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Operator: Greetings, and welcome to the Plug Power Q4 and Year-End 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Teal Hoyos, Vice President, Marketing and Communications. Please go ahead, Teal. Teal Vivacqua Hoyos: Thank you. Welcome to the 2025 Fourth Quarter Earnings Call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations, of our financial position or other forward-looking information. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results. Such statements are subject to risks and uncertainties that could cause actual results, or performance, to differ materially from those discussed as a result of various factors, including, but not limited to, risks and uncertainties discussed under Item 1A Risk Factors in our annual report, on Form 10-K for the fiscal year ending December 31, 2024, or quarterly reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and September 31, 2025, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only as of the day in which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call, or as a result of new information. At this point, I would like to turn the call over to Plug Power's new CEO, Jose Luis Crespo. Jose Luis Crespo: Good afternoon, everyone, and thank you for joining us. As many of you know, today is my first earnings call as CEO. I would like to begin by acknowledging the foundation I am inheriting. Andy led this company for almost 20 years with vision and determination, building Plug into a global leader in the green hydrogen ecosystem. That is a platform a few CEOs are fortunate to inherit and I am grateful for it. My mandate is clear. I will work to convert this leadership position into sustained profitable growth. I have been part of building this company, setting and executing on its strategy. I deeply understand both the opportunity in front of us and the discipline required to realize it. We entered 2025 focused on these objectives: grow the top line; improve margins, targeting margin neutral in Q4; reduce cash usage; expand hydrogen production, including commissioning the Louisiana plant all while strengthening liquidity. We delivered against those objectives. In 2025, we achieved approximately 13% revenue growth while turning gross positive margin in the fourth quarter. Gross margin improved by 125 percentage points, from negative 122.5% in Q4, 2024 to positive 2.4% in Q4, 2025. A 125 percentage point improvement in gross margin is a meaningful milestone in strengthening our operating performance. The results we delivered were not accidental. They reflect ambition paired with discipline, focused execution and the hard work of the entire Plug team. 2025 was a defining year for Plug. In a highly uncertain macroeconomic environment, we grew revenue at double-digit rates and achieved positive margin. A combination that has been challenging for many companies in our sector. We believe this represents an inflection point. Now that said, we are not done. We still have work to do to achieve sustained profitability while maintaining growth. My responsibility now is to build on this momentum and continue progressing toward profitability. In 2026, our focus remains on advancing toward profitable growth. We currently expect revenue growth in 2026 to be directionally comparable to 2025, driven primarily by our material handling and electrolyzer business. In material handling, favorable conditions have emerged. The reinstatement of the investment tax credit in January, combined with increased demand from pedestal customers such as Amazon and Walmart position us for renewed growth in this segment. We are seeing new developments and fleet refresh programs at key customer sites, while activity increased across both new and repeat customers. Our electrolyzer business continues to develop and expand globally. Today, the company has shipped over 300 megawatts of our GenEco electrolysis globally, and are now deployed on six continents, demonstrating significant operating experience across multiple markets. In 2025, we delivered equipment for major projects, including a 25-megawatt project with Iberdrola and BP in Spain, and a 100-megawatt project with GALP in Portugal, resulting in a record $188 million in electrolyzers revenue. Europe's regulatory mandates and funded incentive programs provide a structural support for hydrogen adoption. We see significant opportunity in refinery decarbonization and in the production of e-methane, e-methanol, synthetic jet fuel and ammonia. We estimate that meeting European mandates just for transportation could require 4 to 6 gigawatts of electrolyzer capacity by 2030, and we intend to compete for a meaningful portion of that opportunity. We remain focused on converting as much as possible of our approximately $8 billion electrolyzer funnel into revenue-generating projects that will support Plug's long-term growth. In 2026 we expect to begin executing projects with Carlton and Schroders in the U.K., and we will continue progressing with Allied Green Ammonia towards FID on the 3-gigawatt project in Australia, and the 2-gigawatt project in Uzbekistan. As an example of the activity in the market, over the last 2 months, we executed 750 megawatts of new basic engineering design packages agreements. In 2026, we expect to see full year benefit of the Quantum Leap initiatives launched in 2025. These improvements are expected to be further supported by continued cost reductions and optimization efforts across the business. Together with revenue growth, these actions position us to achieve positive EBITDAS in the fourth quarter of 2026, consistent with our previously stated targets. We also intend to continue reducing cash usage in 2026. We ended 2025 with $368.5 million in unrestricted cash. We currently expect continued improvement in cash usage similar to the reduction achieved in 2025. With ongoing cash flow improvements and the planned $275 million proceeds from the monetization of assets, and associated rights announced in Q4, 2025, which we expect to close in the first half of 2026, we believe we are well positioned to support our operation plans through 2026. In conclusion, we continue our journey towards profitability. 