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Pedro Cota Dias: Good afternoon, everyone. Thanks for joining, and welcome to NOS's Fourth Quarter and 2025 Full Year Results Conference Call. As usual, we will start with a brief presentation by our CFO, Luis Nascimento, and then we'll open for Q&A, and we have the executive team in the room for that as well. So Luis, over to you. Luis do Nascimento: Thank you, Pedro. Good afternoon to all, and welcome to our conference call. We will begin, as usual, with the main highlights of this fourth quarter. In the quarter, NOS maintained a positive operational momentum despite new competitive environment, leveraging 5G and nationwide fiber fixed infrastructure, also a healthy cash flow generation driven by top line growth, operational efficiencies across OpEx and CapEx structural decline. And an attractive shareholder remuneration with a strong dividend yield while maintaining a robust financial position. A quick overview of our main KPIs. During fourth quarter, consolidated revenues increased by 0.3% to EUR 486 million and EBITDA rose 4.4%. This solid EBITDA performance, along with a CapEx reduction of 4%, led to improved EBITDA CapEx -- EBITDA AL minus CapEx of almost 21%. Recurring free cash flow, excluding extraordinary effects, increased 132% to EUR 71 million and net income increased 58%, reflecting a solid operational performance and our strategic transformation program. Our annual numbers also reflect a strong performance, which we will discuss in more detail later in this presentation. So NOS has achieved upgraded classifications from both CDP and S&P Global Ratings, recognizing its significant ESG efforts. The CDP score improved from B to A, reflecting a leadership position in the fight against climate change, a distinction achieved by only 2% of the companies. Furthermore, NOS's S&P Global score increased from 58 to 75, nearly doubling the sector average of 40. As part of its dynamic strategy to create value, NOS is enhancing its customer value proposition through COMBINA, a new initiative in partnership with Galp and Continente. This program offers unique customer benefits, including up to a 10% discount at Continente and a EUR 0.30 discount per liter on fuel at Galp. These significant savings can partially or even fully offset the family annual telecom costs. With 150,000 customers in the first 2 months, COMBINA is a key component of NOS value proposition, translating into significant savings for our customers. Our SCAILE program with 140 AI use cases identified and already 40 implemented is a key driver of our efficiency, contributing to a 2.3% reduction in fourth quarter OpEx. The personal productivity vertical, one of our 7 SCAILE initiatives is successfully massifying AI across NOS. NOS GPT supports over 4,000 users with an impressive 40% daily adoption, and our FAAST training program has already reached over 1,400 employees. With SCAILE, we are effectively boosting efficiency throughout NOS. On the operational performance side, this was another strong quarter of Fiber to the Home. More than 6.1 million households are now covered by NOS Gigabit fixed network with Fiber representing almost 90% of households passed. This is a significant increase of 159,000 households quarter-on-quarter and almost 380,000 year-on-year. But despite a challenging competitive market, NOS delivered a strong fourth quarter with 2% increase to 10.9 million RGUs. With 60,000 -- 66,000 net adds, this quarter posted a good level of net adds despite natural fourth quarter seasonality. We achieved 7,000 net adds in unique fixed accesses in the quarter. Despite the seasonal slowdown and intense competitive environment, these results are consistent with [ pre-digi ] levels. Churn continue at low levels and new offers, WOO and naked broadband continue control, but with some impact in the mix of new customers. In mobile, with 62,000 net adds in the quarter, mobile RGUs increased 3.3% year-on-year, reflecting a strong performance, particularly in postpaid customers with higher ARPUs. Postpaid had 88,000 net additions, posting very strong results driven by WOO and by NOS's competitiveness on convergence cross-sell. Prepaid net additions declined 26,000 in the quarter, below fourth quarter '24, driven by the competitive pressure that impacted more on low ARPU customers. In summary, a solid operational performance despite the competitive environment. Now moving to Audiovisuals and Cinema business. The number of tickets sold declined 19% year-on-year, an improvement versus the minus 28% of third quarter, driven by a difficult October and November, but with a solid December with revenues flat year-on-year, supported on Zootropolis, Avatar and Now You See Me, all movies distributed by NOS Audiovisuais. On the financial performance side, NOS consolidated revenues rose 0.3%, mostly affected by an 8% decline in Audiovisuals and Cinema division that were offset by the resilient performance of the Telecom segment and by the solid 4.4% growth of IT. Telco revenues were flat year-on-year, primarily due to the performance of the enterprise sector that posted a 1.3% increase driven by large company segment and Wholesale. The B2C segment experienced a decline of 0.4% due to the increased competition impacting ARPU despite the strong operational activity and solid equipment sales, still an improvement versus the decline of minus 1.1% in third quarter. Revenues in the B2B increased by 1.3% to EUR 123 million, continuing the growth path from previous periods. The slowdown in the overall revenue growth of the business results from a lower volume of projects and resale with lower margins. The new IT business showed a strong increase of 4.3%, mainly driven by a solid 9% growth in IT services and despite a 3% reduction in the volatile resale of equipment and licenses. As previously explained, the Audiovisuals and Cinema division reported an 8% decline, driven by the 19% reduction in cinema attendance. So NOS's operational performance and solid results of NOS transformation program supported on Gen AI-driven efficiency program continued to deliver strong 4.4% EBITDA increase, significantly above revenues with a strong contribution from Telco and IT, which recorded increases of 4.4% and 11%. Audiovisuals and Cinema division posted a 1% EBITDA increase despite an 8% decline in revenues. NOS CapEx continues the structural declining trend, and this quarter dropped 4% to EUR 92 million, supported by a CapEx decline in all lines of businesses. Telco CapEx declined 1.2%, driven by a 2.6% reduction in customer-related investments. [ Expansion ] CapEx had a small increase of [ 0.4% ] this quarter, mainly driven by fiber projects as we approach the end of NOS Fiber deployment. IT CapEx declined 34% to EUR 1.9 million, explained by an exceptional customer-related investment during fourth quarter '24. And Audiovisuals and Cinema CapEx declined 24%, reflecting a return to a more normal spending levels in movies after the higher investment in 2024 caused by the Hollywood strikes and by a reduction in cinema CapEx. As a result, improved operational performance and efficient CapEx management drove to a 20.6% increase in EBITDA AL minus CapEx. Net income declined to 10.9% to EUR 63.8 million, primarily due to a reduction of EUR 31 million in extraordinary effects, mainly related to ANACOM refund of activity fees in fourth quarter '24. However, excluding these items, net income rose EUR 23.5 million, a 58% increase year-on-year. It's a strong increase driven by a strong EBITDA growth, supported by a solid operational performance and by a proactive cost management, complemented by a EUR 10 million contribution from tax reduction and by EUR 3.9 million in results from joint ventures. Free cash flow increased 155% with a EUR 2.8 million positive year-on-year impact from an extraordinary tax payment in 2024 related with the ANACOM refund of activity fees. Without extraordinary items, recurring free cash flow increased 132% driven by EUR 11.7 million from strong operational performance and lower investments, by a positive impact of EUR 22 million in working capital and by a reduction of EUR 5.6 million of income tax paid. So now moving on to the final year key financial numbers. Despite stronger competition, NOS demonstrated a resilient revenue performance in 2025 and strong OpEx and CapEx efficiencies leading to a solid EBITDA AL minus CapEx growth. Consolidated revenues increased by 1.6% with Telco growing 1.6% and IT 3.5%, offsetting a 2.6% decline in Cinema and Audiovisuals. Consolidated EBITDA also grew by 4.3%, while EBITDA AL minus CapEx saw a significant 15% increase. NOS showed strong growth in net income and free cash flow in the final year '25, excluding extraordinary items. Net income after adjusting for these items increased 29% and free cash flow, excluding these items, also rose by 15%, indicating a solid underlying financial performance. So at the close of the year, NOS's debt decreased to EUR 1.022 billion, and the financial leverage ratio dropped to 1.5x, well below the reference threshold of 2x. Additionally, NOS benefits from a lower average cost of debt, now 2.7%, representing a decrease of 0.8% year-on-year, reflecting lower interest rates. As end of December, the company held EUR 342 million in cash and liquidity. So with all these elements in play, the Board has approved a total dividend of EUR 0.45 per share composed of EUR 0.35 ordinary and EUR 0.10 extraordinary. This payment reaffirms our strong commitment to an attractive and sustainable shareholder remuneration. With this, we conclude our presentation, and we are now ready to answer to your questions. Operator: [Operator Instructions] And now we're going to take our first question. And it comes from the line of Ajay Soni from JPMorgan. Ajay Soni: I've got 3 questions. First is around your SCAILE program. So what headcount reductions could you deliver from this in '26 and in the midterm? And then where are the most of these -- could most of these cuts come from within your business areas? Second is around the slightly slower business growth we've seen from lower volume of projects. So what's the reason behind this? And is the Q4 growth expected to continue into 2026? And then the last one is just around your price rises in 2026. Could you remind us what you've done and then what the customer reaction has been so far relative to the price rises you did in previous years? Luis do Nascimento: First, well, we didn't understand completely the questions. But if I understood, the first one is on SCAILE. And if we can -- if we believe that we can continue to have these solid efficiencies for 2026. And yes, we do believe so. As I said, SCAILE is a long project. We have 140 use cases. We have begun only -- we have implemented 25% to 30% of them. So yes, we do believe that we can have efficiencies for the next couple of years. Miguel Almeida: Yes. The third question was on price raises. So what we did is this February, so this past month, we raised prices by 2.34%, which is in line with the inflation in 2025. And until now, the customer reaction has been very positive in the sense that there was no reaction, even when we compare to other price inflation increases in the past, so we didn't have them last year. But in the past, we had less customers either calling us or complaining. So the reaction in that sense was good, mainly because the amount of the increase is not that significant. I'm not sure we understood the second question. Luis do Nascimento: If I understood, it was about B2B resale. Ajay Soni: Sorry, it's around the business growth. So you mentioned the slower growth in Q4 was down to a lower volume of projects. So I was wondering what the reason was behind this? And then is this Q4 growth a level you expect to continue into 2026? Or should it accelerate from here? Miguel Almeida: This line of revenues from projects is very volatile. It has been always the case in the past, some quarters very strong, some quarters not that strong. It also -- we are always comparing to the same quarter of previous year. So if you have a good quarter last year and not so good quarter this year, the difference is significant. But there is no structural trend that you can take out of that. Probably next quarter will be okay. There's always a lot of volatility around this kind of one-shot projects. It's not like telecom revenues, which are basically monthly fees, which are recurrent and stable, but these B2B projects, not so much. But again, there's no particular trend or structural trend you can take out of these numbers. Luis do Nascimento: And the question comes from the line of Mollie Witcombe from Goldman Sachs. Mollie Witcombe: I just have 2. Firstly, some color on the competitive environment in B2C specifically would be fantastic. I've noticed that the ARPU in Consumer seems to be a little bit better in Q4. So just an idea of how you're thinking about incremental competition in Q4 and into Q1? And then my second question is just on IT growth potential. You previously talked about potential for 5% to 10% CAGR, 3-year CAGR market growth with 5% to 10% in applications, tech consulting, cloud, et cetera, and then 10% to 15% in cybersecurity. Could you give us an update on these trends? Is this still what you're expecting to see? And how are you seeing the markets develop? Miguel Almeida: Yes. Thank you very much. In terms of competitive environment, I don't think there's any significant update. We have been living more or less the same competitive environment since November '24 for the reasons you all know. The dynamics hasn't been different throughout 2025. Nothing really relevant changed already this year in 2026. So I would say that from that sense, of course, in a level of competition, that is much more aggressive than we had before November '24. But since November '24, it has been the same. And we don't expect it to change going forward. So it's a new reality. We have been living under this reality with the strategy that we have communicated. So with the main brand NOS, with a premium service and with a discount brand WOO, fighting the low end of the market. We are happy with the results, and we don't see trends changing materially going forward. In terms of IT growth, yes, that's -- we're still kind of bullish around the IT business. We believe we have tailwinds, and we will continue to grow in that business. So the numbers you mentioned, 5% to 10% is within our -- also our estimate up until now. And when we look at 2025, we actually managed to be slightly above that, but we'll see going forward. But we are still betting on significant growth on that line of business. Mollie Witcombe: Understood. Sorry, just a follow-up maybe with a third question. Potential upside from AI on CapEx has been a bit of a theme this quarter amongst other European telcos. Just you've talked a lot about kind of potential from AI, but just wondering specifically what you're seeing on CapEx. Miguel Almeida: Well, what we're seeing is across different cost drivers. Some from accounting point of view are considered OpEx, others are considered CapEx. But what we see is the impact is very transversal, very across many different functions, processes, areas. So yes, we see some impact there. But nevertheless, we were already planning beyond AI. We are already planning a decrease in terms of CapEx in 2026 when compared to 2025. But of course, it helps to have that reduction with this help from AI, which makes us more productive and as such, taking more out of each euro that we invest. Operator: And the question comes from the line of Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I have 3 questions as well, please. Perhaps following up on the question around pricing, and you mentioned the mix. And I think this year, we didn't have a price increase, but the Q4 ARPU trend and exited the year quite well. Is that perhaps upselling within the tiers? Or is that just a better mix within your kind of premium brand and your challenger brand given perhaps a more relaxed competitive dynamic in the market? Second question is around the operational efficiencies from SCAILE. So I guess, limited top line growth through '25, but 4 percentage points expansion at the EBITDA AL level. Is that the right level we should think about in '26? Or should we see a pickup in those efficiencies? And lastly, on the fiber rollout, can you remind us what your target coverage is? I think you said low 90s before. And should we be thinking that the remainder will be covered by alternative technologies such as satellite? Miguel Almeida: Thank you very much for your questions. In terms of -- I would tend not to read too much from the ARPU in Q4. There are some specific effects, namely, for example, premium TV channels that had a good quarter, which helps ARPU. But I don't think you can read from those numbers any significant change in terms of the mix between the main brand, the premium brand and the low-end brand. I don't think you can have that reading from the quarter numbers. Obviously, the low-end brand will keeps growing, keeps increasing its weight on the overall customer base of NOS. That is something that we expect to continue throughout 2026. So you cannot read too much from those ARPU numbers from Q4. As I mentioned, this is very seasonal and specific impact, namely from the premium TV channels. In terms of SCAILE, what -- actually, what you asked would imply some kind of guidance that we tend not to give. So what we can say is that we expect SCAILE to continue to contribute to cost optimization. That much is true. But in terms of numbers, I would rather not give any specific guidance, even though obviously, we have our own budget and our own estimate. In terms of fiber rollout, we estimate our present coverage in terms of households passed close to 94%. And that is as high as we will go on a stand-alone basis. We expect the remaining of the market, so 100% to be actually also covered with fiber. But from this project, the state project that has as an objective to cover the white areas with fiber. So one can expect once this project is implemented, and it should be pretty soon, at least start pretty soon, 100% of the country would have fiber, which means that alternative technologies are not necessary, and we don't see any space for those alternative technologies in a country that has 100% fiber coverage. Roshan Ranjit: That's very helpful. Just a follow-up on the fiber point. Given the extensive fiber network, have there been any developments on the wholesale front offering out the network and maximizing that utilization? Miguel Almeida: You mean -- sorry, can you repeat your question? I'm not sure that [indiscernible] wholesale. Roshan Ranjit: Sure, of course. It was just any wholesale discussions on the fixed network, please. Miguel Almeida: Wholesale discussions in the sense that we should open the network. The answer is no, not at all. We have no plans to give access to our network in the coming future. Operator: And the question comes from the line of Antonio Seladas from A|S Independent Research. António Seladas: So first one is related with your SCAILE program. So I know that you don't like to provide any guidance. Nevertheless, it seems fair to assume that OpEx will continue to perform below the top line. So it seems fair to assume it. I don't know if you want to comment on this. And second question is related with -- there were some comments on the press this morning that you could acquire some company on the IT space. I don't know if you want to comment on this. Miguel Almeida: Yes, sure. The question was around our plans for the IT business unit, if we had plans to expand to grow. And the answer was, first of all, we want to grow organically. We already mentioned the targets in terms of growth -- organic growth. But also, we said that we are open and actually actively looking to also grow from acquisitions. It's not obvious. We don't have any specific target at this time, but we are open to the possibility of growing also through acquisitions. In terms of the OpEx numbers and the impact of SCAILE on the OpEx, what I think we can say without giving too much guidance is that we expect margin expansion. Operator: [Operator Instructions] And now we're going to take our next question. And it comes from the line of Fernando Cordero Barreira from Banco Santander. Fernando Cordero: Thank you for taking my 2 questions. The first one is on the COMBINA program that you have presented as well. I would like to understand which is the kind of impact that you are expecting in your churn rates at the end, given the discounts that you are offering be, let's say, -- just trying to understand which could be the savings on the -- either on the [indiscernible] or in the customer retention cost that is going to be at some extent, funded by the COMBINA program. And the second question is quite simple. Just would like to understand if you are expecting any kind of financial impact from the floods and from the meteorological issues that we saw in this first quarter when you report the first quarter in May. Miguel Almeida: Okay. Thank you very much, Fernando. In terms of COMBINA, I think it's fair to say it's still early days. The main objective for us is churn reduction. To be completely transparent, that is the main objective. Nevertheless, we announced 150,000 COMBINA clients, I think, last week. In the first 2 months, 150,000, we have 1.5 million customers. So it's still limited in terms of the customers that have joined the program. But without any number or quantification because it's still too early, the objective is clearly to reduce churn, given one more reason to customers to stay with NOS because the benefits from this program are actually quite significant. In terms of the storms, it was hard. We still have some residual customers without service on fiber. In mobile, it's back, working again. We have some negative impact, but it's quite limited. We have the negative impact in terms of revenues because we have to credit the customers that were without service. But we are talking a limited region of the country and a few days, nothing very significant. We have some costs associated to rebuild what was destroyed. But again, some of the major investments associated with that rebuild is not on us, namely towers, namely poles, which suffered a lot. This is not on us. So again, we are not expecting a big impact in terms of financial costs. In terms of service, it was a big impact, as you know. But in terms of financial impact, not that significant. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. Pedro Cota Dias: Okay. So thanks very much for joining again and any questions, please feel free to reach out. So take care. Bye.
Jon Stanton: Good morning, everyone, and welcome to Weir's 2025 Full Year Results Presentation. Before we start, I would like to draw your attention to the usual cautionary notice on forward-looking statements. We've found a very strong year. So there's a lot to cover today. I'll start with introductory remarks, then Brian Puffer, our CFO, will present the financial review. I'll then return to cover our strategic progress during the year and our outlook for 2026. And after the presentation, both Brian and I look forward to answering your questions. So beginning with our equity case, we is delivering on the sustainable growth and shareholder returns that we promised. We are today is a focused technology partner to the mining industry with market-leading hardware and software solutions, both of which leverage our secret sauce of mission-critical technologies and unmatched customer intimacy to deliver a unique value proposition protected by high barriers to entry. We are poised to benefit from multi-decade favorable market demand tailwinds for critical minerals while the adoption of new technologies to enable sustainable mining will only boost the potential opportunity set available to Weir. And as we now pivot our focus to growth, we are driving returns with strong through-cycle organic growth excellent execution and compounding M&A. With the platform we now have in place, there is significant potential for incremental value creation. Turning to our results. In 2025, we delivered a strong financial performance, reflecting Weir's market-leading technology and deep customer relationships. We successfully navigated the uncertainty arising from tariffs and global supply chain disruptions, leveraging the flexibility creates in our operational footprint to provide seamless service to our customers. On revenue, our strong operational performance delivered 6% constant currency growth year-on-year. This performance reflects a combination of high demand in the aftermarket, flawless execution on our OE order book in the fourth quarter and contributions from acquisitions completed in the year. We expanded our operating margins by 150 basis points, exceeding our target of 20% a year earlier than expected reflecting both the success of our Performance Excellence Program and the quality of our new software solutions business. We once again delivered against our free operating cash conversion target of 90% to 100%, supported by a disciplined operational performance and the maturing of our Weir business services functional capability. We grew our constant currency operating profit by 15%, significantly ahead of last year, and underpinning another year of predictable dividend growth. And finally, our absolute Scope 1 and 2 emissions are down 31% now against our 2019 baseline, putting us ahead of our original 2030 SBTI target for a 30% reduction. On top of our strong financial performance in 2025, we also made significant strategic progress in advancing our growth strategy with meaningful self-funded acquisitions and partnerships in digital, geographic expansion and product extensions. As we continue to integrate these businesses into our One Weir platform, all transactions are performing well and expect to generate returns well above our cost of capital. Together with several new product launches, we've considerably expanded our addressable market of mission-critical solutions and created a unique technology proposition to the mining industry. In summary, 2025 was an exceptional year for Weir, and our achievements reflect the dedication of my outstanding were colleagues around the world. whose commitment to our customers and passion for our purpose underpins our success to date and who are more excited than ever about what we can deliver in the future. I'll now hand you over to Brian to take you through our financial results in more detail. Brian Puffer: Thank you, John, and good morning, everyone. As John just mentioned, we are delighted by the operational execution from across the group during 2025, which is evidenced in our strong financial results. During the year, orders increased by 7% to GBP 2.6 billion, supported by our high level of demand for our market-leading products and strategic acquisitions. Original equipment orders were unchanged year-on-year, reflecting positive underlying demand for mine site expansions and debottlenecking solutions, offset by the phasing of large greenfield projects. Aftermarket orders grew by 8%, supported by high mining activity levels and contributions from acquisitions. Revenue increased in kind by 6% to GBP 2.6 billion reflecting strong execution of our order book, particularly in the fourth quarter. Original equipment revenue increased by 2% from shipments of medium to large projects in Minerals as well as smaller brownfield optimization and debottlenecking projects. Aftermarket revenue grew by 8%, supported by hard rock mining production trends which drove demand for wear parts and expendables across both divisions. Operating profit increased by 15% year-on-year to GBP 518 million, resulting in operating margins of 20.2% and an increase of 150 basis points. This strong performance reflects both incremental performance excellence savings and contributions from our acquisitions in software solutions, which I will cover in a moment. Profit before tax of GBP 447 million was GBP 19 million ahead of last year despite a GBP 22 million translational FX headwind. Growth in profit delivered a 3% increase in EPS for the year to 123.8p per share. Turning to cash. We're free operating cash conversion of 92% was within our target range of 90% to 100%, reflecting an increase in profits, offset by higher working capital due to a buildup in inventory prior to the closure of some of our operations as part of Performance Excellence as well as the impact of U.S. tariffs on our year-end inventory balances. As expected, following significant acquisition activity in 2025, net debt-to-EBITDA increased to 1.9x toward the top end of our range following acquisitions. Return on capital employed likewise decreased by 140 basis points to 17.9%, though still well above our cost of capital. Taken together, our strong financial performance in 2025 underpins our full year dividend of 41.7p per share, a 4% increase from last year. Turning to results in each of our divisions, starting with another strong performance for Minerals, which included the launch of new technologies to expand our addressable market, the completion of the Townley acquisition and the delivery of several key performance excellent work streams, which supported further margin expansion. Market conditions are positive with gold and copper prices reaching all-time highs and driving strong demand as customers sought to maximize production from existing assets. Mineral orders grew by 5% in the year, original equipment orders were stable, reflecting a lower level of large orders as expected. Excluding these projects, orders increased by 7%, highlighting the positive underlying growth in small- to medium-sized projects. In aftermarket, orders grew by 7%, supported by our expanded installed base, higher demand for pump spares and communation parts. As well as orders from Townley during the 4 months of our ownership post completion. Revenue increased by 6%, reflecting original equipment product shipments, positive mining market trends and a contribution from Townley. Aftermarket revenue grew by 7% supported by strong performance in North and South America and underpinned by positive hard rock mining production growth in these regions. Operating profit increased by 11% on a constant currency basis to GBP 406 million with performance excellence work streams and operational efficiencies, delivering further margin expansion to 21.9%. And an increase of 100 basis points. Our ESCO division delivered an excellent performance with growth in core GET products, expansion of the installed base of Motion Metrics solutions and further operational improvements in the division's foundry network. Orders grew by 11% with strong demand for our core GET products in mining and infrastructure markets, partly offset by normalized demand for dredge solutions. Excluding the GBP 44 million contribution from Micromine, like-for-like growth was 4%. Revenue was stable on a like-for-like basis, reflecting strong underlying aftermarket growth in core GET markets and Motion Metric Solutions, offset by the phasing of mining bucket deliveries, which impacted original equipment revenue. Total divisional revenue increased by 6%, including 41 million for Micromine. Operating profit increased by 22% to GBP 152 million with margins expanding 260 basis points to 21.4%, reflecting a contribution from Micromine of 120 basis points and incremental Performance Excellence savings. While the financial performance of Micromine is included within ESCO, we committed to update you on the key business operational metrics, which drive value post acquisition. In Micromine, customer retention increased to 94% with low churn supported by our semiannual product updates and world-class support. Recurring revenue for the year grew to 88% and as expected, annual recurring revenue grew 24% on an annualized basis. Turning to operating margins, which increased 150 basis points year-on-year to 20.2% and including a 10 basis point headwind from translational FX, primarily reflecting the deflation of the U.S. and Australian dollar. The key driver of margin expansion in the year were a marginal shift in minerals revenue mix towards aftermarket resulting in a 10 basis point tailwind. Incremental savings from our Performance Excellence program of 140 basis points highlighting the compounding benefit of the program with cumulative savings now at GBP 59 million. Initial benefits from our acquisitions in the year contributed 30 basis points as expected. And a 30 basis point headwind from increased R&D investment, supporting new product launches and material science advances consistent with our policy of investing 2% of sales and R&D. Taken together, these factors resulted in margins of 20.2%, achieving our goal of 20% margin a year early with more to come. Adjusting items totaled GBP 73 million for the year with costs relating to exceptional items of GBP 47 million. Costs across the 3 pillars of Performance Excellence program were GBP 45 million pounds, bringing the final total program costs to GBP 113 million below our previous guidance. Acquisition and integration costs were GBP 22 million, including GBP 5 million arising from the unwind of the fair value uplift on inventory for Townley. During the year, the U.S. entity, which held asbestos-related claims enter Chapter 11 bankruptcy proceedings and has subsequently been deconsolidated. We believe the remaining provision to be sufficient to cover future exposures with no further charges related to this provision expected. Other adjusting items reflect normal amortization of acquisition-related intangibles, which increased as expected and charges associated with asbestos provision to the date of bankruptcy. Turning to returns, where adjusted operating cash decreased by GBP 25 million to GBP 566 million, reflecting increased working capital outflows due to phasing of safety inventory supporting our Performance Excellence activities and large original equipment order deliveries, both of which we expect to unwind as operations rebalanced across our platform in the coming year. Working capital as a percentage of sales increased by 170 basis points to 22.4%. Though as mentioned, we expect to return towards our 20% target as our operations normalize. CapEx was marginally lower year-on-year at 1x depreciation compared with 1.1x in the previous year, while free operating cash conversion decreased slightly to GBP 475 million resulting in free operating cash conversion of 92% within our target range for the year. Turning to liquidity, where free cash flow decreased to GBP 267 million, reflecting higher tax payments increased finance costs and outflows related to settlement of financial derivatives in relation to our refinancing activities. Following the self-funded acquisitions of Micromine, Townley and Fast2Mine and the strategic investment in CiDRA Net debt-to-EBITDA was 1.9x on a lender covenant basis within our target range following acquisitions. Jon will provide more detail on our 2026 outlook later in the presentation. Though this slide sets out some key modeling considerations for the year ahead, including: First, we expect net interest cost to be GBP 90 million, reflecting our acquisition and refinancing activities in 2025. We expect CapEx and lease spend of around 1.3x depreciation as we look into making investments in our foundries as well as the start of a company-wide SAP S/4 implementation. We remain on track to delever at pace and expect to return towards our normal operating range of 0.5 to 1.5x by the end of 2026, supported by a free operating cash conversion of 90% to 100%. We anticipate exceptional cash costs of around GBP 25 million to GBP 30 million, primarily relating to acquisition and integration costs from our M&A activity in 2025 and from the completion of final Performance Excellence related products. And finally, we expect our effective tax rate to be 28%, in line with the current year. As we look ahead, we have taken decisive actions to address legacy balance sheet exposures, positioning Weir with a stronger and cleaner balance sheet as we pivot our focus to delivering growth. As mentioned earlier, we have deconsolidated the U.S. entity containing asbestos provision and expect the existing provision to be sufficient to cover any future exposure. In addition, our defined benefit pension schemes have gone from a circa GBP 100 million deficit to a funded surplus making the need for any future special cash contributions unlikely. And finally, as we enter the final year of our Performance Excellence program, we have increased our total savings target to GBP 90 million. By the end of 2025, we have expensed all program-related costs totaling GBP 113 million below our previous guidance. Going forward, we will continue to incur acquisition and integration costs as we convert our M&A pipeline, which will drive amortization from related intangibles. In future, this means we will have a simplified exceptional items. Improving the quality of our earnings and the consistency of our cash generation. To summarize, mining markets remain supportive with high levels of activity in our core mining markets as our customers deliver on the growing demand for critical metals. With ongoing expansion of our installed base, combined and contributions from acquisitions, we see a strong underpin for future demand for our aftermarket products. In 2025, we executed strongly delivering revenue and margin growth while executing on our Performance Excellence program ahead of schedule and under budget. Cash conversion remained within our target range, and we delivered another increase to our full year dividend. We completed the acquisitions of Micromine, Townley, and Fast2Mine, and while we expect some additional costs arising from refinancing of this acquisition activity, these investments will be accretive both to growth and margins. Our strong cash conversion will support deleveraging at pace and our strong clean balance sheet is positioned for growth. Overall, we delivered a strong financial performance in the year. And as we move through 2026, we have strong momentum across the group and are confident in delivering another year of growth. Thank you, and I will now hand back to John. Jon Stanton: Thank you for that, Brian. Now turning to our business review. I'll share more details on our strategic progress in the year and set our view of market conditions and the outlook for 2026. Starting with our Weir strategy where our pillars of people, customer, technology and performance are fully embedded throughout the organization with top to bottom alignment on our priorities across our global team. At our Capital Markets Day in December, I presented our refreshed framework, acknowledging the opportunities and challenges which come as were continues to evolve. Going forward, our strategy specifically reflects the adoption and utilization of AI, the opportunity we create through mining industry thought leadership, our capability to deliver transformational solutions to our customers and our capacity to leverage lean operations and high-quality and efficient global business services. As I mentioned in my introductory remarks, in 2025, we made significant progress on advancing our growth strategy in digital, geographic expansion and product extensions evolving our business in line with our clear capital allocation policy. So taking each in turn, on digital, we accelerated our strategy by embarking on our mission to create a global leader in mining software solutions with Micromine, Fast2Mine and Motion Metrics, we've created a market-leading end-to-end offering, and 2026 is the year of bringing it all together. Progress-wise, the integration of Micromine is complete. Fast2Mine has started very strongly in pursuit of the 1-year earnout. Motion Metrics has officially now moved into the software segment within ESCO. With this platform, Weir will connect domain knowledge in extraction and processing with upstream data to drive unique customer insights and drive productivity at a time when the industry needs it the most. Our cross-selling pipeline continues to build. And I'm really encouraged by the great collaboration going on between our hardware and software businesses as we leverage their collective strengths to grow faster. Turning to our geographic presence. We made several investments enhancing our footprint in some of the world's fastest-growing mining regions. The acquisition of Townley strengthened Minerals presence in North America, adding more phosphate exposure and completing our global foundry capacity plans for the division. Sales and marketing integration is now well underway. And we're focused on incorporating the Florida foundry into our Zero Harm safety culture with investments already made in upgrading the physical environment. Earlier this week, we announced the completion of our acquisition of the remaining share in ESCO'S Chilean joint venture ESEL, strengthening ESCO's ability to serve customers across South America and bringing more foundry capacity in-house. Between signing and completion, the ESCO team has worked tirelessly with great support from Elecmetal, to prepare customers for the transition and set up our own sales and logistics capability in Chile which leverages the existing minerals footprint. This means we're ready to hit the ground running on completion this week. And at the Future Minerals Forum in January, we signed a joint venture agreement with Olayan a powerful partner in Saudi Arabia, marking a significant step forward, which positions were for growth in this rapidly expanding mining and metals market. We're delighted to have Olayan as our partner again, following our previous successes in oil and gas. But finally, we invested in filling product gaps in our future-facing mill circuit solution. Just as we did with ENDURON and ELITE screens, we have in-house developed the ENDURON vertical stirred mill with novel proprietary features, offering course, fine and regrind capabilities with dramatically lower energy costs than ball mills. We've already received our first VSM order, generating an important reference for the new technology. In addition, we signed a global collaboration agreement with CiDRA to commercialize their new P29 separation technology, which offers improvement in throughput of over 40% compared to traditional grinding circuits. Like our other flow sheet solutions, P29 is modular meaning it can be retrofitted onto existing sites to improve productivity as well as form the core technology to future greenfield flow sheets. Now moving back to progress on our organic strategy where, in 2025, we is leading with real purpose in promoting the sustainable and efficient delivery of critical resources. For example, in November, we launched our newest industry report untapped which is driving new conversations about water and mining with our leading thinking, technological expertise and broadened flow sheet offering, we're strongly positioned to support the industry in a shift to more strategic water management. While delivering technology for our customers to meet their sustainability challenges, we're also delivering a more sustainable wear, inclusive of recent changes to our foundry footprint and expected market growth, we still expect to meet or exceed our Scope 1 and 2 emissions reduction target of 30% as a group by 2030. Externally, we have retained our A score for climate transparency from CDP for the fourth consecutive year and along with our updated climate transition plan, we continue to advocate for the right frameworks to drive progress in the heart to abate mining industry. Turning to our people pillar. We continue to create a safe and purpose-driven workplace for all colleagues. On safety, our ambition is 0 harm. But in 2025, we fell short as our total incident rate increased over the prior year. Encouragingly, through focus on leadership and best practice, there has been a reduction in the number of recordable incidents in the second half of the year, and we're committed to maintaining this momentum through a broader strategy refresh in 2026. We continue to invest in creating an inclusive environment where people can do the best work of their lives. Employee engagement remains high with our Net Promoter Score of 49% in the top 10% of manufacturing companies globally as benchmarked by Peakon. Within Software Solutions, our full year employee retention rate of 87% reflects the success of the integration program at Micromine. External recognition continues with Weir ranked in the top 10 of Britain's Most Admired Companies and achieving Tier 1 status in CCLA's Mental Health Benchmark for the first time alongside only 9 other companies. For me, the real highlight of the year that demonstrates the strength of Weir's culture has been the collaboration on cross-selling software solutions through our global footprint. Early signs have been very encouraging with war introductions to several Tier 1 miners leading to many new opportunities, our first license sales and a strong pipeline of additional opportunities developed for 2026. Turning to our customer pillar, where our GBP 40 million order to provide tailings solutions to Codelco in Talabre, Chile illustrates both our proven experience on large-scale, sustainable trainings operations as well as the importance of local presence, delivering the world-class service were is known for. We are delivering on our digital vision, our commitment to annual upgrades and software features such as fully integrated stope optimization with advance underpins micromine market-leading recurring revenue growth and customer satisfaction. Motion Metrics had a great year in 2025 and is now transitioning to the full annual subscription-based service model, which has been so powerful for Micromine. Underpinned by our long-standing relationships with customers, and our technological leadership, Minerals continues to gain market share in large mill circuit pumps, converting over 90% of competitive field trials during the year, consistent with our historical success rates. Likewise ESCO grew its market share in core mining markets, completing 159 net major digger conversions, an increase in successful conversions of 18% versus the prior year. While ESCO continues to be the clear market leader in the mining GET market globally, we have the opportunity to leverage the brand to access new opportunities through our attachment strategy. Working directly with our customers, we designed a production master, a new highly engineered hydraulic shovel bucket that is more robust in key areas of where allowing longer cycles between maintenance. Our direct-to-customer approach has led to exceptional growth in Australia. In the past 3 years, ESCO has increased bucket sales in this key market by 700% with more to come. Turning to the technology pillar where we continue to invest in our core hardware solutions as part of our growth strategy, maintaining our market leadership across the mill circuit, Minerals released new ENDURON crushers and next-generation mill circuit pumps delivering higher productivity, reduced downtime and lower carbon emissions for our customers. Our next intelligence solutions are transforming how we create and capture value as customers focus on increasing throughput and minimizing unplanned downtime. We have onboarded over 110 customer sites over the last 3 years, and in September, we announced a new strategic partnership with Viking Analytics to enhance our digital wear monitoring solution with AI-enabled early predictive wear detection. In ESCO, we recently launched Vertesys, our next-generation GE system for infrastructure markets, which provides an increase in wear-life and reduced adaptive change time which building on NEXUS in mining reduces operational downtime and total cost of ownership for our customers. By continuing to innovate, we are further pushing the boundaries of slurry pumping at Teck, Highland Valley Copper. We built our relationship on the existing concentrator line around other installed products. The customer wants a higher output and less downtime, initially relying on next intelligent solutions and support from our nearby Kamloops service center as a result of our demonstrated service and technology leadership, we were invited to trial our MCR 760, which is now the largest story pump working in North America ultimately displacing a long-established competitor on site. Turning to the performance pillar, where we've upgraded our final cumulative performance excellence savings target by GBP 10 million taking us to GBP 90 million overall. With final total cost for the program of GBP 113 million, GBP 7 million less than our prior estimate, the program has delivered an excellent return on investment and build continuous improvement capability that will keep delivering efficiencies going forward. Each area, capacity optimization, lean process and GBS has overachieved repeatedly with minerals, ESCO and corporate teams working together seamlessly. As we enter the final year of delivery, we can reflect on a highly successful program which has not only underpinned our operating margin expansion, but also created a scalable platform that will enable future growth for many years to come. So now looking ahead, Activity levels in our core mining markets remain strong, with customers increasingly investing in expansion and debottlenecking CapEx as supply deficits in critical minerals emerge. This shift is driving positive policy developments in key jurisdictions such as the United States and Chile, where permit and licensing regulatory frameworks are being reconsidered to allow new projects to develop faster. Meanwhile, engagement among our mining customers and ePCMs on technology and innovation is encouraging as the need for new and better solutions the challenges of significantly increasing capacity in the near term become ever more apparent. Additional demand drivers such as AI, defense manufacturing reshoring will further underpin growth in ore production. Faced with declining ore grades and growing geological complexity as the best resources are mined, customers are putting more stress on their existing equipment, leading to more maintenance events. Together with our growing installed base, current market conditions are supportive of increasing need for our spares, expendables and services. So turning to our outlook for the year ahead. We entered 2026 with a strong opening order book and expect to see increasing CapEx, which will support OE growth. In the short term, we see a continued bias to brownfield projects with the potential for larger expansion projects to accelerate, although as ever, the timing is difficult to predict. Demand for our aftermarket spares and expendables is strong. Coupled with modest price increases, we have a solid foundation to deliver another year of mid-single-digit growth in aftermarket revenue while our software businesses remain on track to deliver further strong growth in line with our acquisition expectations. So overall, we expect another year of growth in revenue and operating profit with 50 basis points of operating margin expansion. While we've upgraded our final Performance Excellence savings target, we expect some portion of the benefits to be reinvested in R&D and IT systems, specifically a final investment in a single instance global ERP key to unlocking another level of future operational efficiencies and margin expansion. Finally, we expect improvements in working capital and result in free operating cash conversion of between 90% and 100% consistent with our medium-term guidance. So putting together today's key messages. We delivered a strong operational performance in 2025, reflecting flawless execution of our order book, robust aftermarket growth and contributions from acquisitions completed in the year. We made significant progress in advancing our growth strategy with meaningful self-funded acquisitions and partnerships in digital, geographic expansion and product extensions. We continue to deliver our Performance Excellence program at pace, delivering savings to date of GBP 59 million and upgrading our final target to GBP 90 million in total cumulative savings. In '26, we expect to deliver another year of growth and margin expansion supported by a positive market outlook. And finally, we're delivering all the above in the right way, providing our people with purposeful work and personal growth and customers with innovative technology solutions that accelerate sustainability in mining. Looking forward, the long-term value creation opportunity for Weir is even more compelling. We've created a global leader in engineered hardware and software for the mining industry. Demand for critical metals continues to build and customers are increasingly recognizing the need for new, more efficient solutions to unlock future supply. And finally, we're providing a clear pathway to sustain growth and total shareholder returns through a clear capital allocation strategy, sector-leading operating margins and consistently high cash generation. Thank you for listening. And Brian and I will now be pleased to take any questions that you have. Operator: [Operator Instructions]. Our first question is from Jonathan Hurn at Barclays. Jonathan Hurn: Just a few questions for me, please. Firstly, can you just sort of explore the sort of the growth outlook for FY '26. So obviously, you're guiding to mid-single-digit growth. That's pretty similar to -- or I should say, mid-single-digit organic growth, that's pretty similar to what you did in FY '25. So essentially, there's no real pickup coming through I mean the question is really what drives that pickup? Is it essentially bigger large orders coming through. And if so, can you just sort of talk us through the outlook for those? And do you feel that they could potentially come through in the second half of this year? Or would it be more FY '27? The second question was just on the topical Reko Diq. Just what you're seeing there, please? I mean, did all the orders get shipped that were scheduled. What's left to go there in terms of OE? And how do we think about sort of the aftermarket revenue there? Obviously, does that get pushed out further on the back of sort of the disruption. And then the third and final question was just on Micromine. Obviously, recurring revenue growth was 24% in FY '25. I think to get that deal math to work on a 3-year basis, that growth rate, I think, has to be higher. So how should we think about that sort of recurring growth going forward, particularly in 2016? Do you think it can accelerate from the 24% that we did in FY '25, please? There are three questions. Jon Stanton: Yes. Thanks for that, Jonathan. So yes, I think on the growth question, look, stepping back, we're seeing a continuing positive demand environment across the global mining and metals complex. Driving ongoing demand for aftermarket and a consistent level of smaller OE brownfield debottlenecking type projects. So that underpins us being bang in the middle of the fairway on the organic growth across the aftermarket and fairly stable levels of original equipment on a brownfield. We do expect that or we see that the -- I would say, the environment and the backdrop in terms of potential for further growth in CapEx to come through is looking increasingly positive. I would say that -- our large customers are probably more bullish this year than they were at this time last year. There is an appetite, I think, to invest to grow production given the emerging supply deficits, which probably come through quicker than people expected in terms of some commodities and also what's going on politically in terms of government and regulatory interventions to try and free up some of the things that have been robust to the development of greenfield projects. So I think the setup is feeling increasingly positive. But as ever, it's really, really difficult to call when these things will come through. So I think the pipeline is good. We can see the projects out there. But at this stage, it's not really the right thing to do to say, look, we're definitely going to get it this year. We may do. We may sort of see in the latter part of the year a pickup, but we'll call it when we really start to see it coming through. But I think more broadly, the general environment remains highly positive in terms of the demand environment with upside. That's how I'd characterize it. In terms of Reko Diq look, from a balance sheet perspective, we've now delivered and been paid for the HPGRs. So we only got a relatively modest amount left in the order book. that is covered by advanced payments, so -- and cancellation clauses. So we have no balance sheet exposure at all. Clearly, we would love to see that mine get built and the aftermarket opportunity to come through. And we're hopeful that it will do. We note that it's under review at the moment rather than anything more firm than that. We know that the Pakistani government is an investor in the project. So there is a real local interest to build the mine and start the development of the mining industry. And we are actively engaged with that at the political level in Pakistan. So we're hopeful, but we don't know at this point in time and obviously in the event of the weekend at a further, sort of, complication, if you like, to how that may play out. So we'll see. So bottom line is we have no exposure, and we wait and see whether the longer-term aftermarket opportunity will come through. On Micromine, I would say that, yes, I mean, the recurring revenue growth that we outlined is very much in line with the historic performance levels of the business. So where we expected it to be on sort of an organic basis, if you like. And 2025 has been all about us setting up the ability to exceed that growth in terms of leveraging the minerals and the ESCO footprint globally to essentially be able to drive revenue growth above that level. And we're very clear that over the next 3 years, we want to deliver, we need to deliver higher revenue growth than that. '25 has been about the setup. We've now got a great pipeline. We've had our first incremental license sales from a Tier 1 customer off the back of the -- of leveraging the existing platform. So that's working in line with plans. That will come through as we expect, and that will -- as we go through '26, we should see an acceleration in that growth. Operator: Our next question is from Lush Mahendrarajah from JPMorgan. Lushanthan Mahendrarajah: I've got two, if that's okay. The first is just on the margin guidance. I mean, 50 bps expansion would be helpful if you just give us sort of quantify the moving parts of pluses and minuses in that. And then in terms of within that, the R&D and IT investment, I know you sort of touched on it, but be interested to hear what exactly you're doing there? And also, I guess, how we should think about that cost as we sort of look forward? Is it -- should we be thinking sort of a continued headwind in the outer years? The second question is just on aftermarket orders. I think the growth was a bit lower in Q4, but I know you have that sort of tough comp from that multi-period order. I guess can you just remind us what the underlying aftermarket was? And I guess, should we be seeing that accelerating from here, just given some of your gold and copper customers are running their sites a bit harder, those are my two questions. Jon Stanton: Okay. Thanks for that. Well, on the margin point, I'll make an overarching comment and then turn it over to Brian to take you through the moving points. But I just want to remind you, we've been very consistent on the setup for our margins and having achieved what we've achieved over the last few years to get above 20% operating margins. The setup has been very clearly that we want to be a 20-plus a 20%-plus operating margin company, and we're going to have the ability to sustainably stay there through the ongoing benefits of performance excellence and continuous improvement. And within that, we will have the ability to invest in opportunities to develop the business through R&D or other ways. We'll have the ability to deal with any headwinds that may come from a CapEx cycle and therefore, OE kind of margin hit as it were. And in today's quite difficult world, have the ability to weather any bumps in the road that may come along. So that's really how we're thinking philosophically about the business. The other thing I would say in terms of the overarching comments is that clearly, every year, we have outperformed our guidance in terms of operating margin targets in the journey over the last 4 years from middle teens to now north of 20%. So at this point in the year, where we're guiding, we think 50 basis points is an appropriate place to be. We've got a high level of confidence in delivering that. We're quite conservative, as you know, including on our pricing assumptions. We're probably towards the lower end of the range of what performance excellence might deliver. So the 50 basis points is our sort of PAT high confidence level in terms of margin expansion at this point in time. But again, as I pointed out, our track record is that we outperform. In terms of the moving parts as we see them today, Brian? Brian Puffer: Yes. Well, thanks, Lush, for the question. And the moving parts are actually quite simple this year. They all could change. So mix we're seeing is pretty neutral, not having really an impact. As we sit here today, the FX, we're not expecting a big headwind or tailwind. So there is no real movement in terms of margin. Obviously, we'll have to see how that plays out. So there's really three main levers in the margin bridge. On the positive side, we have a 110 basis point increase for Performance Excellence. As John said, we've increased our guidance from $80 million to $90 million. And we hope to deliver more than that. And so that's what we're actively working on to do. With the acquisitions, we should see a 20 basis points increase in our margins. So that's having a positive impact. And offsetting that is an 80 basis points decrease, and that's the investment that Jon talked about. Both in terms of some new systems that we need to implement and which will deliver further benefits in the future as well. And the R&D type expenses, building out new product lines. And Jon talked about some of the things we're doing in that space in his speech. But obviously, we need to invest in that and to grow. So, that's sort of the slight down on the margins, and that gets us to 20.7%. But as Jon said, that's -- we feel very confident in that number, and our goal is to beat that. Jon Stanton: Thanks, Brian. And yes, Lush, on the Q4 aftermarkets, look, I'm delighted with the orders that we got in the fourth quarter. It was an incredibly -- probably the highest quarter in terms of aftermarket we've seen, as you say, the comp was tough, and that was because we had the other half of the multi-period order in Q4 last year, which obviously was all recognized in Q2 in 2025. So you add that back and minerals would have been 2 or 3 percentage points higher in terms of its aftermarket growth year-on-year on a like-for-like basis. But again, I think you have to look at the aftermarket performance over the course of the year for both businesses was exactly what we said it would be at the start of the year. We said mid-single digit. Both businesses delivered 5% aftermarket growth. And I was really delighted with the strength of the orders in the fourth quarter. So it means we enter 2026 with a really good order book, and I think that's just indicative of going back to Jonathan's first question. that's indicative of the setup in the markets and the opportunity for growth as we move through into 2026. Lushanthan Mahendrarajah: And so just to follow up on that, do you think that sort of -- when you think about aftermarket order growth for this year, do you think that sort of mid-single-digit level again? Or the scope... Jon Stanton: No. I mean I think that's our working assumption at this point in time based on the underlying fundamentals and growth drivers that we see. Again, could it be more than that than absolutely. I mean we're obviously watching events in the Middle East very closely and how that plays out. I don't think it changes any of the fundamentals. But yes, I mean, again, mid-single digit is our sort of high confidence level guidance at this point in time. The setup is strong. Might we outperform and the potential is clearly there. Operator: Our next question comes from Vivek Midha from Citi. Vivek Midha: Just a couple of quick ones for me. So the first one is on the free operating cash flow guidance of 90% to 100%. You did highlight some headwinds from the cash costs of the Performance Excellence Program, but also signaling the net working capital sales ratio could come down from a temporarily higher level in 2025. So were those the two key moving parts? Is there any upside risk to your guidance there? My second question is just around maybe the cost implications from higher raw material prices, how are you seeing pricing evolving for your spares and in the broader aftermarket? Brian Puffer: So thanks for the question on cash. Yes, our cash delivery was 92%, well within our range. There were some headwinds in the fourth quarter. One of the largest ones was with some of our performance excellence, we've been moving operations and closing operations. And one of the things that we pride ourselves on Weir is making sure our customers always have their equipment. And so with these moves, we built up some safety stock at the end of this year, which contributed to higher inventory values. We saw some impact from tariffs on the inventory, and there was just some normal buildup with such a large delivery in you may flip out of inventory, but some of that goes into receivables. So your working capital doesn't go down. So we ended up at a much higher working capital as a percentage of sales in '25 compared to '24, I think it was about 170 basis points. We see that returning to normal, and our goal is to get that back down to around the 20% mark. So there were some one-offs this year that we see normalizing through 2026. Jon Stanton: Yes. And I would just add to that. If you go back to '24, we delivered 102% where we had benefits of some advanced payments coming through. And this year, we're carrying some extra inventory for the reasons Brian sets out. So we're very, very confident that the business is absolutely capable of delivering the average through the cycle, the middle of that range of 90% to 100%. So we feel really good about that. And again, we've built a track record of now consistently delivering that. On the cost point of view, in terms of our pricing assumptions at the moment, we've built in our expected view of inflation across raw materials and other input costs at this point in time. Obviously, again, there's now a little bit of uncertainty as to whether we might see higher levels of inflation in commodities. Certainly started with the oil price. Does that flow through into some of the other raw materials that we use? Possibly. And again, I just -- I'd refer you back to the track record over the last few years of consistently being able to -- where we see inflation or rising costs managing it well through our network and being able to mitigate to some extent but where we can't, then using pricing to be able to protect our gross margins. And you all know that the gross margins that we earn on our spares on the aftermarket is the real driver of profitability and cash for the business. And we've managed the business on those gross margins, and we've consistently demonstrated that we can do that and maintain or grow those gross margins through pricing. So I think if things change, we have the ability to adjust the assumptions and pass through a little bit more pricing. Just a related Point, I'd comment on at this point, obviously, there's kind of been some new news on tariffs, further twists and turns, but the effect of that on us is pretty immaterial to be honest, and no overall change in terms of what the President Trump latest announcement on tariffs are. Operator: Our next question is from Andrew Douglas with Jefferies. Andrew Douglas: All my questions have really been answered, but I will add one, please, to the mix. Can you talk about the M&A pipeline? And your intentions over the next, let's call it, 12, 18 months. You clearly bought two large acquisitions in software and other the two couple of more bolt-ons including one that completed last week. Can you just talk about where you want to take this business now from a software perspective? And if you can throw in your thoughts on AI and how you're using AI as part of your software proposition. And maybe you want to comment on whether you think it's a risk given the world's a slightly different view of software event? Jon Stanton: Yes. Hi, Andy, thank you for the questions. Yes, look, from an M&A pipeline, obviously, 2025 was a very busy year for us and some -- the acquisitions that we've been tracking for several years all came through in a flurry, which was great that we were able to be successful and get them over the line. As Brian said in his speech, it doesn't mean that we sort of went up towards our higher limits in terms of our net debt to EBITDA. So we see 2026 really as a year of coming back down into the normal operating range and using the cash generation to bring the debt level back down. So that's very much the focus. But it doesn't mean that we're done with our acquisition strategy. We continue to see opportunities both in the software world to further develop on the platform that we've built, but also in the more traditional equipment space as well. So while we're going through a year of cash generation and paying down debt, we're going through a process of rebuilding the pipeline so that as we've got headroom, we have the ability to deploy that and compound growth adding to the underlying organic growth that we will see. And as I said, that has the potential to be hardware and software. On the software side, probably much more likely to be smaller bolt-ons such as Fast2Mine type size. We see the big -- and that -- by the way, that -- as I said in my speech, that acquisition is absolutely storming away in terms of what it's delivering so far. The potential to add smaller software businesses into the micro mine portfolio and platform and globalize and drive growth in that way is very, very significant. So the potential to do smaller bolt-ons in software is very much there and in the back of our minds. And I think now having been through a period of consolidation, most of the software businesses of scale that are mining specific have now gone to strategics basically. So I think RPM Global was the last one of scale that Caterpillar just acquired. So that's the dynamic there. In terms of AI, we're in -- we are stepping back. I personally believe that, as we said in our Capital Markets event in December, AI, big data and analytics, digital capability has a massive role to play in helping mining to scale up and clean up and to deliver on the commodities that are required. So we're embracing it. We talked a lot about it in our Capital Markets event. In terms of the threat aspect of it, when we look at what Micromine does, it's clearly absolutely mission-critical in terms of mining process and mission-critical in terms of safety as well. I think for those reasons, it's very unlikely that customers are going to just kind of unleash Agentic AI on their operations and do away with the need of software. So I think I think for applications like what our software does. I think the threat of that is very, very low. I'd also say that the ability of AI agents to write code that could compete with what we're doing is very, very low as well because our code and the value that we bring to our customers is based on years and years of data, proprietary data, proprietary training materials, it's not public. So an AI agent can't go and write the code based on that data. That's why the software that we -- the two reasons there that the software that we're providing to customers, we feel very strongly is well protected against any threat. Hopefully, that answers your question. Operator: We have time for one more question. So the last question is from John Kim with Deutsche Bank. John-B Kim: I'm wondering if you could give us a bit of color on kind of the pipeline versus more recent years. which mineral exposures do you see kind of driving the growth, call it, the next 2 or 3 years? And any color specifically on copper and gold production would be helpful. we understand that pricing is quite sportive, but production volumes have struggled given a number of events. Any color there would be really helpful. Jon Stanton: Yes. No, I think gold is obviously in a super place at the moment, driven by the geopolitical situation and return of gold is a long-term store of value, government's buying goals. Given everything that's going on in the world at the moment, we don't see that changing. And our customers are running hard to increase production and develop new capacity. So we see that everywhere in the world from a gold mining point of view to the extent that even in North America, very old gold mines that were shut down a long time ago because they were economic or being reevaluated to potentially be reopened. So there's a lot of kind of very old brownfield activity, if you like, going on in gold alongside the production growth drivers on the larger gold mining operations around the world. So I think the backdrop for gold strong. likewise copper supply deficit there emerged earlier than I think people were forecasting driven by some of the production challenges that we saw through last year. Clearly, the long-term demand outlook for copper is phenomenal, and it's great base. It's our largest exposure. We're hopeful that actually some of the locations that did see production challenges last year, we'll start to be able to ramp up, particularly in South America. So we're -- we're watching that closely and talking to those customers about how we can support them and bringing some of that production back up. But clearly, there's a expansion of copper production is a massive theme, and a lot of the pipeline is weighted towards that. Equally, our third largest exposure iron ore, I think despite concerns about the demand environment there, the price has held up very, very well. And particularly for the higher grade iron ores that we're mostly exposed to then the theme there is we continually move towards green steel and hydrogen steel, those higher grades is going to remain in very high demand. So I think that plays to the strength of what we now can do from the comminution capability perspective. So I think for our big three exposures, the environment looks really, really good. But even the areas that have been weaker over the last 12, 18 months, if you think about the PGMs, if you think about nickel and lithium, then those commodity prices have come back up, and we see customers already sort of starting to respond to that. So again, that's probably one of the areas where we would see -- where we would see potential upside from this point in time. And I think the pipeline of broader expansion opportunities, it does cover all of the above. So there's a little bit of everything in there, which sort of again points back to the diversified nature of Weir and the resilience that we have. So the relevance we have is all of the supply of these critical minerals is ramped up. Yes, it's a common theme. We've talked about our peers have talked about it, that the backdrop in terms of demand environment remains very active and strong. Operator: Thank you. This now concludes the Q&A session. So I'll hand back to John for any closing comments. Jon Stanton: Thank you, operator. Thank you, everybody, for questions. I appreciate that. And obviously, if there are any follow-up questions during the course of the day, very happy to respond to those as and when. But thanks again for your time today. We do appreciate it. Thank you.
Pedro Cota Dias: Good afternoon, everyone. Thanks for joining, and welcome to NOS's Fourth Quarter and 2025 Full Year Results Conference Call. As usual, we will start with a brief presentation by our CFO, Luis Nascimento, and then we'll open for Q&A, and we have the executive team in the room for that as well. So Luis, over to you. Luis do Nascimento: Thank you, Pedro. Good afternoon to all, and welcome to our conference call. We will begin, as usual, with the main highlights of this fourth quarter. In the quarter, NOS maintained a positive operational momentum despite new competitive environment, leveraging 5G and nationwide fiber fixed infrastructure, also a healthy cash flow generation driven by top line growth, operational efficiencies across OpEx and CapEx structural decline. And an attractive shareholder remuneration with a strong dividend yield while maintaining a robust financial position. A quick overview of our main KPIs. During fourth quarter, consolidated revenues increased by 0.3% to EUR 486 million and EBITDA rose 4.4%. This solid EBITDA performance, along with a CapEx reduction of 4%, led to improved EBITDA CapEx -- EBITDA AL minus CapEx of almost 21%. Recurring free cash flow, excluding extraordinary effects, increased 132% to EUR 71 million and net income increased 58%, reflecting a solid operational performance and our strategic transformation program. Our annual numbers also reflect a strong performance, which we will discuss in more detail later in this presentation. So NOS has achieved upgraded classifications from both CDP and S&P Global Ratings, recognizing its significant ESG efforts. The CDP score improved from B to A, reflecting a leadership position in the fight against climate change, a distinction achieved by only 2% of the companies. Furthermore, NOS's S&P Global score increased from 58 to 75, nearly doubling the sector average of 40. As part of its dynamic strategy to create value, NOS is enhancing its customer value proposition through COMBINA, a new initiative in partnership with Galp and Continente. This program offers unique customer benefits, including up to a 10% discount at Continente and a EUR 0.30 discount per liter on fuel at Galp. These significant savings can partially or even fully offset the family annual telecom costs. With 150,000 customers in the first 2 months, COMBINA is a key component of NOS value proposition, translating into significant savings for our customers. Our SCAILE program with 140 AI use cases identified and already 40 implemented is a key driver of our efficiency, contributing to a 2.3% reduction in fourth quarter OpEx. The personal productivity vertical, one of our 7 SCAILE initiatives is successfully massifying AI across NOS. NOS GPT supports over 4,000 users with an impressive 40% daily adoption, and our FAAST training program has already reached over 1,400 employees. With SCAILE, we are effectively boosting efficiency throughout NOS. On the operational performance side, this was another strong quarter of Fiber to the Home. More than 6.1 million households are now covered by NOS Gigabit fixed network with Fiber representing almost 90% of households passed. This is a significant increase of 159,000 households quarter-on-quarter and almost 380,000 year-on-year. But despite a challenging competitive market, NOS delivered a strong fourth quarter with 2% increase to 10.9 million RGUs. With 60,000 -- 66,000 net adds, this quarter posted a good level of net adds despite natural fourth quarter seasonality. We achieved 7,000 net adds in unique fixed accesses in the quarter. Despite the seasonal slowdown and intense competitive environment, these results are consistent with [ pre-digi ] levels. Churn continue at low levels and new offers, WOO and naked broadband continue control, but with some impact in the mix of new customers. In mobile, with 62,000 net adds in the quarter, mobile RGUs increased 3.3% year-on-year, reflecting a strong performance, particularly in postpaid customers with higher ARPUs. Postpaid had 88,000 net additions, posting very strong results driven by WOO and by NOS's competitiveness on convergence cross-sell. Prepaid net additions declined 26,000 in the quarter, below fourth quarter '24, driven by the competitive pressure that impacted more on low ARPU customers. In summary, a solid operational performance despite the competitive environment. Now moving to Audiovisuals and Cinema business. The number of tickets sold declined 19% year-on-year, an improvement versus the minus 28% of third quarter, driven by a difficult October and November, but with a solid December with revenues flat year-on-year, supported on Zootropolis, Avatar and Now You See Me, all movies distributed by NOS Audiovisuais. On the financial performance side, NOS consolidated revenues rose 0.3%, mostly affected by an 8% decline in Audiovisuals and Cinema division that were offset by the resilient performance of the Telecom segment and by the solid 4.4% growth of IT. Telco revenues were flat year-on-year, primarily due to the performance of the enterprise sector that posted a 1.3% increase driven by large company segment and Wholesale. The B2C segment experienced a decline of 0.4% due to the increased competition impacting ARPU despite the strong operational activity and solid equipment sales, still an improvement versus the decline of minus 1.1% in third quarter. Revenues in the B2B increased by 1.3% to EUR 123 million, continuing the growth path from previous periods. The slowdown in the overall revenue growth of the business results from a lower volume of projects and resale with lower margins. The new IT business showed a strong increase of 4.3%, mainly driven by a solid 9% growth in IT services and despite a 3% reduction in the volatile resale of equipment and licenses. As previously explained, the Audiovisuals and Cinema division reported an 8% decline, driven by the 19% reduction in cinema attendance. So NOS's operational performance and solid results of NOS transformation program supported on Gen AI-driven efficiency program continued to deliver strong 4.4% EBITDA increase, significantly above revenues with a strong contribution from Telco and IT, which recorded increases of 4.4% and 11%. Audiovisuals and Cinema division posted a 1% EBITDA increase despite an 8% decline in revenues. NOS CapEx continues the structural declining trend, and this quarter dropped 4% to EUR 92 million, supported by a CapEx decline in all lines of businesses. Telco CapEx declined 1.2%, driven by a 2.6% reduction in customer-related investments. [ Expansion ] CapEx had a small increase of [ 0.4% ] this quarter, mainly driven by fiber projects as we approach the end of NOS Fiber deployment. IT CapEx declined 34% to EUR 1.9 million, explained by an exceptional customer-related investment during fourth quarter '24. And Audiovisuals and Cinema CapEx declined 24%, reflecting a return to a more normal spending levels in movies after the higher investment in 2024 caused by the Hollywood strikes and by a reduction in cinema CapEx. As a result, improved operational performance and efficient CapEx management drove to a 20.6% increase in EBITDA AL minus CapEx. Net income declined to 10.9% to EUR 63.8 million, primarily due to a reduction of EUR 31 million in extraordinary effects, mainly related to ANACOM refund of activity fees in fourth quarter '24. However, excluding these items, net income rose EUR 23.5 million, a 58% increase year-on-year. It's a strong increase driven by a strong EBITDA growth, supported by a solid operational performance and by a proactive cost management, complemented by a EUR 10 million contribution from tax reduction and by EUR 3.9 million in results from joint ventures. Free cash flow increased 155% with a EUR 2.8 million positive year-on-year impact from an extraordinary tax payment in 2024 related with the ANACOM refund of activity fees. Without extraordinary items, recurring free cash flow increased 132% driven by EUR 11.7 million from strong operational performance and lower investments, by a positive impact of EUR 22 million in working capital and by a reduction of EUR 5.6 million of income tax paid. So now moving on to the final year key financial numbers. Despite stronger competition, NOS demonstrated a resilient revenue performance in 2025 and strong OpEx and CapEx efficiencies leading to a solid EBITDA AL minus CapEx growth. Consolidated revenues increased by 1.6% with Telco growing 1.6% and IT 3.5%, offsetting a 2.6% decline in Cinema and Audiovisuals. Consolidated EBITDA also grew by 4.3%, while EBITDA AL minus CapEx saw a significant 15% increase. NOS showed strong growth in net income and free cash flow in the final year '25, excluding extraordinary items. Net income after adjusting for these items increased 29% and free cash flow, excluding these items, also rose by 15%, indicating a solid underlying financial performance. So at the close of the year, NOS's debt decreased to EUR 1.022 billion, and the financial leverage ratio dropped to 1.5x, well below the reference threshold of 2x. Additionally, NOS benefits from a lower average cost of debt, now 2.7%, representing a decrease of 0.8% year-on-year, reflecting lower interest rates. As end of December, the company held EUR 342 million in cash and liquidity. So with all these elements in play, the Board has approved a total dividend of EUR 0.45 per share composed of EUR 0.35 ordinary and EUR 0.10 extraordinary. This payment reaffirms our strong commitment to an attractive and sustainable shareholder remuneration. With this, we conclude our presentation, and we are now ready to answer to your questions. Operator: [Operator Instructions] And now we're going to take our first question. And it comes from the line of Ajay Soni from JPMorgan. Ajay Soni: I've got 3 questions. First is around your SCAILE program. So what headcount reductions could you deliver from this in '26 and in the midterm? And then where are the most of these -- could most of these cuts come from within your business areas? Second is around the slightly slower business growth we've seen from lower volume of projects. So what's the reason behind this? And is the Q4 growth expected to continue into 2026? And then the last one is just around your price rises in 2026. Could you remind us what you've done and then what the customer reaction has been so far relative to the price rises you did in previous years? Luis do Nascimento: First, well, we didn't understand completely the questions. But if I understood, the first one is on SCAILE. And if we can -- if we believe that we can continue to have these solid efficiencies for 2026. And yes, we do believe so. As I said, SCAILE is a long project. We have 140 use cases. We have begun only -- we have implemented 25% to 30% of them. So yes, we do believe that we can have efficiencies for the next couple of years. Miguel Almeida: Yes. The third question was on price raises. So what we did is this February, so this past month, we raised prices by 2.34%, which is in line with the inflation in 2025. And until now, the customer reaction has been very positive in the sense that there was no reaction, even when we compare to other price inflation increases in the past, so we didn't have them last year. But in the past, we had less customers either calling us or complaining. So the reaction in that sense was good, mainly because the amount of the increase is not that significant. I'm not sure we understood the second question. Luis do Nascimento: If I understood, it was about B2B resale. Ajay Soni: Sorry, it's around the business growth. So you mentioned the slower growth in Q4 was down to a lower volume of projects. So I was wondering what the reason was behind this? And then is this Q4 growth a level you expect to continue into 2026? Or should it accelerate from here? Miguel Almeida: This line of revenues from projects is very volatile. It has been always the case in the past, some quarters very strong, some quarters not that strong. It also -- we are always comparing to the same quarter of previous year. So if you have a good quarter last year and not so good quarter this year, the difference is significant. But there is no structural trend that you can take out of that. Probably next quarter will be okay. There's always a lot of volatility around this kind of one-shot projects. It's not like telecom revenues, which are basically monthly fees, which are recurrent and stable, but these B2B projects, not so much. But again, there's no particular trend or structural trend you can take out of these numbers. Luis do Nascimento: And the question comes from the line of Mollie Witcombe from Goldman Sachs. Mollie Witcombe: I just have 2. Firstly, some color on the competitive environment in B2C specifically would be fantastic. I've noticed that the ARPU in Consumer seems to be a little bit better in Q4. So just an idea of how you're thinking about incremental competition in Q4 and into Q1? And then my second question is just on IT growth potential. You previously talked about potential for 5% to 10% CAGR, 3-year CAGR market growth with 5% to 10% in applications, tech consulting, cloud, et cetera, and then 10% to 15% in cybersecurity. Could you give us an update on these trends? Is this still what you're expecting to see? And how are you seeing the markets develop? Miguel Almeida: Yes. Thank you very much. In terms of competitive environment, I don't think there's any significant update. We have been living more or less the same competitive environment since November '24 for the reasons you all know. The dynamics hasn't been different throughout 2025. Nothing really relevant changed already this year in 2026. So I would say that from that sense, of course, in a level of competition, that is much more aggressive than we had before November '24. But since November '24, it has been the same. And we don't expect it to change going forward. So it's a new reality. We have been living under this reality with the strategy that we have communicated. So with the main brand NOS, with a premium service and with a discount brand WOO, fighting the low end of the market. We are happy with the results, and we don't see trends changing materially going forward. In terms of IT growth, yes, that's -- we're still kind of bullish around the IT business. We believe we have tailwinds, and we will continue to grow in that business. So the numbers you mentioned, 5% to 10% is within our -- also our estimate up until now. And when we look at 2025, we actually managed to be slightly above that, but we'll see going forward. But we are still betting on significant growth on that line of business. Mollie Witcombe: Understood. Sorry, just a follow-up maybe with a third question. Potential upside from AI on CapEx has been a bit of a theme this quarter amongst other European telcos. Just you've talked a lot about kind of potential from AI, but just wondering specifically what you're seeing on CapEx. Miguel Almeida: Well, what we're seeing is across different cost drivers. Some from accounting point of view are considered OpEx, others are considered CapEx. But what we see is the impact is very transversal, very across many different functions, processes, areas. So yes, we see some impact there. But nevertheless, we were already planning beyond AI. We are already planning a decrease in terms of CapEx in 2026 when compared to 2025. But of course, it helps to have that reduction with this help from AI, which makes us more productive and as such, taking more out of each euro that we invest. Operator: And the question comes from the line of Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I have 3 questions as well, please. Perhaps following up on the question around pricing, and you mentioned the mix. And I think this year, we didn't have a price increase, but the Q4 ARPU trend and exited the year quite well. Is that perhaps upselling within the tiers? Or is that just a better mix within your kind of premium brand and your challenger brand given perhaps a more relaxed competitive dynamic in the market? Second question is around the operational efficiencies from SCAILE. So I guess, limited top line growth through '25, but 4 percentage points expansion at the EBITDA AL level. Is that the right level we should think about in '26? Or should we see a pickup in those efficiencies? And lastly, on the fiber rollout, can you remind us what your target coverage is? I think you said low 90s before. And should we be thinking that the remainder will be covered by alternative technologies such as satellite? Miguel Almeida: Thank you very much for your questions. In terms of -- I would tend not to read too much from the ARPU in Q4. There are some specific effects, namely, for example, premium TV channels that had a good quarter, which helps ARPU. But I don't think you can read from those numbers any significant change in terms of the mix between the main brand, the premium brand and the low-end brand. I don't think you can have that reading from the quarter numbers. Obviously, the low-end brand will keeps growing, keeps increasing its weight on the overall customer base of NOS. That is something that we expect to continue throughout 2026. So you cannot read too much from those ARPU numbers from Q4. As I mentioned, this is very seasonal and specific impact, namely from the premium TV channels. In terms of SCAILE, what -- actually, what you asked would imply some kind of guidance that we tend not to give. So what we can say is that we expect SCAILE to continue to contribute to cost optimization. That much is true. But in terms of numbers, I would rather not give any specific guidance, even though obviously, we have our own budget and our own estimate. In terms of fiber rollout, we estimate our present coverage in terms of households passed close to 94%. And that is as high as we will go on a stand-alone basis. We expect the remaining of the market, so 100% to be actually also covered with fiber. But from this project, the state project that has as an objective to cover the white areas with fiber. So one can expect once this project is implemented, and it should be pretty soon, at least start pretty soon, 100% of the country would have fiber, which means that alternative technologies are not necessary, and we don't see any space for those alternative technologies in a country that has 100% fiber coverage. Roshan Ranjit: That's very helpful. Just a follow-up on the fiber point. Given the extensive fiber network, have there been any developments on the wholesale front offering out the network and maximizing that utilization? Miguel Almeida: You mean -- sorry, can you repeat your question? I'm not sure that [indiscernible] wholesale. Roshan Ranjit: Sure, of course. It was just any wholesale discussions on the fixed network, please. Miguel Almeida: Wholesale discussions in the sense that we should open the network. The answer is no, not at all. We have no plans to give access to our network in the coming future. Operator: And the question comes from the line of Antonio Seladas from A|S Independent Research. António Seladas: So first one is related with your SCAILE program. So I know that you don't like to provide any guidance. Nevertheless, it seems fair to assume that OpEx will continue to perform below the top line. So it seems fair to assume it. I don't know if you want to comment on this. And second question is related with -- there were some comments on the press this morning that you could acquire some company on the IT space. I don't know if you want to comment on this. Miguel Almeida: Yes, sure. The question was around our plans for the IT business unit, if we had plans to expand to grow. And the answer was, first of all, we want to grow organically. We already mentioned the targets in terms of growth -- organic growth. But also, we said that we are open and actually actively looking to also grow from acquisitions. It's not obvious. We don't have any specific target at this time, but we are open to the possibility of growing also through acquisitions. In terms of the OpEx numbers and the impact of SCAILE on the OpEx, what I think we can say without giving too much guidance is that we expect margin expansion. Operator: [Operator Instructions] And now we're going to take our next question. And it comes from the line of Fernando Cordero Barreira from Banco Santander. Fernando Cordero: Thank you for taking my 2 questions. The first one is on the COMBINA program that you have presented as well. I would like to understand which is the kind of impact that you are expecting in your churn rates at the end, given the discounts that you are offering be, let's say, -- just trying to understand which could be the savings on the -- either on the [indiscernible] or in the customer retention cost that is going to be at some extent, funded by the COMBINA program. And the second question is quite simple. Just would like to understand if you are expecting any kind of financial impact from the floods and from the meteorological issues that we saw in this first quarter when you report the first quarter in May. Miguel Almeida: Okay. Thank you very much, Fernando. In terms of COMBINA, I think it's fair to say it's still early days. The main objective for us is churn reduction. To be completely transparent, that is the main objective. Nevertheless, we announced 150,000 COMBINA clients, I think, last week. In the first 2 months, 150,000, we have 1.5 million customers. So it's still limited in terms of the customers that have joined the program. But without any number or quantification because it's still too early, the objective is clearly to reduce churn, given one more reason to customers to stay with NOS because the benefits from this program are actually quite significant. In terms of the storms, it was hard. We still have some residual customers without service on fiber. In mobile, it's back, working again. We have some negative impact, but it's quite limited. We have the negative impact in terms of revenues because we have to credit the customers that were without service. But we are talking a limited region of the country and a few days, nothing very significant. We have some costs associated to rebuild what was destroyed. But again, some of the major investments associated with that rebuild is not on us, namely towers, namely poles, which suffered a lot. This is not on us. So again, we are not expecting a big impact in terms of financial costs. In terms of service, it was a big impact, as you know. But in terms of financial impact, not that significant. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. Pedro Cota Dias: Okay. So thanks very much for joining again and any questions, please feel free to reach out. So take care. Bye.
