistent rebuild of the book because our back book of EUR 27 billion still has something like EUR 20 billion in there, which will come due over that period and will be replaced by more profitable business. So that is one driver. The second driver to it, and you referred to a flattish book is that of course, we want to also substitute and reduce our nonperforming loans. Look at the U.S. at the moment, the entire U.S. book [ 28 ] is more or less going to disappear, including the nonperforming loan side, but also on the rest that gets substituted with more profitable and interest income producing operating income on that part of the book. So a lower NPL book is supporting this trajectory as well. And the third layer on the real estate finance side is definitely a more efficient liability and equity side. So there is funding support coming in. Marcus has outlined on the funding page in which direction the funding costs are going, and this gives us tailwind there as well. So those are the key levers. Next to that, if you drill further down in REFS, I could also mention, of course, we are diversifying in our portfolio. So we are taking more managed properties, hotels, student housing, those asset classes on our books. They provide for a better risk return profile compared to other asset classes, most notably the office portfolio, which will more decline over time. So there are multiple levers that all play into improving the operating income in the real estate finance side. Paying attention to real estate investment solutions, the growth here clearly to EUR 7 billion to EUR 8 billion of assets under management is literally coming from the EUR 3 billion to EUR 3.5 billion that we have when you look into real estate investment solutions for 2026 is substantially adding revenues there as well. And we are building out our Originate & Cooperate business. So there is clear anticipation of fee income growth for real estate Investment Solutions. And in the combination of both of those elements next to the fact that the negative impact from others that you see on Page 30 is going to disappear because it's a lot of one-offs that we had in 2025 that are not coming back, that gives a consistent growth of operating income towards the mentioned EUR 600 million in 2028. Corinne Cunningham: Okay. And just on the rate assumptions behind that, do you just assume current rate supply? Marcus Schulte: Correct. Yes, it's more or less current rate supply. We assume a moderate bias for rates to come down on the short end, but rather assume that rates in the middle and longer part of the curve would stay or slightly rise given funding agendas of governments, et cetera. And that's basically the assumption. So a reasonably steep curve, but no major impulse for the income as such. However, of course, as Kay mentioned, if you, for example, look at the equity side, et cetera, interest rates going stable in medium-term and term means, of course, that investments that you make are positive yielding and not anymore 0% yielding if vintages from the low interest rate phase basically gradually wash out of the system, right? So that's essentially the effect. Operator: The next question is from Sharada Patel of Citi. Unknown Analyst: So I've got 2 questions. So if the numbers are reviewed annually, do you know when the next review for Poland and Finland will be? And then the second one will be just some more explanation around the EBA's position on the U.S. because it seems like the market loss rate is below the 0.5% kind of threshold. So if it's not equivalent, is there kind of a different benchmark number that they're comparing it to or is there a different data source that they can refer to and do find equivalent? Is this? Kay Wolf: We were just wondering whether there are more questions, right? So we wait. Unknown Analyst: Yes, sorry. And just finally, so if there's -- I just wanted to know, you're expecting that this U.S. change will come in, in the first quarter, but are there any changes kind of later down in the year if they can find an equivalent data source that could mean that, that is reversed? Kay Wolf: Thanks, Sharada, and thanks for your questions. Let me take your first question on the technicality. The national competent authorities would have to, by law, communicate latest by the 30th of June of the following year, the loss rate that triggers the treatment. That's the law. The reality is that we are continuously monitoring publications. And they can also publish in between. So that is -- there is on the one hand side, the way it should be and there is on the other hand side, the way it happens. By a matter of fact, we are monitoring regularly because as a foundation of our bank, we need to, the respective published levels and would then respectively apply them once they are published. And on the U.S. data, look, the U.S. is not -- does not have the same type of heart test and equivalent LGD regime, as we all know. So therefore, by a matter of fact, they do not publish exactly the same data to comply with a European rule set out in the CRR. For that purpose, equivalents should be and can be applied. But by a matter of fact, looking into that, the conclusion of the EBA, if you read that is that there is no such data that would exactly cover the requirement of the CRR. And therefore, stating -- and also stating that what is published and could be applied to is from their perspective, limited able to apply. And hence, their conclusion that for the U.S., despite the U.S. being a regulatory regime that is deemed by the European Commission as an equivalent regime, the level of data and information that is being published is viewed by the EBA is not sufficient for applying the respective calculation that we have been applying in the past. There is a hell of a lot of data published in the United States, as we all know. It's the country with most of the statistical data. But of course, they do not publish 100% according to European rule regulation. Unknown Analyst: Okay. And why is this change only happening now? Because obviously you've been using F-IRBA since January '25? Marcus Schulte: And look, I mean, perhaps 2 things and just to your earlier question, Sharada. And for that reason that Kay and I explained, the 26 basis points that we compute do not matter because at the end of the day, the decision is in principle and irrespective of computation. But this is, of course, not meant to pbb. It's a clarification that the EBA has published to the market in principle, it's public. And it has come out now on the back of a question that was raised and now they've been clarifying that point to the market in general. Kay Wolf: So it's completely irrespective of pbb per se, right? This is a clarification to a standard. Operator: Sharada, do you find your question answered? Then the next question is from Daniel Crowe, Goldman Sachs. Daniel Crowe: These are kind of just follow-ons from what has already been asked. So just Domenico answered, and I'm not sure if you gave a full answer to this. But just given the volatility that you're seeing in your RWA measures of capital at the moment, if you wanted to move to standardize, could you actually do it? Because we've seen quite a lot of movement in your CET1 over the last couple of years, which is obviously the moves are understandable. But if you wanted to move to standardize, could you? And then just following on from Corinne's question around the SRT and its impact on the potential impact from the U.S. If this SRT was not in place, what would have been the capital impact there because I think there's going to be a decent bit of confusion around why that doesn't protect you a little bit more? And then just finally, just on Deutsche Invest, I know you say EUR 40 million of revenues. Could I just get the cost number for -- that's coming with Deutsche Invest as well? Kay Wolf: Yes. Daniel, thanks and as well to you, welcome. Thanks for your question here in this round. To your first question, moving to another capital regime is, first of all, regulated under the respective rules that have to be applied for banks. And in general, it is a process that needs to be approved by ECB. So it's not on us to jump around. And again, repeating and reiterating or making the focus of what Marcus said, what we have been seeing, and you said that over the last years in terms of volatility, that is, by a matter of fact, a reflection of the foundation approach. We called it the procyclical nature of it. And to a degree, the digital effect of being above or below a threshold for an entire portfolio without reflecting on the individual performance of the bank is one of the reasons. And when you consider where the market has been moving and we are talking that real estate markets now on low levels being stabilized, what you see literally by a matter of fact, we are moving in the cycle through really a low point and a hard point. And considering the capital regime, you always need to look through that and we need to look through-the-cycle as a whole. But the short answer, I gave it a little bit longer because of the consideration that I expect behind your question. The short answer is we are not free here to jump around on capital regimes. And don't view as a sloppy Marcus smiling at me, don't view it as a sloppy answer, but I want to be clear given that, that question was asked twice, Daniel. Daniel Crowe: Yes. No. And I understand like the capital itself is moving your leverage ratio is obviously in a good place. I was just wondering. Kay Wolf: And that is a bit the situation that we also on the respective page on the capital side, wanted to give a reflection. You see the derisking of the bank, the deleveraging of the bank also reflected, I think, well in the leverage ratio and how the leverage ratio has developed. And then? Daniel Crowe: Just had the SRT not been in place, the impact of the U.S. portfolio of 135 bps, what would that have been? Kay Wolf: I don't have the number around, Daniel. But what I can say it would be, of course, higher because there is a mitigating effect by the SRT. So the effect would be even higher. So we do here benefit from the derisking process, of course. Overall, by the way, we also benefit from the repayments that we got on our performing book as well as a reduction in our NPLs. The entire exit of the U.S. in itself mitigates, of course, the impact, but the SRT standalone, of course, has a mitigating effect as well. Daniel Crowe: And the final one was just on costs in Deutsche Invest. I know you said EUR 40 million of revenues. I just -- I know you said costs stable across the bank, but I just wanted to check what the costs were for Deutsche Invest. Kay Wolf: The cost for Deutsche Invest, I think when we said around EUR 40 million for 2026, we also said around EUR 4 million of profit before tax before the PPA effect. So the delta of it roughly is the cost range that you have. So you are around EUR 35 million of costs that you have in that business. Daniel Crowe: And also thank you for taking calls from the credit side. Much appreciated. Operator: The next question is from Paul Noller, Commerzbank. Paul Noller: I would like to quickly go to the most recent events. You mentioned that you are guiding for loan loss provisions in '26 of between 25 basis points and 30 basis points. I don't assume that takes into account the recent rise in energy prices. So I would be curious to see your view on if we are now looking in Europe at a protracted increase in energy prices, how that might impact the debt service coverage ratios, specifically in your European [ Rev ] portfolio. I'm thinking here about hotels, logistics and what effect you think that might have down the road on risk cost in 2026? Kay Wolf: Yes, Paul, thanks for your question. I mean, first of all, let me clearly state that we have no active business whatsoever in the Middle East. I think that is one thing that should be said. So the impact and you're alerting to that is more an indirect impact rather than a direct impact that we will have to consider. And whilst energy prices is the one precise one, overall, I think one could sum up, it will be inflation and inflation on the cost side and in particular, on the service properties will have an impact. The experience that we have when you consider going back to the Ukraine war and the energy price rise that we have had, although it's awful to compare wars with each other, that to clearly state that. But take that as an example, we have the experience of those cost developments. Of course, one could say there have been mitigants and one could read now as well if it gets completely out of normalatality rises, then there will probably be additional support coming. Of course, there is a higher pressure on the cash flows that are coming. But from the experience that we have been seeing that is within the range in our portfolio of what we guided for in terms of the cost also stressing the fact that the hotel portfolio, take this as an example, is only 2% of our portfolio. So we are not that heavily involved. We are just going into and expanding into it. So we can take those considerations, of course, when taking new loans on our balance sheet. Operator: At the moment, there are no further questions in our queue. [Operator Instructions] So with that, thank you very much, and I'm handing the floor back over to the host. Kay Wolf: Yes. Thank you very much. Thanks for the exchange. Thanks for the questions, in particular, Corinne, Domenico, Sharada, Daniel, thanks for your questions and looking forward to have you around in our next call. If there should be more questions arising, which would not be unusual, you know our Investor Relations team, Michael Heuber, Axel Leupold, they are available. So please reach out. And otherwise, I wish you all a good day. And again, big thank you also in the name of Marcus for having joined our call. Thank you very much. Marcus Schulte: Thank you.
Operator: Ladies and gentlemen, welcome to the publication of the consolidated Annual Report 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead, sir. Herbert Juranek: Good afternoon, ladies and gentlemen. Let me welcome you to the presentation of the results of the business year '25 of Addiko Bank on behalf of my colleagues, Ganesh, Tadej, Edgar and Stefan. We have prepared the following agenda for you. I will start with the key highlights and the related achievements of '25. After that, I will pass on to Ganesh, who will update you on our results on the business side. In the second chapter, Edgar will share insights into our financial performance, while Tadej will outline the progress made in the risk area. At the end, I will present to you the cornerstones of our new midterm specialization program and our updated guidance 2026. After that, we will move on to Q&A. So let's begin with the highlights. I'm confident to inform you that despite negative influences coming from the legislative changes in several countries, we were able to close '25 with a net profit of EUR 44 million. These results includes a net profit for the fourth quarter of '25 of EUR 8.7 million, which is EUR 1 million higher than the result of EUR 7.7 million in the fourth quarter of 2024. Our earnings per share for '25 amount to EUR 2.28 and our return on average tangible equity comes in at 2.5 -- sorry, 5.2%, also influenced by the increased equity base. Overall, 2025 was a challenging year for Addiko because of reasons we will come back later on. Nevertheless, we were successful to achieve a 20% growth rate on new business in consumer lending and finally, to return to a positive trend in SME with an 11% growth rate on new business. Net interest income was with 1.8%, slightly lower year-on-year, driven by the impact of the lower interest environment on our back book and on our national bank deposits. A key positive is that thanks to our strong sales performance and the strategic cooperation agreement in our insurance business, we were able to increase our net commission income by 7.6% year-on-year. Altogether, we managed to slightly improve our net banking income by 30 basis points despite a significantly lower rate environment. Ganesh will give you more insights into the business development during his presentation. Because of our strict cost management, we accomplished to limit the increase of our administrative costs below inflation to only 1.6%. Nonetheless, due to the factors mentioned before, our operating result ended up at EUR 109.8 million compared to EUR 112.3 million in '24. Let's briefly comment on our positive risk performance. We successfully reduced NPE volume further to EUR 125.5 million compared with EUR 144.7 million at the end of 2024. Consequently, our NPE ratio also improved to 2.5%, down from 2.9% in the previous year. On top of that, our coverage ratio continued to improve to 81.7% from 80% at the end of last year. Ultimately, the cost of risk on net loans ended up at 0.96% or EUR 35.2 million compared to EUR 36 million last year. Tadej will give you more details on the risk development later. Our funding situation remained quite solid with EUR 5.3 billion deposits and a loan-to-deposit ratio of 70%. Our liquidity coverage ratio is currently comfortable above 300% at group level. And finally, our capital position gets even a bit stronger with 22.4% total capital ratio, all in CET1 based on Basel IV regulations compared to 22% based on Basel III in the previous year. Next page, please. As mentioned earlier, Addiko faced interventions from regulators and governments that negatively impacted the bank's performance in several of our markets. Croatia introduced a 40% debt-to-income cap for nonhousing loans effective 1st of July '25 and required banks to provide essential banking services free of charge since January '26. Serbia, Republika Srpska and Montenegro introduced interest rate caps, fee restrictions and debt caps. Overall, these measures are having a significant negative impact on our core revenues. Consequently, we have introduced initiatives to counterbalance the income reductions and to develop new income sources. Going forward, all regulatory effects, as known of today, are already reflected in our updated guidance. As reported in our earnings calls last year, we entered the Romanian market via our Slovenian bank through EU passporting, offering a fully automated digital lending solution for consumers. In the second half of '25, we launched several marketing campaigns to build awareness and strengthen our brand positioning. Although we achieved our recognition and recall targets, the conversion rates were below our expectations. Consequently, we refined our marketing approach. The new marketing campaign supported by an Addiko Song with life-size Oskar combined with targeted brand-building initiatives was launched in mid-February. We will keep you updated on the progress and will conduct a results-driven review in the second half of this year. Now with regards to our ESG program, I can confirm that all initiatives remain on schedule and are advancing in line with plan. Additional information is set out in the appendix of this presentation. Let me briefly touch on our regulatory sustainability disclosures. As part of the updated EU taxonomy framework, the commission has introduced a temporary opt-out for financial institution. In our case, this is fully aligned with our business model. Addiko made use of its opt-out as we do not engage in taxonomy-relevant lending activities. This approach avoids unnecessary administrative burden while maintaining full transparency in our ESG reporting. Next page, please. Let me briefly comment on our share performance and the scheduled changes to our listing. Addiko's share price increased noticeably during 2025, closing the year at EUR 22.5 and continued to rise further in 2026 to EUR 27.4 as of yesterday evening. At the same time, trading volumes and overall liquidity has remained persistently very low, making professional market making difficult and not economically viable for providers. As a consequence and in line with the Vienna Stock Exchange rules, our shares will be reclassified from the Prime Market to the Standard Market with effect of 1st of April 2026. This reclassification has no impact on our strategy or operations, but better reflects the liquidity profile of the stock. Let me now address the regulatory concerns regarding our shareholder structure. Following the sanction imposed by the European Central Bank in 2024 for exceeding the 10% ownership threshold without prior approval, certain regulatory uncertainties continue to persist. Although the voting restrictions applicable to a specific shareholder group were lifted in early February 2025, the supervisory authorities continued to identify residual uncertainties concerning the bank's shareholder structure. The bank remains fully committed to maintaining a transparent, cooperative and constructive relationship with all relevant regulatory bodies and we continue to engage actively with them to address the outstanding supervisory considerations. In this context, I need to mention that the current shareholder situation continues to create significant additional efforts and a severe distraction for the bank. Nevertheless, we will carry on to do our best to fulfill the increasing related demands put upon us by our regulators. In line with supervisory expectations and regulatory requirements, the dividend distribution for the financial year 2025 remains suspended, taking into account regulatory considerations related to the shareholder structure. From the perspective of the bank's long-term stability and in the best interest of all stakeholders, the Management Board maintains its position that dividend payments will not be resumed until the share -- until the ownership structure has been conclusively clarified and the related concerns raised by the supervisory authorities have been fully resolved. Now let me briefly outline how we performed against our '25 guidance. The positive message is that despite headwinds, we delivered on our '25 guidance. In income and business, our loan book grew by 7% year-on-year, supported by strong consumer demand and the renewed pickup in SME in the fourth quarter. Our NIM ended up at 3.7% and net banking income held stable. Costs were managed well with OpEx at EUR 195.4 million, coming in below guidance. In risk and liquidity, performance remained fully in line with expectation. We kept the cost of risk below 1%, achieved an NPE reduction to a level of 2.5% and closed the year with a loan-to-deposit ratio of 70%. In profitability, we reached a return on average tangible equity of 2.5% (sic) [ 5.2% ]. Overall, these results reflect our disciplined approach in a demanding environment. Now let me hand over to Ganesh for further insights into the business development. GaneshKumar Krishnamoorthi: Thank you, Herbert, and good afternoon, everyone. Moving to Page 7. As Herbert mentioned, 2025 has been a challenging operating environment. Credit demand remained resilient across our markets. However, interest rates declined rapidly during the year. This intensified competition and created significant pricing pressure. As a result, loan book retention also became more challenging as customers increasingly refinance their loans at the lower rates. At the same time, unexpected regulatory interventions also affected market dynamics. The most notable example is Croatia, where a 40% debt-to-income cap was introduced on July 1. In Serbia, authorities mandated lending rate caps, which led to interest rate reduction. These measures tightened our lending conditions and also affected our pricing in both the markets. Nevertheless, despite these headwinds, our continued focus on digital-savvy customers, the micro SME segment and point-of-sale financing combined our strategy of offering lower-ticket, high-margin loans with speed and convenience while maintaining prudent risk discipline enabled us to deliver strong growth. Consumer new business strongly increased by 20% year-over-year, resulting in 10% growth of our consumer loan book with an attractive new business yield of around 7%. In the SME segment, the new business grew 11% year-over-year with a yield of around 5%. Overall, our focused loan book expanded by 7% year-over-year with a blended yield of 6.4%. As a result, the focus book now represent 92% of our total portfolio, demonstrating the resilience of our specialized strategy, even in a more competitive and regulated environment. Please turn to Page 8 for a more detailed outlook. Looking more closely to our Consumer segment, the strong double-digit growth we delivered was driven by several key factors. First, we benefited with solid market demand across our core geographies. Second, we successfully launched full digital end-to-end lending with zero human interventions in 3 of our core markets, clearly differentiating our offerings from competitors and significantly improving speed and customer convenience. Third, our point-of-sale proposition continues to perform well, delivering 14% year-over-year growth, further supported by the launch in Bosnia and Herzegovina. Fourth, we identified a sweet spot between growth and pricing, allowing us to proactively retain customers and protect the loan book through disciplined repricing actions. In addition, we launched newly redesigned mobile app with the introduction of new card features, including Google Pay and Apple Pay integrations, which contributed to a 12% year-over-year increase in net commission income. Finally, in response to evolving regulatory environment, we are already implementing mitigating measures, including downselling, introducing co-debtor structures and focusing on high-quality customer segments with larger ticket size. We are confident that these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward in 2026. Let's turn into SME segment. Our core business model remains unchanged, to be the fastest provider of unsecured lower-ticket loans to underserved micro and small enterprises through our digital agents platform. As mentioned earlier, the market environment remained challenging due to aggressive pricing, which has created some pressure on our loan book retention. However, with improving market demand, we implemented several targeted initiatives to reignite the growth. First, our turnaround plan in Serbia supported by new leadership team delivered strong momentum with 43% year-over-year growth in new business. Second, we placed a strong emphasis on retaining quality clients and protecting the loan book through more targeting pricing, loan prolongations and enhanced service delivery. Third, while maintaining our core focus on unsecured lending, we broadened our product offering by placing also greater focus on slighter larger tickets and secured lending, supported by experienced and high-quality teams to ensure continued risk discipline. This resulted in double-digit year-over-year growth in investment loan volumes. Finally, we launched a new digital SME tool designed to process high ticket loans, faster and with greater simplicity, providing a clear competitive advantage. Overall, we believe these initiatives will position us well to return to sustainable growth in the SME segment going into 2026. Lastly, let me briefly touch on our progress in AI adoption last year. We are actively investing in AI technologies to enhance both operational efficiency and customer experience across the organization. The 2 AI applications are already live, one supporting employees by handling HR-related inquiries and others assisting our call center by analyzing customer inquiries and generating response recommendation. In addition, we are currently exploring further AI use cases across IT, risk and marketing with the aim of strengthening operational efficiency and enabling core data-driven decision-making across the bank. To summarize, while 2025 presented a challenging operating environment, it also pushed us to further refine our specialist business model and adapt our pricing approach. Most importantly, we launched several new propositions that enhance speed, convenience and value for our customers across Consumer and SME segment, positioning us well for continued growth going forward. Looking ahead to 2026, we will continue to focus on profitable growth while implementing measures to mitigate the impact of the recent regulatory restrictions, in particular, we aim to accelerate growth in Romania through a refreshed marketing approach and strengthened broker partnerships, and we will launch our point-of-sale lending business in Croatia. At the same time, we will further enhance our end-to-end digital value proposition and refine our dynamic pricing capabilities to better balance growth and profitability. In parallel, we are developing a new specialized program focused on new lending products aimed at deepening customer engagement and further expanding our fee-driven income streams. Herbert will provide you more details on this later. Please let me hand over to Edgar. Edgar Flaggl: Thank you, Ganesh, and good day, everybody. Let's turn to Page 10 for an overview of our performance for the full year 2025. Despite a challenging interest rate environment and cost pressures, we delivered stable results, supported by a resilient consumer lending, strong fee income and a robust capital position. Now let's take this one by one. Our net interest income came in at EUR 238.4 million, a slight year-on-year decrease of 1.8%. This reflects the lower rate environment, which weighed on income from our variable back book, so circa 13%, 1-3%, of our book and the income on National Bank deposits. At the same time, balanced treasury and liquidity management activities as well as lower funding costs acted as a stabilizer. As a reminder, the rate backdrop shifted materially throughout the year with 4 rate cuts totaling 100 basis points during 2025, which also pressured pricing on new loans and elevated early repayments of higher-priced parts of the back book. On the business side, as Ganesh pointed out already, momentum in our Consumer segment remained quite strong, with interest income up 6.3%, driven by the 10% growth in the Consumer loan book. Overall, the focus book grew 7% year-on-year, showing also a slight improvement during the last quarter of 2025. On the fee side, we delivered solid growth. Net fee and commission income rose 7.6% to EUR 73 million, driven by bancassurance, accounts and packages and card business, which altogether grew 13%, 1-3%, year-on-year, with bancassurance as a key contributor. Looking into the year 2026, those new regulations in Croatia limiting fees on banking products already have an impact on fee generation today and we'll keep having an impact going forward. Putting it together for 2025, net banking income came in at EUR 316.9 million and was broadly stable year-on-year despite a challenging environment. Our general administrative expenses, in short OpEx, increased slightly to EUR 195.4 million, up 1.6% year-on-year, mainly due to wage adjustments, targeted operational investments and general indexation increases. When excluding the EUR 3 million in extraordinary advisory costs related to the takeover offers in the year 2024, operational costs were up just 3.2% year-over-year. Our cost-income ratio came in at 61.7%, which is a tad higher than last year. The operating results landed at EUR 109.8 million, down 2.3% year-on-year. The other result, which includes costs for legal claims as well as for operational banking risks remained manageable for the full year. We have allocated some additional provisions for new legal claims in Slovenia and made a rather small top-up in Croatia as part of the year-end closing also to reflect increased lawyer costs. The main point in Slovenia remains what the higher courts will rule upon regarding the applicable statute of limitation and if that will be in line with the currently dominant legal opinions. When it comes to risk costs, our expected credit loss expenses were EUR 35.2 million, which translates into a cost of risk of just south of 1% on net loans for the full year. Tadej will provide more insights in just about a moment. All in all, we delivered a net profit after tax of EUR 44 million, which translates into a return on average tangible equity of 5.2%. So while operating in a lower rate environment and managing cost pressures and new regulatory constraints, our focus business remained resilient with solid momentum in consumer lending and continued support from fee-generating activities last year, while also SME lending started to pick up again during the fourth quarter last year, specifically also in Serbia. Turning to Page 11 and our capital position which remains a real strength. Our CET1 ratio came in at a very robust 22.4% at year-end 2025. For context, that's slightly up from the 22% at year-end 2024, which, however, was based on Basel III. While as we all know, for 2025, the new Basel IV or call it CRR3 rules apply. This CET1 ratio now includes the audited profit for the year with no dividends being deducted in line with supervisory expectations and taking into account regulatory considerations related to the current shareholder structure. You will also notice that our risk-weighted assets increased and that's mainly driven by changes in risk weighting under Basel IV as well as the new interpretation of EBA guidelines on structural FX, which we discussed in previous earnings calls. Looking ahead, we have already reported on the final SREP for 2026, which includes a small increase of our Pillar 2 requirement, so up by 25 basis points to 3.5%, while the Pillar 2 guidance remains unchanged at 3%. So in short, our capital is strong and our buffers are ample, supporting controlled growth while we navigate the evolving and not often straightforward regulatory landscape. With that, I will hand over to Tadej for more on risk management. Tadej Krašovec: Thank you, Edgar, and good afternoon, everyone. Let me provide an overview of our credit risk performance for the year 2025. As indicated on the chart to the left, one of our key risk management initiatives was reducing of NPE volumes. We achieved this through proactive portfolio management, portfolio and forward flow sales, write-offs, targeted restructuring and collections. The result is clearly visible. We achieved a significant EUR 19 million reduction in NPE volume compared to the end of the previous year. Out of that, as illustrated on the right-hand side of the slide, the NPE portfolio decreased by EUR 14.5 million in the last quarter alone, driven by high NPE outflow and a well contained inflow. Consequently, we concluded 2025 with an NPE volume of EUR 126 million and attained a record low NPE ratio of 2.5%. Throughout the year, we placed significant emphasis on developing statistically driven credit risk steering approaches and enhanced monitoring tools. This allowed us to promptly identify subsegment and channel developments that did not align with our expectations, enabling swift implementation of risk restructures or also relaxations to positively influence the bank's portfolio quality. Particularly in declining interest rate environment, rigorous oversight of our risk profile and optimization of risk return balance remain essential to operate within our risk appetite, mitigate adverse selection and ensure the resilience of the bank's balance sheet. However, not all regions performed entirely in line with our forecasts. The micro segment posted ongoing challenges in Croatia, Serbia and Slovenia. And furthermore, the SME sector in Slovenia exhibited variances from our 2025 outlook, necessitating additional controls within the credit process. We are confident that the refined risk criteria and enhanced controls introduced will help mitigate further adverse selection. Moving to Slide 13. Loan loss provisions totaled at EUR 35.2 million in 2025, resulting in a cost of risk of minus 0.96% on net loans, both figures notably better than anticipated. This positive outcome was largely attributable to exceptional late collections, an area we have improved as part of our acceleration program during '24, which exceeded even our ambitious targets. The segment's breakdown for '25 is as follows: the Consumer segment recorded a negative 0.79% cost of risk; SME segment, minus 1.9%; while the nonfocus segments contributed to provision releases with a positive cost of risk of 1.88%. In the final quarter, that means Consumer provisions were EUR 1.7 million; SME segment, we generated EUR 8.6 million; and in nonfocus segment, we saw a release of provisions in the amount of EUR 1.4 million. The SME segment figures were impacted by a single large case in Slovenia, I elaborated on in previous earnings calls already. The post-model adjustment was slightly reduced from EUR 1.4 million to EUR 1.2 million. To summarize, Addiko's portfolio position remains robust and resilient, supported by strong collection performance and active portfolio management. Our focus remains on decision models, intelligent risk rules, advanced and automated statistical monitoring and rapid response when every critical risk indicators or the risk return balance require attention. Thank you. And with that, I'll go back to Herbert. Herbert Juranek: Thank you, Tadej. Now I would like to present the highlights of our new specialization program to you. The new specialization program has just been launched and is designed as a 3-year program running from 2026 to 2028. It supports the execution of our specialist banking vision and aims to unlock additional value through a focused performance and transformation agenda. The first pillar is business expansion. Here, we will broaden our product stack and strengthen our ecosystem, meaning we will enhance our core offering, add relevant adjacent products and create a more connected experience for our customers. In addition, we will explore selective new market opportunities in a measured and disciplined way, focusing on areas where our digital lending capabilities can be applied effectively, where fee-based revenues can be expanded and where we see sound risk-adjusted potential. The second pillar focuses on our engine and platform. We will upgrade our platforms and decisioning capabilities with AI-enabled tools to further strengthen analytics, risk processes and service excellence, supporting greater efficiency and competitiveness. The third pillar is competencies and