2025 was about margin progression, optimizing the platform we have built, enforcing cost discipline, strengthening infrastructure control, improving liquidity and sharpening our strategic focus. 2026 will be about continued sales growth and advancing the financial milestones outlined in our road map, including our target of achieving positive EBITDAS in Q4, 2026, a milestone within our road map towards positive operating income in 2027, and full profitability in 2028. With that, I will now turn the call over to Paul for a detailed review of the fourth quarter and full year financial results. Paul? Paul Middleton: Thanks a lot, Jose Luis. Let me first expand on the margin results. The significant improvement we achieved stems from a culmination of efforts over the last 2 years to optimize and scale the investments we have made. We've made a conscious effort to really focus on margin and cash flow improvement. And this includes multiple actions undertaken within Project Quantum Leap and our overall product cost down road maps. More specifically, in Q4, the results benefited from significant improvements in the unit service costs; achieving rates almost half of what they were over -- a little over a year ago; ramping our hydrogen platform through our three facilities, including Louisiana that was turned on and scaled up this year; scaling sales volumes as increased sales provides tremendous incremental overhead leverage and continued discipline and scrutiny over discretionary spending. Equally important to these Q4 results is the fact that we see this progress as a platform to continue driving towards our 2026 financial targets. Regarding cash usage, we saw improvements throughout the year, and these actions were associated with Project Quantum Leap and included targeted price increases, labor optimization, rooftop consolidations, improvements in production costs and leveraging our hydrogen platform, and clear focus on reducing our OpEx resource investment. We expect 2026 to include a full year of benefits from these activities undertaken last year. In addition, we see significant upside to continue this optimization effort and drive even more leverage as we grow sales. We anticipate continued improvement, incremental leverage from growth in equipment sales, given our capacity, continued improvements in our service cost profile, additional improvements in fuel efficiency and network leverage, and continued scrutiny over OpEx and resources. We continue to be laser-focused on driving growth in margins and cash flows in near term and achieving our Q4 goal of positive EBITDAS. Despite the progress we made, as conveyed in our filing, we determined it was prudent for Plug to record a net $763 million in various charges associated predominantly with noncash charges for asset impairments and the capital transactions we undertook in Q4. The impairment charges stem from multiple factors, including overall market conditions, resulting in slower growth than anticipated for certain products. In terms of impairments, this relates to property, plant and equipment, intangible assets, and assets associated with power purchase agreements and fuel. As a result of these impairments, it will reduce our future amortization and depreciation in '26 and onward. In terms of liquidity, as Jose mentioned, we ended with over $368 million in unrestricted cash. We recently executed the first of three transactions associated with monetizing the $275 million for the data center project sales. We have an effectively unleveraged balance sheet, given our debt restructuring we undertook, which also lowered our cost of capital and extended the maturity. We have also significantly curtailed our CapEx expenses, and we believe we have the platform we need to deliver our financial goals, so we anticipate even lower CapEx rates in 2026. These factors, coupled with the focus on improvement in margins and cash flows put us in a strong position to achieve our near-term and midterm financial goals, and fund our operating plan for '26. GAAP EPS for Q4 '25 was $0.63 negative, compared to GAAP EPS of negative $1.48 for Q4 '24. But if we exclude the unusual charges in each period, adjusted EPS for Q4 '25 was negative $0.06, versus adjusted EPS for Q4 '24 of negative $0.29. And the progression in this is just another illustration of how operationally the company is making progress holistically in growing overall sales and margin profiles. I'll now turn the call back over to Jose Luis. Jose Luis Crespo: Thank you, Paul. We will now open the call for questions. Operator: [Operator Instructions] Our first question today is coming from Colin Rusch from Oppenheimer. Colin Rusch: Congratulations on the progress here. So as you look at 2026 from a revenue growth perspective, can you just give us a bit more color around which drivers are actually moving the needle from a growth perspective? It looks like you're talking about kind of low double-digit growth overall. I'm just curious if there's one part of the product business that's actually making an outsized impact on that growth? Jose Luis Crespo: So for 2026, as I mentioned, we are projecting similar growth as we saw in 2025. And the main drivers for that growth are going to be material handling. What we're seeing in material handling is our pedestal customers are going back to growth. We are also seeing refreshes. Some of the sites that we have with some of the pedestal customers are sites that have been running between 5 and 6, 7 years, time to refresh. So we see an uptick on that. We also see new customers. As you know, we signed Floor and Decor last year, but we see other customers coming online in 2026. And also the value proposition is just getting stronger when -- and I think we mentioned this during the symposium. Our customers are beginning to see also that the material handling fuel-cell solution allows them to reduce their utility demand on their sites, which is really valuable