Benjamin Poh: Good morning, ladies and gentlemen. I'm Ben Poh, Head of Investor Relations. And today, I will be moderating the call. On behalf of ASMPT Limited, welcome to our fourth quarter and full year 2025 Investor Conference Call. Thank you all for your interest and continued support. [Operator Instructions] Before we start, let me go through our disclaimer. Please note that there may be forward-looking statements about the company's business and finances during this call. Such forward-looking statements could involve known and unknown uncertainties, risks and could cause actual results, performance and events to differ materially from those expressed or implied during this conference call. For your reference, the Investor Relations presentation on our recent results is available on our website. On today's call, we have the Group Chief Executive Officer, Mr. Robin Ng and the Group Chief Financial Officer, Ms. Katie Xu. Robin will cover the group's key highlights for the fourth quarter and full year 2025 and provide outlook and guidance for the following quarter. Katie will provide details on the financial performance for the year and quarter. Now I will hand the time over to our Group Chief Executive Officer, Robin? Cher Ng: Thank you, Ben. Good morning. Good afternoon and good evening, everyone. Thank you for joining us today for our fourth quarter and full year 2025 earnings conference call. Before we begin, and as I'm sure you know by now, I recently announced my decision to step down from my role as Group Chief Executive Officer for personal reasons and to devote more time to my family. I will remain in my role until the successor is appointed to ensure a smooth and orderly transition. I'm proud of what we have achieved as a business during my time as CEO and I'm grateful for your trust in me over the years. I'm confident that ASMPT has the right foundations and the people in place for its next phase of growth. Thank you once again for your continued support. Moving on. The group has decided to divest ASMPT NEXX, which has been classified as a discontinued operation. Therefore, please note that unless otherwise specified on today's call, we will refer to the group's continuing operations only. Now for the key highlights for 2025. We experienced strong performance in both our semi and SMT businesses, supported by AI-driven structural growth. There was an increase in customer activity translating into meaningful bookings and revenue for the group, evident in both advanced packaging and our mainstream portfolio. Group bookings grew 21.7% year-on-year driven by both SMT and semi businesses and our full year revenue increased 10% year-on-year, mainly from our flagship TCB solutions. Now let's look at TCB. TCB momentum strengthened further in 2025 with significant new orders across logic and memory, solidifying our TCB technology leadership. We established deep engagement with both logic and memory customers and saw encouraging traction in areas such as HBM and C2W ultrafine pitch applications. This continues to reinforce our position as a leading provider of advanced packaging solutions as customers move to more complex chiplet-based and high-density architectures. Turning to our SMT segment. Bookings were better than expected, supported by AI servers, China's EV ecosystem and increased requirements for data transmission for base stations. Last but not least, we also advanced several transformation initiatives from late 2025 to date. These are to enhance focus on our back-end packaging business, improve agility and optimize our portfolio as part of a longer-term strategy. These actions will place us in a stronger position to scale capabilities in the areas where customer demand is more structurally aligned with our technology strength. Overall, 2025 was a year where we executed well, deepen customer engagements and continue building the foundation for sustained growth. I will elaborate further as we move to today's presentation. Let me now provide an update on the TCB total addressable market. This time last year, when we presented this slide, we expected the TAM to reach around USD 1 billion by 2027. Since then, the landscape has evolved meaningfully. The acceleration of AI-driven investment especially in advanced logic and high-bandwidth memory has expanded the market significantly more than our earlier assumptions. Based on our latest projections, we now estimate the TCB TAM to grow from roughly USD 759 million in 2025 to USD 1.6 billion by 2028, representing a CAGR of 30%. This reflects sustained adoption of 2.5D architectures, higher HBM stacks and the industries move towards final pitch interconnect. All areas where TCB is increasingly the preferred solution. Our target market share remains at 35% to 40%. This is supported by the breadth of deep engagements across leading logic and memory customers and by the performance of HBM, C2S and C2W TCB platforms, including strong uptake of our plasma enabled ultra-fine pitch capabilities. We are well positioned to benefit from this expanded TCB TAM, and we are committed to continue investing in this exciting technology. Moving on to advanced packaging. This remains a strong growth engine for us in 2025 supported by rising complexity in both logic and memory packaging. As customers shift further towards chiplets highest at HBM and final pitch interconnects, we continue to see solid demand across our TCB platforms, in particular. Of note, with our breakthrough into comparative HBM market, we also grew TCB market share significantly, achieving record TCB revenue growth about 146% year-on-year. In 2025, our AP revenue growth of 30.2% year-on-year was driven by TCB. As a result, AP's contribution to group revenue also increased from 26% in 2024 to 30% in 2025. Now let's look at TCB more closely. In logic, our C2S solution maintains its dominant position as a process of record with a steady flow of orders from key OSAT customers in 2025. Extending into early 2026, we are pleased to share that we have secured additional orders for 9 more TCB tools from the same customer. We are well positioned for further order wins as the market shift towards larger compound lines. At the same time, our C2W ultra-fine pitch platform, enhanced with plasma AOR technology secured orders for 2 tools in February 2026 from a leading customer for C2W applications. Since the announcement, we have secured 2 more such tools, TCB tools from the same customer. As the industry transitions from mass refer technology to TCB, the group stands to benefit significantly as the preferred C2W solution provider offering plasma enabled capabilities. This engagement underscore the confidence customers place in the ability to support tighter technical specifications and next-generation packaging road maps. In memory, we deepened our engagement with several customers and continue to expand our share with shipments in Q4 2025. Our tools have demonstrated superior performance with industry-leading production yields and interconnect quality. We were also the first to secure HBM4 for 12 high orders from multiple players, and we are now leading HBM4 16 high development with our flux-based TCB tool deployed for sampling, and our fluxless AOR-TCB process under qualification. These are important milestones for our technology leadership as HBM architectures scale further. Beyond TCB, we also made progress in hybrid bonding, where we received customer buyouts and shipped more tools. Our second-generation hybrid bonding solution is highly competitive, offering high alignment precision, bonding accuracy, footprint efficiency and units per hour. In Photonics, revenue grew year-on-year, and we sustained our leading position in the 800G optical transceiver market, while continuing development work with industry partners on 1.60 transceiver solutions. Our CPO collaboration also continues to move forward with key global players. And in SMT SiP applications, demand remained robust, especially in AI-related RF and system in package application. Our next-generation chip assembly tool also gained traction among advanced logic smartphone applications. Overall, advanced packaging delivered another year of meaningful progress with broader adoption across logic, memory, photonics and SiP and it continues to be a central pillar of our long-term growth. And finally, our mainstream business. This accounted for about 70% of fiscal year '25 group revenue. In 2025, AI-related demand was also a strong momentum driver for our mainstream business. Rising requirements for AI data center power management applications, kept utilization reach elevated at leading global IDMs, benefiting semi mainstream. Meanwhile, SMT mainstream secured more orders to support increased data transmission requirements for base stations and AI server bots. In China, our mainstream business saw around 18% year-on-year revenue growth across both semi and SMT. SEMIs growth was driven by strong demand for wire and die bonder applications underpinned by robust OSAT utilization. SMT benefited from increased deployment of AI server bots and strong demand for EVs in 2025. With these highlights, let me now hand over the time to Katie, who will walk you through our group and segment financial performance. Yifan Xu: Thank you, Robin. Good morning, good evening, everyone. Let me take you through the group financial performance. Before I start, I would like to reiterate that unless otherwise specified, the numbers I will be referring to today are for the group's continuing operations only, with adjustments made under non-HKFRS measures. This slide covers our financial results for 2025. For the full year, the group delivered revenue of USD 1.76 billion, representing an increase of 10.0% year-on-year, driven largely by TCB. Group bookings reached USD 1.86 billion, representing 21.7% year-on-year growth. Both SMT and SEMI registered high bookings during the year. The group continues to build a healthy backlog with book-to-bill of 1.05, which is our highest since 2021. In 2025, group adjusted gross margin was 38.3%. This was 172 basis points lower year-on-year, reflecting lower gross margin in both SMT and SEMI. Group operating expenditures was HKD 4.56 billion, up 3.2% year-on-year, mainly driven by strategic R&D and IT infrastructure investments of HKD 237 million as we communicated at the beginning of last year. These investments were partially offset by disciplined execution of cost control and efficiency measures. Now looking ahead for 2026 for OpEx, as Robin mentioned, we are committed to continuing the investment in our core technologies, and we expect OpEx to rise by about HKD 200 million in 2026. In 2025, both adjusted operating profit and net profit improved year-on-year due to high revenue and operating leverage. In the fourth quarter, we delivered revenue for continuing operations and discontinued operations of USD 557.1 million that surpassed the upper end of our guidance. Q4 revenue for continuing operations was USD 508.9 million, representing an increase of 12.2% Q-on-Q and 30.9% year-on-year, driven by strong growth across both SEMI and SMT. Group Q4 bookings were USD 499.7 million. The Q-on-Q increase was due to stronger TCB bookings, while the year-on-year growth was largely driven by SMT's mainstream business. Group Q4 adjusted gross margin was 35.8%, down 175 basis points Q-on-Q and 101 basis points year-on-year. This sequential decline came from both SEMI and SMT with year-on-year decline due to lower SEMI margins partially offset by higher SMT margins. Group Q4 adjusted operating profit was HKD 161.0 million, up 4.3% year-on-year due to -- up 4.3% Q-on-Q due to higher revenue and operating leverage. Group Q4 adjusted net profit was HKD 119.9 million, up 42.2% Q-on-Q and 390.7% year-on-year. The Q-on-Q increase was largely due to fees of HKD 39 million from order cancellations while the year-on-year increase was due to stronger operating profit. Adjusted earnings per share were HKD 0.30. Moving on to the Semiconductor Solutions segment for the fourth quarter of 2025. SEMI delivered Q4 revenue of USD 245.6 million, an increase of 9.4% Q-on-Q and 19.5% year-on-year. Q-on-Q and year-on-year growth was driven by AI-related applications, mainly from Photonics. SEMI Q4 bookings were USD 253.3 million, up 15.4% Q-on-Q and 2.3% year-on-year. The increases were due to TCB orders from advanced logic customers and a market share gain in high-end die bonders. SEMI book-to-bill ratio in Q4 2025 was 1.03. Q4 adjusted margin for SEMI came in at 40.3%, down 102 basis points Q-on-Q and 292 basis points year-on-year. The Q-on-Q decline was largely due to product mix and inventory provision as a result of an isolated order cancellation. Year-on-year decline was due to product mix, inventory provision mentioned above and higher factory utilization in Q4 2024 during the TCB ramp. Q4 adjusted segment profit was HKD 98.0 million, up 62.5% Q-on-Q and up significantly year-on-year. Both Q-on-Q and year-on-year improvements were mainly driven by higher volume and fees related to the order cancellations. Next, let me move to the SMT Solutions segment performance for the fourth quarter of 2025. SMT delivered strong Q4 revenue of USD 263.3 million, up 15.0% Q-on-Q and 43.8% year-on-year driven by AI servers, EVs in China and the billing of a bulk order for smartphone applications. However, contributions from automotive end market outside of China and industrial remains soft. SMT recorded Q4 bookings of USD 246.4 million, down 3.9% Q-on-Q but up 73.3% year-on-year. The Q-on-Q decline was due to seasonality, while the year-on-year increase came from the demand for AI servers and EVs in China. Q4 SMT gross margin was 31.6%, down 225 basis points Q-on-Q, but up 199 basis points year-on-year. The Q-on-Q decline reflected continued weakness in automotive and industrial end markets and the billing of bulk order mentioned above, which had a lower margin. The year-on-year increase was mainly due to higher volume. Q4 segment profit was HKD 193.1 million up 18.5% Q-on-Q and significantly year-on-year due to higher volume. This slide highlights ASMPT's revenue breakdown by end markets. Computer end market was significantly up, becoming the largest contributor to group revenue, accounting for 22%. The growth in computing was largely driven by our TCB solutions. Consumer end market was the second largest contributor at 17%. Year-on-year revenue growth came largely from the group's mainstream solutions, consistent with higher revenue from China. The communication end market contributed to 16% to group revenue, driven by photonics and high-end smartphone-related applications. The automotive end market contributed almost 16% to group revenue, supported by EV demand in China, where the group remains a leading player. Lastly, the industrial end market contributed 10% to group revenue, reflecting soft market conditions. As you can see from this slide, we're a truly global business partnering with customers across all major regions. China remained the largest market, contributing 41% of group revenues. However, Europe and Americas declined year-on-year, mainly due to soft market conditions in SMT with Europe's share of revenue down to 13% and Americas down to 11%. Looking at Asia outside China, their proportion increased collectively from 24% to 34%, largely driven by TCB revenue. The group continued to maintain low customer concentration risk with the top 5 customers representing approximately 16% of total revenue in 2025. We have an existing dividend policy of distributing about 50% of the annual profit as dividends, and we firmly believe in returning excess cash to our shareholders. For the second half of 2025 with adjusted EPS at HKD 0.68 for continuing and discontinued operations, the Board has recommended a final dividend of HKD 0.34 per share. In addition, the Board has recommended a special cash dividend of HKD 0.79 per share after taking into consideration the net cash inflow from recent strategic projects. Together with the interim dividend of HKD 0.26 per share paid in August 2025, the total dividend payment for 2025 will be HKD 1.39 per share. With that, let me now pass the time back to Robin for an update on our transformation initiatives and the next quarter's revenue guidance. Cher Ng: Thank you, Katie. As mentioned earlier, we undertook several transformation initiatives from the late 2025 to date as part of our long-term strategy. In November 2025, we completed the divestment of our entire equity interest in AAMI in exchange for cash and new shares in Shenzhen Original Advanced Compounds Company Limited. In January this year, we announced a Strategic Options Assessment of our SMT Solutions segment. The assessment is underway, and we will update at the appropriate time when there are material developments. Lastly, today, we make public the decision to divest ASM NEXX Incorporated. These initiatives share a common objective of optimizing ASMPT's portfolio streamlining operations to enhance agility and improving margin and profitability while ensuring continued investment in infrastructure and technology development in high-growth areas. We also sharpened our focus on the back-end packaging business. In the meantime, business for all our segments continue as usual. Let me now turn to our Q1 2026 revenue guidance. The group expects Q1 2026 revenue to be in the range of USD 470 million and USD 530 million. At midpoint, this represents a decline of 1.8% Q-on-Q and 29.5% year-on-year. Notably, the group's midpoint revenue guidance for continuing operations only already exceeds current market consensus, which includes both continued and discontinuing operations. We anticipate sustained Q-on-Q revenue growth in our SEMI segment driven by TCB and high-end die bonders, although this will be partially offset by SMT seasonality. On a year-on-year basis, the higher group revenue is expected to be driven mainly by strong momentum in SMT coupled with steady growth of SEMI. For Q1 2026, group gross margin is expected to improve, led by SEMI gross margin returning to the mid-40s level. This improvement is driven by higher volumes from TCB and high-end die bonders. SMT's gross margin, however, is expected to stay at similar levels as automotive and industrial end markets remain soft. The group bookings momentum will accelerate in Q1 2026, supported by both segments. Looking further ahead, structural industry growth from AI demand is expected to drive revenue growth across both SEMI and SMT. In TCB, with our industry-leading technologies, and deep engagement across a broad AI customer base, we are well positioned to expand our TCB business in a rapidly growing market. Our SEMI and SMT mainstream businesses continue to be supported by global investment in AI infrastructure and steady demand from China, while SMT automotive and industrial end markets are expected to remain soft in the near term. This concludes our full year and fourth quarter 2025 presentation. Thank you, and we are now ready for Q&A. Let me pass back the time to Ben to facilitate. Benjamin Poh: Thank you, Robin. Ladies and gentlemen, we will now begin the Q&A session. [Operator Instructions] So with that, may I have the first question. Okay. Gokul, please unmute yourself and raise your question. Gokul Hariharan: Ben, Robin and Katie. Robin, first of all, thanks for your leadership over the many years, and good luck on your retirement. My first question is on TCB, the addressable market TAM expansion to $1.6 billion. Could you talk a little bit more about where is the upside mostly coming from in your estimates? Let's say we get to this $1.6 billion, what will be the mix of HBM versus logic look like in 2028? And given that you gave an estimate of $750 million addressable market for last year, what was the market share roughly for ASMPT last year? Should we assume that it was about 30% or so for TCB, just to get a starting point of your TCB journey when we think about this TAM expansion? Yifan Xu: Gokul, this is Katie. Let me try and address the questions that you have. First, on the TCB TAM, let's just take a quick minute on the methodology. Actually, last year, that was our first time publishing the TAM at $1 billion. This year, actually, the methodology is very, very similar. So we essentially used the wafer per month that actually you guys have published in the industry, and we start that to the number of AI chips and the interconnects and then the tools needed, right? So it's the same methodology. So to your question about what's driving the expansion? Obviously, right, really, it's the starting point. It's the wafer per month that has expanded significantly for the AI industry overall. So that's the main expansion. Now, in terms of the mix of hybrid bond -- sorry, HBM and the logic, I think previous years, we've communicated that HBM is the larger portion of the TAM and it will continue to be so probably until as we go into the outer years, right, if we talk about HBM 20-high beyond, then at that point, maybe hybrid bond will be kicking in and then the logic side, especially CoW will actually become more prominent in the TAM. So then the other thing is you asked about the last year's market share, and you said about 30%, and you are quite in the ballpark for that one. Gokul Hariharan: Got it. That's very clear. Second, on the proceeds from, I think, this rationalization of the portfolio and some strategic actions that you're taking. Good to see that happen, but could you also talk a little bit about what is the kind of end state that you are hoping for once this rationalization is being done? Are there areas that you're kind of trying to bulk up on as it pertains to the back-end packaging business? And specifically on NEXX, what is the rationale for divesting NEXX given that has a fair bit of 2.5D bumping and ECD plating kind of business, which theoretically, it feels like closer to the advanced packaging business, but just help us understand why that divestment of NEXX is also happening. Cher Ng: Gokul, thanks for the question. I'll take that question, Gokul. So basically, I think it's really focusing really on our back-end packaging business because this is where -- we feel this is where the structural growth will be, and this is where I think our strength sort of match the industrial roadmap for packaging. So really back to focusing on back-end packaging. So first, you notice we divest our leadframe business that I just discussed one step. And now we are assessing SMT, which is more of the downstream operation. And then as to your question on NEXX, you are right. NEXX is although it's advanced packaging, but it's not exactly back-end. It's more -- this belong more to the middle end. And the technology, to be honest, is more wet technology, whereas wet technology is really more on automation and vision and so forth. So we felt that it's probably the right time to consider divesting NEXX to really focus all our attention, all our resources on the back-end side. Gokul Hariharan: Understood. And maybe if I could squeeze in one more. I think any quick view on how the mainstream SEMI Solutions business you're expecting it to progress, Robin? What are you hearing from your customers given at least from a CapEx perspective, many of your customers seem to be moving up for the first time in this up cycle? Cher Ng: Yes, yes. I think we're beginning to see -- maybe we talked about green shoots some quarters back, but this time around, the green shoots seems to be real from our point of view. Now because there is a tailwind behind the mainstream business, and this time around, we feel that -- we have been talking for a few quarters already, Gokul, that we feel this time around is underpinned by AI investment as well. You can imagine when the industry continue to invest more and more in terms of data center. Besides the GPUs, there are many other components inside the data -- inside the server bots, AI server bots. You have power management devices and many other components, right? So you can imagine with all the server bots going into data center and the build-out data center CapEx, there is huge massive amount of components need to be packaged using both our semi, wire bond and the normal die bond tools as well as our SMT pick-and-place tools. So this AI data center investments are really driving our mainstream, both on the semi side as well as on the SMT side. Gokul Hariharan: Okay. Okay. That's very clear. So we should expect that mainstream SEMIs also should be growing. I think it's not been growing for maybe 3, 4 years now after 2021, but it looks like '26, we should see some growth in the non-advanced packaging piece of SEMI Solutions as well, right? Cher Ng: Yes. As far as we can see, I think our visibility is, again, is quite normal in our business to be limited to 1 or 2 quarters, right? So I think, first half looks to be okay. Half-on-half better than -- half-on-half growth year-on-year, half year also, we think it will grow. But if you ask me on the second half, let's wait for a while to see how we develop limited visibility at this point in time for second half. Benjamin Poh: I see a raised hand from Daisy. I will request Daisy to unmute and raise your question. Daisy Dai: Firstly, I want to ask about the HBF opportunities because I listened to your competitor's earnings call, they are talking about high-bandwidth flash opportunities. Have you guys also seen these opportunities from ASMPT side? Cher Ng: Yes, we do, Daisy. This is a very good question. I think this is, again, probably an exciting development. To be honest, we have not factored this into our TAM, TCB TAM, because potentially, the way we assess the technology or the packaging technology required, I think, TCB could be also be a tool to package HBF. So this is something that we look forward to. If the industry -- if the industry develop in this direction, I think we will also stand to benefit in time to come. Daisy Dai: Okay. And also following Gokul's previous question, and you previously also mentioned that you expect the second half will also grow versus first half. So I want to ask about the order visibility for -- from ASMPT side, because I think in normal times, back-end order visibility is 3 to 6 months. And how is the order visibility now? And what is the magnitude that you are seeing that second half could grow versus first half? Cher Ng: Correction, correction, Daisy, correction. Maybe let me make it clearer. Just want to answer Gokul's question. I'm just saying first half 2026, we have better visibility because of the momentum we are seeing in terms of advanced packaging as well as mainstream, but second half is still limited in terms of visibility. But at least this time around, we can see a little bit further, maybe slightly more than a quarter, but second half, let me correct your statement, second half, we still have limited visibility. . So when I mentioned just half-on-half, I'm sort of giving you some color. First half this year, demand probably will be better than first half last year as well as second half of last year. So I'm just comparing half-on-half and year-on-year. But second half, I repeat, we still have limited visibility at this point in time. Benjamin Poh: And next, I request Arthur to unmute. Yu Jang Lai: Robin, you will be missed. First, congrats on the strong results. So first question is on the backlog. You highlight that backlog almost over $800 million. Can you give us more color on the spread between the SEMI and SMT? And also, you highlight the high-end bonder. Can you share with more on the TCB's product such as panel label fan-out? Yifan Xu: Arthur, on the backlog, just really quick. The SEMI side backlog is stronger as a large quantum than SMT. Yu Jang Lai: Is this a significant higher, or is pretty -- is insignificant, yes? Yifan Xu: You mean, the percentages, roughly 60-40, I guess, don't call me that exact, somewhere there. Cher Ng: So Arthur, on your second question about high-end die bond, which I think you're referring to what we have mentioned in our announcement. Yes, I think, if we're referring to the same thing, I think, it's good news. We have penetrated into a high-end die-attach application for high-end smartphones, right? So if you look at the camera modules of high-end smartphones, there are many, many box ship components in there, which need to be put in place as well. So the customers have chosen our die-attach application to place those components. So this is a brand-new market for us. We have never been in this market. So we really look forward to having more market -- increasing the market share in this particular area. So that's for the high-end die bond I think you're referring to. Now you also have a question on panel-level fan-out. We see a lot of trending in that direction. We feel that this is also driven by AI as well, right? So panel-level fan-out for components that go into their center, becoming more and more visible. So definitely, we have a tool, basically a mass reflow tool that we can deploy for a solution like this. So we're also pretty well placed to capture this opportunity. Yu Jang Lai: Got you. And second question is on Page 10. You highlight there is order cancellation on the SEMI side. Can you give us more color? Is it associated with the NEXX? Yifan Xu: Yes, Arthur, so this order cancellation does not have an association with NEXX. So let me just give a little bit more color on that. The order cancellation came from a global IDM, who's focused on automotive applications and order came a few years ago and it was for our SEMI mainstream products. The customer had to cancel the order due to weak automotive industry performance. So that's why we got this cancellation, but I want to make sure that we all understand this is a very much an isolated event. Benjamin Poh: Next, I would like to request Leping to unmute and raise the question. Leping Huang: The first question is also about the TCB TAM. So when you derive the TCB TAM in 2028, what's the split between memory and the logic? And you also say that you're targeting 35% to 40% market share in 2028. So what's your current market share in memory and logic and what's the upside we can expect in the next few years? Yifan Xu: Leping, maybe just to add a little bit more basically essentially the answer I provided Gokul on the split of memory and the logic. Currently, the memory -- the HBM portion in the TAM definitely is much larger than logic. But as we go out -- a few years out, this dynamic will actually shift where the logic, especially CoW should take a larger share. But we cannot share the specific split for confidentiality reasons or competitive reasons, I should say. Now in terms of the market share, as Robin has mentioned in the opening, ASMPT is very, very strong in COS and also when we are actually making all of wins on CoW. So our market presence in the logic space is very strong. On HBM, you guys probably remember a year ago, we broke into HBM market. So we have gained market share there. So that's kind of where we are in terms of market share. Cher Ng: Maybe just to add on a little bit in terms of the competition landscape, I think in the logic space, we had a [indiscernible] for a very key supply chain for substrate application. And then recently, the good news is that we announced we won two tools for C2W application, right, for the same supply chain, and then we won two more. So I think it is a signal that we are also being recognized as a solid solution provider for the C2W space as well. Now on the memory side, I think the competition landscape is different. We have a strong incumbent in the memory space, but we have done a fantastic job in 2024. We have practically 0 share in HBM. And then in 2027 -- in 2025, we managed to penetrate in a very meaningful way, in the HBM market. Now that we are -- we have a strong foothold in the memory market, we look forward to better times ahead in terms of HBM demand allocation. Leping Huang: Okay. The second question is about the memory super cycle. So are you seeing an acceleration of the capacity expansion from your HBM customer? And given your HBM4 of high order win, are your customers provide a longer-term rolling forecast to secure your TCB tool for the 12-high and 16-high? Or how you plan your capacity in this year for the TCB business? Cher Ng: Yes. Definitely, definitely in terms of the HBM CapEx is really in line with investment in data center, right? So with data center investment continue to increase, you can expect HBM to continue to increase as well, not just in the number of HBM, but also in the highest stack from 12-high to 16-high to 20-high potentially. So that means there will be more and more opportunities for TCB packaging as HBM continue to stack up in terms of high. Now you asked whether about capacity allocation. To be honest, I think there are some more differentiation between 12-high and 16-high, but they are not major. Some hardware module need to be different. If we use to package 12-high between 12-high and 16-high, there are some hardware modifications, but also some software. So not -- so there's not much material differences between the 12-high TCB tool and the 16-high TCB tool. Benjamin Poh: And next, I would like to request Simon Woo to unmute and raise question. Simon Woo: Robin, as always, we'll miss you. So the, I think long-term question for 2028, you are expecting TCB market TAM $1.6 billion for 2028. Any rough idea of the percentage of the hybrid bonding assumption for that time or very low single digit or mid-single digit or? Cher Ng: Sorry, Simon, because your line is breaking up. So do you mind to say that again? Simon Woo: So my question is that the hybrid bonding portion of the 2028 TAM, $1.6 billion. Yifan Xu: So this is the TCB TAM. So there is no hybrid bond in the TCB TAM. But I guess you're asking our assumption of the hybrid bond adoption timing. Is that what your question is? Simon Woo: Yes, sure, yes. Yes, that can help. Yifan Xu: Okay. In our model so far, for HBM 16-high, we assume that -- we're actually confident that the TCB will continue to serve 16-high because as we get into 20-high, it really depends on the JTEC standard, right? If the standard continues to relax, then, it will actually be an upside to this model. Otherwise, we assume that in the model itself that the 20-high will be moving on to hybrid bond. Cher Ng: Partially. Yifan Xu: Partially. Yes, partially. Simon Woo: Expected TCB can be used for the 20-high, if that is okay? Cher Ng: Yes, Simon. I think looking at how -- looking at the -- how the technology, TCB technology developed over the years and also into the future, we are confident that the TCB technology together with, of course, we need to collaborate with our customers as well. They are -- wafer technology will probably, we believe, will continue to improve. So I think a combination of both the wafer as well as TCB tools, we are hopeful and optimistic that 20-high can still use TCB. Of course, if what Katie said, if the standard can be relaxed to increase the high from 775 to beyond 775, maybe 950 or even 1050 micron, then the chance of using more TCB for 20-high and beyond will even be higher. So the situation, so we just have to wait for a little longer to see how the industry plays out in terms of the high restriction. Simon Woo: Yes, very clear, sir. Do you believe the logic area and our PLT will require hybrid bonding as well, or maybe year later? Cher Ng: Simon, sorry, you're breaking up. Sorry, I need to ask you to repeat it. Simon Woo: I should use a better one. But my question is alluded area, do you see that any meaningful progress for the hybrid bonding for coast and our TCB area? Cher Ng: So I believe your question is in the logic area whether there's no opportunity for hybrid bonding, right? Simon Woo: Yes. Correct. Correct. Yes. Cher Ng: Yes. Actually, to be honest, hybrid bonding has already been adopted at the chiplet level, right, for certain devices. We believe that, that has already been ongoing. It all depends it's very dynamic, right? So even, to be honest, even at the chiplet level, TCB can be used as a tool as well, especially when we look at the exciting technology that we're going to develop for TCB going into the future. The TCB technology will get closer and closer to the hybrid bonding technology. So from that perspective, we are optimistic and hopeful that at some point, TCB can also be used also at the chiplet integration level. But as I said, this industry is very dynamic. So nobody knows what's going to happen, but let's continue to monitor this space. Simon Woo: Yes. Very clear. Sorry, the last check, 30% of your revenue is advanced packaging, any rough idea, that means anyway, near $0.5 billion to your revenue for the advanced packaging last year, so any rough idea what was the TCB portion out of the total advanced packaging revenue last year? Cher Ng: You're talking about TCB proportion to the advanced packaging. Is that what you are saying? Simon Woo: Yes, 2025, last year, yes. Cher Ng: Very dominant, very dominant, major share of the AP revenue for TCB, yes. Simon Woo: Dominant means majority portion? Cher Ng: Yes, ballpark around it. Yifan Xu: If you look at the TCB market, the TAM slide that we shared, and Robin mentioned, you know what the TCB market size was in 2025. And I think Gokul earlier mentioned about our market share as you do with the rough calculation, you actually will get there. If that's what you guys are trying to do? Simon Woo: Yes, $200 million, $300 million, maybe. Sorry, one last question from some investors asking, what over the revenue appearance or erosion after your massive restructuring for the SMT or leadframe, the back-end area, a rough idea of what percentage of the revenue will be off once you complete all the restructuring process? Yifan Xu: Maybe let me try to answer your question. So for a clarification. For AMI, we were 49% shareholding. And now after the disposal of AMI, there's actually no revenue impact year-on-year of the last few years. So there's no revenue impact at all. For the NEXX business, we just announced today to be as discontinued business or put up for sale, right? NEXX revenue is about USD 100 million, that's what you're looking for. Benjamin Poh: Yes, I think we have time for one final question. And Donnie, we'll request you to unmute and raise your question. Donnie Teng: Wish Robin you all the best after the retirement. My first question is regarding to your guidance. Can you break down or elaborate more on the bookings momentum in the first quarter? And particularly, TCB because I think based on your announcement in fourth quarter last year, we already have received quite some TCB orders. So I'm also wondering what kind of trend in terms of the TCB bookings into the first quarter this year? This is my first question. Cher Ng: Thank you, Donnie. I think you probably expect my answer, we cannot be too granular because for competitive reason as well, but I think in overall, I think 2026, we were expecting TCB to continue to grow in line with the investment -- so much investment in data center, right? So that I think that's for one. Now if I drill down to the booking, I'll give you some booking color for Q1 2026. We're likely to see a strong booking in Q1 -- Q-on-Q around 20% growth Q-on-Q and even stronger around 40% year-on-year growth for Q1 booking '26 for both SMT segment as well as the SEMI segment. I think we have been talking a fair bit over the last couple of quarters as well that we see AP will continue to grow. And because of mainstream momentum gaining very strongly over the last 1 or 2 quarters and into Q1 2026 as well. So I think both advanced packaging as well as mainstream will continue to do well in Q1 2026 as far as bookings are concerned. Now however, I have a caveat just now as well, right? With the stronger booking, also let me caveat or qualify that we might see some impact on revenue conversion because we are seeing longer material lead time due to tightness in the supply chain, right? So although bookings are going to be very strong in Q1, but the conversion to revenue may take a little bit longer than usual because of supply chain tightness, okay? Yes. So I think this is some color I want to give you. And by the way, I think Q1 bookings, the way we see, it will be the highest quarterly booking in 4 years. Donnie Teng: Understood. Can I have a follow-up on this? So for the SEMI business bookings, the strong sequential growth, can we say it's primarily driven by more like conventional packaging or from advanced packaging? Cher Ng: I would say, mainstream will probably grow a little bit more than advanced packaging. Advanced packaging tend to be a bit lumpy. We have been saying that for a long time really don't expect AP revenue to be continuously high, because first and foremost the customers are limited, less customers than the mainstream. Second, these are high-value tools, so customers cannot continue to buy quarter-on-quarter. So -- but the demand for TCB is steady for sure, right? But don't expect this to continue to be on a quarter-on-quarter basis continue to grow. So that's on the side. But on -- but what we are seeing quite interesting is really on the mainstream side, -- so we see really a pickup in terms of mainstream for those reasons I said earlier, AI-driven data center. Donnie Teng: Okay. Got it. And my second question is regarding to your 2025 review in terms of the market share gain, particularly in the HBM market. So -- but if you -- if I remember correctly, we actually received quite sizable orders from fourth quarter 2024 from leading HBM customers. And since then into 2025, actual the bookings despite of -- there are some repeat orders, but it seems like not as significant as what we had back in fourth quarter 2024. So I just want to clarify that our market share gain in 2025 for HBM and TCB is primarily driven by the big orders we received in fourth quarter 2024? Yifan Xu: Just really quick. Donnie, the market share data is actually based on billing. Donnie Teng: Yes. So the follow-up is like, when should we expect to receive a more meaningful repeat orders from the leading HBM customer? I mean -- or when should we can expect that orders can be, maybe more significant than what we had back in fourth quarter 2024? Cher Ng: Yes. I think it all depends on how soon they rollout in volume for 16-high, right? So also that depends on their customers' rollout of the new architecture. So the timing has to be aligned with ultimately how the ultimate consumer rollout the GPU architecture. So I think as the industry moved from 12-high to 16-high, I think all equipment suppliers, including myself for TCB are waiting anxiously for that particular customer to allocate TCB demand. So at this moment, we feel that 2026 will be a year whereby, there will be new true demand for TCB for 16-high, but exact timing, unfortunately, Donnie, I cannot give you any visibility at this point in time. But it cannot be too long is we know in our opinion. Benjamin Poh: That will be our last question for today. So I will pass the time back to Robin for his closing remarks. Cher Ng: So thank you for all your well wishes about my retirement. Now before we end, let me capture some really key takeaway from today's discussion. First, 2025 was a year of solid execution for us. and strengthening our customer engagement across the group. So we delivered growth in both bookings and revenues with a book-to-bill ratio of 1.05 and a healthy backlog, reflecting continued momentum and trust the customer place in us. Second, AI-related demand was the engine of our overall business in 2025. Across both infrastructure and applications, AI drove significant activity in both SEMI and SMT. This reflects an enduring structural trend that we expect to persist for some time as we increasingly shift customer roadmaps and priorities. Last but not least, TCB was a standout for us in terms of momentum and in terms of technology leadership. We expanded engagement in both logic and memory, securing wins across HBM, C2S and C2W application. So with our latest TCB TAM projection, this highlights the scale of the opportunities in TCB, and we continue to target a 35% to 40% share of this market. So in short, before I close, overall, we are well positioned as we enter 2026. So thank you once again for joining us, and we look forward to updating you in the next quarter. This concludes our call. Thank you, and take care.
Operator: Good day, and welcome to the Alto Ingredients Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Harriet Fried of Alliance Advisors. Please go ahead. Harriet C. Fried: Thank you, operator, and thank you all for joining us today for the Alto Ingredients Fourth Quarter and Year-end 2025 Results Conference Call. On the call today are President and CEO, Bryon McGregor; and CFO, Rob Olander. Alto Ingredients issued a press release after the market closed today, providing details of the company's financial results for the fourth quarter of 2025. The company also prepared a presentation for today's call that is available on its website at altoingredients.com. A webcast and a webcast replay will be available on the Alto Ingredients website. Please note that the information on this call speaks only as of today, March 4. You are advised that time-sensitive information may no longer be accurate at the time of any replay. Please refer to the company's safe harbor statement in the slide deck posted to the company's website, which states that some of the comments in this presentation constitute forward-looking statements and considerations that involve risks and uncertainties. The actual future results of Alto Ingredients could differ materially from those statements. Factors that could cause or contribute to such differences include, but are not limited to, events, risks and other factors previously and from time to time disclosed in Alto Ingredients' filings with the SEC. Except as required by applicable law, the company assumes no obligation to update any forward-looking statements. In management's prepared remarks, non-GAAP measures will be referenced. Management uses these non-GAAP measures to monitor the financial performance of operations and believes these measures will assist investors in assessing the company's performance for the periods reported. The company defines adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, provision or benefit for income taxes, asset impairments, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related expense or recoveries and depreciation and amortization expense. To support the company's review of non-GAAP information, a reconciling table has been included in today's release. On today's call, Bryon will provide a review of the company's strategic plan and activities. Rob will comment on its financial results. Then Bryon will wrap up and open the call for Q&A. It's now my pleasure to introduce Bryon McGregor. Bryon, go ahead, please. Bryon McGregor: Thank you, Harriet, and thank you all for joining us today. I'll begin with a quick review of our fourth quarter results and achievements, after which I'll turn the call over to Rob for more details on our numbers. After that, I'll give you an overview of our major initiatives for 2026 and the opportunities we're seeing in our markets. We'll then open the call for Q&A. The fourth quarter capped a year of strong execution, and it was a pivotal milestone in our strategic realignment. Entering the year, we made tactical decisions to focus on opportunities that were within our control to maximize earnings. We adjusted staffing to align with our current organizational footprint, captured cost savings, invested in the throughput and efficiency of our plants, culled underperforming business activities in our Marketing and Distribution segment and maintained operational disciplines in support of our diversification efforts. Earnings for the fourth quarter were $21 million, a $63 million improvement compared to the fourth quarter of 2024. For the full year 2025, earnings were $12 million, a $72 million improvement. Further, adjusted EBITDA for the fourth quarter was $28 million, a $36 million positive swing from last year. For 2025, adjusted EBITDA grew to $45 million, a $53 million improvement compared to 2024. Increased crush margins, qualified 45Z credits and strong renewable fuel export sales were major contributors to improved performance for both the quarter and the full year. Our Carbonic acquisition in early 2025 is a perfect example of our focused strategy. This acquisition and the resulting diversification into liquid CO2 improved the profitability of our Columbia ethanol plant. Alto Carbonic also contributed positively to the profitability in our Western segment for both the fourth quarter and for all of 2025. Further, we made significant progress in determining the amount of 45Z transferable tax credits for 2025 and associated incremental earnings. We expect to qualify approximately 90 million gallons of combined production on an annual basis for 45Z credits at our Columbia and our Pekin Dry Mill facilities. In the fourth quarter, we recorded for the full year $7.5 million in 45Z credit earnings or $0.10 per gallon net of estimated monetization costs. For 2026, with the removal of the indirect land use change or ILUC, from the GREET model, we expect to qualify for $0.20 per gallon at our Columbia and Pekin Dry Mill facilities and to generate approximately $15 million in net proceeds. We continue to pursue opportunities to lower our carbon scores further. The Pekin Wet Mill and ICP do not currently qualify for these credits, but are advantaged to serve a variety of domestic and export markets, which are predominantly sold at a premium to ethanol. Finally, with respect to our Western asset optimization and monetization plan, as I mentioned at last quarter's call, current market conditions, including operational improvements, together with the positive impact of our Alto Carbonic acquisition have materially changed the calculus for simply selling the facility. Given Columbia's improved profitability, we are no longer actively marketing the asset. We continue, however, to evaluate all options for our Magic Valley facility, including selling the plant as well as restarting and capturing 45Z credits, and monetizing the valuable CO2 the facility would produce. In summary, we are pleased with our Q4 and full year results that demonstrate the successful execution of our strategic realignment. I'll now turn the call over to Rob for a more detailed review of our financial performance. Rob? Robert Olander: Thank you, Bryon. Thank you. First, I'd like to review the financial results for the fourth quarter of 2025 compared to the fourth quarter of 2024. Net sales were $232 million, $4 million lower than in the prior year. This reflects a reduction in volumes sold of 10.6 million gallons, primarily due to our decision to idle our Magic Valley facility at the end of 2024. On a consolidated basis, the average sales price per gallon increased to $2.10 from $1.88 per gallon, partially offsetting the reduction in volumes sold. Gross profit for Q4 2025 was $15.2 million, a significant increase of $16.6 million compared to Q4 2024's gross loss of $1.4 million. The significant improvement in gross profit was due to the following drivers: stronger market crush margin of $0.23 per gallon in Q4 2025 compared to $0.08 per gallon in 2024 accounted for approximately $8 million. An increase in renewable fuel export sales at premiums to domestic sales contributed $5 million on a higher volume and higher average sales price per gallon. We realized $2.6 million less in compensation costs for the quarter related to the staffing reduction implemented earlier in the year, including the impact of idling our Magic Valley plant and a gain on our annual pension valuation adjustment. The sale of Oregon carbon credits contributed an additional $2.9 million on improved market pricing. We continue to benefit from our Carbonic acquisition, which we completed at the beginning of 2025 as it contributed $1.4 million to our Western Production segment during the quarter. With the idling of Magic Valley, this segment had a positive gross profit for the quarter and the full year. With high-value liquid CO2 now in our product mix, our Western Essential Ingredients return improved to 48% in the fourth quarter from 30% a year ago and contributed to an increase in our consolidated return to 52% from 43%, and partially offsetting these positives was a net negative $4.2 million in combined realized and unrealized changes in derivatives. SG&A expenses decreased by $500,000 to $6.9 million. Once again, this is attributable to rightsizing staffing levels in the first half of the year. As you may recall, in Q4 of 2024, we recorded the final acquisition-related expenses for Eagle Alcohol of $5.7 million and $24.8 million of impairment charges related to Magic Valley and Eagle Alcohol, both of which were excluded from adjusted EBITDA. In the fourth quarter of 2025, we recorded $800,000 of asset impairment charges related to the cleanup of CapEx projects. As discussed on prior calls, in April 2025, we sustained damage to our Pekin campus River loading dock. After filing an insurance claim with our carrier, in Q4, we received our maximum insurance coverage payment of $10 million. Of these proceeds, $1.5 million was recorded as a reduction to cost of goods sold as a reimbursement for previously recorded expenses. $1.8 million was recorded in other income for lost profits related to the business interruption. And the remaining $6.7 million of income was recorded as excess insurance proceeds in accordance with GAAP, which will be used to fund the repairs and improvements in 2026. Since the excess proceeds were not related to operations, we excluded this gain from our calculation of adjusted EBITDA. As Bryon mentioned, we made significant progress in qualifying for 45Z credits and are entering into contracts to sell these credits to third parties. The expected proceeds from selling the 2025 credits are $7.5 million net of selling costs, which directly strengthened our bottom line in the fourth quarter. The combination of improved gross profit, lower SG&A expenses, recognition of 45Z tax credits and the excess insurance proceeds resulted in net income attributable to common stockholders of $21.5 million or $0.28 per diluted share for Q4 2025, an increase of $63.5 million compared to Q4 2024. For the year, net income attributable to common stockholders was $12.1 million or $0.16 per diluted share compared to a loss of $60.3 million or $0.82 per share. Adjusted EBITDA increased $35.6 million to $27.9 million for Q4 2025 compared to a negative adjusted EBITDA of $7.7 million for Q4 2024, reflecting the above-mentioned improvements in gross profit and SG&A, but excluding the $6.7 million in excess insurance proceeds. And for the year, adjusted EBITDA was $44.7 million, an improvement of $53.2 million compared to negative adjusted EBITDA of $8.5 million for 2024. Turning to our balance sheet. As of December 31, 2025, our cash balance was $23 million. During the fourth quarter, we generated $10 million in cash flow from operations. We generated $5 million in cash flow from investing activities, including $7 million from excess insurance proceeds, partially offset by $2 million in CapEx. We used $22 million in our financing activities as we paid down $16 million on our operating line of credit and $5 million on our term debt. As a result, we ended the year with $55 million outstanding on our term loan. At year-end, we had a total loan borrowing availability of $102 million, consisting of $37 million under our operating line of credit and $65 million under our term loan facility. Our improved profitability in the last half of 2025 allowed us to further pay down $10 million of principal on our term debt in February of 2026, and we expect to pay down an additional $6 million in March. This will reduce the principal amount of our term debt to $39 million by the end of the first quarter. We are pleased to significantly reduce our debt and continue to strengthen our balance sheet. In 2026, we plan to elevate our capital expenditures to roughly $25 million while maintaining strong cost discipline and prioritizing the highest ROI projects. Approximately 45% of our capital expenditure budget is earmarked for maintenance projects, while the remaining 55% is for optimization projects, including taking further steps to implement capacity increases at our Pekin Dry Mill. Included in the $25 million budget are the cost to complete the repairs of the existing dock and adding the second alcohol loadout dock. As a reminder, we are building the second dock to mitigate future business interruption and enhance our logistical capabilities by expanding throughput and creating redundancy. We expect to begin the repairs on the original dock and the installation of the second dock this spring and to complete both projects by the end of 2026. I'll now turn the call back to Bryon. Bryon McGregor: Thank you, Rob. In summary, we entered 2026 with a leaner cost structure, a higher mix of premium exports and carbon advantage volumes, expanded CO2 opportunities and potential upside from 45Z tax credits. We've completed the heavy lifting of addressing losses at underperforming assets, removing structural costs and repositioning our portfolio towards higher value and more consistent revenue streams and are moving forward with plans to improve the company's return on assets. By continuing to improve operations, we believe we will strengthen Alto's ability to capitalize on favorable margin environments to stabilize when margins are compressed and to ensure that our assets are producing positive returns. In 2026, we intend to stay focused on what is within our control on driving improved profitability and executing on multiple opportunities to grow earnings. As a reminder, the first quarter is a seasonally challenging period for us. And in January of this year, extreme cold weather disrupted River Logistics and curtailed production at our Pekin campus. We took advantage of the downtime to make some of the repairs we had planned to be completed in the second quarter during our biennial wet mill outage. This has allowed us to defer the remaining work until the spring of 2027 and to make up for January's lost production next quarter. With respect to additional outages planned for 2026, we expect normal Q2 outages at ICP and Columbia, consistent with those in 2025. In the second half of the year, the Pekin Dry Mill will take a longer outage to implement a project to increase production capacity by approximately 8%, further improving the plant's profitability. As Rob mentioned, we have important capital projects planned for 2026 and intend to maintain strong cost discipline, and we'll continue to prioritize the highest ROI projects. CO2 utilization remains a compelling opportunity for us as demand for liquid CO2 continues to rise. In 2026, we intend to capitalize further on demand growth in the Pacific Northwest and on our liquid CO2 processing capabilities by increasing our throughput volume and storage capacity. We're also assessing large-scale CO2 utilization and sequestration opportunities at our Pekin campus and developing plans to capture more value for our CO2 as quickly as possible. We have contracted to sell a significant volume of renewable fuel exports for the first half of 2026 and believe there are increasing opportunities for us to expand volumes and premiums in this market. We are on track to match our 2025 high-quality alcohol volumes. And on the regulatory front, we continue to view E15 as a meaningful long-term demand tailwind for the farming and ethanol industries. While permanent nationwide adoption remains pending, the EPA has consistently supported summer E15 sales through waivers and political momentum has strengthened entering 2026 with renewed administration and bipartisan congressional support. Taken together, we believe the trajectory for E15 remains clearly positive and supportive of incremental ethanol demand over time. I'm proud of the progress our team has made and excited about the path forward. Our focus remains on operational excellence and disciplined capital allocation. We entered 2026 from a position of greater strength with an improved ability to navigate market volatility and a clear strategy to drive higher margin diversification and enhance asset value. Operator, we're now ready to begin Q&A with sell-side analysts. Operator: [Operator Instructions] And the first question will come from Amit Dayal with H.C. Wainwright. Amit Dayal: Bryon, congratulations on a very strong quarter. It looks like a lot of drivers in place for a strong 2026 as well. But I just want to focus on the 45Z tax credits. You're guiding for around $15 million in those benefits in the year at $0.20 per gallon. What steps are you taking that could maybe get you even more in those benefits? And will that potentially come through in 2026? Or will that -- are you working on it for maybe 2027 and beyond? Bryon McGregor: Sure. I'll take the front part of this, and then, Rob, if you want to round out anything that I otherwise missed. It's -- a lot of the drivers and opportunities around 45Z for us at these plants is around lowering our carbon intensity scores in some form or another, either reducing our energy demands or sourcing -- changes in sourcing of products and/or services. So anything that we can do in that regard or the way that we -- and the types of products that we purchase, whether it's corn, right, and traceability and the like. And so -- but it's clear that -- and compelling that anything that you can do to lower your score further as quickly as possible, the better. So it's really a priority for us. I don't know that it's appropriate to share more than that with regards to some of the projects, but we're actively pursuing it on many fronts and making sure that we can do what we can to lower those scores further. Rob, anything else you want to add? Robert Olander: Yes, sure. Thanks, Bryon. As we mentioned, one opportunity to capitalize further on the 45Z tax credits is also to increase our production capacity. And we do have a project scheduled for end of Q3, early Q4 to expand the production capability of our Pekin Dry Mill. It's already one of our lowest cost producing assets. But adding additional 45Z credits on that additional production really justifies that project. And our intent is to improve the capacity by about 8% or 5 million gallons. Amit Dayal: Understood. And then you just mentioned it, Bryon, the traceability of the feedstock, this -- are we already in compliance with that? There's a treasury proposal around 45Z eligibility. So I just wanted to see how we stand on that front. Bryon McGregor: We're active in that front. I wouldn't say that all of our bushels are traced. I think that there is some work that needs to be done around incentivizing our farmers to provide that information. So I think -- and it's not just something that we can do on a stand-alone basis, but it's going to require regulatory support as well and adoption across the entire industry. That said, we're doing what we can, and we're making some headway there. Amit Dayal: Okay. And then just last one for me. On the Western asset, should we expect revenue pickup in 2026? I know operationally that is performing much better now. But do we see -- can we think of any revenue improvements coming through in 2026 for that segment? Bryon McGregor: Certainly intend to try and increase production capacity there or increase our overall -- that's what I'm looking for. Robert Olander: Yes. We definitely plan to work on improving our production utilization rate. And then as I think Bryon mentioned in the call, we're exploring opportunities to expand our CO2 throughput as well. Operator: Your next question will come from Eric Stine with Craig-Hallum. Eric Stine: So you mentioned ethanol exports that you had locked in a portion of that. It sounds like a meaningful portion of that for the first half. I'm wondering if you can kind of quantify that a little bit. And then also curious, as you think about going forward, increasing volumes and increasing margins there, I know you have to have certain certifications to even access other markets. So just curious what kind of steps that would entail to both increase volumes and potentially the margins you get. Bryon McGregor: Yes, sure. So while we don't specifically provide that level of detail, what's, I think, important to understand for us is that it's to try and find the optimal balance to optimize the value of the product that we're making. So particularly for ICP and for -- or the distillery and the wet mill to the extent that we can produce higher quality products or export fuel products would be the highest marginal value for those products, and they sell at a premium to -- or predominantly sell at a premium to what would be domestic fuel, even including 45Z credits. But where we can as well at other plants, which are largely designed to be selling into the domestic fuel markets that we're doing all that we can to continue to optimize those values to obtain as much 45Z credit as we can. So it's really, again, finding a balance. And what we've been able to do is to sell more of that product for increasing demand in Europe for those products. So while we've seen somewhat of a marginal -- a margin compression around some of the high-quality products that we sell, we've been able to see an increase in demand for that in the export market. Does that answer your question? Rob, would there be anything else you want to add to that? Robert Olander: Yes. No, that's good. Eric Stine: Yes. I mean, clearly, back half of the year, I mean the purchases or the exports to some of those European markets were quite significant. So okay. Then I mean, I think the main question that I have is -- and this might be, Bryon, a really hard question to answer. But I mean, you've clearly raised the floor here to the business. I mean I know in the past, you had the platform when the crush is strong that you would do quite well. But conversely, when it was really tough, I mean, it would definitely show in results. I mean, is there a way to think about what the business looks like, maybe not in a worst-case scenario, but in some of the bad markets that we've seen in the past because correct me if I'm wrong, but it seems like you have -- you've raised the floor pretty meaningfully versus where it's been in the past. Bryon McGregor: Yes. So I think there's a number of factors that go into that. I think part of it is as you think back at the maturation and kind of the evolution of the company where we were originally focused around destination facilities, the brilliance in the destination was is that they're able to -- they perform really, really well when you see supply constraints, right? But they also demonstrate their vulnerability when you get an oversupplied ethanol market, which has been largely the case for most of the, call it, 18, 20 years where we've been producing over 15 billion, 14 billion gallons of capacity in the industry. So what we've been able to do is, to some degree, both through monetization and exiting certain locations, but as well then being able to shore up the financial viability of those assets with other revenue sources and be able to lower operating costs around that, you're able to take out some of the vulnerabilities around the floor in tight crush margins. And then again, the other focus in what would be the origin facilities at Pekin is around optimizing the value of those revenue streams or the value of those products that generate that revenue stream, and then being diligent and efficient about how we execute. So it's about cost management and then making sure that we're investing in projects that not only either increase revenue, but also reduce operating expenses and/or improve efficiencies as well. So if we can do all 3, that's a home run. And I think we've been able to see a lot of those benefits over the last couple of years. Eric Stine: Got it. And so this is -- I mean, it sounds like you'd characterize it more as -- I mean, this has been many, many, many years in the making if you've gotten rid of a lot or you've sold the 2 California plants. But then what you've done in the next -- or I'm sorry, in the last, call it, 2-plus years, you've just kind of taken it to that next level. Is that fair? Bryon McGregor: Yes, I think that's right. Operator: And that will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Bryon McGregor for any closing remarks. Please go ahead. Bryon McGregor: Thank you, Chuck. Thanks again, everyone, for joining us to hear about our progress that we've been able to make and our initiatives for 2026. As always, we appreciate your feedback and support. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to Advanced Flower Capital Inc.'s fourth quarter and fiscal year 2025 earnings call. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Gabriel A. Katz, Chief Legal Officer. Please go ahead. Gabriel A. Katz: Good morning, and thank you all for joining Advanced Flower Capital Inc.'s earnings call for the quarter and fiscal year ended 12/31/2025. I am joined this morning by Robyn Tannenbaum, our President and Chief Investment Officer; Daniel Neville, our Chief Executive Officer; and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our 02/10/2026 press release and is posted on the Investor Relations portion of Advanced Flower Capital Inc.'s website at advancedflowercapital.com, along with our fourth quarter and full year earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, anticipated market developments, portfolio yield, and financial performance in 2026 and beyond. These statements are subject to inherent uncertainties in predicting future results. Please refer to Advanced Flower Capital Inc.'s most recent periodic filings with the SEC, including our Annual Report on Form 10-K filed earlier this morning, for certain conditions and significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During this call, we will refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations to net income, the most comparable GAAP measure, for distributable earnings can be found in Advanced Flower Capital Inc.'s earnings release and investor presentation available on our website. Today's call will begin with Robyn providing a high-level recap of our 2025 fiscal year, including the conversion to a BDC. Dan will then provide an overview of our portfolio. Finally, Brandon will conclude with a summary of our financial results before we open the lines for Q&A. With that, I will now turn the call over to our President and CIO, Robyn Tannenbaum. Robyn Tannenbaum: Thanks, Gabe, and good morning to all our investors and analysts that have joined us today. Looking back on 2025, Advanced Flower Capital Inc. was focused on, one, reducing our exposure to underperforming credits through active portfolio management, and two, converting from a real estate trust to a business development company, or BDC, to expand the universe of transactions Advanced Flower Capital Inc. could invest in. We continue to focus our portfolio management efforts on underperforming credits in order to preserve capital. We believe that as we begin to get repaid on some of these underperforming assets and reinvest that capital into performing credits, we may unlock future earnings potential. I am pleased to announce that we received $117,000,000 of paydowns from performing and underperforming credits from the start of 2025 through today. During fiscal year 2025, Advanced Flower Capital Inc. originated $53,000,000 of new commitments, and subsequent to year end, we have closed on $89,700,000 of new commitments in the lower middle market, which Dan will describe in further detail. Turning to our conversion to a BDC, as of 01/01/2026, we completed our previously announced conversion from a REIT to a BDC. Our conversion expands Advanced Flower Capital Inc.'s investment flexibility to pursue opportunities beyond real estate-backed loans, including a broader universe of operating businesses aimed at enhancing long-term shareholder value. Before turning the call over to Dan, I want to touch upon our earnings for the quarter and fiscal year. For the quarter and full year ended 12/31/2025, Advanced Flower Capital Inc. generated distributable earnings per basic weighted average share of negative $0.12 and positive $0.39, respectively. Primarily due to realized losses from two underperforming credits recognized during the year, our 2025 dividends were characterized as a return of capital, making the 2025 distributions to our shareholders tax-free. Future dividends may receive similar treatment if Advanced Flower Capital Inc. recognizes additional losses in 2026. Looking ahead, the Board of Directors has declared a first quarter dividend of $0.05 per share, which will be paid on 04/15/2026 to shareholders of record on 03/31/2026. With that, I will turn it over to Dan, who will discuss our portfolio management efforts, strategy expansion, and new deals we have recently invested in. Daniel Neville: Thanks, Robyn, and good morning, everyone. I will begin with an update on our portfolio, then turn to our expanded strategy and deals we recently completed. Looking at our existing portfolio, from 2025 through today, we received $117,000,000 in paydowns. This includes the repayment of two loans subsequent to year end at par plus accrued, with an additional $1,800,000 in prepayment and exit fees from those two loans. We currently have three loans on nonaccrual and are focused on receiving paydowns on those loans to redeploy that capital into performing credits that should contribute to current income. We have continued the liquidation process for Private Company A. From 2025 through today, we have received $6,300,000 of paydowns. The borrower is still in receivership, and the distribution of proceeds needs to be approved by the court. We currently have a pending motion for an additional distribution of $6,400,000 in proceeds. While we are frustrated by the pace of distribution to date, I am happy to report that all of the operating assets of the estate are under agreement, and we expect distributions will continue to flow in over the course of 2026 as regulatory approvals and other milestones are met. Regarding Private Company K, two of the three Massachusetts dispensaries have signed purchase agreements approved by the court and are awaiting regulatory approval to effectuate the sale. We expect the sale of all of the collateral of Private Company K to be completed sometime in 2026. Lastly, we wanted to take a minute to touch on Justice Grown. In February, one of Justice Grown's claims was dismissed in the New Jersey action, and we also had oral arguments on the appeal of the preliminary injunction. We expect a ruling on the appeal in the coming months, and the Justice Grown mature loan matures on 05/01/2026. We continue to actively manage these positions to preserve shareholder capital and maximize recovery value. Our earnings may continue to be affected by the underperformance of some of these legacy loans and any realized losses we take on assets. However, as we begin to get repaid on some of these loans on nonaccrual and reinvest that capital into performing credits, we may unlock future earnings potential. Since expanding our investable universe, our active pipeline remains strong, with over $1,400,000,000 of deals as of today. We are focused on sourcing deals and backing companies in the lower middle market across a variety of industries. We are primarily focused on providing loans to cash-flowing borrowers with $5,000,000 to $50,000,000 of EBITDA. These financings are often used for expansion capital, acquisitions, refinancings, and recapitalizations. Turning to our activity after converting to a BDC, I would like to discuss two loans that we closed in Q1 2026. In January, Advanced Flower Capital Inc. closed a $60,000,000 senior secured credit facility to support the combination of Stat and the Morsby Group, which is backed by Cambridge Capital. Stat is a leading revenue recovery specialist servicing the Walmart, Target, and Amazon ecosystems. Morsby is a procurement specialist that focuses on long-tail supplier negotiations and savings for Fortune 1000 clients. Advanced Flower Capital Inc. provided the $60,000,000 to finance the acquisition of Morsby and refinance existing indebtedness. In February, Advanced Flower Capital Inc. committed $30,000,000 to a $60,000,000 senior secured term loan to support the acquisition and growth of a leading healthcare benefits platform tailored toward hourly and sub-$50,000 salaried employees, which is a large and underserved segment of the workforce. At closing, Advanced Flower Capital Inc. funded $20,000,000 of this commitment supporting a top-tier sponsor. In closing, we remain focused on unlocking value from underperforming loans and are excited about the new lending opportunities that we are seeing. Now I will turn it over to Brandon to discuss our financial results in more detail. Brandon Hetzel: Thank you, Dan. For the quarter ended 12/31/2025, we generated net interest income of $5,200,000 and distributable earnings of negative $2,800,000, or negative $0.12 per basic weighted average common share, and had GAAP net income of $900,000, or $0.04 per basic weighted average common share. For the full year ended 12/31/2025, we generated net interest income of $24,600,000, distributable earnings of $8,700,000, or $0.39 per basic weighted average common share, and had a GAAP net loss of $20,700,000, or $0.95 per basic weighted average common share. As previously mentioned, we believe providing distributable earnings is helpful to shareholders in assessing the overall performance of the business. Distributable earnings represents the net income computed in accordance with GAAP, excluding noncash items such as stock compensation expense, any unrealized gains or losses, provision for current expected credit losses, also known as CECL, taxable REIT subsidiary income or loss net of dividends, and other noncash items recorded in net income or loss for the period. We ended 2025 with $317,400,000 of principal outstanding spread across 15 loans. As of 02/25/2026, our portfolio consisted of $366,400,000 of principal outstanding across 15 loans. During the quarter, we repurchased $13,000,000 of our unsecured bonds. Currently, $77,000,000 of our unsecured bonds remain with a maturity in May 2027. We continue to evaluate and explore options to refinance that bond prior to maturity. As of 12/31/2025, the CECL reserve was $46,100,000, or approximately 18.2% of our loans at carrying value, and we had a total unrealized loss included on the balance sheet of $27,700,000 for our loans held at fair value. As of 12/31/2025, we had total assets of $275,600,000, total shareholder equity of $175,600,000, and our book value per share was $7.46. Lastly, on 03/02/2026, the Board of Directors declared a first quarter dividend of $0.05 per share, which will be paid on 04/15/2026 to shareholders of record on 03/31/2026. With that, I will now turn it back over to the operator to start the Q&A. Operator: We will now open for questions. To ask a question, please press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from Aaron Thomas Grey with Alliance Global Partners. Your line is open. Aaron Thomas Grey: Good morning. Thank you for the question. This is John on for Aaron. So the active pipeline increased meaningfully with $1,400,000,000, up from last quarter's $400,000,000. Could you provide some color on the key factors that led to this increase, and how quickly you believe this could potentially translate to closed originations? Robyn Tannenbaum: Sure. Thanks for the questions. Daniel Neville: So, the pipeline increased meaningfully. That is primarily a function of our conversion from a REIT to a BDC. As you know, and as we have discussed, the investable universe within a REIT-only framework and the associated restrictions on real estate coverage was limiting to the loans that we could do within our portfolio. Upon converting to a BDC, that investment universe has been expanded beyond cannabis, which happened in August, but also allows us to invest in cash flow loans that are not fully covered by real estate as they were under the REIT framework. Aaron Thomas Grey: Great. Thanks. And then is there a split you could provide between the cannabis and non-cannabis pipeline, and what the expected yields for the non-cannabis, how those would compare to the legacy portfolio? Robyn Tannenbaum: Sure. So this is Robyn. We view the active pipeline as an active pipeline for lower middle market companies regardless of industry and spreads across a few. We are not going to break out what industries those are associated with, including cannabis. And as for yields, I would point you to page 14 in our deck. Yields that we have invested in are obviously not indicative of future yields, but Private Company X and Private Company Y were the last two loans that we did, which were in the lower middle market. One loan's yield to maturity per the deck is 14%, and one is 19%. Aaron Thomas Grey: Great. Thanks. I will jump back in the queue. Operator: Thank you. As a reminder, to ask a question, please press 1-1. Our next question comes from Pablo Zuanic with Zuanic and Associates. Your line is open. Pablo Zuanic: John, can I just follow up on—you gave good color there? About the loans on nonaccrual. In the case of Private Company A, what is left then is $4,400,000. There is nothing else to recover, right, if you can confirm that? In the case of Private Company K, you said two dispensaries are in the process of being sold. The third one, I guess, is still pending. The principal is over $12,000,000. Can we assume that when you are talking about process that you will recover and redeploy, that for Private Company K you will be getting the $12,000,000? And then any further color you can give on Justice Grown? From our start, it seems unlikely that you will be paid $78,000,000 or $79,000,000 principal in May. But if you can just give me—give color—correct me if I am wrong in my assumptions. Thank you. Robyn Tannenbaum: So this is Robyn. I will let Dan answer a few. On Private Company A, I believe what Dan was referring to is the amount that is currently pending in front of the receiver, not the total amount that we expect to get over time. Okay, and then I will let Dan take Private Company K. And then in terms of Justice Grown, we commented all that we are going to comment, and that is we really do not have anything to expand upon there aside from the loan is due in May. Daniel Neville: Yeah. So just to elaborate on Company A, we commented on the amount that was distributed in 2025, which was, I believe, $6,800,000. We have a pending motion for $6,400,000 that we expect to be distributed in the coming months. And then there were various other assets within the estate, both operating assets and financial assets, that will be monetized over time, and as those proceeds come in, we would expect additional distributions. We did not make a commentary on what the expected amount of the proceeds from the balance of the assets would be relative to what you see in our disclosures. Regarding Private Company K, which is the Massachusetts operator, as I discussed, two of the dispensaries are under APA and have court approval to effectuate those sales. Both are pending regulatory approval in front of the CCC, which typically is a three- to four-month process, although it can be longer, can be shorter. And then the third dispensary, we are receiving final LOIs in the coming weeks and expect that sale to also be effectuated in the 2026 timeframe. We do not break out reserves with respect to individual loans, but I would say that we believe that we are appropriately reserved on our portfolio as everything stands today. Pablo Zuanic: Thank you. That is good color, Dan. And then just, I know you are not going to guide for future loans, but is the first quarter pace based on the two facilities you extended to low middle market companies—is that cadence, call it $100,000,000 per quarter, is that something that you think can be sustained for the rest of the year? And just remind us how that would be funded in terms of your credit facilities and, of course, the proceeds you may receive. Daniel Neville: Yeah. So, Pablo, I think you can look at cash on the balance sheet and the capacity of our credit facilities. As it stands today, the $100,000,000 per quarter pace is not something that we currently have capacity to sustain outside of—obviously there are some loans that are on nonaccrual today, and we could receive proceeds from those loans over time, but it is very difficult to predict. But I would say that we are pleased to come out of the gate and start the year on a strong footing with two solid loans in the lower middle market to sponsors that we like and companies that we like at attractive yields. And I think, again, as Robyn said, I would point folks to page 14 of the deck and some of the terms associated with those loans, and that is the kind of deal that we would like to do going forward as we deploy capital over the course of 2026. Pablo Zuanic: Thank you. And then just two more if I may. One, again, I know you are not going to give guidance in terms of pipeline between cannabis and non-cannabis, but given everything that is happening on the regulatory landscape, do you foresee making any new loans in cannabis this year? I mean, I think the fourth quarter activity in terms of new loans was minimal in cannabis, right? So just your macro outlook in cannabis and whether that indicates that there would be opportunities to make loans in cannabis or not. And then the second question, which is unrelated, but does the whole Blue Owl Capital situation—how does that—obviously it does not affect your performance directly, but it does affect sentiment. Do you want to make any comments on that in terms of how investors should think about that situation relative to Advanced Flower Capital Inc.? Thank you. Daniel Neville: So in terms of the cannabis loans and the question regarding that, I think it is something that is in our pipeline that we continue to evaluate. But as we have said previously, the bar is very, very high for making any new loans into cannabis. Unfortunately, the regulatory approval that everyone is talking about first happened in August 2023, and there really has not been a ton of incremental progress since then. And so while we are hopeful and optimistic that there is regulatory approval, I think the lack of equity capital in the industry over the last three years, combined with the burgeoning tax liabilities that some of these companies are carrying, make it a very difficult sector for us to deploy fresh capital into. Robyn Tannenbaum: And then in terms of the BDC question, I think that each BDC speaks on its own credit performance and credit portfolio, just as we have. The middle market loans that we have made are new, and we feel good about those loans and where we invested. I am not going to speak on the industry or any other companies. They know their book a lot better than we do, so I will leave it to them to discuss on their earnings call. Operator: Alright. Thank you. This concludes the question-and-answer session. I would now like to turn it back to Daniel Neville, CEO, for closing remarks. Daniel Neville: Thank you for joining us today, and we look forward to talking to you on future earnings calls. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us today for the Mayville Engineering Company, Inc. fourth quarter and full year 2025 results conference call. My name is Sami, and I will be coordinating your call today. During the presentation, you can register a question by pressing star to remove yourself from the question queue. Your host, Stefan Neely with Valem Advisors, to begin. Please go ahead, Stefan. Stefan Neely: Thank you, operator. On behalf of our entire team, I would like to welcome you to our fourth quarter and full year 2025 results conference call. Leading the call today is Mayville Engineering Company, Inc.’s President and CEO, Jagadeesh Reddy, and Rachele Lehr, Chief Financial Officer. Today’s discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today’s forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Operator: Further, this call will include the discussion of certain non-GAAP financial measures. Stefan Neely: Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which is available at mechinc.com. Following our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Jagadeesh. Jagadeesh Reddy: Thank you, Stefan, and good morning, everyone. The fourth quarter represented a transitional period for Mayville Engineering Company, Inc. While demand in our legacy end markets remained muted during what is typically a seasonally softer quarter, our team remained focused on positioning the business for successful execution and growth as we enter 2026. Over the past six months, we have experienced robust and sustained demand momentum within our data center and critical power end market. In response, we have proactively reallocated available capacity and resources to support successful project launches and meet the evolving needs of our OEM customers in this market. As a result of these actions, our fourth quarter margin performance was pressured. We incurred and retained cost that would typically be flexed with softer demand, reflecting deliberate investments to support program readiness and execution. Importantly, this margin pressure is primarily driven by early-stage project inefficiencies and project launch costs as we prepare for higher-volume programs rather than pricing or structural cost challenges. As these programs ramp and utilization improves, we expect margins to normalize in line with our long-term expectations. These margin dynamics are transitory in nature and, importantly, position Mayville Engineering Company, Inc. to deliver profitable growth in 2026 and beyond as we capture demand in the rapidly expanding data center and critical power market. In addition, we remain focused on executing our MBX operational excellence framework, driving disciplined process improvements across our plants, and advancing initiatives to optimize and rationalize our manufacturing footprint, which we expect will further enhance operating leverage as end market demand recovers. Now turning to a review of our key markets and the respective end market outlooks. Starting with commercial vehicle, we continue to see net sales to this end market declining approximately 19% versus the prior-year period. In their most recent report, ACT has revised its full-year 2026 outlook upwards, now projecting a 3.4% increase in Class 8 production in 2026. This improved outlook reflects greater clarity surrounding the 2027 EPA emission standards, resulting in anticipated pre-buy activity and improved macroeconomic conditions. In contrast, our construction and access market revenues increased approximately 15% year over year during the quarter. This is supported by the AccuFab acquisition and strong nonresidential activity. Organic net sales growth in this market was approximately 11% in the quarter. In the powersports market, net sales grew approximately 20% year over year, driven by the impact of incremental volumes from new business wins and stabilized customer production schedules, as dealer inventory levels are now in line with current demand. This was partially offset by a decrease in sales within the marine propulsion market. Net sales in our agriculture market were approximately flat year over year amid signs that demand is reaching a cyclical trough. Within our data center and critical power end market, our business saw growth of approximately 13% year over year, supported by legacy OEM demand growth and early project launches on AccuFab-related cross-selling opportunities. Overall, demand from OEM customers in the data center and critical power market remains strong. Our qualified opportunity pipeline now exceeds $125 million, and the value of projects scheduled to launch in 2026 is approximately $40 million to $50 million. Combined with organic growth from our legacy OEM customers, we expect data center and critical power to represent more than 20% of our revenues in 2026. Looking ahead, we expect this end market to remain a consistent growth opportunity for Mayville Engineering Company, Inc. Based on recent market studies, we estimate our serviceable addressable market to range from $115 million to $185 million per gigawatt of new data center capacity installed. Given the number of new data centers expected to come online in the U.S. in 2026, this represents a total market opportunity of approximately $3.2 billion. We expect this market to grow at a compound annual rate of approximately 16% from 2026 to 2030. Please note these estimations exclude server racking opportunities, which represent additional incremental upside. While we will continue to take a balanced approach to allocating capacity to this end market, the robust demand growth allows us to proactively manage our commitments. This approach ensures us to maximize footprint utilization, deliver consistent profitable growth through the cycle, and continue to invest in growth initiatives that unlock long-term value. Before turning the call over to Rachele, I want to highlight several areas of commercial momentum that give us confidence in our growth trajectory for 2026 and beyond. Across all of our end markets, customer engagement and bidding activity remains strong. During the fourth quarter, we secured approximately $15 million in new project awards with data center and critical power customers. Year to date, total awards across our legacy markets were more than $108 million, exceeding our annual target of $100 million. Looking ahead to 2026, we expect total bookings across our end markets to be approximately $140 million, supporting profitable growth as our legacy markets move toward a cyclical recovery exiting 2026. Within our legacy end markets, we have continued to expand our share with our commercial vehicle customers as they launch new products heading into the 2027 EPA regulation changes. These products support future growth and are scheduled to begin production in late 2026 and 2027. In addition to the future expansion in commercial vehicle revenues, we secured new agriculture business on new model introductions and additional service business for a military customer. Within the data center and critical power market, approximately $15 million of awards secured in the fourth quarter were primarily driven by demand from major AccuFab customers. These substantial scopes of work span power distribution units, static transfer switches, busway components, and data center cooling. Turning to capital allocation. We closed 2025 with strong free cash flow generation. While we expect free cash flow to be softer in the first quarter, we continue to anticipate full-year free cash flow conversion of approximately 50% to 60% of adjusted EBITDA. As we progress through the year, our primary use of free cash flow will remain focused on debt reduction. As we progress toward our long-term target of 2.5 times leverage, we expect to become increasingly opportunistic deploying capital towards M&A, with an emphasis on further diversifying our end market exposure and supporting consistent profitable growth. In the meantime, our priority remains disciplined capital deployment, ensuring that growth investments are targeted, return-driven, and fully aligned with maintaining balance sheet strength. With respect to guidance, to provide investors with greater visibility into our business trends, we are introducing quarterly financial guidance in addition to our full-year outlook. This is due to the fast-moving data center and critical power environment and developing improvements within our legacy end markets. Rachele will cover our guidance in more detail, but I would like to highlight a few key elements of our expectations for 2026. Inclusive of a full year of AccuFab and associated data center and critical power cross-selling synergies we expect to realize in 2026, we anticipate full-year net sales to increase relative to 2025, along with margin expansion and improved free cash flow. These expectations assume an improvement of our legacy end markets primarily during the second half of the year. In summary, Mayville Engineering Company, Inc. is entering an important transitional year, one that is shaping the next phase of our growth and value creation. While we are intentionally investing both capital and operating resources ahead of anticipated demand, we believe the foundation for sustainable growth and improved profitability is firmly in place. With disciplined execution and a clear strategic focus, we are well positioned to deliver long-term value for our shareholders and our customers. With that, I would like to turn the call over to Rachele. Thank you, Jag. Rachele Lehr: Good morning, everyone. Total sales for the fourth quarter increased 10.7% on a year-over-year basis to $134.3 million. Excluding the impact of the AccuFab acquisition, organic net sales declined by 5.3% compared to the prior-year period. Our manufacturing margin rate was 6.6% for the fourth quarter of 2025, compared to 8.9% for the prior-year period. The decrease in our manufacturing margin rate was due to $1.2 million of data center and critical power-related project launch costs and $1.7 million of early-stage project inefficiencies on a commercial vehicle project. This was partially offset by higher-margin net sales contribution from the AccuFab acquisition. Excluding these temporary launch phase dynamics, our manufacturing margin rate would have been approximately 9% during the quarter. Other selling, general, and administrative expenses were $9.7 million, or 7.2% of net sales, for the fourth quarter of 2025 as compared to $7.9 million, or 6.5% of net sales, for the same prior-year period. The increase in these expenses primarily reflects $200,000 in nonrecurring costs and $1.1 million in incremental SG&A expense, each associated with the AccuFab acquisition. Interest expense was $3.8 million for the fourth quarter of 2025, as compared to $2.0 million in the prior-year period. The increase was driven by higher borrowings resulting from the AccuFab acquisition, partially offset by lower SOFR base rates relative to the prior-year period. Adjusted EBITDA margin was 4.7% for the quarter, compared to 7.6% in the prior-year period. The decrease reflects lower legacy market volumes and $2.9 million of project launch costs and early-stage project inefficiencies, partially offset by the benefit of the AccuFab acquisition. Excluding these items, adjusted EBITDA margin would have been approximately 7%. Turning now to our cash flow and the balance sheet. Free cash flow during the fourth quarter of 2025 was $10.2 million, as compared to $35.6 million in the prior-year period. The year-over-year decline primarily reflects the receipt of $25.5 million in settlement proceeds in the fourth quarter of last year related to a former fitness customer dispute. Excluding this item, free cash flow was approximately flat year over year. During the fourth quarter, we used available free cash flow to repay approximately $10.0 million in debt, resulting in net debt at the end of the quarter of $205.3 million, up from $82.1 million at the end of 2024. Our increased debt resulted in a net leverage ratio of 3.7 times as of December 31. Now turning to a review of our 2026 financial guidance. As Jag previously mentioned, we are introducing quarterly guidance in addition to full-year guidance. For the first quarter of 2026, we currently expect net sales of between $137 million and $143 million and adjusted EBITDA of between $5 million and $7 million. Our first-quarter outlook reflects continued project launch costs and margin pressure ahead of the majority of data center and critical power project ramps, which begin in the second quarter. Additionally, free cash flow is expected to reflect normal seasonal working capital usage, incremental working capital investments to support the data center and critical power ramp-up, and planned capital expenditures of $3 million to $5 million. For the full year, we expect net sales of between $580 million and $620 million, adjusted EBITDA of between $50 million and $60 million, and free cash flow of between $25 million and $35 million. This outlook reflects a full year of AccuFab ownership, $40 million to $50 million of incremental cross-selling revenue, and a gradual improvement in the legacy end market demand, primarily in the second half of the year. Additionally, embedded within our 2026 adjusted EBITDA guidance is $2 million to $3 million of cost improvements driven by our NBX operational excellence and strategic value-based pricing initiatives, net of inflationary pressures. As it relates to free cash flow, we expect our free cash flow conversion for the full year to be between approximately 50% to 60% of adjusted EBITDA, coupled with full-year capital expenditures to be between $15 million and $20 million. Given this outlook and our priority of repaying our debt, we expect to achieve a net leverage ratio of three times or lower by the end of 2026. Again, 2026 will be a transitional year for us. We believe that our cost structure and working capital discipline will position us for profitable growth, strong free cash flow yield, and improved adjusted EBITDA margins as we enter a phase of cyclical recovery and growth across our legacy end markets, supported by elevated growth in our data center and critical power end market. With that, operator, that concludes our prepared remarks. We will now open for questions as we begin our question-and-answer session. Operator: Thank you very much. To remove yourself from the question queue, please follow the prompts. Our first question comes from Michael Shlisky from D.A. Davidson. Your line is open. Please go ahead. Linda (D.A. Davidson): Yeah. This is Linda. My first question, starting with the commercial vehicle market. In your remarks, you noted the revised ACT outlook, and from the data we got overnight, it shows that Class 8 truck orders for February were one of the top ten months of all time. Does this change your view on 2026, and do you think any of it pulls from 2027 orders if this is just an emission-related pre-buy? Jagadeesh Reddy: Yeah. Great question, Linda. And I was expecting that question this morning. You know, I did not see the ACT report until I got up this morning. Right? So, obviously, it is fresh off the press. I was not surprised by the increase in orders in February, but, obviously, we were surprised by the magnitude of increase of orders in February. We have seen signals from our OEMs in the last month or so inquiring us and other suppliers about capacity, utilization, and we have seen signals from them of potential build rate increases. What I can tell you is we have not seen any of those signals translate into demand yet. Having said that, we expect again, given this morning’s news, we expect some of this demand to accelerate the build rate increases from our CV customers, and we expect that to start showing up in mid to late Q2. Usually, for most suppliers, there is a six-week lead time, and hence, we have not seen that yet in our EDI feeds. But we do expect that. So with that in mind, you know, we came into this call expecting approximately a 230,000 build rate. We will have to wait and see if that estimate changes in the coming quarters. And that is one of the reasons why we came out with our quarterly guidance, which is new for us. These are fast-moving developments in our legacy end markets. We are seeing similarly green shoots in construction and small ag as well. So with all of that, we wanted to be more nimble, not only internally, but also externally in how we are communicating with our shareholders. Linda (D.A. Davidson): Great. Yeah. I appreciate the color. That is very helpful. Then, switching to ag, we keep hearing about ag getting better, whether that is from John Deere or other suppliers getting a little more bullish. Do you see any light at the end of the tunnel on that end market? Jagadeesh Reddy: As some of our customers have indicated, the large ag will still be down this year, double digits. That is our customer forecast, what they have publicly communicated. But we are seeing signs of improvement in small ag, lawn care, turf, and forestry equipment. So we do see some green shoots, as I mentioned, in the ag business. I also want to remind you that our ag business is close to 5% of our overall sales, as much as it used to be a much larger piece of our business. With our data center business and other end markets continuing to grow and ag continuing to stay down in the last 18 to 24 months, it is now a much smaller piece of our business. Linda (D.A. Davidson): Got it. And then, my last question will be on critical power. You mentioned some launch cost in critical power providing a margin headwind in 2026. Do you think that would be complete by 2027, and what kind of margin tailwind might that be next year? Rachele Lehr: Linda, this is Rachele. Just, you know, as we look ahead into 2026, we really see that being ahead of the program launches. And we really expect and anticipate most of that to start taking place, to be at full run rate at the end of the second quarter. So we really expect to be at full run rate for the second half of the year. So we expect to incur more of those costs having the margin pressure in the first half. We do anticipate a little bit trailing into the second half of the year, but it is really going to be a first-half impact. Linda (D.A. Davidson): Got it. Thank you so much. Thank you for your time this morning. Jagadeesh Reddy: Thank you, Linda. Operator: Our next question comes from Greg Palm from Craig-Hallum. Your line is open. Please go ahead. Greg Palm: Yeah. Thanks. Good morning, everybody. You know, you incurred more cost and recognized lower margins than expected back from the November call. So I guess, looking back, what surprised you relative to that outlook? And then maybe you can just help unpack the EBITDA guide specifically for Q1 and maybe more specifically, what that margin progression looks like in sort of the Q2 to Q4 time period. It sounded like there are going to be some costs that you incur in Q2, and those mostly trail off in the second half. So just wanted to be sure we understood that right. Jagadeesh Reddy: Yeah. Let me start first, Greg. The headline really for us is we have won more business in data centers than we anticipated coming out of our November call. We expect our Q1—we are not obviously talking about Q1 bookings here—but our Q1 bookings for data centers will be significantly higher than what we have seen in the second half of last year after the acquisition. So in preparation for those, we are in the middle of many of those launches already. The business we have won in Q1. So we had to bring on significant resources online, not only in December, also in Q1 as we sit here. And that is the primary reason why we are showing the margin profile that we are showing in Q1. Rachele Lehr: And I would add, you know, our legacy business, we always had product launches, but we are doing that over, you know, 12 to 18 months, a much longer time, and we are able to do that. This, you know, this business is 8 to 12 weeks. And so we have had to expedite that and really make investments. We have a product launch team specific to this, more than we have ever had before, because of the speed and the intensity of which our customers are asking for things. Again, as Jag mentioned, this really did exceed our expectations and what we are winning. We first acquired this business, you know, we have said, hey, it is going to be $1 to $2 million in cross-selling synergies in 2026, and here we now are at $40 to $50 million. So we have just had to invest more, and we are seeing that continue into Q1 because a lot of these will not be at their full run rate until the end of the year, but we want to nail it and want to make sure we hit it out of the park with these new customers in our locations. Jagadeesh Reddy: And we are retooling six of our legacy plants—Mayville Engineering Company, Inc. plants. That is a significant effort to put data center work, not only what we have won so far year to date and last year, but what we are anticipating in 2026. Right? So it is great news, obviously, for the rest of the year and long term, that we are able to quickly convert six of our facilities for cross-selling synergies. Greg Palm: Okay. That is great color. And you already mentioned you are expecting that end market to represent more than 20% of revenue. I am just curious, as we sit here today, what kind of visibility do you have into that, you know, call it a $125 million revenue number if you want to use that. And, you know, there is a sentence in the press release that talks about pipeline and multiple large opportunities. Are these multiple large opportunities within that $125 million number, or is that something separate? Jagadeesh Reddy: So I would say with very good confidence that we have good line of sight to that $120 million worth of data center business for the year. So that is number one. Number two, very little of significantly large opportunities are in that qualified pipeline number we put out. Greg Palm: Sorry. Say that one more time. Jagadeesh Reddy: So some of the significant and large opportunities that we are pursuing, those are either—it is, you know, one or zero, right? So we did not want to take into account those opportunities—we do not want to inflate our pipeline with those large opportunities. Right? So when we talk about the $125 million of qualified pipeline, most of that is visibility and greater than 50% confidence that we could win those opportunities. So we are excluding some significantly large opportunities in that qualified pipeline. Greg Palm: Okay. And just to be clear, like, is there—when you talk about expectations for the year, if you were to, you know, win more small business or win, you know, one or a few of these large— is that something that could translate into more revenue this year above and beyond that $120 million number, or should we think of that more like a 2027 event? Jagadeesh Reddy: Yeah. It is possible, Greg, and hence our effort at quarterly guidance here. This is a fast-moving end market, and we do know, though we laid out $40 to $50 million cross-selling synergies, our expectation is that if we continue to win at the existing win rates in this end market, right, there could be upside to that number. Greg Palm: Okay. Perfect. Alright. I will leave it there. Thanks. Jagadeesh Reddy: Thank you. Operator: Our next question comes from Ross Sparenblek from William Blair. Your line is open. Please go ahead. Sam Carlevon: Good morning. This is Sam Carlevon for Ross. Thanks for taking my question. Jagadeesh Reddy: Hey. Morning, Sam. Sam Carlevon: Maybe starting with Rachele, can you help us parse out some of the moving pieces within the EBITDA guidance? I mean, how should we build to just an $8 million year-over-year step up considering 2026 includes a full year of AccuFab and incremental $40 million to $50 million of margin-accretive cross selling. Rachele Lehr: Sure. I think there are a couple of things to take into account here. One is our legacy business. The volumes continue to remain muted as we budgeted today. Now, of course, we just talked a little bit about what we learned on CV overnight—that there is some upside there. But as we look through the year, our customers are saying, our guidance is saying, that we expect most of those to start to rebound sometime in the second half of the year. So we have that pressure continuing on that piece of our business. We have a high fixed cost—55% of our costs are fixed—and so when we have that lower utilization, we really have ongoing under-absorption associated with that. The other piece is preparing for that legacy rebound. We are carrying some talent that we continue to hold on to because it is coming. And then the third piece is those launch costs. We, like I said, really want to make sure we hit it out of the park. The speed is faster. We are ramping up talent. We are learning as we go with this, and it is exciting to see the growth that we have with that, but we really need to be focused on delivering that. So first half is really pressured by the absorption, the launch cost, and getting ready for the rebound. Sam Carlevon: Got it. Have you given kind of what those launch costs are expected to be for the full year? Or just any sort of range there would be helpful. Rachele Lehr: Not full year, but we expect the first quarter to be very similar to the fourth quarter of launch costs for data center and critical power—$1 million to $1.5 million. We expect that to taper down through each of the quarters of the year. Sam Carlevon: Okay. Got it. I guess switching gears then. I mean, the $40 million to $50 million of in-year revenue synergies sounds like that is back-half loaded. I mean, it seems like that implies a pretty healthy exit rate exiting 2026. So I do not know if you could kind of help us size that ramp and kind of what that means as we enter 2027 of the business you guys have already won? Rachele Lehr: Yeah. I think, you know, as we look at—and we are seeing—by 2026, data center and critical power could be 20% of our total business, so that is significant. The adjusted EBITDA margins on that business are between 20% to 22%. So when you take that into account, knowing that the majority of that $40 to $50 million is going to come in the second half of the year, we will be exiting with margins in excess of our historical. If our historical business continues to come up, that will only additionally be upside. Sam Carlevon: Okay. From a revenue perspective, though, if we say, call it, you know, $20 million in the third quarter, $20 million in the fourth quarter, something like that, that implies an exit rate of, like, call it $80 million. Is that the right way we should be thinking about it into 2027? Jagadeesh Reddy: Yeah. That is, I think, a pretty good assumption, Sam. Sam Carlevon: Okay. Got it. That is what I thought. That is helpful. I will leave it there. Thanks, guys. Operator: Thank you. Our next question comes from Andrew Kaplowitz from Citi. Your line is open. Please go ahead. Natalia Bak: Alright. Good morning. This is Natalia on behalf of Andrew Kaplowitz. Jagadeesh Reddy: Morning, Natalia. Natalia Bak: Maybe just first question on data centers. As data centers and critical power segment grows and represents more than 20% of revenue, should investors expect more customer concentration to increase as well? Or is the opportunity pipeline diversified across multiple customers within that end market? Jagadeesh Reddy: Yeah. Within that end market, it is reasonably diversified. You know, not only are we working with some of the blue-chip names in the critical power end market, we also are working with the next tier of OEMs within that end market. So I do not expect a significant concentration in that end market for us. Natalia Bak: Got it. That is helpful. And then just maybe switching over to your access end market and then the recovery as well. You are expecting a modest recovery driven by infrastructure spending and potential rate cuts. But are you already seeing early signs of improvement in customer order patterns or conversations, or is that recovery more of a second-half expectation at this point in time? Jagadeesh Reddy: In the construction portion of that end market, we are already seeing the build rates increasing. You have seen public comments from our customers that are bringing back capacity online, bringing back employees online. Right? So we are seeing that already hitting our demand and EDI rates. In access, there were some, you know, starts and stops, if you will, with particularly the rental houses increasing their demand in Q4, but then, you know, some softer commentary from our customers on the access side of the end market. So we will have to wait and see and watch how access develops. But, you know, in general, we are positive on the construction and access end market. Natalia Bak: Great. Thank you. Appreciate it. That is it on my end. Jagadeesh Reddy: Yep. Thank you. Operator: Our next question comes from Ted Jackson from Northland Securities. Your line is open. Please go ahead. Ted Jackson: Thanks. I came in with 10 questions to ask and checked every one of them off. So, anyway, here is a couple for you, Jag. With regards to the 20% of revenue for ’26 that could be coming from data center and power, will that—are you going to be turning down in your legacy business to be able to ramp and hit that, or is that just on top of what is going on within the footprint that you have? For a lot of your legacy businesses, you know, then going even a little further, it is like, if we do see a stronger turnaround in, say, commercial vehicles, which, you know, my personal opinion is that we will, you know, will that preclude you from being able to get any additional business? And then I have got a couple more. Jagadeesh Reddy: Yeah. At this stage, Ted, we believe we have enough capacity to be able to ramp up data center business while we see improved run rates within our legacy business. It is not a question for 2026, I believe. It is really for us to figure out a way to continue to expand our capacity as we go into 2027. Our teams have been working feverishly for the last couple of quarters using our MBX framework to increase throughput, increase productivity. We are bringing on additional shifts in some of our plants. We are hiring more employees in some of our locations. So we are planning accordingly. And at this point, we are not going to have to turn down any of our legacy customer business. But that is something that we will continue to watch. And it also presents us some choices as we go into 2027, not necessarily for capacity reasons, but perhaps for margin and pricing reasons. Right? So we will continue to evaluate those opportunities as we go into 2027. Ted Jackson: I think the adding shifts is interesting to me. I mean, and, obviously, employees too. You know, I recall in the past, some of your locations, you only were running at one shift. And, honestly, adding additional shifts was kind of difficult because of labor constraints. You know, where are you in terms of, you know, kind of current utilization? You know, where are you in terms of kind of adding production shifts, and what are some of the hurdles you are having to overcome to make that happen? Jagadeesh Reddy: Yeah. Without the two AccuFab facilities, right—if you exclude them for a second—I would say we are still around 55% on a 24/7 equipment capacity basis. Right? So as we ramp up some of these volumes in our legacy factories, we are looking at automation. We are looking at, you know, extending our shift schedules. Not all, but many of our plants coming out of COVID went to two 10-hour shifts for four days a week. Right? So that is 20 hours a day, four days. But what we are doing is standardizing our shift schedules across the company. Now we are going to three eight-hour shifts, five days a week. That is one way we can immediately increase our run capacity in these plants. We are looking at automation, as I mentioned. We are looking at weekend shifts. We are looking at third shifts in some of our plants. So, you know, it is a mix of different strategies depending on where we see capacity needed and where we see demand coming in. Ted Jackson: Okay. Going over to when you talk about, you know, having to put resources to ramp up and incurring margins—so we are kind of dancing around all this—so it is people, you know, more labor cost. Is there—what other things go into, you know, the resources needed to position yourself to capture this growth that is impacting margins beyond, you know, obviously, the order of additional— Jagadeesh Reddy: Right. You know, as we mentioned earlier, our traditional program launches would have taken 6 to 18 months in many cases. Now we are having to launch these new programs on a 6 to 12 week basis. I will give an example. We have one data center customer that in January came to us and then essentially quadrupled their demand for one of the product lines we used to make in Raleigh. So we had to shift that product line to Defiance, Ohio, one of our, you know, traditionally commercial truck plants, and we went in full force. You know, I was part of a 15-member Kaizen team. I was on the plant floor for a full week figuring out how do we, you know, quadruple our output in that plant for that customer. So, you know, we are rethinking how we assemble components. We are rethinking how we do product flow through the factories. We are rethinking logistics. Right? We are having to rethink everything from scratch compared to what we used to do in any of our previous operations. Right? So that needs project management resources. That needs engineering resources. That needs MBX resources. So all of this, we are trying to do at six different locations, as I just mentioned, as we ramp up data center work. Right? So that is the initial investment we are making. We are obviously having to put in some additional capital to improve productivity. We have most of the capital needed to produce these parts, but sometimes additional capital—new types of machines or automation—improves throughput and product. We are also thinking about how do we get more volume out of our factories as well for these customers. So those are all the things that we are doing. And all of that is investment we are making upfront. Ted Jackson: Okay. And then my last question, which is kind of a silly one, but just to make sure—I want to make sure I understand what the term revenue synergies mean. So when you say that, you know, you are going to have $40 to $50 million in the revenue synergies in 2026, can you just give me a quick definition of what that— Rachele Lehr: Yeah. Jagadeesh Reddy: Anything from a data center customer that is going to be made in a legacy Mayville Engineering Company, Inc. plant. That is how we define that. As we mentioned, you know, last year, the two AccuFab plants we acquired were at capacity when we acquired them. So we are, of course, trying to drive additional throughput through those two plants, and that is not considered in the cross-selling synergies. That is just productivity improvement at those two plants. But anything we are moving out, increasing volume, and, you know, new programs from data center customers that we are putting into Mayville Engineering Company, Inc. plants, you know, that is where we consider cross-selling synergies. Ted Jackson: Thought I had it right. Just wanted to make sure. That is it for me. Thanks a lot, Jag. Jagadeesh Reddy: Thank you, Ted. Operator: We currently have no further questions, so I would like to hand back to Jag for some closing remarks. Jagadeesh Reddy: Before we conclude, I want to again thank our employees for their continued strong focus and execution, and our shareholders for their ongoing support. While we recognize the near-term challenges in several of our legacy markets, we are confident in the progress we are making to position Mayville Engineering Company, Inc. for durable, higher-margin growth in the years ahead. We look forward to sharing our continued progress with you. Thank you for joining us today. Operator: This concludes today’s call. We thank everyone for joining. You may now disconnect your lines.