people. We'll continue to invest in skills, training and development while ensuring the right capacity and efficiency across our teams to support the next phase of our strategy. We consider this an important investment in order to enable the successful implementation of our ambition on Pillar 1 and Pillar 2. Overall, our approach is to expand our offering, grow fee-based revenues, strengthen customer engagement and continue optimizing costs through automation and AI-assisted processes. This program sets the foundation for scaling our specialist model and supporting sustainable growth in the year ahead. We will present more details of the program in our presentation of our Q1 results on the 13th of May. Now let's move on to the final page. Before I walk you through our updated guidance, let me briefly outline the context behind our assumptions. Despite the fact that the global economic environment has become increasingly unpredictable, our CSEE markets continue to show comparatively resilient performance. We expect our region to deliver higher growth rates over the next 2 years than the European Union average. Nevertheless, the combination of regulatory fee and rate restrictions, aggressive pricing behavior by several competitors and cost pressure driven by governmental-related factors such as increases in minimum wages requires us to further strengthen our operating model. This is precisely why our specialization program will play a key role. It is designed to enhance efficiency, strengthen competitiveness and improve risk-adjusted performance in the coming years. Now let me walk you through our operating guidance, starting with loan growth. We expect our loan book to continue expanding at a healthy pace with a CAGR of more than 6% over the period from '25 to '27. This reflects the momentum in our core segments and the continued scaling of our specialist model. Looking ahead, looking at our interest margin, for the coming years, we anticipate the NIM to remain above 3.6%, taking into account the regulatory environment, interest rate caps and a more moderate rate trajectory. Based on impacts resulting from the latest regulatory-driven measures, we expect NBI to remain broadly flat in 2026, before returning to growth above 5% in 2027 as our business mix evolves and the effects of our specialization program begin to materialize. Operating expenses. Our focus on efficiency continues. We keep our OpEx below EUR 205 million in both '26 and '27, while still investing selectively to support our transformation agenda and competitiveness. Cost of risk and risk -- and asset quality. We expect a cost of risk of around 1.3% going forward, reflecting prudent underwriting and disciplined risk-adjusted growth. At the same time, we aim to keep the NPE ratio below 3%, which remains our guiding principle for portfolio quality. Capital and liquidity. We expect the total capital ratio to remain above 18.8%, subject to the yearly SREP outcome. Our capital strength provides a solid foundation for controlled growth. Accordingly, we plan to gradually increase the loan-to-deposit ratio towards 80%, supporting loan expansion while maintaining a conservative liquidity profile. Based on this assumption and the higher capital base, we expect the return on average tangible equity to be around 4.5% in 2026, rising towards 6% in 2027, supported by growth, efficiency measures and the contribution from the specialization program. Regarding the dividend, I addressed the situation earlier. However, in this context, I would like to stress again that the current shareholder situation continues to create significant additional efforts for the bank, which is a severe distraction. Nevertheless, we will carry on to do our best to cooperate and to fulfill the increasing related requests put upon us by our regulators. The management of the bank is fully focused on protecting the bank and acting in the best interest of all stakeholders. In this spirit, we will continue working with full energy to make Addiko the leading specialist bank in Southeast Europe, creating value for both our clients and our shareholders. With that, I would like to conclude the presentation. Our next events are the Annual General Meeting on the 20th of April 2026 in Vienna and the presentation of our Q1 results on the 13th of May. Thank you very much for your attention. We are now ready for your questions. Operator, back to you. Operator: [Operator Instructions] The first question comes from the line of Dodig, Mladen from Erste Bank. Mladen Dodig: It's not Madlain, it's Mladen. Congratulations on the results, and I particularly congratulate on the revamped growth and movements finally in SME, that where my first question comes. If I look at the guidance and the last year update for '25, '26, it appear a little bit conservative, if I remember correctly. Actually, I'm looking at it, it was more than 7% CAGR, and now it's more than 6%. I mean it's a small tweak, but would you consider that a little bit conservative considering the effect that you have started -- finally started to catch up with the market and competitors? And just for the moment, I will forget now about the whole situation right now, we have geopolitically. Herbert Juranek: So first of all, thank you very much, Mladen. Before I hand over to Ganesh, I would say we looked at it. And I mean, you call it conservative, but we also need to see the restriction put upon us coming from the regulatory front in several markets, which are also influencing the overall growth potential. But Ganesh, you want to comment this? GaneshKumar Krishnamoorthi: Yes. Mladen, so I think we believe the 6% CAGR is a reasonable growth, considering all the restrictions what we have. We do have some challenges also in SME in some other countries, which we need to work on. So yes, I mean, considering all these facts, that's why we revised from 7% to 6% CAGR. Mladen Dodig: And a little tweak on return on average tangible equity, I would say that also comes from the fact that your equity now keeps growing without chance to moderate it, right? Herbert Juranek: That's right. That's right. So I mean, as long as -- as I said, as long as the shareholder situation does not change and the regulatory fuel to that, we will not pay out the dividend. And consequently, the equity base will increase. Mladen Dodig: Of course, yes. And second question or third, 0.96 basis points risk versus 1.3 guidance, do you think that this might still go lower below this 1.3 in '26? GaneshKumar Krishnamoorthi: I think today speaking here, I think, yes, I think it will be below 1.3. This is our expectations also, also driven by coming back to the limitations in each individual country, right? They protect us to play in the subsegments that are a bit more risky, but where we achieve higher interest rate. But of course, cost of risk at the end will also be lower due to that. It will be below 1.3% is expectations, I can estimate, yes. Mladen Dodig: Just looking also on net banking income last year, the guidance, '26, you just molded to '27, the growth more than 5%. And for '26, you expect flattish development. Of course, I would say, as you mentioned in the call, aggressive pricing from the competitors too. But do you expect that there might be some more decreasing interest rate environment, although now it's very difficult to make such a statement as we already these days are seeing the inflationary pressures coming from the Middle East conflict? I mean probably I would like to see in outlook '26 some percentage for the net banking income growth, but as you stated flat, perhaps this is kind of a global explanation, right? Edgar Flaggl: Mladen or Modlin whatever you prefer. This is Edgar speaking. So a straight answer, our rate assumptions are flat. So as you rightfully say, who knows what the reality will be what's going on in the Middle East. But we assume a flat environment, so deposit facility rate 2% throughout our guidance. When you compare also movements in terms of net banking income, please don't forget that all these regulatory and legal restrictions that have been put in place either last year or starting this year, for example, the Croatian topic on free accounts, et cetera, et cetera, this has a full year 2026 impact of EUR 10.5 million on the top line alone. So you will... Mladen Dodig: EUR 10.5 million only in Croatia? Edgar Flaggl: No, no, not only Croatia. Mladen Dodig: No, fee and income, okay. Edgar Flaggl: Yes. Croatia would be roughly 70% if you take the NCI and the DTI restriction. I think we disclosed that in the Q3 earnings call. So you will probably find this in the script as well. Mladen Dodig: Okay. And a final question from my side, again, of course, about dividend. So let's assume that some situation gets resolved and you get a nod from the regulator to pay out something, what do you think how that might look like? And what would be your -- where will you be leaning to paying a lot immediately or some gradual payments, of course, provided that a regulator would agree to that, too? Herbert Juranek: Well, so first of all, we will decide it when this situation is here. I mean our clear ambition as a general comment as a management is to pay a dividend. I mean that's the whole purpose of the thing. And we had this -- our guidance was around about 50% before this was introduced. So I think this is an area we are aiming for. You also know that if you want to pay out a dividend, which is above the yearly profit, you need -- so out of equity, you need the approval of the regulator for that. So what we would do is when the situation is solved, we will look at it. We will look at the state of the bank, what is healthy and what we can do and then we will judge and decide on that. But for the time being, we don't want to comment it. We feel also obliged vis-a-vis our supervisors, and we share with them the view that currently, we will not pay out something. Operator: There are no more questions on the phone at this time. Herbert Juranek: Okay. Do we have any other questions? Edgar Flaggl: We also have no questions on the webcast. Herbert Juranek: Okay. So as there are no further questions, we thank you for your attention and wish you all the best. Thank you for dialing in. Goodbye.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Inc. 2025 Annual Results Conference Call. [Operator Instructions]. I will now turn it over to [indiscernible], Head of Investor Relations. Unknown Executive: Thank you, operator. Good day, ladies and gentlemen. Welcome to the JD Health 2025 Annual Results Conference Call. Joining us today are JD Health's Executive Director and CEO, Mr. Dong Cao; and CFO, Ms. Deng Hui. Before we start, we'd 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. In 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 the reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 2025, issued 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's statements in the original language will prevail. I would like to turn the call over to Mr. Dong Cao. Please go ahead, sir. Dong Cao: Hello, everyone. I'm Cao Dong, CEO of JD Health. It is a pleasure to share with you our 2025 full year results. In 2025, China's economy maintained a steady and resilient momentum in industrial foundation for company's continued development. The government actively promoted development of new quality productive forces in the health consumption sector and encourage the standard adoption of AI across the health care sector, charting a clear path for long-term sustained growth. 2025 marked the return of JD Health's return and profit to a trajectory of rapid growth, further reinforcing our positioning as a market leader. As industry-leading health care service provider, we continue to deepen our presence across key health care segments through our omnichannel, super pharmaceutical supply chain infrastructure, comprehensive AI-powered online health care service capacities and the full life cycle health care management ecosystem. We remain committed to delivering accessible, convenient, high-quality and affordable health care products as well as our solutions. In 2025, we continued to capitalize our super pharmaceutical supply chain advantages and industrial direct sales capacity building AI-enabled full-scenario healthcare services ecosystem that supported sustainable high-quality growth. In fourth quarter, revenue reached RMB 21 billion, representing year-over-year increase of 27.4%. Non-IFRS reached RMB 1.1 billion, up 13.5% year-over-year with margin of 5%. For 2025, our revenue reached RMB 73.4 billion, representing year-over-year about 26.3%. Non-IFRS profit totaled RMB 6.5 billion, up 36.3% year-over-year with our non-IFRS profit margin 8.9%. Notably, we delivered revenue growth of more than 20% year-over-year for 4 consecutive quarters, while our full-year non-IFRS profit margin reached its highest level ever since IPO in the pharmaceutical sector. Leveraging our supply chain strength, we continue to gain from partnership with pharmaceutical companies as the first online marketplace for new and specialty drug launches. We introduced more than 100 new drugs during the year, a significant growth from 30 in 2024. Taking the DAYVIGO as an example, this flagship collaboration between Eisai and JD Health exceeded 20,000 orders in launch month alone. At the same time, by working closely with pharmaceutical companies to promote innovative integrated consultation, pharmaceutical and service closed-loop model, we are strengthening those partnerships and establishing a novel health care ecosystem that supports comprehensive collaborative relationship. For instance, we established strategic collaboration with Novo Nordisk, drawing on omnichannel expertise in chronic disease management and treatment solutions together with JD Health [indiscernible] in healthcare service. We jointly established a dedicated public health hub on obesity. This initiative supports a one-stop diagnosis and treatment and medical solution for diabetes and drug [indiscernible]. We also formed a strategic partnership with Eli Lilly to promote the innovative digital health solutions for patients in China who are living with obesity and type 2 diabetes or alopecia areata. Those solutions integrate patient education, live consultation, medical supply and long-term disease management. In health supplement, we fully harnessed our direct sales capacity, actively engaging in product co-development, supply chain structuring, professional service enhancement and industry standard setting to reinforce our platform central role across our value chain. By focusing on the senior nutrition, child development, beauty supplements and ready-to-consume nutrition products, we have helped the brand partners to achieve sustainable long-term growth. For instance, while the standard deep-sea fish oil market strategy matured, we identified the growing consumer demand for high-purity, high adoption products with significant untapped potential. Based on this insight, we worked with [indiscernible] to develop a premium fish oil product tailored to market needs to tap the high-end segment, featuring 97% of high-quality EPA. The product garnered over 15 billion impressions on its launch date on JD Health's platform. In medical device, we fully integrated our supply chain strength to build a seamless online-to-offline service loop, driving industry-wide upgrades through the ongoing technological innovation, for instance, in collaboration with Yuwell Medical, we launched the JD brand continuous glucose monitoring on our platform, which can be connected directly to JD Health's app via Bluetooth to deliver integrated blood glucose management experience, covering monitoring, analysis, intervention and tracking. For users who require device setup or configuration systems, we offer in-home support with health care professionals providing hands-on guidance through the process. In response to national initiatives to foster new quality productive forces in the health, we provide the capacities and medical AI solutions to a wide range of ecosystems. We aim to enable high quality and sustained development such as the Dr. Da Wei and a suite of multi-role intelligent service agents, AI doctor digital twins, and AI health chatbot, Kang Kang. At the end of 2025, Dr. Da Wei has completed hundreds of millions of interactions. The JOY DOC 2.0 version comprehensive management solution spanning 3 key areas: clinical nutrition, pharmaceutical services and weight management. This product provides health care institutions with standardized traceable and highly efficient digital intelligent support. We work together with the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College to cover 5 million patients in 2025. Our on-demand retail business also achieved breakthrough through the year. We continued to expand the online medical insurance payment services as well. We have been expanding coverage to 29 key cities. By 2025, we have established more than 300 self-operated pharmacies nationwide. By integrating those stores with our on-demand retail business, we have further differentiated our product offerings and enhanced the overall user experience. Additionally, we continued to strengthen our integrated online and offline medical services. JDH's at-home rapid testing service maintained strong growth momentum with full year order volume increasing by 81.9%. Our at-home rapid testing service pioneered a hospital-grade home testing service during the year, extending the professional practice of hospital laboratories into the home setting, processing for cities including Beijing and Shanghai. This service exemplifies the deep integration we have achieved across our supply chain and digital platform strength and the professional medical expertise of the public hospitals during the peak respiratory seasons. It effectively eases hospital congestion, shortens patient visit time and lowers the risk of cross infection caused by JD Health service basket and digital coordination system. The process from sample collection to delivery takes an average of 3 hours and can be completed seamlessly with the app. Looking ahead, we will continue to strengthen our super pharmaceutical supply chain advantages centering on user experience, cost and efficiencies. By capitalizing our direct sales capacities and deepening collaboration with brand and ecosystem partners, we further cement our leadership in the health care retail market and reinforce user awareness of JD Health as a go-to platform for online health product services. At the same time, we will continue to advance technological innovation in AI applications, empowering our integrated consultation, examination, diagnosis, pharmaceutical service, closed-loop through an AI plus supply chain strategy and supporting the high-quality growth and sustained development of the broader health care sector. By steadily expanding our health care ecosystem service scope and consistently enhancing our integrated online and offline medical services, we will share better experiences to the business. Now please welcome CFO, Ms. Deng Hui, to share details of financial performance. Deng Hui: Good to see you. Thank you for attending and joining the JD Health earnings conference call. This is Deng Hui. It is my pleasure to provide you update on our fourth quarter full year 2025 financial performance. In 2025, China's macroeconomic landscape continued to show a cost recovery trend, showing new development opportunities. For AI-driven health industry, JD Health actively responded to a policy directive of fostering new quality productive forces in the health consumption sector. Achieving sustained and high-quality growth in 2025, the revenue reached RMB 73.4 billion, representing a year-over-year increase of 26.3%. Non-IFRS profit amounted to RMB 6.5 billion, up 36.3% year-over-year with a profit margin of 8.9%. It's worth noting that our revenue growth rate has maintained above 20% for the consecutive quarters, while our non-IFRS profit margin reached its highest level since its listing. In the fourth quarter of 2025, revenue totaled RMB 21 billion, up 27.4% year-over-year. Non-IFRS profit for the quarter reached RMB 1.1 billion, increased by 13.5% year-over-year with a profit margin of 5%. As of December 31, 2025, our annual active user accounts for the past 12 months stood at approximately 220 million with a net addition of 34 million compared to December 31, 2024. Among other revenues, direct sales revenue reached RMB 60.9 billion in 2025, representing year-over-year increase of 24.8% and accounted for 82.9% of total revenue. This growth was primarily driven by increased sales of chronic disease related drugs and expanded first launch partnership for innovative drugs as well as health supplements, where we focused on strengthening our direct sales capacities and cultivating growth in high-quality segments and sales of new created medical devices. Meanwhile, service revenue reached RMB 12.6 billion for the full year of 2025, up 34.1% year-over-year and accounting for 17.1% of our total revenue, an increase of 1 percentage point year-over-year with platform commissions and advertising services maintaining strong growth momentum. During the year, we prioritized the onboarding of emerging brands, significantly increased resource allocation to merchant support, and expanded the merchants access to our omnichannel infrastructure and resources, fostering growth for both the platform and our merchant partners. We continue to advance our on-demand retail business in 2025 to be more efficient and accessible on-demand services to our users by continuously strengthening synergies among supply fulfillment, payment and expertise experiences. In health care services, we further deepened our Internet plus health care service ecosystem through AI empowerment this year, achieving scaled deployment of AI technologies across consultation, examination, diagnosis, pharmaceutical scenarios. We launched a series of AI-based solutions tailored for users, doctors, hospitals, primary health care institutions, including AI Jingyi and JOY DOC, establishing the industry's most comprehensive AI enhanced health service matrix. Our AI agent, Dr. Da Wei, has completed hundreds of millions of user interactions with a 98% satisfaction rate. Meanwhile, JOY DOC has served over 5 million patients across several hospitals, including the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College. From the profitability level, JD Health's gross margin was 24.8% in 2025, up 1.9 percentage points year-over-year. The improvement highlights the core strength of our supply chain as well as the ongoing enhancement of our direct sales capacity. Our direct sales mode effectively drove gross margin expansion through economies of scale, while empowering our professional procurement and sales teams to identify industrial trends and capitalize high potential subsegments, boosting overall operational efficiency. At the same time, we encourage a greater resource investment from merchants fulfilling growth in higher-margin business such as advertising services on a non-IFRS basis. Our fulfillment expense ratio was 10.4% in 2025, up 0.2 percentage points. Our selling and marketing expense ratio maintained largely flat at 5.2% in 2025 compared with last year with [indiscernible] hitting the road this year, promoting awareness of our quality standards for nutrition products while helping drive sales growth in the health supplement segment, although selling and marketing expenses rose by 26.9% year-over-year. Our R&D expense ratio was 2.2% in 2025, up (sic) [ down ] slightly by 0.1 percentage point year-over-year as a result of our ongoing investment in AI technologies. As of the end of December, we had over 880 R&D personnel, increased compared with the previous year. As revenue continued to grow, the proportion of fixed R&D expenses will decline accordingly, while the productivity of our R&D team will also improve. We remain committed to investing in health AI technologies and have launched a suite of AI-powered products, serving users, hospitals and primary health institutions across multiple health care scenarios. Moving ahead, we will continue to deepen our efforts in these areas. The G&A expense ratio was 0.8% for the full year of 2025, flat with 2024. Our back-end staff and operational management efficiency levels continue to lead the industry. Finance income was RMB 1.5 billion in 2025, attributable to increased cash balance. Other income and gains, net was approximately RMB 1.6 billion (sic) [ RMB 0.77 billion ] in 2025, mainly reflecting fair value changes in wealth management products. Excluding share incentive, our non-IFRS profit for 2025 increased by 36.3% year-over-year to RMB 6.5 billion with a margin of 8.9%, up 0.7 percentage points from last year, reaching its highest level ever since our IPO. Our cash flow from operating activities reached RMB 10.2 billion for the full year of 2025. As of the end of December, cash and cash equivalents, restricted cash, term deposits and wealth management products measured at fair value through profit or loss at amortized cost totaled RMB 96.5 billion (sic) [ RMB 69.5 billion ], a net increase of RMB 10.1 billion compared to December 31, 2025 (sic) [ 2024 ]. In summary, JD Health delivered high-quality growth in 2025, underpinned by continuously optimized operational capacities and steady profitability growth. Our strong performance highlights our persistence, enhancing user experience, while improving cost and efficiency by developing and refining AI-powered health service scenarios. We broadened our business scope, further validating the distinctive value propositions of our dual-engine business model. That concludes our prepared remarks. We are now open for questions. Operator: [Operator Instructions] Now we are going to welcome Miranda Zhuang from American Bank. Xiaomeng Zhuang: In 2025, you achieved a faster growth, and you had very good growth momentum with better profit margin. That is great news. I have a question to you. Can you share with us the near term and the 3-year middle-term prospects, what will be the main growing points? And what will be your strategies? Dong Cao: Thank you for the question. You're my old friend, Miranda. I want to share with you the general directions about the track for the future growth. We know that pharmaceutical sector, health products and medical devices are belonging to one community. The market size is around RMB 3 trillion to RMB 4 trillion. This is the size of the total market share, and we have to check different proportions. So you could fully understand, in the entire year, the revenue is RMB 17 billion (sic) [ RMB 73.4 billion ]. Compared to the potential of the market, we are still having a big room to grow, which means that we have a lot of opportunities to grab. Currently, we could achieve more than one digit growth potential. I believe that this is a huge market. Despite the fact that JD Health is a huge pillar, we could also go faster and we could go deeper. That is our inspiration, and that is our commitment to go deeper and go faster built on our existing advancements and results. The next point is from the perspective of the users. Currently, around 220 million users were out there and the total number is still growing, and we have a lot of active users, but not as big as the total user base of the JD Group. Because we are JD Health, we could still have a big room to grow. So I'm just sharing with you the size of the sector as well as the users of JD Health. I believe that from both fronts, we could do a lot of things to grow our potential. To be more specific, for the next 1 to 3 years, what will be happening and what will be the key drivers. To start off, I want to go back to the product portfolio and what will be the growing momentum. I'm going to speak about the pharmaceutical products. For the long run, we are in the leading position and we are growing very fast. We continue to improve our performance in 2025. The new drugs are taking 15%, and we are growing very fast compared to the velocity of 2024. You could feel the change and you could feel the transformation. Built on the mindset of JD Health, more brands, more pharmaceutical companies and more manufacturers will come to us. They will finally realize JD Health is a huge platform. We could help them, we could empower them. We could bring to them additional value. The new products, the special drugs could have very good sales at our platform, driving us to embrace a larger number of new drugs on their first sales. This is a very positive trend and I am very happy to share with you. I believe that in terms of the pharmaceutical companies, we will continue to grow. I believe that this market will grow, of course. We have the in-hospital and off-hospital market and off-hospital market will be moved to the online setting at even faster manner. Those are the trends we could observe on the market. That's why I'm so confident in sharing with you our growing potential and growing [indiscernible]. In terms of the health supplements, I know that you've followed us for long-term. When we are discussing the pharmaceutical companies and health supplements, you can know we are offering the best quality products. We could offer you very good user experience as well. We go very fast and we are highly efficient in delivering our services and offerings. We are doing more than selling. We are also providing the evidence-based solutions. It's like we are collaborating with GNC. We are jointly releasing the white paper, providing better service and educational resources to the users. We are also providing a premium fish oil, improving the user experiences in the overall manner. We want to add to user experiences, and we want to add user value. We are not selling products in an efficient manner. We're also helping the users to select the best ever products. And we are also an online platform having huge integrated logistics chain advantages, which means that we are having this pillar and we will grow this as well. The next topic is about medical devices. I want to give you a case. We're collaborating with Yuwell to offer customized products. The monitoring of the glucose device. It is well set. And for the next step, we have more plans. In terms of the sales, we will provide software, hardware as well as integrated chronic disease management plan. If you tried our products, you can know how well it is. It is very unique and it's very special. If you try the Yuwell glucose monitoring device, you can know how good it is, you could know which food is good for you and what are the foods bad for your health. I believe that is the best collaboration model. You could manage your food, you could manage your diet, and you could complete all those processes for our product. And we are now promoting AI-empowered health management device. This will be the new ecosystem. AI is keyword, very popular. In 2025, we launched the AI doctor, Dr. Da Wei, completed hundreds of millions of interactions with online users with a high level of satisfaction ratio. The AI matrix includes the 2B, 2C and 2H front with very good performance separately. Those performances are not yet fully matured. They are not translating directly into sales revenues. However, we can safely say that they will be the future drivers, helping JD Health to garner potential profits. In the long run, they will be our long-term drivers. I'm just sharing with you those highlights for reference. Thank you, Miranda. Thank you for the rest of investors. Now please start your second question. Operator: The next question comes from UBS, Henry Liu. Henry Liu: Thank you for the prepared remarks, the management, and thank you for having my questions. Can you say a few words about the competition landscape of the company. For instance, we have the e-commerce platform, we have the brick-and-mortar physical stores. How you can stay competitive among all those competitors? Dong Cao: For the long term, I'm confident in standing out of all those competitors and market players. If you are watching and following us for the long run, you know we are a company with a lot of pragmatic mindset and behaviors. You know how we check and observe this market landscape, you know how we view our competitors. From the perspective of JD and JD Health, we are good at managing the supply chains. We are good at managing our own brand products, because we want to manage the quality of the products, we want to ensure the best efficiency on this market. In terms of health care market, those elements are maturing. We want to manage the health of the users, and we have a strong mindset. That is why we are standing out compared to other competitors. That is in our DNA, that is in our blood veins, and we are maximizing our DNA. In the company, the revenue is growing very fast, of course. And our market penetration rate is not as good as we expected. In the future, the market will be highly fierce, of course. But this market is not yet fully competitive. It's not receiving full competition. Every company could have their own proportion and share. You could manage your supply chain, you could play up your strengths and you could do somethings with a lot of pragmatic behaviors and you could improve the health. So we could extend our strength in the long run, and we could further extend our market scale. That is my general impression, and that is my short answer for your question. Next question, please. Operator: The next question comes from Haitong International, Meng Kehan. Kehan Meng: I'm from Haitong International. Congratulations. Thank you for sharing with us the great results in 2025. I have some questions to you. For the next few years, what will be your plan to start the brick-and-mortar stores? And what will be the impact for the online practices? And for the ILC, what will be your future plan? Would there be any change? Would there be any large M&A plans? Dong Cao: I want to take those questions with more elaboration. I believe a lot of investors are very interested in those points. First of all, we don't have the plan to have a large-scale M&A. But it doesn't mean that we don't care about the offline practices and offline maneuvers. The efficiency, the cost of running the brick-and-mortar stores is one of our key strengths, of course. I talked about the medical insurance policy. This is very key in managing the brick-and-mortar store, the pharmacy. 35% of the gross margin will be the bench line. It's not that high, of course. And we have a lot of good chances. We are not relying 100% on the medical insurance, and we could ensure the security of the business. Of course, the gross margin was not as high as we expected when we are running it online, but still very satisfactory, but still satisfied with those results. When we are running the offline stores, we prioritize. We also care about their practices, because around RMB 2 trillion -- in terms of the market share, RMB 2 trillion belong to the offline practices, and some of them belong to the in-hospital market, around 7% to 8%. It matters. I don't think the online business can 100% replace the offline business. Still, we have to watch closely to the development of the offline business, but how we are going to maximize our strength. There are 2 sets of practices. The offline pharmacies for one thing. We are running 300 offline pharmacies up to now, 300. Those pharmacies are serving their neighbors. We are consistent in promoting the offline pharmacies. Those offline pharmacies are good at delivering immediate service requirements and demand. In terms of the data, they are accounting for 10% in terms of market share. Some patients want to have immediate medical products. The size of the pharmacy is not big. Our priority is on B2C business to customer. But this is a very important scenario for us to manage the customer relationship, and we would do a good calculation, how we are going to manage the stores, how are we going to manage the operator or the users. And this is a platform with a lot of openness, and we are collaborating with the chain pharmacies as well. Those are our business patterns and business scenarios to better serve the users, bring them the premium experiences. So I don't think we're going to have a large-scale M&A to cover the offline pharmacies. I don't think so. We may maintain the structure, the size. And offline pharmacies in terms of number is too many. Altogether, 700,000 in totality. I believe that we can do more to improve their overall efficiency. The next is about the checkup centers. I believe that checkup centers are providing us a new area to grow our business range. We can do a better job improving the quality, and that will be the new entry to collect different dots. I believe that the offline checkup centers will be the entry point to manage the health. Now we have several checkup centers in operation. We're not in a hurry to duplicate the model. We want to maximize the JD DNA, be pragmatic. We'll be patient, we'll be accepting the market changes. We will never go too fast. We are having a long-term vision to be the guardian of the people's health in China, and we want to do a good job. That is our practices for the offline business. We will never do it overnight. We'll not complete all the business over the short term. We will be stable and we'll be cautious. It's a step-by-step manner. All in all, the business here will be extended and there will be no obvious shock to our core business. So we believe that whatever we are doing, the AI-empowered practices, the offline pharmacies, we will go very steadily, step-by-step, improving the users experiences. Before each step we are marching on, we'll find out what will be the long-term mission, what will be our purposes before we are taking up this step. Now we are using a lot of AI technologies. We are improving the general efficiencies very positively. The AI nutritionist is also a good practice. The conversion rate is even higher than the real person nutrition practitioner. I believe that the offline pharmacies will also be greater scenario, faster use and to administer the AI practitioners. So don't worry about large M&A from JD Health. We will do everything step-by-step with very good reason. Operator: Next question from Goldman Sachs, Lincoln. Lincoln Kong: Congratulations for you to have the 2025 outcome. I have a question on the progress of AI+. Please share your opinions about the supply chain, about your practices for the future. Dong Cao: Again, I want to give you our overall planning. There are several directions ahead of us. The first is the 2C, to customer direction. You could check what happens in JD application. On JD Health application, we have the doctor, Kang Kang. We have the JOY DOC. For the 2C side, you have the Jingyi. They are doctors, Dr. Da Wei. We have the pharmacists, we have the nurses. They are AI bots, they are AI twins. A lot of consultation services are out there, the shopping services, the before and after sales services are out there. The conversion rate, the satisfaction rate, the user experiences are very positive. The online consultation is booming, empowered by the AI technologies. Those are the good outcomes from the 2C front. However, it's not right time for us to commercialize all those practices and assets, but still we're in a good position, we're in a good direction to have the commercialization. Now we have the Jingyi. We have the 2H to hospital front. In the future, I hope that we could get connected to the hospitals. We are speaking about 70% of the resources of the 2 trillion market size will be in different hospitals. We want to expand our market share, rely upon the partnership with different hospitals. The hospitals will help us to manage the patients. For instance, we could do the pre-consultation, helping the patients to check in the right departments. Those are some things we could down before the hospital entry. For the post-operation diet and nutrition, we could also have the AI to help those patients, and we can collaborate with the hospitals. In the future, we could manage this business with incremental growing momentum. And for the 2B side, the 2B side is operated for the doctors totally free of charge. However, how we are going to set up a good business model, how we're going to have the final commercialization, we are still in the process of pondering on. In China, it's very special for the doctors to pay. Still, I believe that as long as the products and the services are excellent, we could have sort of some method to charge. Still, it's a very complicated value chain in the medical sector. There will be the right payer. That is the question we have to keep thinking. And we have to avoid the homogeneous competition. No matter what, those are the directions we are embarking on, and we are seeing a much more clear directions and light at the end of the tunnel. In the near future, I believe that we could see more frequent AI application with positive outcome. If there's any feedback, I will let you know, and we will keep a close eye on this market. But please keep it in mind. JD Health has very good AI innovation practices, and we go very steady by collaborating with the stakeholders, and we will continue to promote innovative drugs. When we are checking the market, it looks very dynamic, it looks very popular, but we will be the one who speak deeper to this market, and we will give you good solutions, because all in all, we want to serve the patients, we want to serve the users with good experiences. We are more than observer, we are a practitioner. Thank you. Operator: For time's sake, we are going to close the Q&A session. Now I'm going to welcome you give us the closing remarks. Dong Cao: Thank you once again for joining us today. If you have further questions, please contact the IR team directly. Thank you.
