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Operator: Good afternoon, and welcome to the MicroVision Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead. Drew Markham: Thank you, Paul. Good afternoon. I'm here today with our Chief Executive Officer, Glen DeVos; and our Interim Chief Financial Officer, Steve Hrynewich. Following their prepared remarks, we will open the call to questions. Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, strategic plans, acquisition benefits and risks, expectations regarding customer engagement and product deliveries, go-to-market strategies, product performance and pricing, market landscape and opportunities, cash flow forecasts, liquidity and the impacts of recent financing activities, availability of funds and access to capital, expected revenue, operating expenses and cash balances, as well as statements containing words like believe, expect, plan and other similar expressions. These statements are not guarantees of future performance. Actual results could materially differ from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. This conference call will be available for audio replay on the Investor Relations section of our website at www.microvision.com. Now I would like to turn the call over to Glen DeVos, our Chief Executive Officer. Glen? Glen DeVos: Thanks, Drew. We have a lot to cover, and I want to start today's call by sharing our view of the significant changes we see happening in the broader LiDAR market, what we call LiDAR 2.0, and how we are building MicroVision to lead in this new era. When I reflect on the last 10 years or so in our industry, what we refer to as LiDAR 1.0, it was clearly a technology race. Companies operated with a Silicon Valley mindset putting hardware first chasing best-in-class specs. The prevailing thought was that the best technology would lead to wins and that the volume would drive down costs, which would in turn lead to mass adoption. The challenge with this start-up mentality is that it was at odds with the realities of how the industry operates. Long predevelopment and sourcing cycles followed by uncertain volumes, a recipe for fragile revenue, heavy burn rates and has led to consolidation in the space. What MicroVision defines as LiDAR 2.0 isn't driven by technology, but rather by providing value to our OEM customers. It's not about winning with the single most impressive sensor, but rather it's about achieving scalable deployments across real-world platforms that drive long-term growth and margins. The transition from LIDAR 1.0 to LiDAR 2.0 now is now underway. Looking across our industry, incumbents will face significant challenges in navigating this shift, for example, hardware-centric players have impressive technology but the wrong economics, embracing a mindset of volume will fix price, while also failing to leverage the value that software can deliver. Automotive-only players have deep focus, but their single-threaded revenue creates risk when faced with program delays, low option take rates or tightening budgets. Industrial players have revenue prospects in the short term, but the current electromechanical sensor architectures with their associated high cost structures are vulnerable to the emerging high-performance solid-state sensors with their significant lower cost basis. These challenges require a fundamentally different approach and success in LiDAR 2.0 will come to companies that can excel in 4 key areas. These include: first, having a scalable product portfolio that enables participation in diversified end markets, enabling robust revenue streams and achieving scale across the business, taking an open approach to software that both drives down hardware costs while also enabling our customers to more effectively manage their applications and systems. Hitting the right price point with a hyper-focused design-to-cost approach that enables our OEM customers to unlock value in their end markets and embracing automotive-grade execution coupled with fiscal discipline. The new MicroVision has been built to lead in this LiDAR 2.0 era. So why are we feeling so confident? Certainly because we have the following capabilities. First, we have the right portfolio through the acquisition of Luminar and Scantinel, MicroVision now has the most complete and robust LiDAR technology portfolio. MicroVision's MOVIA sensors offer compact, cost-effective short-range solid-state sensing with applications in all of our end markets. We are now seeing the anticipated interest in MOVIA S following its launch at IAA last September with multiple customer trials for industrial and automotive applications. Our IRIS AND HALO sensors acquired from Luminar offer long-range sensing for high-speed use, and it's a perfect fit for automotive and security and defense. Our 1550 nanometer FMCW sensor acquired from Scantinel provides ultra long-range sensing with initial applications in automotive and security and defense. The combined software products, MOSAIK and SENTINEL now provide a complete end-to-end capability from silicon to point cloud to perception with advanced AI-based features, which can easily be integrated and configured by our customers, leveraging our open software framework. With this product portfolio, MicroVision is now equipped with the solutions to serve the automotive, the industrial, and the security and defense markets with a scalable set of hardware and software solutions. I want to take a moment though to highlight the emerging needs in the security and defense sector that are of increasing importance to MicroVision. We completed our proof-of-concept phase for our drone and ground-based autonomy platforms in Q4 of last year, and we are now working closely with our defense advisory board members as part of our business development and customer engagement phase. With our drone-based MOVIA Air and our newly acquired IRIS and HALO products, we have the right products at the right time to enable real-time drone-based mapping and perception as well as ground-based autonomy. The ongoing shipments of MOVIA L to a European customer was an important start for us in this space and validates the need for these applications to use robust solid-state solutions. We will be publicly showcasing our capabilities over the course of the next months as we ramp up our efforts in this important market. Our production technology, our U.S. and German footprint, as well as our U.S. manufacturing capability position MicroVision to be a leader in the security and defense space. Now in addition to our portfolio, MicroVision's use of software is a clear differentiator. The new MicroVision shifts our center of gravity from hardware bragging rights to software that lowers cost and expands capability. Our focus on advanced software-centric signal processing through the full stack continues to enable MicroVision to drive down the cost of the sensor hardware. This strategy follows a very similar blueprint to what we did in vision and radar for the move to software-defined sensors was a key step in achieving cost levels that drove mass adoption and achieving scale for these technologies. LiDAR will follow the same path, but we are making it happen much faster. Additionally, our open software framework completely changes how our customers can utilize and leverage the capability of our sensors. It gives them full control of their system development and integration, opening up new value creation opportunities for them. And finally, we're accelerating revenue. The new MicroVision is converting existing commercial demand and customer relationships into shipped product and revenue. And this is happening now. Following the Luminar acquisition, our top priority has been to restart those commercial relationships and contracts where I'm meeting personally with our IRIS and HALO customers. In the first month since the acquisition, we've already shipped IRIS units as we transfer contracts and POs and reestablish commercial relationships and the production schedules. The customer feedback has been very positive, with strong interest in MicroVision's post-acquisition combined product road map where we can be a total solution provider to them. The Luminar acquisition also significantly expands our market access by bringing approximately 30 new customer relationships and many more incremental prospects to MicroVision. It also enables us to offer new sensor solutions to existing MicroVision customers. This cross-pollination is further accelerating our commercial traction. Additionally, we began shipments of MOVIA L in December to an EU security and defense OEM with repeat orders continuing in 2026. As I talked about earlier, we are very pleased with the momentum in this segment where we see opportunities to expand near-term revenue. And then finally, as I mentioned, MOVIA S continues to gain interest and traction with multiple customer engagements and we remain on track for our Q4 MOVIA S industrial launch. We could not be more excited about MOVIA S as it is truly the right product at the right price and at the right time. We are also confident that our operations can support this accelerated revenue, but we know that the proof is in the execution. The new MicroVision is guided by experienced leaders with proven reputations in the automotive industry. With automotive-grade DNA and a collaborative approach to partnering with customers, the company is poised to meet commitments, milestones and deliveries. Now to reiterate my remarks from last week's fireside chat, I want to be very clear about our thinking regarding our recent Luminar and Scantinel acquisitions, and the critical role they play in enabling MicroVision to lead the LiDAR 2.0 era. First, they round out our strategy of offering the right product at the right price. By integrating these assets with MicroVision's, we now offer the most comprehensive and robust LiDAR portfolio in the industry. We expanded our ability to serve different industries, use cases and price points. Not only will this open up immediate revenue streams in automotive, industrial and security and defense, that will also make our business more resilient and diversified. Second, the acquisitions accelerate revenue. In particular, the Luminar acquisition brought active commercial programs and established customer relationships that pull forward our timeline to scale. We've made significant projects in resetting these commercial relationships. And as I mentioned earlier, are now shifting products to multiple customers. This approach accelerates MicroVision's path to revenue compared to achieving this organically, which would have taken much longer. And third, these acquisitions have added depth to the talented MicroVision team with expertise in hardware, software and advanced perception, all with proven experience in navigating automotive requirements and manufacturing at scale. This has enabled us to make the recently announced decision to consolidate our Redmond engineering, manufacturing and supply chain management operations into our Orlando site. This marks a key step in realizing the synergies we identified as part of the acquisitions as well as improving our overall operating efficiency. Orlando will be our U.S.-based manufacturing site for our full line of products, which is serving the security and defense sector and will be critical for that sector. It will also complement our ongoing high-volume contract manufacturing strategy. In summary, we didn't acquire Luminar or Scantinel to simply grow bigger, we acquired them to move faster. We have also continued building out our executive leadership team with proven credibility across the markets we serve, including automotive. Executives like Fabio Laura, who's leading our operations, supply chain management and quality, as well as Greg Scharenbroch, who will join -- who joined us in November as our Vice President of Global Engineering. What I've shared with you today serves as the basis for the new MicroVision strategy and how we will lead in the area of LiDAR 2.0. It's a strong and clear blueprint to guide the company and these steps are already well underway. I would now like to invite Steve to review our GAAP fourth quarter and full year financial performance. Stephen Hrynewich: Thank you, Glen. For fourth quarter revenue, we reported $0.2 million primarily driven by hardware sales in the industrial sector. This compares to $1.7 million of revenue during the same period in 2024. On a full year basis, we reported $1.2 million of revenue in 2025 as compared to $4.7 million in 2024. The decline from both 2024 periods is a result of a last time buy on a contract with an agricultural equipment customer to deliver legacy Ibeo sensors. Total operating expenses for the fourth quarter of 2025 were $25.3 million. This includes noncash charges of $13.4 million related to asset impairment, and $1.5 million of depreciation and amortization and offset by a net credit of $1.5 million of share-based compensation, primarily due to the forfeiture of PSUs from an executive departure in December. Adjusting for these noncash items, our cash-based operating expenses totaled $11.9 million. Compared to the previous quarter, including a onetime $1.2 million cash severance payment in the third quarter, our operating expenses were $0.9 million higher than Q3, and in line with our expectations. The increase is primarily related to the addition of our Aerial Systems team to bolster our competitiveness in the security and defense sector as we announced in November. On a full year basis for 2025, our total operating expenses were $65.5 million, which includes noncash charges of $13.4 million related to asset impairment, $5.8 million of depreciation and amortization, and $0.7 million of share-based compensation. Adjusting for these noncash items, our cash-based operating expenses were $45.5 million. As compared to full year 2024, our operating expenses declined $14.4 million or 24%, primarily driven by reduced purchase services and actions taken in 2024 to reduce head count and rightsize our business. This year-over-year decline in operating expense is a demonstration of our accounts management focus and cash-conscious mindset. Cash used in operations for the fourth quarter was $15.4 million. This compared to $15.1 million in the fourth quarter of 2024. On a full year basis, cash used in operations for 2025 was $58.7 million as compared with 2024 at $68.5 million. The year-over-year decrease of $9.8 million or 14% was primarily driven by our intentional reduction of operating expenses. Capital expenditures for the fourth quarter were in line with expectations at $0.2 million. This compares to $0.1 million during the same period in 2024. On a full year basis, capital expenditures were $0.7 million in 2025 and $0.4 million in 2024. For both periods, the year-over-year increase is primarily attributed to purchases of tooling equipment needed for the production of MOVIA S sensors scheduled to start in early Q4 of this year. In the fourth quarter, we incurred $29.4 million of noncash asset impairment and adverse purchase commitment charges, of which $16 million is accounted for as cost of revenue because it relates to inventory and commitments of our short-range MOVIA L sensor. The remainder of $13.4 million is accounted for as operating expense, primarily attributed to perception software and equipment for our long-range MAVIN sensor. The write-down of MOVIA L, MAVIN and Perception software results from a multi-factored analysis, including the progress of our next-generation short-range solution and the market readiness of the long-range solution that we recently acquired. With the recent announcement of our consolidation of operations from Redmond into our new Orlando facility, we are currently evaluating the impact to the 2026 financial statements and anticipate asset impairment charges of $8 million to $12 million related to our Redmond office and operating lease as well as people-related restructuring charges of $1 million to $2 million. On our balance sheet, at the end of the fourth quarter, we finished with $74.8 million in cash, cash equivalents and investment securities. We also have $43 million available under the current ATM facility. Subsequent to the end of 2025, we issued 2 new senior secured convertible notes in the aggregate principal amount of $43 million. The new notes will be used to repay the current outstanding principal balance and interest of $19.5 million on a current note with the remaining available for general operations. The new notes are redeemable in cash, or shares of the company's common stock. With our strong leadership, depth and breadth of our product portfolio, financial discipline through operational cost management and capital raise activities, we are well situated to deliver our cost-efficient products that meet performance standards to our customers and capitalize on the significant revenue opportunities that the automotive, industrial and security and defense sectors have to offer. With our recent acquisitions, the LiDAR industry is consolidating into a handful of key players. MicroVision is well positioned to lead the LiDAR industry in these 3 verticals and offers a significant opportunity for shareholder value creation. I would now like to pass it back to Glen for closing remarks. Glen DeVos: Thanks, Steve. This is a transformational time for MicroVision. Today, we've talked about the vision for a new MicroVision, a company built to lead in the new era of LiDAR 2.0. We shared how our strategy allows us to create value for customers in new markets and the steps we're taking to deliver the right portfolio with the right performance at the right price. We've also begun to demonstrate concrete steps as a testament to our focus on execution, shipping products against existing orders and prudent financial management. Turning now to guidance for calendar year 2026. We expect revenue to be in the range of $10 million to $15 million. This is based on our analysis completed to date of both prior MicroVision outlook going into 2026 as well as the now continuing Luminar revenue streams. This is a positive reflection of our ability to retain and convert prior Luminar contracts to ongoing Microvision revenue. We expect cash use in operations plus CapEx to be in the range of $65 million to $70 million for the full year, which reflects a modest increase over 2025 due primarily to the acquisitions of Scantinel, Luminar as well as the addition of our Virginia-based aerial systems team. These additions have dramatically expanded our market access but with thoughtful and disciplined management of our cash burn. In summary, as we move into LiDAR 2.0, I'm very confident that MicroVision is positioned to lead this transition. We have the right portfolio and products to access multiple end markets. We are delivering the right performance at the right price. We have the management and engineering teams to deliver at automotive grade, and we have the financial discipline to ensure that we will continue to have access to capital and financing to achieve our growth plans. Our mission is clear. Our team is aligned, and we're focused on creating value for customers and shareholders. I'm excited about the path lies ahead for the new MicroVision and LiDAR 2.0. Thank you, and we will now open the call for questions. Operator: [Operator Instructions] And the first question is coming from Jason Kolbert from Boral Capital. Jason Kolbert: Thanks for the guidance, $10 million to $15 million, that's for this year. How does that break between the automotive and industrial segment? And what kind of margins are we talking about on that revenue? Glen DeVos: Steve, do you want to take that one? Stephen Hrynewich: So the breakdown of our revenue is mostly in the industrial space with the balance being in the automotive side. That's kind of where our key customers are that we brought over from the Luminar side, and that's the key customers that we're currently working with right now, developing those relationships, which is going to help us achieve our guidance in terms of our revenue situation. From a margin perspective, our margins definitely should be positive. We're still working on what that cost is going to be just based on the cost that we're going to be getting as we're getting that cost evaluated as we're doing the PPA right now, but we do definitely see our margins to be positive this year. Jason Kolbert: And going forward beyond 2026, so what I'm trying to understand is how these 2 segments grow and what's the market potential in automotive, what's the market potential in everything else, the industrial? Stephen Hrynewich: I think what we're seeing as we move forward into the future as we get towards the end of the decade, we definitely see our revenue growing in the automotive space, most likely that won't be till towards the end of the decade '28, '29, and that's where all of the automotive companies are developing their LiDAR strategies, their ADAS strategies, and they will implement LiDAR into their platforms. So we are in process of a number of RFQs as we speak right now to support those activities. So we see the automotive kind of towards the end of the decade and that's going to form a big portion of our business. Our bridge between now and then is primarily going to be in the industrial space, as Glen talked about in his prepared remarks. We have a number of customers that we're working with right now. Then the other piece is going to be on the defense and security side. So we've got some products that we're going to have readily available mid this year for salable units to those potential customers. As Glen mentioned, we do see some growth in that area. We see that kind of moving forward into the future. That's going to kind of again -- but the industrial and the defense side is going to be a bridge as we progress into the automotive side, which will begin towards the end of the decade. Glen DeVos: Yes. Just to add some content to that. For auto, as Steve said, that's going to be later in the decade, the RFIs and the RFQs that we're talking about now are targeted for the '29, '30 start of ramping. So if you think about auto, that's where you start seeing volumes and really more meaningfully in the '30, '31 time frame. Now that's at scale. So that's the big TAM where you have basically a multibillion dollar TAM and significant opportunities. Industrial for us, we'll see some sales this year, but really MOVIA S is our big industrial product. So as we launched in October, back half of the year or the back quarter of the year, we expect MOVIA S sales to start driving and then strong growth through 2027. So as those orders come in and preorders come in over the course of this year, we'll be able to give an accurate projection of what that growth looks like in '27. And then security and defense, this is an area that is still -- it's still very nascent, but we actually are very optimistic about it. There's a lot of focus now on drones and what can be done with drones in terms of autonomy, providing basically mapping, real-time mapping in conflicted areas and also extending perception for ground-based vehicles as we look at ground-based vehicle autonomy. And that's one where we'll be sizing those markets for us, but we're confident that's very interesting to us for 2 reasons. One, we think it has significant sustainable growth, but it's also -- it has higher ASPs and sale prices than, say, industrial and certainly auto. So it's a great opportunity for us to commercialize and monetize the IP we have there, whether it's IRIS and HALO or it's MOVIA S, monetize that in that market at very attractive ASPs. Jason Kolbert: And just my last question is on the sales and marketing line. It just seems like a big line, right? You're spending a lot of money there. What is that money actually being spent on? Stephen Hrynewich: So sales and marketing line -- sorry, go ahead. Glen DeVos: No. Well, why don't you complete your thoughts, Steve, and then I'll add my color. Stephen Hrynewich: Yes. I think most of our sales and marketing line, as of right now, we're kind of building our team up. We now have a team that's on a global basis. We're bringing over the Luminar team. So we've got a strong team that's going to help us drive forward this revenue opportunity. And we have an office in a couple of different locations that we're trying to continue with that team moving forward. And Glen, do you want to pass it on? Glen DeVos: Yes. Since joining MicroVision, this is -- it's almost been a year now. One of the things that I've been prioritizing and certainly since taking over as CEO is having just a very strong sales and marketing capability. We have great technology. But if you're going to compete in automotive, if you're going to compete in industrial, and then security and defense, you have to have the right people in the commercial organization that understand the sales motion, have the respect of the customers and can really deliver that. And so we've been growing that organically prior to the Luminar acquisition. And part of that was what we did with the Defense Advisory Board to help us understand and develop our strategy for security and defense. Part of it was bringing on some additional talent over the course of the year. And then hear more recently expanding that team with the -- with onboarding of the Luminar sales team, and it's really -- we're now -- we now have just a very capable sales and marketing team that can take the portfolio we have and really bring that to market. So I could not be happier with the team that we have. It's an investment that we needed to make if we were going to grow the business and accelerate the business growth. And -- but that's the reason why it is what it is. Operator: And the next question will be from Casey Ryan from WestPark Capital. Casey Ryan: Glen, Steve, great update. So my first question is, I guess, this is sort of related to the Scantinel acquisition and the FMCW technology. Is that technology getting a lot of interest from defense? It sounds like maybe that's kind of the key thing with its range. I know it's historically been targeted trucking, but is that helping you sort of think defense is a bigger opportunity for you in particular, using FMCW, versus some of the other product lines? Or is it all the product lines are being considered for multiple because I know there are so many applications in that defense space. Glen DeVos: Yes, great question. Scantinel, there is a significantly increased pull from the defense sector for the technology really for 2 reasons. One is 1550 nanometer, which is you don't -- it's basically not visible with night vision goggles or night vision capabilities. So it's essentially invisible. So from a scanning and perception standpoint for night ops, it seems very, very attractive. And then the FMCW, and that architecture gives it all for long-range capability. And where we're seeing interest is on drone detection, long range drone detection as well as other types of navigation and mapping. So when we acquired Scantinel, of course, the focus of the team really had been in the commercial vehicle market that has been the primary focus. What we're seeing now is a much -- an equally strong pull from the defense side. So still has interest in application in CV, mainly commercial vehicles, but much stronger interest from defense, no question about it. Kind of related to the second part of your question, we also have interest in the other products, and particularly -- for security and defense and particularly, if you think about short-range LiDAR like a MOVIA S, where you can or even now doing MOVIA L with our MOVIA Air products, those are 940 nanometer, and 905 nanometer, but they're very good for terrestrial mapping. So they're not as worried about being visible because it's a very low-cost drone that's flying around doing mapping away from personnel and providing real-time perception and extending that perception from those ground-based vehicles and personnel. And so we're seeing interest there relative to MOVIA L products and MOVIA S products for mapping. And then as well, IRIS and HALO for basically on vehicle perception. So if you think about vehicle autonomy where vehicles want to operate at night, you want to have a 1550 nanometer solution that you can offer. Again, so that vehicle isn't visible at night as it's scanning and its sensors are working. So really across all of those products, we're seeing significant interest there, both in ground-based autonomy, but also with regard to drone applications. Casey Ryan: Okay. Terrific. So then I was curious about sort of -- as you acquire all the Luminar assets, and I think Orlando was kind of their headquarters. And this is just asking about how much effort it is to sort of complete the acquisition? Are there additional locations that you inherited with your purchase that you're sort of responsible for closing down and consolidating? Or was the Orlando kind of the only thing that was on your plate around physical locations? Because I know Luminar had lots of offices and spots around the world. Glen DeVos: Yes. We really only acquired 2 locations. One is, as you said, the Orlando office, and they were -- really their headquarters and where their engineering tech center was. And then the other is in Colorado, which was the Black Forest Engineering team for their ASIC design. So those are the 2 offices and sites that we're maintaining. We did bring over people from some of the other offices. If you think about Japan, if you think about Sweden and Germany, but we did not assume responsibility for those facilities. So we're not having to deal with closing down legal entities or closing down offices around the world. And so Orlando, Colorado, those are offices that we have and we're going to keep. And then as we mentioned earlier, we'll consolidate operations in Orlando. Casey Ryan: Yes. Okay. Terrific. That's great color. And then last question, I think, for me. And maybe this is all -- too many new products and too many opportunities at one time. But I think we're seeing some I don't know if it's a desire or sort of a road map of combining centers, right, cameras with LiDAR and maybe radar, some of these new radar applications. But does that change the way you go to market at all? Do you want to partner with somebody? Or is that all kind of too far in the future to worry about today? How do you see sort of all those sensors coming together at some point in some applications? Glen DeVos: Yes. To your point, it really depends on the application. It's interesting in automotive. We went through a period where we thought, hey, combining sensor modalities would be really a great way to package sensors in the car, and then we immediately brought them all back apart because it gave us more flexibility in where you can mount the sensors and how you mount them and then actually sourcing those sensors. You combine sensors, you end up actually restricting that. So there are some applications where combined sensor like LiDAR and camera. For instance, that's what we do with our MOVIA Air products where we have LiDAR as well as a resolution camera that we then fuse that in the sensors. So when we provide the map data coming out of the drone, it has fused vision as well as LiDAR. But right now, that tends to be more of how the OEM wants to package those sensors on their platforms. And we can do it as a stand-alone sensor. We're happy to work with others in a combined sensor configuration. We just recently had some discussions around those lines this week as well. But as of right now, our feeling is we'll develop a great LiDAR sensor that can be flexible in terms of how it's integrated, how it's mounted, whether that's in a combined fashion or as a stand-alone LiDAR sensor. Casey Ryan: Terrific. That's actually a great perspective. It's a great update, and it looks like it's going to be an exciting 2026. Operator: I will now turn this call back over to Steve Hrynewich to read questions submitted through the webcast or in advance of the call. Steve? Stephen Hrynewich: Thank you, operator. Our first question is with regards to your revenue guidance of $10 million to $15 million, how confident are you in achieving this? Glen DeVos: Yes. Let me take that, Steve, and then I'd ask you to add any further comments from your end. So that revenue is a combination of sales of our long-range and our short-range products, and it's really across all 3 end markets. We've already been shipping into critical customers that came with that Luminar acquisition, and we really expect that to continue. In addition, the commercial uptake of the short-range MOVIA S is actually ahead of our expectations. We believe that was going to be a great product. The interest and the pull we're seeing on that validates that. And now it's up to us to launch that on time and at volume. We believe we have, however, a clear line of sight to other opportunities and that combination of what we know today, what we're seeing, that gives us a great deal of confidence with that guidance. Now as we continue to work through what were the Luminar customer engagements and those contracts and production schedules, we believe there are additional opportunities there that we can include. But we still have to work through that process. We were basically what about 5, 6 weeks into it. And so through a lot of it, but not through all of it yet. And we believe that there will be additional opportunities for us. Stephen Hrynewich: I think just to add to that, as Glen mentioned, we're looking at production of our MOVIA S short range sensor in quarter 4 of this year. We have lots of customer traction, lots of interest from our customers. So we are definitely expecting to see revenue with that product coming in the fourth quarter this year. Glen DeVos: Yes. Stephen Hrynewich: Okay. Second question. How many customers are you engaging with including your recent acquisitions? Glen DeVos: So with the addition of Luminar's customer base, that has been a significant increase to our opportunity pipeline and really across all 3 verticals. And they've basically brought in incremental about 30 new customers for us to be working with. And within that customer group, many more opportunities and prospects. And as I mentioned earlier, with the onboarding of the Luminar sales and their commercial team, that was just a tremendous benefit of the acquisition because not only do they bring those contracts, they bring relationships and they bring knowledge of those end markets, knowledge of those customers. So it isn't just a matter of the formality of acquiring a contractor, taking over a PO, we also now have the individuals with MicroVision who understand and have a history with those contracts, the history with those customers and a deep understanding of those customers' needs and how we can then basically bring our solutions to them. So that's why that's been such a benefit. Stephen Hrynewich: Along with same lines, another question. What is the state of the Luminar customer relationships of Volvo, Nissan, Caterpillar? Have you delivered to any of these brands yet? Are these critical to achieving your 2026 guidance? Glen DeVos: Yes, it's a great question, actually. And well, it's not appropriate to comment on individual customers, it is fair to say that every Luminar customer is engaged with us. And I mentioned, this is in part due to the fact that we have a sales team that knows them, that's maintained contact and now we're continuing those dialogues. By normalizing and restarting those past relationships, as you can imagine, when you go -- when a supplier goes into bankruptcy, that generally speaking, puts a pause on the relationship, it's disruptive. Well, we're now normalizing those relationships and having discussions, not just around the active POs or the near-term needs but also discussions regarding ongoing development. We're not going to comment on how individual customers drive guidance. Subsequent to closing, we have shipped to the largest customers in automotive and commercial vehicles. So that product and that associated revenue is flowing as we speak. Stephen Hrynewich: Next question is, how did Luminar impact MicroVision's path to revenue and commercialization? Glen DeVos: So to put a very concisely, Luminar accelerates our revenue. It brings with it. That acquisition brings with it active commercial programs and established customer relationships that really pull forward our path to scale significantly. So we are actively engaged with the Luminar customer base and normalizing and restarting those relationships. And as I mentioned earlier, converting those paused POs and contracts over to active shipments as well as the discussions regarding ongoing development. Now one of the other benefits, though, is we've been able to take -- with the Luminar customer base, we've been able to bring their products into -- the Luminar products into our existing MicroVision customer base as well as the MicroVision products into that existing Luminar customer base. So that cross-pollination we talked about in the -- earlier in the meeting, that really helps us accelerate that traction because it means that MicroVision can be a single one-stop shop provider for their LiDAR perception needs. We provide short-range, long-range, wide field of view, narrow field of view, we can provide the complete LiDAR solution set to them, which it's important from a purchasing standpoint. It's also important from a technology standpoint, because that means harmonizing and integrating all of those sensors becomes much simpler. They don't have to try to integrate short-range sensor from one supplier with a long-range sensor from another. They -- we can do all of that for them. So it's really an exciting development that we're able to cross-pollinate across the different customer bases. Stephen Hrynewich: And I think just to add to that, one of the key parts of the acquisition is, again, bringing that revenue ahead early. So the HALO product going out into the future is going to bring it as a quicker time for us from a long-range perspective. So that product now is getting very close to samples that we can be providing to customers. And the team is working on that as we speak. And this is going to, again, hurry our -- ready our revenue in terms of the long-range solution quicker. Glen DeVos: Yes, great point, Steve. Stephen Hrynewich: Next question is, what happened to the multiple RFQs that you previously announced? Glen DeVos: Yes, that's another great question. We continue to be actively engaged with those customers. And what's interesting is that, I mean, this has been ongoing for some period of time, and we now have a more diversified product portfolio to offer, especially with our recent acquisitions. So different product offerings for them. But we're seeing an interesting behavior with regard to those RFQs and those RFIs, I mean, normally, when you talk about the automotive passenger car market, an RFI is followed by an RFQ, the RFI is used to kind of understand the market, understand the supply base, selected technologies. The RFQ comes, kind of narrow that down with pricing and the specifics and then a production award typically would follow that. And that's usually management in a short period of time, not 2 plus or 3 years. So what we're seeing right now in that automotive, in particular, the North America and European passenger car market, the OEMs are clearly reformulating their Level 3 value prop and offerings. And this is doing no small part to the cost of these systems and really the limited initial value that the features offer to their end customers. At the end of the day, the end customer is simply not willing to pay $6,000 to $9,000 more for an L3 and certainly not the L3 that they're currently offering. So we've seen some program cancellations or those offerings being suspended. And I think what it highlights to me is why our focus on cost is so important because we need to be able to drive the cost of short-range and long-range LiDAR sensors down to the point where the OEMs can afford to put them on the cars, it can enable Level 2+ or Level 3 features that the OEMs can then offer at a price point that their consumers find attractive but they still have healthy margins. So it's -- we're still involved in those RFIs and RFQs. In some cases, the discussions now are in year 3. But I think, again, it just reflects and emphasizes the fact we have to be driving the cost of these sensors down to where the OEMs can really, really be able to put it on the vehicle and drive value both for them and the end consumer. Stephen Hrynewich: Okay. With the current technology you have plus with the acquired technology, what makes your overall portfolio, your technology different? Glen DeVos: Well, I think a couple of things to that. First, we have a, as I mentioned, a really broad portfolio. We have 905 nanometer, 1550 nanometer. We have short-range and long-range. Time of flight, FMCW, solid-state and scanning with polygons on MEMS. What that means and why that's important is that means, we can bring the right solution for any given application in any of the end markets that we're serving. And additionally, our approach combines that strong hardware performance with an open software framework. And so instead of offering a closed system, we enable the OEMs and the partners to integrate faster, customize functionality and basically identify new ways of monetizing advanced features on our sensors, and that openness and that open software framework reduces the integration complexity, shortening their development time lines and reducing their costs, helping customers move from concept to deployment faster. And then finally, as a U.S. and German-based company with U.S.-based manufacturing, we can bring that complete product portfolio to the security and defense market, which is a significant differentiator for us. Stephen Hrynewich: Okay. Good. How do you create value for customers and specifically to the automotive sector? Glen DeVos: Well, I can tell you, it's not to vendor with the most impressive demo that will create that value. It's the supplier that enables new use cases across the vertical -- across the verticals. And for industrial, that's the ability to enable autonomy at affordable prices as well as advanced safety systems and security and defense. We talked about it, it's applications, such as unmanned ground vehicle autonomy as well as drone-based real-time mapping and reconnaissance. Now for automotive, this includes enabling Level 3 features and like we talk, making them affordable for the OEM and end consumer. And ultimately, Level 3 systems have just simply been too expensive and especially when you consider Level 2+ systems now coming in well below $2,000 on cost to the vehicle. So for us, it's a matter of how do we enable the OEM to successfully offer these types of products and services to their customers, but most critically to be able to do it in a way where they make and they unlock value for themselves. And so our ability to enable our customers to unlock value is how we will create value for them. Stephen Hrynewich: Next question here is, what is the future for MAVIN in the MEMS technology? Glen DeVos: So when you think about MAVIN, really the key there is the MEMS scanning technology. That's the heart of MAVIN. And that technology is still a very important part of our total portfolio. So now with MEMS, it has some very good applications. It's great for scanning when you think about a fixed-wing drone doing terrestrial mapping, MEMS is a really, really excellent scanning mechanism for that laser. And so great for scanning on drones. It's also very good for narrower field of new scanning. So if you think about automotive, when you get down to about 60 degrees of horizontal view -- field of view scanning, MEMS is a great option for doing that. And as a result, as we think about Tri-LiDAR, that's where you can get the field of view for long-range LiDAR down to around 60 degrees when MEMS now comes into play. So for us, MEMS, it remains a really important part of our scanning technology portfolio, and we continue to look at applications for it. Stephen Hrynewich: Next question is, what's the status of the CFO hire? Glen DeVos: So the CFO hire, this is ongoing. If you think about that role, it's really critical that our CFO has that -- our new CFO would have the skill set and be able to really accelerate our success in the vision that we have laid out today. So we have to have the breadth and depth to the CFO skills along with the relevant industry experience. Now we're in a very, very favorable position in that our Executive Vice Chair, who is part of our leadership team, have been a CFO for 4 public technology companies, and that gives us tremendous capability along with what I would say is just an outstanding financial team that is -- just gives us a really solid basis from a financial and accounting foundation. And so when you combine those, that means we can take the time we need to take to find exactly the right person for that role. So we're continuing with that. We would expect that sometime here in the second quarter. But we're not in a situation where we have to rush that, which is a great place to be. Stephen Hrynewich: Okay. All right. Let's go for -- we've got 4 minutes left, maybe one more question here. Now with the recent -- again, the recent acquisitions, obviously, the company has changed. How are you different now? And what is your competitive advantage in the marketplace? Glen DeVos: Well, I mean, the first and foremost difference is the breadth of the portfolio. So we've significantly augmented the portfolio compared to where we were pre-acquisition, in particular if you add Scantinel and Luminar. So first question is portfolio. Second question is time to revenue. As we mentioned, in particular, the Luminar acquisition dramatically accelerated that timeline to revenue and -- versus doing that organically as we were pre-acquisition. So that time to revenue and the broadening of the customer base is that we now have access to with our portfolio, that's a huge difference. And then finally, just deepening on the whole, the entire team and the capabilities we have. So if you look at the depth of our knowledge, whether it's the Scantinel team in Ulm, it's the MicroVision team in Hamburg, it's the combined team now in Orlando with the Black Forest Engineering team now in Colorado. When you look at that depth of engineering talent, it's just amazing. We have the talent to support that portfolio, to develop those products and to deliver on that. So it truly is, as we said at the beginning of today's call, it's a transformative time for MicroVision. And that's what gives me confidence that we will be very well positioned to lead in what we call LiDAR 2.0. Stephen Hrynewich: Okay. Thank you, Glen. Okay. That brings us to the end of our call today. I just want to thank you, everybody, for participating on our call today and your continued support of MicroVision. We will now close the call. Operator: Thank you. This concludes today's conference. All parties may disconnect. Have a great 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.
Operator: Good day, and welcome to the Bioventus Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Dave Crawford. Please go ahead. David Crawford: Thanks, Chuck, and good morning, everyone. Thanks for joining us. It's my pleasure to welcome you to the Bioventus 2025 Fourth Quarter Earnings Conference Call. With me this morning are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our business, review our performance against our 2025 priorities and lay out our 2026 objectives. Then Mark will review the fourth quarter results and discuss our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A Risk Factors of the company's Form 10-K for the year ended December 31, 2025, as such factors may be updated from time to time in the company's other filings made with the SEC. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable securities laws. This call will also include reference to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website at bioventus.com. Now I will turn the call over to Rob. Robert Claypoole: Thank you, Dave. Good morning, everyone, and thanks for joining our call today. Bioventus delivered another solid quarter and concluded a successful year across our strategic priorities while helping patients recover so they can live life to the fullest. Over the past 3 years, we have established a strong track record of meeting or exceeding our financial guidance while enhancing our portfolio and significantly strengthening our commercial, operational and financial fundamentals across our company. In short, we've transformed Bioventus. It's a different company today with a very strong foundation, and we are now entering an exciting new phase and are well positioned to build a $1 billion leading med tech company. In this next phase, we are increasing our focus on accelerating our revenue growth while further strengthening our earnings power and expanding our capital allocation optionality through strong and consistent growth in free cash flow. We believe this combination will drive significant future value creation for shareholders. For my remarks this morning, I would like to discuss 3 areas. First, I will briefly highlight our fourth quarter performance. Second, I will summarize our 2025 full year performance with respect to our 3 priorities that we outlined at the start of last year. And finally, I will lay out our objectives for 2026. Let's start with a review of the fourth quarter, which represented a significant year-over-year acceleration and reflects our progress with sharpening commercial execution, scaling operations and strengthening our financial foundation. The results further demonstrate that Bioventus possesses a powerful combination of value drivers of revenue growth, increased profitability and enhanced cash flow. We delivered 10% organic revenue growth with robust performance across our core businesses, and we achieved the second half revenue acceleration that we guided to throughout the past year. We drove an increase in adjusted EBITDA of $8 million and expanded our adjusted EBITDA margin by almost 500 basis points compared to the prior year. And we set a record for quarterly cash from operations at approximately $38 million, helped in part by our improved inventory management. In addition to our strong financial performance, we received positive market feedback and valuable insights from the pilot launches for 2 of our exciting growth drivers, peripheral nerve stimulation, or PNS, and platelet-rich plasma, or PRP, which I will discuss in more detail in a moment. Now let me shift to a review of our full year performance against the 3 priorities I introduced at the start of 2025, driving above-market revenue growth, continuing to expand our profitability and accelerating free cash flow generation. Across all 3 of our businesses, we delivered above-market organic revenue growth for 2025. In our Pain Treatments business, we drove solid growth from our market-leading HA business and added the 2 new high potential growth drivers I already referred to, PNS and PRP. We also received a strong contribution to our 2025 growth from Surgical Solutions and equally important, solidified our plan to accelerate growth in this business in 2026 and beyond. And in Restorative Therapies, we delivered our highest organic growth in the last 7 years, thanks to the excellent execution of our great team and the powerful impact Exogen has on patients' lives. Turning to our second focus area, expanding profitability. We drove nearly 150 basis points of adjusted EBITDA margin expansion compared to 2024, surpassing our goal to expand our adjusted EBITDA margin by 100 basis points. This illustrates our capability to build our profitability by leveraging the combination of strong organic revenue growth, our peer-leading gross margin and consistent operational efficiencies. Expanding our adjusted EBITDA margin to a level at or above many of our peers gives us the ability to invest in our significant growth opportunities in 2026, which we believe will accelerate future revenue growth. And with respect to our third focus area, we ended the year by generating nearly $75 million of cash from operations, accomplishing our goal to nearly double cash flow from operations compared to the prior year. In addition, we refinanced our term loan, which enhanced our liquidity and drove interest expense savings in the second half of the year that we expect to continue throughout 2026. Overall, 2025 was a pivotal year for our company and reflected our substantial advancements with our portfolio, execution and financial performance. Next, I would like to highlight the 3 objectives we are prioritizing in 2026. First, with a strong financial foundation established, we are very focused on accelerating our growth drivers through targeted and disciplined investment. Second, as we significantly increase investments to accelerate future growth, we aim to drive profitability at a pace exceeding revenue growth. And third, we look to continue to strengthen our already robust cash flow, which in turn will enhance our capital allocation optionality. Let me expand on each objective, starting with revenue growth. We remain focused on driving above-market growth across our core business, led by our durable and very profitable HA franchise, which generates profit to invest in and accelerate our future growth drivers of PNS, PRP, ultrasonics and our international business. In 2026, we plan to allocate approximately $13 million of incremental investment towards these exciting growth drivers. Investment across these businesses includes expansion of commercial resources, evidence generation to highlight the clinical and economic benefits of our technology, stronger marketing to raise awareness of our clinically differentiated portfolio and continued R&D innovation. Let me provide additional context on these 3 investments -- on these investments across our 3 businesses. First, within our Pain Treatments business, we will be investing in both PNS and PRP. Our PNS platform will receive the largest share of the incremental investment, given the rapidly expanding market, our highly differentiated technology and the enormous potential of this business. This resource allocation strategy is supported by our successful pilot launch and positive feedback from physicians and patients as they see the benefits of our innovative technology. During the pilot launch, we gained positive traction with both our trial and permanent solutions and collected valuable insights. The learnings from the pilot launch enable us to invest aggressively in 2026 in a very targeted and measured way to maximize the growth of this business in 2026 and over the coming years. Mark and I have spent time in the field and witnessed firsthand the positive impact that our PNS technology has on patients' lives. Our interactions with a wide variety of customers and patients have made us even more confident that our PNS business will become a major growth driver for Bioventus given the power, size and ease of use of our differentiated technology. We're also excited about PRP following its successful pilot launch. As a reminder, we are leveraging our existing HA commercial team for PRP, so there is less incremental investment required for this growth driver. Again, the market feedback from our pilot launch has been positive about our differentiated technology and the benefits for both physicians and patients. We believe the combination of PNS and PRP will provide a minimum of 200 basis points of growth this year with further acceleration in 2027. Shifting to our Surgical Solutions business, where ultrasonics will receive a disproportionate amount of our incremental investments considering the size of the market, the unique benefits of our technology and our increasing ability to make our solution the standard of care. In 2026, we plan to invest aggressively in marketing to raise awareness and medical education to train surgeons earlier in their careers and in sales expansion in targeted areas. We will also continue to support the growth of our excellent bone graft substitutes technology by raising awareness of our distinct clinical and economic value proposition. And with respect to our Restorative Therapies business, we will continue to support the business with targeted investments in 2026 and maintain our renewed focus and disciplined execution following a very successful 2025. Finally, within our International segment, we plan to make significant investments across Pain Treatment, Surgical Solutions and Restorative Therapies given the untapped growth potential in front of us. I recently attended our international sales meeting and came away even more confident that our international business is well positioned to become a key growth driver for Bioventus. We now have a targeted growth plan, new structure and capabilities and a highly energetic team that is very focused on driving excellent execution in 2026. Before I turn the call over to Mark, let me briefly touch on our other 2 key objectives for 2026, earnings and cash flow. Mark will share more details on both during his section, so I'll just provide the headlines. We remain committed to increasing our earnings and strengthening cash flow even as we accelerate investment in our growth drivers. We expect earnings growth to outpace revenue growth, driven by our peer-leading gross margin, disciplined resource allocation and our interest expense savings. Given our substantial progress over the past few years in raising our EBITDA margin, we believe the best way to maximize shareholder value is to prioritize greater investment in our future growth while maintaining an EBITDA margin of approximately 20% for 2026. We believe our strong business model gives us the flexibility to invest more aggressively in 2026 to accelerate our future growth and the ability to expand our margins as soon as 2027. And we believe this combination of accelerating growth and margin expansion will create significant shareholder value. And with respect to our third objective, as our increased earnings outpaces revenue growth, we expect it to contribute to an increase in cash flow, which will create increased capital allocation optionality. In the near term, we will continue to prioritize strengthening our balance sheet by using our strong free cash flow to further reduce debt. In conclusion, thanks to the strong execution of our team, we have transformed Bioventus and created a strong foundation. It's unusual for a company our size to consistently grow above the market while simultaneously increasing its investment in growth and expanding profitability and cash flow. We believe this combination is one of the many aspects that sets Bioventus apart. We are now entering a new stage, confident in our portfolio, growth strategy and investment power to become a $1 billion leading med tech company. Our team is focused, excited and ready for the year ahead. Now I'll turn the call over to Mark. Mark Singleton: Thank you, Rob, and good morning, everyone. Let me begin by saying that I am proud of our team's hard work and dedication to transform Bioventus and significantly improve our financial results over the past few years. After a strong finish to the year, our improved execution has now positioned us to increase investment in our future growth while continuing to strengthen our balance sheet. I'm confident that with continued strong focus and disciplined execution, we will advance our business and create significant shareholder value. Turning to our headline results for the fourth quarter. Revenue of $158 million increased 3% compared to the prior year. Organic growth was 10% after adjusting for the impact of our advanced rehabilitation divestiture at the end of 2024, which was a result of strong performance across Pain Treatments and Restorative Therapies. Revenue growth also benefited from an additional selling day compared to the prior year. Adjusted EBITDA of $37 million was $8 million higher than the prior year and represented an increase of 30%. Again, foreign exchange rates had an unfavorable impact for the quarter, and we incurred an unplanned loss of almost $1 million. For the year, we've absorbed more than $3 million in unplanned impacts from FX rate movements. Adjusted EBITDA margin of 23% expanded 490 basis points compared to the fourth quarter of last year. This was the result of higher revenue, improved gross margin and disciplined spending. And adjusted earnings were $0.24 per diluted share for the quarter. Now let me provide some additional commentary on our quarterly revenue. In Pain Treatments, we continue to see the second half acceleration that we previously communicated as revenue advanced 15% in Q4. Growth in HA benefited from strong volume growth in DUROLANE and recent account wins from earlier in the year. Next, Surgical Solutions revenue grew by 3%. Results in Ultrasonics were impacted due to a tough comparison to the prior year for capital sales, which was an all-time high. To give you a sense of the tough comparison, generator revenue in the fourth quarter this year still represented our third highest total ever. For the year, we exceeded our plan for capital sales, which provides the foundation to accelerate disposable growth in 2026. Growth was also impacted in our International segment due to the timing of distributor orders. Shifting to Restorative Therapies. Revenue declined 26% compared to the prior year due to the divestiture of our Advanced Rehabilitation business. Excluding the impact of the divestiture, organic growth was 10% as the Exogen team delivered another strong quarter to close a remarkable year. Finally, revenue from our International segment was unchanged compared to the prior year, while organic growth climbed 10%. For the year, our International segment grew 11% organically as our new team delivered on its target of double-digit organic growth in 2025. We believe this positive momentum can continue given the talent additions made throughout the year, market expansion opportunities and improved commercial execution. Moving down the income statement. Adjusted gross margin of 76% was 180 basis points higher than the prior year period due to improved product mix and favorable comparison to the prior year, which more than offset the impact of tariffs and foreign exchange rates. Adjusted total operating expenses and R&D expenses declined by $2 million as increased investment was more than offset by direct expense savings related to the divestiture of our Advanced Rehabilitation business. Now for additional detail on our bottom line financial metrics. Adjusted operating income of $33 million increased $7 million compared to the prior year. Adjusted net income of $20 million increased $1 million compared to the prior year. This growth is the result of our increased gross margin, decreased operating expenses and lower interest expense, which was offset by higher tax expense. Now shifting to the balance sheet and cash flow statement. Consistent with our planning assumptions, we generated significant cash flow for a third straight quarter. Cash flow from operations totaled $38 million, nearly doubled compared to the fourth quarter last year. The stronger cash flow was driven by higher profitability, lower interest expense and a reduction in inventories. As Rob mentioned, we achieved a full year objective of nearly doubling cash flow from operations, delivering a 92% increase for the year. We ended the quarter with $51 million in cash on hand, $294 million in outstanding debt. During the quarter, debt decreased $29 million as we repaid the borrowings on our revolving credit facility. As a result of the lower debt outstanding, our net leverage ratio declined to below 2.5x at the end of the quarter. We are confident our projected strong cash flow and increase in adjusted EBITDA will drive our net leverage well below 2x by the end of 2026. We believe this reduction in our net leverage will drive additional interest expense savings and enable greater optionality for future capital deployment. Finally, let me lay out our 2026 financial guidance and provide some additional color on our guidance for the year. Based on current business trends, we expect net sales to range from $600 million to $610 million. In terms of quarterly phasing, we expect our first quarter revenue growth to be below our implied guidance range, at which point we believe it will accelerate in Q2 and the second half of 2026 as our PRP and PNS investments result in a more meaningful contribution to growth. First quarter growth is expected to be impacted by 1 fewer selling day than the prior year and a rebalancing of HA distributor inventory levels given the very strong fourth quarter results. For the year, we expect adjusted earnings per share of $0.73 to $0.77, which represents growth that outpaces our revenue growth. This demonstrates strong earnings expansion while making significant incremental investments in our growth drivers. Finally, further demonstrating the strength of our business and our momentum, we project cash from operations to range between $82 million and $87 million, an increase of approximately 10% to 17%, driven by higher operating earnings and lower interest expense. In line with the cadence established in prior years, we expect revenue and adjusted EBITDA to be the lowest in the first quarter of 2026 and to be the highest in the fourth quarter. Our guidance does not assume additional impact from the U.S. dollar fluctuation for the year. In closing, Bioventus has solidified its foundation, and we are now at an inflection point to invest in our 4 growth drivers to accelerate future revenue growth, deliver increased profitability and strengthened earnings power and generate significant free cash flow. We believe this is a powerful combination as we strive to create increased value for our shareholders. Operator, please open the line for questions. Operator: [Operator Instructions] And our first question for today will come from Chase Knickerbocker with Craig-Hallum Capital Group. Chase Knickerbocker: Congrats on the impressive execution to finish 2025 here. I wanted to start in pain. You've kind of far exceeded kind of what we had modeled there in Q4. I wanted to get a little bit more color. I just throw out a couple kind of quick questions on pain. So just any growth contribution year-over-year from price? And then some thoughts on kind of GELSYN and SUPARTZ's contribution to growth. Was it positive? Was it negative? And clearly, it looks like double-digit during growth, but can you just give us a sense of kind of underlying volume, too? Robert Claypoole: Chase, this is Rob. Thanks for the question. Yes, maybe I'll start by saying we have a great Pain Treatments business. And of course, it starts with HA, saw that again in the fourth quarter. Knee osteoarthritis isn't going away. It has favorable underlying demographics. And as you know, HA is a very trusted therapy in this space, and we believe we set ourselves apart competitively with our clinical differentiation and broad private payer access and significant commercial strengths. And we saw that again in the fourth quarter. I think it's another example of how this business over the long term generates durable, very profitable growth for us. So yes, in the fourth quarter, strong performance by the team. It was a great job. It's in line with what we signaled to you that we'd see a back half of the year acceleration. And of course, that's driven always by account wins and market expansion in general. It was also aided to a small extent by selling days and distributor dynamics. So even more positive than what we saw -- than what we expected. As it relates to price volume, our business continues to be driven by volume. We're focused on both, very intentional about both. But as it relates to the performance that we saw, highly driven by volume and saw a good performance across the portfolio there. I may -- I'll just mention one more in the last part of what you said, which was on DUROLANE. Yes, with the strength of DUROLANE for us and the continued shift in the market from multi to single injection, as you would expect, DUROLANE is what led the performance for us. Chase Knickerbocker: Got it. And maybe just on the '26 guide, can you give us a sense for kind of assumptions by segment as far as how you kind of come out on the top line versus contribution for growth by segment? Mark Singleton: Yes. Thanks, Chase. This is Mark. When you kind of walk through the portfolio, again, really strong fourth quarter, proud of the results that we delivered in fourth quarter and the turnaround that we've done over the last few years. When we look at our growth for 2026 -- in 2025, Exogen had a really strong year. So from that perspective, we look for the Restorative Therapies segment to be low to mid-single-digit growth in 2026. From a pain perspective, we really look at that as our continued execution across the different pieces of our portfolio within that. And we'd expect mid- to high single-digit growth in the pain portfolio. And then from a surgical perspective with our strong ultrasonic technology that we believe is ability to really change the standard of care in that business over time that we would expect to have double-digit growth in that portfolio in 2026. Chase Knickerbocker: And then just one last one for me, guys, if I can sneak one in. Just as it relates to kind of pain for 2026, obviously, exiting the year on that strong quarter and guide kind of implies a step down, inorganic growth for the HA business that gets you kind of closer to market growth rates. Can you just kind of walk us through kind of why that deceleration in organic growth in the first half of the year from kind of the strong Q4 performance? And just maybe walk us through what in the market is kind of causing that expectation from you guys? Robert Claypoole: Yes, sure. I'll take that, Chase. So in 2026, we expect to grow our HA business above the market again, and we anticipate that growth to be less than 2025, partly influenced by the selling days in Q1 and normalizing inventories, but mainly because of our very intentional approach to continuously play the long game and to go after business that is accretive to our profitable growth. That's the main driver. And we've done that and shown that for years with our durable profitable growth in this business. And it's important for us because we're leveraging that profitable growth to fund our exciting future growth drivers, 2 of which, as you know, fall into our Pain Treatments business with PRP and PNS. So that's really the key, some contribution from selling days and normalizing inventories, but really our intentional approach to go after profitable growth. So we feel good about HA and our Pain Treatments business overall for 2026. Operator: Your next question will come from Mike Petusky with Barrington Research. Michael Petusky: Yes, nice finish to the year. So I guess, Mark, on the -- you guys sort of alluded multiple times to the -- in terms of pain and maybe some favorable order timing, it seemed like distributor dynamics, et cetera. Is there any way to quantify how much sort of, I guess, tailwind you got just from sort of favorable order timing in the quarter? Mark Singleton: Yes. Thanks, Mike. Appreciate your question. From an order timing perspective, really selling days was really favorable to us in Q4. So that helped us a little bit overall from the -- as Rob said, a little bit higher growth than what we had expected. Some of the distributor dynamics in Q4 probably helped us $2-ish million, maybe a little bit higher overall, and that's a little bit alluded to when we look into Q1, that will be our lowest growth from an overall year perspective. So as we see some of that move down after Q4. And so those are really the 2 main drivers of that. Michael Petusky: Okay. And then just sort of one more, I guess, maybe a couple of questions within one more category. In terms of PNS, you guys referred to learnings during the pilot phase. And I'm just curious, what were your learnings in terms of -- is it the trial lead? Is it as important as I think you guys had believed it was? Is TalisMann getting favorable reception? Like what have you guys learned? And then second part to that, I guess, is -- I may have missed this, but are you guys reaffirming the 200 basis point bump from PNS and PRP for '26? Robert Claypoole: Thanks, Mike. Yes. First on the PNS pilot, there are a number of things that we were seeking to learn during that pilot, and it was very successful from that standpoint. First is just in terms of our differentiated technology. It's you always gain additional insights once you go into pilot launch. And what we received back was very positive feedback on the power of our technology, the size of it and the ease of use. And all of those relate back to that our peripheral nerve stimulation technology, in particular, our permanent solution is the only one on the market that was designed from the start for peripheral nerves. And so we saw -- but we saw a positive feedback from that during the pilot launch. We expected it, but good to have that confirmed. And then also from a learning standpoint, we plan to scale this business aggressively. And so what we learned during the pilot launch was how to do that most effectively from the optimal resource allocation across that business in terms of where we invest and also the pace at which we should go with throughout 2026 and beyond in order to maximize our success. And then just a lot of learnings around the best way to execute in the market to help patients with our fantastic technology while creating this major new growth driver for Bioventus. So we're really looking forward to that -- all of that playing out as we are shifting here into the full launch and accelerating this year and expected for the years to come as well. Regarding the second part of your question, in terms of the 200 basis points, yes, we reaffirmed that in our remarks earlier that we expect to see a minimum of 200 basis points from the contribution of PNS and PRP combined. Operator: The next question will come from Caitlin Roberts with Canaccord Genuity. Caitlin Cronin: Congrats on the quarter. Maybe just starting with Ultrasonics. How near term are your expectations to build out the neurosurgery and the general surgery parts of the business? And does this require more rep adds from that perspective? Robert Claypoole: Caitlin, yes, our biggest focus for our Ultrasonics business is in the spine space, and that's for a few different reasons. But the most -- the biggest reason is just the significant size and opportunity of that space. It's much larger than neuro in general. And -- but we're also -- we have the technology and the interest with neuro in general because it's already -- the Ultrasonics is already an established standard of care in those spaces, and it lends itself naturally to us accelerating the growth in this business. But the biggest focus and the majority of our investment is going to be aimed at expanding within the spine space. And then was that -- did I cover both parts of your question? Or was there a second part to it there? Caitlin Cronin: Yes. It was just if you required any more rep adds for adding those other indications, but it sounds like the focus is more on spine. So... Robert Claypoole: Yes. But I'll touch on that as well. I mean it is the same sales organization that calls on both the spine space and neuro for us within Ultrasonics. And as we've alluded to a number of times, our 4 growth drivers, including Ultrasonics, are getting a disproportionate amount of our investment in 2026. And with Ultrasonics, we expect that to be in a number of places, including expanding our sales presence. So that will impact, of course, both spine and beyond spine and also increasing our marketing power. We have such great technology, but we need to raise awareness of our differentiated clinical and economic benefits with Ultrasonics. And we're really looking forward to putting more marketing power beyond this business and then doing some other things in terms of surgeon training and evidence and continued innovation. We have a fantastic R&D team behind our Ultrasonic business, and we're rejuvenating some of the investments from an innovation standpoint because we believe we can continue to drive exciting technology that will really help our surgeons and patients in this space. So we will see some of the investment go to Ultrasonics this year. Caitlin Cronin: That's great. And just a quick one on PNS. Any color on the progress to building out the PNS team and cadence to hiring this year? Robert Claypoole: Yes. We're moving fast. We're scaling the business. And again, as I mentioned earlier with Mike, really driving that optimal resource allocation across PNS, and it's with the sales organization, of course, but it's also with the back support that we have, evidence that we're investing in. And as you may have seen recently, we've brought on a new dedicated General Manager for this business, just given the enormous potential that it has. So Megan Rosengarten has joined Bioventus and under her leadership, we're really looking forward to driving it aggressively throughout the year. So we'll see throughout the year an investment in this business across multiple aspects that are required to scale it effectively, not just to drive the growth in 2026, but as we mentioned, we expect that growth to further accelerate in 2027 and beyond. Operator: This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Rob Claypoole, our CEO, for any closing remarks. Please go ahead. Robert Claypoole: All right. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the fourth quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve earnings and accelerate our cash flow to create significant shareholder value. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Jennie Daly: So good morning to you all. We're going to start nice and sharp today because I know it's a really, really busy results day. But before I do, and it has become usual practice, we have members of our group management team with us here today and also our first newly appointed Customer Experience Director, Maria Sebastian. So Maria, give everybody a wave so they know who you are. And we will -- hopefully, you'll have the opportunity to catch up with Maria later this morning. And while not -- there is Maria. Actually, you missed your moment, Maria. So here is Maria, our Customer Experience Director. And while not here today, I'm also pleased to say that we have appointed a new Divisional Chair for the London and Southeast, Tom Pocock, formerly of Barclays. And Tom will be joining us soon, and you'll no doubt meet through the course of the year. Right. Let's get started. So I'll start with some highlights on 2025 and the delivery of the medium-term targets we set out last October. And Chris will cover 2025 performance in more detail and turn to guidance. And then I'll update you on how the spring selling season is playing out and how we are driving the business forward with those medium-term targets firmly in our sights. There we go. So this morning, you'll hear our strategy for driving returns in what has been a challenging year for the industry. Against that backdrop, we delivered 2025 volumes in line with guidance, growing completions by 6% with new outlet openings up 29% in the year, ending 2025 with 219 outlets ahead of expectations. The planning activity we created and stopped over the last 3 years has gained momentum through the year and is now delivering both in applications -- results, sorry, in both applications submitted, but more pleasingly, in the rate of permissions granted. And this is ultimately the basis for future outlet openings. And you'll hear that we remain very confident in delivering average outlet growth year-on-year. Another key focus is utilizing our strong existing landbank and increasing capital efficiency. Chris will speak more about this. It's not something that happens overnight, but we are well on that journey. Our strategy and the actions that we've been taking will drive improved returns, both in terms of margin and return on assets in the medium-term. We have a continued focus on cost discipline, grinding out cost whilst protecting value and balancing the medium-term strategy commitments. And while the housing market remains tough, we remain confident in this plan that is in our control and deliverable. And you'll hear more about this during the presentation. However, our outlook does not incorporate potential impacts from recent events in the Middle East that may arise for the U.K. economy and our business given the early stages of development. And finally, you will have seen that we've added flexibility to our capital allocation. Chris will talk you through the detail, but suffice to say that we remain confident that the unchanged quantum of net asset value-based returns remains appropriate, but do see benefits for shareholders and having more flexibility by adding the potential for a buyback element to our ordinary distributions. So this slide will be a bit more familiar to you and gets a bit more into the guts of our 2025 performance. I won't run through them all, but I'll just pull out a couple of the highlights. We delivered a robust sales rate, which I think attests to the quality of our product and locations and the efforts of our teams. Turning now to landbank. You can see that our landbank has come down slightly as planned as we seek to reduce landbank years. This is a key objective for us given the strong landbank that we hold, though we will do so principally by growing volumes. We've continued to prioritize customer scores and build quality as part of our commitment to operational excellence. We have a high customer score comfortably above the 5-star threshold under the new survey criteria, and our build quality continues to lead the sector. I'm delighted that for the second consecutive year and the third in 5 years, our Taylor Wimpey site manager was awarded the Supreme Award in the NHBC Housebuilders Award. This year, congratulations go to Lee Dewing of our North Yorkshire business. So you'll have already seen most of the key numbers on the slide through the trading statement, but I'll just highlight the outlet chart, which I think illustrates the progress that we are making in outlet openings. We opened 71 outlets last year, 29% up from 2024 with good progress year-on-year. There's some good momentum here, and we remain very much on track. We expect to open more outlets in 2026 than we did in 2025 and remain confident in growing average outlet numbers year-on-year. I think it is worth reminding you what we said about our approach to outlets. We have a strong single brand, and we mostly run our sites as single outlets. So this increase in outlets represents real growth in new markets. So I'll now hand over to Chris to take you through our performance and guidance in detail. Chris Carney: Thanks, Jennie, and good morning, everyone. As usual, I'll take you through the financial performance for 2025, a year in which the group delivered a robust set of results despite a challenging market backdrop. Our disciplined operational focus, the consistent execution of our strategy and the continued progress in planning and outlet openings underpins the financial resilience you'll see across the next few slides. So let me begin with the headline financials. Group revenue increased 13% to GBP 3.84 billion, supported by growth in the U.K. completions, resilient private pricing and a stronger contribution from land sales. Overall, a very good performance in a year where second half sentiment softened. Gross profit was slightly higher at GBP 658 million with gross margin stepping down to 17.1%. This movement is consistent with the factors that we've been flagging throughout the year, modest build cost inflation, slightly lower opening order book pricing and the impact of landbank evolution. Adjusted operating profit was GBP 421 million, up 1% year-on-year, delivering an adjusted operating margin of 10.9%, and I'll come back to margin performance in more detail shortly. PBT and adjusted EPS were both lower year-on-year, reflecting higher net finance costs. And finally, return on net operating assets edged up to 11% with improved asset turn more than offsetting the margin headwinds. Turning to the U.K. We completed 10,614 homes, excluding joint ventures, up 6.4% year-on-year and in the middle of the guidance range we set a year ago. Private completions increased by 7.7%, while affordable completions increased by almost 2%. Affordable represented 21% of total completions, and we expect a similar mix of around 20% to 21% in 2026. The blended U.K. average selling price was GBP 335,000 with the private average selling price at GBP 374,000, both about 5% higher. This reflects a greater proportion of completions in London and the South. Underlying pricing was positive in the North and became progressively softer as you move down the country, but overall remained reasonably resilient. As we entered 2026, underlying pricing in the order book was roughly 0.5% lower year-on-year, primarily due to those late year book deals in London that we highlighted in the January trading update. After taking that into account, we expect mix benefits to support an increase in the 2026 blended average selling price of around 2% over the GBP 335,000 reported for 2025. Adjusted U.K. operating profit remained steady at GBP 369 million, while margin softened to 10.1%. On the next slide, I'll walk you through the main drivers of the 1.4 percentage point operating margin reduction. So in 2025, we saw modest market-driven pressures from both pricing and build cost, which together reduced adjusted operating margin by 110 basis points. On pricing, the pressure came from the opening 2025 order book and the London bulk deals, which contributed to completions in 2025 and formed part of the order book for 2026. Build cost inflation was about 0.5% in half one and 1% for the year overall, driven mainly by materials rather than labor. The underlying market rate was slightly higher, but our supply chain self-help initiatives and increasing usage of our new house type range helped offset part of the pressure, and that work will continue into 2026. Landbank evolution was also a factor as we continue to trade out of older higher-margin sites acquired after the Brexit referendum. We still expect this to normalize and then become a positive contributor. And as we discussed in October, that improvement will start in 2027 and become more meaningful in 2028 and 2029. As we said in January, land sales were particularly strong in 2025, enhancing our group margin by roughly 60 basis points, a similar benefit to 2024. However, as we said, we don't expect land sales to be margin enhancing in 2026, so that benefit will unwind. We also had a 0.5 percentage point impact from the GBP 20 million one-off charge relating to historic workmanship issues at the legacy London apartment scheme. So these 2 impacts dropping out will be broadly neutral going into 2026. The headwinds from pricing and build cost inflation were partly offset by improved recovery of operating expenses as both volume and revenue grew. So turning to cladding and fire safety. This slide will look familiar to everyone from the half year, and I'm pleased to say that the overall provision has remained broadly unchanged. That sits alongside strong operational progress. We've continued to move at pace, progressing assessments, initiating further works, and we've now fully remediated 62 buildings. Since June, the number of buildings awaiting formal assessment has reduced by around half. There is still significant work ahead, but the stability of the provision over the past 6 months reinforces the robustness of the assumptions we updated in June. To date, we have set aside GBP 544 million for cladding and fire safety remediation and spent GBP 131 million. That leaves a remaining provision of GBP 413 million. Our cost estimates on assessed buildings, including the cavity barrier risks highlighted at the half year have continued to prove robust. The small uplift you see reflects routine mechanics, the unwind of discounting and minor updates to assumptions such as inflation and legal costs. Cash spent in 2025 was GBP 49 million, around half our previous guidance, mainly due to the delayed invoicing from the Building Safety Fund. With those payments now expected this year, we anticipate around GBP 150 million of cash outflow in 2026 and about GBP 100 million in 2027, with remediation still expected to conclude in 2030. Our balance sheet remains a core strength of the business. Net operating assets were broadly flat at GBP 3.8 billion. Land -- net of land creditors reduced modestly, reflecting the contraction in the short-term landbank to 77,000 plots, consistent with progress towards the targets we set out in October. Work in progress increased year-on-year, supporting higher outlet numbers and continued infrastructure investment to support new outlet openings. Tangible net asset value per share declined to GBP 1.176, driven by the increase in the building safety provisions in the first half. Turning to cash flow then. This bridge shows the movement from opening to closing net cash. The working capital outflow reflects higher debtors due to the London bulk deal signed towards the end of the year and lower creditors mainly from reduced affordable advance receipts and customer deposits. The land decrease includes a higher level of deferred receipts on land sales and the increase in WIP supports our outlook growth strategy as planning momentum improves. After tax, interest, dividends and other items, we ended the year with a strong net cash position of GBP 343 million, in line with guidance provided at the half year. Now I've included this slide to reiterate a couple of points from our investor and analyst event in October as this is a critical focus for the business. Our medium-term plan remains 14,000 U.K. completions, 4.5 to 5 years of short-term landbank, 16% to 18% adjusted operating margin and return on net operating assets above 20%. Capital discipline across land and WIP is central to delivering those improved returns. In 2025, we made good progress, returning capital into smaller sites, reducing the scale of the landbank, increasing outlet numbers and improving the distribution of our investments across the country. The short-term owned and controlled landbank is now 77,000 plots, down from 79,000. The average approved site size reduced again in 2025 to 211 plots compared to an average of 260 in the previous 5 years. And we closed the year with 219 outlets, up 3%. As we discussed in October, WIP invested in both London and infrastructure will take time to normalize, but we're seeing early progress. WIP per outlet has improved since the half year and is now back in line with end of 2024 levels. London apartment WIP reduced from GBP 270 million in June to GBP 200 million and the GBP 100 million of land sales completed in 2025 will release around GBP 30 million of infrastructure capital for reinvestment to fuel future growth. So there was good progress in 2025, increasing confidence in our ability to deliver the returns set out in our medium-term plan. Next, turning to our capital allocation priorities. Today, we're announcing an evolution of our shareholder distribution policy. But before outlining the change, I think it's important to note the context. Taylor Wimpey is inherently highly cash generative through the cycle, and that cash continues to fund the consistent investment we make in land and work in progress to support future growth. That remains unchanged. As a result, the first 2 priorities of our framework stay exactly as they are, maintaining a strong balance sheet and investing in land and WIP to underpin sustainable long-term growth. We've been equally consistent in returning significant cash to shareholders. Since introducing our ordinary dividend policy in 2018, more than GBP 2.8 billion has been returned. Our existing distribution policy, returning 7.5% of net assets or at least GBP 250 million each year through the cycle also remains in place. What we're introducing today is an element of flexibility in how that amount is delivered. We will continue to return 7.5% of net assets split equally between the final and interim. However, from here, a minimum of 5% of net assets will be paid as a regular ordinary dividend with the remaining portion returned either via dividend or share buyback to be determined by the Board as most appropriate at the time. This added flexibility strengthens the policy and supports the long-term interests of all shareholders. Accordingly, today, we are announcing a final 2025 dividend of GBP 0.0295 per share, equivalent to GBP 105 million and a GBP 52 million share buyback, which will commence shortly. Taken together, this brings total shareholder distributions for 2025 to GBP 322 million, including the 2025 interim dividend. Finally, our fourth priority remains unchanged. We will return excess cash to shareholders when appropriate. So with the combination of good cash generation, a strong landbank and an invested WIP position, giving us everything we need to support disciplined profitable growth, it's clear that our long-standing commitment to funding the business first remains fully intact, and this evolution in policy is built on that foundation. So finally, turning to guidance. As you would expect, we remain mindful of the broader geopolitical backdrop, including recent developments in the Middle East. Our outlook today reflects the conditions we see in our markets at present and does not incorporate any potential impact from those emerging events given the uncertainty and the early stage of development. With our strategic approach to land and strong conversion into outlets, we continue to expect average outlets to be higher in 2026 than in 2025. Trading in the year-to-date has been encouraging, although we did enter the year with a slightly lower order book. Against that backdrop, we are setting U.K. volume guidance, excluding joint ventures at 10,600 to 11,000 completions for 2026. At our January trading update, we covered the 2 main moving parts impacting adjusted operating margin in 2026, and I'll recap those now together with one further relevant factor for 2026. Pricing in the opening order book was around 0.5% lower year-on-year, driven by bulk deals. We continue to see low single-digit build cost inflation and legal completions in Spain are expected to normalize this year to around GBP 350 million to GBP 400 million after 2 years of higher than usual output. Taken together, these factors are a headwind to profit margin in 2026 relative to 2025, and we, therefore, expect adjusted operating profit of around GBP 400 million, and we expect pre-exceptional net finance charges to be around GBP 30 million. As we said in January, U.K. volumes in 2026 are likely to be more second half weighted than usual with around 40% completing in half 1, reflecting the softer market conditions in Q4 last year. Given the half 1, half 2 phasing effect, we anticipate a larger half 1 cash outflow than last year, resulting in around GBP 0 to GBP 50 million of net cash at the half year with the half 2 weighting of completion supporting a recovery in the balance by the year-end. So in summary, I'm pleased with the group's performance in 2025, a strong and resilient result despite a changeable market backdrop. Looking ahead, our focus is on leveraging our excellent land position to drive outlet growth, which in turn supports volume growth, margin progression and enhanced return to shareholders over time. I'll hand you back to Jennie. Jennie Daly: So taking a step back then and looking at the market as a whole, we are pleased to see some signs