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Stevanato Group Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Lisa Miles, Chief Communications Officer. Please go ahead, madam. Lisa Miles: Good morning, and thank you for joining us. With me today is Franco Stevanato, Chairman and Chief Executive Officer; and Marco Dal Lago, Chief Financial Officer. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be located under the Financial Results tab. As a reminder, some statements being made today will be forward-looking in nature and are only predictions. Actual events and results may differ materially as a result of the risks we face, including those discussed in Item 3D entitled Risk Factors in the company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission. Please read our safe harbor statement included in the front of the presentation and in today's press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation may contain non-GAAP financial information. Management uses this information in its internal analyses and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of these non-GAAP measures please see the company's most recent earnings press release. And with that, I will now hand the call over to Franco Stevanato. Franco Stevanato: Thank you, Lisa, and thanks for joining us. Today, we will review our 2025 performance, address current market dynamics, discuss our fourth quarter results and provide 2026 guidance. We finished fiscal 2025 with another solid quarter that led to positive full year performance and positive momentum as we start 2026. For the fiscal 2025, total company revenue increased by 9% at constant currency rates and 7% on a reported basis compared with 2024. This growth was consistent with our expectations and reflects the execution of our strategic priorities throughout 2025. The biopharmaceutical and Diagnostic Solutions segment delivered another solid year with double-digit top line growth for fiscal 2025. This offset the expected revenue decline from the Engineering segment. Revenue growth in the BDS segment was driven primarily by strong market demand for high-value solutions, which increased 29% in fiscal 2025, and represented 46% of the total company revenue for the year. The strong performance in High Value Solutions was also the main driver for margin expansion in the year with gross profit margin rising by 160 basis points compared to 2024. These results demonstrate the company's ability to execute against our strategic priorities and to grow our innovative premium offerings positioning the business for sustained success in the evolving market environment. At the same time, as we continue to move up the value chain, we are pivoting away from certain non-high-value product categories that we consider not aligned with our strategy, and we may consider additional action in the future. Since our IPO in 2021, we remain committed to meeting customer demand for high-value solutions, which meant investing in key projects in Fishers, Indiana and Latin Italy to spend capacity for high-value syringes. In 2025, the Nexa syringe was our fastest-growing product driven primarily by growth from GLP1s. This should come as no surprise as the syringe is by far the most prevalent format for GLP-1s in United States today. There's no doubt that we've been successful in winning our fair share of the GLP-1 market. This success is rooted in our long history of being a trusted partner to customers. Our global footprint, which provides supply chain security and the quality of our products, which have a characteristic that resonate with our customers. For example, our Nexa platform feature high mechanical resistance. It can be produced at scale, and it is ideally suited for an auto-injector. In fiscal 2025, our revenue from GLP-1s accounted for approximately 19% to 20% of total company revenue. growing more than 50% compared with 2024. We currently expect that the GLP-1s will serve as a meaningful tailwind as special demand continues to grow in the years to come. With the launch of the Wegovy pill, patients now have more options for GLP treatments. The general consensus among industry experts and our customers is that injectables are expected to be the preferred format for treatment lost while our GLPs will enable market expansion and support patients with specific needs. We also anticipate the market for GLP-1 will continue to evolve over the next decade, primarily driven by the different commercial and supply chain strategies among the originators, biosimilar launches, the expected expansion of treatment indications and next-generation [ incretin ] still in clinical phases. We are already seeing some of these dynamics play out in the market today. As we noted on prior calls, recent demand for cartridges has outpaced our prior expectation, and we are expanding our capacity to satisfy demand. We see this trend aligned with the introduction of new pen injector formats with various treatment plants as well as the expected growth of biosimilars, especially in APAC. We currently expect that we will continue to benefit from GLPs in the future. We also believe that the market will continue to evolve and mature. We see a pipeline of opportunities where we are well positioned with a deep expertise, a global footprint and a comprehensive portfolio of products from primary packaging to our platform drug delivery devices. While GLPs represented the largest top line growth contributor in 2025, we continue to increase our participation in other injectable biologics with our premium best-in-class high-value product portfolio. In fiscal 2025, we realized a 40% increase in the number of customers ordering premium ranges, both Alba and Nexa platforms for biologic application that were unrelated to GLP-1s. These 2 customer projects are expected to play an important role in the future growth. We continue to expand our participation in the broader set of biological applications with new customer programs, unlocking incremental value and setting the path for sustainable growth in the coming decade. As a result, in fiscal 2025, Biologics represented 41% BDS revenues, up from 34% in 2024. Third, to the next slide for an update on our strategic growth investments. In Latina, the past year was dedicated to the installation and production of syringe capacity and customer validations all of which will continue in 2026. The next phase in Latina is devoted to increasing capacity for EZ-fill cartridges to meet rising global demand. Turning to Fishers throughout 2025, the teams were focused on core activities, including the ongoing line installations. In parallel, customer validations and audits continue and in 2025 we doubled the number of customers that are now validated in features. Looking ahead, line installations and customer validation activities are expected to continue all year. We continue to advance the build-out for contract manufacturing activities in support of a couple of large device programs for a key U.S. customer the build-out is going well. Nearly all of the injection molding machines are installed, and we started producing components for qualification activities. The first phase of new clean room is completed. We still expect the commercial activities to begin at the end of 2026 or early 2027 for the first device program. Please turn to the next slide for a status update on the Engineering segment. Over the past 12 months, we've made meaningful progress advancing our optimization efforts and improving execution. In 2025, we rightsize operations streamline processes and increase standardization across delivery teams. We reinforce our project management office, driving improvements in project planning, process harmonization, contract management and customer engagement. We also consolidated offices in Denmark, move the visual inspection activities to Italy and acquired a new location in Bologna to access strong technical talent. This section have contributed to double-digit growth in site acceptance rates, an important KPI. Nevertheless, our 2026 guidance assumes a revenue decrease from the Engineering segment due to lower order intake in the prior months. While our efforts in 2025 were focused on execution we recently stepped up our sales and marketing efforts, which has led to a more robust opportunity pipeline. Converting opportunities into new firm orders has been slower than we anticipated. But our pipeline is especially strong in pharmaceutical visual inspection, underpinned by innovation and superior technology. All in all, getting the business back to historical performance is taking longer than we expected and we're working to best position the segment for long-term success. In summary, 2025 was a successful year, characterized by robust top line growth, a favorable mix and ongoing margin expansion. Double-digit growth in our BDA segment more than offset the expected revenue reduction in engineering and enable us to navigate the favorable effects from foreign currency. High-value solutions were the primary driver of revenue growth and margin expansion, reflecting our ability to scale our main investments and perform in full alignment with the strategic direction set at the time of our IPO. We expect that GLPs will remain an important tailwinds, having anchor our position as a market leader in high-value products. Importantly, our best product set enable us to achieve strategic position beyond GLPs, allowing us to participate in the broader global market for injectable biologics and biosimilars. Looking ahead, we will continue to execute our strategic priorities, including aligning growth investments with customer demand trends. I will hand the call over to Marco Marco Dal Lago: Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to year-over-year changes unless otherwise specified. Starting on Page 10. We ended fiscal 2025 with positive financial results for the fourth quarter. Total company revenue grew 7% at constant currency and 5% on a reported basis to $346.5 million for the fourth quarter of 2025. Foreign currency translation was a headwind throughout fiscal 2025 with an higher impact in the second half of 2025 due to a weaker U.S. dollar. Our BDS segment delivered another solid fourth quarter with revenue increasing 13% at the constant currency and 10% on a reported basis. This offset the expected 23% revenue decline in the Engineering segment. For the fourth quarter of 2025, revenue from high-value solutions grew 31% to EUR 171 million, represented approximately 49% of total company revenue in the quarter. The strong performance was driven by continued growth in our premium performance Nexa syringes and, to a lesser extent, EZ-fill cartridges. For the fourth quarter of 2025, gross profit margin increased 120 basis points to 30.9%. This was mostly driven by 3 factors: first, a favorable mix of high-value solutions. Second, the year-over-year improvements in Latin and Fishers as we scale production in our new facilities. But together, they remain dilutive to the corporate margin. And third, the improved market landscape for vials which led to higher vial production and better utilization. This was partially offset by tariffs and unfavorable effects of foreign currency. For the fourth quarter of 2025, operating profit margin was 20.2%. As a result, net profit totaled EUR 47.6 million and diluted earnings per share were EUR 0.17. On an adjusted basis, net profit was EUR 49.8 million and adjusted diluted EPS were EUR 0.18 for the fourth quarter of 2025. Adjusted EBITDA increased 7% to EUR 97.7 million, and adjusted EBITDA margin increased 70 basis points to 28.2%. Let's review segment results on Page 11. The BDS segment finished strong with double-digit growth in the fourth quarter. Revenue grew 13% at the constant currency and 10% on a reported basis to EUR 307.1 million. Segment growth was led by a 31% revenue increase from high-value solutions to EUR 171 million, which accounted for 56% of segment revenue. This offset the 9% revenue reduction in other containment and delivery solutions as we prioritize the production of premium products. For the fourth quarter of 2025, gross profit margin for the BDS segment improved 50 basis points to 31.6% led by a favorable mix, operational gains in our new facilities as we scale commercial production and an improved vial market. These positive trends were offset by the unfavorable impact of tariffs and foreign currency translation. This resulted in an operating profit margin of 23.8% which improved 50 basis points in the fourth quarter of 2025. The BDS segment continues to perform well, reflecting the successful execution of our strategic priorities and a strong position to capitalize on future opportunities. For the fourth quarter of 2025, revenue from the Engineering segment decreased 23% to EUR 39.4 million due to lower revenue in glass conversion and assembly, offsetting growth in pharmaceutical visual inspection. For the fourth quarter of 2025, segment gross profit margin decreased to 15.8%. And as a result, operating profit margin was 9.1%. Ongoing efforts under our business optimization plan have yielded the improvements in execution and meaningful operational progress. However, the unfavorable portfolio mix coupled with low order intake continues to put pressure on margins. The team has been very focused on securing new orders which will help refresh and reposition the portfolio for long-term success. Please turn to the next slide for a review of balance sheet and cash flow items. We ended the year with cash and cash equivalents of EUR 130.6 million and net debt of EUR 337.7 million. With our current cash on hand, cash generated from operations, available credit lines and our ability to access additional financing we believe, we have available liquidity to fund our strategic and operational priorities over the next 12 months. For the full year 2025, capital expenditures totaled EUR 294.9 million, of which approximately 89% were deployed for growth projects to support customer demand. These investments are related to capacity expansion for high-value solutions and supporting future DDS commercial activities. For the full year 2025, cash from operating activities totaled EUR 286.1 million. Cash used in the purchase of property, plant, equipment and intangible assets was EUR 275.1 million. The combination of increased cash flow from operations and lower CapEx and drive a significant year-over-year improvement in free cash flow, and we exited fiscal 2025 with positive free cash flow of EUR 18.4 million for the full year. Lastly, turn to the next slide, we are establishing 2026 guidance. We expect revenue in the range of EUR 1.260 billion to EUR 1.290 billion. On a constant currency basis, revenue will range between EUR 1.278 and EUR 1.308 billion. Adjusted EBITDA in the range of EUR 331.8 million to EUR 346.9 million, and adjusted diluted EPS in the range of EUR 0.59 to EUR 0.63. Our 2026 guidance considers headwinds and tailwinds, and we have assumed the following factors: revenue will be stronger in the second half of 2022 and compared with the first half. The effects from foreign currency translation are expected to be a headwind of approximately EUR 18 million for fiscal 2026 with an impact of approximately EUR 10 million in Q1. As a result, in the first quarter, we expect mid-single-digit revenue growth on a reported basis compared to last year based on the midpoint of our guide. For the full year, the BDS segment is expected to grow on a reported basis, high single to low double digits and double digits on a constant currency rate. Engineering is expected to decline by mid-single digit to low double digits. For fiscal 2026 High-value solutions are expected to range between 47% to 48% of total company revenue. And in 2026, we are assuming a tax rate of approximately 26.8%. And finally, capital expenditures and free cash flow. We have assumed CapEx in the range of EUR 270 million to EUR 290 million before customer contributions and prepayments. Net of contributions and payments is expected to range between EUR 240 million and EUR 260 million. Regarding free cash flow in 2026 we are modeling breakeven to positive free cash flow of approximately EUR 20 million. I will hand the call back to Franco. Franco Stevanato: Thank you, Marco. In closing, we remain focused on executing our key priorities supported by strong business fundamentals. We operate in attractive growing end markets. with favorable secular tailwinds, innovation across the industry continues to advance patient care, and we remain mission-critical to the delivery of biologics supporting new therapeutic areas, expanding global access to treatments and improving standards of care. Demand for innovative drug products remain strong. There are more than 9,000 injectable assets in the global drug pipeline undergoing clinical evaluation or being registered and more than 60% are biologics. We believe we are well positioned to serve this demand through our integrated value proposition, differentiate the portfolio and long-standing commitment to science and technology-driven innovation. Biologics, our fast and growing segment is expected to remain a key driver of top line growth and margin expansion as we continue to move up the value chain. At the same time, we're making meaningful operational progress, and we expect to increasingly benefit from new capacity coming online, productivity gains and improvements within our Engineering segment. Together, we expect that these efforts position us to deliver long-term sustainable growth and shareholder value. Operator, we are ready for questions. Operator: Thank you. This is the Chorus Call conference operator. [Operator Instructions] First question is from Michael Ryskin, Bank of America. Michael Ryskin: Great. Congrats on the strong end of the year. I want to start on sort of parsing out your guide for 2026. I appreciate you provided a lot of color in the deck and in your prepared remarks. I'm curious if you would comment on your expectations for GLP-1s in 2026. I think you said for 2025, it was up to 19% to 20% of revenues and grew 50% year-over-year. So at the midpoint of your guide for 2026, what is your assumption for GLP-1 growth next year? And I have a follow-up. Franco Stevanato: Thank you, Franco speaking. Revenue from the GLP1s accounted in 2025, approximately between 19% to 20% and we have delivered our growth in 2020 compared to the '24 about 50%. If you do an estimation and look at our outlook of 2026, we think that will be a growth in the range of mid-teens. Michael Ryskin: Mid-teens. Okay. That's great. And then a follow-up on the Engineering segment. I mean, on the one hand, encouraging, it sounds like you're making a lot of progress in terms of the operational plan, the optimization moving to the facilities around rightsizing operations. All of that is encouraging, but then the guide for engineering for 2026 and the color on low order intake that's a disappointing update. So on the order intake side, we just love to -- this is engineering specific, I would just love to get a better sense of what you think is behind that. Is that some weakness in the market? Is it as simple as you guys were so focused on getting the operational things right, that you missed a few opportunities? Just get a sense of why that suddenly turned bad in the second half of 2025 and how quickly can you regain the momentum on the commercial side of things? Franco Stevanato: So first of all, the pharmaceutical market, in particular, biologics, is also robust in terms of demand for new machines that need for spectrum machine, assembly technology is very robust today. Most of the biologic market is it will move to injection and when there is also self administration and it's going to require a new special machine. So today, the order intake and the pipeline that we have in the engineering is healthy, is [indiscernible] what is the big -- nice KPI is the fact that there are repetitive orders with our historical bigger clients. So what was the same point is the fact that the sales cycle because of technicality of this line is taking a little bit longer than was expected, translating water instead to maybe receive the order, the confirmation of the order in January, February can be easily postponed a few months. This is going to -- there is why we took some more prudent approach. Another important element that we'll have to underline in 2025, the big focus of the engineering division is really to make a strong operational progress in terms of management and execution and the good KPI that we can translate to share with you is the number of site accepted tests that increased more than double in 2025 compared to 2024. This is extremely important. At the end of again, the company '25 focus our attention to execute and deliver this line. Now we are entering the new ways to new orders, repetitive orders with our clients. This take a little bit more muted what are our expectation. But the outlook in the medium term is strong growth in the engineering division. Operator: Next question is from Patrick Donnelly, Citi. Patrick Donnelly: Maybe one on the high-value solutions side, it seems like you guys are guiding 47%, 48% of revenue for that segment. Can you just talk about where we are on kind of the utilization capacity side? I know you guys are ramping Fishers you're renting Latina in terms of utilization. Are you still capacity constrained with the high value side? Just wondering where we are on the capacity side versus the demand? Are there areas where demand is outpacing capacity would be helpful just to talk through that piece? Franco Stevanato: So capacity in Stevanato Group in particular for prefilled syringes through the format of Nexa syringes, Alba syringes and cartridges to play a role in 2025, practically, we run approximately full capacity intervenor. And also this is translating the ramping up that we're doing in Latin in particular with good success, the ramp-up that we are doing in Fisher. So also in 2026, we will follow this nice positive momentum where the demand is robust, practically in all our high-value product, but the capacity have played a role '25. It will play a role also in 2026 for Stevanato Group. Patrick Donnelly: That's helpful. And then maybe one for Mark. Just on the margin expansion here. Again, obviously, the mix helps to degree within the high-value stuff that is helpful here with GLP growth. Can you just talk about the moving pieces on the margins the right way to think about the path forward here as high value becomes a bigger and bigger piece of the pie? And then I guess, flowing that into just the cash flow piece, how you continue to drive an inflection there? It seems like a little bit positive this year. Lisa Miles: Patrick, just to clarify, I think you're asking about '26 or are you asking about '25? Patrick Donnelly: Yes. '26 margin expansion and just the drivers of cash flow into '26 as well. Marco Dal Lago: Yes. Thanks for the question. So overall, Stevanato Group level, we are assuming in our guidance as mentioned, the center point of the guidance, 7.5% revenue growth and 8.3% on a constant currency basis. About margin, we see margin expansion from 0 to 30 basis points on a consolidated level. Operating profit margin ended 50 basis points at the center point of our guidance and adjusted EBITDA margin expanding for approximately 150 basis points. Gross profit margin, we can put together some headwinds and tailwinds. On the headwind side, for sure, we can mention higher depreciation were compared with 2025, we expect approximately 150, 170 basis both more in depreciation on industrial business. We have currency headwind embedded in our guidance. And on the positive side, instead, we have on top of the 2 new facilities where we can see quarter after quarter, the financial performance is improving, both in Latina and Fishers. So we are on the right track there to keep on expanding profitability -- and that's briefly also engineering. Frank already mentioned the market and revenue guidance. What I can tell is that we anticipate better margin in 2026 compared to 2025, mainly driven by the project mix. We are targeting more textile contracts with respective customers. So not really customized mines as we did in the past. And also, we will leverage the optimization plan we executed in 2024 and 2025. So we have -- this is embedded in our model and in our guidance for 2026. Operator: Next question is from Doug Schenkel, Wolfe Research. Douglas Schenkel: Good day, everybody, and thank you for taking the questions. I have 3, I'll just throw them out there and then listen to your answers. So one, is there any change in how you're thinking about the long-term growth outlook for GLP-1s for your business? Two, more near term, how strong is your visibility on demand pursuant to the assumption you embedded into guidance for GLPs, which I think is high teens growth in 2026. And then third, thinking about Lilly's multi-dose quick pen format, how do the economics differ between formats for Stevanato and really getting at vials versus cartridges? Franco Stevanato: What is related to the GLP-1 in 2026, practically were just executing the foreign cast that we share with our clients today and have already everything is embedded in our guidance that we are sharing with you today. We have already all the problem that was clear our clients. So what is beyond the 2026 it's a little bit too early to make any type of grand because there are a lot of moving pieces in the GLP-1. We see the big originator that are moving between, also the pen injector, they're launching also cartage new requirement, thanks to their fixed dose span. -- also, we see a lot of biosimilar in the market that continues to be very, very active to put capacity both for syringes, for cartridges, also from the devices. So the GLP-1 in the next decade, it will continue to be a powerful tailwinds for Stevanato, for all the industry but it's a little bit too early to understand what to be the final configuration between originator, biosimilar pen versus out injector. Lisa Miles: I think that answer covers all of your questions, just to confirm. Douglas Schenkel: Yes. I think the only thing, Lisa, was just the economics of the different formats. Lisa Miles: In terms of syringes, cartridges vials, so on and so forth. Douglas Schenkel: Also here, sorry. Franco Stevanato: Most of the GLP-1 products are under syringe Nexa that's a high-value product or cartridge is to feed that is also a high-value product. We have biosimilar a lot of requirement through our Alina's a high-value product this is practically the tendency is to answer to you that GLP-1 is going to be in a configuration of high-value products because of the EZ-fill or through Alina for Stavanato Group. Operator: Next question is from David Windley. David Windley: I just wanted to clarify definitionally, when you are talking about GLP-1s, are you including the full gamut of mechanisms that are kind of pursuing obesity. So GLP-1 glucagon non-incretinglucagon. Are we kind of generally bucketing all of that together for definitional purposes? Franco Stevanato: Correct. I confirm. David Windley: And then as you think about -- I think you talked about Nexus syringe being the strongest driver of growth in '25. Franco, you just commented to Doug's question about the kind of '27 and beyond outlook being a little less clear because of the transition, I guess in '26 on that guidance that you're giving for this GLP-1 or obesity category, is that still driven by Nexa syringe or do you see that start -- you mentioned in the prepared remarks some uptake in capacity in cartridge in your next phases of capacity, is cartridge kind of overtaking the growth lead as we move into '26 and beyond? Franco Stevanato: In 2026, Nexa syringes, it will continue to play an important role in the GLP-1s, David. Beyond the 2026 is also true that we are building a lot of capacity on the cartridges to fill, still minor compared to syringe Nexa but we are starting also to see that the customer originator and also biosimilars, they're starting to put new capacity not only on syringes but for cartridges in the next year to come beyond '26. David Windley: And if I could just sneak in a follow-up on the margin question. Would you be able to size -- maybe this is a Marco question, but size the tariff and FX headwinds to margin so we kind of understand what the gross improvement was from the mix shift to HBS, but offset by tariffs and FX, please? Marco Dal Lago: Yes. Sure. We mentioned the top line about EUR 20 million currency headwind, assuming our model, EUR 1.20 exchange rate that you know in the last days there was volatility, but this is what we have in our model. You can assume about 30% of that is impact in margins for 2026. About tariffs, we have been able to have a good dialogue with our customers, mainly predominantly transferring the effect of tariffs to customers in 2025, we had about 4 million headwinds, but it was mainly related to supply chain and the time to transfer the different scenario. So we are assuming limited impact from tariffs in 2026. Operator: Next question is from Paul Knight, KeyBanc. Paul Knight: Franco, after the 50% growth in GLP-1 last year, your mid-upper teens guide on '26 seems a bit conservative. Is it because Fishers is just ramping or what's behind this guide on GLP ones for this year? Franco Stevanato: No, I think it's core because the pharmaceutical industry, in particular, all the originators, the launch the product on the market in 2025. There was a massive preparation of the supply chain. Now to have a mid-teens growth in this in this category of drugs is still very important. I think it is a realistic number, Paul. When there is a takeoff of the product, when starting the product as to really go commercial. So this is what we see through our originator also to our biosimilar clients. Lisa Miles: Paul, perhaps it's best to think about it of an initial surge, followed by a period of normalization where growth slows a bit. Paul Knight: Yes. And then you had mentioned earlier a 45% increase in customers using high-value product. What's driving that? Is it share gain is [ NX1 ] regulations? Is it recent approvals that have been the right ones for you? What's behind that 45% customer gain? Franco Stevanato: On the non-biologic, you mean? Yes, this is our most important KPI in Stevanato Group. So the strategy that we're building since the day of the IPO of Stevanato Group is to become the partner of the pharmaceutical industry and everything that is around biologic where the good news that more than 60% of biologic, it will be through injection through a certain indication for devices. This has to become our big #1 strategy. And this is exactly what we are executing. Today, we are deeply engaged on Nexa syringes program. We are deeply engaged on Alba program. Syringes can move from 1 ml to 2.25 ml to 3 ml to 5 ml cartridge is the same format because both cartridges and syringes are going to be inserted on pen on auto-injector. Also, we are heavily investing in capacity for device space to our Alina clean room that we are building up in Germany and also for other selective program of [indiscernible] in Germany. Also, we have a big contract with American client in Fisher. So everything is going to summarize that where there is an injection want to be in. The real future in the next 1, 2, 3, 4, 5 years are the incremental value that we'll be able to generate spread through several tens of hundreds of programs worldwide through biologic and biosimilar, mostly United States, in Europe and also is growing rapidly. This is a big long-term strategy of Stevanato. Operator: Next question is from Calum Times, Morgan Stanley Unknown Analyst: Beyond GLP-1s, I'd love to get a better sense of what you're seeing across the biologic category today. I realize there's a lot of GLP focus just given the relative growth profile. But curious how other biologic categories have been performing, how customer discussions have been trending? Any positives? Any pressure points? And then what's just being assumed from these categories in the guide for. Franco Stevanato: So the category are practically monoclonal antibody. We have a wide range of biosimilar spread in a different region of the world. We are focused on mono infirmatory rare disease, all products that are going to require an injection or a certain medication. So there's a combination for Stevanato over Nexa syringes, [indiscernible] fill with at or injectors will be great to a little later thought as well on U.S. onshoring. Unknown Analyst: Obviously, Fishers should be well positioned for that. Any early discussions or insights you could share with us to just better understand the time lines for benefits here and when we could expect something to appear in the P&L. Do you want to say sure you mean? Franco Stevanato: Yes. Today, the price of Fishers play an important role when we decide in 2002, and we started to develop these plans -- this was really the purpose to be the campus that was going to mirror exactly the same capability that we have in Europe in particular for easy-fitchnology. -- with a different range of syringes, vary to files for devices. Today, what we see that many clients that are addressing their supply chain in United States and the fact that we are present in future with this why the capability is play all translating water, we can really accelerate additional opportunity for customers on to utilize the supply chain. Operator: Next question is from Larry Solow, CJS Securities. Lawrence Solow: Great. I guess just lots of information GLPs and all that. I really appreciate it. I guess from your seat today, and I won't hold you to this, but as we look out over the next 5 years, do you think the GLPs in summary, will, in aggregate, will still be driving 10% plus growth to Stevanato on a top line basis? What's your confidence level on that? Franco Stevanato: So we -- I think it will be -- continue to benefit on the GLP-1 in the future like a tailwinds. So the good news of the GLP-1 is this is information that we share constantly with our clients. We see quarters after quarters that the number of patients are going to increase and the large. So this is the good news. So from the moment that they launched, we also all our clients that they see more upside downside a number of the new customers. More and more, what we see that there are new opportunities for Stevanato on Nexa syringes, the opportunity for cartridges to fill and also for our device space. So I can see that it will be a long always for Stevanato that we help to further boost our biological revenue I don't know if after 5 years, it will continue to be in double digit because in [indiscernible] is also rapidly growing in other therapy that is so-called biologic. And this is are all high-value product like albacore our pen Liana or high format on cartridges. Lawrence Solow: That's all fair. What about just the RTU vials you mentioned 2025, obviously, had a nice rebound 24 down years. What can you give us a little more granularity on sort of how the year finished up and your outlook for '26 in that market? Marco Dal Lago: Yes, Marco speaking. As forecast, let's say, we went up about 6% in 2025, predominantly, we grew in asteric ratio. And this is where we see more traction also for 2026 where we expect a mid- to high single-digit growth, predominantly driven by the configuration. Another other point, orders intake in '25 was double digit higher than 2024. So we see the to is not a sharp increase, but we see increasing [indiscernible] demand. Lawrence Solow: Got you. And then if I could just squeeze one more in. Just Latina Fishers the trajectory of profitability. Where do we kind of stand? And I know Latin is a little bit ahead and Fishers is larger. But where do we stand and when do we kind of hit full run rate profitability? When do you think we can start closing in on that? Marco Dal Lago: We are going to the right direction. We see quarter-after-quarter better financial performances, the side operational performance, and we are growing quantities and that leverage our fixed expenses. We are very well positioned in Latina, where we are getting close to our average gross profit margin. Fishers, we are a little bit behind, but we see steady improvement of Fishers. That's difference as mentioned many times between the 2 plants. Latina is a smaller plant is about field, and we ramp up more rapidly than in Fishers. Fishers is a more complex plan with different type of products, syringes, vials, [indiscernible] , the drug delivery system. So we are progressing. We are improving going to the right direction, but it will take longer compared with Latina. Today, the gross profit margin is positive on the combination plants still dilutive compared to the average of the company and the average of this segment. Franco Stevanato: If I can give a sort of business angle. In Latin, we have continued the installation of the line for high-speed line for syringe. We are continuing to orient our regional customers to national customers. And this year, we're going to install the first high-speed line forecast is way to fill, but the goal is to do the validation is yet to start to do commercial revenue in the beginning of 2027 and in Fisher continues to perform audit to our big international clients in order to become particular domestic United States. In fact we have doubled the number of audit validation in 2025. Important milestone that we are advancing with the build-out of this bigger apartment production that is still expected to produce out in get for one big U.S. client at the end of this year. Operator: Next question is from Matt Larew, William Blair. Matthew Larew: The first is starting on GLPs, maybe the question on historically Lisa Miles: I'm sorry. We cannot hear you at all. Can you speak up a little bit? Matthew Larew: Sure. Can you hear me now? Lisa Miles: A little bit better. Matthew Larew: Okay. So you've historically said that you expect orals to be about 30% or 1/3 of the market. And I would say, investor expectations on that metric have moved quite a bit since the oral [indiscernible] launch. So you've addressed GLP growth for next year and reference for the next couple of years, but how do you feel about that metric? And I guess, in discussions with your customers, how are they viewing that metric? Franco Stevanato: Yes. So for sure, this is -- we are putting a lot of attention on this evolution of the pie, and we have a lot of point of contact with our clients, both the originator and the biosimilar. We look at what are the key opinion leaders are sharing. Our peers are customers also, I know that all the banks are very well prepared on this. [indiscernible] we are going to confirm that the share between injection spread between cartridges or syringes, which we represented the majority in the range of 70% and oral to be the minority in the range of 30%. Now what also we see, like I also mentioned to all of you before, we see this is information that we receive from the market the number of total patients worldwide, it will continue to increase month after month. And we don't see cannibalization between injection to the order because they are targeting to different type of patients today. So this is our internal estimation. From a supply chain point of view, what do we do because this is another important [indiscernible] if you look at the number of lines that the pharmaceutical industry is installing for syringes, for cartridges, and the number of lines for assembly technology for pen injector both into the originator into the biosimilar and to the CMO is still high. There's a big program of massive investment for injection in the next year to come on a worldwide basis. Matthew Larew: Okay. And on non-GLP biologics, sort of backing into maybe that being up mid-teens. Does that sound right? And then you referenced in the deck large global pipeline, I think, 60% of the 9,000 molecules. So what's your expectation for non-GLP biologics going forward. And I think that's generally speaking, all high-value demand. I guess if you could confirm that as well. Franco Stevanato: Usually, this non biologic product are a very rich that are maybe not in big size, it's difficult that to go in the range of hundreds of millions, in the range of tens of millions. They're looking -- because of the specific of this large molecule, they're looking for particular drugs, particular primary packaging with particular coating, particularly, for example, we are engaged with our Alba syringe because they have a special plasma coating. We are engaged with particular [indiscernible] silicon syringes with particular Nexa syringes and also different format. We see more and more moving to 3 mls to 5 today. That's something that is a little bit new on the market, usually the autoinjector pen used to stop at 3ml. So all overall, we see several hundred of programs spread to many customers meet the top 25 customer and some hundred of biosimilars that are extremely active to build capacity in this way. So what we are doing in Stevanato Group, we are building a supply chain through our engineering division, with particularly line dedicated to be able to be fast and flexible to serve these customers. So we want to keep a few [indiscernible] Latina in particular United States to be able to serve this wide range of products that are moving from syringes to [indiscernible] fee through our device colleagues. We are ready with our out injector, in particular also with our pen Alina or in a selective way when we already serve the syringes of the cartridges, we afflict CMO. So I want to reiterate our real strategy in Stevanato is really to say where there is an injection, self-administration, we want to be always on the #1 on the #2 for this product. Matthew Larew: Okay. And just one follow-up. You referenced the contract manufacturing opportunities and maybe that will be ramping end of this year into next year. How do you expect the economics of that business to look for you relative to the BDS business and your engineering segment? Marco Dal Lago: So we are not classifying the CMO as IPO. Nevertheless, we see the specific projects in a high range of normal value solutions. And as mentioned many times, we are taking here a selective approach with customers, leveraging this particular case, the integration between syringes and injectors, all the capabilities we have tool with very important customers. So we are using this strategy, taking a selective approach, especially where we can leverage integration. Operator: Last question is from Curtis Moiles BNP Paribas Exane. Curtis Moiles: Great. I think you've already given a lot of color here. But on the High Value Solutions guidance for 47% to 48% of revenue, I just wanted to clarify, are you thinking that will be primarily driven by GLP-1s? Or maybe can you separate the contribution from syringes versus kind of files and cartridges? Marco Dal Lago: It's a level of detail we don't provide. What I can tell you is that we are increasing our high-value solution next year double digit -- low teens if we consider constant currency rate. So we are growing both and other biologics next year. Curtis Moiles: And then also just I think earlier in the call, you mentioned that you could consider some additional actions around permitting away from the non-HPS categories. Can you maybe give a little color about what you're thinking about there? Lisa Miles: I'm sorry, Curtis. We missed a portion of your question as you were dropping out. Can you please repeat? Curtis Moiles: Sorry, Yes, of course, I think in the beginning of the call, you mentioned that you could consider actions around pivoting away from non-high-value solutions categories in the future. I was just wondering if you can comment on what you're thinking about there. Lisa Miles: Yes. Thank you for clarifying that. Franco Stevanato: Yes. Today, the focus in Stevanato Group also the investment or the attention of all our colleagues is on building capacity and to become the partner of this biologic market for high-value product and this is a while, for example, what you had to do to select, we are going maybe to the privatized the [indiscernible] for example, this historical product is good to produce in certain regions of the market, but in particular, in your United States, the goal is to focus to become the #1, #2 in the new product. Or for example, another example, in Germany, we have built this new big [indiscernible] room in order to host the production for line originally in this screen room we used to produce a standard in [indiscernible] forecast. We have decided to use this space, important space this now how to start to ramp up in the next years Salina the type of the prioritization that we are looking in the next year's focus on biologic high-value products. And when there is no strategic customer behind the strategic market, we try really to do some [indiscernible] Operator: Ms Miles, gentlemen, there are no more questions registered at this time. Lisa Miles: Thank you, everyone. That concludes today's call, and we'll be seeing you shortly. Have a good day. Operator: Ladies and gentlement, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Thank you for standing by, and welcome to National Vision Holdings, Inc.'s fourth quarter and fiscal 2025 earnings conference call. At this time, participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Tamara Gonzalez, Investor Relations. Please go ahead. Tamara Gonzalez: Thank you, and good morning, everyone. Welcome to National Vision Holdings, Inc.'s fourth quarter and fiscal 2025 earnings call. Joining me on the call today are Alex Wilkes, CEO, and Chris Laden, CFO. Our earnings release issued this morning and the presentation accompanying our call are both available in the Investors section of our website, ir.nationalvision.com. A replay of the audio webcast will be archived in the Investors section after the call. Before we begin, let me remind you that our earnings materials and today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission. The release and today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation. I would like to draw your attention to slide two in today's presentation for additional information about forward-looking statements and non-GAAP measures. Further, please note that all financial measures in today's commentary are based on a continuing operations basis unless otherwise noted. As a reminder, National Vision Holdings, Inc. provides presentations and supplemental materials for investor reference in the Investors section of our website. I will now turn the call over to Alex. Alex? Alex Wilkes: Thanks, Tamara, and good morning, everyone. Thanks for joining us today for our fourth quarter and fiscal 2025 earnings call. I'll start off by saying we had a great year. We enhanced our leadership team, laid out an ambitious transformational roadmap, and rallied the entire organization around initiatives focused on modernizing every aspect of the business, from customer engagement and in-store digital tools to product, pricing, presentation, data, and technology infrastructure. We delivered strong mid-single-digit comp store sales and modernized our business, all while driving significant operating margin expansion. I'm proud of how our teams executed with urgency, and I'm confident in our ability to continue expanding our market share as we close the gap in areas where we are underdeveloped compared to the category. In 2025, the number of exams performed by our doctor network increased over last year, and metrics across ticket, NPS, and conversion moved in the right direction, contributing to healthy profit expansion, a key tenet of our path forward and in line with the expectations we set out to achieve. I am also pleased with how our target customer cohorts are embracing the changes underway. We're expanding our customer base with more profitable customers, such as those who use managed care, progressive lenses, or bring in a prescription from another doctor, or what we call Outside Rx. This highly intentional customer mix shift we are driving resulted from key initiatives around new selling techniques in our store and a new approach to merchandising to give these customers the products they want. These initiatives were instrumental in driving the strong results we reported in fiscal 2025. Our 2025 results exceeded the expectations we laid out at the start of the year and are proof points to the power of our transformation. In fiscal 2025, net revenue grew 9% to $1,990,000,000. Adjusted comp store sales were 6%. Adjusted operating income grew 56% to $102,500,000 versus $65,500,000 in 2024, with AOI margin expansion of 160 basis points over 2024, landing at 5.2%. This all contributed to adjusted EPS of $0.80 for fiscal 2025, compared with $0.52 in 2024. We finished the year strong with fourth-quarter comps tracking as expected within our long-term financial algorithm, and bottom-line results supported by our initiatives and strong execution. In the fourth quarter, net revenue grew 15.1% to $503,000,000. Adjusted comp store sales were 4.8%. Adjusted operating income was $17,600,000, with AOI margin improving to 3.5% compared to 0.7% in the fourth quarter last year, and adjusted EPS in the fourth quarter came in at $0.15 per share compared with a loss of $0.04 per share last year. It's important to call out that in the fourth quarter, we saw traffic growth in our managed care, progressive, and Outside Rx customers combined, along with strong average ticket growth. Overall, I'm incredibly pleased with the performance, consumer resilience, and the execution of our strategy during the fourth quarter. Chris will cover more detail on the quarter in just a few minutes. We're happy with the execution of our strategies and the results they are delivering. And first quarter to date, we're seeing continued confirmation of our strategy with comp store sales in the mid-single-digit range despite the weather challenges we've experienced so far this year. The success we saw in 2025 reflected early wins on the strategy we laid out at our Investor Day last fall. As we shared, our strategic initiatives are focused on four growth vectors, each with long runways, which include expanding with underdeveloped customers, evolving our product offering where we are underdeveloped, enhancing the patient and customer experience, and new store growth, while also remaining disciplined and intensely focused on operating margin expansion. During 2025, we began to expand with underdeveloped customers. Through data-driven insights, we recognized that our customer audience is skewed more middle-income and was much broader than our historical targeted approach reflected. This intentional shift in customer mix delivered exactly the kind of performance we expected, driving stronger comps and healthier traffic from higher-value segments such as managed care, Outside Rx, and progressive customers. During fiscal 2025, we saw the benefit of our initiatives reflected in average ticket growth of 6% for the year and driven by meaningful progress to close the pricing and product mix gap relative to the category. Managed care comp sales grew low double digits in 2025, and we ended the year with 42% of revenues attributable to managed care. Traffic declined half a percent overall for the year, reflecting declines with self-pay customers offsetting strong traffic gains with our more profitable customer cohorts. While some attrition among less profitable self-pay customers is anticipated and is reflected in our overall traffic results, the growing influx of more profitable customers is strengthening the quality of our business, and it is reflected in the profit expansion we are achieving. On the product side, our strategy to target areas of underdevelopment versus the category is paying off. We made a significant pivot in fiscal 2025 to attract a greater share of the more profitable customer cohorts already shopping in our stores, notably those paying with insurance. As we refocused on attracting a broader, more profitable customer base, we transformed our merchandising strategy to better meet their needs. These are customers who seek premium frames and can spend more, whether through insurance benefits or higher disposable income. This evolution in customer and product approach allows us to better serve more profitable customers while still delivering compelling value to customers across all income demographics. In 2025, our shift towards more premium frames and branded assortments drove higher ticket and resonated strongly with existing customers while attracting new customers in the higher-income band demographics. With a higher mix of our customers using insurance, we evolved the mix of frames sold in our stores to better serve their needs. We ended the year with approximately 40% of frames for sale in our stores priced above $99, up from 20% at the start of the year, and we have more to do on that front to continue modernizing our stores. We introduced more branded products, new brands like Lam, Ted Baker, Hugo Boss, Jimmy Choo, and, in the fourth quarter, Kendra Scott, and we're really excited that in early innings, these are turning above market benchmarks. These products proved critical to serving our target customers. The timing of our business modernization could not be better, from expanding our premium assortment and refreshing our brand to strengthening the selling capabilities required to win in the premium and in particular in smart eyewear. Since launching Meta AI glasses last spring, our sell-through has exceeded expectations. As of the fourth quarter, Meta is available in 300 stores, and, based on this performance, we expect Meta will be available in all stores by the end of the second quarter. Our early success in smart glasses is a proof point to the attractiveness of America's Best to these customers. We're proud to offer this technology with access to eye care at scale in the U.S. As we look ahead, we're being methodical and strategically phasing efforts to enhance our offerings across frames, lenses, and contact lenses. In 2026, we have an exciting year lined up for frame introductions. Some of the new frame brands coming to America's Best include a range of sought-after premium, fast fashion, and lifestyle brands like Burberry, True Religion, Kate Spade, Polo Ralph Lauren, and Costa. These advancements to our product mix also complement our pricing strategy, which progressed over the year from no-regrets pricing actions to modernizing our ticket on the bundle, and ultimately to enabling us to implement product segmentation in our stores. Together, pricing, product mix, and the influx of targeted customers has driven comp store sales as reflected in the higher average ticket we saw over the course of the year. Looking to 2026, our pricing actions have become more sophisticated. This year, we're simplifying lens pricing and insurance pricing constructs to remove friction and make lens selection and upgrades easier for customers to understand. Throughout 2025, we made significant progress in our lens leadership initiative, and we have plenty of runway to grow. We grew in key lens products like anti-reflective coating, advanced materials, transitions, and progressives. For 2026, I think about our ambition for lenses similar to what we did in 2025 on frames. We are going to begin providing more premium lenses within our assortment. We designed and executed tests for our lens leadership strategy around pricing and assortment simplification. In the coming months, we expect to begin offering Stellest, an FDA-approved lens designed to slow myopia progression while correcting refractive error in children with myopia. We are also offering more premium lenses to help managed care customers get more out of their benefits. One example of this is we plan to introduce a tier-four progressive lens later this year, which offers the widest, most natural, and distortion-free vision across all distances. This is a highly sought-after lens for progressive customers, reflecting strong demand for premium performance and a comfortable vision experience. Our initiatives that enhance our lens offerings extend to key areas where we are underdeveloped when compared to the rest of the category. By 2026, we expect we will have made meaningful progress to close the gap versus the category when it comes to lenses. We expect lenses sold with premium materials to approach 60% from 50% today, which includes migrating from plastic to polycarbonate, and we expect anti-reflective would approach 50% of mix from approximately 40% today. In addition to specific frame and lens product enhancements, our focus for 2026 is to continue to build our retail excellence muscle to meet customers where they are. We've changed how we think about product assortments in our stores and are moving to frame assortments by lifestyle or category and not just price point alone. Our goal is to drive greater relevance at the local level by aligning assortments more closely with the customer profiles we serve in each market. We're doing this through a disciplined, data-driven approach to segment assortments in both America's Best and Eyeglass World. We've identified distinct store merchandising clusters and expect to begin tailoring assortments later this year. Stores will be aligned into five merchandising tiers, each designed to serve defined customer cohorts. As a result of this work, depending on the cohort of a store, the mix of branded frames is expected to increase from approximately 40% today to approximately 70% by the end of the year. Our merchandising strategy is working. By upgrading our frame and lens assortments, aligning pricing with higher-value customer needs, and tailoring assortments at the store level, we're driving higher ticket and healthier mix while preserving our overall value proposition. As we move into 2026, we're building on this momentum with disciplined product innovation and segmentation that we believe will position us to continue closing the gap versus the category and drive sustainable growth. Importantly, our merchandising strategy only works if it shows up in the experience. That's where our focus on customer and patient experience becomes a critical growth driver. In early 2025, we began implementing a more consultative selling model in both our America's Best and Eyeglass World brands, which has played a meaningful role in closing the gaps across underdeveloped customer segments and product categories. These changes are taking hold in our stores, with a noticeable shift in frontline associates' behavior as they move beyond purely transactional interactions. The evolution of our selling approach is showing up in our average ticket, contributing meaningfully to our comp performance, and it is being well received by store teams. Importantly, our consultative selling approach really allows our associates to provide exceptional value for customers across demographics. It's about creating a joyful shopping experience where you get the product that best meets your lifestyle needs. To support this transformation, we deployed iPads and digital tools enabling associates to more effectively match customers with products that best meet their needs. These tools, along with enhancements to our selling processes, have strengthened associate effectiveness and reinforced our move toward a consultative selling model. In parallel, we refreshed the in-store environment, updating visual elements such as graphics, pricing presentation, signage, and associate dress standards. The overall look and feel of our stores is materially different from a year ago. Importantly, these improvements were achieved with relatively modest investments and without significant capital intensity, demonstrating our ability to drive meaningful change efficiently. Overall, these initiatives are improving performance with strong capital discipline. Our remote exam technology continues to provide important capacity flexibility across our network and remains integral to how we deliver care at scale. We are pleased with the progress our teams are making on our remote hybrid model where in-store doctors also perform exams in other stores remotely, and we continue to expand the number of doctors trained and participating in this program. We believe this is an important way to deliver care more efficiently and give us greater flexibility in how we deploy our doctor network going forward. At our Investor Day, we shared that the Eyeglass World brand is a part of our portfolio that we call emerging brands, which today also includes the Vista Optical brand, with locations on select military bases and within select Fred Meyer stores. The foundational efforts in Eyeglass World to strengthen operations really gained traction, delivering solidly positive comps throughout the year. The focus has been on building a culture centered on accountability and ownership, implementing retail best practices, and driving overall operational execution. During the year, we took a meaningful step to an employed OD model at our Eyeglass World locations, helping to standardize store execution and the patient experience. We are refining the Eyeglass World brand positioning. That work is underway now. We are thrilled with the work VML did for America's Best, and we'll share an update on what's coming with Eyeglass World later this year. We made tremendous strides in 2025, successfully transforming our brand marketing, shifting from a primarily promotional posture to a more strategic brand-led approach. Our focus in 2025 was on redefining the America's Best brand, including the launch of a new logo, a refreshed design, and our national creative campaign, Every Eye Deserves Better. This campaign was designed to expand our audience targeting, allowing us to reach higher value such as managed care, Outside Rx, and progressive lens wearers, while remaining true to our value proposition, and performance of the campaign has been phenomenal. Since the launch, America's Best unaided awareness saw a noticeable uptick, reaching the highest in the category. Importantly, we continued targeting pragmatic buyers, those that are value-seeking self-pay consumers, reinforcing that our value proposition is compelling for customers across income demographics. As we reflect on the year, it's worth noting the journey we have taken at America's Best. Up until this past fall, America's Best was essentially a promotional all-the-time banner with the two-pair and eye exam offer. In 2025, we started redeploying these promotional dollars to more targeted advertising, improving both efficiency and effectiveness. As a result, America's Best brand awareness is at its highest in recent memory, and a great accomplishment that we believe is yielding the traffic that we want. With America's Best new brand identity and campaign now launched, we're able to more fully leverage these refreshed assets to drive greater impact. This updated identity gives us significantly more flexibility to personalize our messaging and increase relevance with target customers. These are capabilities that were more limited under the prior Owl-led campaign. This is a multiyear transformation, and in 2026, we're taking the next bold step forward with the addition of a new media partner, Infinite Roar, who brings a fresh perspective and more innovative thinking to how we deploy our marketing spend. Underpinning this evolution is a more segmented approach to messaging. Our 2026 strategy is designed to bridge broad brand awareness with more targeted content designed to engage our target customers. Importantly, we're also expanding into mid-funnel activities, with increased emphasis on influencers, social media platforms, audio, and sponsorships, creating a more balanced and effective media mix. In parallel, our recent CRM improvements are designed to drive improved engagement post-purchase, including annual eye exam bookings and more tailored journeys designed to reactivate lapsed customers. Following the launch of our new CRM platform in 2025, we began with initial journeys focused on reengaging lapsed customers. In fact, in the fourth quarter, early results from our new lapsed customer journey were nearly twice as effective as our old approach, albeit on a smaller base as the program has just kicked off. Those early efforts delivered meaningful insights that sharpened our messaging and segmentation. That learning in hand, we're expanding our CRM activation to include enhanced lapsed customer outreach, post-exam engagement, and journeys tailored to our highest-value customer cohorts. You've heard us talk about modernization a lot, and a big piece of that is expected to come from our technology strategy. Our goal is not just to keep pace with the industry, but to become an innovation leader supported by industry-leading technology foundations. This starts with an unwavering focus on creating a joyful customer experience, starting with our online presence where millions of customers begin their journey with our brands. It continues through a seamless experience into our retail locations and is maintained by meaningful ongoing connection points. In 2025, we launched the first phases of our elevated customer experience efforts rooted on the industry-leading Adobe Digital Experience Platform. In 2026, we plan to expand that across all our brands and deepen the integration with our in-store experience. Complementing our digital experience platform, we're integrating Adobe CRM capabilities to enhance our customer insights, create more meaningful customer interactions, and build increased brand loyalty. To support the transformation across our customer experience, we are modernizing our foundational platforms, beginning with the launch of a new end-to-end Oracle ERP platform in 2025 with expanded capabilities planned in 2026 and 2027. We continue to deepen our investments in our modern data platforms, including our Microsoft and Databricks-based data warehouses as well as our data analytics and visualization platforms. These investments are intended to create ongoing agility to allow us to continue to innovate quickly and realize the optimal benefit from emerging technologies, including AI and agentic commerce, among others, and we believe they provide us with the scale needed to meet our planned growth for years to come. We believe the work we've done across operations, merchandising, marketing, and modernizing our technology capabilities creates a more optimal environment for our customers. This is critically important where it matters most, helping our doctors deliver exceptional eye care for our patients. We had a strong year in 2025, with doctor retention and recruiting achieving well beyond our expectations, including over 10% of the recruiting class for new graduates. Our doctor coverage remains healthy and stable, supported by innovative recruiting and retention strategies. To close, fiscal 2025 was a defining year for National Vision Holdings, Inc. We did what we said we would do. We executed our strategy, modernized our business, improved the quality of our customer base, delivered strong top- and bottom-line results. These results are the outcome of disciplined execution across merchandising, pricing, marketing, customer experience, and technology. I'd like to thank our teams for their dedication and continued commitment to our transformation. Your efforts have been instrumental in driving the progress we've seen. Just as important, the progress we've made this year positions us well for what's ahead. We have clear opportunities to close the gaps and drive profitable growth. With our distinct growth vectors, strong industry tailwinds, and a team that has proven it can execute with urgency and precision, we're confident in our ability to deliver sustainable long-term value. Thank you for your time and continued support. With that, I'll turn it over to Chris to walk through our 2025 results and 2026 outlook in more detail. Chris? Christopher Laden: Thank you, Alex, and good morning, everyone. As Alex shared, fiscal 2025 was a year of significant progress for National Vision Holdings, Inc. When I first spoke with you less than one year ago, I reinforced our commitment to a clear and focused mandate to expand our operating margins through disciplined execution and operational excellence. Through the collective efforts of our entire organization, we successfully rallied around this objective and implemented the foundational changes necessary to drive sustainable margin improvement in 2025. Key to our success has been instilling a culture of strong financial discipline across all levels of the enterprise. We strengthened our organizational processes to ensure every dollar spent drives measurable value creation. The culmination of these efforts resulted in a 160 basis point expansion in operating margin in 2025. This progress reflects the dedication and alignment of our entire team, and I'm confident in our ability to build on these achievements as we enter fiscal 2026. Before I provide our outlook for 2026, let me first turn to our fourth quarter and fiscal year 2025 results, which, as a reminder, include an extra week compared to the prior year. The 53rd week represented $35,600,000 in net revenue and $3,500,000 in adjusted operating income. All results reported today are inclusive of this 53rd week impact, with the exception of our comparable sales and adjusted comparable sales metrics, which are reported on a 52-week calendar. In addition, I will be referring to certain non-GAAP metrics in my discussion, and would refer you to today's press release for reconciliations of all non-GAAP financial measures to their most comparable GAAP financial measures. For the fourth quarter, net revenue increased 15.1% with adjusted comparable store sales growth of 4.8% and growth from new stores. During the quarter, we opened 12 new America's Best stores and closed four America's Best stores. We ended the quarter with a total of 1,250 stores. Adjusted comparable store sales growth in the period was driven by an increase in average ticket of 5.8%, which reflects continued strength in the managed care cohort, including operational improvements that led to higher revenue in the quarter, along with execution of our pricing and merchandising initiatives. We expect to continue to benefit from improvements in our managed care operations going forward, though likely not to the magnitude we experienced in the fourth quarter. The increase in average ticket was partially offset by a 2.5% decline in overall customer traffic compared to the prior year, as healthy trends in our managed care business continue to offset softer traffic in our cash pay business. As we have discussed, this intentional evolution of our customer mix to more profitable target customer cohorts is expected to create a healthier overall business, even if we see short-term traffic decline. To that end, in the fourth quarter, we saw traffic growth for managed care, progressive, and Outside Rx customers combined. As a reminder, the fourth quarter is unique for us, as it is typically our lowest revenue quarter of the year and one weighted toward the end of the period given seasonality with customers using benefits before expiration. To provide some additional context to our comps in Q4, there was a negative impact to our results driven by the calendar shift of the 53rd week. We lost one of the highest-volume selling days in the comp calendar, which, for context, normalized, would have driven an additional 50 basis points improvement in our Q4 traffic comp. Overall, the trends we have talked about throughout the year remain consistent. We are excited about the revenue and operating margin performance for the quarter and the year. Our eye exam conversion to product sales has remained consistent with prior quarters, which is another key indicator of customer acceptance of our merchandising and pricing transformation. As a percentage of net revenue, costs applicable to revenue decreased approximately 40 basis points. The resulting increase in gross margin is driven by our growth in average ticket from higher managed care revenues in the quarter and execution of pricing and product mix initiatives, partially offset by the expected slight increase in optometrist-related costs as we lapped a prior-year onetime benefit related to doctor incentive true-ups. Adjusted SG&A was $251,900,000 in the fourth quarter, and as a percentage of revenue, leveraged 180 basis points. This performance was primarily driven by operating leverage on lower associate-related expenses and advertising, partially offset by higher variable incentive compensation and health care expenses. Adjusted operating income, reflecting the benefit of the 53rd week, increased to $17,600,000 compared to $3,200,000 in the prior-year period, and adjusted operating margin increased 280 basis points to 3.5% for the quarter. Net interest expense was $4,200,000 compared to $4,600,000 in the prior year. During the quarter, we entered into an interest rate hedge on a portion of our outstanding debt. This $100,000,000 hedge is at a fixed rate of 3.43% and is intended to reduce exposure to short-term rate volatility. Adjusted EPS was $0.15 per share in the fourth quarter, up from negative $0.04 per share last year. Turning now to our financial results for fiscal 2025 as compared to fiscal 2024, we delivered adjusted comparable store sales growth of 6%, adjusted operating margin expansion of 160 basis points to 5.2%, and adjusted EPS growth of approximately 54% to $0.80 compared to the prior year. Turning next to our balance sheet, we ended fiscal 2025 with a cash balance of $38,700,000 and total liquidity of $332,000,000, including available capacity from our revolving credit facility. During fiscal 2025, we repaid $101,300,000 in long-term debt convertible notes, bringing our total debt outstanding, net of unamortized discounts, to $245,900,000 at the end of 2025. We ended the year with a net debt to adjusted EBITDA of 1.1 times. For the full year, we generated operating cash flow of $146,300,000 and invested $72,800,000 in capital expenditures, primarily driven by investments in new and existing stores and information technology. We also had non-capital investments related to our IT infrastructure, including our finance ERP and new CRM and our e-commerce platforms during the year. We continue to maintain a strong balance sheet and healthy cash flow to support our growth and capital allocation priorities. Our Board of Directors recently approved a new share repurchase authorization following the expiration of our prior authorization on January 3. While our priorities are focused on the growth initiatives underway, we are pleased to have the authorization in place to repurchase up to $50,000,000 of shares until December 28, 2030. Moving now to our fiscal 2026 outlook, which is consistent with the initial view we shared at our Investor Day last fall, reflecting continued momentum from our transformation initiatives, confidence in our strategic direction, as well as consideration for a range of scenarios with respect to the macro environment and consumer demand. For fiscal 2026, which, as a reminder, is a 52-week year, we currently expect net revenue between $2,030,000,000 and $2,090,000,000, supported by adjusted comparable store sales growth of 3% to 6%. Our comp outlook assumes a similar mix of ticket and traffic as we saw in 2025 and incorporates strong quarter-to-date results despite the significant weather events during the quarter. With respect to profitability for 2026, we expect adjusted operating income between $107,000,000 and $133,000,000, which includes a range for depreciation and amortization of $88,000,000 to $92,000,000. At the midpoint, our outlook assumes fiscal 2026 adjusted operating margin expansion of approximately 100 basis points relative to fiscal 2025, excluding the 53rd week. This expansion in adjusted operating margin is expected to be primarily driven by SG&A leverage. Our guidance takes into account our multiyear cost savings plan, and we remain on track to realize approximately $10,000,000 in annualized savings this year. Interest expense is expected to be between $14,000,000 and $16,000,000. We expect our effective tax rate to be approximately 28%, excluding the impact of vesting of restricted stock units and stock option exercises. Bringing this all together, we expect adjusted diluted EPS to be between $0.85 and $1.09 per share, which assumes approximately 82,000,000 weighted average diluted shares outstanding. We expect capital expenditures to be between $73,000,000 and $78,000,000, which includes investments to open approximately 30 to 35 new stores this year. Store openings will be relatively balanced throughout the year and will be weighted towards America's Best brand stores. We also expect to close approximately 10 to 15 stores as part of our ongoing fleet optimization efforts, resulting in net new store growth of approximately 20 to 25 stores. We expect store closures beginning in the second quarter, continuing with a relatively balanced cadence through the fourth quarter. As we consider the impact of returning to a 52-week fiscal year, the quarterly profile of the business will be affected. Taking into account factors such as the loss of the 53rd week, holiday shifts, changes in selling days, and the timing of our investments, our expectation for adjusted operating margin is for Q1 and Q3 to drive more favorable year-over-year growth, with Q2 and Q4 yielding flat to modest growth. In summary, we are proud of the results we have delivered for fiscal 2025. We believe the strategic initiatives we have put in place position us well to deliver on both our near- and long-term targets and will drive shareholder value. And with that, I would like to thank you for your participation in today's call. Operator, we're now ready for questions. Tamara Gonzalez: Thank you. Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Our first question comes from the line of Michael Lasser of UBS. Please go ahead, Michael. Michael Lasser: Good morning. Thank you so much for taking my question. You're providing a lot of evidence that your strategy is working and leading a very effective performance. The key question from here is going to be whether there could be a pause in the trade-off between the growth you're getting from the insurance, more richer-pay customers versus the traditional customers that National Vision Holdings, Inc. has served. So are you seeing any evidence of that, whether it was the shape or cadence of the fourth quarter or what you've seen quarter to date, that there could be a disruption in this growth rate as you have that potential handoff over time? Alex Wilkes: Hey, Michael. Good morning. Thanks for the question. I will address a bit of the shape of the fourth quarter and step a little bit through what we are seeing in the first quarter and then provide a little bit of color on the cash pay customer versus the managed care customer. So, the fourth quarter certainly was an interesting quarter for us. We started October off actually pretty darn strong, and were happy with the results. November kind of as expected, but then we did see some slowing in December, in particular with the cash pay customer. An important nuance of December, though, was as soon as we cleared Christmas, actually, our week 53 was pretty darn fantastic, and we saw consumer demand come back. I think a little bit of that was related to the compressed timeline between Thanksgiving and Christmas where folks might not have been as much in the optical game as we would have liked, and there was a fair amount of macro noise. As we moved into January, that demand continued. We were super happy with our results all through essentially January 22 when winter storms, I think, put not just our business but a lot of other businesses a little bit on our heels with the winter weather that impacted, frankly, a large swath of the U.S. Again, super pleased with where we are sitting through the first quarter, two months in, sitting in the mid-single-digit range, seeing sequential acceleration in traffic. So really, really quite pleased with that. Now a little bit deeper into your question on the managed care versus the cash pay cohort. Again, continuing to see strength with the managed care consumer. The cash pay customer is still a bit more fickle than what we have previously experienced in years past. We did start to see a little bit of improvement last year, and then late last year, there was a little bit of continued macro wobble. But we do think that we will comp positively with the cash pay consumer in 2025. One of the interesting things that we have talked about is that the cash pay consumer has actually opted into some of the more premium products that we have rolled out at a faster clip than what we had anticipated, and that was also a contributor to our success in 2025. So, Michael, I hope I got to most of your question. Michael Lasser: You did. You did a great job, Alex. So you expect cash pay to comp positive. What would that compare to the comp from that cohort of consumers in 2025, just so we have a relative frame of reference? And what have you factored in from both the tax refunds as well as smart glasses that will be fully deployed to your stores by the second quarter into your guidance for this year, just to help us assess the degree of conservatism that could be baked into the outlook? Thank you so much. Alex Wilkes: You got it. So on the cash pay consumer side, again, it is a combination of both traffic and ticket. As we are introducing more products and rolling out smart eyewear to more stores, we absolutely think that cash pay consumer is going to participate in that. We are still being a bit more conservative on our traffic expectations with the cash pay consumer until we start to see a bit more acceleration in the repurchase cycle of that consumer cohort. But, again, on an overall comp basis, because they are opting into the more premium offerings we are launching, we do feel positive about the cohort on a comp basis. On the second point on tax refunds in 2026 outlook as that relates to smart eyewear, clearly, we think having more money in the consumer's pocket is a good thing for us and a good thing for consumption of the category in general. As we step through the next couple months, we will hopefully see some of that flow through at a higher rate to our business than what we have even experienced quarter to date. Again, optimistic. We obviously think cash in the consumer's pocket is a good thing. But with our stronger resiliency with the managed care consumer, we are not necessarily as dependent on the tax refund tax seasonality now as we may have been in years past. As it relates to smart eyewear and 2026 outlook, we are super excited that we are going to be deploying Ray-Ban Meta to the balance of our fleet by the end of the second quarter. Again, this has been one of the really pleasant surprises of our business, that it is one of the hottest-selling products that we have in our assortment. We are ecstatic with the performance of Ray-Ban Meta within our stores. The transaction value of that consumer is significantly higher, among the highest of our consumer types. So nothing really but enthusiasm and good news for us as it pertains to that product category. Michael Lasser: Understood. Thank you so much, and good luck. Alex Wilkes: Thanks, Michael. Operator: Thank you. Our next question comes from the line of Simeon Siegel of Guggenheim Securities. Please go ahead, Simeon. Simeon Siegel: Thanks. Hey, good morning, everyone. Nice job. Sorry if I missed it, Alex. I know, and maybe this is following up on the last one a little, but just any way to help us think about how you're breaking apart the pieces of that net traffic between those two pieces? So thinking about the puts and takes of the gains from the profitable target customers versus what you think you will walk away from. This is something about for the future: what you think you will still walk away from? I'm just curious when we can start having the reset offset behind us and the traffic is more of a simple story of the new target customer growth. Then maybe, Chris, really impressive SG&A leverage. How much of that was cutting expenses versus leveraging fixed costs on higher sales? And how are you thinking about that SG&A dynamic into next year? Maybe the same idea of leverage versus opportunities to cut costs? Thanks, guys. Alex Wilkes: I will take the traffic one and then turn it to Chris on the leverage question. We think we have multiple years of work ahead of us to be very deliberate on our consumer cohort shift. Again, I spoke a little bit about this in my prepared statements, that historically we were really an always-on promotional company. When you market two pair of eyewear for a certain price including an eye exam, and that is your primary lead offer that you deploy most of your marketing spend against, you are speaking to one customer type that is really sensitive to price. As you begin to shift that marketing expense into a marketing expense that is more targeted, you are making a conscious decision to walk away potentially from some of those cash pay consumers as you are reinvesting into the acquisition of the more valuable customer group. So, yes, Simeon, we do believe that this is a multiyear strategy. We are winning with the more profitable customers that we are seeking. We have rebuilt our acquisition platform to accomplish just that, and not just my message externally but internally to the team here has been we need to ensure that we are winning with the customer cohort to drive the profitability of the company. Again, Chris talked about this at length too. That is the primary mission of this management team: to continue to expand operating margin, and we are doing that through this intentional shift of the customer cohort. Long story short, we think we have multiple years of runway to go as we work on this customer shift, and what we are measuring ourselves on is our effectiveness at driving the customers that we want into our stores. Christopher Laden: On the cost front, the operating leverage expansion that we are seeing is really a healthy mix of both things. Our comps at 6% for the year certainly help leverage our more traditional fixed costs, but we have unpacked every line item within our SG&A portfolio over the course of the last twelve months. We have seen in 2025, and we expect to see over the next couple of years, about $20,000,000 of cost out in those line items. We joked a little bit at Investor Day: things as big as relooking at our logistics contracting for national freight to something as minor as looking at what kinds of paper our stores are ordering and making sure that we are optimizing there. What we see in the future is a continued ongoing, precise view of how we spend, both at the support center and our stores. The team has embraced it with open arms. It is something that the entire enterprise has rallied around and is excited about. Simeon Siegel: Great. Thanks so much, guys. Congrats again. Best of luck for the year. Alex Wilkes: Thanks, Simeon. Operator: Thank you. Our next question comes from the line of Dylan Carden of William Blair. Please go ahead, Dylan. Dylan Carden: Thanks. Alex, what do you make of the projections for sort of a softer end market this year? I think some of the ones out there are down low single digits for the total industry, and then obviously last year was sort of soft. Is that sort of the corollary that you see in traffic being kind of your cash customer more subject to those types of declines, and your business is sort of staying above the fray given all your initiatives? Is there sort of more of a turbocharge capacity for the other end of it? Alex Wilkes: You know, Dylan, first and foremost, I think we control our own destiny on a lot of these elements. One of the things that I was most pleased by in 2025 was, in a category where eye exams were declining between the mid- to high-single-digit range, we actually grew eye exams in the plus-one range. I think that speaks to the strength of our brands. It speaks to the strength of our strategy and how we are communicating with the consumer about the offerings that we provide across our banners. Even in the face of some macro challenges and some uncertainty, I think our strategies are paying off, and it is showing in outstripping the category from an acquisition and eye exam growth perspective. When we think about things that can help us to continue to outperform, it is that we are the obvious destination for value in the category. We are not shifting away from that, but we are refining exactly what that means. We think elements like continuing to introduce more premium products—to your question on turbocharging our business—continuing to introduce more premium products, making the in-store environment a bit more joyful. We did not talk about it at length during the call, but I am happy with the momentum we are seeing at Eyeglass World and the change in trajectory there. In 2024, that was a negative-comping business, and Eyeglass World was plus 4.2% last year. I think all of those things are pulling in the right direction and cumulatively are having a nice strong impact on our business, even in the face of some macro uncertainty. That being said, as you know from following our story, we do prepare for all sorts of scenarios, which is why our guidance continues to be incredibly prudent. Dylan Carden: Excellent. And then CapEx stepping down for kind of a second year in a row, is there any bigger lift or investment necessary for sort of store experience as you cater to a higher-income consumer? Alex Wilkes: I think we have been pretty intentional about the investments we are making in kind of refreshing the stores, particularly with the America's Best rebranding, have been intentionally focused on things that require minimal capital. So we can refresh these stores, we can introduce some of the new branding assets at a pretty nominal rate for CapEx relative to the size of the business. As we reported on CapEx, we said during Investor Day we are looking to spend 4% to 5% of revenue in CapEx over the next few years. In the very immediate term, when we are directing more of those investments at modernization of the business and organic investments, you will see a lot of this show up in our traditional CapEx. Also, some of that does not come through kind of traditional CapEx. There are still cash investments we are making that we will see build through other assets in the balance sheet. Christopher Laden: So the dollars are still being reinvested in the business, but unlike when we were growing at a faster pace with new stores, not all of that is showing up in the CapEx line. Alex Wilkes: And then, Dylan, I want to double down on something again, a statement I made during my prepared remarks. One of the things I am super proud of this company for having done over years is investing in doctor equipment, ensuring that the stores are well maintained, ensuring that our stores are orderly and clean. We do not have anything that is massively out of sorts. Where we did have opportunity is to make the environment a bit more joyful by modernizing the dress code of our associates. Again, those are not capital- or even expense-intensive items. These were minor investments along visual merchandising. For those of you who have not been in one of our stores recently, I would say go into one of our stores and take a real look around at the environment, at our people, at our teams, and compare them to what it looked like a year ago. I think you will see and feel a noticeable difference in the environment, again, even in context of some very, very cost-efficient and minor tweaks from a capital structure. Dylan Carden: Really appreciate it. Thank you. Operator: Thank you. Our next question comes from the line of Brian Tanquil of Jefferies. Your line is open, Brian. Brian Tanquil: Hey, good morning, guys, and congrats. Maybe just as I think about the comment you made that what you're realizing is that your current target customer is probably more of a middle-class or middle-income customer. How durable do you think that is? I mean, as we think about maybe a down trade that is happening right now, and then how do you mesh that with all the strategies that you're putting in? Just trying to get a sense of the stickiness of this customer base that is now showing up at your stores. Alex Wilkes: Brian, I will tell you this. Thanks for the question. I think we feel even better about it today than we would have a year ago because that middle-income consumer has higher expectations of product. They have higher expectations of experience, and those are all things that we are continuing to deliver on. Again, it is important to think through the lens of our price and value gap versus the category. We are delivering better products, a better experience. We are delivering better stickiness through our investment in CRM and shifting our marketing and acquisition expense into areas that are in particular pointed at the notion of retention, all while maintaining a significant gap versus the category—an intentional gap versus the category—in terms of average dollar ticket transaction. Again, yes, we are absolutely focusing on driving our ticket growth through introduction of more premium frames and being more deliberate on pricing. That being said, we still are the obvious destination for value in the category. Introducing more premium product while still maintaining our value positioning in the market—we actually think that is the winning recipe to continue to be a destination of choice, in particular for that consumer that you spoke of. Brian Tanquil: Got it. And then just on the weather impact from the quarter, looks like you have a decent number of stores in the Northeast, New York, New Jersey. So just curious how you think, or how we should be thinking about the impact from that from a modeling perspective. Thanks. Alex Wilkes: We had probably about 15% of our fleet that sat right in the crosshairs of the winter storms that we had to weather through the end of January and even into February. Again, I am really happy with how the team has responded to call patients back and get them back in stores for appointments that potentially they could not make due to store closures and road closures and all those things that we had to manage through. Sitting here today, two months through the first quarter in the mid-single-digit range with sequential traffic acceleration from the fourth quarter, I could not be more pleased with how the team has responded to those challenges that we faced in the first couple months. Tamara Gonzalez: Thank you. Operator: Our next question comes from the line of Robert Ohmes of Bank of America. Your question please, Robert. Robert Ohmes: Good morning. Thanks for taking my question. Actually, Alex, and maybe Chris, just on 2026 and thinking about the most important potential tailwinds, or maybe just highlighting more of the tailwinds. How significant—you mentioned simple lens pricing—could you give us maybe some more color on that? Also, remote exams, is that a driver still or sort of tailwind for 2026? And then maybe just a little bit more on the advertising. You mentioned a new media partner. As you go through 2026, what incremental could we see on the marketing side? Alex Wilkes: Thanks, Robbie. On tailwinds, we are really excited about the new product introductions that are coming throughout the year. Similar to last year, those new product introductions are going to be phased in throughout the course of the year, and we think we are going to see continued momentum from that. On the lens side, lens purchasing in this category is a very complicated and non-consumer-friendly activity. With our deployment of iPads with the OptiCam, all intended to demystify the lens shopping experience, we think that is going to continue to help. We are looking at simplifying our lens assortment, especially once we have our tier-four lens introduced, so that we can create a more simple lens hierarchy so that consumers understand the good-better-best architecture a bit better than what they do today with all the different degrees of add-ons and lens materials and all the different combinations that exist today. We are testing our way through that at the moment to understand exactly how to create that narrative and create that experience the most efficient way for the consumer. We think that will be ready for commercial application towards the back half of the year. Certainly, we think that is a win for our consumers. We think that is a win for the business as well and helps us towards our goal of migration to more premium lens materials and lens add-ons. Remote exams continue to be a winning recipe for our business, and, frankly, I think it is one of the reasons that we were able to weather the weather impact of the first quarter in the way that we have, by having doctors that could see patients remotely when they may not have been able to travel into a location. What a great asset to have during that time period. Again, super excited about the opportunity that we can provide doctors to both practice in store and practice remotely. We think that is a differentiator and, frankly, one of the reasons that we had a really strong recruiting class in 2025. Our doctor retention and doctor recruiting was at an all-time high for the year, and we think offering remote as a mode of practice is certainly one of the contributors to that. On your last question on advertising and the media partner, I think this is our next bold step in the transformation of our marketing capabilities. If you think of 2025 as really a year around creating new brand assets and a new identity and a new campaign, 2026 is around how we take those assets and deploy them differently. I have spoken about this in the past. Historically, we spent a lot on linear TV advertising, we spent a lot on search, and we have not really done a particularly good job in mid-funnel activation and digital, in targeted advertising where more and more consumers are actually consuming their media. With our new partner, we are making some deliberate shifts this year in how we deploy our acquisition expense, in particular, in the mid-funnel range of acquisition. All of that is intended to pull in the same direction and help us to attract those customers that we spoke about: the managed care, the Outside Rx, and the progressive customers that are so important to our profitability expansion story. Robert Ohmes: Sounds great. Thank you. Operator: Thank you. Our next question comes from the line of Anthony Chukumba of Loop Capital Markets. Please go ahead, Anthony. Anthony Chinonye Chukumba: First off, thank you for taking my question. Second off, congrats on a really wonderful 2025, and it is very encouraging to hear that you are doing mid-single-digit comps in the first quarter given the weather challenges that have impacted so many retailers. I just wanted to drill down a little bit on smart glasses. Obviously, you are selling the Ray-Ban Meta. It is going really well for you. You are expanding to all your stores. I just want to clarify—two parts to the question. First off, you do not have any type of exclusive arrangement with Meta, do you, where you can only sell their smart glasses? Related to that, obviously, there is going to be Android XR that will be coming out. Do you foresee a scenario in which you could potentially be selling some of those glasses as well? Thank you. Alex Wilkes: We do not have an exclusive relationship with Meta, but we are super happy with the partnership that we have with Ray-Ban Meta and with our partners at EssilorLuxottica. Again, I think it is just a great proof point for us that we can be highly successful in selling smart eyewear in our store environment. I cannot wait for this to be scaled to the remainder of the fleet by the end of the second quarter. Absolutely, we believe that we will be participants in the smart eyewear space across different platforms, and the success that we have had with Meta so far is the proof point that we will be a very meaningful player in smart eyewear for years to come. Anthony Chinonye Chukumba: Got it. Keep up the good work, guys. Alex Wilkes: Thanks, Anthony. Operator: Thank you. Our next question comes from the line of Adrian Yee of Barclays. Please go ahead, Adrian. Angus Kelleher: Hi. This is Angus Kelleher on for Adrian Yee. You talked about consultative selling driving higher ticket and better mix. How scalable is that across the full fleet? How many stores were you deploying that in at year-end? What is the level of investment or turnover or upskilling needed to roll that out nationwide? Alex Wilkes: Angus, great question. We are rolling it out nationwide. However, as you can imagine, moving 14,000 people along the journey of consultative selling is quite the task. It requires reinforcement. It requires focus. It requires center-stage activity during our national sales meetings. This is not a one-and-done thing. Our field sales organization is continuously focused on ensuring that we are sustaining those behaviors, but it is a multiyear journey to get our associate base to the point where we want them to be. OptiCam and the launch of OptiCam in Q4—one of the things that we really loved about that is that it becomes the tangible tool to help our associates along with that journey. It is really the combination of a selling tool with content that we have created to, again, demystify the experience and help consumers through the journey combined with the behaviors and the selling techniques and the consultative selling techniques that we are teaching and reinforcing. That will help along the journey of consultative selling. By simplifying the lens experience, we will make it easier for our associates to engage in consultative selling because it just makes it that much easier to have the conversation with the consumer. Angus Kelleher: Great. Thank you. Good color. Then just a quick follow-up. Can you help us size up how much of your managed care customer base is Medicare Advantage or skewed to older demographics? As you think about potential changes to Medicare Advantage plan benefits, do you see any potential risk to vision coverage or customer retention within that cohort? Thank you. Alex Wilkes: We really do not see any risk in changes to Medicare Advantage as they participate in the managed care realm. Medicare Advantage generally participates in managed care through a third-party TPA relationship with a managed care provider. It is not something we, frankly, track, but the conversations that we have with our managed care partners indicate this is not something that we should be concerned about or believe that will be a material impact to our business. Angus Kelleher: Okay. Sounds good. Best of luck. Operator: Thank you. Our next question comes from the line of Matt Koranda of Roth Capital. Please go ahead, Matt. Matthew Butler Koranda: Hey, guys. A lot has been asked and answered, but I wanted to hear, as it pertains to the mid-single-digit comp guide for 2026, how important the continued frame assortment optimization is in that plan versus the premium lens penetration assumptions that you are making. Then, did you explicitly have any tailwind baked into the comp from AI glasses? Let's start there. Christopher Laden: A couple of things to unpack there. First of all, when we think about our average ticket increase through 2026, it is really going to be a healthy mix of both our frame assortment evolution and lens leadership. Something to keep in mind is we still have tailwinds coming from 2025. We started last year with about 20% of our frame board priced over $99. We ended the year at 40%. That was a phased approach throughout the year. We are continuing to see tailwinds even in Q1 and the first half of the year from some of that evolution. At the same time, we are continuing that evolution through the rest of this year, targeting around 60% of the frame board by the end of this year. I think we will continue to see some tailwind on the frame side, as Alex mentioned. The simplification of our lens portfolio and some of our selling tools and techniques around simplifying the customer journey on lenses, we think, will ultimately yield improvements in average ticket as well. As we think about the AI impact and smart glass impact to our comp, we could not be more excited about the acceleration of that product category. At the same time, it is in 200 stores today, and it does not represent a material impact to the business, but we are super excited about its contributions over time. That is likely a multiyear journey where that becomes something that is a material impact to our comp. Matthew Butler Koranda: Okay. And then on AI glasses, what are you seeing in terms of prescription lens attach rates? I know you guys are very different than some of the traditional venues in which the Meta product is sold, which is more sun-related. Are you seeing higher rates of prescription lens attach rates? How do you think about premium lens attach rates to AI glasses as you move forward with the strategy? Alex Wilkes: Matt, it is a really, really good question. One of the reasons we are most bullish on this technology is that, in fact, we are seeing a very high degree of premium lens attachment with the Meta smart eyewear glasses that we are selling. The vast majority of what we are selling is coming with a prescription lens, and the vast majority of those lens sales are coming with the attachment of premium lens additions and lens products. The overall package purchase of a Meta AI transaction is among the highest-value transactions that we are seeing, and it is significantly, in part, related to what we are seeing from a lens attachment perspective. Matthew Butler Koranda: Great to hear. Thanks, guys. Operator: Thank you. Our next question comes from the line of Simeon Gutman of Morgan Stanley. Please go ahead, Simeon. Lauren (for Simeon Ari Gutman): Hi. This is Lauren on for Simeon. Thank you for taking our question. Just first, really quickly, curious on the managed care versus self-pay consumer in 2026 as it relates to your 3% to 6% comp. Could you elaborate more on the comp expectations for managed care versus self-pay at the low end versus the high end of the guide? Thanks. Alex Wilkes: Our planning scenarios assume with the high end that we can see a positive comp across both consumer cohorts. Again, what we saw in 2025 is that our self-pay consumers were leaning into some of our more premium assortments at actually a faster clip than even some of our managed care consumers. That being said, at the low end of our range, our assumptions for negative traffic would likely come out of the self-pay cohort. To unpack that a little bit further, we are trying to drive the right traffic within the business. When we think about our guide of 3% to 6%, we are still anticipating and feel confident that we are going to drive the right traffic with our customer cohorts that we are targeting, even at the low end of the range. But at that point, you are still essentially in the negative traffic comp for the self-pay consumer. Lauren (for Simeon Ari Gutman): Okay. Great. Thank you. Then you also previously shared expectations for managed care to reach around 50% of revenues, and today you shared it is around 42%. So is 50% still the right goal? If so, what is your line of sight to achieving that 50%? Alex Wilkes: We still feel great about 50% being the North Star. The 42% is on a base where both self-pay and managed care are growing. In order for managed care to hit that 50%, we expect to see disproportionate growth in there, but we still feel great about 50% being a North Star. We still look at a multiyear journey to get there, but all the strategies we discussed at Investor Day are specifically targeted at exactly that, and all the proof points thus far have been very positive. Lauren (for Simeon Ari Gutman): Okay. Great. Thank you. Tamara Gonzalez: Thank you. I would now like to turn the conference back to Alex Wilkes for closing remarks. Sir? Alex Wilkes: You got it. Thanks so much, and thank you for your questions today. Let me just wrap with this. To my National Vision Holdings, Inc. teammates listening to the call today, thank you for your dedication in 2025. It was a remarkable year, and to the 14,000 people who contributed to this, thank you on behalf of the leadership team for remarkable performance, and I cannot wait to see what we do in 2026. Thank you, guys. Tamara Gonzalez: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. My name is Melissa, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Bath & Body Works Fourth Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I'll now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin. Luke Long: Good morning, and welcome to Bath & Body Works fourth quarter 2025 earnings conference call. Joining me on the call today are Daniel Heaf, Chief Executive Officer; and Eva Boratto, Chief Financial Officer. In addition to this call in this morning's press release, we've posted a slide presentation on our website that summarizes the information in these prepared remarks and provide some related fact and figures regarding our operating performance and guidance. As a reminder, some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause the actual results to differ materially from these forward-looking statements, please refer to the Risk Factors in Bath & Body Works 2024 Form 10-K. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. With that, I'll turn the call over to Daniel. Daniel Heaf: Thank you, Luke, and good morning, everyone. Today, we'll discuss our fourth quarter results, our outlook for fiscal 2026 and the early progress we're driving to return the company to consistent growth. Our fourth quarter performance was better than we had anticipated, but still well below the standard we expect for ourselves. Our aspiration is clear to bring together luxury scent, real benefit and unmatched access, building a brand consumers love, trust and choose every day. Last quarter, we introduced the Consumer First Formula, our multiyear plan to return Bath & Body Works to sustainable growth. Our fourth quarter results reinforce our diagnosis and the necessity and urgency of this plan. After a self-start to the quarter, our actions to strengthen our performance were successful. Supported by consumer rebound after the government reopened and strong execution of targeted promotions by our teams during key holiday moments. We ended the quarter with net sales down 2% and adjusted EPS of $2.05, both ahead of our expectations. Looking ahead, we expect improvement in our financial performance as we execute the Consumer First Formula with discipline and urgency. However, the full financial impact of the actions we were taking will take time and build throughout 2026 and accelerate into 2027. Since launching the Consumer First Formula last quarter, we have been focused on execution across the organization, teams are motivated, aligned and moving with pace. With many new roles and leaders in place, we are implementing an enhanced go-to-market approach with improved process and collaboration between product, brand and marketplace teams. Let me walk through some of the progress we are making across our four strategic priorities. First, creating disruptive and innovative products. Strengthening our hero category product offering and restarting our innovation engine, it's foundational to our plans. Since Q3, our product, merchant and supply chain teams have been working side-by-side to take insights from consumers and prestige brands and translate them into innovative products that we can deliver to consumers at extraordinary value and unmatched scale. We are prioritizing investments behind our fragrance icons; our priority product franchises and the core forms that drive repeat purchase. A recent example is the launch of our new moisturizing hand soap, one that featured updated efficacious formula, elevated packaging and is marketed as benefit first. Since the launch, consumer reviews and sell-through have been strong. So much so that we are now actively chasing into demand. This is a sign of things to come as we refocus on the consumer and our hero category. Our 2026 product pipeline reflects this approach to innovation. It is grounded in consumer insights, incorporate enhanced consumer testing and is targeted in the body care, home fragrance and soap and sanitizer category where we are the market leader. In the back half of 2026, consumers will begin to see significant product evolution in these hero categories that include new forms and upgraded vessels, such as the restage of our moisturizing body wash and a new flatback spray hand sanitizer, both directly informed by consumer feedback and designed to look modern, while improving usability. We are also strengthening how we communicate product quality by evolving the labeling on our packaging, emphasizing ingredient transparency and highlighting product efficacy and benefits, such as 48-hour moisture and dermatologists approved claims. We know stronger quality messaging is critical to attract new younger consumers, and it is already being rolled out across all touch points, including our stores, digital platforms and our product label. We expect that our new product formula, upgraded packaging, stronger product claims and elevated franchise positioning will increase our appeal to new consumers, while also increasing loyalty amongst our core customer base. We also expect consumers to respond positively to the rollout of higher fragrance loads across our iconic scent, franchises and complemented by new sensitive skin offerings. These examples reflect our focus on strengthening leadership in the core, delivering more consistent and relevant benefit advancements and better meeting the evolving expectations of today's consumer. In short, these early actions of a much broader innovation agenda, which accelerates in the back half of the year and continues through 2027. Earlier this quarter, we launched our latest Disney Princesses collaboration, building on the insights from last year's collection, including offering a broader range of accessories. This latest lineup features 5 new fragrances, Life is a Fairytale, Snow White, Mulan, Rapunzel and Aurora, along with the return of 2 fan favorites from the original collection, Belle and Tiana. The launch has resonated with customers and overall is in line with our expectations. Collaborations remain an important part of our growth strategy, and we have more collaborations planned this year than last. As we said last quarter, we will, over time, deploy them differently and more strategically to drive energy into our fragrance icons, key franchises and seasonal collections. A good example of this is the launch of the PEEPS collection, specifically designed to support the Easter shop. In summary, we are moving with pace to modernize our product, packaging and formulations, and this will become increasingly visible in the back half of the year and continue to build through 2027. Second, reigniting the brand. We have begun laying groundwork to modernize how Bath & Body Works shows up and communicates with consumers. Our brand and marketing teams are shifting towards clearer, more elevated brand and product storytelling. We are sharpening our position and creative platform, adopting a modern, consistent visual identity across channels and increasing investment in upper funnel media with higher-caliber influencers and creators to build a more culturally relevant presence that sparks excitement and builds awareness with new consumers. Earlier this quarter, our evolved brand identity made its debut on Amazon, showcasing Bath & Body Works in a modern and relevant way for today's consumer. I'll speak more about the Amazon launch in a moment. This updated visual identity is supported by richer, visually compelling product storytelling that highlight what makes our brand distinct, that everyone deserves to find their feel good. As expert creators, we bring together luxury fragrance, meaningful benefits and easy access delivered at exceptional value. The new brand expression that debuted on Amazon will begin rolling out across our own channels later this year. As we modernize the brand, creators and influencers at scale will be an important part of our new go-to-market strategy. The use of influencers is a proven go-to-market playbook that will allow us to create a more visible and consistent presence across the social media platforms, we know our consumers use every day. These actions are the beginning of a transformation of Bath & Body Works from a retailer to a global brand, one that leads with creativity, celebrates product and creates culture. I know what this looks like when it's successful, and I can see the upside. Third, winning in the marketplace. Discovery should feel effortless. We are focused on meeting consumers wherever they choose to shop online, in stores and across third-party platforms. Our global store fleet is a meaningful competitive advantage in beauty and fragrance, one that would take newer competitors significant time and resources to replicate, and we are committed to fully leveraging its strength. To welcome more consumers to the brand, we have taken steps to simplify and modernize the in-store experience. For example, we have reduced SKUs by 10%. Looking ahead, we are focused on enhancing in-store navigation. Changes will roll out later this year, creating a more intuitive, invited and elevated shopping journey. I am confident the consumer will feel the difference. At the same time, we are making these in-store changes, we are broadening and improving how consumers can discover and shop the brand across owned, digital and third-party platforms. A major milestone in this work was our February 20 launch on Amazon. We know consumers often go to Amazon to purchase their beauty products, and this launch gives us access to Amazon's broad, high-intent customer base, enabling us to reach new and lapsed consumers in one of the world's most trafficked marketplaces. The curated Amazon assortment is designed to attract new shoppers to the brand, while giving loyal consumers fast, convenient access to their favorite products. As we learn more from our Amazon launch, we are evaluating additional opportunities to extend our distribution further in strategic and brand-accretive ways. In parallel, we are elevating our owned digital experience with a focus on reducing friction and improving the customer experience through clearer product navigation, stronger storytelling and a more intuitive and modern shopping experience. For example, we have now lowered our free shipping threshold from $100 to $50, aligning more closely with specialty retail standards, enhancing our competitive positioning and crucially reducing friction for new-to-brand consumers. Looking outside of North America, our international business continues to be an exciting opportunity. The international business is approaching $1 billion in retail sales. Our partners who own and operate the stores believe in our strategy and are accelerating the pace of new store openings across existing and new markets, including Germany and Brazil. This reflects the strong global demand for our brand and allows us to further expand our reach to consumers worldwide. Our goal here is simple: be in the path of the consumer, spark Discovery and ensure the Bath & Body Works brand shows up consistently and powerfully across every owned and partner touch point. Finally, operating with speed and efficiency. We are laser-focused on removing complexity from our business, streamlining decisions, shortening cycle times and driving productivity. Our multiyear Fuel for Growth program targets $250 million in cost savings over 2 years with approximately $175 million included in our 2026 guidance. These savings allow us to accelerate and fund our strategic investments in product and brand. As we move forward, we are closely [ monicating ] indicators that our strategy is gaining traction, and we will share green shoots along the way, such as accelerated growth in new-to-brand consumers, stronger pricing power behind our innovation, improved performance in our hero categories and expanded reach through new distribution channels. The Consumer First formula represents a comprehensive end-to-end transformation of our company. It is designed to ensure we consistently meet and exceed the expectation of today's modern consumer. This work is well underway. We are moving with urgency. And as the year unfolds, our progress will become increasingly visible to consumers, associates and shareholders alike. At the core, this transformation is repositioning us from a specialty retailer to a premier global brand. With that, I'll turn over to Eva to walk you through our financial performance and outlook. Eva Boratto: Thank you, Daniel, and good morning, everyone. Today, I'll provide the details of our fourth quarter results, a wrap-up of 2025 performance and a review of our 2026 guidance. Beginning with the fourth quarter, net sales were $2.7 billion, down 2.3% versus last year and better than the guidance floor we set of down high single digits. This performance reflects improvement as the quarter progressed following a soft start in early November, when we navigated significant macroeconomic pressure that impacted our consumer demand. Our targeted promotional and operational adjustments such as a new Black Friday weekend event drove dual channel traffic growth on those key days. Our Q4 category performance reflects the same challenges we shared in Q3. We must deliver consumer-right product innovation, elevate the brand and be available wherever and whenever she chooses to shop. Body care declined mid-single digits below the shop, driven by underperformance in seasonal collections, notably holiday traditions, which did not resonate for the first time in several years. Consumer research shows our body care offerings have become too predictable and that we need to be more disruptive, modern benefit-led innovation. On a positive note, Champagne Toast had its strongest year ever, validating our strategy of elevating our core fragrance icons. Home fragrance grew low single digits, performing above shop. Candles were a relatively bright spot supported by stronger 3-Wick and Single-Wick acceptance, better inventory positioning and disciplined pricing. Soaps and sanitizers also grew low single digits with our pocketbac sanitizers leading the way. In U.S. and Canadian stores, net sales were $2.1 billion, a decrease of 2.6% to the prior year. Direct channel net sales were $579 million, a decrease of 2.5%. When adjusted for buy online, pick up in store, digital outperformed stores. International net sales were $91 million, up 8.6% to the prior year, and system-wide retail sales grew 13%. We are pleased with the rebound of our international business with all geographies delivering growth and our partners maintain healthy inventory positions. Our fourth quarter adjusted gross profit rate was 45.7%, better than expected and a decline of 100 basis points to last year, driven primarily by tariff impacts and partially offset by B&O leverage, which benefited from the Q1 '25 exit of a third-party fulfillment center. Mix-adjusted AUR declined low single digits, reflecting our strategies during holiday. Adjusted SG&A rate was 23.2%, increased 90 basis points to last year, reflecting softer sales and investment in technology and initiatives associated with the Consumer First formula. Bringing it all together, adjusted operating income was $614 million, 22.5% of net sales. Adjusted earnings per diluted share of $2.05 exceeded expectations and declined 2% to last year. With respect to inventory, we ended the fourth quarter with inventory down 5% to prior year and importantly, with clean inventory levels headed into spring. Our real estate portfolio remains healthy with 60% of our fleet in off-mall locations. In the quarter, we opened 21 new North American stores, all off-mall and closed 28 stores, primarily in malls. For the year, we opened 32 net new stores. International partners opened 36 stores and closed 7 stores in Q4 with 44 net new stores in the year. We ended the year with 573 international locations. Now for the fiscal year 2025, net sales were $7.3 billion, flat to the prior year, and adjusted earnings per share was $3.21, down 2% to the prior year. For additional full year results, please refer to the slide presentation we have posted on our website. Turning to our 2026 guidance. We expect 2026 to be a year of disciplined investment behind the Consumer First Formula, balancing rigorous cost control with targeted reinvestment to position the business for sustainable long-term growth. We expect net sales to be down 4.5% to down 2.5%. Key assumptions behind our net sales include a macro environment similar to 2025 with continued value-oriented consumer behavior. Our innovation pipeline, improved marketing execution and new touch points such as marketplace and wholesale will begin to contribute more meaningfully over time with a greater impact in the back half of 2026 and into 2027. Promotions are assumed at comparable levels to 2025 and will remain an important tool to drive traffic and customer engagement. International net sales are expected to be up mid- to high single digits. We expect full year gross profit rate of approximately 42.4%, reflecting B&O deleverage, primarily due to sales declines and merchandise margin pressure from product investments, partially offset by our Fuel for Growth initiatives. We are assuming tariff levels, inclusive of product cost inflation pressures remain roughly neutral to year-over-year earnings. We expect full year adjusted SG&A rate of approximately 29.2%, reflecting normal wage inflation, Consumer First Formula investments and sales deleverage, again, partially offset by Fuel for Growth initiatives. Our Fuel for Growth targets $250 million in cost savings over 2 years. As Daniel mentioned, we expect approximately $175 million of cost savings in 2026 with those savings earmarked to accelerate investments in innovation, digital and marketplace capabilities and high brand impact initiatives. We expect full year adjusted net nonoperating expense of approximately $230 million, reflecting the interest benefit of the early redemption of our January 2027 bond and an adjusted effective tax rate of approximately 26.5% and weighted average diluted shares outstanding of approximately 203 million. There are no share repurchases assumed in our outlook. Considering these inputs, we are forecasting full year adjusted earnings per diluted share of $2.40 to $2.65. Turning now to the first quarter. We expect Q1 net sales of down 6% to down 4%. We expect first quarter gross profit rate to be approximately 42.5%, reflecting approximately 150 basis point headwind from tariffs as we had no tariff impacts in Q1 of 2025, and B&O deleverage due to the sales decline. B&O dollars are expected to be relatively flat. We expect our first quarter adjusted SG&A rate to be approximately 32.3%, reflecting net sales deleverage and net timing of investments in Fuel for Growth savings. Our first quarter outlook includes adjusted net nonoperating expense of approximately $60 million and adjusted tax rate of approximately 28.5% and weighted average diluted shares outstanding of approximately 202 million (sic) [ 203 million ]. Considering all of these inputs, we are forecasting first quarter adjusted earnings per diluted share of $0.24 to $0.30. Now for a quick update on capital allocation. We are a strong cash flow generating business, and our top priority remains driving sustainable long-term profitable growth through strategic investments in the business. For the full year 2025, we invested $237 million in capital expenditures. We generated free cash flow of $865 million, including approximately $125 million of working capital benefits that our teams drove. We returned $167 million to shareholders through dividends and repurchased 15.1 million shares for $400 million. In 2026, we expect to invest approximately $270 million in capital expenditures focused on high-return real estate, Consumer First Formula investments largely related to product assortment and logistics and fulfillment upgrades. We expect to reduce the number of new store openings this year, resulting in square footage growth of approximately 1%. We expect to generate approximately $600 million of free cash flow in 2026, including a $65 million after-tax benefit from the interchange fee litigation settlement. We expect to maintain our annual dividend of $0.80 per share and we will redeem our $284 million of January 2027 notes in the first quarter, as I previously noted. We remain committed to returning to our 2.5x gross leverage target over time. And as always, we will take a balanced approach, investing to drive long-term growth, while returning excess cash to shareholders. To summarize, 2026 is an investment year as we execute our Consumer First Formula with pace and discipline. We are confident in our strategy and our ability to establish Bath & Body Works as a premier global brand, one that delivers sustained durable growth. With that, we'll open the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis: Daniel, I wanted to get your insight on the competitive landscape across mass, specialty and other fragrance players. Some of these competitors are also leaning heavily into content creators and elevated packaging. How are you approaching this? And do you think you're positioned to compete effectively at this point? Daniel Heaf: Lorraine, thanks for the question. Without a doubt, the landscape we are operating in is increasingly competitive. We operate in innovative, youthful, fast-growing, high-margin categories that naturally attract strong interest and new entrants. I love -- I really love the sectors that we play in. As I explained on the last earnings call in Q3, for a period, our product innovation, our brand expression and our market execution did not keep pace with the competition or with the consumer. We leaned too heavily on promotions to drive the business. The Consumer First Formula is directly addressing those gaps, and we are moving with pace. It is not strategy, it is action. You will see from us bold and disruptive product innovation. We talked about a green shoot on the call in the moisturizing hand wash, new packaging, new formula, benefit-led marketing and the success that we've had that, a refreshed and reenergized brand that resonates with today's consumer and an elevated and extension and expansion of our distribution in the marketplace, as you have seen with our February 20 launch on Amazon. Now as part of that marketing evolution, we are going to significantly expand the use of content creators. This is really what I mean by moving from being a specialty retailer to being a global brand. We expect to see a roughly tenfold increase in how we leverage content -- and how we leverage content creators so we can show up in social media in a way that is modern and relevant. And what I love so much about this job and what I love so much about this company is where we sit. We're evolving so fast to adopt the playbooks used by these small insurgent competitive brands, but we do so from a position of strength and with what I believe are significant competitive advantages. We have the scale and resources to invest meaningfully. We have our 2,500 stores globally, which just gives us an amazing mousetrap to capture the demand we create. We have our fast, agile domestic supply chain that allows us to chase into demand, and we offer extraordinary value to our consumers. So what I like about where we sit is that we will be an incumbent, but operating with the pace and the agility of an insertion brand. I have so much confidence in our strategy, in our competitive position and most importantly, in our team's ability to execute with pace. Lorraine Maikis: Eva, can you talk a little bit about the puts and takes around your gross margin forecast for the year? What's embedded for tariffs, promotions, any other items? I would have thought you'd get some of that -- those elevated China tariffs back over the course of the year. So maybe just how you're thinking about the pace of gross margin development through the year? Eva Boratto: Sure. Lorraine. Overall, our outlook assumes about 130 basis points of gross margin pressure. I'll start with merch margin where we expect to see pressure, really driven by those product investments that Daniel just referenced, you'll begin to see some of that new product in the back half of the year. From a tariff perspective, our guidance assumes tariffs inclusive of product cost inflation, it's tough to separate those, roughly flat to earnings year-over-year. I would note you'll see an outsized impact in Q1 as we're wrapping the start of tariffs, which for us began in Q2 of last year. We had essentially no tariffs. That reverses a little bit with some of the rate movements in Q3 and Q4. We are -- we expect to experience B&O pressure as well, natural deleverage given the sales declines, the investments we are making in real estate and some wage inflation. This is all net of our Fuel for Growth. The Fuel for Growth program that we highlighted, about half of the savings flow to gross margin versus the other half SG&A. So we're continuing to mine for opportunities to improve our underlying cost as we progress. Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo. Irwin Boruchow: Congrats on the improvements. I guess 2 questions. First one, Eva, could you help us understand the 1Q revenue guide a little more? Just looking for some thoughts really relative to the trends maybe that you saw exiting the fourth quarter. Eva Boratto: Sure. Thanks for the question. I'll start with a comment we made last November that was very consistent in Q4. When you exclude the benefit of broader promotional activity, our core business has been trending down about 3%. As I noted in our -- in my prepared remarks, our plan does assume promotional levels consistent with 2025. We are not building incremental promotional intensity into our plan. That doesn't mean we won't have different promotional events. But overall, as we think about intensity, we're assuming we're relatively flat. So think about the 3% I referenced as a baseline for 2026. And for Q1, we are facing our most challenging year-over-year comparison from a top line perspective. We had our strongest quarter last year in Q1. Irwin Boruchow: Got it. So I guess my follow-up is kind of to that point. So last year in Q1, I think you started off with a really successful collab, which created some tough compares for you this year. But just kind of curious if you can comment on how the follow-up Princess launch, which had a few weeks ago did. I think Daniel had some positive comments, but really just trying to understand how you were able to comp that event, and if that sets you up well relative to the 1Q guide that your kind of giving us today on revenue. Eva Boratto: Sure. Let me take that question in a couple of ways. So first, on the Disney Princess 2.0 launch, right, we built on our learnings from last year and our insights. We offered a broader range of accessories last year, those accessories sold out very quickly within a day or a couple of days. And overall, the launch has resonated with existing customers and overall is in line with our expectations. I would say you can't just look at Disney in isolation how it's affecting the overall shop. Q1 to date is tracking in line with the expectations that we just set. And while Q1 to date top line is running above our guidance range, that's consistent with our internal cadence of assumption and as there is some movement in timing of key events that can affect the quarter. So I'd say, overall, we're running in line with our expectations. Operator: Our next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Daniel, maybe taking a step back, what signposts should we look for to know that your Consumer First Formula is working here? And what gives you confidence in the plan or any green shoots that you're seeing at this point? Daniel Heaf: Matt, yes, great question. Let me give you a little bit of color on that. Let me start by saying I'm really pleased with how fast the whole company has moved from strategy to action. We're all collectively motivated, aligned behind the 4 pillars. We're focused on the Consumer First Formula. And I believe we're moving with real pace and discipline. The most important signposts are very clear and measurable, and we expect to see an acceleration in new-to-brand customer growth. We expect stronger pricing power and sell-through behind our core innovation. We are definitely looking for improved performance in our hero categories, specifically body care in 2026 and expanded reach and incremental sales from the new distribution channels that we will open this year, like Amazon, which we opened on February 20. These are just some of the tangible proof points that the Consumer First Formula is working. And as I've said a number of times, we expect the change to be visible to the consumer before we see the full benefits of our new strategy in the financials. And I believe there are things that the consumer is already starting to feel. We talked about the moisturizing hand soap. It is new formula, efficacious, benefit-led marketing, and we're seeing great customer reaction from that. And it is just a signal of the things that we have to come. As I said in Q3, we are really ramping into product innovation in the back half of this year. And then as Eva mentioned, we talked about the iconization of our fragrances. If we put the right level of marketing, if we build multiyear plans behind some of our iconic fragrances, we believe we can make big, bigger. We started that with Champagne Toast last year, almost as a test, and it had its best year ever. We've got a way to go to deliver that, but we will show that in 2026. When we talk about winning in the marketplace, international continues to be a great opportunity and grow nicely. We saw system-wide retail sales up double digit, which gives us confidence in the global opportunity for the brand. And then I would say, Amazon, it's an important structural proof point, one that we've already launched early into the fiscal year, and we know it's an opportunity to acquire new-to-brand customers as well as service customers, existing customers at a speed and convenience that this brand hasn't offered in the past. So that's a little bit of a color behind some of the proof points. Eva Boratto: And Daniel, can I just add a couple of additional points from a point you made. As you look at international, our partners are showing confidence in the strategy with acceleration of new store openings next year. We're expanding in new markets. And our store openings will be at least 60 net new store openings. And on the point that Daniel made about the moisturizing hand soap, as we look at the productivity of that, the productivity of that is double the soap hand gel soap that it's intended to replace. So just an early proof point of real tangible benefits when you bring the product to the market that resonates with the consumer. Matthew Boss: Daniel, to follow-up on that, how best to think about the cadence of your top line initiatives that you walked through over the course of this year? And maybe to put numbers behind it, just the time line that you see to reverse the underlying negative 3% run rate that Eva cited versus industry growth in your segment today? Daniel Heaf: Yes. As we said on our Q3 earnings call, we don't expect to grow in 2026, but yet we expect sequential improvement as we move through the year as the impact of the investments that we are making and the impact of the Consumer First Formula ramp. And really, I want everybody to think about the Consumer First Formula, not as a set of discrete initiatives, but as a system, a holistic transformation. It really as these things come together, which we will start to see in the back half, it is new product. It is a refresh and reignited brand brought to life in an integrated and elevated marketplace that delivers both the consumer impact and the financial impact that we are looking for. So make no mistake, we expect it to build through the year, and there is -- the whole company is working as fast as possible to return this company to durable and profitable growth without leaning on the brand erosive and promotional strategy that we have had in the past. Operator: Our next question comes from the line of Simeon Siegel with Guggenheim Partners. Simeon Siegel: Daniel, and sorry if I missed it if you said this, obviously early, but is there any way to quantify the initial reads from Amazon, maybe how you're thinking about both Amazon and the other incremental wholesale partnerships within the full year guide for next year? And then just when thinking about wholesale, I'm curious maybe higher level, can you share your thoughts on this is -- is this something you want to drive customers to wholesale? Or is it more so a function of you want to be able to meet your customers where they are? And then just, Eva, just quickly, it was nice to see the B&O leverage. And I heard the comment for go forward, but I'm just curious if you could tell us what the leverage point is now for occupancy and then maybe for SG&A as well? Daniel Heaf: So I'll sort of take the strategic question and maybe Eva, you can follow-up. So yes, the third pillar of the strategy is really winning in the marketplace. And the ambition here is to make discovery effortless. We are focused on meeting consumers where they are and where they choose to shop online, in our own stores and across third-party platforms. And Amazon is an important part of the strategy. We've only been live for a couple of weeks. So it's a bit early to be able to assess performance. But there's no question that the channel meaningfully extends our reach by giving us access to Amazon's broad consumer base and helps us connect, as I said, with both new and lapsed shoppers to drive brand discovery. I'm particularly pleased with the response that we've had from the way that the brand looks. If you think about when I started here, our own website offered one photograph per product. And I think it was seen very much as a way for store shoppers to replenish. If you look at how our assortment, and it is a limited assortment to start with on Amazon Look's, there's 50 SKUs. The product photography is incredible. You can see the scent stacks. You can see the benefits with lifestyle photography. We're starting to sell the brand through an elevated positioning and product storytelling in a way that we haven't done so before. And once we've done that at Amazon, of course, it's relatively quick and cheap to start to roll that out across our existing touch points. So Amazon is both a place to drive brand and consumer discovery, no question. And we are competing in the marketplace for traffic on Amazon. For too long, we've allowed our competitors to use our keywords and the fact that we didn't have an official brand presence to take the demand that was rightfully ours and funnel it towards their product. That is now no longer happening. So we have high expectations for this. It will make a meaningful financial impact in the year, and we are ramping into it. Eva Boratto: Great. And Simeon, to your question about the full year guide, inherent in our guide is about $50 million or 0.5 point of growth from our expanded distribution efforts. I would note our Amazon partnership is a wholesale model. So we're not realizing full year sales. We're excited about the start to the launch, and the teams are highly engaged to continue to drive this strategy forward. On leverage points, I would say we don't really have any changes to our leverage point. B&O at about 2% to 3% sales growth and SG&A at about 2.5% to 3.5% sales growth. Operator: Our next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: Daniel, you mentioned a few times the words luxury and pricing power. And I wondered if you could drill down a little bit more about what specific initiatives center around these strategies? Daniel Heaf: Kate, yes, I think that's a -- it's a great question. So I think for too long, the brand has not listen to the consumer. And so that's what we mean when we talk about putting the consumer at the center of everything that we do. We are taking consumer insights and directly translating that into our new and disruptive innovative product. This is a new process that we are operating. And for too long, I think that we've looked at mass as the competition, which, of course, it is. But really, the USP of our brand and what we're getting back to is bringing queues and scents from luxuries and making it available at accessible price points. That is really the opportunity that we have in front of us. So it's not that we are looking to reposition the brand as prestige or move into luxury price points. That's absolutely not what we're doing. But it is luxury scent with benefits at unbelievable value for consumers. Katharine McShane: And just as a second question, Eva, we wanted to ask about the international outlook. Is there any risk to the numbers you gave today just given the current circumstances in the Middle East? I know there was a little bit of a drag the last time we saw a conflict in that region on your international sales. Eva Boratto: Yes. Thanks for the question, Kate. It's quite early. Let me take a step back, right? We're pleased with the rebound of our international business. In Q4, all geographies delivered growth, and our partners are starting the year in a healthy inventory position. As we look at the Middle East, today, international represents, as you know, about 5% of our total net sales with the Middle East currently representing about 40% of the portfolio. That's down quite a bit from where we were a couple of years ago. We have a strong diversified international portfolio. We're expanding our markets, and we have strong compelling consumer demographics. So I think it's too early to comment on the current dynamic in the Middle East, we'll continue to monitor it and pivot. Our stores are open and continuing to function, and we're focused on our partners and our associates, of course. Operator: Our next question comes from the line of Jungwon Kim with TD Cowen. Jungwon Kim: Daniel, as you think about the collaboration and Amazon, how is your retention strategy is different, if not at all? And how do you think that will evolve over time? And in terms of the core offering as you continue to evaluate what's the right mix of body care, candles and soap and sanitizer going forward? Daniel Heaf: Jungwon, so let me expand a little bit on collab. So -- as I said in Q3, we're sort of thinking about collabs differently. We love collabs. We want to use them differently and more strategically. We want to use them to drive energy into the things that are permanent about this brand. So driving energy into our priority franchises, driving energy into our iconic fragrances or driving energy into a seasonal collection that we are known for. And the good news is we have more collabs this year than we did last year, and we are starting to use them strategically already. A really good example of this is live right now. So we launched our PEEPS collab, which has had really excellent response for consumers. And what it's doing is not standing alone as a collab as a separate thing that's used to drive a quarter, but it is actually set up to drive energy into our Easter collection, and we are starting to see good results from that already. And when it comes to Amazon, I do think, as I've said in the past, this is predominantly about meeting new and lapped consumers. We have a very powerful and very successful rewards program with over 40 million members and over 80% of our transactions in our own network flow through that. That is an excellent tool for continuing retention, but Amazon doesn't offer our rewards program. And so we are getting a benefit of having improved AUR on that, and that is what the consumer is getting as a balance for speed and convenience. So it really is about new and lapped consumers on Amazon. And then on the second part of your question with regards to the core offering, I would say, we're focused together on making sure that we are taking share. And to take share, we should be growing in line or better than the marketplace. That is the standard we expect of ourselves, and that is what the Consumer force -- First Formula will deliver. So I don't really think about what's the right balance for the business. I think where is the consumer demand, where is the growth in the marketplace and how are we going to claim our rightful share of that. Eva Boratto: And just to repeat what you said earlier, Daniel, right, particularly as you look at body care and soaps and sanitizers, these are nice growing markets out there that we can win in. Daniel Heaf: Absolutely. We do so from a position of strength. Operator: Our next question comes from the line of Mark Altschwager with Baird. Mark Altschwager: Starting with margin, guidance implies low teens EBIT margin this year. Do you view this as a durable base for the business? And then what is your philosophy on driving faster top line versus EBIT margin expansion in fiscal '26 and into fiscal '27? Eva Boratto: Sure, Mark. I'll start with that. We -- this business has been a very healthy margin business for a long time. We need to invest for growth responsibly, while we're funding the journey through our Fuel for Growth, but we must invest in this business to get the business back to growth. And when you do that, this business leverages nicely. And so as we think about margin expansion beyond '26, we'll come back to you as we continue to execute on the Fuel for Growth strategy. But I would think about it, there's leverage to be had as we drive growth in the business. Daniel Heaf: It is growth and margin, but growth must come first. Mark Altschwager: And then a follow-up on capital allocation. You're pausing buybacks, redeeming the nearly $300 million in debt in Q1. But if free cash flow tracks toward the $600 million guide, would you intend to remain out of the market for the full year? Or is there a path to resuming some opportunistic repurchases through 2026? Or how are you thinking about the longer-dated maturities on the debt side as you update your buyback plans? Eva Boratto: Sure. Thanks, Mark. Our priorities remain the same, investing in the business, returning cash to shareholders and maintaining a strong balance sheet. We are committed to our 2.5x gross leverage. We repurchased those bonds earlier in the process of doing so. It was earnings accretive. We were preserving the cash for those bonds. And of course, as we progress through the year, we'll maintain the flexibility to return cash to shareholders after funding our Consumer First Formula priorities. Operator: Our next question comes from the line of Sydney Wagner with Jefferies. Sydney Wagner: Just one more kind of on the pricing architecture. How are you thinking about the price taking with newness and kind of what your right to pricing is there? Is there any learnings you've had as you've rolled out some of the brand refreshed product? And then just as you work to shift brand perception toward being benefit-led, adding dermatologist-approved claims in store, do you feel the consumer is following you there? What's been the early feedback on those specific claims? Daniel Heaf: Sydney, yes. So with pricing, I think our strategy is very clear. We have relied too often in the past on deeper and more frequent discounts. As we go into 2027, we are expecting AUR improvements on our innovative products. So we're expecting to get paid for our innovation. And that product isn't just great innovative, disruptive product in and of itself. It will be wrapped in new energy and new brand identity. So I do believe that when you get it right, great product, great brand brought together in the marketplace, we can start to regain pricing power. So that is absolutely the strategy. And as Eva and I have both said, across the whole business, it's not our intention in this financial year to use deeper and more frequent discounts as a lever to growth. We know that is not in the best interest of the business long-term. So that's how we're thinking about pricing. It's not that the pricing or the tickets will be materially different on innovation. It's the fact that it will not be included in some of the more aggressive discounting that we may do. When it comes to benefit-led, it is very clear in our consumer insights for many years that this is a critical thing that we must crack for new and younger consumers to consider the brand. And it is really a multipart 365 strategy. We have rolled out new claims and new levels of ingredient transparency on our product. So you can see it today on our labeling and the presentation that we showed as part of this call gave a couple of highlights of that. It is now prominent and permanent in stores and our website just launched what we call the feel good formula, which is going a much more detailed look into our ingredients and our commitment to a more clean product. So it's early days. We're getting good consumer feedback, and we expect this to be a core part of our brand identity as we move through the year, are critical for us. Operator: Our final question this morning comes from the line of Krisztina Katai with Deutsche Bank. Krisztina Katai: So Daniel, with the emphasis on attracting new younger consumers, and I believe I heard you say a roughly tenfold increase in leveraging content creators. Can you maybe just talk about your expectations around new customer acquisition, just how you see changes in your consumer demographics by age, by income? And then just how are you tracking engagement rates on social media platforms that you expect to see as a direct result of these efforts in 2026? Daniel Heaf: Great question. So our expectations on new consumers is that we are expecting to see a trend break in the levels of new consumers that we are attracting to the brand that -- we're really, really focused on that. And it is -- we welcome all consumers to the brand, and that's what I love. We are a broad church when it comes to consumers. We have propositions like Disney Princesses, which clearly skews younger. And we have a very, very loyal consumer that we love that skews slightly older. And where we want to play, of course, is where the market is growing, which is in that 25- to 30-year-old female demographic. And that is where our innovation in the back half is truly targeted. And when it comes to brands, of course, we're tracking new-to-brand consumers. Of course, we have really good new metrics on brand health, and we're expecting improvements in that also. And when it comes to social media, there are many metrics that we track, but I would say the most important one is going to be number of posts from the influencers. We're really looking for those thousands of influencers that we recruit to be posting their content about our products and our brand in their voice because we know from having seen this playbook run with other competitors and those insurgent brands I talked about, that is the secret to success in that area. So thank you for your question. Okay. So thank you, everybody, for your question. When I look -- and when we work in retail, the holidays don't mean a break. With that in mind, I just want to take this last moment to extend a heartfelt thanks to our associates across stores, across distribution centers and our home office for their continued commitment, passion and determination. We are acting with urgency and clarity against the Consumer First formula, creating disruptive and innovative product, reigniting our brand, winning in the marketplace and operating with speed and efficiency, all to attract new and younger consumers. Our expectations for our business and our brand are high, and this work will take time, but we are confident that we have the platform, the plan and the team to win. Thank you very much, everybody. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Michael Preuss: Hello, everybody, and welcome to our Financial News Conference for the Full Year 2025 and the Outlook for 2026. Many thanks for joining us today. To begin, Bill Anderson will share his perspective on our performance and the path ahead of us. Heike Prinz will provide an update on the progress of our Dynamic Shared Ownership operating model; and Wolfgang Nickl will provide an overview of our financials in 2025 and the group outlook for 2026. We will then hear from Rodrigo Santos, Stefan Oelrich, and Julio Triana on the performance of our divisions and the plans going forward to execute their respective strategies. We also have a chance to briefly hear from our new Board member, Judith Hartmann, who joined the company on March 1. Now before starting, I would like to briefly draw your attention to the cautionary language included in our safe harbor statement. And with that, over to you, Bill. William Anderson: Thanks, Michael. Thank all of you for joining us today, and we're really happy to go through our 2025 results and provide an outlook for 2026. But before doing that, I want to share a short update on company leadership. As we announced in November, Judith Hartmann has joined the company and the Board of Management as of March 1, and she'll take over as CFO in June. But between now and then, she'll be busy getting to know the company and its stakeholders. But we wanted to give you the chance to hear from her today. So before getting into our results, I'm going to turn it over to Judith, who's joining from one of our pharma facilities here in Germany. Judith Hartmann: Thanks, Bill. And yes, I have started my discovery tour of Bayer today here in Buckautal, Germany. It's an impressive site, and I have already had some great conversations here this morning with our Pharma R&D team. I'm eager to learn much more about all of the businesses, of course, in the next few weeks ahead of me. So yes, this is only my third day, but I'm very pleased to have joined Team Bayer. Health and Nutrition are personal passions for me, and I am very excited to contribute to a company that truly makes a difference in people's lives. The mission, Health for All, Hunger for None, really resonates with me, and I can already see many great things happening at Bayer. Our novel operating model, Dynamic Shared Ownership, our investment in AI, both of these are very important levers to accelerate our business. And most importantly, I have already been impressed by our passionate and talented people. I'm looking forward to continuing my onboarding over the next months as I prepare to take over as CFO from Wolfgang in June. I will have the opportunity to meet many people: customers, stakeholders, employees, and I'm sure many of you over time. Until then, I'll turn it back over to you, Bill. William Anderson: Great. Thanks, Judith. Well, let's start with 2025. In July, we upgraded our currency-adjusted sales and earnings guidance for the year. Today, we're announcing that we delivered that guidance, landing comfortably within the improved corridor. Sales came in at EUR 45.5 billion, and we posted core earnings per share of EUR 4.91. And our free cash flow came in at EUR 2.1 billion. Here's a picture of our businesses. Crop Science progressed in the first year of its profitability improvement program, a rejuvenated picture of our Pharmaceuticals business emerged with launch medicines establishing themselves as growth drivers and others advancing through our pipeline to the market. Our Consumer Health business suffered from market softness in the United States and China, but maintained the bottom line. And across the firm, we're seeing improvements to the way we operate. Launches are moving with great speed. Resources are moving more fluidly. Our organization is considerably flatter and leaner, less managerial and more mission oriented. We have roughly half as many layers and have reduced management by 2/3 compared with when we kicked off this work. The 88,000 people of Bayer are doing more faster with less. All-in-all, we recognized progress on our comprehensive turnaround plan, but the journey is far from over. There's much more to do in each of our priorities, in each of our businesses. Our focus is on the important work ahead. One of those key priorities is significantly containing litigation. Two weeks ago, Monsanto and plaintiffs lawyers in the U.S. announced a nationwide class settlement to resolve eligible, current and future cases in the glyphosate litigation. Today, I want to reiterate a few key points. First, the class settlement is moving through approvals. Just as we said 2 weeks ago, we're confident in the merits of the agreement. We await the judge's ruling and will be ready for any scenario. Second, Monsanto has filed its opening briefs with the U.S. Supreme Court, and the case has received strong support in the form of amicus briefs from the U.S. government, Attorneys General in 15 states the U.S. Chamber of Commerce and many others. We will continue preparing our case in anticipation of a ruling likely in the second half of June. We're particularly grateful for the backing we've gotten from farmer groups across the United States who know better than anyone how important glyphosate is for their work. In fact, the White House recently recognized how essential glyphosate is for U.S. Food Security with an executive order. We share that view, and we're fully prepared to comply. Overall, our multipronged strategy proceeds at pace. We know we have some important milestones ahead of us. We'll stay focused on taking the right steps for the company and remaining prepared for all outcomes. Beyond that, this issue has garnered a lot of attention lately. And in the coming months, we expect a rigorous debate about American agriculture and what's needed to create a food system that's robust, sustainable, healthy and regulated by sound science. We appreciate that people come to this issue with a range of opinions, and we welcome that conversation. Most importantly, we've got to be clear on the facts. Fact one, glyphosate safety is resoundingly confirmed by regulators, more than 50 countries, including the U.S., Canada, countries across Europe, all say so. These are thorough reviews, not designed at getting clicks or going viral, but carefully assessing risk and reaching scientific assessments. Fact two, Glyphosate is essential for agriculture and food systems. It keeps carbon in the soil and protects harvest from being wiped out by weeds. It keeps a trip to the grocery store affordable at a time when food prices are a topic of concern. American farmers are a bedrock of the nation's economy and a force for food security around the world. We want to keep it that way. Fact three, litigation in the U.S. is big business. Litigation costs amount to more than $600 billion a year. That's taking more than $4,000 out of the pockets of every American household every year. And it's growing, thanks to backing by private equity and foreign investors who enjoy tax-free returns. Last week, the Washington Post called on Congress to pass tort reform and specifically cited the glyphosate litigation as an example of how this system has gone wrong. The next time the narrative is framed as sticking it to the big corporation, people should question who is actually the big corporation here and who's ultimately bearing the cost. For years now, we've been on the record on this issue and many others surrounding the glyphosate litigation. We've made our case to politicians across political lines and the general public. We'll continue to be clear and transparent about our interests. We'll engage with people of different opinions, and we'll hope to find common ground. Most importantly, when it comes to questions this big, we will always start with what's true. Beyond litigation, we have a full agenda for 2026. We have ambitions to help many more patients with Nubeqa and Kerendia. 2026 will be the first full year of sales for both Beyonttra and Lynkuet, and we want to launch Asundexian as soon as possible. Our Crop Science business set the foundation in 2025, establishing its 5-year framework. Execution is underway and will continue in 2026 with the goal of improving the top and bottom line in 2026, all while preparing important launch plans scheduled for '27 and beyond. Consumer Health plans to advance its Road to Billion strategy, offsetting an uncertain market by making the right investment decisions in categories where we have the most to win. And in a year where we're bearing the brunt of the litigation-related impact, we're exercising vigilant discipline in how we manage our resources. Cash conversion is of the utmost importance. Deleveraging remains a big focus area and Wolfgang will tell you more about our financing plans for this year. And we're laser-focused on delivering the EUR 2 billion in organizational savings through our operating model. In terms of our outlook, we expect a solid performance in 2026, with product declines in Pharma and Crop Science due to loss of exclusivity and regulatory pressure in the EU, offset by continued strong performance of our launch products in our annual portfolio refresh. In addition, we want to ensure continued investment in our pipeline and launch products in 2026 to set ourselves up for growth in 2027 and beyond. Before accounting for FX changes, we see our core earnings per share landing roughly in line with last year. And as we shared 2 weeks ago, we're expecting a negative free cash flow this year due to the litigation-related payouts. So that outlook is emblematic of the company's current strategic position, strong signs of progress, but still working on a comprehensive turnaround. We've made major gains across the company, but that work is not yet complete. We focused on delivering what we've committed for 2026 and making the right long-term decisions to set Bayer up for sustained profitable growth. We have a clear picture of what needs to be done in every area. We're dialed in on the tasks at hand, and we're ready to deliver. Wolfgang will walk you through the numbers. But before that, Heike is going to tell you more about our progress in implementing our new operating model. So over to you, Heike. Heike Prinz: Thank you very much, Bill. And ladies and gentlemen, let me give you a brief overview of where we stand with the transition of Bayer to our new operating model, Dynamic Shared Ownership or DSO for short. Today, 2.5 years after its announcement, DSO is the operating model of the Bayer Group in all countries, in all divisions, in all enabling functions. We are now organized as an agile network of teams. And with redesigned HR processes, we are placing more and more decisions in the hands of our employees. The reduction in bureaucracy is also reflected in our costs, which we were able to reduce by a further EUR 700 million last year. By the end of this year, the savings achieved through DSO will total EUR 2 billion, as announced previously. But DSO has not only reduced cost. Bayer has become noticeably leaner, more flexible and more effective overall. An outstanding example of this are the recent product launches by our Pharmaceuticals division, some of which took place in record time. I myself worked in the pharma business for a long time, and I know what an enormous achievement this is and how important it is to get a new product to market and to patients quickly. With DSO, innovations are created more quickly, and they reach our customers in the shortest possible time, directly benefiting patients, farmers and consumers. And with that, I'm handing it over to you Wolfgang. Wolfgang Nickl: Thank you very much, Heike, and also a warm welcome from my side. Let's together, take a closer look at the group financials for the full year 2025. In the pivotal year, we fully achieved our raised financial guidance for all group KPIs. Group net sales grew by 1% year-over-year in currency and portfolio adjusted terms. All divisions delivered their adjusted guidance. Let me briefly highlight the main business drivers by division. For Crop Science, the anticipated regulatory headwinds from the dicamba label vacatur and the Movento expiration were offset by strong corn seeds and traits growth. That was driven by several factors. First, we had historically high corn acreage in North America; strong performance of our corn seeds and traits globally; and finally, a portion of incremental licensing revenue from the resolutions with Corteva in Q4. Let me pause here for a few additional comments on the Corteva resolutions. First, the resolutions represent licensing fees rightfully owed to us for the usage of our proprietary technology across multiple periods, including the years '25 and '26. Licensing fees are an important element of our business model and thus are accounted for as operating revenue. Second, based on content and timing of the resolutions about EUR 300 million, supported our corn performance in Q4 '25, and as you may have read in the annual report, about EUR 450 million will support our soy performance in Q1 '26, which is reflected in our outlook. We always had a high level of confidence that we would prevail, but these numbers were higher than what we had modeled before. Third, given the positive impact, we decided to advance certain strategic measures like product portfolio streamlining together with an impact on incentives. This is largely offsetting the positive effect on licensing income in '25. It is important to note that the underlying operational targets would have been achieved without these effects as well. Our Pharma business fully delivered on its raised guidance. Nubeqa and Kerendia continued their significant growth momentum and finished the year ahead of our raised expectations. With that, the launch assets performance more than offset the expected decline in Xarelto as well as headwinds in Eylea. Our Consumer Health division delivered a resilient performance in a challenging market environment with net sales stable year-over-year and in line with our revised guidance. Nutritionals were particularly affected by difficult market conditions in China and the U.S., while softer seasonality in cough, cold and allergy led to a decline in this category. As previously indicated, our group top line was impacted by material FX headwinds of around EUR 1.7 billion, largely driven by the depreciation of the U.S. dollar, the Brazilian real and hyperinflation currencies. Let's now move to the bottom line. Group EBITDA before special items came at EUR 9.7 billion compared to the prior year negative foreign exchange effects of around EUR 500 million weighed on profitability. We also saw higher incentive provisions and growth investments compared to the prior year, while top line growth and cost savings helped to compensate. An important year for our transformation, all our divisions and the enabling functions delivered on their profitability commitments, balancing necessary growth investments with disciplined resource allocation and cost savings. Core earnings per share came in at EUR 4.91. The decline versus the prior year was driven by the expected lower EBITDA before special items and includes FX headwinds of about EUR 0.30. Our core financial results came in better than expected. The core financial result improved markedly over the prior year due to lower interest expenses and positive changes in equity results. Reported earnings per share were at minus EUR 3.68. Main drivers for the delta next to the regular amortization of intangibles, other significant litigation-related provisions and our liabilities classified as special items. Litigation-related special items amounted to EUR 7.5 billion in total, including the increase that we announced 2 weeks ago. Let me also clarify that our litigation-related provisions and liabilities are based on a comprehensive assessment. The provision liabilities of EUR 11.8 billion contain all litigation-related costs we know today and can reliably forecast. Also covering past glyphosate verdicts either settled or pending in appeals. Our free cash flow came in at the upper end of our guidance range at EUR 2.1 billion. The anticipated year-over-year decrease is mainly driven by the expected higher incentive and litigation-related payouts. Net financial debt was reduced below EUR 30 billion by the end of '25. And that was due to the cash flow contribution and about EUR 1.4 billion in foreign exchange tailwinds driven by a weaker U.S. dollar. Let's now move to the outlook for 2026. Let me start by explaining the background for a methodology change that we will implement for our core earnings per share KPI as of this year. What we want to achieve is to provide enhanced transparency around our operational performance, reflecting necessary cost of doing business and moving core EPS closer to the reported EPS. Previously, our core EPS definition only included the core depreciation linked to usual depreciation of property, plant and equipment. All amortization of intangibles were excluded. As of this year, we will also factor in the amortization of certain intangible assets, in particular, software. The change in methodology leads to an approximately EUR 0.35 step-down in '25. Adjusting for the new methodology, we come from the EUR 4.91 that I just mentioned to EUR 4.57 for core EPS in 2025. For '26, we anticipate stable core earnings per share at constant currencies on a like-for-like basis. All businesses plan to further progress in their transformation, continue to execute the strategic agenda and set the basis for future growth. This includes continued savings as well as investments in innovation and launches. Overall, expected higher earnings contributions from Crop Science and Consumer Health will be offset by anticipated lower earnings in Pharma, in line with the divisional strategies. On the corporate level, our outlook assumes higher long-term incentive provisions due to the increased share price compared to the end of '25. This also results in higher reconciliation costs. We also expect higher interest expenses impacting our core financial result. This is driven by an anticipated increase in net financial debt due to the substantial litigation-related payout and the resulting negative free cash flow for 2026. Finally, on geopolitics. Let me start by addressing the recently started war in the Middle East. Our thoughts are with the people across the region. Our focus is on ensuring the safety of our people and the continuity of our business. At this point in time, we do not see a material impact on our business, and we will continue to closely monitor the situation. We are in close contact with our people on the ground and ensure continued supply of our essential products. Regarding tariffs and FX, we are prepared to deal with a new dimension of volatility across businesses and regions. In '25, we successfully managed a dynamic trade environment and limited the impact of additional tariffs. This was achieved through a combination of mitigating measures by our cross-functional teams as well as tariff exemptions based on the relevance of our products. Our new way of working provided extremely -- was provided to be extremely helpful, handling the situation, and we will continue to build on that strength going forward. For '26, our outlook includes our latest assessment of estimated direct and indirect geopolitical impacts. As mentioned previously, we expect foreign exchange rate fluctuations to remain a major swing factor based on year-on-year spot rates, we anticipate continued foreign exchange headwinds of about EUR 0.30 to our core earnings per share, as shown on the right side of the chart. Managing our FX exposure and geopolitical context has been a major priority for us in '25 and will continue to be a priority for us in '26. Overall, we will continue to monitor the situation very closely. This includes the future of the U.S. EU trade relations following the recent court ruling on our tariffs. Let me summarize with the outlook for the group KPIs for '26. We anticipate net sales of EUR 45 billion to EUR 47 billion at constant currencies, representing a gross range of 0% to 3% in currency and portfolio adjusted terms. For EBITDA before special items, we target between EUR 9.6 billion and EUR 10.1 billion in '26 at constant currencies, representing a minus 1% to plus 4% development versus the prior year. As mentioned, core earnings per share are expected to come in between EUR 4.30 and EUR 4.80 at constant currencies. Now free cash flow outlook of minus EUR 1.5 million to minus EUR 2.5 billion at constant currencies, we account for the expected significant litigation-related payout of around EUR 5 billion as we also announced 2 weeks ago. With the negative cash flow, we expect net financial debt to increase to between EUR 32 million and EUR 33 billion at constant currencies. As also announced 2 weeks ago, ultimate financing for the litigation resolutions is planned to rely on senior bonds and instruments receiving equity credit by the rating agencies and not on the AGM authorized capital increase. While finalizing these measures, please note that the current net financial debt outlook for now is conservatively reflecting straight debt financing. And with that, I'll hand it over to you, Rodrigo. Rodrigo Santos: Thank you, Wolfgang. In Crop Science, we have built a more agile organization through our DSO and strengthening our operational discipline through our 5-year framework. That discipline is already delivering tangible impacts. It shows up in three areas of our core business and the differentiated growth we see through the end of the decade. Number one, in the resilient performance we delivered in 2025. Number two, in the clear step forward, we expect in 2026. And number three, in the progress already made against our 5-year framework, laying the foundation for a stronger performance through the midterm. So before turning to 2026 specifically, let me anchor us in where we stand in the 5-year framework. Because this is the lens through which we manage the business and the road map that guides every decision we make. We are on track to deliver across the triangle, sales growth, margin and cash. We strengthened the operational foundation of the business by simplifying the portfolio and sharpening our footprint, we are firmly on course to deliver the more than EUR 1 billion margin improvement. Actions included divesting and outsourcing multiple activity ingredients exiting nearly 200 crop protection products and streamlining our global site footprint from crop protection to seed production. We are also exiting lower-return vegetable crops and the non-core seed treatment equipment business. As we advance our efforts, portfolio is streamlining and go-to-market models will largely complete by year-end. Innovation remains our engine for future growth. Protecting our proprietary traits and R&D capability is critical. Simply put it, the recent resolution with Corteva is licensing revenue for the use of our technology. It does not changes our growth outlook or license expectation. It does ensure fair compensation for our technologies today and well into the future. And it safeguards the value of our innovation engine, which advanced six projects and introduced 470 new hybrids and varieties last year. Our industry-leading pipeline position us for differentiated durable growth. Our first blockbuster Plenexos is now launched, and we will expand into Brazil this year. The icafolin submissions are complete, and the new gold Camelina is now in the market for biofuels. And the nine additional blockbusters are on track for upcoming introductions. That includes the Preceon Smart Corn introduced with biotech approach and also the Vyconic in '27 and '28. As followed closely by our fifth-generation herbicide-tolerant soybean trait, position us for double-digit share growth and put us firmly on our path to reclaim the #1 soybean trait position in North America. This is the strength of our pipeline. We have unprecedented number of market-shaping innovations on the horizon with a clear pathway for growth. So 2026 represent another step forward in delivering our 5-year framework. We expect Ag market fundamentals to remain challenging and project below average market growth. However, our resilient base and focused execution give us confidence. While we benefit from the license income, we will continue pushing hard on our 5-year framework measure. Overall, 2026 is another year of diligent execution of our strategic plan setting us for the future. Our core business growth is expected at 1% to 4% currency and portfolio adjusted. An important contributor for this growth is the recent approval of the Stryax dicamba formulation. This marks the first step in reestablishing the momentum of our North America soybean business, giving farmers the added flexibility they've been waiting for. And for 2026, we expect Stryax herbicide growth as well as pricing gains in soy and cotton. Still, we do expect -- we do not expect full recovery yet preparing for the Vyconic introduction in 2027. For corn, we expect low single-digit growth globally based on anticipated price and market share increases despite the acreage reduction in the U.S. In core Crop Protection, we anticipate softer growth on higher volumes driven by new products, offset continued pricing pressure and the EU regulatory impact, as previously expected. For glyphosate, tariffs recently have been reduced on China imports in the U.S. and the generic PRC pricing has been declining below the historical median. With that, we currently expect glyphosate sales to decrease by 2% to 6% comparing to the prior year. We will continue to monitor the situation and adjust pricing as needed to the separately managed commodity business. As we look at calendarization, the noted soy licensing revenue will benefit the first quarter. However, lower tariffs and generic price declines are adversely affecting glyphosate sales. In addition, we expect a soft start to the crop protection season on top of the continued regulatory effects in Europe. Our growth drivers, such as the Stryax sales will only emerge later in the season. On the bottom line, within our margin profile, we expect EBITDA margin before special items of 20% to 22% at constant currency inclusive of the dilutive glyphosate margins. This reflects continued cost discipline as well as pricing and mix benefits from portfolio streamlining in line with our 5-year framework. For example, in soy, we are focused on pricing to value and improved utilization rates over top line growth. We will monitor currency closely as sales seasonally in the soft currency markets like Brazil can create volatility in both top and bottom line results. Taken together, these factors underpin a realistic execution-focused 2026 outlook and underscore the momentum we are building for the years ahead. Our sharpener portfolio, leaner footprint and increasingly resilient earnings model gives us a strong confidence in delivering our midterm targets and navigating x cycles with a greater consistency. With that, over to you, Stefan. Stefan Oelrich: Thank you, Rodrigo. In the Pharmaceuticals division, we continue to make really great progress on our strategic agenda. We have now entered the last year of what we are calling our resilience phase. We're well on track in renewing our top line and our strategy of balancing expected declines for our mature products with growth from new products, which is well working out. I will shortly provide more details on our expectations for 2026. However, I want to also highlight that we're well set for our next wave of growth into the next decade. This is driven by significant sustained growth momentum of Nubeqa and Kerendia, a very successful launch of Beyonttra, the first launch of Lynkuet in the U.S. as well as very positive data presented for Asundexian only a few weeks ago. We've also demonstrated great successes in our efforts to grow our pipeline value and nourishing our foundation for future growth. Driven by our new innovation model, we have progressed 16 clinical programs across the development phases and achieved approval for five new key indications or products in 2025. I already mentioned Asundexian, but I do want to reiterate the genuine excitement we witnessed among attending physicians at ISC in New Orleans just a few weeks ago. Not many were expecting such groundbreaking results. With this potential new treatment option in secondary stroke prevention, we may have an opportunity to truly rewrite the future for stroke survivors and their families. In addition, we're continuing to leverage our new operating model for increased performance. And we have consequently been able to sustain our margin in the mid-20s range. All of this despite facing continued loss of exclusivity and pricing pressures, while we continue to invest in our launches and also in our pipeline. Moving into 2026, we expect an unbroken growth momentum for Nubeqa and Kerendia, amounting to an expected growth of approximately 50% at constant currencies. This will be driven by continued market penetration and indication expansions such as the upcoming EU approval for Kerendia in heart failure, following the recent positive CHMP opinion. This growth momentum will be further supported by the continued launch dynamics of Beyonttra and also Lynkuet. While we were able to defend Xarelto well in 2025 overall, we experienced the expected increased generic pressure towards the year-end. We, therefore, also expect a slight acceleration of relative declines in 2026 in comparison to last year, being in a range of minus 35% to minus 40%. Given the accelerated pricing pressures we have seen for Eylea with the entry of 2 milligrams biosimilars since Q3 2025, which we may have slightly underestimated, we will focus our activities to build on the strong clinical profile and unparalleled label of Eylea 8 milligrams. We plan to significantly expand Eylea 8 milligrams contribution to the Eylea franchise to approximately 70% and sustain our market-leading position in volume shares. Despite these efforts, we will likely see declines for Eylea franchise in the range of approximately 20% to 25% at constant currencies in 2026, with the pricing pressures somewhat leveling out thereafter. Since 2 milligrams biosimilars only entered the market fairly recently, we will continue to closely observe and evaluate the evolving situation and will provide updates as we gain more clarity as per our usual reporting practice. In line with the stringent shift of resources to focus our activities on our current and future growth drivers as well as our continued pricing pressures and declines in our mature product portfolio, we expect a modest contraction of our base business in 2026. In sum, we're expecting growth of 0% to plus 3% at constant currencies for this last year of our resilience phase before returning to mid-single-digit growth as of 2027. And we're hovering over a prior year during which the pricing pressures increased over the quarters and Nubeqa and Kerendia will continue to grow as this year progresses. We expect the top line for the second half of 2026 to come in stronger than in the first half. Looking at our 2026 margin, we would expect that the impact of a changed product mix and increased growth investments throughout the year will only be partly balanced by cost savings from efficiency measures. We, therefore, expect a 2026 EBITDA margin before special items of 23% to 25% at constant currencies as we keep working to expand our margin as of '28 towards 30% by 2030. And with that, over to you, Julio. Julio Triana: Thank you, Stefan. As we review our performance and set our priorities, I want to begin with the progress we're making on our Road to Billion strategy. Last year's market environment was challenging for two reasons. First, market dynamics in the U.S. and China; and second, the continuation of seasonal softness in cough, cold and allergy. Despite these obstacles, we have stayed committed to our strategic approach focusing on areas where we can create the most value and actively respond to evolving market conditions. By focusing our efforts on the highest potential categories, we continue to advance our goal of reaching billions of consumers and creating sustainable value for our business. Across markets, consumers are more deliberate in their spending. They compare, they seek more, and they have more ways to shop. E-commerce continues to scale quickly, while traditional retail consolidates. Retailers and pharmacies, particularly in the U.S. and China have reduced inventory levels to manage working capital more tightly. Despite this backdrop, the fundamentals of our business remain attractive. A growing middle class, rising self-care, adoption and constrained health care systems continue to support durable demand for our categories. In the near term, we expect continued volatility in China and the United States with performance likely to contract. Over the long term, we expect both markets to return to a sustainable healthy growth pattern. While allergy, cough and cold have been soft for 2 years, the fundamentals underlying our categories remain very solid. As one of the top 3 global players in fast-moving consumer health, we're well positioned to capture this growth. We hold leadership positions in categories such as dermatology, digestive health and cardio. Our balanced portfolio across seven treatment and prevention categories pairs global mega brands with very strong local heroes. This mix gives us resilience in the short term and significant room for expansion over the long term. A Road to Billion strategy is designed to convert this foundation into sustainable value creation. At its core, the strategy aims to increase household penetration by reaching billions of consumers through both online and offline channels as well as through our strong presence in pharmacy and health care professional settings. In the medium term, this support consistent sell-out growth and more predictable sell-in. Looking ahead to 2026, we expect continued macro geopolitical volatility. Given our geographic footprint and the segments where we compete, we expect our relevant market to grow by about 2% to 3%. This is about 100 basis points slower than the total Consumer Health market. Category dynamics, geographic mix and elevated volatility underpin our net sales growth outlook of 0% to 4% in currency and portfolio adjusted terms. Building on our 2025 base, we aim for continued value recovery. In the United States and China, our two biggest markets will play a crucial role in our overall performance, slowing growth and market volatility there could heavily influence our results. Consumer confidence remains soft. If consumer spending picks up and seasonal categories see higher incidents, we might achieve the higher end of our growth forecast. If not, growth could be toward the lower end. Given the volatility and its impact on our top line, our EBITDA margin outlook before special items for 2026 is 22% to 24% on a constant currency basis. Savings from our new operating model and active cost management are expected to offset annual cost increases. We continue to reinvest portions of these efficiencies to strengthen brand equity and gain market share. We will continue to accelerate investment in e-commerce and AI across brand building and activation, customer engagement and product supply. Prioritizing self-care and empowering people to take control of their health has never been more important. Through our Road to Billion strategy, focused on building trusted brands we're uniquely positioned to meet needs of consumers, creating lasting impact and long-term value. And with that, over to you, Michael, for the Q&A. Michael Preuss: Thank you very much, Julio, and thank you to all the Board members for the presentations. And let's now start the Q&A session. [Operator Instructions] So we have the first question coming from Annette Becker from Borsen-Zeitung followed by Antje Honing from Rheinische Post. So first question, Annette, over to you. Annette Becker: I hope you can hear me. Michael Preuss: Yes, we can hear you. Annette Becker: Okay. I have two questions. First, I'd like to know why your Q4 results are in operating version, so extremely weak? The EBITDA reduced to 16%. And then the second one, what does the negative free cash flow for this year mean for the dividend you're paying out next year because your shareholders have now 3 years of minimum dividend. And I think that's not so good for time lasting. William Anderson: Yes. Let me comment on the second one first, which is that the dividend decision will be taken at a later date when we have results of the year. But -- so we'll be making a recommendation regarding that in due time, but we don't have any comment on that right now. I'll turn it over to Wolfgang for a little more perspective on the Q4 results. You have to remember that because a large part of our business is in agriculture and agriculture is seasonal, that the EBITDA margins go up and down accordingly. But maybe Wolfgang, you could provide a little more color. Wolfgang Nickl: I think you're absolutely right. I mean, as a matter of fact, we also don't look at quarterly results too much. We were really focused on the annual results. And as we said, we fully achieved everything on every KPI. And there was nothing extraordinary in Q4 worth mentioning. William Anderson: Yes. I think we have to say we increased our results -- sorry, we increased our expectations in August of 2025. And we fully delivered on those increased expectations. So I think we feel quite good about our Q4 results. Just some historical perspective, if you go back a year to what the expectations in terms of profit for Bayer were 1 year ago, we over-delivered that by about 9%. So I don't think we would characterize it at all as weak, but rather strong. Michael Preuss: Okay. So the next question comes from Antje Honing, Rheinische Post, followed then by Jonas Jansen from Frankfurt Allgemeine Zeitung. Antje, you are next. Antje Honing: I have two questions. One to Heike Prinz. How many jobs have been cut by DSO so far? And when will the cuts be completed? And how many jobs will then we have in totally? And to Bill Anderson, Bayer will sometimes have to repay the debts incurred in settling the wave of lawsuits. Will this lead to a cost-cutting program efficiency program and further job cuts? Heike Prinz: Yes. Thank you, Antje, for your questions. As I shared with you earlier today, DSO, our new operating model has been implemented in all parts of our organization. And I think right now, really the focus is on leveraging this operating model to drive performance in our businesses. Now you will see in our publication that we are at 88,000 employees across the world. But we've also shared with you previously that DSO is not about having a head count target or a job cut target. So really, the focus, as you've heard from also the divisional heads is on driving performance in our businesses. William Anderson: Yes. And Antje, our big focus is our mission. You see it here behind us, but this is what we and the 88,000 people of Bayer come to work for every day. And we're really committed to do that in the best way possible. And we are generating a lot of cash. Every year, we're generating cash from our operations, and we plan to continue to do that by getting more productive. But whether that productivity is going to be mostly driven by revenue growth, or whether there's going to be additional cost savings, we've announced cost savings that we plan to achieve by 2029 in Crop Science. We already announced that. But I think we've got a team that is really focused on driving this mission forward. And we've got exciting opportunities in Pharma, in Crop Science, in Consumer Health. And I think we will have no problem repaying our debt. I think our main question is how high can we go, and we're determined to go really far, really fast. And we've got an operating model in place that allows us to do that. And if you look across this company, whether it's in Consumer Health, where we're launching products now in well under a year that used to be 2 to 3 years of a life cycle to launch. We've got that under 1 year. If you look in Pharma at the progress we've made in the pipeline, but not only the progress in the pipeline, but how we're doing on launching those products, on bringing those to patients around the world. We've accelerated that dramatically by putting the power in the hands of our people. And in Crop Science, the work is really amazing what's happening throughout our world in product supply, in R&D just amazing stuff in terms of our people, having the power to make gains. So you hear about AI and productivity gains, and you hear about job losses. What we're looking to do with AI is put it right into the hands of every Bayer person to extend their impact to make them more effective every day for the mission. So I think we see an opportunity to dramatically increase productivity. But we want to do that a lot through growth. Michael Preuss: Right. The next question comes from Jonas Jansen, Frankfurter Allgemeine Zeitung, followed then by Sonja Wind from Bloomberg. Jonas, please go ahead. Jonas Jansen: Hello. Good morning, and thank you for taking the time. In the outlook, you have a China tariff effect on glyphosate sales expectation. Can you maybe explain this a little bit further because I thought there's kind of a Buy American movement right now in the U.S.? Or is that still a price topic. And then regarding to the White House, glyphosate letter, could you maybe explain what that could mean looking in the future with the plans you have there for the phosphate? And do you think that the latest efforts you had surrounding glyphosate and regulation and litigation, that will have an effect on the Supreme Court or is that not directly related at all? Thank you. William Anderson: Yes. Thanks, Jonas. I'm just going to try to answer these both really quickly. So in terms of the tariff effect on glyphosate, imports into the U.S. So last year, the rates of tariffs were generally 25% to 35% even, I think, for brief periods a bit higher. As a result of the IEEPA ruling from the Supreme Court recently, that rate has dropped to 3%. So it basically has a corresponding drop in the price of generic glyphosate in the U.S. And so that results in price or volume losses for us, and we just have to deal with it. So we're dealing with that. I would say that tariff rate remains kind of uncertain for the future, but at the moment, it's about 3%. So we have to deal with that by offsetting it with gains elsewhere, and we plan to do that. In terms of the letter, the White House letter on glyphosate production, yes, this has nothing to do with the Supreme Court and it actually has nothing to do with the settlement either. This is basically the U.S. government recognizing the vital importance of glyphosate to the American farming system. Frankly, the vital -- glyphosate is vital to farming systems outside of the U.S. as well, but the administration is taking a position and not wanting to be dependent on foreign sources, for something that's essential for food security and national security. So we've received the letter. We intend to comply with it, and there's not much else to say. So thanks for the questions. Michael Preuss: The next question comes from Sonja Wind, Bloomberg, followed then by Jens Tonnesmann, Die Zeit. Sonja, over to you. Sonja Wind: Bill, you said that you're ready for any scenario regarding the judge's decision for the settlement proposal. What is your plan in case it gets denied? And do you have a rough time line of when you expect the decision? And then also coming back to a broader question, which you said in February that you will look at the company's structure in the future. Will that be in 2026? Do you expect after the U.S. Supreme Court's decision? Or is that even further in the future? William Anderson: Yes. Thanks, Sonja. So we have plans for every scenario. I don't think we're going to speculate on a denial scenario, but I would say the time line is days. So you won't have to wait long for an answer there. In terms of the company structure question, basically, what it comes down to, and you've heard that from our division heads and from Heike and Wolfgang. I mean, we just -- we have so much going on. We have five big issues we're tackling. We've made remarkable progress in 2025 and 2024, we got more to do. So we're not going to be distracted by talking about structure right now. But that said, we are -- we remain very much committed to tackling that question in due time, but I couldn't give you a particular timing. So, thanks for the question, Sonja. Michael Preuss: Next question comes from Jens Tonnesmann, Die Zeit, followed then by Bert Frondhoff from Handelsblatt. Jens, you are next. Jens Tonnesmann: Yes, you can hear me. Well, I've got two questions that may sound like beginners questions to you. Bill, you were emphasizing how much support you feel in the U.S. regarding glyphosate. And the glyphosate has been proven safe by regulators of more than 50 countries, including the U.S., of course. So, can you please once more explain why then did you even agree to the recent settlement with the plaintiffs that are putting quite a strain on Bayer financially? And doesn't that contradict your commitment to focusing on the facts and your criticism of the litigation business? And second, would it be possible for Bayer to withdraw from the settlement partly or fully if the Supreme Court rules in Bayer's favor in June. William Anderson: Well, Jens, I think those are very reasonable questions. And I wouldn't categorize them as beginner's questions. But I think we can all recognize that the litigation situation in the U.S. is very complex. This is not a true phenomenon. I remember as a boy sitting at the dinner table here in a conversation about the tort system and some of the strange results that it could produce. So this is not a new thing. But the fundamental issue that's before the Supreme Court is whether the scientific endeavors of hundreds of scientists can be basically overturned by a jury of non-experts based on a very small set of facts as opposed to an exhaustive decades long set of facts. That's kind of what's at play. Nevertheless, the system is quite challenging for companies, and we believe that this settlement offer -- this settlement agreement is the right approach at the right time, because the company needs to move on. This has been a huge drag on Bayer for almost a decade, and that needs to stop because we have a mission that's more important than a court flight. And so we got to get on with it. But yes, the Supreme Court case and the settlement are distinct. They accomplish different things. The Supreme Court case is asking of the fundamental question about whether the EPA has the authority to govern pesticide labels and questions of pesticide safety or whether that gets played out in hundreds or thousands of courtrooms. So that's really important, not just for glyphosate or for our past verdicts, but it's also very important for the future of new and innovative tools like new crop protection products that we want to launch that are important for farmers as they continue to struggle to basically put affordable food on the table. So that's very important for that. The settlement is something that's important for Bayer in terms of moving on. So thanks for your questions, Jens. Michael Preuss: Okay. Next line is Bert Frondhoff from Handelsblatt, followed by Elisabeth Dostert from Suddeutsche Zeitung. Bert, over to you. Bert Frondhoff: I hope you can hear me. No, you can't hear me? Michael Preuss: Yes, we can. You can just go ahead. Bert Frondhoff: Okay. Good. Yes, Bill, can you give us another assessment on how Bayer views the conflict in the Middle East. I guess you source many intermediate products from Asia and the pharmaceutical business, the business via hubs in the Middle East. Are you concerned about problems in the supply chain? William Anderson: Yes. Thanks, Bert. I mean, first off, as Wolfgang mentioned, and I think we all share this. Our first concern is for the safety of our employees in the Middle East region and for all the innocents there. And we hope and pray a rapid cessation and a lasting peace. And there needs to be a solution for a lasting peace there. The short answer though, regarding your question, we're not particularly concerned about our supply chain. We're not heavily dependent on Middle Eastern hubs for our supply chain. So we don't anticipate any interruptions in supply. Michael Preuss: Okay. And next question then comes from Elisabeth Dostert, Suddeutsche Zeitung, followed by Isabella Bufacchi from Il Sole. Elisabeth, over to you. Elisabeth Dostert: Bill, what was your trip with Friedrich Merz to China and which role does China play for Bayer? Is it more for your Pharmaceuticals division or do you sell Crop Science products like glyphosate in China? William Anderson: Yes. Thanks, Elizabeth. Yes, it was a very eye-opening trip. Very interesting to see continued remarkable progress in China in building out infrastructure in the strength of various innovative industries. And I think, yes, it was very useful dialogue. And we have about 7,000 people in China working in Pharmaceuticals, Crop Science and Consumer Health. Our biggest division in China is Pharmaceuticals. And we have production there. Well, we have production for all three divisions in China, but it's an important market. It's an important innovative hub. And we have very good relations with our Chinese partners. And this is, again, we have a mission of Health for All, Hunger for None. That takes us pretty much to every corner of the globe. We see, yes, the need to feed the world in a way that is environmentally sustainable as something that's everybody's business. It's sort of every citizen of the world has a stake in that, likewise with medicines and every day, human health products that we have from our Consumer Health division. So we've got -- I think we've been in China for about 150 years. And we are very pleased with our, again, our great colleagues in China and the importance of continuing to drive innovation and access to these important, yes, tools for producing food and medicines. Michael Preuss: Okay. From China to Italy, we have next in line, Isabella Bufacchi from Il Sole, then followed by Andrew Noel from Chemical ESG. Isabella you're next. Isabella Bufacchi: Good morning. Thank you for the opportunity. I have two questions. One is on your net financial debt. It went below EUR 30 billion in 2025, and it was down a lot, 8.5%, but it's going up again in 2026. Now I was looking at your ratings. You have three ratings from S&P's, Moody's and Fitch, with a negative outlook. And the level that you are a downgrade would be quite painful because you would get to the last rate before speculative grade. So I've seen that you want to avoid that. I mean, you're looking for an upgrade. But I also saw that you were a solid A rating before the Monsanto. So I was wondering whether do you think that a good solution, final on litigation would have an impact on your ratings with the possibility of going back to A? And my second question is on Europe. As Europe as in a way it's own momentum, there are flows of capital coming back to Europe. Here in Europe, the growth is weak. But do you see any potential? Are you looking at Europe to increase your investments here? Wolfgang Nickl: Yes. Thank you very much for your questions, Isabella. I'll take the first one on the net financial that -- first of all, thanks for recognizing we came below EUR 30 billion. That was significantly better than the Street expectation. It was really driven by free cash flow performance, and we had a bit of a translation effect there as well. I think you have seen that we will be up slightly because we have a negative free cash flow expected for this current year, and that's largely driven by the EUR 5 billion expected payouts for settlements and defense costs and so on. So we could be higher up. But I also said in the script that will depend on the final takeout financing. This is all simulated based on straight debt. And like we said before, we will likely use instruments that receive at least partial equity rating by the rating agencies. That brings me to the rating agencies. You should expect that we have a very, very solid dialogue with the rating agencies on an ongoing basis. That's very valuable for us. And we keep them abreast of all the developments in particular as it relates to the financing as well. And of course, like every other stakeholder, they look at the developments on the litigation front as well. And as Bill said, hopefully, over the next couple of weeks and months, we see things going the right way there. And lastly, yes, the company has always been focused on A category kind of rating, so meaning leverage of something around 2.5 or less. We like that rating from an accessibility viewpoint from a flexibility viewpoint. And that's our midterm target. And probably the last thing is '26 will be the brunt of litigation payouts. We also said that, that EUR 5 billion will reduce to EUR 1 billion per year for the subsequent 5 years, and then it will be going down significantly. And if you pair that with the growth outlook that my colleagues have specified in particular for '27, you should see the company making significant progress in that regard, and that will hopefully also be realized and recognized by the rating agencies. Bill, I think you do the Europe piece. William Anderson: Yes. Yes, thanks for the question. I think Isabella, I think it's a mixed picture, the question of investment in Europe, and it's simple. We need basically more energy. We need lower energy prices in Europe and less regulation. And I think the experiment that's been run over the last decade the idea that sort of Europe could lead out in regulation and that, that would provide a competitive advantage, I think that's a failed experiment. And I think that's becoming more and more obvious every day. So I think those are some of the things that we would be able to invest more if we had better access on energy, less regulation, less bureaucracy. That being said, we're making major investments in Europe. So for example, in Monheim, very close to Leverkusen, we're building a new state-of-the-art chemical research facility that is going to be a base for crop protection, research and development for decades. We have cell and gene therapy production that's rapidly either being built or expanding in both Berlin and in San Sebastian in Spain. In Italy, I was in Italy, I can't remember, maybe 1.5 years ago, and I got to see some production we have there in the Milano vicinity that's sending really innovative healthcare products to the world. We also -- it's one of the few countries where we launched our short stature corn system, which is going to revolutionize corn production around the world and Italian farmers are some of the lead innovators there in adoption. So I think there's amazing potential for future innovation in Europe, but there's more work that needs to be done. Michael Preuss: Right. So next question comes from Andrew Noel from Chemical ESG then followed by Yonglong He from Xinhua. Andrew, you're next. Andrew Noel: I've got two, please. I understand now it's not the time for a decision on a split. But is the work that you're doing on Crop Science portfolio in line with getting the business ready for an IPO and making it more attractive to investors? I ask because BASF and Syngenta have been doing M&A in biologicals and that makes it more attractive to the sort of investor crowd. And the second question would be probably one for Rodrigo. Is there any interest in the new molecule opportunities at FMC, the partnerships they're talking about and perhaps the same for Corteva split, I guess? Thank you. William Anderson: Okay. Maybe I'll make a comment on the first one and then hand it over to Rodrigo. I think our basis for proceeding with all of our work at Bayer with respect to our divisions, our businesses, we need to be the best home for every business, and that means we have to be the -- yes, the most innovative, the leanest, the fastest. And so, I think all the measures that Rodrigo and his colleagues are taking in Crop Science, would be a benefit to Bayer Crop Science as part of Bayer or as a stand-alone entity. I don't think there's any kind of tension there. But that's the mentality we have to have with each of our businesses is we got to be the leanest, fastest, most innovative, simply put. Rodrigo, any comments on... Rodrigo Santos: Sure. Thank you, Andrew. And again, we are -- this is part of our 5-year framework. And I think the discipline that we are on the execution of that 5-year framework is very important. That includes, Andrew, that we have a very robust pipeline of crop protection, right? We talk about Plenexos, the first one that we launched. We have icafolin coming, Conventro, Stryax, and many other products that we have in our portfolio. We are always open for collaborations and with different companies on biologics. We have an open collaboration work that we do. No specifics to the two companies that you mentioned, but -- we have a strong portfolio coming in the next years. And I'm very excited about the work that we are doing on R&D on crop protection using AI to really move faster on the invention of new molecules. So I feel that we are -- we're going to be focused on launching these new technologies to the farmers in the next years, and this is really exciting and keeping the discipline on the execution that we lay out last year. Michael Preuss: Next question comes from Yonglong He from Xinhua, then followed by Anja Ettel, Die Welt. Yonglong, you're next. Yonglong He: I have two questions for Mr. Bill Anderson following the previous questions on your latest trip to China with German Chancellor. Well, the first one is, do you have any special impressions from this visit like an impressive moment or observation then stood out to you this time? And how have you observed the living and working conditions of people there in China? And the second question is, well, this year, China started its first year of the 15th year plan underscoring openness and innovation, which is also the innovation, which is also Bayer's core strategy. So would Bayer see this more opportunity and alignment or pressure competing with other international companies, there? William Anderson: Sure. Yes, I mean there were a lot of really impressive things to see. It was great to see, for example, the partnership between Mercedes and the local companies on autonomous driving. And so the Chancellor got to actually make a tour in the car that was basically driving itself. You just put in the destination and it goes. So that's obviously pretty cool to see. We were at Unitree. So we got to see the robot demonstrations, the humanoid robots which is -- yes, that's kind of cool to experience them up close and personal. I think the -- with respect to living and working conditions, it was a short trip. But I know that our 7,000 people at Bayer are -- yes, they're very excited about the innovation that they're doing. They've implemented dynamic shared ownership also in China, which is sort of unprecedented levels of empowerment for the individuals. It's not perfect yet. It's not perfect anywhere in the world, but I know they're excited to continue to work on that. And yes, we're -- I think we have five innovation hubs now in China. And so we're excited about the opportunities to continue to innovate together with many partnerships in China. I think we have over 100 collaborations with universities in China on various projects. But what they all have in common is they're all about Health for All, Hunger for None, which is why we exist at Bayer. We have 88,000 people in the world. We have 7,000 in China. We're all working on one mission. Thanks again for the question, Yunlong. Michael Preuss: So next, we have a question from Anja Ettel, Die Welt, and then we have a final question afterwards from Akash Babu from Scrip. Anja, over to you. Anja Ettel: Just a quick follow-up to Isabela Bufacchi's question. You spoke of the goal of less regulation in Europe as a failed experiment. And just to clarify, if you were to decide what would then be your top one priority in terms of less regulation in Europe. So what should be improved first here in your view? And a personal question, because Mr. Anderson, you have now been in office for about 3 years. Time is running fast. If you were to take stock of your tenure so far, how would you assess your performance? Where are you satisfied? And where maybe have you fallen short of your own expectation? William Anderson: Yes. Thanks, Anja. Well, I'm going to give you an answer that maybe is a little different than some that you'll hear on this question of less regulation in Europe and how do you fight this bureaucracy. And I think, by the way -- at Bayer, I think we're well, we're an interesting case study in how you fight bureaucracy, because -- let me give you an example. When we started our work almost 3 years ago, we had a rule book for Bayer that was -- I think it was 1,362 pages or something -- some number like that. And we could have said, "okay, we need to cut that back," right? And we probably would have spent the last 3 years taking that 1,300-page rule book and making it 1,100 pages, that would have made zero impact. You cannot fight bureaucracy with bureaucratic methods. Like, "Hey, let's form a bunch of committees, and let's see if we can write shorter rules or let's see if we can take the 26 rules about, I don't know, office furniture arrangement and make it 20 rules." Okay? That never works because by the time you would cut back 20% of the rules, the system would have generated another 30%. So I have to say, and I give this advice when I'm asked to policymakers, politicians, you've got to create kind of some sort of safe harbors for innovation. Because the amount of rules that exist -- and by the way, I'm not blaming -- some people blame Brussels and maybe Brussels blames Berlin and Berlin blames the state. Hey, there's too much everywhere. There needs to be some innovation zones created where whether large companies or new entities can come in and get going on things. I think AI is a fascinated example because everyone is racing to regulate it. We don't even know what it is yet. We're trying to write rules for things that haven't been done yet is the biggest folly. So I think there is a real rewiring that needs to be done. And I think there's there's a big wake-up call right now on that. So again, we could talk about that a lot, but I think this is something we have to get real about. We're never going to fight bureaucracy with bureaucracy. You got to make a clean sweep. What do we do with our 1,362-page rule book? We killed it, and we replaced it with a 14-page code of conduct that everybody needs to follow. All right? And so that is how you deal with bureaucracy. You have to basically clear it out and start over from scratch. And I think there's some real thinking that needs to be done on that. In terms of assessing 3 years, first off, I don't think of it as about me because when I arrived at Bayer, I sat down with some of these folks right here as well as a whole bunch of our other leaders and we basically said, "Hey, what do we want to do? What do we want to achieve together?" And we said, we identified four and then basically five things. We said we need to rejuvenate the Pharma pipeline. We need to really build up the productivity and profitability in Crop Science. We've got to get debt down. We've got to deal with the litigation situation. And we've got to tear out bureaucracy. And I think we've made tremendous progress on all five of those things. So I think we all feel really good about that. But when I talk to Bayer people, whether they're senior leaders or frontline workers, I always ask them, so how do you feel about the progress we've made and people say, yes, good, more than we thought we could do. Almost everyone says, "Wow, we've changed more than any of us thought we could do." But then I always ask, so how much more work do we have to do? And you might think people would say, "Oh, I'm tired. Can we just take a break?" But people tell me consistently we have more to do than we've done so far. And I actually find that exciting because I think we have a lot more gains to make, and I know my colleagues feel very similarly. We're going to -- we've made tremendous changes at Bayer in the last 2.5 years. We got a lot more to come, and we're excited about what those mean for our mission, for our customers and for our shareholders. So thanks for the question, Anja. Michael Preuss: So, and we have a last question coming from Akash Babu from Scrip. Aakash Babu: Perfect. I have two actually really quick ones. So in the past, you mentioned that you would be willing to walk away from the glyphosate business if things don't really improve or get handled. Especially, since you mentioned that it has been a drag on the business. So if everything doesn't go well in the next few days and weeks, is that something that still remains on the table for you? And secondly, I know you mentioned the 88,000 employee count right now. But I just wanted to understand if there was a to-date figure in terms of job cuts specifically as part of DSO, because I think you mentioned around 12,000 job cuts as part of the program back in August. William Anderson: Yes. So Akash, we -- what we said about glyphosate is that we've been dealing with litigation over claims that are historical claims or from historical use of glyphosate. And -- but we're still providing it because of its essential nature and because basically, the verdict of, from farmers and regulators is that this is a really important option. And we said, hey, but we -- there needs to be some sort of protection or some sort of change in the legal status. So we certainly see the settlement and SCOTUS are important topics. The recent executive order from the White House is also important on that. So we have to take that all into account. I think that it's important for these tools to be available for farmers and certainly, our actions will reflect that. I think what have we said -- I think we're saying, is it 14? There've been about 14,000 job reductions since we began implementing the new system. Some of those have to do with the new system explicitly. Others are things like facilities that we closed or things that we exited that aren't specifically related to DSO, but just have to do with the changing economics of different product lines. So thanks for your questions, Akash. Michael Preuss: Okay. So thank you very much for your questions and for your interest. Thank you very much also for your answers. This concludes our financial news conference for today, and we all wish you a great day. Thank you very much.