Operator: Hello, ladies and gentlemen, and welcome to the Deutsche Pfandbriefbank Analyst Call Regarding the Publication of the Preliminary Annual Results for 2025. [Operator Instructions] Let me now turn the floor over to your host, Kay Wolf, CEO of Deutsche Pfandbriefbank. Kay Wolf: Thank you very much. And ladies and gentlemen, a warm welcome from my side, from our side, Marcus, our CFO, here as well. And thanks very much for taking the time joining our first analyst call in 2026. Before Marcus and I will take you through the preliminary effects and figures for 2025 and also a prolonged view on the outlook for 2026 to 2028. As usual, we are doing that based on IFRS figures for the Group. I would like to take the opportunity to inform you that we are going to slightly amend this call going forward. And we have decided we're starting into a New Year to develop a bit further in the setting here. And going forward, not only our equity analysts, but also sell-side credit analysts who are covering pbb on a regular basis are invited to ask questions. This is clearly aiming for even further broadening the communication and the dialogue with the community that is covering us in great detail. And I'm really looking forward together with Marcus to your questions that are coming from both of you, from our equity analysts as well as our debt analysts, both from the sell side. And as always, there will be sufficient time left on our side for questions and answers at the end of the session. Ladies and gentlemen, 2025 was a landmark year for pbb. We made far-reaching decisions that go well beyond what we presented to you on our Capital Markets Day back in 2024. The transformation of pbb is more intense and therefore, more time-consuming than originally anticipated. In addition, the market recovery remains sluggish, providing us with less momentum in the new business than expected and in some countries with additional regulatory headwinds. This makes it more difficult to achieve our strategic goals and limits our flexibility and also latitude for action. However, we remain fully convinced that we are on the right track. We are working hard to make the bank more resilient, profitable and diversified. We are not losing sight of our strategic goals. Despite difficult conditions, we have already made good progress. As a result, we succeeded in significantly reducing the bank's risk profile in 2025. Repayments totaling EUR 1.4 billion and the EUR 1.7 billion significant risk transfer transaction at the end of last year enabled us to substantially reduce our risk exposure in the U.S. This represents a major step forward in our withdrawal from the U.S. market. We were also able to reduce the risks associated with the existing nonperforming loans in our development portfolio. With that, we deem the shielding and risk coverage of the U.S. and the development books as in general completed. At the same time, we are encouraged by the significant increase in new business to EUR 6.3 billion, including prolongation larger than 1 year. In a challenging market environment, we were able to increase new business volume by 23% compared to the previous year. In doing so, we are consistently tapping into new asset classes in order to diversify our portfolio. Nevertheless, in 2025, we remain below our original goal of between EUR 6.5 billion to EUR 7.5 billion. However, our key indicator of profitability, return on tangible equity was around 8% for the new business, which is already in line with our strategic ambition level. We have also made progress in diversifying our income streams. The acquisition of Deutsche Investment will broaden our business model. In 2026, Deutsche Investment will make its first notable low-capital binding contribution to pbb's overall results with its commission income. However, despite our efforts, we have not succeeded yet in placing our first own investment product in what is a difficult real estate investment market. But we continue to see the great market potential and remain committed and confident to make progress in the future. The decisions we made last year to put the bank on a more sustainable foundation for the long-term had a significant negative impact on our 2025 annual results. With costs of around EUR 366 million the decision to exit the U.S. market and the derisking of the nonperforming development loan contributed significantly to the negative pretax result of EUR 250 million. Due to this significant negative pretax result, the bank will not pay a dividend for the financial year 2025. With regard to AT1, the conditions for servicing instruments are currently well met. However, as you know, for regulatory reasons, we are not allowed to comment at this time on whether we will pay the AT1 coupon in April as we always -- we have always done in the past. With the CET1 ratio of 14.9% at the end of 2025, the bank remains solidly capitalized. The SRT transaction resulted in a significant RWA reduction of EUR 1.1 billion. However, this was offset by necessary regulatory loss given default adjustments to capital requirements in our foundation IRBA regime. These adjustments are linked to country-specific and backward-looking loss developments in the respective commercial real estate markets. They are completely independent of the performance of our portfolio or individual pbb loans. In addition, the embedded threshold and trigger mechanism increases the volatility and procyclicality of the F-IRBA capital regime for commercial real estate in the current market environment. In Q4 2025, the effects are primarily caused by the loss rate development in the countries of Poland and Finland. And we will discuss these effects in more detail later. For 2026, we expect pretax earnings to be in the range of EUR 30 million to EUR 40 million. The U.S. exit, in particular, will continue to have a significant negative impact with SRT costs of around EUR 44 million. Additionally, sluggish market recovery will not offer significant support. The most important KPI for us remains the improvement of the return on tangible equity to 8%. For the whole bank, we expect to achieve this profitability target in 2028, 1 year later than originally planned. Ladies and gentlemen, we are not satisfied with our 2025 results or the outlook for 2026. The transformation of pbb is more intense and therefore, more time consumed. Even more in the current market environment, it requires more resources than we had originally anticipated. Still, it remains the right thing to do, and it is necessary on this scale. Let us now take a brief look at market developments on Page 5. We can all observe the high level of volatility at the macroeconomic and in particular the geopolitical level on a daily basis. And just last weekend, a new armed conflict broke out in engulfing the entire region, the Middle East. This volatility as well as the associated uncertainty and unpredictability are likely to remain with us for the foreseeable future. At the same time, unstable economic outlooks and volatile tariff policies continue. We, therefore, expect growth in Europe to remain at the low level. Inflation is stable at around 2% within the ECB's target range. So interest rates in the Eurozone are not likely to fall in 2026. In economic and interest rate terms, therefore, no or only minor stimulus are to be expected. The European real estate market remains in the phase of growth. We do not expect further continuous -- we do expect further continuous improvement, albeit at a rather modest level. In line with the consensus among many market experts and their forecast, we do not anticipate a breakthrough in 2026. Sentiment remains subdued and investors remain cautious. However, we intend to leverage our good momentum in the new business of the fourth quarter of last year and continue to grow this year as well. However, attractive financing opportunities that meet our risk return profile remain rather underrepresented and are therefore highly competitive. This is clearly evident in the transaction volumes in commercial real estate financing in Europe, as you can see on Page 6. In line with the significant rise in interest rates, the volume of transactions slumped by almost half. Since then, the markets have been recovering steadily but hesitantly. We expect transaction volumes in Europe in 2026 to remain notably below the 2022 level. Although the ECB's key rate has normalized, it remains well above the level seen during the historically low interest rate phase. Everything, therefore, points to a continued sluggish market recovery in an unstable environment from which pbb can itself not completely decouple. Let me now turn to our business segments, starting with Real Estate Finance Solutions, our core business pillar on Page 7. As already mentioned, we significantly increased our new business volume by 23% to EUR 6.3 billion. We had a stronger-than-expected fourth quarter with a high proportion of January new business commitments, which grew to 63%. The return on tangible equity in new business remains at around 8%, thus meeting our profitability requirements. We are also making progress in diversifying our book. Our growth asset classes with hotels, data centers, student and senior housing now accounts for around 7% of our new business with a stable pipeline of just under 20%. Before I move on to Real Estate Investment Solutions, I would like to give you a deeper insight into the progress of our withdrawal from the U.S. market, all on the next 3 pages. As you can see on Page 8, we have made strong progress in reducing the U.S. portfolio in 2025. Within the last 12 months, we were able to reduce our performing book by 1/3 from EUR 3.3 billion to EUR 2.2 billion. Of the remaining EUR 2.2 billion, the SRT covers a portfolio of EUR 1.7 billion. This leaves an economic risk position of only EUR 500 million in our performing portfolio. You can see the rundown of our book in the top right corner of the slide. We aim to have almost completely wound down of our U.S. exposure by the end of 2029. Let me give you on Page 9, some more detailed information regarding the SRT transaction in our U.S. business, which is of strategic importance for us. It is certainly a unique transaction for this market, both in terms of our strategic decision to exit the U.S. market and in terms of the transaction parameters. The transaction covers a performing U.S. portfolio with a volume of around EUR 1.7 billion. It comprises only 26 loans and has, therefore, a significant higher risk concentration compared to other transactions in the market. In addition, 92% of the portfolio is concentrated in office loans. pbb retains the First Loss Piece of around EUR 51 million and is fully protected -- this is fully protected by existing Stage 1 and Stage 2 risk provisioning. The Mezzanine tranche of EUR 247 million was taken over by Oaktree, protecting pbb against future losses to this extent. The SRT portfolio is expected to gradually reduce until 2029, aligned with expected maturities of the loan portfolio, reducing interest income over time. At the same time, the cost for the Mezzanine tranche will also decrease. The SRT transaction provided for an RWA relief in the amount of EUR 1.1 billion and a positive CET1 effect of 120 basis points. Finally, on the U.S. book on Page 10, some remarks regarding our NPL portfolio. At the end of 2025, our NPL book in the U.S. stands at EUR 900 million. In the fourth quarter, we were able to reduce NPLs by around EUR 100 million and have built some momentum. Currently, 5 further loans totaling EUR 300 million are already in advanced exit process for the first quarter of 2026. We are able to exit these loans within our existing valuation. Hence, no further material risk provisions were required. This makes us confident that we will be able to further reduce the NPL portfolio in 2026. The coverage ratio for the U.S. NPL book has increased significantly from 20% to 36%, a solid protection. Let me now, on Page 11, give you an update from our Real Estate Investment Solutions division, which will become pbb's second business pillar from 2026 onwards. The integration of Deutsche Investment with assets under management of around EUR 3 billion is well advanced. Following the first-time consolidation, we expect commission income of around EUR 40 million in 2026. Together, we want to continue to grow in the investment management area, both with equity products and with debt capital markets -- debt capital solutions in the form of funds or mandates for institutional investors. In our Originate & Cooperate business, we are currently finalizing our rollout. We have an established partner network. The sales and origination teams at our locations in London, Paris and Munich are in place. The focus in 2025 was on developing the business model. We are now well-positioned to tap into this completely new business area for pbb. Ladies and gentlemen, let's go to Page 12. The transformation of our business model requires a transformation of the bank organization itself. We are making good progress here. And with that, we continue to reduce our operating cost base. We have been able to reduce management positions by around 20%, thereby streamlining our organization. The new target operating model lays the foundation for a more efficient and profitable setup of the bank. We are also focusing on new technologies aligned with market and customer requirements. At the same time, the expansion of our new production hub in Madrid is also making good progress. We successfully hired 27 colleagues, and we want to continue to grow these to around 85 by 2028. In everything we do, we will continue to keep a close eye on our costs. By 2028, administrative expenses in our business area Real Estate Finance Solutions are expected to fall by a further 7%. At the same time, we are investing in the expansion of our new businesses in Real Estate Investment Solutions. And at this point, I would like to hand over to my colleague and our CFO, Marcus, who will now guide you through the most important developments and key figures for the Group. Marcus Schulte: Thanks, Kay, and good morning, and welcome also from my side. As usual, I will now guide you through more detail on 2025 results, portfolio developments, capital and funding. Let me start with the operating and financial highlights. The operating overview on Slide 14 illustrates the ongoing portfolio transition quite well. Kay has already discussed the pleasing profitability contribution from the REF new business. The key good news is that the overall strategic approach works as designed. Maturing business in the back book is continuously replaced by more profitable RoTE accretive new business in the front book, thus step-by-step increasing profitability towards the target of 8% for the portfolio as a whole. However, even though new business volume has been up by 23% in '25 year-over-year, the slower-than-expected market recovery still weighs on volume. New business is not yet enough to compensate for pre and repayments and the significant derisking of the U.S. and development exposures. Hence, the REF portfolio declined by EUR 1.7 billion in '25 to now EUR 27.3 billion. We expect this to stabilize from here as new business is expected to further improve gradually over time from here. At the same time and as intended, the noncore portfolio has come down by EUR 1.2 billion to EUR 8.5 billion year-over-year, including against some opportunistic asset sales and liability buybacks also in Q4. This brings me to the financials overview on Slide 15. The key P&L figures reflect both the financial impact of our strategic transition and the significant derisking of the U.S. and development book. With this said, operating income is down by EUR 122 million year-over-year, EUR 57 million lower NII and EUR 65 million lower realization and other income. NII is down due to the reduced portfolio value as well as our funding cost position and capital optimization. As you remember, among others, we optimized our capital structure with a successful EUR 300 million Tier 2 issuance in June last year, which, of course, came at a cost. Also, realization and other income was significantly down due to meaningful one-off effects. First, operating income 2025 was negatively impacted by minus EUR 32 million one-off fair value risk charges due to our strategic U.S. exit decision. Second, realization income was down EUR 57 million year-over-year as '24 has benefited particularly strongly from significant noncore asset sales and liability buybacks. As already mentioned before, we expect realization income to remain at such lower levels, now supported mostly by ordinary REF prepayment income. As expected, general and administrative expenses are down year-over-year by EUR 9 million, while investments into our strategic transformation are ongoing. This demonstrates our ongoing strict cost discipline. But above everything else, 2025 was burdened by the sharp increase of loan loss provisions to minus EUR 410 million. This unusually high LLP were dominated by minus EUR 334 million that were set aside for the derisking of the legacy U.S. and development exposures. To be precise, minus EUR 235 million for the U.S. exits in the second quarter and minus EUR 99 million for German legacy development NPLs, which were meaningfully derisked further in the fourth quarter. Rather moderate loan loss provisions of EUR 68 million or 30 basis points were put aside for the European investment loan portfolio, reflective of a solid asset quality in our strategic core portfolio. All-in-all, this resulted in a highly unsatisfactory pretax loss of minus EUR 250 million, which is, however, within our latest adjusted guidance of minus EUR 210 million to minus EUR 265 million and which has to be seen in the context of our substantial derisking. After total risk costs for the U.S. and derisking of the legacy portfolio, these were at minus EUR 366 million across all income lines. This would then bring me to the quarterly deep dive. And first, I'm now on operating income on Slide 16. If looking at the quarterly development of operating income, also here, the impact of the portfolio and funding transition become clear. However, in the fourth quarter, NII and NCI stabilized at EUR 99 million as further increased portfolio profitability almost compensated for the slightly lower portfolio volume. Funding in turn, now provided for a moderate tailwind as previous funding access normalized in Q4 and costly funding vintages get substituted by gradually cheaper funding. Realization and other income is in sum slightly down by EUR 4 million quarter-over-quarter as other income in the previous quarter had benefited from a significant positive one-off. All-in-all, operating income thus has come down moderately by EUR 4 million quarter-over-quarter to EUR 106 million. On the back of EUR 4 million higher total expenses, pre-provision profit, therefore, declined by a total of EUR 8 million quarter-over-quarter to EUR 39 million. And that brings me to the next deep dive on operating expenses, and I'm here on Slide 17. Operating expenses, including depreciation, remain well managed, being down year-over-year by EUR 9 million or 3% in 2025 from EUR 266 million to EUR 257 million, while investments into our strategic transformation are ongoing. Actually, expenses for the running bank operations in '25 have been reduced by EUR 17 million or 7%. That said, operating expense in the fourth quarter increased very moderately as envisaged. Due to EUR 5 million higher one-off costs, especially in connection with the implementation of the target operating model, while again, expenses for the running bank operations were down by EUR 1 million. Although the cost base has been well managed, the cost/income ratio for '25 appears somewhat elevated at 61%. This is, however, more a reflection of the operating income transition, including the minus EUR 32 million one-off fair value risk charges for the U.S. exit, which has, as you know, to be shown in operating income. And now to our deep dive on the risk provisioning, I'm on Slide 18 here. Risk provisioning of minus EUR 54 million in the fourth quarter is especially driven by a further derisking of our German legacy development NPL. With that said, net additions of minus EUR 86 million in Stage 3 result from minus EUR 55 million for derisking measures for idiosyncratic legacy development NPL and minus EUR 29 million for European investment NPL. Only marginal minus EUR 2 million had to be booked for U.S. Stage 3 in Q4 as the substantial one-off U.S. derisking measures in Q2 again proved to remain adequate. This was partly offset by EUR 31 million net releases in Stage 1 and 2. EUR 50 million release of U.S. management overlay due to the SRT and ordinary repayment, Kay has explained that, was partly counteracted by EUR 19 million additions, mainly from market-wide macroeconomic scenario and parameter updates. I will mostly skip Slide 19 as the development of the stock of loan loss allowance is more or less just a reflection of the risk provisioning I just explained and usage, of course, from existing stock. Just one brief comment. The REF NPL coverage ratio overall remained stable quarter-over-quarter at around 30%, up from around 22% as per year-end 2024. This brings me then to the portfolio. As the U.S. portfolio is on exit and was already covered extensively by Kay at the beginning, I will focus on our strategic core portfolio, the European portfolio. I'm starting with the European performing portfolio on Slide 21. With the significant derisking and [indiscernible] markets gradually but slowly recovering, the quality of the performing European portfolio further stabilized with an ongoing improvement of risk KPIs for the performing investment loans since end of '24. The average LTVs have stabilized at 55%, a solid level in view of the property price correction seen in the last 2 years. The 12-month rolling valuation adjustments have gradually improved and continued to do so in Q4. And also when looking at the exposure at risk or layered LTVs, we see a decline by 16% in '25 and 4% alone in the fourth quarter. With that said, I will leave the further details on the performing European REF portfolio, which you can find on Slide 22 for your own reading. And I will therefore continue with Slide 23, where we discuss the European NPL portfolio. The European NPL portfolio predominantly consists of German development loans, which account for almost half of the NPL. The remaining 20% in Germany and 11% in France are mainly driven by some selective office properties of 2 new office loans with a total volume of EUR 239 million in the fourth quarter. 15% come from the U.K. and consists of legacy shopping centers known. The European NPL portfolio is solidly covered by 31%, up from 29% as of third quarter end and 27% as of year-end 2024. This brings me to our deep dive on the development portfolio on Slide 24. The development portfolio has been significantly derisked in 2025 and in particular, also in Q4. The total portfolio has been reduced by EUR 400 million or 16% to EUR 1.8 billion, while NPL has been kept largely flat with no new NPL rising in 2025. However, legacy NPL have required focused attention with dedicated derisking and support measures of the exit strategies through the entire year. In Q4, we decided to receive particularly demanding legacy developments in the final finishing phase and put aside EUR 55 million Stage 3 loan loss provisions for those. This brings the coverage ratio for development NPLs further up to solid 29%. All-in-all, the portfolio is now substantially derisked, and we feel comfortable with the existing coverage. And with that, I move to capital on Slide 26. With the CET1 ratio of 14.9% as per year-end, our capitalization remains solid. This is slightly down from 15.4% as of fourth quarter end. Let me explain the various effects in regulatory capital in particular RWA. RWA stayed flat at 17.5% -- EUR 17.5 billion, sorry, reflecting 2 opposing effects. While the SRT transaction provided for a leaf of EUR 1.1 billion RWA as per year-end, a change of applicable regulatory LGD levels in F-IRBA resulted in an offsetting effect of the same amount. I will come to this on the next slide in quite some detail At the same time, in the numerator, there was a slight reduction of regulatory capital by circa EUR 100 million in Q4 due to increased prudential backstop such as the expected loss shortfall and the NPL backstop as well as the fourth quarter loss and the preemptive AT1 coupon reduction from regulatory capital. All-in-all, our CET1 ratio of 14.9% stays solid. SREP requirements remain well exceeded with more than 500 basis points buffer over the CET1 ratio requirement and more than 400 basis points over the own fund ratio requirement as per year-end 2025. I would also like to take this opportunity to provide some further context. When looking at capital ratios, it is worthwhile to note that our F-IRBA RWA are procyclically elevated so that the F-IRBA CET1 ratio of 14.9% at year-end now stands below the pro forma standardized credit risk standard approach CET1 ratio of 15.3%, which by many is seen as a regulatory floor. Also, when looking at our capital on a simplified nominal level, we observed a steady increase of our leverage ratio, now close to a healthy 8%. This is, of course, down to robust capital and consistent ongoing deleveraging. Taking into account our substantial deleveraging and derisking and our future focus on core European markets only, we now define our long-term minimum CET1 ratio at 13% through-the-cycle, still providing ample of buffer to MDA. At this point, let me also reiterate that the conditions for the AT1 coupon payment are clearly met, as Kay said, with a buffer of MDA of more than 500 basis points and available distributable items of around EUR 2 billion. I also want to be very clear here that we continue to see debt capital and its investor base as a key cornerstone of our wholesale-led funding strategy. This then brings me to Slide 27, where I would like to explain the aforementioned change of applicable LGD levels for commercial real estate for certain countries in F-IRBA. In the F-IRBA regime, the LGD is dependent on the country-specific eligibility for preferential collateralized treatment. How does this work? The European Banking Supervisory Authorities of each country collect and publish the average CRE market loss rate from their national supervised banks on a regular basis. If the commercial real estate market loss rate in a respective country exceeds 0.5%, trade transactions no longer qualify for preferential collateralized LGD levels in the computation of F-IRBA RWA. In the fourth quarter, consideration of new loss rates for Poland, Finland and Austria meant loss of the preferential collateralized LGD treatment in these countries, even though some of these countries only very marginally exceeded the loss hurdle rate of 0.5%. Given the somewhat meaningful overall pbb footprint in these countries, the underlying RWA increased by EUR 1.1 billion. In effect, this means that the RWA relief from the SRT has been entirely consumed by the loss of the preferential collateralized LGD treatment for the aforementioned countries. In this context, I would like to make a few things clear. Number one, this development is not about pbb's own economic portfolio quality having deteriorated, but rather down to overall market-induced impact amplified by the digital nature of the F-IRBA LGD regime that I explained. Given that Poland and Finland have only marginally exceeded the hurdle rate, a digital reversal is possible when the banking authorities in the respective countries publish updated data. With regards to portfolio volume, 3/4 of the countries pbb operates and remain eligible for preferential collateralized LGD treatment and loss rates remain far below the 0.5% hurdle rate, as you can see in the last column of the table on Page 27. However, there has been another more recent development. On February 27, 2026, the EBA communicated its position that U.S. loss data published by the U.S. Federal Reserve is not viewed equivalent even the U.S. themselves are deemed an equivalent regime under the CRR. If applicable, preferential LGD treatment of real estate located in the U.S. would no longer apply in principle when calculating current RWA for these countries going forward. pbb will carefully review this assessment, but if applied, this would result in a pro forma reduction of our CET1 ratio of circa 135 basis points for our entire U.S. portfolio. When also taking the envisaged first-time consolidation effect from the acquisition of Deutsche Investment into account, which is minus 26 basis points and becomes effective in Q1 2026, the pro forma CET1 ratio as of year-end 2025 would be 13.3%. Even at this harsh pro forma level, the buffer to MDA would still be comfortable at around 340 basis points. And finally, a few remarks on the funding and liquidity side. I'm now on Slide 28. All-in-all, we maintained a resilient and balanced funding mix with ongoing focus on efficiency and cost optimization. With EUR 2.1 billion Pfandbrief issued, a successful EUR 750 million senior and our successful EUR 300 million Tier 2 issuance, we completed our funding agenda '25 already in summer and provided for comfortable funding access. With an LCR of 379% and EUR 5 billion liquidity at year-end, we maintain a solid liquidity in line with our reduced balance sheet needs. But most important, issuance costs have come down on all instruments, slightly on Pfandbrief, more strongly on senior preferred as well as deposits. All-in-all, we expect this, in combination with moderate funding needs to provide some ongoing tailwind on funding costs going forward. This is, of course, looking through current noise as we have no current need to issue anything. In 2026, we plan for a moderate EUR 1.75 billion in Pfandbrief issuance, of which more than 40% have already been done on further reduced costs. In addition, we plan for a maximum [indiscernible] preferred issuance of EUR 500 million. The retail deposit volume is planned to stay largely stable at around EUR 7 billion, in line with our reduced balance sheet needs, catering for a 50-50 split in unsecured funding, 50 for each wholesale and deposit funding. With that, Kay, I hand over back to you. Kay Wolf: Thank you, Marcus. Ladies and gentlemen, let me now on Page 30, turn to the future. We have a challenging year 2026 ahead of us. And the overall situation hasn't gotten any easier with the recent developments since last weekend. Our full focus is on increasing operating income in our 2 core business areas: Real Estate Finance Solutions and Real Estate Investment Solutions. However, operating income in Real Estate Finance Solutions will be affected by the cost of the SRT. Furthermore, we have to cater for lower positive one-off effects in 2026 compared to last year. We continue to exercise strong cost discipline. We continue to make our core business, real estate finance solutions more cost efficient. The initial consolidation of Deutsche Investment and the further development of our business activities account for higher operating expenses in Real Estate Investment Solutions. In fact, we are reinvesting cost savings into our new business activities. Nevertheless, the cost/income ratio will temporarily increase to between 70% and 75%, mainly due to the development in the operating income. We expect a normalization in risk provisioning. With the U.S. and development book largely shielded last year, we anticipate in 2026 risk costs of 25 basis points to 30 basis points in our core markets in Europe. What does that mean specifically for 2026? Let's go and move to Page 31. We want to keep our growth momentum in the new business and achieve a volume of between EUR 7.5 billion and EUR 8.5 billion in real estate financing. We expect the portfolio volume between EUR 27 billion and EUR 28 billion. In Real Estate Investment Solutions, we expect to grow assets under management to be between EUR 3.3 billion and EUR 3.7 billion. Operating income is targeted to be in the range of EUR 357 million to EUR 425 million. Cost/income ratio between 70% and 75%. The share of fee income is expected to rise to more than 10% in 2027. As announced, pretax profit is expected to be between EUR 30 million to EUR 40 million. Moving to Page 32 and looking further ahead, we remain committed to our strategic goals and key performance indicators. Return on tangible equity is our main KPI. We are already at around 8% in new business. We want to achieve this for the whole bank by 2028. Operating income shall amount to around EUR 600 million towards 2028. In Real Estate Finance Solutions, 3 key levers should increase the return on tangible equity. First, SRT costs will decline with the reduction of the U.S. portfolio. Second, more profitable new business will substitute less profitable existing portfolio. And third, a more cost-efficient liability and equity side will improve refinancing costs. In Real Estate Finance Solutions, we target to grow assets under management to EUR 7 billion to EUR 8 billion. The share of operating income is expected to grow well above 10% in 2028. We have already significantly reduced the risk profile of our portfolio. In 2028, risk costs are expected to normalize to around 15 basis points to 25 basis points. We remain focused on an efficient cost base and we continue to execute our cost measures in a disciplined manner. Cost savings in our Real Estate Finance Solutions business will be reinvested in the development of real estate investment solutions. Overall, broadly stable operating expenses help to bring the cost/income ratio back to target level of 45% to 50% by 2028. And that brings me to our last page that summarizes our targeted key developments until 2028. Ladies and gentlemen, pbb is in the middle of its transformation to a more resilient, profitable and diversified European commercial real estate bank. We have to acknowledge that we will not be able to achieve our ambitious goals we set in 2024 within the planned timeframe. Also, the market environment economically and geopolitically has not developed as we had expected. But we are making progress. In challenging times, we are acting decisively as our exit from the U.S. market underpins and we sustainably reduced risks in our books. We have the momentum to grow our new business volume even in a currently sluggish CRE market, and we are doing so profitably. And in 2026, we start to see notable first capital accretive contributions from our new businesses. We are on the right track with this fundamental transformation even if it will take more time. Thank you very much for your attention. Marcus and I are now looking forward to your questions. Operator: [Operator Instructions] The first question is from Tobias Lukesch from Kepler Cheuvreux. Can you hear us, Mr. Lukesch? Tobias