of improvement and opportunity. Mortgage availability remains good with mortgage rates lower year-on-year and real wage growth supporting affordability, though still more challenged than in the years before the downturn. Unemployment remains at low levels. And although customer sentiment is lower generally, it has been on an improving trend. In addition to the budget uncertainty through much of the second half, last year was also impacted by a notable increase in the amount of secondhand stock on the market. And although we hope for improvement this year, we're also ensuring that our customers are aware of the benefits of buying new. Encouragingly, first-time buyer numbers are showing some signs of improvement, but remain well below the levels we saw before the downturn. Deposit building remains a real challenge for this group, particularly in the affordability constrained south. On the Section 106 affordable housing side of the market, securing partners remains a challenge. But despite that, we are in a good position for 2026 affordable deliveries. Overall, medium- to long-term drivers continue to look positive. And as a result, our medium- to long-term view of the market opportunity is unchanged. There is a long-term structural undersupply of homes in the U.K. However, we also now have a political commitment to address undersupply with meaningful interventions to support supply side bottlenecks such as planning and more on that later. So turning now to Taylor Wimpey and our focus on controlling what we can and driving value from it. A good example here is the performance that we're driving from our marketing platforms. Last year, we updated you on how we changed our marketing approach to target fewer but higher quality leads, and it's pleasing to see clear benefits of this. We've also improved the online experience for customers through optimizing media and website effectiveness. We are seeing good quality lead generation, a year-on-year increase in overall appointments, which is still the best indicator of future intention to purchase and better conversion rates. And finally, we are seeing good quality visitors with a strong intention to move, but decisions are taking time with customers visiting sites multiple times before commitment. Spring selling season is progressing well with our performance similar to this time last year, which you will remember as a strong comparator. The year-to-date net private sales rate compares well to this point last year. The last 4 weeks have been a bit stronger at 0.87, including bulks or 0.83, excluding bulks, and that compares to the same period in 2025, which was 0.82 with no bulks. Whilst this is encouraging, I think we should remain mindful of the weak trading in quarter 4 and that it is still early in the year. As we told you in January, our order book at the start of the year is a bit lower than the comparative period given the tougher trading environment that we saw in the second half of 2025. We had a strong Boxing Day sales campaign supported by proactive management actions, and we can see that the appointments taken in this period are now converting into sales in recent weeks. As a result, the order book has made some progress, and it currently stands at 7,678 homes compared to around 8,000 at the same time last year. As I said, customer sentiment is moving in the right direction. However, we are still seeing first-time buyers, especially those in the South, grappling with affordability constraints. As a result, incentives remain an important factor in gaining commitment and are running around 6%. Now over the next few slides, I'll show you the progress that we're making in driving a more efficient land position and liberating our strategic land pipeline through our assertive planning strategy. We're still at the relatively early stages of the new planning cycle. But as expected, we've seen some early improvements in decision-making because of the changes introduced by the NPPF at the very end of 2024. These pie charts represent a snapshot of expected outcomes for our assertive strategic applications as at February 2025 and February 2026. I think if you want a stat that really shows a shift in sentiment, this is a good one. At this moment in time, we forecast 49% of planning officers will make a positive recommendation on our assertive applications. That's more than double the 22% we saw at the same point last year. I would stress that this is a point-in-time snapshot of what is a dynamic process. So as applications progress through the various stages of planning consideration, such as consultation stage, we would expect the not known categories to crystallize in some numbers towards the positive. With a clearer and more consistent planning policy backdrop weighted to housing delivery, our proactive strategy is delivering. This clarity means that we are being more determinative in our approach to engagement at a local level. It also means that we are more confident in a positive appeal outcome than in past years, and we are choosing this route more quickly when local engagement routes are exhausted. And not on the slide, but in terms of overall applications, sentiment has visibly improved with positive planning progress or planning achieved on 71% of applications in 2025 compared to 58% the prior year. So against this positive and improving backdrop, how are we faring? So you will recall that I've been telling you for some time that we've had a very deliberate and targeted strategy since 2023 to get ahead, load the planning basis and now we are seeing results. We achieved detailed planning for over 10,000 plots in 2025, 28% increase year-on-year. On the chart that you can see on the left, while some of those applications have been in the system since 2023, many more were submitted more recently and have benefited from early progress following the NPPF. We also converted over 5,000 plots from the strategic pipeline in the year, not unexpectedly weighted to the second half and final quarter. Additionally, plots for first principal planning determination are continuing to increase, now standing around 32,000 plots, and we are progressing them through planning at a pleasing rate. At the investor and analyst update, we set out a number of set of applications that we intended to submit from our strategic land pipeline. Just to stress, these applications are over and above our business as usual planning activity. In October, we expected to submit 52 applications in 2025 compared to 20 in 2024 or around 11,500 plots. I'm pleased to say that our teams have worked hard and hit the application target, surpassing the plot count level. In October, we also talked about 17 set of applications being targeted for committee decisions. And this was a stretching target. And whilst applications came in slightly below, in plot terms, the numbers came in broadly in line. And we have since had a number of those delayed applications go to planning committees in 2026. So all in all, I think it's a good showing relative to our experience in most recent years. All this is key to driving outlets, and we are maintaining the momentum, which we will see in the next slides. We start from a position of strength, a strong short-term landbank sitting at 77,000 plots, which continues to give us the confidence that we can deliver growth without net investment in land. Our intention in the land market in 2025 was to continue to be selective and below replacement. In the year, we approved around 8,000 plots. And as you heard from Chris already, the average site size of those approvals was around 211 plots, in line with our strategy to target smaller sites. And the geographic distribution approvals nudged in favor of our Northern businesses. The land market remains uneven, but there are signs of gradual stabilizing as the flows of opportunity improve. Competition remains high for well-located deliverable sites, whilst more complex or lower-value locations see less competition. Investment is, I think, expected to remain selective in the near-term as landowner pricing realism continues to act as a constraint in some areas. We remain confident of delivery over the next few years. We already own and have planning for all of our 2026 completions and already own or control everything we need for 2027, almost all of which has planning. With the momentum we've outlined, we are on track to open more outlets in 2026 than we did in 2025 and expect average outlets to increase year-on-year. So now I'm going to run through a couple of example sites approved during 2025. Both examples are own sites that we've unlocked and I think reflect the tangible benefit of our assertive planning actions. They demonstrate the improving planning environment and illustrate how our mature strategic land pipeline is supporting early delivery during this period of planning opportunity. So you may recall that in October, Shaun White highlighted this particular site located in the Green Belt on the edge of Solihull. We have held this land for over 30 years. And I think a few sites demonstrate the maturity and value within our strategic pipeline or indeed the frustrations of the planning system quite as well as this one. The journey hasn't been straightforward though it was considered as a draft allocation in the early 2010s, the site didn't make it into the 2013 adopted Solihull local plan given limited Green Belt review. Though the site was not formally adopted, it was never dropped, but was identified as a draft allocation since the local plan review commenced in 2015. After various stages of consultation, the local plan journey concluded negatively in October 2024 when an inspector's report into the plan concluded that it would be found unsigned if pursued. So after nearly 10 years of effort, the council withdrew their plan. But the breakthrough came when 2 things aligned, our continuing local engagement and the emergence of the draft NPPF 2024. This caused an immediate shift in sentiment within the council, a council which now find itself under real pressure to deliver a 5-year housing land supply. In fact, as Shaun noted in October, whilst we had already worked to prepare an application, we were now actively encouraged by the planning authority, and we submitted an application in December 2024. This came against a positive backdrop, an updated NPPF guidance on Green Belt release and strengthened recognition of local housing need. What followed was a marked change in pace, engagement with officers and elected members was constructive throughout, and we secured a resolution to grant within 12 months. That is rapid progress in today's planning environment and a testament to the quality of the work from our team and the appetite of forward-thinking councils to approve high quality schemes on a proactive basis to support their housing need. We now move to the next phase. Reserve matters applications are underway and will be submitted later this year with an outlet anticipated late 2027. This site, I think, is a story of the commitment and our commitment to strategic land over the long-term, to partnership and being agile enough to act decisively when the environment shifts in our favor. And it represents exactly the kind of capital-efficient progress we need, land we have held for decades, unlock through determination, good timing and the strength of our relationships. And now a smaller site example, this one at Abbots Langley, another owned site, which was acquired in 1996 on Green Belt land now considered grey belt. We submitted a detailed application in July 2025, proposing 50% affordable housing. What made this possible was the constructive early engagement with the local planning authority. They encouraged a detailed submission in this instance because the housing need was clear and the authority could not demonstrate a 5 year housing land supply. And as a result, the presumption in favor applied, giving the application a strong footing from the outset. That clarity and national policy meant that our teams could move confidently and present a high quality scheme with the right evidence behind it. The shift in sentiment, combined with the planning reforms created an environment where good applications are now progressed quickly and Abbots Langley is a perfect example. We'll shortly begin work on site with an outlet scheduled to open in the second half of this year. So to summarize, the assertive planning strategy that we've pursued since 2023 is delivering results. The planning reforms have created a more decisive and supportive environment and where engagement is tougher, if updated, then the NPPF gives our teams the certainty they need to pursue an appeal route if required. The examples this morning give me confidence that the planning landscape is continuing to improve and that it will be supportive of our medium-term targets. So we outlined these targets to you in October last year, and this is our business focus. We remain both committed and confident in achieving these over the medium-term. During 2026, we will continue to focus on strategy execution and with improvements in results coming through over the medium-term. And as a reminder, this plan is predicated on current market conditions, so sales rates around the levels we've seen over the last 2 years. So you've heard today that our strategy is in progress and is driving returns on what has been a challenging environment over the last few years. We are a business with a strong balance sheet, excellent landbank and experienced teams, and we've ensured that we are ready and poised for growth. We are well positioned. Our planning strategy shows signs of early wins with continuing momentum in an improving planning backdrop. Day-to-day, we're focused on driving outlets, recycling capital and driving returns without net land investment. Thank you, and happy now to move to questions. Allison Sun: Jennie, Allison from Bank of America. Just 2 questions from my side. So first, can you give us a bit color in terms of the sales rate in January, February, like how it is progressing? And what's the driver behind that? And the second is, can you tell us how the incentive has changed maybe year-to-date versus last year? Jennie Daly: Okay. So I think in terms of what's driving the sales rate, probably different than we saw at the end of 2024 and start of 2025. we had a fairly subdued market in the final stages of 2025. I talked about sort of our leaning into the Boxing Day campaign. We had generated a lot of interest, but we were coming off a fairly soft start. So the teams need the opportunity to build the leads into sort of further engagement into site visits and then reservations. So it's perhaps not surprising that January was just a little softer given that sort of a slow start coming in from the tail end of 2025. And as I mentioned, we have seen sort of increased momentum in the last 4 weeks. So February, the last 4 week rate was 0.87 and excluding bulk was 0.83 against a comparator of 0.82. So month-on-month improvement there. And in terms of incentives, we're running at around 6% now. We are seeing that customers have an expectation of a deal. And there is, as I mentioned, quite a lot of inventory on the secondhand market. So there's customer choice. So using that incentive to support customer commitment. Zaim Beekawa: Zaim Beekawa, JPMorgan. The first is on the -- obviously, in light of no demand stimulus, some of your peers have done some shared equity schemes. Has a view changed there in terms of offering something similar? And then second, on the landbank evolution, Chris, I think you gave sort of the details on the margin bridge, but maybe some details as to how much that could impact completions in '26 also? Jennie Daly: Okay. I'll give Chris the landbank evolution question. We continue to look at various models in the market around sort of shared equity and others. We see them as quite expensive, both for the customer and for our balance sheet. And from what we can see in the market, they're not really driving sort of customer engagement. We have a very strong platform to engage with customers and to drive inquiries, which is working well for us at the moment. I would stress that we do continue to look at various models coming to the market, but we need to ensure that it is actually a benefit to the customer and that it also comes at a reasonable price to the developer. Chris? Chris Carney: Yes. And on the landbank evolution, I said back in October that our expectation was that the impact would be minimal in 2026. It would start to kick in, in 2027 with the lion's share in '28 and '29. Ami Galla: Ami Galla from Citi. A few questions from me. The first one was on the market. To an extent on the PRS side or on bulk deals, I remember that the broader backdrop was a lot more difficult in the second half of last year. How has that shifted into early this year? And are you seeing more sort of opportunities there to make bulk deals at a better pricing? If you could give us some color in terms of the sort of discount that you have to give on bulk deals, that will be helpful. The second question was just on the Section 106 process. The government has talked about a clearance mechanism. Can you give us some sense of how do you think that will pan out? And do you think that would help you as we think about the sort of second half and the order book beyond that? And the last one was just on the timber frame facility. Can you give us an update of how that is progressing? And how should we think about the utilization there? Jennie Daly: Okay. Just on the Section 106, Ami, to government clearance. Yes. Okay. We haven't seen any sort of material change in sort of PRS sort of activity or pricing since we entered the year. And we're seeing some fairly deep discounts being sort of presented sort of out in the market. So no shift that we are seeing. On the Section 106, although government have sort of made some guidance available, the frustration, if I can call it that, is that it is just guidance. It's not a directive, and it lacks a degree of punch that we need with local authorities who are unwilling to engage. We're actually making really good progress with local authorities who are willing to engage, and that's very pleasing. But we do continue to meet some fairly incalcitrant authorities unwilling to discuss potential cascade mechanisms, for example, for Section 106. So we would be still asking government for something that's genuinely a solution to drive that part of the market. But to just reconfirm, we are in a good place for 2026. And in terms of timber frame, it's progressing well. It's maturing. We're learning as we go, and I'm quite pleased with progress at this point, Ami. But it really will come into its own when volumes start to step up. It's intended to be there to support us through skill shortage and sort of more rapid growth period. Aynsley Lammin: Aynsley Lammin from Investec. I think I've got 3 as well actually, please. Just you flagged up again the kind of affordability constraint around first-time buyers, and there's been some noise again around the potential kind of fiscal stimulus support on the demand side for government. Just interested, I think you're always quite well plugged in. So interested in your view of where we might be there, where government's thinking is on a kind of Help to Buy type scheme. And second question, just interested a bit more color, I guess, on build material cost inflation, labor inflation, what the trends are doing there? And then thirdly, just on the kind of change of more flexible share capital returns, did you consider at all reducing the quantum? You still obviously seem very wedded to that 7.5%. And what's the criteria you'd use between kind of choosing dividends versus share capital return -- share buyback? Jennie Daly: Okay. I mean in terms of affordability, although we're seeing some improvements, we talked about the sort of variable difference between North and South. The wage growth and some improvements into -- sort of from the FCA and PRA changes last year have helped around thresholds, stress testing, income multiples. But in higher value areas where deposit building is still a very significant challenge and maybe add on to that stamp duty as well in some areas where entry homes are above the stamp duty threshold. So we see that the first-time buyer is still sort of heavily impacted. And I think that, that's playing out right across the market. The scale of the inventory sitting in the second half market. I think that the lack of activity from first-time buyers is part of the cause of that also. So we do think that there is a case, particularly now that we're seeing such progress in supply side, but continuing weakness in demand for some form of demand side stimulus. There have been discussions with government, but it would be too much to say that those are progressive at this point. And then in terms of sort of capital returns before I pass over to Chris for the build cost and maybe more detail around dividend, I think it's important to note that the overall distribution remains at 7.5% of net asset value. But that flexibility or sort of evolution, we think, is in the best interest of our shareholders at this point in time. Chris, do you want to pick up on build costs? Chris Carney: Yes, of course. So you saw on the slide today, 1% build cost inflation for completions in 2025. The exit rate that I mentioned, I think, in January was 1.5%. In January, we saw several manufacturers request pretty sizable increases, the order of 5% to 10%, well above inflation. We pushed back and many of those were sort of either withdrawn, deferred or partially offset through rebates, although we haven't been able to eliminate all of those increases. And the pressure is coming from sort of raw materials, energy, packaging and a little bit of labor inflation as well. So based on where we stand today, obviously, you can see we're guiding to another year of low single-digit build cost inflation, likely higher than the 1% that you saw on the slide. But we'll continue to aim to beat the market through improvement in our procurement practices and other self-help measures, including the benefits from the pull-through of the new house type range, but we would still expect build cost inflation to be above 1% in 2026. And just to follow-up on what Jennie said on the question on capital returns. We're in a very strong position, Aynsley, to grow output and volumes without needing additional investment across land and WIP as we set out in October. And yes, as you'd expect, the Board does regularly review the overall quantum of distributions in the context of our capital allocation priorities. And you remember what they are. The first one is maintain a strong balance sheet and the second is to invest in land and WIP to support future growth. And yes, if either of those constraints came about in either one of those priorities, then that would prompt to change, but we don't have that at the moment. William Jones: Will Jones from Rothschild & Co Redburn. Try 3 as well, please. First, just maybe extending on build costs. Could you just remind us at this stage of the year, what visibility you have in terms of cover for the year ahead? And maybe just expand if you can a little bit on those efficiencies and particularly interested in the house type range and where we are on rollout. Second was London. Could you give us a sense of either plots remaining completions, just some sense of the proportions there? And maybe if you could help on what the margin drag has been from London in '25 and potentially '26, just high level to think about as and when that reverses back out? And the last, maybe just around land and intake margins, and I appreciate you don't give kind of hard numbers anymore, but any color on as you've got migrated somewhat to the smaller sites into the north, how that's affecting the economics? Jennie Daly: Okay. Chris Carney: Yes. So in terms of build cost inflation and cover, yes, I mean, we are well progressed in those -- in that position. So over 90% of our materials are negotiated centrally. We don't -- we've moved away in recent years from having like a point in the year where they all get negotiated, but we have pretty good visibility for this year. So very comfortable with what I've outlined. I think it's worth just bearing in mind that we've been dealing with build cost inflation and little or no house price inflation for 3 years now, and that's been tough. And it has driven a real sort of step change in how we procure. We've expanded the number of categories and the spend that we manage centrally to maximize our purchasing power. We're retendering those categories more often. We've introduced rapid repricing, which lets us benchmark more quickly and secure better terms as soon as we see sort of signs of pressure from suppliers. And we've recently added e-auctions as one of the things that we're doing and the early results are very encouraging. And yes, where we have suppliers who are a bit in transient, pushing for unjustified increases, then if we have to, we'll switch supply. So we've made pretty meaningful changes in how we address the market conditions, and we're seeing benefits in that. In terms of the new house type range, it accounted for just over 1/4 of our completions in 2025, and that will rise to just under half in 2026. So obviously, those rollouts just take time to flush them through the landbank. And obviously, planning has been difficult. So now it's a little bit better than obviously, the pace improves. In terms of, pardon me, London completions and margin drag and all that sort of stuff, actually, it's -- I don't think you should necessarily think about it like that. It is all tied up in the landbank evolution that we've talked about. But actually, some of the London sites that they were procured a long time ago, and they've been delivered very well. So it's not quite right to just assume that they have a massive drag. Some of them are actually pretty good in terms of the margin performance. And the last one was... Jennie Daly: Yes, the landbank or the land intake, I'll take that I'll give you a rest there, Chris. I mean, look, we don't give sort of guidance or -- but I'm really comfortable the acquisitions that we made last year, good markets, good sort of intake margins, entirely supportive of our medium-term targets. Glynis Johnson: Glynis Johnson, Jefferies. Chris Carney: Yes, Glynis. Glynis Johnson: Nice to steal the microphone for someone else. Four questions, but hopefully, super quick. You talked about North-South in terms of approvals, a bit of a skew. Can you talk about the outlet openings? Do the outlet openings also have a North-South SKU? And does that make a difference? Second of all, in terms of incentives, one of your peers yesterday talked about stepping up incentives and stepping up quite substantially and was of the view that others would have to follow. Have you seen incentives move up as we've gone through February? Are you seeing any areas where incentives have stepped up markedly or competition as a whole step up? Thirdly, London, when do you need to take the decision about whether or not to do further bulk sales in London? What is the -- what are you looking for in London to say, okay, we can just sell out on a normal basis or need to do bulk deals, which you've already said PRS is at quite substantial discounts. Actually, I'll leave it there at 3. Jennie Daly: Yes. In terms of sort of outlet openings, we're a business that looks to support all our businesses. And I think that we've got a reasonably good spread sort of across our divisions of outlet openings. On incentives, I mean, I mentioned that incentives are running at 6%. I think that we're working hard on pricing, Glynis. It remains disciplined, and we're certainly aligned to the wider market rather than trading aggressively sort of for volumes. So we're working, as we always do, to balance price and sales rates without sort of sacrificing sort of value or sort of long-term value. We can see some movements. It's part of the every day. There's a lot going on in the markets. And so our businesses are mindful of sort of changes in behavior by others. But we'll continue to drive that really disciplined sort of balance and ensure that we're doing the right thing in terms of long-term value. And then in London, the decisions around sort of bulk deals, they're carefully balanced. They're relative to how we're seeing the sales market evolve. We're also mindful of the capital that's potentially locked up and where we think that, that capital is better recycled through a potential bulk deal. As you saw last year, we will make those decisions. But we remain very active in the private sales market also. So there's no plan as such, we will continue to watch the market, and we'll make judgments as we progress. But overall, our approach to bulks hasn't changed. Our preference is to do those on a planned basis. Alastair Stewart: Alastair Stewart from Progressive. A couple of broad-ish questions. First, on the market. You mentioned it's taking time to secure sales. Have you got any broad comparatives either in the overall length of time from first clicking on to the website and then finishing? Or is it a case of coming back and forward more often than in the past? And related to that, you said there's quite a lot of inventory in the secondhand market. Is a lot of that buy-to-let landlords trying to get out? So that's kind of the first question. Second question is on the Iran situation. Obviously, a week is not a long time. But are you getting any feedback from your sales outlets that the rank and file buyers are getting a bit jittery. And possibly on the other side, is this great exodus to Dubai tax [indiscernible]. Some of them actually thinking of getting back in a hurry and that in turn may actually support your London market. And finally, again, costs, any brick manufacturers or anybody else giving you gentle calls saying we've been noticing the price of gas recently, guild your lines for further increases. Jennie Daly: Okay. Quite a few things there. Alastair Stewart: Two questions. Jennie Daly: Yes, yes. I think there's 4, but we'll go. In terms of taking time, I mean, I think the overall time taken about 80 days from inquiry to reservation. Alastair Stewart: Sorry, what was that? Jennie Daly: 80, 8-0. And actually, that hasn't moved massively. The interesting point in the comments that I made was the multiple visits. So we're seeing customers coming back sort of more frequently than previously. And our teams are working hard with our customer group. In terms of the secondhand market, it's a good question. And we did do some work as we saw the secondhand inventory climbing sort of last year. It's not as simple as that. Yes, there's a couple of markets where you would say maybe buy-to-let landlords. But it's pretty pervasive, Alastair, right across the country. And I would take it back to you, you need first-time buyers to drive the whole ecosystem, and that's where I would put the issue. We're not hearing anything from customers as yet. And we haven't had any calls from any of the suppliers. And if they're listening, I don't want any are on gas. And a lot of them are hedged in the near-term in any event. And as Chris says, then we will make sure that we're sort of pushing back very hard on that. And whether there's opportunity sort of in this crisis, I'm going to say there's a human cost to what's going on in the Middle East, then I'm sure that our London teams will be sort of ready and able to talk to them. Rebecca Parker: Rebecca Parker from Goldman Sachs. Just wondering in terms of your outlets that you plan to open in 2026, how many of those have detailed planning consent? And then secondly, how are you seeing land market opportunities? At the moment I know that you were saying that some landowners, the pricing realism is acting as a bit of a constraint. And then thirdly, how should we be thinking about WIP as we go into 2026, just given that you do have that target to increase outlets? Jennie Daly: Okay. Sorry, could you repeat the second question? Rebecca Parker: How are you seeing land market opportunities just given that you commented that there was a bit of pricing realism acting as a constraint? Jennie Daly: Okay. I mean I think as I said in my narrative, we're in an excellent position for 2026 in terms of planning and in fact, in an exceptionally good position for 2027 as well. We are seeing, as I said, some stabilization in the land market. We are seeing more opportunities coming through in many of the geographies. Competition is stronger for sites that are sort of further along the planning process and in good quality locations, weaker where it's more complex, where planning is less evolved. But we talked about in an environment with build cost inflation and particularly with some of the regulatory costs that we're going to see sort of realizing over the coming year, ensuring that landowners are realistic is an important part in the market. And some of the other commentators, Savills and the RICS are seeing very similar sort of positions. And then WIP, Chris, can you take the WIP question? Chris Carney: Yes. So WIP at the end of 2025 was GBP 2.07 billion. And I think as we progress to the first half, it'd probably be somewhere between GBP 2.1 billion, GBP 2.2 billion at that point. Jennie Daly: Chris? Christopher Millington: Chris Millington at Deutsche. First one, I just wanted to ask about the medium-term targets. Obviously, the market has been a bit stop starting over the last couple of years. And recalling back to the CMD, it looked like the profile was to get you to those 14,000 completions by about 2029 based on the CAGR growth rate. Where do you think that is at the moment? Obviously, this year, we're looking at kind of 2% growth at the midrange. That's number one, just the timing about mid-terms. Second one is you've had a few questions around London, et cetera, et cetera. But could you just talk in a general sense kind of how North Midlands versus South has progressed over the last couple of years? And does it move up? And is there much of a margin difference between the 2, given the relative demand profiles rather than just picking out discrete parts of the market? And the final one is H1, H2 margins this year with volumes back-end loaded with the order book coming in a bit lower. Can you give us some feel kind of how that H1 margin can look? Obviously, we can do the sums over the full year and back out H2? Jennie Daly: Okay. If you will take the last one, Chris. I mean in terms of the medium-term, I think we were really clear when we spoke in October about 2026, not likely to sort of demonstrate sort of full growth, and we talked about the achievement of our medium-term targets not being linear. And we also said somewhere between 3 and 5 years. So I think that we remain confident. I've talked a few times in the narrative about remaining confident in the medium-term targets over that time frame. In terms of London differential, I think it's probably the same answer that Chris gave really. There are differentials. There's always been sort of differentials between our Northern operating businesses and in London. And it would be wrong to characterize all schemes in and around London as per schemes. There's definitely some challenge around sales in those sites, but some of them are performing fairly well on a relative basis. And then half 1, half 2 margins, Chris? Chris Carney: Yes. Yes, of course. So our half 1 operating margin in 2026 is going to be lower than half 1 operating margin was in 2025, which I think was 9.7% and that reflects 3 sort of key factors. We came into this year with underlying pricing in the order book around 0.5% lower year-on-year. Second, we've seen low single-digit build cost inflation in that 12-month period, we talked about that this morning. And third, obviously, we've signaled very clearly in the statement that the volumes are going to be weighted 40% in the first half, 60% in the second half. And that was due obviously to the softer market conditions that we experienced in Q4. And I think that means we expect to deliver around 30% of the group's 2026 adjusted operating profit in the first half. Christopher Millington: And can I come back really quickly? Not on the margin on the geographic split, proportional on completions. However you do split your geography, how much would you regard as North and Midlands versus below that or South of that? Chris Carney: Sorry, Chris. Christopher Millington: I'm talking about the proportion of... Jennie Daly: Yes. So [ between the ] segment, Chris as you know, I mean, it would be reasonable to expect everything sort of from Nottingham, Birmingham North is North and everything South is South. But we've talked about it's also gradations of. So it gets softer the further South you come. It's not simply just characterizing all of the South as impacted. There are some markets that are more challenged in the South. There are some markets in the North, which are more challenged. So I'm not happy to sort of strike a line and say that's North and this is South because it's a movable depending on markets. Christopher Millington: It's just -- it keeps getting referred to as being soft. And it's just to put context around that comment. Jennie Daly: Yes. Well, you just think of it on the basis of the further South you come, there's a gradual softening or look at it in terms of sort of pricing. Pricing is, as you come South as it increases, then it becomes more challenging. There are some markets in Kent where affordability is easier. They're doing really well. So I think it's just a way of sort of helping you understand the broad variables. Okay. One more. Kate Middleton: Kate Middleton, Panmure Liberum. Just a quick question on pricing. So I know you're speaking about stronger growth in sales prices in the Northern regions. But just wondering if you can attribute a particular ASP to the North versus London and the South. And then just a couple on sites. So guiding to net outlet growth. And obviously, you've said 211 plots per site is the average for the year. Wondering if that's just what you're continuing to target moving forward or whether that's due to reduce? And also with the outlet growth, are we looking at sites closing as well as opening at a greater rate? Or is the rate of site closure kind of staying relatively consistent moving forward? Jennie Daly: Okay. So we don't segment on an ASP basis, albeit we do give Spain on a separate basis. In terms of sort of average site size, so the 211 that we referred to was on land intake rather than outlet opening. We talked about targeting smaller sites. I think we were really clear in October, that's not small. It's sites that we can still achieve a volume housebuilder sort of benefit in. So 211 is pretty good. I'm comfortable with that. If it was a little bit lower, that would be good, a little bit higher, fine. And then in terms of outlet growth, well, the rate of closure is a function of the market. And so we'll see how the market sort of evolves over time in the coming months. All right. Well, thank you very much for your time today. I do know it's a busy -- it's been a busy results day. And Chris and I look forward to seeing you later in the year.
Operator: Good morning, and welcome to the Liquidia Corporation Full Year 2025 Financial Results and Corporate Update Conference Call. My name is Josh, and I will be your operator today. [Operator Instructions] Please note that today's call is being recorded. I'll now turn the call over to Jason Adair, Chief Business Officer. Jason Adair: Thank you, and good morning, everyone. It's my pleasure to welcome you to our full year 2025 financial results and corporate update call. Joining me today are Dr. Roger Jeffs, Chief Executive Officer; Michael Kaseta, Chief Operating Officer and Chief Financial Officer; Dr. Rajeev Saggar, Chief Medical Officer; Scott Moomaw, Chief Commercial Officer; and Rusty Shundler, our General Counsel. Before we begin, please note that today's discussion will include forward-looking statements, including statements regarding future results, product performance and ongoing clinical or commercial activities. These statements are subject to risks and uncertainties that may cause actual results to differ materially. For further information, please refer to our filings with the SEC available on our website. Please also note that our earnings release and our commentary includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release. With that, I'll turn the call over to Roger. Roger? Roger Jeffs: Thanks, Jason, and good morning, everyone. As we look back on 2025 and forward into 2026, what stands out is the rapid establishment of our preferred product profile paired with precise execution. Last year demonstrated that Liquidia could launch, scale and reach profitability quickly within only 120 days of launch, in fact. Most importantly, we demonstrated that physicians were willing to rapidly change prescribing behavior when presented with a new differentiated option in YUTREPIA. The benefits of its product profile, deep-lung delivery, low-effort device and wide dose range are taking hold in clinical practice and help place YUTREPIA as one of the top specialty drug launches over the past 5 years across all therapeutic categories. This did not happen by chance, but with purpose as a category defining the SENSE study data clearly set a new data-driven standard for therapeutic success. The momentum of 2025 has clearly carried into 2026. As of February 28, we have received more than 3,600 unique patient referrals and shipped therapy for more than 2,900 patients since launch, maintaining our robust trajectory. While others have observed stagnation from supposed seasonality, that has not been our initial experience as we continue on the same tour trajectory without decline which would suggest that our percent market share is rising and that we are capturing a disproportionate number of new patient starts for inhaled prostacyclins as the best-in-class option. This steady forward momentum is being achieved across PAH and PH-ILD, with new patient prescriptions roughly equal now between the two indications. Patient starts remain at 75% naive to 25% transitions from other prostacyclins. Importantly, breadth and depth are also improving in a measurable way. We have increased total prescribers to around 860 as centers gain confidence and usage expands in the community. A key indicator of that depth is that roughly 25% of physicians have already referred 5 or more patients which is exactly the pattern you want to see when the therapy evolves in becoming the standard of choice rather than an initial trial. If 2025 started the full commercial phase, 2026 begins the full clinical exploration of what may be possible with YUTREPIA and L606. Our development strategy is built on principles we have understood for a long time with prostacyclin. Exposure drives efficacy, tolerability drives durability and convenience drives compliance. Each of these elements is critical to the totality of therapeutic experience and speaks to the high bar that YUTREPIA has quickly established around safety, efficacy and convenience. This year, we will look to further cement this best-in-class product profile via the initiation of multiple new studies, including studies that will transition patients from oral and inhaled prostacyclin therapies and a study of new combinations like adjunctive studies with sotatercept that we hope will further advance the changing standard of care. Further, we will work to initiate new studies to support expansion into additional disease areas such as systemic sclerosis-associated Raynaud's phenomenon and PH-COPD, where high unmet addressable need remains. And of course, we will look to move the therapeutic needle even further via the advancement of our next-generation L606 pivotal study with the study initiated in multiple territories and enrollment expected to begin in the following quarters. Importantly, this disciplined expansion of clinical evidence will be funded by cash flow from operations and will help grow the value of the franchise and the company. With that, I will turn it over to Mike. Michael Kaseta: Thank you, Roger, and good morning, everyone. Our financial results are a direct reflection of two things: sustained patient growth and retention and disciplined execution. Over the last 9 months, as the referral and start curves have moved higher so have revenue, margin contribution and cash generation. For the full year 2025, YUTREPIA generated $148.3 million in net product sales including $90.1 million in the fourth quarter, representing 74% growth in net product sales over the third quarter, 2025. The fourth quarter also marked our second consecutive quarter of increasing profitability with not only non-GAAP adjusted EBITDA of $27.3 million but also $14.6 million of net income. We ended the year with approximately $190.7 million in cash and cash equivalents, having generated $33 million of positive cash flow in the fourth quarter alone. Liquidia is now operating as a cash-generating growth engine. That is not aspirational, it is visible in the quarterly numbers and on the balance sheet. Roger, back to you. Roger Jeffs: Thanks, Mike. We're confident in 2026 and the years ahead as we focus on building a durable franchise with increasing patient preference and a clear path towards at least a $1 billion franchise in 2027 with increasing growth in the years beyond. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Ryan Deschner with Raymond James. Ryan Deschner: Congratulations on the impressive continued launch so far for YUTREPIA. Curious, given the greater than 2,900 patients starts you're reporting today, where do you think this puts you in terms of current market share? And how are you thinking about continued growth in the first half of 2026? And then I have a follow-up. Roger Jeffs: Yes. Thanks, Ryan. I appreciate you joining the call this morning. So it's hard to give an accurate percent market share from a patient number standpoint, given the competitor that doesn't disclose their numbers. So what we have done is talked about -- we've done an analysis based on revenue that maybe, Mike, if you don't mind going through, that speaks to this question. Michael Kaseta: Yes. Thanks, Roger, and thanks, Ryan, for the question. So to give everyone an idea, inhaled treprostinil revenue for Q4 was approximately $550 million. And as Roger said, despite what our competitors have talked about with seasonality in Q4 in their business and their corresponding decrease in revenue from Q3, that's still an increase of 5% revenue from Q3 of 2025. The fact that we had an 80% increase in revenue quarter-over-quarter means that we're accounting for more than 100% of market growth in Q4. And again, as Roger have said, that represents a disproportionate share of new patient starts, along with a fair share of switches from Tyvaso. In terms of what that share is in Q3, we had about -- from a revenue point of view, 10% of market revenue that increased to 17% in Q4. So we're seeing a significant increase quarter-over-quarter. As Roger mentioned, the 2,900 patients starts in just 9 months since launch, that is through February 28. So we're seeing that continued momentum that we've seen in Q4 the first 2/3 of Q1 of 2026 and feel very excited and bullish on our ability to continue a successful launch. Roger Jeffs: And Ryan, just to add, I don't -- it's been very consistent in terms of trajectory, and we don't see any impediment going forward this year with regard to any change in that trajectory. As we mentioned in the prepared remarks, the depth of prescriptions is increasing. We're working on improving the duration and durability so that scripts back upon scripts so that the revenue growth remains. And I believe you had another question, Ryan? Ryan Deschner: Yes, thanks for that. With the new [ outcomes ] data from a competitor that came out recently, what's your take on the potential impact of a new addition to the oral prostacyclin receptor agonist mix on the YUTREPIA launch [indiscernible]? Roger Jeffs: Yes. I mean it's a good question then. First of all, we'll congratulate therapeutics on a successful trial with a IP1 selective agonist, I think for us, it really doesn't have any impact at all. If you look at it, it's more like UPTRAVI than not. I mean, they're both in the nanomolar range. I think potency-wise, they're generally similar. Their target binding profile is highly selective just to the IP1 agonist, and I think the results are similar. You're seeing an effect long term over years in clinical worsening with a very muted effect on symptom oncology which primarily if you look at the 6-minute walk distance, which they didn't disclose, they said it was significant. But my guess is it's muted. And as you know, with UPTRAVI, they had no statistical significance or [ clinical significant ] change in 6-minute walk distance. In these patients -- when you're talking about a first edition of prostacyclin, the patients are symptomatic and looking for improvement. So I don't think like the oral therapies just aren't going to give that bang for the buck. What they are going to bring is the GI. And if you look at the AE profile that was shown, you could see a high degree of GI side defects, diarrhea, emesis and nausea. So I think it's more of the same and all the results that Mike just talked about in terms of our launch trajectory and success, are in the presence of UPTRAVI being in the market. So it's really -- to me, it's really an interchange between how that -- how ralinepag will compete with UPTRAVI in the marketplace once it's launched. So not that concerning. I think also if you look at their box and whisker plot, while they did have success across a lot of different subgroups, one thing that was not differentiated was dose. So it doesn't seem like there's an ability to dose a better outcome there. So what you see is what you get based on probably close to the initial start dose. So again, more of the same, and I don't think it will be impactful in any way in terms of how we view our business. Operator: Our next question comes from Julian Harrison with BTIG. Julian Harrison: Congrats on the progress. Roger, I'm sure you're very familiar with soft mist inhalers, can you help us better understand the differentiation potentially of YUTREPIA, maybe L606 as well relative to a softness inhaler that was recently announced by another company in the space? And then as a follow-up, regarding the PAH versus PH-ILD split of patients on YUTREPIA, should we still be thinking about that on approximately a 3:1 basis? How do you see that maybe evolving over time? Roger Jeffs: Yes. I'll answer the and maybe ask Scott to help me with the second question first. So we've moved to a pretty equal split now between PAH and PH-ILD. There's clearly more white space opportunity in PH-ILD. And I think as we -- one of the things we're doing is we're going to grow our sales force significantly by 1/3. So we're going to have a larger share of voice. And the purpose of that larger share of voice is to get into the community, particularly into the PH-ILD space to continue to penetrate that market, drive awareness and either drive starts to drive referrals. So I think over time, that should become an increasing value proposition. But in PAH, don't forget, we have not only the inhaled market opportunity, but we're also going after the oral and parenteral opportunity. So on aggregate revenue numbers, they may appear similar in terms of the business opportunity. But in pure patient numbers, I think PH-ILD has the opportunity to be more successful. Scott, do you have any other questions or any other responses that you'd like to add? Scott Moomaw: No -- I would completely just agree with everything Roger said. It's been interesting to see PAH get off to a fast start. But as we mentioned, PH-ILD has come on strong and about half where it's going to go from here. I think PH-ILD, we know PH-ILD is definitely the bigger opportunity long term, as Roger called it the white space. but there's still a load of opportunity in PAH. So where it will settle out eventually. I think PH-ILD definitely will be bigger, but there's a lot of growth in both buckets right now to continue in the near term. Roger Jeffs: Yes. Great. Thanks, Scott. So again, Julian, there's multibillion dollar opportunities in each indication. So we're excited about the opportunity that YUTREPIA and subsequently L606 will have in these markets. With regard to the SMI, I know it's a seminal question for everybody in sort of front of mind because there were some pretty hyperbolic comments made about it. What I would say is I think their commentary in general was -- it sounded very much to me that it was validating YUTREPIA because it sounds like they're trying to develop product that has the product profile of YUTREPIA. So -- and what is that? It's an easy-to-use low-resistance device with high portability. There's mitigation of cough. But for us, it's specifically done view of the print formulation of engineered particles in the lower end of the respirable range. And then dosing flexibility due to that tolerance which then parlays as we've clearly shown in the ASCENT study that we can rapidly and aggressively dose patients to 2 or 4x the past standard with absolutely no exacerbation in cough in a population of PH-ILD patients who have a baseline cough and a high predilection for exacerbation of cough when they take inhalation therapy. So YUTREPIA is putting an ideal product profile. What Mike described is we're clearly getting the lot, if not most, of the NRx share, and our TRx share is catching up over time. And the SMI to me is just -- it's a repurposed opportunity. So if you go back to the 793 patent that has a priority date of 2006, and look at example one in particular, it talks about there a single-dose acute administration of treprostinil using an SMI. And in that same patent, there's a single acute dose with the ultrasonic nebulizers that is Tyvaso as we know it today. And what that showed is that in PAH patients with a single dose, low dose, that cough was prevalent, and it describes the MMAD or the median diameter of those particles to be in the 4 to 5-micron range. So nothing different. So you're giving Tyvaso solution. You're not doing anything to improve its tolerability or penetration to the lower airway, you're just using a different way to present an aerosolized mist. So it doesn't really matter if you use a soft mist inhaler, yes, that's probably better from a portability standpoint, but that will be it, it will still present itself clinically in terms of how it behaves as Tyvaso nebulized. So we don't really view it as competitive. I think you'd have to ask the competitors to explain the comments they made around tolerability, they've said they still have to do bioequivalent. So whatever data they have, my guess is it's just single-dose acute studies in normal volunteers which is a very bad proxy for what may happen in patients with a high predilection of cough. And the truth to that statement is, remember, when they launched Tyvaso DPI, they had no data in patients that was done on bioequivalence in PH-ILD. And you've seeing the issues they've had through the National Jewish state, in particular, with the DPI and PH-ILD. And now it seems like they've capitulated and feel that DPIs are now not useful, at least their DPI and they're trying to pivot to another methodology, but I don't see that methodology as providing any forward-looking benefit. So that's kind of my quick view on it. I know, Rajeev, you have some broader statements around perspective because this has been tried before in other markets. And if I could, I'd ask you to speak to those instances, if you will. Rajeev Saggar: Yes, sure. Thanks, Roger. So I think I just want to highlight some key points here. I think the signature of the SMI was primarily derived from the Spiriva Respimat and that was done at a time when the CFC propellants were being removed. And also, there was a patent issue from that company, and they compared it to Spiriva HandiHaler, which is the dry powder formulation. And at that time, the HandiHaler was the highest resistance device ever to be developed in patients with asthma and COPD, which is tens of millions of patients. The only device that has a higher resistance than the HandiHaler to date is actually the Tyvaso DPI device that's used in PAH and PH-ILD. But what's really interesting is with all the studies done comparing the softness inhaler to a dry powder inhaler using the same formulation in this regard with tiotropium, the SMI has never been shown to change the clinical efficacy, the pharmacokinetics and most importantly, who's never been shown to improve or modify safety and/or tolerability inclusive of the concerns for cost. So I just want to highlight as what Roger spoke to that the SMI does not port any substantial benefit besides the portability itself. Operator: Our next question comes from Amy Li with Jefferies. Amy Li: Congrats on the momentum. So when we look at your path to the $1 billion revenue target in 2027 that you laid out, our math suggests that implies sustained patient adds from here. So is that the right way to think about the trajectory? And more importantly, what gives you confidence in maintaining your current pace in the next couple of years? How much visibility do you have into the patient funnel and where the patient is coming from? And then how -- and are you still confident in that number in light of kind of the potential emerging competitive dynamics like SMI? Roger Jeffs: So I'll ask Mike to speak to some of -- how we get there, at least from a revenue calculation standpoint. But as we just said, Amy, we don't see any influence from the SMI. I think it's -- again, it's going to be Tyvaso and perhaps a more portable format from using jet nozzles to create aerosolized particles. But as I said, they're going to be poly dispersed, they're going to cause cough, they're going to have titration issues. So I don't really see that impacting us in any other way. And as you're noting in the competitors' revenues, the nebulized business is decreasing, mostly because we're beginning to take that share away. So I think more of that will continue to happen. Mike, do you want to talk about kind of how we see our sales continuing decline amounting towards greater -- at least $1 billion in revenue in 2027? Michael Kaseta: Yes, Amy, thanks for the question. I mean if you just look at -- start with what I talked about earlier. The market for the quarter was over [ $500 million ], which means it's about -- it's already on -- the inhaled treprostinil market is already a $2 billion market. You then talk about -- our share of that revenue has increased considerably quarter-over-quarter. We believe that will continue as well. Then you look at the opportunity that we talked about in PAH with the $2 billion oral opportunity where we believe that there will be significant opportunity for us to gain significant share from that. So that's another $2 billion opportunity just within PAH that we see. And then as Scott and Roger had said earlier, we're just scratching the surface in PH-ILD. We're enhancing our sales force. We're getting more penetration. We're getting further into the community. So when you look at the overall opportunity, our current $2 billion market opportunity in inhaled treprostinil plus the oral opportunity plus the enhanced white space in PH-ILD, we feel very bullish in our ability to continue on this trajectory and continue on this path to get us to what -- as Roger had said at JPM, YUTREPIA being a $1 billion product in 2027. Roger Jeffs: Yes. I think the other thing, Amy, too -- great response, Mike, is, look, we're doing directed studies that we're going to transition patients from the competitive agents, either oral or inhaled and show the benefits of moving those patients to direct tolerability and efficacy. So all of these things just will continue to build a portfolio and a suite of evidence and data-driven proof that YUTREPIA is the best-in-class and first in choice product. Operator: Our next question comes from Serge Belanger with Needham. Serge Belanger: First question on the legal front. Any new updates or developments that you can share with us? And then secondly, regarding payer access, I think you reported another 85% prescription to patient start conversion. Just curious how that number varies across the Medicare and Commercial segment. And I guess, what additional coverage work is required. I know you had coverage from three major commercial payers, but what additional payers need to come online over the remainder of 2026? Roger Jeffs: Sure. Thanks for the question. So I'll take the legal and then I'll pass it to Mike for payer. So really nothing new from what we said at JPMorgan, Serge, so just a reminder for those who may be newer to the story, that the oral hearing was in June, post-trial briefings were completed in August. So we're now approaching 9 months from trial and 7 months from the post-trial briefing. So we do think we're in the sweet spot for when an opinion should and could be rendered. But obviously, it's been taking longer than we all expected. So we can't really probabilitize on when it actually will come down. What I would say is we remain very confident in the arguments that we made and we strongly believe that we should win. And the case should read out favorably to us. We acknowledge there's a lot of potential options here or outcomes. But regardless of what happens, we're prepared for any and all outcomes. So really nothing new to state today other than we remain confident in our position and look forward to hearing from the judge in due time. So Mike, if you'll talk to payer access, please. Michael Kaseta: Yes. So it's great to hear from you. I think where we are with payer and pull-through is just another example of how we've executed on this launch. Scott and his team have done a masterful job, the fact that we are at -- we've maintained 85% plus of pull-through from really the very early stages of the launch is just simply staggering. And we continue on that pace. We've also said from the beginning of the launch was our goal was to make sure that patients have a choice if they want to use YUTREPIA and what we can say is we've achieved that. And we continue to work through our pull-through, making sure that we provide a suite of services to patients to make sure that if they want YUTREPIA, they can get it. And I think that's evident in that pull-through percentage, and we don't see any change in that coming. And our goal will always be to improve that as we move forward. But I really think we're already in a best-in-class state being at 85-plus percent pull-through percentage. Operator: Our next question comes from Ben Burnett with Wells Fargo. Benjamin Burnett: Congrats on all the progress. I just wanted to see if I could get a little bit of color on some of the launch dynamics into the first quarter. Anything you can say kind of around inventory stocking trends or kind of the refill rate that you're seeing? Roger Jeffs: Yes, Mike, if you wouldn't mind commenting on that? Michael Kaseta: Yes, Ben, thanks for the question. As we said in our press release, and Roger reiterated already, we've already had a strong January and February when it comes to both new patient starts and referrals. We're staying on the exact same trajectory we were on in Q4. We've often gotten questions from analysts and from comments from our competitors about seasonality. We've seen nothing but increases across the board. And as we showed today, we continue to see those increases. So as we've always said, as Roger had said, we are still very confident as we move through the rest of Q1 into Q2 and are on our path to be a $1 billion product in 2027. Now as it relates to inventory and stocking, I think we're now at the point of the launch 9 months in, where we've really normalized and I don't expect there to be any significant swings now. Specialty distributors can make decisions that ended up quarters that we don't have influence over. But at the end of the day, we are tracking well. Our demand is extremely strong. And as a result, we feel very confident in the revenue as we move forward. Benjamin Burnett: Okay. That's extremely helpful. And I guess just also regarding the systemic sclerosis RP program. I thought that was interesting. Could you maybe walk us through kind of the evidence in support of treprostinil and kind of what your path forward is there? Roger Jeffs: Yes, I'd love to. So Rajeev, if you wouldn't mind talking about the Raynaud's program? Rajeev Saggar: Yes, sure. Thanks for the question. So obviously, systemic sclerosis is a rare condition overall. And obviously, by the nature of their -- the actual topic of systemic means they have multiple disorders affecting multiple organ dysfunctions inclusive of the most deadly, which is and PAH and PH-ILD. And despite that, their single most complaint of what drives their quality of life is the problem that occurs with Raynaud's phenomenon, which occurs in at least -- and it's debatable, but somewhere between 90% to 95% of all patients with systemic sclerosis or scleroderma. The reason why we think we have good rationale is that actually many of the drugs that have been approved for pulmonary hypotension have been studied, specifically on the -- and the complication of Raynaud's phenomenon, which is known as digital ulcers inclusive of prostacyclins. In fact, in the European and the U.S. guidelines for the management of Raynaud's phenomenon, iloprost and/or Flolan is used as salvage therapy in the event that patients are recalcitrant to treatments such as calcium channel blockers and/or even PD5 inhibitors, which is used off label. So that just shows that the prostacyclin class in and of itself is able to prevent worsening of ischemic episodes. They're potentially leading to avoiding issues of gangrene and/or amputation of these digits that's affecting these patients. One of the challenges oral treprostinil was studied in condition, again, to try to modify the digital ulcers. The problem with that was the trial was fraught with tolerability issues and patients coming off because of the intolerability of oral treprostinil, Again, highlighting that if we can provide YUTREPIA for these patients, we know that the tolerability profile of inhaled treprostinil has significantly improved. We can also -- we also know from our data that we can dose to a significantly high level, ensuring that we obtain appropriate pharmacokinetic profile to modify the disease and so we look forward to initiating our Phase IIa program in systemic sclerosis RP here in -- near the end of the year. Operator: Our next question comes from Jason Gerberry with Bank of America. Jason Gerberry: Two for me. Just first on PAH, I wanted to just get your view on sort of the role for an inhaled treprostinil in the PAH setting. It's a bit confusing. And so -- on the one hand, your competitor flagged that maybe inhalation approaches are going to see a diminished role in PAH. And then when we talk to KOLs, what they're saying is they're not putting new starts on UPTRAVI but yet when we look at IQVIA data, the UPTRAVI NRx look pretty stable. So there's a lot of conflicting data points in this, and it's a dynamic space. Winrevair is now getting used more in newly diagnosed PAH. So how do you see this dynamic where the role of, say, oral versus an inhaled prostacyclins in PAH? And then my second question for Mike, just when I look at fourth quarter numbers, it looks like really good revenue recognition per patient to take the average -- the 3Q number versus the 4Q number over sales or under sales, I should say. So when we look ahead to 2026, it doesn't seem like that there's going to be a huge gross to net adjustment in the numbers relative to the patients and the revenue capture, but wanted to get your perspective there. Roger Jeffs: Yes. Thanks for the question, Jason. So I'll speak to the PAH issue in terms of oral versus inhaled. And I think the field is moving. The paradigm is shifting to where patients aren't going to be willing to accept off-target effects any longer. And because the burden of those off-target effects can be as bad as the burden of the disease in terms of impact on daily living. So the orals, clearly, if you look at the frequency of AEs related to the GI toxicities, they're significant, and they occur daily, they occur over hours in the day and if you then pair that with minimal symptomatic benefit to the disease, that benefit to risk exchange is not a good negotiation for the patient. So I think going forward, particularly as we continue to evolve data around the ability of YUTREPIA to dose titrate drive effect and really eradicate off target effects to the GI or from parenteral issues related to septicemia and subcutaneous site pain and irritation. There really -- there's -- nobody would be willing to make a trade-off because now you can get the symptomatic benefit without sacrificing your daily living through these off-target effects. So I do think -- and our competitors said it when they spoke about their SMIs, like the people are tired now of off-target effects and their people -- what you want to see is a better benefit to risk profile, which YUTREPIA provides. And then it is a 4 times a day therapy, so that would be the only sort of negative there. We're going to negate that negative with L606. So the imports of that studies will achieve in a different way through liposomal encapsulation, all the benefits of YUTREPIA but then now we'll do it in a twice-a-day format and it will also minimize peak-to-trough excursions so that trough benefit is steady to the peak benefit. So what we're trying to do at this company is really improve patient outcome, have patients feel better, remove these off-target effects and then get them to a point in time where they can take an easy portable therapy without risk. So I think we're well on our way to doing that. I think clearly, YUTREPIA's become the preferred inhaled. And as we continue to sort of cannibalize share from orals, you'll see more and more of that. So again, very excited [indiscernible] across the board. And I think that's it for the PAH to oral. So maybe, Mike, if you can talk about the fourth quarter dynamics? Michael Kaseta: Yes, Jason, thanks for the question. So as we look at our growth to net from 2025 to 2026. As we had said in previous quarters, working on access in the back half of the year, we had some new to market blocks that had existed on the commercial front. Those were slowly removed. The result of that is going to be twofold. One, we will pay more rebates on more of our business as we move forward in 2026. But that will be offset by having more patients having access. So what I would say is, as we have kept saying we are extremely confident in our trajectory as we move into '26 and into '27 but what I would say is maybe there'll be a very small incremental increase in our gross to net, but that is -- it goes to our goal of making sure patients have choice and patients have access. So we will have achieved that goal. And I think we'll sit at a place where we're very comfortable and can still achieve our goals in 2026. And as we've said, being a $1 billion product in 2027. Roger Jeffs: Operator, I think we have time for one more question. Operator: Our next question comes from Gaurav Maini with LifeSci Capital. Gaurav Maini: Congrats on a great print and continued strong launch of YUTREPIA. Just two for me, if that's okay. Can the team give some color on that one in four prostacyclin transition patients and kind of what bucket of prostacyclin therapy, i.e., oral versus inhaled, these patients are coming from? And then secondly, on the new exploratory YUTREPIA trials, can you just describe how these are expected or if they are, I guess, to be label enhancing? Roger Jeffs: Yes. So maybe I'll ask Scott to talk about sort of how the transition market, kind of the demographics of that and then Rajeev, if you will speak to the benefits of the trials that we're doing. So Scott? Scott Moomaw: Sure. So as we've said, you alluded to, we've said that 75% of the patients are new to prostacyclin and then 25% are switch. Obviously, in PH-ILD, there aren't other options. So it's -- those switches are coming from inhaled. In PAH, what we said is that about 30% of the 25% in PAH are coming from the orals. And then the bulk of those are coming -- the rest of those are coming from inhaled. Now we are starting to see more patients transition off of parenterals on to YUTREPIA, I don't think that's going to necessarily become material in terms of the switches, but it is interesting and shows that in the future, we'll probably kind of encroach on the parenteral space. But when I'm out there in the market, I can tell you that the enthusiasm around using YUTREPIA instead of the oral prostacyclins for all the reasons Roger elucidated earlier, is only growing. And so we think that whether they're switching the patient off of an oral prostacyclin or they're using YUTREPIA instead of an oral prostacyclin, again, I think there is a big opportunity there for us. Roger Jeffs: Thank you, Scott. So Rajeev, if you'll speak to the trials, please. Rajeev Saggar: Yes. Thanks for the question. So listen, I firmly believe we're entering into a decade and beyond of inhaled renaissance here in PAH and in PH-ILD. And I think YUTREPIA is leading the charge today, and L606 is going to definitely beat it tomorrow. In that regard, the trials that we are purposely conducting is defining how to switch from the oral prostanoid to YUTREPIA. I think we highlighted a few things on this call. Number one, it is very clear that practitioners across the board are very interested in delivering the most tolerable drug. I think this has been highlighted by the addition of sotatercept to the armamentarium, which has, I think, completely negated and limited the utility of parenteral therapies at this time. We have several large anecdotal cases of YUTREPIA being used acutely in the hospital and to combine that also with sotatercept to maximize the benefit of that combination. In regards to oral prostanoids, we plan to switch studies from selexipag to YUTREPIA. It would detail to the practitioners how to do that effectively and safely. And also, again, the advantage of YUTREPIA is that we can dose 2 to 4x that typically what is used traditionally by Tyvaso. In those studies, we'll also highlight some of the hemodynamic capacity of YUTREPIA, which I think would be very exciting. In regards to label enhancing, I think we reserve the right to always present our data to the agency for consideration for label discussions in that regard. And then finally, I think we've highlighted just -- to highlight again the sotatercept study. The purpose of this study is to transition patients that are on sotatercept in combination with either forms of prostanoid inclusive of parenteral and/or oral and transition those off those therapies safely and effectively to YUTREPIA. So those are the studies that we are keenly and working across to initiate this year. Roger Jeffs: Thank you, Rajeev there. Well said both from you and Scott. So I'll close by just saying as you can hear, Liquidia is all-in for our patients and trying to provide better and better opportunities, both now and in the future. And we look forward to speaking with everyone again in May when we update you on our Q1 outcome. Thank you, everyone. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Webull Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Carlos Questell, Head of Investor Relations. Please go ahead. Carlos Questell: Good morning, good afternoon, and good evening, everyone. Welcome to Webull's Fourth Quarter and Full Year 2025 Conference Call. Earlier today, we issued a press release detailing our fourth quarter and full year results. A copy of the release can be found on our IR website at webullcorp.com under the Investor Relations tab. Please note that this call is being recorded and will be available for replay via our IR website. During the call, we'll be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to the cautionary statement and risk factors contained in our filings with the Securities and Exchange Commission and press release, both of which can be accessed via our website. Today's presentation will include a discussion on adjusted operating expenses, adjusted operating profit and adjusted net income, all non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to their most directly comparative GAAP measures are included in the press release that we issued today. It is important to note that although we believe that these non-GAAP measures provide useful information about operating results, they should not be considered in isolation or construed as an alternative to their directly comparative GAAP measures. Furthermore, other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. With me today is our Group President and U.S. CEO, Anthony Denier; and our Group CFO, H.C. Wang. We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn it over to Anthony. Anthony Michael Denier: Thank you, Carlos, and hello, everyone. Thanks for joining us today. Webull's fourth quarter and full year results show strong progress and returns for our first full year as a public company. Our full year results reflect our success as we continue to enhance our offerings for our growing base of active traders and investors, expand our client base globally and extend our capabilities into new markets, including institutional investors. Following our public listing in April of last year, we have been executing on an ambitious plan to address the growing requirements of our user base of sophisticated, active investors looking for autonomy from traditional brokerages. We're proud to report that we offer that platform today, and it provides our users with a one-stop shop for securities trading as well as offering in crypto, futures, prediction markets and more. And what's more interesting is, it's all enhanced by AI. AI is dramatically changing the investing industry, and we at Webull are on the forefront of many of those changes. We're proud to be shaping the future of active self-directed trading through the integration of AI via Vega, our AI assistant for trading and platform guidance, delivering real-time insights and AI-generated trading ideas. Launched at the end of last year, Vega is already integral to our continued growth, providing our users with market data, information and associated analysis as well as real-time portfolio monitoring, with user-controlled management of positions and risk preferences. Since launching just a few months ago, Vega currently assists 1.2 million global users each week with 10% of weekly active users deploying the tool to answer over 10 million questions since creation. AI deployment across our platform also extends within our organization with AI implementation across customer service, R&D and internal operations. We're looking to integrate AI into every aspect of our internal business to optimize and scale a global business that provides a differentiated, sophisticated regulatory compliant trading platform to users across markets. I'm proud of the Webull team for a strong first year as a public company. I'm also proud of our leadership and the development of our AI capabilities over the past year. As we establish Webull as a leading investment platform for active traders, I want to be sure you understand how important the scale we have achieved is to our strategies going forward. We are poised to bring our solutions to brokerage firms, high-net-individuals, family offices and wealth advisers. I look forward to chatting with all of you about B2B opportunities in 2026. With that, let me now walk you through the key highlights from 2025 in more detail. Here on Slides 2, 3 and 4, I'll walk you through our 2025 highlights. We are proud of our performance in 2025, delivering record revenue and a solid operating profit margin improvement from the prior year. We recorded revenue of $571 million, representing 46% growth from 2024, driven by record trading volumes across all asset categories. First, customer assets reached $24.6 billion, inclusive of approximately $1 billion in assets from the acquisition of Webull Pay, representing an 81% increase from 2024. Second, equity trading volume increased by 59% year-over-year, to $732 billion, while options volume rose by 19%, to 550 million contracts. And our newer products, including futures, prediction markets and crypto, all delivered strong growth during 2025. We recorded an elevated but disciplined increase in adjusted operating expenses of $460.7 million, representing an annual increase of 24% as we continue to invest in strategic product offerings and market expansion to support long-term growth. Operating profitability was strong with a 14.6 percentage point increase in adjusted operating profit margin, on an annual basis, to 19.3%, representing an adjusted operating profit of $110.3 million for the year. As our industry undergoes structural changes, we will continue to invest proactively to capture outsized share over time. Turning now to Slide 5 and our 2025 road map. I'm really pleased with this progress. Webull Premium, our subscription-based service for active traders and long-term investors, has reached 102,000 subscribers by year-end, surpassing the 100,000 target we set for ourselves. Our premium subscribers contribute 30% of our AUM, 60% of overall margin debit balances and our most active customers. Looking ahead, we aim to double our premium subscriber base in the coming year while continuing to enhance the product with additional features, making it the best value product for active traders. One of our proudest moments of 2025 was the introduction of Vega, our AI tool that combines news, earnings and technical data to deliver a focused, intuitive experience that helps both new and seasoned investors navigate modern trading and make smarter decisions. Since its release, approximately 1 in 8 users have used the assistant before trading, and Vega continues to play a role in not only bringing people to our platform, but keeping them there as reflected in the 1.2 million users a week who utilize this exciting technology. We also launched BlackRock model portfolios, which provide a robo-advisor offering and allow users to access a range of diversified portfolios across various asset classes, including alternative and digital assets. In line with expanded digital asset offerings, 2025 marked the reintroduction of crypto trading for our U.S. customers with the acquisition of Webull Pay and the launch of crypto trading in Australia and Brazil. We are also actively exploring digital asset licenses in a number of other markets and expect to bring them online in the coming year. The introduction of prediction markets to our asset classes has also been an exciting innovation this year. This offering provides an engaging and accessible trading experience that lowers barriers to entry for users. This quarter, more than 162 million prediction contracts were traded, with 81 million in December alone. We're excited to continue the momentum around prediction markets with the introduction of sports prediction markets across all the major sports leagues. And while Webull has always been a global player, 2025 has been a year of further global expansion. We now have more than 760,000 funded accounts outside the U.S. APAC customer assets have surpassed $3 billion, and our partnership with Meritz Financial Group has increased access to the U.S. market for Korean investors. Canada is also on track to soon reach $1.5 billion in customer assets, fast on the heels of surpassing $1 billion only 4 months ago. Additionally, we launched our platform in the Netherlands and are now licensed in 4 additional EU markets: Germany, Italy, Spain and Portugal. We prioritize delivering U.S. products to international markets from the start, and it is just good business to have diversified revenue streams globally. Looking ahead to 2026. On Slide 6, you'll see that we have identified 3 main priorities for the year. First, we will sustain and grow our elite offerings for active traders, leveraging AI tools that enhance the trading experience and allow us to maintain price leadership across the market. Second, we will continue growing our global business by cementing our position in existing markets and continuing to add to our localized product offerings. Finally, as I noted earlier, we will be building on last year's partnership with Meritz to expand our B2B platform. On Slide 7, I'll discuss our growth in both users and funded accounts for Q4. During the fourth quarter, we added roughly 1 million registered users, bringing the platform to a total of 26.8 million registered users. We saw steady sequential growth throughout the year, posting a more than 3 million user increase year-over-year and representing a 15% increase. Our investments in marketing are yielding results and are indicative of a strong fit between our offerings and market demand. As previously mentioned, Webull's roots as a global market data platform mean there is a significant number of registered users in geographies where our trading platform is not yet available. We continue to offer best-in-class market data and information to all users regardless of their brokerage status, a feature of our platform that has only been bolstered by the introduction of Vega to all Webull accounts. On the right side of the slide, you can see funded account metrics. Funded accounts defined as accounts where customers have made an initial deposit that has remained above 0 for 45 consecutive calendar days as of the record date, showed steady growth. We added approximately 100,000 new funded accounts this quarter, bringing the total number of funded accounts to 5.03 million, an 8% year-over-year increase. As we continue to innovate and enhance our offerings, we're also happy to report that our quarterly retention rate remained high at approximately 97%. Turning to Slide 8. Legal customer assets reached an all-time high of $24.6 billion in the fourth quarter, representing an 81% increase on a year-over-year basis and a $3.4 billion sequential increase. You all know that trading volumes were high in the fourth quarter. Our growth in customer assets reflects this. Customers deposited over $3.9 billion during the quarter, an incredible 225% increase year-over-year and a sequential increase of $1.8 billion, bringing cumulative net deposits for the full year to $8.6 billion. Lastly, on Slide 9, you'll see trading volumes for the quarter. While we saw strong growth in our newer products, particularly prediction markets and crypto, equity and options remain our core offerings, and trading volumes continue to grow. Equity notional volume reached $239 billion, up 87% year-over-year and 17% sequentially, while options contract volume totaled 154 million this quarter, up 38% year-over-year and up 5% sequentially. These results underscore the strength and resilience of our active trader base, which remains highly engaged through periods of market volatility. Our customers continue to trade consistently across core asset classes, reflecting a disciplined long-term approach rather than short-term momentum-driven behavior. With that, I'll pass the call over to H.C. for a closer look at our financial results for the quarter. H. Wang: Thank you, Anthony, and thanks to everyone for joining us today. In the fourth quarter, Webull generated total revenue of $165.2 million, representing 50% year-over-year growth. This strong performance reflects continued strength across both trading and interest-related income streams. On the expense side, adjusted operating expenses were $143.6 million, up 62% year-over-year, primarily driven by increased marketing and branding investments. Let me take a moment to frame this clearly. The increase in marketing spend is intentional and strategic. We are capitalizing on a strong equity market backdrop, multiple industry catalysts and the branding tailwind from our recent listing to accelerate customer acquisition, AUM growth and international expansion. Over time, we remain confident in our ability to scale revenues ahead of the expenses, supported by the operating leverage in our model. I will now walk through profitability and then the key components of revenues and expenses in more detail. Turning to Slide 11. We continue to demonstrate consistent profitability. Webull has now delivered 5 consecutive quarters of operating profitability with each quarter generating over $20 million in adjusted operating profit. In Q4, adjusted operating profit was $21.6 million, representing a 13% adjusted operating profit margin. Adjusted net income was $14.6 million, or 8.8% of revenue. For the full year, we generated $84 million in adjusted net income in our first year as a public company. As we look ahead, our approach remains consistent. We will continue to balance disciplined execution, profitability with targeted investments to capture long-term growth. Turning to Slide 12. Our trading-related revenues continue to grow, supported by momentum from the third quarter and strong trading activity across asset classes. Trading-related revenues increased 56% year-over-year to $112.5 million and DARTs increased to 1.2 million (sic) [ 1,202 ] in the fourth quarter. We're seeing broad-based engagement across equities, options, futures, crypto and prediction markets. Importantly, our users continue to trade consistently across market conditions. This reflects the base of active traders who remain engaged through volatility rather than being driven by short-term momentum-based behavior. We believe this positions us well for sustained growth on trading revenues over time. Turning to Slide 13. Interest-related income continues to scale along with client assets. In the fourth quarter, interest-related income grew 31% year-over-year to $43.5 million, primarily driven by higher interest earned on client cash, margin lending and corporate cash. Specifically, customer margin balances increased 43% year-over-year to $689 million at the end of Q4, reflecting higher utilization from our premium customers. Sequentially, interest-related income was roughly flat as declines in fully paid stock lending revenues offset increases in other categories. This reflects the normalization of borrowing rates for certain hard-to-borrow securities, which had elevated stock lending revenues in the prior quarter. As I've mentioned on this call before, our business model is relatively resilient to interest rate changes. Over the long term, as we continue to grow client assets globally, we expect this revenue stream to continue to expand. Finally, let's turn to Slide 14 for a closer look at operating expenses. Adjusted operating expenses increased 62% year-over-year, with the majority of the increase driven by marketing and branding investments. These investments are focused on accelerating customer acquisition and AUM growth, and we are already seeing strong early returns as reflected in our record $3.9 billion of net deposits in the quarter. It's also important to note that excluding marketing, our cost base remains well controlled. We achieved our highest operating profit margin ex-marketing in the fourth quarter at 45%, demonstrating the strong operating leverage of our platform. We expect that our margins should continue to improve as we further scale and diversify our revenue base, which will give us the flexibility we need to invest opportunistically in customers and AUM growth, particularly during periods of market expansion. Now thank you, everyone. With that, I'll turn the call back to Anthony before we open the line for questions. Anthony Michael Denier: Thanks, H.C. Q4 was another record-breaking quarter for Webull on multiple fronts as we focus on growing revenue, growing AUM, all while maintaining fiscal responsibility. This is now our fourth reporting quarter as a publicly listed company, and Webull has delivered growth and profitability every quarter. As we mark a monumental milestone for the platform, I want to recognize our global team for an outstanding year. It's clear that the team's dedication has been central to the progress we've made as a company and will continue as we look forward to the next year of supporting our user base of active securities traders, expanding our platform for investors across existing and new markets and continually looking to expand our client base, including with B2B offerings. We look forward to engaging with you at several upcoming industry and investor conferences. On that note, we welcome any questions you may have, either here on the call or one-on-one. Operator: [Operator Instructions] Our first question is from Chris Brendler with Rosenblatt. Christopher Brendler: Congratulations on the strong results. I'm going to ask the most obvious question first, which is, just maybe dive into the marketing spend in the fourth quarter a little bit in terms of the sequential increase. How much of that went to new customer acquisition? How much of that went to incentives on folks bringing over balances? And if you could comment at all about the run rate from here? As we think about 2026, you expect this elevated level to continue? That would be great. Anthony Michael Denier: Chris, Anthony here. Thanks for the question. So the Q4 marketing expense was certainly higher, and that is -- that's actually illustrated in the success in the AUM growth we've had. The majority of the marketing spend we do -- you don't see Webull on Super Bowl Sunday. You don't see us on billboards around town. We focus a lot of our marketing spend on where it's most impactful for the customers that we are focused on acquiring, and those are high-net-worth active trading customers, right? And that's reflected in the net deposits we received in Q4, right? So record net deposits, $8.6 billion over the course of the whole year. $3.9 billion over the course of just Q4 alone. And that successful marketing campaign is the main driver for the higher marketing costs we see in Q4. Now going forward, we're going to be very conscious on maintaining a strong operating margin. So I do not expect that the marketing costs will be as high going forward. But again, we're opportunistic. Where we have an opportunity to grow and to invest in growth, we will take that opportunity. So Q1 is looking much lighter than Q4 was, but that was a lot because of the success of Q4. H. Wang: Chris, just something to add on top of Anthony. So if you look at our marketing expense, as a percentage of revenue, it was about 35% in 2024. And that as a percentage of revenue has actually come down to about 23% -- 24% in 2025. So as we continue into the new year, we will continue to obviously invest in customer acquisition and AUM growth, but we will also be keeping an eye on this ratio, percentage of revenue and spend on marketing. An important point, I think Anthony had alluded to is that we are -- the majority of our marketing spend is actually performance-based. So these are for successful deposits, for successful account openings, these are that we can track. These are not fixed branding investments that are committed early in the year. So we have a lot of flexibility to dynamically calibrate and adjust the marketing spend as we see where the market is going. Christopher Brendler: Makes total sense. I appreciate that color. Since we're already in March and markets have changed a little bit since last year, certainly seeing a lot of trading volume but also some volatility. Can you comment at all about 2026 year-to-date in terms of the trends in DARTs and equity versus option? That would be great. Anthony Michael Denier: Yes. No, no problem. I think the market is setting itself up for an interesting rest of the year. But looking back, we're