Operator: Good morning, and welcome to the MDA Space Ltd. Conference Call and Webcast. This call is being recorded on March 4, 2026, at 8:30 a.m. Eastern Time. [Operator Instructions] For those participating via webcast, please note that the company has included a presentation. Webcast participants can advance the slides by using the arrow seen in the presentation window. [Operator Instructions] I would now like to turn the call over to Jim Floros, Vice President of Investor Relations at MDA Space. Please go ahead. Jim Floros: Thank you, Kel. Good morning, and welcome to MDA Space's Fourth Quarter and Full Year 2025 Earnings Call. Mike Greenley, our CEO; and Guillaume Lavoie, our CFO, will lead today's call and share some prepared remarks before taking your questions. A couple of housekeeping items before we begin. Today's call is accessible via webcast on our Investor Relations website. All our disclosures, including the press release, MD&A and financial statements are available from our Investor Relations website as well as SEDAR+. I would also like to remind you that today's call will include estimates and other forward-looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors, assumptions and risks that could cause actual results to differ. In addition, during this call, we will refer to certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meaning under IFRS, and our approach in calculating these measures may differ from that of other issuers and therefore, may not be directly comparable. Please see the company's quarterly report and other public filings for more information about these measures, including reconciliations to the nearest IFRS measures. And with that, it's my pleasure to turn the call over to Mike. Mike Greenley: Thank you, Jim. Good morning, and thank you to those joining us today to discuss our fourth quarter and full year 2025 financial results. Before we get into our update, I want to start by acknowledging and thanking the MDA Space team for delivering another exceptional year of performance, our best yet since the IPO. The level of growth we achieved this past year would not have been possible without your hard work, innovation and total mission focus. Our talented teams around the world are the reason we continue to be a trusted mission partner and leader in the expanding space and defense industry. In 2025, we delivered record results for both revenue and adjusted EBITDA. We grew revenues to $1.6 billion, an increase of more than 50% year-over-year and expanded our adjusted EBITDA to $324 million, up almost 50% versus last year. In addition, we maintained solid adjusted EBITDA margin of approximately 20% for the full year 2025. Our financial performance enables us to continue investing in our business as we deployed $242 million in capital expenditure to support our growth initiatives while also generating positive free cash flow of $165 million. Taking a step back, 2025 built on MDA Space's track record of consistently delivering growth over the long term. Since 2020, our backlog has grown 7x to $4 billion, underpinning a revenue growth CAGR of 32% over the past 5 years, exceeding our stated goal of 20% to 30%. Importantly, this growth has been profitable with demonstrated adjusted EBITDA margin of 20% yet again in 2025. A key driver of this profitable growth relates to the investments we've made to develop industry-leading products and capabilities. We have been deliberate in our focus on R&D as a differentiator for MDA Space. We were ranked 32nd within Canada's top 100 corporate R&D spenders this year. This is the third year in a row where MDA Space has been included in this ranking. In addition, MDA Space ranks within the top 20 Canadian companies when it comes to overall size of our portfolio of patent families and within the top 10 Canadian companies when it comes to the annual patent filings in Canada over the last 5 years. We leverage our R&D investments to deliver value to our customers globally, and we combine this with disciplined operational execution to convert top line growth into profitable cash-generating operations, resulting in a robust balance sheet and a conservative leverage profile. This provides us with flexibility to continue investing in our business to capitalize on growth in our industry as evidenced by the investments we are making in developing commercial and dual-use products and services, expanding our manufacturing capacity and increasing our vertical integration such as the acquisition of SatixFy. Looking ahead, I'm pleased to introduce our 2026 financial outlook. Our backlog of $4 billion at the end of 2025 provides us with strong revenue visibility. And for the full year, we expect revenues to be $1.7 billion to $1.9 billion, representing year-over-year growth of approximately 10% at the midpoint. We expect full year adjusted EBITDA to be $320 million to $370 million, representing year-over-year growth of approximately 7% at the midpoint, with adjusted EBITDA margin of 18% to 20%, in line with our original IPO guidance. We expect capital expenditures to be $225 million to $275 million to continue to support our growth initiatives. And lastly, we expect free cash flow to be neutral to negative for the full year due to normal working capital fluctuation on our existing programs and continued investments in growth CapEx. As we think beyond 2026, the team is energized by the strong momentum and positive trends we are seeing in our end markets, and MDA Space has the right technology portfolio to capitalize on the opportunities ahead of us. We continue to expect to deliver significant revenue growth on average over the next several years. All over the world, governments, defense agencies and corporations are finding new and valuable ways of using the capabilities of space with the benefits of space-based and dual-use solutions expected to grow significantly in the coming years. The space economy is estimated to have grown to USD 626 billion last year, according to Novaspace's Space Economy report and is forecasted to surpass $1.8 trillion by 2035 according to the World Economic Forum projections. A tenfold reduction in launch costs over the past 10 years, combined with more powerful satellite technologies supported a record 329 launch attempts in 2025 and 98% of those were successful. Demand for space-enabled global connectivity is expected to result in more than 43,000 satellites to be launched over a decade starting in 2025. Renewed interest in space exploration is expected to increase the number of missions by 185% over the next decade to 855 with a significant emphasis on establishing a sustained presence on the moon. And space is increasingly emerging as a mission-critical and essential military domain, complementing the traditional fields of air, land and sea. Over the past year, we have observed defense spending on space by the world's leading powers surge to unprecedented levels as space has become critical to safeguarding national interest in evolving geopolitical environment. In particular, the U.S. dedicated $175 billion to its Golden Dome space defense architecture, Germany pledged EUR 35 billion for next-generation satellite and space situational awareness capabilities. And here at home, Canada confirmed that space will be a core element of its current 2% of GDP NATO defense spending commitment with plans to increase this budget to 5% of GDP by fiscal year '35, '36. At 5% of GDP, this would translate to approximately $155 billion in annual spend for Canada, an increase of $90 billion compared to fiscal year '25, '26. And we expected a meaningful amount to be allocated to defense-related programs for which MDA Space is well positioned to deliver given our long-standing heritage of being a trusted contractor for both space and defense opportunities with the Canadian government for decades. And recently, we have demonstrated that MDA Space is in a strong position to participate in defense opportunities through recent announcements such as the strategic partnership with the Government of Canada's Department of National Defense and Telesat to develop and deliver military satellite communication capabilities in the Arctic, a $5 billion-plus program of record. In addition, we were awarded a contract on behalf of the Canadian Space Agency to procure long lead parts for the RADARSAT constellation mission replenishment satellite, part of government's $1 billion RADARSAT+ initiative. We have also been selected as an approved supplier by the U.S. Missile Defense Agency, receiving an IDIQ contract related to the SHIELD program and established an MOU with Hanwha Systems to explore opportunities to collaborate on the development of South Korea's sovereign K-LEO defense constellation. Supplementing this will be opportunities to participate as a key supplier of satellite subsystems similar to contracts we were previously awarded to support U.S. Space Development Agency missions. Beyond space, we are also in a strong position to be Canada's national defense champion. Leveraging our deep mission experience and complex defense capability that has supported Canadian and allied operations for decades, we recently launched 49North, a dedicated defense organization exclusively focused on delivering secure multi-domain C5ISR and mission-critical capabilities for Canada's national defense priorities outside the space domain. This launch reflects increasing demand for sovereign defense capability across land, air, maritime and joint domains. By bringing together proven defense and mission-critical systems expertise under a dedicated organization, we enhance focus, accountability and disciplined program execution. 49North will be focused on building a strong pipeline in non-space defense, actively partnering with domestic and global industry and investing in the capabilities required to support Canada's national defense priorities. All this activity bodes well for the continued growth of MDA Space as we are pleased to announce today that as a result of our annual pipeline review and strong market and customer demand, our pipeline contains $40 billion in cumulative opportunities over the next 5 years. Within this pipeline, $10 billion includes either opportunities with government customers that have downselected MDA Space or follow-on opportunities with existing customers. For opportunities where we have been downselected, this means we are now part of a narrow list of candidates who have moved on to the next stage with the contract award process. In addition, our pipeline is well distributed between government and defense and commercial opportunities. The geographic distribution is balanced between significant opportunities here at home in Canada and the United States with growing opportunities within Europe and other parts of the world, including Southeast Asia. This pipeline should allow us to continue to diversify our customer base and international footprint and combined with our backlog provides us with confidence to continue to drive profitable and stable revenue growth for years to come. I'll now spend a few minutes on each of our business areas. In Satellite Systems, we continue to see good momentum in the market with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects, both for commercial and government applications. We are also seeing strong activity levels from customers and our opportunity pipeline remains robust. Over the past year, our Satellite Systems business delivered year-over-year growth of 85%, a remarkable achievement. On Telesat the Lightspeed program, we continue preparations for the program's engineering and manufacturing development and continue to make progress on completing the final critical design review. We expect to begin delivering a small number of satellites in 2026 with deliveries ramping up in 2027. The team continues to work on the Globalstar next-generation LEO constellation. We achieved a significant milestone with completion of the critical design review. Work is being carried out through development activities on life testing of equipment and procurement activities are advancing with equipment deliveries taking place. We have also begun assembly and integration activities of the first satellites. We also continue to advance work on the initial Globalstar program, where MDA Space is the prime contractor to enhance Globalstar's LEO constellation through the addition of 17 satellites, which support SOS features and direct-to-device communication on certain Apple products. In Q4, the team continued to progress flight hardware production and advanced satellite integration and test work with 15 satellites currently on the shop floor in our facility with 8 satellites successfully completing functional acceptance testing. After experiencing some delays last year, we are tracking towards the revised time line established in Q4 for deliveries this year. We are also making great progress with our Montreal facility expansion, which will add 185,000 square feet to our existing satellite production facility. The manufacturing and engineering group that will support the new production lines have moved into new office space, and the new facility now contains printed circuit board production lines and is capable of producing flight hardware. Once complete, this facility will be one of the world's largest high-volume manufacturing facilities in its satellite class. Finally, we have entered into a termination agreement with EchoStar following the cancellation of the contract they awarded us last year, and we are turning our focus to the other opportunities we are pursuing within our pipeline. Moving to our Robotics & Space Operations business. We continue to see good traction and activity levels on both the government and commercial fronts. As the world leader in on-orbit space robotic operations and decades of experience in building and maintaining the current international space station, we continue to engage with commercial LEO destination companies to provide inputs to their design concepts for SKYMAKER robotics compatibility. MDA SKYMAKER is our commercial suite of robotics products specifically designed to be configured to suit a variety of mission applications, including space station assembly and servicing. While the International Space Station is currently slated to be retired by 2030, NASA is supporting the development of commercially owned and operated space stations in low earth orbit, which the agency, along with other customers can purchase services and stimulate the growth of commercial activities in microgravity. We expect NASA to release the procurement call for the next phase of CLD development in the coming months, and we look forward to continuing to support the CLD candidates in their system development and bids to NASA. This past December, we successfully demonstrated our autonomous lunar logistics capabilities through a prototype vehicle developed for the CSA's lunar utility rover. Using the CSA's analog train in Saint-Hubert, Quebec, the demonstration showed our capability to autonomously transport large cargo elements from a landing site to a habitat, robotically manipulate smaller payloads and have multiple autonomous vehicles coordinate motion and work together on tasks. These are key logistics capabilities pivotal to humanity's return to the moon, and we are proving that we can deliver. Lastly, our team continued to make progress on executing Phase C of the Canadarm3 program while ramping down on Phase B activities, conducting closeout activities throughout Q4. The team is focused on building and testing engineering models of the system elements while working towards critical design review. Moving to our Geointelligence business. In Q4, we were pleased to have been awarded a $45 million authorization to proceed contract by the Canadian Space Agency for critical long lead parts that are required to build a replenishment satellite for the RADARSAT constellation mission as part of the government's $1 billion RADARSAT+ initiative. Alongside this ATP contract, the CSA also announced its intention to further contract MDA Space to build, test and launch this replenishment satellite. In addition, we were selected to deliver a concept study to support the development of RADARSAT+ next-generation mission to eventually succeed the current RADARSAT constellation mission. In Q4, the team also continued to progress work on CHORUS. Our spacecraft electrical integration and testing activities progressed well through the end of the year and made solid progress in testing the full SAR antenna, which was well characterized on our near field test range. We started to validate some of our flight control procedures related to the ground segment and construction work continued for the new mission control center, and we continue to track to our launch window in late 2026. Before I hand it to Guillaume, I want to mention that Alison Alfers has resigned from the Board of Directors due to unexpected family circumstances effective March 3, 2026. Ms. Alfers has been a valued member of the Board since 2022, supporting MDA Space during this exceptional period of growth. We are grateful for her contributions and extend our sincere thanks and best wishes to her and her family. With that, I'll hand it over to Guillaume. Guillaume Lavoie: Thank you, Mike, and good morning, everyone. Overall, both Q4 and full year 2025 delivered record results with solid growth in revenue and profitability, combined with strong free cash flow generation and a solid backlog to end the year, positioning us well for 2026 and beyond. Total revenues for the fourth quarter were a record $499 million. This represents $153 million or 44% increase over the same period last year. The year-over-year increase is driven by higher revenues from our Satellite Systems business, including the impact of the EchoStar termination agreement. On a full year basis, total revenues were also a record, coming in at $1.63 billion, an increase of 51% over 2024. The year-over-year increase in revenues was primarily driven by higher volumes of work performed, again, primarily in our Satellite Systems business. By business area, revenues in Satellite Systems of $371 million in the fourth quarter of 2025 were $137 million or 58% higher compared to the same quarter in 2024. The strong showing was driven by the increase in volume of work on the Telesat Lightspeed program, the Globalstar next-generation LEO constellation program and the impact of the closure of the EchoStar agreement. On a full year basis, revenues for Satellite Systems increased to $1.1 billion, which represents an increase of more than $500 million or 85%, which is remarkable from the same period in 2024. And then again, this was driven by volume of work on the Telesat Lightspeed and the Globalstar next-generation LEO constellation programs. In Robotics & Space Operations, revenue of $66 million in the latest quarter were in line with the levels seen in Q4 2024 and in line also with our expectations for this quarter due to timing of revenue recognition on nonlabor costs. For the full year 2025, revenues were $309 million, translating into a year-over-year increase of $29 million or 11%. This increase is primarily driven by the higher volume of work performed on the Canadarm3 program as volume of work on Phase C activity increased throughout the year. Revenues in our Geointelligence business of $62 million in the latest quarter represents an increase of $15 million or 31% year-over-year due to volume of work on programs. For the full year 2025, revenues for Geointelligence were $214 million, representing a $12 million or 6% increase compared to 2024. Moving to gross profit. For Q4 2025, gross profit was $127 million, representing a $45 million or 55% increase over the same period last year. Gross margin in the latest quarter was 25.5% and compares to 23.6% for the same period in 2024. For the year, gross profit was $410 million, representing $128 million or 45% increase over 2024. Gross margin for the year was 25.1%, which compares to gross margin of 26.1% in 2024. The year-over-year change in gross margin is driven by evolving program mix. Adjusted EBITDA in the quarter was a record $96 million compared to $71 million in Q4 2024, driven by higher volumes of work as we continue to convert our backlog. Adjusted EBITDA margin was 19.3% in Q4 and the slight decline in margins compared to Q4 of last year is attributable to our evolving program mix. On a full year basis, adjusted EBITDA was also a record, coming in at $324 million, up from 2024 levels of $217 million, representing $107 million or 49% year-over-year increase. Adjusted EBITDA margin of 19.8% for the full year 2025 compares to 20.1% for 2024 and is driven by, again, an evolving program mix. Adjusted net income in the quarter was $59 million compared with $35 million in Q4 2024 and the year-over-year increase of $23 million or 67% was primarily driven by higher operating income. Full year adjusted net income of $190 million was up 71% year-over-year, also largely driven by higher operating income. And finally, adjusted diluted earnings per share of $0.45 in Q4 and $1.46 for the year were up 61% and 66%, respectively, versus the same period last year. Moving to our backlog. We ended the quarter with a solid $4 billion backlog, which is slightly below December 31, 2024, driven by continued conversion of our backlog into revenue. This is normal and is to be expected due to the order level in 2025, which will vary from 1 year to the other. We continue to expect that MDA Space will be a growing company, supported by our pipeline containing $40 billion in cumulative opportunities over the next 5 years. As mentioned by Mike, within this pipeline, $10 billion includes either opportunities with government customers that have downselected MDA Space or follow-on opportunities with existing customers. Moving to CapEx. We remain focused on making the right investments in the business to support our strategic growth initiatives. In Q4 2025, we spent $70 million on capital expenditures, up $61 million from last year. We continue to be on track with setting up production lines to ramp up high-volume satellite production, and we have virtually completed our investment in MDA CHORUS. In addition, we have started to capitalize work related to our space-grade chip following the acquisition of SatixFy. On a full year basis, our capital expenditure was $242 million compared to $198 million in 2024. We demonstrated once again this year that we can execute our investment plan to deliver sustainable and profitable growth in the future. Cash from operations during the quarter generated $51 million compared to $376 million in Q4 2024. The year-over-year decrease is primarily driven by normal program-related working capital fluctuations in the quarter. Free cash flow was slightly negative at minus $20 million in the quarter versus positive $315 million in the prior year. For the full year, cash from operations generated $407 million compared to a cash generation of $813 million in 2024. The year-over-year decrease in operating cash flow, again was driven by normal program-related working capital fluctuations, including higher advanced payments received in 2024. Free cash flow was a healthy $165 million in 2025, in line with our guidance of neutral to positive free cash flow for the full year and compares to prior year free cash flow of $615 million. Moving to our balance sheet. We ended the quarter with a strong financial position with net cash of $152 million, available liquidity of $669 million under our credit facility and a total available liquidity of $821 million. Our net debt to trailing 12-month adjusted EBITDA ratio was a healthy 0.4x. In the quarter, we strategically evolved our capital structure through the issuance of $250 million in senior unsecured notes due 2030 and with an amendment of our senior revolving credit facility of $700 million, extending the maturity to 2030 and also allowing for a $150 million accordion feature. Our strong balance sheet position provides flexibility and liquidity, allowing us to deploy capital on the right strategic opportunities to support our strong growth profile. In summary, this was a strong quarter to wrap up fiscal 2025, and we continue to be encouraged by the positive momentum we are seeing across our businesses. I also want to take the time here to recognize the work, dedication and passion of the MDA Space team. Without each employee's contribution, these outstanding results would not have been possible. Now let me turn to our 2026 outlook. As Mike noted, we are introducing our 2026 financial outlook, and we are well positioned to capitalize on strong customer demand and robust market activity, given our diverse and proven technology, including our product offerings. For the full year, we expect revenues to be between $1.7 billion to $1.9 billion, representing a year-over-year growth of approximately 10% at the midpoint of the guidance. This is off the back of extraordinary growth in 2025. When comparing the revenue growth between 2020 and the midpoint of our guidance for 2026. This represents a CAGR of close to 30%, which approaches the high end of our stated goal of 20% to 30% CAGR for the business. We expect full year adjusted EBITDA to be between $320 million and $370 million, representing a year-over-year growth of approximately 7% at the midpoint of the guidance and adjusted EBITDA margin of 18% to 20%. The adjusted EBITDA range is to provide flexibility for us to strategically scale up the business for future growth, particularly in R&D and in SG&A and aligns with our historical goal since the IPO and continues to represent very solid profitability. We expect capital expenditures to be between $225 million and $275 million in 2026 to support another year of investments related to expanding production at our Montreal facility, investments in chip development and investments to support commercial growth initiatives. Although we continue to invest in our future, our capital intensity as a percentage of revenues is reducing from an average of over 20% between 2021 and 2024 to now less than 15% in 2025 and 2026 at the midpoint of our guidance. Finally, we expect full year free cash flow to be neutral to negative, driven by normal program working capital fluctuations, combined with the CapEx required to support future growth. With this outlook, MDA Space is positioned to once again deliver a strong year of profitable growth with the vast majority of revenue for 2026 contained within our solid backlog. Looking beyond 2026, we are excited about the opportunities ahead, supported by our $40 billion pipeline. On our mission to grow the business, the team is focused on executing customer commitments and leveraging our capabilities and technology to win new business pursuits while remaining disciplined in delivering sustainable profitable growth. With that, operator, we are ready for questions. Operator: [Operator Instructions] And your first question comes from Doug Taylor from Canaccord Genuity. Doug Taylor: Congrats on a great close to 2025 and the outlook for '26. You've given more color to the pipeline, $40 billion. It's a staggering number and a big expansion from the last number you provided. Is it fair to characterize the expansion here as being more defense and intelligence related versus commercial communications? Would you provide some further color as to where you're seeing the most growth and opportunity? Mike Greenley: Yes, for sure, we can do that. This is like our annual update to pipeline. We're going to try to make sure that we gave the numbers last year and carried it through the year, and we're up -- we've scrubbed all the numbers at the start of every year and updated the pipeline expectations. So that's what we're doing here now. The growth in terms of the size of the pipeline has certainly been based on opportunities we collected through the year. There are a number of them, yes, that are defense and intelligence related, defense related, both in the space sector in addition to the non-space sector with the announcement of 49North and the focus there. The 49North also creates opportunities for us to, through 49North, take on some new non-space things. And so yes, both domestically and internationally, the defense side has some of the chunkier growth in the pipeline. Doug Taylor: Would you quantify just because you mentioned the 49North pipeline as being material within the context of this larger number? Mike Greenley: I don't know what the materiality number would be, but there's -- it's early days with 49North, but with the initiation of it as we started the year, it has immediately picked up some media opportunities as a defense prime in Canada. Doug Taylor: Okay. And then I'll just ask one more question on the pipeline as it relates to your guidance here, and you get this question every year at this time. So I guess what I'm asking here is the degree of coverage of the guidance you're providing for '26 that you're taking out of backlog. And I guess, I assume it's relatively high. And the flip side of that question was the amount of pipeline conversion that is baked into that guidance versus supporting '27 and beyond. Mike Greenley: Yes. Like certainly, '26 is, as I said, is a year of very high visibility on revenue from backlog. So we're executing a lot of backlog as we go through '26. We do expect some orders in the guidance that's been given. The pipeline is a 5-year pipeline. So it's from now through the next 5 years of specific named opportunities that we are pursuing. The pace at which those can come in is often based on customer activity. And some of that customer activity is in areas that are newly emergent such as the Canadian government's new defense industrial strategy, the creation of the new Defense Investment Agency. So we have a lot of new policy and new processes around an expanding defense budget, which assures opportunities in the pipeline, which are great, but there's a little less insight in terms of exactly how fast those things can move. And so we are definitely seeing procurements moving faster, especially strategic procurements in the sovereign defense capability areas identified in the Canadian defense industrial strategy. And so that's really great to see. But in terms of exactly how those will play out, we have to be a little bit cautious until we actually see some more examples of how these things are going to flow through the modified procurement processes. So they're there. Things can happen, both government and commercially as we go through the year, but the pace of those will be based on outside forces. Operator: Your next question comes from Justin Lang from Morgan Stanley. Justin Lang: Mike, you're quite bullish towards the end of the last year that we could see potentially another sizable commercial constellation order announced here in '26. Just curious if you're still hopeful that we could see a large order like that this year? Any color there would be great. Mike Greenley: Yes, it's still possible for sure. Like I say, that's all based on commercial customer activity as well and when and how they decide to move out on different opportunities. So we're still actively engaged, actively quoting people in the pipeline on the commercial side of things. So there's absolutely potential that, that could happen, but we'll wait and see how it rolls. But we still are behaving in a way that we are feeding customer with inputs to assure that they're comfortable to move forward. Justin Lang: Okay. Great. And then maybe just on the CapEx guide for the year. If we could just maybe put a finer point on where the investment is going in terms of what exactly is left to build out in Montreal and how much you'll be spending on this chip development effort? And then should we think about CapEx sort of stepping down materially from here into '27? Or is it more of a smoother downward glide path from here? Guillaume Lavoie: Thank you, Justin. I'll take that one. So really, the focus this year will be on the Lightspeed and Globalstar production line equipment. That's really the focus for us. We also have to continue to invest in office space and things like parking. I mean, we've been growing a lot. Our factory there in Montreal is virtually completed, like the building is completed, but we need a bit more investments to make sure that everybody can come to work comfortably. The facility has been expanding quite a bit. In terms of chip development, for sure, now we started to capitalize the work that we're doing there. It's intangible assets for the most part. And that's important within the midpoint of $250 million, but it's ramping up essentially in 2026. And finally, we have some commercial sort of opportunities where we see that we need to invest a little bit ahead of getting the business. And so those are really the areas of focus for us. I think if we look beyond 2026, I feel like we're going to still have a good year of spending in 2027. Too early to say if it will be lower than the midpoint we're guiding to this year in 2026. But beyond that, and when looking at the business for the future, I feel like a number of $150 million to $200 million would be a reasonable long-term number to assume now. We've been indicating in the past a bit lower than that. But really, the big driver here is that now we have chip capabilities. And so we're going to have to continue to invest on that front, but that's obviously strategic, and it has a lot of value for us. Operator: And your next question comes from Konark Gupta from Scotiabank. Konark Gupta: Just on the pipeline, maybe the $40 billion, obviously, it's an outstanding -- have you like figured out what's the incremental? You said defense obviously driving some of that. But in terms of segments, I'm thinking, is it more on the satellite side that you're seeing these incremental opportunities making satellites? Or is it more from the services side, whether it's geo intelligence or something else? Mike Greenley: I would say more on the -- certainly, there's really solid expansion on the satellite side, definitely in two types of satellites, in communication satellites and earth observation satellites. So there's definitely solid growth in contracting for and delivering satellites. There is some new capability offering type stuff in space that is being introduced as the space market continues to expand that can affect robotics and space operations. So that's really been good to see. And so those are the main driver areas. And then like I mentioned before, a little bit of a bump there in the non-space defense with the creation of 49North and the ability to take on defense prime contracts in an improved way. Konark Gupta: Okay. And on the $10 billion like BD pipeline seems like it's maybe up the pipe, the opportunities because you've been shortlisted by the governments and you're expecting some follow-ons. In terms of time line, then do you see -- like government orders can be lumpy, obviously, but do you expect some of these $10 billion worth of opportunities might be converting into contracts this year and next year? Or these are more sort of back-end loaded? Mike Greenley: No, I would think a lot of the shorter list ones would have -- there's a number of them that would have a chance within that bucket over the next 24 months. Like I said, the -- some of that is government related and therefore, it is going to be linked with the behavior of government under new defense procurement initiatives. But they're not all in some other government ones are just normal procurement processes. So there's some that could come this year and then definitely some that could come next year. Konark Gupta: And last one for me before I turn over. In terms of RFPs, I mean, your business has grown a lot. Your opportunity pipeline is expanding. Are you expecting to fill a lot of RFPs this year? Like can you provide some context historically, like how many RFPs typically you fill in a year? Mike Greenley: I don't have that number in my head. That's a new good one for me to get in my head, how many bids do we write a year. So I'll have to go and work on that. But it's steady. Let me just say that. For sure, our new business teams are very active. Constantly responding to requests for quotations and request for proposals. So RFQs and RFPs in the system, it is a constant activity. So we will definitely be responding to a number of those as we go through the year for sure. Operator: Your next question comes from Ken Herbert from RBC Capital Markets. Kenneth Herbert: Maybe, Guillaume, I wanted to see on the adjusted EBITDA guide for the year, a bit of a wider range than we would typically see, and I can appreciate some of your comments around the higher R&D spend. But can you give any more detail on maybe some of the puts and takes between the upper end or the lower end of the adjusted EBITDA outlook and maybe any more specifics on the areas of focus for R&D and other investments. Guillaume Lavoie: Yes. Thank you, Ken. So at the end of the day, we wanted to give ourselves some wiggle room here. And depending on the timing of the investments that we're contemplating to support our strategic growth, we will see potentially an impact on the EBITDA margin. Again, we've maintained a range of 18% to 20%. So we're going to be strategic about those investments. And it's going to also be sort of part of how we see the timing of revenue recognition. If top line comes in very strong, then we might invest a little bit more. And in an alternative scenario, then we might be a bit more prudent with our different investments. But at the end of the day, I think what's to be sort of highlighted here is that we're coming off a very strong year of growth again. We're now guiding to be a $1.8 billion company, and we were a $400 million company not so long ago. And so Mike and I were thinking about that a lot because we've been investing in our facilities and all of that, but we need to maintain our technological leadership. So that's why we feel like we have some investments to do in R&D. And also, we need to scale the rest of the business, rather if it's us working on making sure we're using AI or making sure that we have enhanced capabilities within finance, legal, HR and IT. And so I think we'll manage it prudently, but -- and we will always do that. We're very disciplined, as you know. But we felt like we needed the proper wiggle room to execute and deliver another good year here in 2026. Kenneth Herbert: Great. Guill, I appreciate all the detail. And then maybe, Mike, we think about your defense exposure today as maybe mid-teens of the business. If you're successful on some of these pipeline opportunities as you've leaned into this opportunity on the defense and national security side, what could defense broadly represent maybe of the revenue mix exiting '26 or into 2027? I mean, can you maybe just frame that opportunity for us? Mike Greenley: Yes. I think exiting '26, I wouldn't expect a big sudden change. I think '27, yes, if some things start to get contracted in these various forms of pipeline as we go through '26, then in '27, we could start to see some additional revenue lift from the defense side and then certainly in 2028. So these -- a number of these programs tend to be larger, and so they'll take time and then they'll have to ramp up. But the relative contribution in terms of your mid-teen estimate and how that might change, of course, will be dependent on what else has happened on the commercial side as well, which is still a significant part of the pipeline. And so -- but the defense portion will go up as we go through the next 24 months. That's our expectation. Operator: And your next question comes from Russell Stanley from Beacon Company. Russell Stanley: Congrats on the quarter. Maybe a follow-up on that last question around your revenue mix expectations. How should we think about the gross margins kind of on a midterm basis? I think people might generally assume that defense-related work must come at lower margins. Is that -- are you seeing that? Or do you expect that? Or are you more or less kind of expecting gross margins to be unchanged relative to the work you see on the commercial front? Guillaume Lavoie: Maybe I take that one, Russ, and give you some insights here. So 2026, 18% to 20%. We're very confident about that range for the business. We don't expect that to change in the near term. So I would expect that we could continue to deliver within that range for 2027. And then what's going to happen is two things. First, as we increase our production in Montreal, we might see some margin opportunities in terms of margin expansion in the future. Now with that said, when we look at defense contracts, they do typically come with lower EBITDA margin. It's too early to tell like what will our mix be. Today, it's about 70% commercial, 30% government and defense. And so we'll see how that evolves. But one thing to keep in mind is that we are seeing very, very large opportunities coming for us, given everything that we've been saying this morning. And so at the end of the day, if we would be in a position in a number of years where we would see a lot of big defense opportunity coming to us, we might see a bit of compression on the EBITDA margin. But at the end of the day, we don't take margin to the bank, right? And from my perspective, this would be still very good for our business because we would increase our earnings per share and absolute EBITDA number. But that's all the color that I guess we can give at this stage, and we'll continue to provide updates as things evolve over the next few years here. Russell Stanley: That's great color. And maybe my follow-up just around the backlog and given the pipeline and the huge growth you've seen there, this is a bit of a hood problem question, but how do you think about managing the backlog as a multiple of revenue, balancing wanting to keep the backlog as healthy as possible while managing delivery time lines and expectations for customers with a $40 million pipeline at some point, that might be a nice problem to have, but I'd love to hear how you're thinking about it right now. Guillaume Lavoie: Yes, I'll start. Maybe Mike can -- yes, sorry, Mike and I were not in the same location today. He's in Europe, and we're here in Toronto. So that's a great question, Russ. Like from our perspective, like we have a really good thing going on for us here because we've invested in a brand-new center of excellence right here in Brampton, Ontario. So we can take on a lot more work. And as I commented earlier, we're now very close to having a world-class high-volume satellite manufacturing facility in Montreal that can deliver up to 400 satellites per year. And so I mean, we've made all those investments, and now we're basically ready to convert more opportunities from our pipeline into our backlog and then continue to execute and generate revenue growth. Now we are obviously targeting a book-to-bill ratio above 1 compared to our revenue every year. This year, we were a bit below that. But if you look at the past 2 years, then we were above. So it's just going to be a matter of timing here. In our business, it takes a bit of time to convert pipeline opportunities into orders. But I think we're very well positioned here from an infrastructure and footprint standpoint to take on a lot more business. Maybe, Mike, if you want to add anything? Mike Greenley: No, I think that's great. Operator: And your next question comes from David McFadgen from ATF Cormark (sic) [ ATB Cormark ]. David McFadgen: A couple of questions. Maybe I'll ask one on the pipeline as well. So we've seen it double since Q3, and you now disclosed that $10 billion of the $40 billion is for follow-on orders or defense or I guess, a combination of both. Can you confirm that Apple Globalstar follow-on order would be in that $10 billion pipeline? Mike Greenley: We're not going to -- no, we don't talk about specific opportunities in our pipeline. But the -- the other thing is that it hasn't been like a -- it's been a jump over the next year. Like we're trying to make sure we update the pipeline annually and make sure that we give as part of guidance for the year, we give an update on pipeline. So we'll carry this pipeline number as we go through the year. We're not going to talk on a quarter-by-quarter basis about adjustments to the pipeline. Our order development and order cycle is such that we shouldn't be thinking about quarterly stuff. We should be thinking about annually stuff. So we'll be working this pipeline as we go through this year and give an update to it at the same time next year. And so there hasn't been like some huge swing just in the 3-month period. It's been building as we've been going through '25 and with all the changes that have occurred in the market and our changes to our position that have contributed to that. So -- but I don't want to comment on specific opportunities like that. David McFadgen: Okay. Do you know when NASA is going to announce this -- the award for this like over USD 4 billion RMS contract for the manned lunar train utility vehicle, it's just been over a year now delayed. Mike Greenley: Yes. It's been like -- people have been looking for that to be announced every month for many months. And so I think that it probably got slowed down as in the fall, which would be expectation was there as the new NASA administrator Jared Isaacman, came into his job and everybody has to confirm what all the priorities are. So I think that probably slowed down a little bit. And then you will have seen like a strong burst in the last little while about ensuring the return to the lunar surface and ensuring in the sort of mini space race that's going on here, maybe it's not too much of a mini space race, the space race that's going on here between the United States and China to be able to get humans back on the moon and start having habitats there and all that kind of stuff, there's a significant focus on that. So I think that probably in the architecture of their programs and which sequence of things need to be decided and announced in what order has probably been reshuffled a bit as the new administrator has come into his job. But in the background, people continually expect that as being one of the programs that could be announced at any time kind of a thing because the -- it's been -- we agree that the community has been waiting for a while for that announcement. David McFadgen: Okay. And then just on Lightspeed, can you confirm that the critical design review is complete and you started construction of those satellites? Mike Greenley: The critical design review, I think there's a few actions that are still being worked like the -- the critical design review process absolutely was conducted. And then there's a few odds and sods of things that people are following up on that always happens in the CVRs. In terms of being able -- talking about moving forward with the construction of satellites, certainly, that's all progressing because we owe a couple of satellites this year into Telesat. So we're leaning into that. David McFadgen: Okay. And then was the EchoStar payment, was that anything material in the quarter? Guillaume Lavoie: So maybe I'll take that one, David. So that contract termination process with EchoStar is now completed. We've received payments for all termination amounts that we were entitled to receive under the terms of the original contract. And the terms of that agreement with EchoStar, the termination agreement are confidential. And we are precluded from sharing details of the agreement, including the dollar amount that we were compensated for. But this is behind us. We're moving forward. We have a strong pipeline, and we're glad that this was completed in the fourth quarter. Operator: And your next question comes from Thanos Moschopoulos from BMO Capital Markets. Thanos Moschopoulos: With respect to Telesat and Globalstar, can you remind us when the first deliveries happen? Is that kind of Q3 time frame? Or when would that be? Mike Greenley: Globalstar from that first contract for 17 satellites, there will be deliveries through the first half of the year. And then with Telesat with Lightspeed, there'll be some deliveries near the end of the year. Thanos Moschopoulos: Okay. And then for the second Globalstar contract, would there also be deliveries towards the end of the year? Mike Greenley: I think I have to check on that in terms of the latest status for that in terms of whether it's late in the year or early in the next, but I'd have to check on that. There's lots of moving parts still on that program. Guillaume Lavoie: I think that's a good way to put it, Mike. We're very advanced with that contract. We started the construction. As Mike said, we have completed the CDR. And so it's just a matter of working with the customer here. We've always said that we would have some ramp-ups mostly in 2026 with a more significant year of production and delivery in 2027. But as Mike said, there's a lot of moving parts with the second contract here. So we expect that we'll start delivering either at the end of 2026 or in 2027. Thanos Moschopoulos: Great. And then, Mike, with respect to 49North, what would be some of the, I guess, more meaningful areas of opportunity that you call out? Clearly, you have a broad range of capabilities. You're already getting a lot of non-space work with the service combatants. But what would be some of the near-term or larger opportunities or buckets within non-space that you would hope for within the defense sector in Canada? Mike Greenley: Yes. In terms of areas where we've got a really strong history of past performance, one of the key areas would be on autonomous systems. We're a leader with the Canadian forces in the delivery and/or operation of autonomous air systems like drones for the military. And so that's an area of strength for us. Another area of strength would be in sensors. You mentioned the Canadian Surface Combatant, we're the River-class destroyer, where we're responsible for the integration of the electronic warfare suite and the sensors around that. And so these are -- those are example areas where we're historically strong. The -- we have strengths in things like submarine command training, for example, that will be a hot topic as we move forward into the future as Canada goes and buys new submarines. We're responsible for that today. So -- and then the -- there's some -- there'll be some large programs coming forward in integrated command control communications with sensors and the like, where we have strong secure systems integration expertise that can lead programs in that area. That will apply to a number of different programs that could come along. Operator: And your next question comes from Greg MacDonald from Stifel. Gregory William MacDonald: Mike, I know you don't want to talk about specifics on the pipeline, but the Golden Dome, I think most of us would consider a different risk profile than some of your other opportunities. Can you say -- are you willing to say whether there's anything in the Golden dome inside the pipeline? Mike Greenley: I think there could be opportunities related to that. Like you would have seen us get a -- we announced an IDIQ contract signature there with the SHIELD program with the U.S. Missile Defense Agency, which is really an opportunity to be able to be sort of inside the tent and able to bid on things. And so that creates some opportunity. And then some of the opportunities for Canada that are related to Arctic Defense, whether that's Arctic Defense Communication or Arctic Defense Surveillance, those types of programs that are Canadian programs would be eligible to be part of Golden Dome scope. And so I think that I have to honestly say that those things could absolutely be related to Golden Dome scope, but they would be Canadian programs. In the U.S., on the U.S. side of things, we would continue to have conversations with folks that could benefit from our space capabilities as they continue to advance their solutions for Golden Dome on the U.S. side. You would have seen us in the last number of years be providing satellite technology to all the satellite primes in the SDA LEO constellations. And so we've got a strong history of performance there delivering into U.S. primes when their programs ramp up. Gregory William MacDonald: Great. That's helpful. And then second quick question on 49North. To what extent -- you talked a lot about hardware. We know that Canada does and you do sensors well, systems integrations well. When you talk about systems integration, should we assume that includes software and in particular, kind of the command and control integration stuff and the AI prediction stuff? Or is that beyond the scope of what you guys are looking at? Mike Greenley: No, it could definitely include those types of things. We're strong in systems integration. That can include hardware and software integration to deliver a system for sure. And we have past performances of that in the 49North team. So we have strong capability there. So yes, that can definitely be part of that. In terms of AI, that's going to depend on the systems. These days, when you have sensors that are delivering data into an integrated system that you then need to determine what the current situation is and evaluate alternative courses of action from that information you're receiving. Of course, our artificial intelligence-related system elements can be logically part of that. And we see that on all of our programs, including our space programs these days. As you look at the road maps for the evolution of these technologies, AI has more and more of an opportunity all the time. And so that can definitely come up as part of a systems integration solution. Operator: And your next question comes from Michael Kypreos from Desjardins Securities. Michael Kypreos: I'll be quick here. Just any updates on capital allocation and how the M&A pipeline is these days? Mike Greenley: The pipeline is good. So I was just going to say from a pipeline perspective, the pipeline is good. So we keep an eye on all the same areas we ever talked about M&A. We talk about vertical integration. We talk about geographic expansion to open up bigger pipelines for ourselves around the world. Those types of thought processes absolutely continue, and we continue to look at and focus on targets, but I'll let Guillaume talk to capital allocation. Guillaume Lavoie: Thank you, Mike. Michael, so yes, I mean, focus for us is to continue to look for targets so we can expand geographically. And then obviously, the second priority is to execute our growth organic plan. And again, you saw the guidance this morning for this year. We're going to spend at the midpoint, $250 million into CapEx. And so those are really the 2 priorities, potentially doing some acquisitions and then focus on delivering on our investments that we need to support our growth. We're not thinking of introducing any dividends at this point or share buybacks or things like that. We're very focused on continuing to grow the company. Operator: And there are no further questions at this time. Mr. Mike Greenley, you may proceed with the call. Mike Greenley: Okay. Well, thanks, everybody. I appreciate all the questions and the discussion, and we will get back at it and look forward to talking to you again in the next quarter. Thanks a lot. Operator: This does conclude your conference call for today. Thank you very much for your participation. You may now disconnect. Have a great day.