Lukesch: Yes. Can you hear me? Yes. It takes 10 seconds until I'm in talk mode. Sorry for that. On the capital, the first question regarding the EBA communication of the U.S. LGD equivalents and may we see or will we see the 135 basis points negative core Tier 1 ratio impact? And if we will see it, what is the timeline for that? Then secondly, on dividends, what is the projection for the future? I mean, yes, there were moving parts. Yes, you're cleaning up the business. You say you're on the right track for '28, but you haven't touched on dividend projections. So I was wondering what this means for capital distribution going forward, especially since you lowered the through-the-cycle threshold to 15%, even so you highlighted we might get closer to that level if we see the U.S. LGD impact. And then on the U.S. NPL portfolio, this was now reduced to EUR 0.4 billion. What is the projected development here over the next 3 years? And maybe could you please quantify the impact on risk provisioning -- on the risk provisioning guidance you have provided, which will be lower for this year and then further lowered for the years to come? Marcus Schulte: Hello Mr. Lukesch, good to hear you. Thanks for your clarifying question on the very new statement that came out by the EBA just a few days ago, actually Friday last week. So I think the Q&A are quite clear in that they say that the EBA sees in principle that the computations as done by the Fed don't mean that the computations are eligible for the European regime, even though, again, as I said, the U.S. fundamental principle are, of course, an equivalent regime. It's very new. So we are carefully assessing this. But at this point in time, I would expect clearly that it will happen. And I cannot rule out that this will be a Q1 effect already. And let me again say this would be 120 basis points for the commercial real estate and another 10 basis points roughly for the residential so stated that 135 basis points that you see. And that is something we expect to happen, but we have to carefully assess it, and we will update you then on Q1, but I would expect it to be reflected in Q1. Kay Wolf: Yes, Mr. Lukesch, then I take the other 2 questions. On dividend, thanks for the clarifying question. We are sticking to our distribution guidelines that we have put out with our strategy on 2024. And thanks for raising that question. So we want to distribute 50% of our profits, and we want to use the tool of dividends on the one hand side, but also share buybacks on the other side. And to your last question on the U.S. NPL, yes, you see we have quite a good momentum built also based, of course, on the provisioning that we did and the shielding to reduce the book. We will more than half reduce it in 2026. And we see over the next 2 to 3 years, a full exit on that book. However, as we speak, we continuously watch and see whether we can value preserving exit those NPLs earlier. But current projection with regard to your question should be then towards '28 and '29 in line with the rundown also of the performing book. Operator: Mr. Lukesch, does that answer your question? Do you have a follow-up? We can hear you. Then we are moving on to the next question. The next question is from Miriam Killian of Deutsche Bank. Miriam Killian: I hope you can hear me all right. So my question would be surrounding the tax expenses that we saw in the fourth quarter that were quite a bit higher than we anticipated. If you could maybe just provide some color surrounding this. That would be my only question for now. Marcus Schulte: Yes. So as you say, for the full year result pretax minus EUR 250 million post-tax, minus EUR 284 million. Essentially, this is DTA reversals, which you have to mostly see in the context of risk provisioning, but also more importantly, in the context of the lower business projections that we have for future years, which basically mean that we have this impact from DTAs that cater for the EUR 34 million in addition to the EUR 250 million pretax loss. Operator: The next question is from Domenico Maggio from Jefferies. Unknown Analyst: I have 4. On the expected capital erosion from Deutsche Investment acquisition, is that going to be 26 bps or 30 bps in the next quarter? Second one will be, what do you mean exactly with pro forma credit risk standardized approach? Is this pro forma for some adjustment or is this a normal standardized approach? And if the standardized model results in higher capital, then why did you transition in the foundation model? Third question would be, are you able to switch your capital model again in the future? I assume the ECB would need to approve that. I'm asking this clearly given the unfavorable capital development and your previous transition to different capital models. And the last one, what would be the impact to RWA if all countries were to lose their preferential LGD level? Marcus Schulte: Okay. So good to hear you, Domenico. So to your first question, we've been indicating previously on the signing of the transaction in the summer that the capital effect could be around minus 30 basis points. That's the number you have in your memory. And the precise figure that I gave you is minus 26 basis points now. So it's a clarification of an estimate that you've been hearing with Q2 results. The second point is that you were asking about the nature of the pro forma numbers we were giving. So these numbers are basically under the assumption that the bank will apply credit standardized approach in its entirety instead of the F-IRBA model computation with PDs out of the model and LGDs out of a matrix. So it's a substitution of the entire book pro forma into standardized KSA in German, CRSA in English. And it is, of course, a pure exercise to illustrate the very high RWA density that we now have and the capital compression that we face because obviously, a lot of people who are looking at the capital ratios see the standardized capital ratios as a floor to where it would be. And the point we are trying to illustrate that at this point, and this is the last answer to your question, at this point, at the bottom of the cycle, it happens to be that with what is happening in these digital LGD hurdle rates that I mentioned for these countries that even the standardized approach is better than the F-IRBA in this part of the cycle. But of course, you would choose capital models through-the-cycle and it was a very conscious decision to move to F-IRBA because essentially the old IRBA, advanced IRBA, as you remember, is essentially not suited for low default portfolio. And that's, I think, why we and others moved from an IRBA approach in our case to an F-IRBA approach. And we have to look at that on a through-the-cycle basis, on a through-the-cycle basis, the F-IRBA from our point of view is advantageous. Right now, at this part in the cycle with the few digital events that we have seen, it is not. But as I said, Domenico, what we always have to bear in mind, the pro forma numbers that I gave, right, adding everything together, U.S. CRE, U.S. residential, the acquisition that will happen, of course, no modificating effect including, as I mentioned, that, of course, digital event, one can also flip into the other side, for example, for these countries. And lastly, what would be the RWA effect? You see that on this table that we provided on Page 27. At the end of the day, from my point of view, the very key message of that slide is that for the vast part of the portfolio, 75% portfolio that we have in the F-IRBA, the green dots that you see, the actual losses are far, very far below the hurdle rates. What we try to illustrate there that currently, we don't foresee at all that these countries that you see would move into such a digital situation that we've experienced, for example, in the fourth quarter with Poland, Finland and Austria, you can see how far they are away from the 0.5%. Unknown Analyst: Yes. Helpful. I was asking that just to assess the worst-case scenario. And just a quick follow-up. You mentioned that the banking supervisory authority of respective countries collect the data and then they updated during the year. Is that an annual exercise or does it occur more frequently? Just I mean. Marcus Schulte: Typical annually. Unknown Analyst: Annually. Operator: The next question comes from Jochen Schmitt from Metzler. Mr. Schmitt, can you hear us? Jochen Schmitt: It took some time until I got unmuted. I have 2 questions, please. Firstly, again, on the CET1 ratio, your new target of above 13%. How much of this change versus previously was driven by SRT and how much by the possible changes in regulatory treatment, which you mentioned on Page 27 or to ask the question in a slightly different way. If the pro forma CET1 ratio, which you mentioned were to realize, would you possibly again review your CET1 ratio minimum target again? And secondly, very briefly on the EUR 40 million fee assumption for Deutsche Investment in '26, what is the pretax earnings contribution, which you expect from that? Kay Wolf: Mr. Schmitt, good to hear you. Thanks for having you around. Let me take the 2 questions. And let me start with your question on CET1. The strategic adjustments around the minimum level is not driven by the capital regime under which we are reporting. It's driven by the risk profile of the firm. I think we have outlined that always in the calls and have said originally, we set it at 14%. Now we are moving it to 13%, and that is purely driven by the risk profile of the portfolio. When we were at 14% we had still a much higher position on the U.S. portfolio, which we now have completely derisked from our perspective or nearly completely derisked economically. And we have also shielded our development portfolio next to our strategic position to focus on the European core markets, most of which you see on Page 27, where we have allocated, and we are focusing on those markets. So overall, strategically, the steering of the capital levels for the firm for us, is not driven by the capital regime, but it's driven by the risk profile of the portfolio and how that portfolio behaves through-the-cycle. I remember -- I would like to reiterate what Marcus said, it's a 13% through-the-cycle. And we all know here that commercial real estate markets are volatile. And that's a reflection on the 13%. With regard to your second question on the Deutsche Investment Group, we would provide, of course, way more detail when we communicate on our quarter 1 figures because there is where we first time will provide way more detail on it. But for 2026, it's a profit before tax of around EUR 4 million. And you will have to deduct then, but we will provide more details on that, the PPA, the purchase price adjustment as well so that you should look around EUR 3 million for the Deutsche Investment Group for 2026. Operator: Next question is from Corinne Cunningham, Autonomous. Corinne Cunningham: Thanks very much for letting fixed income people speak on the call. Just a couple of quick clarifications and a few questions from me, please. When you said the 13.3% assumes the whole book moves to standardized, the calculations seem to suggest that that would include the U.S. moving to standardized and the acquisition of DIG, but not all of your core European lines of business. Can I just? Marcus Schulte: What I said was the whole U.S. book, meaning the commercial real estate book, which is in detail described on Page 27, but also the very limited residential exposure that we have that is also subject to a similar but slightly different regime and the same principle. And with that in principle decision or wording of the EBA, we assume that we will lose the preferential treatment for LGDs for both the commercial real estate and the residential portfolio in the U.S., so the total U.S. portfolio. Corinne Cunningham: That's clear. And then just you mentioned on the dividend policy, 50% distribution policy. Is that expected to apply to 2026 or not until you get to the end of your planning period? Kay Wolf: Corinne, thanks very much, and thanks for having you. Good to hear you. It applies for the year 2026 and the coming years. So that's the dividend policy that we have set. So it's for the future years that we want to deploy and have this policy in place. Corinne Cunningham: Then the other question was about the way the SRT is working in the U.S. And can you explain why it doesn't help you with the change from F-IRB to standardized given that you've now got a fairly chunky first loss cover, why are you not protected against that change out of F-IRB in the U.S. portfolio? Kay Wolf: I can answer that in 2 ways. First of all, our -- not our entire U.S. portfolio is covered under the SRT. So there are remaining pieces and as well the 5% size of the SRT portfolio is not covered, yes. So you will see that effect. The second point, Corinne, I would make is that the SRT does provide protection for the change in the regime. However, the loss of the preferential treatment, of course, reduces the positive effect that we mentioned of EUR 1.1 billion. It doesn't remove it completely because the other offsetting elements that you see when you look at the quota of EUR 135 million, you need to bear in mind the portfolio components that are not yet in the -- that are not covered by the SRT. I hope I was clear. Corinne Cunningham: The is not covered, totally get that. So the rest is it just the senior layer that's being hit or basically the SRT is giving you less protection than you budgeted when you set it up? Kay Wolf: I think the overall structure, the way it works from a capital regime perspective, Corinne, on the SRT, you cannot separate the senior and the math. You need to look at the entire capital structure and the entire capital structure defines the capital that needs to be put aside under the respective regimes, be it F-IRBA or standardized. So it's not simple saying it is to be deployed on the unprotected side. It needs to be deployed on the entirety of the portfolio and the amount of capital that you have to put aside depends on the structure at the point in time. As you know, that this structure, when it starts winding down, is also starting to shift and change, and that has always an impact on the respective capital that you need to put aside. Unfortunately, not a very straightforward mechanism, but the mechanism of how to deploy it, I think there is clearly defined rules of how the structures need to be taken into consideration when calculating under the respective rules. Corinne Cunningham: Okay. And then maybe a more fundamental question about the revenues. So your revenues, you're targeting to basically increase them by 1/3. What are the main building blocks of that? I know you talk about, obviously, the cost of the SRT should fade away, but that's still a very significant revenue build with a flat loan book. Is it based on increasing interest rates? Just very keen to hear how you would expect to build to that EUR 600 million revenue number. Kay Wolf: Yes. I would, Corinne -- I would start with that, and I would kindly ask Marcus to chip in as well if I might not touch on all the aspects. I would probably, Corinne, draw your attention for that on Page 30, where we have the walks on the operating income side for the respective business units through 2026. But those walks give a good indication in the direction of travel that we are going for the year 2028. First of all, on the Real Estate Finance Solutions business, you see already in 2026 positive impacts from the rebuild of the book, putting more profitable new business on, substituting less profitable business. You see that here with EUR 15 million-plus EUR 35 million in the range, take that as a consistent rebuild of the book because our back book of EUR 27 billion still has something like EUR 20 billion in there, which will come due over that period and will be replaced by more profitable business. So that is one driver. The second driver to it, and you referred to a flattish book is that of course, we want to also substitute and reduce our nonperforming loans. Look at the U.S. at the moment, the entire U.S. book [ 28 ] is more or less going to disappear, including the nonperforming loan side, but also on the rest that gets substituted with more profitable and interest income producing operating income on that part of the book. So a lower NPL book is supporting this trajectory as well. And the third layer on the real estate finance side is definitely a more efficient liability and equity side. So there is funding support coming in. Marcus has outlined on the funding page in which direction the funding costs are going, and this gives us tailwind there as well. So those are the key levers. Next to that, if you drill further down in REFS, I could also mention, of course, we are diversifying in our portfolio. So we are taking more managed properties, hotels, student housing, those asset classes on our books. They provide for a better risk return profile compared to other asset classes, most notably the office portfolio, which will more decline over time. So there are multiple levers that all play into improving the operating income in the real estate finance side. Paying attention to real estate investment solutions, the growth here clearly to EUR 7 billion to EUR 8 billion of assets under management is literally coming from the EUR 3 billion to EUR 3.5 billion that we have when you look into real estate investment solutions for 2026 is substantially adding revenues there as well. And we are building out our Originate & Cooperate business. So there is clear anticipation of fee income growth for real estate Investment Solutions. And in the combination of both of those elements next to the fact that the negative impact from others that you see on Page 30 is going to disappear because it's a lot of one-offs that we had in 2025 that are not coming back, that gives a consistent growth of operating income towards the mentioned EUR 600 million in 2028. Corinne Cunningham: Okay. And just on the rate assumptions behind that, do you just assume current rate supply? Marcus Schulte: Correct. Yes, it's more or less current rate supply. We assume a moderate bias for rates to come down on the short end, but rather assume that rates in the middle and longer part of the curve would stay or slightly rise given funding agendas of governments, et cetera. And that's basically the assumption. So a reasonably steep curve, but no major impulse for the income as such. However, of course, as Kay mentioned, if you, for example, look at the equity side, et cetera, interest rates going stable in medium-term and term means, of course, that investments that you make are positive yielding and not anymore 0% yielding if vintages from the low interest rate phase basically gradually wash out of the system, right? So that's essentially the effect. Operator: The next question is from Sharada Patel of Citi. Unknown Analyst: So I've got 2 questions. So if the numbers are reviewed annually, do you know when the next review for Poland and Finland will be? And then the second one will be just some more explanation around the EBA's position on the U.S. because it seems like the market loss rate is below the 0.5% kind of threshold. So if it's not equivalent, is there kind of a different benchmark number that they're comparing it to or is there a different data source that they can refer to and do find equivalent? Is this? Kay Wolf: We were just wondering whether there are more questions, right? So we wait. Unknown Analyst: Yes, sorry. And just finally, so if there's -- I just wanted to know, you're expecting that this U.S. change will come in, in the first quarter, but are there any changes kind of later down in the year if they can find an equivalent data source that could mean that, that is reversed? Kay Wolf: Thanks, Sharada, and thanks for your questions. Let me take your first question on the technicality. The national competent authorities would have to, by law, communicate latest by the 30th of June of the following year, the loss rate that triggers the treatment. That's the law. The reality is that we are continuously monitoring publications. And they can also publish in between. So that is -- there is on the one hand side, the way it should be and there is on the other hand side, the way it happens. By a matter of fact, we are monitoring regularly because as a foundation of our bank, we need to, the respective published levels and would then respectively apply them once they are published. And on the U.S. data, look, the U.S. is not -- does not have the same type of heart test and equivalent LGD regime, as we all know. So therefore, by a matter of fact, they do not publish exactly the same data to comply with a European rule set out in the CRR. For that purpose, equivalents should be and can be applied. But by a matter of fact, looking into that, the conclusion of the EBA, if you read that is that there is no such data that would exactly cover the requirement of the CRR. And therefore, stating -- and also stating that what is published and could be applied to is from their perspective, limited able to apply. And hence, their conclusion that for the U.S., despite the U.S. being a regulatory regime that is deemed by the European Commission as an equivalent regime, the level of data and information that is being published is viewed by the EBA is not sufficient for applying the respective calculation that we have been applying in the past. There is a hell of a lot of data published in the United States, as we all know. It's the country with most of the statistical data. But of course, they do not publish 100% according to European rule regulation. Unknown Analyst: Okay. And why is this change only happening now? Because obviously you've been using F-IRBA since January '25? Marcus Schulte: And look, I mean, perhaps 2 things and just to your earlier question, Sharada. And for that reason that Kay and I explained, the 26 basis points that we compute do not matter because at the end of the day, the decision is in principle and irrespective of computation. But this is, of course, not meant to pbb. It's a clarification that the EBA has published to the market in principle, it's public. And it has come out now on the back of a question that was raised and now they've been clarifying that point to the market in general. Kay Wolf: So it's completely irrespective of pbb per se, right? This is a clarification to a standard. Operator: Sharada, do you find your question answered? Then the next question is from Daniel Crowe, Goldman Sachs. Daniel Crowe: These are kind of just follow-ons from what has already been asked. So just Domenico answered, and I'm not sure if you gave a full answer to this. But just given the volatility that you're seeing in your RWA measures of capital at the moment, if you wanted to move to standardize, could you actually do it? Because we've seen quite a lot of movement in your CET1 over the last couple of years, which is obviously the moves are understandable. But if you wanted to move to standardize, could you? And then just following on from Corinne's question around the SRT and its impact on the potential impact from the U.S. If this SRT was not in place, what would have been the capital impact there because I think there's going to be a decent bit of confusion around why that doesn't protect you a little bit more? And then just finally, just on Deutsche Invest, I know you say EUR 40 million of revenues. Could I just get the cost number for -- that's coming with Deutsche Invest as well? Kay Wolf: Yes. Daniel, thanks and as well to you, welcome. Thanks for your question here in this round. To your first question, moving to another capital regime is, first of all, regulated under the respective rules that have to be applied for banks. And in general, it is a process that needs to be approved by ECB. So it's not on us to jump around. And again, repeating and reiterating or making the focus of what Marcus said, what we have been seeing, and you said that over the last years in terms of volatility, that is, by a matter of fact, a reflection of the foundation approach. We called it the procyclical nature of it. And to a degree, the digital effect of being above or below a threshold for an entire portfolio without reflecting on the individual performance of the bank is one of the reasons. And when you consider where the market has been moving and we are talking that real estate markets now on low levels being stabilized, what you see literally by a matter of fact, we are moving in the cycle through really a low point and a hard point. And considering the capital regime, you always need to look through that and we need to look through-the-cycle as a whole. But the short answer, I gave it a little bit longer because of the consideration that I expect behind your question. The short answer is we are not free here to jump around on capital regimes. And don't view as a sloppy Marcus smiling at me, don't view it as a sloppy answer, but I want to be clear given that, that question was asked twice, Daniel. Daniel Crowe: Yes. No. And I understand like the capital itself is moving your leverage ratio is obviously in a good place. I was just wondering. Kay Wolf: And that is a bit the situation that we also on the respective page on the capital side, wanted to give a reflection. You see the derisking of the bank, the deleveraging of the bank also reflected, I think, well in the leverage ratio and how the leverage ratio has developed. And then? Daniel Crowe: Just had the SRT not been in place, the impact of the U.S. portfolio of 135 bps, what would that have been? Kay Wolf: I don't have the number around, Daniel. But what I can say it would be, of course, higher because there is a mitigating effect by the SRT. So the effect would be even higher. So we do here benefit from the derisking process, of course. Overall, by the way, we also benefit from the repayments that we got on our performing book as well as a reduction in our NPLs. The entire exit of the U.S. in itself mitigates, of course, the impact, but the SRT standalone, of course, has a mitigating effect as well. Daniel Crowe: And the final one was just on costs in Deutsche Invest. I know you said EUR 40 million of revenues. I just -- I know you said costs stable across the bank, but I just wanted to check what the costs were for Deutsche Invest. Kay Wolf: The cost for Deutsche Invest, I think when we said around EUR 40 million for 2026, we also said around EUR 4 million of profit before tax before the PPA effect. So the delta of it roughly is the cost range that you have. So you are around EUR 35 million of costs that you have in that business. Daniel Crowe: And also thank you for taking calls from the credit side. Much appreciated. Operator: The next question is from Paul Noller, Commerzbank. Paul Noller: I would like to quickly go to the most recent events. You mentioned that you are guiding for loan loss provisions in '26 of between 25 basis points and 30 basis points. I don't assume that takes into account the recent rise in energy prices. So I would be curious to see your view on if we are now looking in Europe at a protracted increase in energy prices, how that might impact the debt service coverage ratios, specifically in your European [ Rev ] portfolio. I'm thinking here about hotels, logistics and what effect you think that might have down the road on risk cost in 2026? Kay Wolf: Yes, Paul, thanks for your question. I mean, first of all, let me clearly state that we have no active business whatsoever in the Middle East. I think that is one thing that should be said. So the impact and you're alerting to that is more an indirect impact rather than a direct impact that we will have to consider. And whilst energy prices is the one precise one, overall, I think one could sum up, it will be inflation and inflation on the cost side and in particular, on the service properties will have an impact. The experience that we have when you consider going back to the Ukraine war and the energy price rise that we have had, although it's awful to compare wars with each other, that to clearly state that. But take that as an example, we have the experience of those cost developments. Of course, one could say there have been mitigants and one could read now as well if it gets completely out of normalatality rises, then there will probably be additional support coming. Of course, there is a higher pressure on the cash flows that are coming. But from the experience that we have been seeing that is within the range in our portfolio of what we guided for in terms of the cost also stressing the fact that the hotel portfolio, take this as an example, is only 2% of our portfolio. So we are not that heavily involved. We are just going into and expanding into it. So we can take those considerations, of course, when taking new loans on our balance sheet. Operator: At the moment, there are no further questions in our queue. [Operator Instructions] So with that, thank you very much, and I'm handing the floor back over to the host. Kay Wolf: Yes. Thank you very much. Thanks for the exchange. Thanks for the questions, in particular, Corinne, Domenico, Sharada, Daniel, thanks for your questions and looking forward to have you around in our next call. If there should be more questions arising, which would not be unusual, you know our Investor Relations team, Michael Heuber, Axel Leupold, they are available. So please reach out. And otherwise, I wish you all a good day. And again, big thank you also in the name of Marcus for having joined our call. Thank you very much. Marcus Schulte: Thank you.
Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ardent Health Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Dave Styblo, Senior Vice President of Investor Relations. Please go ahead. David Styblo: Thank you, operator, and welcome to Ardent Health's Fourth Quarter 2025 Earnings Conference Call. Joining me today is Ardent President and Chief Executive Officer, Marty Bonick; and Chief Financial Officer, Alfred Lumsdaine. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures including adjusted EBITDA, adjusted EBITDAR and free cash flow. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release and supplemental earnings presentation, which were both issued yesterday evening after the market closed and are available at ardenthealth.com. With that, I'll turn the call over to Marty. Martin Bonick: Thank you, Dave, and good morning. We appreciate everyone joining the call and webcast. During our third quarter call, we committed to taking swift and decisive action to address certain industry challenges that has intensified. The initiatives were designed to strengthen our operating model and better position the company for long-term earnings growth. I'm pleased to share that our fourth quarter results reflected a number of positive developments and encouraging signs of progress as a result of the actions we took since our last update. Key industry headwinds that we flagged as accelerating on the third quarter call, including professional fees and other rate pressures driven by payer denials showed stability in 4Q. Additionally, our team focus on disciplined execution and expense optimization is already starting to pay dividends and drove solid fourth quarter earnings performance. Furthermore, we generated robust cash flow that was above our expectations resulting in nearly a 50% increase in full year 2025 operating cash flow. In short, I'm pleased with our finish to 2025 and the momentum that we've built exiting the year. Importantly, we expect operating performance traction to further ramp throughout 2026. During today's conversation, I'm going to focus my comments on 3 key areas: First, I'll walk you through fourth quarter performance, which resulted in 2025, recording our highest ever revenue, EBITDA and operating cash flow. Second, I will provide color on our IMPACT program, our work to improve margins, performance, agility and care transformation and how those actions are strengthening our business, along with an update on industry challenges we highlighted last quarter. And third, I will share context around our 2026 financial guidance. Let's start with fourth quarter performance in 2025 results. We reported solid fourth quarter revenue supported by durable industry demand. This capped off a strong 2025, where we grew full year revenue by 6% at $6.3 billion, squarely in the middle of our 2025 guidance range. Underpinning this performance was strong 2025 admissions and adjusted admissions growth of 5.3% and 2.3%, respectively. Fourth quarter adjusted EBITDA benefited from the impact program initiatives to optimize revenue and streamline the business. For full year 2025, we grew adjusted EBITDA 9% and expanded margin 20 basis points. We also generated significant operating cash flow of $223 million in 4Q and $471 million during 2025, up 49% from 2024. Our improving earnings profile, along with diligent work to maximize collections contributed to the large increase. Finally, we strengthened our balance sheet during the year. We increased cash by approximately $150 million to over $700 million at the end of 2025, and we reduced our lease adjusted net leverage nearly 0.5 turn to 2.5x. That's a good segue into the second topic of today's discussion, our IMPACT program progress and an update on industry challenges. We are pleased with the traction of IMPACT-driven initiatives to further optimize costs and strengthen margins. During the third quarter call, we sized $40 million of annualized IMPACT program savings that we expected would ramp during the fourth quarter of 2025 and reached run rate entering 2026. We are on track to deliver on that target and are raising the expected contribution to approximately $55 million, which Alfred will discuss shortly. Importantly, IMPACT is a multiyear operating model transformation, improving not only margins, but our performance agility and care transformation. These efforts are reflected in the P&L. For example, we activated precision staffing initiatives that resulted in fourth quarter a salaried wages and benefit expenses declining 0.4% year-over-year. Similarly, we reduced SWB per adjusted admission by 2%, which is a significant inflection from the 4% growth during the first 3 quarters of 2025. Within SWB, we reduced contract labor expenses by 26% to $17 million in the fourth quarter. To put that into context, contract labor accounted for only 2.6% of SWB in 4Q, which is the lowest it's been since 2019 when we were running in the mid-2% range. These improvements are being driven by focused efforts to optimize precision staffing, drive operating room excellence and expand virtual care. In contract labor, we renegotiated a key contract to improve our rates and we reduced overall utilization by accelerating our speed to hire and leveraging real-time management tools. This enabled us to reduce agency labor FTEs by approximately 175 in the last 4 months of 2025. In the operating room, which is 1 of our highest impact areas for improving performance, we increased first case on time starts by over 10 percentage points in 4Q versus 3Q and expect to continue on that progress this year. Additionally, we continue to see significant value and care transformation through our virtual care activities, including virtual nursing, patient monitoring and provider coverage. As we have shared previously, these programs have improved workflows, ease staffing pressures and strength in clinical support across our hospitals. Building on this success, we announced a partnership with last week to launch an enterprise-wide AI-assisted virtual care expansion that will span more than 2,000 patient rooms by year-end. This will establish a connected, scalable virtual care network across all markets, improving safety, operational efficiency and enabling better utilization of clinical talent. Stepping back, I'm encouraged by the traction of our IMPACT program built throughout 4Q and the momentum it provides heading into 2026 as we manage well-known industry pressures. On that front, I wanted to provide a brief update on the 2 pressure points we experienced in the third quarter. Payer denials in 4Q held generally consistent with 3Q, and we are starting to see some improvements on the margin aided by our partnership with Ensemble. Specifically, we've been focused on denial integrity and more consistent application of our contractual tools yielding better predictability in the revenue cycle. Likewise, professional fees also moderated in Q4 with growth decelerating to 8% from 11% in Q3. Our strategic recontracting and vendor transitions are having a positive impact. While it's still early, the 4Q data points are directionally favorable on both industry challenges. Pivoting to our third discussion point, I want to address our 2026 outlook. We entered this year encouraged by tangible progress from our IMPACT program and expect to continue building momentum throughout the year. We remain highly focused on optimizing revenue, disciplined expense management and productivity, the levers most within our control, all while delivering excellent quality care to patients. In terms of industry demand, our positioning remains a strong cornerstone as our markets continue to grow 2x to 3x faster than the national average and are further bolstered by rising care complexity. These structural trends reinforce our long-term growth thesis, while we continue to overcome the impact of well-known industry headwinds. With that backdrop, we are issuing 2026 adjusted EBITDA guidance of $485 million to $535 million. As Alfred will detail, this reflects tailwinds of mid-single-digit core earnings growth and IMPACT program savings, we now estimate will contribute about $55 million in 2026 at the midpoint, up from our $40 million estimate. Those benefits will largely help offset headwinds that include a prudent estimate for potential exchange disruption. We believe this is an appropriate posture to start the year given the broader market uncertainties Importantly, we expect adjusted EBITDA to return to growth in 2027 after lapping this year's annualization of payer denial and professional fee headwinds and as IMPACT program savings build through 2026. Before turning the call over to Alfred, I want to underscore that the deployment of AI and other technology continues to be an important part of Ardent's