almost at the end of the first quarter already. And I can say confidently now that, I mean, January is probably the second best month we've ever had as a company since inception. So Q1 is certainly looking strong. When there is volatility, especially with our customer base, there's a lot of activity and a lot of trading. When the markets start getting harder to read, whether there's geopolitical headlines that we're reading multiple times a day now, that could change the direction of the market at any time. We see a lot more concentration in our options business, and the margin in our options business is quite higher than our equities business. So that's actually a net positive for us. And I think in a volatile tape, which seems like it is going to be in the foreseeable future, I think we're extremely well positioned with just our core customer base, right? You see a lot of our competitors looking to target active traders. We have only targeted active traders since day 1. That is our core. That is our flywheel, right? And it will constantly help us when there is volatility in the market. And the activity between a casual retail trader and an active retail trader is very different. So the second part, I think, where we have an advantage is our global distribution, right? We're now operating in 14 different countries around the world, and it's great to have diversity of revenue streams with different product types, with a volatile market and a questionable outcome of which direction the market is going to go. And then lastly is our B2B business, which has done nothing but expand since we made our first announcement only 3 months ago. We'll continue to build on those partnerships. It is a long-term and slow growing business when you're dealing with B2B relationships, but they are consistent through different changing markets over time. Christopher Brendler: That's great color. One last one, if you don't mind, is the prediction markets here. Super exciting to see the success after such a late in the year launch, certainly it ramped very quickly. How should we think about prediction markets and contributing to earnings and profitability in 2026? Anthony Michael Denier: So prediction markets are exciting for our business. I think it opens up our TAM to a completely new demographic of customer. It is a great reengagement tool for customers that have gone dormant or have slowed their activity on the platform. It's a great calling card to come back and rediscover investing and trading. I do not believe that prediction markets are going to be any part of our core business going forward. I think our core business is in the active securities trader. And I think the prediction markets are a great tool that we can use to engage -- and keep clients engage with -- and keep clients engaged with their portfolio, allowing them to speculate, to hedge and allowing them to have access to new tools and a new on-ramp to gather a new customer base. Operator: The next question is from Mike Grondahl with Northland Securities. Mike Grondahl: I wanted to follow up on the $3.9 billion in net new deposits. You guys really called out the marketing spend, and we know what you've done there for people moving balances. But I didn't hear you mention crypto, that new offering or Meritz, that rollout. Do you want to attribute any of that big growth to crypto or Meritz? Or I guess, drill down a little bit deeper there, Anthony. Anthony Michael Denier: Yes. So firstly, any of the B2B relationships that we've onboarded, they're not attributable to net deposits. Those net deposits are purely coming from retail. Crypto, however, is included because our crypto business is only attributed to retail right now. To give you a little bit of color on how Meritz is going, we've been obviously quiet in terms of the revenue attributed to this new partnership because we still are growing it, and it's still very early. But we have, to date, traded north of $1 billion notional in equity for Korean customers through our relationship with Meritz. That number is growing on a week-to-week basis, and we expect them to be a very important partner for our B2B business in the longer term. On the crypto side, and we've talked about this before, the availability and the opportunity for us for crypto is a wide-open field. And I'm extremely excited about the ability to be best-in-class for active crypto trading, but it's still too early. The amount of trading that we're doing on crypto versus our securities business is still de minimis. We are still waiting to roll out a couple of key products towards the end of this quarter. And I think there'll be much more material conversations to have for Q2 in terms of crypto revenue contribution. Mike Grondahl: Got it. And just going back to Meritz, how ramped up is that relationship? Is it still early innings, middle innings? And then what does the pipeline look like for other international partnerships or opportunity? Anthony Michael Denier: So for the Meritz relationship, again, a very key one for one of the largest active trading regions in Korea, very, very early innings. I mean we're still not even out of the second inning yet. First inning was getting them onboarded. Second inning is where we are as we're still testing. And some of that test phase, we are working out the different trade flows that they want to send to us, and that number has been growing on a steady basis. I expect that -- I expect to be 10x at the end of this year where we are today, to give some context. And pipeline for B2B, that's where the B2B gets really exciting. As you guys know, onboarding institutional investors is not as quick as onboarding a retail customer. So these relationships do take time to build. But the pipeline is primed and ready. We have multiple businesses that are looking to connect with us on multiple reasons. We're beating our competition in price. We're beating our competition in technology. We're beating our competition on having boots on the ground where these B2B relationships are, and we're beating them on product diversification. There's very few competitors that we have in this space that can match us on all those fronts. So I expect the B2B business to be equal, if not greater, over the next several years than our current retail business. Operator: The next question is from Karim Assef with Bank of America. Karim Assef: Can you guys hear me okay? Anthony Michael Denier: Yes, sir. Karim Assef: Okay. Perfect. Congrats on a strong quarter. My first question is on capital priorities and M&A. So could you give us an update about your capital priorities for this year? And what are some of the key focus areas for M&A in terms of size and target markets? H. Wang: I'll take this one. I think our answer hasn't really changed. We'll continue to be very focused investing in growth, that means customer acquisition, AUM acquisition and continue to invest in technology, especially AI, to make us the best-in-class platform for active traders and also in geographical expansion where we're currently operating. So I would say it's primarily in organic growth as we see a lot of opportunities in our current space where we're gaining share across a number of markets. In terms of the M&A opportunities, I think it's something I think we'll be opportunistic. We don't have a strategy necessarily saying that we have to grow through acquisitions. But if something interesting that does come along, we'll obviously evaluate it from a risk-reward perspective. Karim Assef: Got it. And then for my follow-up, I wanted to know if there are any plans to publish monthly metrics such as DARTs, account growth, net deposits, similar to what some of your peers provide? And if so, could you share the timing or the context around when you might start? H. Wang: Well, thanks for the suggestion. I think -- we are listening, and we are evaluating and also balancing with, I guess, where we are in terms of the maturity of the business. So if you noted, we've actually disclosed more granular data in terms of DARTs and also the interest earning asset balances in this quarterly presentation. So we want to be transparent and give more information to our investors and research analysts. So when we're ready, we'll be releasing data probably on a more regular cadence. So thank you. Operator: The next question is from Ed Engel with Compass Point. Edward Engel: I wanted to kind of drill down on some of the success you're seeing on the performance marketing side. Is there any specific segment or segments that are kind of driving a lot of the growth there, whether it's U.S., international or kind of these new products, like crypto and prediction markets? Anthony Michael Denier: So what I've been most impressed with, especially over the course of '25, was the growth of the international contribution, meaning our non-U.S. broker-dealers that are contributing into our U.S. product flow, mainly in the form of equities and options business. We have more than doubled the amount of incoming flow over the course of '25. So a doubling effect, which I am very confident that, that trend will continue into '26 as we continue to export kind of the U.S. retail experience to retail investors outside the U.S., to all of our broker-dealer affiliates in the Webull Corporation umbrella. Looking at things like a retail customer sitting in another country, is still reading the same investment blogs, is still looking at the same Reddit channels, talking about using options to trade volatility or ahead of an earnings cycle, right? But that customer usually does not have access to that U.S. product where they live. And if they do have access to it, usually, they have to be some ultra-high-net-worth customer or they're going to pay some ridiculously high fees or have a very bad user experience. We are bringing that U.S. experience outside of the U.S. and been extremely successful in doing so. We're continuing to push that agenda. We are the first true zero-commission platform in Hong Kong. And when we went to zero commission in Hong Kong, I believe it was November of 2025. Our Hong Kong customer order flow nearly doubled immediately. We will continue to push pricing, price compression and better user experience everywhere globally. So that international cohort is really important for us. And then when we look at product types, you mentioned crypto, of course, crypto is extremely important for our demographic of customer. Like I mentioned earlier, we will be focusing on targeting active crypto traders with price compression here in the U.S. We have licenses and are offering crypto currently in Brazil and Australia. And I believe that we will have -- I want to be careful. I don't want to make too many promises. But we will have probably 2 more licenses to trade crypto before the next earnings call and continue to expand on that for expanding our user base for the products that we offer. And then lastly, I think prediction markets as a new product is something that's extremely interesting for our B2B business. In order to offer predictive markets, you have to have multiple licenses. And you have to have the ability to offer technology on a quick delivery schedule that you can then offer these products to other platforms that do not have the proper licenses and do not have the proper technology to offer it. So there's a huge queue of clients that we're building that will also expand our prediction market business that expands outside of retail alone. Edward Engel: Great. Appreciate all that color. And then just kind of get into the trading revenue segment within the platform and trading fees line item, a pretty big sequential increase in that. We can kind of back into prediction market revenue just given the volume you gave us, and it's some of that, but not really all of it. So just curious, of that kind of platform and trading fee line item, like what really drove that sequential increase? H. Wang: Well, there's -- it's actually a number of things. So outside of our core products, equities and options, all the other asset classes are -- the trading-related revenues go into the platform and trading fees. So that includes futures, crypto and prediction markets as well as the commissions that we do collect on some of our foreign affiliates. Yes, so Q4, there's a big jump, I think, for several reasons. One is that our -- like our futures business actually continues to grow. And also, we had consolidated Webull Pay, the crypto business, at the end of Q3. So Q4 was really the first time that we had ever presented crypto revenue in any of our results as well as prediction markets. So as you can see, we -- like, Q4 was a big quarter for prediction markets. And so for us, that also is a significant contributor to the results in Q4. Edward Engel: Great. And then just one last housekeeping one. I saw on the balance sheet that you -- it looks like the promissory note balance declined. Was that you paying this down [indiscernible]? H. Wang: Yes, we paid -- yes, that's correct. We had $100 million of promissory note on our balance sheet at the beginning of Q4. And then we paid off $35 million of the principal of the promissory note in Q4. Edward Engel: Okay. And I guess the interest payment steps up, correct, in about a month. Is it fair to assume that you would try to take it down relatively quick? Or are you okay with it out there? H. Wang: I think we're -- again, we're evaluating. We have time to pay down the promissory notes. So there's flexibility on when to pay it off. So I think it depends on the -- our cash flow and our balance sheet and also our strategic priorities in the coming quarters. So there is -- the goal is to eventually pay it off. So -- because we are -- we would like to maintain a healthy balance sheet and not to take on too much debt. And so the goal is definitely to pay it down over time. And then so hopefully, save on the interest costs. Brian Vieten: Great. Once again, congrats on the big growth. Operator: The next question is from Brian Vieten with Siebert. Brian Vieten: Just a question on, I guess, the customer funnel kind of driving new adds and keeping people engaged. Can you just talk about prediction markets versus crypto? Like what's been, I guess, a more compelling funnel for you and how you see that looking in '26? And then separately, just on price, it seems like for a number of products, the pricing is very competitive. But I do wonder if maybe you could come out at sort of a healthier price level and then the customer could kind of opt out versus you kind of immediately cut the price and then it's harder to maybe raise it down the road. Have you guys run through any of these analyses where maybe you do just have the normal fee structure and you could always sort of cut it down over time and kind of delight the customer from that standpoint. Is that an exercise you guys have worked through with prediction markets, crypto, kind of your newer markets? Anthony Michael Denier: Brian, so I think one of the big differences, though, when we talk about price compression for crypto, I think the biggest differentiator between our business and any of our competitor business in terms of trading of crypto and the spreads that are built in the pricing is that we're not reliant on any crypto revenue currently, right? So any revenue that we add, whether it's from a pricing spread that's 1/4 of the margin of our next competitor, that's still accretive revenue for us. And if any of our competitors were to match our pricing, they'd have to be cutting their crypto revenue significantly. So we think that, that puts us in a very good position. It almost reminds me of when we launched the platform in 2018, where there was us and 2 or 3 other digital platforms that were only offering zero commission, right, for equities. And the largest players, they were very, very slow to adapt and change because it was so cannibalistic to a very important revenue stream that they depended on. I see this as the same exact opportunity for us. And to get more detailed about your question when, I don't think we would have an across-the-board pricing compression for all clients because the majority of crypto investors are long-term investors, right? They're buying it to add to their portfolio. So the entry cost is not that important to them. We're targeting the active crypto traders, right? People that are day trading crypto multiple times a day, every day. That is the majority of our customer base, with active traders, and we want to cater a product specifically for them. So we do have a couple of different models in mind, and I will give you more details as we get closer to a launch date. Brian Vieten: Okay. Great. Okay. Perfect. And I guess just from a fee capture standpoint, it sounds like, near term, it's more about getting volume out there and driving more engagement and getting new customer adds? Is it -- are we right to think there's probably not a big revenue number coming from crypto prediction markets in '26? I might have missed that if you covered it earlier, but could you just walk through the fee structure a little bit for this year? Anthony Michael Denier: So for our prediction markets, we charge $0.01 commission per contract. We also do receive exchange rebates on top of that as part of the revenue stream for prediction markets. We did run an offering around the Super Bowl, where we announced no commission for prediction markets, for anything related to the Super Bowl, game winner, point spread, MVP, things like that. And that actually drove a significant amount of traffic without us actually having to advertise or pay for expensive advertising during the Super Bowl cycle. A very successful program for us. I think there's very little compression that's available for prediction markets. I think the prediction market game is strictly about volume and size at this point. And that could be run in a couple of ways. It could be a targeted audience, which, again, I'm not convinced that that's our audience. I think our audience are the active securities traders, not the pure spec traders, but that can change. Still kind of waiting to see some data and waiting to see which direction a lot of the kind of regulatory and political cultural oversight -- in which direction that wind is going before I want to commit to doubling down on a specific product. And obviously, crypto on-ramp is a natural progression for our demographic, and we'll continue to pursue the right product suite as we roll out -- like I mentioned, as we roll out the offering and get aggressive into Q2. Brian Vieten: Okay. Great. And then just lastly, I think for some of your competitors, one of them has 10, 11 businesses, I think that are $100 million or more in revenues. Prediction Markets was the fastest growing -- I'm sorry, the fastest to $100 million of all 11 businesses. And it's funny, we looked at a couple of years back, a lot of them didn't -- they launched 5 years ago. But even if you haircut the prediction market number by 80%, it's still the fastest to $100 million. And so I guess from my standpoint, it's I'm still a little bit, I guess, just confused why we wouldn't just have the full capture in such a sort of fast-growing market that's kind of wide open. But I'll hear your side as well. Anthony Michael Denier: No. So Brian, I mean, we do have the full suite of prediction markets that all of our competitors have. It's not that we don't offer them. We absolutely do offer them. However, we don't put our prediction markets front and center in our customer experience, right? And I think that's a great metric you mentioned, but another great metric is you look at our traditional securities products, we're probably $115 million in terms of AUM of the competitor you mentioned, yet we do 1/3 the amount of equity business they do on any given day. We do probably 20% to 25% of the options business that they do in any given day. So we understand who our core customer is, and we build our platform and we develop it around our core customer. Operator: This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the NN, Inc. fourth quarter 2025 earnings conference call. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Joseph Kameniti, Investor Relations. Please go ahead. Joseph Kameniti: Thank you, Chloe. Good morning, everyone. Thanks for joining us. I am Joseph Kameniti with the NN, Inc. Investor Relations team, and I would like to thank you for attending today's earnings call and business update. Last evening, we issued a press release announcing our financial results for the fourth quarter and full year ended 12/31/2025, as well as a supplemental presentation, which has been posted to the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Alpha IR Group at NNBR@alpha-ir.com. Joining us today from NN, Inc.'s management team are Harold C. Bevis, President and Chief Executive Officer; Christopher H. Bohnert, Senior Vice President and Chief Financial Officer; and Timothy M. French, our Senior Vice President and Chief Operating Officer. Please turn to slide two, where you will find our forward-looking statements and disclosure information. Before we begin, I would like for you to take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and the Risk Factors section in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, inflation, supply chain constraints, foreign exchange rates, tax rates, acquisitions and divestitures, synergies, cash and cost savings, future operating results, performance of worldwide markets, general economic conditions and economic conditions in the industrial sector, including the potential impacts or ramifications of tariffs, impacts of pandemics and other public health crises and/or military conflicts, the company's financial condition, and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the financial section of the press release and the supplemental presentation. Please turn to slide four, and I will now turn the call over to CEO, Harold C. Bevis. Harold C. Bevis: Thank you, Joe, and good morning, everyone. Thanks for spending a few minutes with us as we give you an update on the business and the state of the transformation in 2026. On slide four, I will begin with spending some time discussing the highlights of the fourth quarter. And Joe, can you advance to slide four? Mine looks like the webcast is slow. Thank you. 2025 marked NN, Inc.'s third consecutive year of improved results, and we were able to increase adjusted EBITDA results toward recent company highs and our adjusted operating income grew meaningfully, showing a significant improvement versus 2024. And we were able to fund a large vintage year of growth programs with our free cash flow. Importantly, we completed the majority of the heavy-spending portion of our transformation plan, which saw us close and consolidate four plants and right-size about 800 people. Second point is we are well underway in showing success in strategically evolving our business portfolio. We are intentionally shifting our sales profile towards higher-value end markets and higher-value capabilities and intentionally shifting away from low-value commodity automotive part-making and certain markets in the automotive arena. We are fixing and/or exiting the unprofitable plants that we inherited and business trips, and we are replacing this business with new wins in desirable areas. Our new business wins program continues to perform well, and we continue to focus it away from commodity auto part business. We have now won more than $200 million worth of new business since the launch of this transformation plan in mid-2023. Ahead of us this year are record levels of program launches. On top of that, we have a pipeline now that stands at over $800 million of high-quality prospects. One fun point that I wanted to point out is that we recently achieved our first new business win in the data center market. It is now a key target market for NN, Inc. and we fit nicely into it. We are making the high-precision watertight couplings that go into water-cooled computing equipment. In 2026, we are already migrating a bigger portion of our cash flow used toward investment in new business since the majority of our cost restructuring has been completed. Now we are in a better position to fund growth-related CapEx. In 2026 versus 2025, we are roughly doubling the amount of capital spending that we are putting into the business for growth purposes. That ability to fund comes from a higher level of EBITDA as well as completion of projects. 2026 is going to be a year where NN, Inc. returns to net sales growth, and it is happening right now in the first quarter. This is going to be an important pivotal year in our transformation, and our 2026 forecast calls for an end to focus on top-line growth going forward. One caveat that I want to point out, and Joe touched on it and it is in our risk factors in our 10-Ks also, is that volatility remains high in our markets. We are a supply chain participant in a lot of global supply chain decisions, and there is a lot of influence by tariffs, precious metals pricing, and ongoing geopolitical unrest. The volatility has increased a little bit here with the Middle East happenings. Except for that, we have the same type of risk factors this year as we had last year. Turning to slide five in the deck, I wanted to give a little more detail on Q4 and the full-year 2025 metrics. Our fourth quarter came in at $104.7 million; our full year at $422.2 million. This is a little lighter than we had hoped. Some of our main end customers reduced their inventory positions towards the end of the year and are now getting caught up in the first quarter, and we are feeling it. Tim, Chris, and I had not seen a good, healthy backlog of typical business since we have been here, and we are happy to say that we do have backlogs here in the first quarter because people are getting caught up with some of their end-of-the-year decisions to reduce their inventories, and we are having a good quarter. But a takeaway on our sales is that we were able to rationalize some commodity, no-profit automotive parts, and we have largely done that with these plant closings and exits, and we are happy to say that that is largely behind us. Our adjusted operating income also has been nicely improving. Adjusted EBIT, which is what we are focused on as well, in the fourth quarter was $3.3 million, and we had $14.2 million for the full year. Those results are roughly three times the prior year, and we foresee and forecast a nice improvement this year again. The results are coming from a leaner, more efficient operating model across all of our operations, and we are running a cleaner set of business through our machines because we have rationalized some of the low-end stuff. Now we have a more structurally supportive model to deliver positive operating income and adjusted EBITDA. Our adjusted EBITDA continues to improve. It was almost $13 million in the quarter, $12.9 million for the full year. These results were above prior year and also pushing towards company highs. Despite the continued weakness and volatility in the global automotive and commercial vehicle markets, we were able to perform at that level. Our adjusted EBITDA margins are forecast to expand again this year, and the Q4 margins were up 90 basis points year over year, and we are continuing to improve in line with our long-term goal that we have stated in past talks like this, 13% to 14%. Our new business wins continued on the same pace, and we were awarded more than $4.07 billion for the full year. We exceeded our guidance and expectations. We were still somewhat capital-limited last year on this topic because we were spending a lot of money on restructuring still, and we have more to spend now on a go-forward basis. That is one reason why we have increased our goals now that we are intending to pursue new business. The key wins were concentrated in our focus areas and especially beneficial to us last year and continuing is the surging defense electronics industry in the United States. We are directly benefiting from that, and it is immediate ramp-up type of business. We continued to secure new awards that were at accretive gross margins and are still averaging over 25%. We are positioned to continue winning business in 2026. We have a couple of large foundational programs underway right now in medical and in defense, and they are going to be gateway wins for us. We already have a large multiyear re-win in our electrical power business that we have accomplished this year year to date, where we beat out two large global competitors and secured that business on a go-forward basis. Our adjusted gross margin performance was 18.8% in the fourth quarter and 18.5% for the full year, which again has us trending towards our five-year goal of 20% consolidated gross margins, and in this area, we are ahead of our plan and we are encouraged by our progress. This strong performance is driven by the operating improvements that I have touched upon here a couple of times, as well as the shifting in our portfolio towards our profit business. On cost and operational leadership, it is an ever-present goal for us as a manufacturer to be better and better at manufacturing with a continuous improvement mindset, and we accomplished our goals in 2025. SG&A as a percentage of sales continued to drop as well and is now at 10.9%. We have all but eliminated an expensive executive layer that was here when we arrived, and we have reinvested some of that payroll savings into a bigger business development team. We are happy to report that we achieved our cost-out targets of $15 million for the year, which offset all inflation and pricing and implemented the re-rationalizations that we wanted to do, and we have plans for another $10 million out this year. This operational performance and ability to lower costs has helped us overcome the rapid rise in precious metal cost inflation, which has been a big deal for us that we have been able to conquer and still increase our ratios on top of it. Please turn to slide six, Joe. I wanted to talk a little bit about 2026, and then Chris and Tim are going to add portions to it as well. As already mentioned, we are forecasting revenue growth in each quarter and across the full year of 2026, and that growth is happening. It started immediately in January, as I mentioned, because there was some curtailment of supply chains at the end of 2025, which are now being refilled, and we will continue growing through this year. The global automotive markets are expected to grow slightly in 2026, a couple of percent, but the growth outlooks are very region-specific, and so we have outlooks for North America, South America, EMEA, and Asia that are specific to the region and take into account adoption rates of EVs as well as affordability issues. The commercial vehicle market is expected to begin growing this year in 2026, and it has already started out that way with strong orders over the last three months. Just yesterday, ACT Research came out with the February orders, and they were some of the highest orders ever received for that time of the year. There is an EPA 2027 mandate that is forthcoming, and the long-awaited pre-buy in that market seems like it has started, and we will benefit from that and are benefiting from that, and that is one of the sources of our positive back orders right now too. We have a strong supply chain of orders in that area already, and it happened rather quickly. It happened in December, January, February. Our 2026 outlook calls for gross margin growth and adjusted EBITDA growth, and this will be balanced through the year, also starting in Q1. Our outlook for this year is supported by gradually improving markets. We do not really see any V-shaped recoveries, if you will, the hardest growth that we are participating in, the most upward, is U.S. defense business. It is likely to get stronger as all the munitions are being used and weapons are being used, and that is where we are participating in that. We are seeing increased volumes. We do have another $10 million cost-out program this year, and we have a record amount of new business launches that is underway, and we have a record amount right now in the quarter. So we have a lot of positive tailwinds right now in the business, and we are thankful for that. Tim and Chris, please knock on wood after I said that. Unfortunately, although our sales rates and production rates of U.S.-made cars are growing, we expect the U.S. auto parts market to remain volatile. Industry forecasts call for automobiles to be made and sold, but there are continued supply chain issues stemming from global tariffs, U.S.-caused trade wars, a fundamental reset that is going on between vehicles and internal combustion engines, overall affordability of U.S.-made vehicles, EPA resets, and now war in the Middle East on top of the Russia-Ukraine war. The automotive supply chains in the world are very global, and these are very disruptive things that are happening right now. The new normal will be volatility, and I would just say it is continuing. It does require tactical maneuvering on our part. As a supply chain participant, really, we are a taker on a lot of these decisions that are at the OE level. But we are upsizing our new growth program, and we have more CapEx to spend this year, and therefore, we have set higher goals and we are committing to a higher outcome. We are now looking to achieve between $70 million to $80 million of new wins this year, and I will just tell you, we have already started off this year in the first quarter on that pace. Overall, we still remain capital-constrained due to our capital stack, and I will give you an update on that later. But we have incrementally increased the amount of CapEx that we are going to spend on growth. It is very deliberate; it is very intentional. Tim and I approve them one by one. We look at every one of them. What market are they in, who is the customer, what is the part, do we want to spend money on that, do we want to spend money on that right now? I can tell you that we are hands-on with the growth topic. It is very deliberate. Overall, we are excited for this year. We can see that it is going to be stronger than last year. Our performance in the first quarter is already on track to achieve higher outcomes, and we are off to a good start. With that as an introduction, I will now turn the call over to Christopher H. Bohnert and Timothy M. French, and then I will come back and review some of the market information later. Chris? Christopher H. Bohnert: Thank you, Harold. Good morning, everyone. Today, I will be presenting our financial information on both a GAAP, or an as-reported basis, and pro forma basis to provide transparency into our operating results, primarily due to the exit of certain unprofitable business in this year and part of last year. I will start on slide seven, where we detail our financial results for the fourth quarter. I will get into the full year as well. Slide seven shows our as-reported GAAP results on the left side, pro forma adjustments in the middle, and pro forma results on the right side, as we have done in previous quarters. As a reminder, we use these adjustments to provide a representation of how management views and makes decisions about our business on a current and go-forward basis. The pro forma specific adjustments to the fourth quarter include last year's contribution from strategically rationalized sales volumes and the impacts of foreign currency translation on our non-U.S. operations. On an as-reported basis, net sales for the quarter were $104.7 million, declining by about $1.8 million versus last year's fourth quarter. On a pro forma basis, accounting for the adjustments I referenced earlier, our net sales increased $1.4 million, up about 1.4% versus the prior-year fourth quarter. Adjusted operating income for the fourth quarter was $3.3 million compared to $2.4 million in last year's fourth quarter. On a pro forma basis, operating income was down slightly to $3.2 million, or about 5.7% versus the prior year. Our adjusted EBITDA was $12.9 million, as Harold mentioned, for the quarter, up from $12.1 million a year ago. On a pro forma basis, adjusted EBITDA increased $1.1 million, or 9.3% year over year. Adjusted EBITDA margin was 12.3% of net sales. This represents about a 100 basis point improvement on an as-reported basis, expanding 90 basis points on a pro forma basis, so a nice increase there. Now turning to slide eight for the full year 2025. Our pro forma results and comparisons also normalize for the sale of the Lubbock business, which was divested in 2024. On an as-reported basis, net sales for the year were $422.2 million, declining $42.1 million versus last year. On a pro forma basis, adjusting for the sale of Lubbock, strategically rationalized sales volumes, and FX impacts, net sales decreased $7.4 million, or 1.7%. Adjusted operating income for the year was $14.2 million, up $9.1 million from $5.1 million in the prior year. On a pro forma basis, the results marked a steep improvement, more than doubling from the $7.0 million in 2024 on a pro forma basis. Adjusted EBITDA for the year was $49.0 million compared to $48.3 million for the prior year. Pro forma, our results increased $2.2 million, up about 4.7%. Adjusted EBITDA margin was 11.6% of net sales, representing an expansion of about 70 basis points on a pro forma basis. We worked through the transformation across our business; we have grown our adjusted EBITDA now towards pro forma company records. Meaningfully growing our operating income, and we have expanded our margins and advanced margin capture toward multiyear targets. Notably, we have done this work to improve our structural profitability despite a smaller top line, which has reflected the impacts of our exit of dilutive sales volumes. We are now prepared to continue delivering our growth through our operating income and adjusted EBITDA, coupled with an expected return to sales growth beginning in 2026. Now I would like to turn to slide nine, where I will detail our performance across our operating segments. For year-over-year comparisons, I will be speaking to our pro forma numbers. In our Power Solutions segment, where our business consists largely of stamped products, net sales for the quarter were $45.5 million, up $5.9 million, or 14.9%, compared to $39.6 million in the prior-year period. This improvement was driven by the increase in precious metals pass-through pricing, as well as the benefit of new program launches in electrical and defense business. This improvement was partially offset by lower sales volumes concentrated in one stamping products customer. For the full year, Power Solutions pro forma net sales of $178.6 million improved 5.3% compared to pro forma net sales of $169.6 million. Power Solutions adjusted EBITDA results as reported of $6.4 million increased $0.8 million versus last year's fourth quarter of $5.6 million. This improvement was driven by sales growth, particularly in defense and electronics products, and was further supported by operational cost reductions, higher margins, and an overall improved sales mix. On a full-year basis, Power Solutions segment adjusted EBITDA of $30.7 million improved by $3.0 million, or 10.8%, compared to the full-year results of $27.7 million as a function of our adjusted EBITDA growth, 90 basis points versus 2024. We won an additional $3.1 million in new business awards for the segment in the fourth quarter, bringing the full-year total to $13.2 million. Our wins have largely been concentrated in key target growth markets of electrical, defense, and electronics products, which we expect to remain strong growth sectors for our business. Christopher H. Bohnert: Now turning to slide 10, our Mobile Solutions segment, which covers our machined products business. Net sales for the fourth quarter were $59.3 million compared to the prior year of $63.8 million. Net sales comparisons were primarily impacted by the rationalization of dilutive business and lower volume in North American auto customers, partially offset by favorable foreign exchange effects. For the full year, pro forma net sales of $244.0 million declined $25.0 million, or 9.3%, compared to results of $269.0 million in the prior year. We note that while we observed weakness in the North American auto markets across the year, our sales comparison was largely concentrated to one specific auto part customer which had pushed out volumes due to its own production disruptions. Our fourth quarter adjusted EBITDA in the Mobile Solutions segment was $10.0 million, up slightly versus last year's fourth quarter on a pro forma basis. Quarterly adjusted EBITDA results reflected our successful shedding of unprofitable sales, which has improved the margin mix of the business, combined with overall lower operating costs. These factors have helped drive adjusted EBITDA margins to 16.9% for the quarter, up about 160 basis points from the same period a year ago. For the full year, Mobile Solutions adjusted EBITDA of $33.5 million declined 4%. Notably, adjusted EBITDA margins of 13.7% showed expansion of about 70 basis points for the full year versus full-year 2024, displaying the impact of business rationalization and footprint consolidation. On the new business front, we continued achieving new wins in innovative programs totaling $26.2 million in the fourth quarter and $58.6 million for the full year. We won over 200 individual award programs in 2025, including machined parts in defense and medical markets, as well as high-quality automotive programs focused on more innovative next-generation fuel efficiency for internal combustion powertrains. Thank you. With that, I will turn the call over to Tim, who will discuss our commercial and operational progress. Tim? Timothy M. French: Thank you, Chris. I will begin with slide 11. Our new business momentum has continued to build and is now translating into meaningful scale and future growth. As Harold mentioned towards the top of the call, over the trailing three years, we have secured over $200 million of new business wins. With quarterly commercial performance remaining consistently strong across that timeline. Importantly, these awards are coming in at an average gross margin of about 27% and are concentrated in strategic markets where we see the best long-term value. It is worth noting that the implied margins on these wins are meaningfully above the multiyear goal of 20% and higher than current levels for the business. As these programs launch, they will be accretive to the overall margin profile and help support profitability and earnings improvement. Over the last three years, we have fundamentally rebuilt our sales pipeline, which had atrophied in the years before the launch of the transformation. Now our pipeline sits strongly at $800 million of potential opportunities. Our commercial execution is focused on disciplined growth. We are winning where our technology and differentiation matter most, particularly across defense, medical, data center, and other high-reliability applications. Supporting this outlook, our global team of roughly 40 commercial and technical personnel are actively pursuing and executing against the pipeline. These opportunities convert to wins, launch cadence steps up meaningfully. 2026 will be a very big year for launches as we expect to launch over 100 programs. As I mentioned, the new programs are margin accretive and continue to shift our mix towards structurally stronger, higher-reliability end markets while reducing relative exposure to commodity automotive. Overall, the combination of strong bookings, a deep pipeline, and strong launch schedule gives us confidence in the durability and quality of our growth trajectory. Turning to slide 12, I will briefly touch on our long-term roadmap. Notably, we remain well on track to meet our long-term goals that we have laid out as part of our enterprise transformation. Our 18.5% adjusted gross margins consistently showing improvement in each sequential quarter and pulling in line with our 20% adjusted gross margin goal. Our adjusted EBITDA, supported by an improved, leaner, and more efficient operating structure, is expected to continue improving and delivering on higher margin rates. Expect to grow at a 10% compounded annual growth rate, reaching $80 million in adjusted EBITDA by 2030. Overall, we see approximately 5% market growth, further supplemented by the benefit of approximately 2% share gain, as we hone our commercial efforts in electric grid, data center, defense, electronics, and medical markets. As we do this, we are strategically deemphasizing less valuable elements of our portfolio, with the explicit intent to continue lowering our overall portion of the company attached to commodity automotive parts. In parallel, we will continue advancing our successful cost-out programs across our operations. In 2026, we aim to drive approximately $10 million with cost rationalization, which will help offset pressure from inflation and pricing. And finally, as we move forward, we are going to continue sharpening our focus on areas critical to our growth that align with our highly valued capabilities. These include robotics— Harold C. Bevis: Did we lose Tim? Operator, can you hear Tim? Timothy M. French: Can you not hear me, Harold? Joseph Kameniti: Yeah. I can hear you. Timothy M. French: Okay. Well, then just closing, these include robotics, artificial intelligence, automation equipment, as well as opportunities for material and vendor substitution. With that, I will turn the call back over to Harold. Chris, are you able to hear me? Christopher H. Bohnert: Yeah. I can hear you, Tim. Operator: Harold, is your line muted? Everyone, please stand by while I check the speaker line. Harold, please proceed. Harold C. Bevis: Thank you. Tim, are you there? Timothy M. French: Yes. I am. Harold C. Bevis: Okay. I got dropped for some reason. Are you to me now? Timothy M. French: Yeah. I completed, and we are ready for you on slide 13. Harold C. Bevis: Thank you. I apologize to the listening group here. I got dropped off the call somehow. I would like to talk about the markets for a moment, starting with the electrical grid and data center market, which is 60% of our sales, that there is a strong market outlook for this year. There are many announcements being made to expand aggressively the data center infrastructure. We participate in this market in the U.S. and in China. There is a big announcement by Amazon and a lot of the data center builders, and we continue to see growth in this area. The next market underneath that on the chart is the China automotive market, where we have been in that market for about twenty years, in the China automotive market and the China commercial vehicle market, and the China data center market now. But the automotive market has a good outlook for the year. It started off at the beginning of the year kind of weak. BYD and Geely being big end OEs that we service, they have had some timing issues in their local market. But this remains a strong element of the NN, Inc. portfolio, both sales for use in China as well as the export market for those vehicles and those parts. On the commercial vehicle side, we expect to see this market improving this year. As I previously mentioned, the growth looks like it is going to be sooner than had been forecast, as orders have come in strong for the first few months of the year already, and there are structural reasons for that if you follow that market, so it looks sustainable. It is not a fluke. Defense electronics is 10% of our business, and it is growing strongly, specifically with an end customer we serve being Raytheon and the desire for their missile defense systems. We are basically increasing our production capacity and our ability to make larger parts as well. Our own organic growth here is expected to remain strong through the year, and it is building, and we have already been given multiyear volume increase outlooks from several customers as forward indication of what we need to do. On industrial, we are really tied into GDP-level growth here, a lot of building products as well, like smoke detector parts and security system parts, and our primary focus in this area is innovation takeover business, and we are having good success. Medical remains a steady and growing market for us. For us specifically, we have been increasing the breadth of our team that focuses on this market. We now have a very large, strong pipeline of opportunities, and I mentioned earlier in my initial comments, we are on the edge of foundational large programs that will enhance our credibility. Global automotive is North America, South America, and Europe. We carry tempered expectations for the year here, not negative per se but tempered by volatility. The view here is that we will continue to participate in the high-end part of the market for very precise parts, and our goal here is over time to hold our sales flat by re-winning the amount of sales that go into production and replacing them, staying flat, keeping our capacity equally full, not going backwards, and it is not a focus area for us. It is really a hold-your-own kind of area, and this part of the company's portfolio will shrink over time. Intentionally. On page 14, in December, we announced that our Board had launched a committee to look at our financial and strategic options. We have previously discussed in some of our calls together that our capital stack is problematic. There is basically too much debt plus preferred equity, and we would like to solve that over time. We are looking at various options here. We really have no updates that are concrete. I just want you to know that it is underway. It is a Board process, and it is ongoing, and when there is something big to say, we will say it. But right now, we do not have anything, and instead, we are just focusing on looking at our options and basically letting the business grow right now, which is what is happening. Turning to slide 15, I would like to talk about 2026 and what our guidance is. We are guiding to net sales growth, which is meaningful to us: $445 million to $465 million in sales, which covers the consensus outlooks on us, anchored by the new program launches which Tim walked through, and they are expected to occur through the year, and we have already been winning new business that is immediate ramp-up for this year. So this will be a strong area for us during 2026. We have overall strengthening of some of our end markets, as I mentioned, commercial vehicle markets coming back after a three-year freight recession, and defense is growing much stronger than anyone had expected. No one had expected President Trump to be able to go through as many munitions as we have in a short amount of time, and we participate in the reloading of that supply chain. Adjusted EBITDA—we are starting with a wider range here as the year starts, and we will narrow it and focus it as the year unfolds. But as I mentioned, the first quarter is already starting off very well, and it is supported by higher contribution margins. Our mix is naturally higher now and we have unit volume growth underway, and we expect that to continue through the year, and so we are going to have good mix. Usually people talk about getting hurt by mix; we are going to benefit from mix, mix that we have caused. Furthermore, we are going to reduce costs another $10 million this year to more than offset the inflation and pricing agreements that we have in place, and we are going to increase our new business wins target to $70 million to $80 million. We have a long-term goal to get to $600 million in organic sales, as Tim touched on. We do have EOPs during the five years, so another way to think about it is our sales plan is replace EOP plus another $200 million. To do that, we have to win above that $200 million rate because we do have EOPs during the period as well. As mentioned, our pipeline is more than sufficient. We are running over a 20% hit rate and carrying an $800 million prospective pipeline. This is just a matter of doing the job on a continuous basis and making it happen. We have continued to add key personnel in defense, electrical products, data center products, electronics, and medical. We are looking forward to this year, and we are excited about this year, and we think that it is going to be a nice record year for the company. With that, I would like to turn the call over to our operator to answer any questions that you might have. Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Our first question today comes from John Edward Franzreb with Sidoti. Please go ahead. John Edward Franzreb: Good morning. This is Justin on for John. Harold C. Bevis: Hello, Justin. John Edward Franzreb: Hey. Can you expand on the data center end market opportunity, including any additional color on the size, expected ramp timeline, and margin profile of your first direct data center win? Harold C. Bevis: Yes. We have a couple of product angles into the data center market. We are focused on the cabinetry that houses the equipment and specifically the cooling. It is a very high-precision, micron-tolerance type setup so that the cooling does not escape the cooling system and damage equipment, and it plays right into our capability as a very precise, micron-level tolerance achiever. The first entry point was to become an approved supplier to the equipment-building crowd as a provider of watertight coupling, and it turns out it is very much needed. The cabinets are dense with this type of product. We are putting our hands around the size of the TAM. It is a very specific thing, and we do intend to report out on it in our next public call. We have a team underway with that right now. The second product that we are targeting into the data center market is cable assemblies. At the top of the rack is a distribution of the electricity busbar as well as high-voltage cable assemblies, and we can make those also. The new team we hired at the end of last year from the electrical products background, with Mohammed Farhad as our leader technically, and then Tim Merrill and three other people that are account managers that know the industry well, are now prospecting. We do have formal pipelines, and we do have customers delineated, and that is what we are doing. It is not a long ramp-up either. It is not like the gestation period for getting onto a medical equipment or an automobile or commercial vehicle. It is an immediate ramp-up kind of industry because the supply industry is behind. There is a need for more gigawatts of power in data centers than is in place, so it is an immediate ramp-up business for us. We are quite excited about it. John Edward Franzreb: Very helpful. Thanks for the color there. Maybe shifting gears to transformation, with the heavy lifting behind you, including plant closures and exiting dilutive businesses, what does the roadmap for sustaining sales growth in 2026 look like? Harold C. Bevis: Yeah. So roughly speaking, if you look at the 10-K and the numbers that Chris and his team have put out there, we are going to be doubling our capital spending. The biggest use of our free cash flow is cash interest to service our debt, and the second is CapEx, and so we are increasing the amount of CapEx that we are going to allocate to growth to really continue the paths that we are on. So this year, growth primarily, 85% to 90% is from new wins, and it is going to come from wins that preceded the beginning of the year. We are ramping up business that we already won. This year's wins primarily will benefit 2027 to 2028, with the exception of areas that are immediate ramp-up like data center, like defense ramp-ups that are happening right now, like the volume increases that are going on in commercial vehicle platforms where we are already approved. There is just an increased production rate. So 2026, we can see very well, Justin, and the new wins program for this year will create the outline for 2027 and 2028. John Edward Franzreb: Great. Thanks. Good luck in 2026. I will turn it back. Harold C. Bevis: Thank you, Justin. Operator: The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Rob Brown: Congratulations on all the progress. On the kind of the ramp of new business in 2026, I think your chart showed a pretty strong ramp of sort of full program kind of ramp rates. But what is the cadence of ramp in 2026 in terms of revenue this year versus future years? Harold C. Bevis: Yeah. You want to take that one? Timothy M. French: Sure. Obviously, when we are ramping up launches, it is not an immediate turn-on of the peak annual sales. So we are launching over 100 programs this year, and we would expect to see somewhere around between $20 million and $25 million of revenue from those launches that occur in 2026. But you also have to keep in mind that we launched programs in 2025 that will continue to escalate as well. But from launches purely in 2026, it will be between $20 million and $25 million of revenue. Rob Brown: Okay. Great. That is very helpful. And then on your CapEx outlook, I think doubling that would put it around $25 million to $30 million. What sort of CapEx activity are you planning, and what program areas do you need CapEx for? Harold C. Bevis: You want to do that, Tim? Timothy M. French: Sure. The bulk of our CapEx goes towards growth programs. We will be spending well over $15 million in growth programs, and it is not focused on any specific area. It is tied to a program launch and capability requirements within that. But 75% of our CapEx spending will be focused on capital required for launching new business. Does that answer your question? Rob Brown: Yep. Very good. Thanks, Tim. I guess one last question just on Q1 activity. You mentioned some strength in Q1. How much visibility do you have beyond that? Is Q2 looking strong as well, or is that really hard to say at this point? Harold C. Bevis: We have released orders into the second quarter already, and we have, Rob, a real healthy backlog already. We have a shippable backlog that hit us a little bit by surprise with the strength that happened in commercial vehicles over the last few months. We have forecasts with our customers. Generally, we force specificity through our raw material lead times, so we can already see Q2. Yes. For Q3 and Q4, we do not have firm releases that go out that far, so we just have expectations from our customers, and it is looking to be very, very consistent with the sales guidance we just gave. I wanted to add another point to your last question, Rob, on CapEx. If you look at our net CapEx last year, it was about $10 million, and this year it is going to be about $20 million, and to Tim's point, it is primarily going to be on more growth, funding more growth programs that will help this year and next year, and primarily next year. Primarily, the capital spending for this year will help make 2027 larger because we are basically saying yes to more programs. In fact, we yesterday said yes to a pretty large program that was about $1 million of capital, for example, and it will take about six months to get the machine. It is one machine that we need, that we are out of capacity on, and we already have the load for it. The spending this year, primarily the extra spending, will primarily help next year. The $10 million kind of rate, we had already pre-spent that with programs that we were awarded last year. So absolutely inflecting up intentional growth in these target areas, and it is already hitting the first quarter. Rob Brown: Okay, great. Thank you. I will turn it over. Timothy M. French: Thank you. Operator: We will conclude our question-and-answer session, and I would like to turn back to Harold C. Bevis for any closing remarks. Harold C. Bevis: Thank you, Chloe. Thank you, everyone, for staying on the phone for a bit with us, and we are pretty happy to report this update on the business. It is quite positive. It is a nice inflection point for us to be reporting on growth and growth and growth now, and we want to get more growth. It has been our game plan all along to get the ugly restructuring out of the way. We had to part ways with about 800 employees and sever them and pay those severances. We had to close four plants. But it is behind us, and we are thankful for that, and we have a more profitable, cash-generative company now, and we are using it to our advantage to be competitive in the areas where we want to. We are off to a good start. Thank you for your support, and we look forward to speaking with you again in the future. With that, we will end our call for today. Timothy M. French: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to Stem's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Erin Reed, Head of Investor Relations. Thank you. You may begin. Erin Reed: Thank you, operator. This is Erin Reed, Head of Investor Relations at Stem. We welcome you to our fourth quarter and full year 2025 earnings call. Before we begin, please note that some of the statements we will be making today are forward-looking. These statements involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. We, therefore, refer you to our latest 10-K and other SEC filings and supplemental materials, which can be found on our IR website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter and full year 2025 earnings release, which is on our website. Arun Narayanan, CEO; and Brian Musfeldt, CFO, will start the call today with prepared remarks, and then we will take your questions. With that, I will turn the call over to Arun. Arun Narayanan: Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. I am pleased to be speaking with you 1 year after assuming the role of CEO, and I could not be more proud of what the Stem team has accomplished over the past 12 months, best-in-class execution, unwavering commitment to our customers and each other and disciplined financial performance. 2025 was a transformative year that methodically, yet decisively reshaped Stem into a software-centric operationally disciplined organization. Every commitment we made and the proof of our strategic transformation is in the results. Today, I will take you through a look back on our fourth quarter and full year accomplishments. After that, I will walk you through our 2026 priorities and show you how we are determined to become the operating system for clean energy projects. And finally, I will give you a preview of guidance for the year ahead. Brian will follow with the detailed financial results and our complete 2026 outlook. In 2025, we delivered on guidance across every metric. Full year 2025 revenue grew 8% year-over-year to $156 million with over 55% of that revenue coming from software and services, evidencing our successful and ongoing transformation. Software, services and edge hardware revenue grew by 25% year-over-year to $141 million. Year-end ARR grew 16% year-over-year to $61 million. In 2025, we substantially expanded gross margins and considerably reduced our operating expenses. We achieved 3 consecutive quarters of positive adjusted EBITDA, resulting in our first ever full year positive adjusted EBITDA of $7 million. We also achieved positive operating cash flow for full year 2025, another first and major accomplishment in the company's history. Throughout the year, we continued to deepen and expand our PowerTrack platform, delivering meaningful improvements in platform stability, performance and customer experience. We added 6 gigawatts of solar assets to a total of 36 gigawatts under management and added $7 million in PowerTrack ARR to reach $41 million. In 2025, we accelerated our R&D efforts, leveraged AI tools and rebuilt our product road maps. We successfully launched 2 new products last year. Both products, PowerTrack EMS and PowerTrack Sage, have resonated well with our customers, and we are encouraged by the early traction. We launched PowerTrack EMS in September 2025, and it is a premier solution for utility-scale projects. This morning, we announced a new engagement with Everyray, a German clean energy developer and EPC. This 100-megawatt hour deal further expands Stem's presence in Germany and reinforces PowerTrack EMS' role as the control backbone for sophisticated utility-scale storage deployments across Europe and other international markets. Commercial operations for those deployments are expected to commence in the summer of 2026. Our expansion into the utility-scale market, both domestically and internationally, gained meaningful traction in the fourth quarter with utility-scale bookings increasing 10% sequentially. Notably, nearly all fourth quarter utility-scale bookings were driven by international solar projects, underscoring growing demand in global markets. I talked with you about PowerTrack Sage, our AI-powered assistant in previous calls, and I continue to be excited about it. We deployed PowerTrack Sage in the fourth quarter to more than 80 customers for a beta trial and the feedback has been overwhelmingly positive. PowerTrack Sage will be generally available at the end of this month. At launch, we will deploy a light version across the entire PowerTrack customer base, embedding AI-assisted capabilities into the core platform from day 1 and accelerating adoption at scale. This universal rollout ensures immediate value realization while positioning AI as a foundational component of the PowerTrack experience. For customers seeking deeper automation, advanced analytics and expanded workflow functionality, we will soon offer premium tiers at incremental cost, creating a clear pathway for upselling, monetization and long-term platform expansion. Finally, our managed services business delivered solid fourth quarter performance, highlighted by a new brownfield agreement. Under this deal, we will operate and optimize a 4-site energy storage portfolio for a Southern California utility. Our services include real-time asset monitoring, enrollment and dispatch into California demand response programs, performance reporting to optimize site dispatches and energy cost savings and more. This is a solid proof point for our differentiated managed services capabilities and validation of our brownfield strategy. Overall, the result of 2025 is this. Stem has established a stable, increasingly profitable, software-centric business model. 2025 was about transformation and achieving stability. 2026 is about operational leverage and building for scale. So let's dive in. As we enter the new year with strong fourth quarter momentum, we are focused on 3 new priorities: Priority #1: Driving operational leverage; Priority # 2: Continuing to strengthen our core business; and, Priority #3, building the foundation for accelerated growth in 2027 and beyond. Now let's dive deeper into each of these in turn. First, driving operational leverage. We have built a sustainable business model. And in 2026, we intend to demonstrate the leverage it creates. Our software-centric model delivers predictable, high-margin revenue and cost discipline is now embedded in the culture of this company. In 2026, we will continue integrating AI across the organization to drive productivity improvements, and we will maintain our relentless focus on cost reductions, cash conservation and working capital management. Second, strengthening our core business. We remain focused on driving core platform excellence for PowerTrack in 2026. The platform maintains its market-leading position in commercial and industrial solar monitoring in the U.S. This year, we will deliver further platform stability, scalability and simplified intelligent UI updates that drive customer value and retention. The domestic C&I solar market, where we already hold significant share, offers moderate growth in 2026, but this is a stable, high retention base that continues to generate recurring revenue. Additionally, we are targeting a brownfield strategy to further increase our market share as well as a range of other adjacent offerings. Our other core business, managed services for energy storage, continues to be a differentiated offering that sets Stem apart from competitors. Our brownfield strategy remains a key focus as does actively pursuing greenfield opportunities. We are scaling in existing domestic markets, leading with our proof of performance and winning with our differentiated offerings. And finally, to priority #3, building for growth in 2027 and beyond. Outside of our core C&I solar and storage businesses, we are focused on expanding our utility-scale footprint domestically and internationally. We are targeting key markets across Europe, leveraging local support infrastructure that we have built and continue to invest in. Both the domestic and international utility-scale storage and solar markets are growing, and we are well positioned to capture rising demand and take share. Power EMS helps us differentiate in the utility-scale space by providing a solution for hybrid solar plus storage sites and also stand-alone BESS sites, which are increasingly common in the utility-scale market. We expect meaningful revenue conversion of PowerTrack EMS bookings to begin at the end of 2026 and the beginning of 2027. While we are bringing PowerTrack EMS to market this year, we are also exploring other ways in which our team's expertise and our technology can deliver value in the clean energy space. This year, we are starting with 2 areas of emerging opportunity. First, as part of our suite of professional services offerings, we are developing AI services that leverage our domain expertise and operational knowledge to help customers identify, prioritize and deploy the current iteration of generative AI solutions in a way that generates real economic outcomes. These offerings are distinct from PowerTrack Sage, and they are focused on helping customers unlock value across their broader operations. And our second area of opportunity is with data centers. More and more, we are seeing data centers adopting renewables as a power source. We believe Stem has the foundational technology and deep expertise in both solar and storage to be a meaningful player in this market. I am encouraged by these options. We see a natural extension of our existing capabilities driving our entrance into the space, and I look forward to updating you all on our progress in the coming quarters. 2026 is an optimization year, focused on margin expansion and operating leverage while we continue to invest selectively in the capabilities that will drive scale in 2027 and beyond. I want to be deliberate about that framing because it shapes how you should think about our trajectory. PowerTrack EMS was launched in late 2025. It accelerates through the end of 2026 and meaningfully scales in 2027 and beyond. Our utility-scale team is building meaningfully in 2026, and this foundation will drive us towards taking share in 2027 and beyond. We believe that the market positions we are strengthening today will pay dividends for years to come. The building blocks we are putting in place span every dimension of the business. On technology: our AI integration, improving stability and scalability. On markets: international expansion and utility-scale expansion here and abroad. On products and offerings: a comprehensive suite from solar monitoring to storage optimization. On operations: building operating leverage and driving operational excellence. Expanding the value chain of our offerings today sets up the foundation for future growth. This is important to note because it ties into our core software-centric vision for Stem. We are determined to become the operating system for new energy projects across solar, storage and hybrid assets and in different market segments and geographies. Before turning it over to Brian, let me introduce the key themes of our 2026 guidance. We are entering the year with a strong foundation from our 2025 execution and believe we are well positioned to execute on our commitments. We expect our software-centric strategy to drive moderate top line revenue growth, strong gross margins and significant adjusted EBITDA expansion, supported by continued software momentum, our expanding product suite and the operational leverage we have built into the business. Brian will provide a more detailed look at our 2026 guidance and also dive deeper into our fourth quarter and full year 2025 financial results. With that, let me pass over the call to him. Brian Musfeldt: Thanks, Arun, and hello, everyone. Let's walk through the results. For the full year 2025, we were in line or above all of the financial expectations we outlined on our third quarter call. We exceeded our profitability guidance, demonstrating the dedication to operational discipline that runs through this organization. For the full year of 2025, total revenue was $156 million, up 8% year-over-year. Most importantly, revenue from software, services and edge hardware, the core of our software-centric model, was up 25% year-over-year to $141 million. Battery hardware resale was $15 million for the year, consistent with our strategic deemphasis of lower-margin business. This shift in revenue mix is precisely what we committed to delivering, and it is reflected in our improved gross margin performance this year. Turning now to the fourth quarter. PowerTrack software revenue continued its strong performance, growing 14% year-over-year and edge hardware revenue grew an impressive 21% year-over-year. Managed service revenue was up 51% year-over-year, driven in part by onetime performance-based revenue, where we exceeded asset operational targets. Battery resale revenue was down from $27 million to less than $1 million year-over-year as expected. Project and professional services revenue increased significantly year-over-year, driven by approximately $11 million of onetime DevCo revenue recognized in the fourth quarter. Excluding DevCo, fourth quarter project and professional services revenue was up 27% year-over-year. I also want to note that as of the end of the year, we have sold or written off all of the project assets associated with DevCo from our financial statements, and we do not intend to make any further investments in DevCo assets moving forward. Now let's take a look at gross margins. For the full year 2025, we achieved record GAAP gross margins of 38% and record non-GAAP gross margins of 46%, driven by decreased battery hardware sales, a favorable software and service revenue mix and improved edge hardware margins. Fourth quarter GAAP gross margins were 49% and non-GAAP gross margins were 45%, continuing our strong results. You can again find the detailed revenue and margin breakdowns we introduced last quarter in our supplemental materials on our IR website. Full year 2025 cash operating expenses were down 41% from 2024, and fourth quarter cash operating expenses were down an impressive 50% year-over-year. We are building sustainability into our cost structure, not temporary reductions, but permanent structural efficiency while simultaneously developing new products and entering new markets. That combination is the foundation of our operating leverage thesis moving forward into 2026 and beyond. The improved margins and significantly reduced OpEx in 2025 drove positive adjusted EBITDA of approximately $7 million for the year, above the high end of our guidance range and representing the first year of positive annual adjusted EBITDA in Stem's history. We achieved 3 consecutive quarters of positive adjusted EBITDA this year, with the fourth quarter coming in at $5 million, a 30% improvement from fourth quarter of 2024. The improvement was primarily driven by improved gross profits and reductions in operating expenses with modest additional benefit related to the final sales of the DevCo project assets. Full year operating cash flow was $7 million, slightly above the high end of our revised guidance. The fourth quarter benefited from the sale of our DevCo project assets and other favorable working capital movements. We ended the fourth quarter and full year 2025 with $49 million in cash, up from $43 million at the end of the third quarter. This is a solid liquidity position that supports our '26 plans. And now turning to our operating metrics. Fourth quarter bookings were $33 million, up slightly from last quarter due to increased software and service bookings, offset by decreased battery hardware bookings. Contracted backlog was $21 million, down 4% from $22 million last quarter due to decreased battery hardware bookings. Our end of year 2025 backlog is 2% higher than it was at the end of 2024 and excluding battery hardware, is 23% higher than prior year. CARR decreased $3 million sequentially to $67 million due to lower managed services bookings and the cancellation of a managed service customer agreement. This customer cancellation driven by adjacent nonscalable product requests outside of our road map, impacted CARR by $3 million, ARR by $1 million and AUM by 0.1 gigawatt hours. Despite this cancellation, total company ARR grew 1% sequentially and 16% year-over-year to $61 million, supported by increased PowerTrack software bookings. Turning now to our full year 2026 guidance. We are encouraged by the strong momentum we carried throughout 2025 and that we bring forward into 2026. We expect that performance to accelerate as we advance throughout the year. For revenue, we expect total revenue in the range of $140 million to $190 million. Within that range, we expect $130 million to $150 million to come from high-margin software, services and edge hardware revenue, our core business. We expect the remaining balance of up to $40 million to be driven by battery hardware resales, which remain opportunistic and are not a strategic priority. We expect non-GAAP gross margins of 40% to 50%, broadly in line with our 2025 performance. Higher battery hardware resales would cause gross margin percentage to trend toward the lower end of that range. We expect adjusted EBITDA of $10 million to $15 million, representing approximately 85% growth at the midpoint versus full year 2025, driven by revenue growth, operating expense discipline and increased operating leverage. We expect operating cash flow of $0 to $10 million, reflecting stable cash generation from operations for the year. And finally, we expect ARR of $65 million to $70 million, representing approximately 10% growth at the midpoint, continuing the momentum from 2025. I'm extremely proud of what the team has accomplished in 2025, and we are continuing to build a strong foundation into 2026 that sets us up for accelerated growth in 2027 and beyond. And I will now pass the call back over to Arun for closing remarks. Arun Narayanan: Thank you, Brian. As I reflect on 2025, I am struck by the scope of what our team accomplished. We delivered a business transformation, executed a financial turnaround, completed 2 new product launches and demonstrated a clear strategic path forward. We said we would do it, and we did it. As I look ahead through the remainder of 2026 and beyond, I am confident. We have 3 clear strategic priorities to guide us in 2026. We have an ambitious but achievable adjusted EBITDA target and multiple growth drivers that derisk execution. And last but certainly not least, we have a team with a proven track record of executing. Our long-term vision is to build a scalable, profitable software and services company that holds a market leadership position in clean energy intelligence. Stem is uniquely positioned to capitalize on the ongoing clean energy transformation with a market-leading platform, a growing product suite and an expanding global footprint. To our customers, we are grateful for your continued partnership and trust. To our investors, we appreciate your support through this transformation and your confidence in our vision. To our team, your execution through a challenging transformational year reflects your talent, your resilience and your dedication. Thank you. With that, I will ask the operator to open the line for questions. Operator: [Operator Instructions] Our first question comes from Justin Clare with ROTH. Justin Clare: I wanted to start off on the PowerTrack EMS launch. So you mentioned that you could see an acceleration for PowerTrack EMS in 2026, but more meaningful scale in 2027. So just wondering how we should think about the timing of bookings for the product. Could we see an increase as early as Q1 or Q2? Or is that more of a second half dynamic? And then just wondering if you could talk through the typical sales cycle and lead times for the EMS deployments. Arun Narayanan: Justin, thank you for your question This is Arun. Good to hear from you again. PowerTrack EMS was launched in September 2025. And the reason we are so excited about it is it is the first time we are able to address a solar and storage solution and address a customer's need completely. If you think about even the press release that we put out today, we are able to work with newer customers in international markets as well as customers domestically as well. And the main sort of aspect of these solutions are geared towards utility-scale projects. Inherently, they are a longer life cycle, and this means that we need to give time to build the business, build the pipeline, engage with the customer and make sure that the solution is a good fit and then work with the customer through the commissioning of the project all the way to revenue recognition. So it does take some time, and we are working on that today. Justin Clare: Okay. And then I guess curious, would you anticipate the revenue [Audio Gap] recurring revenue stream, but maybe you could help us understand that. Arun Narayanan: Yes. So it depends on the components, right? So think about a project that we deploy, it would have hardware, software as well as service components and the mix of these 3 components would be the totality of the contracts that we are executing. Depending on the component we're talking about, the revenue recognition would follow specific time line. So maybe hardware is recognized immediately upon delivery, but the service component would need to run through the commissioning life cycle. So that -- if you look at the Everyray press release that we announced today, we are encouraged by the feedback that we're getting from our customers. That's a 100-megawatt hour project that we have deployed. And just connecting back to the remarks that we made earlier, we are looking at 2026 as a way to build the foundation and then see 2027 as the point at which we're able to scale the revenue. Justin Clare: I see. Got it. Got it. Okay. And then just on the 2026 guidance, it does look like the battery resale revenue up to $40 million. That's a fairly meaningful increase potentially from the 2025 storage resale revenue of $15 million. So just wondering if you could speak to what's driving the increase there, considering you are shifting emphasis toward software and services, are you still seeing demand from customers where they prefer you to do the procurement? Arun Narayanan: I would characterize Stem as a trusted adviser. We have really good relationships with our customer and the ability for our technical expertise in the organization to assist customers through that journey is very valuable to our customers. So we have deemphasized the OEM hardware resale component of the business. But when we see opportunities to help customers meaningfully and it doesn't use up our balance sheet, we do pursue it. And this is how we see the year develop, and that's how we are guiding to it. Justin Clare: Got it. Okay. And then just one more on margins. Wondering if you could give us a sense for how you see the gross margins evolving for software, services and edge hardware in '26 relative to '25. It looks like you could potentially have a higher mix of battery hardware resale, which is lower margin. But overall for the year, it looks like margins could be flat year-over-year. So it implies there could be an expansion in the software margins. So just checking, is that the right interpretation and how we should think about it? Brian Musfeldt: Justin, this is Brian. Yes, I mean, we've guided you to 40% to 50% for the year. And that is obviously at a mix of kind of revenue, software services and hardware. We do break out for you now in our slide deck the kind of detail by each revenue kind of line. You can look at that in the appendix for that. But yes, I think you see that this year, software was over 70% or just north of 70%. So I think you can look at that from a mix perspective and based on our guidance and what we're looking at for improved software revenue will drive that mix up a bit. Operator: [Operator Instructions] There are no further questions at this time. This concludes our question-and-answer session. I'd like to turn the call back over to Arun for closing comments. Arun Narayanan: I want to thank everyone for joining our fourth quarter and full year earnings call, and we look forward to speaking with you next during our first quarter 2026 earnings call this spring. Thanks, everyone. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Good day, and welcome to Ciena Corporation's fiscal first quarter 2026 financial results conference call. All participants will be in listen-only mode. To withdraw your question, please note this event is being recorded. I would now like to turn the conference over to Gregg Lampf, Vice President of Investor Relations. Please go ahead. Gregg Lampf: Thank you. Good morning, and welcome to Ciena Corporation's 2026 fiscal first quarter conference call. On the call today is Gary Smith, President and CEO, and Mark Graff, CFO. Scott McFeely, Executive Adviser, is also with us for Q&A. In addition to this call and the press release, we have posted to the investors section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of Ciena Corporation's results of operations. A reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. Before turning the call over to Gary, I remind you that during this call, we will be making certain forward-looking statements. Such statements, including our quarterly and annual guidance, commentary on market dynamics, and the discussion of our opportunities and strategy, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. Assumptions relating to our outlook, whether mentioned on this call or included in the investor presentation that we posted earlier today, are an important part of such forward-looking statements and we encourage you to consider them. Forward-looking statements should also be viewed in the context of the risk factors detailed in our most recent 10-Ks and our forthcoming 10-Q. Ciena Corporation assumes no obligation to update the information discussed in this conference call whether as a result of new information, future events, or otherwise. As always, to allow for as much Q&A as possible today, we ask that you limit yourselves to one question and one follow-up. With that, I will turn the call over to Gary. Gary Smith: Thanks, Gregg, and good morning, everyone. Today, we reported strong fiscal first quarter financial performance. We delivered revenue of $1.43 billion in the quarter, our highest ever and at the top end of our guidance, reflecting strong execution across the business. Demand is incredibly strong with exceptional order activity in the quarter. This, along with long-term planning conversations with customers, gives us confidence in the durability of demand and our ability to drive growth as we move through the year and into 2027 and beyond. Adjusted gross margin came in at 44.7%, which was ahead of expectations, and we continued to drive increased profitability, illustrated in part by our adjusted earnings per share of $1.35, which is more than double our EPS in Q1 of last year. These record results reflect Ciena Corporation's market leadership and reinforce our role as a critical provider of the high-speed optical systems and interconnects that enable AI workloads to scale and to be monetized. In fact, we are taking meaningful share of the increase in AI-driven connectivity spend as customers trust our technology leadership, deep collaboration, and proven execution. To this end, we believe 2025 will ultimately stand out as one of our strongest years of market share gains, and we believe it will be even stronger in 2026. With our recent inclusion in the S&P 500, we may have new listeners on the call, so allow me to begin with a brief summary of our business. At the highest level, Ciena Corporation is the global leader in high-speed connectivity. We build solutions that move enormous amounts of data across cities, data center campuses, countries, and oceans, quickly, reliably, and at massive scale. Through industry-leading optical systems and interconnect solutions along with automation software and services, we power the world's most advanced networks, helping service providers, cloud companies, hyperscalers, governments, and enterprises meet explosive connectivity demands, especially in an increasingly AI-driven world. Our foundational business has always been to address connectivity needs in the wide area network, or WAN, spanning subsea, long-haul, metro, and data center interconnect, or DCI. We remain the undisputed global leader in this domain. Today, much of this business is driven by the continued adoption of cloud services across our global customer base and the network infrastructure required to support it. It is also increasingly fueled by the rise of large-scale AI data centers that need to be interconnected with DCI solutions linking data centers across campuses, regions, and continents. Additionally, service providers around the world have begun reinvesting in their optical transport infrastructure alongside autonomous networking capabilities, both to support surging AI-driven traffic growth across their networks and to improve operating efficiencies. And service provider and cloud provider customers are increasingly working together to deliver connectivity through managed optical fiber networks, or MOFN, as they navigate regulatory requirements and capacity needs in the U.S. and in other new and emerging geographies around the world. By way of example, our orders in India were up 40% year over year, reflecting ongoing high demand specifically for MOFN in that country. Together, we view these as structural multi-year demand drivers that reinforce the critical need to serve WAN-connected connectivity requirements, fueling both our growth and continued momentum. We expect revenue from the MOFN application will continue to be an important contributor to overall service provider growth going forward, and we are uniquely well positioned to further strengthen our leadership in high-speed WAN connectivity for service providers, cloud providers, and the growing group of neoscalers from whom we saw increased momentum in the quarter for both direct and MOFN-related design wins. In parallel to this, we are focused on the significant expansion of our addressable market opportunities in and around the data center. It is now well understood that cloud providers are investing heavily in data centers to deliver on both the current and future promises of AI. In just the last few weeks, we have seen announcements from the four largest global hyperscalers that outlined a step-function increase in their 2026 CapEx to more than $600 billion in aggregate, driven by infrastructure needs related to AI training and inference workloads at massive scale. These build-outs involve several areas of opportunity for Ciena Corporation, not only in the WAN, but increasingly in and around the data center, including scale across, scale out, scale up, and our unique data center out-of-band management solution, or DCOM. I will start first to discuss the scale across, which is really an application supported in part by our interconnects portfolio, which is emerging as AI data centers grow in size and begin to hit power and space limitations. To overcome these constraints, customers are distributing compute across multiple sites and using high-speed performance optical networks to interconnect them, effectively creating one single AI training environment that operates across distance. We believe that we are in the very early stages of this wave of opportunity, and we are already experiencing extraordinary demand, with three hyperscalers choosing to use our optical solutions for their training applications across distance, which we have talked to you about in recent quarters. And all three hyperscalers are significantly ramping, including additional orders for multiple additional from the first hyperscaler we announced in Q3 2025. We are addressing this demand for scale across solutions with our RLS platform, the de facto industry line-system standard for cloud providers, as well as our 800ZR pluggable optics. To underscore this, we realized a second consecutive record quarter for RLS shipments and revenue. We expect to expand our role in scale across applications with the introduction of our new RLS HyperRail solution. HyperRail delivers an order-of-magnitude increase in fiber density within existing rack footprints, helping customers scale traffic while reducing, and in some cases avoiding, costs and complexity associated with adding substantial numbers of amplifier huts. The solution, developed in close collaboration with our hyperscaler and service provider customers, represents another inflection point for Ciena Corporation, and we expect to be first to market again. In fact, we will be demoing the first prototype of our HyperRail system at the OFC trade show in a few weeks’ time. This solution, we expect, will begin standardization at 2026 and will ramp in 2027, allowing us to capture share and incremental value as these distributed AI training expands across regional clusters and moves to further distances. In addition to scale across, we see meaningful opportunities inside the data center, including the scale-out connectivity between racks and scale-up connectivity within racks. As we know, the physics of copper inside the data center is reaching its limit. While there will be a place for copper solutions with shorter distance scale-up interconnects, network architectures will include more optical co-packaged interconnects, and over time, as data rates and bandwidth requirements continue to increase, coherent optical connections will overtake IMDD ones for shorter reaches to address growing capacity volumes inside the data center. And as the world's leading high-speed connectivity company, we are investing meaningfully to intersect these important use cases. We continue to demonstrate progress toward our in-and-around-the-data-center growth objectives, and our expanding interconnect portfolio, including ZR and ZR+ pluggables and optical components, is well positioned to address the rising power and space constraints associated with those evolving scale-up and scale-out architectures. We have just reached an important milestone with our first product introduction following the Nubis acquisition last fall, which addresses scale-out and scale-up needs. Last week, we announced the Vesta 206.4T optical engine, which is the industry's first high-density, low-power, open-ecosystem pluggable CPO solution. Samples of the Vesta product will be available in calendar Q2 2026, and we are actively discussing Vesta, as you would expect, with our cloud provider customers and partners, and we are excited to be showcasing it at OFC again in a few weeks' time. For scale-up opportunities inside the rack, where XPUs are getting faster and driving heat and power concerns, we are advancing the Nitro Linear Redriver technology, also from our Nubis acquisition. We believe this is a critical element to active copper cabling solutions, which extend the distance that signals can travel and reduce power by up to 80% versus AEC-type solutions. We also expect samples of the Nitro Redriver to be available in calendar Q2 2026. Finally, our data center out-of-band management, or DCOM, solution continues to represent another significant opportunity inside the data center. Leveraging our XGS-PON and routing and switching platforms, DCOM was initially designed with Meta to meet hyperscale provisioning and configuration requirements. We continue to work with them and are engaged in technical discussions with two other major global hyperscalers. Let me summarize by emphasizing that demand in Q1 2026 was unprecedented, reflected in very strong order intake and a meaningfully higher backlog. We executed well and demonstrated strong performance on both top and bottom lines. This exceptional demand was broad-based across service providers, hyperscalers, and an expanding set of neoscalers. Opportunity continues to build in waves, from our traditional and expanding WAN business to multiple applications in and around the data center. Furthermore, to monetize AI for both training and inference workloads—the latter of which represents another significant growth vector still in its infancy—the foundational requirement is again high-speed connectivity. These dynamics, combined with our deep collaborative customer relationships that improve our long-term visibility plus our continued focus on execution, give us increased confidence for multiyears of strong growth and profitability ahead. I will now turn the call over to Mark to cover our financial performance and guidance in more detail. Thank you, Mark. Mark Graff: Thank you, Gary, and thanks everybody for joining the call this morning. As Gary noted, demand remains robust and has been, in fact, increasing. We are focusing our resources to not only strengthen our financial results, but also to secure near- and long-term supply and manufacturing capacity to deliver for both our customers and our owners. The results delivered in Q1 are a testament to the progress we are making and will continue to make. With that, I would like to update progress against our financial priorities previously discussed. We continue to make progress to our next milestone of 45% gross margin, as witnessed by our 44.7% gross margin performance in Q1. Q1 results benefited from product mix, inclusive of contributions from incremental demand for capacity infills, the execution of cost reductions, and early progress on advancing the value exchange with our customers. Longer term, an improving price environment, new product inflections like HyperRail, and focused cost optimization all provide opportunity to deliver improved gross margins. Our balance sheet continues to be a source of strength with working capital improving, driven by cash from operations yielding $228 million in Q1, a decrease in cash conversion of three days, and inventory turns growing to 3.2 times. With respect to capital allocation, we are taking a balanced, disciplined approach, prioritizing R&D to advance our technology leadership in the fastest growing segments of the market and to drive product velocity, all while holding OpEx levels approximately flat to 2025, delivering significant operating leverage. We are investing our CapEx to expand capacity, scale output, and meet rapidly growing demand. In Q1, capital expenditures were $74 million, inclusive of the accelerated capacity investments. For context, this is approximately two to three times our average CapEx over the last twelve quarters. Let me take a moment to comment on the industry supply and its impact on Ciena Corporation. As you have heard from many others in the industry over the last few weeks, the supply landscape remains challenging. To be blunt, our revenue in the first quarter would have been higher but for these constraints. Our close relationships with customers give us early visibility into their demand and our need to expand capacity to address it. We have been working with partners to scale by way of two key initiatives. First, we continue to partner with contract manufacturers with respect to their manufacturing capacity and output expansion, which is yielding strong results. Second, we are deeply engaged with component vendors, which is where more of the industry challenges exist, to secure and expand supply, including through responsible long-term purchase commitments. As shown by our Q1 results, we are navigating the supply environment well and are investing to expand capacity. However, we expect demand will continue to outstrip supply, at least for the next several quarters. Turning to Q1, as Gary noted, revenue reached $1.43 billion, up 33% year over year and a quarterly record for the company. Our optical revenue was up over 40% year over year, led by Waveserver and RLS product lines, each of which were up over 80% from the year-ago period. We had three greater-than-10% customers, including two global cloud providers and one Tier 1 North American service provider, with strong MOFN activity. Regarding backlog, as Gary discussed, our order intake has been incredibly strong over the past ninety days, leading to a new record by a significant margin. Given the extraordinary nature of the demand, we want to share with you that backlog has increased by approximately $2 billion this quarter to exit Q1 at approximately $7 billion. In fact, nearly all new orders we are taking now will be for fulfillment in fiscal 2027, providing ongoing confidence in our outlook. As a result, we expect backlog to continue to grow throughout the year. Rounding out Q1, adjusted operating expense met expectations, leading to an adjusted operating margin of 17.9%, 190 basis points over the midpoint of our December guide. We achieved adjusted net income of $197 million in the quarter, which delivered an adjusted EPS of $1.35, more than double a year ago. We exited the quarter with a cash balance of $1.4 billion after purchasing approximately 400,000 shares for $81 million under the current repurchase authorization. Before I discuss our Q2 and updated 2026 outlook, I would like to make a few comments on tariffs. As you know, on February 20, the Supreme Court struck down the IEEPA tariffs originally implemented in March 2025. As previously stated, these tariffs have been immaterial to our financial results. While we have noted this ruling as a subsequent event in our forthcoming 10-Q, it has not had any impact to our reported results. The administration has announced a new global replacement tariff under a separate legal authority with final rates still pending. Based on current information, we believe that these developments will have an immaterial effect on our business. Obviously, we are monitoring new developments and working closely with customers and suppliers to assess any future impacts. Now, with respect to our view for the remainder of the fiscal year and Q2, given the current dynamics, we now expect to deliver revenue for fiscal 2026 between $5.9 billion and $6.3 billion, essentially raising our year-over-year growth rate from 24% to 28% at the midpoint of the range. We believe this range appropriately balances the strong market demand with ongoing industry supply conditions. Given our Q1 results and the expectations for Q2, we expect our 2026 gross margin to be between 43.5% and 44.5%, one point above our December guide and 130 basis points improvement above 2025. With the first half exceeding our expectations and the supply challenges we are actively managing, we now expect first-half and second-half gross margins to be roughly equivalent. And we now expect adjusted operating expense of approximately $1.52 billion to $1.53 billion, resulting in adjusted operating margin of 17.5% to 19.5%. This small difference in OpEx is really due to the stronger demand environment. In Q2 2026, we expect to deliver revenue in the range of $1.5 billion, plus or minus $50 million; adjusted gross margins between 43.5% and 44.5%; and adjusted operating expense of approximately $375 million to $390 million, which will result in an adjusted operating margin of 17.5% to 18.5%. To conclude, we had a strong start to fiscal 2026. Demand for our technology is robust and durable. We see multiple waves of opportunity ahead, from continued AI training to expanding inference workloads, both domestically and internationally, to new HyperRail solutions and faster interconnects inside the data center as higher-speed requirements come online. We continue to offer market-leading, innovative technology that uniquely enables AI both in the WAN and in and around the data center, and we continue to thoughtfully allocate shareholder capital to deliver value to both our customers and our owners. Given all these opportunities, we are confident our momentum will extend beyond 2026. With that, we will now take questions from the sell-side analysts. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from Amit Daryanani with Evercore ISI. Please go ahead. Amit Daryanani: Yep. Thanks for taking my question. I guess I have two from my side. One of the things, just on the gross margin side, really impressive performance in the first half of the year despite some the supply chain issues folks are having, and I think mix was slightly negative. Just spend some time on what are the ups levers on gross margins that are helping you out, and are you seeing a shift in pricing at this point whatsoever? That would be really helpful to understand. Mark Graff: Sure. Hey, Amit. It is Mark. Yeah, I agree. We had a very strong performance. We are quite happy with the 44.7% that we printed this morning, and it is really driven by a couple of things. We saw customers requiring increased capacity, both in hyperscalers and in service providers, that increased their infill rates, and so we got quite a bit of tailwind from that. Secondly, I think the engineering team has done a wonderful job of engineering cost reductions into our products that is really separate from the supply chain activities that you are seeing us increase revenue with. So between those two things, I think we are really seeing some good tailwinds. Moving forward, I think we have got a few more levers that we are going to start working through. You mentioned price increases. One of the things that we are trying to do is really balance the price increases with our share position in the market, and I think what you have seen is we have been able to increase our gross margin as well as increase our share, and so I think we are doing a really good job of balancing those two things. I think moving forward, you will see even more aggressive cost reductions, and then the price increases that we talked about at the end of last year—those really have not started to fully kick in until the second half of the year. So I think that creates additional tailwinds for us. So all in all, again, I think we are making really good progress towards that 45% waypoint, and you should see that throughout the year. Amit Daryanani: Got it. And then if I would just follow up, how do you see the pluggables market, especially with 800-gig ramping up through fiscal 2026 and 2027? And if you could just maybe compare and contrast a bit about your positioning in 400 versus 800, that will be helpful as you go into the next cycle. Thank you. Scott McFeely: Yeah, I mean, we have seen pluggable revenue increase period over period, and we have talked in the past about our interconnect business, and we went from 2024 to 2025, that doubling sort of in the rearview mirror, and then we talked about it as a major portion of our inside and around the data center with our aspiration to triple that this year, and we are well on track for that. So we do see significant growth. From a competitive perspective, as we have talked about in the past, through choices that we made to focus early introduction of the technology in the last generation more on our systems business and our pluggable business because that was a bigger opportunity, we were not necessarily first movers in that market, so that probably cost us some share and probably cost us, actually, frankly, some margin dollars. That is not the case in the 800-gig. We are first to market there, and 800-gig is moving quite along. Now, I will say, though, and I just want to make sure people understand this, is that we are talking about capacity adds across the portfolio. It is not just pluggables. Mark mentioned the growth that we are seeing on Waveserver. If you want to be the strategic supplier to the web scalers, they have networks that span campuses, metros, national networks, submarine networks. You have to have all the things in the toolkit, and we are seeing increases across all of those components, system business and pluggables. Operator: And the next question comes from Simon Leopold with Raymond James. Please go ahead. Jeff Cocci: Yeah, thanks, guys. Jeff Cocci in for Simon. So just a couple of housekeeping items. Can you give RPO for the quarter and the percentage of the $7 billion backlog that is product? And then, while you are doing that, maybe you could just give the percentage of sales that are ZR pluggables for the quarter. And then I guess my second follow-up would be what percentage of the telco revenue is now MOFN, and how did traditional telco grow? Thank you. Mark Graff: Yeah, there were quite a few questions in there, Jeff, so let me start. If you think about the backlog, I think right now roughly 80% is products and software, and the rest I would think about as services. We are not going to really disclose the percent of pluggable revenue in the quarter. As Scott said, we expect that to triple year on year, and we are on track to deliver the 800 pluggable ramp that we talked about. Sorry, I lost track of all your questions. Scott McFeely: What else did you have? What— Mark Graff: RPO and then percentage of telco that is MOFN. Gary Smith: I will take percentage on the MOFN thing for you. By the way, I would say the interconnect is somewhat of a proxy at this stage for pluggables to some extent, so we clearly disclose all of that. I would say you are looking at about 10% to 15% of our service provider business being MOFN. We have visibility to a fair amount of it, but not all of it. We partner with service providers on identifying some of these particular build-outs, and we are seeing a good steady ramp in that. You are seeing service provider growth; I think in the first quarter, it is like 22%. Of that growth rate, MOFN is a big contributor to it. But I think overall, it is going to be about 10% to 15% of our total service provider business. Mark Graff: And then RPO, if you think about RPO as a percent of the orders that we took in Q1, Jeff, you should be thinking roughly 60%. Jeff Cocci: Great. Thanks, guys. Operator: And the next question comes from Ruben Roy with Stifel. Please go ahead. Sahid Singh: Hey, guys. This is Sahid Singh on for Ruben Roy. I guess just digging into and following up on the last set of questions around backlog, you guys have gone from $5 billion last quarter to $7 billion this quarter. I think you just said 80% of the $7 billion is products and software. And so if I just apply that 80% to the 5, that is implying $1.6 billion in product and software growth, which, you know, loose math and loose assumptions there. So then I am thinking through, okay, last quarter you said Meta expanded their DCOM engagement, the RLS customer expanded, there are a couple more hyperscalers added on, and we are talking hundreds of millions per opportunity as you have mentioned. So could you just help us bridge the gap and perhaps provide some color as to what the incremental here is relative to the expansions that were announced last quarter or the new hyperscalers that were announced? Gary Smith: Yeah, I would say that first of all, it is very broad demand that we are seeing. It is very strong on service providers, submarine, MOFN, and obviously hyperscalers. And I would also say hyperscalers in their various applications, because I think the point to note is we have very broad relationships with most of them now, across multiple applications—submarine cable, long-haul, metro, in and around the data center, and with things like DCOM inside the data center as well. So basically, if you look at all of those from an order point of view, they were all up and to the right. And I think that is sort of systemic around the drive of the traffic outside the data center now. You are seeing growth in cloud, general cloud. You are seeing inference. You are seeing this new market of training now emerge. As I said in my comments, we have now got three hyperscalers deploying us for training, and we are at the very, very early stages of that. So you put all of that together and that yields the incredible demand that we saw in Q1. And as Mark said, despite the fact that we are ramping our capacity for delivery as seen in our results, demand is going to continue, we believe, to outstrip our ability to supply, and that is going to continue for, we believe, this year. And so we are going to end up with a larger backlog than we have right now as we turn the year, despite the fact that we are ramping our capacity strongly throughout the year and obviously through 2027 and 2028. Mark Graff: Yeah, and the one thing I just maybe want to clarify a little bit for you: that 80% is across the entire $7 billion of backlog, not just the $2 billion increment. So you can look through where we ended Q4 to where we are ending Q1 and back into, I think, the information you need. Sahid Singh: Yeah, I think I got you there. The $2 billion was simply coming from the incremental, as you are saying, but I assumed 80% was sustained through last quarter as well, which may not be the case is what I am understanding. Okay. On the follow-up, maybe just touching on what Amit had asked at start of the call around pricing. How much of pricing increase is currently baked into backlog relative to volume? Mark Graff: Yeah, we are probably not going to give you that number specifically. As we disclosed in Q4, the pricing increases that we talked about were really on the new orders, and because we had such a big backlog at the time, most of that was going to be seen in the second half. So you should expect those price increases to show up in Q3 and Q4. Operator: And the next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Meta Marshall: Great, thanks for taking the question, and congrats on the quarter. Maybe just on impressive operating levers that you guys are out of the business? And just where are you finding those levers to keep OpEx flat as I assume bonus plans need to reset? There is obviously a lot of projects that you are working on with various hyperscalers. And then second, did you mention whether there were any 10% customers within the quarter? That is just a small nit, thanks. Mark Graff: Yes, Meta. So on OpEx, first part of your question, we were able to hold OpEx flat year on year, really, for three reasons. The first is, if you recall last year, each quarter it seemed that we were increasing our OpEx guidance to take into account the increased performance that we were doing last year. We basically reset that, and we were able to scoop that increment and reinvest that back into the business. So that is one. Two is, you will recall, we announced a small RIF—somewhere between 4%–5% of the population. We have been able to harvest those savings and reinvest into the business. And then you will recall that we ceased further investment in our 25-gig PON activity. So those three things, we were able to scoop those up, reinvest them back into the business, and that met our needs year on year and so, nominally, that is how we got to that flat OpEx and the, to be honest, quite impressive operating leverage. On the 10% customers, we had three. We had two hyperscalers and one Tier 1 North America service provider that is pretty exposed to MOFN. Meta Marshall: Great. Thank you. Operator: And the next question comes from Karl Ackerman with BNP Paribas. Please go ahead. Karl Ackerman: Yes, thank you. I have two, Mark. I will ask both of them for you. Could you speak to the duration of this accelerated CapEx spending, which seems driven by enhanced visibility you now see extending over a multiyear period? And for my follow-up, you also spoke about more aggressive cost reductions to support margins. I am curious if you could expand on that and whether that relates primarily to further outsourcing to the EMS partners or if there are other things we should consider. Thank you. Mark Graff: Yeah, so let me take those, and on the second one, maybe Scott can add some more color here. On the duration of CapEx, you will remember in our December call we talked about we doubled our CapEx year on year, and within that doubling of CapEx, we were increasing our productive CapEx by 50%. So really think about working with our contract manufacturers to expand their manufacturing capacity. Now, obviously, that has some lead time, and so we are investing through the year, and we expect that increase in capacity to start showing up towards the end of the year. And the intent was really to set up a 2027 plan for us. I am not going to go into 2027 yet, but the intent is to invest in 2026 and to realize the benefits in 2027. On the cost reductions, I would not say that it is more outsourcing to EMS folks. I think our engineering and product teams are really looking at the cost components of the products and looking at different materials, different solutions, and trying to drive a lot of those costs out. I would also remind you that we have got the most vertically integrated supply chain, and that drives a lot of both cost advantage for us, but I would say right now, more importantly, supply stability. And so between those two things, as I said, we are starting to see the ability to increase revenue as well as bring in a little better cost profile. Scott, if you have got something to add. Scott McFeely: Yeah, I think on the cost reduction piece, I think of it as three levers. One is we are driving a lot more volume through the machine, and we do have some fixed costs; you get a tailwind there. That is the first one to get your mind around. On the engineering aspects or design aspects that Mark talked about, think of it as a couple of things. Number one is where you do not change the function of a product, but you are going after the cost base of it, and that can be through more vertical integration, that could be through substituting parts for different parts, that could be opening up your supply chain to multiple other sources, and we are pushing on all of those levers, by the way. The other piece of the design stuff is as you go from generation to generation, where you are changing the function of the products, you get back to those price-value conversations with customers and, you know, sticking more dollars into our pocket as we do those transitions, and those are going on all the time to some degree. The third piece—and we did not talk a lot about it—it is not all on the lines that you said where we are depending more on the EMSs, but we are constantly looking at that supply chain design, the whole ecosystem design, and trying to optimize that to get cost out of it as well. So it is not the engineering design, but the supply chain design. And we are pushing on all of those, and that is why you are seeing the results you are getting. The team is doing a good job executing on those, and there is more in the future. Karl Ackerman: Very clear. Thank you. Operator: And the next question comes from George Notter with Wolfe Research. Please go ahead. George Notter: Hi, guys. Thanks very much. Was curious about your comments about the progress with the value exchange with customers. Obviously, you are raising pricing. I know it is going to come through later in the year as you eat down the backlog. But just stepping back and thinking about the space, you have got higher memory costs, you have got component suppliers that are being really aggressive on price—they are repricing their own backlogs. It just seems like it is an environment you guys could be more aggressive on price and even perhaps reprice your own backlog. So I am just curious, why not be more aggressive here given the supply-demand dynamics and what is going on in the supply chain? Thanks a lot. Gary Smith: Yeah, George, this is Gary. I think you know we have talked a lot about the good things that we are doing to manage our margins and the rest of it, including the value we are balancing, but it is a balance to it all, and that is what we are trying to strike as we go through this. You are seeing it translate into improved financial performance in all dimensions—market share gains, revenue, gross margin improvement, and operating leverage. We are seeing that, and it is a confluence of things. Scott talked about some of the cost reduction stuff. Mark talked about the value exchange. All of those things are happening and are getting weaved into the business over time. As you know, we take a very long-term view of how we run the business, and I think we see this as a multiyear opportunity for us, and we will strike a balance between those challenges of supply chain, because you have got a lot of shortages going on right now as well, which we are navigating through pretty well. So, it is the confluence of those things that result in the approach that we are taking. Mark Graff: Gary said it well. Pricing is a lever, George, but we are also looking at can we improve cash conversion, can we get better terms and conditions, can we get longer-term purchasing commits with maybe some more non-cancelable, less risky terms as we satisfy this quite large backlog. We are not taking pricing off the table, so we should say that. And you are right, we are seeing some cost increases coming from the supply chain, and we are in early days of having those conversations with customers, so I do not want to get too far into that. But I think we are trying to pull on all the levers and overall, I am pretty pleased with the progress we are making so far across the board. George Notter: Got it. Super. Anything new competitively? Obviously, the competitive environment is, I guess, more benign than it has been in recent years. You have had some consolidation among competitors. Anything new in terms of their behavior on pricing or terms or just general competitiveness in the space? Thanks. Gary Smith: On the WAN business, I think you articulate the environment well there. We are fortunate because we have got such close relationships with the hyperscalers to get out in front, as Mark said, around the capacity and component supply to that, which is showing up in our growth rate. We were able to stay out ahead of that, and we took market share in 2025, and I think we will take even more market share in 2026. This is all really now about—we are on our next generation of line systems with the HyperRail; we are on our next generation of modem technologies in their various forms. So, our competitive position continues to improve there. Obviously, as you get in and around the data center, particularly inside of it, it is a different set of competitors. It is a different set of dynamics. What we bring to the table there is our leading high-speed technology and our systems knowledge, frankly, and translating that into the component purchase we believe is meaningful, and we have got a lot of the hyperscalers leaning in with us on that. But it is a different ecosystem and environment. We have got new and different competitors there, some of which are very large. So we do not underestimate that, but we think we are coming from a position of strength and uniqueness around our optical technology, as you are really looking at the opticalization—if that is a word—of the data center, as the electrical stuff runs out of steam from a physics point of view. And we are starting to pick off some of those applications where that is most pronounced. DCOM, I think, is a decent example of that. We have got the new technology that we announced in market from the Nubis acquisition. So that is going to be a different set of competitors for us. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Operator: You there? You might be on mute. Operator: Kyle? Operator: Alright, we will move on to the next. Tim Long with Barclays. Please go ahead. Go ahead. Alyssa Shreves: Hi, this is Alyssa Shreves on for Tim. I just had two quick ones. Were you seeing any dynamic in the quarter with the order growth? Was there any trend in customers trying to get ahead of pricing actions, or was it really just underlying demand kind of driving the growth there? And then I had a follow-up. Gary Smith: Pure underlying demand across the board. Not driven by pricing thresholds or anything. There is so much demand for capacity out there across the board. Service providers have not invested in their optical infrastructure for about five years—they have been so preoccupied with 5G, etc.—that there has been an under-invest in the optical infrastructure in the world, and you are seeing very strong growth from the service providers and MOFN activity as well. And then you have got hyperscalers with the across training, clustering, new market for optical that is really ramping pretty significantly. And then you have got the inside-the-data-center optical moves as well. So across the board, Alyssa. Alyssa Shreves: Okay, that is helpful. And then just a quick one on APAC. The orders for India in the quarter were really strong. Should we expect the region to be driving APAC this year? Just given last year was more mediocre growth in the region, it was down the prior year. Should we expect a step change now with India? Gary Smith: I think that India will probably be very, very strong and robust this year, largely driven by MOFN. Obviously, it is the fastest growing Internet market in the world. All of the hyperscalers are leaning in and playing there, and because of the regulatory environment, they have to really partner with local folks and service providers to provision their optical networks. So I think that is going to be very sustainable. We are seeing an uptick in the amount of projects there. I would say overall, we are going to see good growth out of Asia Pacific this year in a number of areas, including Japan. That is largely driven by two things. One, my point earlier about service providers have largely underinvested in optical in the last five years, so that is beginning to play a part in it. The second part of it is the increase in MOFN activity in the whole Asia Pacific area, and submarine cable being a part of that too. Alyssa Shreves: Great. Thank you so much. Scott McFeely: Thank you. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Tal Liani: This time, you hear me? Operator: Yes. How are you doing? Tal Liani: I got so excited, I broke my headset. I have a question about the risk of early ordering. What we are seeing in every cycle is that when there are constraints, customers start ordering much, much earlier, and that creates big increases in backlog and then declines. How can you manage it? So I am sure you probably do not know if there is or to what extent, but is there any way you can manage early ordering through pricing the way Cisco does it, or any other way in order to mitigate the phenomenon? So you do not have what we had in 2022 or 2023, whenever we had the previous cycle. Gary Smith: Tal, that is a good question. First of all, I think having suffered through that, we are suitably sensitized to it, and we learned some lessons through that, one of which is visibility into things like installation and what are they actually doing and when with the equipment. I would say that the dynamic here—the service providers—is good steady growth. We have good visibility into that and what they are doing with it. And they were the main folks that were having the challenges around the ordering piece. The hyperscalers, I think we have deep collaborative relationships with them. They are our biggest services customers as well, and you saw our installation services were up 42% in the quarter. That gives us, and we have unique visibility into, what they are doing and deploying across the board there. So, given the scale of this, this is deep and collaborative relationships with them around precisely what are they trying to do, where. And so that gives us good confidence and visibility in the way we structure our agreements with them, given these lead times and the rest of it, which they are mindful of. I think we have great assurance—another way of saying this—in the quality of our backlog. Mark Graff: Yeah, I think the only thing that I would probably add, Tal, is when we talked about value exchange, part of that is making sure we have got the right terms and conditions in place so that we do not get stuck holding the bag, and we have not really seen a lot of people pushing back on that. Tal Liani: Got it. Second question is on margins. The risk is that in times like that, the component pricing will keep going up, and you start to see it. It started with memory. We start to see it now with other companies or other types of components. What can you do going forward? What can you do in order to mitigate the future risk? I understand what you are doing now and how you are trying to mitigate the current risk, but are there any forward pricing or forward purchase commitments, etc., you can take in order to mitigate the future increase in component pricing? Or what are you trying to do, or how are you trying to address it? Mark Graff: Yeah, Tal, I think there is—again, we keep coming back to this word “balance.” I think we are really focused on ensuring that we have got the secure supply to satisfy the demand that we are looking at, and we are locking in the pricing as we know it today with our component suppliers and the contract manufacturing folks. All that said, there is still future risk of them repricing their backlog, and we are having conversations both on our supplier side as well as on the customer side, so that we are not getting squeezed in the middle. But, again, it is the balance of pricing and supply on one side and pricing and share on the other. And I think given the results that you have seen and the basis of our raise, I am feeling pretty comfortable that we are striking those right tones. Tal Liani: Got it. Great. Thank you. Operator: And the next question comes from Atif Malik with Citi. Please go ahead. Adrienne Colby: Hi, it is Adrienne Colby for Atif. Thank you for taking the question. I wanted to ask another one about gross margin. With the 800ZR pluggables ramping in the latter part of the year and also with the pricing increases kicking in, why would we not see gross margin expansion in the second half? Mark Graff: The guide that we gave was a good range based on what we see from the product mix and from the supply chain challenges that we are trying to work through—again, that balance that I talked about before. From our seat right now, we think that is a pretty good guide. As we make more progress, we will give you guys updates. Adrienne Colby: Great, that is helpful. Thank you. And then just as a follow-up, I was wondering if you could provide some more color on the momentum that you are seeing with neoscalers, maybe just in the relative size of the opportunities, if most of that is falling in cloud direct versus MOFN. Gary Smith: Yeah, we are seeing, obviously, an emerging ramp here around a bunch of the—loosely called—the neoscalers, which encompass a fair range of different players. I would say largely right now MOFN-orientated, given the capital expenditures, time to market for them, etc. But what is clear from it all is that the network is now a real priority for them. And I think that plays through to the hyperscalers too. There has been such a maniacal focus—and continues to be, obviously—on things like power, GPU accessibility, etc. Now it is really about the network. The traffic is beginning to come out of the network both for inference and for training. And the neoscalers are obviously seeing that too. So they are leaning in on the network. We are also beginning to see some of them wish to have control of some of that network as well and do their own builds. We are cautious about that approach given the financial structure of some of those neoscalers—not all of them. But we are seeing across the board the neoscalers leaning in on their whole network requirements, largely really, Adrienne, currently going for MOFN. Operator: Thank you. We will take one other question today. Thank you. The next question comes from Ryan Koontz with Needham & Company. Please go ahead. Ryan Koontz: Great, thanks. You touched on scale across a bit. It seems like we are very early in the momentum around that area. Can you maybe expand on those projects—where we are in terms of a rough count, how your visibility is improving there relative to backlog and specific scale across projects? Thank you. Gary Smith: Hi, Ryan. We shared—I think it was in Q3—we announced the first large hyperscaler rollout. We have actually seen during the course of this quarter additional sites being added to that. Again, I would say all of these currently that we are seeing are in North America, which is, I think, to be expected. We have added two more hyperscalers to that that are also rolling this out. I think we are in the very, very early stages of this, and in talking with them, though, the plans are large and expansive, as you would expect for the scale of what they are trying to do here. It is absolutely enormous. So we are at the very early innings of this whole training, clustering. I would say that what we are also observing is there are—all of these hyperscalers we talk about homogeneously; they are not. They have very different business models. They have very different architectures both inside the data center to some extent and certainly outside from a networking point of view. Their training varies as well. And so you have got lots of different variables in there in terms of distance, capacity, speed, etc. They all want low latency, and they all want super high speed, but you are seeing a lot of variables about how they are clustering this. And again, I would say we are at the very early stages of this, Ryan. Ryan Koontz: Really helpful. Thanks for that, Gary. One last question on DCOM here. Great early move here; seems like you have got a big lead in this opportunity to bring PON to out-of-band. Do you feel like that space is defensible for you, and how do you sustain a competitive advantage there? Thank you. Gary Smith: I think there are a number of elements to that sustainability. I think it is deep collaboration, first off, and understanding and intimacy, and obviously Meta were incredibly helpful in instigating that. But there are different use cases; they are slightly different in the different hyperscalers. The dependability of it is we are very vertically integrated into it. We own the core technology, and it is the software that we are putting on that as well. We are uniquely positioned about that. So we think it is the combination of all of those elements—the collaboration, the vertical integration, the uniqueness and high speed of it, and then all of our software integration capability, and also, by the way, installation, which we are also doing. It is the confluence of those things that provide—we think it is quite defendable. Operator: Really helpful, Gary. Thank you. This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Brilliant Earth Group, Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Colin Bourland, Vice President of Strategy, Business Development, and Investor Relations. Please go ahead. Colin Bourland: Thank you, and good morning, everyone. Welcome to the Brilliant Earth Group, Inc. Fourth Quarter 2025 Earnings Conference Call. My name is Colin Bourland, Vice President of Strategy, Business Development, and Investor Relations. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeffrey Kuo, our Chief Financial Officer. During the call today, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a description of the risks that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinion only as of the date of this call, and we undertake no obligation to revise or publicly release the result of any revision to these forward-looking statements in light of new information or future events unless required by law. Also, during this call, management will refer to certain non-GAAP financial measures. A reconciliation of Brilliant Earth Group, Inc.'s non-GAAP measures to the comparable GAAP measures is available in today's earnings release, which can be found on the Brilliant Earth Group, Inc. Investor Relations website. I will now turn the call over to Beth. Good morning, everyone, and thank you for joining us. Beth Gerstein: I am pleased to share strong Q4 results today. We delivered our largest quarter ever of net sales in Q4, driving 4% year-over-year growth in net sales with particularly strong performance in fine jewelry. We also delivered positive adjusted EBITDA, above the midpoint of our stated guidance, highlighting the agility of our business model. Our results reflect the success of the investments we have been making across product, brand, and experience. 2025 was a banner year for Brilliant Earth Group, Inc. We celebrated our twentieth anniversary and achieved major accomplishments across each of the strategic priorities that drive our growth. Before we dive into the results, I want to remind you of that growth strategy and how it guides our execution in this highly competitive and dynamic industry. We believe that these four things are key to realizing the growth opportunity ahead of us. First, our aim is to build Brilliant Earth Group, Inc. into the most loved and trusted jewelry brand. 2025 was a year of incredible brand momentum and successes. Our brand was at the center of many high-visibility moments this year, as stars like Beyoncé, Sabrina Carpenter, and Selena Gomez chose our product for major events in their lives. And we expanded our brand reach through unique partnerships ranging from Jane Goodall to Ring Pop. Second, create great product that is distinctive and ownable and builds affinity for the Brilliant Earth Group, Inc. brand. Have particular focus on expanding beyond our core bridal business into fine jewelry. And 2025 was a breakthrough year in which we grew fine jewelry mix to 17% of bookings with many iconic product releases, including our signature Pacific green-colored lab diamond collection, our Medallions with Meaning, and our Love Decoded collection. Our success in fine jewelry has turned what was a nascent portion of sales just five years ago into a business on a path to $100,000,000 annually. Third, deliver joyful and personalized shopping experiences that delight customers, foster lasting relationships, and set new standards for modern luxury retail. Last year, we continued to deliver industry-leading digital experiences and opened two new showrooms, reaching 42 in total. And our physical retail strategy continues to evolve with the opening of our first flagship showroom in Beverly Hills earlier this year, which showcases our new approach to experiential retail. And fourth, continue to develop our industry-leading asset-light business model utilizing cutting-edge technology and processes to drive long-term profitable growth. The results we shared today demonstrate the power of our model and this team's ability to deliver. Now let me walk you through some performance highlights of Q4. For the fourth quarter, net sales were $124,400,000, representing 4.1% growth year over year, and the highest quarter of net sales in our history. ASPs in Q4 were up year over year across the assortment. Much of the growth in ASP was driven by changes in mix to higher-priced items within each assortment, as we are seeing particular strength with the higher-end consumer combined with strong total and repeat order growth. For the full year, net sales reached $437,500,000, up 3.6% year over year. We delivered a fantastic holiday performance, including another record-breaking Cyber Weekend. Throughout the holiday selling period, our seamless omnichannel model drove strong traffic and conversion, both online and in our showrooms. From our Joyful Delight in the Details holiday campaign to showroom executions, including new experiences like trunk shows and deeper inventory investments, we saw strong performance during the quarter, especially in the ten days leading up to Christmas, where we drove 15% year-over-year bookings growth as customers sought Brilliant Earth Group, Inc. as their go-to gifting destination. Our gross margin was 55.9% in Q4 and 57.5% for the full year, approximately in line with what we had communicated during our Q3 earnings call, highlighting our ability to drive strong margins despite significant metal and tariff headwinds. You all know that the challenges presented by record metal prices and fluctuating tariff conditions are unprecedented. Our ability to manage through these conditions has been a testament to the strength of our business model and our team. This is an industry-wide impact, but our ability to optimize the performance drivers within our control has allowed us to navigate these challenges and still deliver profitability within our expectations. Jeffrey will talk more about the impacts, but as we are now into the new year, you can expect that we will continue to focus on optimizing our business in the ways that we can control to mitigate as much of the external cost pressures as possible. Our strong gross margin, another quarter and year of year-over-year marketing leverage, and overall operating expense discipline enabled us to drive a Q4 adjusted EBITDA of $4,200,000, or a 3.3% margin, and full-year adjusted EBITDA of $12,000,000, or a 2.7% margin, illustrating the agility of our business model and our continued discipline in cost management. Turning to some additional highlights for the quarter. Fine jewelry was a clear standout. In Q4, for the first time, we had multiple days where we hit $1,000,000 in fine jewelry bookings. We are seeing strong demand for both self-purchase and gifting, with almost half of new customers discovering Brilliant Earth Group, Inc. through fine jewelry in Q4, resulting in another record quarter in fine jewelry. Fine jewelry bookings grew 34% year over year in Q4, with strong unit and ASP growth, reaching 23% of total bookings mix for the quarter and 17% for the full year. As you know, fine jewelry has been one of our top strategic priorities for several years as we diversify beyond our bridal heritage, and we have driven extraordinary results. Our full-year 2025 fine jewelry bookings are more than three times bigger than they were just four years ago at the time of our IPO. Our iconic and signature fine jewelry collections, like Jane Goodall, Soul, and Love Decoded, and collaborations like Ring Pop, continued to significantly outpace overall fine jewelry bookings growth as customers are increasingly drawn to Brilliant Earth Group, Inc.'s one-of-a-kind styles through campaigns that capture consumers' imagination. We have also had great success driving growth in lab-grown diamond fine jewelry. As you know, we are early leaders in the lab diamond space. We have immense opportunities as lab diamonds continue to increase in popularity amongst consumers. In Q4, bookings from fine jewelry made with lab diamonds grew 61% year over year, and we continue to see significant opportunities for lab diamonds to increase the addressable market of consumers looking to buy diamond jewelry for everyday wear. In wedding and anniversary bands, we set another record, delivering our largest fourth quarter of bookings ever with double-digit year-over-year growth. And we continue to see success across both our men's and women's collections, with outperformance in giftable and higher price point diamond rings in Q4. And in engagement rings, we continue to drive booking of approximately 1% year over year in the second half of the year. Our signature collections, the exclusive designs we are known for, continue to drive strong results, growing double digits year over year in Q4. Turning to our seamless omnichannel experience, we continue to innovate across our digital and in-person customer experience. In digital, we made many enhancements from online imagery and merchandising to overall up-leveling of our online shopping experience. In showrooms, we opened two new locations in 2025, one in Southlake, Texas, and another in Alpharetta, Georgia, ending the year with 42. And as our showroom format strategy continues to evolve to more ground-floor and mall locations, we have had increasing success with retail customers who walk into the showroom without a prior appointment. In fact, orders from these retail customers grew 61% year over year in Q4. In January, we opened our first flagship showroom in Beverly Hills. This showroom is a new and evolved concept that celebrates the artistry, craftsmanship, and quality that we are known for, while immersing customers in the fullest physical expression of our brand to date. In addition to elevating our hallmark appointment experience, we have introduced several new features, including an eternity bar featuring the widest breadth of our engagement and wedding assortment and our unique design-your-own experience, a fine jewelry personalization station, a dedicated VIP showroom, and an exclusive new date night appointment offering that is an exceptional personalized experience for couples. The date night appointment is a simple idea that takes what can be a stressful process for couples and makes it genuinely fun and celebratory. The Beverly Hills flagship is both an evolution and elevation of our retail strategy. In fact, Forbes called our concept a blueprint for the future of luxury jewelry retail, and we agree. Beyond the opening of our flagship, we expect to open another two showrooms in 2026. For Q1 to date, I am pleased to report that we have seen a continuation of strong performance with strong year-over-year bookings growth, year-over-year new and repeat order growth, as well as an encouraging Valentine's Day start to the year. ASPs are also up year over year across engagement rings, wedding and anniversary bands, and fine jewelry, consistent with what we observed in Q4, demonstrating strength among our higher-income consumers. We also recognize that the industry is facing historically high metal costs. We believe we are well positioned to navigate this environment with our agile and sophisticated merchandising, pricing, and sourcing strategies. Before I hand the call over, I also want to share that today we released our 2025 Mission Report, which marks our two decades of impact and charts our progress toward our four mission pillars: transparency, sustainability, compassion, and inclusion. I invite you to read the report, in which we also introduced the next generation of initiatives designed to expand our impact even further. And finally, I want to thank our incredible team for their commitment and tireless efforts this past year. Their passion and execution are the reason we can stand here today, twenty years in, and say with confidence that the best is still ahead for Brilliant Earth Group, Inc. I will now turn the call over to Jeffrey. Jeffrey Kuo: Thanks, Beth, and good morning, everyone. As Beth mentioned, we are pleased to report fourth quarter and full-year results where we continue to successfully drive our strategic initiatives, deliver top-line growth, and sustain profitability and positive free cash flow despite a challenging cost environment. Let me take you through the details. Q4 net sales were $124,400,000, up 4.1% year over year, which was our biggest quarter ever and near the midpoint of our stated guidance range. Full-year 2025 net sales were $437,500,000, up 3.6% year over year. Total orders grew 6.5% year over year in Q4 and 13% for the full year. Repeat orders grew 15% year over year in Q4 and 13% for the full year, demonstrating the effectiveness of our customer acquisition and retention efforts, and the continued resonance of our brand and products with consumers. Average order value, or AOV, was $2,001 in Q4 and $2,082 for the full year. This represents a decline of 2.3% year over year in Q4 and 8.2% for the full year. Our Q4 AOV reflects the continued success we have had in driving strong fine jewelry performance, which carries a comparatively lower price point, along with year-over-year growth in ASPs across the assortment, as we see strong success driving sales of higher price point items. Q4 gross margin was 55.9%, and full-year gross margin was 57.5%. This represents a 370 basis point decline year over year in Q4 and a 280 basis point decline for the full year. To put the Q4 margin environment in context, gold prices at the end of Q4 were up approximately 67% year over year, while platinum was up approximately 144% year over year, both at or near what were then all-time highs, and we continue to navigate a challenging tariff environment. We are extraordinarily proud of our ability to deliver strong gross margins in this environment, which speaks to the strength of our premium brand positioning, our data-driven price optimization engine, our globally diversified supply chain, and the agility of our team and business model to adapt quickly to changing market conditions. We delivered Q4 adjusted EBITDA of $4,200,000, or a 3.3% adjusted EBITDA margin. During that time, the gold spot price increased approximately $400 an ounce and platinum over $675 an ounce between the time of our last earnings call and the end of the year, and we were still able to deliver adjusted EBITDA above the midpoint of our guidance range and exceeding expectations. Full-year 2025 adjusted EBITDA was $12,000,000, or a 2.7% adjusted EBITDA margin. This highlights the sustainability of our business model, driven by our strong gross margins, continued marketing leverage, and overall operating expense discipline. Q4 operating expense was 55.9% of net sales compared to 57.6% of net sales in Q4 2024, representing approximately 170 basis points of leverage year over year. Full-year 2025 operating expense was 58.7% of net sales compared to 59.5% in 2024, representing approximately 80 basis points of leverage year over year. Our disciplined management of expenses while also driving growth and investing in the business is demonstrated in this year-over-year leverage. Q4 adjusted operating expense was 52.7% of net sales compared to 53.9% in Q4 2024. Full-year 2025 adjusted operating expense was 54.9% of net sales compared to 55.4% in 2024. Adjusted operating expense does not include items such as equity-based compensation, depreciation and amortization, showroom pre-opening expenses, and other nonrecurring expenses. Q4 marketing expense was 24.6% of net sales compared to 26.1% in Q4 2024. This represents approximately 150 basis points of year-over-year leverage. Full-year marketing expense was 24.2% of net sales compared to 25.7% in 2024, also approximately 150 basis points of marketing leverage. This is our second year of driving year-over-year leverage in marketing spend, and these results speak to our dynamic management of marketing spend, including use of AI and machine learning to drive efficiencies, while still making strategic investments to grow the brand. Employee costs as a percentage of net sales were higher in Q4 by approximately 110 basis points as adjusted year over year. For the full year, employee costs were approximately 90 basis points higher as adjusted. This includes growth in showroom employees, including from newly opened showrooms; we continue to strategically invest in our showroom expansion. Other G&A as a percentage of net sales declined year over year by approximately 90 basis points as adjusted in Q4, as we continue to drive operating expense efficiencies and amortize expenses over a larger net sales base. For the full year, other G&A as a percentage of net sales was higher by approximately 10 basis points as adjusted, as we balanced prudent investment with disciplined cost management. Year-over-year inventory grew approximately 39%, principally as a result of strategic procurement opportunities to purchase diamond and jewelry inventory at advantageous prices during the year in light of tariffs. Even with this increase, our 4x inventory turns as of year end continue to be significantly higher than the industry average of one to two times. We maintain conviction that the agility of our data-driven, capital-efficient, and inventory-light operating model continues to be a compelling competitive advantage. We ended the fourth quarter with approximately $79,100,000 in cash. As you know, during Q3, we paid off our term loan, leaving us with no debt on the balance sheet, and we completed the one-time dividend and distribution of approximately $25,000,000. For the full year, we generated approximately $5,800,000 in free cash flow, demonstrating our continued ability to generate cash while making strategic investments and driving growth. Turning to our outlook for 2026. As Beth mentioned, we have carried our momentum into the new year. For our annual guidance, we expect net sales to grow in the mid-single-digit percent range year over year. We expect continued headwinds in gross margin, with metal prices near all-time highs, and expect gross margin to be in the mid-50s percent range for the year, assuming that metal prices remain at similar levels to where they are today. We expect to continue driving year-over-year leverage in marketing expense as a percentage of net sales for the year, continuing the success we have had in the past two years, driving increasing efficiency while delivering strong top-line results. We will continue to make selective medium- and longer-term investments in 2026, including in employee costs and other G&A, such as investments in technology and in our showrooms. We expect to deliver positive adjusted EBITDA for the year, but slightly lower than last year's adjusted EBITDA dollars given the challenging metal cost environment. We also expect that most of this year's adjusted EBITDA will come from Q4. For Q1, we expect net sales to grow in the mid-single-digit percent range year over year. We expect adjusted EBITDA margin to be in the negative mid-single-digit range as a percentage of sales, driven in significant part by both the speed and magnitude of recent gold and platinum price increases, with both metals remaining near all-time highs. I also want to address our previously stated medium-term outlook. As many of you know, we laid out a set of medium-term targets, and we have been on our way to delivering on those medium-term targets. You can see this in our improving net sales growth trajectory and our continued leverage of marketing expense as a percentage of net sales, where we have now delivered two consecutive years of full-year leverage. However, the precious metal environment we are operating in today is unlike anything our industry has experienced. Gold and platinum prices have reached levels that were impossible to anticipate when we set those targets, and this has had a meaningful impact on gross margin. Because of this level of uncertainty in metal prices and the magnitude of their impact, we do not believe it is appropriate to speak to targets beyond the current year at this time. We remain confident in the underlying health and trajectory of our business, and we will continue to share our perspective on the path forward as visibility improves. In closing, our data-driven approach, including agile price optimization, disciplined expense management, and our asset-light business model, positions us well to outperform the industry while delivering profitable growth. With that, I will turn the call over to the operator for questions. Operator: Thank you. We will now open for questions. To ask a question, please press 11 and wait for your name to be announced. To withdraw your question, please press 11 again. The first question comes from Oliver Chen with TD Securities. Your line is open. Julia Shlansky: This is Julia Shlansky on for Oliver Chen. I am curious to hear about your expectations for AOV growth in the context of guidance for the next year, and expectations for gold and platinum hedging, and how much of your current inventory that you have secured throughout the year is effectively hedged or price loaded. Thank you. Beth Gerstein: Okay, great. I can start on AOV. In Q4, it was slightly down, which I think is actually the smallest decrease that we have seen for a bit of a while. Overall, what is driving AOV is we are seeing ASPs increase across the assortment. Part of that is due to the price positioning that we have, the strength of our brand, and the strong reception we are seeing for our iconic jewelry collections, as well as a great reception from our higher-income customers. So ASPs are up across the assortment. We are also seeing really strong performance in fine jewelry, and as fine jewelry is a lower category, that is what is driving the overall effect. That is what we are seeing from a high level. Jeffrey, I do not know if you want to comment more on AOV, and then maybe you can lean into the gold and platinum question. Jeffrey Kuo: No, I think you covered that well, Beth. From the perspective of how we are managing metal costs, we have a variety of different tools that we use. Hedging is one of those strategies. As you know, we also are able to price optimize and really think dynamically about pricing, think about things like design and product engineering and ways to manage costs while maintaining very high quality standards, as well as vendor optimization and negotiations. We have a lot of different tools at our disposal, and you can see that in the results of how we navigated Q4. We were able to navigate these very significant changes in metal prices and still deliver an adjusted EBITDA that was within our expected range. Colin Bourland: Great. Thank you both. Operator: Thank you. Our next question will come from Ashley Owens with KeyBanc Capital Markets. Your line is open. Ashley Owens: Hi, great. Good morning, and thanks for taking our questions. As we think about 2026, how would you frame the key bookings growth drivers across the business, whether that is further bridal recovery or continued fine expansion? And how should we think about share gains relative to industry growth over the next year? Beth Gerstein: We are really encouraged by the growth that we have been seeing and the continuation of some of the strong growth that we saw in Q4. The drivers that I mentioned in the remarks—with fine jewelry being very strong, with our showroom strategy, and with the brand awareness—continue to be key growth drivers in 2026. It is really a continuation of all of the initiatives that we have been talking about, and we are very encouraged by the brand resonance that we are seeing and by some of the breakthrough moments that we are partnering with and driving overall increased awareness. On the fine jewelry side, we are going to continue to see this be a growth driver. There is a lot of opportunity. It is a very large market, and we are also continuing to outperform the industry as it relates to fine jewelry. We are very encouraged by the growth signals that we are seeing there and are going to continue to lean in and continue to be that go-to destination for jewelry. One of the stats that I mentioned—that half of our new customers discover us now through fine jewelry—just shows you the size of the opportunity and how it is gaining momentum. Ashley Owens: Within the $100,000,000 longer-term opportunity you called out, do you expect the business to become less dependent on some of the engagement ring cycles and volatility we have seen and driven more by repeat purchases and gifting occasions? And then quickly on gross margin and the mid-50s outlook for the year given the metal environment, as we think about modeling for 2026, should we assume that persists through the year, or is there potential for sequential improvement as pricing, sourcing adjustments, or fine jewelry mix growth increase and those things flow through? Thank you. Beth Gerstein: Sure. Yes, in terms of how we are thinking about the business, fine jewelry is a continuation of the diversification away from our bridal heritage. We are continuing to be bridal leaders and introduce new collections, and we continue to see that as an important part of our overall growth, but fine jewelry becomes more and more of a driver. We are continuing to see that diversification. Even wedding and anniversary bands, having double-digit growth, show an evolution of the business, and if you look at a lot of the independents out there where the mix is leaning more toward fine jewelry, that is the path that we are on as well. Jeffrey, do you want to talk about gross margin? Jeffrey Kuo: In terms of gross margin outlook for the year, as I mentioned, we are looking at gross margin to be in the mid-50s percent for the year given the metal environment. As we go through the year, we do have more and more ways to mitigate some of the headwinds, including things like pricing and the operational actions that I mentioned earlier. We have more tools over time. We do not have a more specific shaping on a quarter-by-quarter basis of how we expect gross margin to look, but we think that our agility overall that we have demonstrated in recent quarters continues to serve us well, and we are better positioned than the industry at large to be able to navigate a variety of different conditions. Ashley Owens: Super helpful. I will pass it along. Thank you. Operator: Thank you. As a reminder, to ask a question, please press 11. The next question comes from Anna Glaessgen with B. Riley Securities. Your line is open. Anna Glaessgen: Hi. Good morning. Thanks for taking my questions. I would like to start on the embedded pricing within the guidance. I think on the Q3 call we talked about Q4 being a particularly challenging time to lift prices as the consumer is generally more price sensitive. Are you assuming that at the turn of the year in Q1 there is better opportunity to offset the headwinds that you have been noting in gross margin? Beth Gerstein: Yes, I can start there. We are seeing an improved opportunity in terms of continuing to optimize and take selective price increases. Jeffrey mentioned the speed and the volatility in terms of metal prices overall, which is especially notable in Q1. One of the advantages that we have is a very sophisticated pricing algorithm. We are very much a test-and-learn and data-driven company, and we also have a premium brand positioning with proprietary designs. All of that enables us to have more pricing power. Q1 certainly gives us a better opportunity than Q4, where we tend to be a little bit more selective. This is something that we have a lot of experience navigating throughout our history, and we are going to continue to use the tools available to us, but we do see opportunity to be selective in terms of increasing our pricing. Anna Glaessgen: Great. Turning to OpEx, with the mid-50s approximately gross margin assumption, to get to slightly lower profitability from 2025, it seems to imply an escalation in operating expense leverage in the year. Could you maybe talk to the biggest opportunities there? Jeffrey Kuo: Yes, I would be glad to. I would like to frame how we are thinking about overall guidance for the year. You can see that we have seen strong performance on the top-line side, and we are guiding to a higher growth rate overall for the year than last year. We have been very successful in driving marketing efficiencies and expect to be able to continue to drive year-over-year marketing efficiencies this year. The big headwind that is incorporated is on the metal pricing side and the impact on gross margin. That is something that is facing the entire industry. You can see the very large and very fast shifts in terms of metal price recently, and that is really the main factor. Some of the things like marketing leverage help us to offset that, and we are going to be disciplined in terms of other OpEx areas such as employee and other G&A costs to balance, as we always have, making medium- and longer-term investments with driving profitability. Our approach to OpEx is that we are going to be disciplined and look to continue to drive efficiency in areas like marketing. What you are seeing in terms of the year-over-year change in profitability is really coming from the metal cost that we are seeing in the environment overall. Anna Glaessgen: Got it. One more follow-up, if I may. I believe, Jeffrey, you said in the prepared remarks that most of the adjusted EBITDA in 2026 should be from Q4. That seems to be roughly in line with historical seasonality. I was just wondering if you are implying that we could potentially see a negative EBITDA in Q2 or Q3? Jeffrey Kuo: You are right that we do expect most of the profitability in Q4, and that factors in a number of different things. Seasonally, Q4 is our biggest quarter, and you are going to see that come into play. We may have discussed in prior calls how a lot of our operating cost structure is not highly seasonal, so you have a relatively more stable base of things like employee costs and other G&A over the course of the year. In Q4, you have the opportunity to amortize that over a much larger revenue base, and that is factored into our guidance. As you go over the course of the year, we think that we have more and more opportunities to capture efficiencies and be able to mitigate some of the metal cost headwinds as we go through the year. Anna Glaessgen: Great. Thanks. Operator: Thank you. I am showing no further questions in the queue at this time. I will now turn the call back over to Beth for closing remarks. Beth Gerstein: Thank you, everyone, for joining us, and we look forward to talking to you in our next quarterly call. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome to the Ambiq Micro, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I would now like to turn the call over to Charlene Wan, Ambiq Micro, Inc.’s Vice President of Corporate Marketing and Investor Relations. Charlene, please go ahead. Charlene Wan: On today’s call, Ambiq Micro, Inc.’s CEO, Fumihide Esaka, will provide an overview of the company’s performance and strategy. CFO, Jeffrey Winzeler, will then discuss the quarter’s financial results and 2026 outlook. Following their remarks, Scott Hanson, Ambiq Micro, Inc.’s Founder and CTO, and Aaron Grashian, EVP of Global Sales and Marketing, will join Fumi and Jeff for Q&A. Our earnings release is available on the Investor Relations page of our website at www.ambiq.com. We have also posted our earnings presentation on the Investor Relations section of our website. Before I turn the call over to Fumi, I would like to remind our listeners that during the course of this conference call, management will discuss non-GAAP financial measures. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release available on the company’s Investor Relations website. In addition, today’s call will contain forward-looking statements, representing management’s beliefs and assumptions only as of the date made. Our most recent annual report on Form 10-Q and other filings with the SEC provide more information on specific risks that may cause the actual results to differ materially from current expectations. And now it is my pleasure to turn the call over to Ambiq Micro, Inc.’s CEO, Fumihide Esaka. Fumihide Esaka: Good morning, everyone, and thank you for joining us. 2025 was a strong year for Ambiq Micro, Inc., defined by disciplined execution and accelerating demand for edge AI across our end markets. Our performance reflects both share gains and market expansion as we enable AI on more devices across more markets and in a growing number of use cases. We are entering 2026 with strong momentum. Based on current demand indicators, we expect outsized top-line growth. We remain confident in our long-term opportunity as we partner with customers to advance their edge AI roadmaps and deliver sustained growth. Starting with Q4 performance, we delivered our highest net sales quarter of 2025, exceeding guidance. End-user demand outpaced our customers’ expectations, resulting in incremental expedited orders late in the quarter. Three key factors behind the net sales increase from Q3 were, first, strong end demand for our customers’ products; second, broader adoption of Ambiq Micro, Inc. solutions within customer portfolios; and third, customers upgrading to Apollo 5 for more advanced edge AI functionalities. Turning to the full year, 2025 was a milestone year for Ambiq Micro, Inc. Edge AI adoption was a clear growth driver, and we estimate that more than 80% of the units we shipped were running AI algorithms. Net sales and non-GAAP gross profit increased in every quarter of the year, and we delivered our highest-ever gross profit for the year. We expanded our customer base across multiple end markets, including securing a large wearable customer. At the same time, we continued to strengthen and diversify our design funnel, particularly in medical, industrial, and smart home and building markets. As these programs move into production over the next 18 to 24 months, we expect incremental growth and revenue diversification. We also expanded our product portfolio to support more advanced edge AI applications, launching Apollo 510 Lite, Apollo 510B, and Apollo 330. On the software side, we introduced the Helia AOT and Helia RT AI runtime powered by our new Helia Core AI kernel library. Finally, we completed a successful IPO, demonstrating strong investor demand and confidence in our strategy and long-term opportunity. Our 2025 performance highlights the strengths of our SPOT platform in delivering ultra-low-power solutions and enabling edge AI across an increasingly diverse set of applications and end markets. Based on our customer conversations, we see several trends accelerating edge AI adoption in 2026, with SPOT enabling powerful new AI capabilities across an expanding range of industries. We expect to further grow market share while broadening the overall opportunity. First, customers are adding more sophisticated edge AI capabilities into their devices to differentiate their products and drive demand. Second, wearables are evolving into true personal health platforms requiring more advanced on-device intelligence and ultra-low-power performance. This includes real-time health insights across multiple wellness indicators. Third, wearables are expanding into new high-value form factors such as rings and eyewear. This broadens the addressable market and increases demand for low-power, high-performance edge AI solutions. Looking ahead to 2026, we expect customers to launch new models with more advanced features across diverse form factors, including rings, display-less bands, and watches. We also expect a new scaled global customer to enter into mass production this year. Products launched in late 2025 are continuing to ramp in volume. At the same time, we anticipate ongoing migration to Apollo 5 as customers look for greater performance and AI capability. As a result, we expect 2026 to be a year of strong growth for Ambiq Micro, Inc. While we are making impressive progress, we remain early in a large and expanding edge AI opportunity. To capture this opportunity, we are taking focused action to accelerate growth over the coming years. First, we are leveraging our existing Apollo family and derivatives to expand aggressively into high-value markets. Second, we are developing new products that enable more advanced edge AI capabilities and expand our reach. We are making solid progress on both fronts. Starting with market expansion, edge AI is becoming more capable and complex across medical devices, smart homes, and industrial markets. In healthcare, customers are building smarter cardiac monitors, senior care devices, and hearing aids, all with enhanced AI capabilities. In industrial markets, AI-powered sensors are enabling predictive maintenance and asset monitoring, which helps reduce downtime and improve operational efficiency. In smart buildings, edge AI helps manage lighting, HVAC, security, and occupancy data to optimize energy use in real time. While these markets are growing, design cycles remain longer, particularly in regulated and industrial environments. We are encouraged by our early traction and believe we are well positioned to expand our footprint as edge AI adoption scales across a broad range of end markets. Our integrated hardware and software platform is purpose-built for these transitions by combining AI-enabled processing, connectivity, and edge intelligence in a single ultra-low-power architecture optimized for power-constrained devices. Our recent partnership with RONS highlights this progress. Through the NavaSear brand, RONS is a leading provider of intelligent equipment operation maintenance solutions. By leveraging SPOT hardware and software, RONS will deploy large-scale, always-on battery-powered sensors. We expect this and similar engagements to increase diversity of our design funnel and unlock new and durable long-term growth in the industrial edge. This is just one example of how SPOT is powering AI adoption across diverse end markets. We are building on this strong foundation with the ongoing expansion of our Helia AI software ecosystem. Helia will support more AI kernels, with performance improving over time. Paired with our AI development kits, Helia will help customers build ultra-efficient AI models for health analysis, speech interfaces, machine health monitoring, and more. Turning to our product roadmap, this morning we announced new technical details for Atomic. It is the first SPOT family built on a FinFET process with TSMC, enabling operation down to 300 millivolts, the lowest voltage in our company’s history. This breakthrough pushes the boundary of ultra-low power while enabling significantly more sophisticated AI capabilities. This combination is essential for the next generation of battery-powered edge AI devices. Atomic is purpose-built for AI workloads that benefit from parallel processing rather than raw clock speed. With its integrated NPU, GPU, and embedded memory, we believe it will power a new class of intelligent devices, including advanced wearables, AR glasses, and smart cameras. At the same time, we see significant opportunity to extend our reach into new markets with Apollo derivatives that support smaller form factors and core edge AI capabilities. Reflecting stronger customer demand, we are accelerating development of both Atomic and Apollo product families. Instead of a three-year step-by-step plan, we now plan to start development of Apollo 340 and Atomic 120 this year, along with ongoing work on Atomic 110. Apollo 340 is designed as a highly scalable platform to expand into new high-opportunity segments. It combines Ambiq Micro, Inc.’s energy efficiency with an attractive price point, compact form factor, and comprehensive developer support and reference designs. This will make it well suited for distribution channels, ecosystem partners, and reference designs, multiplying sales leverage and accelerating delivery of on-device AI to the mass market. Turning to Atomic, the first SoC designed from the ground up for advanced AI, Atomic 110 will enable personal devices with smaller batteries to achieve longer battery life while supporting richer features such as natural-language voice interfaces and on-demand health analysis, unlocking new possibilities for personal life-logging devices. In industrial markets, Atomic will support more complex AI models for local, cost-effective predictive maintenance. In medical applications, it will enable more real-time, always-on, private metrics in smaller form factors. Atomic 120 will introduce capabilities tailored for smart cameras and next-generation smart eyewear, which is one of the fastest-growing categories in wearables. In summary, 2025 was a year of strong performance and focused execution for Ambiq Micro, Inc. We believe in 2026 we are well positioned for significant top-line growth, supported by solid customer demand and accelerated product momentum. At the same time, we are intentionally increasing investment across R&D, software, and go-to-market initiatives to capture an even larger share of the expanding edge AI opportunity. Our ultra-low-power SPOT platform, combined with the strategic actions we are taking, is laying the foundation for sustained long-term growth. With that, I will turn the call over to Jeff to review the financials. Jeffrey Winzeler: Thank you, Fumi, and good morning, everyone. Our 2025 performance reflects the benefits of our strategic repositioning, which strengthened the quality of our revenue base and aligned the company with long-term growth opportunities. At the end of 2024, we took deliberate steps to prioritize customers who view our ultra-low-power technology as a critical enabler of edge AI, while reducing exposure to efficiency-focused, feature-neutral customers primarily in Mainland China. As a result, we delivered sequential sales and non-GAAP gross profit improvement in every quarter of the year. Our full-year results reflect stronger margins and increased gross profit dollars by 32.1% on 4.7% lower net sales, achieving our highest-ever annual gross profit. These results validate our strategic repositioning, and with the strong momentum in the business, we believe we are well positioned to deliver sustainable growth over the coming years. Now turning to our fourth quarter results, we delivered the highest net sales quarter of 2025 with results ahead of our guidance on accelerating demand trends. Net sales of $20.7 million increased 2% year over year. Non-GAAP gross profit increased 75.5% to $9.4 million, while non-GAAP gross margin expanded almost 20 percentage points to 45.5%. This performance reflects the impact of the strategic repositioning I just described, with 8.6% of net sales driven by customers in Mainland China, down from 50% in 2024. Sequentially, net sales increased 14.2%, driven by strong underlying demand. Non-GAAP gross profit dollars increased 15.9%, with non-GAAP gross margin expanding 70 basis points. The improvement was driven by a more favorable product mix, reflecting higher sales to customers deploying multiple edge AI capabilities on our SPOT platform. Turning to operating expense, non-GAAP R&D expense was $9.3 million, up 33% year over year and 34% sequentially. This reflects additional investment that began in the fourth quarter to support our product development for both the Atomic and Apollo families. Non-GAAP SG&A expenses were $7.3 million, up 19.7% year over year, largely due to public company costs. Sequentially, SG&A increased 17.4%, driven by strategic investments in sales and marketing as well as higher incentive compensation reflecting stronger net sales performance in the quarter. Other income was $1.3 million, up $1.1 million year over year due to interest income earned on IPO proceeds. Fourth quarter non-GAAP net loss attributable to common stockholders was $5.9 million, a $1.7 million improvement year over year and $1.9 million lower sequentially. Non-GAAP net loss per share attributable to common stockholders was $0.32. We ended the quarter with no debt and $140.3 million in cash and cash equivalents, reflecting the proceeds from our IPO. And in 2026, we completed a successful follow-on offering that generated an additional $76.8 million. Our strengthened cash position provides flexibility to fund growth initiatives and support our strategic priorities. Now turning to our outlook, for 2026 we expect the following: net sales to be in the range of $21 million to $22 million, reflecting the trends Fumi covered earlier; non-GAAP gross margin between 44% and 45%, reflecting the ramp of the Apollo 5 family. We expect to see improved yield and a better cost structure as this product family scales throughout the year. Non-GAAP operating expense of $18.0 million to $18.5 million, reflecting increased investment to support our strategic growth priorities, including approximately $1.7 million related to IP purchases in the quarter. Non-GAAP loss per share of $0.39 to $0.33, based on weighted average share count of 20.38 million shares outstanding. As you update your full-year models, please keep the following in mind. We are encouraged by the demand inflection we saw in 2025. We see a clear path to strong net sales growth in 2026 driven by new model launches, ramping of a scaled global customer, higher volumes from recent customer introductions, and continued adoption of Apollo 5. We remain focused on driving continued yield improvements across the portfolio while recognizing that gross margin may be affected by broader industry cost dynamics and supply chain pressures. We expect non-GAAP operating expense will be approximately $30 million higher than 2025. This higher spending is tied to the accelerated development of both Atomic and Apollo product families, reflecting strong customer demand. The increased OpEx includes growing Ambiq Micro, Inc. engineering headcount, utilizing contract engineering to provide flex in our model for both upside and downside flexibility, and $7 million to $10 million of IP purchases necessary for product development. Given the timing of IP purchases will be project-driven, do not expect operating expenses to be linear in 2026. In summary, our 2025 results reflect the strength of our competitive position, disciplined execution, and favorable secular tailwinds. Apollo is now powering multiple generations of products in production, and our expanding portfolio of derivatives is supporting upgrade cycles and broadening our reach across customers and end markets. At the same time, we are investing to enable higher-performance edge AI applications and expand our long-term revenue opportunity. With Apollo driving growth and margin expansion today, and Atomic positioned to contribute meaningfully beginning in 2028, we believe we have multiple growth drivers to support sustainable growth over time. With that, I will turn the call back to Fumi before we open the line for Q&A. Fumihide Esaka: The opportunity ahead for Ambiq Micro, Inc. is large and growing quickly. We expect to deliver meaningful sales growth in 2026, and we are just getting started. As AI moves beyond the cloud and into everyday devices, our technology is helping lead this change. With SPOT’s industry-leading power efficiency, we enable intelligent devices that are mobile, secure, and personal. We bring powerful AI directly to where data is created and decisions are made. We believe this shift to true edge intelligence is a defining moment for our industry. We are excited about the role Ambiq Micro, Inc. will play in shaping this future. Thank you for your continued confidence and support. With that, I will open the call to questions. Operator, please go ahead. Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one to join the queue. Your first question comes from the line of Quinn Bolton of Needham & Company. Your line is open. Quinn Bolton: Hey, guys. Congratulations on a nice finish to 2025 and a strong outlook for 2026. I guess, let me ask: Fumi or Jeff, you have mentioned several times your strong outlook for 2026. I am wondering if there is any sort of guidance you can provide around that. I mean, certainly, you could be on pace to generate north of $90 million of revenue, maybe even approaching $100 million. And a related follow-up: historically, you have seen revenue peak in June, just reflecting seasonality of some of your wearable customers. In 2025, you saw sequential growth throughout the year. What kind of revenue pattern quarter to quarter would you expect? Do you think Q2 is the peak, or could it be a more linear ramp through the year? And then I have a follow-up. Fumihide Esaka: Hi, Quinn. Thanks for the great comment. Like I said in the script, Q4, definitely, we are seeing as an inflection point. Customer forecasts are coming in extremely strong, and the trend will continue in 2026. Again, we see Q1, Q2, Q3 to be extremely strong, and Q4, I think we are still a little bit at a far distance, and typically seasonality will fix in Q4. But we clearly see a path to more than $100 million at this point, and we are very confident that we can achieve more than what we originally forecasted. Does that answer your question? Quinn Bolton: That is great. And then a question if Scott is there. You announced that 12-nanometer SPOT technology gets down to operating voltage as low as 300 millivolts. If I looked at a more standard low-voltage process at TSMC for 12 nanometer, does that get down to 400, 500 millivolts? How much lower at 300 millivolts would the SPOT process be than the standard foundry offering at TSMC? Just trying to get a sense of the power advantage you bring with the 12-nanometer SPOT technology. Thank you. Scott Hanson: Process nodes across foundries is going to be on the order of 700 millivolts, so 0.7 volts. We are running at a fraction of that operating voltage. If you are running at, let us say nominally, to make it easy math, 350 millivolts against a 700 millivolt competitor, that is going to give you a fourfold energy advantage. Of course, things are a little more complex than that. On the one hand, I have always said that a good portion of the SPOT advantage comes from all the stuff we do other than voltage scaling: the way we build our clock trees and our bus fabrics and our memories and everything else. You have the potential to go more than 4x if you layer all that innovation in. We feel really good about what 12 nanometer is looking like and are excited about some of the early measurements that we are seeing in-house. Quinn Bolton: That is great. Thank you. Operator: Your next question comes from the line of Tore Svanberg of Stifel. Your line is open. Tore Svanberg: Yes. Thank you and congratulations on the strong results. Fumi, could you talk a little bit more about some of the applications or end markets that are going to be driving the strong growth in calendar 2026? I mean, obviously, wearables have been a big part of the business, but you are now getting into industrial. Any more color on the types of applications that will be driving the growth would be very helpful. Fumihide Esaka: Thanks. We are seeing strengths in every product line and end market. First, let me tell you that Apollo 3 family, 4 family, and Apollo 5 family are seeing very strong demand to enable edge AI. And, yes, major increase is still coming from wearable customers, but 25% of the funnel is now non-wearables and medical and so on. We do expect more than the original percentage of the share as non-wearables in 2026. The growth is phenomenal. You would expect our traditional industrial leaders, but some other medical and industrial applications will be contributing to our 2026 revenue. Tore Svanberg: Very good. And as my follow-up, you talked about some volatility in the OpEx for the year. I was just hoping you could give us a little bit more feel for whether it is going to be first-half weighted or second-half weighted, because I think you did say it is not going to be linear. Any more color on first half versus second half would be very helpful. Thank you. Jeffrey Winzeler: Sure. As we think about OpEx for 2026, as you know and as we said on the call, we are going to invest roughly a $30 million increase in our OpEx year over year. The way that is going to break out is there are three major components that really drive that increased spending. The first is Ambiq Micro, Inc. headcount. We are going to hire more engineering in both hardware and software and continue to grow our internal capabilities. That spending will be somewhat linear as we add more people to the company. The second place that we are going to spend that money is in contract engineering. This is important because it gives us scale both on the upside and the downside. It gives us a more variable cost structure. For that contract engineering, it will be very much project-based. As we think about the products that we are going to tape out in 2026, you would expect to see very high periods of engineering, probably more in the Q2, Q3 timeframe, where we will utilize that project engineering. The last place that we will spend a significant amount of money is in our IP acquisition. These IPs are necessary for us to build new products, and that is very project-based. It is not a linear spend, and given it is to support products that we are going to tape out in the second half of the year, I would expect the majority of that spending to take place in the Q2, Q3 timeframe. Tore Svanberg: Very helpful. Congrats again. Operator: Thank you. And again, if you have a question, please press star one on your telephone keypad to join the queue. Your next question comes from the line of Vivek Arya of Bank of America. Your line is open. Vivek Arya: In terms of elevated component pricing, are you seeing any impact on demand due to that? Are you relatively insulated from any pricing pressure from your customers as they want to preserve their margins? And how should we think about the gross margin trajectory through the year, given the introduction of a lot more new, higher-complexity Apollo SKUs with your customers and more design wins? Should we expect that to accrete significantly or remain around this 45% zip code? Jeffrey Winzeler: When we think about margins, first of all, we are very happy with the margin accomplishments that we made in 2025. We increased our gross profit dollars by over 30% year over year, and we increased our gross margin year over year, going to 45% for total 2025. When we think about the margin equation going forward, there are two components. The first is the ASP side of the equation, and there we continue to focus on opportunities where we can maximize our value. We are very much looking for high-revenue opportunities where we get paid the most on a per-unit basis for our product. On the cost side of the equation, we are very focused on things that we can control, which are yield across our product portfolios. That said, our efforts may be tempered by some of the dynamics that are happening in the industry. The increasing cost of being a fabless semiconductor company exposes us to higher pricing of our capacity, probably more in the back half of the year. That aspect of it we are monitoring very closely, and that could put pressure on our ability to grow margins year over year. Vivek Arya: Okay. Thank you. And then in terms of this new customer you have got in 2025, any idea in terms of the timing of that ramp, when it becomes sizable? Should we expect that socket to be similar size to your other wearable customers, or will it remain a little bit smaller? Fumihide Esaka: You mean 2026, right? That new customer is starting to ramp starting Q1 with very, very strong growth quarter after quarter, and we expect that 2027 will be even bigger. We are very excited to have that new customer being a big family. Operator: Thank you. And we have a follow-up question from Quinn Bolton of Needham & Company. Your line is open. Quinn Bolton: I know you do not give us a split quarter to quarter on Apollo 3, 4 versus 5, but it does sound like you are seeing broader adoption of Apollo 5. Could you give us any rough percentage of revenue that was Apollo 5 exiting 2025, and what percent of revenue it could reach in 2026? Is it a pretty significant mix shift up to Apollo 5? Any comments would be helpful. Fumihide Esaka: Apollo 5 is definitely increasing, but again, the denominator—you know that our total revenue is growing faster than expected—and Apollo 3 is really enabling one of the big customers. Apollo 4 is enabling one of the newer customers that joined in 2025, and Apollo 5 is across all the customers. All of them are growing, and for Apollo 5, I have to say that the quantity itself is growing fast. If you ask about the percentage, we do not give out too much of that percentage, but the percentage is slowly growing, while the absolute quantity is growing fast. Quinn Bolton: Okay. Got it. Thank you. Operator: With no further questions, that concludes our Q&A session. This also concludes today’s conference call. We thank you for your participation. You may now disconnect.
Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Fourth Quarter 2025 Earnings Webcast. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by 1 on your telephone keypad. Thank you. I would now like to turn the call over to David Glick, Group Senior Vice President, Treasurer and Investor Relations. Please go ahead. David Glick: Thank you, Operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 fourth quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be recorded or broadcast without our expressed permission. A replay of the call will be available until 03/12/2026. We take no responsibility for inaccuracies that may appear in transcripts of the call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores, Inc. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the Company's 10-Ks and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases. These pre-tax costs amounted to $8 million and $5 million during 2025 and 2024, respectively, and $35 million and $16 million for the full fiscal years 2025 and 2024, respectively. Now here is Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover three topics this morning. Firstly, I will discuss our fourth quarter results. Secondly, I will review our full year 2025 results. And thirdly, I will talk about our outlook for 2026. Then Kristin will provide additional details. Okay. Let's start with our fourth quarter results. Total sales increased 11%. This was on top of 10% total sales growth last year. The fourth quarter is by far our largest quarter of the year, so to grow total sales by double digits on top of double digits is especially impressive. It shows that we are continuing to take retail market share. Comparable store sales increased 4%. We knew coming into the quarter that we were up against 6% comp growth from last year and that we had some tariff-related gaps in our assortment. We expected our sales to be within our guidance range of 0% to 2%. So we were very pleased to handily beat this guidance and to deliver a strong two-year comp stack of up 10% for the fourth quarter. Our buying, planning, supply chain, marketing, and store teams executed very well to chase this trend. I am not going to spend a lot of time dissecting the details of our Q4 comp performance, but I would like to call out two important items. Firstly, our elevation strategy. This has been a focus over the last couple of years: elevating the assortment to offer better, more recognizable brands, higher quality, and more fashion, all at terrific values. There is clear evidence of the success of this strategy in our internal sales data. For example, when we analyze our sales by price point, we see that the highest comp growth rates are in the higher price buckets. In other words, despite the economic pressure she may be feeling, our customer is responding to the great values we are offering at these higher price points. These trends drove a mid-single-digit increase in our average unit retail in the fourth quarter. The second point I would like to make is that although we are pleased with our ahead-of-plan comp growth, as we hindsight the quarter, we can see that there were important categories where we could have done more business. I will explain what I mean, and we will talk more about this in a few moments when I discuss the full year. But before I move on to our full year 2025 results, let me just touch on Q4 earnings. In the quarter, we achieved 100 basis points of operating margin expansion and 21% earnings per share growth. Again, this is the largest quarter of the year, so we are especially happy with this performance. Now let's discuss our results for the full year 2025. For this discussion, I am going to read the headlines, but then I would like to spend most of the time talking about how, in response to tariffs, our operating strategies shifted in 2025 and how this impacted these sales and earnings results. The headlines are that in 2025, we delivered 9% total sales growth on top of 11% total sales growth last year; 2% comp sales growth on top of 4% comp sales growth last year; 80, that is eight-zero, basis points of operating margin expansion on top of 100 basis points last year; and 22% earnings per share growth on top of 34% earnings per share growth last year. What really jumps out from these headline results is that we drove extraordinarily strong earnings growth on a relatively modest comp sales increase. Let's talk about that. When we started the year 2025, as usual, we planned our business for low single-digit comp growth. So we believed or hoped that we might be able to chase to mid-single-digit comp growth for the year. Our initial 2025 focus and operating strategies were consistent with this comp sales outlook. But then in April, things changed. The introduction of tariffs forced us to recalibrate. It was clear that if we ignored the margin impact of tariffs, then this would significantly reduce our earnings growth. Over the last few years, we have worked hard to build our operating margin. And in 2025, we decided that we were not going to allow tariffs to set us back. So we took numerous actions to offset the impact of tariffs. We talked about these actions in our quarterly calls in May and November. They included pivoting away from and planning down receipts in categories which faced the greatest negative margin pressure from tariffs. These categories were mostly in our home businesses. Reducing inventory levels across the store to drive a faster turn and thereby generate lower markdowns. Raising retails in select, fast-turning categories where there was limited resistance or pushback from the customer. And aggressively going after expense savings across the P&L. These actions were very successful. In May, despite the initial shock of tariffs, we were confident enough to reiterate our earnings guidance for the year. In August, we took this guidance up. In November, we took our guidance up again. And today, we are reporting actual full year results featuring 80, eight-zero, basis points of operating margin expansion and 22% earnings per share growth. These numbers are well ahead of the original earnings guidance that we issued on this call in March. So let's talk about sales. As I said a moment ago, at the start of 2025, we planned our business for low single-digit comp growth but hoped we would be able to chase to mid-single-digit. We did not. We did not because the actions we took in response to tariffs were a drag on sales. Of course, we knew this. We knew that cutting receipt plans for businesses most impacted by tariffs was the right thing to do for earnings growth, but that it would likely dampen our sales upside. This impact showed up in Q3 and Q4. In Q3, unseasonably warm weather hurt our outerwear business. That can happen. We do not control the weather. But in the past, when this has happened, we have been able to lean on non-seasonal businesses, particularly home categories, to pick up some of the slack. That did not happen because our home assortment was the most impacted by the shift away from businesses with the greatest margin pressure from tariffs. Without these assortment gaps in Q3, we would likely have driven more sales. That said, given tariffs, our earnings growth would have been lower. My commentary is similar for Q4. I know it seems like an odd thing to say given that we are reporting strong percent comp growth on top of 6% comp growth last year. But I am convinced that we could have done even more sales in the fourth quarter. For example, toys. There are categories that are very important in Q4—gifting and housewares—where we could have done more business and driven higher comp growth across the chain. At the start of 2025, we had much higher full year sales plans for these businesses. But once tariffs were introduced, it made sense to pull back. We could have made a different decision. This would likely have delivered a stronger comp increase but with lower earnings growth. Wrapping up on the full year, let me reiterate that we are very pleased with our results. 80 basis points of operating margin expansion on top of 100 basis points last year; 22% EPS growth on top of 34% last year. One of the reasons why I have taken a few minutes to go through all this and to provide a full analysis of the drivers of our 2025 results is that it helps inform how we are thinking about the sales outlook for 2026. In fact, this is a good segue to talk about that sales outlook. I tend not to use the word “bullish” very often. But I am going to use it now. We feel very bullish about our sales outlook in 2026. Barring some black swan event, we think that we have an opportunity to really drive sales this year—comp store sales and total sales. There are several external and internal factors that are driving this optimism. On the external side, based on our trends in the fourth quarter, our view is that our customer looks quite resilient right now. Add to that, we expect that the current tax refund season is going to be more favorable than recent years. As we have said in the past, our core customer is very sensitive to tax refund payments. And the early signs and expert predictions are very positive. So we think there may be sales upside, especially in the first quarter. Staying on external issues, we do not know what will happen with tariffs this year. It is very uncertain. But we believe that the industry and our supply base have now adjusted to them. And the tariffs are unlikely to represent the same margin challenge that they did last year. Let's move on to the internal drivers of our optimism. There are two things to highlight. Firstly, in 2026, we will be up against our easiest comp sales comparisons for some years. In Q1, in Q3, and even in Q4, we look at the comp numbers that we posted last year and we feel like we have tremendous opportunity. As I explained a moment ago, in the back half of 2025, we had significant tariff-related gaps in our assortment, especially in our home businesses. These gaps held back our sales trend. Now that the industry and our supply base have adjusted to tariffs, we plan to go after these assortment opportunities in the back half of 2026. Secondly, we expect continued progress on our Burlington 2.0 initiatives, including the completion of our Store Experience 2.0 remodel for the balance of the chain. And we are also excited about the rollout of additional Merchandising 2.0 capabilities, especially regional and store-level localization. Since our last quarterly call in November, these favorable external and internal factors have caused us to reconsider and take up our sales plans for 2026. That is why we are raising our comp guidance to 1% to 3% for the full year. This is modestly higher than our typical model. That said, you can divine from my comments that we think there may be potential upside to this guidance. And we are positioned to chase the sales trend. There is one other important point to make. Although we are very excited by the sales outlook, we do not plan to go after this sales opportunity at the expense of margins. We have made huge progress expanding our operating margin over the last couple of years. We are confident there is more to come, and we anticipate that any ahead-of-plan sales in 2026 will drive further operating margin leverage. At this point, I would like to turn the call over to Kristin. Kristin? Kristin Wolfe: Thank you, Michael, and good morning, everyone. I will provide more details on the financials. First, starting with the fourth quarter, total sales grew 11% and comp store sales grew 4%, well above the high end of our guidance. As Michael noted earlier, this Q4 growth is on top of last year's 10% total sales growth and 6% comp store sales growth. Our Q4 adjusted EBIT margin expanded 100 basis points versus last year. This was 50 basis points above the high end of our guidance. The gross margin rate for the fourth quarter was 43.7%, an increase of 80 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Product sourcing costs were $232 million versus $217 million in 2024. Product sourcing costs levered 30 basis points as a percentage of sales, driven by supply chain productivity and cost savings initiatives. Adjusted SG&A costs in Q4 were 40 basis points lower than last year. The leverage in SG&A was primarily driven by leverage from store payroll and occupancy costs on higher sales in the quarter. Q4 adjusted EBIT margin was 12.1%, and our adjusted earnings per share in Q4 was $4.99. Both of these were well above the high end of our guidance. Our Q4 adjusted EPS represents a 21% increase versus the prior year. At the end of the quarter, comparable store inventories were up 12% versus the end of the fourth quarter in 2024. Our reserve inventory was 40% of our total inventory versus 46% of our inventory last year. We are very happy with the quality of the merchandise, the brands, and the values that we have in reserve. We ended the quarter in a very strong liquidity position, with approximately $2.2 billion in total liquidity, which consisted of $1.2 billion in cash and $926 million in availability on our ABL. We had no borrowings outstanding at the end of the quarter on our ABL. During the quarter, we repurchased $59 million in common stock, bringing our annual share repurchases to $251 million. At the end of Q4, we had $385 million remaining on our share repurchase authorization, which expires in May 2027. In Q4, we opened one net new store, bringing our store count at the end of the year to 1,212 stores. In Q4, we had two new store openings and one closing. I will now move on to discuss our full year 2025 results. Total sales increased 9% on top of 11% in 2024. Comp store sales increased 2% on top of 4% in 2024. Our operating margin for the full year expanded by 80 basis points. Merchandise margin increased by 40 basis points despite the negative impact from tariffs. Freight expenses improved by 20 basis points and product sourcing costs levered by 20 basis points. We also achieved 30 basis points of leverage on adjusted SG&A. This leverage was offset by 20 basis points of deleverage in higher depreciation and amortization costs. In terms of store openings, for the full year, we opened 131 new stores, while relocating 18 stores and closing nine stores, adding 104 net new stores to our fleet. I will now move on to our 2026 guidance. This guidance excludes expenses associated with bankruptcy-acquired leases of approximately $8 million in 2026 versus $35 million in 2025. For 2026, we expect total sales growth in the range of 8% to 10%. This assumes 110 net new store openings. We anticipate that approximately 60% of these new stores will open in the first half of the year, with the balance opening in the fall. We are forecasting comp store sales for the full year to increase 1% to 3%, and our adjusted EBIT margin to be in the range of flat to an increase of 20 basis points versus last year. This results in adjusted earnings per share guidance in the range of $10.95 to $11.45, an expected increase of 8% to 13%. Capital expenditures, net of landlord allowances, are expected to be approximately $875 million in fiscal 2026. I would now like to move on to guidance for the first quarter of 2026. This Q1 guidance excludes expenses associated with bankruptcy-acquired leases of approximately $6 million each in 2026 and 2025. We expect total sales to increase 9% to 11%. Comp store sales are assumed to increase 2% to 4% for Q1. We are expecting adjusted EBIT margins to be in the range of down 60 to down 100 basis points over 2025, which results in an adjusted EPS outlook in the range of $1.60 to $1.75 versus last year's first quarter adjusted earnings per share of $1.67. I would now like to turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to questions, I would like to reinforce a few of the key points that we have discussed this morning. Firstly, we are very happy with our Q4 performance: 11% total sales growth, 4% comp sales growth, 10% two-year comp stack, 100 basis points of operating margin expansion, and 21% increase in earnings per share. Secondly, we are also pleased with our full year results. We achieved 80 basis points of operating margin expansion on top of 100 basis points last year, and 22% earnings per share growth on top of 34% last year. In 2025, in response to tariffs, we had to adjust and make choices. We took actions to address the margin impact of tariffs and to drive earnings growth. The results are clear. This strategy was spectacularly successful. And thirdly, we are feeling bullish about 2026. There are external and internal factors that are driving this optimism. We think there may be upside to our sales guidance. And we anticipate that any ahead-of-plan sales should help drive additional operating margin expansion. I would now like to turn the call over for your questions. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Again, that is star followed by 1 on your telephone keypad. Kindly limit your questions to one question and one follow-up. Your first question comes from the line of Matthew Robert Boss of JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks, and congrats on another nice quarter. So Michael, to break down the fourth quarter further, could you elaborate on what drove your ahead-of-plan sales? And in particular, what makes you think that you could have done even more sales in the fourth quarter than your reported results? Michael O'Sullivan: Well, good morning, Matt. Thank you for the question. As I said in the script, overall, we were very pleased with our trend in Q4, a strong 4% comp growth on top of 6% comp growth last year. So 10% two-year stack. That said, the breakdown of this comp growth by business was very, very different to how we had originally planned it. Let me explain that. Over the last few years, we have had enormous success growing our home businesses. Especially in the back half of the year, home has been a real engine of growth for us, with categories such as gifting, home decor, housewares, bedding, toys, and seasonal decor. Now our original plan for 2025 was to significantly expand those areas, starting in Q3 and then into Q4. We believed that we had a significant sales opportunity. Now with the introduction of tariffs in the spring, we faced a different set of economic choices. If we had maintained our original plans in those areas, we could have driven higher sales. But because of tariffs, we had to adjust. You know, the way I think about this is our mission is not just to chase sales; it is to chase profitable sales. And looking back, I am very pleased with how smartly and flexibly our teams responded in that situation. When tariffs were announced, we set about remixing our plans to focus on businesses that were less impacted by tariffs—you know, certain categories in apparel, footwear, beauty, and accessories. So not surprisingly then, coming back to your question, our comp growth in Q3 and Q4 was strongest in these specific businesses. I would say that our merchandising teams in those categories did a great job delivering terrific assortments that drove our comp sales in the back half. The flip side, of course, was that our comp growth in our most important home and holiday categories was lower. Of course it was. As I said, we deliberately lowered the mix of these businesses in response to tariffs. And it was that remixing that really enabled us to drive such extraordinary earnings growth in 2025. Now the last part of your question— which businesses could have delivered more sales then? It is all the categories that I mentioned: gifting, home decor, housewares, bedding, toys, seasonal decor. Now despite the gaps in the assortments in those businesses, we still turned very fast. So that tells me that if we had had more receipts, then for sure, we could have done more business. But those additional sales would have come with unacceptably low margins. Let me wrap up my answer by looking forward, though. We are excited for 2026. The math is different now. The industry has had the chance to adjust to tariffs—you know, tariffs are still here, but they are lower now than they were last summer. You know, as I have described, last year we started out with ambitious sales plans in our home businesses, but we had to shelve those plans in response to tariffs. That opportunity—that sales opportunity—has not gone away. And in 2026, unlike 2025, we see the chance to go after that opportunity aggressively and profitably. Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Ike Boruchow: First question for Michael. I think I have a question on the comp guidance just for 2026—1% to 3%. It is higher than you normally give us. I know it is relatively small, but it is a deviation from your typical guide. How can you give us a little bit more color on how we should interpret this along with your—cannot help but hear the word “bullish” and think that is a change from you as well. So just how should we interpret this? Michael O'Sullivan: Yeah. Good morning, Ike. Yeah. Growing up in the UK, “bullish” really is not a part of the vocabulary. But yeah, I am using “bullish” this time around. So let me answer your question. As you know, we typically plan our business and guide to flat to 2% comp growth, with the goal being to chase any sales upside. You know, in the fall, when we started to put together our 2026 budget, flat to 2% was our starting point. And that was the—obviously, that was the initial guide that we discussed in November. So over the last two months, we have had a chance to really look at the outlook for 2026. And obviously, we have torn apart and analyzed our 2025 performance. Now based on all that, we see a lot of potential upside. You know, again, as I said in the prepared remarks, there are external and internal factors that are driving our optimism. On the external side, based on our fourth quarter sales trends, our customer looks pretty resilient to us. We also think the tax refunds are likely to create some momentum, certainly in the first quarter. And while we do not know what will happen with tariffs, we think they are unlikely to present the same margin challenge that they did last year. Now on the internal side, specific to Burlington Stores, Inc., if you like, we see an opportunity to drive sales as we look at Q1, Q3, and even Q4, as we lap issues in those quarters—especially tariff-related assortment issues in the back half. Now with all that said, let me reassure everyone that, you know, we are an off-price retailer. Our overall playbook has not changed. We are still going to plan sales conservatively, manage the business flexibly, and then chase any upside. I should also make the point that although raising guidance to 1% to 3% is not a very significant change, it does matter. It gives our merchants a little more open-to-buy so they can be more aggressive as we start the year, as we start the quarter. It gives them more of a head start, if you like, as they chase the sales trend. The other data point that I should call out is our inventory level. At the end of Q4, our comp store inventories were up 12%. Now that kind of increase is very unusual for us. But it was deliberate. And it is another indicator that we see potential sales upside in 2026—especially in Q1. Ike Boruchow: Got it. And then a quick follow-up for Kristin. On the margins—just the 1Q down 60 to 100—can you just elaborate what exactly are the moving pieces there? Because the full year seems pretty solid, but what is going on in the first quarter that we should take note of? Kristin Wolfe: Hi. Good morning. Thanks for the question. It is a great question—glad you asked. Let me start with the full year, and then I will touch on the Q1 dynamic specifically. So for full year 2026, 1% to 3% comp store sales growth and operating margin flat to up 20 basis points. Going down the P&L, we are assuming relatively flat merchandise margin as we invest and reinvest any favorability from cycling tariffs to better support better brands, higher inventory levels in stores—all of this to drive sales. Similarly, for the full year, we are expecting relatively flat freight and product sourcing costs as our continued productivity and cost saving initiatives are still there, but mostly offset by new DC start-up costs this year. Then in SG&A for the full year, we expect to see about 20 basis points of leverage at a 3% comp. That is what is driving the full year guidance. And it is worth reiterating: we continue to expect 10 to 15 basis points of incremental leverage for every point of comp above the 3%. So now to your specific question about the first quarter—it is an outlier for the year. We are guiding lower margin in Q1, but we absolutely expect margins to increase in Q2, Q3, and Q4. We have some unique factors going on in the first quarter. First, we have some pressure on gross margin. We will not have anniversary tariffs—that puts some modest pressure on markup. And we also have a markdown timing shift into Q1 from Q2. Secondly, as it relates to our supply chain costs, we will see some deleverage specifically in Q1 that is related to the start-up costs from our new Savannah distribution center, which we plan to open in the second quarter. And then the last thing going on in Q1 is we are lapping a few one-time favorable items from Q1 last year. Michael has talked about how aggressively we went after expense savings across the P&L in response to tariffs, and there were some levers that we pulled specifically in April to drive savings that we are now lapping in Q1. These are the primary deleverage items that drive the down 60 to 100 basis points for Q1. And again, just to reiterate, we do expect EBIT margins to increase to varying degrees for each of Q2, Q3, and Q4 to offset the lower operating margin in Q1 and net out to that flat to plus 20 basis points for the full year. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Lorraine Hutchinson: Thank you. Good morning. Michael, we are expecting tax refunds to be much higher than last year. In 2021, you saw a significant sales lift from these stimulus checks. Should we think of higher refund checks in the same way? Michael O'Sullivan: Good morning, Lorraine. Thank you for the question. At a very high level, I would say that the answer is yes. Whether it is a tax refund check or a stimulus check, it puts extra money in our customers' pockets, and that is always a good thing and helps to drive comp sales. That said, there are a couple of very important differences, I think. Firstly, the stimulus checks back in 2021 were much more significant and more expansive. They went to everybody. For the one big beautiful bill, it looks like there are many different pieces to it. And it does not affect everybody equally. So it is difficult to tell how much it will impact our customers. You know, our expectation is that the impact will be much less significant than the 2021 stimulus checks. The second point to make is that the 2021 stimulus checks—they were a one-time thing. So in 2022, you will remember, we were up against them. The one big beautiful bill is a change in the tax code. And in that sense, it is permanent. So any sales lift that comes from it should be sustained rather than a one-time event. Anyway, I guess boiling it all down, it is difficult to know how big an impact it might have. We have built in some upside to our plans, and we are ready to chase. Lorraine Hutchinson: Thank you. And then wanted to follow up on inventory. You spoke earlier about the comp store inventory up 12%. But your reserve penetration was lower than last year at the end of the fourth quarter. Are you happy with your inventory levels? And maybe more broadly, how are you feeling about merchandise supply and off-price availability? Kristin Wolfe: Good morning, Lorraine. This is Kristin. I will take the first part of your question on inventory. Michael kind of spoke to it on the higher inventory levels in an earlier question, talking about our approach for 2026 sales guidance. But at the end of Q4, our comp store inventories, as you noted, were up 12%. This was deliberate, and we feel very good about the amount of inventory and the freshness of that inventory. The primary driver of the higher inventory is we wanted to be prepped and stocked for higher traffic, due to the higher tax refunds as well as the underlying trend of our business and sales anticipated in Q1. In addition, the other dynamic is we did a great job delivering transitional receipts in Q4, such that our assortment was fresh—there is newness in the store as we move from holiday and into spring. And we are continuing to improve our capabilities to better localize assortments by geography and climate, and these strategies contributed slightly to higher comp store inventory levels at the end of Q4 versus last year. So that is on in-store inventory. On reserve inventory, our reserve penetration was lower than last year, but at 40% of total inventory, it is really more in line with historical levels at the end of Q4. In 2023, for example, it was slightly higher than this—we saw 39% at that time, the end of 2023. And as we look at that inventory that we have in reserve, we really feel good about the quality and the values and the brands that will help support sales and support our ability to chase in 2026. Michael O'Sullivan: And then let me jump in on the last part of the question—on off-price merchandise availability. I would describe the buying environment for off-price right now as excellent. I think you have probably heard the same thing from other off-price retailers. There is plenty of supply in the market across most categories. You know, I mentioned in the prepared remarks that we think there may be sales upside in 2026. Well, it is important to add that we see plenty of off-price merchandise availability to help fuel that sales trend. Kristin Wolfe: Thanks, Lorraine. Operator: Your next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is now open. Brooke Siler Roach: Good morning, everyone. Firstly, I have a quick question about the monthly cadence of comp sales in 4Q. In particular, I am wondering how your business performed in January and your comp trend exited the quarter. Thank you. Kristin Wolfe: Good morning, Brooke. It is Kristin. I will take the question. It is a good question. As we look at it, it makes the most sense, given the timing of holiday, to look at and speak to November and December combined. And for that two-month period in Q4, our comp sales increased mid-single digits. And as we got closer to Christmas, that trend accelerated. So we were really pleased with this holiday performance and the sales trend we saw, particularly given the strength of our holiday season last year. Then as we moved into January, that strong trend and momentum continued. January also ran a mid-single-digit comp. And I will point out that our comp in January would have been even stronger if not for the significant winter storm that impacted many of our major markets late in the month. It was widespread and led to several hundred store closures. This disruption cost us about a point of comp on the full quarter and several points for the month of January. Now to the last part of your question, once we dug out from the winter storm, we resumed that strong comp store sales trend. Momentum has continued into February, such that Q1 is off to a very strong start. We have a lot of the quarter ahead of us, of course, but so far, good. Brooke Siler Roach: That is great to hear. As a follow-up, I was hoping you could speak to sales trends by customer demographic. What are you seeing in terms of sales trends by different income groups? And are there any callouts on trends for other demographic groups that we should be aware of? Thank you. Michael O'Sullivan: Yeah. Good morning, Brooke. It is Michael. I will take that. It is a good question. It is something we look at all the time. We slice and dice our internal sales data just to see if there are any pockets of weakness or pockets of strength. So let me tell you what we are seeing. You know, on sales trends by different income segments, as we analyze the performance of stores based on median household income of the surrounding area, our comp sales trends in the fourth quarter were very broad-based. It is true that our stores in lower-income trade areas had a slightly higher comp than the rest of the chain, but it was very close. In other words, all income cohorts performed well in the fourth quarter. So when you segment our customers based on household income, every segment is looking fairly resilient right now. On the second part of your question—other demographic groups—again, there is not much to call out. When we look at performance of our stores based on ethnicity of the surrounding area, again, the trends look fairly broad-based. For example, stores in high Hispanic trade areas—if I exclude the southern border—those stores are pretty much right in there with the rest of the chain in terms of comp performance. So, you know, overall, as we look across demographic segments, income and ethnicity, etcetera, we are not seeing any major pockets of weakness at this point. Brooke Siler Roach: Thanks so much. I will pass it on. Michael O'Sullivan: Thank you. Operator: Your next question comes from the line of Adrian Yee of Barclays. Your line is now open. Adrian Yee: Great. Thank you very much. It is really nice to see Burlington 2.0 kind of really coming into its own. Thank you. A little bit more color on the elevation strategy. How should we be thematically thinking about the pyramid of sort of good, better, best—where it was, where it is going to? Your other off-price competitors that are doing a similar strategy—they are also opening stores in your market. So just how do we think about how you are differentiated on the product? And then, Kristin, a little bit more on the supply chain, but maybe more from a qualitative benefits over multi-year horizon. How do you think about productivity, capacity utilization? And are you running anything in tandem? Like, are you running, you know, legacy DCs or something that we can roll off, you know, in the next twelve to eighteen months? Thank you. Michael O'Sullivan: Good morning, Adrian. Thank you for the questions. Obviously, I will take the first one on the elevation strategy. Yeah. We are very pleased with what we are seeing in our elevation strategy. It has been a major focus for us for the last couple of years: elevating the assortment to offer better, more recognized brands, higher quality, and more fashion, all at great values. You know, we are very encouraged by the results. And our internal data shows us that by elevating our assortments, we have been able to drive higher customer perception scores, stronger comp growth in higher price buckets, and ultimately, higher average unit retail and higher transaction size, which is what you should be seeing if you have a successful elevation strategy. Now one aspect of this that I am especially pleased about is that we have successfully pursued this elevation strategy without taking a hit to margin. You know, that has always been the major challenge in off-price. When you increase the mix of better brands or you raise the quality or you take more fashion risks, then that can really pressure your merchandise margin. When you elevate the assortment like that, and the AUR goes up, the typical pattern is that markup is pressured and markdowns increase. It takes skill to elevate the assortment without hurting merchandise margin. So the fact that we have been able to elevate the assortment and at the same time have actually expanded our margins is, I think, a clear testament to the strength and the talent of our merchant teams. By offering a terrific assortment with great value at higher price points, we have been able to convince the customer to trade up and to spend more. And, yeah, as I say, over the past couple of years, we have elevated the assortment, but it is really important to point out that we, at the same time, have expanded our margins. And, Kristin, do you want to take the second question? Kristin Wolfe: Yes. Adrian, on supply chain—I appreciate the question. I will speak to both qualitatively and quantitatively. We do continue to make significant progress reducing supply chain expenses as a percentage of sales. That has certainly been a focus. We are doing this through numerous productivity initiatives in our DCs and cost savings projects across supply chain. So for 2025, supply chain costs levered 20 basis points, and this was on top of 50 basis points of leverage in supply chain in FY 2024. So we are seeing that leverage. This spring, 2026, we are going to go live in our newest DC in Savannah, Georgia. We are really excited about this new asset. It is more than twice the size of our current largest DC. It is highly automated. It is built for off-price processing. Now kind of near term, as you would expect, there are significant start-up expenses associated with opening a new facility of this size, and that will drive some deleverage in 2026. And for 2026 overall, we expect supply chain costs as a percentage of sales to be relatively flat for the year as these new DC start-up costs are then offset by our continued efforts around productivity and cost savings initiatives elsewhere in the supply chain. You see this dynamic more in Q1, where we are expecting about 10 to 20 basis points of deleverage on this line. And then as the year goes on, we expect that deleverage to moderate as we offset with these cost savings initiatives. Now sort of on the qualitative point in your question, it does typically take two or so years for a DC to be fully ramped up. Over time, we absolutely expect this state-of-the-art design-for-off-price DC to drive cost efficiencies for us, notably significantly faster processing time. And additionally, based on the physical locations of our vendors and our store base, we believe over time we can see some modest leverage in freight related to this new DC. So we are continuing to invest in new distribution centers and, over time, we will modify our DC footprint to have the majority of our supply and processing go through our more efficient DCs. That will take time, but that is the plan that we are continuing to execute. Adrian Yee: Fantastic. Thank you very much. Best of luck. Michael O'Sullivan: Thanks, Adrian. Thank you. Your next question comes from the line of Mark R. Altschwager of Baird. Mark R. Altschwager: Great. Thank you for taking my question. Michael, can you talk about the pipeline for new stores and relocations? Michael O'Sullivan: Yes. Good morning, Mark. Yeah. I am glad you asked this question. I am really very excited about our new store program and our new store pipeline over the next couple of years. When we—you know, going back a little bit—when we laid out our long-range plan back in November 2023, we said at the time that we thought we could open roughly 500 net new stores over the next five years, or approximately 100 net new stores per year on average. We are running slightly ahead of this. And not only are we ahead in terms of number of new stores, we are also very—it is important to say—we are also very happy with how those stores are performing. We expect new stores to achieve about $7 million in sales in their first full year. Our new stores are running in line with that. We then expect them to comp above the chain for their first few years in the comp base. And, again, recent cohorts are actually outperforming these expectations for comp growth. That means that our overall investment returns for new stores are very strong, well above our hurdle rates. The other aspect of our new store program that I am excited about and I want to call out is our store relocation and downsizing programs. You know, as you know, we have a lot of older, oversized stores in the chain. In 2025, we relocated 18 of those stores to smaller format locations, mostly in busier nearby strip centers. Now with those relocations, we are seeing a good sales lift and a reduction in occupancy costs. So driving much improved earnings. In 2025, we also physically downsized about 20 existing stores. Now this is a new and growing program for us. When we downsize the store, we reduce the footprint of the store, and we either return the excess space to the landlord or we sublease it to a co-tenant. Now as we reduce the footprint, we have refurbished, modernized, and improved the reduced space. With our downsized projects, we are seeing very strong returns driven by significantly lower occupancy costs. In many cases, we are also seeing a sales lift. We have many stores in the chain that are candidates for our downsizing program. So we expect that program to grow over time and become more important. Now wrapping up my answer, we obviously have a much, much smaller store base than our off-price peers. And we therefore have much, much more room for growth. So we are very excited about our new store program and our new store pipeline, including the 110 net new stores that we plan to open in 2026. And we are also excited by our relocation and downsize programs as I described. These programs are not only going to help us expand our store base, but they are going to help us transform it. Mark R. Altschwager: That is very good color. Thank you. And just a follow-up. In the prepared remarks, you talked about some of the localization initiatives and how that seems to be ramping up. Can you give us a little bit more detail? Michael O'Sullivan: Yeah. Sure. It is actually another really great question. Localization—it is hard to overstate this—but I think localization is a major opportunity for us. It is a capability that our off-price peers have had and have invested in for many, many years. And it is an area where we frankly are a long, long way behind. You know, there have been times over the last several years—there are even times now—when I walk one of our stores, say, in a beach community or in the South in the summer, I look around, and it looks like Burlington Coat Factory has come to town. So we need to—we have a huge opportunity to improve and get better at customizing and localizing our assortment not just based on the region and the climate, but also based on income levels and demographics of the trade area. Now, you know, this is a business problem where people, process, and technology—including, by the way, artificial intelligence—can make a huge difference. And we have known for some time now that it is a major opportunity for us. Indeed, we have talked about it with investors. But we also recognized that it would be difficult for us to make significant progress on localization until we had really strengthened and upgraded our foundational merchandise planning and allocation systems. Over the last couple of years through Merchandising 2.0, that is what we have done. And we are now in a position to really start going after localization. Now, you know, I know from experience that this is not a capability that we can build overnight. But I am very excited about some of the initiatives that we have begun to roll out—better store and class-level planning and forecasting, much stronger localization analytics, new store assortment planning and trending, seasonal flow and event planning, assortment distortions based on income and demographics, and an expansion and redesign of our merchandise planning regions. You know, if you go back and look at the history and the growth of our off-price peers over time, you will see that localization was a major unlock in their evolution and growth. As I say, we are a long way behind. We have a lot of work to do. And it is going to take some time. I think that over the next several years, localization is going to be a key driver for us. Mark R. Altschwager: Thanks again. Operator: Thanks, Mark. Our last question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: Hi. Good morning, everyone, and nice to hear the progress. Your operating margins were very strong in the fourth quarter as well as for the fiscal year. Can you just walk us through the puts and takes of the margin drivers? Thank you. Kristin Wolfe: Good morning, Dana. Thanks for the question. I will start with Q4 and then I will go into full year. As Michael discussed and we talked about on this call today, we took deliberate actions in 2025 to drive our operating margin and earnings growth. In Q4, the biggest contribution was an increase in gross margin. There was an 80 basis point increase versus last year. Sixty of that 80 basis points came from merchandise margin. Merchandise margin was driven by lower shortage as well as the actions we took to mitigate tariffs that Michael talked about today. The other 20 basis points came from lower freight expenses. Similarly, on product sourcing costs, supply chain cost savings helped us leverage 30 basis points in the quarter. And then we achieved 40 basis points of leverage in SG&A. This was mostly driven by sales leverage in store payroll and occupancy expenses. And all of these items more than offset deleverage we saw from higher depreciation expenses in the quarter. For the full year, many of the same levers drove the 80 basis points of improvement in EBIT margin. And as a reminder, this 80 basis points of improvement was on top of 100 basis points of improvement in 2024. Gross margin for the year increased 60 basis points. That was made up of merchandise margin of 40 basis points and freight expenses of 20 basis points. Supply chain savings drove a 20 basis point leverage for the year with cost savings initiatives. And SG&A drove 30 basis points due to many of the cost savings initiatives we put in place earlier this year that we described. These improvements more than offset 20 basis points of deleverage we saw in depreciation for the year. And just one last point on margin. I want to reiterate that we believe the margin gains we achieved in 2025 are absolutely sustainable, and we believe we have further margin expansion opportunities ahead of us. We will be laser focused on driving sales in 2026, but we have opportunities over time to drive faster turns, generate more supply chain savings, and leverage SG&A expenses, particularly as we deliver a stronger comp store sales increase. Operator: That concludes our question and answer session. I would now like to turn the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We look forward to talking to you again in May to discuss our first quarter 2026 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Operator: Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I will now turn the call over to Priya Trevetti, Senior Vice President and Global Head of Investor Relations and Treasury of Victoria's Secret & Co. Priya, you may begin. Priya Trevetti: Good morning, and welcome to Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. For the period ended January 31. Joining me on the call today is Chief Executive Officer, Hillary Super, and Chief Financial and Operating Officer, Scott Sekella. We are available today for approximately 30 minutes to answer questions. I would like to remind you that any forward-looking statements we may make today are subject to our Safe Harbor statement found in our SEC filings, and in our press releases. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press releases and in our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and in the investor presentation posted on the Investors section of our website. I will now turn the call over to Hillary. Hillary Super: Thanks, Priya. Good morning, everyone, and thank you for joining us today. This is a standout year for our business. We returned to growth mode in 2025 with full year comp sales up 5%. Fourth quarter and full year results exceeded top and bottom line guidance reflecting strength across brands, channels, and geographies. In the fourth quarter, we grew comp sales 8% to deliver our highest fourth quarter revenue since becoming an independent public company. Brand momentum is building, our customer file is growing, and we are gaining market share. Eighteen months ago, I joined Victoria's Secret & Co. because I saw one of the compelling transformation opportunities in retail. To capture that opportunity, we put in place a clear road map for the business. Our Path to Potential strategy. Built on four pillars. Supercharging our bra authority, recommitting to PINK, fueling growth in beauty, and evolving our brand projection and go-to-market strategy. Throughout the year, we executed this strategy with focus and discipline. We assembled a leadership team that has rallied around the new direction for our business, re-centering the organization around what matters most. Creating emotionally compelling product, building brand heat, and deepening our connection with the customer. While still early in our transformation, the results to date are clear. We reasserted our leadership in bras, restoring the category to growth for the first time in four years. We reignited PINK, delivering its strongest growth year in a decade. And we steadily grew our nearly $1 billion beauty business. We also expanded our customer file for the first time in years. A signature brand moment in 2025 was the fashion show, which re-established Victoria's Secret & Co. at the center of the cultural conversation and translated directly into business momentum. It also marked a meaningful step forward in our new era of sexy. Defined not as a single look or standard, but as a feeling of confidence and authenticity. The progress we made in 2025 reflects a deliberate evolution in how we operate. When we combine great product, powerful storytelling, and an elevated experience, our customer responds. I would like to spend a few moments discussing our holiday and Valentine's Day execution, which reflects marked improvement versus the prior year. I will then cover our international performance followed by the progress we are making against our strategic pillars. Scott will then walk you through our detailed financials and 2026 outlook. As we reflected on last year's holiday and Valentine's seasons, we saw an opportunity to further strengthen our position and translate learnings and insights into growth. In 2025, we amplified the fashion show to drive sustained traffic and engagement through November and into Black Friday, delivering our highest customer turnout since 2021 with strong participation from new customers. In December, we maintained a consistent cadence of fashion newness, especially in bras and sleep. We supported key categories with deliberate inventory investments, targeted digital and social marketing, and refreshed store windows and merchandising. In particular, sleep significantly outperformed expectations and became a key growth engine for the business during the quarter. For Valentine's Day, we reinforced Victoria's Secret & Co. as the destination. We shortened the semi-annual sale and set the assortment earlier, extending the selling window and broadening the lifestyle offering. For VS, this was my favorite floor set since joining the business. Elevated, beautifully executed, and undeniably Valentine's Day. Anchored in bras, the floor set was powerful and offered a range of sensibilities from glamorous to casual. We supported the launch with a high-impact campaign featuring Hailey Bieber, driving engagement and new customer acquisition. At PINK, we built on the viral fashion show moment featuring the K-pop group TWICE with a bra-centered Valentine's Day campaign. The campaign focused on self-expression, friendship, and empowerment in a way that was unmistakably PINK. The campaign resonated and drove continued acceleration in the PINK bra business. The VS and PINK Valentine's collections outperformed our expectations, delivering double-digit sales growth. The week of Valentine's Day, store traffic increased significantly year over year, meaningfully outperforming the mall. Turning to international. For the fourth quarter, net sales increased 43% year over year with growth across channels and geographies, led by continued strength in China. In that market, social commerce and live streaming are critical to the purchase journey and powerful drivers of engagement and conversion. This year, we took a more coordinated global approach to product, marketing, and storytelling. We aligned our merchandising to our strategic pillars to ensure each market delivers the right assortment and messaging and complemented our global assortment with exclusive local product, allowing us to move quickly to meet demand. We also benefited from a more global approach to the fashion show, resulting in a brand halo that extended internationally. During my recent visit, I saw firsthand the work our teams are doing to drive outsized results, and I am confident we have significant runway to grow digitally and in stores. International remains a significant long-term opportunity for us. In fiscal 2026, we expect to deliver double-digit growth by expanding in existing markets, entering new markets, and maximizing our digital and social commerce opportunity. Now let us turn to the progress we have made in each of our four pillars of the strategy. We begin with supercharging our bra authority. Over the past year, we put bras back at the center of the Victoria's Secret & Co. brand while strengthening our operating muscle. Recognizing that bras are not typically a holiday gifting category, we focused on our core franchises. We delivered a steady flow of newness as well as fun in the assortment, supported by digital storytelling and the right inventory levels to meet demand. Our disciplined execution drove outsized growth across our top bra franchises and sustained customer engagement through the holiday. As a result, the Victoria's Secret & Co. bra business grew mid-single digits in the fourth quarter. We continued reducing promotions throughout the year, which drove a mid-single-digit increase in our bra AUR. This performance was partially enabled by our industry-leading bra fitting experts, who build meaningful connections that deepen customer loyalty in our stores. Our efforts returned the Victoria's Secret & Co. brand bra business to annual growth for the first time since 2021. When we win in bras, we see a halo across the brand. That effect was evident in panties as well as in sleep which I noted earlier. We made panties more fun and playful. We introduced more newness, balanced our silhouette offering, and expanded fabrics. The results were strong. VS panty AURs increased and the business significantly accelerated in the fourth quarter, driving our best performance in panties since 2021. This momentum is particularly meaningful since this is our number one new customer acquisition category. We leaned into sleep this quarter, an important gifting category and a meaningful driver of Q4 performance. Sleep is highly visible. Customers wear it, share it, and signal their affinity for the Victoria's Secret & Co. brand. Our social channels were flooded with real moments as our sleep assortment was celebrated in posts from holiday gatherings, family photos, theme parties, and festive occasions. Our iconic sleep assortment was a standout through the holiday and into Valentine's Day led by hero styles in logo and heritage stripes. Applying insights from the last year, we were better positioned with inventory and digital activation to capture demand. As a result, sleep delivered outsized growth and became our third largest new customer acquisition category in the quarter. Altogether, the Victoria's Secret & Co. brand delivered low double-digit growth for the quarter, a clear demonstration of the multiplier effect of our strategy. We carried our momentum into the first quarter with the outperformance of our Valentine's Day collection, and immediately followed with the launch of the Victoria's Secret signature collection. Signature elevates the comfortable bra she reaches for every day, bringing new energy to an essential category and is anchored by our best selling wireless T-shirt bra featuring a stylized update to our classic logo. The collection was supported by a thumb-stopping campaign with a cast of fan-favorite VS Angels that drove strong social engagement and cultural buzz. Beyond Signature, we have a powerful pipeline of innovation. Watching our spring floor sets come together genuinely made my heart race. They are vibrant, saturated with color, and completely alive. I cannot wait to see customers step into this experience and feel that same energy. Our second pillar is recommitting to PINK. For several years, the brand had drifted from its core, losing clarity, energy, and cultural edge. In 2025, we reset the foundation and returned PINK to a differentiated, digitally native, socially driven lifestyle brand for 18–24 year olds rooted in its bold, playful, and irreverent DNA. One year into our Path to Potential strategy, PINK has a stronger brand definition, growing awareness and relevance, and renewed affinity. All of this is showing up in the numbers. In the fourth quarter, PINK grew high single digits driven by increased apparel penetration and renewed momentum in bras. Importantly, we pulled back on promotions, driving more regular price selling and double-digit AUR expansion, which benefited margins across PINK's portfolio, showing that the brand is regaining pricing power. On the apparel side, PINK won the holiday season with core icon styles and fashion newness. Our Wednesday drops have become highly anticipated as customers check in regularly with growing urgency to purchase, and our second drop from the LoveShackFancy collaboration resonated with our brand fans and drove significant regular price selling in December. PINK's bra business also exceeded expectations for the quarter. TWICE's appearance in the fashion show sparked viral demand and drove two sellouts of the Wear Everywhere bra. We built on that momentum by featuring TWICE again in our Valentine's Day campaign, deepening the emotional connection with our customer. I saw that firsthand during a visit to our Dadeland Mall store in Miami where young customers gathered together to dance and learn the choreography. This is exactly the kind of emotional connection that we have been working towards. The TWICE campaign became our most viewed PINK campaign ever, generating more than 79 million social views. PINK app downloads increased 50% in the quarter as customers sought early access to drops, with downloads accelerating further following the Valentine's Day launch. Importantly, PINK brand equity and consideration among 18–24 year olds are at their highest levels in years. As we enter the first quarter, we are maintaining a disciplined cadence of product newness, activating around spring break, continuing to innovate our ICON styles, and seeing early progress in revitalizing the PINK panty category. Later this year, we will open a stand-alone PINK pop-up in SoHo, New York, bringing the brand to life physically. In 2026, we see a long runway to expand PINK. Our focus is on building relevance with Gen Z by celebrating the moments that matter to her and meeting her in her digital world through entertainment, culture, and community. By moving at the speed of culture from high-impact moments like the fashion show and Valentine's Day to partnerships that spark conversation and engagement, we believe we can strengthen emotional connection and drive growth. Our third pillar is fueling growth in beauty. In beauty, scent is our secret weapon. It is often her first layer and her lasting impression tied to memory and the moments that matter most. For her, fragrance is emotional. For us, it is powerful. It creates loyalty and connection in a way that few categories can. This emotional resonance is translating into meaningful growth. Newness in fine fragrance, including the holiday edition of Bombshell, resonated strongly, amplified by integrated marketing across channels. As a result, beauty grew low single digits in the quarter, driving another year of growth for the business. Fine fragrance continues to lead our beauty business and remains a key differentiator. While many brands compete primarily in mists, we have established ourselves as a world-class fine fragrance destination with craftsmanship and creative rigor of couture fashion houses. This is anchored by Bombshell, America's number one fragrance. We are investing in our team and creative capabilities in beauty. Looking ahead, we are strengthening our innovation pipeline, expanding into adjacencies, and differentiating PINK's beauty offering. We are also using real-time insights to respond to demand. We see a meaningful runway to accelerate growth in 2027 and beyond. Finally, our brand projection and go-to-market pillar is transforming how our brands show up. Over the past year, we have clarified each brand's distinct positioning. That clarity now guides our product, marketing, and cultural engagement. We have sharpened our marketing model, shifting investments towards digital and social and leaning into bold, entertainment-led creative. This is allowing us to tell more brand stories on more platforms and with greater frequency. Recent examples include the January release of our behind-the-scenes fashion show documentary, which keeps the fashion show top of mind and brings the creativity and the people behind the brand to life. Social activations for the documentary have generated over 36 million views. Additionally, our Valentine's Day campaigns drove over 10.5 billion impressions, three times that of last year. These events extended the halo of our biggest brand moments. That brand heat is translating into strong results. In the quarter, we grew our total intimates business at a high single-digit rate and expanded intimates market share for the third consecutive quarter with share up low single digits. Our overall customer count grew at a low single-digit rate led primarily by new customer acquisition, including amongst young customers, while retention among existing customers improved. Growth spanned both digital and stores, and spend per customer increased mid-single digits, reflecting the continued progress in quality of sale. At the same time, our brand relevance and purchase consideration metrics are at their highest levels in several years, including across digital. Our app is a highly engaging way to connect with customers, offering personalized experiences and deeper insights into how customers shop. In the fourth quarter, app downloads increased 25%, and our apps now drive approximately one third of our digital sales. For the remainder of 2026, we continue to execute a disciplined cadence of brand-building moments. With sharper positioning, stronger consumer insight, and a more modern go-to-market model, we see a path to converting brand heat into sustained market share gains. In closing, we delivered exceptional results. One year in, the Path to Potential strategy is taking hold. The acceleration in the back half of 2025 underscores the impact of our disciplined execution and sharper focus. This performance is especially meaningful because our team is just hitting its stride. Many members of the management team have been here for less than a year and are already driving tangible impact. Over the past several months, I have spent time in our stores across the U.S. and internationally. The energy of our teams and the engagement of our customers are unmistakable. We are listening closely, responding quickly, and translating real-time insights into incredible product and experiences. That responsiveness, combined with innovation and more effective marketing, has strengthened our trajectory and positions us to build on our success. We enter fiscal 2026 with strength and confidence in our ability to lap our recent performance. The guidance we are issuing today reflects the strength building across all three businesses and how our Path to Potential strategy is creating a multiplier effect that supports sustained growth. I want to thank our teams for the commitment, creativity, and discipline they bring to this business every day. Our performance is a direct result of their execution. We are still early in this transformation, but the progress is real, the momentum is building, and the opportunity ahead is significant. With that, I will turn it over to Scott to walk through the financials and our fiscal 2026 guidance. Scott Sekella: Thanks, Hillary, and thank you, everyone, for joining today's call. Before I begin, as a reminder, in 2024, we recorded a change in our accounting estimate related to the expected future redemption of outstanding gift cards issued by the company. As a result of this change in accounting estimate, we recognized a one-time cumulative adjustment which increased net sales, gross margin, and operating income by approximately $26 million in 2024. That said, we are pleased to report fourth quarter and full year results that exceeded the high end of our guidance on both the top and bottom line. For fiscal 2025, excluding last year's gift card breakage benefit, net sales grew 6% to $6.553 billion. Adjusted operating income rose 16% to $403 million and adjusted EPS increased 22% to $3.00, all despite $85 million in net tariff pressure. Now let us review our fourth quarter results in more detail. Net sales for the quarter were $2.270 billion, an increase of $164 million or 8% over last year, or 9% excluding the one-time gift card breakage benefit. Comp sales increased 8% for the second consecutive quarter. These results exceeded expectations and reflected broad-based growth at Victoria's Secret, PINK, and Beauty, and across all channels and geographies. We saw increases in sales metrics, including higher comp traffic and average order value, reduced promotions, and increased regular price selling. AURs in the quarter were up 6% compared to last year and up 7% excluding panties. Hillary explained how we accessed the insights from 2024 and applied these learnings across the business. I want to highlight the operational excellence we are building as an organization. Our cross-functional teams have delivered more frequent product newness and bolder marketing and storytelling. This strong execution translated into impressive fourth quarter results. In North America, our total intimates business across VS and PINK grew at a high single-digit rate. We outperformed the intimates market in the quarter, driven by strong performance in bras, and delivered low single-digit market share gains. We exited the year having grown our total intimates business for the first time in four years. Combined with the success in sleep and Valentine's Day that Hillary mentioned, the VS brand grew low double digits in the fourth quarter. At PINK, we invested in-depth behind our key icon styles while delivering fresh fashion newness, returning both PINK apparel and the total PINK brand to growth. Fiscal 2025 marked PINK's strongest growth in a decade. In Beauty, we grew low single digits in the quarter supported by fine fragrance and mists, which continued to perform well. For 2025, Beauty delivered yet another year of growth. Our international business also continued to perform exceptionally well during the quarter. Reported fourth quarter sales grew 43% to $276 million driven by outstanding performance in China, primarily in the digital channel. Adjusting for the shift in the reporting of European digital sales, which were previously fulfilled from our U.S. distribution center and recorded in North American direct sales, international sales grew 27%. International results included high single-digit retail comp sales gains combined with continued new store openings. Fourth quarter adjusted gross margin dollars were $895 million. Adjusted gross margin rate in the quarter was 39.4%, compared to an adjusted gross margin rate of 39.7% in the fourth quarter last year, or approximately 38.9% excluding the $26 million gift card breakage benefit. Excluding the gift card breakage benefit, we expanded our year-over-year adjusted gross margin rate by 50 basis points despite approximately $60 million, or 250 basis points, of net tariff pressure in the quarter. We mitigated this headwind with margin expansion driven by our strong operational foundation, which enabled us to scale effectively, resulting in significant leverage on buying and occupancy expenses. Additional drivers included a pullback in promotions and increased regular price selling. Adjusted SG&A dollars were $579 million in the fourth quarter, and our adjusted SG&A rate was 25.5% compared to 25.4% last year or 25.8% excluding the $26 million gift card breakage benefit. We leveraged on the SG&A line by 30 basis points, driven by the sales beat and continued discipline in expense management across the business. This was partially offset by investments in store labor and higher incentive compensation expense associated with our outperformance in the quarter. Adjusted operating income was $316 million for the fourth quarter, above the high end of our guidance of $265 million to $290 million and up from last year's fourth quarter adjusted operating income of $299 million, or $273 million excluding the $26 million gift card breakage benefit. Nonoperating expenses, consisting principally of interest expense, were $14 million in the quarter, better than our guidance of approximately $17 million and down from last year, driven primarily by a lower level of weighted average borrowings and lower interest rates. Our adjusted net income per diluted share was $2.77, significantly better than our guidance of adjusted net income per diluted share of $2.20 to $2.45, and last year's fourth quarter adjusted net income per share of $2.60 or approximately $2.35 excluding the gift card breakage benefit. Turning to the balance sheet. Our inventories remain in a healthy position. Fourth quarter total inventories were up 12% year over year. Excluding the impact of the Adore Me inventory reserves, inventory growth would have been in line with our previous mid-teen guidance. From a liquidity standpoint, we ended the fourth quarter with a cash balance of $518 million, an increase of $291 million above last year. We generated free cash flow of $312 million for the full year. Included in free cash flow was a $69 million benefit related to the settlement of a long-standing intercompany fee litigation. Excluding this one-time item, our adjusted free cash flow was $244 million, more than $30 million above the high end of our guidance. As planned, we repaid all outstanding borrowings under our $750 million ABL credit facility in the quarter. Our cash balance and the full availability under our ABL agreement leave us in a strong financial position with ample flexibility for continued execution of our strategic priorities. Before moving to our outlook, I want to briefly address the DailyLook and Adore Me businesses. As noted in our press release this morning, we have initiated a strategic review of DailyLook, which operates as a digitally based premium subscription women's apparel and accessory styling service and represents a noncore asset within our portfolio. We are evaluating options to best position DailyLook for long-term success. We also continue to assess the Adore Me business and explore opportunities to optimize it within our portfolio. As a result of this ongoing review, we recently discontinued Adore Me's intimates-based subscription offering and converted it to a loyalty program designed to provide customers with a flexible, improved, and seamless shopping experience. We also decided to exit the Adore Me distribution center in Mexico, and we have transitioned all fulfillment operations to the U.S. In conjunction with these actions, in the quarter, we recorded a noncash pretax impairment charge of $120 million related to the long-lived assets of Adore Me and a $36 million charge related to inventory reserves and other restructuring charges. These charges have been excluded from our adjusted non-GAAP results. Moving to our outlook, which is based on tariff assumptions consistent with the rates in place prior to recent developments. We have not included any impact of any potential changes to tariff rates and will continue to monitor developments closely and remain agile in our approach. As we discussed, we saw outperformance in the fourth quarter and that momentum has carried into 2026. Our spring offering is resonating well. Looking ahead, we have a strong pipeline of floor sets and brand moments. Brand heat continues to build as our product resonates with customers, driving market share gains and growth in our customer base. Our Path to Potential strategy is in its early stages, and we see substantial opportunity ahead to continue to deliver top-line growth. For fiscal year 2026, we expect net sales to be in the range of $6.850 billion to $6.950 billion compared to net sales of $6.553 billion in fiscal year 2025, representing growth of approximately 5% to 6%. We expect fiscal 2026 operating income to be in the range of $430 million to $460 million compared to adjusted operating income of $403 million in 2025. This implies operating margin expansion of approximately 20 to 50 basis points despite the incremental tariff headwinds. We have built a solid operational foundation that enables us to scale effectively and supports growth. As our top line grows, this foundation provides meaningful leverage across our buying and occupancy expenses. In addition, we believe our disciplined expense management, tariff mitigation efforts, and ongoing focus on reducing promotions and increased regular price selling position us to continue to expand our operating margins. Our fiscal 2026 guidance assumes an incremental gross tariff cost of approximately $160 million. We expect to mitigate most of that impact, resulting in an incremental net tariff impact of about $40 million. Our mitigation efforts include optimizing costs with vendors, further diversifying our sourcing, ensuring we have a more efficient air versus ocean freight mix, and implementing strategic pricing actions including more targeted promotions, increased regular price selling, and selective price adjustments where we identify value gaps in the market. We expect tariffs to have the greatest impact in the first half of the year, with the first quarter seeing the largest impact since last year's first quarter was not affected by tariffs. That impact eases in the back half as we begin to lap tariffs and our mitigation efforts increase. Given these inputs, we are forecasting fiscal year 2026 net income per diluted share to be in the range of $3.20 to $3.45 compared to adjusted net income per diluted share of $3.00 in 2025. We estimate capital expenditures in the range of $220 million to $240 million in fiscal 2026, or approximately 3% of sales. Capital investments will continue to focus on stores, the customer experience, and technology and logistics supporting our strategic initiatives to drive growth and operating efficiencies. We estimate 2026 free cash flow of approximately $220 million to $250 million. As for store counts and renovation plans in North America in 2026, we expect store counts to be flat to slightly up this year. By the end of the year, we estimate our Store of the Future presence in North America will be approximately 250 stores or 30% of the fleet, up from 25% in 2025. Internationally, we expect our Store of the Future presence by the end of 2026 to be approximately 55% of the fleet, up from 45% in 2025. By 2027, we expect approximately 50% of our global fleet will be converted to this format. Turning to our outlook for the first quarter of 2026. We are forecasting net sales in the range of $1.490 billion to $1.525 billion compared to net sales of $1.353 billion in the first quarter of 2025. This outlook assumes top-line growth of approximately 10% to 13% based on our continued momentum quarter-to-date in our North America business as well as strength in our international business. With this sales outlook, we expect first quarter 2026 operating income to be in the range of $32 million to $42 million compared to an adjusted operating income of $32 million in the first quarter of 2025. We expect our first quarter 2026 gross margin rate to be about 35.5% compared to an adjusted gross margin rate of 35.2% in the first quarter of 2025. This means we anticipate the first quarter 2026 gross margin rate to expand approximately 30 basis points year over year. Our margins are expanding despite the approximately 175 basis points of tariff pressure in the quarter. We expect to more than offset this based on the strength of our operational model, which continues to deliver leverage on buying and occupancy expenses as net sales grow, as well as our disciplined promotional strategy and more regular price selling. The SG&A rate in the first quarter of 2026 is expected to be approximately 33% compared to the first quarter 2025 adjusted rate of 32.8%. The forecasted increase in SG&A dollars is primarily driven by store labor investments and other costs to support the customer experience and top-line growth, as well as higher incentive compensation expense as the first quarter of last year benefited from a reduced level of incentive compensation expense. Given these inputs, we estimate first quarter earnings per diluted share to be in the range of $0.20 to $0.30 compared to adjusted earnings per diluted share of $0.09 in the first quarter of 2025. We expect to end the first quarter with inventories up high single digits compared to last year. This expected increase reflects growth to support business trends, the impact of tariffs, and timing related to our operations, mostly due to our strategic shift towards ocean freight from air freight, which results in us taking ownership of inventory earlier as compared to last year. In closing, our Path to Potential strategy is delivering tangible results as evidenced by the significant acceleration in our business during 2025. We are entering 2026 with momentum. Despite an uncertain macro environment, our fundamentals remain strong and resilient. We remain focused on managing costs while continuing to invest in product innovation, brand strength, and the customer experience. We are positioned to continue to scale effectively, giving us confidence in our ability to drive sustainable, long-term value. We will now open for questions. Operator? Operator: Thank you. And one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we will go to the line of Matthew Boss with JPMorgan. Your line is open. Matthew Boss: Great. Thanks, and congrats on a nice quarter. So maybe, Hillary, could you elaborate on new customer acquisition trends following the inflection in the file to growth last quarter? And just what inning you see marketing and product improvement in today as we think about sustaining momentum into 2026? Hillary Super: Sure. Sure, Matt. So customer acquisition. When you look at our total customer file, we are seeing growth across new, retained, and reactivated, but the highest growth in new. And within that, we are seeing a nice uptick in younger customers. It is a little gray because there is a delayed match in age range, so it is not a precise science, but we do see that and we see anecdotally in our business that we are increasing our count of new customers, which feels great. I would also add that from an income perspective, we are seeing consistent performance across the board in all income cohorts. And we are seeing growth in the customer count across all income cohorts as well as spend. So we are feeling really good about the complexion of customers as we enter 2026. In relation to marketing and what we have planned, you know, the team is just getting started. When we executed Q3 and Q4, the majority of the leadership team on the brand side was new. And so while we are tremendously happy with the success we had in the back half of the year, we are just getting started and we are learning things every day that we are playing forward. I think Valentine's execution is an example of that, where we learned the power, the virality of a K-pop group like TWICE, brought them back to collaborate on Valentine's Day, and just saw record results from that collaboration. So we are moving quickly. We have a number of events planned for both brands. And I think one of the things I am most excited about is we are really starting to find our voice with the PINK brand and what resonates there. I think we were farther along with VS and building brand heat in VS, and I am very excited about some of the things that are in the pipeline for PINK. So all the way around, we are feeling really positive. Matthew Boss: Great. And then maybe, Scott, as a follow-up, I think you mentioned momentum multiple times. I lost count in terms of the first quarter to date. But maybe just if you could elaborate on the momentum that you are seeing first quarter to date, maybe relative to the 10% to 13% revenue growth outlook and just drivers of the demand acceleration that you are seeing relative to holiday. Scott Sekella: Yeah. I mean, you know, coming off of holiday, which started with the fashion show heat, continued with the product newness. And then when you think about the fourth quarter setting Valentine's Day a little bit earlier and getting the heat around Valentine's Day in Q4. That carried in to February through Valentine's Day, and we saw, you know, impressive traffic, especially the week of Valentine's Day, which has set us up for a strong Q1 with that guide of plus 10% to plus 13%. I will say, you know, February is probably our easiest comp month given, you know, last year the trends were down and then sort of rebounded in March and April. So for Q1, we expect that 10% to plus 13%, but the March–April time frame will probably be a little bit below what we are seeing in February. Hillary Super: And then I will just jump in on the categories. We are really, really pleased in February to see very broad-based success across business units, across channels, and even in the categories that we are really focusing on. So I would say very consistent, very broad-based success. That being said, the things that I am really paying attention to in VS are sleep and intimates. In PINK it is bras, apparel, and collaborations, and in Beauty it is fine fragrance and mists. And I am really happy to report that all of those businesses are performing very well and very consistently. Matthew Boss: It is great color. Best of luck. Operator: Thank you. Our next question comes from Simeon Siegel with Guggenheim Partners. Your line is open. Simeon Siegel: Great. Thanks. Hey, everyone. Good morning. Really nice job. So Hillary and team, obviously, you have this slate here behind you. You are seeing what is working, what is it, maybe it feels like you have a really nice handle on the brand. So just as we take a step back, anything you are willing to share about how large you think each brand can and should be? And then I do not know if it is Hillary or Scott, but just any notable discrepancy in AUR, I think, versus Victoria this past quarter. And do you see greater go-forward opportunity at either brand? Thank you. Hillary Super: Sure. I am just very optimistic about all three business units. I do not see a reason why we cannot hit historical levels of sales in VS and Co. in general. I am not going to point to any specific numbers by brand, but we see tremendous runway in all of them. And we are working towards delivering that. I am feeling great across the board and with PINK, I think we are just really getting started. In terms of AUR, we are seeing broad-based success across removing promotions. But two things I want to highlight are real strength in bra AUR, which just goes back to leaning into our expertise, authority, and storytelling, as well as our in-store service. And then the other thing I would highlight as a real win was PINK apparel, where we saw double-digit AUR increases. And we have been able to, I think, make the most headway with delayering promotions. But we still think there is tremendous room to continue delayering, and we continue to look at that and discuss it and work towards it every day. Simeon Siegel: That is really great. Great job, guys. Best of luck for the year. Operator: Our next question comes from Mauricio Serna with UBS. Your line is open. Mauricio Serna: Great. Good morning, and thanks for taking our questions. First, to Hillary, maybe could you talk about, you know, on a higher level, in what inning do you see yourself on the turnaround of VS and PINK? Just curious because, you know, you have had now three consistent quarters of very strong comp sales. So just thinking, like, how far along do you think you are on this turnaround? And maybe could you elaborate on the market share trends you saw in the quarter for the North America bras and panties categories? Thank you. Hillary Super: Sure. What inning are we in? You know, early to mid. I think it is different for each business unit. Victoria's Secret brand, I think, is farthest along. That team has been working together for the longest. I think we, you know, have the clearest view of what we needed to be dominant in there, which is obviously bras being at the heart of that business. It is really just clicking. And there is so much that we can build upon there. I feel great about that. I think in PINK, we are seeing equally strong results, but we are more in learning mode. I would say this customer has changed more than the Victoria's Secret customer. The 20-year-old today is very different than the 20-year-old twenty years ago when this brand started. So we are learning and acting and seeing real success. And one of the things that I would point to outside of TWICE and what we have been able to do with that collaboration is really learning through the LoveShackFancy collaboration, applying those learnings to our PINK by Frankies collab that just dropped a couple weeks ago and seeing that turn into measurable results. And so we are consistently reading, learning, and reacting in PINK, and I think we are in earlier innings because of that. And then in Beauty, Beauty is a very technical business. There is a lot of innovation that is required. We have made some key hires, and we are really thinking a little bit longer term in Beauty. So that innovation and that regulatory element of Beauty takes a little bit of time, so we are going to be a little more conservative with Beauty in 2026 with the intention to start ramping up in 2027. I think you asked me one other question. Market share—yes. Super pleased with market share increases in all of the key categories. The only other thing that I would say to elaborate is it does look like we are taking share from the value sector primarily, which was where we had targeted all along. And so we continue to see that coming to fruition. And we are super excited that we are able to provide the emotional connection without having to drive promotions to entice those customers, and that is also just feeling like a real proof point for us. Mauricio Serna: Great. And just a quick follow-up for Scott. Maybe could you talk about the cadence of tariff impact throughout the year? You just kind of said that the first quarter is going to be the biggest one, but just more details would be very helpful. And just to clarify on the rates you are using, you are assuming a 20% for, you know, every country except China. Does that include also, like, India being, like, 18% coming down to 18% from 50%? Just wanted to understand that since I think you have exposure to that market. Thank you. Scott Sekella: Yeah. Yeah. Let me start with the second and then tackle the first. So we are assuming tariff rates in place prior to the Supreme Court ruling, and so we will continue to monitor the developments with that. With India, we had a good chunk of the 50% mitigated, so going to 18% is a smaller impact for us. So it does not really move the needle in a significant manner. In terms of the cadence of tariffs throughout the year, as we said, it will be heavier kind of in the first half and particularly even in first quarter if you think about tariffs were not in place in Q1 last year. So we will see, you know, about a 175 bps headwind in the quarter on that tariff pressure for Q1. And then it will still be an impact in Q2, but it will be lesser of an impact in the back half as, one, we start to lap tariffs, but two, our mitigation even continues to execute and ramp up through the back half. Mauricio Serna: Thanks so much, and best of luck. Operator: Thank you. Our next question comes from Corey Tarlowe with Jefferies. Your line is open. Corey Tarlowe: Hillary, I wanted to ask you about what worked well for you in 2025, and then as you think about 2026, if you could, for us, just zoom in on what you are looking to change in the first half specifically. Because I think if you compare what we saw in the back half of last year, some of that product and floor sets had your mark on it, but we heard it in your prepared remarks today about how emphatic you are about the new floor sets that are really hitting. So I was curious about what it is that you really see as the biggest factors of change in the first half of this year. And if you would like to elaborate about back half as well, that would be great too, but I wanted to zoom in there. Thanks so much. Hillary Super: Sure, Corey. Really proud of 2025 across the board. I think both from a product evolution standpoint, a cultural connection standpoint, and from a marketing optimization standpoint. I would say those were the three major levers that we pulled and worked in concert together to create the tangible results. As I think about assortment specifically to your question, Q1, the quarter we are in right now, really starting with Valentine's Day, is the first season that we, as a new team, all worked together from beginning to end, from concept to customer. And so you are seeing all of our insights, all of our conversations, all of our debates and hard work come to fruition with these floor sets. And I think more than anything, we have breathed new life into this assortment. It is more energetic. It is more fun. It is a little more youthful. We are not taking ourselves super seriously. Intimates should not be a serious business. This is about fun and escape and joyfulness. And I think that is really coming through on our floor sets. Particularly in the front half of the year, we have marketing optimization as a huge lever as that team really started to impact the back half of the year. And from our analysis on back-half-of-the-year marketing optimization, the analysis is telling us that, like, there is even more we can do, in particular with how we put the fashion show into the world. So we had a very specific pre, during, and post media strategy that worked very well, much better than it did the year prior, but even more to do there next year. So we have a very robust calendar of deliveries, activation, new ideas, new cultural connections in both brands throughout the entire year. I am not going to tell you what they are. But we are excited. And I think what you will see is the power of this executive team coming together as they all anniversary a year together and they start supercharging their ideas and really driving outsized results. Corey Tarlowe: That is great. So I guess a follow-up for Scott. Given all the excitement that is flowing into the business and sort of circling that square with the outlook for the year. How do you think about the factors of upside to the current guidance? Thanks so much. Scott Sekella: Yes. I mean, we feel really good about our current guide. As we have shared with Q1, a plus 10% to plus 13%. We touched on the momentum coming into the quarter and what we are seeing. I think you will see that momentum sort of carry into Q2. And then as we start lapping the higher comps in the back half, we see a runway to growth there, but it probably will not be as high as the growth in the front half is how we are thinking about it right now. But excited for all of these new floor sets. Excited for how the marketing is bringing the story to life, and I think it is setting us up for that sustainable growth throughout the year. Corey Tarlowe: Great. Thanks so much, and best of luck. Operator: Thank you. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open. Good morning and thank you for taking our question. Brooke Roach: I was hoping I could follow up on Matt's question on marketing. What marketing spend as a percent of sales is embedded within the plan this year versus last year? Do you expect that rate to move higher on a medium-term basis given that you have with your customer engagement strategy? Scott Sekella: Yeah. I will touch on the first part and then Hillary can give some color. But in terms of marketing as a percent of sales, we see it picking up slightly right now. We see there is opportunity to potentially invest more where we can get a return on that ad spend. And so we did invest more through the back half, where we saw those opportunities, last year. And we are planning for a slight uptick this year. Hillary Super: And then I would just add that we have, you know, we have tremendous opportunity in optimization of marketing, especially in terms of segmented marketing. We are in the early stages of really evolving with the customer as she evolves her purchase and sort of consideration journey with agentic commerce. And then we are going to be looking for places where we have opportunities, where we have an absolutely unbelievable idea that is potentially out of the box and something that we want to bring to market. And so we are working to make sure that we have levers we can pull when those things arise. And we can manage it within our budgets. And, you know, those are some of the things I am most excited about, to be honest with you. Brooke Roach: That is great color. Scott, as you look at the merch margin opportunity ahead, how much more opportunity do you see from promotional reduction and what are your pricing plans? And how might that change as a result of the dynamic tariff environment that we currently find ourselves in? Scott Sekella: Yeah. Great question. As we went through 2025, you know, we had tailwinds from pulling back on promotions pretty much all year, even in Q4, which is a heavier promotional period, and we were still identifying days of promotions that we could shorten. We also increased our holiday GWP buy-in. So we are always looking for those opportunities, and we see those opportunities all through 2026 as well. As these brands become more about emotion versus promotion, we will continue to get tailwinds from pricing and promotions throughout the year. We also talked last year where we implemented some strategic price increases where we saw value gaps. So some of that will lap in the front half. We continue to monitor the consumer reaction, but we have not seen the consumer pull back. So I think you will see AURs continue to tick up throughout the year. And then we continue to monitor tariffs. I mean, as we said, we are planning with the tariffs that were in place prior to the recent developments. We talked about the color of how that is going to weigh on the front half versus the back half. But the other piece I would touch on with margins is just as we grow, we have got that low leverage point. So as we grow north of that 1% to 2%, we are going to continue to leverage in a meaningful way on buying and occupancy, which is what we have seen these last couple quarters. Whereas tariffs have come on in a big way, we have been able to still grow that gross margin rate. Hillary Super: Great. Thanks so much. I will pass it on. Operator: Thank you. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open. Marni Shapiro: Hey, guys. Congratulations. And especially on Valentine's Day, I am still shook that you had Hailey Bieber. It looked so beautiful. I do want to focus a little bit on PINK. It feels like PINK is getting its grounding and footing around the balance of apparel versus intimates versus beauty and accessories. I am curious if you could kind of outline what it should look like long term with the hits of fashion from your collaborations, like the denim that you pop in there. And where does active and beauty kind of fit into the PINK assortment now? Hillary Super: Sure. You are right. I think we are hitting our stride, and we are putting the puzzle pieces together here. And Ali said to me last week, she said, you know, it is really feeling great that the business is about 30% intimates, 30% core icons, and then 30% collaborations and fun that is unexpected. So I thought that was a good comment and something that we are really thinking about and refining. So lots of runway here, lots of experimentation. And then the key is when something clicks is how fast we can run with it to the next idea. And I think the team has done a tremendous, tremendous job at that. And then in terms of accessories and beauty, you know, I think—I am an accessories merchant from way back, so I have a lot of passion about that category, and I think there is upside and opportunity there. I think we need to spend some time really brainstorming that. We are not quite there yet, so that will be future upside. And then with beauty, we are actively working on that, so I expect that to be an early 2027 evolution as the team gets in place and starts working on longer-term ideas for PINK Beauty. But, you know, we know that that customer is deeply engaged with beauty, and we certainly think we have an opportunity there. Marni Shapiro: And so does ACTIVE fall into core icons? And then if you could also touch on VSX, which I feel like also seems to have more consistency and, like, a real home in the stores over the last, you know, four to six months. Hillary Super: Yes. Okay. So active within PINK is actually in apparel. That being said, I think that the trend is moving away from sort of a head-to-toe leggings-bra look, and so we are evolving with that into more of a lifestyle look. So it will not be as pure of an active category as it has been in the past. It will be a bit more mixed. As it relates to VSX, we continue to have great success in our authority with sports bras and really thinking of those as an extension of our bra authority initiatives. I think we have an opportunity to sharpen that assortment, focus it in, and in many cases I think it is more of a digital opportunity than a stores opportunity, and so we are rightsizing that square footage in stores as we move towards the back half of this year. But we have a little fine tuning to do there. And so, as we see the enormous, enormous opportunities in the four pillars, we are really focusing our effort on that. And then we have some of these other secondary opportunities, which we will start pursuing more in the out years. Marni Shapiro: Fantastic. Thank you, guys. Operator: Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Your line is open. Ike Boruchow: Hey, everyone. Let me add my congrats. Just wanted to ask about two things, I think, for Scott, maybe for Hillary. Firstly, on the momentum quarter to date, I am sorry if I missed this, did you reference what the U.S. business is comping thus far? Is there any shifts that are impacting the business in the first quarter, Chinese New Year, anything that we should be thinking about? And then a follow-up, Scott, just on the margins, I think you had guided some slight leverage in the fourth quarter, and we saw some slight deleverage even though the revenue was significantly better. Can you kind of walk us through what exactly happened on the cost line and why there was not some better flow through there? Just kinda curious if that was incentive comp or something else, some pull forward of investment. Thank you. Scott Sekella: Yeah. So quarter to date, no real shifts, like, in or out of the quarter. So quarter to date, we have got the momentum coming off of, you know, Valentine's Day, super strong set that dropped in January. That momentum, as I said, carried into the Valentine's Day period, and Valentine's Day week the traffic was just phenomenal. So, you know, February is the lowest comp month, particularly of the year but also of the quarter, as things started to turn in that March–April time frame. So for the quarter, we expect March and April to kind of be below what we are seeing in February, but still result in that 10% to 13% guide. There is a little bit of shift between April and March, but that is all in Q1 as Easter shifts from April to March this year. So it does not impact in or out of the quarter. In terms of the margin, so gross margin grew—the adjusted gross margin rate grew year over year. Obviously, we had the tariff headwinds. But then we leveraged on buying and occupancy. And then we had more favorable promos and pricing than we initially thought, because as the quarter progressed, even though it is a promotional period, we found opportunities to continue to pull back. From an SG&A perspective, we did invest a little bit more in marketing to drive some of those outsized sales, but then we have higher incentive comp given the outperformance. So that is sort of the cost drag, if you will, from an SG&A perspective. Ike Boruchow: Got it. Thanks, Scott. Operator: Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open. Dana Telsey: Hi. Congratulations, everyone. Hillary, you mentioned a pop-up for PINK in SoHo happening sometime. What are the markers that you need to see that would make PINK a stand-alone concept for you? And then given the success of the fashion show in 2025, what learnings or hindsight are you thinking about for 2026 that could make it even more impactful? Thank you. Hillary Super: Hi, Dana. Thanks. Okay. PINK stand-alone. We are doing a long-term pop-up in SoHo in the bull's-eye of the traffic pattern in that area. So we are very excited about that. It is going to be a little bit of a laboratory for us as we start to build out some of these additional categories that Marni was asking about. We are going to be looking at the KPIs of, you know, traffic, conversion, store productivity, all of those things. But also, it is a brand-building and marketing moment and a customer connection moment. And what is very interesting about this modern 20-year-old is that, you know, she is living and sort of beginning her connection with a brand in a digital world. Everything is happening off of her phone, but then she is seeking out in-real-life experiences. You know, they refer to her as the lonely generation. She is looking for that third space. And we are seeing a higher penetration of store sales for the PINK brand. So we are looking to create that special space and learn about that. Do I think that we would have a very significant PINK stand-alone strategy that comes out of it? Probably not. We like the side-by-side format, but I do think that there will be specific locations, whether they are college towns, etcetera, where there are particularly high levels of young customers where we may want to experiment with this. And so it is a first step towards that, and I think we are going to learn a lot. And I think we are going to have a lot of fun in the meantime. Hillary Super: We learned a lot with the fashion show. Overall, we were very, very pleased and saw much higher returns on our investment than we did a year prior. Part of that came from the very specific planning of the pre, during, and post media activation strategy. We learned that we could do more. I think we learned that the global approach to talent was an extremely important piece of its success globally. We learned that having a distinctly PINK section was particularly disruptive in a positive way for the PINK business. And I think we really have an appetite to move beyond a singular event a year. It is really an unlock to thinking about how we might be in conversation with our customer in a more evergreen way. And so those are all things that we are thinking about as we enter 2026 and beyond. Dana Telsey: Thank you. Operator: Thank you. We have time for one more question. Our last question comes from Adrienne Yih with Barclays. Your line is open. Adrienne Yih: Great. Thank you so much, and great to see the progress, Hillary, Scott, and the whole team. I guess I will start with it seems like, you know, we have all been on this journey of kind of elevating the business and getting back to your historical strength. This seems like really kind of an acceleration in that journey. When you are kind of getting feedback from customers and the new customers, are they recognizing now how highly complex bras are to make—well-fitted bras? Are they understanding the quality and the investments that you are making there? It was really nice to see the bras returning, the bra segment returning to growth. If you can talk about kind of the cadence of launches and the feedback that you are getting in that particular category. And then secondarily, I have to ask this, Middle East—I know you do franchises there. We are calculating maybe 2% of exposure there. If you can talk about any disruption there. Thank you. Hillary Super: Sure. I will start, and then I will pass to Scott on the Middle East question. So with bras, I think that we are in the very early stages of reeducating and reengaging with our customer on our authority and expertise in bras. The amount of time, energy, resources we expend to fit and perfect bras. The culture that we have in stores around bra fitting and that it is a very personal, very emotional experience and one that I think our teams do very, very well and build long-term connections around. And then thirdly, I would say middle-funnel marketing with influencers' testimonials about bras, their love for bras, has also been really impactful and, I think, something that has been missing. We have not had that authoritative voice for years. I think bringing that voice back while being able to strike a balance of emotion with authority has been the real key because it is an emotional purchase. It is a technical fit purchase, but also an emotional purchase. And I think we are doing a very good job threading that line. In terms of cadence of launches, we have a robust cadence of launches, events, and milestones this year in both brands. And it is something that we are investing more resources and energy around. And really, we have learned that we must be always-on in bras in some way, shape, or form. And so that is our intention this year, and we are excited with what is to come. Scott Sekella: Adrienne, in terms of the Middle East, we are obviously staying very close to the situation and monitoring the developments and how long this may last. But there are two areas right now that we are paying close attention to. One is just shipments to North America. We are experiencing some delays, not material, that are going to have a broader impact on the business that way. And then as you said, we have got franchise partners in the Middle East. There are a handful of store closures right now. This is where our business model helps mitigate some risk because even though there are store closures, the impact to us is the royalty rate as that product sells to the end consumer. So the impact is a bit less than if it were our own stores. Adrienne Yih: And is it fair to assume it is no sourcing there? No sourcing exposure? Scott Sekella: No real sourcing exposure. No. Operator: Thank you very much. Best of luck. Great results. Hillary Super: Thank you. Thanks, Adrienne. Operator: Thank you all for participating in the Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.