Operator: Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley Inc.'s fourth quarter and full year 2025 earnings results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions for asking questions will be provided at that time. We ask that participants limit themselves to one question and one related follow-up during the Q&A period. Please be advised reproduction of this call in whole or in part is not permitted without written authorization of Holley Inc. And as a reminder, this call is being recorded and will be made available for future playback. I would now like to turn the call over to your host, Anthony Rozmus with Investor Relations. Anthony, please go ahead. Anthony Rozmus: Good morning and welcome to Holley Inc.'s fourth quarter and full year 2025 earnings conference call. On the call with me today are President and Chief Executive Officer, Matthew Stevenson, and Chief Financial Officer, Jesse Weaver. This webcast and the presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties including the ones described in our SEC filings. This morning, we will review our financial results for the fourth quarter and full year 2025 and discuss guidance for the full year 2026. At the conclusion of the prepared remarks, we will open the line for questions. I will now turn the call over to our CEO, Matthew Stevenson. Matthew Stevenson: Thank you, Anthony, and good morning to everyone joining us. As we reflect on 2025, I am pleased to report that our disciplined approach delivered strong fourth quarter results in a year of meaningful progress for Holley Inc. This was a pivotal year, and not because of one standout quarter but because of sustained performance across all four quarters. For the first time since 2021, we delivered full year net sales growth while achieving adjusted EBITDA margins above 20%, highlighting the earnings capability of our business model. Our core business generated net sales growth in every quarter of 2025, culminating in double-digit growth in the fourth quarter, our strongest performance of the year and clear evidence of accelerating momentum as we enter 2026. When we refer to core, we are excluding divested operations and strategically rationalized product lines. Four straight quarters of core growth demonstrate that the underlying business is performing and that our strategy is producing measurable results. Throughout the year, we operated with focus and rigor, driving volume-led growth, sharpening pricing execution, strengthening operational capabilities, and maintaining financial discipline. Full year net sales growth was driven primarily by volume, complemented by pricing, a balanced mix that reflects solid underlying demand for our leading brands. In the fourth quarter, we saw growth across B2B and direct-to-consumer channels, underscoring the resilience of our omni-channel platform and the strength of our relationships with distributors, e-tailers, marketplaces, installers, and our own digital ecosystem. This strategy centered on serving enthusiasts wherever they choose to engage drove growth across all four divisions and 22 key brands in 2025. Just as importantly, we reinforced our financial foundation. We generated meaningful free cash flow and ended the year with net leverage below the target we set out at the 2025, demonstrating balance sheet discipline and strong financial control. Consistent growth, expanding margins, strong cash generation, and leverage reduction all achieved simultaneously. That combination reflects disciplined, focused performance. Let us turn to slide five which outlines how the sustained performance translated into measurable financial results for both the fourth quarter and full year 2025. As noted, for the first time since 2021, we delivered both full year net sales growth and adjusted EBITDA margins above 20%, a clear indication that our multiyear transformation is taking hold. Core net sales grew in every quarter of 2025, accelerating to 13.5% growth in Q4, reflecting solid demand and stronger commercial execution. For the full year, net sales totaled $613.5 million. Core net sales increased 6.6%, driven primarily by 3.8% volume growth with an additional 2.8% contribution from pricing, a healthy mix that speaks to the quality of our growth. Performance was broad-based, with growth across all divisions, 22 key brands, and in both the B2B and direct-to-consumer channels, demonstrating the strength and diversification of our portfolio. Our strategic initiatives continue to drive tangible results. Revenue programs contributed meaningfully in 2025, while cost and efficiency actions delivered approximately $20 million in savings through purchasing discipline, tariff mitigation, operational improvements, and productivity efforts. We generated $34.2 million of free cash flow for the year, including $3.9 million in the fourth quarter, an improvement year over year even as we continue investing in the business. We also prepaid an additional $10 million of debt in Q4, bringing total prepayments to $100 million since September 2023. We ended the year below 3.8 times leverage, achieving our stated target and enhancing our financial flexibility. The takeaway from this slide is alignment. Revenue growth, margin expansion, cost discipline, cash generation, and leverage reduction all progressed together, reinforcing the durability of our operating model. Turning to slide six, let us take a closer look at the fourth quarter results. Net sales were $155.4 million, increasing 10.9% year over year with 13.5% core growth, our strongest core growth performance of 2025. Gross margin expanded to 46.8%, up 120 basis points versus the prior year, driven by pricing discipline, favorable mix, and continued operational improvements across sourcing and manufacturing. Adjusted EBITDA margin improved to 21.4%, up 56 basis points year over year, with adjusted EBITDA increasing to $33.2 million from $29.1 million last year. We delivered net income of $6.3 million in the fourth quarter, representing a meaningful year over year improvement. Innovation remains central to our strategy. During the quarter, we launched new products from all four divisions, including multiple Snell 2025-certified motorsports helmets such as the popular Stilo ST6, new APR power packages for Volkswagen, Audi, and Porsche platforms, and plug-and-play Edge modules for late model GM trucks and SUVs enabling consistent full-time V8 performance. New product launches contributed approximately $23 million in new product sales for the full year, underscoring the ongoing vitality of our portfolio. Operationally, we maintained an average in-stock rate of approximately 91% across our top 2,500 SKUs, supporting performance through disciplined inventory management and strong product availability. In addition, we completed approximately $20 million in combined purchasing savings, tariff mitigation, and operational improvements during 2025, structural actions that strengthen the business for the long term. The fourth quarter is also an important engagement period for our brands. We participated in both SEMA and PRI, two of the industry's most significant events, further deepening relationships with enthusiasts, installers, and distribution partners. Taken together, our fourth quarter results reflect strong commercial performance, expanding margins, operational discipline, and continued investment in innovation and brand engagement. Turning to slide seven, you can see how fourth quarter core growth translated across each division. American Performance increased 10% year over year, with several lifestyle and power brands delivering double-digit growth. Truck and Off-Road grew 5.4%, led by Baer Brakes as new truck-focused offerings gained traction, 21.5%, and capped a solid year for the division. Safety and Racing faced earlier headwinds as we navigated the October transition to Snell 2025 Motorsport Helmet Certification. Following the launch, performance accelerated driven by new helmets and continued strength in motorcycle safety. The division closed the quarter up 13.3%. Importantly, every division contributed to fourth quarter growth, underscoring the breadth of our portfolio. We have structured the organization around focused divisional leadership with clear accountability, supported by shared capabilities across multiple centers of excellence. Fourth quarter results demonstrate the model is working as intended, driving divisional performance while maintaining enterprise alignment. Let us move next to slide eight, where we revisit the strategic framework that continues to guide our execution and support long-term growth. At the foundation of our approach are three clear priorities: fueling our teammates, strengthening customer relationships, and accelerating profitable growth. These are not abstract concepts. They shape how we allocate capital, how we measure performance, and how we prioritize initiatives across the organization. Throughout 2025, this framework provided clarity and consistency in decision making; it aligned our teams, sharpened our focus, and ensured the progress you have seen across revenue, margins, cash flow, and leverage was intentional, not incidental. As we walk through the strategic initiative tracker, you will see how these priorities translate into measurable actions and tangible results. Turning to slide nine, the strategic initiative tracker quantifies the impact of our execution in the fourth quarter and across the full year 2025. Under Trailblazing Trusted Partner, we generated revenue of $14.7 million in Q4 and $43.9 million for the year, driven by improvements in product data quality and deeper collaboration with key customers. Under Premier Consumer Journey, Q4 contributed $4.1 million, bringing the full year total to $12.5 million. Third-party marketplaces grew 24% in 2025, led by strong Amazon performance. Under Product Innovation and Portfolio Management, we delivered $10.8 million in Q4 and $40.3 million for the full year. Approximately $23 million came from our new product launches, with an additional $16 million driven by focused portfolio management across our B2B network. Under Global Expansion and New Markets, we contributed $1.2 million in Q4 and $3.7 million for the year, reflecting continued progress in Mexico and expansion within powersports. Under Fund the Growth, we generated $7 million in Q4 and approximately $20 million for the full year through purchasing savings, tariff mitigation, and operational efficiencies. On I am in a great place to work, employee engagement improved by four points while revenue per employee reached approximately $460,000, exceeding our 2025 objective and reinforcing our focus on culture and productivity. Collectively, these initiatives delivered meaningful revenue contribution and significant structural cost savings in 2025, clear evidence that our strategic framework is translating into measurable financial results. Turning to slide 10, our strategic framework and eight key focus areas continue to guide execution and long-term value creation. This slide outlines several of the priority initiatives that will drive performance in 2026. Under Premier Consumer Journey, we are continuing to optimize our product launch process to accelerate adoption and improve speed to market. At the same time, we are enhancing digital merchandising and expanding our presence across key third-party marketplaces, ensuring we meet enthusiasts wherever they choose to shop. Within Trailblazing Trusted Partner, we are deepening relationships with our largest B2B customers while applying the same structured data-driven approach to mid-sized accounts. We are also expanding the reach of our direct sales organization and advancing meaningful growth initiatives with national retailers to further strengthen our brick-and-mortar presence. Product innovation remains central to our strategy. In 2026, we will expand our Performance Chemicals portfolio, including new vehicle care products, while continuing to grow packaged solutions and modern truck through partnerships serving both OEM dealers and consumers. We are applying a similar approach in Euro and Import, working closely with leading dealers alongside our direct-to-consumer efforts. International expansion continues to represent opportunity as we introduce more of our portfolio to enthusiasts globally. Powersports also remains a growth priority, supported by deeper collaboration with major distributors to increase awareness and adoption of our UTV and safety offerings. While remaining committed to our deleveraging objectives, we will selectively evaluate strategic M&A opportunities that strengthen priority growth categories and unlock operational synergies. Supporting these growth initiatives are focused operational actions eliminating non-value-added costs, reducing tariff exposure, driving strategic sourcing savings, improving facility efficiency, and optimizing our manufacturing footprint. In 2026, we will also begin the early stages of implementing a new ERP and warehouse management systems to support scalable, long-term operational excellence. Collectively, these initiatives position us to deliver over 4% revenue growth and more than $15 million in cost synergies this year. Now with that, I will turn it over to Jesse to review our fourth quarter and full year 2025 financial results in more detail, and provide additional perspective on our outlook for 2026. Jesse? Jesse Weaver: Thank you, Matt, and good morning, everyone. Before diving into the details, I want to reinforce Matt's earlier comments that we closed 2025 having achieved several meaningful financial milestones. We delivered four consecutive quarters of core business growth, and returned to full year reported net sales growth for the first time since 2021, driven by the focused execution of our strategy across both our D2C and B2B commercial engines. Importantly, the quality of this growth reflects the transformation of our company across virtually every department, creating a durable growth engine and a level of operational excellence that simply did not exist before. We also strengthened the balance sheet, completing $25 million of debt prepayments in 2025 and surpassing $100 million in total prepayments since September 2023. And importantly, we achieved full year adjusted EBITDA margins above 20% for the first time since 2021. Taken together, these milestones reflect tangible progress against the strategy. And with that context, I would like to walk through our progress in more detail, starting with an update on progress against our 2025 financial priorities on slide 12. Our efforts in 2025 remained centered on reinforcing the core strengths of our business, restoring historical profitability, improving working capital management, and deleveraging the balance sheet. On profitability, the team delivered $10 million in operational savings during the year, achieving the top end of our stated target. These results were driven by optimized staffing models and sustained efficiency gains across our manufacturing and distribution network. We also advanced facility consolidation and disciplined network-wide cost actions that further strengthened the structural profitability of the business and enhanced our operating foundation. Turning to working capital, excluding tariff impacts on product costs, we closed the year with a $9 million improvement, including $4.5 million realized in the fourth quarter alone. While inventory levels did not fully reach our original reduction targets for the year, the outcome reflects deliberate operational decisions aimed at improving supply chain efficiency. These actions temporarily elevated inventory that represents important steps towards building a more resilient and consistent operating model. We also made meaningful progress in strengthening the balance sheet. During the fourth quarter, we prepaid $10 million of debt, bringing total payments for the year to $25 million and over $100 million since 2023. As a result of our transformation focused on restoring profitability, improving working capital discipline, and executing targeted debt reduction, we reduced leverage from a peak of 5.67 times in 2023 to 3.75 times at year end in 2025, a significant improvement in the strength and flexibility of our capital structure. On slide 13, I will review our key financial metrics for the fourth quarter. Net sales for the fourth quarter increased 10.9% to $155.4 million compared to $140.1 million in the prior year period. Growth was driven by a healthy balance of price and volume, contributing approximately 5.6% and 5.4%, respectively. It is worth noting that the way the Christmas and New Year holidays fell this year provided an estimated two to three percentage points of benefit from incremental in-off days from our major partners. Even adjusting for that timing impact, growth was solid and reflects continued underlying momentum in the business. This marks our second consecutive quarter of reported net sales growth, which is the first sustained growth we have delivered since 2023. Excluding approximately $3 million of prior year sales related to divestitures and strategic product rationalization, core sales increased approximately 13.5%, representing our fourth consecutive quarter of consistent growth in the business coming from a combination of price and volume, contributing approximately 5.7% and 7.8%, respectively, in the quarter. We are particularly encouraged that this growth was broad-based across both B2C and B2B channels and throughout all divisions, reflecting the continued impact of our commercial transformation initiatives. Gross profit for the quarter was $72.8 million, an increase of 14% versus the prior year. Gross margin reached 46.8%, expanding 120 basis points year over year. Margin improvement was supported by the flow-through of pricing actions as well as operational gains across our facilities, lower excess inventory write-downs, and continued enhancements in product quality reflected in reduced warranty claims. SG&A, inclusive of R&D, was $47.9 million compared to $39.4 million in the same period last year. The year-over-year change reflects the comparison against reduced payroll expense in the prior year due to furlough actions, lower incentive compensation accruals in 2024, and increased 2025 investment in SOX readiness, cybersecurity, and tariff mitigation initiatives. Net income for the quarter was $6.3 million, representing an improvement of $44.1 million versus the prior year period when we had a combined goodwill and trademark impairment of approximately $49 million. Adjusted net income was $4.6 million compared to $12.6 million last year. Adjusted EBITDA for the fourth quarter was $33.2 million, up from $29.1 million in the prior year. Adjusted EBITDA margin reached 21.4%, expanding 56 basis points year over year. On slide 14, I highlight continued positive cash generation with fourth quarter free cash flow of $3.9 million compared to $1.8 million in the prior year period. For fiscal 2025, free cash flow totaled $34.2 million, marking our third consecutive year of positive cash generation, and this performance reflects strong execution and disciplined financial management across the organization. On slide 15, we continue to reduce our covenant net leverage at the end of the fourth quarter to 3.75 times, versus 3.91 times in Q3 and 4.17 times a year ago. Our leverage continued to decline as a result of stronger operating performance and disciplined cash management. We achieved our goal of being below 4.0 times by year end, which reflects continued progress in strengthening our capital structure. We ended the quarter with $37 million of cash on hand and no outstanding balance on our revolver. Our liquidity position remains solid, and we remain committed to maintaining a conservative balance sheet posture as we continue to execute on our broader financial priorities. Now turning to financial results for full year 2025. Net sales for fiscal 2025 were $613.5 million, representing 1.9% growth compared to fiscal 2024, making this the first full year of reported top line growth since 2021 and a testament to the organization’s focused execution against the strategic initiatives targeted at driving the commercial engine of the business. Excluding approximately $26.8 million of divestiture-related and strategic product rationalization sales from the prior year period, underlying core growth was approximately 6.6%, coming through a combination of price and volume, contributing 2.8% and 3.8%, respectively. Once again, business momentum was broad-based across divisions and channels, reflecting continued traction from our commercial transformation in both B2B and D2C. Gross profit for the year was $266.2 million, an increase of $27.7 million versus the prior year. Gross margin reached 43.4%, an expansion of 378 basis points year over year. Margin performance reflects a combination of pricing benefits and ongoing operational progress, specifically facility-level efficiencies, lower excess inventory adjustments, and improved product quality evidenced by reduced warranty claims. Year-over-year improvement also reflects the absence of the $8.2 million in strategic product rationalization charge recorded in 2024, which had negatively impacted gross margin and EBITDA in the prior year. SG&A, inclusive of R&D, was $165 million for the year compared to $150.9 million last year. Year-over-year changes largely reflected comparison against lower payroll expense in 2024 related to furlough actions, reduced 2024 incentive compensation accruals, increased investment in external sales support, and higher 2025 investment in SOX compliance, cybersecurity, and tariff mitigation initiatives. Net income for the year was $19.2 million, representing an improvement of $42.4 million versus the year end of 2024. Adjusted net income was $21.2 million compared to $24.8 million last year. Adjusted EBITDA for the year ended 2025 was $124 million, up $13.5 million from 2024. Adjusted EBITDA margin was 20.2%, an increase of 191 basis points year over year, and delivering on our commitment of achieving at least 20% EBITDA on an annual basis since the transformation began upon Matt’s appointment in June 2023. Turning to slide 17, where we will walk through guidance for 2026. As we enter the year, the consumer backdrop remains uneven in this increasingly K-shaped economy. Middle- and lower-income households continue to face pressure from elevated prices and tighter credit, while higher-income consumers remain willing to spend. While overall sentiment is still subdued, recent improvements and stable spending trends suggest conditions are gradually stabilizing as we move into the year. We are incorporating these dynamics into our 2026 guidance and outlook, while also recognizing that significant winter weather events impacted consumer spending as we began the year. For 2026 revenue, we are expecting a range of $625 million to $655 million, which implies approximately 4% to 4.5% growth at the midpoint of the range. Our adjusted EBITDA guidance is $127 million to $137 million, representing approximately 6.5% growth at the midpoint. As it relates to capital expenditures, we expect to invest between $15 million and $20 million this year, modestly above our historical range. This increase reflects targeted investments in facility consolidations to drive structural efficiencies, ERP implementation to enhance operational scalability, and incremental product development to support our next-generation EFI platform. We view this as a temporarily elevated level of investment tied to high-return initiatives that strengthen the operating model and support long-term growth, not a structural shift in the capital intensity of the business. In support of this outlook, the financial priorities that have underpinned our transformation remain firmly in place for 2026. On slide 18, you will see the specific objectives aligned to each of these priorities. First, as it relates to profitability through operational efficiency, we are targeting an incremental $5 million to $7 million in savings through continued network optimization, facility consolidation, and disciplined cost actions. Second, improving working capital remains a key focus area. Through enhanced forecasting, tighter safety stock management, supplier negotiation on minimum order quantities, and continued refinement of our SIOP processes, we are targeting $10 million to $15 million in inventory reduction by year end. And third, the combination of earnings growth, working capital improvement, and disciplined capital allocation is expected to further strengthen the balance sheet, positioning us to exit the year below 3.5 times leverage and continue progressing toward our longer-term objective of approximately three times in 2027. Taken together, these priorities reflect a continued commitment to profitable growth, stronger cash generation, and a more resilient capital structure. As we conclude fiscal 2025, we are encouraged by the progress we have made and the foundation we have built for the year ahead. Our focus remains centered on reinforcing our balance sheet, driving sustainable free cash flow, and allocating capital with discipline, all of which support our long-term growth trajectory heading into 2026 and beyond. We are proud of the team for closing the year on a strong note and continuing progress in 2026. This concludes our prepared remarks. We will now open for questions. Operator: Certainly. We will now be conducting a question-and-answer session. As a reminder, a confirmation tone will indicate your line is in the question queue. Our first question is coming from Brian McNamara from Canaccord Genuity. Your line is now live. Brian McNamara: Hey, good morning, guys. Congrats on the strong year and the progress on your initiatives here. So market growth in 2025, can you guys quantify that and what your expectation is for 2026? I know I see a plus 4.3 at the midpoint for guidance versus your historical kind of mid single-digit market growth number? Just trying to assess relative conservatism here relative to market growth. Great. And then secondly, on pricing, 2025 volumes were better than we would have thought. Can you remind us of the timing and frequency of pricing you take in a typical year and how much pricing growth is contemplated in guidance? And is that 8.5 pricing you took last June kind of still working through the P&L? Thanks, guys. Yes, I will see. Jesse Weaver: Yes. I would say market growth last year, I mean, obviously we did pretty strong. And core growth of 6.6%. I want to say based on our intel from the market, out-the-door sales were probably in the 3% to 4% range. So we continued to take share throughout the year and I think that partnership with distribution partners is really paying off there. I would say for next year, Brian, our plan would indicate that the share gains continue, maybe not to the pace that we saw last year, but it is implicit in what we have guided to right now. That. Typically, the pricing cadence is middle of year. We did, obviously, in Q4, sorry, the end of Q2, take some price in the 8.75% and then the Q3 call, we talked about how it was not all completely flowing through. Obviously, we picked up more of that flow-through in Q4. And this year, we are recognizing the market probably does not have a stomach for the level of pricing that we took last year to kind of support the tariff impacts that we are all experiencing. We did take a modest price increase at the very beginning of the year, but I would suspect that that is going to be slightly offset with continued sort of partnership with distribution partners and selective channel margin enhancements to continue to drive growth. So not a lot anticipated there. Or price increase middle of the year at least at this point. Matthew Stevenson: Thanks, Brian. Operator: Thank you. Next question today is coming from Christian Carlino from JPMorgan. Your line is now live. Hi, good morning. Thanks for taking our question and congrats on a strong year. Could you talk about how you are thinking about elasticity as you annualize the impact of tariffs into the second half? Less apparent right now seeing that eight to nine points part because of B2B growing faster. But compared to your typical low single-digit price increases, as that normalizes over the year, to what extent are you assuming an improvement in unit trends to offset this as maybe real wages theoretically tick up later in the year? And just any broader comments on maybe cadence of the year would be helpful. Jesse Weaver: Yes, I would say, Christian, obviously, we talked about the strategy around the pricing increase to make sure we were able to maintain margin and free cash flow. And you can see in our guide, that is playing out. To your question around volume impacts, continuing to see on the out-the-door sales continued growth. I would say there has been in some select areas some volume implications there. But the team is maniacally focused on taking surgical pricing actions to address those things as they come up. You take a shot here and then you kind of refine along the way. I think as we talked about just in the previous question, we do anticipate some volume increases here to achieve our guidance. In terms of the actual cadence of the sales throughout the year, I think as we have talked about in the past, in a perfectly normal year, which no years we all know is perfectly normal, it would be about 52%, 48%. I think that is what we hit last year. Then just depending on inventory levels and how the weather is doing in a particular period, that could shift a bit. And I think you probably heard in my remarks Q1, with the January weather event and then a double whammy with early February weather event in the Northeast, I would say this year is probably going to shape up more like a 51/49 with more of the sales kind of shifting to the back half, but not to veer too far off from that. Christian Carlino: Got it. That is really helpful. And I guess, could you, to the extent you can, quantify the impact from the weather so far this year? And then my question was going to be about are distributors ordering any more aggressively in anticipation of stronger demand during tax refund season or would you expect them to chase if they need to? And, I guess, what is your assessment of both channel inventory levels in terms of their need to potentially chase and then your own inventory levels in terms of your ability to fulfill that if they end up needing to chase inventory? Thanks. Matthew Stevenson: Yeah. Sheila. You want to go for it? Yes. Christian, generally speaking, what we are seeing, to Jesse's point, is the out-the-doors are pretty healthy. With that said though, there were some weeks there in late January and early February that impacted all of us, including our distribution partners, quite significantly as people were bearing out from either ice or snow. And so if you take those out of the equation, like I said, the out-the-doors are pretty healthy. And then the month of March, just for the seasonality of the business, the month of March is a big month and at the same time we run a promotional event or marketing calendar to capture that demand as the season starts to pick up. Now in terms of any out of the ordinary stock-ups or anything for tax refund season or anything, we are not seeing anything out of the ordinary there. And then generally speaking, inventory levels, taking into consideration those weeks that were quite slow due to the weather conditions, they are a little heavier. But that would be the only real indication of impact on the inventory levels. Christian Carlino: Got it. Thank you very much. Best of luck. Operator: Thank you. Next question is coming from Bret Jordan from Jefferies. Your line is now live. Bret Jordan: Hey, good morning, guys. Hey, Brett. Good morning. You commented on seeing some recent consumer improvement. I guess when you think about the four segments of the business, are any of those more cyclical than others? Is Euro and Import more of a luxury buyer who is less sensitive? I guess, when you look across the portfolio, are there areas that are brighter than others? And then within chemicals, I guess it looks like a sort of an expansion year for that. Could you talk about the TAM and sort of maybe the margin profile of that category and has it become a fifth segment? Or is this sort of just overlaid across the existing business lines? Matthew Stevenson: Yes, Bret. And, you know, I think in Jesse's prepared remarks, she talked about that K economy. We see it in our portfolio. In the Euro business, you saw the robust growth there that we had in 2025, significant double digits there on the core up over 20%. And so those buyers of Euro cars tend to be more affluent. We are also seeing some of those patterns in our safety business around our Stilo brand, which is ultra premium. You almost consider them luxury helmets in the motorsports segment. We are seeing phenomenal growth on that segment as well. But generally speaking, things are still generally healthy across the portfolio per numbers that we provided there for 2025, but you are definitely seeing some spikes driven by more of that K economy phenomenon with a more affluent customer. Yes. We have actually bucketed it in our American Performance vertical under our accessories group, just because the kind of the legacy nature of some of our existing portfolio focuses there. But on chemicals, they are great margin products for us. And we just saw natural expansion opportunities based on our enthusiast consumer base. So we recently introduced the NOS Octane Booster, which is now getting placement in retailers, which is very exciting. And then as we get into 2026, in the back half of the year, we will introduce a new car care line, which with the reach we have with millions and millions of enthusiasts just makes complete sense. So we are really excited about that. And eventually, we will have a strategy; it takes a little longer to get into national retailers and such, but eventually that is the goal to get that on shelves as well as third-party marketplaces and our own e-commerce platform. Bret Jordan: Okay. Great. Thank you. Matthew Stevenson: Yes. Thanks, Bret. Operator: Thank you. Our next question is coming from Joe Feldman from Telsey Advisory Group. Your line is now live. Joseph Feldman: Hey, guys. Good morning and congrats on the quarter and the year. Wanted to ask, can you share a little more color on the ERP and the WMS system? Maybe just remind us what is the plan for that this year, like, how that gets implemented, because, you know, occasionally, that can be a little bumpy and I know you guys said you have more work to do there. Just curious if you could share more thought on that. Okay. That is helpful. Thanks. And then with that, I know everybody asks about AI these days, so I figured I will ask too. But are you incorporating or will the new systems allow you to incorporate AI to maybe for better design or better, you know, demand visibility, things like that. Got it. Thank you. And then maybe just one quick one for Jesse. Well, I do not know it is quick, but can you share a little more color? You talked about, I guess, some operating expense savings. Presumably, does that mean we will see that line versus gross margin? Like, maybe you can share a little color on the collection for 2026, how those should shape up? Matthew Stevenson: Yes, appreciate the question. Joe, this year, it is mostly just preparation alignment that also drives some capital expense in Jesse's outlook. Really for the implementation go-live more in early 2027. But right now, the team, of course, has a lot of work to be done prior to going live, and that investment will happen. But in terms of any potential business impact, our job, of course, is to make sure that does not happen, but that would not even be on the table here for 2026 regardless. Yes. I mean, the team is already using AI in various facets. But, yes, the more modern ERP will allow other API plug-ins and AI to continue to evolve our competencies around that. So that is one of the many benefits that we see in the new ERP implementation. Jesse Weaver: You are asking, Joe, where will the $5 million to $7 million in operation savings come in and the timing of that? Yeah. I mean, obviously, we do not break those out in our guidance, but it would be pretty much like the operating savings line is also kind of helping with mitigating some of any pressure that would be residual from tariff mitigation actions as well. So you will see most of that just flow through the gross margin line. And then on the SG&A side, it is just more the margin expansion there is just through leverage on fixed cost. Joseph Feldman: Got it. Okay. Thank you, guys. Good luck with this quarter and year. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments. Matthew Stevenson: All right. Thank you, Kevin. Slide 20 underscores a compelling investment narrative for Holley Inc. We operate in a nearly $40 billion passion-driven market where loyalty runs deep and performance matters. With a portfolio of iconic, innovation-led brands, Holley Inc. holds a clear leadership position. In addition, we have a proven track record of disciplined M&A and value creation through integration. Looking ahead, we see meaningful opportunity to expand our digital ecosystem, enhancing how enthusiasts and distribution partners engage with our brands and further strengthening our competitive advantage. Our long-term commitments are clear: deliver mid single-digit organic top line growth, maintain 40% gross margins, maintain at least 20% adjusted EBITDA margins, generate sustainable free cash flow, and pursue disciplined, value-creating acquisitions. In closing, 2025 was defined by consistency and discipline. We delivered core growth every quarter, expanded margins, generated meaningful free cash flow, and reduced leverage below our target, all while continuing to invest in innovation, customer relationships, and operational excellence. We enter 2026 with a stronger foundation, greater financial flexibility, and a clear focus on disciplined, profitable growth. Thank you to our team members, our passionate enthusiasts, and our longstanding distribution partners for the commitment that drives our collective success. We thank you for your participation today and have a great day. Thank you. Operator: Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good day, and thank you for standing by. Welcome to Wix.com Ltd. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Emily Liu, Investor Relations. Please go ahead. Emily Liu: Thanks, and good morning, everyone. Welcome to Wix.com Ltd.'s Fourth Quarter and Full Year 2025 earnings call. Joining me today to discuss our results are Avishai Abrahami, CEO and Co-Founder, Nir Zohar, President and Co-Founder, and Lior Shemesh, our CFO. During this call, we may make forward-looking statements and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20-F that could cause our actual results to differ materially from these forward-looking statements. We do not undertake any obligation to update these forward-looking statements. In addition, we will comment on non-GAAP financial results and key operating metrics. You can find all reconciliations between our GAAP and non-GAAP results in the earnings materials and in our interactive analyst center on the investor relations section of our website, investors.wix.com. With that, I will turn the call over to Avishai. Avishai Abrahami: Thanks, Emily. 2026 is shaping up to be a defining year and the start of a new chapter shaped not just by the continued shift toward AI, but by AI beginning to prove its real-world value and utility more broadly. At Wix.com Ltd., we expect to begin to see the bold bets we have made over the past few years translate into measurable impact. When we founded Wix.com Ltd. twenty years ago, our vision was straightforward. Make Wix.com Ltd. the go-to platform for anyone, anywhere to create online. Over the years, we have delivered on that ambition. What started as a simple do-it-yourself website builder has grown into the leading online presence creation platform serving not just self creators, but also businesses of all sizes as well as professional designers and developers. In recent years, the web has undoubtedly become much more AI-first. That shift is redefining how and what people build online. AI has dramatically expanded the world of what is possible and created new dimensions that had not existed before. As a result, Wix.com Ltd.'s market opportunity today is exponentially larger than in 2025, primarily driven by our expansion into the application space facilitated by our acquisition of Base 44. This total addressable market expansion has advanced us leaps and bounds towards achieving that long-term vision of being the go-to place for anyone to build whatever they can imagine online. With the addition of Base 44 to our platform, users can now build tailored software applications, smart mobile applications, pro-level visual content, and, of course, websites, but so much more powerful and sophisticated than ever before. These are all things you can create on Wix.com Ltd. today, which is incredible, but the possibilities ahead are much, much bigger. Importantly, as our business and time have evolved over the past twenty years, and will continue to evolve over the next twenty, we remain focused on simplifying very complex technologies and making them accessible to anyone and everyone. Today, there are two new cornerstone offerings to advance our vision. The first is Wix Harmony. Wix Harmony is the first-of-its-kind website creation platform that blends intuitive visual editing with the flexibility and power of Vibe coding. Wix Harmony provides a unified AI layer that spans across the full Wix.com Ltd. experience, allowing for a real AI partner to be with you every step of the way as you create, manage, and grow an online presence or business. After launching in English in January, we are now expanding Wix Harmony globally in other languages, and I am very pleased with the early performance we are seeing, particularly across conversion and monetization metrics. We believe Wix Harmony has the potential to fundamentally reshape how individuals and small businesses build and scale online, not just on Wix.com Ltd., but across the Internet as it becomes increasingly AI-driven. Over time, we plan to gradually make Harmony the default experience for new and existing users, an evolution we anticipate will drive meaningful long-term impact across conversion, engagement, retention, and monetization. The second new pillar of our strategy is Base 44, our leading Vibe coding platform that expands our reach into the vast world of software creation and significantly grows our TAM. We are equally ambitious in this new world as we are in the world of website creation. Through innovation and strong marketing execution, Base 44's user base is scaling rapidly. Today, the number of new users joining Base 44 is nearly two-thirds of the number of new users joining Wix.com Ltd. This is an indicator of the platform's accelerating momentum and highlights the opportunity ahead to empower a massive and compounding cohort of users to build whatever they want online. Just one year after Mauer founded the company and nine months after our acquisition, Base 44 recently reached approximately $100,000,000 of ARR, placing it among the fastest growing software platforms in history. While Base 44 is already emerging as a top platform to build lightweight personal projects, we are seeing adoption from a growing community of businesses and enterprise-sized organizations too. Companies in the tech, banking, and healthcare industries, as well as government organizations and nonprofits, are using Base 44 to build customized software solutions. We are seeing users develop their own CRM capabilities, product and project management tools, ERP systems, workflow automation frameworks, and financial reporting applications. Importantly, this momentum and growth is completely organic. With no sales team at Base 44 today, self-propelled adoption by enterprise-size organizations demonstrates the strength of the platform as well as our successful marketing execution. As much as we are pleased by the success so far, I believe the real potential still lies ahead as Vibe coding permeates beyond early tech-forward adopters to the broad online population. I have not been this excited to kick off a new year in a long time. In just the first two months, we have made bold moves across both our product roadmap and capital strategy, which Nir will speak about shortly. We are confident in our strategy, our ability to execute, and the opportunity in front of us as the Internet shifts further towards AI. Wix.com Ltd. is reshaping how people create in this AI era and significantly expanding what is possible to build online. With that, I will turn it over to Nir. Nir Zohar: Thanks, Avishai. I would like to start with Q4 user cohort trends and what we are seeing there today before discussing our capital strategy and the announcement made today. As we closed out 2025, our new user cohorts exited the year with strong momentum. In the core Wix.com Ltd. business, new cohort bookings maintained double-digit growth in the fourth quarter, fueled by a healthy top of funnel, higher conversion from free to paid subscriptions in key markets, and increased monetization per user. When we include Base 44, new cohort bookings growth accelerated very meaningfully quarter over quarter, driven by particularly robust demand for Vibe coding capabilities. This strength we saw in our new cohorts also extended to existing core Wix.com Ltd. users. Our users are more active, engaged, and impactful than ever, demonstrated by resilient revenue retention in 2025. With net revenue retention of 105% in 2025, we nearly matched the strong retention we saw in 2024 despite the persistent GPV headwinds throughout 2025. This demonstrates that the inherent stickiness and creation power of our user base continues to improve. The strength of this user base supported by high retention and growing user value is also reflected in the projected ten-year value of existing cohorts, which grew 14% year over year. For the first time ever, we now project over $20,000,000,000 in future bookings over the next decade from current Wix.com Ltd. users. This opportunity exists within just our core Wix.com Ltd. business and does not yet include Base 44, where the potential is both new and much larger. Throughout the year, we continued to increase user value as both new and existing users demonstrated better monetization. This was a result of a steady shift toward higher-tier subscriptions, greater adoption of business solutions, and GPV growth. Paid subscription volume in our key markets, particularly in the U.S., where we generate a majority of our revenue, increased year over year in 2025. Additionally, business subscriptions made up a significantly larger share of our total subscription mix in 2025 compared to 2024. Looking into 2026, these positive cohort dynamics are gaining more momentum in these early months of the year. New cohort bookings growth in the core Wix.com Ltd. business has accelerated compared to last year's already very strong cohort growth. This is a direct result of Wix Harmony, which is helping both new and existing cohorts convert more effectively, build more, and capture greater value. Finally, before I turn it over to Lior to walk through our financial and 2026 expectations, I would like to make a few comments on our repurchase plans for this year and the equity investment we announced this morning. As you heard from Avishai, we have a bold and ambitious strategy centered around reshaping the possibilities of online creation over the next few years. We believe the products we are building today will drive accelerating growth in the core Wix.com Ltd. business over time, as we extend our leadership as the go-to AI-powered online presence creation platform globally, notably with Wix Harmony. In tandem, we are seeing explosive growth at Base 44, which we expect will become a profitable and meaningful long-term growth engine. Accordingly, we believe that our current stock performance greatly undervalues these opportunities as well as the fundamental strength of our business. So, taking full advantage of this and demonstrating our immense conviction in our strategic plan, we expect to complete the large majority of our $2,000,000,000 repurchase program this year. We plan to do this as quickly and aggressively as we can. Sharing in our conviction, Durable Capital Partners has led a $250,000,000 equity investment in the form of a private placement of our ordinary shares and warrants. In addition to being highly respected equity investors, Henry, Anuk, and the team have been longtime supporters of Wix.com Ltd., and developed a deep understanding of our business. Their investment is a powerful endorsement of our long-term vision and ability to execute as we build the next era of the Internet. We are thrilled to partner with them as we pursue our strategy, accelerate growth, and create lasting value for our users and shareholders. With that, I will hand it over to Lior. Lior Shemesh: Thanks, Nir. We exited 2025 with strong cohort momentum, a clear strategic plan and poised for continued growth in 2026. We are delivering on our ambitious product roadmap. At the same time, our cohorts are strengthening, as Nir discussed, driven by positive early behavior from Wix Harmony and continued outperformance of Base 44 as we expand our reach across the entire online creation journey. We expect 2026 to be a pivotal year as we make category-defining innovations and expand our leadership across the broader online ecosystem as AI tech increasingly makes the impossible now possible, setting the foundation for long-term growth acceleration. Before I get into our expectations for 2026, I want to quickly recap our Q4 and full year 2025 results. Bookings and revenue growth were healthy in the fourth quarter, building on the incredibly strong growth we saw in the same quarter last year. Total bookings in Q4 were $535,000,000, up 15% year over year, while total revenue was $524,000,000, up 14% year over year. Top-line growth was driven by strong new cohort behavior and solid retention of our existing user base in our core Wix.com Ltd. business as well as Base 44 outperformance. Base 44 finished the year with approximately $59,000,000 of ARR, above our expectations at the time of acquisition. Excitingly, Base 44 recently reached approximately $100,000,000 in ARR, a major milestone that underscores our rapid growth and growing market leadership. Strong ARR growth was driven by product innovation that has resonated, a rapidly expanding user base, improving conversion, and consistent upgrade and renewal trends. Overall strength in Q4 was tempered by continued GPV headwinds, as SMBs on the platform saw macro pressure resulting in seasonally softer than anticipated GPV on the platform. Encouragingly, higher-selling and larger businesses increasingly come to Wix.com Ltd. to build and operate their storefronts. GPV grew 11% year over year to $3,700,000,000 in the fourth quarter, and 11% year over year to $14,300,000,000 for the full year. GPV growth coupled with a steady increase in take rate throughout the year drove year-over-year transaction revenue growth of 18% in Q4 and 19% in the full year. Partners revenue grew 21% year over year to $203,000,000 in Q4, driven by solid studio performance as well as strong adoption of Google Workspace and marketing solutions. This was partially offset by the GPV headwinds I just mentioned. Turning to margins, fourth quarter total non-GAAP gross margin ticked down slightly sequentially and year over year to 68% as expected, and total non-GAAP operating income came in at 15% of revenue. Lower total non-GAAP gross margin was driven by investments in Base 44 to support its rapid growth. We continue to incur elevated AI compute cost as we scale to meet stronger than expected Base 44 demand and maximize gross profit dollars. We believe these AI costs to be front-loaded as new users consume more AI inference bandwidth during their initial build phase. We anticipate non-GAAP gross margin for Base 44 to improve sequentially throughout 2026 as we proactively optimize AI model usage and costs primarily through enhancing prompt caching, batching requests, focused model routing, and more favorable pricing from LLM providers. Approximately one-third of Base 44's AI inference cost today is attributed to token consumption of free users, and included under S&M expenses in the fourth quarter to align with industry standards. We believe AI costs incurred by free users as a percentage of total AI cost will decline over time as conversion improves. Even after incorporating AI-related costs associated with free users into cost of revenue, Base 44's non-GAAP gross margin is already positive today, reflecting healthy underlying unit economics that we believe will continue to improve. We expect Base 44 gross margin to increase as the year progresses. Higher operating expenses in the quarter were driven by accelerated advertising and branding investments into Base 44 against our tROI target, which currently stands at less than twelve months. These increased investments were anticipated as we captured elevated top-of-funnel traffic exiting the year. Non-GAAP gross margin and operating profit margin in our core Wix.com Ltd. business improved sequentially and year over year, driven by healthy top-line growth paired with a stable and disciplined operating cost base. We exited the year with free cash flow of $156,000,000 in Q4, or 30% of revenue. Fourth quarter free cash flow in the core Wix.com Ltd. business was stable compared to the previous quarter. Moving on to 2025 full year results, total bookings in 2025 grew to $2,070,000,000, up 13% year over year. Total revenue in 2025 was $1,993,000,000, an increase of 13% year over year. Total consolidated ARR was $1,836,000,000 at the end of year, up 14% year over year. Total non-GAAP gross margin was stable for the full year, while non-GAAP operating margin declined modestly as investments in Base 44 offset non-GAAP growth and operating margin expansion in the core Wix.com Ltd. business. We generated free cash flow excluding acquisition-related expenses of $605,000,000, or a milestone 30% of revenue in 2025. Turning now to what we expect in 2026. With new cohort momentum driven by Wix Harmony and the continued outperformance of Base 44, we anticipate bookings and revenue growth to accelerate this year. Before I get into the numbers, I want to comment quickly on our updated guidance philosophy. As innovation evolves our opportunity set and expands Wix.com Ltd.'s TAM into new areas, we are refining our guidance approach to reflect a broader range of potential outcomes. So for the full year 2026, we expect bookings and revenue for the consolidated business to grow at mid-teens percentage year over year. For 2026, we expect revenue for the consolidated business to grow at a mid-teens percentage on a year-over-year basis. We expect innovation-driven growth to be accompanied by high-impact but disciplined investments to fully unlock the market opportunity ahead for both Wix.com Ltd. and Base 44. For the full year 2026, we expect free cash flow margin in the low to mid-20% range assuming current capital structure excluding acquisition expenses. This wider than normal guidance range reflects the dynamic hyper-growth trajectory of Base 44 and the inherent variability that accompanies this level of rapid growth. We are playing to win and are willing to make the necessary investments in order to scale Base 44 into the market leader. So if Base 44 top-line growth outperforms more meaningfully, we may experience further pressure on near-term free cash flow margins. In our core Wix.com Ltd. business, we expect solid bookings and revenue performance with flat to expanding free cash flow margin for full year 2026. In addition to accounting for our current capital structure and the exclusion of acquisition costs, this expectation also takes into account, one, a material currency headwind on our total payroll expense base net of our hedging activity as the U.S. dollar continues to significantly weaken against the Israeli shekel; two, negligible AI inference costs associated with Wix Harmony as a result of proactive infrastructure optimization completed last year. 2026 is shaping up to be a foundational year as we drive forward innovations that we believe will cement Wix.com Ltd.'s leadership and expand our role across an evolving online creation ecosystem. Operator, we are now ready for questions. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Brad Erickson with RBC Capital Markets. Your line is now open. Brad Erickson: Guys, thanks for taking my question. I have a couple. First, if we look at the organic growth you are embedding into the full year bookings guide, can you lay out and maybe rank some of the contributors there between, you know, thinking about things like payment volumes or subscriber mix shift or pricing? So start there. Lior Shemesh: Hey. This is Lior. So we do not assume a significant change. We do not assume any increase in pricing or change in pricing. I believe that the entire guidance that we provided for 2026 actually reflects the growth that we see within the Wix.com Ltd. core business and Base 44. But beside that, I cannot indicate something that is kind of extraordinary. The same goes for GPV payments and so on. Brad Erickson: Understood. That is helpful. Thanks. And then just stepping back, what types of businesses or applications are you seeing users set up with Base 44? And how much crossover is there with what you see on Wix.com Ltd.'s core platform? Are they, would you say, kind of a decidedly different customer profile, or do you see some of those folks making a choice between the two? Thanks. Avishai Abrahami: We see many different kinds of applications. People are building things for themselves, their family, and then personal growth applications, all the way for applications for the business, for their enterprise application machine. And replacement in companies, SDR, estimations, a lot of different things. Really, it is a huge variety. I think that is one of the things that makes us so excited about Base 44. It looks like people are so creative and the TAM for that, because of that, is essentially infinite. We do not see any kind of competition, and you can see that they are very mostly different usage also, as you can see now. Clearly, Harmony is accelerating, Base 44 is accelerating. So, obviously, we do not think they take from each other. Right? Brad Erickson: Got it. Thanks. Operator: Thank you. Our next question comes from the line of Josh Beck with Raymond James. Your line is now open. Josh Beck: Thank you for taking the question. Kind of a higher-level question with Base 44. It seems like it is skewing upmarket, and then, obviously, Harmony is kind of more geared towards the self creator. So do you see those trends persisting in terms of the segmentation? And how far upmarket do you expect Base 44 to go? And then a financial question related to Base 44. Lior, I believe you said about a third of the inference costs are coming from the free users. I think that is kind of a snapshot for today. Is that happening maybe quicker than you had anticipated, meaning the conversion of free to paid is happening at a pace maybe above your expectations? Would love some comments there. Thank you. Nir Zohar: Hey. It is me. I will take the first one. In terms of the self creators question and the more upmarket, I think definitely on the Harmony side, Harmony is a product we built for the self creators. So I think the association you are making between self creators and Harmony is the right one. For Base 44, as Avishai just said before, the range of opportunities in terms of the kind of usage is still extremely wide. And it makes sense. It is really a very vast TAM in the making, and it is expanding all the time. So we are seeing all kinds of usages. By the way, I think we are definitely also seeing a lot of personal use as well on Base 44. And there, I think it is too early to say whether it is more of one or the other. And to be honest, I think we are going to work very hard to help it segment over time to try and win on both ends for Base 44. Lior Shemesh: I will take the second question. Yes, about one-third as of now is related to free users. Look, I believe that when we started it was higher than that. I think that we keep on increasing conversion, which is a really, really good sign. And we also become much more efficient in terms of how we use the model between the different types of users. So I do believe that the portion related to that will decrease in the future, as the overall cost will decrease. Josh Beck: Very helpful. Thanks, guys. Thank you. Operator: Our next question comes from the line of Ken Wong with Oppenheimer and Company. Your line is now open. Ken Wong: Thanks for taking my question. Great to see the amazing Base 44 outcome. Can you give us a sense for what accelerated that growth sequentially? And I realize you are still working through some of the details, would love to get a sense for what the Base ARR bookings look like in fiscal 2026 that is reflected in the free cash flow margin guide of low to mid twenties? Lior Shemesh: So, yes, we do see an acceleration and, in a way, also better than what we expected. I think that the fact that we have already gotten to $100,000,000 of ARR actually reflects that. And with regard to the assumptions about the bookings, we do not break it down between Wix.com Ltd. and Base 44. You know, we believe that it is already an organic product internally, and we are not relating it separately. You know, a big part of Base 44 growth is actually based on the synergy with Wix.com Ltd., and it is super important to understand it. Therefore, we are not going to provide separately between Base 44 and Wix.com Ltd., but we did mention the ARR and also the growth of the ARR that should give you a very good indication of what we assume with regard to that. We are very optimistic about it. Ken Wong: Fantastic. And then if I could have just a quick follow-up. I think the early guide was that you would see second-half acceleration of the core, specifically partners. It does seem like it maybe downticked a little bit. We would just love to get any color from you in terms of what you saw in Q4 on the core legacy base business? I mean, Wix.com Ltd. business. Sorry? Lior Shemesh: Yeah. Sure. We actually saw acceleration in Q4 from partners. I mean, we said from the very beginning of the year that we will see acceleration of core Wix.com Ltd. in the second half of the year. This is exactly what happened. The only thing that was not expected is some kind of modest softness in GPV. That was partially compensated by the fact that we see a better growth in terms of subscriptions. So I think that if you look at the second half of the year for Wix.com Ltd., we actually did see some acceleration also in the fourth quarter, mostly coming from our creative subscriptions. Ken Wong: Fantastic. Thank you very much. Operator: Thank you. Our next question comes from the line of Andrew Boone with Citizens. Your line is now open. Andrew Boone: Thanks so much for taking my questions. I am sorry, I am at the airport; there is a little bit of conversation going on. Can I ask, in terms of Base 44 and LTV, if I think about the payback period of one year, how do we think about that now that you are just having customers that are hitting that one-year mark? How are you guys estimating the LTV or the payback period using that framework as you guys define CAC for Base 44? And then I would love to ask, it looks like about $30,000,000 of acquisition cost in 2025. Can you guys ring-fence what that would look like for 2026 and how we should think about that within the free cash flow guide? Lior Shemesh: Thank you so much. Sure. So you are right. I mean, Base is a very young company, very young product. And, by the way, this is why we are very also conservative about the guidance. But right now, based on the information that we have, based on the history that we already have, we are looking at less than one year of tROI and this is how we manage the acquisition cost. I think that it is very important to mention right now that we are investing for growth. We are not necessarily trying to optimize our gross margin. We are optimizing dollar profit. And right now, we intend to invest in growth. And, by the way, you can see that also reflected in part of our free cash flow guidance. So with regard to the tROI, by the way, it is the same Wix.com Ltd. playbook that we have used for many, many years, and we are very good at it. With regard to the $30,000,000 acquisition cost in 2025, definitely, it is going to be higher in 2026 because we see the demand in the market and, as I mentioned before, we plan to pursue that. We plan to go and make sure that we will continue to get a lot of market share and expand this business. We see a great potential about this business. Andrew Boone: Thank you. Operator: Thank you. Our next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald. Your line is now open. Deepak Mathivanan: Hey, guys. Thanks for taking this. So one on Harmony and then one on OpenAI partnership. First, you noted that with the early region Harmony, you are seeing improving conversion. What type of users are you seeing initially? Are you seeing perhaps more sophisticated tech users adding advanced capabilities to their websites with some of the more traditional SMBs? Is Harmony helping the capabilities of the websites become more at all in the early days? Can you talk a little bit about that? And then on the partnership with OpenAI for Apps SDK, in addition to just integrating for a new website creation when Wix.com Ltd. is invoked as an app, what are some of the other benefits in terms of how ChatGPT is navigating the website created by Wix.com Ltd. that you are potentially seeing? Any color you can add on how deeper this partnership can evolve over time. Thank you so much. Avishai Abrahami: Of course. So for the first part, we are pretty much seeing everybody using Harmony that was using Wix.com Ltd. before. So it is everything from personal websites to the hair salon website to large company and enterprises, so pretty much everybody. At this stage, Harmony does not support a database, but that will be added soon. So a bit less ticketing and websites, but nothing major. As for your other question, can you repeat it, please? It was breaking for me. Deepak Mathivanan: Sure. In addition to the apps partnership with OpenAI, do you see potential opportunities in terms of how Wix.com Ltd. websites are navigated and searched by OpenAI in the future, particularly ChatGPT? Avishai Abrahami: Well, yeah, of course. I think that it is a very big subject. I think that all we are seeing, and if you remember a year ago, I spoke about the fact that it is very unlikely that the LLM companies will build in back for the various services, and so they are probably not going to build all the e-commerce stuff and are not going to build databases for businesses. They are going to bring the layer of intelligence on top of that. And this is just one example where we allow Wix.com Ltd. users to build, with the intelligence that OpenAI provides, their website. Right? It is even more interesting because it is an intelligence which is talking to the intelligence of the site. I mean, this creates tremendous opportunities for the future. There is so much more we can do there. And because it is not APIs in the standard way, it is essentially two intelligences that are discussing and working together to give you a website. And that is a fantastic pattern that can be grown a lot. As for how OpenAI or any other LLM can read Wix.com Ltd. sites, we support pretty much everything. We support, of course, make text. If our customers choose so, we can make the text visible and easy to crawl and built in a way that is very easy for the LLMs to process. And we also have ways so we can give the LLMs more than just the content that we normally offer over the website, because LLMs like to read a lot of content, when humans tend to want to read less. So this is one option. We, of course, support the ICP on every Wix.com Ltd. website and pretty much every ad standard. I think that this is not a small step in the long roadmap of how we collaborate and create the new Internet, an agent Internet, but for humans. So you still need the visualizer, still need the designer, still need to buy products. However, you want to create the ability for it to work together for humans to have a better experience. Got it. Thanks, Deepak. Operator: Thank you. Our next question comes from the line of Trevor Young with Barclays. Your line is now open. Trevor Young: Great. Thanks. First question, just on premium subs. The decline persisting there even when layering in Base 44. I appreciate the commentary that growth in key markets like the U.S. was positive. That metric is still negative for the second year in a row. Why is that? And how much more churn is there among these lower-value subs? Nir Zohar: Hi, Trevor. It is me here. So I think, as a reminder, this is very much aligned with our strategy around bringing value to the cohorts and prioritizing, I think, cohort value over the subs. And it is something we have been pursuing for a few years now and have been talking about. And, again, throughout the year, we have seen more opportunities around geographies and areas where we can go higher-value subscription, which is why we prefer to go after those. So you can, obviously, see the lower net subs, but you are seeing the higher value that comes into the cohorts over time. Trevor Young: Thanks for that, Nir. And just a follow-up question. How should we think about the composition of growth between self creator and partner in 2026? Is partner now kind of like a low-twenties grower, or could that slow further? And then on self creator, clearly, that will pick up from the contribution from Base 44. But should we assume that the core Self Creator business remains stable given that Harmony is coming in at the same price points as the older Editor product? Thank you. Lior Shemesh: Yes. I think that for self creator, you should assume that it is stable. Actually, when you think about it, we do see some acceleration in terms of the new cohorts. I think that we already indicated that in the performance of Harmony. So it mostly has a very positive impact on self creators, especially for the new cohorts. Remember that most of the cohorts are already performing, meaning that most of the effects of Harmony is on new cohorts. So we are going to see that over time. With regard to partners, we have a lot of innovation that we are going to do in the near future. But also, Trevor, remember that Base 44 has a ton of interesting things for our partners that they can actually use for their customers, and it is more revenue stream for them. So we believe that although right now most of it is self creator-led, we believe that it is a great opportunity also for partners to use Base 44 in the future. Trevor Young: Thanks, Lior. Thank you. Operator: Our next question comes from the line of Mark Zegutovich with Benchmark. Your line is now open. Mark, do you want— Mark Zegutovich: Thank you. Question on Harmony, then I had a follow-up on your partnerships. But on Harmony, just curious what the early cohort KPIs that you are seeing there in terms of conversion, ARPU, attach rate, churn, relative to the traditional cohorts and how durable you see these KPIs across your geos? Lior Shemesh: So I will start with Harmony. As we mentioned, we see a very good performance of the new cohorts. We actually see a better conversion, faster monetization, and also higher ARPU. So we believe, we hope that this strong trend will continue. Again, I think that it is too early, but we feel very positive about the first reaction and performance of this product, which, in a way, we expected that, but it is always nice to see that. Mark Zegutovich: Got it. And then in terms of the LLM partnerships you have, OpenAI with Harmony and Anthropic via Base 44, curious how the economics work here and specifically the revenue split with these partners. And then within Wix.com Ltd. and ChatGPT, that framework there, what percent of new Harmony sign-ups do you expect to come here over time, and how do you manage a theoretically lower platform or take rate if these AI interfaces become your major distribution partners? Thank you. Nir Zohar: Hey. It is me. So, first of all, obviously, we cannot go into economics we have with different deals and agreements we have with the LLM partnerships. I think it is worthwhile mentioning that we actually have quite a few different kinds of cooperations and partnerships and joint ventures with each and every one of them on completely different areas of the wide range of infrastructure that Wix.com Ltd. has and supports. On the Wix.com Ltd. side, the Base 44 side, we have been doing research with them for many, many years now, so also the research teams are very tightly connected on the Anthropic side, on the Google side, on the OpenAI side, and others. I do not think, and currently we are not assuming, any kind of impact specifically on the Wix.com Ltd. inside GPT thing. So I cannot comment on changes that are being incurred because of it. If it becomes, over time, for some reason, a much more significant stream, then, obviously, we can address that. But for the time being, we do not expect that to be significant. Mark Zegutovich: Got it. Thank you. Operator: Thank you. Our last question comes from the line of Mike McGovern with Bank of America. Your line is now open. Mike McGovern: Hey. Thanks for taking my question. For Base 44, when you think about going from about $60,000,000 in ARR exiting the year to now over $100,000,000, or close to $100,000,000, in such a brief period of time, can you just double-click on what was able to accelerate that growth? I know they have added a couple key features like payments. Is there anything else in there? Nir Zohar: So I do not think we can point to one specific product release or change. And also, you have to remember that the cadence of improvement and innovation there is massive. So there is much more that is happening all the time. But it is a combination of the ability to increase the user base, the increase in incoming first and foremost because there is more and more brand awareness. We did a Super Bowl campaign, which definitely did not hurt and was very beneficial. And the brand awareness grows, and also, I would say, as the awareness to the category grows for more and more people, obviously, the demand is increasing. And then we match that demand with our stellar marketing team that has been working very diligently to ignite and push the Base 44 growth over time. And then I would say definitely the product is improving. And also, we keep on optimizing many, many parts of both the funnel, the product, the business model. We are basically taking so many things out of the Wix.com Ltd. playbook and everything we learned over the past two decades in how to run a successful subscription business, and we applied to Base 44 in the right relevant way. And I think you are seeing the results. Mike McGovern: Got it. And then when we think about tokens and free tokens for trial users within Base 44, much of that, when we think longer term, is somewhat self-inflicted in that S&M expense increase, and you could just lower that over time as Base 44 scales and awareness grows. Nir Zohar: Well, I think it is a great question, and we will keep on testing and understanding where the threshold should be. We can definitely find ways to move the threshold as time progresses. We do think that having the free tokens there and having a freemium model is great because you want to give people the opportunity to test-drive, to pilot the product and try it out. And we think that, obviously, the people who are gaining value from it will continue, and those are the people we will monetize immediately. The ones who do not may come back later on, and we have seen the same thing when we were building the Wix.com Ltd. freemium model. Whereas, again, Base 44 is a very young product, on the Wix.com Ltd. cohorts, we are seeing people who are converting who joined us ten or fifteen years ago. That is amazing. So, over time, building a big cohort base where people can experience your product, love your product, but if they do not necessarily need it right now, will come back to it later is a big benefit. But that being said, we definitely think there are more things we could do to hone the business model over time, and we will align that as we go forward. Mike McGovern: Thank you. Operator: Thank you. This concludes the question-and-answer session. Thank you all for your participation on today’s call. This does conclude the conference. You may now disconnect.
Operator: Greetings. Welcome to the Horizon Technology Finance Corporation Fourth Quarter 2025 Conference Call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, note this conference is being recorded. I will now turn the conference over to Megan N. Bacon, Director of Investor Relations and Marketing. Megan, you may begin. Thank you, and welcome to Horizon Technology Finance Corporation's Fourth Quarter 2025 Conference Call. Representing the company today are Michael P. Balkin, Chief Executive Officer, Paul Seitz, Chief Investment Officer, and Daniel Raffaele Trolio, Chief Financial Officer. Megan N. Bacon: I would like to point out that the Q4 earnings press release and Form 10-Ks are available on the company's website at horizontechfinance.com. Before we begin our formal remarks, I need to remind everyone that during this conference call, the company will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believes, expects, anticipates, intends, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements, and some of these factors are detailed in the risk factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended 12/31/2025. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Horizon Technology Finance Corporation's CEO, Michael P. Balkin. Michael P. Balkin: Welcome everyone, and thank you for your interest in Horizon Technology Finance Corporation. Today, we will update you on our quarterly performance and the current operating environment. Paul Seitz, our Chief Investment Officer, will take us through recent business and portfolio developments as well as the current status of the venture lending market, and Daniel Raffaele Trolio, our Chief Financial Officer, will detail our operating performance and financial condition. We will then take questions. 2025 was a year of transformation for Horizon Technology Finance Corporation in many respects. While we navigated a number of micro and macro challenges throughout the year, we believe we have been able to successfully lay the groundwork for Horizon Technology Finance Corporation to succeed over the longer term. While the government shutdown in the fourth quarter led to our merger with MRCC being delayed into 2026, we are excited to be holding our special meeting shortly and hopefully closing the merger in the weeks ahead. As a reminder, closing the merger will significantly increase Horizon Technology Finance Corporation's capital available for investment in earning assets and allow it to take advantage of greater economies of scale in the combined vehicle. Additionally, Monroe Capital, which is the parent company of Horizon Technology Finance Management, will be continuing to provide ongoing support to the post-merger company. As a result, we expect you will see an even more coordinated and synergistic effort between Monroe and Horizon Technology Finance Corporation in 2026, which is already evidenced by Horizon Technology Finance Corporation's first quarter co-investment with Monroe in a venture loan to Osseo. With Horizon Technology Finance Corporation's larger capital base and Monroe's ability to co-invest, we expect to originate larger venture loans to cutting-edge early and later-stage venture capital and institutional-backed companies as well as small-cap public companies. The merger, working with Monroe and increasing our ability to fund larger transactions, will allow us to bring the Horizon Technology Finance Corporation platform to the next level. I could not be more excited for Horizon Technology Finance Corporation's future. Turning to our specific results for the quarter, we generated net investment income of $0.18 per share, while our NAV per share ended the year at $6.98. Based on our outlook, our undistributed spillover income, and the anticipated completion of our merger with MRCC, our Board declared regular monthly distributions of $0.06 per share payable in April, May, and June 2026. As we grow our portfolio in future quarters, it remains our goal to deliver NII at or above our declared distributions over time. We achieved a portfolio yield on debt investments of over 14% for the fourth quarter and nearly 16% for the full year 2025, once again at or near the top of the BDC industry. We redeemed our notes due in 2026 with the proceeds of our issuance of 7% notes due 2028. We finished the year with a committed and approved backlog of $154,000,000, and our portfolio returned to growth in the fourth quarter. And finally, we are closing attractive venture debt investments while our pipeline of venture debt opportunities continues to grow. As we begin 2026, we remain excited for our long-term future growth given our numerous strengths including our portfolio yield remains among the industry's highest, which we expect will lead to increased NII over time. Our liquidity and balance sheet are strong, and will further strengthen post-merger. We maintain a strong committed backlog, a robust pipeline, and with the backing of Monroe Capital, we are able to compete for larger, higher quality opportunities to make debt investments to growing companies, which will grow our loan portfolio. And finally, the demand for venture debt capital remains high, and we expect to be a key supplier of such capital in the coming year and beyond. Again, we appreciate your continued interest and support in the Horizon Technology Finance Corporation platform. I will now turn the call over to our Chief Investment Officer, Paul Seitz, to give you the details of our fourth quarter results and progress. Paul? Paul Seitz: Thanks, Mike, and good morning to everyone. As Mike noted, we are preparing for next week's special meeting which, if shareholders approve the proposal to issue more shares, will allow us to close the merger with MRCC. If approved and closed, Horizon Technology Finance Corporation will have the size and scale to originate larger venture loans to growing public and private small companies. It will enable us to grow our portfolio and NII over time. We remain very excited to do so. At the end of the year, our current portfolio stood at $647,000,000 as we returned to growth. In the fourth quarter, we funded nine debt investments totaling $103,000,000, including two refinancings of our existing investments. We also continue to make progress in building our pipeline, including larger venture loan opportunities in our target sectors. Two of our pipeline opportunities, HealthOS and Osseo, have already closed in 2026. In Q4, we increased our committed backlog by $35,000,000 from the end of Q3, which positions us well to further grow our portfolio in the quarters ahead. In Q1, we expect to further grow our portfolio driven by our current pipeline. Along with the venture loans which have already closed since the end of the year, we have been awarded two new venture loan transactions representing $82,500,000 in total commitments. It goes without saying that we will always be disciplined in originating and underwriting new loans. During the fourth quarter, we experienced one loan prepayment and two refinancings totaling $43,000,000 in prepaid principal and collected approximately $1,000,000 in warrant proceeds. Our onboarding debt investment yield of 12% during the fourth quarter remained consistent with our historic levels. We expect to continue to generate strong onboarding yields with our current pipeline of opportunities, which we believe will generate strong net investment income over time. Our debt portfolio yield of 14.3% for the quarter was once again among the highest-yielding debt portfolios in the BDC industry, despite the lower level of prepayments in the quarter. Our ability to generate industry-leading yields continues to be a testament to our venture lending strategy and our execution of such strategy across various market cycles and interest rate environments. As of December 31, we held warrants, equity, and other investments in 97 portfolio companies with a fair value of $51,000,000. Structuring investments with warrants and equity rights is a key component of our venture debt strategy and a potential generator of shareholder value. As mentioned, we ended the year with a committed and approved backlog of $154,000,000 compared to $119,000,000 at the end of the third quarter. We believe our pipeline of investment opportunities combined with our committed backlog, most of our funding commitments subject to companies achieving certain key milestones, provides a solid base to prudently grow our portfolio over time. As of year end, 87% of the fair value of our debt portfolio consisted of three- and four-rated debt investments, while 13% of the fair value of our portfolio was rated two or one, consistent with our levels at the end of the third quarter. We continue to collaborate with all of our portfolio companies in utilizing a variety of strategies to optimize returns and create future value. Turning to the venture capital environment, according to PitchBook, approximately $92,000,000,000 was invested in VC-backed companies in the fourth quarter, driven again in significant part by continued large investments in AI. At $339,000,000,000 of investment, 2025 was the largest year of investment since the record year of 2021, and a positive sign that investment activity has sufficiently recovered from 2023 and 2024. Exit markets remained open, though slow, in the fourth quarter with approximately $100,000,000,000 of exit value driven primarily by tech IPOs. While the M&A market appears to be healthy and the IPO market is open, given the performance of many second half 2025 IPOs, investors and bankers may be more circumspect in bringing companies public in 2026. The life science IPO market remains limited, creating more opportunities for venture loan originations, as evidenced by our loans to Peltos and Osseo. In terms of tech, there remains considerable optimism. We continue to be doing deep due diligence, particularly in AI and defense technology, to determine the best types of opportunities for future investments. We want to take a moment to make a few comments about AI. First, note Monroe Capital published a white paper on AI on February 6, which we believe summarizes our current view on AI and the tech sector. It is obvious to us that AI is changing the game, and AI-related risk has been a central focus in our underwriting process. We believe the claim that the days of enterprise software are over is inflating the risk, and at the same time, those who claim it is business as usual are underestimating the risk. Given Horizon Technology Finance Corporation and Monroe's track record in software investing, we are confident we can navigate this changing environment. As we progress through 2026, we believe venture debt remains a compelling option for companies to access capital with lower dilution to their investors as companies continue to grow and prepare for exits. This compelling option provides significant opportunities for Horizon Technology Finance Corporation to seek high-quality, well-sponsored tech and life science companies to add to its portfolio. To sum up, while 2025 was a challenging year, we have made significant strides to succeed in both 2026 and for the long term. If and when we close the merger, we will have an even greater capacity to target larger venture loans for both private and small-cap public companies. Additionally, we will continue to work diligently on optimizing outcomes with respect to our current portfolio. We are confident that we are on the right path to expand our portfolio over the longer term and remain a leader in the venture lending space. We expect this will lead to increased NII over time and ultimately additional value for shareholders. With that, I will now turn the call over to our Chief Financial Officer, Daniel Raffaele Trolio. Daniel Raffaele Trolio: Thanks, Paul. Good morning, everyone. There were a significant number of positive developments in 2025 for Horizon Technology Finance Corporation, namely our impending merger with Monroe Capital Corporation and our continued ability to strengthen our balance sheet despite the challenging environment. Our actions demonstrate our continued ability to opportunistically access the debt and equity markets. In addition, we continue to diligently work with all of our portfolio companies to optimize outcomes for our investments and improve our credit quality. As such, we believe we remain well positioned to grow our portfolio in the coming quarters and create additional value for our shareholders moving forward. To recap 2025, we further strengthened our capacity in May by increasing the commitment under our senior secured credit facility with Nuveen to $200,000,000. In September, we raised $40,000,000 of debt capital through the issuance of our 5.5% convertible notes due 2030 and used the proceeds to retire our Horizon Funding Trust asset-backed notes which had an interest rate of just over 7.5%. In December, we raised $57,500,000 of debt capital through the issuance of our 7% unsecured notes due 2028, and used the proceeds in January 2026 to redeem our 2026 public notes. Finally, we successfully and accretively raised over $14,000,000 through our ATM program during the year, further demonstrating our continued ability to opportunistically access the equity markets. As of December 31, we had $189,000,000 in available liquidity consisting of $143,000,000 in cash and $46,000,000 in funds available to be drawn under our existing credit facilities. We currently have no borrowings outstanding under our $150,000,000 KeyBank credit facility, $181,000,000 outstanding on our $250,000,000 New York Life credit facility, and $90,000,000 outstanding on our $200,000,000 Nuveen credit facility, leaving us with ample capacity to grow our portfolio of debt investments. Our debt-to-equity ratio stood at 1.5 to 1 as of December 31, and netting out cash on our balance sheet, our net leverage was 1.05 to 1, below our target leverage. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity as of December 31 was $472,000,000. Turning to our operating results, for the fourth quarter, we earned investment income of $21,000,000 compared to $24,000,000 in the prior-year period, primarily due to lower interest income on our debt investment portfolio. Our debt investment portfolio on a net cost basis stood at $602,000,000 as of December 31, up 3% compared to $585,000,000 as of 09/30/2025. For 2025, we achieved onboarding yields of 12% compared to 12.2% achieved in 2024. Our loan portfolio yield was 14.3% for the fourth quarter compared to 14.9% for last year's fourth quarter. Total expenses for the quarter were $12,500,000 compared to $12,800,000 in 2024. Our interest expense of $8,000,000 was $200,000 lower than last year's fourth quarter, while our base management fee was $2,900,000, $200,000 lower than the prior-year period, due to our smaller portfolio. We received no performance-based incentive fees in the fourth quarter as we continue to defer incentive fees otherwise earned by our advisor under our incentive fee cap deferral mechanism. While we expect that the adviser will return to earning incentive fees, as a reminder, our adviser has agreed to waive up to $4,000,000 of fees, or $1,000,000 a quarter, if the merger is completed. Net investment income for the fourth quarter of 2025 was $0.18 per share, compared to $0.32 per share in 2024 and $0.27 per share for 2023. Prepayment activity and the income that is typically associated with prepayments was lower than our historical experience. We continue to expect prepayment activity will remain modest in the near term. For the full year 2025, we generated NII of $1.50 per share. The company's undistributed spillover income as of December 31 was $0.65 per share. Based upon our outlook, undistributed spillover income, and the anticipated completion of our merger with MRCC, our Board declared monthly distributions of $0.06 per share for April, May, and June 2026. We anticipate that the size of our portfolio, our expectations for growth, and our predictive pricing strategy will enable us to generate NII that covers our distribution over time. To summarize our portfolio activities for the fourth quarter, new originations totaled $103,000,000, which were offset by $13,000,000 in scheduled principal payments and $50,000,000 in principal prepayments, refinancings, and partial paydowns. We ended the year with a total investment portfolio of $647,000,000. At December 31, the portfolio consisted of debt in 38 companies with an aggregate fair value of $596,000,000 and a portfolio of warrant, equity, and other investments in 97 companies with an aggregate fair value of $51,000,000. Our NAV as of December 31 was $6.98 per share compared to $7.12 as of 09/30/2025, and $8.43 as of 12/31/2024. The $0.14 reduction in NAV on a quarterly basis was primarily due to our paid distributions exceeding our NII. As we have consistently noted, nearly 100% of the outstanding principal amount of our debt investments bear interest at floating rates. Of those investments, approximately 71% are already at their interest rate floors, which should mitigate the impact of decreasing interest rates. This concludes our opening remarks. We will be happy to take questions you may have at this time. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from the line of Michael Brown with UBS. Please proceed with your questions. Cory Johnson: Hi. This is Cory Johnson on for Mike. I was just wondering, can you maybe go into a little bit more about how you decided on the new dividend level, you know, kind of what was the decision-making around that? Daniel Raffaele Trolio: Yeah. Good morning, Cory. As we say every quarter, we review our distribution level with the Board. We look at the current portfolio and the run rate. We look at the spillover. We look at our pipeline and our growth opportunities and determine based on that a level that we think is sustainable and one we can cover over time. Cory Johnson: Great. And then also just a quick follow-up. If I heard this correctly, did you say the percent at contractual floor is 71%? Was that? Daniel Raffaele Trolio: That is correct. Yep. Cory Johnson: Okay. Alright. Thank you. Operator: As a reminder, to ask a question, you may press 1 on your telephone keypad. At this time, the next question is from the line of Paul Johnson with KBW. Please proceed with your questions. Paul Johnson: Yes. Good morning. Thank you for taking my questions. I was just wondering if you could just kind of help me understand here a little bit more just the earnings slide here, quarter over quarter. Because, you know, the portfolio yield of 14% with a, you know, roughly 10% ROE just something does not really fit there, and I am just wondering, you know, aside, I guess, the lower prepayment income, I mean, what kind of drove, I guess, the lower interest income? I guess, was that the driver during the quarter? Because you are not earning incentive fees. You know, there was net portfolio growth in the quarter. You know, the portfolio was roughly flat in terms of loss, so it does not seem like there was much depreciation in there. I was just wondering if we can just kind of understand maybe the earnings bridge a little bit and if maybe we could expect that this is maybe somewhat of a trough, and we could potentially see a little bit more. Daniel Raffaele Trolio: Yeah. So, Paul, all those things you stated were correct. You know, quarter over quarter, we grew the portfolio. You are right, the net realized and unrealized for the quarter was flat. And so there is, you know, positive movement in the quarter. Most of the fundings were towards the end of the quarter, so that had some impact. And, really, the major impact when you are looking quarter over quarter was the prepayment and the activity that occurred each quarter. We had some significant prepayments and refinancing on a couple of names in Q3. And then in Q4, we really had one prepayment, a couple of opportunistic refinancings that we did with our own portfolio companies. That had a lower income level than we typically receive on prepayments. And so when you add up the timing and the lower prepayment rates and the income related to that, that kind of connects the difference between the NII. Paul Johnson: Okay. Got it. So if I am just thinking about the $102,000,000 of origination this quarter, that includes a number of refinancing within the portfolio where, I guess, the return is structurally lower somehow. Daniel Raffaele Trolio: So, yes. It included a couple refinancings. They are positive in the event where we accelerate fee income on the previously outstanding debt investments, and we are able to rewrite with a full, new, fully loaded fee new debt investment. It is just lower income related to a prepayment where we will receive a prepayment fee, but with refinancing, that is one of the fees that we do not get. Paul Johnson: Okay. Got it. Thank you for that. And then my other question was just on the opportunity for public company financing. Are those opportunities where you are refinancing or taking out existing debt or is it more of an opportunity where you are providing new capital to those companies? Paul Seitz: Yeah. Hey, Paul. Thanks for the question. It can be a combination of all of the above. But I think the opportunities we are seeing in the market, and there are a significant number, is that many of these companies do not even realize there is an opportunity to use debt capital like ours where they cannot go to a bank because maybe they are not profitable today, or what have you. So in many cases, they will issue equity which is much more dilutive. So what we are offering out to these companies is a more flexible capital structure that is less dilutive and gives the company an opportunity to have some growth capital here. So we believe this is a very fertile market for us. And again, the opportunity set is fairly wide. Paul Johnson: Okay. That is great. Thank you very much. That is all for me. Paul Seitz: You bet. Operator: Our next question is from the line of Sean Paul Adams with B. Riley. Sean Paul Adams: Hey, guys. Good morning. It looks like you guys had an aggregate decline in nonaccruals quarter over quarter. Can you just provide a little bit more color on the status of those three remaining portfolio companies on nonaccrual? Daniel Raffaele Trolio: Yeah. You know, what we say each quarter, we are working each one of those nonaccruals and they are all at various levels. We are trying to maximize the recoveries with each one of them. And as you pointed out, we were able to improve the percentage of nonaccruals quarter over quarter. Besides that, we cannot really get into too much detail, as these are private companies. Sean Paul Adams: Got it. Appreciate it. Well, on the actual from the four to the three, can you provide a little bit more detail on that one that came off? Daniel Raffaele Trolio: Again, it is a private company, where we cannot, you know, besides giving names. It was just a deal that we were working on, an acquisition last quarter that was completed this quarter, and we received the amount of our fair value. And so there is no NAV impact. Sean Paul Adams: Got it. Appreciate it. Operator: Thank you. The next question is from the line of Christopher Nolan with Ladenburg Thalmann. Please proceed with your questions. Christopher Nolan: Hi. What was the driver of the realized loss, and was that from Metallic Therapeutics? Daniel Raffaele Trolio: TALIC was a percentage of that, but TALIC was a small position. And, again, the realized losses were realized this quarter at the fair value that we had them going into the quarter. As you can see, Q4 net realized and unrealized was slightly positive. Christopher Nolan: No. Totally understand that. I am just trying to understand what was the driver of the realized loss. Daniel Raffaele Trolio: Yeah. No. TALIC was a small piece of that, and we usually do not give, you know, detail on these private companies and how we have worked out each one of them. Christopher Nolan: Okay. In the earnings release, it highlighted in subsequent events you guys are redeeming some of your 04/2026 notes. How much of that has been redeemed, please? Daniel Raffaele Trolio: The full amount was redeemed in January. Christopher Nolan: Great. And then I guess on the new dividend, am I correct that when the deal was announced, management is indicating that they are going to try to support a $0.33 dividend through 2026, or am I mistaken there? Daniel Raffaele Trolio: So support it in which way? We have agreed to have the adviser waive $4,000,000 of fees for the four quarters following the close, at $1,000,000 a quarter. Outside of that, then we have the repurchase program that we have in place that will support the shares. Christopher Nolan: Great. Final question. Should we look at the new dividend as a reasonable earnings run rate for the company? And does that assume elevated nonaccruals? Daniel Raffaele Trolio: So, as we say, you know, we review the distribution level with our Board. We set it at a level that we believe we are going to cover over time. And so, that is what we did. Operator: Next question is a follow-up from the line of Paul Johnson of KBW. Please proceed with your question. Paul Johnson: Can I just clarify, so on the convertible conversion this quarter, what was the conversion rate there? And I guess, is there any kind of dilutive impact in the first quarter from that? Daniel Raffaele Trolio: The conversions for the converts that we have done are all at NAV. They are required to be converted at NAV. And so in the fourth quarter, the $8.5 million that has been converted, and anytime it does convert, it will be at the stated NAV at that time. There is no dilution. Paul Johnson: Okay. Got it. Thank you very much. Operator: Thank you. At this time, we have reached the end of our question and answer session. I will hand the floor back to Mike for closing remarks. Michael P. Balkin: Thank you all for joining us this morning. We appreciate your continued interest and support in Horizon Technology Finance Corporation, and we look forward to speaking with you again soon. This will conclude our call. Operator: Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.