transformation strategy. We've taken a progressive disciplined approach to building the infrastructure required to deploy these tools at scale and that foundation is enabling us to advance additional initiatives this year. The takeaway is simple. Our single instance of Epic and enterprise-wide technology foundation gives us a structural efficiency advantage that continues to widen over time. We are seeing tangible benefits in coding accuracy, labor efficiency clinical throughput and quality. As for Ardent, you heard earlier that we are expanding AI-assisted virtual care across the full enterprise in 2026, supporting a virtual first approach that improves access, streamlined care delivery and extends the operating efficiencies already demonstrated in several markets. Our AI-enhanced scribe technology reduces clinical documentation time by 35% for physicians, enhances documentation quality and supports appropriate revenue capture. Adoption continues to grow, with Ardent providers now using the AI scribe in approximately 85% of patient visits without double the industry average. Additionally, we continue to deploy medical wearables that enable continuous vital sign monitoring. In markets where we implemented, this technology has reduced mortality by up to 15% and shortened length of stay by approximately 1/3 of a day. Finally, we are leveraging technology to support both clinical staff and operating room scheduling. This provides frontline leaders with real-time insights into staffing patterns and surgeons access to pull forward cases to maximize our operating room utilization. And importantly, our single instance of Epic remains a core differentiator standardizing and optimizing workflows, enhancing provider scheduling and consistently delivering strong clinical outcomes, including top quartile performance. Collectively, these tools have and will continue to make Ardent more efficient and enable us to deliver best-in-class patient care and quality. With that, I'll turn it over to Alfred to provide more detail on our fourth quarter financial performance and outlook. Alfred Lumsdaine: Thanks, Marty, and good morning, everyone. Building on Marty's comments, we're pleased with our fourth quarter results and our momentum exiting the year. Fourth quarter revenue of $1.61 billion was essentially flat compared to the prior year and in line with our expectations. As a reminder, we recorded 2 quarters of financial benefit related to the New Mexico DPP program in the prior year period. Adjusting for this, year-over-year revenue growth would have been approximately 3%. In terms of volumes, fourth quarter admissions increased 1.5%, adjusted admissions grew 2% and surgeries were essentially flat. Fourth quarter adjusted EBITDA of $134 million was 2% above our implied guidance midpoint, driven by expense discipline, operating efficiencies and our IMPACT program initiatives. As Marty noted, these actions contributed to SW&B cost savings after increasing 6.7% for the first 9 months of 2025 compared with the prior year period, salaries, wages and benefits declined 0.4% in the fourth quarter year-over-year, reflecting our focus on precision staffing and reducing reliance on contract labor. For the full year 2025, revenue increased 6% to $6.3 billion and adjusted EBITDA grew 9% to $545 million with margins expanding 20 basis points to 8.6%. Similarly, pre-NCI adjusted EBITDA margin also expanded 20 basis points to 12.7%. We generated robust operating cash flow of $471 million in 2025, up nearly 50% over the prior year. And free cash flow, net of noncontrolling interest distributions was $170 million. This is an outstanding result and reflects the work we've done to improve collections and correspondingly reduce AR days. Of note, the timing of our last payroll cycle in 2026 will create about a $50 million cash flow headwind year-over-year. We also strengthened our balance sheet during 2025. At the end of the fourth quarter, our lease adjusted net leverage was 2.5x, which was an improvement from 2.9x at the end of 2024, and our total net leverage was 0.8x. Additionally, we increased total cash by over $150 million, finishing the year with $710 million. At December 31, 2025, our total debt outstanding was $1.1 billion and total available liquidity was $1 billion. We also repurchased $3 million of stock during the fourth quarter and had $47 million remaining under our repurchase authorization at December 31. Now turning to 2026 financial guidance. We expect revenue of $6.4 billion to $6.7 billion or 3.6% growth at the midpoint. We expect adjusted admissions growth of 1.5% to 2.5% which contemplates expected exchange disruption from the expiration of the enhanced subsidies. Our adjusted EBITDA guidance is $485 million to $535 million. And I'd like to add some context and key assumptions behind that. Adjusted EBITDA for the full year of 2025 was $545 million. From there, we estimate our jumping off base to be approximately $475 million. This reflects approximately $50 million from the annualization of headwinds we discussed on our 3Q earnings call. Those primarily related to elevated professional fees and rate pressures, including elevated payer denials. The remaining approximately $20 million impact reflects restoration of short-term incentive compensation, which was below the typical baseline target in 2025. From the $475 million 2025 jump-off base, our midpoint of guidance assumes 2026 core earnings growth of approximately 4%. Additionally, we expect our IMPACT program to generate approximately $55 million in adjusted EBITDA in 2026, up from the $40 million estimate that we shared at the end of Q3. This creates a year-over-year tailwind of approximately $50 million, given that we recognized about $5 million of IMPACT program savings in 2025. This higher target incorporates additional opportunities we've identified across revenue and expense optimization, primarily in controllable salaries, wages and benefits. Finally, we estimate the exchange headwind will be approximately $35 million. Collectively, this results in a 2026 adjusted EBITDA guidance midpoint of $510 million. Our outlook excludes any potential benefit from the Rural Health Fund. Additionally, while we're already executing on IMPACT program savings pull-through, our work is far from finished, and we plan to continue to identify and execute on additional opportunities. With regard to payer denials and professional fees, we're not factoring in any improvement in our outlook from the back half of 2025 despite some indication that pressures are at least beginning to moderate. Finally, we believe the exchange headwind we have assumed in our guidance contemplates an appropriately sober view of the associated disruption risk. In short, our goal is to establish prudent adjusted EBITDA guidance in light of the current industry headwinds and tailwinds. I'll conclude by noting that we feel confident in our ability to return to adjusted EBITDA growth in 2027. As we transition into the second half of 2026, we expect to begin lapping the annualization of the industry headwinds that accelerated in the back half of 2025. Additionally, we anticipate the IMPACT program savings will build through 2026 and thereby augment 2027 core earnings growth and position us to grow adjusted EBITDA even with the BBBs Medicaid redeterminations beginning next year. With that, I'd like to turn the call back over to Marty for concluding remarks. Martin Bonick: Thank you, Alfred. I want to leave you with 3 key takeaways from today's call. First, our fourth quarter results reflected solid earnings performance as we quickly addressed the industry headwinds outlined last quarter. These actions helped drive our strongest revenue, EBITDA and operating cash flow in our history. Second, our IMPACT program continues to accelerate under Chief Operating Officer, Dave Casper's leadership. The operational improvements underway are strengthening the business. We have raised our 2026 savings target and pressure points of payer denials and professional fees and stabilize with early indications of improvement. Third, we have established prudent 2026 guidance and expect to return to EBITDA growth in 2027. We remain financially strong and strategically positioned to create long-term shareholder value. In 2025, we generated $471 million in operating cash flow and strengthened our balance sheet, giving us the flexibility to invest through cycles and deploy capital to support long-term growth. Looking ahead, these fundamentals position us to expand margins and grow adjusted EBITDA over the next several years. Before I turn the call over for questions, I want to recognize our 25,000 team members and 2,000 affiliated providers across Ardent. This is a time of significant change in health care and their resilience, agility and unwavering commitment to our purpose have been critical to our progress. Every day, they continue to adapt, improve how we operate and deliver high-quality care to the people and communities we serve. Their dedication is the foundation that allows us to navigate change and positions Ardent for long-term success. With that, I will turn the call over to the operator for a question-and-answer session. Operator: [Operator Instructions] Our first question comes from the line of Ann Hynes, Mizuho Securities. Ann Hynes: Just on some guidance assumptions on maybe a little bit more details. So you said professional fees, can you remind us what the actual increase in professional fees was in 2025 and what you expect the year-over-year increase to be in 2026? And then also with the enhanced subsidies. I know bad debt can be an issue, especially in Q1 you have greater -- should we assume greater maybe lower net revenue growth in Q1, just given that we're not 100% sure how many people will be kicked off and we might not have visibility into that until later this spring. Like how should we assume bad debt through the year-on-year assumptions? Martin Bonick: Thanks, Ann. Appreciate the questions. Professional fee growth year-over-year 2025 was in the roughly high single-digit range. We are making similar assumptions into 2026, consistent with our comments with denials and pro fee growth, not expecting significant reduction from these elevated rates and it would be upside if we did see some improvement in those. On the second half of your question on the enhanced subsidies, and we see lower growth from a revenue standpoint in Q1? I mean I think some of it is just going to depend on the timing. I'm sure you're familiar with the 90-day grace period. We'll have to see how that plays through. It's too early for us to really speak to that dynamic. As you saw from our guide, we think we're being prudent in our overall assumptions as it relates to the HIX enrollment expectations. Operator: Our next question comes from the line of Matthew Gillmor with KeyBanc Capital Markets. Unknown Analyst: This is [ Zack ] on for Matt. Could you guys provide some detail on your underlying HIX assumptions as it pertains to expected volumes declines in 2026? And then what percent are you assuming shift to other coverage versus uninsured? Martin Bonick: Yes. This is Marty. The good news is, given the expectations in the market for enrollment declines. Our markets were actually up. New Mexico was up. Texas was up, and so we're seeing some good pull-through on the initial side. I think the uncertainty comes in terms of what happens after the grace period and how many of those people defect. We're planning for enrollment to decline about 20% as we play through the fluctuation of that impact. And we're assuming about 10% to 15% move to employer-sponsored coverage and the rest go to self-pay. So we assume that the utilization we got 30% lower in that cohort. Unknown Analyst: Great. And then just for the $15 million increase in the IMPACT program, can you provide some detail on how those were identified, maybe bucket those savings, whether it be revenue integrity, cost takeouts or other met that you guys are producing those savings? Alfred Lumsdaine: Yes. This is Alfred. I would say of that $15 million increment that we've identified, the vast majority currently is in the SW&B line. Operator: Our next question comes from the line of Raj Kumar with Stephens. Raj Kumar: Maybe just kind of it would be helpful to get a perspective on the kind of IMPACT initiatives that have a longer lead time until the benefits materialize. And just kind of when we think about the commentary in 2027 return to EBITDA growth and then kind of thinking about the sustainability of that earnings growth heading into '28 as you kind of incur some of the OBBVA-related headwinds. Just kind of curious on how much more tank there is or how much more fuel there is left on the kind of IMPACT initiatives front on those kind of longer lead time initiatives? Martin Bonick: Yes. This is Marty. As I stated before, the IMPACT initiatives are meant to be multiyear and durable and sustainable, as we look at the OBBB impacts coming down the line. We're very confident that with the technology improvements that I mentioned in the AI. These are going to be multiple tailwinds that we're going to be able to continue to capitalize on. As Alfred said, SWB is an early target because it's the most direct control, but we know that we still have opportunities in the supply chain that we're harvesting and continued opportunities in the revenue cycle as we continue to enhance our coding, our collections and management, returning those denials. And so there's multiple factors. And so the early wins, as Alfred talked about, we are harvesting, but we expect these to continue. an magnify over the continuing years to come out to offset those headwinds that we have. So we feel very confident in our ability to continue to harvest these and direct them for the future. Raj Kumar: Got it. And then maybe as my follow-up, just kind of thinking about some of the kind of moving pieces in 2026 guidance. I guess is there any kind of 1Q volume impact from the winter storms that's embedded and maybe any call out on that would be helpful? Martin Bonick: Yes. Obviously, for us, the primary impacts were in the Texas, East Texas and Oklahoma markets from Winter Storm Burn. Of course, we did -- went into bull mode to ensure that we're rescheduling cancer surgeries. Did see some of that lost volume at the tail end of January come back in February. We're not pointing to that for any sustainable impact. You could have maybe just a very, very immaterial impact to Q1 overall, but not looking for that from any kind of an enduring dynamic. Operator: Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Unknown Analyst: This is [ Michael Murray ] on for Ben. Your guidance called for 3.6% revenue growth at the midpoint, and you project core earnings growth of 4%. So slight core margin expansion, but that obviously excludes the headwinds that you called out. So I wanted to see if there's anything to call out on your core operations cost structure. Whereas some of the margin expansion you would normally see rolled up in that IMPACT program? Alfred Lumsdaine: No, I don't think there's anything in particular that I would call out that core margin expansion is similar to what we saw in 2025 once you exclude the headwinds that we've talked about at length, and so very consistent. Again, obviously, we talked about the HICS dynamics as well. But no, there's really nothing to call out. We've seen, we believe, sustainable efforts to improve both the labor line and the supplies line. Unknown Analyst: Okay. And then my follow-up. On professional fees, I appreciate the commentary on high single-digit growth expectations for the year. Should we expect a bigger headwind in the first half versus the second half? And if so, what growth rate do you believe you'll end the year at? Alfred Lumsdaine: Yes, I would continue to stick with that high single digits growth. Again, as we mentioned in our commentary, we're not modeling in any substantial improvement. So I think a similar rate throughout the year would not be inappropriate. Operator: Our next question comes from the line of Kevin Fischbeck with Bank of America. Unknown Analyst: This is [ Joanna Gajuk ] filling in for Kevin. So first one, just a follow-up on the IMPACT program cost saves. And it sounds like you expect more in the future, but as we just think about that number for '26. Is there some sort of time line? And should we think about a run rate number you expect to be when you exit '26 in this cost savings? Alfred Lumsdaine: Yes, thanks, [ Joanna ]. Yes, from a ramping perspective, the 40 plus the 15 is, I would say, fully identified and being executed on and there will be a modest amount of ramp into '27 on that, but the larger opportunity would be anything else that we identified during the year and are able to actuate and that would create additional impact, no pun intended, into 2027. Unknown Analyst: Okay. So a modest ramp, but I guess the point you were making before is that there's additional progress, right? So like '26, you have on whatever you identified, there's a little bit of a ramp, but it's more about like incrementally any additional savings after you achieve that target for this year? Alfred Lumsdaine: Yes. Unknown Analyst: Okay. And a different topic. So I appreciate the comments about the core growth being 4%. And when we look at things, we exclude the benefit because we're assuming like there's not much of a growth, I guess, in that sort of bucket. So if we do that, we get to implied growth excluding the DTP, so everything else besides the DPTs will have to grow 12%. So that seems like a high growth. So can you walk us through like what's driving the fast growth? Alfred Lumsdaine: Well, I guess I would start with saying that the PPP are volume-based. States are growing. And we certainly, in addition, have strategies to capture share as well. So I would not say that PPPs would be flat. But then second, going back to the previous question as well, we generated a similar core growth to that 4% number in 2025, we need to adjust for those incremental headwinds of and payer denials. We've laid out what our volume growth expectations are of 1.5% to 2.5%. And then I would also add our rate of increase on our commercial contracts. We're roughly 90% contracted for the year and we're seeing rate increases of between 4% to 5%, all leads us to be very comfortable with that $20 million expectation from core growth. Unknown Analyst: All right. And then you said the DPP sorry, just a follow-up on that. So all your programs, the DPP programs are volume-based. But I guess if the enrollment in Medicaid enrollment is declining in these states, like what happens with that funding? Alfred Lumsdaine: That would be an exposure at Medicaid. And then again, depending on where those lives go. Martin Bonick: And this is Marty. As we saw in previous years, some of that Medicaid disenrollment actually attributed to positive commercial conversion. And so again, we feel very confident, as Alfred said, in terms of the core growth algorithm we've outlined it, consistent with prior performance. Operator: Our next question comes from the line of it Benjamin Whitman Mayo with Leerink Partners. Benjamin Mayo: Was hoping to get an update on the ambulatory or outpatient strategy. You guys acquired some urgent care assets, I think, in the last year-or-so, but maybe give us a look at the pipeline, what does it look like? And do you feel like you're in line or behind on your targets? Martin Bonick: Whit, this is Marty. Yes, we feel like our ASC and ambulatory strategy has been continuing to develop. We started with the urgent cares and had good success with those opening up access points. And I think that contributed to a lot of the positive growth that we saw when you look at across the peer group. This year, we're continuing to focus on growing that, opening up a new ED department in our market, opening up 5 new urgent cares hospital-based ASC and other HOPD ASC and a freestanding ED in Texas. And so we feel like, again, we're continuing to deploy capital in a disciplined way to continue to grow that outpatient market share and capture the shift of where a lot of these volumes are going. And so we feel we're very much on pace and continuing to deploy capital in very rational manner. Benjamin Mayo: Okay. And then maybe for Alfred. Cash flow this year, any reason that it wouldn't grow in line with your EBITDA? I think you mentioned there were some timing factors that influence the shape of cash flow this past year. Alfred Lumsdaine: Sure. Thanks, Whit. Yes, obviously, we were really pleased with the robust cash flow that we generated for the full year from a -- as I called out in my opening comments that we did have a dynamic of a -- our last payroll cycle being fully accrued at the end of the year and next year that effectively will be paid right before the end of the year. And that's about a $50 million headwind from a year-over-year perspective and then it starts to build every year again and that's simply from a timing perspective. Otherwise, we would expect cash flows to follow consistent with our 2026 guidance. Benjamin Mayo: Can I squeeze in 1 more just on the rural health fund. Do you believe that any of your hospitals qualify for that? And that's it. Martin Bonick: Yes, this is Marty. Yes, we do believe that given our footprint sort of midsized urban markets with regional spokes with primary and secondary level hospitals that we should qualify, we think that maybe upwards of 1/3 of our hospitals could qualify now. We're closely working with our state governments to understand how they're utilizing these funds and going to be deploying those. It does seem that they're going to be deploying these funds greater than just hospitals to support the entire rural care network. But with our clinic presence, we think that we've got a good story to tell and good rationale based upon some of the technologies that we've deployed and continue to deploy out the markets our virtual attending program being an example of how we're keeping patients close to home and supporting those local hospitals in local markets. And so we're working very closely with our vendors and with the states to make sure that we can capture as much of that as possible. At this point, it's too early to tell what's going to happen in terms of how those are going to be distributed or win. So we did not include any of that in our guide. So that would be potential upside. And there's a couple of good points. Our 2 largest states in terms of Texas and Oklahoma have also been to the Texas received at the largest allocation from the government in Oklahoma, I think, was the fifth highest in the country. So those are some good proof points and antidotes that will hopefully help and pay out based upon how we've been supporting the rural networks and supporting those rural hospitals. Operator: Our next question comes from the line of Scott Fidel with Goldman Sachs. Unknown Analyst: You've got [ Sarah ] on for Scott. Can you please describe how the 4Q volume trends compared to your expectations? And then with the exchange open enrollment and Medicare AEP complete, what further perspectives do you have on sustaining volume growth this year? Martin Bonick: This is Marty. I'll take the first part of that. I think the volume was very consistent with what we thought. In Q4 of '24, we're overlapping or lapping some of the midnight rule, and so that contributed to a little bit of a deceleration. But otherwise, volumes were very strong and adjusted admissions continue to grow. And if we look across all of our statistics, volume statistics for full year 2025, we are sort of best-in-class in the peer group, and so the demand for our services continues to remain strong in our markets, #1 or #2 in majority of the markets that we serve and our markets are growing 2 to 3x faster. So the slowdown in Q4 is consistent with lapping that 2 midnight rule and focusing on high acuity growth versus just growth for growth sake. Alfred Lumsdaine: On the second part of your question, this is Alfred, under the assumptions we laid out pertaining to the exchange dynamics, the headwind that we would expect associated with admissions from the HIX enrollment would be upwards of 50 basis points. Unknown Analyst: And then just with the progress in payer denial activity, can you provide any color here on the impact of 4Q performance and how we should think about that benefit on a go-forward basis? Martin Bonick: This is Marty. Yes. The fourth quarter, we did see some moderation or stabilization from the elevated Q3, and we're expecting that to continue. We've got the second half of the year from '24 -- '25, I should say, that we're expecting to continue into '25, but then moderating. So that's the view. Alfred Lumsdaine: Yes. This is Alfred. I would just say add that overall, we did see some slight improvements very modest and late in the year or take any month or weeks and project that out as a trend. However, we're both optimistic that the work we're doing with to curtail and combat the denial trends will yield some benefit. However, we want to be very sober and realistic and to Marty's point, in not projecting that to be sustained and just deal with the reality of what we experienced in the last half of 2025. Operator: Our next question comes from the line of Craig Hettenbach from Morgan Stanley. Craig Hettenbach: I appreciate all the color on the exchange implications this year. Outside of that, can you give us a sense in terms of other payer mix of Medicaid, Medicare, commercial exchange is kind of what you're expecting from a volume perspective this year? Alfred Lumsdaine: This is Alfred, Craig. Yes, I think we get the color as it pertains to the exchange dynamics. And just as a reminder, we we ended last year with 6% of our 7% of our revenues from an exchange perspective. So just a little bit lower than, I'd say, the industry average from an overall exposure standpoint. Otherwise, I wouldn't say we expect any significant material shifts in our planning other than what we lined out from an exchange perspective. And then, of course, where do those lives end up, one dynamic, I think it's a little too early to tell, but we've seen just a little bit as we've seen this inexorable march of traditional Medicare moving to MA, that seems to be slowing or maybe even reversing a bit in early data, but I would say that's not -- we didn't necessarily forecast that as a trend, but we would view that as a positive development if it continues. Craig Hettenbach: Got it. And then, Marty, just following up on all the technology initiatives, how do you think about that in terms of just time line of beginning to the needle from a margin perspective and things we should be watching for around that? Martin Bonick: Yes, Craig. We've got a number of things that I outlined that we're deploying. care virtual care is building off of a successful pilot that we already started in East Texas. We'll be rolling that out across the the entire system, an entire company by the end of this year. So we expect that benefit to continue to ramp. We're starting in a very focused way with our virtual nursing and sitting programs, which should have a direct financial benefit as well as a quality benefit to our patients. And as we continue on that, as I mentioned before, we saw a positive success with our virtual attending where we're actually bringing specialists from the metro areas into some of those rural areas and helping to keep those patients close to home, which allows us to keep some of those acuity transfers in our primary and secondary markets while making room for the higher acuity cases to come into tertiary centers. And so that's an example. But this will continue to ramp throughout the year as well as other initiatives that we have in flight across the board from both the back-end business side as well as on the frontline clinical side and staffing and scheduling in between, so these will continue to ramp, and this is part of our care transformation impact that we expect to continue to ramp over the next several years as AI becomes more and more prominent. We've had a very labor-dependent business across this industry. And I think AI is going to be a liberator. We're looking into new ways of helping to extend our primary care reach with AI and then helping patients to do that so we can expand panels. And so there's a lot of focus in this area to actually transform the way in which we deliver care to make it more accessible, make it more affordable and transform the cost structure for the business. So we're excited about the future possibilities. Operator: Our next question comes from the line of Benjamin Rossi with JPMorgan. Benjamin Rossi: Just an assessment the uptick in average length of data close the year. I appreciate that you've been making some efforts to try and bring this down through improved rounding and some of your new investments in the virtual care. What do you think have been some of the winning factors in bringing this figure down this year? And are you seeing any variation in length of stay across your payer classes between Medicaid, Medicare and commercial, particularly among your exchange volumes? Martin Bonick: This is Marty. Thanks. Length of stay is a factor of acuity and a factor of efficiency inside the hospital. As our acuity continues to grow, that raw length of stay will also likely have the corresponding impact. But as we look at sort of a geometric mean length of stay, we've actually seen very good performance and the technology investments that we're making are helping with that efficiency. So I think that the length of stay is a continued focus across all of our hospitals. It's a quality measure. It's a safety measure and it's an efficiency measure. But we think that we're managing that and still have some opportunity to improve. Benjamin Rossi: Understood. And I guess this is a follow-up from the policy side. With the CMS model and Medicare fee-for-service some of this program overlapping in a few of your states and your footprint, are you thinking about any potential impact in 2026 as CMS starts rolling out these AI-based tools for prior auths? And then do you factor this into your embedded assumptions for now raising in 2026, it sounds like you aren't assuming a meaningful shift in denial trends during the year. So just curious any color there? Martin Bonick: Yes. As Alfred outlined, we're taking a very prudent look at denials and not making any dramatic assumptions from it changing. That being said, to the question, it does overlap in a couple of our smaller markets. Our work with Epic and that is an advantage we have. Epic has been working collaboratively with both payers and providers. and we're part of that work group to advance ways in which we can streamline that. We just had a new electronic prior authorization module go live with one of the large payers in the country just recently. And so while CMS is focusing on this, I think it's an opportunity for us to work with our partners with both Ensemble and Epic to drive better performance in this area. So we think that these technological advances will help address the governmental intentions behind these laws that are coming out and they're experimenting with a lot of these different programs, but we feel like we're well positioned given the technology partner vendors we have to stay on top of that. Operator: [Operator Instructions]. Our next question comes from the line of Timothy Greaves with Loop Capital. Timothy Greaves: I guess, I want to ask around the existing market and the growth there. I believe you listed a bunch of initiatives that you guys are working on in answering with question. But I guess around that, I guess, I want to know from a broader sense, how -- what you're seeing in the current environment impacted your plan around these initiatives? Like are you guys like maybe leaning into more affecting physical versus digital opportunities or anything around that in the near term? Anything that you can point out that's notable? Martin Bonick: Apologize, it came across a little bit distorted the question, can you reframe this core question Timothy Greaves: Yes, I'll reframe it a bit. I guess what I'm trying to see is how you guys are interacting with the market in a broader sense of like growing in existing markets? So as far as versus physical expansion versus digital opportunities, you listed like the -- Hello Care, virtual care opportunities. But just in the current environment, how you guys are prioritizing this expansion of your footprint? Martin Bonick: That came across a little bit more clear. Yes, we are focused on growth in a number of different ways. We always said from the onset, we're going to prioritize growth in our core markets, both high acuity service lines in our inpatient environment as well as growing the outpatient, our focus the last couple of years of growing urgent cares as access points has paid off for us. We are expanding that funnel, so to speak. But our consumer team is really helping to drive that continued engagement. So last year, we saw about a 5.5% improvement in our total encounters and we grew our total unique number of individuals that we serve consumers in our markets and so our digital outreach strategies are very much focused on not only attracting those initial patients but retaining them in our system. And again, our technology vendors with Epic really help play into that because we can have a longitudinal relationship with our patients and make sure that we can be their one-stop shop for care when they need it, and they're not going out and searching in the market for point solutions. We've got a strong virtual care offering in all of our markets and all of our clinics. And so patients can get the care where and when they need it the most. It doesn't have to be inside of a hospital or a clinic setting, it can be virtual and in the home. So we're very much focused on using those lower cost of capital digital solutions to attract, retain and grow our patient base. Timothy Greaves: Okay. I think the one question is good for me. Operator: At this time, we have no further questions. I would like to turn the call back over to Marty Bonick for closing remarks. Martin Bonick: Thank you all for your participation in our Q4 call. We're entering 2026 with operational momentum, financial strength and strategic clarity, and we are confident in our ability to execute. We appreciate everybody's support, and thank you. Operator: This concludes today's conference call. You may now disconnect your lines. Have a pleasant day.