Operator: Hello, everyone, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. My name is James, and I will be your operator for today. If you would like to ask a question during the presentation, the conference call will now start, and I will hand it over to Diana Raschow. Please go ahead. Diana Raschow: Good morning, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. Joining me today are Robert W. Eddy, Chairman and Chief Executive Officer; Laura L. Felice, Chief Financial Officer; and William C. Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our investor website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. I will now turn the call over to Robert W. Eddy. Robert W. Eddy: Good morning, and thank you all for joining us. We are pleased to share that we closed out fiscal 2025 with strong momentum, delivering solid comparable club sales growth and strong profitability. Throughout the year, we navigated a dynamic environment marked by a more cautious, value‑seeking consumer, tariff‑related and geopolitical uncertainties, and broader macroeconomic volatility. Even with these challenges, our team remained focused and resilient, consistently delivering value, convenience, and quality for our members. We also achieved several meaningful milestones in 2025 that strengthened our business and reinforced the momentum we are carrying into the year ahead. We grew our membership base by more than 500,000 members, the largest annual increase in recent years, underscoring the relevance of our value proposition and the loyalty of the families who rely on us. We successfully opened 14 new clubs, the most we have ever opened in a single year, expanding our reach into new markets with sales, membership, and profit performance all well above expectations. We also advanced our digital capabilities, with digitally enabled sales penetration reaching 16% as more members embraced the convenience of omnichannel services. All of these are material accomplishments that create a structurally higher lifetime value for both members and shareholders. Ultimately, these achievements helped drive record full-year earnings per share, reflecting the strength of our model and disciplined execution across the business. As always, our team demonstrated an incredible commitment to our purpose: to take care of the families that depend on us. This purpose guided our decision-making and enabled us to deliver the dependable experience our members count on, no matter the conditions. That was especially evident late in the quarter when winter storm Fern, one of the largest storms in recent years, brought significant snow and ice across much of the U.S., impacting nearly our entire club footprint. We pride ourselves on being open and in stock for our members when they need us most. In the days leading up to the storm, we set a daily record for gas volume that was 20% higher than our previous daily record, reinforcing that we are a destination in times like these. Our team worked tirelessly to keep our clubs open and ensure that our members had access to the essential supplies they needed, from groceries and household goods to ice melt and emergency items. Their remarkable efforts really showed our purpose of taking care of the families that depend on us. I am incredibly proud of the way that they showed up for our members and communities. Turning to our fourth quarter sales performance, we delivered merchandise comparable club sales growth of 2.6%, reflecting our 13th consecutive quarter of market share gains and 16th consecutive quarter of traffic growth. Our perishables, grocery, and sundries division grew comps by 2.3%, driven by solid unit growth supported by improvements in assortment and merchandising. Even after lapping the chain‑wide rollout of Fresh 2.0, we are still seeing strong, steady comp performance in perishables, clear proof that this is not a onetime lift but a real, lasting shift in how our members shop with us. These results reinforce the importance of our core consumables franchise, which continues to demonstrate consistency even in a volatile operating environment. In general merchandise and services, comps increased by 4.3%, which outperformed our expectations for the quarter, driven by changes in merchandise mix. While we are pleased with our progress, it is important to note that general merchandise can be variable quarter to quarter, given the discretionary nature of many of these categories. As such, we would not expect performance at this level every quarter, but we are encouraged by the traction we are seeing as our broader transformation efforts take hold. Turning to membership, the foundation of our business and one of our greatest strengths, we ended the year with over 8,000,000 members, a new high for our company. In comp clubs, this growth reflects strong acquisition, continued loyalty from our long‑tenured members, and the ongoing relevance of our value proposition. Our growth was also the result of opening our 14 new clubs this year. Growing both the comp and total member bases is incredibly important to our future success. For the fourth consecutive year, we achieved a 90% tenured renewal rate. This level of loyalty is rare in retail and speaks directly to the consistency of the experience we deliver and the relevance of the BJ's Wholesale Club Holdings, Inc. membership model. We also saw continued strength in our higher‑tier memberships. Penetration increased to 42% this year, demonstrating strong adoption of the enhanced benefits in our higher‑tier offerings. These members are among our most engaged and the highest-spending cohorts, and we see meaningful opportunity for continued growth here. What stands out this year is not just the growth of membership, but the quality of that growth. The combination of more members, exceptionally high renewal rates, and deeper engagement among our most loyal tiers reinforces the health of our model. It also gives us tremendous confidence as we look ahead, because strong membership is the engine that powers everything else: traffic, share gains, and long‑term profitable growth. As our membership base grows in both size and quality, we continue to make it easier for members to shop with us whenever and however they choose. Digital engagement remains a major unlock for convenience, and this quarter, digitally enabled sales grew by 31%, driven by strong adoption of BOPIC, same‑day delivery, and Express Pay. These services have consistently been among the most meaningful drivers of digital growth, with more than 90% of digital orders fulfilled directly from our clubs—an efficient and member‑friendly model that has contributed significantly to our momentum. Our digital business also achieved a milestone this quarter, posting its highest sales day ever on Black Friday, and then surpassing that record again on Cyber Monday. This performance reflects not only high engagement, but the continued maturation of our digital portfolio. We are increasingly seeing members tap into our digital conveniences for different shopping occasions, underscoring how ingrained these capabilities have become. For example, a member stocking up in club ahead of a winter storm may be more inclined to use Express Pay to make that shopping trip faster and easier. We are also continuing to lean into AI to create even more seamless and intuitive experiences for our members. Our AI shopping assistant, Ask Bev, is designed to enhance the member experience through more personalized, intuitive, and efficient product discovery and support. And behind the scenes, AI is enhancing our merchandising enrichment and platform reliability. Value remains foundational to how we serve our members, and we continue to see that resonate across all income levels, particularly in a period where many consumers are becoming more selective with their spending. A strong pricing position is central to our model. Our advantaged structure allows us to consistently deliver meaningful savings—up to 25% better than traditional grocery. We are relentless about maintaining that edge for members. This commitment to value is one of the reasons we continue to see steady renewal rates, strong traffic, and healthy unit growth in our core businesses. Our own brands are another important way we help members manage their budgets without compromising on quality. In fiscal 2025, own brands represented 27% of our merchandise sales, and we remain on track toward our long‑term goal of 30%. These products offer significant savings and are an increasingly important part of how families shop our clubs. That loyalty, combined with higher margins, makes this effort powerful for our company. We also create value through compelling discounts and promotions. A recent example is our Big Game event, where members who spent over $150 received a $15 digital bounce‑back coupon, providing members with a high‑impact way to save during a key seasonal moment. At a time when members are making careful decisions with every dollar, our focus on great prices, quality products, and highly curated assortments ensures we remain a trusted destination for families looking to get more value out of every trip. We continue to make meaningful progress on expanding our footprint and bringing the BJ's Wholesale Club Holdings, Inc. model to more communities. In the fourth quarter, we opened seven new clubs, a great finish to a year that saw us open 14 new clubs. We are so proud of our 2025 class of club openings, which saw us open clubs in eight different states. These clubs as a whole are delivering sales, membership, and profit that are well above expectations, and we are very excited for our continued accelerated club growth. The success in our new clubs and new markets is a testament to the team working on new clubs, whose mission is to make the next opening even better than the last. The team is ready for our first‑half‑of‑the‑year openings in the Dallas–Fort Worth area, and I have a tremendous amount of confidence that we will deliver for these new members and communities, as we have proven time and again in our new club program. We remain on track to deliver our commitment of 25 to 30 new clubs over 2025 and 2026, and as we look out at the new club pipeline, we would expect this pace of openings to continue over coming years. Our sustained expansion reflects our confidence in the relevance of our model, our ability to serve more members across more geographies, and our long‑term commitment to profitable growth. Before I hand things over, I want to take a moment to recognize our team members across our clubs, our supply chain, and our club support center. Their commitment to taking care of the families who depend on us is what enables our performance quarter after quarter. Their hard work, especially in dynamic environments like this one, continues to inspire me every day. As we look ahead, we remain confident in the strength of our model and our ability to execute on our long‑term priorities. Our business is built to win in both stable and uncertain environments, and the investments we are making today put us in a strong position to continue delivering value for our members and sustainable growth for our shareholders. With that, I will now turn it over to Laura L. Felice to walk you through the financial results in more detail. Laura L. Felice: Thank you, Bob. Before I dive into the numbers, I want to acknowledge the exceptional work that our teams across our clubs, distribution centers, and support functions. Their continued focus on serving our members and strengthening our operations played a major role in delivering our fourth quarter results. Now let me walk through the financial highlights for the quarter. Net sales for the fourth quarter were approximately $5,400,000,000, an increase of 5.5% over last year. Total comparable club sales, including gasoline, rose 1.6%, with fuel prices continuing to run down mid‑single digits year over year. Excluding gas, merchandise comparable sales increased 2.6%, and we were pleased to see growth in both traffic and units. Traffic strengthened as the quarter progressed, helped in part by members stocking up ahead of the late‑January winter storm. Within our grocery, perishables, and sundries business, comps were up 2.3%, supported by strong performance in categories like nonalcoholic beverages, candy, and snacks. Unit growth was approximately 1.5%, and price remained up year over year as we have seen inflation continue to moderate. Our general merchandise and services division comp increased 4.3% in the fourth quarter, driven by strength in consumer electronics and apparel, even as home and seasonal remained a drag on the business. Membership fee income rose 10.9% to roughly $129,800,000, supported by healthy acquisition and retention trends across the chain as well as an annual fee increase in January 2025. Our membership base remains vibrant, and we continue making progress in improving member mix quality. As we look ahead, we expect membership fee income growth to moderate as we fully lap the fee increase and return to a more normalized run rate. Turning to our gross margins, excluding gasoline, our merchandise margin rate was down about 50 basis points year over year, driven by changes in merchandise mix. SG&A expenses totaled $818,200,000, representing slight deleverage as a percentage of sales, primarily due to new club openings and continued investment in our key strategic initiatives. Our gas business outpaced the broader industry. Comparable gallons were up 0.1%, significantly better than the low‑single‑digit declines seen elsewhere. Fuel margins were generally stable during the quarter, resulting in profitability modestly ahead of expectations. Adjusted EBITDA for the quarter increased 1% to $266,500,000, supported by steady cost discipline. Our effective tax rate for the quarter was 25%, slightly below our statutory rate of roughly 28%. Altogether, fourth quarter adjusted EPS of $0.96 increased 3.2% year over year. For the full fiscal year, we delivered adjusted EPS of $4.40, reaching the high end of our revised guidance range. Looking at the balance sheet, inventory levels increased 3.1% year over year in absolute terms and were down 2% on a per‑club basis, reflecting strong execution by our teams. In‑stock levels improved about 40 basis points versus last year and reached record highs, a testament to better merchandising alignment and operational efficiency. Our capital priorities remain unchanged. We continue to invest in areas that drive long‑term value: membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.4 times, giving us substantial flexibility. During the quarter, we bought back approximately 1,300,000 shares for $117,700,000, bringing the full‑year repurchases to roughly 2,600,000 shares for $252,400,000. This accelerated pace of repurchases underscores our confidence in the long‑term strength of the business and our ability to generate consistent cash flow. We ended the year with approximately $750,000,000 remaining under our current authorization, and expect to remain thoughtful and opportunistic with future repurchases. Looking ahead to fiscal 2026, we expect comparable sales excluding gas to grow 2% to 3%, and we are guiding to adjusted EPS of $4.40 to $4.60. Our multiyear focus on building a stronger, more efficient, and high‑quality business is yielding real progress, and we remain confident in our ability to deliver sustainable long‑term growth. We expect slight deleverage in our SG&A driven by accelerated new club openings, particularly with continued outsized growth in depreciation. We will also continue to invest to ensure our new market growth performs at or ahead of our expectations, as well as making sure we deliver unbeatable value to our members every day. We plan to further invest in our supply chain network to support the long‑term growth and are excited to open our automated distribution center in Ohio in 2027. We are planning for an effective tax rate of approximately 27% for the year, with the lowest rate in the first quarter when we typically experience a windfall from stock compensation. Given the evolving landscape, we are not contemplating the impact of recent tariff news and evolving macro uncertainty on our current assumptions. Tariffs may shape the trajectory of inflation and broader consumer demand, and ultimately influence our results this year. We continue to believe we are well positioned to offer our members the value that they are seeking every day. Before I hand it back to Bob, I would like to thank our team members for their continued dedication to our company, purpose, and communities, and their contributions to another great year of delivering in a dynamic environment. Bob, back to you. Robert W. Eddy: Thanks, Laura. Before I wrap up, I just want to take this opportunity to reflect on the incredible progress our team has made on behalf of our shareholders. Looking back over the last three years, we have grown our member count by 1,500,000 members—that is over 20%—and increased our annual MFI run rate by more than $100,000,000, while delivering 90% tenured renewal rates. We have driven digital penetration from 9% to 16%, generated $3,300,000,000 in adjusted EBITDA, and produced more than $2,600,000,000 in operating cash flow, including over $1,000,000,000 this year. We have opened 29 clubs as part of a $1,700,000,000 capital investment into our business, with returns on new clubs well into the double digits. We have accelerated the pace at which we are expanding and have a pipeline to support this level of growth going forward. As part of this effort, we have also added about $500,000,000 of owned real estate onto our balance sheet. On top of this capital investment, we paid down well over $300,000,000 of debt, bringing our net debt ratio down to 0.4 times, and repurchased well over $500,000,000 worth of shares, retiring about 5% of our share count in the process. The club business is a long‑term share gainer and a great business to be invested in because value wins. By delivering the assortment, value, convenience, and membership experience our members love, we will be rewarded with growth in the lifetime value of our members. This lifetime value is the foundation of the equity value that accrues to our shareholders. As we look out towards this year and beyond, we are more excited than ever for both the progress we have made and for the opportunity to create even more value for our shareholders by investing for the long term and delivering value to our members in everything we do. We are at a unique moment in time as it relates to the growth of the club channel. Now more than ever, we are here to play to win. Operator: Thank you, Bob. As a reminder for our audience, please press star followed by the number 1 on your telephone keypads. We will now open for questions. Our lines are now open for questions. We now have Michael Allen Baker from D.A. Davidson. Go ahead, please. Your line is now open. Michael Allen Baker: Great. I wanted to ask about merchandise margins, down 50 basis points. In the press release, you said mix. I guess I heard strength in consumer electronics and TVs; I suppose that was probably part of it. But what else drove the lower merchandise margin? Can you talk about sort of inflation—cost inflation versus price inflation? I know one of the hallmarks has been trying to give value back to customers. Just how that whole pricing dynamic is playing out, please? And what should we expect for 2026? Thank you. Mike, I will ask one more. You talked about continuing the pace of openings—25 to 30 every two years. You are only in 21 states right now. How long can you grow 25 to 30? I guess what I am getting at is have you looked at the art of the possible? Could this be a nationwide concept? How many stores could you have over time? Robert W. Eddy: Maybe I will take the lead here, and Laura can fill in behind me. We are pretty proud of our quarter. You brought up margins in your question and our pricing stance and a few other things. So let me talk a little bit about it in the broadest sense, and Laura can add in some details if she sees fit. The largest contributor to our margin performance against our expectations during the quarter was the mix of the business, and it is mix towards general merchandise. You remember that for us, general merchandise is slightly lower margin than some of the other parts of our business, and within general merchandise, consumer electronics tends to be the lowest gross margin within general merchandise. You remember when we talked about how Q4 might roll out for us, we had restricted buys in a lot of our general merchandise categories to try and manage exposure to tariffs and markdowns and things, and that played out exactly the way that we thought it would. So within the four big businesses in general merchandise, we had a good quarter from a CE perspective. Our apparel business continues to grow. It has been growing for a few years now pretty steadily and had another good quarter there. And then, as expected, we had a tougher quarter in our home and seasonal businesses. Those were more subject to tariffs. That is where much of our inventory cuts happened, and those two businesses had negative comps. So the mix issues associated with that were the predominant cause of the 50 basis point decline in merchandise margins. We also made considerable investments in value during the quarter in our grocery business, and we will continue to do that in the future. As you know, value is the most important thing that we provide our members every day. We take our pricing gaps very seriously. They improved during Q4 because of these investments that we made, and we will continue to do that as we can to provide our members the best value every day. You know we always try and spend into the beat. We saw that we were having a quarter where we could do that and decided to take that option on our members' behalf. So we are very happy with our quarterly performance and made all the numbers work out on our shareholders' behalf. Yeah. On your question about store growth, let me start out, and then William C. Werner can fill in. He obviously runs our real estate portfolio. This year was a fantastic year for us from a real estate growth perspective—opening 14 new clubs, a bunch of new states, a bunch of existing markets for us as well. I would tell you that this new class of clubs is the best class of clubs we have opened in any of the years since we have gone public. Just a couple of data points: our membership in these clubs is up over 30% versus what we planned; our on‑time renewal rates in our new clubs are about 900 basis points higher than our chain average at this point; and I talked about in our prepared remarks that our new clubs are well into double‑digit return on capital. So we are really excited about the performance we have had so far. The team has done a fantastic job getting these clubs open on time this year. We have got another 12 or so to go in this new year and a really robust pipeline. I will hand it over to Bill, and he can address the rest of your question. William C. Werner: Yeah. Mike, maybe the one simple idea I will give you and the investment community to think about as it relates to our growth is as we continue to take share, the models continue to update the viability that we have to open up in new markets. We have seen that this year with markets like Selma, North Carolina, and Sumter, South Carolina. They probably would not have been on our radar a handful of years ago, and in pretty short order, not only were they on our radar, but we were able to go there, execute, and those clubs are both off to amazing starts, which gives us a lot of confidence in terms of going into new and different markets into the future. I would tell you that we enter the Dallas–Fort Worth market later next month. Our team is confident, but certainly not complacent, as we go into these in terms of how we execute with the success that we have seen. If anything, the early engagement and the hustle of the team on the ground there in the Dallas market has been pretty awesome. I was down there last week and spent some time with the team and with some community leaders, and we heard feedback across the board that the way that we have engaged with the community down there is something that they have never seen before. We are really excited to get those clubs open. It will be a nice milestone for the company as we show the success that we will have down there, and that success creates opportunity for the future. As we sit today, we are really excited, we are really confident, and more to come. Michael Allen Baker: Thank you. Robert W. Eddy: Thanks, Mike. Operator: Thank you, Michael, for that question. Next up, we have Peter Sloan Benedict from Baird. Go ahead, please. Your line is now open. Peter Sloan Benedict: Hey, good morning, guys. Thanks for taking the questions. First, just around the merchandise comps, any way to quantify maybe how impactful Fern was—maybe some of the stock‑up activity that happened at the end of the quarter in 4Q? And then, as you are thinking about the year ahead here, any cadence we should think about? I know there is a lot of puts and takes. Maybe your view on SNAP and the changes there. Just anything that you are contemplating that we should be aware of in terms of the cadence of comp in 2026? That is my first question. And, again, my follow‑up is just maybe a little longer‑term picture. You know, the return to kind of the algo that you guys have. This year there is obviously a lot of puts and takes. You have the investments that are going on. I am just curious, as you get a bunch of these new clubs up and running, when do you start to kind of maybe return the business model to the algo? Is that something that could occur in 2027? Is it 2028? Just conceptually, how does that work in your mind? Thank you. Robert W. Eddy: Thanks. Good question. Obviously, winter storm Fern was a big deal, particularly in our footprint along the East Coast. I would start out with our feeling that largely storms are a net push. You get the buildup on the front side of it—and that can be a little buildup or a big buildup depending on the size of the storm and how well forecasted it is—and then you obviously suffer the downside of storm effects: closing stores, power losses, people not driving, and deloading the pantry that they just loaded up. So on the whole, storms are generally a push. Fern was very big and impacted most of our footprint, and it was certainly very well forecasted—a week out, everybody was saying we were going to get a big storm. We did have a pretty large buildup in front of the storm, and, obviously, it was big and impactful, and so we had a pretty large fall‑off after the storm. The thing to think about is the net impact, and I would say it was a slight positive to the quarter. The downside of the pantry deloading and the travel effects and such, and the supply chain effects, actually crossed the fiscal year a little bit, and so we saw some of the downside leak into February, and I think this is a normal effect. We have seen some weather in the Northeast in February as well, and so February's comps were a little lower than our plan, but all of that is normal weather stuff. Our team did a great job serving our members. Certainly, we proved our destination status—that stat that we put in the prepared remarks of beating our daily fuel volume record by 20% was pretty insane to do that. Our supply chain team really was pretty heroic, beating records of how many cases we moved day after day as the buildup happened, and our club teams did a wonderful job staying open when we could and keeping everybody safe and serving our members. Overall, a very slight impact to the quarter, and I would say a slight impact to Q1 on the negative side as well. From a guidance perspective, there is certainly a lot to balance in the stacks and what is going on, so I will give that question to Laura. Laura, what do you say about guidance? Laura L. Felice: Yeah. Hey. Good morning, Pete. From a comp perspective, we put out a range of 2% to 3% for the full year. What we did not talk about in the prepared remarks is the cadence of the two‑year stacks, and those accelerated slightly in Q4, as they did in Q3. When we look at the year coming up, I would point towards the two‑year stacks as a starting position. Remember that the first quarter of last year was the high watermark from a comp perspective, and so we have built the plan on that, which would imply the lowest comps in the beginning of the year and growth as we progress through the year. Robert W. Eddy: Thanks, Pete. We are really taking a very long‑term approach to what we are doing here. We talked a lot about our real estate growth. That impacts our depreciation and our EPS performance, but with all that said, I thought this is a pretty good year. We are very proud of our progress—the growth of our entire franchise last year: growing total merchandise sales by more than 6%, membership by 7%, MFI by 9.5%, adjusted EBITDA by 6%, EPS by 9%. Those are all fantastic results. And then, in the prepared remarks, all the three‑year stats, I think, are even more impressive. While we are not satisfied and still want to grow faster, we have a lot to be proud of. We think our shareholders should be happy with our performance, and we will continue to make long‑term investments like in real estate and in value to really get our franchise flywheel moving faster for the future. Operator: Thanks, Peter. Just another reminder for our audience: If you would like to send your questions in, you may do so by pressing star followed by the number 1 on your telephone keypad. In the interest of time, we ask that we limit our questions to just one question per participant. Thank you. Let us move on to Edward Kelly from Wells Fargo. Go ahead, please. Your line is now open. John Park: Hey, good morning. This is John Park on for Ed. Thanks for taking my questions. I guess, can you talk a little bit more about the underlying membership trends? How much of the MFI increase was from the fee increase? And any changes in discounting lately that you guys are doing? Robert W. Eddy: Good morning, John. Thanks for your question. There is certainly a lot to be proud of in our membership growth. We talked about a little bit of that in our prepared remarks, but 500,000 member growth this year; 1,500,000 over the past three years; 10% MFI growth for the year, a little bit more than that for the quarter; another year of 90% renewal rates; improvements in our higher tier—really just sustained, fantastic performance in our membership base. This continued growth in member count will continue, including with as many as 12 new clubs next year, and, obviously, some of that MFI growth was the fee increase, as you pointed out. We are quite optimistic on our ability to continue to grow our membership franchise, and as we do, we will continue to optimize for the best mix of acquisition and retention and rate, and MFI dollar growth. As you might imagine, those things somewhat compete with one another, and so we are trying to optimize the best result for our overall business. When you think about the concept of discounting, I would take you all the way back to many years ago when our chief acquisition model was a free trial model, and we moved away from that towards a discounted membership model tied to easy renewal. Folks that get a discount have to sign up for automatic renewal, and they pay full fee in the second year and beyond. Most membership models use a discounting model at this point, including our two club competitors. The team has done a really nice job optimizing those three things—member count, the rate that the members pay, and the renewal rate. The team also does a nice job varying and trying to optimize in the channels in which we offer these discounted offers, and they obviously change offer constructs and things as we go—really trying to figure out what the best value is for each segment of membership and, again, trying to optimize the business for us and for our shareholders. As we move forward, we will do a lot of the same—trying to optimize what we offer, when we offer it, and who we offer it to—and I expect we will see continued great growth in total membership, MFI dollars, and renewal rates. Laura L. Felice: The one thing I might add on to that is Bob talked about the new club growth and members we are acquiring in the new club. As we step back and look under the numbers—we have talked about this in prior quarters—we are also really proud of the membership growth in comp clubs which, as you know, is really important to the long term of our business. Think about 2% to 3% comp club member growth, which is a fantastic set that we are proud of as we move forward. John Park: Awesome. Best of luck, guys. Operator: Thank you, John. Moving on, we now have Katharine Amanda McShane from Goldman Sachs. Go ahead, please. Your line is now open. Katharine Amanda McShane: Good morning. We had a longer‑term question as well. Just with the success that you are seeing with your digital growth, do you think your stores are able to keep up with this level of fulfillment, and are there any investments that need to be made going forward to further support this growth, either in the tech stack or with assets? Robert W. Eddy: Hi, Kate. It is a good question. We have had sustained, fantastic growth in our digital business. I think it was 31% this quarter, and somewhere near 60% on the two‑year stack—obviously bigger going backwards—and it has really been the engine of convenience that our members love, whether it is buy online, pick up in club, same‑day delivery, or Express Pay. Getting that penetration up to 16% of our business has been a big win, and I expect it to go even further as we go because our members, quite frankly, love all these options. As you know, about 90% of our entire digital business is fulfilled by our clubs, and so you are right to ask the question. I would tell you that we are relatively unconstrained from this perspective. We can pump a lot more volume through our average boxes. In certain very high‑volume clubs, we have constraints. We are working around those constraints by investing capital, by investing in labor, by moving volume around the chain, by using different providers to help us do it. I do not really see a ceiling on our digital growth going forward, and we will work hard to make sure we do not have a ceiling there. We continue to invest in all of our digital properties. Our digital team is fantastic at really improving the experience every day on a relatively inexpensive basis, and they do it day in and day out, and when they say something is going to be done, it gets done. We have come to very much value that as we talk to our members and offer new things to our members, and, obviously, our members are reacting well to that. I do not really see that changing in the future. We are happy to take all the digital growth that comes to us. Katharine Amanda McShane: Thank you. Operator: Thank you, Kate. Moving on, we now have Steven Emanuel Zaccone from Citi. Go ahead, please. Your line is now open. Steven Emanuel Zaccone: I wanted to follow up on the earnings guidance for the year. Laura, you mentioned some SG&A investments—can you help us understand how big they are? And then on the merchandise margin outlook, I want to follow up there. How should we think about that for 2026? Obviously, mix was a factor in the fourth quarter, but you did reference earlier last year making some price investments, or investments in general, to provide value for consumers. How do you see that playing out in 2026? Laura L. Felice: Thanks. Good morning, Steve. Maybe I will start on your SG&A question. We spoke a little bit about that in the prepared remarks—so, slight deleverage. We are continuing to invest in the new club growth and ramp that growth. Going into Texas at the end of the first quarter, as Bill talked about, and into the second quarter, we are certainly investing to win there. We know we are off to a strong start, as Bill already talked about as well, but we want to make sure we set ourselves up for success. So some deleverage largely as we look on the new club ramp, and it is largely D&A. From a merchandise margin perspective, we do not guide to merchandise margins on an annual basis. I would say the fourth quarter was certainly the low mark on a year‑over‑year basis as we went backwards a little bit. Remember that for the full year, we rounded it out flat. What we are after this year is continuing to manage the business—making sure we are making price investments where they make sense—all after going towards our long‑term lifetime value of membership and the guidance we have set forth. Steven Emanuel Zaccone: Okay. That is helpful. Thanks very much. Operator: Thank you, Steven. Moving on, we now have Mark David Carden from UBS. Go ahead, please. Your line is now open. Mark David Carden: Good morning. Thanks so much for taking the question. I want to ask a bit about the Texas ramp. I know the stores are yet to open, but you have been doing some initial promos. How has interest been just relative to what you have seen in other markets? And then how have you handled any supply chain challenges, just given distance from current DCs? Is there a set number of clubs you need to open before it makes sense to add a new DC to that region? Thank you. Robert W. Eddy: Hi, Mark. Why do I not ask Bill to take over that question? William C. Werner: Yeah. Hey, Mark. Listen, I will start with the engagement down in the Texas market and then come back to some of the infrastructure. The engagement has been amazing out of the gate. I mentioned earlier I was down there with the team last week. We have had the team on the ground for many, many months already, engaging with the community, and we have a ton of data given the acceleration of all the recent openings in terms of what we expect from engagement and membership from the clubs that we opened so far. As we sit here and look eight to ten weeks out from the openings, we are seeing exactly what we thought we would see in terms of overall engagement and membership sign‑up, so all signs are positive so far in terms of the entry. I am really excited. The team has done such an amazing job. I am really proud of everything that they have done, and I am really excited to see the results of all their hard work. In terms of the infrastructure, we have been planning for this investment for a while now. We will serve the market with a combination of distribution from our existing distribution infrastructure as well as some hyper‑local support on the ground, and then we will continue to scale as we have done all along. As I think about how we have moved over the last handful of years to some of the adjacent western markets from where we are today—Columbus, Indianapolis, Nashville, and Detroit—that certainly has created a new distribution footprint for us, and we have served that along the way. We will continue to amplify how we serve that with the new distribution center that we are building out in Columbus as we speak. That is a major investment for us, and it will yield significant operational efficiencies for us as well as savings as we get it open. The opportunities that we have to invest in the expansion have been driven by the success of the new clubs, and it is a great challenge to work through, and we are excited for everything that we are doing. Robert W. Eddy: We are really bullish, as Bill said, about our ability to be successful in Texas. I will offer you one statistic we heard this week: there are more homes being built in the Dallas–Fort Worth market than in the entire state of California. It is certainly a place with very, very high growth. Our team has been doing fantastic work on the ground. The initial membership sign‑ups are well ahead of our pre‑opening plan. Obviously, the numbers are small until the boxes actually open, but the engagement we have seen with the folks in these communities that we will enter has been very strong. We are obviously respectful of this challenge—it has certainly got great competition in the neighborhood—and we want to make sure we offer Texans products and an experience that they like. I think we are off to a pretty good start so far, and we will invest heavily in this market to try and get it right, and we will give it our best shot every day. Mark David Carden: Thanks so much. Good luck, guys. Operator: Thank you. Moving on to the next participant, we have Oliver Chen from TD Cowen. Go ahead, please. Your line is now open. Oliver Chen: Thanks a lot. Hi, Bob and Laura. Regarding general merchandise and the variability that you are seeing, what should we expect in terms of guidance with home and seasonal? And related to that, the category management program as well as fresh in the year ahead—any major catalyst there or changes or more innovation that you are doing there that will underpin some of the comp guidance? Thank you. Robert W. Eddy: Hi, Oliver. Thanks for your question. Maybe I will start, and Laura can fill in whatever I missed. If you look at the complexion of our business in the fourth quarter, you saw quite a mix. Our grocery business performed very well—certainly, perishables is the most important part of that business. We lapped the full chain rollout of Fresh 2.0 during the quarter, and we continue to see steady gains in our perishables business. That has been impacted by some food deflation in that category, but even without that, we had a good quarter. We saw some improvement in our grocery business, and hopefully, that translates into our sundries business as well, as we start to pull some of the same levers there. In general merchandise, we had a good quarter from a CE perspective, where we could chase some inventory and sell it. The prospects for our home and seasonal businesses are kind of varied at this point in time. We need to continue to improve our merchandise mix and our assortment and our value in those categories. Our merchandising team has made strides, and they continue to get better. We obviously are still working on our merchandising team at this point, and we hope to have some news to announce in the next couple of weeks from that standpoint. I would look at home and seasonal as a longer‑term growth initiative. We will continue to grow CE. We will continue to grow apparel. We know what to do in those categories. In the future, we hope to build on that growth in home and apparel. With respect to CMPs, that program is still going on. It has been a successful program for us. Versus our older program we called CPI, which was much more margin‑focused, this has been much more assortment‑focused, and I think what you will see from us in the future is a better mix of those two thoughts. We are trying to put the right thing on the shelf, but also trying to get some more margin performance so that we can make further investments in value—making sure that we are offering the right everyday price, the right promo, the right product—and, obviously, paying the right cost for that product is a fundamental part of the retail equation and making sure we can run the business in the best way for our members and our shareholders. Lots of good stuff to be proud of in the merchandising world and lots of work to come in the future. Oliver Chen: Thanks a lot. Best regards. Operator: Thank you, Oliver. Next up, we have Rupesh Dhinoj Parikh from Oppenheimer. Go ahead, please. Your line is now open. Rupesh Dhinoj Parikh: Just going back to inventory, I know last year your team planned conservatively on the discretionary front, just given some of the tariff headwinds and uncertainty out there. Just curious how you are thinking about inventory over this year. Do you feel like you have sufficient inventory on the discretionary side? So just high‑level thoughts there. Thank you. Robert W. Eddy: Hi, Rupesh. Our inventory is in great shape. Let me first congratulate our supply chain team and our merchandising team for another great performance this quarter, where although total inventory was up 3%, on a per‑club basis it was down, and our in‑stocks improved by 40 basis points. The team continues to do a great job getting better and more efficient for our members. We need continued gains on that front, and our team has great plans to keep pushing in that regard. With respect to total inventory levels in the business going forward, there is nothing really to think about from a grocery business perspective—that is just about optimizing what we are doing there. From a general merchandise perspective, we have ramped up our inventory in the coming year. We have made bigger buys to support both the new clubs that we are bringing on and, hopefully, comp growth in our general merchandise business as well. Where we were very conservative last year from an inventory buy perspective, we are being slightly more aggressive this year—nothing crazy—but we do have plans to buy more inventory, and, hopefully, we have picked the right items and our members love the assortment and the value that we offer. Rupesh Dhinoj Parikh: Great. Thank you. Best of luck. Operator: Thank you, Rupesh. That is it for the questions queue. With that, it concludes today’s call. Thank you all for joining. We appreciate your time. You may now disconnect your lines, and have a great day.
Operator: Welcome to the Lexicon Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. As a reminder, this call is being recorded today, 03/05/2026. I will now turn the call over to Lisa DeFrancesco, SVP, Investor Relations and Corporate Communications for Lexicon Pharmaceuticals, Inc. Please go ahead, Lisa. Lisa DeFrancesco: Thank you, Michelle. Good morning, and welcome to our Q4 and full year 2025 Earnings Conference Call. Joining me today are Dr. Michael S. Exton, Lexicon Pharmaceuticals, Inc.'s Chief Executive Officer and Director; Dr. Craig B. Granowitz, Senior Vice President and Chief Medical Officer; and Scott M. Coiante, Senior Vice President and Chief Financial Officer. This morning, Lexicon Pharmaceuticals, Inc. issued a press release announcing our financial results for the fourth quarter and full year of 2025, which is available on our website at www.lexpharma.com and through our SEC filings. A webcast of this call, along with a slide presentation, is also available on our website. During this call, we will review the information provided in the release, provide a corporate update, and then use the remainder of our time to answer your questions. Before we begin, let me remind you that we will be making forward-looking statements, including statements related to the safety, efficacy, clinical development, regulatory status, and therapeutic and commercial potential of sotagliflozin, pilovapitan, LX9851, and our other drug programs, as well as our business generally. These statements may include characterizations and projections related to clinical development, regulatory status, and market opportunity for our drug programs, and commercial performance of INPEFA for heart failure. This call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, strategic alliances, and intellectual property, as well as other matters that are not historical fact or information. Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements. We refer you to our most recent Annual Report on Form 10-Ks and other SEC filings for detailed information describing such risks. I will now turn the call over to Michael S. Exton. Mike? Michael S. Exton: Yes, thanks, Lisa. Good day, everyone. Thanks for joining us today. As I reflect back on this year, my first full year as CEO at Lexicon Pharmaceuticals, Inc., I am enormously proud of all the progress we have made. In addition to all we have accomplished in 2025, we had a tremendously productive start to this year, so we are excited to give you some updates on our recent progress and discuss the many important milestones ahead of us in 2026. By way of a high-level overview, Lexicon Pharmaceuticals, Inc. is advancing three very strong, novel, late-stage programs in the therapeutic areas of cardiometabolic disease and chronic pain. In cardiometabolic, we have sotagliflozin, which is currently in late-stage development in hypertrophic cardiomyopathy. We are also planning an NDA submission for sotagliflozin in type 1 diabetes and collaborating with our licensee, Beatrice, on making sotagliflozin available in patients outside the U.S. and Europe. We also have our novel, oral, early-stage program in obesity, LX9851, which is being advanced by Novo Nordisk. Within chronic pain, we have pilovapitan, a Phase III-ready drug candidate for diabetic peripheral neuropathic pain. Each of these programs have key potential catalysts upcoming, which we will cover shortly. Any one of these programs alone would represent a significant scientific achievement to be excited about, but taken together, they comprise a portfolio that we are quite proud of. Now, before I jump into the details and next steps for each of these programs, I want to emphasize that in addition to the R&D excellence behind this pipeline, we have also been diligent about driving operational excellence, as well as improving our financial position and cost structure to sustainably support our core programs going forward. So looking ahead, we have set clear goals for what we need to achieve in 2026. The Sonata HCM Phase III trial of SOTA for obstructive and nonobstructive is enrolling well, and we expect to complete enrollment in the middle of this year. We received feedback from FDA that data from the third-party STENO-1 study can support an NDA resubmission for Zynquista for glycemic control in type 1 diabetes if supported by patient exposure and safety data from the study. Now, based on the data we have seen thus far, we expect to resubmit in 2026 with potential approval later this year. Our partnership strategy continues as we support our existing licensees, Novo Nordisk and Beatrice, while also exploring new partnerships where appropriate to augment our capabilities, including seeking a partner for Phase III development of pilovapitan. And last but not least, we are financially well positioned following our recent raise. We plan to maintain our operational discipline to support long-term growth with diligent expense management and continued focus on deploying capital towards the highest value, highest impact opportunities. Collectively, this truly demonstrates our lead-to-succeed strategy in action. Now, we entered 2026 with significant momentum, and that has really continued in the first few months of the year. In January and February alone, we announced a successful end of Phase II meeting with pilovapitan in DPNP with no objections raised by the FDA to advancement into Phase III development. We strengthened our financial position with more than $100 million in additional cash from our recent capital raise as well as the Novo Nordisk milestone payment. We continued enrollment in the ongoing Sonata HCM Phase III study of sotagliflozin for HCM, surpassing 50% enrollment completion earlier this quarter, and progressed our work towards a potential resubmission of our NDA for Zynquista in type 1 diabetes later this year, if the STENO-1 patient exposure and safety data requirements identified by the FDA are achieved. So as you can see, we are very much off and running, and so much more to come. With that, I will ask Craig to provide a deeper dive on our lead programs. Craig? Craig B. Granowitz: Thank you, Mike, and good morning, everyone. As most of you know, our pipeline is focused in two primary therapy areas, the first being cardiometabolic disease and the second being chronic pain. I will start with our cardiometabolic platform, sotagliflozin. As we approach important upcoming milestones for sotagliflozin in both HCM and T1D, it is an opportune time to review sotagliflozin's unique mechanism of action. As the only dual inhibitor of both SGLT1 and SGLT2, we want to focus on the importance of the SGLT1 effects. While SGLT2 is expressed primarily in the kidney, SGLT1 is expressed in the kidney but also in other tissues, particularly the GI tract and the heart, as well as the endothelium. We believe that inhibition of SGLT1 in the GI tract is important in postprandial glycemic control in patients with T1D. Similarly, we believe that inhibition of SGLT1 in the heart has important effects on myocardial health, particularly in disease states like HCM. It is also thought that inhibition of SGLT1 in the endothelium may be important in reduction of ischemic events like stroke and MI. The graphic on the next slide demonstrates the distribution of SGLT1 and SGLT2 protein expression in human tissues. On the right-hand side of the panel, it is evident that SGLT2 expression occurs primarily in the kidney. SGLT1, but not SGLT2, is expressed in the GI tract and heart. It is also noteworthy that SGLT1 expression in the heart is significantly upregulated in patients with ischemic heart conditions and in patients with hypertrophic cardiomyopathy. We will continue to discuss these and other factors contributing to the growing body of evidence supporting the potential benefit of SGLT1 inhibition for the treatment of HCM in the coming months. The mechanistic differentiation leads us to the rationale behind our current development efforts for sotagliflozin, a potential first-in-class therapy for HCM and glycemic management in type 1 diabetes. Regarding HCM, interest and awareness of the disease has been growing, particularly with new treatment options becoming available, but this disease remains an area of severe unmet need for both people with obstructive HCM and particularly those with nonobstructive HCM. Our Sonata HCM Phase III study includes patients from both populations, and top-line results are expected in 2027. In type 1 diabetes, Lexicon Pharmaceuticals, Inc. has been committed to the development of a novel treatment for glycemic control in patients with T1D for many years. The FDA has provided feedback that clinical trial data from STENO-1, a third-party funded investigator-initiated study of sotagliflozin, may support a resubmission of our NDA for Zynquista in T1D. Based on the study data we have seen to date, we are preparing to resubmit the NDA and potentially receive regulatory approval in 2026. Elaborating further on the opportunity for HCM, our Phase III Sonata HCM study is a large, global, registrational trial with a KCCQ endpoint, designed to support a regulatory filing and broad label in HCM. We have completed the initiation of our target 130+ study sites in approximately 20 countries across the United States, Europe, Israel, and Latin America. I could not be more proud of the team's significant efforts in achieving this goal. Sonata is the only registrational trial currently enrolling patients with both obstructive and nonobstructive HCM. The study is pragmatic in design, allowing for patients currently being treated on a CMI. The enrollment in the study is stratified but not capped, and as Mike mentioned, we have surpassed the 50% enrollment target earlier this quarter and are on track to complete enrollment by midyear. As I mentioned earlier, as a dual inhibitor of SGLT1 and SGLT2, we believe that sotagliflozin could offer distinct advantages for the treatment of obstructive and nonobstructive HCM. Importantly, it is the only drug, to our knowledge, in clinical development for HCM that works both inside and outside the heart. It acts directly on the myocardium to modify cellular energetics, and we believe it has the potential to be a first-line agent with no REMS in both obstructive and nonobstructive HCM. Additionally, sotagliflozin is already approved for heart failure, with no observed risk of A-fib to date. This is important given that many patients who have HCM go on to experience major adverse cardiovascular events, such as myocardial infarction, stroke, or heart failure. Complementing the upcoming clinical results from the Sonata trial are two investigator-initiated trials, the SOTAcardia and the SOTA Cross studies. SOTAcardia, data from which was presented at the American Heart Association meeting last November, evaluated the effects of sotagliflozin in patients with HFpEF without diabetes with a baseline ejection fraction greater than 50%. Clinically, these patients have a number of symptomatic and anatomical characteristics similar to those with nonobstructive HCM. Data from SOTAcardia showed improvements in patient symptoms such as KCCQ score and six-minute walk test, as well as cardiac function, such as left ventricular mass and left atrial filling pressure, findings which support the rationale for sotagliflozin's use in nonobstructive HCM. SOTA Cross is a crossover study evaluating sotagliflozin in symptomatic nonobstructive HCM. This is an ongoing 12-week crossover study with a readout expected in 2027, measuring a number of outcomes, including cardiac function, symptoms, and biomarkers. Moving on to the next slide, there is a growing body of evidence that supports sotagliflozin's unique potential for reducing cardiovascular events. This slide highlights recent data presented at the Scientific Sessions and the HCM Society and an upcoming presentation at the American College of Cardiology's 75th Annual Scientific Sessions that highlights sotagliflozin's impact on cardiac remodeling in HCM, the benefits of sotagliflozin in HFpEF, and sotagliflozin's effects on MACE events in patients with type 2 diabetes. In summary, we are excited to complete enrollment in Sonata HCM and look forward to upcoming data presentations at ACC and several HCM-related medical meetings in the second half of this year. Now turning to Zynquista, our sotagliflozin program in type 1 diabetes. As we previously announced, we had productive meetings with the FDA in late 2025, during which they confirmed that STENO-1, a third-party funded investigator-initiated study of sotagliflozin being conducted by the Steno Diabetes Center in Denmark, appears to be sufficient to support a review of a resubmission of our NDA for Zynquista in T1D. Based on current STENO-1 enrollment estimates and safety data we have received to date, we are planning for an NDA resubmission and potential regulatory approval in 2026. There are approximately one million patients with type 1 diabetes in the United States, and there has not been a new therapy approved for over a century to help those patients achieve glycemic control alongside insulin. That is an unacceptable status quo. The outpouring of support for Zynquista from the diabetes community has been remarkable and reinforces what we have always known. These patients desperately need new treatment options. If approved, Zynquista would be the first and only oral therapy in class for type 1 diabetes. It is not just a commercial opportunity, though certainly it is, but it is a chance to fundamentally improve how we treat this challenging medical condition. Global development of LX9851 in obesity remains on track, and our progress on this program triggered a $10 million milestone payment in February under our license to Novo Nordisk, with potential for another $20 million in additional milestones in 2026. We have now fully handed off development to Novo Nordisk following the completion of IND-enabling activities, and we are encouraged by the continued enthusiasm for this asset and its novel mechanism. Just this week, the Journal of the Endocrine Society highlighted our recent publication on ACSL5 inhibition as a featured article. These preclinical data provide some insights as to the potential of ACSL5 as a target and LX9851 as a drug candidate for obesity and chronic weight management. In addition to our cardiometabolic programs, Lexicon Pharmaceuticals, Inc. also has a Phase III-ready non-opioid asset for neuropathic pain, pilovapitan. Pilovapitan is a novel investigational agent targeting AAK1, and like sotagliflozin, pilovapitan has a broad pipeline and appeal potential. Our lead indication for pilovapitan is DPNP, supported by two Phase II studies that provide evidence of consistent and clinically meaningful pain reduction. We have accumulated data from more than 600 patients treated with pilovapitan and have demonstrated a well-understood and acceptable safety and tolerability profile. Beyond DPNP, we believe there are other potential applications for pilovapitan. The AAK1 pathway is central to a number of cellular processes such as synaptic signaling between neurons involved in pain signaling and spasticity. With this in mind, we are conducting IND-enabling work in multiple exciting neuroscience indications. As Mike mentioned, we had a successful end of Phase II meeting with the FDA for pilovapitan in DPNP. During that meeting, FDA raised no objections to the advancement of pilovapitan into Phase III development in that indication. The Phase III program would include two placebo-controlled, 12-week, two-arm registrational studies comparing a 10 milligram daily dose to placebo. The primary endpoint of the Phase III studies would be placebo-controlled change in average daily pain score from baseline to Week 12. FDA also confirmed that it will not require any additional preclinical or clinical studies that would be expected to complicate or delay the advancement of the program into Phase III development and potential regulatory submission. With this regulatory alignment in hand, we are continuing our ongoing discussions with partners. I will now turn it over to Scott to provide an update on the company's financials. Scott M. Coiante: Thank you, Craig. We begin this morning with our results for both fourth quarter and full year of 2025. Total revenues were $5.5 million and $49.8 million for the quarter and year ended 12/31/2025, respectively. Revenues for the fourth quarter of 2025 include $4.3 million of licensing revenue recognized from the Novo Nordisk agreement and net sales of INPEFA of $1.1 million. Revenues for the year ended 12/31/2025 include $45 million of licensing revenue from the Novo Nordisk agreement and $4.6 million of net sales of INPEFA. Total revenues for the fourth quarter and full year 2024 include the upfront payment of $25 million received upon entering into the Viatris license agreement, and net sales of INPEFA of $1.6 million and $6 million, respectively. Research and development expenses for the fourth quarter of 2025 decreased to $11.3 million from $26.7 million in 2024. Full year 2025 research and development expenses decreased to $61.1 million from $84.5 million in 2024, primarily reflecting lower external research expenses from our progress in Phase II clinical trial, partially offset by increased investment in our Sonata Phase III clinical trial. Selling, general and administrative expenses for the fourth quarter of 2025 decreased to $8.8 million from $32.3 million in 2024. Full year 2025 SG&A expenses decreased to $37.3 million from $143.1 million in 2024. The decrease in 2025 reflects lower costs resulting from the company's strategic repositioning in late 2024 and our significantly reduced marketing and promotional efforts for INPEFA in 2025. Net loss for the fourth quarter of 2025 was $15.5 million, or $0.04 per share, compared to a net loss of $33.8 million, or $0.09 per share, in the corresponding period in 2024. Net loss for the full year 2025 was $50.3 million, or $0.14 per share, compared to a net loss of $200.4 million, or $0.63 per share, in the same period in 2024. For the fourth quarter of 2025 and 2024, net loss included non-cash stock-based compensation expense of $2.8 million and $1.5 million, respectively. And for the full years of 2025 and 2024, net loss included non-cash stock-based compensation expense of $12.5 million and $13.5 million, respectively. As of 12/31/2025, Lexicon Pharmaceuticals, Inc. had $125.2 million in cash, investments, and restricted cash, as compared to $238 million in cash and investments as of 12/31/2024. Subsequent to year-end, Lexicon Pharmaceuticals, Inc. strengthened its cash position by more than $100 million from net proceeds received from the sale of common and preferred stock and a milestone payment from Novo Nordisk. I would like to now note a few financial highlights from both the fourth quarter and full year 2025. In addition to the revenue highlights, which I mentioned previously, operating expenses were reduced by $39 million for the fourth quarter of 2025 as compared to the fourth quarter of 2024. We continue to look for ways to reduce costs and streamline our operations. We also meaningfully improved our cost structure for 2025, with operating expenses down $129.5 million for 2025 as compared to 2024, reflecting our strategic repositioning in late 2024 and substantially reduced marketing and promotional spend for INPEFA in 2025. In addition, we also reduced our total debt by approximately $46.3 million in 2025, primarily using the proceeds from the Novo Nordisk upfront payment. Moving ahead to 2026, we expect total operating expenses to be between $100 million and $110 million. R&D expenses are expected to be between $63 million and $68 million and do not include costs associated with Phase III pivotal studies of pilovapitan, as our goal would be to move this asset forward with a development partner. SG&A expenses, which include sales and marketing expenses, are expected to range between $37 million and $42 million. I will now turn it back to Mike for closing remarks. Michael S. Exton: Yes, thanks, Scott. Now, before we turn to Q&A, I just want to say again how excited we are about the year ahead in 2026. Last year was a year of progress, and 2026 is a year of potential and possibility with several pivotal milestones ahead across our three core programs, with multiple upcoming catalysts that we believe can drive substantial value creation. From pilovapitan partnership opportunities in neuropathic pain, to sotagliflozin's multiple shots on goal across HCM, heart failure, and type 1 diabetes, to LX9851's near-term milestone potential in obesity, we are really firing on all cylinders this year. Each of these programs addresses serious unmet medical needs, and each has the potential to be transformative for patients who desperately need new treatment options. We have the pipeline, we have the team, and we have the momentum, and I am incredibly excited about what lies ahead. We will now open for questions. Operator, please go ahead. Craig and Scott and I will take your questions. Operator: Thank you. To withdraw your question, please press 1, 1 again. We ask that you please limit yourselves to one question and one follow-up before reentering the queue. One moment for our first question. Our first question will come from the line of Andrew Tsai with Jefferies. Matt (for Andrew Tsai, Jefferies): Hey, good morning. This is Matt dialing in for Andrew Tsai. Congrats on the progress this quarter. Just a couple of questions from me. How much patient work updated does the open-label IST STENO-1 study have on DKA safety right now for you to be able to guide to a potential approval in 2026? And then what are the exact timelines from submission to approval that you are expecting? Is this going to be a Class 1 or Class 2 resubmission here? Michael S. Exton: Yes, thanks, Matt. I will let Craig talk about the data. We are expecting a six-month review here, so reemphasizing that the data that we are seeing, we expect a submission this year and as well an approval before the end of 2026. Craig, do you want to talk about the data that we are seeing? Craig B. Granowitz: Yes. So, again, Matt, I need to be a bit careful because this is not our trial. It is an investigator-initiated study. But as a reminder, this is a large trial. It is 2,000 patients total: 1,000 patients which were on or are considered the standard of care and then another 1,000 which are randomized based on baseline characteristics to enhanced care, which would include sotagliflozin in a significant percentage of patients but also the possibility of being on semaglutide and/or Kerendia, depending upon baseline patient demographics. The study has enrolled the majority of the patients. And, again, I do not want to overstep Dr. Rossing and the Steno group, but enrollment has proceeded briskly. I think you can see some of their updates on clintrials.gov, and the enrollment, as we laid out with FDA, is proceeding to plan. We pre-agreed with FDA on two important criteria for resubmission. The first would be the total exposure required. The second would be a rate of DKA. I can be a bit more expressive about the second criteria because the FDA put that in their end-of-review letter: that they were really looking for a rate of diabetic ketoacidosis at or below that achieved with the 400 milligram dose arm in the inTandem program, which, in the FDA's parlance, was a number needed to harm of about 26, which corresponds to a rate of about 3.5 cases per 100 patient-years. I can tell you that currently we are tracking in a way, both in terms of total exposure and DKA rates, that give us a high degree of confidence in where we stand in terms of our submission and approval timelines that both Mike and I highlighted during the call. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Yigal Nochomovitz with Citigroup. Yigal Nochomovitz: Okay, thank you. I have got a question on the partnerships for the pain program. So you had the end of Phase II meeting. Could you just talk about how much the results from that meeting have accelerated partnering discussions since then? And is there a clearer line of sight to transacting something this year? Thank you. And also, how much more can you say about what Novo plans to do with 9,851? You know, in terms of how it is going to be inserted into the development program, meaning in combo with the GLP-1 or for those perhaps not responding well enough, or perhaps even as a maintenance therapy, you know, following the course of GLP-1 therapy? What can you say there? Is that really Novo's call now? Michael S. Exton: Yes, thanks, Yigal. So I would not say that they accelerated because we are in constant dialogue with a number of partners that we have been communicating with, but it allowed the conversations to be a little more specific and obviously provide some confidence around the program being able to move into Phase III and take away that sort of regulatory risk, if you like, which has been incredibly well received by partners. So we continue to talk details with them and look forward to providing some more updates in the very near future. Yes. I do not necessarily want to speak on Novo, but I think I have sort of hypothesized where I think that LX9851 would fit into the treatment paradigm and certainly with some of the background for their enthusiasm. But before I do that, Yigal, let me just reinforce how impressed we have been with the Novo team. And I think you know, we all recognize that perhaps they are sort of losing the battle in injectables and have really pivoted strongly towards oral formulations as being the future and their future in obesity management. And, really, we have had that hypothesis all along that the future of obesity treatment will be in oral combinations of different MOAs, just like it is in most of cardiometabolic disease, whether it be hypertension, hyperlipidemia, etcetera, because it allows you to get synergies by combining different MOAs, and orals obviously facilitate that ability to drive combinations. I think they are being very open, and they therefore are really doing an incredible amount of work on this program to see whether it is going to be as a standalone monotherapy, to see whether it is in combination, to see whether it is right at the initiation of treatment, whether it becomes a maintenance therapy. I think all of those options are on the table for them, and they are really driving very, very hard, which gives us confidence, as we mentioned in the opening remarks, around the potential of receiving those two further milestones this year, which would really be an accelerated Phase I development. And we are excited about the possibility of clearing that hurdle and then really getting into Phase II and beyond, which would be very material for the company. Craig, do you have any additional thoughts? Craig B. Granowitz: I will just add from the scientific standpoint, the mechanism is complementary to semaglutide. You know, as we have communicated, I think it is nicely summarized in the Journal of the Endocrine Society paper that just came out this week. As we mentioned during the prepared remarks, this mechanism is thought to be really the only agent that is in development acting on what is called the ileal brake, which is a very different neuroendocrine signal of satiety that we have seen and we have communicated, I think, at prior meetings, could act additively both to the amylin mechanism and certainly to the GLP or semaglutide mechanism. So I think that is really how Novo is thinking about this, that this agent could be acting either alone or in combination with semaglutide, or potentially in an additional combination with both an amylin analog and semaglutide analog. But, again, we do not want to speak for Novo, our partner. Operator: Thank you. And one moment for our next question. Our next question is going to come from the line of Joseph Pantginis with H.C. Wainwright. Joseph Pantginis: Hey, guys. Good morning. Thanks for taking the question. So, Mike, I know the intent for pilovapitan is moving forward with an expected partner, but I want to ask the question this way. So, based on, you know, the larger coffers that you have now and how things are rapidly progressing with the data and your FDA discussions, are you looking towards any sort of flexibility or optionality with regard to even starting the study on your own prior to getting a partner? That is very helpful. Thank you. And maybe a question for Craig here. When you look at the SOTA profile for HCM, just curious how you believe the SOTAcardia and SOTA Cross studies on the periphery could potentially impact future sNDAs and/or the marketing potential as you look at the broadening profile for SOTA in HCM? Michael S. Exton: Yes. It is a great question, Joe, and it is a great position to be in when you have got a number of opportunities ahead of you. And, you know, we are really very much focused on our near-term cardiometabolic opportunities. So I think what we see in the opportunity with T1D for SOTA as well as HCM are both incredibly large commercial opportunities for us, and so we are very much focused on driving that forward. We have been continuing to do some work in preparation of what the Phase III program would look like for pilovapitan. And, in fact, that has been a part of the partnering discussions as well, as we continue to sort of engage in a very granular timeframe of what would be expected moving forward. And even that is changing as we speak. As you know, the recent announcement by Dr. Makary for one-trial possibility is something that is coming into our thought process as well. We need to consider that as a possibility for pilovapitan, as we will be for all programs. So we are doing work in parallel, but we are not going to invest the financial commitment to commencing a Phase III trial for pilovapitan because we really want to invest that cash for both T1D and HCM at the moment. Craig, did you have anything else? Craig B. Granowitz: Yes, I think, Mike, you summarized the strategic part really well. I just wanted to reinforce the importance of the patient groups in the legislative dimension as well. And what we have seen in this regard is tremendous interest from the patient community in really trying to bring that into a legislative position. As well as, as you know, Joe, a lot has been done in the acute pain setting, particularly in light of the opiate situation. Patients who are on chronic pain treatment like DPNP are at much higher risk of actually developing opiate addiction. There has been a really strong interest across the board in the pain community, both on the opioid avoidance side as well as the diabetes community, in terms of really trying to put momentum behind this effort from a legislative front. So we are really trying to approach this from multiple different ways: a regulatory, legislative, patient access standpoint, as well as, as Mike said, we have really now finalized what the development program would be under standard conditions based on the end of Phase II meeting. So we continue to really look at all of these areas as the discussions continue because we do not want to just have the asset sitting there. Michael S. Exton: Yes, no, exactly. So I think Craig summarized that well. There is a bunch of activity that we are doing to continue the preparation for the program, in parallel with the discussions. But our investment of capital is squarely focused at this time on Zynquista and HCM because we see those opportunities coming at us very, very fast. Craig B. Granowitz: Yes, thanks for the question, Joe. You know, we try to approach this in a way that really is the sum of the total is far greater than each of the individual parts. And we have really tried to take a pragmatic design approach to Sonata HCM that would be clear, efficient, and rapid, that would spare capital in terms of doing a study that would achieve the goals of the FDA and other health authorities, but not add dramatically to the cost or slow enrollment. And in that regard, we are really looking at SOTA Cross, SOTAcardia, and a number of other trials that we have been discussing, investigator-initiated trials looking at various imaging, functional, and patient feel outcomes that would complement the primary endpoint of Sonata HCM. And we hope that the sum total of all of that will provide more mechanistic understanding of how the SGLT class will complement that of the CMIs, and also could be the first and only in HCM, but also to differentiate the dual mechanism of SOTA and the SGLT1 effects from the SGLT2 inhibitors that are not being studied and have no data in HCM. Michael S. Exton: Yes, no, and just allow me to throw a little more color onto that, Joe, because it is a very important element of our portfolio, and we think it is a great opportunity not only for SOTA and patients with HCM, but for Lexicon Pharmaceuticals, Inc. So as we noted, we did raise, you know, close to $100 million earlier this year, and we are spending a small portion of that this year at the moment, as, sorry, Scott gave in his guidance for the year. But one of the important elements that we are going to undertake is to have a small field medical team to really bring about what is a ton of evidence now showing, you know, a lot of the reason to believe of SGLT1 as being a new class of medicine and having evidence that indicates it will be a very significant medicine for both obstructive and nonobstructive HCM. So we are going to employ that field force as we march towards the data in Q1 2027 to not only talk about Sonata, not only talk about SOTA Cross and SOTAcardia, which are very important elements, but a lot of the mechanistic evidence, one of which we presented today. And I think as we sort of educate the physician community beyond top KOLs, we really see why SOTA has significant potential in HCM. So it is really an important focus for the company over the next 12 months. Thank you, guys. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Yasmeen Rahimi with Piper Sandler. Shannon (for Yasmeen Rahimi, Piper Sandler): Hi, this is Shannon on for Yasmeen Rahimi. Congrats on progress, and thanks for taking our question. Can you just help us understand your visibility and confidence for getting the additional 50% enrollment for Sonata by mid-2026? And then, also, is the cadence of that enrollment the same in both cohorts for nHCM and oHCM? Great. Thank you so much. Michael S. Exton: Yes, great, great question. So I will let Craig have first go with that one. Craig B. Granowitz: Yes, Shannon, it is a great question. We have a really nice window right now of enrollment. There are not a lot of competing global trials right now. We have, as I mentioned during the prepared remarks, all 130 sites now open across 20+ countries, and we are at that, what I would call, steep part of the S-shaped enrollment curve. We have sort of gotten over the early parts. We have had a few protocol amendments to make enrollment, clarify things where there were open issues, and enrollment has really ticked up consistent or ahead of our projections at this point. And as Mike mentioned, we have crossed the 50% enrollment target much earlier in this quarter, and we see continued uptake in enrollment across all of the regions. The U.S., Europe, and Latin America are all contributing. Your second part of your question regarding enrollment is we have enrolled significant numbers of patients with both obstructive and nonobstructive HCM. What we are seeing, not surprisingly, is that there are some patients, particularly at these large academic centers, that are being treated currently with the CMIs for obstructive. So we are seeing even more patient inflow for the nonobstructive cohort than the obstructive cohort, but we believe that we have enough patients in both cohorts to achieve what we set out in the trial. And as we mentioned, the trial is stratified but not capped, so we did stratify the patients based on their baseline of either being obstructive or nonobstructive, but we have not set a formal cap of a specific number of each group, and that we did discuss and align with FDA before we started the trial. Michael S. Exton: And, Shannon, it is a great point. Enrollment is never linear, as all those people know who have run clinical trials in any clinical trial. And, you know, we have our target curve, and our enrollment curve is right on that target curve, and we continue to enroll strongly such that we have a high degree of confidence that we will hit that midyear target, which will have then a data readout in 2027. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Roanna Ruiz with Leerink Partners. Michael (for Roanna Ruiz, Leerink Partners): Hi, this is Michael on for Ruiz at Leerink Partners. Thank you for taking our question. I have a question about the Phase III design of the pilovapitan program. Previously, you mentioned several measures to mitigate the placebo response that you saw previously. Are you able to comment on what the enrollment criteria changes will look like for Phase III? Like, for instance, will you require a minimum pain score threshold, things like that? Thank you. Great. Thank you so much. Michael S. Exton: Yes, great, great question, Michael. Thank you for that question. I think the changes that we are going to have, as we have mentioned, probably the single largest change we are going to have is actually to expand enrollment. During the year, we did run a renal impairment study, and we believe that having a renal impairment study completed with no impact on clearance with GFRs down to 30 significantly increases the enrollment potential for this study. There is a high degree of correlation between neuropathy and nephropathy, both in terms of the enhancement of patients but also the severity of their neuropathic pain. As GFR drops, you tend to see a higher percentage of patients that have neuropathic pain, but also the more severe neuropathic pain. In terms of the other entry criteria, we are really looking at similar pain scores at baseline. I think the only change that we looked at—and we looked at a number of variables that might have affected the placebo rate—on the patient characteristics, the only one that we saw that was meaningful, and, again, this is all retrospective, looking back at the completed data, was the duration of their neuropathy prior to enrollment. So we might make some minor changes to the enrollment criteria in terms of the duration of their neuropathy of about a year. I believe in the Phase II study it was six months, but to extend that to approximately one year. The other major elements that, in talking to our advisers and to the FDA and in discussions with them, we are going to do more regarding the training of patients during the pain score, because, again, reinforcing constantly how to use the visual analog scale for pain management, both with the sites and the patients, is another element that we think that we can do to have more consistency across patient enrollment in the study sites. And also, we now have a large number of study sites that have significant experience with us running these trials because we have now run two large trials, two large Phase II trials, so we think we have a good supply of sites to enroll these studies that will have experience with this drug and now have experience with doing DPNP studies. Operator: Thank you. I am showing no further questions at this time, and I would like to hand the conference back over to Michael S. Exton for closing remarks. Michael S. Exton: Yes, thanks so much, operator, and thanks, everyone, for your questions. Very much appreciated. Look, as I reflect on 2025, moving into 2026, the company has made a leap forward, in my opinion. If you think about where we were last year, we needed to really summarize all of the Phase II data for pilovapitan, we needed to find a path forward for Zynquista, we needed to accelerate the enrollment of SOTA in HCM. And fast forward to nearly at the end of 2026, and we now have clarity on pilovapitan, and partnership discussions are ongoing, we are on the precipice of a resubmission for Zynquista, and we are nearly closing the enrollment of the HCM study, Sonata, with a readout in 2027. So we have got an amazing set of opportunities ahead of us, and hopefully you can see how pumped we are about all of those things coming our way in 2026 and beyond. So we feel very good. We are pushing very hard and look forward to giving you some more updates as the year progresses. So thanks very much, everyone. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.