for customers in days where we all know that utility and electricity availability is becoming more challenging. But that's not the only area that we're going to see growth. As I mentioned, in the electrolyzer business, we also see growth and opportunities. We just signed, at the end of 2025, we announced that the agreement with Carlton Power for 55 megawatts. And we are looking at, in the next couple of months or so, signing a similar agreement for another project in Australia. We have -- a lot of the projects that we have in the funnel are beginning to move further into FID. So we are expecting to see also growth in the electrolyzer business. So those are going to be the two main drivers for growth in 2026. Colin Rusch: Excellent. And guys, when you look at the fuel margins and the cost of that fuel, I know you're getting better at optimizing some of the production costs and timing around that, but I'm just curious about how quickly you can start driving some of those margins closer to breakeven on the fuel side? Paul Middleton: Yes. Thanks, Colin. I think just to clarify, if we kind of look back and we think about some of the things we've done, I mean, obviously, turning on these three plants and vertically integrate them puts us in a great position and we've seen that in the benefits in our results. We see that continuing to trend upwards. We've been on this maturity curve of optimizing those facilities. We hit all-time records in the Georgia plant for many of the months in 2025. And we've seen a progression in the utilization and efficiency of the newer plant in Louisiana, as we've turned that on this year and scaled that up. So one thing we expect for 2026 is obviously better leverage on those facilities now that we can take those learnings and run those plants even more efficiently. Second thing is, obviously, we're adding, as Jose mentioned, more sites, more material handling customers. And a lot of that we're going to feed through those plants and so you get greater volume leverage, which is important. We've shown progression in our logistics network and how we can drive greater efficiency through that. And then the last one of the other challenges we've been focused on and really made tremendous progress is the efficiencies at the sites in terms of how the systems -- the -- recapture the gas, how do you make sure that you minimize any losses of the molecule through the system. So the combination of those things, coupled with the new agreement we signed with the third-party gas company last year, that's reduced prices, but also put us on a platform of working with them to optimize the network with which sites are sourced from which plants. All of those factors are what's been driving the improvement and we're going to see additional improvement this year. So I think we're going to directionally be moving there as we progress through the year. And part of it will be tied to -- the -- timing of turning on some of these volumes, getting additional leverage out of those facilities as the year progresses. But we expect that we're -- we have been, and we expect that we're going to continue to move in the right direction in that regard for the course of the year. Operator: Next question today is coming from Craig Irwin from ROTH Capital Partners. Craig Irwin: So first one I wanted to ask about is just an update on the cash needs this year. So you guys did a great job last year, $368 million in restricted -- in unrestricted cash exiting the year. You got your cash burn down dramatically year-over-year. You've put in place the $275 million in asset sales. You're obviously continuing to execute on the restricted cash for your PPAs -- your historical PPAs as those roll off? And I guess as you make new sales, which is good. But can you maybe help us understand the tempo of cash needs across this year now that we don't have some of these big construction projects, and that you've taken all these other steps to put in place, the actions to get to positive EBITDA? Jose Luis Crespo: Thank you for the question, Craig. Paul, do you want to cover that? Paul Middleton: Yes. Thanks, Craig. A couple of things. One, if you look at the progression in the last couple of years, just the improvements in margin and just overall profitability, and how that's been playing, as well as our leverage of our working capital, you've seen the reduction in operating cash flows and cash burn in general. You've also seen a big reduction in the CapEx. I mean, I think if you look at the Q4 rates, they were one of the lowest CapEx rates we've had in a long time. So it postures us really well because we expect certainly, as we talk about our financial targets this year and getting to EBITDAS breakeven to positive in Q4, we expect a similar reduction in the cash burn that we've experienced the last couple of years. And so if you just look at that mathematically, coupled with a very nominal CapEx rate, it mathematically puts you in a position where the opening cash position we have is almost enough to cover it all, but obviously, the $275 million puts us in a great position to fund the year. So we sit today and our working plan is that we've got more than adequate existing capital and access to that capital that's coming in through those projects to fund this year without needing incremental capital. I do have optionality. I have an unleveraged balance sheet. And so it's not my preference to go out and get debt. But obviously -- and now that we've restructured the debt, I've got an incredibly low cost of capital structure in place right now, in that 7% range. And so I'm in a good spot overall, in terms of lots of other factors. There's other positive things that are happening like we've gotten past through some of the acquisitions and the earn-outs, and we've got some of those things behind us. We've really tempered the JV investments. A lot of things have just been very -- put us in a good position where just the overall cash needs have dropped substantially. So I guess in conclusion -- and if you look at seasonality of the sales, with the 1/3, 