Amanda Blanc: Okay. Good morning, everyone, and thank you for joining us today for our full year results presentation. I'll start with a quick update on our 2025 performance and how Aviva will deliver today and for the future before Charlotte takes you through the results. Then we'll open for questions. So let me begin with the key messages. Aviva has delivered another outstanding set of results in 2025, extending our multiyear track record of delivery. We have achieved our 2026 targets of full year early and have now raised our ambitions. And we have enormous potential to go even further for the longer term. We are set up to make the most of the opportunities across the market, whether that's with artificial intelligence as technology changes the game, general insurance as the importance of scale and brand grows, wealth as the market expands with regulatory tailwinds or in retirement for the next wave of pensioners as the U.K. ages. And I'll cover some of these in more detail later. So let's get into the numbers, which include the 6-month contribution from Direct Line. As you can see, it's been a great year. Operating profit rose 25%. IFRS return on equity increased and cash and capital generation are growing. We now have over 25 million customers and an opportunity to serve even more of their needs with over 7 million of those customers being multiproduct holders. Operating EPS growth is well into the double digits. And today, we are announcing a final dividend of 26.2p per share, up 10% year-on-year. And we are resuming the share buyback now at a higher level of GBP 350 million. Every business contributed to these results. In General Insurance, premiums are up 18%. We are now approaching the sub 94% combined ratio ambition, and we are already achieving this in our U.K. business. In Wealth, we are extending our #1 position with over GBP 230 billion of assets. And we are growing with record net flows of almost GBP 11 billion. In Protection, we have improved margins and are nearing completion of the AIG Protection integration program. In Health, we have grown in-force premiums by double digits with a low 90s combined ratio. And in Retirement, we have written GBP 4.6 billion of bulk annuities at attractive returns, supported by real asset origination in Aviva Investors. Turning now to targets. As I've said, today's results mean that we have already delivered our 2026 targets. This is a fantastic achievement, and I'm really proud of Aviva's performance. So I want to thank the whole Aviva team for their hard work. In November, we set new 3-year targets across operating EPS, IFRS return on equity and cash remittances. These now include Direct Line and better reflect our trajectory as a diversified capital-light business. Charlotte will cover more details on the numbers shortly. But now I'd like to talk about Aviva's longer-term potential. This has been a journey where we have driven sustained growth, served more customers and stepped up for shareholders year in and year out. And we continue to create longer-term value with smart strategic M&A resulting in today where we are the U.K.'s only diversified insurer with a clear strategy that is delivering results. Our focus is now on hitting the new targets, further accelerating beyond 75% capital-light and realizing the full benefit of Direct Line. But this is just the next step in our journey. There is more long-term potential beyond this 3-year time horizon. Clearly, we are set up to capitalize on a range of opportunities across all our markets, but I'll prioritize three of these today. First, how we outperform right through the cycle in General Insurance; secondly, why we are uniquely positioned to lead in Wealth; and thirdly, how we are using artificial intelligence to shape the future of Aviva. And supporting all of this is one constant, our leading customer franchise and preeminent brand. So let's start with General Insurance. This is and always will be a cyclical market. And after more than 325 years in the industry, we know how to navigate cycles. And we have been through disruption time and time again. Direct Line changed the industry by selling directly over the phone. Price comparison websites then reshaped the market. And now we have generative AI with autonomous vehicles to come. And through all of these changes, Aviva continues to deliver, bringing in fantastic people, launching innovative products like Aviva Zero, expanding distribution onto PCWs and through Lloyd's and so much more. And we have tripled profits over the last 5 years. The U.K. is the most competitive insurance market in the world with high regulatory barriers to entry. And Aviva is the standout #1 insurer here and the only player operating at scale across Personal and Commercial Lines. We have always adapted and we will keep adapting. When we acquired Direct Line, we knew that market conditions would continue to evolve. And the same is true when we set our new group targets. But we also knew that Aviva has the scale, discipline, technical expertise, proprietary data, brand strength and diversified group model to grow profitably. And there's plenty of room to grow, unlocking value from Direct Line, expanding partnerships, scaling SME in Canada, building out our Lloyd's presence, not to mention the opportunity with our 25 million customers. The market will keep changing, and that's exactly why we invest in innovation. We are ahead on EVs, telematics, automation and AI, and we'll stay ahead. So our portfolio is built to deliver performance for years and decades to come. Looking first at Personal Lines in the U.K. Owen and the team have a track record of outperformance, delivering profitable growth through COVID, periods of high inflation and pricing practices where many others struggled. And though the market is challenging today, we are still writing at target margins. It is not by chance that we have been able to do this. Our scale is unrivaled with breadth across distribution and game-changing amounts of proprietary data. We have the only wholly owned repair network in the U.K., which saves us around GBP 500 per repair. And we have huge potential with Direct Line, not just with the cost synergies, but growth headroom with leading brands and new products such as Pet, Green Flag Rescue and Micro-SME. Turning now to Commercial Lines, where it's a similar story. We are successfully navigating tougher conditions. We have built up our pricing strength, and we are able to quote above the technical prices in our models. Putting margins first has always been our priority, and that's why we have delivered consistent profits year-after-year. We have unique strengths to win in this market. So let me just highlight a few. We are a leader in SME and mid-market, and these segments are more resilient. We have first-class underwriting with strength across motor fleet and liability. So we are very well positioned for any future shift with autonomous vehicles. And with access to Lloyd's through Probitas, we can tap into a wide range of attractive lines, having launched 8 since the acquisition. This now includes high net worth, which is complementary to our already leading proposition here. So across both Commercial Lines and Personal Lines, we are well set up for success today and in the future. Moving to Wealth, which is a huge opportunity for us. There are GBP 2.7 trillion worth of assets today, growing at double digits, and the market is set to surpass GBP 4 trillion by 2030. This strong growth is underpinned by clear structural trends and regulatory tailwinds. At Aviva, we have a leading Workplace and Adviser Platform businesses. And we are leveraging advice capabilities in Succession Wealth and scaling fast in Direct Wealth. We have built a competitive edge that no one else can match. We have a leading customer franchise with a significant affluent opportunity. Our holistic offering and trusted brand means that we can support customers throughout their lifetime. We have always invested in our platform, which is ranked by de facto as the #1 in the market. Our modern technology platform brings scale benefits. And of course, we have leading investment solutions with Aviva Investors. And the performance of our Wealth business is testament to all of this. Since 2022, we have grown assets faster than the market, and we have improved margins at the same time. In Workplace, our profit margin is up by almost 2 points over the last 2 years, which makes this business a key driver of growth and a major contributor to our profits. So we are on track for our GBP 280 million Wealth profit ambition in 2027. And the importance of Wealth within our portfolio is growing. It is fast approaching 10% of our group earnings, further increasing our share of attractive fee-based income. But the longer opportunity here is even more exciting. Take Workplace. It is a highly attractive market, which has grown four-fold over the past decade. And with a constant flow of employer and employee contributions, it is expected to triple over the next decade. This growth is not only strong, but it is also very resilient. Aviva has an incredible track record here, and we're accelerating. The business is a genuine growth engine with 1,500 scheme wins over the last 3 years and a near 100% retention. And we are very pleased to now be the sole administration partner for the Mercer Master Trust, expected to bring around GBP 8 billion worth of assets over the next 12 to 18 months. The strength of our proposition is powered by leading Aviva Investors default funds. And we recently launched our My Future Vision Fund, which gives customers access to private markets and reinforces our commitment to the Mansion House Compact. So when you bring together our Workplace, Direct Wealth, and Advice businesses, you get a truly unique Wealth offering. We are able to retain and serve customers from their very first job all the way through to their retirement. And we are tapping into 4.5 million affluent customers who hold more than GBP 1 trillion worth of assets. We're also leveraging technology and innovation to deliver advice and guidance at scale. Targeted Support is a huge opportunity for us. This is a new service that sits between guidance and full financial advice, and it will allow us to offer easy-to-access support to so many more people. Our first journeys here will focus on how people save for their pensions, launching around the middle of this year. And there's still so much more to share on the Wealth business. So we will do a deeper dive at the next in-focus session, which will be in Q4 this year. Finally, turning to Artificial Intelligence. So we know that this is going to be transformational. And here at Aviva, we have a greater opportunity than most. For any opportunity that you have seen in the media, and there's been quite a few recently, there are key enablers that you actually need to drive the value. It is not enough to just have the technology. You need access to millions of customers, the ability to deploy and reuse at scale, capacity to invest, and most importantly, proprietary customer and claims data. Aviva has all of these in spades, and our diversified model is more resilient for any disruption. This technology isn't new to us either. We have been using traditional AI capabilities for over a decade now. In fact, over 98% of retail business in U.K. Personal Lines is priced with machine learning. And we have been training over 150 machine learning models in claims with our own data for years. Generative AI and Agentic are just the next steps on this journey. And because of our targeted investments in technology and talent, we already have many of the AI-ready foundations in place, so we are well positioned for this shift. We have built an in-house platform to deliver use cases at speed, and we are already seeing tangible benefits. We have halved the time taken to review each case in medical underwriting. And we have also reduced call wrap times by 20% for customer service agents in Direct Wealth, which we are now rolling out more broadly in IW&R. All of our colleagues have access to AI tools, and we continue to enhance and streamline all of our data. We are proud of what we've achieved so far, but we are aiming much higher and always balancing ambition with pragmatism. Our focus now is on prioritizing progressively bigger end-to-end opportunities where AI can transform areas like customer engagement and distribution, underwriting and claims right through to back-office operations. This is the kind of change that will shape Aviva's future. And some of this is closer than you think. So let me give you an example in U.K. General Insurance claims. We have already saved nearly GBP 100 million through our claims transformation and Agentic has the potential to unlock much more. Over the next few months, we will be testing an AI-enabled claims agent built in-house and launching later this year. This will enable us to handle simple claims from start to finish without human support. And the best part is that this is voice-enabled. Most claims begin on the phone. So this will be transformative for customers, delivering faster, clearer and more consistent outcomes. And finally, I'm delighted to announce our partnership with OpenAI, which is a really important step for us. Combining OpenAI's cutting-edge capabilities with our expertise and data will help us to deliver powerful AI solutions for our customers and our colleagues. So there's a lot more to come, and we'll share more with you at our half year results in August. Now I'll finish with what brings all of this together. Aviva's powerful unique model. We have diversification and growth advantage with market-leading positions and a majority capital-light portfolio. We have a customer advantage with almost 22 million U.K. customers and a leading brand. We have a scale, technology and data advantage, including the opportunity that AI brings. All of this gives us real confidence for the future over the next 3 years and well beyond. And with that, I'm going to hand over to Charlotte, who's going to take you through the results in more detail. Charlotte Jones: Thanks, Amanda, and good morning, everyone. It's great to be here for another full year results presentation. 2025 was a strong year for Aviva once again, as we continued our growth momentum. Operating profit was up 25% to GBP 2.2 billion, which translated to an EPS of 56p and a return on equity of 17.5%. Cash remittances were up 4% to GBP 2.1 billion, and this excludes the funding for Direct Line, which is reported separately. Solvency of 180% is at the top end of our working range, supported by GBP 2.3 billion of own funds generation or OFG, the solvency measure of operating performance. In November, we said we were on track to meet our 2026 group targets a year early, and I'm pleased to confirm that we have achieved that. We exceeded our GBP 2 billion operating profit target before the contribution from Direct Line. The group total of GBP 2.2 billion is in line with November's guidance. And we comfortably achieved our OFG target a year early and are ahead of schedule on our cash remittance target. This demonstrates the grip we have on performance management to actively manage through the cycle and outperform peers. So given our excellent progress, we set new and ambitious 3-year targets in November, reflecting the shape of our group today and our plans for the next 3 years. These targets allow better comparability with peers, align with our capital management framework and support our plans to grow in capital-light businesses. These targets are ambitious and achievable. They take into account the outlook for each business, including good visibility of where we are in the cycle. So we're targeting an 11% operating EPS CAGR from 2025 through to 2028. This reflects the operating earnings growth and share count reduction from regular and sustainable capital returns. So our 2025 EPS of 56p is ahead of the 55p baseline that we set in November, as the last few weeks of the year saw more benign weather than expected. And we're not assuming this favorable weather repeats. So the 11% target is from the 55p baseline and builds to around 75p by 2028. We're really confident in our plans to drive progressive earnings across the group. And combined with share buybacks, we're well placed to achieve this and our other group targets. So I'll now unpack the group results in a bit more detail, starting with General Insurance, which was 56% of business unit operating profit. Top line growth has been an impressive 14% over recent years, and margin has improved too, with the combined ratio better by 1.6 points. The investment return has grown in line with the portfolio, all of which together means operating profit has grown to almost GBP 1.5 billion. In the U.K. and Ireland, premiums grew 27%. A large component of this was the addition of Direct Line reported as part of U.K. Personal Lines, where we saw 50% premium increase. Commercial Lines premiums grew 7% as we build GCS, integrate Probitas and leverage the strength of our SME and mid-market propositions. The combined ratio in the U.K. for both Commercial and Personal Lines is a strong 93.9%. This is a 1 point improvement, reflecting the earn-through of pricing and some favorable weather. In Commercial Lines, positive prior year development was more than offset by elevated large losses in the current year. And including Ireland, COR was 94.1%, reflecting the impact of storm Eowyn back in Q1. Overall, operating profit for U.K. and Ireland grew 52% to over GBP 1 billion. Now in 2026, growth will benefit from a full year of premiums for Direct Line. Now looking at the U.K. and Ireland business as a whole, we expect to deliver a 2026 combined ratio of better than 94%, subject, of course, to normal weather patterns. We come from a position of strength with good rate adequacy and relative to the softer market, we have held rate. We leverage the strength of our brand, scale, pricing sophistication, proprietary data and diversification. And we have extensive experience in managing pricing cycles and disruption. So we're really well placed to navigate the current conditions. Premiums in Canada, up 2% in constant currency. The Canadian market is at a different stage in the pricing cycle compared to the U.K. And so Personal Lines grew as we secured pricing increases across property and auto, maintaining strong retention. This was offset by some portfolio actions taken in Commercial Lines that I covered at the half year. And the undiscounted core was almost 3 points better, largely reflecting weather experience, which was broadly in line with our budget compared with the elevated cat activity in 2024. There was improved large loss experience compared to '24 as well as pricing actions earning through. Investment income was marginally down, but operating profit was up 49% to GBP 408 million. And for 2026, we expect to deliver a combined ratio approaching 94% for Canada. The Personal Lines rating environment remains supportive with further pricing increases expected. In Commercial Lines, though, the dynamics are similar to the U.K. with softer conditions that vary line-by-line. So across the portfolio, we will navigate the cycle with discipline. Now moving to Insurance, Wealth and Retirement and starting with the Insurance businesses, Health & Protection. Demand for Health has been affected by cost of living pressures for consumers and small businesses re-prioritizing spend to absorb the national insurance changes. Despite this, in-force premiums were up 12%, and we maintained a low 90s COR. Operating profit was up 9% as the business grows in line with our ambition. Now as expected and in line with the first 9 months, protection sales were lower following the consolidation of AIG and Aviva propositions back in August 2024. Margins have improved by 90 basis points as we reprice the business. And all of this is in line with our integration plans. Operating profit was up 97% as we had some adverse assumption changes back in 2024. And in '25, we recognized a onetime integration benefit following the legal transfer of business acquired from AIG. Now moving to Wealth. Workplace net flows were up 6% as member contributions grew and we onboarded new schemes. The resilience of this business is demonstrated by the impressive GBP 1 billion of regular monthly contributions. Our Adviser Platform performed strongly with flows up 11% despite elevated outflows around the time of the U.K. budget. And in our Direct business, the customer base grew by almost 1/3 to over 100,000, and we're continuing to invest in developing the proposition. Wealth operating profit was up 36% with operating margin improving by 1.1 basis points as the business grows and leverages the cost base. Operating profit as a portion of revenue is 23%, up 4 points. And as Amanda mentioned, we are on track to meet our near-term ambitions. And beyond that, the opportunity is even more exciting for the group's long-term growth. We have a strong brand proposition and scale from which to build. So we anticipate further improvements in operating margin and profit progression. In Retirement, we wrote a more typical GBP 4.6 billion of BPA following an elevated 2024. Importantly, Aviva Investors originated GBP 3.5 billion of real assets to support the business. Now this is an increasingly competitive market, and our team has continued to trade well and with discipline. We achieved a mid-teens IRR, well above our low teens guidance, and the business has been written a relatively low strain. Individual annuity sales were up 19% to GBP 1.6 billion, our highest level since 2015 pension reforms, supported by a new product launch. Operating profit was 5% lower as higher releases from the contractual service margin were offset by a lower investment result. And we expect to remain active this year in retirement, and we'll be disciplined in the competitive environment. Now turning to costs and efficiency. The ratios are broadly stable despite the temporary uplift effects from acquisitions and new partnerships. Across the group, we continue to invest in exciting growth and productivity initiatives, including the use of AI and in automation. And we expect this investment to drive efficiencies in each of our businesses. It will improve operating leverage and unlock significant long-term value from our extensive customer base and proprietary data. Now the application of our consistent capital allocation framework is a critical part of what we do to optimize our diversified group. And this slide summarizes how we think about performance and financial strength and what that means for uses of capital. We continue to build sustainable growth in earnings and cash and work to maintain our balance sheet strength. We grow the regular dividends. We invest in the business for growth and efficiency, and we return capital to shareholders. Nothing here is new, but it's important that you see we do this really well. And as an example of the framework in action, I'll pause for a moment on solvency. One of the advantages of the model we have built is proactive balance sheet management. A year ago, our cover ratio was 203% as we prepared to complete the Direct Line transaction. This used 31 points of capital ahead of the realization of the capital synergies. We've delivered elevated management actions of 11 points and accelerated 3 points of Direct Line synergies by temporarily moving the business to standard formula. This has supported building solvency back up to 180%. The underlying capital generation of 16 points includes a couple of points of favorable one-offs, including positive weather and reinsurance pricing impacts, which we can't assume will repeat, but we do expect to unlock the remainder of the Direct Line synergies. Specifically, we're on track to deliver at least GBP 350 million or 7 points of solvency around the end of this year. And looking forward, we expect a progressive build of operating capital generation of around 20 points in 2027. This assumes normal levels of management actions of around 200 points. And depending on whether these impact own funds or SCR or both, this translates to between 2 and 4 points of solvency. This level of capital generation will continue to grow and provides headroom in excess of the annual dividend and regular buyback. Now moving to a few words on Direct Line. The integration continues to progress well and at speed. We have successfully implemented our pricing models into Direct Line with an improvement in written calls in the fourth quarter. We've made excellent progress on the Direct Line branded PCW sales, doubling the number of policies in Q3 and almost doubling them again in Q4. We've transferred GBP 2.9 billion of assets to Aviva Investors with more to come. And we've made good progress rationalizing two office locations and three motor repair sites. We're progressing and removing duplicate roles and have an incredibly strong leadership team in place with a proven track record. All of this is enabling us to deliver material financial benefits. So in November, you'll remember, we uplifted our cost savings ambition to GBP 225 million and confirm Direct Line's own cost program of GBP 100 million had been achieved. We have delivered the first GBP 50 million of cost savings in the second half of 2025. This will fully earn through in '26 and contributed around GBP 10 million to operating profit in 2025. We expect to deliver the remaining GBP 175 million of savings fairly evenly over the next 3 years. And we're also investing around GBP 50 million to unlock claims cost benefits of at least GBP 50 million each year. And all the work on the acquisition balance sheet has now been completed. Now I'll briefly cover the delivery of our commitments on dividends. Today, we've announced the final dividend of 26.2p, giving a total dividend of 39.3p, a 10% increase on 2024. This includes the regular dividend growth plus the 5% uplift we promised following the acquisition of Direct Line. We've also resumed the buyback, launching a new GBP 350 million program increased to reflect the higher share count. And as we go forward, our consistent dividend policy of mid-single-digit increases in the cash cost of the dividends builds from this higher point. And combined with the resumption of the regular buyback, this will deliver a highly -- a higher progressive DPS development. So to summarize, 2025 was another great year for Aviva and the outlook for '26 and beyond is positive. Our diversified business model and the addition of Direct Line leaves us well placed to continue our track record of growth and earnings momentum. We will continue to invest in data, customer engagement and operating efficiency, ensuring we keep winning in an ever-changing world. And of course, we will maintain a firm grip on performance management across the group. All of this gives us great confidence in delivering the ambitious targets we have set and the future beyond that time frame. And with that, I'll hand back to Amanda. Amanda Blanc: Okay. Thanks, Charlotte. So before we move to Q&A, let me conclude with the key points. We have real momentum, and we are building on it every single year. 2025 extends our track record of strong profitable growth. We have already delivered another set of targets, and we are driving towards the raised ambitions that we have set for our next chapter. Aviva is in a stronger position than ever. And this isn't just a strong position for the next few years. Aviva is uniquely placed for longer-term success. Here is why. We are the U.K.'s national champion and the only diversified insurer. We are accelerating capital-light and unlocking higher returns. We have an outstanding customer franchise of more than 25 million customers globally. We are the U.K.'s most trusted insurance brand. We have proprietary data at scale, driving better pricing, better risk selection and better customer outcomes. And all of this fuels our superior returns for shareholders with strong and sustainable earnings growth and attractive dividend and regular share buyback. So these strengths and many more give me deep confidence that we will unlock the full potential of Aviva in the years ahead. So thank you for listening. Let's move to your questions. Unknown Executive: Thank you. And as usual, if you just raise a hand and give us a moment to get a microphone to you. We'll start at the front here with Andrew Baker. Andrew Baker: Andrew Baker, Goldman Sachs. First one, I guess, on your '26 combined ratio guidance. If I look at U.K. and Ireland, I think the underlying is about 96.7% in 2025. So it's quite a jump to get to less than 94%. So can you just help us with the bridge there? And then similarly on Canada, how do you get from sort of the 96.5% underlying to approaching the 94% that you've highlighted? And then secondly, I can see you added a slide in the appendix giving a bit more detail on autonomous vehicles. Are you able just to give us sort of your view on maybe the timing here, opportunities, threats and I guess, ultimately, how you think Aviva is positioned to win in this market? Amanda Blanc: Okay. Charlotte, do you want to take the first one? Charlotte Jones: Yes, I'll take the first one. Thanks, Andrew. So look, I'll start by saying we're very pleased with the COR of 94.6% for the group. And underlying COR has increased across the group from 1.4% to 96.7%. But I'm very comfortable with the position. So let me try and explain. So in Canada, we've seen about 0.7% of improvement in the underlying as we've seen price increases earn through, and we've seen auto theft trends improve. And we see having put around 10% through in Personal lines and those trends continuing, we can see the continued trend towards the sort of approaching 94%. We took those portfolio actions in the Commercial book. So again, some of that profitability will improve as a result of that, already coming through in the second half, but you'll get a full year effect of that. In the U.K., yes, the underlying COR I've got is 96.3%. But in there, you've got some elevated Commercial Lines, large loss experience, which was kind of in the second half. So just as I won't assume weather is better than long-term averages and I don't assume prior year development coming through. I also assume that large losses will be at a kind of regular loss loading. And when you look at the nature of the large losses, they were idiosyncratic in nature. So they were good underwriting decisions, just a bit of bad luck. So again, I wouldn't assume they repeat. Now they were about 1.7 points higher than the long-term averages or the loadings that we set. So if I take that off the 96.3%, you can see that's already quite a lot of an improvement. Then I've got Direct Line coming in, in the second half, it's still not at the performance level we would want it to be. So it's got a negative impact in the second half. But as we see that earning through and we see more of the cost synergies come through, then again, that will drive a lot of the improvement. So we have the plans, and we've got the good line of sight to the guidance we've given. Amanda Blanc: On autonomous vehicles, so yes, we did put the slides in the deck because we sort of thought that there might be one or two questions on it. There's obviously been a lot of media activity on this in the last couple of weeks. But you've also -- you've seen sort of two extremes of that really. This is going to -- everything is doomsday scenario to the sort of major manufacturers coming out only last week and saying that they've abandoned their Level 3 driving system plan. So I think that we've got to just manage some of the noise that sits around the topic. Now on saying that, we do recognize that this will bring a change in the market. And just the same as I think we've adapted to hybrid vehicles, to electric vehicles, pricing sophistication, now generative AI, I think we sort of feel very ready for this. Our view is we've looked at the WEF analysis and the BCG analysis. And we would concur that the widespread adoption is not expected until the 2040s. And even then, I think if you think about the upgrading of the car park globally is going to cost trillions of dollars. I mean, I don't think we should just underestimate even that an average car price today versus what it costs to have a fully autonomous vehicle, you're talking about tens of thousands of cost difference. So I think you sort of have to balance that. But when it comes to it, who's going to win in this autonomous vehicle world? Well, I think, first of all, this is the most competitive market in the world, as I said in the presentation. So I would bank on the U.K. being able to deal with this. We've got a deep -- as Aviva, we have deep understanding of vehicle technology. So we are the #1 insurer for EVs today. We have our own repair network. So the feedback loop in terms of that repair is going to be important. We've got -- we're one of three telematics players in the market. We've got about 3 billion miles of telematics data since that product was first offered. By the 2040s, as you can imagine, we're going to have a lot more data. So all of that data will matter. But I think ultimately, you're never going to have this as being a pure Commercial Lines product because at some point, the vehicle may get stolen, and I don't think that the vehicle manufacturer is going to take responsibility for that. There will be times when the vehicle is being driven in difficult driving conditions on country roads where it's not going to be fully autonomous. And so what you're going to need is this balance between Personal Lines and Commercial Lines. And I would put Aviva out there to be able to deal with that as probably the only player in the U.K. today that actually can. So I think we have to be circumspect about it. We have to recognize that the market will change. But I think genuinely, we are thinking it's a good way off. But we thought we'd put the slide in because we thought you may be interested. Unknown Executive: If we come to Farooq. Farooq Hanif: Just one numbers question and one non-numbers question. So on the numbers, I noticed your investment income in General Insurance was up quite a lot, certainly compared to what I expected. Is that a sustainable level? And will that get the margin with the unwind of the discount as well? I mean, can we expect that to sort of be a sustainable level that might grow from here? And then secondly, on -- going back to AI, I mean, there's also been a lot of kind of wild scenarios about how Wealth will be affected by AI and how distribution will be killed and margins will disappear and lots of doomsday stuff on that, too. So what are your thoughts on Wealth, particularly around Targeted Advice and how you could use Gen AI to your advantage? Charlotte Jones: Okay. Yes. So I think nothing particularly to call out on the investment income. It is obviously affected by having the Direct Line portfolio. But the rates that we were earning is pretty consistent. So LTR as a percentage of average assets aligned to the prior at 4.2%. So nothing untoward or nothing particularly to call out in the investment income. So, no. Amanda Blanc: Okay. So on AI in Wealth specifically, but I think more broadly. If we think about the investment that needs to go into AI and how you will reuse that across the business, I think if you think about Aviva, if you think just even on claims summarization, we've taken things for motor that we will apply to home, to travel, to health, to protection, to various other areas. So if you think about the investment spread across the business, we feel that we're in a good position to be able to sort of get more maximum use and maybe keep more of the benefit of that and not pass all of that on to -- in a competitive environment. On Wealth specifically, if we think about this new term of the moat, which is obviously new to all of us in the last -- the AI moat, like what is Aviva's AI moat? And I would say that one of the biggest moats that we have is our workplace pension business. Why is that the case? Because it is basically connected to employer, employee and provider. And effectively, with 4.5 million workplace pension customers, with the data that we have on those customers, we know what they are saving and the ability for us to be able to use AI and all the other data that we may have on them from things like motor, home and everything else to be able to provide a more personalized proposition via targeted support or simplified advice or going right through to sort of the full fat advice. I think that we're in a really good position to be able to capitalize on that. So I think we've seen disintermediation in many places before. Take price comparison website. I mean that massively transformed the motor market and disintermediated to almost a whole extent where today, 95% of quotes come that way. As a mass affluent player, we are in a perfect position to be able to manage that any potential disintermediation. But I still believe that advice will be there. I just think that the advisers will be given better information, more support, and they'll spend more of their time with the customers, where the customers want that face-to-face advice. But I think for those many people, 91% of the population today that don't take advice. AI will facilitate the ability to be able to do that and mean that they will get better guidance. And you've got 12.5 million people in the U.K. today that do not save enough for their retirement. I think it gives a real opportunity to be able to do that. So I would say we're bordering on the sort of excited end of the scale in terms of the opportunity that, that provides Aviva. Unknown Executive: Larissa? Larissa van Deventer: Larissa Van Deventer from Barclays. Three quick ones on my side. The first one, just on Canadian Commercial. Is the culling now done? Or should we expect some of that to linger into 2026? On the Life value of new business, if you could please give us a little bit more color on what drove the decline and how we should think about margin evolution going forward, basically was to separate the one-offs from any structural change that you may see? And the last one on Workplace. You've been very positive on this for some time. What needs to happen for you to meet your targets? And do you see -- and specifically on that, how do you see margin or potential margin compression in that space? Amanda Blanc: Okay. So I'll pick up one and three and then hand over to Charlotte to take the margins bit of three. So on the Canadian portfolio remediation, yes, that is largely done. And I think if we think about Canada, we really see a big opportunity there to improve the performance of the Canadian business. I think there's a number of areas, a push out in terms of SME, a move more from Ontario as well as into Quebec, where we're not largely represented in Quebec today. We've got big partnerships with Loblaw and RBC, which we will be capitalizing on. And so I think the Canadian business has made some really strong improvements that they will continue to build on over the coming period. And that's why Charlotte was able to give the guidance that she wanted to there. On the Life VNB, Charlotte, and then hand back on Workplace. Charlotte Jones: Yes. So I suppose there's a couple of things. In general, there's an element coming down because of the retirement levels of the BPA volumes being less. Then we've got a slightly strange effect coming through in Wealth in the fourth quarter, and that's allowing for some assumption changes, which kind of are relevant for the whole year, but they come through in the fourth quarter. There's a little bit -- so there's a little bit on Retirement margin and a little bit on Wealth. But I would encourage you on Wealth to always look at the flows and the operating margin and how we're improving the operating leverage there and therefore, the opportunities on the profitability. The VNB metric isn't that applicable, but we give it so that you can see the overall IWR level. Amanda Blanc: I mean on Workplace, so what gives me the confidence here? Well, I think the progress that has been made, you've only got to look at the sort of the progress towards the GBP 280 million ambition. And that is primarily driven by the contribution from the Adviser Platform and the Workplace business. So Workplace AUM is up 19% to GBP 153 billion. So strong new business and growing member contributions. Net flows of GBP 7 billion, so that's 6% of AUM. We're getting regular GBP 1 billion member contributions every month. We talked about the new scheme wins, the win rate of 75%, which I think is pretty impressive. And so we've got a very positive outlook on Workplace. And we announced the new deal this morning with the Mercer transfer, that's GBP 8 billion being transferred in over the next 12 to 18 months. So I think the team are in -- they're doing exceptionally well here. On the margin, Charlotte, do you just want to comment on Workplace margins? Charlotte Jones: Sorry, yes. On Workplace margins, we have shown the improvement in the operating margin. So if I look at it at the overall Wealth level, it's gone from about 7% to 8.1%. If I look at Workplace, which has not been so much diluted by some of the investment that we're spending, it's improved from about 10.7% to 11.5%. So all the pressure that you constantly always expect at the revenue margin level, which continues to be there, we're compensating by the scale that we have, the operating leverage that, that drives and that keeps going forward. And so, we also gave you a stat on sort of the expense margin as well, which is sort of like the inverse of a cost/income ratio. And again, that's showing an improvement to 25% now for the whole Wealth business. So I think we've got to keep on it. We've got to make sure that we're protecting as much of the revenue margin as we can. And we do that through being competitive. We have to be competitive, but then there's a lot of incremental contributions into Workplace that sometimes attract a slightly higher margin per item. So we have to keep mind on that, but the real driver is making sure that the operating leverage continues to build. Unknown Executive: Andrew? Andrew