Operator: Ladies and gentlemen, welcome to the ANDRITZ's Full Year 2025 Results Conference and Live Webcast. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Matthias Pfeifenberger, Head of Investor Relations. Please go ahead, sir. Matthias Pfeifenberger: Good morning, and a warm welcome from ANDRITZ out of Vienna this morning. After preliminary headline results a few weeks ago, it's my pleasure to welcome you to the final full year earnings call and webcast. I have the pleasure to present to you our CEO, Dr. Joachim Schonbeck; and our CFO, Vanessa Hellwing. The earnings presentation will be structured as usual. We will present the CEO highlights, followed by the financial performance, followed by the performance across the business areas and then ending up with guidance. We'll also conduct a Q&A session. [Operator Instructions]. And now I'd like to pass on to Dr. Joachim Schonbeck for his elaborations. Joachim Schönbeck: Thank you, Matthias. Good morning, everybody. Thank you for being with us this morning on the disclosure, not the disclosure, but on the details of our last year's result. If you look back to the year 2025, we can say the world has been cautious on investments, but rich in geopolitical surprises. For ANDRITZ, this means we go back to what we can do best, giving out our clear priorities and executing with a high discipline. And I'm very proud how well our team achieved what has been asked to do and the dedication they put into it to achieve the results we finally came up with. The trust of our customers helped us through this difficult year, and we are happy that they showed the confidence with the many orders they placed with us. We definitely came back to growth in order intake. We had a strong order intake in the full financial year, strongly driven by hydropower and by -- but also by Pulp & Paper. We saw a slight decline in Environment & Energy, where I would say, investment decisions were pending and postponed. But structurally, we believe demand is okay. And in metals, we definitely are faced with broader structural issues in the industries in automotive as well as in the steel and metals industries where investment was not at highest priority for the last year. Our revenue declined a bit, but due to our disciplined execution and cost discipline, we could keep the comparable EBITA margin stable, very happy that this turned out very well. We compensated a significant FX effect translation and through the improved order execution on the one side, and the timely implemented capacity reductions, we could protect the bottom line very well. We even saw margin progress in hydropower as well as in metals. All in all, we are confident to propose to the general assembly to increase the dividend to EUR 2.7 per share, up from EUR 2.6 per share in the previous year. And the payout ratio increases from 52% last year to 58% in this year. So that's all well in line to what we have promised to you how we want to manage that part. If we have a look to the Q4 in more detail, the order intake reached the EUR 2 billion. That's down from the previous year. Revenue at a high EUR 2.3 billion, up 3% from the previous year. Order backlog reached record high in ANDRITZ's history, EUR 10.5 billion at year-end, never had that, 7% up from last year. EBITA margin in the fourth quarter at 9.7% and at EUR 228 million. The reported EBITA was at 8.5%, EUR 200 million, and the gap is basically all costs for restructurings that have been done and that will are prepared for this year. Net income is at 6.6% and EUR 154 million. If we have a look to the full year order intake, a bit shy of EUR 9 billion with EUR 8.9 billion, up 8%. Revenue, EUR 7.9 billion, so very positive book-to-bill ratio. Order backlog, as I said, 10.5% (sic) [ EUR 10.5 billion ] and the comparable EBITA margin for the full year was at 8.9%, exactly where it has been last year, EUR 698 million. The reported EBITA is down at 8.2%, down from 8.6% at EUR 648 million. So here, the gap is the cost mainly for the restructuring that we are -- that we have done in the year '25 and that we will do in the year '26. Net income is with 5.8% at a good stable level, EUR 457 million. The Project activity, as you can see, is on a considerably high level, now 5 quarters in a row with more than EUR 2 billion order intake in a quarter. And with the project, I would say, pushovers from Q4 into Q1, we expect also that trend not to break. If we go into the details of the business areas, you see nice increase in order intake. If we look on a quarter-to-quarter base, we increased to previous year in all 3 quarters, but in the last quarter where we dropped by 21%, that was driven by a very large order we booked for hydro business, the project Cahora Bassa in the fourth quarter of 2024. So that's, I would say, more a onetime effect. If we look to the business areas, you can see a very nice increase in Pulp & Paper and Hydropower; 20% up for Pulp & Paper and 16% up for Hydropower, while in Metals, it's down by 13% for the full year. Environment & Energy, basically 3% down. So I would say, Pulp & Paper, very happy to have -- to be successful on the, let's say, this wave of investments we saw in China for backward integrating the paper industry. In total, we received 5 orders for complete pulp mills in China, very, very huge success showing that we are really well positioned in the market itself, but also technological-wise. In Hydropower, strong demand on renewable energy, but also our new offerings around grid stability, energy storage and turbo generators is picking up. So I would say, overall, it's the energy demand and in particular, the demand in electrical energy is really supporting us. In metals, the investment climate is down. And basically, we saw the third year in a row where the market declined, and that is true for the steel as well as for the automotive industry. Environment & Energy, we saw interest in the market for these new green technologies for the green transition of industry, namely green hydrogen and carbon capture but we did not see investment decisions in the markets where we are in, namely Europe and North America. Regulatory uncertainties playing definitely one role. High energy prices still in Western Europe or in large parts of Western Europe play another role. But I would say on the positive side, we had received many orders for engineering studies, both for carbon capture and green hydrogen. So we see there is a demand. Industry is preparing, and we ANDRITZ, we seem to be a trusted partner for these endeavors. Looking to the revenue. We see a decline compared with the previous year of 5% year-on-year. And you can see that we had a decline in the first 3 quarters, and we had basically the turning point in the fourth quarter where we exceeded the revenue of the previous year's quarter. So also here, we believe that this trend will continue in the upcoming year because the good order intake and the significant backlog we have will definitely help us there. You could see in the fourth quarter, all 3 business areas, Pulp & Paper, Metals and Hydropower increased their revenue compared with the previous year; on Environment & Energy, dropped a bit. And over the full year, only Hydropower could increase the revenue. That's basically in line what I've told you in the previous calls that we had together that in the Hydropower, the large order intake that we have takes a bit more time than in other businesses to turn into revenue. But as we execute disciplined and in time, this revenue will come. And you see this trend starting now, and it will prevail. One word to the, I would say, significant impact on the revenue side is definitely the FX translation, which was EUR 85 million in the fourth quarter and EUR 222 million for the full year, significant impact, a strong euro, and we will see what this impact will be for this year. The backlog, as I said, record high, EUR 10.5 billion at year-end. And you can also see that the historical balance between Pulp & Paper and Hydropower is now largely driven towards hydropower, now 43%, almost 50% of our entire backlog from Hydropower. And therefore, we can drive the revenues out of that very effectively over time. Looking to the EBITA. Comparable EBITA margin remained stable. The absolute EBITA went down by 6% along with the revenue. I would say we are quite happy that despite the downturn, we could keep the margin. Main drivers for that is timely implemented and executed capacity reductions in the area where needed, namely in Metals and in Pulp & Paper, but also significant improvements in project execution. And there, I can specifically name Metals on the one side and Hydropower on the other side, we really made a strong improvement on that discipline. I would say, looking a bit forward, while Pulp & Paper, some residual capacity adjustments need to be done, but it's mainly rightsized for what we see to come. In Metals, we will continue the restructuring this year because we see the markets will demand it. And we also see that the business is really capable of delivering good operational results at the same time when they are restructuring. So very happy to see that. Turning to ESG. We have finished our ESG program, which was targeted for 2025, I would say, with a very satisfactory result. We reached all but 2 goals. And these 2 goals, I would say, we missed only slightly. The one we missed was the share of green products. We wanted to have 50% of our revenue based on that. We ended up with 47%. Still, it's a record high level for ANDRITZ. And I believe, for sure, targeting in the right direction. And we significantly increased the share of women in the workforce. You also see it in this panel. We are not -- so -- but in total, we are not on 1/3. So we wanted to be at 20%. We ended up with 17% at the end of 2025. Maybe the target was a bit too ambitious, but that is the way it is. So we see we are moving in the right direction. And as it was well executed this program, we gave way to a new ESG program for environment, social and governance. We want to enable the green transition, and we still believe there is demand, and we will -- we can cope with that. We want to support people to grow, people in ANDRITZ and outside ANDRITZ, and we want to govern with integrity. That's -- these are our commitments for the new ESG program. We have targets laid out for 2030 on the environment, the social and the governance. I don't want to go through with you in all the details. No major differences to what we have done before. Maybe one of one main difference is that on the greenhouse gas emissions, we got certified and approved by SBTi. So our reduction targets on greenhouse gas emissions is now fully supporting the Paris climate targets. That is good. On the social, we focused on excellent frequency rate because that everybody returns safe from working in hundreds is still one of our key priorities. So we want to go below 1 ambitious targets, but I believe we have the tools in hand to do that. We're focusing on women in leadership positions. We want to move above 15%, and we want to keep the voluntary turnover below 4%. Very important employee engagement index. We want to stay there above 75%. We believe in a people's business like we are doing, that's very important to deliver to our customers what they expect when they engage with ANDRITZ. On the governance, we put a focus on supply chain as you rightly expect that we ourselves will govern in full compliance. And so therefore, we have moved the targets into the supply chain, supplier social audit, supplier prequalification, supplier rating on sustainability by third parties. So that's the area we are focusing on. In the excellent work of our teams in the ESG has also been recognized by the outside world and the top rating agencies all rated us up with very nice results. We moved to the science-based targets. So I believe we are -- we have made up the gap that has been communicated to us in the previous years. So I would say we are on a good track there. We had a very successful year in 2025 regarding M&A. We had made 6 major acquisitions. I think they all have been communicated individually anyhow. 2 acquisitions that completed our portfolio. The one was the Salico Group, in metals, basically being fundamental closing of the gap between the metals processing and the Schuler part of our metals business. We have a portfolio completion done on the paper side. We acquired A.Celli in Italy. They are strong in supporting our business on the tissue machines, but they are particularly strong on the winder technology that was one of the key technologies we were missing. On decarbonization, we acquired LDX Solutions in the United States. That's an engineering company offering a clean air technology, ideal addition to our product portfolio technology-wise, but also excellent addition for our strategy to increase our local content in the United States, and we are now well positioned there to support the industry for their environmental investments. In China, we acquired Sanzheng. It's a technology provider for induction heating technology. They are specialized in induction heating for cold strip. So ideally, a combination with our metals processing group. We know them from -- already from several projects we have done together with them inside and outside China. And so therefore, we believe it's an excellent acquisition and can really give us a more complete offering to the customers in an area where they really are looking for a single-source solution from us. On the customer service, we have made 2 acquisitions, both acquired from Babcock & Wilcox in the United States. The one is Diamond Power, sootblower company for boiler cleaning. And the other is a material handling company, taking care of the ash that is coming out of the boilers. Both are very good. We know the companies very well. Diamond, they are, I think, 130, 140 years old. It's an ideal fit not only that we know them from the industry, but also culture wise. So we are very confident all 6 acquisitions will fully deliver what we expect from the business plans that we have concluded. Service business reached another record level, and that is very exciting, especially if we know about the decline we have in the -- on the paper side in the paper business and with the paper machine utilization around the globe, not above 60%. Also the service revenues are down. So we are very happy that we could increase revenue once more and keep the growth stable in that very important area. We did not only reach all-time high in the service revenue. We also increased the relative share to 44%. So you see we are moving closer and closer to the 50% we all wish that could be. Having said that, I hand over to Vanessa to learn about the financial performance. Thank you. Vanessa Hellwing: Thank you, Joachim. So also from my side, a warm welcome. And based on the good overview that Joachim just gave, I would now like to walk you through the financial details of our results from '25. But let me first start with some key highlights from the CFO perspective. So ANDRITZ has generated a strong operating cash flow again. We closed with EUR 653 million for '25, which is 3% above last year. Throughout the year, we have used our cash to expand spending on M&A significantly, as you have seen, to EUR 329 million outflow. And despite that, we continue a very strong financial position. We have actively reduced our net liquidity by almost EUR 200 million in '25, while generating quite remarkable cash flow in the fourth quarter of almost EUR 340 million. And that way, we managed to increase our net liquidity sequentially. Therefore, we follow our focused capital allocation by proposing higher dividends to the AGM this year. With EUR 2.70 per share, this is not only representing an attractive dividend yield, but also implying a significant increase in dividend payout. We will discuss our performance on the operating net working capital and return on -- sorry, and our ROIC in more detail in a minute. But to give you a quick preview already here, with an increased management focus on working capital, we have improved our net working capital as a percentage of sales sequentially and leading to a strong cash inflow in Q4. Our return on invested capital decreased in accordance with our M&A activities. However, it remains strong on an industry level and still substantially above our average cost of capital. Turning now to our usual EBITDA to net income bridge for 2025. Our EBITDA margin remained relatively stable at 10.4%, while absolute EBITDA decreased by 9% to EUR 823 million, which is in line with the decrease in revenues in the course of the year. Depreciation remained flat year-on-year, resulting in a reported EBITDA of EUR 648 million. Reported EBITDA margins slightly declined year-on-year to 8.2%, which is based on higher net NOI, so nonoperating items, summing up to EUR 50 million in 2025 compared to EUR 30 million in the previous year '24. IFRS 3 amortization increased to EUR 65 million, naturally driven by our enhanced M&A delivery. The amortization of Xerium, you might remember a large acquisition done in 2018 amounted to EUR 18 million in the fiscal year and was now fully amortized in Q4 '25. Our recent acquisitions, on the other hand, have been adding EUR 25 million to annual PPA amortization. In the financial result, you see a big swing from minus EUR 15 million in '24 to a positive EUR 16 million in the recent -- in '25. This comes basically from decreased interest income by EUR 26 million based on a lower interest rate in combination with the reduced gross liquidity that you see. And furthermore, we had seen the negative impact of EUR 24 million from the deconsolidation of OTORIO already in 2024. I hope you remember that. In the meantime, we have sold OTORIO to Armis and received a consideration in Armis equity. We have now divested our Armis shares, which resulted in a positive net effect of EUR 36 million that we have gained from the transaction in the course of '25. And just to recall, ANDRITZ has sold its stake in OTORIO to Armis, which is a leading supplier of cyber exposure management and security. For ANDRITZ, cybersecurity is certainly a key element of our business, but it is not part of our core activities. And that way, with this sale, we will continue a close cooperation with Armis and participate from their high innovative services. And here to complete the picture of the net income elements, the tax rate slightly increased by 0.5 percentage points to 23.7%, which is basically reflecting also a one-off effect that we have already reported for 2024. Summing up, the decline in net income to EUR 457 million in '25 is caused by the revenue and consequential EBITA decline as well as higher nonoperating items. Our net profit margins, however, as already mentioned by Joachim, remained solid at 5.8%. So on the next slide, let me walk you through the free cash flow calculation for 2025 and start again with the EBITDA at EUR 823 million. Our enhanced focus on working capital management has paid off. And therefore, outflows for net working capital are quite decent for '25 compared to an impact that we had with minus EUR 115 million in the previous year. Cash outflows from income taxes remained broadly flat year-on-year and changes in provisions and others were slightly higher with minus EUR 17 million compared to last year, generally driven by personnel-related provisions for pensions and severance payments. Also to mention provisions on projects remain stable here. Adding up the items mentioned, it leads to a slightly improved cash flow from operating activities of EUR 653 million for '25. So deducting higher CapEx of EUR 270 million, we arrive at a free cash flow of EUR 383 million, which is slightly below the EUR 399 million from the previous year. As Joachim reported, our M&A delivery exceeded recent year's levels with a number of deals that we have signed. Our M&A CapEx significantly increased to EUR 344 million compared to only EUR 76 million in '24. And this spend was well covered and digested by our free cash flow in 2025. Now let's turn to the net working capital development. Here, we focus on the quarterly development of the operating net working capital. As you can see, we are pretty lean overall with current run rates of some 12% to 13% of revenue. And just to recall once more, for a project engineering company like ANDRITZ, the operating net working capital consists of the typical trade working capital as well as contract assets and liabilities and prepayments related to our POC orders. What you can take from that picture is that operating net working capital has increased somewhat over the last few quarters coming from a level 3 years ago where we received several large projects with respective prepayments. The structural increase in operating net working capital also results from the growth in service business where generally higher inventory levels are required. The good news is that after the increase throughout the last year, the operating net working capital has been well reduced in Q4 '25 after the all-time high that we saw in Q3. And important, this also includes working capital from acquisitions. It has been reduced in absolute terms, but also in percentage of sales. 12% is now in line with the average of the last few quarters again with the increased management focus on net working capital in general and the full consolidation of the acquired revenues in the course of this year, so '26, we will continue, of course, to monitor that KPI very closely. To discuss the sequential improvement in Q4 in more detail, let me now turn to the next slide. As you already saw, we have split the operating net working capital into its 2 components. Trade working capital on the upper blue part of the chart and contract assets and liabilities with advanced payments, and those are displayed in gray at the bottom of the chart, reflecting our project cash flows, which are rather typical for us as a project engineering company. On the prepayment side, we have seen a constant improvement over the last few quarters, which created additional contract liabilities, of course. On trade working capital, we achieved a sequential improvement in Q4. This reflects stronger management focus and also normal seasonality. Typically, we see a buildup in the first 3 quarters followed by a release in Q4. And as mentioned on the last call, on the Q3 call, the full year increase was largely acquisition-driven. Revenue from acquired businesses are included only on pro rata basis, while the assets are fully consolidated from the first day of consolidation. And this creates a temporary distortion, especially in relative terms. One structural factor is also shaping working capital and sales conversion, we actually see a shift from large-scale projects to more midsized and smaller orders. And as a result, we have less POC business and more completed contract orders. This leads to lower overtime revenues, but also to a higher work in progress that needs to be managed here in the working capital. So here, I would now like to turn your attention to more details on the development of our operating cash flows in '25. Operating cash flow amounted to a strong EUR 339 million in Q4, supported by the working capital improvement mentioned before. For the full year, operating cash flow also improved year-on-year to more than EUR 650 million, which is a reasonable achievement considering the absolute EBITDA decrease. Also here, our increased focus on operating net working capital is becoming visible. In general, we are still seeing a usual volatility in operating cash flows on a quarterly basis, which is very typical in the project business, of course. Important to emphasize here again is the overall high level of operating cash flow that we are maintaining compared to the historical level. This is driven by higher top line levels, better margin and also improved cash conversion. It becomes evident when we look at the right side of this chart showing not only the absolute level of operating cash flows for each year, but also the 3-year rolling average that you can see in light gray. And 2 to 3 years actually reflect the average execution cycle of our capital business. On this slide, we turn our focus from generating cash to allocating it properly. And I'm very happy to present here again our dividend proposal for the fiscal year 2025 to you, subject, of course, to our 26th Annual General Meeting. To highlight again, EUR 2.70 per share proposed does not only represent the fifth consecutive dividend increase, but also a significant increase in our payout ratio to 58% coming from 52% last year. And this is in line with our progressive dividend policy and with our 50% to 60% target corridor for the payout ratio. And despite declining earnings per share, we are here proposing to exactly balance it through higher dividends once more. Since last year, we are providing transparency on our capital allocation, and we can now add 2025, which somewhat alters the historical average that we have presented. In the last years and especially in '25, we have increased capital allocation significantly. And this actually while keeping a strong financial position and sufficient net liquidity. Our cash was allocated especially to the M&A side, where we have used '25 to close a much higher number of value-accretive deals compared to previous years. And we have talked about the dividend increase just a minute ago. But also on the conventional CapEx front, we have increased our investment in service, in green solutions, in digitalization and also in R&D. And we are planning to provide more disclosure on this going forward in the course of the year. Our capital allocation strategy remains balanced across CapEx, dividends and M&A. And we also might also place some opportunistic share buybacks as a more flexible option on top of this. And we can say capital allocation at ANDRITZ remains internally funded. Our aggregate cash outflows in the last 6 years have been more than covered by operating cash flow generation. And in my opinion, that's a very sound picture. So let me now turn from capital allocation to our strong financial position and walk you through the changes in our net liquidity profile. Over the last 3 years, we have steadily decreased our liquid funds by termination of bonds and promissory notes. We still maintain a strong financial position, especially when including our EUR 500 million revolving credit facility. Our net liquidity declined further from EUR 905 million at the end of 2024 to EUR 713 million by the end of '25. We saw lower net liquidity levels also in the course of the year. As you remember, due to the outflow of the purchase price for acquisitions and also for our annual dividend payment in Q2. Net liquidity has been restored again towards year-end, and that was driven by the strong cash flow generation in the fourth quarter. So as mentioned, FX also had a negative effect and this also on liquidity, of course, with roughly EUR 50 million, which is translation effect only. And before you ask, yes, of course, we do hedging on all our projects where relevant. With EUR 700 million net liquidity and more headroom from our revolver from our RCF, ANDRITZ continues to hold a strong financial position with sufficient liquidity as part of our DNA. Following these details on capital allocation and net liquidity, let me provide you a quick update here on our ROIC performance. To recall, ROIC is our main metric monitoring the value generation over the long run. It has been increasing since 2020 and stands at a substantial margin in our -- at our cost of capital. So the ROIC has started to decline somewhat in the first half of 2025 and now also for the full year to just under 18%. This is, in fact, still an industry-leading level considering it is post tax and including all restructuring costs. On the one hand, this is obviously driven by the organic EBITA decline. But more importantly, this is because of our recent acquisitions with purchase price allocation leading to higher goodwill and intangibles, of course. Nevertheless, ANDRITZ's balance sheet ratio of goodwill and intangible is still very low in industry comparison and our equity position remains strong. And also important to keep in mind that EBITA from these acquisitions is only included on a pro rata basis. If we would adjust the acquisitions for '25 entirely, our ROIC would remain close to 20%. However, our aim is to restore ROIC in the future, of course. At the end of my presentation, let me quickly summarize the development of our headline financials again. So our main leading indicators are still pointing upwards. Order intake increased notably in '25 by a plus 8% year-on-year, resulting in a book-to-bill ratio of 1.13. Order backlog stands on a record level for the year-end. The notable increase in order backlog in the last year to this record level already secures material part of the next year's revenue generation. As a consequence of high revenue recognition from the completion of larger orders in '24, our revenue trajectory is still pointing downwards, but we have reached the inflection point as consistently addressed in the course of last year. And so we returned to revenue growth in the fourth quarter despite the significant FX headwinds as outlined by Joachim before. And even though not stated in our official disclosure, I would like to proudly mention here that we reached a historical high monthly revenue volume in December only of EUR 1 billion, indicating the capability of our global organization and management. Along with lower revenues and restructuring expenses from capacity adjustments in Pulp & Paper and Metals, our reported EBITA decreased, but we were able to maintain our comparable EBITA and net profit margins stable on a high level. Operating net working capital and ROIC remain in high focus going forward. The development this year was obviously impacted by the many acquisitions we had. And our enhanced capital allocation and higher M&A delivery support value creation and have reduced our net liquidity position, as mentioned. And as mentioned, FX has been significantly headwind, especially from March. And also the tariffs have still not impacted our key end markets so far. We will provide further details on that later in the presentation. And for now, I thank you for your kind attention, and Joachim will now focus on the key developments across the business areas. Joachim Schönbeck: Very well, Vanessa, thank you very much for this detailed overview. Now let's move to the business areas. So Pulp & Paper market recovered on the pulp side, still flat on the paper side. We were happy to really benefit from the move in China in the paper industry to backward integrate into pulp mills. As mentioned before, we had been awarded 5 complete pulp mills in China, and we see this trend continuing in the year. So we are -- in Asia on that side of the world, we are quite optimistic on the investment climate. And we usually also see that the Chinese industry is then moving ahead with a good order intake and the good references we have, we believe that we also will take our fair share of the market. We have a strong momentum last year in power boilers. Basically, these are not only boilers, these are small power plants, a sludge incineration in Germany with special focus on phosphorus recovery. Here, we have a special technology, and we took 100% of the market in Germany. These were 3 small power plants, very, very good achievement of our teams. We also saw momentum on the pipe side picking up in the U.S. So smaller modernization started, and we might see more to come on the -- for sure, investment environment and climate in U.S. is definitely also a bit influenced by some of the political decisions taken. On the revenue side, we believe that we gone through the valley, and we can grow that. The good order intake of '25 will now go into revenue this year. And we are happy to see that although steep decline in revenue that through the timely capacity reductions we have done in Pulp & Paper, we could keep the margin on a nice level. We dropped from 11% to 10.8%. So I would say, a rather small drop on a very good level. Also, of course, supported by the strong increase of the service share now up to 59% of the total revenue. In Metals, I can tell you the industry is in a difficult situation. However, I can be really proud of our teams, how they coped with it on the few projects that have been on the market, they have positioned themselves very well. So we got the trust from our customers. And that is true for Asian market as well for the European and the North American market. We went through significant restructuring taking out around 500 employees in the past year, closing several locations in Germany. So really protecting the bottom line through some cost discipline and very happy to report that it's not only an increased profitability for the fifth consecutive year, but with a 6.1% EBITA margin, the first time in our profitability target for 2027. So we're very proud how that develops in difficult times. Hydropower, I would say we're also very proud, very good development. But here, we, for sure, have a support from a market, strong demand, I would say, worldwide on renewable energy, on -- but also our new offerings for grid stability, energy storage and turbo generators support that strong growth. We could increase the order intake for the full year by 16%, could grow the revenue by 12%. And on the EBITA margin, we moved up from 6.1% to 6.8%. So very close to the targets we have set. We see this trend continuing. Environment & Energy. Here, we, I would say, faced a surprisingly subdued market, which, frankly speaking, we did not expect. And this is why we also were not, I would say, in time with our capacity adjustments that we have done. On the green transition side, a lot of interest. We received many orders for engineering studies, but no orders for equipment and plant deliveries. Clean Air developed very well, both in Europe and in North America. And in our separation and pumps business, we saw many projects delayed, a lot of exposure to the mining business and also here, uncertainty on the green transition definitely have played a role. So at the end of that, our margin dropped from 11.1% to 10.6%, still on a high level, still within our target margin. But here, you can see the effect that we had been prepared for growth and started with our capacity adjustments a bit too late. What is to say on tariffs and FX, I would say we can confirm no direct impact on the tariffs yet on anything we should report and can report. So we will, of course, monitor that. We cannot allocate the indirect effect. So -- but I would say no direct impact on the FX translation we have mentioned several times. Strong impact for the year increasing over the year -- now let's see how the euro develops in this year, but you see that's basically -- that's a nominal loss of EUR 222 million in revenue. But at the end, it's not a loss, not a single equipment has been supplied less and not a single customer has not been served. So that's a pure financial effect. 2026, what can we expect? I would say, project activity, we expect to stay on that level. We would expect from that revenue growth. And for sure, it's supported by growth on service, which we believe we can continue, but also our record backlog will help us. We will further improve profitability and restructuring is ongoing in Environment & Energy and in Metals. So we guide for this year a revenue between EUR 8.0 billion and EUR 8.3 billion and a comparable EBITA margin between 8.7% and 9.1%. The midterm targets basically have been confirmed. And in looking to the time, no need to repeat that. Instead, give me 2 minutes here. You see we have now Environment & Energy in the target margin range. We have our, let's say, child of special attention, the Metals business area for the first time in the target area, we believe the trend that you see here on improving profitability will continue. This is why we continue the restructuring. And you see the Pulp & Paper and Hydropower, they are only 0.2 percentage points out of the range. So we are confident that we can grow in that direction. We have learned that even in difficult markets, we can do that. And if there is anything left, you want to know, we have not told you so far. Now we are ready for questions and answers. Thank you very much. Operator: [Operator Instructions] And we have the first question coming from Akash Gupta from JPMorgan. Akash Gupta: I have a few, and I'll ask one at a time. My first one is on growth. So when I look at your guidance, EUR 8 billion to EUR 8.3 billion, maybe if you can help me with what is the implied organic growth we have in this corridor. The starting point is 7.9%. I think you may be having some exchange rate headwinds already embedded given we saw higher exchange rates headwinds in second half? And also, you may have some carryover effect of M&A. So first one is on what is implied organic growth in 2026 guidance? And then the second part of the first question is that if we then take the midpoint of EUR 8.15 billion, what level of organic growth would you need in 2027 in order to hit the at least EUR 9 billion revenue target for next year? Joachim Schönbeck: Akash, thank you very much for your question. We have not in detail provided our planning and our guidance, what is organic and what is not organic. I would say, as a general rule, we also know from the history that we grow 50% organic and 50% through M&A. That is still true. with, I would say, with the good acquisitions we made, we might expect now next year a bit more on the M&A side, but that's, I would say, only that's more marginal. We are working and we are preparing ourselves to continue the growth on the service side as we did even in the last difficult year. So we expect further growth. We had an annual track record of 7%. We believe that we can return to that. And on the capital side, we do not have the growth exactly in our hand because we also depend -- we depend on the market there. So this is why we gave out that guidance, and I hope this clarifies a bit what you were asking. Akash Gupta: And second one is on automotive in metals as well as Environment & Energy. So yesterday, European Commission adopted Industrial Accelerator Act, where proposals to increase demand for low-carbon European-made technologies and products. I wanted to ask if you are seeing any optimism on project activity on the back of these regulatory changes in Europe? Or if not, then how long it might take before we see any activity on your end? Joachim Schönbeck: For sure, this will help our customers. And usually, if it helps our customers, it at the end helps us. as I have explained, we see both in automotive and in metals. We see now 3 years in a row, a shrinking market, which means that basically, the industry is overrunning their equipment a bit. It's a traditional business. If you run it 24/7, there is a lot of where you only -- you come to end of lifetime. You can always push it a bit. So from being in these industries long enough, we are quite confident that the market will increase, and we are very confident that we will take our fair share. And for sure, these legal acts from Europe will definitely help and protect a bit the European automotive and also maybe the European steel industry. I'm not aware of that Act in detail. Akash Gupta: And last one is on CapEx in Hydropower business. So when we look at your competitors and especially in broader power generation market, almost every company is increasing quite substantial capacity. So can you talk about what sort of CapEx need do you anticipate in 2026 in Hydropower? And would that have any impact on total CapEx for the year? Joachim Schönbeck: The majority of our manufacturing CapEx for 2026 will be for hydro. There is a strong demand on the turbine side as well as on the generator side. And -- but it will not exceed our natural cash flow. So we will invest, and I think it's wise to invest because for you, as you know, it's still the cheapest way to spend our money into growth. Akash Gupta: And the overall CapEx level last year, it was around EUR 200 million. Do we expect it to increase or stable in 2026? Joachim Schönbeck: Increase. Operator: The next question comes from Sven Weier from UBS. Sven Weier: The first one is just wanting to go through the order pipeline because you said it's stable on a high level. As usual, I'm particularly curious on Pulp & Paper because you also alluded to China. Joachim Schönbeck: Yes. What's the question? We cannot hear you. Matthias Pfeifenberger: I think we lost Sven Weier. Could you turn to the next question, please? Operator: Yes, of course. The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Patrick Steiner speaking. Three questions from my side. The first is a bit of a follow-up on the previous question basically. Could you provide us a bit of a bridge for -- regarding your revenue guidance to '26 and '27? I mean what are the major drivers behind the less dynamic expected revenue development to '26, including M&A effects and the expected better dynamic from '26 to 2027? Joachim Schönbeck: It is driven by the strong order increase we saw in Pulp & Paper and in Hydropower on the one side. And from the project structure itself, Pulp & Paper will turn more quickly into revenue. So what we see in order intake in '25, we will see a significant amount of that already in revenue in '26. While on Hydropower, it takes a bit longer. So it's a buildup more over time. And this is why the outlook is a bit cautious. As we have reported, we had a decline in order intake in Metals and Environment & Energy. And this is why we do not see particular growth there. This is why the outlook is a bit cautious. This is also why we go to capacity adjustments in Metals and in Environment & Energy to protect the profitability. Patrick Steiner: Okay. That's very helpful. Second question, you had a very good slide in operating net working capital as a percentage of revenue. Could you elaborate a bit how this is going to look like in 2026 after the acquisitions are fully included for full year basically? And also how this would change with -- if you receive a larger project? Vanessa Hellwing: Well, the acquisitions are already in fully fledged on the net working capital, as you can see here. It's only the ratio that is a bit blurred due to the pro rata revenue recognition of the acquisitions done in '25. So it's just that the percentage might decrease further on. So if we would receive a larger project, we usually see this in combination with larger prepayments, which would, of course, have a positive impact on the overall net working capital. Patrick Steiner: Okay. Last one for now. Capital allocation has not been fully funded by operating cash flow in the last 2 years. Should we expect this to change in '26 and '27? Or are you comfortable increasing net debt if favorable opportunities to deploy capital occur? Vanessa Hellwing: Well, so we will continue our capital allocation on quite aggressive path on this. So it depends a bit, of course, on the opportunities that we see from M&A. And of course, we will not just shoot on targets that are not value accretive to ANDRITZ overall. But furthermore, as mentioned, CapEx spend will continue even slightly increased. And yes, I mean, the dividends, of course, we will keep also our path here. So we actually see that we continue the picture that you saw the last 2 years or 3 years to really spend our capital -- spend in capital to further manage our net liquidity well, but still keep, of course, a substance for ANDRITZ as this is part of our DNA and necessary for dealing with large projects in an engineering company like we are. Patrick Steiner: So if we think about CapEx maybe slightly increasing, dividends increasing and in terms of M&A and share buybacks, more of an opportunistic stance for 2026, this would make sense, right? Vanessa Hellwing: Yes, exactly. Operator: The next question comes from Lars Vom-Cleff from Deutsche Bank. Lars Vom Cleff: Maybe quickly starting with a follow-up question to Akash. I understood that with regards to the reported revenue guidance, you're not willing to split between organic and inorganic. But would it be fair to assume that included in your revenue guidance, you are calculating with an FX headwind that is comparable to last year? Vanessa Hellwing: That's what we do. Lars Vom Cleff: Okay. Perfect. And then you already mentioned order intake rather driven by midsized orders at this stage. If I remember correctly, on the Q3 call, you said there are no major project negotiations in Pulp & Paper currently, but in Hydro. Is that still the case? Or could we hope for a large greenfield order in Pulp & Paper this year? Joachim Schönbeck: The hope never dies. We have -- as I told you, what we can be pretty certain of is that this backward integration in the Chinese paper industry continues. And as that continues, it also impacts a potential greenfield new pulp mill in South America because that's one of the major markets. So we cannot see these 2 topics independent. And I would say, as it is said in many areas of this world in [indiscernible]. Lars Vom Cleff: Perfect. And then quickly staying with the order intake, order backlog at records or at least close to record levels, nice book-to-bill in '25. We could also hope for a book-to-bill exceeding 1 again for '26 if momentum continues. or am I wrong here? Joachim Schönbeck: If momentum continues, you are right. Yes. Lars Vom Cleff: Okay. Perfect. And then maybe ending with -- you also said on one of the recent calls that you're seeing increasing pricing pressure from pulp and paper peers. I guess that also has not changed much recently given that everyone is fighting for juicy projects. Joachim Schönbeck: Yes, you are right on that. Operator: The next question comes from Daniel Lion from Erste Group. Daniel Lion: I would -- could you maybe elaborate a little bit on the adjustments planned now in '26? How far are we actually in the Metals division? And what would you expect to come in the E&E division? Maybe overall, how much should we include in our models for adjustments? Joachim Schönbeck: So we expect in total, I believe we are talking about 700 to 800 people. Daniel Lion: And this is already provisioned to some extent or... Joachim Schönbeck: To some, but not fully. Vanessa Hellwing: So for the NOI in '25, about 50% were accruals for this year. So we will cover a lot with what we have digested already in '25, maybe some more to come. Daniel Lion: And how long would you expect to have this impact the figures? Will this be done in the first half already? Or will we have to expect some impacts in the second half year as well? Joachim Schönbeck: Second half year as well, it's 700, 800 people, you don't do overnight. It's a process you need to negotiate. And depending on which country, majority is Germany, takes long time. And so I would expect we need the year to work through that. But as you could see from the previous year, we can do this in parallel to do good order execution. So from that point of view, I think we are on a good track. Daniel Lion: Okay. And then maybe also, again, slightly focusing on '27, what kind of revenue -- what kind of order intake or backlog would you expect roughly that is required in order to reach EUR 9 billion in revenues next year? Joachim Schönbeck: I have not made the calculation, but we do not step back from the targets we have for '27. Daniel Lion: So anything that would need to happen on the way there, something sizable or like, I don't know, big picture greenfield contract in Pulp & Paper or in order to make the guidance happen? Joachim Schönbeck: It would definitely support, but we do not believe that we need a large greenfield mill in South America to reach our targets. Operator: [Operator Instructions] We now have Sven Weier again from UBS. Sven Weier: I hope you can hear me now. Joachim Schönbeck: Yes. Perfect. Sven Weier: So going back to the Hydro business, I was wondering if you could go through the turbocharger business a bit more in detail, how sizable it is? What kind of growth rates you see? So any color on the turbocharger business you can give? Would be appreciated. That's the first one. Joachim Schönbeck: So turbogenerator business is, I would say, medium-sized 3-digit million business. Growth rates double digit at the moment. We do not -- of course, we do not know how this will continue. That's a business we are selling to energy engineering companies in the energy business and not to the end customer. So we have, I would say, it's a bit of a different feeling for the end market. Prognosis is good for the years to come. So currently, that's the volume we can report. And this is why it definitely supports the Hydro business. Sven Weier: And when you say 3 digit, is it like in the low 3 digits or get a better feeling? Joachim Schönbeck: It's in the mid-3 digits. Sven Weier: Okay. But you're not selling to the turbine makers directly, but basically to those guys who install the whole project. Joachim Schönbeck: No, no, to the turbine. We sell to the turbine makers, but not to the users, not to the utilities, not... Sven Weier: And those are kind of the known names like Siemens Energy and GE or... Joachim Schönbeck: Potentially. Sven Weier: Okay. And then, I mean, the pipeline in Hydro in general, I guess, probably also looks pretty promising based on what you said for 2026. Joachim Schönbeck: Yes. I can only confirm that. Yes. Sven Weier: And then you said you had some spillover into Q2 from Q4, if I understood you correctly on orders. Does it mean that you think Q1 orders should be higher than Q4 overall because of that spillover? Joachim Schönbeck: Could be. We definitely had some decisions that have been pushed over the year-end. We cannot tell you whether they will be pushed across the next quarter, but there are feasible projects that have been pushed. And so I would say we are not -- with what we see on the project side, we are not pessimistic. Sven Weier: So it won't be lower, let's put it this way in Q4. Joachim Schönbeck: Yes. We can agree on that. Sven Weier: Frank but good. The final question I had was just on the M&A because obviously, you kindly provided the revenue details, the money you paid, so I can calculate the kind of EV sales multiple. But I was just wondering if there's also kind of an average profitability across those targets that you bought? Are we talking like average 10% margin roughly. Joachim Schönbeck: I don't have the figure in my head, but in average, higher than what you see from ANDRITZ in total. Operator: There are no more questions at this time. I would now like to turn the conference back over to Matthias Pfeifenberger. Matthias Pfeifenberger: Okay. Thanks a lot. Thanks for the presentations of the Executive Board and the extended interest in ANDRITZ and in this call. And we wish you a good day and see you next time. Thanks a lot. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Operator: Ladies and gentlemen, welcome to the ANDRITZ's Full Year 2025 Results Conference and Live Webcast. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Matthias Pfeifenberger, Head of Investor Relations. Please go ahead, sir. Matthias Pfeifenberger: Good morning, and a warm welcome from ANDRITZ out of Vienna this morning. After preliminary headline results a few weeks ago, it's my pleasure to welcome you to the final full year earnings call and webcast. I have the pleasure to present to you our CEO, Dr. Joachim Schonbeck; and our CFO, Vanessa Hellwing. The earnings presentation will be structured as usual. We will present the CEO highlights, followed by the financial performance, followed by the performance across the business areas and then ending up with guidance. We'll also conduct a Q&A session. [Operator Instructions]. And now I'd like to pass on to Dr. Joachim Schonbeck for his elaborations. Joachim Schönbeck: Thank you, Matthias. Good morning, everybody. Thank you for being with us this morning on the disclosure, not the disclosure, but on the details of our last year's result. If you look back to the year 2025, we can say the world has been cautious on investments, but rich in geopolitical surprises. For ANDRITZ, this means we go back to what we can do best, giving out our clear priorities and executing with a high discipline. And I'm very proud how well our team achieved what has been asked to do and the dedication they put into it to achieve the results we finally came up with. The trust of our customers helped us through this difficult year, and we are happy that they showed the confidence with the many orders they placed with us. We definitely came back to growth in order intake. We had a strong order intake in the full financial year, strongly driven by hydropower and by -- but also by Pulp & Paper. We saw a slight decline in Environment & Energy, where I would say, investment decisions were pending and postponed. But structurally, we believe demand is okay. And in metals, we definitely are faced with broader structural issues in the industries in automotive as well as in the steel and metals industries where investment was not at highest priority for the last year. Our revenue declined a bit, but due to our disciplined execution and cost discipline, we could keep the comparable EBITA margin stable, very happy that this turned out very well. We compensated a significant FX effect translation and through the improved order execution on the one side, and the timely implemented capacity reductions, we could protect the bottom line very well. We even saw margin progress in hydropower as well as in metals. All in all, we are confident to propose to the general assembly to increase the dividend to EUR 2.7 per share, up from EUR 2.6 per share in the previous year. And the payout ratio increases from 52% last year to 58% in this year. So that's all well in line to what we have promised to you how we want to manage that part. If we have a look to the Q4 in more detail, the order intake reached the EUR 2 billion. That's down from the previous year. Revenue at a high EUR 2.3 billion, up 3% from the previous year. Order backlog reached record high in ANDRITZ's history, EUR 10.5 billion at year-end, never had that, 7% up from last year. EBITA margin in the fourth quarter at 9.7% and at EUR 228 million. The reported EBITA was at 8.5%, EUR 200 million, and the gap is basically all costs for restructurings that have been done and that will are prepared for this year. Net income is at 6.6% and EUR 154 million. If we have a look to the full year order intake, a bit shy of EUR 9 billion with EUR 8.9 billion, up 8%. Revenue, EUR 7.9 billion, so very positive book-to-bill ratio. Order backlog, as I said, 10.5% (sic) [ EUR 10.5 billion ] and the comparable EBITA margin for the full year was at 8.9%, exactly where it has been last year, EUR 698 million. The reported EBITA is down at 8.2%, down from 8.6% at EUR 648 million. So here, the gap is the cost mainly for the restructuring that we are -- that we have done in the year '25 and that we will do in the year '26. Net income is with 5.8% at a good stable level, EUR 457 million. The Project activity, as you can see, is on a considerably high level, now 5 quarters in a row with more than EUR 2 billion order intake in a quarter. And with the project, I would say, pushovers from Q4 into Q1, we expect also that trend not to break. If we go into the details of the business areas, you see nice increase in order intake. If we look on a quarter-to-quarter base, we increased to previous year in all 3 quarters, but in the last quarter where we dropped by 21%, that was driven by a very large order we booked for hydro business, the project Cahora Bassa in the fourth quarter of 2024. So that's, I would say, more a onetime effect. If we look to the business areas, you can see a very nice increase in Pulp & Paper and Hydropower; 20% up for Pulp & Paper and 16% up for Hydropower, while in Metals, it's down by 13% for the full year. Environment & Energy, basically 3% down. So I would say, Pulp & Paper, very happy to have -- to be successful on the, let's say, this wave of investments we saw in China for backward integrating the paper industry. In total, we received 5 orders for complete pulp mills in China, very, very huge success showing that we are really well positioned in the market itself, but also technological-wise. In Hydropower, strong demand on renewable energy, but also our new offerings around grid stability, energy storage and turbo generators is picking up. So I would say, overall, it's the energy demand and in particular, the demand in electrical energy is really supporting us. In metals, the investment climate is down. And basically, we saw the third year in a row where the market declined, and that is true for the steel as well as for the automotive industry. Environment & Energy, we saw interest in the market for these new green technologies for the green transition of industry, namely green hydrogen and carbon capture but we did not see investment decisions in the markets where we are in, namely Europe and North America. Regulatory uncertainties playing definitely one role. High energy prices still in Western Europe or in large parts of Western Europe play another role. But I would say on the positive side, we had received many orders for engineering studies, both for carbon capture and green hydrogen. So we see there is a demand. Industry is preparing, and we ANDRITZ, we seem to be a trusted partner for these endeavors. Looking to the revenue. We see a decline compared with the previous year of 5% year-on-year. And you can see that we had a decline in the first 3 quarters, and we had basically the turning point in the fourth quarter where we exceeded the revenue of the previous year's quarter. So also here, we believe that this trend will continue in the upcoming year because the good order intake and the significant backlog we have will definitely help us there. You could see in the fourth quarter, all 3 business areas, Pulp & Paper, Metals and Hydropower increased their revenue compared with the previous year; on Environment & Energy, dropped a bit. And over the full year, only Hydropower could increase the revenue. That's basically in line what I've told you in the previous calls that we had together that in the Hydropower, the large order intake that we have takes a bit more time than in other businesses to turn into revenue. But as we execute disciplined and in time, this revenue will come. And you see this trend starting now, and it will prevail. One word to the, I would say, significant impact on the revenue side is definitely the FX translation, which was EUR 85 million in the fourth quarter and EUR 222 million for the full year, significant impact, a strong euro, and we will see what this impact will be for this year. The backlog, as I said, record high, EUR 10.5 billion at year-end. And you can also see that the historical balance between Pulp & Paper and Hydropower is now largely driven towards hydropower, now 43%, almost 50% of our entire backlog from Hydropower. And therefore, we can drive the revenues out of that very effectively over time. Looking to the EBITA. Comparable EBITA margin remained stable. The absolute EBITA went down by 6% along with the revenue. I would say we are quite happy that despite the downturn, we could keep the margin. Main drivers for that is timely implemented and executed capacity reductions in the area where needed, namely in Metals and in Pulp & Paper, but also significant improvements in project execution. And there, I can specifically name Metals on the one side and Hydropower on the other side, we really made a strong improvement on that discipline. I would say, looking a bit forward, while Pulp & Paper, some residual capacity adjustments need to be done, but it's mainly rightsized for what we see to come. In Metals, we will continue the restructuring this year because we see the markets will demand it. And we also see that the business is really capable of delivering good operational results at the same time when they are restructuring. So very happy to see that. Turning to ESG. We have finished our ESG program, which was targeted for 2025, I would say, with a very satisfactory result. We reached all but 2 goals. And these 2 goals, I would say, we missed only slightly. The one we missed was the share of green products. We wanted to have 50% of our revenue based on that. We ended up with 47%. Still, it's a record high level for ANDRITZ. And I believe, for sure, targeting in the right direction. And we significantly increased the share of women in the workforce. You also see it in this panel. We are not -- so -- but in total, we are not on 1/3. So we wanted to be at 20%. We ended up with 17% at the end of 2025. Maybe the target was a bit too ambitious, but that is the way it is. So we see we are moving in the right direction. And as it was well executed this program, we gave way to a new ESG program for environment, social and governance. We want to enable the green transition, and we still believe there is demand, and we will -- we can cope with that. We want to support people to grow, people in ANDRITZ and outside ANDRITZ, and we want to govern with integrity. That's -- these are our commitments for the new ESG program. We have targets laid out for 2030 on the environment, the social and the governance. I don't want to go through with you in all the details. No major differences to what we have done before. Maybe one of one main difference is that on the greenhouse gas emissions, we got certified and approved by SBTi. So our reduction targets on greenhouse gas emissions is now fully supporting the Paris climate targets. That is good. On the social, we focused on excellent frequency rate because that everybody returns safe from working in hundreds is still one of our key priorities. So we want to go below 1 ambitious targets, but I believe we have the tools in hand to do that. We're focusing on women in leadership positions. We want to move above 15%, and we want to keep the voluntary turnover below 4%. Very important employee engagement index. We want to stay there above 75%. We believe in a people's business like we are doing, that's very important to deliver to our customers what they expect when they engage with ANDRITZ. On the governance, we put a focus on supply chain as you rightly expect that we ourselves will govern in full compliance. And so therefore, we have moved the targets into the supply chain, supplier social audit, supplier prequalification, supplier rating on sustainability by third parties. So that's the area we are focusing on. In the excellent work of our teams in the ESG has also been recognized by the outside world and the top rating agencies all rated us up with very nice results. We moved to the science-based targets. So I believe we are -- we have made up the gap that has been communicated to us in the previous years. So I would say we are on a good track there. We had a very successful year in 2025 regarding M&A. We had made 6 major acquisitions. I think they all have been communicated individually anyhow. 2 acquisitions that completed our portfolio. The one was the Salico Group, in metals, basically being fundamental closing of the gap between the metals processing and the Schuler part of our metals business. We have a portfolio completion done on the paper side. We acquired A.Celli in Italy. They are strong in supporting our business on the tissue machines, but they are particularly strong on the winder technology that was one of the key technologies we were missing. On decarbonization, we acquired LDX Solutions in the United States. That's an engineering company offering a clean air technology, ideal addition to our product portfolio technology-wise, but also excellent addition for our strategy to increase our local content in the United States, and we are now well positioned there to support the industry for their environmental investments. In China, we acquired Sanzheng. It's a technology provider for induction heating technology. They are specialized in induction heating for cold strip. So ideally, a combination with our metals processing group. We know them from -- already from several projects we have done together with them inside and outside China. And so therefore, we believe it's an excellent acquisition and can really give us a more complete offering to the customers in an area where they really are looking for a single-source solution from us. On the customer service, we have made 2 acquisitions, both acquired from Babcock & Wilcox in the United States. The one is Diamond Power, sootblower company for boiler cleaning. And the other is a material handling company, taking care of the ash that is coming out of the boilers. Both are very good. We know the companies very well. Diamond, they are, I think, 130, 140 years old. It's an ideal fit not only that we know them from the industry, but also culture wise. So we are very confident all 6 acquisitions will fully deliver what we expect from the business plans that we have concluded. Service business reached another record level, and that is very exciting, especially if we know about the decline we have in the -- on the paper side in the paper business and with the paper machine utilization around the globe, not above 60%. Also the service revenues are down. So we are very happy that we could increase revenue once more and keep the growth stable in that very important area. We did not only reach all-time high in the service revenue. We also increased the relative share to 44%. So you see we are moving closer and closer to the 50% we all wish that could be. Having said that, I hand over to Vanessa to learn about the financial performance. Thank you. Vanessa Hellwing: Thank you, Joachim. So also from my side, a warm welcome. And based on the good overview that Joachim just gave, I would now like to walk you through the financial details of our results from '25. But let me first start with some key highlights from the CFO perspective. So ANDRITZ has generated a strong operating cash flow again. We closed with EUR 653 million for '25, which is 3% above last year. Throughout the year, we have used our cash to expand spending on M&A significantly, as you have seen, to EUR 329 million outflow. And despite that, we continue a very strong financial position. We have actively reduced our net liquidity by almost EUR 200 million in '25, while generating quite remarkable cash flow in the fourth quarter of almost EUR 340 million. And that way, we managed to increase our net liquidity sequentially. Therefore, we follow our focused capital allocation by proposing higher dividends to the AGM this year. With EUR 2.70 per share, this is not only representing an attractive dividend yield, but also implying a significant increase in dividend payout. We will discuss our performance on the operating net working capital and return on -- sorry, and our ROIC in more detail in a minute. But to give you a quick preview already here, with an increased management focus on working capital, we have improved our net working capital as a percentage of sales sequentially and leading to a strong cash inflow in Q4. Our return on invested capital decreased in accordance with our M&A activities. However, it remains strong on an industry level and still substantially above our average cost of capital. Turning now to our usual EBITDA to net income bridge for 2025. Our EBITDA margin remained relatively stable at 10.4%, while absolute EBITDA decreased by 9% to EUR 823 million, which is in line with the decrease in revenues in the course of the year. Depreciation remained flat year-on-year, resulting in a reported EBITDA of EUR 648 million. Reported EBITDA margins slightly declined year-on-year to 8.2%, which is based on higher net NOI, so nonoperating items, summing up to EUR 50 million in 2025 compared to EUR 30 million in the previous year '24. IFRS 3 amortization increased to EUR 65 million, naturally driven by our enhanced M&A delivery. The amortization of Xerium, you might remember a large acquisition done in 2018 amounted to EUR 18 million in the fiscal year and was now fully amortized in Q4 '25. Our recent acquisitions, on the other hand, have been adding EUR 25 million to annual PPA amortization. In the financial result, you see a big swing from minus EUR 15 million in '24 to a positive EUR 16 million in the recent -- in '25. This comes basically from decreased interest income by EUR 26 million based on a lower interest rate in combination with the reduced gross liquidity that you see. And furthermore, we had seen the negative impact of EUR 24 million from the deconsolidation of OTORIO already in 2024. I hope you remember that. In the meantime, we have sold OTORIO to Armis and received a consideration in Armis equity. We have now divested our Armis shares, which resulted in a positive net effect of EUR 36 million that we have gained from the transaction in the course of '25. And just to recall, ANDRITZ has sold its stake in OTORIO to Armis, which is a leading supplier of cyber exposure management and security. For ANDRITZ, cybersecurity is certainly a key element of our business, but it is not part of our core activities. And that way, with this sale, we will continue a close cooperation with Armis and participate from their high innovative services. And here to complete the picture of the net income elements, the tax rate slightly increased by 0.5 percentage points to 23.7%, which is basically reflecting also a one-off effect that we have already reported for 2024. Summing up, the decline in net income to EUR 457 million in '25 is caused by the revenue and consequential EBITA decline as well as higher nonoperating items. Our net profit margins, however, as already mentioned by Joachim, remained solid at 5.8%. So on the next slide, let me walk you through the free cash flow calculation for 2025 and start again with the EBITDA at EUR 823 million. Our enhanced focus on working capital management has paid off. And therefore, outflows for net working capital are quite decent for '25 compared to an impact that we had with minus EUR 115 million in the previous year. Cash outflows from income taxes remained broadly flat year-on-year and changes in provisions and others were slightly higher with minus EUR 17 million compared to last year, generally driven by personnel-related provisions for pensions and severance payments. Also to mention provisions on projects remain stable here. Adding up the items mentioned, it leads to a slightly improved cash flow from operating activities of EUR 653 million for '25. So deducting higher CapEx of EUR 270 million, we arrive at a free cash flow of EUR 383 million, which is slightly below the EUR 399 million from the previous year. As Joachim reported, our M&A delivery exceeded recent year's levels with a number of deals that we have signed. Our M&A CapEx significantly increased to EUR 344 million compared to only EUR 76 million in '24. And this spend was well covered and digested by our free cash flow in 2025. Now let's turn to the net working capital development. Here, we focus on the quarterly development of the operating net working capital. As you can see, we are pretty lean overall with current run rates of some 12% to 13% of revenue. And just to recall once more, for a project engineering company like ANDRITZ, the operating net working capital consists of the typical trade working capital as well as contract assets and liabilities and prepayments related to our POC orders. What you can take from that picture is that operating net working capital has increased somewhat over the last few quarters coming from a level 3 years ago where we received several large projects with respective prepayments. The structural increase in operating net working capital also results from the growth in service business where generally higher inventory levels are required. The good news is that after the increase throughout the last year, the operating net working capital has been well reduced in Q4 '25 after the all-time high that we saw in Q3. And important, this also includes working capital from acquisitions. It has been reduced in absolute terms, but also in percentage of sales. 12% is now in line with the average of the last few quarters again with the increased management focus on net working capital in general and the full consolidation of the acquired revenues in the course of this year, so '26, we will continue, of course, to monitor that KPI very closely. To discuss the sequential improvement in Q4 in more detail, let me now turn to the next slide. As you already saw, we have split the operating net working capital into its 2 components. Trade working capital on the upper blue part of the chart and contract assets and liabilities with advanced payments, and those are displayed in gray at the bottom of the chart, reflecting our project cash flows, which are rather typical for us as a project engineering company. On the prepayment side, we have seen a constant improvement over the last few quarters, which created additional contract liabilities, of course. On trade working capital, we achieved a sequential improvement in Q4. This reflects stronger management focus and also normal seasonality. Typically, we see a buildup in the first 3 quarters followed by a release in Q4. And as mentioned on the last call, on the Q3 call, the full year increase was largely acquisition-driven. Revenue from acquired businesses are included only on pro rata basis, while the assets are fully consolidated from the first day of consolidation. And this creates a temporary distortion, especially in relative terms. One structural factor is also shaping working capital and sales conversion, we actually see a shift from large-scale projects to more midsized and smaller orders. And as a result, we have less POC business and more completed contract orders. This leads to lower overtime revenues, but also to a higher work in progress that needs to be managed here in the working capital. So here, I would now like to turn your attention to more details on the development of our operating cash flows in '25. Operating cash flow amounted to a strong EUR 339 million in Q4, supported by the working capital improvement mentioned before. For the full year, operating cash flow also improved year-on-year to more than EUR 650 million, which is a reasonable achievement considering the absolute EBITDA decrease. Also here, our increased focus on operating net working capital is becoming visible. In general, we are still seeing a usual volatility in operating cash flows on a quarterly basis, which is very typical in the project business, of course. Important to emphasize here again is the overall high level of operating cash flow that we are maintaining compared to the historical level. This is driven by higher top line levels, better margin and also improved cash conversion. It becomes evident when we look at the right side of this chart showing not only the absolute level of operating cash flows for each year, but also the 3-year rolling average that you can see in light gray. And 2 to 3 years actually reflect the average execution cycle of our capital business. On this slide, we turn our focus from generating cash to allocating it properly. And I'm very happy to present here again our dividend proposal for the fiscal year 2025 to you, subject, of course, to our 26th Annual General Meeting. To highlight again, EUR 2.70 per share proposed does not only represent the fifth consecutive dividend increase, but also a significant increase in our payout ratio to 58% coming from 52% last year. And this is in line with our progressive dividend policy and with our 50% to 60% target corridor for the payout ratio. And despite declining earnings per share, we are here proposing to exactly balance it through higher dividends once more. Since last year, we are providing transparency on our capital allocation, and we can now add 2025, which somewhat alters the historical average that we have presented. In the last years and especially in '25, we have increased capital allocation significantly. And this actually while keeping a strong financial position and sufficient net liquidity. Our cash was allocated especially to the M&A side, where we have used '25 to close a much higher number of value-accretive deals compared to previous years. And we have talked about the dividend increase just a minute ago. But also on the conventional CapEx front, we have increased our investment in service, in green solutions, in digitalization and also in R&D. And we are planning to provide more disclosure on this going forward in the course of the year. Our capital allocation strategy remains balanced across CapEx, dividends and M&A. And we also might also place some opportunistic share buybacks as a more flexible option on top of this. And we can say capital allocation at ANDRITZ remains internally funded. Our aggregate cash outflows in the last 6 years have been more than covered by operating cash flow generation. And in my opinion, that's a very sound picture. So let me now turn from capital allocation to our strong financial position and walk you through the changes in our net liquidity profile. Over the last 3 years, we have steadily decreased our liquid funds by termination of bonds and promissory notes. We still maintain a strong financial position, especially when including our EUR 500 million revolving credit facility. Our net liquidity declined further from EUR 905 million at the end of 2024 to EUR 713 million by the end of '25. We saw lower net liquidity levels also in the course of the year. As you remember, due to the outflow of the purchase price for acquisitions and also for our annual dividend payment in Q2. Net liquidity has been restored again towards year-end, and that was driven by the strong cash flow generation in the fourth quarter. So as mentioned, FX also had a negative effect and this also on liquidity, of course, with roughly EUR 50 million, which is translation effect only. And before you ask, yes, of course, we do hedging on all our projects where relevant. With EUR 700 million net liquidity and more headroom from our revolver from our RCF, ANDRITZ continues to hold a strong financial position with sufficient liquidity as part of our DNA. Following these details on capital allocation and net liquidity, let me provide you a quick update here on our ROIC performance. To recall, ROIC is our main metric monitoring the value generation over the long run. It has been increasing since 2020 and stands at a substantial margin in our -- at our cost of capital. So the ROIC has started to decline somewhat in the first half of 2025 and now also for the full year to just under 18%. This is, in fact, still an industry-leading level considering it is post tax and including all restructuring costs. On the one hand, this is obviously driven by the organic EBITA decline. But more importantly, this is because of our recent acquisitions with purchase price allocation leading to higher goodwill and intangibles, of course. Nevertheless, ANDRITZ's balance sheet ratio of goodwill and intangible is still very low in industry comparison and our equity position remains strong. And also important to keep in mind that EBITA from these acquisitions is only included on a pro rata basis. If we would adjust the acquisitions for '25 entirely, our ROIC would remain close to 20%. However, our aim is to restore ROIC in the future, of course. At the end of my presentation, let me quickly summarize the development of our headline financials again. So our main leading indicators are still pointing upwards. Order intake increased notably in '25 by a plus 8% year-on-year, resulting in a book-to-bill ratio of 1.13. Order backlog stands on a record level for the year-end. The notable increase in order backlog in the last year to this record level already secures material part of the next year's revenue generation. As a consequence of high revenue recognition from the completion of larger orders in '24, our revenue trajectory is still pointing downwards, but we have reached the inflection point as consistently addressed in the course of last year. And so we returned to revenue growth in the fourth quarter despite the significant FX headwinds as outlined by Joachim before. And even though not stated in our official disclosure, I would like to proudly mention here that we reached a historical high monthly revenue volume in December only of EUR 1 billion, indicating the capability of our global organization and management. Along with lower revenues and restructuring expenses from capacity adjustments in Pulp & Paper and Metals, our reported EBITA decreased, but we were able to maintain our comparable EBITA and net profit margins stable on a high level. Operating net working capital and ROIC remain in high focus going forward. The development this year was obviously impacted by the many acquisitions we had. And our enhanced capital allocation and higher M&A delivery support value creation and have reduced our net liquidity position, as mentioned. And as mentioned, FX has been significantly headwind, especially from March. And also the tariffs have still not impacted our key end markets so far. We will provide further details on that later in the presentation. And for now, I thank you for your kind attention, and Joachim will now focus on the key developments across the business areas. Joachim Schönbeck: Very well, Vanessa, thank you very much for this detailed overview. Now let's move to the business areas. So Pulp & Paper market recovered on the pulp side, still flat on the paper side. We were happy to really benefit from the move in China in the paper industry to backward integrate into pulp mills. As mentioned before, we had been awarded 5 complete pulp mills in China, and we see this trend continuing in the year. So we are -- in Asia on that side of the world, we are quite optimistic on the investment climate. And we usually also see that the Chinese industry is then moving ahead with a good order intake and the good references we have, we believe that we also will take our fair share of the market. We have a strong momentum last year in power boilers. Basically, these are not only boilers, these are small power plants, a sludge incineration in Germany with special focus on phosphorus recovery. Here, we have a special technology, and we took 100% of the market in Germany. These were 3 small power plants, very, very good achievement of our teams. We also saw momentum on the pipe side picking up in the U.S. So smaller modernization started, and we might see more to come on the -- for sure, investment environment and climate in U.S. is definitely also a bit influenced by some of the political decisions taken. On the revenue side, we believe that we gone through the valley, and we can grow that. The good order intake of '25 will now go into revenue this year. And we are happy to see that although steep decline in revenue that through the timely capacity reductions we have done in Pulp & Paper, we could keep the margin on a nice level. We dropped from 11% to 10.8%. So I would say, a rather small drop on a very good level. Also, of course, supported by the strong increase of the service share now up to 59% of the total revenue. In Metals, I can tell you the industry is in a difficult situation. However, I can be really proud of our teams, how they coped with it on the few projects that have been on the market, they have positioned themselves very well. So we got the trust from our customers. And that is true for Asian market as well for the European and the North American market. We went through significant restructuring taking out around 500 employees in the past year, closing several locations in Germany. So really protecting the bottom line through some cost discipline and very happy to report that it's not only an increased profitability for the fifth consecutive year, but with a 6.1% EBITA margin, the first time in our profitability target for 2027. So we're very proud how that develops in difficult times. Hydropower, I would say we're also very proud, very good development. But here, we, for sure, have a support from a market, strong demand, I would say, worldwide on renewable energy, on -- but also our new offerings for grid stability, energy storage and turbo generators support that strong growth. We could increase the order intake for the full year by 16%, could grow the revenue by 12%. And on the EBITA margin, we moved up from 6.1% to 6.8%. So very close to the targets we have set. We see this trend continuing. Environment & Energy. Here, we, I would say, faced a surprisingly subdued market, which, frankly speaking, we did not expect. And this is why we also were not, I would say, in time with our capacity adjustments that we have done. On the green transition side, a lot of interest. We received many orders for engineering studies, but no orders for equipment and plant deliveries. Clean Air developed very well, both in Europe and in North America. And in our separation and pumps business, we saw many projects delayed, a lot of exposure to the mining business and also here, uncertainty on the green transition definitely have played a role. So at the end of that, our margin dropped from 11.1% to 10.6%, still on a high level, still within our target margin. But here, you can see the effect that we had been prepared for growth and started with our capacity adjustments a bit too late. What is to say on tariffs and FX, I would say we can confirm no direct impact on the tariffs yet on anything we should report and can report. So we will, of course, monitor that. We cannot allocate the indirect effect. So -- but I would say no direct impact on the FX translation we have mentioned several times. Strong impact for the year increasing over the year -- now let's see how the euro develops in this year, but you see that's basically -- that's a nominal loss of EUR 222 million in revenue. But at the end, it's not a loss, not a single equipment has been supplied less and not a single customer has not been served. So that's a pure financial effect. 2026, what can we expect? I would say, project activity, we expect to stay on that level. We would expect from that revenue growth. And for sure, it's supported by growth on service, which we believe we can continue, but also our record backlog will help us. We will further improve profitability and restructuring is ongoing in Environment & Energy and in Metals. So we guide for this year a revenue between EUR 8.0 billion and EUR 8.3 billion and a comparable EBITA margin between 8.7% and 9.1%. The midterm targets basically have been confirmed. And in looking to the time, no need to repeat that. Instead, give me 2 minutes here. You see we have now Environment & Energy in the target margin range. We have our, let's say, child of special attention, the Metals business area for the first time in the target area, we believe the trend that you see here on improving profitability will continue. This is why we continue the restructuring. And you see the Pulp & Paper and Hydropower, they are only 0.2 percentage points out of the range. So we are confident that we can grow in that direction. We have learned that even in difficult markets, we can do that. And if there is anything left, you want to know, we have not told you so far. Now we are ready for questions and answers. Thank you very much. Operator: [Operator Instructions] And we have the first question coming from Akash Gupta from JPMorgan. Akash Gupta: I have a few, and I'll ask one at a time. My first one is on growth. So when I look at your guidance, EUR 8 billion to EUR 8.3 billion, maybe if you can help me with what is the implied organic growth we have in this corridor. The starting point is 7.9%. I think you may be having some exchange rate headwinds already embedded given we saw higher exchange rates headwinds in second half? And also, you may have some carryover effect of M&A. So first one is on what is implied organic growth in 2026 guidance? And then the second part of the first question is that if we then take the midpoint of EUR 8.15 billion, what level of organic growth would you need in 2027 in order to hit the at least EUR 9 billion revenue target for next year? Joachim Schönbeck: Akash, thank you very much for your question. We have not in detail provided our planning and our guidance, what is organic and what is not organic. I would say, as a general rule, we also know from the history that we grow 50% organic and 50% through M&A. That is still true. with, I would say, with the good acquisitions we made, we might expect now next year a bit more on the M&A side, but that's, I would say, only that's more marginal. We are working and we are preparing ourselves to continue the growth on the service side as we did even in the last difficult year. So we expect further growth. We had an annual track record of 7%. We believe that we can return to that. And on the capital side, we do not have the growth exactly in our hand because we also depend -- we depend on the market there. So this is why we gave out that guidance, and I hope this clarifies a bit what you were asking. Akash Gupta: And second one is on automotive in metals as well as Environment & Energy. So yesterday, European Commission adopted Industrial Accelerator Act, where proposals to increase demand for low-carbon European-made technologies and products. I wanted to ask if you are seeing any optimism on project activity on the back of these regulatory changes in Europe? Or if not, then how long it might take before we see any activity on your end? Joachim Schönbeck: For sure, this will help our customers. And usually, if it helps our customers, it at the end helps us. as I have explained, we see both in automotive and in metals. We see now 3 years in a row, a shrinking market, which means that basically, the industry is overrunning their equipment a bit. It's a traditional business. If you run it 24/7, there is a lot of where you only -- you come to end of lifetime. You can always push it a bit. So from being in these industries long enough, we are quite confident that the market will increase, and we are very confident that we will take our fair share. And for sure, these legal acts from Europe will definitely help and protect a bit the European automotive and also maybe the European steel industry. I'm not aware of that Act in detail. Akash Gupta: And last one is on CapEx in Hydropower business. So when we look at your competitors and especially in broader power generation market, almost every company is increasing quite substantial capacity. So can you talk about what sort of CapEx need do you anticipate in 2026 in Hydropower? And would that have any impact on total CapEx for the year? Joachim Schönbeck: The majority of our manufacturing CapEx for 2026 will be for hydro. There is a strong demand on the turbine side as well as on the generator side. And -- but it will not exceed our natural cash flow. So we will invest, and I think it's wise to invest because for you, as you know, it's still the cheapest way to spend our money into growth. Akash Gupta: And the overall CapEx level last year, it was around EUR 200 million. Do we expect it to increase or stable in 2026? Joachim Schönbeck: Increase. Operator: The next question comes from Sven Weier from UBS. Sven Weier: The first one is just wanting to go through the order pipeline because you said it's stable on a high level. As usual, I'm particularly curious on Pulp & Paper because you also alluded to China. Joachim Schönbeck: Yes. What's the question? We cannot hear you. Matthias Pfeifenberger: I think we lost Sven Weier. Could you turn to the next question, please? Operator: Yes, of course. The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Patrick Steiner speaking. Three questions from my side. The first is a bit of a follow-up on the previous question basically. Could you provide us a bit of a bridge for -- regarding your revenue guidance to '26 and '27? I mean what are the major drivers behind the less dynamic expected revenue development to '26, including M&A effects and the expected better dynamic from '26 to 2027? Joachim Schönbeck: It is driven by the strong order increase we saw in Pulp & Paper and in Hydropower on the one side. And from the project structure itself, Pulp & Paper will turn more quickly into revenue. So what we see in order intake in '25, we will see a significant amount of that already in revenue in '26. While on Hydropower, it takes a bit longer. So it's a buildup more over time. And this is why the outlook is a bit cautious. As we have reported, we had a decline in order intake in Metals and Environment & Energy. And this is why we do not see particular growth there. This is why the outlook is a bit cautious. This is also why we go to capacity adjustments in Metals and in Environment & Energy to protect the profitability. Patrick Steiner: Okay. That's very helpful. Second question, you had a very good slide in operating net working capital as a percentage of revenue. Could you elaborate a bit how this is going to look like in 2026 after the acquisitions are fully included for full year basically? And also how this would change with -- if you receive a larger project? Vanessa Hellwing: Well, the acquisitions are already in fully fledged on the net working capital, as you can see here. It's only the ratio that is a bit blurred due to the pro rata revenue recognition of the acquisitions done in '25. So it's just that the percentage might decrease further on. So if we would receive a larger project, we usually see this in combination with larger prepayments, which would, of course, have a positive impact on the overall net working capital. Patrick Steiner: Okay. Last one for now. Capital allocation has not been fully funded by operating cash flow in the last 2 years. Should we expect this to change in '26 and '27? Or are you comfortable increasing net debt if favorable opportunities to deploy capital occur? Vanessa Hellwing: Well, so we will continue our capital allocation on quite aggressive path on this. So it depends a bit, of course, on the opportunities that we see from M&A. And of course, we will not just shoot on targets that are not value accretive to ANDRITZ overall. But furthermore, as mentioned, CapEx spend will continue even slightly increased. And yes, I mean, the dividends, of course, we will keep also our path here. So we actually see that we continue the picture that you saw the last 2 years or 3 years to really spend our capital -- spend in capital to further manage our net liquidity well, but still keep, of course, a substance for ANDRITZ as this is part of our DNA and necessary for dealing with large projects in an engineering company like we are. Patrick Steiner: So if we think about CapEx maybe slightly increasing, dividends increasing and in terms of M&A and share buybacks, more of an opportunistic stance for 2026, this would make sense, right? Vanessa Hellwing: Yes, exactly. Operator: The next question comes from Lars Vom-Cleff from Deutsche Bank. Lars Vom Cleff: Maybe quickly starting with a follow-up question to Akash. I understood that with regards to the reported revenue guidance, you're not willing to split between organic and inorganic. But would it be fair to assume that included in your revenue guidance, you are calculating with an FX headwind that is comparable to last year? Vanessa Hellwing: That's what we do. Lars Vom Cleff: Okay. Perfect. And then you already mentioned order intake rather driven by midsized orders at this stage. If I remember correctly, on the Q3 call, you said there are no major project negotiations in Pulp & Paper currently, but in Hydro. Is that still the case? Or could we hope for a large greenfield order in Pulp & Paper this year? Joachim Schönbeck: The hope never dies. We have -- as I told you, what we can be pretty certain of is that this backward integration in the Chinese paper industry continues. And as that continues, it also impacts a potential greenfield new pulp mill in South America because that's one of the major markets. So we cannot see these 2 topics independent. And I would say, as it is said in many areas of this world in [indiscernible]. Lars Vom Cleff: Perfect. And then quickly staying with the order intake, order backlog at records or at least close to record levels, nice book-to-bill in '25. We could also hope for a book-to-bill exceeding 1 again for '26 if momentum continues. or am I wrong here? Joachim Schönbeck: If momentum continues, you are right. Yes. Lars Vom Cleff: Okay. Perfect. And then maybe ending with -- you also said on one of the recent calls that you're seeing increasing pricing pressure from pulp and paper peers. I guess that also has not changed much recently given that everyone is fighting for juicy projects. Joachim Schönbeck: Yes, you are right on that. Operator: The next question comes from Daniel Lion from Erste Group. Daniel Lion: I would -- could you maybe elaborate a little bit on the adjustments planned now in '26? How far are we actually in the Metals division? And what would you expect to come in the E&E division? Maybe overall, how much should we include in our models for adjustments? Joachim Schönbeck: So we expect in total, I believe we are talking about 700 to 800 people. Daniel Lion: And this is already provisioned to some extent or... Joachim Schönbeck: To some, but not fully. Vanessa Hellwing: So for the NOI in '25, about 50% were accruals for this year. So we will cover a lot with what we have digested already in '25, maybe some more to come. Daniel Lion: And how long would you expect to have this impact the figures? Will this be done in the first half already? Or will we have to expect some impacts in the second half year as well? Joachim Schönbeck: Second half year as well, it's 700, 800 people, you don't do overnight. It's a process you need to negotiate. And depending on which country, majority is Germany, takes long time. And so I would expect we need the year to work through that. But as you could see from the previous year, we can do this in parallel to do good order execution. So from that point of view, I think we are on a good track. Daniel Lion: Okay. And then maybe also, again, slightly focusing on '27, what kind of revenue -- what kind of order intake or backlog would you expect roughly that is required in order to reach EUR 9 billion in revenues next year? Joachim Schönbeck: I have not made the calculation, but we do not step back from the targets we have for '27. Daniel Lion: So anything that would need to happen on the way there, something sizable or like, I don't know, big picture greenfield contract in Pulp & Paper or in order to make the guidance happen? Joachim Schönbeck: It would definitely support, but we do not believe that we need a large greenfield mill in South America to reach our targets. Operator: [Operator Instructions] We now have Sven Weier again from UBS. Sven Weier: I hope you can hear me now. Joachim Schönbeck: Yes. Perfect. Sven Weier: So going back to the Hydro business, I was wondering if you could go through the turbocharger business a bit more in detail, how sizable it is? What kind of growth rates you see? So any color on the turbocharger business you can give? Would be appreciated. That's the first one. Joachim Schönbeck: So turbogenerator business is, I would say, medium-sized 3-digit million business. Growth rates double digit at the moment. We do not -- of course, we do not know how this will continue. That's a business we are selling to energy engineering companies in the energy business and not to the end customer. So we have, I would say, it's a bit of a different feeling for the end market. Prognosis is good for the years to come. So currently, that's the volume we can report. And this is why it definitely supports the Hydro business. Sven Weier: And when you say 3 digit, is it like in the low 3 digits or get a better feeling? Joachim Schönbeck: It's in the mid-3 digits. Sven Weier: Okay. But you're not selling to the turbine makers directly, but basically to those guys who install the whole project. Joachim Schönbeck: No, no, to the turbine. We sell to the turbine makers, but not to the users, not to the utilities, not... Sven Weier: And those are kind of the known names like Siemens Energy and GE or... Joachim Schönbeck: Potentially. Sven Weier: Okay. And then, I mean, the pipeline in Hydro in general, I guess, probably also looks pretty promising based on what you said for 2026. Joachim Schönbeck: Yes. I can only confirm that. Yes. Sven Weier: And then you said you had some spillover into Q2 from Q4, if I understood you correctly on orders. Does it mean that you think Q1 orders should be higher than Q4 overall because of that spillover? Joachim Schönbeck: Could be. We definitely had some decisions that have been pushed over the year-end. We cannot tell you whether they will be pushed across the next quarter, but there are feasible projects that have been pushed. And so I would say we are not -- with what we see on the project side, we are not pessimistic. Sven Weier: So it won't be lower, let's put it this way in Q4. Joachim Schönbeck: Yes. We can agree on that. Sven Weier: Frank but good. The final question I had was just on the M&A because obviously, you kindly provided the revenue details, the money you paid, so I can calculate the kind of EV sales multiple. But I was just wondering if there's also kind of an average profitability across those targets that you bought? Are we talking like average 10% margin roughly. Joachim Schönbeck: I don't have the figure in my head, but in average, higher than what you see from ANDRITZ in total. Operator: There are no more questions at this time. I would now like to turn the conference back over to Matthias Pfeifenberger. Matthias Pfeifenberger: Okay. Thanks a lot. Thanks for the presentations of the Executive Board and the extended interest in ANDRITZ and in this call. And we wish you a good day and see you next time. Thanks a lot. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
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.