Colin Hunt: Good morning, and welcome to the presentation of AIB Group's results for 2025, a landmark year for our company. I'm going to spend some time outlining the macroeconomic backdrop and giving an overview of the progress on our '23 to '26 strategy before handing over to Donal, our CFO, who will bring us through the details of our financial performance. 2025 was another year of successful delivery by AIB Group against our strategic objectives, priorities and targets. We're pleased to be delivering a profit after tax of over EUR 2.1 billion, representing a RoTE of 25%. In a looser monetary policy environment, our NII remained resilient, coming in ahead of expectations at EUR 3.75 billion. The strength of our financial performance and the scale of organic capital generation allowed us to grow our business, to invest in our business and to propose total distributions of EUR 2.25 billion, payout ratio of 105%, while still delivering an exceptionally strong capital outturn with CET1 ending the year at 16.2%. And 2025 was the year that AIB returned to full private ownership, having returned a cumulative circa EUR 21 billion to the Irish state. So it was a landmark year, a year of progress and closure, a year that positions us to build an ever better, ever stronger, trusted AIB in the interest of all our stakeholders and the economies and the communities that we serve. We remain resolutely committed to the sustainability agenda, an agenda that sits at the core of our strategy and at the very heart of our purpose. We're making good progress towards meeting our long-established 2030 targets with almost EUR 23 billion of green and transition lending deployed since 2019. And last year's new green lending reached an all-time high for us of 43% of all new lending, well on track to hit the 70% target we've set for ourselves. We're also continuing to decarbonize our own business with 92% of our electricity needs sourced from our virtual power purchase agreement from the output of 2 solar farms. The scale of the environmental and social lending opportunity and our excellent credentials in this space create the platform for continued success in ESG bond issuance, and I'm very proud of the fact that AIB is now one of the world's leading issuers of ESG paper globally. Our confidence in the outlook for AIB in 2026 and beyond is underpinned by continuing solid and consistent performance by the Irish economy. Growth in modified domestic demand surprised somewhat on the upside in 2025, and is expected to hover around 2.5% to 3% over the next few years, a rate of expansion that is reasonable in an Irish context and stellar compared to our neighboring economies across the Irish sea and indeed further afield. Our population continues to grow, and it's likely to exceed 6 million in the next decade. And our labor force exceeded 2.8 million people at the end of last year, representing an increase of an incredible 59% since 2000. And now that demographic bounty is a key driver of Ireland's economic success, and it creates a very positive operating backdrop for AIB, Ireland's leading financial institution. And while we've seen remarkable growth in the numbers of work in the country's GDP, the balance sheets of the country, businesses, households, individuals are all very conservatively positioned. Net government debt fell to 40% of gross national income last year and the downward trajectory is expected to remain a feature of the budgetary landscape over the coming years. Now the government is in a very strong position to deliver on its ambitious national development plan, which will see EUR 275 billion deployed in building a world-class public and social infrastructure here over the next decade. And meanwhile, households continue to delever with debt to disposable income running at about 40% of the post-GFC peak with the savings ratio running at 15%, an indicator of which is very well reflected in our own liabilities performance. Ireland remains a preferred destination for foreign direct investment. Now we will, of course, continue monitoring the international trade climate, but it's only fair to say that the performance in 2025 surprised on the upside, both in terms of investment and also in terms of export volumes. I made mention already of the government's NDP, a plan which will see a much needed ramping up of infrastructure -- of investment in critical infrastructure. And if this country is to consolidate and sustain its economic progress, we need to close existing gaps in housing, water, energy and transport infrastructure, and we need to do it at pace. We look forward to continued progress on the delivery of new housing with 2025 seeing over 36,000 new homes being completed. And that was the best output performance since the GFC, but it's still well a drift of the level of housing completions needed to satisfy demand. And we expect to see housing output continuing to grow year in, year out with the level of completions forecasted 45,000 in 2028, representing an increase of some 25% on the 2025 performance. But given the scale of unsatisfied demand that's out there, housing supply is going to have to reach levels well ahead of in-year structural demand if the market is to return to equilibrium. So challenges remain, but we are seeing good progress, and we are optimistic about the supply outlook and the opportunities that creates for our lending businesses, both in mortgages and development finance. Now looking back to the lending performance last year, new lending was 2% higher than in 2024. We saw a 4% decline in new mortgage lending in a growing market with our mortgage market share falling to 30%. Now I've remarked on many occasions that we do not target mortgage market share per se. Instead, we are focused on writing the right business at the right price. That said, it is important to note that not all mortgage market shares are the same. And we have a strong preference for having direct relationships with our customers as they embark on the biggest financial decisions of their lives. In the direct-to-consumer market, we remain by some distance, the leading player with a market share of 46% and the pipeline for the early months of 2026 looks very good. Personal lending was 4% ahead and now 88% of personal loans are applied for digitally across the group. Total property lending saw an increase of 25% of the subdued base of recent years. Corporate lending had a good performance with new lending up 8%, but this was offset by a quieter year for Climate & Infrastructure Capital in a noisy external environment. A number of deals which we expected to close in December tipped into January, and that business is off to a very good start this year. Now given the macro backdrop and the strong and visible pipeline ahead for the operation divisions, we are confident in our ability to deliver a medium-term lending growth CAGR of 5% out to the end of 2027. Our franchise remains exceptionally strong, and we are very pleased to be now serving more than 3.4 million customers with more new customers choosing AIB than any other financial institution in Ireland. And the trust that our customers, both long-standing and new place in us is underpinned by the resilience of our digital offering with level 1 service availability running at 99.99% in 2025 and by the strength of our physical presence with AIB having the largest branch network in Ireland. And that community engagement is key to our relationship with our customers, particularly for the very biggest moments in their financial lives who know that we are digitally trustworthy and we are there in person when it really matters. I'm pleased with the response of our customers to our enhanced savings and investment offering through AIB Life and Goodbody with total AUM now comfortably exceeding EUR 18 billion with plenty of growth in the pipeline. On a stand-alone basis, AIB Life is now showing real traction with AUM reaching EUR 3 billion, which was a 20% increase in 2025. Now as Ireland ages and government policy evolves, we believe there is potential for significant additional growth in savings and investments in '26 and beyond. We remain the bank of choice for new account openings with the group enjoying a market share of 49% of the flow and 40% of the stock of current accounts in 2025. Our Corporate and Business Banking franchise remains exceptionally strong, and we're going to continue to invest in secure and speedy digital enablement over the years ahead as we meet the evolving needs of these critical parts of Ireland's economic success. And of course, we remain the country's leading green bank, standing we will maintain as we grow the share of green lending and broaden and enhance the range of green products and services across the group. Looking now at the first of our strategic priorities, the focus on customers, their expectations and their needs is key to the long-term success of AIB. Through a data-driven approach to customer segmentation, we understand those expectations and needs like never before. And that unrelenting focus on our customers is paying dividends in the form of Net Promoter Scores with all-time highs in 5 of the 6 key customer journeys being recorded in 2025. Meanwhile, service levels in our customer engagement centers remain very strong, and we continue to invest in delivering an easier, more engaging and protective relationship with our customers. And we will use AI extensively to help us deliver that high-quality relationship of real trust. ABBYY, our AI digital assistant, whom we launched in December of 2024, is engaging now with an ever greater number of customers. Covering 66 customer journeys, ABBYY has assisted over 1.3 million customers since her rollout, and the feedback has been very positive, with particular reference being made to the speed and the ease of dealing with our digital assistant. 80% of our customers who call our engagement centers choose to continue dealing with ABBYY. We are continuing to make steady progress on our second strategic priority, greening our business. We're playing an active role in financing the transition to a more sustainable future. We've now deployed almost EUR 23 billion of the EUR 30 billion Climate Action Fund. And we lent an additional EUR 6.3 billion in new green and transition lending in '25, with the greatest contribution coming from retail banking, predominantly in the form of green mortgages, which now account for 62% of all new Republic of Ireland mortgage lending. Across corporate and business banking, we are the leading player in financing sustainable lending to the engines of economic development, while Climate and Infrastructure Capital is continuing to play an important role in funding solar, wind, bioenergy, waste-to-energy assets in Ireland, Britain, the European Union and in North America. The loan book in this division has now expanded to more than EUR 6 billion, and we expect to see further significant growth in '26 and beyond. And notwithstanding our ambition to be a champion of the transition to a greener future, the scale of the opportunity is simply enormous and continues to grow, allowing us to be highly selective in choosing the technologies and the geographies where we are willing to put the group's capital to work. Our third strategic priority speaks to ever greater operational efficiency and resilience, and I am very pleased to report accelerating progress right the way across the organization. We've invested significantly in resilience because it is fundamental to customer trust, and trust is the prerequisite for any credible digital ambition. We're continuing to strengthen, simplify and streamline AIB with a 40% decline in the number of legal entities within the group and ongoing decommissioning of legacy applications and increased digital automation of customer contact. We've invested wisely in AI with Copilot now deployed across the organization and the first wave of internal agentic assistance is now being deployed. We're making great progress in enhancing credit decisioning through nCino, which now handles 2/3 of all new SME lending. Our platforms remain resilient with world-class Level 1 service availability and 0 critical cyber incidents in 2025. And the rollout of push notifications on our app is making a material difference to the quality of our everyday customer engagement. There is so much more to come with our next-generation app set to launch in the summer. And by design, it will be more agile and flexible than any other app previously deployed by us, and it will be capable of rapid and high-frequency enhancements. Allied with the imminent launch of Zippay across the Irish retail banks, our customers are going to enjoy and experience a significant improvement in the quality of their digital interaction with us over the coming months. Now this foundation gives us the right to accelerate. Our new digital platforms can scale confidently because the underlying estate is stable, secure and well governed. The pace of technological change that we're seeing is unprecedented in the history of banking. Now our team has demonstrated clearly and consistently the efficiency, security, resilience and customer experience gains that they are capable of delivering. And given that track record of achievement and the speed of change that is now readily apparent, we believe that we can credibly build the future faster at AIB. Our annual investment in the business has increased from an average of EUR 300 million recent years to EUR 350 million last year and will rise to EUR 400 million this year and beyond. And the bulk of that increase is devoted to strategic projects, which will allow us to continue enhancing our customer experience, our digital agility and the resilience and the durability of our systems. We will build the future faster here and in so doing, continue to earn the trust of our 3.4 million and growing customer base. We are now well embarked on the final year of the strategic cycle. And while we're very focused on delivering on our targets for 2026 and continuing to generate attractive shareholder returns, our minds are inevitably turning to the next strategic cycle, which will bring us to 2030. And as we move through the months ahead, our plans and our targets will take more concrete form and we'll seek Board approval for what comes next in December before we share the full details with our investors and the analyst community. Now it would be premature of me at this stage to outline the set of performance indicators and parameters, which will guide the next phase of AIB's development. However, they will, I believe, be fully reflective of my own 2030 ambitions for this organization. I want AIB to be the best bank in Europe and the most trusted brand in Ireland. Now these may be audacious aspirations, but they're grounded in what we have already achieved together. We have made huge progress in recent years in reshaping and transforming the group in the interest of all our stakeholders. We have the leading customer franchise. We're generating shareholder value, including a RoTE of 25% and return on assets of 1.4%. Our organization is in great shape with 370 basis points of organic capital generation and EUR 2.25 billion return to our shareholders. And I'm very excited about what I know it can and will deliver over the months and years ahead. Now 2025 was a landmark year. We delivered against the commitments we set for ourselves. We performed ahead of expectations, and we did so with positive momentum across the business. However, 2025 was a milestone. It wasn't a destination. We've come a huge way in recent years with a strong capital base, a very clear strategic ambition and a market-leading position. AIB is well positioned for the future, and I remain convinced that our best days still lie ahead as we work relentlessly to build a better, stronger, more resilient AIB in the interests of all those who put their trust in us. Donal? Donal Galvin: Thank you very much, Colin, and good morning, everyone. I'm very happy and pleased to be able to deliver the financial highlights for AIB for 2025. We've delivered a profit after tax of EUR 2.1 billion with a return on tangible equity of 25% and earnings per share of EUR 0.933. Our total income was EUR 4.5 billion, which was down 8% on the year. That's broken down between a net interest income reduction of 9% and net fee and commission income increase of 4%. Our costs were slightly lower than expected at EUR 1.99 billion, which is up 1% on the year, and that gave us a cost/income ratio of 44%, and our FTEs were 3% lower year-to-year. Our gross loans increased 2% or 3% on an underlying basis to EUR 72.3 billion, and that included EUR 14.7 billion of new lending, which was up 2% year-on-year. Our asset quality remains resilient and our ECL coverage remains at 1.6%. We had an ECL charge of EUR 172 million, which represents a 24 basis points cost of risk. And our NPEs finished the year at 2.2% of gross loans, which is the lowest for a number of years in AIB. Our funding position remains exceptionally strong. We have customer deposits of EUR 117.2 billion, and that represents a 7% increase on the year, which is well ahead of our own expectations. Within wholesale markets, we issued AT1, Tier 2, Euro senior and Dollar Senior, leaving us with a very strong funding position. Our capital at the end of the year, our CET1 was 16.2%, well ahead of regulatory requirements, but that incorporates very strong organic capital generation of 370 basis points and very strong performance on RWA optimization initiatives. Our total distributions for the year are EUR 2.25 billion, representing a 105% ratio. EUR 263 million was already paid in November as an interim. We have a EUR 988 million proposed final ordinary cash dividend. And we've announced and already begun to execute a EUR 1 billion on-market buyback. I'll say on the income statement, I don't want to really repeat myself too much. Obviously, income was down 8%, as I previously mentioned. But notwithstanding that fact, we can see earnings per share flat year-on-year. Total cash dividend per share of EUR 0.5858 is up 58%. So really strong performance there, we feel on the returns. Our bank levies and regulatory fees were EUR 114 million in the year, and that includes EUR 94 million for the Irish banking levy. As we look into 2026, we don't expect any material exceptional items and our bank levies and regulatory fees, we currently estimate will be around EUR 140 million. Net interest income of EUR 3.748 billion, down 9%. I'll just try to walk through the moving parts here. There's a 42 basis points benefit from our structural hedge program. Obviously, related to this, a 45 basis points reduction in net interest margin from cash held with central banks. Customer loans and investment securities are down 22 and 19 basis points, again, just reflecting those lower interest rates. And on the liability side, we had a strong benefit from wholesale funding costs of EUR 119 million, and we had an associated cost of EUR 88 million as customers termed out some of their deposits. Our Q4 exit NIM was 2.69%, and it ends the year overall at 2.73%. This is an important slide, I think, for us to show how we have managed our interest rate exposure through the last number of years. Obviously, interest rates going from minus 50% up to 4% and landing down at 2% has meant that we have been -- have had to proactively manage our balance sheet. As we give our guidance for 2026, the assumptions that we make is that we'll have an ECB deposit rate of 2% and that deposit beta will remain at 20% as it was throughout 2025. We're very comfortable with our NII resilience, which we believe we have shown over the last number of years. And what gives me the great confidence going into '26 and beyond is that we have a growing and granular deposit base, which we have seen grow significantly over the last number of years. We see growth in all of our core markets of around 5% per annum, and we very proactively manage our balance sheet. We do this through our structural hedge program. I think last year, in the midyear, I would have referenced a EUR 15 billion increase in our structural hedge in 2025. Already this year, in the last number of days, we have executed an additional EUR 10 billion of structural hedge. The average yield on that was 2.3% and the average life was 5 years. So the impact that has is reducing our NII sensitivity to 100 basis point move or shock from EUR 378 million down to EUR 286 million. Some of the other moving parts with the structural hedge are that we expect to have EUR 6 billion of swaps maturing in '26, EUR 6 billion of swaps maturing in '27. Throughout '24, '25 and even earlier this year, I've talked about wanting to extend the duration, which is now expected to be 5% -- 5 years by the end of 2026. So we expect at the end of '26 to have a received fixed yield of 2.3% on euros and 2.7% on sterling. In addition, as we've talked about before, we have a large quantum of fixed rate mortgages of around EUR 21 billion. They have a yield of 3.1% and a weighted average life of 1.9 years, and that's relevant because we leave them unhedged, really to add a little bit of natural duration to our balance sheet. So I've really tried to summarize the position for year-end. We'll have an average life of 5.1 years on our euro hedge, and that will remain in place over the next number of years. And our received fixed yield is around 2.3%, so at stroke in the money. So looking through that and looking at that, that's what really underpins and gives us the confidence for our NII guidance to be circa EUR 3.8 billion in 2026. Other income was EUR 756 million, and our net fees and commissions were up 4% in the year. I think the main standouts really was in our cards business, which was up 11%, our wealth and insurance business, which was up 7%. And as we've talked about previously, this is a huge area of focus for the organization going forward. We have EUR 18.3 billion of AUM, as Colin would have mentioned, a number of years ago. Obviously, that would have been a much lower number or approximately 0. But obviously, post the acquisition of Goodbody, post the start-up of our joint venture with AIB Life, we feel we have a very strong foundation. So the Goodbody AUM is EUR 15.3 billion, which grew by 7% in the year. The AIB Life AUM is EUR 3 billion, which grew 20% in the year. I think in the coming years, what you should expect to see in this area is AUM growth of 10% per annum and revenue growth of 15% per annum. But that is going to be a massive area of focus for the organization linked to the huge customer numbers that we have, obviously, linked to a lot of the activity we are embarking on with respect to digitalization and personalization. Other income, some of the other line items can always be a little bit more volatile. I try to just update and guide as the year progresses. But overall, for 2026, other income greater than EUR 750 million. Our cost performance was strong in 2025, outturn of EUR 1.99 billion, which is up 1%. A few different moving parts here. Staff costs were down 1%, mainly due to reduction in headcount. G&A expenses up 6%. We're seeing some inflationary impacts there, higher business volume impacts there and also higher OpEx-related investment spend. So not all of our technology spends get capitalized, some also goes through our OpEx, and you will see it here. And our depreciation number is down 3% on the year, as we really tightly manage the execution of our big programs. So overall, that gives us a cost/income ratio of 44%. Like I said, our FTE reduction was down 3%, ending the year with 10,207 employees. And this is a trajectory we expect to maintain in the coming years. We believe that we'll be able to do it on an organic basis, obviously, as we go through the next number of years. Colin mentioned that we were going to increase our investment spend from EUR 300 million to EUR 350 million, up to EUR 400 million now in 2026. And we're going to really look to accelerate our digitization, which will enable faster innovation, scalability, enhanced security and obviously, operational efficiency. As a result of this, you can expect to see our depreciation grow by 3% or 4% per annum, but that is obviously going to be partially offset by ongoing cost-saving initiatives and efficiencies that come from the rollout of these large programs. But for 2026, we expect our cost to increase by 2%. With respect to asset quality, we had an ECL charge of EUR 172 million for the year, which represents a 24 basis points cost of risk. I'll just really simply break it down into 3 different areas. We had a write-back of EUR 52 million from macros, and that's really reflecting the fact that the way we saw the different range of outcomes post Liberation Day, the outturn, particularly in Ireland, ended up being significantly better. We had a EUR 210 million net charge relating to underlying credit performances, which is really just the normal movement of credit between stages. And lastly, with our PMA, we had a small charge of EUR 14 million in the year, leading us overall to that charge of EUR 172 million. So we have an ECL stock of EUR 1.1 billion and an ECL cover rate of 1.6%. We have PMA of EUR 254 million represents around 26% of our ECL stock. So notwithstanding all of the volatility that remains in the world at the moment, we feel we are very, very conservatively provided. So for 2026, we expect a cost of risk within the range of 20 to 30 basis points, and I look to narrow that as the year progresses. Main movements on the balance sheet side. Obviously, loans increased 2%, liabilities increased 7%. That obviously gives us an excess liquidity position. So what you're seeing here is an increase in the amount of investments we make in the treasury world. We bought an additional EUR 2.4 billion worth of bonds in the sovereign and supranational space in the Eurozone. And for 2026, I think you can expect to see that grow by another EUR 4 billion or EUR 5 billion. Loans to banks was EUR 48 billion, which included EUR 36 billion at the CBI and GBP 3.8 billion with the Bank of England. Overall, our loans increased by 3% on an underlying basis or 2% on a reported basis. Big FX impacts in the year, slight impact from some disposals in the year. But overall, I think we are more confident now than ever that we will be able to reach and achieve our 5% asset growth targets for '26 and '27. What we saw in 2025, I would say, was our wholesale businesses performed very strongly. Property market, still a little bit muted, recovering from the interest rate changes and valuation shock. Our personal consumer business performed very, very strong. And on our mortgage business, we saw growth overall in the year. As I look to 2026, I think what you can expect to see is growth in all of these areas, just slightly more. So our funding and capital position remains very strong. LDR of 61%, LCR of 204% and a net stable funding ratio of 163%. Our MREL ratio was 35.2% in excess of our requirements. So very, very strong foundation there. But I think the big story on the liability side or the balance sheet side for 2025 was really deposits and the deposit growth. So notwithstanding the fact that we had a movement of around EUR 2.4 billion of our customers moving to term, we actually had an increase overall in our current account and demand deposits. So 7% growth was an exceptionally strong outturn, though we do expect that to temper somewhat in 2026, more in line with modified domestic demand. There's no other reason there, no competitive environments that we're necessarily concerned about. It's just we feel that 2025 was maybe an unusually large growth area, but that remains to be seen, and we will obviously be able to watch that quarter-by-quarter. Capital generation for 2025 in AIB was exceptionally strong. We started the year at 15.1%. And then early in Q1, we had a Basel IV impact of 120 basis points. We had organic capital generation of 370 basis points from our business activity. We have a reduction of 390 basis points for distributions, as we've talked about. We engaged with the government and we canceled the warrants that they were granted in 2017 around the time of the IPO, and that had a cost of 70 basis points. Given our strong business performance, we had really strong DTA utilization benefit of 40 basis points. with some other equity movements of 20 basis points cost, which is really just AT1 coupons. And then in other RWA movements, we have a number of RWA optimization items where we had a strong outperformance. That includes execution of a mortgage SRT in quarter 4, the sale of our 49% shareholding in AIB Merchant Services and also the implementation of a new IRB model for our Climate and Infrastructure Capital business, which also had a positive benefit. That doesn't even incorporate the EUR 1.2 billion directed buyback that we did with the government in the first half of the year where we bought back EUR 1.2 billion of stock at a price of EUR 6.25 because that was obviously deducted from the prior year's returns. So the outturn of 16.2% is very strong, over 6% of capital generated in the year, which is really, really strong, and we're very happy with that, obviously, comfortably above all of our buffers. With respect to how we think about capital, same as prior years, come in on the 1st of January and drive a stronger business performance as is possible. So obviously, 370 basis points was the outturn for 2025, but I think you should be thinking even for the medium term, greater than 320 basis points on a sustainable basis and our deferred DTA benefit of circa 35 basis points steady state going forward. We're going to invest in our business in 2 ways. Number one, increase our investment spend and change in technology up to EUR 400 million. And we're obviously going to utilize more of our capital as we grow our balance sheet on a 5% annualized basis. We will continue to optimize our balance sheet wherever we can in whichever format we can. So we will do this through SRTs, where we've already issued 2 transactions, 2 different asset types. Obviously, the corporate transaction was done in '24. The mortgage -- AIB mortgage transaction was done in '25. And in 2026, we will look to execute an SRT transaction within our project finance or Climate and infrastructure capital portfolio. IRB model adoption and development is an ongoing theme. We do expect to have 80% of our balance sheet on IRB models by 2028. I've mentioned the benefit from the project finance model. 2026, we have 2 different portfolios, which we're hoping to review and conclude that being EBS mortgages and commercial real estate, but it's a little bit too early to know what the outturns there are going to be. And lastly, we look to deliver market-leading distributions. We've paid out over 100% in 2024 and 2025. We've paid out EUR 6.5 billion in distributions since 2023. For our ordinary dividend policy, we look to pay a sustainable dividend within a 40% to 60% payout range. Our ordinary dividend will be paid in cash. Our interim dividend will be paid up at 1/3 of the prior year's ordinary distribution -- ordinary dividend per share. With respect to additional distributions, we have capacity for above policy payouts, subject to annual review and necessary approvals. We have optionality to utilize share buybacks, special dividends or a combination of both as we look to move towards our medium-term target of greater than 14%. So wrapping it all up, our 2025 performance, we feel was strong, already achieved or outperformed our 2026 targets. 2026 guidance will be interest income circa EUR 3.8 billion, other income greater than EUR 750 million. Costs are expected to grow by 2%. We expect a cost of risk between 20 and 30 basis points. Loans will grow by 5%, and we expect deposits to grow by 2% or 3% and we will deliver a return on tangible equity greater than 20%. So for 2026 and beyond, we expect to deliver a strong performance in the final year of our strategy. Moving into the next strategic cycle, we have a lot of positive momentum in our business. Sustainable business growth and returns, strong organic capital generation, increased investment in our business and market-leading shareholder distributions. Our medium-term targets continue to guide the business and will be refreshed for our next strategic cycle this time next year. Thank you all very much. Colin Hunt: Thank you very much indeed, Donal. And now we're going to take some time for questions, and we're going to the phone lines. Colin Hunt: The first question comes from Denis McGoldrick in Goodbody. Denis McGoldrick: Just 2, please, if I may. So firstly, you're guiding to circa EUR 3.8 billion NII for 2026. Can you talk us through the moving parts within that year-on-year, along with any color you could give on NII beyond this year, please? And then secondly, you delivered 7% deposit growth in 2025. But could you talk us through the mix within that between interest and noninterest-bearing and how you see that evolving this year? Donal Galvin: Thanks, Denis. I'll take that one. Look, on the liability side, I think it's fair to say that the savings ratio in Ireland is a little bit higher than what people would have imagined. And I think the impact on the Irish banking system was pretty consistent. Notwithstanding that fact, we do think that the deposit market will normalize in 2026, which is why we think that the increase will be 2% to 3%. So it seems like a big drop, but I would argue that that's more due to 2025 outperformance, but we will be able to keep an eye on this on a quarterly basis. I think we don't expect any particular change in mix. Our deposit beta in 2025 was around 20% 2026. We expect to see something similar. So I would just use the same mix as you go forward. And overall, with NII, really nothing new here. I think -- I mean, taking the year-end position of 2025, believing and putting that 5% growth over the coming years, I think, is how you will be able to get closer to the numbers I have. Indeed, as I look at -- if I look at consensus for 2026, '27, '28, I've obviously given you '26 numbers, which are slightly better than consensus. '27 is in and around where we see things. I think 2028 consensus seems a little bit light on loans and obviously, on associated interest income. But for all of those years, '27, '28 will be greater than 20% return on tangible equity as well. I can certainly commit to that. Colin Hunt: Thank you very much indeed, Donal. We're now going to Diarmaid Sheridan at Davy. Diarmaid Sheridan: Two, if I may, please. Just firstly, on the capital and distributions. Could I just invite you to maybe talk to us about when you expect to get to your greater than 14% target, please? And I guess, Donal, you provided some of the outlining measures. But just given how strong capital generation is, I mean, unless you're significantly exceeding your distributions that you've exceeded -- that you've delivered in the last couple of years, it's kind of hard to see how it gets to that level without something maybe from an inorganic or maybe is there something we're missing? The second question just on new lending, just in terms of what the key drivers to get from to bridge from that kind of 2% to 5% growth. I appreciate underlying 3% in '25. And specifically, just on the mortgage market, I get the point you make around the direct channel. Clearly, the broker channel has become a much more significant part. I just challenge you as to whether it's sensible to remain out of that channel? Or is that an area that you're comfortable not to play a significant role in. Colin Hunt: Well, first of all, we don't remain out of the mortgage channel out of the intermediary channel. We have a presence there through Haven. And we've had a big prioritization of green mortgages in the past number of years. And in the final quarter of last year, we made some adjustments to our non-Green mortgage rates. We haven't really seen a huge increase in the size of the intermediary channel in the past number of years. But we do prioritize our direct relationship with our customers. That's what we want to maintain that direct relationship with our customers. But certainly, on foot of the quality of our digital engagement, quality of our in-branch advisory service, the length and breadth of the country and given those price adjustments we made for non-green rates in the closing quarter of last year, what we're seeing coming through now in terms of pipeline is very, very encouraging about the volume of mortgage growth we're reporting in 2026. Donal Galvin: Diarmaid, yes, I think with respect to the capital question, the -- moving towards our medium-term target of 14% being ambition for quite a period of time. That obviously as a baseline represents the amount of capital the organization thinks that it needs to run the business successfully, which is why we are focused on trying to get to that as soon as we possibly can. I would say 2025 was more around a significant outperformance on the capital front than any reluctance to return capital. I mean, and I'd say every of the big initiatives that we worked on, we came out on the right side of that, which isn't always the case. But generating 6% of CET1 in any particular year is a particularly large amount. But look, that's what we worked hard to do. And on any opportunity where we get to look at our balance sheet or any of our activities and make things more efficient, we are going to do that. Even if it drags me or pulls me further higher away from 14%, we will do that, okay? So we executed a mortgage SRT in quarter 4, cost me money, generated 25 basis points of CET1, but it was an implied cost of equity of 3% or 4%, okay? So we will continue to look to do the right things to optimize our capital. And on an annual basis, that's what puts us in a stronger position as possible to move towards that 14%, give our stakeholders, the regulator, the Board, the comfort and confidence for us to maintain payouts similar to the last number of years. Colin Hunt: Thanks, Diarmaid. Now we're going to Sheel Shah at JPMorgan. Good morning. Sheel Shah: Two questions from my side, please. Firstly, on the distributions. So the dividend payout ratio looks to be at the top end of your target range. Can I ask how you're thinking about the split of distributions going forward into '26 and beyond. Would you expect EPS to, for example, grow considering that we're already at the top of the payout ratio range and maybe attributable profits may be taking a bit of a step down next year? And then secondly, can I ask about the investment spend and maybe sort of leaning towards the mobile app and your data insights. Could I ask how much sense do you have of the number of AIB customers that can be potential wealth customers. And how much leakage do you have in terms of AIB customers that maybe go to other providers for services? I'm wondering how much of this you can capture within the group going forward? Colin Hunt: I'll take the second question and then Donal can do the distributions. Do you want to go first, Donal? Donal Galvin: Yes. Look, with respect to the distributions, I mean, from the half year, obviously, we knew the position that we were going to be in, by and large, financially speaking. So I mean, the way we try to look at our distributions, we'll talk to investors, we'll engage with the regulator and then we'll have our own particular thoughts on what the right mix is. This is the first year for us, obviously, being out of state ownership. We announced a new dividend policy, obviously, last year as well, and we were very focused on ensuring that we delivered cleanly, clearly and consistently against that. . So then the makeup with respect to the buyback and the cash dividend, it was -- I mean, a number of factors we had to take into account, one of them being market liquidity as well. We do a buyback that was particularly larger, it might even be difficult to execute within a particular year as well. So that's something that goes into our thoughts. We came out for the first time last year, and we said we'll pay a cash dividend within the range of 40% to 60%. And we decided to pay out at the top end of that range for 2025. Obviously, that's a strong indication of our desire to deliver strong returns to our shareholders. But look, on a go-forward basis, the most important thing, having a conversation around distributions, it goes back to how we think about capital and how we manage ourselves. When we come in on the 1st of January, work hard, deliver on the plans, then you'll generate strong returns. Like without doing that, you're not even having a conversation. So that really is our focus, and then we look and analyze the best makeup of returns in the last quarter of the year. Colin Hunt: Thanks very much indeed. In relation to the app, yes, we have 3.4 million customers, 85% of our customers are digitally active. The app is in the final stages of development. In fact, we have a pilot out there, which is getting very, very positive reaction at the moment, and we look forward to launching it in the summer months. And it's going to be a significant change to what we currently offer. It's going to be far, far more intuitive, far, far easier to navigate, far, far better functionality, and it will encompass all aspects of your relationship with AIB Group. The simple truth is that we really didn't have savings and investment products in the wealth space until we acquired Goodbody and until we established AIB Life. And we've seen our AUM now grow to the point of 18.3%. There's significant further gains to be made there. I've absolutely no doubt about it over the next number of years, and the app is going to make a difference in that regard as well. But that isn't the sole reason that we're increasing our investment spend. What we're looking at is a progressive transformation of our architecture. We've built a data warehouse in the cloud, world-class. We are investing in a new credit life cycle management system. We are building a unified mortgage platform, all of which will allow us to respond to our customers' needs in a far, far more agile, rapid and secure way because ultimately, this is about trust. We're going to turn now to Aman at Barclays. Good morning. Aman Rakkar: I wanted to just come back on capital, please. There's quite a few moving parts in terms of capital generation going forward. In particular, the SRTs and potential headwinds. So I think previously, you've kind of called out CRE, the kind of give back of the CRE component within Basel as a potential headwind. I don't know if you could kind of give us a kind of updated take on whether you still think that is the case. And if you could, in any way, quantify that, that would be really, really helpful. And I just wanted to just ask a bit more about SRTs and around the quantum -- like is there a limit on the amount of SRTs aggregate or cumulative SRTs that you'd be looking to have out at any one point in time? I just want to get a sense of the kind of ongoing run rate of SRTs beyond the kind of existing stock when we're thinking about building out capital from here? Donal Galvin: Yes. Look, with respect to commercial real estate, huge beneficiary from Basel IV effective rough numbers, the risk weightings went from around 100% down to 80%. I don't think that I'm going to have line of sight on that outturn until probably the end of 2026. And I don't actually expect an inspection until 2027. But I'm naturally just going to assume that we'll be given up some of that, but I can't quantify that at the moment. With respect to SRTs, the way we think about those and the way I've talked about this from the start, I want to have a program set up on multiple asset classes executed over multiple years. The reason I want to do this, it's not necessarily for capital generation, okay? We have plenty of capital. And obviously, with every SRT, I'm moving away from 14%, but it's really, for me, an RWA optimization tool and a risk management tool. It helps us at entity level or a business level manage returns. So corporate transaction done successfully in '24, AIB mortgages in '25. Similar sizes, like we look to target 20, 25 basis points of CET1 per transaction. We don't look to be very aggressive and do massive jumbo deals, okay, because it's -- that is not the exercise that we're trying to execute. 2026, we look at our Climate & Infrastructure business. It has a newly approved project finance model, a slotting approach. I'm going to imagine it will be -- there will be less inefficiencies. So the SRT may be less effective than others that we've done. It's just I want to have that asset class in an SRT program, which will help us risk manage it going forward. Beyond that, I will look at commercial real estate. I need to understand all of the data that we're getting from our IRB analysis, and then that will help me figure out how we want to target that market. That's more than likely going to be 2027. And then EBS mortgages as well is another area and another portfolio that I want to look at. I need to wait for the EBS to complete and conclude its own IRB on-site inspection, again, so we can see what the underlying data is telling us. I think they're the main asset classes that I want to get up and running. I want to have them up and running. They will endure. They will remain in perpetuity, certainly as long as they're allowed. I think the question sometimes comes up if different firms maybe max out, let's say, quantums, et cetera, then there's kind of questions from the regulator around associated counterparty risk. But we kind of want to do regular smaller transactions, very diverse investor base over the coming years. But each transaction look to save 20 to 25 basis points of CET1. Each transaction probably going to cost EUR 10 million, EUR 15 million. Cost of equity to date has been very, very attractive for us, but they are the kind of metrics you should be thinking about. Colin Hunt: Thanks very much indeed. And now we're turning to Guy Stebbings at BNP. Good morning, Guy. Guy Stebbings: I think most of my questions are covered. But just one bigger pitch question for Colin. You talked about wanting to be the best bank in Europe in sort of longer term. Could be seen sort of quite an ambitious statement. I guess best bank means different things to different people. So just interested in terms of what sort of metrics you would be thinking about when benchmarking this as such. Colin Hunt: Yes, it's an interesting question and one that was predicted to be landed on top of me today. Ultimately, this is -- we won't decide if we're the best bank in Europe. It will be our stakeholders that do. So whatever -- how do our customers regard us? How do our shareholders regard us. How do our employees regard us and of course, very importantly, how do our regulators look at us. And so it will be a compendium of their views that will determine if we will be a judge to be the best bank in Europe. I know what the team here are capable of. I know the scale of the ambition that we have, and I am very confident that we are going to do our utmost to be ranked amongst all those stakeholder groups as the best bank in Europe. And we'll obviously be updating you in 12 months' time when we have the actual parameters and metrics around how we are going to evaluate that. But it will be in the eyes of the various important stakeholder groups that we deal with every single day. Now turning to Rob Noble, Deutsche Bank. Robert Noble: Two for me, please. So the Climate Capital segment is the one that's growing fastest and presumably will grow fastest going forward as well. There's quite a pickup in Stage 3 loans and the cost of risk has stepped up. So what's going on in this division? And what sort of returns do you see that part of the business generating compared to the group as it scales up. And then just a follow-up on all the capital questions. At the bottom line, what sort of RWA growth you're expecting in 2026 pre the unknown IRB changes? And then do those IRB changes, do they affect your Pillar 2 requirement at all? And could that potentially lead you to lower the 14% core Tier 1 target? Donal Galvin: Rob, thanks for the questions. I'll take that. With respect to Pillar 2, let's wait and see. Overall, we have very detailed programs in place, working with the regulator where we're trying to close out various items on the to-do list. We've been very, very, I would say, efficient in closing those down and over the last number of years have seen a slow, steady improvement in our add-ons, but we are very ambitious in this area as obviously, our add-ons are one of the key ingredients to our medium-term targets. With respect to climate capital, a few different things there. So I mentioned that we have a new slotting model, which is approved, which is really what is used for the bulk of the activities in that area. We've begun to roll that out in quarter 3 and quarter 4. But looking through it all, if it had a -- if that business had a risk weighting density of around 90% pre that model, post the model, it's around 75%, okay? So that's one of the key inputs that you need for your returns analysis. The margins on the business are pretty consistent in different jurisdictions. And I would probably think about that being like a 2.2% margin business or certainly, that's what we model for when we're looking at the business and its growth and its trajectory. Costs are very low, obviously, given it's a very small professional wholesale team. And then it comes down to the cost of risk. For 2025, that division stand-alone had a very high cost of risk of around 110 basis points. Within that, there was around EUR 0.5 billion, EUR 500 million worth of fiber type transactions, all originated around 2019, 2020. And that's to do with the rollout of fiber throughout Europe, okay? Ireland, U.K., France, Germany, Italy, et cetera. So all of those deals are now -- or a lot of them, some are performing exceptionally well, such as in Ireland. U.K., not so much, delays from COVID, et cetera, et cetera, they are coming through now. So we took a few PMAs, quite an amount of PMAs, really just to ensure that in all eventualities, we were really well provided for. So you are seeing refis and equity recaps happening in that business at the moment. But if you took out that fiber portfolio, the cost of risk for that book was probably 5 or 6 basis points. Certainly for our planning assumptions, we use a cost of risk of less than 20 basis points. So if you put all that together, you can see the growth trajectory, and you can see that this is an accretive business for AIB and very heavily supported and strategically important for us. Colin Hunt: Thank you. Now I go to RBC. Good morning, Pablo. Unknown Analyst: I wanted to ask on fee income first. So you're guiding to AUM CAGR of 10% to 2028 with related revenue growth above that at 15% per year. So could you just please provide a bit more detail on what will drive that revenue growth going forward besides the demographic trends that you have already mentioned and perhaps also what the required investment -- additional investments are in that part of the business going forward? My second question was more on your deposit growth. I know that you've mentioned you expect that deceleration to -- from the 7% that you saw in 2025 to be more in line with the evolution of MDD. And I believe you also mentioned that you didn't necessarily expect a material headwind from changes in the competitive environment in Ireland. So I just wanted to check what you have been seeing in the last months in this year as well. And if you expect any material disruption given potential new entrants into the market, the ongoing transaction in Ireland, et cetera? Donal Galvin: Yes. Look, on the wealth, the way we're set up, and I'll just try to explain the guidance we gave you a little bit there. We imagine 10% AUM growth. I'd like to imagine that, that is on the conservative side. We have 2 businesses, high net worth within Goodbodys and then more mass market through AIB Life. Goodbody is obviously -- I mean, if we're able to acquire any smaller roll-up businesses in that space, we're really aggressively looking to pursue that avenue. And that will be, I would say, in Ireland, we would say EUR 1 million up of net worth. The AIB Life business has performed really, really well. It only started up a number of years ago. That is now fully functioning within the AIB construct. So it's a joint venture with Great-West Lifeco, where there's 140 advisers operating throughout the country and working through AIB branches with AIB colleagues. I think the statistics were maybe 40,000 face-to-face meetings or 35,000 face-to-face meetings last year with our customers. And we do expect this to just grow as we continue to roll out new products. And obviously, as the population matures and also educates a bit more on wealth products. So that's what gives us the confidence in this area, massive area of focus for us, not just with respect to customer acquisition, but also connectivity with our mobile presence and mobile banking apps as well, making that as easy as we possibly can for customers. On deposits, it's -- look, it's where -- I'm trying to be as open and clear about this as possible. And I will admit over the last number of years, I have underestimated liability growth for the organization. We're certainly very comfortable with our position in the market, okay? 49%, 50% of all new accounts being opened, and that's a huge area of focus for us, 40% of the stock. So we have no concerns necessarily over competitive threats in this area. It's just we felt that at some stage, a normal savings ratio deposit impact is going to come to pass. I was expecting a slightly different outturn in 2025. Obviously, I was wrong, and it was an outperformance. So let's see how it turns out in 2026. Is it conservative? I mean, who knows. But certainly, that's what our econometric models would show us. And indeed, if it's wrong, I'm sure we'll know it at the next quarterly Central Bank of Ireland report in any case. Colin Hunt: Now we're past the top of the hour, and we're going to draw matters to a close there. Thank you so much indeed for your attendance and for your questions this morning. If you have any other questions or any points of clarification, please do reach out to Niamh, to Siobhain, to John and Bernie on the IR team, and we look forward to engaging with you and indeed our investors face-to-face as the roadshow commences later on today. Thank you so much indeed.
Operator: Ladies and gentlemen, welcome to the Euroapi 2025 Full Year Results. The call will be structured in 2 parts; first, a presentation by the Euroapi Group management team represented by David Seignolle, CEO; and Olivier Falut, CFO. Afterwards, there will be a Q&A session. [Operator Instructions] I will now hand over to Sophie Palliez, Head of Financing, Treasury and shareholder engagement. Madam, please go ahead. Sophie Palliez: Thank you, Laurent, and welcome, everybody. Before we start this presentation, we would like to emphasize that some of the information we will share with you today is looking forward and not historical. This information is based on projections and assumptions concerning Euroapi's current and future strategy, future financial results and the environment in which we operate. These looking forward statements and information, do not constitute guarantees of future performance. They may be subject to certain risks and uncertainties, which are difficult to predict and generally outside the control and they could cause actual results, performance or achievements to differ materially from those described and/or suggested. That said, let me give the floor to David Seignolle. David Seignolle: Thank you, Sophie, and welcome, everybody. Let me begin on Page 5 with the key takeaways from 2025. Our teams thought on all fronts to protect our market position in an increasingly competitive environment. For example, Vitamin B12 as mentioned here. It was also another year of declining API volumes for Sanofi. Fortunately, on the Sanofi side, this was partially offset by a strong commercial CMO activity, particularly in anti-infective and skin care. At the same time, we saw growth in sales of key APIs with other clients such as opiates, et cetera, et cetera. While the top line was under pressure, we continue to make strong progress on everything that we can control. We sustainably reduced our external expenses and our personnel costs. We maintained strict working capital discipline with another year of improving inventory management, and we continue to invest selectively in CapEx to prepare the company for future growth. All of this reflects a real strengthening of our cost discipline across every function. Despite the top line headwinds, our transformation remains firmly on track. We have executed the initial phase of our plan on schedule in all the areas we control, some even earlier than planned. That includes our product portfolio rationalization, our industrial footprint simplification and our organization and processes. Taking a quick look at 2025 from a financial perspective on Slide 6. Net sales came in at EUR 848 million, with Sanofi sales down 26.4%, but other clients up 9.7% as reported. Our core EBITDA came in at EUR 66.2 million, a 31% increase from 2024, with a core EBITDA margin of 7.8%. Our EBITDA was close to EUR 10 million versus negative EUR 44 million in 2024. CapEx stood at EUR 77 million, with 55% of that allocated to growth and performance projects and supporting the company's return to back on track for sustainable long-term trajectory. Turning in to Slide 7. The challenges we faced this year did not weaken our commitment to sustainability. First, our near-term carbon emission reduction targets were validated by the SBTi. This is a strong confirmation that our trajectory is aligned with the Paris Agreement. Looking at our 2025 emissions, we are already seeing meaningful progress. We've achieved half of our targeted reduction for Scope 1 and 2, and we have already exceeded our target of Scope 3. This is a major milestone for the company. On diversity, given the current reorganization underway, we fell short of our 2025 targets on diversity. However, it is important to keep a long-term perspective in mind. In 2023 and 2024, our diversity ratio increased and even exceeded our objectives. The underlying trend remains positive. And on safety, which is something a bit painful to me, but despite our continuous effort, the injury rate remained stable in 2025. Most incidents were minor often related to slip, trips and falls. But that said, even one accident is one too many. And the Accident Prevention Plan launched in 2025 will continue to be rolled out in 2026 with a stronger focus on record analysis and proactive prevention. With that, I will now hand over to Olivier, who will walk you through our financials in more detail, and I'll come back later to look at the perspective. Olivier Falut: Thank you, David. We'll start the review of the consolidated accounts with the evolution of net sales. Net sales reached EUR 848.2 million in 2025 versus EUR 911.9 million in 2024, representing a decrease of 7%. The current impact on net sales was almost -- the currency impact, sorry, on net sales was almost nil. And the 1.2% perimeter impact is collated to the Haverhill divestment. On a comparable basis, sales declined by 5.9%. If we take a look at the net sales per activity on Page 10 now. API solutions to Sanofi decreased by 34.2% due to, first, an unfavorable comparison base related to the stock clearance of buserelin, which positively impacted 2024 sales of EUR 21 million, and the decline of volume of Sevelamer in H1 2025 and the sales of Haverhill at the end of June 2025. Last, EUR 50 million reallocation of Opella sales to other clients starting in May 2025, following the change in control of Opella. Excluding Opella sales to Sanofi in 2025 compared to 2024 only would have decreased by 25.7%. CDMO sales to Sanofi decreased by 4.9%, higher demand of Pristinamycin and PLLA commercial sale contracts was more than offset by the decrease in revenue from the Phase III BTKi inhibitor project. API solutions to other customers increased by 18.6% benefiting from first and an active cross-selling strategy, then 31 additional new clients in 2025, we generated high single-digit net sales in 2025. Last, the EUR 50 million reallocation of Opella sales without the change, sales to other clients would have increased by 4.5%. CDMO sales to other clients decreased by 13.6% as a result of the downsizing and discontinuation of pre carve-out of mature commercial contracts and the slowdown of early stage CDMO business. Turning to the core EBITDA evolution on Slide 11. Core EBITDA reached EUR 66.2 million in 2025. This represents a 7.8% margin, up from 5.5% in 2024. The evolution in core EBITDA margin was driven by the following elements. The stock clearance of Buserelin in '24 for EUR 21 million or minus 0.9% points; volume impact for minus 1.0 point, which is mainly due to the discontinuation of CDMO contracts; price and mix positively contributed by 1.3 points; a positive 0.3 points from the discontinued products. Industrial efficiency led to an additional 1.2 percentage point of core EBITDA margin, energy and raw material increase the margin by 0.9 points, strengthened financial discipline and lower personnel cost in OpEx allowed to gain 1 point of core EBITDA margin while Brindisi weighted minus 1.4 in '25 and on the other hand, the divestment of Haverhill allowed to gain 0.6 points. Total nonrecurring items on Page 12 now. Total nonrecurring items we stated from core EBITDA -- from EBITDA, sorry, stand at EUR 56.3 million in '25. The vast majority of these exceptional items are directly related to the FOCUS-27 plan. We recorded EUR 36.1 million of idle costs, which is mainly consolidation of the Frankfurt site. We also recognized EUR 6.6 million of internal and external costs related to the transformation of the company. Finally, employee-related expenses, in part linked to the redundancy plan amounts to EUR 13.7 million, which mainly concerned again Frankfurt and the divestment of Haverhill. Looking now at items below EBITDA on Slide 14 -- Slide 13, sorry. Operating income amounts to negative EUR 130.6 million in 2025 compared with negative EUR 120.4 million in 2024. Depreciation and amortization remained broadly stable year-on-year. The increase of asset impairment to negative EUR 77.8 million reflects discontinuation of vitamin B12 productivity project in Elbeuf following the reassessment of its economic potential. And a revision of gross assumptions to align with the latest market dynamics. As we move below operating income now, net financial expenses improved EUR 7.5 million in 2025 versus EUR 19.1 million in 2024. This decrease reflects lower financial expenses following the implementation of the financing plan. The 22.89 sorry, income tax -- sorry, EUR 72.9 million income tax expense includes the depreciation of tax assets following the update of growth assumptions. Taking together, these items results in the net loss of EUR 211.2 million compared to EUR 130.6 million lost in 2024. Turning to working capital dynamics on Slide 14 now. As part of our commitment to improve working capital, we have maintained the progress achieved on both months on hand and DSO since the implementation of FOCUS-27. Months on hand stood at 7 in 2025 and DSO at 36. CapEx now on Page 15. CapEx reached EUR 77 million in 2025, with 9% of total 2025 net sales. 65% of CapEx was dedicated to growth and performance, mainly supporting the capacity increase and efficiency projects on peptide and oligonucleotide, prostaglandins and corticosteroids. 21% of CapEx related to compliance. As a reminder, these investments address safety, quality and environmental topics and a significant share of them are mandatory. 24% of remaining CapEx corresponding to the maintenance of the existing asset base. Moving now to Slide 16, which covers the evolution of the net cash position. We ended 2025 with a net cash position of EUR 68.2 million compared with EUR 24.6 million at the end 2024. Cash flow from operating activities generated EUR 128.5 million of the cash in 2025. This was mainly driven by the working capital, which contributed for EUR 120.1 million. This improvement mainly reflects further reduction in inventory totaling EUR 38.9 million, decrease of trade receivables supported by factoring program launched in March 2025. Out of the EUR 45.4 million reduction of receivables, EUR 26.5 million was factored by year-end, with remaining decrease reflects immense cash collection. Other current assets and liabilities includes EUR 36 million paid by Sanofi to reserve minimum availability capacity for 5 selected products, EUR 21 million upfront grants from the IPCEI program, EUR 6.5 million related to the monetization of research tax credit in France. Including the EUR 77 million of CapEx, it was reviewed in previous slide, free cash flow before financing activities stood at EUR 51.5 million in 2025 compared to EUR 15 million at the end of 2024. Finally, cash from financing activities included a cost of debt of EUR 3 million in significant decrease following the debt for refinancing in 2024. This concludes the review of the 2025 consolidated results, and I will hand it back to David. David Seignolle: Thank you, Olivier. Before moving to full year 2026 guidance, let me walk you through the main operational and business drivers that will underpin sales, profitability and cash development for the year. Net sales will be strongly impacted by the rationalization of the API portfolio that we have engaged in 2 years ago. As we've said, the discontinuation of API accounted for around EUR 70 million of sales in 2025 including EUR 20 million related to stockpiling. Although the manufacturing of these API has been stopped, we still expect a residual EUR 10 million to EUR 15 million revenue from these products in 2026 as we continue sales for existing inventory. This means between EUR 55 million and EUR 60 million headwind in 2026 that we decided upon. The other impact are the continued decrease of the sales to Sanofi and further discontinuation of commercial CMO contracts. Turning to profitability. The industrial efficiencies and additional OpEx savings we anticipate should be offset by unfavorable fixed cost assumption, resulting from lower volumes. Our EBITDA will also be impacted by the restructuring costs that are foreseen in 2026. We will maintain a strong focus on working capital discipline and the CapEx to sales ratio is expected to be around 8% of sales. All in all, on Page 19, due to the impact of our portfolio rationalization and considering the challenging business environment, we expect a decrease of around 10% in net sales in 2026 on a comparable basis. Our own decision to streamline our portfolio accounts for around 90% of that decrease. In this context, we will accelerate our transformation to protect profitability and we expect to maintain the full year 2026 core EBITDA margin broadly in line with financial year 2025. Moving to the next slide and an update on FOCUS-27. On Page 21, let me recall, first, what FOCUS-27 was fundamentally about. It was behind around four structural pillars to reshape Euroapi into a more competitive, more profitable and more resilient company. First, streamlined API portfolio. We are concentrating on highly differentiated and profitable products, reducing exposure to commoditized segments where structural pressure is intensifying. Second, a focused CDMO offer where we are leveraging recognized capabilities and strong technology platforms to position ourselves for complexity, reliability and regulatory excellent matters most. Third, rationalize industrial footprint and disciplined CapEx. We are simplifying our manufacturing network and prioritizing high-return investment and improving asset utilization. Fourth, organizational transformation. We are building a leaner, more agile company, aligned with our strategic priorities and able to compete in a faster-moving environment. These 4 pillars remain absolutely valid today. On Page 22, let's have a look at what has been delivered over the last 2 years. Despite the demanding environment, we have executed the core structural actions of FOCUS-27 and reinforced our fundamentals. On the portfolio, 66% of our sales in 2025 are now coming from differentiated products. This compares to 57% at the end of 2023, and we are on track to achieving our target of 70% by the end of 2027. The planned discontinuation of the low-margin product was almost completed at the end of last year, which will impact our 2026 top line, as already said, accounting for 90% of our top line reduction. Regarding the CDMO goals, 70% of the projects are late stage, improving visibility and reducing the risk. On the industrial footprint, Haverhill has been divested, productivity has improved across all sites. One workshop in Frankfurt has been mothballed and 380 positions have been reduced across the company ahead of our original plan. On the organization and cost base, key functions have been reorganized, R&D has been refocused and close to EUR 20 million of OpEx savings have been delivered over the past 2 years. Overall, the Euroapi today is a leaner and more disciplined organization than it was in 2023. Moving to Page 23. Capital discipline has also been a very strong priority under mothballed FOCUS-2027. This is clearly reflected in our CapEx trajectory investment decreased from EUR 137 million in 2023 to EUR 108 million in '24, EUR 77 million in '25, and I've even mentioned that we will be close to 8% for 2026 from a CapEx to sales ratio starting at 14% back in 2023. This reflects a deliberate shift towards stricter prioritization, higher return of projects and certainly better care and discipline around CapEx expenses. We have continued to invest in strategic platforms such as peptides, oligonucleotides and in high barrier APIs like prostaglandins and corticosteroids. At the same time, we took disciplined actions to discontinue the vitamin B12 capacity project following market acceleration and technical constraints. Moving to Slide 24. Let me briefly step back at where we are on our key KPIs for FOCUS-2027. Since 2024, we have incurred EUR 44 million of transformation and restructuring costs, ahead of the 25% originally mentioned for those 2 years. This reflects the fact that the project -- or the restructuring program is ahead of schedule, but it doesn't change the total expense expected envelope of EUR 110 million to EUR 120 million, although we will do every effort to limit that. On incremental core EBITDA, we had initially targeted EUR 75 million to EUR 80 million incremental by 2027 compared to 2024. However, with '26 and 2027 net sales now expected to be below initial assumptions, additional underactivity is anticipated. As a result, this incremental core EBITDA target will not be achieved in 2027. On CapEx, EUR 185 million has been invested over 2024 and 2025 against an initial EUR 350 million to EUR 400 million envelope for '24 to '27. Although we maintain this envelope, we will be looking for all opportunities to either limit our CapEx to projects, offering the highest return and reinforcing competitiveness or optimizing the CapEx expenses. Let me be clear, this is not about slowing down. It is about allocating capital where the returns are sustainable and defensible. Turning to Slide 25, sorry. As we have just discussed, FOCUS-27 and the transformation of the company are on track. However, over the past year, the business environment has evolved faster than initially anticipated. Competition from low-cost Asian players has intensified increase in price pressure in natural APIs. At the same time, we're also seeing large pharmaceutical companies outsourcing more late-stage and complex projects. This creates opportunities, but competition is obviously selective and execution must be precise. Sovereignty initiatives are promising, they have not yet translated into tangible economic incentives at this stage. But we are working or helping towards this evolving. In addition to this external environment, it is fair to say that we also face internal challenges with early-stage CDMO road map progressing at a slower pace than anticipated and the discontinuation of the vitamin B12 project. This is a context in which we are accelerating and sharpening the execution of FOCUS-27 and launching new initiatives. Moving to Slide 26. On the portfolio side, we will further reduce our exposure to commoditized APIs, structurally pressured small molecules and concentrate our resources on high barrier segments such as prostaglandin, corticosteroids and opiates. On these 3 segments, we have solid competitive advantage that we will leverage including further innovation programs that we have mentioned before. This includes technology edge and strong market position in prostaglandin as well as strong expertise and flexible capacity in corticosteroid and opiates. On operations, we'll continue improving operational performance, standardizing and improving our processes, for example, through leveraging technology. We will also strengthen the commercial CMO business. We can offer a reliable and sovereign manufacturing to customers looking for derisking their API supply chain. This will help securing volumes and improved capacity utilization in our sites. On the organization front, we will further streamline structure, simplify processes and align skills and capabilities with a more demanding environment. We have done a lot since the launch of the plan, but we see further opportunities to improve our operating model towards the fit for purpose and leaner organization. In parallel, we are launching additional initiatives, First, we will enhance commercial excellence and expand our API customer base in under-leveraged territories. Let me give you 2 examples. North America, which is the largest and fastest-growing API market worldwide accounted for only 8% of our total sales in 2025. If we go south to Latin America, we only serve 10% of the top drug product players over there. Second, we will refocus the CDMO business on strategic customers and/or complex molecules notably P&O, peptides and oligonucleotides. This means we will stop deleting our commercial efforts and contrate on strategic customers and products that we can succeed upon and increase focused on complex molecule projects, for example, high added value peptides and oligonucleotides projects, including RNA therapy. First, we will optimize our supply chain to structurally reduce our costs while maintaining end-to-end console. This is one very important way to increase competitiveness and adapt to the current environment. Our objective is obviously to adapt the operating model to a structurally tougher market and restore a sustainable path to profitable growth. Moving to our long-term ambition as a conclusion. While we recognize that the recovery is taking longer than initially anticipated, reflecting structural evolution of the market, we are taking the necessary actions to build a more competitive, sustainable and financially resilient operating model. Looking towards the near future, our positioning is clear. We aim to be a European-based sovereign supplier of complex API, a reliable CMO partner and a trusted CDMO player for new drug development. At the same time, this positioning must be supported by a sustainable operating model with a competitive -- cost competitive supply chain, a lean and capital-efficient industrial footprint and obviously an agile organization. Our long-term strategy is anchored in discipline and certainly value creation. This is where our focus is now in the interest of all our stakeholders. Thank you for your attention, and we are now ready to answer your questions. Operator: [Operator Instructions] We have a first question from Clement Bassat from Portzamparc. Clément Bassat: Basically, I have four. The first one about the top line. So what is your 2025 base top line? I assume it is your published figure, minus EUR 70 million from discontinued API, which leads to EUR 778 million. And this would imply a top line '26 of EUR 700 million following your expected 10% decrease in tip line, just to confirm if I am correct. Second question, so regarding the EUR 78 million impairment on Vitamin B12, does this include a portion of the CapEx invested from the current FOCUS-27 plan? And are you considering further impairment in 2026 following the discontinuation of the other API. Third question, just to confirm, you are maintaining restructuring costs at EUR 100 million. This is only cash related, spread through 2027. And finally, your CapEx was limited to EUR 77 million in 2025. So this decrease is a decision to preserve cash or just to adjust to your expected future top line? David Seignolle: Thank you, Clement, for all the questions. Let me -- I may ask you to repeat some at some point, just to be precise. But let me start with answering and maybe Olivier will step in at some of those. So the top-line assumptions that you have made, if I followed, I think, are not the way we think about those. There is no such comparable basis at EUR 778 million, which you mentioned, removing 10% of that getting to EUR 700 million. What we are looking is around 10% versus comparable basis, which you would only reduce the sales of Haverhill in 2025. So you can make the math. I don't want to make it for you. We have not mentioned any specific numbers, but we are not seeing such a drastic drop as you calculated. On the -- I'll come back to the B12 impairment question. Yes, the investment of B12 was part of the EUR 350 million to EUR 400 million total envelope. Most of these investments on B12 were made in '23 and '24, some even earlier -- sorry, in '24 and '25, some even earlier to that to that period. So the impairments are related to that. There is no such plan to further impairment in 2026. There has just been the adjustment of these impairments plus the impairment we did on the terminal value of the company. And there is no such thing to do, to do anything else. I wasn't clear on the restructuring. I'll leave you to come back to it afterwards. And finally, the CapEx of EUR 77 million in 2025. I think it's a bit of both. I think the company has been used to spending far too much money on CapEx in the past, probably referring back to the time that we were a large pharma company where the cash was not a problem. I think over the last couple of years, we have learned to be more disciplined with spending cash, spending CapEx, looking at different ways to fix problem than to invest in new equipment, maybe in some cases, reutilizing elements or not looking for the gold-plated solutions, but more the practical solution that a CDMO or CMO organization needs and not a large pharma. So there is no such thing to say that we want to limit to the further growth. I think we're still committed to investing significantly in the future. And for that, we have a couple of projects such as IPCEI or the morphine project where we are looking at new ways of manufacturing the morphine and all of these projects being either funded by -- partially funded by France Relance and the IPCEI program. And there will be significant investments, but that will come at the right time. All in all, we need to look at a sub EUR 800 million revenue company should not be spending EUR 100-plus million on a yearly basis. Yes, clement, can you go back to the question three on the restructuring, please? Clément Bassat: You are maintaining restructuring cost of EUR 100 million, but I have in mind that restructuring costs are composed with cash and idle costs. So EUR 100 million for me, I understand this is only cash related expected in 2026, 2027 and maybe also 2028. Just to confirm, you are talking just about cash-related amounts. David Seignolle: Yes. So that is exactly -- the last part of your sentence is correct. It's talking about cash amounts. And it's only covering '26 and '27. We are obviously, as I said, have different views on the top line for 2026 and 2027 at this stage than was originally anticipated. And as a result, if we need to adapt the organization to those new levels, we will have to do. But there will be a time to engage in those discussions if they need to happen. Operator: Now we have a question from Zain Ebrahim from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. So my first question is just in terms of the China API increased competition that you're seeing. It sounds like Vitamin B12 is a key segment where you're seeing that competition, maybe anti-infectives as well. But can you talk through which divisions or product categories you're seeing that competition in? And how much of the headwind you're expecting in 2026 is due to price reduction on those product categories versus volume lost to some of the extra competition? That's my first question. Maybe I'll pause there and then I can ask my follow-up. David Seignolle: All right. Thank you. So look, I think the -- unfortunately, this is a strong industry as we see or China has entered into a strong industry-wide program, and we see that across various industries and it's valid in ours, and they are looking at every single product. The reality is we have the small commodity programs -- products, sorry, that are very much impacted because in this specific case, not only they are benefiting from large volumes from very low cost of labor, low energy costs, significant new equipment with, I mean, state-of-the-art, et cetera, et cetera, plus in some cases, subsidies by the government. So in those cases, it's quite difficult to compete. Yet for whomever wants to supply and to get materials from Europe, we will maintain, and we have some of these customers. Now, I believe the trajectory over the next couple of years on those type of products is going to continue to decrease, and we will have to fight back and to provide answers in the cases we can. For the specific categories, I think it's all over the board. The reality, though, is we have quite a strong value proposition on the typical strength category of products that we have in the company. Prostaglandin, we are the global leader in prostaglandin by either the number of products that we look, by the experience and history that we have and the quality of our products, and we aim to maintain that. We are actually reinforcing this offering by looking at different further improvements or innovation projects on site. We have launched, as you know, a strong capacity increase to support the growth in the future, and we continue to accelerate down this path. The second element to that would be the opiate, where not only we benefit from a somehow protected market with all those morphine and derivative products, but we have -- we are working towards significant innovation projects in the future, as mentioned before, and these are benefiting not only for subsidies, but will be supported from our side, from CapEx investment to increase in the future. We don't necessarily foresee challenge on the price on that specific category either. And then finally, the corticosteroids. I think the corticosteroid is maybe a little bit of a different animal. We are -- there is a lot of players in the world. We are the only one, except with one other site in the U.S., which is fully integrated from A to Z of manufacturing of corticosteroids outside China. This is a strength, especially when we talk about sovereignty. We have discussed about sovereignty through COVID and challenges. We see sovereignty through shelf nowadays. We see some geopolitical issues now, which may endanger some logistic routes further in the next couple of weeks and months. So we still believe that this is not going to be simplified in the future and our sovereign solution will be helpful. That being said for corticosteroid, yes, we are challenged on price. Yes, we will probably do some efforts because we have significant projects to innovate and to improve our value proposition to cut costs significantly through new chemical routes in the future. That is what IPCEI actually want the, Work Package 2 of IPCEI is about, and that's a strong avenue for us to reinforce our value proposition in the future. I can't just further comment on the impact of volume or price related to our 2026 earnings. You had a follow-up? Zain Ebrahim: That's very helpful. Yes, my follow-up was on the discontinuation of APIs is helpful in terms of the quantification of the headwind to '26 sales. So should we expect any further discontinuations in addition to what you've already planned? It was 13 API before, I believe. So just any further discontinuations, given the portfolio prioritization that you're undertaking? And can we expect to return to sales growth? Could we see that in the -- it sounds like obviously '26, you've given guidance. For '27, you said it's below expectations, but when can we expect to see that? David Seignolle: Yes. So that's a couple of questions. Let me just get them in order. So are we expecting further discontinuation of products? No. The answer is no. Now this being said, you never know what's going to happen. I think, it's healthy for any company to look at their portfolio regularly. At this stage, we have not decided to further prune our portfolio. Actually, we are looking at growing that. And that's part of our additional activities for commercial that we mentioned. We are looking to new geographies. We are looking to seeing if we can have additional offerings and how we would progress on that specific front. When are we expecting to grow was the second part of your question? Well, the earlier, the better, obviously. What we are seeing for 2026 is still some reduction, as we mentioned. I just want to come back to the fact that 2025 saw a significant reduction in Sanofi's sales. But we just mentioned we gained 31 new clients and the sales to other clients and Sanofi was up close to 10%. So let's -- it's definitely a way forward that while we want to maintain some level of Sanofi, we know that the inherent share of the Sanofi business for the future is to reduce. On that specific front because maybe the question is going to come and I can anticipate it. We are -- we have an MSA up until 2027 that we are working towards extending. We have already five products that are extended until 2032. One specific with Opella now until 2031, and we are working towards concluding the terms of the extension of the other products beyond 2027. So whilst we -- our focus is to manage the reduction of Sanofi over time, we are heavily focused on selling to other clients, cross-selling, acquiring new, et cetera, et cetera. And there is -- and the first elements of the strategic move we did last year with merging the 2 organizations commercial into one and led by an expert in commercial operations in the CDMO and CMO space in our industry with the arrival of Frederic Robert in our organization is proving us right. The problem is, as you very well know, it takes time to bring new clients in and register those. So I would hope to see a continuous momentum into acquiring new clients and new sales into '26 and 2027. Operator: [Operator Instructions] Sophie Palliez: Maybe we can move to the questions that we have from the website. There's a bunch of them. So I'm going to try to summarize them by key subjects. The first subject is about the CDMO business. Our analysis of the reasons of the slowdown of the pace versus what initially expected? And maybe what type of future we see in the CDMO business and how we managed to recover specifically growth in that field, so CDMO. David Seignolle: All right. So the CDMO, as I think mentioned earlier, was -- is indeed lower than anticipated, definitely not at the level where the equity story of the IPO was at. I think over the last couple of what we've learned over the last couple of years is, one, we need to be focused. We can't answer 250, 300 RFPs every year with the organization we have, with the resources we have, the sites and R&D labs that we have because that prevents providing the right attention to the clients, to the requests, the RFPs, understanding the exact needs, et cetera, et cetera. So that's why we decided to be a lot more focused into either not the very, very early preclinical stage and to specific areas in which we know we have a competitive advantage. There is, we have 2 main R&D labs that support the CDMO, one in Frankfurt, which has very strong expertise on the P&O side and in Budapest, which can very much work on complex small molecules, such as the prostaglandin and others. In fact, we are still working with providing very complex and strategic projects for the future, such as, for example, developing the backbone of any future development of a large American Big Pharma. That's the first learning. The second learning we had is, it's a lot more complicated than one would think to get into the CDMO world. CDMO world and the clients know that you get into a lot more questions that you need to answer around what kind of raw material will I be using? What kind of processes will I develop? How can I scale up? What will be the implication and the challenges that I will see. Navigating in all this ambiguity hand-in-hand with the customer is not something that this organization was used to in the past with working with one internal client only, which was Sanofi at the time. So all of this takes time to build the capabilities. And I believe we are doing the right things. We are bringing the right talent, and we are working more hand-in-hand with the customers across all of this. For the future, what we see -- well, we see continuous, let's say, difficulty to navigate in this space because there are a lot of players. There are a lot of actually even Asian players that are coming in with different, let's say, approach to the business than European have. However, there is still place for all of us to work to provide local manufacturing, local scale-up with the right expertise and certainly proximity to the customers. The key point is we will also be thinking CDMO and CMO very much differently. The CDMO is everything that I said, working very much in research and development, aligned or accompanying the customer through this journey of their own development. While CMO is a very simple tech transfer, smooth tech transfer type of approach with a reliable supply chain of existing commercial products. Those CDMO and CMO, as we want to differentiate, require a different set of skills. Different set of skills, either by our commercial and customer-facing individuals, and also on the site with very lean and effective and efficient, certainly operations on the ground. And as a result, we will approach those two businesses very differently moving forward to be able to answer our customers. Sophie Palliez: One question is about core EBITDA in 2015, which improved significantly despite revenue declining. How much of the improvement is actual versus temporary cost savings? Olivier Falut: I guess on this area, the answer is quite simple. In terms of cost savings and improvement of the organization and the model, pretty much everything is sustainable. We improved the structure in terms of industrial footprint. We improved the model in terms of organization, in terms of SG&A. The R&D have been also redesigned. So I would answer clearly that the whole is sustainable, provided, that as I comment before, there is one-offs that are not sustainable, obviously, like the Buserelin issue, meaning impact of 2024. But for the rest, it's pretty much sustainable. David Seignolle: Those EUR 20 million of OpEx that we have mentioned are definitely here to stay and will remain as is. This is part of a new structure, a new baseline of our costs and everything that is being done at the site or in procurement and et cetera, will continue to bring efficiencies on a yearly basis. Sophie Palliez: Question on Asian imports. How can you compete against Asian imports? And where is your -- what do you think you have a sustainable edge to compete against those Asian imports? David Seignolle: So the -- how we can compete? I think there is, where and how, I guess, was the question, right? The key point is, we will not be able to compete on everything. And as customers just want price, I think it will be difficult, just on that pure front. This being said, difficult doesn't mean impossible. And as I mentioned earlier, we have a significant amount of our portfolio that is today still very much competitive and for which we further -- we have further innovation program to reinforce this competitiveness in the future, which will either allow us to increase commercial margins or to provide more competitive offerings to our customers. The second part is -- of the question was... Sophie Palliez: What are competitive edges in decisioning? David Seignolle: So that I mentioned. And then I think the second element is the fact that we are based in Europe. And as I mentioned, I think a lot of customers want reliable supply. Our reliable supply, our very China-independent supply chain, even for raw materials is actually today the only one available in Europe, let's face it. So for whomever customer in Europe or in the U.S. that want risk-free supply chain, China-independent supply, well, we are here available. This being said, I think on all those customers that want pure pricing, not really caring either about ESG or pricing, that's where I think we need to look at things maybe a bit differently. And that's what is mentioned in the cost of our supply chain improvements that we want to do in the future. It could very well be that buying some raw materials or intermediates in a lower-cost country could be coming handy for us, not by depleting our sites, but by able to reduce the pricing that we will, in turn, be able to offer to our customers, increasing those volumes and actually, at the end, probably having higher volumes in this specific site that is manufacturing the API than we used to have. So I think we need to be able to play on both levels. One is top-notch player of premium quality APIs; two, being a European source, sovereign source to China independent supply or sovereign supply; and three, for those customers that want price, let's play here as well. Sophie Palliez: What is the current level of capacity utilization across your main API sites? And what level could you consider as normalized for the business? And do you have an objective in midterm? David Seignolle: So look, on the capacity utilization, I don't think we comment on that, but we would expect around, let's say, ballpark half of our capacity, a bit more half of our capacity being utilized at this stage. There is no surprise, if I say -- to any of you, if I say that in the chemical industry in Europe, given the cost structure and everything, all our -- all my peers, let's say, would agree that 75% to 80% utilization is a minimum to have sustainable long-term perspective. In our situation, we know that at this stage, given the elements of underutilization that we have, which hurts or will hurt or which at least offsets all the efficiencies we are bringing from a cost standpoint, any additional volume that will fill up this available capacity will not only generate commercial margin, but also reduce those underutilization that hit our P&L. So we are working on that. And I think that's why we are discussing very heavily now, how do we increase our offering in terms of portfolio, how do we augment that and how do we play more on the CMO or European-made CMO type of market because I think that can be win-win for both customers and ourselves. Sophie Palliez: So do we have any questions online? Operator: We do not have any more questions online? Sophie Palliez: Okay. So maybe one last to conclude on -- from the webcast. If you had to prioritize one key execution risk that could derail the execution of the plan, what would it be? David Seignolle: I think the key point today is we need to have everyone on the top line. We have proven over the last 2 years that we can -- that whatever we can control, we can simply deliver. And the teams have done an outstanding job across sites, across organization in the last 2 years to actually prove that. And that's why our -- despite the whole headwinds we've seen, our core EBITDA has increased significantly between '24 to '25 and that we landed 2025 with actually a positive EBITDA. And those, as we said, are sustainable measures that will keep yielding results in the future, and we expect further actually on that. Now we need the whole organization to be working top line. And what I mean the whole organization is we need to be able to support our commercial folks that go and talk to customers on a daily basis. We need to provide them with high-quality materials with a competitive value proposition. We need to equip them with top-notch products, maybe provide them more products, provide with the right CMO value proposition, CDMO and R&D expertise. And definitely, when they need support and when they are able to seize clients, we need to be 100% on time, delivering against customer expectations. So I think the key point here is restoring growth will come by having a full organization focused on growth in the future to support the commercial folks delivering on that ambition. Sophie Palliez: Thank you. So I think if there's no more question online, this will end our webcast today. Thank you for attendance. Thank you for the questions. And as usual, the Investor Relations team and the management remains at your disposal, should you have any follow-up questions. Thank you, and have a good day.