Crean: It's Andrew Crean, Autonomous. Could you talk a little bit about Direct Lines, premiums and your retentions there? Is that working out the way you planned as you renew business? Secondly, I noticed the CSM, the net flow -- value net flow is negative to the tune of about 2%. Is that something which you think will continue in the long term, i.e., that your releases will be more than your expected return on new business? And then can you talk about U.K. retail pricing? What's happening in the market in terms of rates? And how you see rates going over this year? Amanda Blanc: Okay. Shall I pick up? Charlotte Jones: Yes, do pricing first and I'll do the two. Amanda Blanc: Yes. So on the -- we're not going to break down the individual brands, Andrew, in terms of like policy count or retentions because we don't do that for Quotemehappy, for Aviva Zero, and everything else. But what I would say is that I think we are incredibly pleased with the Direct Line deal. Actually, one of the real strengths in the Direct Line portfolio is the retention and their ability to retain. And we were with some of the teams earlier this week where their marketing team, particularly were commenting on the strength of the talent within the team around retention. So we feel very good that the team is set up to do that. On the -- on the pricing of the portfolio, on motor, which I assume is the sort of where you're heading. So what do we think about this? So we always give you the numbers. So bear with me just a second. So if we think about our performance in 2025 on Personal Lines motor new business, we were up about 1% on rate. I think the Pearson Ham data was showing rate down minus 11%. On home, we were sort of broadly flat, I think, on new business, and we were up about 8% on rate for home. So I think that shows really good discipline. And I think what it shows is us using our different distribution channels effectively. Obviously, we've got the Nationwide deal, which has come in for travel and home, and that will build over the course of this year. In terms of what we see going forward, I think that obviously, we see inflation in the sort of mid-single digits. We've -- Charlotte talked about us guiding to overall 94%. So that will give you confidence, hopefully, that we will be disciplined. And we do see that the rates are starting to flatten out. And I think the competitors are saying the same thing. You saw the ABI data come through just a few weeks before. So we believe that it is time to start increasing the rates, and we will be very disciplined about how we do that in what is obviously still a competitive market. Charlotte Jones: Then on the CSM, if I look at it, excluding Heritage, it's pretty stable at just under GBP 6.5 billion. Obviously, with a lower volume of BPAs, you've got a smaller amount of that new business CSM going in. Then my interest accretion, that's a little bit higher because we had the higher opening CSM and because of the business written back in 2024, and that was written at higher rates than the portfolio average. So that's kind of driving that. Then experience variances were broadly neutral, whereas the previous year, they've been a bit positive. And assumption changes are relatively minimal across the both. So when I look at the release, it's a bit higher because my starting point is higher. Now if I put Heritage back in there, because that's got no new business and is only coming out, then there's a bit -- the reduction is down to 7.7% from 7.768%. So it's pretty marginal. When I look at the percentage, the release is 10.3%. Again, that's slightly higher than the previous year, which was 10.1%. But that sort of level is expected to repeat. But again, it will depend a little bit on mix and volumes of new business written. But I think it's always important to remember, this is the capital-intense part of the portfolio, and it's throwing off cash that we're investing in Wealth and Health. And obviously, protection is within the CSM. But it's stable to level and obviously will be impacted by how much annuity business we write in every year. But again, it's only part of the picture for IWR. Unknown Executive: Give it to Dom. Dominic O''mahony: Dom O'Mahony, BNP Paribas. Three questions, if that's all right. Just one clarification on the Mercer flow piece. If I've understood that correctly, is that just straight GBP 8 billion to the flows sort of over and above what you would get normally? Maybe if you could just expand on that, that sounds very helpful. Second question, just to come back on the investment income. I think opening yields presumably are lower than 12 months ago. Could you just speak to whether that -- well, firstly, whether that's actually right for your portfolio, but also whether that's a headwind to investment income across the different business lines and/or discounting and/or whether there's anything you could do to offset that? And then the third question, just on the capital generation. So OCG underlying, I mean, much stronger than I was expecting with -- in particular, the SCR growth is interesting, because I think it was ever so slightly negative in the second half as in a release. Is that the reinsurance change that you referred to, Charlotte? I wonder if you might just expand on why the SCR dynamic within the OCG is so benign? Amanda Blanc: So I'll answer the first one, which is a very straightforward one. And then I'll leave Charlotte to answer the two difficult ones. Charlotte Jones: So look, let me just repeat your OCG question again. It's obviously strong, strong underlying and strong management actions. Dominic O''mahony: The SCR, which underlying GBP 36 million headwind in the full year, I think it's about GBP 20 million better than it was in the half year, which implies an underlying release of SCR, a small one. I did this math on the gee, so I might have got it wrong. But I assume that the reinsurance piece that you just -- you spoke to earlier is an SCR release in the underlying? Charlotte Jones: That's correct. Dominic O''mahony: Just wondering how big that is, whether there's anything else explaining the very good print there. Charlotte Jones: So within the underlying -- so management actions tend to apply only to really the IWR world and then we have a little bit in international. So anything that's sort of not run of the mill in the GI businesses still sits in underlying. So yes, there's some approaching a point coming through from -- in the OCG from the reinsurance. There's a little bit of an additional benefit coming through from weather. Then we -- what else have we got? Yes, that's the main thing. Then obviously, we've got the 3 points coming through from Direct Line moving that to standard formula in the short term. We did -- we talk about -- in the IWR side, we talk about moving to the -- moving the credit model and getting an improvement on the way we model credit risk. That's predominantly a benefit in IWR, but there actually is a little bit of a benefit coming across the other areas as well. So that's also impacting the SCR as well. Dominic O''mahony: And sorry, just to clarify, the Direct Line model change, that's going through the underlying, not through the other? Charlotte Jones: Yes, that's right. Dominic O''mahony: Okay. Understood. That was very clear. Charlotte Jones: And then what was your -- your other question was on investment income again. I mean, there's really not a particular headwind. It's a very consistent portfolio. We've got the bigger size and scale because the book is bigger. Then we've added Direct Line. The mix of assets is similar. We've moved the assets across to Direct Line. That's a helpful thing from an investment income perspective as well as fees for Aviva Investors. And then again, nothing much. There's a bit of a mix point, I suppose. And overall, it's a little bit helpful for discounting, but nothing really major to call out. Unknown Executive: Mandeep? Mandeep Jagpal: Mandeep Jagpal, RBC Capital Markets. Two questions for me, please, both on Life. Firstly, given the fixed income market conditions, how have you invested your annuity premiums you received in 2025 versus your target allocation? And does the current allocation create an opportunity for more management actions or margin enhancement in the future? And then on the Retirement IFRS earnings, in the appendix on Slide 56, it looks like experience variances, the line there was quite negative for both operating profit and CSM. Could you provide some color on what drove that negative line? Is there anything to call out here in terms of changing trends in longevity or mortality in the U.K. post the COVID period? Charlotte Jones: Right. So the first question was on the mix of assets supporting the Retirement business. I mean, in general, we've continued to keep a low reliance on corporate bonds in the low spread environment. So that's meant that we've largely written at a relatively low capital spend. When I look at the mix between liquids and illiquids, it's still kind of around the target mix that we have, which is a little over 50% in the illiquids. So we've kind of achieved that. The GBP 3.5 billion of real assets gathered by AI have contributed to that. Obviously, that will be more than 50%. So some of that is then actually in a warehouse ready for deals that we do this year and a portion of that has been an element of back book activity as well. So that's roughly the mix there. And we constantly look at what rebalancing we can do for the back book where as part of the overall ALM. But -- and the spreads, as I say, in corporate bonds has meant that we haven't allocated as much there. So we've still got a higher allocation of gilts. On your second question, which was Retirement IFRS 17. Let me -- I might -- Yes. So look, I think what we've got in Retirement is historically, we've ended up with a little bit of new business, which is slightly unintuitive for the Retirement business because normally, when you write Retirement business, it all goes into the CSM. But in the last few years, we've ended up with a bit of benefit, and that's because the way it's allocated to the CSM is based on the target asset mix at the time and the pricing thereof. If by the time we actually transact, it's slightly different and then that will drive a new business line. So this year, we haven't got that repeating, which is more likely what you would expect from IFRS 17. But in the past, we've ended up with a little bit of new business coming through. In terms of assumption changes, I mean, they were honestly relatively benign. And then you've kind of got experience variance effects. We had more coming out of the CSM because we started with a bigger position. And then the investment return was a little bit lower, and that is because we use a 1-year rate to derive the expected return, and we saw a slightly bigger discount unwind from the higher opening CSM. So -- I mean, there's a few mixed pieces going up and down. But overall, that is a function of IFRS 17. Unknown Executive: Tom? Charlotte Jones: Longevity. What was your question on longevity? Amanda Blanc: Was there have been any changes, any trends? Charlotte Jones: So on longevity, what I would say there is, we have moved to the latest tables. We have reflected essentially the CMI '24, moving from CMI '23 to '24 hasn't led to a big release or anything. We continue to apply a 0 weighting to '22 and '23. And that's -- instead of that, we apply a sort of temporary uplift for the mortality rates in the post-pandemic drivers. So things like the COVID and the NHS pressures. As we kind of look forward, we retain -- so -- and we assume that will run off over a 10-year period, but we keep that under review. We then retain our long-term improvement rate, so we assume that, that continues to improve. So longevity still continues to improve, but the tapers sort of once people are in that 85-plus age bracket. We generally have greater mortality improvements than we see in the general population. That's a function of our portfolio. And so there is -- we are assuming greater mortality improvements than the population more generally. And that will include, but not exclusively factors such as weight loss drugs and other sort of improvements in medical experience. So we are still having an assumption that longevity is improving. Unknown Executive: Tom? Thomas Bateman: Thomas Bateman from Mediobanca. Just a question on Wealth. It's a bit of a fluffy question. But obviously, the GBP 280 million guidance for, I think it's, 2027 is really good in Wealth, quite a big jump from where we are. Could you just break us down? I think it's investment spend, but there's quite a big jump there. Is it just that? And more generally, when you talk about Wealth, it always seems so fantastic, the win rate is really good. So how are you tracking versus that longer-term GBP 500 million guidance? I think it was 2030 or something. And second question, again, on AI. I hear everything else you're saying on the group impact, but you haven't talked much about cost impact on AI. Is that something that we could expect to hear more from you in the long term in terms of cost savings? And third question, just very quickly on the new lines of business at Probitas, what's the contribution from them? Amanda Blanc: Okay. I can pick up one and three, and Charlotte will pick up two. So on Wealth, on the GBP 280 million, so I think if we sort of go back to the in-focus session that Doug did 2 years ago now, we talked then about the getting to the GBP 280 million would be primarily driven by the two big lines of business, which would be -- which is the Workplace business and the Adviser Platform and that we would be investing in the Direct Wealth over the course -- the biggest investment was in 2024. Then there was more investment in 2025. And then that sort of -- that will drop out or become more normalized. I wouldn't say drop out, because you're always going to be investing in the business as we move forward. So that's why we have -- so there is an investment drag, yes. And obviously, we've had some success in Direct Wealth. We've now got 100,000 customers. We've built the platform. We've put proposition onto that platform. And so we see some real traction in that business. So -- but I think we've always said that the benefit from Direct Wealth comes after this GBP 280 million ambition. So are we confident about the continued growth of Wealth post the GBP 280 million? Absolutely. Because we can see that the Workplace engine continues to grow. I mean, I feel like I'm sort of boring you to death on this, but it is quite important, like Workplace contributions are today, that market is GBP 760 billion. It will be GBP 1.3 trillion by 2030. And I'm going to make a number of like GBP 2 trillion by 2035 or something like that, and I'm looking to the team to not to say that, that is the right number. So as we have a close on 25% market share there, and we're retaining at a high level, and you've seen the benefits of the operating margin improvements, we've invested in the technology platform. Doug talked about that when he presented. So we're on modern technology. We're sort of built for this business to just keep growing and growing efficiently. And then you've got some of the tailwinds coming from the regulatory environment. So yes, I'm super positive because it's a growing market. We are really good at it. We've got the sort of AI opportunity and 4.5 million current members, and we've just -- and we're winning schemes like the Mercer scheme. So I feel very good about that. In terms of -- what was the second question? Charlotte Jones: Second question, AI and cost benefits, et cetera. I mean, I think it's very hard to put a specific cost benefit on this yet. Obviously, we -- when we are thinking about it, and what's already embedded in our numbers. So I think on one of my slides, I talked about as an annual BAU spending on growth, efficiency and customer change initiatives, we have about GBP 450 million. That's embedded in the business plans for the markets and the functions, and it's separate to the I&R spend that we have and regulatory-driven stuff. But it's a wide range of investment in our business. And that's a recurring amount that's been going on for a number of years. And as each -- as part of the planning cycle, we work through how we're going to spend that money and some of the projects are multiyear. But you've heard us talk about things like the development of the app, the single source of the customer data, the work on Direct Wealth. That is all -- some of it is automation, some of it is AI. You've heard us talk about claims summarization, which takes call hold time down by 50%. You've heard us talk about the large language models that we're developing that enables protection and underwriting to be done with automated reading of many doctors' notes. So all of that is driving productivity. And each time we spend money on those initiatives. There's a business case that's put forward that has benefits. And that's how we allocate all of the change money across the group. So this is no different. And so to the extent that we've got those activities in flight and they're driving benefits to the business, they are part of the improvements that will drive us to those EPS targets. That's real, and that's built into all our numbers. As we start talking about some of the more advanced things that are still an early stage, such as the Gen AI agent or the Agentic agents and where they will drive benefit, there are probably benefits beyond the planned time horizon. So they're not so incorporated in the targets that we have. But they are partly funded. And as the business cases build, we will start to think through how much of that annual budget is allocated in that direction. So I think it's very dynamic. But what I'm trying to say is, yes, where it's real and tangible and we can put our arms around it, it's both funded and it's included in the benefits that are in the numbers that you can see, where it's more early stage and it's likely to leave benefits longer term, then it's outside of the target range. But people have talked around 15% to 20% of savings. And you can sort of begin to imagine how that might come. Now some of that will be in the work we do with outsources, because a lot of the -- a lot of the work that we have with outsources is the real mechanical stuff that we would look to automate and drive savings there. So some of it will come in the way we deal with those third parties as well. So it's a multiple range of things. What I'm trying to do is give you assurance that it's normal course for us to be investing, have business cases, reflect those in the numbers and deliver. Amanda Blanc: On Probitas, so obviously, we are benefiting from the greater access to markets with the 8 lines of business. So illustratively, for 2025, we wrote about GBP 73 million worth of new business that neither Probitas on their own or Aviva's GCS would have written without previously. So I think we are showing progress. But here, I would say, again, it's about discipline in the current market environment. We've got those lines of business. We're not just going to write for the sake of top line. We will write profitable business. Unknown Executive: Give it to Nasib and then Fahad. Nasib Ahmed: Nasib Ahmed From UBS. So firstly, on capital management, I think pro forma, you're at 187% plus on the solvency. You're above the holding company cash of GBP 1 billion. And Charlotte, you were saying you're generating solvency above the dividend and the share buyback. And similarly on the cash remittances, if I roll that forward, you're generating more cash than you need. What is the binding constraint on distributable cash? Is it leverage where you're kind of around 30%? Secondly, on bulk annuities, it seems like the second half last year was very competitive and probably getting more competitive with the transactions that are probably going to close this year. Why are you still in this market given your focus on capital light? And then thirdly, on PYD first half versus second half, it seems like you've done some reserve strengthening in the second half, both in Canada and U.K. If you can talk a little bit about that. Amanda Blanc: Okay. I'll let Charlotte do one. I'll do two and she can do three. Charlotte Jones: Yes. So look, I think -- just trying to think how best to answer your question. I mean, look, we are talking around -- we're at 180%. Now I'm struggling with your number, 187%, what are you... Nasib Ahmed: With Direct Line coming through 7 points. Charlotte Jones: I see. Okay. So the way I think you need to think about it is, we gave guidance for '27 of 20 points. I am going to get to your question, but let me just set the scene how I see it. So for 2027, I'm giving guidance of 20 points. And that comes from the sort of 12 points that we've had in the past, which is kind of like the 1 point a month of regular underlying OCG plus about 3 points coming from Direct Line. So we had about 1.5 points. This is just the regular performance of Direct Line. We had about 1.5 points in the latter part of the second half of the year. So if I take the 12 points plus the 3 points that's coming from Direct Line, then I think of the business improvements, I'm getting to an underlying of about 17 points. And management actions on a recurring basis will be about 3 points. That gets me to the 20 points. So that's kind of '27. That's looking beyond when the Direct Line synergy benefits come through. So at that point, dividends will probably be about 14 points and buybacks is about 4 points. So 20 versus 18 kind of gives me the couple of points of headroom. '26 is a complicated year because you've kind of got a higher SCR going into the year. I would definitely expect that the underlying generation will continue to improve, but we will be focusing hugely on getting the 7 points of synergies coming out of Direct Line. And then kind of that will then drive the SCR down. But obviously, all the time, there's new business growth, which is driving the SCR up. So each year, the same number of points is leading to more pound notes in terms of capital generation. When I think of just the near term, we've got dividends and buybacks to come out. So my 180% will go down. I've also got a bit of solvency, a bit of a few debt instruments or previously grandfathered instruments that stopping. So I've got some drags on capital coming from that. So I'm not sure I would give the pro forma, and I really don't want to give guidance for '26 because it's quite a complicated year. But what the 20 points looking through that to '27 is, I think, important for modeling. And it is a step-up from '25 when you think of -- obviously, we had extremely high levels of management actions, but that aside, it is a step-up on that. Amanda Blanc: On bulks, so first of all, I think your question was why do we do it? Well, we're actually quite good at it. So we've been doing it for a very long time. We are delivering results that are sort of mid-teens IRRs. So I think that's a pretty good return. It is a significant contributor to the cash and the dividend payment of the group. And what we've always said is that the role of bulks is to sort of stay like this, whilst the capital-light businesses go like this. But we've never said that bulks don't play an important role. So we've got -- we're confident in the business. We've written GBP 4.6 billion of deals -- business across 86 deals. Yes, it's competitive, but our IRRs are attractive. We've got a really strong proposition called Clarity, which is the smaller deals, which we've sort of launched over the last couple of years. We've got a very experienced team. And yes, there are new competitors in the market. But what you have to do when that happens is you have to sit back, you have to make sure that you are disciplined and you allow them to do what they will do. And it's not easy in this market from a regulatory perspective, making sure that you are disciplined to do this well. So we will watch how that plays out. But we would still say that our GBP 15 billion to GBP 20 billion sort of guidance for 2025 to 2027 is there. The other thing I would say is that on individual annuities, which is part of this business, the sales are up 19%. And in our guided retirement proposition, which has got how do people draw down, how do they retire, that individual annuities plays a really important role as does equity release. So I think you have to look at the combination effect of bulks of individual annuities and equity release. And I think that, yes, it will be competitive. And we will maintain discipline. I've said that about every line of business. And I think that's going to be the way that we will play this. We've got a scale position today, and we will make sure that we manage this business for profit. And that's mine and Charlotte's role, and the team are all completely aligned with that. On Canada? Charlotte Jones: So PYD, first half, second half reserving, I mean, we definitely had a positive impact on core from PYD. That's in the disclosures. And it was kind of actually across all the markets. I'm not going to go into the detail of reserving, but we had some larger losses, as I talked about before. We will reserve adequately for those. As we've looked through, again, best estimate reserving across the place, but there are -- there have been some areas that we've strengthened reserves here and there, but nothing major to call out. Unknown Executive: I'm aware others are reporting this morning. So we'll take one last question from William Hawkins at the back, and then we'll take the other questions offline afterwards. William Hawkins: William from KBW. Hopefully, I'll be quick for the others. First of all, thank you for providing more financial information in Excel format. I know it's a really small point, but it is really helpful. Two questions. It feels like ancient history, but can you just go back to the Life Insurance Stress Test and just tell us, did you learn anything that you thought was commercially helpful for your business or your understanding of the market? And then secondly, a lot of talk today about the 94% combined ratio for 2026. What's your feeling about the long-term sustainability of underwriting margins? Is this a ratio that can keep improving because of the great stuff of AI and how you can keep growing the business because you've got amazing diversification? Or is this still a cyclical business? And so at some point, combined ratios have to be poorer. I'm not clear about sort of the long-term view on that. Charlotte Jones: Should I take Life Stress Test? So look, I think the Life Stress Test was, as you say, somewhat ancient history at this stage, but it was back in December -- or November, December when it was reported. I think it did provided some helpful reassurance that the sector is well capitalized and can deal with reasonably severe stresses. And -- but it was done entity level, so it wasn't kind of group level. But nonetheless, the individual and the collective disclosure and the confirmation from the PRA that the framework is working well and they see the sector is resilient. I think was a net positive and partly because -- more specific than that, partly because we do a lot of stress and scenario tests anyway, we work through that. And for us, it is important how the group behaves overall. So neutral to helpful, I suppose. Amanda Blanc: And on the 94% COR, so I think we have to congratulate the U.K. team for getting to 93.9% in a very sort of competitive and dynamic environment. You asked, is insurance going to be still cyclical? My bet on this having done 35 years is, I think it probably is going to continue to be cyclical. I think the winners that come out of that cyclicality, if that's the right word, are those that are constantly looking at the cost and looking at the innovation within the business, making sure that you have pricing discipline that you're able to sort of flex according to the market. The investment in AI and machine learning that we know that, that makes a massive difference to our ability to be able to price in a sophisticated way. But in a competitive environment, you're always going to be giving some of that back because your competitors, it's a bit like an arms race. You will invest in something, you will have a fraud tool or you're not getting rid of that fraudster. What you're doing is pushing that fraudster somewhere else. They'll keep trying, you have to keep going. So I would say in the U.K. market, particularly as I think the most competitive market, I would say that we will be aiming for that 94%, which we've said, I think, for the last 4, 5 years, weather aside, that's where we're aiming. Obviously, we will constantly be looking to improve all of the time, but you also have to recognize cyclicality and the competitive nature of the market. But I think we are set up to win because of our scale, because of our supply chain and because of all of the data that we have and the sophistication that we have within the business. And on that, I'm conscious that you have other places that you might need to get to. So I just want to thank you very much for your questions. Obviously, we're around. If there are any follow-up questions, apologies that we couldn't get to absolutely everybody. But -- we have the brunch next Friday with Charlotte, which I'm sure you will deeply enjoy and you'll be able to ask her all the very detailed questions on appendices and everything else. So thank you very much.
Peter Nyquist: Hi, and good morning, everyone. My name is Peter Nyquist, I'm heading up Investor Relations here at Elekta. With me here in Stockholm, I have our CEO, Jakob Just-Bomholt. I have our CFO, Tobias Hagglov, who's doing his last quarter as well as our incoming CFO, Klara Eiritz, who will not present today, but she will be available here in the studio. Tobias and Jakob will present the result, as always, for the fiscal third quarter -- fiscal year 2025-2026, third quarter. We will start the presentation with Jakob giving away the takeaways from the third quarter as well as an update where we are in the strategic execution and the change of operating model and the cost savings related to that as well. Tobias then will talk about the financials and the Elekta's outlook. After presentation, as always, we will have time for questions and answers. But before we start, I would like to remind you that some of the information discussed on this call contains forward-looking statements. This can include projections regarding revenue, operating result, cash flow as well as product and product development. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. With that said, I would like to give the word to you, Jakob. Please, Jakob. Jakob Just-Bomholt: Thank you, Peter. Thanks, and welcome to all of you. So before I get into the quarter, let me just share some overall reflections. It's a solid quarter, but Elekta, we still are not trading at what I believe is the long-term potential of the company. So that calls for a clear strategy. It calls for decisiveness. It calls for execution, bias to action, bold decisions. And I would say we are on that journey. I would say, specifically related to the change in our operating model, I really appreciate the support from leaders within Elekta, Elekta colleagues. We're changing a lot. We are changing the structure. We are changing layers. We are letting go of people who are highly valued and deeply competent. But we had to change coming back to my point that we are not trading at full potential. But the support in getting there has been spectacular. And as I'll outline, essentially by the end of this week, we are running consultations in U.K. We will be concluded with the change we outlined end of November. That's very good. And then big thanks to you, Tobias. You have ensured that we have had a very orderly transition in leadership within the finance function. To you, Klara, and welcome to you at this call, and we look forward to you presenting the numbers at our Q4 and annual accounts. But let me then turn into what this call is really about our Q3. As I said, it's a solid quarter. We have to recognize significant impact from FX, and we will also see impact coming into Q4. And then clearly, also in line with the guidance we gave at Q2, a significant impact in reported EBIT from a restructuring charge of a bit more than SEK 400 million. We stand by the guidance that it will be less than SEK 500 million. On orders, I would say good, a book-to-bill of 1.17, it was 1.15 last year. Keep in mind that typically, Q3 is a good order intake quarter because we roll on a lot of the service contracts, particularly in Europe, that given quarter. And then we saw -- and I'll come back to China, we did see order growth. We did see revenue growth. So that's pleasing, but it was also expected. On U.S., I'll come back to. But there year-to-date, we have seen good orders coming in. It was also much needed, and then we continued the momentum on Europe. So all in all, when I look at the book-to-bill rolling 12 months of 1.09, I think it's healthy. We would like to see it higher, but it's healthy. In terms of organic growth, we are at 2%, continue to see good momentum in Europe. And as I said, China returning to growth. And we stand by the view that we expect both on orders and revenue double-digit growth, probably around 10% in China for second half of the year. And then what our Chinese General Manager, Anming outlined in the strategy update, we do see the market bouncing back almost to pre-anticorruption levels in terms of units. Gross margin at 38.3% supported by product launches. And also pricing, we actually do see a bit of tailwind on that mix and pricing, but a headwind on the cost, and that's a big focus area. I'll come back to that later on. But of course, it's going to be a significant focus area for us going forward. EBIT margin at 11.9%, a bit higher than last year. But just keep in mind, on a comparable basis, we get headwind from less capitalization, more amortization, relatively speaking. So adjusting for it, the EBIT cash margin that we look a lot at, at Elekta is significantly higher, and you will outline that, Tobias, on rolling 12-month basis is really good news. I can say my sincere hope is that coming into next year, the EBIT cash and the reported EBIT will be roughly the same number, meaning that our amortization and capitalization will be a match. Let's see if we get there. In terms of cash flow, less good than last quarter -- same quarter last year, but we should keep in mind that overall, year-to-date, we see good cash flow improvement, and we have paid out roughly SEK 100 million in the quarter linked to restructuring charge. So if we move on to the next page on commercial development, Americas, a decrease of 6%, fundamentally, of course, not attractive. That's why we have a must-win battle to address it. We did outline last time that we were positive on getting Evo approval. I think it's important as part of our commitment that we have a good say-do ratio, and we were, of course, pleased to see that on 16th of January, we could announce Evo approval. Year-to-date, as I said, we have double-digit order growth, substantial double-digit order growth in the U.S. alone. That's also needed because our decrease in revenue reflects a depleted order backlog. So we have a lot of work ahead of us. But of course, every quarter that goes well and is growing is a good quarter. And year-to-date, we have been doing well. We have sold 2 customers on the promise of Evo upgrade. That's now happening. And we are building our funnel going forward. But you shouldn't expect that it's just going to be a huge splash going forward because a lot of the orders have been already taking year-to-date. But of course, the customer interest is good going forward, and we will look at commercializing Elekta Evo the way we have done in Europe. We continue to see growth in South America linked to very strong order intake prior years. On APAC, as I said, and as expected, China is returning to growth. We do see a little bit slowdown in other large countries, notably Japan, also Indonesia, where there's a big tender. So the market is really awaiting what will happen there. And then on EMEA, we see a good increase, continued strong momentum in Europe. And of course, we need to sustain that going forward. And then I'll just flag here, Middle East could potentially impact timing of installation. It's way too early to indicate how many we have a sense for what are the installations at risk, and it's not going to be material, and it will just be a time delay if that happens from Q4 to Q1. So all in all, I would say a solid quarter commercially. But of course, we would like to see that number go up. And that's what our strategy is all about, yes. So if we take the next slide and look at our must-win battles, this is what we outlined end of January. We feel very good about them. They have been working through. Some we are far on, some we are less far on. And I'll give you more details on simplifying power speed. But we did this. I'll just remind you, not to save cost. Of course, we take that in, but we did it to increase velocity of our decision-making within operations, within commercial and most notably also within our innovation department. We are delayering. We are empowering. We are driving culture. It's part of performance management. I think it's going to deliver a lot of good results. And I actually start to feel that the puzzle is getting assembled. We are moving on from having it as an initiative that we needed to execute on to kind of things are settling down. And as I started out by saying, thanks to great work by the leaders and colleagues at Elekta. It's a lot of change. We have asked people to come back to the office because we feel being an innovation-driven company, we can really benefit from problem solving together rather than at a distance. Two focused innovation. There are a lot I could say, but there's also a lot that could be used against us commercially. But I would highlight that we continue to invest in innovation. We believe there is significant need for our solutions going forward. Our current product portfolio will become even better going forward linked to what we have in our pipeline, but we will do it more focused. We will have a stronger commercial