Operator: Ladies and gentlemen, welcome to the Aareal Bank AG Full Year 2025 Investor and Analyst Conference. I'm [ Moritz, ] the Chorus Call operator. [Operator Instructions] And 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 Jurgen Junginger, Head of Debt IR. Please go ahead, sir. Jürgen Junginger: Agenda covers our results for 2025, our outlook for '26 and an update on our strategic plan, Aareal Ambition. I'm joined today by our Management Board, our CEO, Christian Ricken; Nina Babic, our CRO; CFO, Andrew Halford; and Chief Market Officer, Christof Winkelmann. Christian and Andy will take you through our presentation, which will be followed by a question-and-answer session. Now I'm pleased to hand over to Christian. Christian, the floor is yours. Christian Ricken: Yes. Thank you very much, Jurgen. Good morning to everyone, and thank you very much for attending today's call. Before turning to today's presentation, I would like to refer briefly to the recent events in the Middle East. There is no doubt that geopolitical uncertainties have increased, tensions have escalated, there is heightened caution across most business areas. We are aware of that. As a result, investment activity in many sectors may slow or become less predictable for some time. So far, Aareal has not been directly affected by the events of the last week nor more broadly by geopolitical events over the last year. However, we are, of course, monitoring the situation very closely. Now let me turn to our results for 2025 and our outlook for 2026. And I will also provide you an update on our strategic plan, Aareal Ambition. Starting with Slide 3. First, our results for 2025. And as you can imagine, this slide, this chart has become my actual favorite chart because it's a very well reflection of the delivery of the bank. We target an adjusted profit for the year of over EUR 375 million, which we comfortably achieved. On the basis of this good result, the management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. The adjusted operating profit after the additional EUR 55 million charge was EUR 326 million, which is very similar to the equivalent profit in 2024. Turning to our 2 business segments, both achieved strong results for 2025. Banking & Digital Solutions made a significant contribution to group profits and Q4 average deposits, including retail rose to EUR 17.8 billion. New business in Structured Property Financing reached EUR 12.4 billion for the year, which was a record result. Much of this volume came from Europe, and I will say more about our regional approach later. By the end of 2025, we had reduced nonperforming loans to EUR 1.1 billion. We are planning to bring this balance below EUR 1 billion in the current year, and we are confident we can achieve this in the first half of the year. Our capital ratio continues to be solid with our CET1 fully-phased ratio at 15.5% at the end of 2025. At this conference last year, we introduced our new strategic plan, Aareal Ambition, and I'm pleased to report that we are well on track. As a result, we are well placed to reach our target of around 13% adjusted post-tax return on equity in 2027 still. Our increased focus on Banking & Digital Solutions and our repositioning in the U.S. in Structured Property Financing underpin this progress. I will further -- I will provide further comments on our Aareal Ambition plan later in this presentation. Before moving into the details of our results, I wanted to illustrate the importance of both of our business segments to the overall results. I'm on Slide 4 now. As you can see, Banking & Digital Solutions has contributed significantly to the group's operating profit in each of the last 3 years since the return of, as I would call it, normal interest rates. BDS deposits, including retail rose to an average of EUR 17.8 billion in the fourth quarter of 2025. The business has around 4,300 clients and currently executes payments transactions amounting to EUR 167 billion every year. I would like to thank the staff in this business for their efforts in 2025 and their continued commitment. In Structured Property Financing, the loan volume is over EUR 34 billion, spread across over more than 20 countries and 5 property types. I also would like to thank the staff in this business for their diligence and care as we have grown by taking a conservative approach to risk. I will now hand over to Andy, who will provide further details on our results for 2025. Andy, over to you. Andrew Halford: Thank you very much, Christian, and good morning to everybody. So Slide 6, let me just pick up some of the high-level numbers. So net interest income was down 12% to EUR 934 million, which was mainly the expected impact of lower interest rates. Loan impairment charges are down by 19% to EUR 322 million. As Christian just mentioned, this includes the additional charge of EUR 55 million to support the repositioning of the U.S. business, which includes a faster reduction in U.S. office loans. The efficiency measures that we put in place led to a reduction of 8% in adjusted administrative expenses, which fell to EUR 317 million. The cost-income ratio for 2025 was, therefore, 33%. The other components line includes a EUR 20 million positive one-off, which arose in the second quarter from the successful restructuring of a former legacy nonperforming loan. Overall, adjusted operating profit was EUR 381 million, excluding the additional EUR 55 million charge and EUR 326 million, including the charge. Nonrecurring items amounted to EUR 30 million compared to EUR 34 million the previous year and related to efficiency measures, IT infrastructure investments and other material nonrecurring items. The effective tax rate for the year was higher at 40%, which includes charges arising from the repositioning of the U.S. business. AT1 costs are up by EUR 8 million compared to 2024. This is because our new AT1 issue overlapped with the previous AT1 for about 3 months. Taken together, the adjusted post-tax return on equity was 7.5%, excluding the additional loan impairment and tax charges arising from the actions taken to support the repositioning of the U.S. business. Our solid CET1 ratio fully-phased increased to 15.5% at the end of the year compared to 15.2% at the end of the previous year. Now let's move to Slide 8 and the key profit and loss account items for Banking & Digital Solutions. As Christian has highlighted, BDS continues to make a significant contribution to the bank's overall profitability. In 2025, BDS contributed an adjusted operating profit of EUR 152 million, which is down by 7% compared to the previous year, but this is more than accounted for by the decrease in net interest income, which is down 9% to EUR 246 million. The impact of lower rates is fully in line with our expectations. However, it was offset in part by the strong growth in the housing industry deposits. In BDS, the customer base and share of wallet is constantly growing. Admin expenses are down by 4%, benefiting from tight control of costs and nonrecurring items reflects the investment in digitization that we are making to provide a seamless customer journey. On Slide 9, we look further into Banking & Digital Solutions' net interest income and admin expenses. Net interest income, although down compared with 2024, was above expectations. As I just explained, the impact of lower interest rates was as expected, but was partially offset by the growth in deposits. This growth was continuous during 2025, and therefore, net interest income increased throughout the year. I'll come back to deposits on the next slide. Admin expenses were tightly controlled with strict cost discipline maintained. Turning to Slide 10, which focuses on deposits. Our strong deposit franchise continues to reduce our dependence on the capital markets. As I've mentioned, deposits grew throughout the year. Housing industry and retail deposits in total rose to an average of EUR 17.8 billion in the fourth quarter of 2025. This is an increase of 4% since the fourth quarter of 2024 and an increase of 7% since the first quarter of 2025. Retail deposits have structurally improved and now have an average initial lifetime of around 4 years. The steady increase in housing industry deposits in 2025 reflects our successful sales efforts. These deposit volumes have gradually increased in recent years and reached an average of EUR 14.7 billion in the fourth quarter of 2025. Rental guarantee deposits and maintenance reserves have grown continuously. Sight and term deposits are largely stable. When interest rates returned in 2022, there was a shift from sight to term deposits as depositors sought to capture income. This transaction -- transition has now ceased and today's sight deposits only reflect clients' operating cash and therefore, are expected to be very sticky. Now let's turn to Structured Property Financing and to Slide 11. Net interest income is down 13%, reflecting the impact of lower interest rates and is in line with expectations. Loan impairment charges are significantly down, including the additional charges, admin costs are down benefiting from the efficiency measures that we have introduced. Overall, SPF contributed EUR 174 million to the group's adjusted operating profit. As noted earlier, the other components line includes the positive one-off effects of the restructuring of the former legacy nonperforming loan and the tax charge includes charges arising from the repositioning of the U.S. business. Turning to Slide 12. Let's look further at net interest income from SPF. As I've just said, net interest income was in line with expectations. The result was impacted by lower interest rates. For example, the euro short-term rate decreased from 3.8% at the end of 2024 to 2.3% at the end of 2025, a significant reduction. Net interest income was also affected by proactive strengthening of our subordinated funding and by the weakness of the U.S. dollar. Those factors were partially offset by the growth of our loan book. Turning to Slide 13 and to SPF's admin and loan impairment charges. The efficiency measures adopted across the group are also reflected in the admin expenses of this business segment, which are down 9% to EUR 222 million in 2025. Including the additional EUR 55 million charge, loan impairment charges are significantly down by 19% compared to 2024. Excluding this charge, the decrease would be 33%. Loan impairment charges are heavily biased towards the U.S. and U.S. office loans in particular. Risk costs for the rest of the business are at or below normal levels. At this point in the cycle, we are, therefore, freeing up capacity primarily from U.S. office to redeploy it into the European markets where the returns are presently very strong. I'd now like to hand back to Christian, who will talk about business developments in more detail. Christian Ricken: Thank you, Andy. Now let's turn to Structured Property Financing's new business on Slide 14. We achieved record new business, as I already said, of EUR 12.4 billion in 2025, which was well ahead of our target of EUR 9 billion to EUR 10 billion for the year. Newly acquired business amounted to EUR 8.1 billion, which was up EUR 1.8 billion compared to 2024. The average loan-to-value ratio for newly acquired business was still a conservative 57%, which provides a comfortable risk profile. Gross margins were also good, averaging 234 basis points. Renewals were around similar levels to the previous year. Those figures continue to demonstrate that we are actively identifying attractive market opportunities. Sustainability has been and continues to be an integral part of lending decisions. In 2025, we again supported the green transformation of commercial properties with EUR 5.1 billion of green loans included in our new business numbers. Looking at the geographical distribution of new business, 78% was in Europe, 15% in the U.S., 4% in Canada and 3% was in the Asia Pacific region. As planned, we have increased our focus on Europe and reduced activity in the U.S., concentrating on premium assets and long-standing trusted partners. Our strategy on asset classes has also evolved. Hotel finance continues to be our largest area of new business. However, we are currently taking a more selective approach to new office financing while maintaining our increasing conservative financing of Logistics and Residential, especially Alternative Living properties. Let's now turn to the next slide, which shows our current portfolio. We are at Slide 15. The portfolio totaled EUR 34.3 billion at the end of 2025. This is within the targeted range of EUR 34 billion to EUR 35 billion. As you can see from the 2 pie charts at the bottom of the slide, we are still highly diversified, both by region and property type. We continue to have a clear focus on properties in the major metropolitan areas. We are not financing new construction. Have exposure of only 10% in Germany and no exposure at all to Russia, China or the Middle East. In the U.S., we are focusing on our core strengths. For example, hospitality-related asset classes. We have significantly reduced the U.S. office portfolio, which is down by 1/3 compared to the balance at the end of 2024 and want to reduce this portfolio further. Green loans stood at EUR 11.3 billion at the end of 2025, representing around 1/3 of our total loan book. These loans include the financing of refurbishments as we continue to support commercial properties green transition. Turning to Slide 16 and to nonperforming loans. We are continuing a very active management of nonperforming loans and the balance stood at EUR 1.1 billion at the end of 2025. This is down by 29% compared to the balance at the end of 2023. U.S. office nonperforming loans are down by around 40% over the same period. The Stage 2 coverage ratio stood at 3.1% with the ratio -- sorry, with the Stage 3 ratio at 29% at the end of 2025. The nonperforming loan ratio stood at 3.2%. The U.S. office market remains challenging and U.S. office loans continue to represent over half of total nonperforming loans. More than 25% of the U.S. office loans is nonperforming compared to less than 2% for all other categories. Business outside the U.S. is performing significantly below our long-run average cost of risk. As we have explained, management has taken action to support the repositioning of U.S. loans. We are, therefore, confident that we can reduce total nonperforming loan balance below EUR 1 billion during the first half of 2026 already. Now let me hand over back to Andy for an update on our funding, liquidity and capital positions. Andrew Halford: Thank you, Christian. So on to funding, liquidity and capital. Slide 18 shows our broadly diversified funding mix, solid liquidity ratios and capital markets activity. Following a very active year, liability terms have been successfully extended. Deposits represent around 45% of our total funding volume. The largest part comes from the housing industry with an additional EUR 3 billion from retail deposits. As I mentioned earlier, these retail deposits now have an average initial lifetime of around 4 years. Our liquidity ratios are solid with a net stable funding ratio at 113% at the end of the year and the average liquidity coverage ratio at 209% for the fourth quarter. We're pleased to report that during the year, Fitch revised Aareal Bank's outlook to positive from stable and confirmed its senior preferred rating at BBB+. We demonstrated our full access to the capital markets during 2025. We increased our AT1 capacity by approximately EUR 100 million by replacing the former outstanding EUR 300 million issue with a new issue of USD 425 million, and we issued EUR 100 million of Tier 2 capital. In addition, we completed 3 benchmark Pfandbriefe transactions totaling EUR 2 billion and private placements totaling SEK 1.85 billion. Those were Aareal's first Swedish currency issues since 2006. We also completed our first Significant Risk Transfer or SRT transaction in the fourth quarter. Investors assumed a portion of the credit risk attached to a EUR 2 billion portfolio of European commercial real estate loans in return for a risk premium. This transaction strengthened our capital efficiency. Next, let's look at the Treasury portfolio, which is shown on Slide 19. The Treasury portfolio stood at EUR 9 billion at the end of 2025, up from EUR 8.2 billion the year previous. In terms of asset classes, the portfolio comprises public sector borrowers and covered bonds. It, therefore, has a strong liquidity profile. High credit quality requirements are reflected in the ratings breakdown. 100% of the portfolio has an investment-grade rating with 87% having a rating of AA or higher. Asset-swap purchases ensure that there is low-interest rate risk exposure. The portfolio is almost exclusively in euros and has a well-balanced maturity profile. Turning now to capital on Slide 20. Our ratios continue to be solid. Our CET1 ratio was up from 15.2% a year ago to 15.5% at the end of 2025 on the Basel IV fully-phased basis. Growth in the loan portfolio increased risk-weighted assets but was overcompensated by the reduction in risk-weighted assets that came from our first SRT transaction that I just referred to. This transaction had a total positive CET1 effect of around 0.5 percentage points. Both the Tier 1 ratio of 17.6% and the total capital ratio of 21.1% were further strengthened by the additions to our AT1 and Tier 2 capital during the year. Our leverage ratio at 7.2% at the end of the year is well above regulatory requirements. Now I'll hand back to Christian, who will cover our outlook for 2026 and provide an update on our strategic plan Aareal Ambition. Christian Ricken: Yes. Thank you, Andy. I'm turning now to the outlook on Slide 22. Macroeconomic and geopolitical uncertainty factors are, of course, difficult to predict, and we are monitoring developments closely. However, let me repeat that so far, we have not been affected by current geopolitical events. We are successfully reducing our exposure to U.S. offices. And more broadly, we see a slight improvement in sentiment towards the entire commercial property sector. As a result, Aareal has moved forward into 2026 with confidence. For 2026, we are targeting an adjusted operating profit approaching EUR 400 million. This level of adjusted operating profit would result in an increased adjusted post-tax ROE approaching 8%. In the Banking & Digital Solutions business segment, we expect total deposits to increase further to an annual average of around EUR 17.5 billion. In Structured Property Financing, we aim to keep the credit portfolio at around EUR 34 billion and reduce nonperforming loans below EUR 1 billion in the first half of 2026. Now moving on to Slide 24. I will provide an update on our strategic plan, the Aareal Ambition. We launched Aareal Ambition very successfully in 2025. Let me briefly remind you of the targets we showed you last year. We have 4 strategic targets. They are, first, to strengthen our core businesses; second, to expand our activities; third, to enhance efficiency; and fourth, to maintain a disciplined approach. We are applying these targets across the group. This means that we are continuing to grow our Structured Property Financing activities selectively. In Banking & Digital Solutions, we are targeting growth from existing housing market clients and by further -- by moving further to adjacent markets, for example, the Netherlands. We are also optimizing the scalability of our infrastructure. And on the risk, capital and funding side, we are maintaining discipline over our capital and liquidity ratios. So let's now look at each of these objectives in a little bit more detail. Moving on to Slide 25. The group is now positioned with 2 growth engines within one bank, and this is how we will move forward. In Structured Property Financing, we are sharpening our focus and emphasizing our key areas of competitive strength. This means that we are mainly concentrating on Europe and on hospitality-related asset types. In the U.S., we are actively adjusting the mix and size of our business. In Banking & Digital Solutions, we are accelerating growth. We are targeting an increase in deposit volumes by both nationally and internationally and introducing lending to the housing industry or I would better say, reintroducing lending to the housing industry. In addition, we are building an integrated deposit management platform to serve both our corporate and retail clients. On the risk funding -- sorry, risk, capital and fundings, our objective is strong capital generation and continuation of our solid capital ratios. We also intend to further reduce nonperforming assets. Our infrastructure objectives center on AI and cloud-led technology to create a resilient, efficient and modern platform for the group. In parallel, we will continue to execute our cost efficiency program. Turning to Slide 26 on Structured Property Financing. As I have said, we will grow our areas of competitive strength. And as always, we will continue to adopt a conservative approach to risk while seeking attractive returns. There will be greater emphasis on Europe and greater focus globally on hospitality-related asset types. In the U.S., business will continue to reduce office loans. As a result of these actions, we expect loan volumes to remain stable at around EUR 34 billion. We are also continuously leveraging and broadening our off-balance sheet financing business. We expect to continue to have a portfolio of around EUR 7 billion in these capital-light activities. Moving on to Slide 27 and to Banking & Digital Solutions. We are accelerating deposit growth and expanding our product range. We are currently focused on housing industry customers in Germany. Our first objective is to add new customers, new markets and new channels. We plan to add new groups, for example, small property managers. We plan to add new markets, for example, the Netherlands, France and Spain. And we plan to add a new channel for retail deposits, we plan to have our own platform in addition to the existing option of platforms like Raisin. We also aim to add new ERP partners. Our second objective is to expand beyond the housing industry and into other B2B segments and to do so in Germany and internationally. And thirdly, we are introducing lending services to the housing industry where we have a strong relationship, knowledge and expertise. To support these initiatives, we will continue to invest in digitized end-to-end bank processes and digital product offerings. As a result of these initiatives, we are now targeting combined housing industry and retail deposit volume of more than EUR 18 billion in 2027 compared to an annual average of around EUR 17 billion in 2025. We will also be targeting lending to the housing industry of around EUR 1 billion by 2027. Next, risk, funding and capital on Slide 28. Here, we continue to have 2 major KPIs. We are targeting a Basel IV CET1 fully-phased ratio of at least 13.5%, unchanged on the objective, which we introduced last year. Secondly, we aim to reduce nonperforming loans as a percentage of the loan portfolio to under 3%. To achieve this, we will continue with strong capital generation supported by capital management. We will also continue to optimize funding sources and the risk return from our treasury portfolio. We will, of course, maintain Aareal's conservative approach to risk, proactive credit risk management and our solid balance sheet. Turning now to Slide 29 and to infrastructure. Our objective is an AI and cloud-led transformation along with continued execution of our efficiency program. We aim to create a state-of-the-art platform to support the group's business in the future. As I said, our objective is a modern, resilient and efficient platform. We are also actively driving a technology and efficiency mindset across the bank while streamlining operations and digitizing processes as part of our efficiency program. Our new infrastructure-related KPIs are to achieve gross savings of an additional EUR 40 million in total and a cost-to-income ratio of around 30% by 2027. Moving on to Slide 30. We confirm our 2027 target for the adjusted post-tax return on equity at around 13%. As we have shown on earlier slides, management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. Excluding the additional charge and the tax impact of repositioning in the U.S., the 2025 adjusted post-tax return on equity was 7.5%. Looking to the future, 2 main factors are expected to drive the increase in return. Firstly, an improved risk profile will reduce our cost of risk on an ongoing basis. And secondly, as I have just described, we are accelerating growth in Banking & Digital Solutions, assuming a normalized CET1 ratio of 13.5%, which takes us to the targeted adjusted post-tax return on equity of around 13%. Turning to Slide 31. Let me highlight our ambitious 2027 targets. As I have just demonstrated, we aim for an adjusted post-tax return on equity of around 13%, a CET1 fully-phased ratio of at least 13.5%, a cost/income ratio of around 30% and an NPL ratio of around 3%, a lot of 3s, but these are our targets. And we continue to be on track to meet those. Now moving to our closing slide, I want to round up with a few key takeaways. Both our business segments achieved a strong operating performance in 2025. We have significantly reduced loan impairment charges and costs. Management was able to take action to support the repositioning of our U.S. business. We have successfully launched our strategic plan Aareal Ambition, and we are well on track. We are sharpening our focus in both businesses. And we are confirming our adjusted post-tax return on equity target of around 13% in 2027. Andy, I and the team will now be pleased to take your questions. Operator: [Operator Instructions] And the first question comes from Corinne Cunningham from Autonomous. Corinne Cunningham: Three from me, please. First one, if you can give us a bit more background on what's happening with margin development. You've told us what's happening for new, and you said renewals. I think you said renewals were flat margins. So maybe just a bit more color on what's happening there and guidance on NII going forward. And on the SRT, can you explain the interaction between what's going on in the background in capital? You had a positive impact from the SRT, but your capital ratio was flat. Obviously, you made a loss, but any other moving parts in there with RWAs, please? And then last point, if you can give us a bit more background specifically on what the EUR 55 million, and you call it repositioning of the U.S. portfolio. But does that basically just mean additional provisioning to make assets easier to sell? If you could explain what that means in more detail, please? Christian Ricken: Okay. Thank you very much. So yes, I would like to allocate the question to my dear colleagues. So Christof will take the first one from the market's perspective; Andy, you would talk to the SRT and Nina, you cover the EUR 55 million. Christof Winkelmann: Yes. So also good morning from my side to everybody. To the question as to how the spread is between new versus existing business or prolongations, they are plus/minus within the average number that we've given you. We don't really publish the individual numbers, but you can take plus/minus 10 basis points from the published figure is where the range is for prolongations and new business for us. Andrew Halford: Let me just pick up on the CET1, the SRT question. So simple math, 15.2% a year ago, the SRT gave us about 0.5 percentage point benefit, 15.7%, and we ended the year at 15.5%. So 0.2% reduction from sort of trading, if you like. That is just primarily the impact of the slightly bigger loan book that we had over the year and hence the slightly higher RWAs. So that's the pretty simple composition of the movements of that number. Corinne Cunningham: Sorry. I was just going to ask Q-on-Q, I was looking more Q-on-Q. And is that literally the same, so higher loan book? Or were there other things specifically in Q4? Andrew Halford: No, it is exactly the same. There is nothing abnormal. Nina Babic: Cunningham, I will take the question on the EUR 55 million, the management action, which we have taken. So what is behind that? So in the end, it's a support for us going forward. So it's nothing on the year 2025. It's as an overlay booked for us, giving us a support on the U.S. repositioning going forward. It's not allocated on any kind of nonperforming loans, but gives us also leeway going forward to stay cautious and to follow up on our very cautious and conservative approach with regard especially to the U.S., as you have seen also on the NPL book, the main part of it is allocated on U.S. office. So that's why we want to stay active here and progress on the targets I've just described. Operator: Ladies and gentlemen, this was already the last question. So I would now like to turn the conference back over to Jurgen Junginger for any closing remarks. Jürgen Junginger: Thank you for joining us this morning. But as always, the IR team is happy to take follow-up calls if you have further questions. So have a good day, and thank you again for listening. Thanks. Bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Guy Gittins: Good morning, everyone, and thank you for joining the Foxtons' 2025 Full Year Results Presentation. I'm joined, as always, by Chris Huff, our Group CFO, and we will answer any questions at the end of the call. This morning, I will take you through some of the highlights of 2025, provide an update on the London property market. Chris will then talk you through the financials, and I will finish with an update on our operational progress in the year, followed by some detail on the outlook for 2026. We delivered 5% revenue and EBITDA growth in the year, driven by incremental acquisitions revenue and operational progress in areas such as Lettings, cross-selling and financial services. These higher revenues offset the challenging operating environment, including a volatile sales market and cost headwinds to deliver flat operating profit. These results highlight the resilience of our business as a result of our strategy to position Foxtons firmly as a Lettings-led business. Our portfolio now exceeds 32,000 tenancies, which is up over 50% over the last 5 years, and these tenancies generate highly valuable reoccurring revenues. In 2025, these revenues generated over 2/3 of group revenue. We delivered 8% Lettings market share growth through improved landlord attraction, retention to build on our position as London's largest agent. And impressively, for a London-focused business, we are also the U.K.'s largest Lettings brand. We continue to execute our strategy on acquisitions. In 2024, our acquisitions in Reading and Watford made a significant contribution to revenue growth. Recent acquisitions in Milton Keynes and Birmingham create strong platforms in high-value markets that complement our London base. And operationally, we haven't stood still. The business has embraced a culture of continuous improvement and that mindset is cascading through the organization. We're focused on unlocking the next stage of growth by driving revenue and improving productivity and efficiency right across the business. On Slide 6, you can clearly see our strategy in action. The business has made great progress since I returned in 2022. Over that period, we've reset the strategy with a focus on Lettings-led growth, rebuilt our operational capabilities and delivered significant market share gains. The result is consistent year-on-year revenue growth with an 8% CAGR over the last 5 years. And with a sharp focus on costs, we've maximized operating leverage across the business. As a result, profit growth has outpaced revenue growth, delivering a 23% CAGR over the same period. So while profits were flat in 2025, I remain confident that we can return to our growth trajectory over the coming years. Turning now to Slide 8 and an update on the London Lettings market. On the chart on the left-hand side, you can see the number of renters per property back to 2021, highlighting supply and demand dynamics in the market. The market was resilient in 2025. Tenant demand remains strong and supply levels were healthy. We did see a softening in supply in the run-up to the autumn budget, reflecting speculation around potential tax changes for landlords. But with no major tax reforms announced, supply picked up in December and we delivered a record December for both deal volume and revenue. Rental prices were broadly flat as the market balanced flat supply and demand dynamics with affordability limits for tenants. Even so, the market has delivered a 7% CAGR since 2021. And over the medium term, we expect a return to inflation-linked rental growth. Over the next 2 slides, I will take you through an update on the Renters' Rights Act, one of the biggest changes in the Lettings industry over the last 25 years. On this slide, we've outlined the key provisions in the act. The Renters' Rights Act will come into effect on the 1st of May and brings England broadly in line with the rest of the U.K. There are several key changes. Fixed term tenancies will end, meaning all existing and new rental agreements will move to open-ended periodic agreements. Rent increases will become available to landlords annually, although will require evidence that any increase is in line with the market. This is a shift from the current system where rents are typically fixed for the duration of the contract. And local authorities will have stronger enforcement powers, including the ability to impose higher penalties for non-compliance. So what does this mean for landlords? The vast majority of landlords who provide good quality homes and want to keep good tenants in situ for as long as possible, very little changes to their investment. What does matter is staying on top of the new compliance requirements and working with an agent who can manage those requirements on their behalf. It's incredibly easy to fall foul of the legislation, which is fragmented across local authorities and often overly complex. Even the Chancellor was caught out last year, a reminder of just how difficult it is for ordinary people to navigate the rules. Slide 10. As these new requirements come into force, we expect to see some shifts in the market and opportunities for Foxtons. These fall across 4 main areas. The first is increasing the total addressable market for Foxtons as increasing numbers of DIY landlords opt to use an agent to let and manage their property. Over 50% of landlords fall into this DIY category today, highlighting the size of the opportunity ahead. The second is by increasing Foxton's market share of the Lettings market. We expect landlords will increasingly turn to high-quality agents who can protect their investments and navigate the growing compliance burden. And as the leading agent in our markets, this creates significant opportunity to grow share and also the cross-sell of high-margin property management services. Thirdly, we expect more portfolio stability. With fixed terms removed, we expect longer occupancy lengths as tenancies become more stable. Annual inflation-linked rent increases are also expected to become the norm, creating a more predictable income profile. And fourthly, we expect the estate agency sector to consolidate further. The industry is still highly fragmented with 66% of the market made up of small independent agents. The new regulation will place real pressure on these businesses requiring significant investment in people, training, technology and compliance. Many simply won't be able to make these investments, accelerating consolidation. This dynamic plays directly to our strengths. We are well positioned to lead consolidation in our markets and have a strong track record of delivering attractive returns on capital when we do so. Finally, structurally, we anticipate little change in the size of the sector to remain broadly stable over the medium term based on the experience of similar legislation in Scotland. Turning now to Slide 11 and an update on the London sales market. The sales market was highly volatile in 2025. Across the year, volumes in our London markets were up 2%, in line with our own performance. Q1 volumes were around 30% higher than Q1 2024, driven by a large number of first-time buyers competing ahead of the stamp duty deadline. As expected, Q2 volumes were materially lower, reflecting the pull forward of the transactions into Q1. In the second half, activity was impacted by the delayed autumn budget. The wider economic uncertainty and weak consumer confidence was compounded by the intense speculation around potential tax changes, including the abolition of stamp duty and the implementation of mansion taxes for most properties in London, which really dampened the market. You can clearly see the impact on buyer demand on the bottom chart. New offers agreed, ahead of the budget were subdued, sitting at levels similar to those seen in 2023 shortly after interest rates spiked following the September 2022 mini budget. And with the average transaction taking 4 to 5 months to complete, this slowdown in late 2025 will naturally impact volumes in the first half of this year. In the end, the actual policy changes were fairly limited. Stamp duty remains unchanged and continues to act as a major barrier to improving affordability for buyers. The new mansion tax coming into effect in 2028 only impacts properties over GBP 2 million. While this may create some drag at the very top end of the market, that segment represents only a small share of transactions. This change reinforces our strategic focus on the volume segment of the market, particularly properties priced below GBP 1 million where Foxtons is strongest and where volumes are more resilient. Looking further ahead, it's worth noting that buyer demand in early 2026 is still being held back. For vendors looking to sell in this environment, pricing is absolutely crucial. There are buyers in the market, but they are focused on the right properties at the right price. And when we see homes coming to market competitively priced, buyer interest and offer levels remain strong. I'll now pass over to Chris for a run-through of the financials. Christopher Hough: Thank you, Guy, and good morning, everyone. 2025 saw the group deliver revenue growth despite a challenging operating environment, highlighting the financial resilience we've built into the business over the last 4 years. Financial highlights are set out on Slide 13. Incremental revenues from acquisitions and improved cross-selling of high-value Lettings property management services drove a 5% or GBP 8.6 million increase in revenues to GBP 172.5 million. We delivered GBP 22.2 million of adjusted operating profit, which is flat on the prior year. This represented a robust performance in the context of a challenging operating environment due to a volatile sales market and external cost pressures, in particular, from employer national insurance and living wage increases. Adjusted operating profit margin decreased by 60 basis points to 12.9% as margin growth in Lettings partially mitigated some of these external cost pressures. I'll provide more detail in the segmental reviews. Adjusted EBITDA, which is defined on the same basis used to calculate the group's RCF covenants grew by 5% to GBP 25.3 million. Statutory profit before tax was GBP 16.9 million and net free cash flow grew by 14% to GBP 11.2 million. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, unchanged from the prior year. The group also bought back 5.5 million shares in the year via the buyback programs announced in April and September. Now turning to Slide 14, which provides an overview of the income statement and key changes. Group revenue increased by 5% to GBP 172.5 million, reflecting 5% growth in Lettings revenue, 6% growth in sales revenue and 10% growth in financial services revenue. Group revenue continues to be underpinned by Lettings revenue, which represented 64% in the year. Lettings revenue is non-cyclical and recurring in nature and delivers high levels of consistency and earnings visibility. Direct costs were GBP 3 million higher, reflecting additional acquisition-related headcount, increased revenue-linked staff commissions and GBP 1.1 million of additional employment costs. Contribution margin was flat at 64%, including margin growth in Lettings. Overheads were GBP 4.2 million higher, primarily driven by incremental acquisition operating costs, targeted marketing investments, higher employment costs and GBP 1 million of non-recurring overhead costs. Depreciation, amortization of non-acquired intangibles and share-based payment charges were GBP 1.2 million higher. Together, these movements delivered adjusted operating profit of GBP 22.2 million. Profit before tax was GBP 0.6 million lower than the prior year, reflecting broadly flat adjusted operating profit and GBP 0.5 million higher amortization of acquired intangibles. Cost control continues to be high on our agenda. This included delivering a material cost saving by negotiating an early exit from the Chiswick Park head office lease and rightsizing head office space. This move unlocks GBP 1.5 million of operating cost savings from January 2026 onwards, providing some protection from cost pressures in 2026. Through 2026, we are redoubling our focus on costs to protect profitability in the context of current market conditions. Turning now to Slide 15 and performance in Lettings. Lettings revenue grew by GBP 5 million or 5% to GBP 111 million as a result of GBP 5.2 million of incremental revenues from Lettings acquisitions in Reading and Watford, GBP 0.6 million higher like-for-like revenues, which reflects property management revenue growth with a like-for-like increase in uptake of 7% delivered in the year. This progress will continue to benefit the group in 2026 as revenues annualize and GBP 0.9 million lower interest earned on client monies due to lower Bank of England rates. Revenue per transaction increased by 1%, reflecting the improved cross-sell of property management services, partially offset by the move into higher volume commuter markets and the lower interest on client monies. Contribution grew 6% to GBP 82.9 million off the back of revenue growth, whilst the contribution margin grew by 100 basis points, which is primarily due to margin accretive property management and cross-sell of related ancillary services. Adjusted operating profit grew 9% to GBP 29.8 million and adjusted operating profit margin grew 100 basis points to 26.9%, reflecting the strong contribution margin and the delivery of acquisition-related synergies. Moving to Slide 16, where we have presented detail on the returns from our Lettings-focused acquisition strategy. We have an industry-leading operating platform that delivers high levels of returns from acquisitions by delivering high levels of landlord retention, organic growth from acquired databases and cost synergies. Our operating platform is highly scalable and can power a significantly larger portfolio than we operate today for limited incremental cost. Historic acquisitions in London deliver EBITDA margins above 50% and return on invested capital above our 20% target rates as we maintain a tight focus on ensuring returns through a portfolio's life cycle. Acquisitions are our primary route into new geographies, combining acquired Lettings income to underpin profitability with organic Lettings and sales growth. Under our buy, build and bolt-on strategy, we focus on acquiring platform businesses in high-value markets and enhancing them through high ROI bolt-ons, targeting aggregate returns of at least 20%. In October 2024, we acquired 2 leading businesses in Reading and Watford, completing the group's first acquisitions outside London. Both have performed well, delivering organic revenue growth and first year returns on capital above the target level of at least the group's weighted average cost of capital. The Watford business was integrated onto Foxton's operating platform in 2025 with Reading planned for 2026. Returns are expected to grow as synergies are delivered in Reading and be annualized in Watford. In February 2025, we completed the bolt-on acquisition into the Watford platform. This bolt-on was rapidly integrated and is delivering annualized returns on capital above our 20% target, which highlights the growth we can rapidly deliver in new markets. In January 2026, we acquired leading businesses in Milton Keynes and Birmingham. Over the next 12 to 18 months, we will focus on integration, deploying the Foxtons toolkit to drive organic growth, deliver synergies and support further high ROI bolt-on acquisitions. Moving to Slide 17 and an update on the sales business. Sales revenue grew GBP 2.7 million or 6%, reflecting GBP 3.4 million of incremental revenue from our Reading and Watford acquisitions and GBP 0.8 million lower like-for-like revenues. On a like-for-like basis, revenue was 2% lower, reflecting 3% growth in transaction volumes, broadly in line with the market and 5% reduction in average revenue per transaction, primarily reflecting the higher proportion of lower value first-time buyer properties transacting in Q1 ahead of the March stamp duty deadline. In total, volumes were 19% higher and revenue per transaction was 11% lower. The reduction in revenue per transaction primarily reflects the expansion into commuter markets, which typically display lower revenue per transaction, but higher volumes. The acquisitions in Reading and Watford delivered 9% revenue growth in the first year of Foxtons' ownership, driven by market share growth. Average market share across Foxtons London markets was robust at 4.8%. The adjusted operating loss in sales increased to GBP 5.7 million as the profitable contribution from new commuter town acquisitions only partially mitigated increased operating costs and a strategic decision to maintain bench strength despite weaker H2 market conditions. Improving the profitability of sales remains a key priority for us, and Guy will provide more detail later in the presentation. Moving on to Slide 18 and Financial Services. Revenue in Financial Services was 10% higher at GBP 10.3 million. Specifically, volumes were 13% higher, reflecting the stronger refinance pipeline, higher estate agency cross-sell rates and improved adviser capacity and productivity. 2% reduction in average revenue per transaction, reflecting the change in product mix towards refinance activity. In the year, 42% of revenue was generated from non-cyclical refinance activity and 58% of revenue from purchase activity and other ancillary sources. Adjusted operating profit was broadly flat, primarily reflecting investment in fee earner headcount in H1 as we scale up the business. New fee earners supported revenue growth in the year and typically break even around the 12-month mark. Moving now to Slide 19 and cash flow. There was a 14% increase in net free cash flow to GBP 11.2 million. The operating cash to net free cash flow bridge on the left-hand side shows the key items of note. Operating cash before working capital movements was GBP 36.4 million, 3% higher than the prior year and including GBP 1.9 million of non-underlying cash outflows primarily relating to closed branch costs. There was a GBP 4.4 million working capital outflow, reflecting the ongoing transition to annual billing across the Lettings portfolio to improve competitiveness and landlord retention and position the business ahead of the Renters' Rights Act becoming effective. We expect the portfolio to be fully transitioned to annual billing by 2027 with an estimated GBP 10 million working capital investment across 2026 and 2027. The group paid GBP 4.3 million of corporation tax and made GBP 13 million of lease liability payments in the period. GBP 3.5 million of CapEx spend primarily relating to our new H2 fit-out costs and internally generated software development. Looking at the opening to closing net cash bridge on the right-hand side. Net debt at 31st December was GBP 16.9 million. This reflects GBP 11.2 million of net free cash flow, GBP 5.3 million of acquisition spend and GBP 9.1 million of total shareholder returns. In the year, we increased the RCF to GBP 40 million and extended it by 12 months to June 2028. The interest cover and leverage covenants have remained unchanged. And at the year-end, the leverage covenant ratio was 0.7x, which was below our covenant limit of 1.75x. And the interest cover ratio was 24x, which was above our 4x covenant. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, which is unchanged from the prior year. The proposed dividend will be paid on 15th of May, 2026 to shareholders on the register at 10th of April, 2026, subject to shareholder approval at the AGM. Moving to Slide 20 and an overview of the group's capital allocation framework. The framework aims to support long-term growth and deliver sustainable shareholder returns through organic growth, making accretive Lettings-focused acquisitions, paying a progressive dividend whilst maintaining strong dividend cover and delivering other shareholder returns, namely share buybacks. We continually evaluate the effective uses of capital, including comparing acquisition returns versus those achievable through share buybacks. We consider factors such as expected return on investment, earnings per share accretion, borrowing capacity and leverage. The group seeks to utilize its balance sheet and revolving credit facility to best effect and to maintain a leverage ratio of net debt to adjusted EBITDA of less than 1.25x at the year-end position. I'll now hand back to Guy, who will take us through the operational update. Guy Gittins: Thank you, Chris. Over the next 2 slides, I will lay out operational progress we've made in our business areas and our focus for 2026, followed by the operational upgrades we've delivered across the group. In Lettings, we continued to make progress with our organic growth strategy, delivering against our formula of growing the portfolio and driving the cross-sell of high-margin services. Over the year, we increased our London market share by 8% and maintained high levels of stability across our tenancy portfolio. Revenue and margin growth was supported by a 7% increase in cross-selling property management and the proportion of the portfolio that is actively managed now stands at 43%, up from 32% at the end of 2021. Our focus over 2026 is to continue delivery of our growth formula to continue to grow this highly valuable business. Organic growth is complemented by acquisitive Lettings growth. In the year, we delivered good returns from our Reading and Watford acquisitions with returns above our initial targets. In Watford, we have integrated the business into the operating platform, rebranded to Foxtons and boosted with a bolt-on acquisition that is delivering returns at our 20% target level. We are now the largest Lettings agent in Watford with more than 3x the market share of our nearest competitor. And in January 2026, we expanded into 2 new complementary high-growth markets in Milton Keynes and Birmingham. Milton Keynes is well connected to London, home to a large number of corporate headquarters and has one of the highest levels of GDP per capita in the U.K. Birmingham has undergone a significant regeneration and continues to attract major investments, including a growing number of banking and professional services roles, a trend set to accelerate with the opening of HS2. Both cities have strong pipelines of build-to-rent and new homes developments. And we have already linked these businesses with our corporate customer base. These acquisitions are not part of a plan to become a national agent. This is a targeted strategy focused on markets where Foxtons can create real value. Our priority over the next 12 to 18 months is maximizing returns from these deals through the delivery of organic growth, cost synergies and high return on investment acquisitions. Moving to sales. We operate through a highly volatile market last year, and our market share held broadly flat. In November, we appointed a new Managing Director, James Stevenson, who has a fantastic track record of delivering turnarounds over his 20-year career at Foxtons. And we now have an operational plan to reposition the business to reflect current market environment, and in doing so, improve profitability. It's worth remembering that whilst we are a Lettings-focused business, sales is an integral part of our full service proposition and is highly complementary with Lettings. Our offer is built around supporting customers through their entire property life cycle and sales plays a critical role in helping landlords expand or reposition their portfolios. By delivering this full service approach across sales and Lettings, we significantly strengthened landlord loyalty, enhanced revenue repeatability and increased customer lifetime value. And as Chris highlighted earlier, sales delivered a positive financial contribution before the allocation of shared costs. In Alexander Hall, our Financial Services business, we delivered a 10% revenue growth driven by increasing the operational productivity of our advisers and improving the efficiency of our processes. This included a 13% uplift in mortgage deals per adviser and a 5% improvement on the conversion of leads to mortgage applications. Continuing to build on these upgrades will support further growth. And underpinning all of this is a consistent focus on cost and productivity to maximize the operational leverage across the business. As Chris mentioned, we forensically review our cost base on an ongoing basis, taking costs out wherever we can, including our recent HQ move, which generated GBP 1.5 million of annualized savings. And we're focused on leveraging our technology stack and data capabilities to drive efficiency right across the organization. Turning now to Slide 23. Over this slide, I will present the key group-wide operational upgrades we're delivering to support our growth plan. Customer lifetime value is a key focus for the business. We aim to support customers through their property life cycle, becoming their trusted property partner. And in doing so, we can generate high-quality recurring revenues and earnings. To do this, we need to deliver best-in-class service. We've made significant progress in this area, and I'm pleased to say that we now achieve customer satisfaction scores of over 80%, a double-digit uplift since we launched these programs. In 2025, we continued to enhance the customer experience by further embedding our real-time feedback system across the full customer lifecycle, enabling us to measure service throughout the journey and resolve any issues quickly. Combined with AI-powered sentiment analysis, this allows us to identify the drivers of exceptional service. It embeds insights into training and delivers consistently high standards. Supporting this focus on service are our brand and marketing initiatives. Our focus this year was on strengthening customer attraction and retention in a competitive market. Foxtons has always had a distinctive level of brand awareness. We do things differently. And in 2025, we built on that by launching an exclusive partnership, which makes us the only U.K. estate agent where customers can earn Avios points. It's a differentiated position designed to attract new customers, reward loyalty and drive uptake of our higher-margin services. Turning now to our technology and data capabilities. Our in-house technology and data stack creates the flexibility to develop and deploy AI and data solutions at pace without the constraints of an off-the-shelf system. Our approach is very clear. We only invest in AI where it makes a meaningful difference to our financial results. It's not AI for AI's sake. In 2025, we made strong progress. We expanded our AI-driven sentiment analysis, giving us far deeper insight into customer interactions. We also advanced our data-led lead scoring models, ensuring our people focus their time on the highest value opportunities. And we introduced AI-powered training tools that help new agents reach their full performance faster. Together, these improve efficiency, drive higher productivity and ultimately, enhance profitability. We will continue to identify areas across the platform where embedding AI can deliver an operational and financial impact. These upgrades are a key part of the continuous improvement culture that now runs throughout the entire business. Finally, and most importantly, our people and culture. It is my fundamental belief that a state agency is a people business, having the right talent, developing great leaders and embedding and really demonstrating our core values is critical to our success. This year, we worked with external partners to assess our strengths and opportunities, enhance our employee proposition and introduced our Getting It Done. Together. framework to align recruitment, development and well-being across the organization. The response from our people has been really encouraging. 81% believe Foxtons is well positioned to succeed over the next 3 years, and 85% believe we truly value diversity and build diverse teams. We remain committed to building a collaborative culture that enables our people to deliver exceptional service for our customers. And finally to Slide 25 and the outlook for 2026. In Lettings, we expect the market dynamics we saw throughout '25 to continue with consistent levels of stock and strong tenant demand. The Renters' Rights Act represents a significant growth opportunity for Foxtons as landlords increasingly need professional support to navigate the new regulations. In addition, the 2 acquisitions we completed in January 2026 will generate incremental Lettings revenues. Our plan for 2026 is focused on maximizing the returns from the deals we have completed over the last 18 months, driving organic growth, delivering cost synergies and progressing targeted bolt-on acquisitions to strengthen our market positions. Turning to sales. Buyer activity continues to be held back by weak consumer confidence, macroeconomic concerns and policy decisions. In response, we are repositioning the business for the current market conditions to improve profitability. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and cost continued discipline. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and continued cost discipline. Importantly, profitability across the group remains underpinned by our substantial base of non-cyclical and reoccurring Lettings revenues, giving us confidence in our ability to deliver against our growth strategy. That concludes the formal presentation. Thank you all for joining us today. Chris and I look forward to meeting with many of you in the coming weeks. I'll now pass to the operator for any questions you may have. Operator: [Operator Instructions] Your first telephone question today is from Robert Plant of H2 Radnor. Robert Plant: Three questions, please. Post the acquisition in Birmingham -- the acquisition is in the center of Birmingham. How much of the Birmingham market are you targeting geographically? Secondly, the period of repositioning in sales, how long do you think that will take? And lastly, what are the working capital implications of the Renters' Rights Act? You mentioned investment in working capital. I'm sure there's a difference between when you collect and when you bill for sales. So, can you just talk us through that, please? Guy Gittins: Well, thank you very much for those questions, and welcome, everybody. Thanks for tuning in. Firstly, if I talk about Birmingham, the business that we bought as we do when we're targeting new locations, we always use data to lead the decision and we look for high-volume, high-value rental markets. And obviously, Birmingham is a superb area for this. There's also still, we believe, good growth left in the Birmingham market, both for sales and for Lettings. So, really highlights the reasoning behind looking outside of London as well in conjunction with our continued focus on talking to businesses within London that would be bolt-on. The business that we bought is a Central Birmingham specialist with leading market share within the city center. And we are talking already to other agencies in the nearby vicinity that would allow us to continue our bolt-on strategy to quickly grow revenues and continue to grow that portfolio of Birmingham properties to give us a slightly larger geographic area. So yes, always, we look to buy the hub, which is the business that we bought FleetMilne, and we are wanting to add to that to turbocharge the growth as quickly as possible, and that helps us really drive those profits in the years after. Second question was around repositioning of sales and how quickly does that happen. We're fortunate, as you know, to have huge amounts of data, huge volumes of data and using the data platform that we've built over the last couple of years. Chris and I, and the rest of the senior leadership look at this data on a daily basis to really give us a view of where we think the sales market is heading and allows us to be able to dial up or dial down resource in certain areas. And last year is a great example of that. Prime Central London, the volumes were considerably subdued. However, in our Southwest offices, the market was actually really quite buoyant and that allowed us to be able to apply resource meaningfully to grasp the opportunity in those higher volume areas. And that's really what our plan will be across this year as we sit here looking at the outlook today for what we feel the rest of the sales market will look like in London is different to how it looked 6 months ago and different to how it looked 3 months ago. So, that is an always-on process, but we're perhaps a little bit less excited certainly looking with some of the things that are happening in the Middle East about what may happen around inflation and interest rates. So, we're just making sure that we're always ahead of that. I'll pass on the RRA -- the Renters' Reform Act question over to Chris. Christopher Hough: Yes. The question was around our working capital changes in this area. So, Renters' Rights Act, that will see the removal of fixed terms tenancies. And what we'd expect to see there is an average reduction in the billing period start those tenancies. So, we're making a change here to improve our competitiveness and indeed increase landlord retention. And we've been reducing our billing terms since 2023 as it happens. We estimate that over the course of 2026 and 2027, there's a GBP 10 million investment in working capital required as we fully transition our portfolio. Transitioning portfolio takes time, hence, why there's a 2-year period there. Operator: The next question is from the line of Greg Poulton from Singer Capital Markets. Gregory Poulton: Three questions from me, please. Firstly, obviously, the move to more fully managed tenancies has been an important trend for the Lettings business. Could you just talk about the level of uplift in fees you see from a fully managed versus a letting-only tenancy? And second, can you talk about the expected cadence of acquisitions for the rest of the year? I'm not asking for a forecast on that, but just to sort of guide as to what we could expect to see throughout the remainder of the year? And thirdly, linked to that, how much capital expenditure do you think you will allocate to acquisitions in the remainder of the year? Guy Gittins: All right, Greg. Thanks for those questions. Yes, look, we're really proud of the improvement that we've seen over the last 2 or 3 years with the upsell of our property management service, and that really has come from a fantastic cross-business effort, particularly driven by the Head of Letting working very closely with the Head of Property Management. And that means that we've seen a 7% uplift in that cross-sell of property management services, which ultimately delivers around about a 6% additional fee, which is charging for that premium fully managed service. And of course, as we extrapolate that over a longer period of time, that 7% uplift of the volume of services that we're transferring into that premium service for new deals over time massively helps us grow the overall number of properties that we have under management. And that really is a key KPI that we drive within the business and lots and lots of remuneration is linked to that, lots of the KPIs we talk about across the business is focused on it. So, we're proud of that movement, and it's certainly a very big focus across the business. And I think that as we've mentioned, the change into the Renters' Reform Act does, we believe, increase the likelihood of non-managed landlords wanting to take the fully managed service. As we saw and we mentioned in our presentation, it's really easy to fall foul of some of the rule changes and you need a very, very capable agency who's got large teams of compliance, making sure that your property is fully compliant and looked after at every stage along this journey. And that's why we are seeing more people choose that service through Foxtons. Acquisition cadence, look, we've made 2 great acquisitions at the start of this year. We're watching very carefully what the outlook looks like. And of course, our capital allocation is always very much under review, both with our Board and internally. I'll perhaps let Chris talk to that a little bit later. But acquisitions very much are a function of opportunity. We're talking to agencies both inside London and outside London. And really, we want to make sure that we make the right acquisitions, not just any acquisition. We're pleased with the 2 acquisitions outside of London in Milton Keynes and Birmingham that we've made at the start of this year in January. And really, I suppose my preference now is to try to make sure that those new acquisitions are settled in that we can drive the synergies, that we can make them more profitable and hopefully, find some bolt-on acquisitions to make in the near future. Christopher Hough: Finally, Greg, from a quantum perspective on CapEx and acquisitions, we've done 10 already, and I'd be thinking about that 15 number we put out there previously. So, I expect that additional quantum being the target and the ambition for the remainder of '26. Operator: [Operator Instructions] The next question comes from Adrian Kearsey from Panmure Liberum. Adrian Kearsey: I will say, thank Rob and Greg, for asking the questions I was initially going to ask. But in terms of sales, you've got an average property price last year of GBP 574,000. Can you perhaps sort of give us an indication of the range of the types of properties that you sell to give us a sense of how broad or how narrow your market focus is? Back to also to the second question. Back to Birmingham, currently one site. In order to take advantage of that huge opportunity in Birmingham, when you make further acquisitions, do you think you'll end up having multiple offices in Birmingham? Or will you have a single office in the center? Guy Gittins: I'll take the first question around sales. Our average price around GBP 574,000, look, we want to be in the volume market across the markets that we operate in. And the reason for that is we know that they're more resilient, and we are a volume efficiency machine at Foxtons in sales and particularly in Lettings as well. The spread of properties that we sell, we actually have a minimum fee of GBP 6,000 in London. Now, that means that we don't end up selling many short lease garage spaces, which we were doing a little bit of prior to my arrival. But we do across all price points. I mean, we've just agreed something, a bulk deal in an area in the east of London that's nearly GBP 10 million. And so we're operating in all markets. But absolutely, our sweet spot is that volume piece right in the middle of where the average pricing is across London, and that's really by design. Now, we have been making some efforts to try to increase over time the average. And when I say increase, just a very small increase in that average sales price does make a meaningful difference to us, but we don't want to ever turn our back on that volume market. And the second question was Birmingham one site or multi-sites. Well, I think certainly today, we view the value, the biggest opportunity is to continue to grow from the center to the more affluent areas of the residential areas around Birmingham. And as I've mentioned, we're talking to multiple agencies around those locations at the moment already. And we can also bring, of course, the Foxtons Operating Platform, which really does help grow the businesses. And we've seen fantastic examples of that in both Watford and Reading last year where we've actually delivered some really solid growth once we've layered in the kind of Foxtons' toolkit of marketing, brand productivity and operational excellence. And that doesn't happen overnight. That takes a little bit of time to bed in, and that's what we're very busy doing with both our business in Birmingham and in Milton Keynes at the moment. Operator: There are no more questions from the telephone anymore. We can now read the questions from the webcast. Unknown Executive: First question is from Robin Savage at Zeus. It says, the impact of the Renters' Reform Act this year is interesting. Are there any early market signals that we or any other lettings agencies are seeing that might indicate an uptick in DIY landlords moving towards professional lettings management? Guy Gittins: Great question. Thank you, Robin. Yes, absolutely. Look, we've seen this trend starting to kind of infiltrate the London market over the last 18 months really. We've seen obviously market share increases for Foxtons, and we've seen this increase in our property management cross-sell. And as I've mentioned at the start, that's been a major focus of what I wanted the business to deliver over the last 2 or 3 years, and I'm really proud of the delivery of that. And I don't see it slowing down. We really do offer and believe the offering of the service that we can give to our landlords is best-in-class. And what we are trying to do is deliver the very best service for our landlords, but also making sure that they remain fully compliant and clear of any issues that may be happening and being ahead of those legislation changes as we know they can come in very quickly and catch people out. So, very pleased with what that looks like and definitely are seeing that within London. Unknown Executive: Second question from Robin. Foxtons has built a significant competitive advantage through decades of structured proprietary data and a highly analytical approach. How do you see advances in artificial intelligence and large language models further strengthening that advantage, both in how Foxtons generates market insights and how it manages the business and delivers differentiated services relative to competitors with less developed data capabilities. Guy Gittins: Great question. Thanks, Robin. Well, you've been a beneficiary of coming and seeing the operation in-person here at Foxtons. And I'm sure that you'd agree that there isn't another data system, there isn't another database like Foxtons has across the London market and as far as we're aware, across the whole of the U.K. market. And we've been really utilizing that database, cross-referencing it already with early machine learning over the last 12 months and some AI functionality to help us improve productivity. Great example of that is we have 100 people who sit at Foxtons' head office who are calling into a huge database of nearly 4 million people to drive new listing opportunities. Now the old way of doing that would be just randomly picking a street and calling from A to Z, but our new system uses AI and has machine learning so that it filters up to the top and surfaces the most likely leads that we think we'll convert in the next 3 months. And that's had a meaningful impact on the productivity of that team. We're also using AI to help us improve the speed of new recruits under training to get them to be able to build for the business quicker by helping them through the training flow where we've got AI platforms that have really improved that speed of service during that initial training period. And we're using AI in other areas as well. And as we said in the presentation, we're not -- we are definitely not using AI for AI's sake. It has to have a meaningful impact to the bottom line. And we keep a very, very close eye on lots of technologies that lots of people are working very hard to try to deliver across the industry. And because of our structure of that data and the way that we've built the database, we're able to loop in these functionalities very, very, very quickly. Thanks for that question, Robin. Unknown Executive: One from Andy Murphy at Edison. Given the number of recent deals outside London, are you no longer focusing on London M&A? Guy Gittins: Great question. We absolutely are still very focused on London opportunities. But given where we've seen the growth in the marketplace when we were presented with the deals that we could have done this year and last year, it just totally made sense to look at the Birmingham and the opportunities in Milton Keynes. But it doesn't stop us from looking and continuing to speak to other agents as roll-ins within the London environment. But as I said before, they need to be the right deal for Foxtons, and we need to be paying the right prices for them. And yes, that search is still an always on. So, certainly not turning our back on London-focused acquisitions. Thanks, Andy. Unknown Executive: One from Robert Sanders at Shore Capital. What are the multiples in the market at the moment for Lettings portfolios? And how much consolidation do we see likely in the sector after RRA? Guy Gittins: Yes. I think the RRA opportunity is more likely to create even further consolidation. But actually, I'll let Chris take the questions on the multiples. Christopher Hough: Yes. The multiples really depends where we're buying, what we're buying, the balance of sales versus Lettings. But broadly speaking, a range from 2 to 3x Lettings revenue is a sort of multiple we're seeing, which is actually pretty consistent with what I see in both '24 and '25. So, there's been no significant change there. And for us, now we've got 2 new platforms, which we're building into, i.e., Milton Keynes and Birmingham. That gives the bandwidth and the opportunity to launch into new areas, which is really exciting for us. Unknown Executive: And a question on the sales market from [ Donald ]. How impactful is the lack of overseas buyers in London and the alleged exiting of high-net-worth individuals from the London sales market? Guy Gittins: We touched on earlier, our average sales price across London is GBP 574,000. The super prime market, we know very clearly, particularly last year, felt the pain of the exiting of high-net-worth individuals and certainly, lots of reports, as I'm sure you will have read from the super prime agents really having a torrid year last year. Did that impact our volume market? I mean, ultimately, it does have a very small effect on the movement up and down chain. But the reality is that's why we are in the high-volume market because we know that those transactions overall are less impacted by these big swings of where Netwealth may decide to spend their money this summer versus the next summer. So yes, we haven't been impacted by it. But certainly, super prime agencies, we know really felt the pinch last year. Unknown Executive: And the following question, what are the -- essentially, what's the catalysts that are required to drive volumes in the sales market? Guy Gittins: Well, ultimately, the biggest barrier to returning back to those 145,000 sales transactions that we historically used to see going back before the financial crisis is stamp duty. Last year, we think there were somewhere in the region of 90,000 sales transactions. The year before that, probably 85,000 sales transactions. We always believe that the market would return to its 5 or 6-year average of around about 100,000 sales transactions, but that looks very unlikely this year. And that's the reason that we are ahead of the market really thinking about what we want to do with the sales business this year so that we are rightsizing everything across all of the different regions that we're in. But if you also look at sales being agreed this year already, we know that year-to-date, the number of sales in London is circa down in total around about 6%, whereas pretty much the rest of the U.K. market is up year-on-year on sales agreed. So hopefully, another good reason to point to our acquisitions outside of these locations. Unknown Executive: And that's the end of the questions from the web. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Guy Gittins for any closing remarks. Guy Gittins: Firstly, thank you for joining us this morning. As you know, Chris and I will meet many of you over the coming weeks. We are really focused on continuing to deliver the medium-term targets that we set out in our CMD in last year. We've got a very good business. We've taken a lot of costs out last year, and we're laser-focused on making sure that we can continue to pull all of the different growth levers to achieve those targets in the medium term. I appreciate everybody joining the call this morning, and look forward to seeing you all soon.