Operator: Hello, everyone. Thank you for joining us, and welcome to the RJET Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now hand the call over to Keely Mitchell. Please go ahead. Keely Mitchell: Thank you, Warren, and thank you, everyone, for joining Republic's First Earnings Call subsequent to the Mesa merger. On with me today are David Grizzle, Chairman and Chief Executive Officer; Matt Koscal, President and Chief Commercial Officer; and Joe Allman, Senior Vice President and Chief Financial Officer. I will kick off our call today, reading the safe harbor disclosure, and then I will turn the call over to David for some opening remarks to discuss the strengths of Republic and our position within the regional airline industry. Following David, Matt will walk us through the Mesa merger and integration, key differentiating investments that have positioned Republic for the long term and our focus on long-term strategy. Following Matt, Joe will take us through the financial results, the fleet and provide guidance for 2026. We will then open the call for Q&A. In the Investor Relations section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This call is being recorded and will be available for replay on our Investor Relations website. Today's discussion will include forward-looking statements regarding Republic Airways' future performance, strategic initiatives and market outlook. These statements reflect our current expectations and beliefs based on information available to us today, but they are subject to various risks and uncertainties that could cause actual results to differ materially from our projections. The aviation industry operates in a dynamic environment with inherent risks, including regulatory changes, economic fluctuations, weather-related disruptions and evolving market conditions, that can significantly impact our operations and financial performance. Additionally, our business is subject to the operational and financial health of our major airline partners, labor market conditions, aircraft availability and other factors beyond our direct control. For a comprehensive understanding of the specific risks and uncertainties that may affect our business and financial results, I encourage all participants to review our detailed disclosure in our filings with the Securities and Exchange Commission, including our Form 10-K to be filed with the SEC. These documents provide important context and detailed information that supplement today's discussion and are/or will be available on both the SEC's website and in the Investor Relations section of our company website at rjet.com. Additionally, throughout this webcast, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort appear in today's earnings press release and presentation, which are available on our Investor Relations website. And now I will turn the call over to David. David Grizzle: Thank you, Keely. Good morning, everyone, and thank you for joining us on the call today. Before I dive into our presentation, I would like to give a thank you to our more than 8,400 Republic and Mesa associates across the network. These aviation professionals persevered through a challenging quarter navigating the longest U.S. government shutdown in history and significant winter weather disruptions, which have extended into the new year. Moreover, our associates who support our frontline associates have done extraordinary work to bring our merger with Mesa to the finish line and to set us up for success in the future. In the midst of all of this, we delivered strong results for the quarter and full year 2025. Let's start with the key messages about Republic Airways we will discuss today. Republic is a leader in operational excellence, and we have a highly experienced senior leadership team with 100-plus years of collective aviation industry experience. The leadership and vision of our executive team is focused on continuing to position the airline for long-term sustainable performance. We have made targeted investments in training infrastructure, technology and fleet growth that enhance reliability and expand our ability to support partners at scale. Our vertically integrated workforce pipeline gives us a structural advantage in a constrained labor environment. We maintain a strong balance sheet with an improving debt profile supporting financial resilience. And in 2026, as we execute the Mesa integration, we expand our scale, increased strategic relevance and position the company for greater breadth and long-term value creation. We reported Q4 results to date with an adjusted EPS of $0.54 and total revenue of $464 million, up 21% in Q4 versus the similar period in the prior year. With the closing of the transformational merger with Mesa, Republic Airways is now back in the market as a publicly traded company. For those who are new to the Republic story, we are the largest Embraer jet operator, with 306 E170 and E175 aircraft, which as a single fleet type drives operational simplicity. We maintain long-standing partnerships with American, Delta and United with our fleet diversified across those key partners. We operate 12 crew bases mostly in the Eastern U.S. and carried 21 million passengers in 2025, supporting 1,300 daily departures and more than 370,000 safe arrivals. Our operational performance remains our most important differentiator as evidenced by our delivering nearly 100% controllable completion and approaching 10 hours per day of utilization for each contract aircraft. In fact, in 2025, we had 349 days of perfect controllable operations, which is no small feat. Our 2026 financial projections reflect the execution with revenue reaching a $2 billion run rate with Mesa included on a full year basis. Projected adjusted EBITDAR strengthened to $380 million, underscoring operational leverage and improving profitability. Our business model is built on contractual revenue streams that significantly mitigate demand risk. Under these agreements, our partners are responsible for ticket pricing and demand management, while we are responsible for providing safe, reliable and cost-efficient operations. Our customers also bear 100% of the fuel risk. This structure allows us to focus relentlessly on operational deployment and cost discipline which are the core drivers of value in our model. Over the past 3 decades, Republic has consistently evolved its fleet, scale and structure, while remaining anchored in operational excellence in the CPA business model. We transitioned from a turboprop-focused operator in the late 1990s to an early adopter of larger regional jets, expanded through strategic acquisitions and ultimately sharpened our focus exclusively on contract regional flying. Today, with a unified E170, E175 fleet and the Mesa merger positioning us for greater scale and market share, we enter our next chapter as a stronger, more focused and strategically relevant regional partner. Regional airlines are the backbone of the U.S. air transportation system, serving 95% of the nation's airports that provide scheduled passenger service and providing the only source of scheduled air service to 64% of those communities. Regional airlines operate seamlessly behind the major airline brands and have undergone significant consolidation over the past 1.5 decades. In 2009, there were 16 top independent regional airlines competing in the market. Today, that number has narrowed through just four fully scaled independent operators. This consolidation highlights Republic's position as one of the few independent regionals supporting the largest brands in commercial aviation. Now I'd like to turn the call over to Matt, who has been a standout leader of public for over a decade and a great partner to me. As we announced in December, the Board expects to promote Matt to CEO within this calendar year. He has been instrumental in building our culture, strengthening relationships with our valued customers and driving operational excellence. In addition to his responsibilities as President and Chief Commercial Officer, Matt is also spearheading the Mesa integration. Matt? Matthew Koscal: Thank you, David. Republic is a high-density operator in the most competitive and capacity constrained markets in the country. In the New York City area, Republic records the highest number of arrivals surpassing even several mainline carriers. We also rank among the top 3 operators in both the Washington, D.C. region and Boston. This scale demonstrates Republic's ability to operate reliably and efficiently in some of the densest and most operationally complex aerospace in the U.S. Our presence in these core hubs underscores our strategic importance to our major airline partners. It also means that our flights can be more impacted by air traffic control issues than others. And therefore, the geography where we operate is an important factor when comparing our performance to others in the industry. This slide shows our current routes and reinforces the prior slide that we are highly concentrated in the Northeast corridor. With the Mesa merger, we enter our next chapter with greater scale, adding a new hub in Houston providing new access to international markets in Mexico. On the right side of the slide, we show our history of operational excellence over a 3-year period. Despite our concentration in heavily congested markets, Republic consistently delivered an industry-leading number of days with a 100% controllable completion factor. Republic Airways' long-term business plan is anchored in stable multiyear capacity purchase agreements or CPAs, built on the Embraer platform. We operate 275 Embraer aircraft with an average age of 13 years. Plus we have 31 aircraft in non-operating leasing relationships, bringing the total committed fleet to 306 aircraft. The fleet is diversified across American, Delta and United under a mix of debt finance, partner control and owned aircraft structures, demonstrating flexibility and shared investment with our major airline partners. Our contract exposure is also well staggered with average expirations extending to late 2028 for Delta, 2030 for American and into 2034 for United. Overall, we have long-duration revenue visibility and balance sheet optionality embedded within Republic's partnership-driven model. Of the 306 committed aircraft, 31% are debt financed with obligations generally aligned to the CPA contract terms, reducing refinancing risk underscoring a fleet strategy that supports long-term balance sheet strength and flexibility. 34% of the aircraft are owned outright with no encumbrances, providing significant collateral and financial optionality. The remaining 35% are partner controlled, meaning they operate without carrying the associated financial burden. Overall, nearly 70% of the fleet is either unencumbered or operated without direct financing obligations, underscoring a more conservative capital structure and reduced financial risk profile. Our team of aviation professionals deliver exceptional operational safety and reliability and truly demonstrate trust, respect and care for our passengers and partners. Republic as a company rooted in a distinctive culture of employee engagement and operational excellence. Our strong culture positions us as an Employer of Choice in the regional airline industry. Combined with our industry-leading Workforce Development Academy, LIFT, we have created a differentiated talent pipeline that supports long-term staffing stability and operational consistency. We have made targeted investments in training infrastructure, technology and fleet growth that enhance reliability and expand our ability to support partners at scale. Our vertically integrated workforce pipeline gives us a structural advantage in a constrained labor environment. The combination of Republic and Mesa creates a scaled regional platform with approximately 8,400 associates producing in excess of 865,000 block hours on a fleet of 306 aircraft. The combined company will operate 12 crew bases and serve 142 destinations, expanding scale, network breadth and scheduling flexibility. Together, the merger enhances scale, opportunities for our associates and operational relevance across our major airline partners. Now let's talk about the Mesa integration. The Mesa integration is structured around four clear work streams designed to deliver operational, financial and regulatory alignment over 2026 and 2027. First, we are consolidating back-office operations, including HR, compliance, finance and supply chain. This work is well underway and we expect it to be substantially completed by Q3 of 2026. Second, we're consolidating strategic operations and IT systems into a single cohesive infrastructure. We expect this work stream to be complete, except for our dedicated IT op systems by the end of 2026, with strengthened internal controls. Third, we are focused on fleet health restoration and full E175 harmonization to drive maximum utilization, compliance consistency and improved maintenance and inventory management across the combined fleet. This is a 2-year project. We expect to complete 40% of this work by the end of the year and finish the fleet harmonization by year-end 2027. Fourth, we are pursuing harmonization of the operating certificates in order to align manuals, maintenance programs and operational oversight so that we can create one unified airline from an FAA perspective at the optimal time. Finally, we are harmonizing labor agreements and seniority lists with a goal of implementing joint collective bargaining agreements with each of our organized labor groups. As we execute these initiatives, we expect to align our workforce, fleet and operations to compete more aggressively for future CPA flying. While integration costs are incurred during the transition, the end state supports stronger margins, greater efficiency and enhance long-term value creation. Now I'd like to turn the call over to Joe to walk us through Q4 and full year 2025 results, which include the 36 days of Mesa results since the merger closed. Joe? Joe Allman: Thanks, Matt, and good morning, everyone. It's great to be here with you. This morning, we reported fourth quarter GAAP net income of $5 million on 42.6 million weighted average diluted shares or $0.12 per diluted share. Our effective tax rate was 70% for the quarter, which is well above what we would consider normal. The effective tax rate for the quarter and the full year 2025 was negatively impacted by the non-deductibility of certain items. Total revenue for the quarter was $464 million, up 21% year-over-year, supported by a 23% increase in block hours and an 8% increase in overall average daily utilization per scheduled aircraft. This strong financial performance was despite the 3% lower completion factor for the quarter. During the quarter, we experienced 3,200 more non-controllable cancellations over Q4 2024 due to a combination of factors: the government shutdown, severe winter weather and air traffic control staffing. During Q4, we incurred $15 million in merger-related items. We expect integration activities to continue throughout 2026 and to be substantially completed by the end of 2027. Q4 net income, excluding the merger-related items and with an adjusted tax rate of approximately 29% was $23 million or $0.54 per diluted share. Pretax income adjusted for merger-related items was $32 million, up 14% year-over-year. Adjusted EBITDAR for the quarter was $83 million, up 27% over the same period. The improved year-over-year financial performance is attributable to the growth in Republic's fleet through the addition of new E175 aircraft at United and the removal and transition of some of those aircraft to a long-term operating agreement at American. In addition, the average daily utilization per scheduled aircraft increased and the quarter included the 36 days of Mesa's operations. Moving to the full year 2025 financial performance highlights which again only includes the 36 days of Mesa contribution, I'm going to talk to adjusted results, which exclude non-recurring costs related to the separation of our prior CEO and merger-related items. Please see our reconciliations for details. GAAP net income was $76 million on 40.7 million weighted average diluted shares or $1.87 per diluted share. Adjusted net income was $114 million. Adjusted pretax for the year was $161 million, and adjusted EBITDAR was $342 million up 31% from $260 million in 2024. Total operating revenues for the year were $1.7 billion, up $200 million or 13% year-over-year. Our adjusted effective tax rate was 29%. The company's overall fleet growth of 67 aircraft increased demand for higher fleet utilization and the 36 days of contribution from Mesa are the primary drivers of the improved financial performance, combined with our disciplined cost management. Our financial performance reflects not only strong operational execution, but also the continued trust our airline partners place in our services. Now turning to the balance sheet. We generated $322 million in cash from operations, up $226 million in 2024. After a step down in CapEx in 2024, investment increased in 2025 to support fleet growth. Despite increased investment, leverage improved meaningfully from 3.2x at the end of 2024 to 2.7x as of December 31, 2025, reflecting a healthier leverage profile. Our goal is to be below 2.2x by the end of year 2026 and with a long-term target below 1.5x. Net debt trends demonstrate active balance sheet management and strong growth with flexibility to prioritize additional paydowns as integration progresses. Our improving financial foundation supports a defined Embraer delivery schedule through 2029 with 26 future unallocated deliveries after the last three United placements are taken for this year. These aircraft provide visible capital-efficient growth opportunities for us in the future. Overall, the combination of lower leverage and committed fleet deliveries enhances our strategic flexibility and long-term value creation and we remain focused on maintaining our balance sheet strength. Now let's turn to guidance. For 2026, our guidance centers on black hour production, total revenues and adjusted EBITDAR as the primary operating and financial performance indicators. Block hours are expected to grow to 865,000 or more, reflecting a full year of Mesa flying and improved fleet utilization as maintenance harmonization progresses, and we have the full year effect of the aircraft added to our American relationship in 2025. This block hour growth should lead to revenues in the range of $2 billion, driven by higher aircraft availability and a full year of combined operations. Adjusted EBITDAR is positioned to expand to $380 million as utilization improves and integration activities begin to taper. Capital allocation remains a key focus with defined expectations for CapEx of about $90 million net of new financings tied to scheduled aircraft deliveries and other necessary operational and infrastructure CapEx and disciplined debt extinguishment of $165 million. Overall, we see 2026 as a transition year, balancing integration execution and debt reduction while positioning the platform for stronger earnings power into 2027 and beyond. And now I'd like to turn the call back to David. David Grizzle: Thank you, Joe. Republic's return to the public markets highlights the company with established market share and a clear path to continued growth. Our business is supported by a diversified set of long-term CPAs, a unified and efficient fleet and industry-leading operational reliability. Our proprietary workforce development model and employer of choice culture provides a structural advantage in a constrained labor environment. Strengthened financial positioning and balance sheet discipline further enhance flexibility or expansion. Our integration of Mesa will position Republic as an Airline of Choice as participants in the regional airline industry continue to further consolidate. Backed by a seasoned leadership team, Republic is well positioned to execute on multiple growth levers and drive sustained profitability. We appreciate the support of our employees, our partners and our shareholders. And we look forward to delivering on the commitments we have outlined today. Thank you again for joining us today and for your interest in Republic. Warren, we are ready to open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Savi Syth with Raymond James. Please go ahead. Savanthi Syth: I was wondering with the transition this year and next, if you could quantify either the drag that you expect as a result of it? Or maybe put it another way, how much you can unlock once the transition is completed on the other side? Matthew Koscal: Savi, it's Matt. Great to hear you on the call. Yes, we aren't breaking that out specifically in our guidance. I can tell you though, our guidance for 2026 includes what we anticipate the drag to be. Where it could be accelerated is if we're able to achieve some of the milestones more quickly than we have planned, we absolutely would do that just to unlock the benefits of the enhanced operations. So as we go through the year, what we've got baked into our model is what we anticipated based off the work streams that I outlined in the prepared remarks. And as we go through the year, we'll give you updates on how we're tracking towards those milestones. If we think we're going ahead of schedule, we'll let you know what we think that increased drag looks like. Savanthi Syth: That's helpful. And just on the pilot side, you called out the kind of the unique tools that you have from a pilot supply building side. I was curious what you're seeing in terms of attrition, supply? And then also, just, I guess, during this transition period, are you seeing kind of elevated training or other things that we should take into account? Matthew Koscal: Yes. No, as we look at the pilot supply side, first and foremost, we feel really good about where we sit with our vertically integrated strategy, starting with LIFT, looking at the infrastructure that we've built out over the last several years with our campus, cadet, ambassador programs. Both of those initiatives have provided us with a really deep bench of folks who are waiting for class states today. As we look at the opportunity that we've had here with the training center, it's made us a clear Employer of Choice in the regional space. It's definitely been a magnet for us being the place that pilots want to come and begin their career and continue to move on and experience the opportunity to upgrade the captain. As we look at the attrition trend, last year, we had abnormally low attrition as we come into 2026, and we look at the hiring forecast from our mainline partners, we're expecting what we would call pre-COVID normal levels of attrition, which is healthy for us. It allows us to get back to a normal level of upgrades, which provides for that healthy career progression for our pilots, and we feel really good about what the trend looks like right now for 2026 and going into 2027. Operator: Your next question comes from the line of Michael Linenberg with Deutsche Bank. Please go ahead. Michael Linenberg: I just have two quick ones here. Joe, as I heard you talk about the future deliveries. I know you said that you have thee left for United and then there's another 26 that unallocated through 2029. Can you just -- I may have missed this, but can you give us a sense of what that CapEx is for 2026, maybe 2027, if you have to break it out between aircraft CapEx, non-aircraft CapEx? Joe Allman: Yes. So we have slightly higher CapEx in 2026 related to just some of the build-out of the integration with Mesa, some completion of the construction here at the Carmel campus and the three aircraft deliveries. We highlighted, I think, $90 million or so net of new financings on a gross basis, that's about $170 million. As we look into 2027 and beyond, I think we can -- I'll tell you, on a steady run rate basis, the business probably needs about $45 million of investment just in rotable spare parts, IT infrastructure systems, and that's probably a conservative number. I think when we look at the aircraft deliveries, I think it's a little premature at this stage. But I would tell you, we're working with the airline partners to identify placement opportunities and certainly refleeting or replacement aircraft is an option, but the realities are we're working with all three airline partners and the OEM on the timing of those deliveries and when they'll occur. The first delivery just to give you a sense, is really scheduled there in middle part of Q1 of 2027. Michael Linenberg: Okay. Okay. Great. And just my second question, just there was a lot of movement around with the integration and the ownership of your three partners now that the dust has settled, what are those positions? What are their percentages? And is there any -- are there -- are they subject to change? Like is there any sort of earn-in or earn out? I'm just trying to get a feel for that. Matthew Koscal: Yes. So there hasn't been any major change in our ownership structure from the premerger Republic shareholders. We've had a great working relationship with our existing shareholders, while we are in the private sector, had constant dialogue with them, and they've been great partners and very supportive of the investments we've made to put us in this position of strength as we sit here today. We'll continue dialogue, open dialogue with them to understand their needs long term and where they want to be and we'll be prepared to respond accordingly. But we don't have any further guidance on that sitting here today. Operator: [Operator Instructions] Your next question comes from the line of Catherine O'Brien with Goldman Sachs. Catherine O'Brien: I was just wondering, can you talk about how the conversations with partners on future growth opportunities have changed post merger, if at all? And then just in general, how would you characterize the demand for your product this year versus maybe the last couple, accelerating, stable, decelerating? Just trying to get a sense of the demand environment and how the merger might have changed on some of the tenor of those conversations? Matthew Koscal: Yes. No, thank you for the question. And the merger environment hasn't changed any of the conversation tone with our codeshare partners. We've got a long history of working with each one of our three codeshare partners. They've been incredibly supportive of our entire processes, both a private company and through the merger. As you know, we actually provide service, as we talked about in my prepared remarks, in some really difficult environments of operation for them. And we do that better than anybody else has done in the past or we believe can do today. So there continues to be strong demand for what we do, and in particular, where we operate. We see really bullish signals as we went into building our plan for 2026 on demand. You're seeing some of the same things we're seeing from our codeshare partners that they're building demand in different markets, in particular, Chicago this year, we're prepared to respond to the increased need there. But the tone hasn't changed at all as we transitioned from a private company into the public company sector. Catherine O'Brien: Okay. Great. Maybe just one more quick one on growth. One of your competitors last year placed a prospective order for E175 without having them signed up for partners at the time of the order. Is that something you would consider? Or you're looking to more move in lockstep with your partners as they commit to additional shells potentially in the future? Matthew Koscal: Yes. No, great question. We actually do have flexibility in our future order book. So as we look at our skyline of delivery today, we take the last three deliveries here for our United commitment this year. And then we've got 26 flex aircraft in our order book that allows us to be in a position to respond to demand in a variable fashion as it develops for our codeshare partners. I think historically, if you look, that would be something that we would not have done. But sitting here today, recognizing the strength of our balance sheet, the strength of our business portfolio and the need of our code-share partners being variable, we felt it's important to be able to respond to those demand signals when they develop. And we remain confident that as we continue to work in conversation with our codeshare partners and our OEM that we've got the flex to move that order to around appropriately to align it with the demand. Operator: There are no further questions at this time. I will now turn the call back to David Grizzle, Chairman and Chief Executive Officer, for closing remarks. David Grizzle: Thank you very much, Warren. And thank you all for joining us this morning. We are pleased to be back in the public markets, and we look forward to building our relationships with you going forward. Thank you all very much. Have a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Endeavour Group's Half Year 2026 Results Briefing. [Operator Instructions] I'd now like to hand the conference over to Jayne Hrdlicka, Managing Director and CEO. Please go ahead. Carla Hrdlicka: Thank you, and good morning, everyone. Thanks for joining us today for Endeavour Group's Half Year 2026 results. I'm joined today by Kate Beattie, our Chief Financial Officer, who was most recently our Interim Chief Executive Officer. I'd like to begin today by acknowledging the Gadigal people as the traditional custodians of the land we're presenting from today and pay my respects to their elders, past, present and emerging. I'll start on Slide 4 and speak briefly to the group's half 1 highlights. In the first half, the group delivered underlying EBIT of $563 million, which is the upper end of the range we provided in our January trading update. In Retail, our continued focus on value and price leadership has been embraced by our customers and is delivering both sales growth and market share gains. The market remains highly competitive and despite a very strong holiday trading period, consumer softness continues to be evident. In Hotels, the business continued to perform well, supported by positive trends in food and bar transactions and targeted investment in renewals and new EGMs. Customer responsiveness to our investment in new games and improvements in the gaming experience is fast and links to broader engagement in the venue. This collectively is enabling very strong revenue growth. Moving to Slide 5. As foreshadowed in our January trading update, the group's underlying earnings were impacted by our decision to invest in lower shelf prices for our customers and also to compete more vigorously against the elevated promotional environment currently at play in Retail. Further, in half 1 F '26, the group incurred a pretax net expense of $45 million relating to significant items, and Kate will provide detail on that later in the presentation. During the half, we remain focused on managing cost out of the business. We delivered savings of $24 million through our endeavourGO optimization program, taking the total cumulative program benefits over 4.5 years to $289 million. The Board has approved payment of a fully franked interim dividend of $0.108 per share, which represents a dividend payout ratio of 70% of underlying NPAT. Slide 6 provides a snapshot of both the Retail and the Hotels business. Firstly, in Retail, sales increased by 0.2% to $5.5 billion in the first half, with sales momentum improving across Q2. Excluding specialty businesses, Dan Murphy's and BWS, delivered combined sales growth of 0.7%, reflecting the group's commitment to price leadership in a highly competitive market. In Hotels, sales grew by 4.4% to $1.2 billion in the first half, with sales momentum broadly consistent across both Q1 and Q2. Investment in Hotels, in both electronic gaming machines and venue renewals, combined with positive momentum in Food and Bar, contributed to the sales growth result. Now turning to Slide 7. In Dan Murphy's, we've returned our focus to delivering unbeatable value for our customers. This was achieved by resetting our shelf prices to reflect clear and meaningful price leadership in the market, both in-store and online as well as investing in competitive promotional activity. This has clearly resonated with customers, delivering both sales growth and market share gains. Half 1 highlights include a record level of purchase intent and value for money customer engagement scores, which in turn supported an all-time record sales month in December. Dan Murphy's achieved its biggest ever trading weeks leading to both Christmas and New Year's Eve with Christmas Eve setting a new daily sales record. Turning to Slide 8. BWS is undisputed as Australia's most convenient drinks retailer with more than 1,450 stores nationwide and even more pathways to purchase through delivery partners, providing the convenience of fast delivery in increasingly more locations. In half 1, we continued to deepen our customer engagement with record value for money and e-commerce voice of customer scores. This helped us to deliver our highest ever e-commerce sales month in December. More competitive settings are being established in BWS to ensure the team is fulfilling the mix of needs of their convenience-oriented customers. This can already be seen in increased activity in Everyday Rewards offers and increased focus on great value promotions, both in-store and online. Supported by our in-app promotion offering, Appy Deals, the BWS app now has 850,000 monthly active users with over half of these being millennial and Gen Z customers. Turning to Slide 9. In Hotels, we achieved strong trading results around key social occasions, including Father's Day, Spring Racing Carnival, Footy Finals, Christmas Day and New Year's Eve. These were bolstered by major international live music acts in Australia, including Oasis and Lady Gaga and continued in January with the Ashes and 2 UFC events. Gaming remained resilient, delivering mid-single-digit sales growth, supported by targeted investment in gaming room refurbishments and upgraded electronic gaming machines, with more than 800 new cabinets installed in half 1. In Victoria, we continue to gain market share, demonstrating good return on the investments made in the state. Sales growth in Food and Bars was supported by better tailoring of menus and record trading during key events. Our pub+ loyalty program now has over 600,000 active users, accounting for 29% of our F&B transactions, and our guest experience continues to strengthen with voice of customer score achieving 9.1 out of 10. Turning to Slide 10. We completed 21 hotel renewals during the half and have been pleased with the strong performance uplift they are delivering. Our FY '24 cohort of renewed venues continues to deliver collectively over 20% ROI in year 2 post the renewal, ahead of our 15% target. I encourage you to get out and visit some of our newly renovated hotels, including the Palace in Camberwell in Victoria, the Royal Beenleigh and Northern Grounds in Queensland and the new gaming -- the new premium gaming concept at the Skyways Tavern in Victoria. Moving to Slide 11, One Endeavour, which is a program established to separate our systems from Woolies and simplify our technology landscape. Last year, the decision was made to accelerate the stand-alone ERP system implementation and defer the store system separation to start after the ERP program. I'm pleased to report that the ERP system build phase is on track to complete in half 1, so in roughly 18 months -- half 1 of FY '28, so roughly 18 months from now. In F '26, planned OpEx is expected to be at the lower end of the previous guidance range of $50 million to $60 million and planned CapEx is expected to be below the guidance range, of $40 million to $50 million. Slide 12 provides a summary of the opportunities in the immediate property development pipeline. We continue to make good headway on our 5 highest priority redevelopment opportunities. The development applications for both the Forest Hotel and Chelsea Heights have been approved. Two additional applications have been lodged for the Morrison Hotel and Camberwell sites, and we are planning to launch the application for Doncaster Shoppingtown by the end of F '26. The 2 new DAs are freehold sites with current zoning classification for mixed-use development, which includes accommodation. In aggregate, these 5 sites have been independently valued at between $100 million and $150 million. We believe there is further upside to those valuations once our development applications have been approved. Turning to Slide 13. I'm pleased to say we've continued to progress our sustainability commitments. While I won't go through all the highlights on this slide, the most important point is that we remain committed to doing the right thing, including the responsible service of our products. Now turning to Slide 15. I know the majority of you would like to have a more fulsome discussion on our strategy today. And while we are well progressed, we're not yet ready to have a detailed and comprehensive strategy discussion. That is now in the diary for the 27th of May at the Forest Hotel in Sydney. But for now, I will share a few things. Our process started with getting the facts clear about our business and its performance, while at the same time, understanding the industry through the eyes of our customers. The customer work we did was both for Retail and for Hotel guests. The combination of those 2 pieces of work enabled us to see our business with fresh perspective, which led us to draw some simple conclusions. The first is that over the last few years, the strategy really was to focus on margin. And it's clear this caused us to lose focus on value for our customers at a time when they needed it most. This has now been addressed. You can see clearly from today's results that our customers have responded very well to the decisive action we've taken on price. The second, we are working on regaining the sharpness in what we stand for with customers across both Retail and Hotels. With Dan Murphy's, this clarity triggered the quick moves with respect to reestablishing material price leadership in the second quarter. With BWS, this gave us clarity on what value for money means for convenience shoppers. And in Hotels, it's clear we have work to do in leveraging our scale for good in the eyes of both our people and our guests. The third point is we have significant untapped potential across our portfolio, both in taking cost out as well as generating meaningful revenue growth. And the fourth, the cross-business potential and interconnected nature of our portfolio means it makes sense for shareholders to maintain a combined Retail and Hotels portfolio. I don't think those 4 things are probably of much surprise to anybody on the call, but it's important to note, we have very strong clarity on where we're headed off the back of those 4 points. While we have high-level clarity and the outline of our strategic priorities, this work is ongoing to ensure we have a detailed blueprint across the many initiatives that will create the backbone of our transformation. We look forward to sharing as much as we can when we meet in May. In the meantime, as you've witnessed, we are not hanging back waiting for the detail to be finished before we act. Where we have obvious moves to make, we are making them and with no regrets. The first of the obvious moves is that we're competing in retail. And to be clear, the intention is Dan Murphy's will not be beaten on price by anyone at any point for any reason. And importantly, BWS has significant growth opportunities in further differentiating itself as the market leader in convenience. The second of the obvious moves is acceleration of investment into our Hotels portfolio to fuel continued growth. We will get more sophisticated as we go, but we're in it to win it, and we are out of the gate. We look forward to talking about this more in May. Turning to Slide 16. I want to introduce our new executive leadership team. You'll have the chance to meet them properly in May, but I'm incredibly excited by the mix of perspective and extensive experience we have sitting around the leadership table. It is already making a very big difference. These are experienced industry leaders from top-tier consumer brands, but more importantly, each member of our leadership team brings an owner's mindset and a sharp eye to execution excellence, and we are in lockstep on our strategy reset. Turning to Slide 17. One of the ways we unlock value going forward is leveraging our scale in sites, infrastructure and customer data to unlock both significant continued cost reduction as well as revenue growth. There is significant value to be delivered for our shareholders from this unique portfolio, and we will take full advantage of the opportunities it presents. Slide 18 is the last slide before I hand over to Kate. I won't take you through the words on this slide, but the intent and focus should be clear. In Retail, we are resetting our multi-brand strategy to ensure we put the customer first, delivering more of what they value. In Hotels, we are accelerating investment. Underinvestment in the past has left us with a significant opportunity to accelerate both venue renewals and electronic gaming machine replacements. Using our now proven model to deliver very strong results is the intent. We are also focused on better leveraging our group scale to deliver more local autonomy for our teams and reduce costs while also enhancing our pub+ loyalty program. At a group and at a business unit level, we are simplifying the way we operate to drive both cost and bureaucracy out of the business. progressing our technology separation from Woolworths and looking at all of our assets to determine where and how we should participate. With that, I'll hand over to Kate to take you through our financial results for the first half in more detail. Kate Beattie: Thank you, Jayne. Moving to Slide 20. In the first half, as Jayne said, group sales were up 0.9% versus the prior comparative period, reflecting improved momentum in both Retail and in Hotels. Our underlying group EBIT, which includes $20 million of One Endeavour program costs in Retail, declined by 5.4%, with growth in Hotels more than offset by a decline in Retail. Finance costs of $155 million decreased by 1.9%, primarily driven by our lower average net debt through the half. Underlying profit before income tax of $408 million declined 6.6% versus the first half of F '25, which was largely as a result of the lower retail earnings performance. As we previously flagged in our trading update on the 13th of January, our first half underlying earnings excludes the impact of a pretax net expense of $45 million related to significant items. This amount consists of a $40 million provision relating to our estimated one-off cessation costs, which are arising from the planned closure of the Melbourne Liquor Distribution Centre in 2028. It also includes a $4 million net gain relating to a one-off gain on the sale of gaming entitlements, offset by hotel property impairments and $9 million of advisory fees related to our strategic review. Moving to Slide 21. The group delivered a strong cash realization ratio of 165%, generating $997 million of net operating cash flows in the half. The reduction of $39 million compared with the same period last year is primarily due to the lower earnings, as explained earlier. Free cash flow was lower by $153 million, reflecting accelerated investments, including 16 new retail stores and 21 hotel renewals, with over 800 new EGMs installed. Turning to Slide 22. You can see that net debt has decreased by $34 million compared with the first half of F '25. This reduction is supported by reduced trade working capital as well as proceeds from asset sales. Underlying leverage ratio of 3.3x was supported by the reduction in group net debt, noting, however, that our operating cash flows are seasonally weighted to the first half, so we expect our net debt and consequently, our leverage ratio to be higher again at year-end. At balance date, the group had $1 billion in undrawn debt facilities, giving us ample headroom. The F '26 full year finance costs are expected to be broadly in line with F '25. Turning to Slide 23. You can see gross capital expenditure increased by $71 million in half 1. The increase compared to half 1 F '25 largely reflects our network expansion in Retail and renewal programs in Hotels. In Retail, we opened 5 new Dan Murphy's and 17 new BWS stores. And in Hotels, we completed 21 hotel renewals, including 15 whole of venue repositioning projects, while we continue to upgrade our gaming fleet, as we've spoken about. Net capital expenditure increased by $85 million after including $24 million in proceeds realized from asset sales. For F '26, we have revised our total CapEx guidance upwards to $460 million to $500 million, reflecting the continued acceleration of growth investment in hotel renewals. Turning to our segment results in a little more detail and starting with Retail on Slide 25. In the first half, total Retail sales increased by 0.2% to $5.5 billion. Our core brands, Dan Murphy's and BWS delivered combined sales growth of 0.7% for the period, noting this excludes our specialty businesses. In a competitive market landscape, combined sales for Dan Murphy's and BWS grew by 2.2% in the second quarter, or 0.6% adjusting for the estimated $45 million sales impact of supply chain disruption in the prior comparative period. Our online business continues to be a highlight with sales growing at 35.1% to represent 11.3% of the combined Dan Murphy's and BWS sales. Gross profit margin declined by 84 basis points to 23.9%. This reflects our focus on price leadership alongside elevated promotional activity across the market. Underlying cost of doing business remained flat year-on-year at 18% of sales with inflationary headwinds, including a 4% award-wage increase, mitigated by savings from our endeavourGO optimization program, restructuring benefits and lower One Endeavour technology program costs. While costs have been well controlled, the lower GP margin led to an underlying EBIT of $327 million, a decline of 11.6% compared to last year. The bridge chart on the bottom left of this page shows an indicative sizing of these respective performance drivers. Turning now to Hotels performance on Slide 27 for the detail. In the first half, the Hotels business delivered a strong result with sales growth of 4.4%, growing to $1.2 billion. On a comparable hotel basis, sales grew by 4.2%. Performance was strong across all key sales drivers. Food and bar sales growth benefited from menu optimization and record trade during major-event periods. Gaming remained resilient, delivering mid-single-digit growth, and this was supported by our investment in over 800 new machines installed during the half. Accommodation continued to deliver strong growth by successfully capturing peak demand during key events. Gross profit margin expanded by 12 basis points to 85%, driven by a favorable sales mix, better buying initiatives and optimized menus. Underlying cost of doing business grew by 4.4%. Similar to Retail, the 4% award-wage increase was a material headwind, which we managed alongside our continued investment in guest experience. Our result also reflects higher repairs and maintenance and a step-up in depreciation and amortization following our accelerated investment in EGMs and renewal programs. These impacts were partially offset by the cycling of prior year One Endeavour technology program costs. Underlying EBIT grew by 5% to $275 million, resulting in an underlying EBIT margin expansion of 13 basis points to 23.5%. Again, the chart on the bottom left provides further detail on the sizing of these EBIT drivers. I'll now hand back to Jayne to take you through the outlook. Carla Hrdlicka: Thank you, Kate. So Slide 29. In a competitive and challenging liquor market, we've continued to gain share in Retail. However, sales growth in both Retail and Hotels moderated in February compared to January. It should also be noted that Retail sales in the first 7 weeks of the prior comparable period were impacted by ongoing effects of supply chain disruption. While the outlook for consumer spending remains uncertain given elevated inflation, a war in the Middle East and rising interest rates, the group's scale, value proposition and market-leading brands means we are well positioned to compete and win in a market where consumers remain focused on value for money. Finally, in closing, I'd like to thank our 32,000 team members for their focus on delivering outstanding value products and importantly, experiences for our customers and guests. We are confident and energized about our future and are committed to delivering on the very significant opportunity we see in our portfolio. I will now hand back to the operator for Q&A. Operator: [Operator Instructions] Your first question today comes from Bryan Raymond from JPMorgan. Bryan Raymond: Just my first one is just on gross margins. Obviously, it's down 84 basis points in the first half but you're cycling availability issues. So we sort of understand some of that. And there's obviously a reset in pricing going on. I just wanted to understand sort of the drivers for the second half and particularly around the sales outcome you achieved. Like if I look at underlying like-for-like growth, in the trading update, is probably close to flat, just for industrial action. So if it doesn't respond and get to a certain threshold, I'm not sure what that threshold is, should we assume this pace of gross margin compression continues in the second half and even into '27? Carla Hrdlicka: Look, let me start on that, and then I'll hand it to Kate to add more. But I guess the first thing with respect to the first half gross margin compression. One thing to note there is that it's really roughly half the month that we had, a reset on price and increased promotional activity by us. And then we also had the offset of the lack of stock to promote in December of last year. And so those 2 things probably offset each other. So 84 basis points for the first half is not a bad start in thinking about the second half. And the second half with respect to the sales dynamic, we're seeing green shoots everywhere in the portfolio. So we're encouraged by that. But we have to continue to compete. We will continue to compete. And so that is against the entire market. And that dynamic is impossible to perfectly predict. And so our commitment we've made is loud and clear that we are going to have a material price leadership in Dan Murphy's, and we are going to be competing, and the level of promotional activity will be driven by the market. Bryan Raymond: Okay. Just as a follow-up to that, if your sales momentum remains close to 0, and obviously, it's a tough market at the moment, should we be expecting on -- like, just promotions being used as a driver to try to drive that? Or is there other levers that you could switch to? Because I think we're just trying to work out as the market leader, market share gains are getting probably incrementally more difficult. I'm just trying to think about if there's other levers you can pull other than gross margins. Carla Hrdlicka: Yes. Yes, we might think about it a little bit differently, Bryan. We're really encouraged how quickly consumers responded to the reset in price, but we haven't gotten started yet with respect to really marketing the changed posture of Dan Murphy's, and there's a lot more to come in terms of what consumers will experience in Dan's in particular as well as BWS. And so I don't think you can look at a tick done with respect to what we plan to do to compete better in Retail. We've just gotten started, and these are early gains, not a run rate expectation from our standpoint. And so I think this is early days. We're really excited to see green shoots quickly, but we're nowhere near our run rate in terms of the benefits associated with the investments that we've made. Operator: Your next question comes from Shaun Cousins from UBS. Shaun Cousins: Maybe just a question on volumes in the half and maybe trading to date. I mean given the price investment, can we assume that Endeavour Retail has actually been growing volumes? And I guess, for the industry, have you seen the price discounting that's been led by Dan Murphy's? And then where you've matched others, has that actually driven overall industry volume growth? Or are we just seeing Endeavour Retail regain some of the lost volume and value share from prior years? Carla Hrdlicka: Yes. I think the market itself is soft. We saw record results in Retail in December. That's record results in our history. So we were doing a lot of really good things in December in a soft market. And so we're definitely taking share in every lens we take on it. Shaun Cousins: Our volumes up? Carla Hrdlicka: In the market, the volumes... Shaun Cousins: No. Sorry, pardon me. For both, for yourself and the market. Carla Hrdlicka: Kate, do you want to talk about absolute volumes? Kate Beattie: I think it's definitely up for us as we cycled last year, clearly. But I think that it's hard to take a read through that to say that, that represents an underlying trend. As Jayne said, I think we would say the market is in volume decline. Within that context, we are gaining share. So our volume momentum is certainly improving, and that's been improving steadily since we began the shelf price reset, which was approximately back in August last year. Shaun Cousins: Fantastic. And just to follow up to that on the online growth that you called out, sort of, Kate. That was a highlight in the second quarter. It looks like it was up some 47%, but even your 2-year stack sort of jumped quite a lot. How does Endeavour consider balancing the growth in online where you've also seen a lot of competitive promotional activity and then what a negative impact that has on store economics because we're sort of seeing store sales in decline. So how do you think about managing that, particularly in terms of what it means for CODB and size of the network? Carla Hrdlicka: Look, I'll take a crack at that. We're really delighted to see the volume. And if customers want to buy online versus being in store, then we're quite happy to support that. We have an omnichannel business. And the majority of the volume growth in online came through Click & Collect. That's moving through our stores. That's leveraging the fixed cost in the store. So while it doesn't affect the calculations on same-store sales growth, it's actually activity that's coming out of the store. And so we're pleased with the growth momentum that we achieved with the reset, and the promotional activity is market competitive. And so we're not concerned about that being something that is creating some sort of structural problem in the business. Operator: Your next question comes from Michael Simotas from Jefferies. Michael Simotas: If we look at the price investment that you've made so far and sort of think about the second quarter run rate, do you think if there's no change in market competitive dynamic, you've invested enough in price? And just a follow-on from that, what are your customers telling you on value? When we look at the overall NPS score, there hasn't been a lot of change, but just interested in the detail underneath that. Carla Hrdlicka: Look, I'd say it's early days, right? So it's impossible to be definitive where we sit today. And the most important thing in here is we are going to compete. And we recognize that to be a great retailer going forward, we're going to have to do a great job of taking cost out of the business, improving sophistication in the way that we bring better value to customers and continue to invest in customer experience and ensuring that we've got the sharpest prices in the marketplace. And for Dan Murphy's, that means materially better. Michael Simotas: And when you look at your customer metrics, is that price investment being materially reflected in your customers' opinion of value? Carla Hrdlicka: Again, I'd say it's early days. We see the signs that they're really happy with what we're doing. The value for money scores are improving. But again, I'd say it's early days, and we have just gotten started. And the marketing push and the way we think about engaging customers will all reflect a different stance and tone with respect to both BWS and Dan's. And all of this will be a virtuous cycle that continues to support our core messages to customers. Kate Beattie: I might add another data point to that. I think it's important to note, and it's probably important to the context of Bryan's comments about underlying sales being broadly flat, it's, are we seeing good momentum? And Dan Murphy's and BWS combined have now delivered 6 consecutive months of sales growth to the end of February. So I think that talks to the good momentum we're seeing. And yes, there's some cycling of MLDC in that, but the growth trajectory is strong, and it commenced well before that cycling impact kicked in. It started when we started to invest in lowering shelf prices and of course, has continued through since then. Operator: Your next question comes from David Errington from Bank of America. David Errington: Look, I understand totally the strategy, to be unbeatable in price and to leverage your muscle. I mean it's ridiculous that the market leader isn't leading the market. So I totally get that. But the question I've got is on your cost management. It looks as though your first half, you've done an outstanding job with endeavourGO. And while we're driving gross margins down 85 basis points. To keep the shareholders reasonably interested and happy, you just got to drive those costs out, which you have in this first half. My question is, can you go into detail, please, how you did that? I mean we touched on it a little bit with your trading update in January, but you didn't go into too much detail. Can you basically go into how you're driving those costs out? What happened -- endeavourGO, I think you've pulled $24 million out, a large chunk of that, obviously, Retail. Can you go into where that's coming from? And what opportunities you've got as being able to drive those costs out that will enable you to sustain relatively that we don't just bludgeon earnings. Can you go into detail as to how you're going to keep driving those costs out, what opportunities you've got so that you can get on this retail spiral that you're obviously trying to achieve? But yes, first half, great outcome with costs, but the sustainability and the ability not to damage customer experience by going into this cost-out program. If you could go into that with some details, that would be really appreciated. Carla Hrdlicka: So, David, I'll let Kate talk about the first half in as much as we're prepared to talk about the details. What I would say with respect to forward-looking view, we're really keen to engage in May on that in as much detail as we're comfortable. But we're not worried about our ability to continue to manage cost out. We see plenty of opportunity to continue to manage cost out of the business, and that's probably as far as we can go with respect to outlook. And -- but Kate, do you want to comment on first half? Kate Beattie: Yes. Thanks, Jayne. I think I'd point to 2 things. You're absolutely right to point to the endeavourGO optimization program. I think it's self-evident that over the period that we've been reporting savings against that program, it's continued to deliver. And you might note that we had a target of $290 million, and we're now within $1 million of having delivered that target, which is just in time because it was an F '26 target. So we're there, right? We've delivered $290 million cumulatively in savings across that program, and that continued to deliver in the half. And we've spoken before about the fact that, that program addresses both cost of supply chain, so costs that sit in GP as well as costs that sit both in the front line and in the head office of the business. It's also probably worth remembering that in the second half last year, we spoke about the fact that we had undertaken restructuring across the business, and that has also been a material driver of cost savings in the half. David Errington: It's a cheeky follow-up, and it's probably -- hopefully, it's not considered a second question, but it's a follow-up with One Endeavour. Are you going to start getting tailwinds to those costs in '27, do you think? Or do you think it's going to be roughly the same level? It's a bit cheeky, the question, but obviously, that's a big chunk of costs that you're wearing. Can that ultimately be a tailwind in '27? Or do you think that's going to be sustained? Carla Hrdlicka: You mean in terms of the run rate benefit associated with those costs? Kate? David Errington: Yes. Yes. Well, you're chewing $50 million in costs in Retail in '26. When can we start seeing a bit of a tailwind to that coming in because that will obviously -- when those costs come out, that will obviously be supportive of your Retail earnings as well? Kate Beattie: It's a good question. I think we've said before that the program we expect broadly to continue to around F '30 because we've still got the store system separation to come after ERP. At the moment, we're not in a position to comment on next year's numbers for that program, recognizing we'd still be building the plan for that, but we will do so in due course as we have been update you on the program expectation on a go-forward basis. But yes, eventually, that program disappears and those costs should come down to 0 for that program, recognizing all companies go through technology investment cycles. So hard at this point to say what the outlook on a multiyear basis would be. David Errington: Good job on costs in the first half. Operator: Your next question comes from Tom Kierath from Barrenjoey. Thomas Kierath: Yes, mine is on Hotels. I think when you strip out the One Endeavour costs in the PCP, it looks like the Hotels profit is pretty flat year-over-year. When I look at Slide 10, it says that the hotel renewals have been delivering really strong returns. So is the way to interpret that like the Hotels rather that aren't being touched by renewals, the profitability in those is actually going backwards? And how should we kind of think about, I suppose, that kind of legacy or the ones that you aren't touching going forward? Carla Hrdlicka: Kate? Kate Beattie: Yes, I certainly think it's fair to say that to the extent we haven't touched a venue in a long time, we would be incurring elevated levels of, for example, repairs and maintenance expenditure. And I think some of that's reflected in the results for the half. But we are obviously accelerating the renewal program to address that. Our goal is to catch up on that tail of untouched venues that do require some investment. And I'd say in addition to that, we've uplifted investment in a couple of key areas in guest experience. So that would include, for example, investment in bands and acts, which are a key part of customer attraction. We've also got a degree of elevation of security costs, which again in the context of well-understood market dynamics requiring that and in service, in particular parts of the guest experience. So all of those are contributors to the results for the half. Thomas Kierath: Great. And maybe just a follow-up on the Hotels side. Like how are you guys thinking about mandatory carded play going forward? Just -- I don't know, just a few high-level observations just on that -- on that kind of development would be helpful. Carla Hrdlicka: Yes, that's an open topic. There are lots of moving parts state by state. And so we don't have a crystal ball to predict what's happening there. We're really comfortable with the settings that exist today, and we don't see a dramatic change coming there. And I guess I would just add the obvious, which is, this is important revenue for each of the states. So it's in nobody's interest to do anything dramatic. It's in everybody's interest to make sure that we're being responsible. Operator: Your next question comes from Craig Woolford from MST Marquee. Craig Woolford: Can I ask a question about Pinnacle? It doesn't get a lot of airtime in the release at all, but how did that portfolio perform? And in the context of what you're inferring in the strategy outlook, there's some rightsize on shape and size of the portfolio. Does that relate to Pinnacle as well? Carla Hrdlicka: Sure. I guess I'd start by saying Pinnacle is a really critical part of our strategy, has been and will be. It's our private label portfolio. It's beer, spirits and wine. It is a mix of things that we produce ourselves, which is commercial wine largely, and it is also third-party contracted supply for principally beer and spirits and some imported products across the portfolio. So it is a really important part of our sales mix. The added margin that comes from Pinnacle is material and important for shareholders, is not different to the way I think Coles and Woolies, think about their portfolio of private label sales. So it's a critical part of the portfolio going forward. It's performed well. But like every consumer products portfolio, we need to continue to and will continue to look at how well each individual SKU performs, and we are managing the tail of underperforming SKUs or lesser performing SKUs, just like we do with our third-party suppliers. And we've already taken action with a handful of SKUs. Kate, I don't know if you have the absolute number, it probably doesn't matter, but there are SKUs that are already on the way out, and we'll continue to evaluate the portfolio as we go forward. Kate Beattie: Yes, I think that's right. I would add, we have included a note, I think, in our ASX announcement that highlights the fact that we introduced 110 new owned and exclusive products through the Pinnacle portfolio in the half. So as we've said previously, it's always important to recognize that Pinnacle plays a really critical role in our fast path to product innovation because we can use our customer insights to work through that portfolio on what's trending and what's upcoming and make sure that we're continuing to provide attractive new products to our customers. Craig Woolford: So was Pinnacle like influential on the gross margin outcome? Or was it inconsequential? Carla Hrdlicka: Inconsequential in the context that it's providing the same margin support that it's provided in the past. Operator: Your next question comes from Caleb Wheatley from Macquarie. Caleb Wheatley: I wanted to follow up on the hotel side, if I could. Yes, guiding to about 35 renewals or so for the year. Just keen to get any updated thoughts on how we should think about the pathway to sort of get that back to the required run rate to sort of maintain average age there? And then obviously, any incremental comments around sort of balance sheet settings, noting that the payout ratio on the dividend and the sort of target leverage numbers don't seem to have been reiterated like they have been at the back of the presentation pack, please? Carla Hrdlicka: Well, I'll tackle the first bit of it at a high level. The game plan is to renew as fast as we can, and that's both renewing and adding new EGMs to the portfolio. And so we've got a game plan to do that. We've got a refined formula now on what works, and we're doubling down on that. In every new renewal, we learn, and the next one is better. So there is no constraint on renewals other than just the process and time it takes to both get the planning done and then get the execution delivered. And we're very mindful to how much we invest as we do that and making sure we're learning and getting smarter and managing our costs appropriately, both on the CapEx side and the OpEx side. But Kate, you want to talk to the other parts of the question? Kate Beattie: Yes. I think the other thing I would add on renewals is, what we've been working on for some time and delivering good success in is building a growing pipeline of funnels of hotels. So we're effectively putting more -- have more opportunities to put through the renewal funnel. And the way we're thinking about it is there are going to be some venues which would benefit from relatively light touch but is still going to refresh the guest experience materially without needing to go through DAs and so on. So it's working on how do we keep a steady stream of those going while also working on the bigger, more impactful whole of venue repositionings, for example, and making sure we've got a good healthy and a mixed bag of those opportunities so that as and when we get approvals or things need to shift around, we can still continue to invest, and we're very confident with that growing pipeline. In the context of balance sheet settings, I think it's certainly safe to say at the strategy update, we'll talk about how we're thinking about our capital management framework in the context of our intention to accelerate that investment. Caleb Wheatley: Okay. And just as a follow-up, the refined formula comments that you made there, Jayne, is that sort of more around most effective projects from a return point of view? Is that something around the cadence and looking to accelerate that or otherwise? Any additional color you can provide on that refined formula learnings within that? Carla Hrdlicka: I'm sorry, was the question basically do we expect to deliver the same sort of returns? Kate Beattie: What's the refined formula. Carla Hrdlicka: The refined formula is effectively making sure that we're learning from each renewal and we're adjusting as we go. So we don't have a set and forget model. And to Kate's point, that's led us to, gee, there are a whole lot of venues that we can touch very lightly and make a difference commercially. We don't need -- they don't all need to be major refurbishments. And so yes, we're just working across a broader funnel of opportunity than maybe we had in our sites before. Operator: Your next question comes from Phil Kimber from E&P Capital. Phillip Kimber: I just had a question. You noted that February sales have slowed in both Retail and Hotels. I was wondering if you could give a little bit of color on that. I know it's a short time period, but was it an aggressive slowing? Or are you just sort of calling out something more modest? So just any color you could provide would be great, given it's both Retail and Hotels. Carla Hrdlicka: Kate, do you want to talk to that? Kate Beattie: So I think we did talk about the fact that the Retail sales in the first 7 weeks were impacted by the cycling of the prior year, the supply chain disruption. I think other than that, we don't think there's a material read-through. We're always wary about providing point-in-time comments on very short trading periods, and this is an example of that. It's definitely too early for us to tell whether specific things like the recent interest rate increase or indeed the more recent impact of the what's happening in the more global context, having an impact on consumers. But it is safe to say, and I think we said it in the context of our market, there is no doubt that we do expect cost of living pressures to continue to be impactful to our customer base, and therefore, we do need to and will do everything we can to make sure we are providing good value for money across the board. Carla Hrdlicka: And I'd also say that in the context of such a big December, it's not surprising that February is a bit softer than it would historically have been, just given the 6 wallets that most of our market stares into in managing their budgets every month. And what we're encouraged by really is the robustness of the experience economy. We play squarely into the experience economy in both Retail and our Hotels business. And so I think Kate's point around not overreacting to February, which is, I think across most of Australia, February will have been a softer month. Operator: Your next question comes from Richard Barwick from CLSA. Richard Barwick: Can I just clarify a little bit of what you're talking about on your hotel renewals, particularly in the context that you've upped the CapEx guidance. So in the first half, 21 renewals, including 15 whole of venue, 800 EGMs. And yet you're talking about in the second half only doing 14 renewals and 800 EGMs, but the CapEx budget is up. So I guess is the implication that the 14 you're doing particularly large projects? I'm just a bit surprised, the numbers don't seem to stack up in terms of the number of renewals. Kate Beattie: Yes. I think, Richard, I would talk to the comments I made about a mixed portfolio of small and large. The amount we spend in any half, which is reported in the CapEx number, is going to be a function of the individual projects timing and size. And so I don't think there's a direct correlation that can be drawn between count and dollars, which is why we're giving you guidance on where we think CapEx is going. Richard Barwick: Right. Okay. All right. So it's not -- you can't -- we can't look at sort of renewals, or CapEx divided by renewals equals the average number and model on that because it's going to bounce around much. Is that what you're saying? Kate Beattie: No, definitely not. And maybe to quantify that further, I think when we look -- when we talk about a venue repositioning, we're typically talking in the order of approximately a $5 million spend sort of around that value on average. But some of these are much smaller and they're more like the $1 million or even $0.5 million. I think we don't report below $200,000 because we call that just a very minor upgrade. But there really is a big mix in between those bookends. And at the top end, of course, you are spending much more months both on the project and therefore, in disruption to trade, but then also a much bigger payback when you get it in terms of dollars returned to the business as a result. But there isn't a law of averages here. It really is project by project. Operator: Your next question comes from Sam Teeger from Citi. Sam Teeger: I wanted to discuss Paragon. Can you let us know how much capital is tied up here? And also given the industry oversupply, would it be advantageous for shareholders if you were to source wine from third parties opposing to make it -- instead of making it yourself? And then also, given Treasury Wines found it difficult to divest their commercial portfolio in 2024, is there anything different about Paragon we should consider as to why it might be easier for Endeavour to sell it if you decide to go down that path? Carla Hrdlicka: So I guess the first thing I'd say which is important to note is that we produce to what we sell. And we're very sophisticated about how we do that. So for us, our portfolio of brands deliver very strong margins because we don't have a big inventory problem, which is the challenge that most of the -- rest of the wine industry is staring into right now, given how far in advance they're trying to forecast volume and then there's been some market disruption for them that's of magnitude, out of China, et cetera, et cetera. So we're quite different because we're producing for our own retail needs. I'll let Kate talk about the asset base. I'm very confident she's not going to go into detail, but I'll let you have a crack. And you would assume that we're having a hard look at everything in the portfolio, and we're eyes wide open with respect to the dynamics at play in the market. But I just want to return to my first point, which is, we don't have a problem with respect to our fine wine brands that are in our private label portfolio because we are producing to what we need to sell. And are there ways to optimize and buy third-party grapes, et cetera, you'd expect we look at all those options on a regular basis to make sure that we're optimizing the cost position of everything that we produce. But Kate, I'll let you have a crack at the Paragon question. Kate Beattie: Thanks, Jayne. I'll add a couple more comments. I think the first thing to note is our very small handful of premium wineries represent a very, very small volume of the premium and ultra-premium wine that we sell. The vast majority is sourced from third parties, including exclusive brands and imports as well. So it's -- I would say immaterial -- boutique and immaterial in the context of our total sales portfolio. And also even within those wineries, we are continuing to optimize how we source the grapes that flow into the product. So -- in the half, for example, if you look at our assets held for sale on our balance sheet, you'll notice that there's a couple of vineyards that we are in the process of finding a buyer for. So we are always looking at how we manage the balance of what we hold versus what we source to make sure that we're optimizing the asset base. Operator: Your next question comes from Michael Toner from RBC Capital Markets. Michael Toner: Just on gaming, noting your commentary on Hotels still growing share in Victoria. I'm curious how Hotels are performing in Queensland relative to market. Is that gap to market sort of consistent with what we've seen in recent results? And is that trend of clubs outperforming pubs and sort of regions outperforming metro as you've previously called out, still a headwind there to achieving the level of market growth that, that state has experienced? Carla Hrdlicka: Kate, do you want to talk to that? Kate Beattie: Yes, I will. Thank you. So we've seen improved performance in Queensland. It's not the only state we've seen improved performance in, but we're really pleased with the momentum. We would say that's primarily driven by our investments, both in the experience in the venue as well as in the gaming machines themselves. So we are certainly moving in the right direction, but as with all things, these things take time. I think that's probably the primary comment to make here. We're happy with how we're progressing in what is a really buoyant market. Carla Hrdlicka: I would just add to Kate's point, the focus on renewals and adding new gaming machines is impacting positively the entire portfolio, not just Victoria. Kate Beattie: We've previously made the comment, and I would reiterate it here that where we have invested in renewals, we see on average that the performance is in line with the rest of the market. So it does shift our relative performance up in a way that is really pleasing. Carla Hrdlicka: Yes. Michael Toner: Okay. And if I may, just very quickly clarify something in the presentation on One Endeavour. So that spend coming in terms of the lower end of guidance, is that kind of pushing out the total spend, i.e., like maybe there's some delays to the program? Or is that just reflecting a total lower spend when we think about our forecasting out to like FY '30 plus? Kate Beattie: Yes. That, we're pleased to say that reflects lower expected spend for the program than we had previously thought would be incurred. So it's not pushing out and the program. It's certainly not delayed. We're really happy that we've finished the end of the design phase for the ERP program now, and we're about to start the build phase. And... Carla Hrdlicka: Team there are doing an exceptional job. Kate Beattie: That's right. Operator: Your next question comes from Peter Meichelboeck from Select Equities. Peter Meichelboeck: Just in relation to the Hotels business, you upgraded the 800 EGMs in the half, and I think you indicated doing another 800 in the second half, and that sort of follows, I think, 1,000 that you did and accelerated sort of 1,000 in the last year. That sort of annualized rate of 1,600, is that the sort of long-term rate that we should now be thinking of going forward? Carla Hrdlicka: I don't think we're wanting you to lock on a particular number going forward. We are accelerating. I think we might deliver more than 800 in the second half, but we're saying that's the floor. And so we're not capping or setting targets. We're looking at the portfolio and the commercial opportunities and working with our suppliers to figure out how quickly we can get into a position where we're incredibly competitive as a portfolio. Peter Meichelboeck: And sorry, can I just follow up on the 800 that you did in the first half, would most or all of them be within the 21 renewal sites, or they spread more? Carla Hrdlicka: No. It's definitely spread more broadly than that. So think about them as 2 disconnected things. When there is a renewal happening in the -- in a particular gaming venue, the renewal will take place to upgrade the experience of the gaming venue. It may coincide with the turnover of some machines in that venue, may mean that there are more machines going into that venue. It's a case-by-case situation. But the portfolio of gaming machines, we're looking at across all venues, not just those who are going through an upgrade. Operator: Your next question is a follow-up from Bryan Raymond from JPMorgan. Bryan Raymond: Just on -- back on the Retail business. Just -- I'd be interested if the sales growth is particularly much stronger or weaker in either BWS or Dan Murphy's? I don't expect specific numbers, but just directionally because Coles saw convenience -- the convenience networking growth and implies large declines in their warehouse format. Did you see the inverse? And also given the Dan Murphy's investment in price. I'm just interested in the relativities there. Carla Hrdlicka: I'll let Kate talk about specifics, but BWS is performing well. We are very pleased with the BWS portfolio. Dan Murphy's has had faster major changes put to it. And Dan Murphy's also during Christmas -- I mean, Dan Murphy's is the place to go during Christmas for family gatherings and events and things. So there's an obvious migration towards Dan's that takes place in December. But I think we're the undisputed leader from the standpoint of convenience retailing, and we don't intend to be beaten there as well as we're not intending to be beaten with Dan's. Kate, do you want to add anything to that? Kate Beattie: I think the key thing to say is, as I said, both businesses combined have been delivering sales growth for 6 consecutive months. To the extent that Christmas attracts a disproportionate share to Dan Murphy's irrespective, which it does, and we were cycling supply chain disruption last year, there's been an impact in the half that I wouldn't regard as normal. We're very pleased with the momentum in both businesses. And I also want to take the opportunity to underscore the profitability of the portfolio because the flow-through of the momentum into EBIT margins also continues to be very healthy for our sector. Carla Hrdlicka: Yes. Operator: Your next question is a follow-up from Michael Simotas from Jefferies. Michael Simotas: Just a follow-up to Bryan's question actually. Woolworths has had some very good volumes in the last several weeks and the inverse of that would have been a drag on your convenience business or BWS format. Do you think that change in foot traffic into Woolworths stores has had a material benefit to your business? Or is it too early to call that yet? Carla Hrdlicka: No, I'd say a couple of things on that count. One is that our relationship with Woolworths continues to strengthen and improve and the way in which we work together between BWS and the Woolworths Supermarkets has improved and will continue to improve. You can see that in the way that they're promoting online and the way we feature in online shopping as a grocery customer of Woolworths. You can see that in the way that we're working together with Everyday Rewards. And so we are competing together much better than we ever have before. And that is on top of the fact that they've got more foot traffic going through their stores. So to underscore, I think, a question that Bryan made, there's no -- looking at one of our competitors' results, we look at BWS. There's -- our portfolio is strong. It's performing well, and we're really pleased about that, but we're also really excited about its opportunity going forward to compete even better. Operator: There are no further questions at this time. I'll now hand back to Ms. Hrdlicka for any closing remarks. Carla Hrdlicka: Fabulous. I'll just finish by saying this is a result that shows green shoots. We're pleased with that. We've taken fast action on a couple of things that we thought were really important, notably competing and competing strongly from a retail standpoint, which triggered a price reset in Dan's and ensuring then that we're also matching off promotional activity that is taking place around us. We've got one major competitor, and we've got lots of smaller competitors, and they're all competitors, and we're very conscious of all of them. And so this is the beginning of a journey that we're really excited about. And I think the Hotels business, doubling down and investing in renewals and electronic gaming machines is one piece of the story that will come with Hotels, but it's an important first step, just like the price reset in Dan's is an important first step. And we're really looking forward to the conversation in May and getting into more of the detail with all of you at that point. So this is the beginning of a journey, and we're really excited about that journey. So thank you all for joining us this morning, and we appreciate this is a very busy day at the end of a very busy season. So we're grateful for the interest. And again, I'll finish on thanking our 32,000 employees who all made a big difference in this period. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Euroapi 2025 Full Year Results. The call will be structured in 2 parts; first, a presentation by the Euroapi Group management team represented by David Seignolle, CEO; and Olivier Falut, CFO. Afterwards, there will be a Q&A session. [Operator Instructions] I will now hand over to Sophie Palliez, Head of Financing, Treasury and shareholder engagement. Madam, please go ahead. Sophie Palliez: Thank you, Laurent, and welcome, everybody. Before we start this presentation, we would like to emphasize that some of the information we will share with you today is looking forward and not historical. This information is based on projections and assumptions concerning Euroapi's current and future strategy, future financial results and the environment in which we operate. These looking forward statements and information, do not constitute guarantees of future performance. They may be subject to certain risks and uncertainties, which are difficult to predict and generally outside the control and they could cause actual results, performance or achievements to differ materially from those described and/or suggested. That said, let me give the floor to David Seignolle. David Seignolle: Thank you, Sophie, and welcome, everybody. Let me begin on Page 5 with the key takeaways from 2025. Our teams thought on all fronts to protect our market position in an increasingly competitive environment. For example, Vitamin B12 as mentioned here. It was also another year of declining API volumes for Sanofi. Fortunately, on the Sanofi side, this was partially offset by a strong commercial CMO activity, particularly in anti-infective and skin care. At the same time, we saw growth in sales of key APIs with other clients such as opiates, et cetera, et cetera. While the top line was under pressure, we continue to make strong progress on everything that we can control. We sustainably reduced our external expenses and our personnel costs. We maintained strict working capital discipline with another year of improving inventory management, and we continue to invest selectively in CapEx to prepare the company for future growth. All of this reflects a real strengthening of our cost discipline across every function. Despite the top line headwinds, our transformation remains firmly on track. We have executed the initial phase of our plan on schedule in all the areas we control, some even earlier than planned. That includes our product portfolio rationalization, our industrial footprint simplification and our organization and processes. Taking a quick look at 2025 from a financial perspective on Slide 6. Net sales came in at EUR 848 million, with Sanofi sales down 26.4%, but other clients up 9.7% as reported. Our core EBITDA came in at EUR 66.2 million, a 31% increase from 2024, with a core EBITDA margin of 7.8%. Our EBITDA was close to EUR 10 million versus negative EUR 44 million in 2024. CapEx stood at EUR 77 million, with 55% of that allocated to growth and performance projects and supporting the company's return to back on track for sustainable long-term trajectory. Turning in to Slide 7. The challenges we faced this year did not weaken our commitment to sustainability. First, our near-term carbon emission reduction targets were validated by the SBTi. This is a strong confirmation that our trajectory is aligned with the Paris Agreement. Looking at our 2025 emissions, we are already seeing meaningful progress. We've achieved half of our targeted reduction for Scope 1 and 2, and we have already exceeded our target of Scope 3. This is a major milestone for the company. On diversity, given the current reorganization underway, we fell short of our 2025 targets on diversity. However, it is important to keep a long-term perspective in mind. In 2023 and 2024, our diversity ratio increased and even exceeded our objectives. The underlying trend remains positive. And on safety, which is something a bit painful to me, but despite our continuous effort, the injury rate remained stable in 2025. Most incidents were minor often related to slip, trips and falls. But that said, even one accident is one too many. And the Accident Prevention Plan launched in 2025 will continue to be rolled out in 2026 with a stronger focus on record analysis and proactive prevention. With that, I will now hand over to Olivier, who will walk you through our financials in more detail, and I'll come back later to look at the perspective. Olivier Falut: Thank you, David. We'll start the review of the consolidated accounts with the evolution of net sales. Net sales reached EUR 848.2 million in 2025 versus EUR 911.9 million in 2024, representing a decrease of 7%. The current impact on net sales was almost -- the currency impact, sorry, on net sales was almost nil. And the 1.2% perimeter impact is collated to the Haverhill divestment. On a comparable basis, sales declined by 5.9%. If we take a look at the net sales per activity on Page 10 now. API solutions to Sanofi decreased by 34.2% due to, first, an unfavorable comparison base related to the stock clearance of buserelin, which positively impacted 2024 sales of EUR 21 million, and the decline of volume of Sevelamer in H1 2025 and the sales of Haverhill at the end of June 2025. Last, EUR 50 million reallocation of Opella sales to other clients starting in May 2025, following the change in control of Opella. Excluding Opella sales to Sanofi in 2025 compared to 2024 only would have decreased by 25.7%. CDMO sales to Sanofi decreased by 4.9%, higher demand of Pristinamycin and PLLA commercial sale contracts was more than offset by the decrease in revenue from the Phase III BTKi inhibitor project. API solutions to other customers increased by 18.6% benefiting from first and an active cross-selling strategy, then 31 additional new clients in 2025, we generated high single-digit net sales in 2025. Last, the EUR 50 million reallocation of Opella sales without the change, sales to other clients would have increased by 4.5%. CDMO sales to other clients decreased by 13.6% as a result of the downsizing and discontinuation of pre carve-out of mature commercial contracts and the slowdown of early stage CDMO business. Turning to the core EBITDA evolution on Slide 11. Core EBITDA reached EUR 66.2 million in 2025. This represents a 7.8% margin, up from 5.5% in 2024. The evolution in core EBITDA margin was driven by the following elements. The stock clearance of Buserelin in '24 for EUR 21 million or minus 0.9% points; volume impact for minus 1.0 point, which is mainly due to the discontinuation of CDMO contracts; price and mix positively contributed by 1.3 points; a positive 0.3 points from the discontinued products. Industrial efficiency led to an additional 1.2 percentage point of core EBITDA margin, energy and raw material increase the margin by 0.9 points, strengthened financial discipline and lower personnel cost in OpEx allowed to gain 1 point of core EBITDA margin while Brindisi weighted minus 1.4 in '25 and on the other hand, the divestment of Haverhill allowed to gain 0.6 points. Total nonrecurring items on Page 12 now. Total nonrecurring items we stated from core EBITDA -- from EBITDA, sorry, stand at EUR 56.3 million in '25. The vast majority of these exceptional items are directly related to the FOCUS-27 plan. We recorded EUR 36.1 million of idle costs, which is mainly consolidation of the Frankfurt site. We also recognized EUR 6.6 million of internal and external costs related to the transformation of the company. Finally, employee-related expenses, in part linked to the redundancy plan amounts to EUR 13.7 million, which mainly concerned again Frankfurt and the divestment of Haverhill. Looking now at items below EBITDA on Slide 14 -- Slide 13, sorry. Operating income amounts to negative EUR 130.6 million in 2025 compared with negative EUR 120.4 million in 2024. Depreciation and amortization remained broadly stable year-on-year. The increase of asset impairment to negative EUR 77.8 million reflects discontinuation of vitamin B12 productivity project in Elbeuf following the reassessment of its economic potential. And a revision of gross assumptions to align with the latest market dynamics. As we move below operating income now, net financial expenses improved EUR 7.5 million in 2025 versus EUR 19.1 million in 2024. This decrease reflects lower financial expenses following the implementation of the financing plan. The 22.89 sorry, income tax -- sorry, EUR 72.9 million income tax expense includes the depreciation of tax assets following the update of growth assumptions. Taking together, these items results in the net loss of EUR 211.2 million compared to EUR 130.6 million lost in 2024. Turning to working capital dynamics on Slide 14 now. As part of our commitment to improve working capital, we have maintained the progress achieved on both months on hand and DSO since the implementation of FOCUS-27. Months on hand stood at 7 in 2025 and DSO at 36. CapEx now on Page 15. CapEx reached EUR 77 million in 2025, with 9% of total 2025 net sales. 65% of CapEx was dedicated to growth and performance, mainly supporting the capacity increase and efficiency projects on peptide and oligonucleotide, prostaglandins and corticosteroids. 21% of CapEx related to compliance. As a reminder, these investments address safety, quality and environmental topics and a significant share of them are mandatory. 24% of remaining CapEx corresponding to the maintenance of the existing asset base. Moving now to Slide 16, which covers the evolution of the net cash position. We ended 2025 with a net cash position of EUR 68.2 million compared with EUR 24.6 million at the end 2024. Cash flow from operating activities generated EUR 128.5 million of the cash in 2025. This was mainly driven by the working capital, which contributed for EUR 120.1 million. This improvement mainly reflects further reduction in inventory totaling EUR 38.9 million, decrease of trade receivables supported by factoring program launched in March 2025. Out of the EUR 45.4 million reduction of receivables, EUR 26.5 million was factored by year-end, with remaining decrease reflects immense cash collection. Other current assets and liabilities includes EUR 36 million paid by Sanofi to reserve minimum availability capacity for 5 selected products, EUR 21 million upfront grants from the IPCEI program, EUR 6.5 million related to the monetization of research tax credit in France. Including the EUR 77 million of CapEx, it was reviewed in previous slide, free cash flow before financing activities stood at EUR 51.5 million in 2025 compared to EUR 15 million at the end of 2024. Finally, cash from financing activities included a cost of debt of EUR 3 million in significant decrease following the debt for refinancing in 2024. This concludes the review of the 2025 consolidated results, and I will hand it back to David. David Seignolle: Thank you, Olivier. Before moving to full year 2026 guidance, let me walk you through the main operational and business drivers that will underpin sales, profitability and cash development for the year. Net sales will be strongly impacted by the rationalization of the API portfolio that we have engaged in 2 years ago. As we've said, the discontinuation of API accounted for around EUR 70 million of sales in 2025 including EUR 20 million related to stockpiling. Although the manufacturing of these API has been stopped, we still expect a residual EUR 10 million to EUR 15 million revenue from these products in 2026 as we continue sales for existing inventory. This means between EUR 55 million and EUR 60 million headwind in 2026 that we decided upon. The other impact are the continued decrease of the sales to Sanofi and further discontinuation of commercial CMO contracts. Turning to profitability. The industrial efficiencies and additional OpEx savings we anticipate should be offset by unfavorable fixed cost assumption, resulting from lower volumes. Our EBITDA will also be impacted by the restructuring costs that are foreseen in 2026. We will maintain a strong focus on working capital discipline and the CapEx to sales ratio is expected to be around 8% of sales. All in all, on Page 19, due to the impact of our portfolio rationalization and considering the challenging business environment, we expect a decrease of around 10% in net sales in 2026 on a comparable basis. Our own decision to streamline our portfolio accounts for around 90% of that decrease. In this context, we will accelerate our transformation to protect profitability and we expect to maintain the full year 2026 core EBITDA margin broadly in line with financial year 2025. Moving to the next slide and an update on FOCUS-27. On Page 21, let me recall, first, what FOCUS-27 was fundamentally about. It was behind around four structural pillars to reshape Euroapi into a more competitive, more profitable and more resilient company. First, streamlined API portfolio. We are concentrating on highly differentiated and profitable products, reducing exposure to commoditized segments where structural pressure is intensifying. Second, a focused CDMO offer where we are leveraging recognized capabilities and strong technology platforms to position ourselves for complexity, reliability and regulatory excellent matters most. Third, rationalize industrial footprint and disciplined CapEx. We are simplifying our manufacturing network and prioritizing high-return investment and improving asset utilization. Fourth, organizational transformation. We are building a leaner, more agile company, aligned with our strategic priorities and able to compete in a faster-moving environment. These 4 pillars remain absolutely valid today. On Page 22, let's have a look at what has been delivered over the last 2 years. Despite the demanding environment, we have executed the core structural actions of FOCUS-27 and reinforced our fundamentals. On the portfolio, 66% of our sales in 2025 are now coming from differentiated products. This compares to 57% at the end of 2023, and we are on track to achieving our target of 70% by the end of 2027. The planned discontinuation of the low-margin product was almost completed at the end of last year, which will impact our 2026 top line, as already said, accounting for 90% of our top line reduction. Regarding the CDMO goals, 70% of the projects are late stage, improving visibility and reducing the risk. On the industrial footprint, Haverhill has been divested, productivity has improved across all sites. One workshop in Frankfurt has been mothballed and 380 positions have been reduced across the company ahead of our original plan. On the organization and cost base, key functions have been reorganized, R&D has been refocused and close to EUR 20 million of OpEx savings have been delivered over the past 2 years. Overall, the Euroapi today is a leaner and more disciplined organization than it was in 2023. Moving to Page 23. Capital discipline has also been a very strong priority under mothballed FOCUS-2027. This is clearly reflected in our CapEx trajectory investment decreased from EUR 137 million in 2023 to EUR 108 million in '24, EUR 77 million in '25, and I've even mentioned that we will be close to 8% for 2026 from a CapEx to sales ratio starting at 14% back in 2023. This reflects a deliberate shift towards stricter prioritization, higher return of projects and certainly better care and discipline around CapEx expenses. We have continued to invest in strategic platforms such as peptides, oligonucleotides and in high barrier APIs like prostaglandins and corticosteroids. At the same time, we took disciplined actions to discontinue the vitamin B12 capacity project following market acceleration and technical constraints. Moving to Slide 24. Let me briefly step back at where we are on our key KPIs for FOCUS-2027. Since 2024, we have incurred EUR 44 million of transformation and restructuring costs, ahead of the 25% originally mentioned for those 2 years. This reflects the fact that the project -- or the restructuring program is ahead of schedule, but it doesn't change the total expense expected envelope of EUR 110 million to EUR 120 million, although we will do every effort to limit that. On incremental core EBITDA, we had initially targeted EUR 75 million to EUR 80 million incremental by 2027 compared to 2024. However, with '26 and 2027 net sales now expected to be below initial assumptions, additional underactivity is anticipated. As a result, this incremental core EBITDA target will not be achieved in 2027. On CapEx, EUR 185 million has been invested over 2024 and 2025 against an initial EUR 350 million to EUR 400 million envelope for '24 to '27. Although we maintain this envelope, we will be looking for all opportunities to either limit our CapEx to projects, offering the highest return and reinforcing competitiveness or optimizing the CapEx expenses. Let me be clear, this is not about slowing down. It is about allocating capital where the returns are sustainable and defensible. Turning to Slide 25, sorry. As we have just discussed, FOCUS-27 and the transformation of the company are on track. However, over the past year, the business environment has evolved faster than initially anticipated. Competition from low-cost Asian players has intensified increase in price pressure in natural APIs. At the same time, we're also seeing large pharmaceutical companies outsourcing more late-stage and complex projects. This creates opportunities, but competition is obviously selective and execution must be precise. Sovereignty initiatives are promising, they have not yet translated into tangible economic incentives at this stage. But we are working or helping towards this evolving. In addition to this external environment, it is fair to say that we also face internal challenges with early-stage CDMO road map progressing at a slower pace than anticipated and the discontinuation of the vitamin B12 project. This is a context in which we are accelerating and sharpening the execution of FOCUS-27 and launching new initiatives. Moving to Slide 26. On the portfolio side, we will further reduce our exposure to commoditized APIs, structurally pressured small molecules and concentrate our resources on high barrier segments such as prostaglandin, corticosteroids and opiates. On these 3 segments, we have solid competitive advantage that we will leverage including further innovation programs that we have mentioned before. This includes technology edge and strong market position in prostaglandin as well as strong expertise and flexible capacity in corticosteroid and opiates. On operations, we'll continue improving operational performance, standardizing and improving our processes, for example, through leveraging technology. We will also strengthen the commercial CMO business. We can offer a reliable and sovereign manufacturing to customers looking for derisking their API supply chain. This will help securing volumes and improved capacity utilization in our sites. On the organization front, we will further streamline structure, simplify processes and align skills and capabilities with a more demanding environment. We have done a lot since the launch of the plan, but we see further opportunities to improve our operating model towards the fit for purpose and leaner organization. In parallel, we are launching additional initiatives, First, we will enhance commercial excellence and expand our API customer base in under-leveraged territories. Let me give you 2 examples. North America, which is the largest and fastest-growing API market worldwide accounted for only 8% of our total sales in 2025. If we go south to Latin America, we only serve 10% of the top drug product players over there. Second, we will refocus the CDMO business on strategic customers and/or complex molecules notably P&O, peptides and oligonucleotides. This means we will stop deleting our commercial efforts and contrate on strategic customers and products that we can succeed upon and increase focused on complex molecule projects, for example, high added value peptides and oligonucleotides projects, including RNA therapy. First, we will optimize our supply chain to structurally reduce our costs while maintaining end-to-end console. This is one very important way to increase competitiveness and adapt to the current environment. Our objective is obviously to adapt the operating model to a structurally tougher market and restore a sustainable path to profitable growth. Moving to our long-term ambition as a conclusion. While we recognize that the recovery is taking longer than initially anticipated, reflecting structural evolution of the market, we are taking the necessary actions to build a more competitive, sustainable and financially resilient operating model. Looking towards the near future, our positioning is clear. We aim to be a European-based sovereign supplier of complex API, a reliable CMO partner and a trusted CDMO player for new drug development. At the same time, this positioning must be supported by a sustainable operating model with a competitive -- cost competitive supply chain, a lean and capital-efficient industrial footprint and obviously an agile organization. Our long-term strategy is anchored in discipline and certainly value creation. This is where our focus is now in the interest of all our stakeholders. Thank you for your attention, and we are now ready to answer your questions. Operator: [Operator Instructions] We have a first question from Clement Bassat from Portzamparc. Clément Bassat: Basically, I have four. The first one about the top line. So what is your 2025 base top line? I assume it is your published figure, minus EUR 70 million from discontinued API, which leads to EUR 778 million. And this would imply a top line '26 of EUR 700 million following your expected 10% decrease in tip line, just to confirm if I am correct. Second question, so regarding the EUR 78 million impairment on Vitamin B12, does this include a portion of the CapEx invested from the current FOCUS-27 plan? And are you considering further impairment in 2026 following the discontinuation of the other API. Third question, just to confirm, you are maintaining restructuring costs at EUR 100 million. This is only cash related, spread through 2027. And finally, your CapEx was limited to EUR 77 million in 2025. So this decrease is a decision to preserve cash or just to adjust to your expected future top line? David Seignolle: Thank you, Clement, for all the questions. Let me -- I may ask you to repeat some at some point, just to be precise. But let me start with answering and maybe Olivier will step in at some of those. So the top-line assumptions that you have made, if I followed, I think, are not the way we think about those. There is no such comparable basis at EUR 778 million, which you mentioned, removing 10% of that getting to EUR 700 million. What we are looking is around 10% versus comparable basis, which you would only reduce the sales of Haverhill in 2025. So you can make the math. I don't want to make it for you. We have not mentioned any specific numbers, but we are not seeing such a drastic drop as you calculated. On the -- I'll come back to the B12 impairment question. Yes, the investment of B12 was part of the EUR 350 million to EUR 400 million total envelope. Most of these investments on B12 were made in '23 and '24, some even earlier -- sorry, in '24 and '25, some even earlier to that to that period. So the impairments are related to that. There is no such plan to further impairment in 2026. There has just been the adjustment of these impairments plus the impairment we did on the terminal value of the company. And there is no such thing to do, to do anything else. I wasn't clear on the restructuring. I'll leave you to come back to it afterwards. And finally, the CapEx of EUR 77 million in 2025. I think it's a bit of both. I think the company has been used to spending far too much money on CapEx in the past, probably referring back to the time that we were a large pharma company where the cash was not a problem. I think over the last couple of years, we have learned to be more disciplined with spending cash, spending CapEx, looking at different ways to fix problem than to invest in new equipment, maybe in some cases, reutilizing elements or not looking for the gold-plated solutions, but more the practical solution that a CDMO or CMO organization needs and not a large pharma. So there is no such thing to say that we want to limit to the further growth. I think we're still committed to investing significantly in the future. And for that, we have a couple of projects such as IPCEI or the morphine project where we are looking at new ways of manufacturing the morphine and all of these projects being either funded by -- partially funded by France Relance and the IPCEI program. And there will be significant investments, but that will come at the right time. All in all, we need to look at a sub EUR 800 million revenue company should not be spending EUR 100-plus million on a yearly basis. Yes, clement, can you go back to the question three on the restructuring, please? Clément Bassat: You are maintaining restructuring cost of EUR 100 million, but I have in mind that restructuring costs are composed with cash and idle costs. So EUR 100 million for me, I understand this is only cash related expected in 2026, 2027 and maybe also 2028. Just to confirm, you are talking just about cash-related amounts. David Seignolle: Yes. So that is exactly -- the last part of your sentence is correct. It's talking about cash amounts. And it's only covering '26 and '27. We are obviously, as I said, have different views on the top line for 2026 and 2027 at this stage than was originally anticipated. And as a result, if we need to adapt the organization to those new levels, we will have to do. But there will be a time to engage in those discussions if they need to happen. Operator: Now we have a question from Zain Ebrahim from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. So my first question is just in terms of the China API increased competition that you're seeing. It sounds like Vitamin B12 is a key segment where you're seeing that competition, maybe anti-infectives as well. But can you talk through which divisions or product categories you're seeing that competition in? And how much of the headwind you're expecting in 2026 is due to price reduction on those product categories versus volume lost to some of the extra competition? That's my first question. Maybe I'll pause there and then I can ask my follow-up. David Seignolle: All right. Thank you. So look, I think the -- unfortunately, this is a strong industry as we see or China has entered into a strong industry-wide program, and we see that across various industries and it's valid in ours, and they are looking at every single product. The reality is we have the small commodity programs -- products, sorry, that are very much impacted because in this specific case, not only they are benefiting from large volumes from very low cost of labor, low energy costs, significant new equipment with, I mean, state-of-the-art, et cetera, et cetera, plus in some cases, subsidies by the government. So in those cases, it's quite difficult to compete. Yet for whomever wants to supply and to get materials from Europe, we will maintain, and we have some of these customers. Now, I believe the trajectory over the next couple of years on those type of products is going to continue to decrease, and we will have to fight back and to provide answers in the cases we can. For the specific categories, I think it's all over the board. The reality, though, is we have quite a strong value proposition on the typical strength category of products that we have in the company. Prostaglandin, we are the global leader in prostaglandin by either the number of products that we look, by the experience and history that we have and the quality of our products, and we aim to maintain that. We are actually reinforcing this offering by looking at different further improvements or innovation projects on site. We have launched, as you know, a strong capacity increase to support the growth in the future, and we continue to accelerate down this path. The second element to that would be the opiate, where not only we benefit from a somehow protected market with all those morphine and derivative products, but we have -- we are working towards significant innovation projects in the future, as mentioned before, and these are benefiting not only for subsidies, but will be supported from our side, from CapEx investment to increase in the future. We don't necessarily foresee challenge on the price on that specific category either. And then finally, the corticosteroids. I think the corticosteroid is maybe a little bit of a different animal. We are -- there is a lot of players in the world. We are the only one, except with one other site in the U.S., which is fully integrated from A to Z of manufacturing of corticosteroids outside China. This is a strength, especially when we talk about sovereignty. We have discussed about sovereignty through COVID and challenges. We see sovereignty through shelf nowadays. We see some geopolitical issues now, which may endanger some logistic routes further in the next couple of weeks and months. So we still believe that this is not going to be simplified in the future and our sovereign solution will be helpful. That being said for corticosteroid, yes, we are challenged on price. Yes, we will probably do some efforts because we have significant projects to innovate and to improve our value proposition to cut costs significantly through new chemical routes in the future. That is what IPCEI actually want the, Work Package 2 of IPCEI is about, and that's a strong avenue for us to reinforce our value proposition in the future. I can't just further comment on the impact of volume or price related to our 2026 earnings. You had a follow-up? Zain Ebrahim: That's very helpful. Yes, my follow-up was on the discontinuation of APIs is helpful in terms of the quantification of the headwind to '26 sales. So should we expect any further discontinuations in addition to what you've already planned? It was 13 API before, I believe. So just any further discontinuations, given the portfolio prioritization that you're undertaking? And can we expect to return to sales growth? Could we see that in the -- it sounds like obviously '26, you've given guidance. For '27, you said it's below expectations, but when can we expect to see that? David Seignolle: Yes. So that's a couple of questions. Let me just get them in order. So are we expecting further discontinuation of products? No. The answer is no. Now this being said, you never know what's going to happen. I think, it's healthy for any company to look at their portfolio regularly. At this stage, we have not decided to further prune our portfolio. Actually, we are looking at growing that. And that's part of our additional activities for commercial that we mentioned. We are looking to new geographies. We are looking to seeing if we can have additional offerings and how we would progress on that specific front. When are we expecting to grow was the second part of your question? Well, the earlier, the better, obviously. What we are seeing for 2026 is still some reduction, as we mentioned. I just want to come back to the fact that 2025 saw a significant reduction in Sanofi's sales. But we just mentioned we gained 31 new clients and the sales to other clients and Sanofi was up close to 10%. So let's -- it's definitely a way forward that while we want to maintain some level of Sanofi, we know that the inherent share of the Sanofi business for the future is to reduce. On that specific front because maybe the question is going to come and I can anticipate it. We are -- we have an MSA up until 2027 that we are working towards extending. We have already five products that are extended until 2032. One specific with Opella now until 2031, and we are working towards concluding the terms of the extension of the other products beyond 2027. So whilst we -- our focus is to manage the reduction of Sanofi over time, we are heavily focused on selling to other clients, cross-selling, acquiring new, et cetera, et cetera. And there is -- and the first elements of the strategic move we did last year with merging the 2 organizations commercial into one and led by an expert in commercial operations in the CDMO and CMO space in our industry with the arrival of Frederic Robert in our organization is proving us right. The problem is, as you very well know, it takes time to bring new clients in and register those. So I would hope to see a continuous momentum into acquiring new clients and new sales into '26 and 2027. Operator: [Operator Instructions] Sophie Palliez: Maybe we can move to the questions that we have from the website. There's a bunch of them. So I'm going to try to summarize them by key subjects. The first subject is about the CDMO business. Our analysis of the reasons of the slowdown of the pace versus what initially expected? And maybe what type of future we see in the CDMO business and how we managed to recover specifically growth in that field, so CDMO. David Seignolle: All right. So the CDMO, as I think mentioned earlier, was -- is indeed lower than anticipated, definitely not at the level where the equity story of the IPO was at. I think over the last couple of what we've learned over the last couple of years is, one, we need to be focused. We can't answer 250, 300 RFPs every year with the organization we have, with the resources we have, the sites and R&D labs that we have because that prevents providing the right attention to the clients, to the requests, the RFPs, understanding the exact needs, et cetera, et cetera. So that's why we decided to be a lot more focused into either not the very, very early preclinical stage and to specific areas in which we know we have a competitive advantage. There is, we have 2 main R&D labs that support the CDMO, one in Frankfurt, which has very strong expertise on the P&O side and in Budapest, which can very much work on complex small molecules, such as the prostaglandin and others. In fact, we are still working with providing very complex and strategic projects for the future, such as, for example, developing the backbone of any future development of a large American Big Pharma. That's the first learning. The second learning we had is, it's a lot more complicated than one would think to get into the CDMO world. CDMO world and the clients know that you get into a lot more questions that you need to answer around what kind of raw material will I be using? What kind of processes will I develop? How can I scale up? What will be the implication and the challenges that I will see. Navigating in all this ambiguity hand-in-hand with the customer is not something that this organization was used to in the past with working with one internal client only, which was Sanofi at the time. So all of this takes time to build the capabilities. And I believe we are doing the right things. We are bringing the right talent, and we are working more hand-in-hand with the customers across all of this. For the future, what we see -- well, we see continuous, let's say, difficulty to navigate in this space because there are a lot of players. There are a lot of actually even Asian players that are coming in with different, let's say, approach to the business than European have. However, there is still place for all of us to work to provide local manufacturing, local scale-up with the right expertise and certainly proximity to the customers. The key point is we will also be thinking CDMO and CMO very much differently. The CDMO is everything that I said, working very much in research and development, aligned or accompanying the customer through this journey of their own development. While CMO is a very simple tech transfer, smooth tech transfer type of approach with a reliable supply chain of existing commercial products. Those CDMO and CMO, as we want to differentiate, require a different set of skills. Different set of skills, either by our commercial and customer-facing individuals, and also on the site with very lean and effective and efficient, certainly operations on the ground. And as a result, we will approach those two businesses very differently moving forward to be able to answer our customers. Sophie Palliez: One question is about core EBITDA in 2015, which improved significantly despite revenue declining. How much of the improvement is actual versus temporary cost savings? Olivier Falut: I guess on this area, the answer is quite simple. In terms of cost savings and improvement of the organization and the model, pretty much everything is sustainable. We improved the structure in terms of industrial footprint. We improved the model in terms of organization, in terms of SG&A. The R&D have been also redesigned. So I would answer clearly that the whole is sustainable, provided, that as I comment before, there is one-offs that are not sustainable, obviously, like the Buserelin issue, meaning impact of 2024. But for the rest, it's pretty much sustainable. David Seignolle: Those EUR 20 million of OpEx that we have mentioned are definitely here to stay and will remain as is. This is part of a new structure, a new baseline of our costs and everything that is being done at the site or in procurement and et cetera, will continue to bring efficiencies on a yearly basis. Sophie Palliez: Question on Asian imports. How can you compete against Asian imports? And where is your -- what do you think you have a sustainable edge to compete against those Asian imports? David Seignolle: So the -- how we can compete? I think there is, where and how, I guess, was the question, right? The key point is, we will not be able to compete on everything. And as customers just want price, I think it will be difficult, just on that pure front. This being said, difficult doesn't mean impossible. And as I mentioned earlier, we have a significant amount of our portfolio that is today still very much competitive and for which we further -- we have further innovation program to reinforce this competitiveness in the future, which will either allow us to increase commercial margins or to provide more competitive offerings to our customers. The second part is -- of the question was... Sophie Palliez: What are competitive edges in decisioning? David Seignolle: So that I mentioned. And then I think the second element is the fact that we are based in Europe. And as I mentioned, I think a lot of customers want reliable supply. Our reliable supply, our very China-independent supply chain, even for raw materials is actually today the only one available in Europe, let's face it. So for whomever customer in Europe or in the U.S. that want risk-free supply chain, China-independent supply, well, we are here available. This being said, I think on all those customers that want pure pricing, not really caring either about ESG or pricing, that's where I think we need to look at things maybe a bit differently. And that's what is mentioned in the cost of our supply chain improvements that we want to do in the future. It could very well be that buying some raw materials or intermediates in a lower-cost country could be coming handy for us, not by depleting our sites, but by able to reduce the pricing that we will, in turn, be able to offer to our customers, increasing those volumes and actually, at the end, probably having higher volumes in this specific site that is manufacturing the API than we used to have. So I think we need to be able to play on both levels. One is top-notch player of premium quality APIs; two, being a European source, sovereign source to China independent supply or sovereign supply; and three, for those customers that want price, let's play here as well. Sophie Palliez: What is the current level of capacity utilization across your main API sites? And what level could you consider as normalized for the business? And do you have an objective in midterm? David Seignolle: So look, on the capacity utilization, I don't think we comment on that, but we would expect around, let's say, ballpark half of our capacity, a bit more half of our capacity being utilized at this stage. There is no surprise, if I say -- to any of you, if I say that in the chemical industry in Europe, given the cost structure and everything, all our -- all my peers, let's say, would agree that 75% to 80% utilization is a minimum to have sustainable long-term perspective. In our situation, we know that at this stage, given the elements of underutilization that we have, which hurts or will hurt or which at least offsets all the efficiencies we are bringing from a cost standpoint, any additional volume that will fill up this available capacity will not only generate commercial margin, but also reduce those underutilization that hit our P&L. So we are working on that. And I think that's why we are discussing very heavily now, how do we increase our offering in terms of portfolio, how do we augment that and how do we play more on the CMO or European-made CMO type of market because I think that can be win-win for both customers and ourselves. Sophie Palliez: So do we have any questions online? Operator: We do not have any more questions online? Sophie Palliez: Okay. So maybe one last to conclude on -- from the webcast. If you had to prioritize one key execution risk that could derail the execution of the plan, what would it be? David Seignolle: I think the key point today is we need to have everyone on the top line. We have proven over the last 2 years that we can -- that whatever we can control, we can simply deliver. And the teams have done an outstanding job across sites, across organization in the last 2 years to actually prove that. And that's why our -- despite the whole headwinds we've seen, our core EBITDA has increased significantly between '24 to '25 and that we landed 2025 with actually a positive EBITDA. And those, as we said, are sustainable measures that will keep yielding results in the future, and we expect further actually on that. Now we need the whole organization to be working top line. And what I mean the whole organization is we need to be able to support our commercial folks that go and talk to customers on a daily basis. We need to provide them with high-quality materials with a competitive value proposition. We need to equip them with top-notch products, maybe provide them more products, provide with the right CMO value proposition, CDMO and R&D expertise. And definitely, when they need support and when they are able to seize clients, we need to be 100% on time, delivering against customer expectations. So I think the key point here is restoring growth will come by having a full organization focused on growth in the future to support the commercial folks delivering on that ambition. Sophie Palliez: Thank you. So I think if there's no more question online, this will end our webcast today. Thank you for attendance. Thank you for the questions. And as usual, the Investor Relations team and the management remains at your disposal, should you have any follow-up questions. Thank you, and have a good day.