lens on it, and we will unfold more of that thought process when we meet at the Capital Market Day in June. Then our third initiative, expand in China, win in the U.S. China is important for Elekta. We are market leaders. We did unfold what does that mean, but it really goes into localizing Elekta in China. We are both from a product point of view, we have a very, very strong organization. We are localizing our supply chain, and then we also continue -- we have both local products, and we are saying should we have even a broader made in China for China product portfolio. So we actually feel good about our China position, not least also because what we said is that the market is going to recover. And then with Elekta Evo, it's now about competing in the U.S. This is Elekta's biggest opportunity because this is the market where our relative share is the lowest compared to other places. And I believe we have every right to compete in the market. That's what I hear from our customers, there is systemic demand for having strong competition, and we are ready. And then lastly, the fourth on continuous COGS reduction. I would really say in today's quite volatile world, it has 2 dimensions. And one is to continually address our bill of material, our ability to install and service our installed base. So that's on cost. A lot of focus will be on continuous engineering to update our tech stack and work with our vendors to continuously increase quality, lower cost. But we also focus a lot on pricing to ensure that we can mitigate certain cost increases in today's volatile world. So we are establishing a pricing desk here in Stockholm. I feel good about that, and we certainly have potential to become more dynamic in how we approach that top line part of our business. So that's where we are. If we then go into our operating model, I have to say, actually, I think we have done well. And by the end of this week, we will almost have executed all the changes that we outlined to you end of November. So that's in 3 months. And we are now at 83%, but the remaining 17% is due to a consultation in U.K., which is happening this week. Of course, it's been tough for us within Elekta, but it will serve the company very, very well to clarify roles, responsibilities who are accountable for what, reduce layers, decentralize, push decision-makings to those who has the best knowledge and then move with a bias to action. So we stand by what we state that we will have a run rate savings without jeopardizing commercial or innovation of more than SEK 500 million, full impact Q1 next year, i.e., from 1st of May. The mix is 30% COGS, 70% OpEx. We're still simulating, but that's our best evaluation. Restructuring charge to be taken this year between SEK 450 million and SEK 500 million. We have taken SEK 417 million here in Q3. And then as I said, we are moving well. And then in parallel, we are now linked to budget and also, Klara, with your support, we are now assessing all the discretionary spend because I do think there is a potential for Elekta to just be very, very, very prudent in terms of where we allocate resource and cost and that should also support us into next year. So that's where we are. And then with that, over to you, Tobias. Tobias Hagglov: Thank you, Jakob, and good morning, everyone. So let's look into the third quarter then a little bit more in detail. And I think you, Jakob alluded to several of the points here on the slide. Net sales in the quarter increased by 2%, and we had a growth here in Solutions by 1% and Service by 3%. We can see a continued strong momentum in Europe, supported by our product launches, Elekta Evo, Elekta ONE. And also when looking into our Chinese operations, as you know, this has been impacted by the anticorruption campaign here over the last years. It's actually returning here to growth in the quarter after 2 years, which is a very positive signal. Then moving down in the P&L, looking into the gross margin, we have an improvement here of 120 basis points. In the quarter, we have a negative impact from tariffs of 100 basis points and then furthermore from FX of 130 basis points. But including this, we are improving our gross margin. It is supported by the product launches. It's also, as you heard Jakob mentioned, supported by general price improvements that we see across our products. If we then look at the operating margin, we have an improvement here of 20 basis points, amounting to 11.9 percentage points in the quarter. This is driven by the improved gross margin. We also can see that we have lower R&D investments and also lower admin costs here year-over-year in the quarter. And what also Jakob mentioned here is that we do have lower capitalization of R&D and higher amortizations. And if you actually would look at the cash EBIT margin, adjusted cash EBIT margin is actually up 170 basis points in the quarter year-over-year. And then also here, we do have restructuring charges here of SEK 417 million reported as items affecting comparability, which is also then reflected in the earnings per share. What we have seen in the quarter is a quite a rapid move of the currencies. And here, we have outlined the effect here both from operations and then also sorted out the currency impact. So what we see in our P&L is that our net sales are impacted by more than SEK 500 million negative in the quarter from the FX moves. And in terms of growth, this corresponds to minus 12%. This is predominantly driven by a stronger Swedish krona versus our main revenue currencies, the U.S. dollar and the euro. When you then look further down in the P&L, we have a negative impact on our gross margin of 130 basis points, which I just mentioned, and furthermore here on the operating margin of 180 basis points. And in addition to the translational currency impact, which I just mentioned, this is also driven then by the dollar depreciation versus our main cost currencies in euro and pound. If we then look at the cash flow, and Jakob also mentioned this, we do have a lower cash flow year-over-year in the third quarter. Still though that year-to-date, our cash flow is more than SEK 400 million better than last year. We have also had a more smooth development of our working capital in the inventory development, especially. In this slide here, we have sorted out the effect of restructuring provisions and then here stated more solely the working capital development in the quarter, which was stable. Then investments are lower than last year, both here in the quarter as well as year-to-date. And taxes, interest, net and other are on the same level as Q3 last year. The cash flow generation this year has led to that we have a net debt decrease of more than SEK 200 million compared to Q3 last year. Then looking at the trends here, I was talking about the currency impact and in nominal terms, we have seen a bit of a slight decline of the revenues, although currency adjusted growth here in the quarters. But when you look at it, and I was talking about the improved gross margin, there is a steady trend here, strongly supported by the product launches and price improvements and also which, of course, then with the must-win battles that Jakob was on will be further supported by the gross -- to the gross margin development. So a steady improvement here over the quarters on the gross margin. We have also an improvement here on a 12-month rolling basis on the operating margin improvement. And if you then would look again at the cash operating margin, it's a strong improvement here, which has been ongoing here quarter-by-quarter sequentially. Then looking at the cash flow. We have a lower cash flow in Q3. But if you look at the -- as well as the year-to-date, you look at the 12-month rolling, it's a significant stronger cash flow over the last 12 months than what we had here a year ago. And if we then look at the outlook, we reiterate our '25, '26 outlook. We expect net sales in constant currency to grow year-over-year. And we also expect a negative impact here on earnings and from tariffs in Q4 as well. And the midterm targets, no change there, and they are confirmed. So by that, I would like to, before the Q&A session, say a big thank you to all here over the years here. Working with you has been a pleasure. And I then hand over the word to you, Jakob. Jakob Just-Bomholt: So the closing remarks should reflect what you just heard. So solid quarter, solid performance. We have launched Evo now in the U.S. also. We are building up the funnel, good order growth year-to-date. Obviously, we have strong currency headwind and also increased tariff headwind despite gross margin is at 38.3%. And as you outlined, Tobias, with an improving trend, and we need to sustain that. And then we focus a lot on what we can control as part of our must-win battles, super important, and we are well on the way of resetting how we operate and how we think and how we execute within Elekta. And by the way, it will also lead to cost reduction of more than SEK 500 million. And then we focus obviously on cash flow generation also. That's also why we can report here year-to-date an increase of almost SEK 0.5 billion. Peter Nyquist: Great. Thanks. And before we start with the Q&A, I just want to remind you that we have the Capital Markets Day here in Stockholm set for June 17. So it will be here in Stockholm. More information will be distributed later on. And with that, I think we have -- yes, and this is the calendar for the following report. So the next one comes in May 28, our Q4 earnings report. So with that, I would like to open up for questions, operator. Peter Nyquist: And I think the first question comes from UBS and Kavya Deshpande, please. Kavya Deshpande: Can you hear me? Peter Nyquist: Yes, we can hear you, perfect. Kavya Deshpande: Two, please, both on China. The first was, would you be able to share how much China order growth actually was in the quarter and remind us how this compared to Q2 and Q1, please? Just because you've been quite specific about the target to grow orders around 10% in H2. So it would be a bit helpful to get some more specificity on the year-to-date trend. And then just more generally, would you be able to remind us, please, why you think the radiotherapy category in China differs to other capital equipment markets where we've obviously seen this acceleration in share shift towards Chinese players over the past year and a bit. Specifically to United Imaging, you look like they're getting good traction with their new O-ring linac and adaptive radiotherapy product as well, please? Jakob Just-Bomholt: Yes. Thanks, Kavya. Good questions, of course. So we'll stick to second half, we say double-digit growth on orders, but we have positive both on revenue and orders here in Q3. So that's good. And it is linked to market recovery. Of course, we have also asked ourselves why are we an outlier on China versus other MedTech companies. But I think the short answer is the market is heavily underpenetrated. You have 1.8 linac accelerator per capita, and there is a growing cancer burden in the country. So there has now been pent-up demand, and we used to have 300 linacs, it dropped to 170 and now it could very well be 260, 270 linacs going forward. So we are not entirely back. Then in terms of competitive situation, we also outlined, there are a lot of local ring-based competitors, but there's really one who has traction, that's United Imaging. Despite, I would say, and also because of we have localized our products and our market presence, we remain the market leader. We have lost a bit of share, but we remain in the high 30s in terms of market share, and that's also our aspiration going forward. Peter Nyquist: And we'll move to the next question, Kepler Cheuvreux, and that's Oliver Reinberg. Oliver Reinberg: Quick questions from my side, if I may. Firstly, can you just provide us a bit of color on the order intake composition? I would assume that a large part is driven by Evo. Can you just confirm that ideally quantified? And if that's the case, what kind of product categories you have seen any kind of declines? That's question number one. Secondly, just looking forward into Q4, we had a very strong comparison in terms of gross margin. I just wondered if you can share any kind of thoughts on that, what to expect going forward now? And lastly, just on strategy, Jakob, I just wondered, can you just discuss how you think about the critical size of Elekta overall and obviously, you have to pay for your marketing installation service infrastructure. How easy is that? And related to that, how do you think about the role of partnerships in the past, there was always a discussion of the importance of independence. It would be helpful to get your thoughts on that. Jakob Just-Bomholt: All right. I'll take the very easy one first. Gross margin Q4, we don't give that guidance, I'm sorry. We will stay with our guidance. We believe in organic growth positive for this year. So I hope you understand that. In terms of order intake, what I will share is that, of course, we just got the approval in U.S. mid-January and our quarter ended January. But we have seen a very substantial order growth in the U.S. It's still too low, but very substantial relative to prior years linked to the expectation of Evo getting approved. And as we got more certain, then we saw that pick up. We are now converting that order backlog from Versa HD into Evo. So that's working. We are, by the way, also upgrading to Iris. And then we can just see the funnel opportunity. I would dare to say, quite rapidly expanding in terms of prospective customers having interest. And of course, we hope to see the same commercial traction in U.S. And why shouldn't we, as we have seen in Europe, and there are roughly 2/3 of what we sell of new solutions are Evo related. So that gives you a good indication. And it's also a nice system, I have to say it's versatile, it's adaptive, it's competitive. So we'll continue to build from that. Then the last one in terms of Elekta's critical side, I would almost say I would love to answer it. It will probably also take 10 minutes, and it's certainly a worthwhile topic for our Capital Market Day. But if you will get my helicopter perspective, then relative to our main competitor, of course, we are smaller. But I would just dare to say that we are the focused radiation therapy market, and that comes with a lot of benefits. Then we have assessed our product portfolio. The product portfolio logic is absolutely sound from Brachy to Neuro to linear accelerator, CT, MR to supporting software suite. So the logic stands, and we believe we can build that ecosystem that is relevant. And then there will be a choice. You can have Elekta. We are a little bit more open, not fully open, but a little bit more open than others or you can go for a more closed system. And that's good. We want to give customers choice, and then we want to compete for our fair market share. Peter Nyquist: We'll move to Handelsbanken and Ludwig Germunder. Ludwig Germunder: I have a few. I want to start with the cost savings program, please. And you've been talking about it, of course. But would you say that the underlying impact from savings during this quarter has been in line with your own expectations? Or would you say that the -- for the quarter has been above your own expectations in terms of how fast you've been able to get the impact from it? That's my first one. Jakob Just-Bomholt: As expected, very little impact this quarter. It will have a significant impact in Q4. But the model we did was really focused on Q1 and there we are, I would say, on par with maybe a little bit above our expectations. Ludwig Germunder: Okay. And just to make sure regarding this restructuring charge of SEK 417 million in the P&L, is it fair to assume that most of this was a cash expense in the quarter as well? Tobias Hagglov: No. Most of it is actually a provision, but you also have a certain degree of payments in the quarter cash cost. Jakob Just-Bomholt: Yes. So what we guide is roughly SEK 100 million was paid out in the quarter. That means remaining SEK 300 million remains to be paid out and that's in line with the expectation. And then we will have some further provisions to be made. So the guidance we have given is SEK 450 million to SEK 500 million, of which we have paid out, if you will, SEK 100 million. Ludwig Germunder: Great. Very helpful. And then just one final on the Middle East situation you mentioned. I know you said it's too early to quantify, but would you be willing to give us any context here, like how much of sales or orders are related to the region where you see a risk of any delayed installations? Just to get some sense on how to think about it. Jakob Just-Bomholt: Sure, sure. So -- but take it with a grain of salt because, as you all know, the situation is fluid. But in terms of potentially impacted installations and thereby sale would be 2% of Q4 sales. So I would say it's a very manageable amount, and then we follow in real time those installations. That number may change given where we are and what we see, but I would still dare to say it's manageable. Then our perspective may look different in a week's time. Peter Nyquist: So we'll move to Mattias Vadsten at SEB. Mattias Vadsten: Can you hear me? Peter Nyquist: Yes, we can hear you perfect. Mattias Vadsten: First question, maybe another one that takes 10 minutes to answer, but you talked about commercially driven innovation in the presentation. So if you could give just some examples on what this statement really means, focus on software vis-a-vis hardware, new platforms versus refining current platforms, et cetera, et cetera? That's the first one. Jakob Just-Bomholt: Yes. It's also a fundamental question, and we outlined a little bit in the strategy outlook. We'll outline more, of course, and find the boundary between what we want to say and what we can say and so forth. But yes, commercially driven means a little bit less big platform, more modular-driven innovation. It's deliberately vague. Sorry about that, Mattias. But I would say we reduce the risk profile in our innovation. We increase the traction. And I would say when I -- and we spent a lot of time over the last 4 months in assessing our innovation pipeline. I'm also hands-on involved in it. I have to say. We put a customer lens on and a commercial lens on. And you should expect that over the next 24 months, we will significantly enhance the portfolio of our CM linac portfolio, and that goes both for hardware and software. So I feel very good. That's also why we are willing to fund continued investment. As I said, we are not asking our investors to underwrite, an increase in gross R&D, it will come down a little bit, but we should be able to see more output. And then let's not forget, it's not only resources put in, it's also how efficient you are. So we are also structurally addressing the efficiency within our R&D engine, if you will. Mattias Vadsten: And then you talked a little bit about Evo and the comparison to Europe and so on. But from what you've heard and seen now in terms of customer behavior, customer feedback, what conclusions can be drawn if you compare sort of what you've seen in Europe since sort of late 2024? And also, if you could give an update on sort of upgrade versus new linac? Jakob Just-Bomholt: Yes. If I take the latter first, then given that we have sold quite a few units this year with the promise of upgrading technical obsolescence against the fee, then you can say we have essentially already sold Evos in the U.S. and we'll continue to sell Evo. Then we are now upgrading. We will build reference sites. We will prove -- provide clinical evidence. And it matters a lot that we shouldn't ask U.S.-based customers. I met some of them here 3 weeks ago in Holland, but then they had to fly to Europe. That's not very efficient. So we are now building our reference sites with Evo so we can demonstrate the value. And then we look at our funnel and so far, so good. But I'm not going to commit to a number. I think it's too early days, but why -- I would just say why wouldn't we see the same demand in U.S. as we have seen in Europe. And there, we have just seen a good traction. But I would rather demonstrate it through actions and promise here for the future. But so far, so good, I would say. Mattias Vadsten: Perfect. And then I will squeeze in one final quick one. So you said book-to-bill was 1.3 first half in the Q2 report for China. Could you give that year-to-date figure now, book-to-bill for China? Jakob Just-Bomholt: Yes, it's above 1.1 for China. And so we will end up with a book-to-bill. I'll just do the math here, but it will be above 1.1. And that's an important milestone because we have seen a depletion in our China backlog. So we actually had a good revenue year after the anticorruption, but we were depleting the backlog and now we are building the backlog again. And that's why we essentially feel pretty okay about our China position, recognizing everything that is said in terms of competing. And we're also using it, I would say, we very often, as Europeans, we are a bit defensive. I look at it differently, how can we tap into China speed? How can we build competitiveness in China? And if we can compete in China, when we can, we can also take that know-how elsewhere in the world. Peter Nyquist: We'll move to Veronika Dubajova from Citi. Veronika Dubajova: I'm going to keep it to 2, please. My first one is just to understand the sort of process of converting some of the older orders in U.S. to Evo. Can you sort of maybe talk through from a customer perspective, how that works? And also just from an accounting perspective, when you do trigger that conversion, does that show up in the gross order number? Or is it just because it's a conversion of an older order, there is no incremental impact on that? If you could just touch upon how that works. That's the first one. And then obviously, you guys are pushing ahead with the restructuring with the strategic changes. And so it would be great to sort of just get a little bit of a pulse on the organization and what's the feedback? Where does morale sit? Anything that sort of is worrying you in terms of how the organization is dealing with the changes that you put into place? Jakob Just-Bomholt: Yes, I can do that. So if we talk about upgrades to Evo, that will now happen and there will be incremental charges. I don't want to share the specifics, but it's substantial, and then it will be triggered from a revenue recognition point of view when we install the units. That's typically when we recognize the revenue. So that's how it's going to go. In terms of restructuring, as I started out by saying, I have to say, I've just been super impressed all around with the behaviors from, I would say, owners to leadership to employees. We knew we needed to change. And then at the same time, we empathize because the change is tough. And it is not only in terms of fewer people, it's also the way of working. And I have to say, I've just seen so many people who work, including a few here in this room until very last day, and it's massively impressive. I think the morale is good, where we -- you can say, biggest impact on morale is actually we have implemented a 4-day in the office policy. But we do that because Elekta, our purpose is so important. We need to innovate for customers and patients around the world. There's more than 2 million patients being treated on our ecosystem, you can say. And we feel that we need to increase momentum and velocity. And part of that is inspiring each other. But all in all, I have to say I'm very pleased with where we are. We haven't lost focus on commercial, on customer and cost and so forth. But I have to say there's a lot more to do. So the must-win battles we have outlined is really meant for the next 24 months. And as I said, as part of that must-win battle 1, we are now addressing our discretionary spend, and we are just going through line by line. And that's important because we only want to spend money where it adds value either for our customers, patients and investors. Veronika Dubajova: And just to clarify, so when you upgrade, I don't know, Versa from to Evo. What's the impact on the order backlog? Do you recognize the whole order, the price uplift? How does that work? Jakob Just-Bomholt: Yes. Then we -- once we upgrade, we recognize it in the order backlog. And when we install it, we recognize it in revenue. And obviously, it's quite good margin perspective. Yes. Veronika Dubajova: Yes. But from an order perspective? Jakob Just-Bomholt: Yes. So when we then commit to the order, then there is an order backlog increase. But the way you should think about it, you will not see it in the -- yes, you will see it, but it's not going to be that significant in the total order backlog number. Tobias Hagglov: And it's the upgrade value. It's not like we double counted here, Veronika, if that's your question. Veronika Dubajova: Okay. Perfect. That's just what I was trying to get at. Peter Nyquist: The next question will come from Kristofer Liljeberg at Carnegie. Kristofer Liljeberg-Svensson: Three questions. The first one is you said that you're looking at other costs here besides the restructuring program. So should we interpret that as you expect or that you see potential for more savings than the SEK 500 million in the next fiscal year? Jakob Just-Bomholt: Kristofer, you should interpret what we have said is we are committed to run rate of more than SEK 500 million. And now we'll just -- we are running through the machine and then let's see where we get to. Kristofer Liljeberg-Svensson: Okay. And I don't -- I understand you don't want to be specific, but just to clarify, do you expect China and U.S. sales growth to be positive now in the fourth quarter, given what's happening with better order momentum? Jakob Just-Bomholt: I think the only thing I'll say on China is we have guided towards second half growth, right, double-digit growth, probably around 10%. On U.S., I will put that under the overall group umbrella and say we guide at a positive organic growth for the year. I know we are vague, I hope we can be more precise, but I'll stick to the guidance here now. Kristofer Liljeberg-Svensson: Okay. But when you say 10% in China, is that for orders or sales? Jakob Just-Bomholt: Both. Kristofer Liljeberg-Svensson: Both. Okay. That makes sense. And then my final question, I noticed you said here that you would like cash EBIT to be in line with reported EBIT, i.e., a much less positive effect from capitalized R&D. In such a scenario, would you say that this midterm EBIT margin target of 14% is still valid, i.e. that cash EBIT improvement would be even bigger. Jakob Just-Bomholt: Let's get back to at our Capital Markets Day. But if I just address in isolation, and I think many of you on this call will agree, if we look a couple of years ago, difference between reported and cash-based EBIT was 4%. Last year, it was 3%. This year, it's 1.3%. And it's complex. And I personally like to keep things simple. So within Elekta, we look at gross R&D spend. And why not then take the next step in the simplification and match capitalization with amortization. How that will be executed, we are evaluating. But I do think I said that we are committed to improving the quality of earnings, and I think this is an important part of it. Peter Nyquist: So next question, we'll go to Sten Gustafsson at ABG. Sten Gustafsson: Two questions. And the first one is a follow-up. Did I hear you correctly when you said that you expect to see a substantial part of the cost saving program to materialize in Q4? I think previously, you talked about it to come in Q1 next fiscal year. But do you expect to see it already now in Q4? Jakob Just-Bomholt: Not full amount, but substantial. So you heard correctly, Sten. Sten Gustafsson: Very positive to hear. My second question is related to China. Obviously, you book orders there now for Evo, but have you also started to book sales? Or when will you start installations of Evo in China? Jakob Just-Bomholt: So it goes into what I outlined here that we expect in second half, both from orders and revenue growth of around 10%. Specifically on Evo in China, yes, we got approval. We also see it's a relatively smaller part of the overall portfolio from a commercial point of view. We sell Harmony Pro also with adaptive treatment possibility. Sten Gustafsson: Okay. I mean, but you are allowed to make installations of Evo in China now? Jakob Just-Bomholt: Yes. That's right. Correct. Peter Nyquist: And I would like to welcome in David Adlington at JPMorgan into the call to ask question. David Adlington: Just on the U.S., please. So firstly, I assume you saw some pent-up demand on orders with the approval of the Evo. I just wondered if you could sort of quantify how much of that was pent-up demand and how you're expecting orders to develop in the U.S. in the coming quarter? And then secondly, I just wonder if you've seen any customer reaction to the Varian announcement that they're launching a new platform in the late summer. Jakob Just-Bomholt: Yes. So if I take Varian first, David, I don't comment on competitors' product. We are very well aware, both from an IP point of view and in the market performance. I think it's actually fundamentally good because it's more adaptive, and we are just very early on in the S-curve of making adaptive radiation therapy treatment the main product. So I think for more options to a customer will expand that piece of the market. And then we look at our own innovation road map and feel actually good about our relative strength today, tomorrow and in 2 years. Specifically on U.S., I mean, obviously, it's helpful to have your best product available for commercialization. As I said, part of that pent-up demand was taking in the quarters up to. So we also had a good Q3 and some of the orders we had prior to FDA approval because we included a provision in the contract that they would be upgraded once we got the approval. And now we have the work ahead of us in building the funnel, building the reference sites and really get into the track of what we have seen in Europe. I would say -- so I don't want to give specific guidance. I don't think that's appropriate for Q4. I would say that overall, we are not getting our fair market share in U.S. That's why we have it as a must-win battle. We now have the product portfolio, I would say, to compete. We have set the organization. We know what we need to do. Now we just need to do it and demonstrate it in actions actually. David Adlington: Maybe just a quick follow-up... Peter Nyquist: Go ahead. David Adlington: A quick follow-up? Peter Nyquist: Yes, absolutely. David Adlington: Just wondering, with the announcement that they are launching in September, has that seen any customers who were potentially looking at Evo just sort of pause and wait to see what's coming in September? Jakob Just-Bomholt: It's not the feedback I'm getting. I mean, I look at our funnel and how it develops and that part looks okay. Peter Nyquist: Next question will go to Richard Felton at Goldman Sachs. Richard Felton: Two for me, please. First one is on one of the must-win battles winning in the U.S. So obviously, having Evo in the market is an important part of that. But can you talk about what you're potentially doing differently from a commercial execution perspective in that market going forward? And then the second question, just coming back to China, you alluded to a little bit of market share losses, but there's still a market share in the high 30s in that market. Could you just clarify, are those comments based on the installed base overall or share of new placements? Jakob Just-Bomholt: China share of new placements. Basically, we look at how many linacs been purchased, and it's very transparent in the China market and then what has been our share. On U.S., yes, I can share a bit. I mean, it, of course, always starts with suitable product, but then commercial execution matters a lot. And that's going back into our decentralized model. So we are pushing P&L responsibility to our 5 regions. We report here 3, but we have 5 reporting directly to me. We have delayered the organization. We are centralizing part of the pricing, strategic pricing framework, but otherwise, we are out there. Then we have spent a lot of time mapping our existing installed base, what our retention strategy. We look at aging profile, we look at flips, we look at greenfields. We are mapping out the market. And then we really -- and I have to say, I'm pushing a lot on let's build the funnel because funnel should be a predictor for order intake, which is -- should be a predictor for revenue generation. I'm not saying we are there yet, but we are doing quite some swings, I would say, in structured commercial execution, but that goes for all regions. And then maybe I'll just say -- and then at the same time and very, very importantly, we recognize we are on a burning platform, and we are deeply frustrated about where we are in U.S., not least because I think it's good for our customers and our patients or their patients to have a strong competitive alternative. We think we have that now. They are part of our portfolio. We want to do even better, and that's what we are addressing in focused innovation, and we need to address it fast. Peter Nyquist: Great. Thanks, Richard, for those questions. We move to SB1 Markets with Johan Unn rus has the next question. We lost you there, Johan or maybe you. Can you hear us? Johan Unn rus: Can you? Peter Nyquist: Yes. Now we can hear you. Good. Johan Unn rus: Can you hear me? Yes. I think we will double [ command ] to that. Yes. A follow-up on the funnel in the U.S. Evo is, of course, extremely important in the U.S. and clearly a very important bit of that win -- must-win battle. What about the funnel so far? Can you see any new Elekta? Any orders coming from centers and accounts which are new to Elekta? Or is this Elekta users already? Jakob Just-Bomholt: Yes. So if we look at it, funnel is important. Let's not forget funnel on service and our TPS OIS software is extremely important. We have Brachy and Neuro also important. But if we get to linac, I mean, quite pleasing, we have done some flips taken from competitors. I think that's very important. When they flip us, we flip them. And then it's less a greenfield market actually because it's so mature. If we look at the funnel, I would say I think we are on track in building it. I still -- before I commit to saying that we are at the same track as Europe, I want to see that converted in execution. But as I said, we just got the approval. So I think it's also okay. But so far, so good. So far, so good. Johan Unn rus: Yes. And a follow-up to that, obviously very important to have centers and reference sites. You referred to that earlier. What -- how long will it take to get that in place, 3 to 6 months? Jakob Just-Bomholt: It will happen very quickly. It will happen very quickly. Some of them here in Q4 also. Johan Unn rus: Good. And what about the sense of time from order to installation in the funnel? Are most of them fairly sort of imminent orders, so to speak? Jakob Just-Bomholt: I don't want to give the specific here in terms of maturity from funnel to orders. And then the way you should think about it is from order to revenue, it's typically 12 months, but with significant variations from order to order. But it's, of course, important if you look at U.S., we have a very favorable working capital. I mean people pay upfront and so forth. So I think it's not only from a revenue and EBIT, it's also from a cash perspective, favorable that we get our fair market share. Johan Unn rus: Is it fair to say that, that dynamic is in line with what to be expected in the linac hardware market in general? Or could it be [ offset ]? Jakob Just-Bomholt: I think if it relates to Evo, we are on expectations, but I still would say we need a bit more time. We got approval mid-January. We have received quite a few orders. You saw order intake Q3 linked to Evo. So that's good. I look at year-to-date, and I can see a substantial, substantial increase in U.S.-based, not Americas-based, but U.S.-based orders. I like that. Let's see how we sustain it over the next couple of quarters and our ability to then convert funnel into actual wins. That's what I'm looking at. Peter Nyquist: We will now move to the last question for this session, and that will be Ludvig Lundgren at Nordea. Ludvig Lundgren: So a bit of a follow-up to the Evo and the U.S. So I think in Europe, you actually initially saw sales being driven by Iris upgrades for like previous Versa installations. And as these have shorter lead times than new installations, so I just wonder if you will expect to see a similar pattern in the U.S. And then also, if you can remind us of the margins of these type of installations. Jakob Just-Bomholt: Yes. So the margins, I think, let me put it this way, 80% plus. So they're obviously attractive. And we are looking at upgrade. It will be less than in Europe from that point of view. But we will do Iris upgrades here in Q4. And -- but we also did that last year. So when you look at the comp, we look at Q4 that is a tough comparable quarter last year, but we still stand by, of course, the guidance we have given in terms of organic growth for the year. Ludvig Lundgren: Okay. Understood. And then my final one, just on -- if you have any updates on the Section 232 investigation. And also, if you can comment on this recent U.S. tariff changes and how you expect that to affect? Jakob Just-Bomholt: Yes. We are evaluating it. We actually report here this quarter a bit higher tariff impact, but it's also linked to selling more in U.S. So in a way, it's a positive problem, but we are still evaluating and understanding. So I think we need a bit more time with everything that's going on. Peter Nyquist: Maybe before we close the call, any final remarks from your side, Jakob? Jakob Just-Bomholt: Solid quarter. We are busy. We execute a lot. We have to continue the momentum, bias to action, clear strategy, then we look forward to Capital Market Day where -- so with your support, Klara, I hope and endorsed by the Board, we can outline a financial plan that management stands behind. Peter Nyquist: Thanks. Jakob Just-Bomholt: Thank you very much. Peter Nyquist: Thank you.