2/3, you can expect probably a little bit heavier burn in the first half. And as the volume grows in the second half when we convert those into collections, and leverage even more inventory, it will even be better in the second half. And as we sit today, given the working capital position, for me, EBITDAS is kind of a proxy of cash flows. So you could almost -- I think there's a decent chance we might even get to breakeven to positive cash flows in the Q4, not just the EBITDAS KPI as well. So I think, hopefully, that helps, Craig. Craig Irwin: Fantastic. That's very helpful. So along the -- a similar theme, right. Your new project, new sales commitments that you're making today are, obviously, made with a different discipline than you had in the market a few years ago with the pricing changes and the complete focus on profitability now at Plug. Can you maybe just give us a little bit more color on the 750 megawatts in new engineering design package agreements you signed in the quarter? Are customers paying for these engineering packages upfront now? What do we see as a potential time line for some of these fresh new orders to come through and potentially materialize as bookings and then revenue? How do we look at these opportunities? And is this mostly a new set of customers? Or has this got significant overlap with the existing customer base? Jose Luis Crespo: Thank you. I'm just going to clarify is, focus on profitability through growth. So growth is a very important part of our strategy. And yes, the 750 megawatts of BEDPs that we have signed and started working in the last few months are all new projects. Some projects are in North America, a couple of them are in North America. We also have projects in Europe. The time line is a little bit different for each one of them. A couple of them are -- at least at the moment, the FID time line is into 2017 (sic) [ 2027, ] but there is one project that actually we are replacing, an existing -- a prior electrolyzer company that is no longer going to be doing this project, and they have picked us to do this BEDP for them, you can infer probably what the company is. And that project is already pretty advanced. And what we're doing right now is basically doing a very quick BEDP. And that project has probabilities to be FID in 2026. So a little bit of a different time line for the different projects, but all of them are in the next 12 to 24 months, in the current planning for the FIDs. Craig Irwin: Congratulations on the progress here. Operator: [Operator Instructions] Our next question is coming from Eric Stine from Craig-Hallum. Luke Persons: This is Luke on for Eric. So first one here, just how do you expect activity on the hydrogen pipeline front in Europe to progress after last month's delivery announcement in the Netherlands? Is that -- should we expect to see further inroads there in 2026? Jose Luis Crespo: Luke, do you mean like the deployment, or the development of the actual pipeline in the European market? Luke Persons: Yes. And just potential inroads that Plug might be making there in '26 and beyond. Jose Luis Crespo: So if I understand correctly the question, the pipeline that you're referring to is in the Netherlands, which was announced a couple of years ago that we're continuing to do the deployment in that pipeline. What Plug, and in general, the industry benefits from is that having a pipeline allows us to basically have an offtaker for generation. And what we see, for example, in the Netherlands, we have several projects that we are discussing of companies that are looking into generating to put into that pipeline in particular. So it's a positive development in the industry, and it will help with projects going FID, given that they can deliver hydrogen to that pipeline. I don't know if that answers your question, Luke. Luke Persons: No, I think so. That's helpful. And just as a quick follow-up here. So just quickly on the data center opportunity. I mean, you pointed out last quarter as having potential for hydrogen-based backup power. Obviously, framed it as very early stages. Just wondering if you had any updated thoughts on potential use cases in this market? Jose Luis Crespo: For the particular case of the data center opportunity, we agreed with Stream that we were going to be working on potential applications. We have been concentrated with them right now on closing the deal itself, but open discussion on what we could use fuel cells for. So at this moment, we are concentrated in closing the deal. And in terms of applications, we're going to start discussing with them about what stationary applications we could launch together once the deal is closed. Operator: Your next question today is coming from Jason Tilchen from Canaccord Genuity. Jason Tilchen: With regard to material handling, I think in the last call, you said this is a $14 billion opportunity overall. And you've only really started to scratch the surface with this. Obviously, the price and availability of hydrogen is clearly a major gating factor. But I'm curious, beyond that, what are some of the other things within your control that the company can do to sort of help capture an incrementally greater share of that opportunity going forward? Jose Luis Crespo: Well, we're working with all of our main customers, pedestal customers like Amazon and Walmart, making sure that they can extract as much value of the technology as possible. One of the things that we are seeing, I think I mentioned that before, is that many of our customers are seeing the value of the utility advantages of using fuel cells. For many of our customers, they need between 1 and 2 megawatts to power batteries, if they use batteries in their distribution centers. But when you use fuel cells, you open up that capacity for other uses or actually just to be able to reduce consumption and connection to the grid. Those types of things are the type of things that little by little, we are discovering and working with customers, to understand better how they can take advantage of the technology and to make sure that the business case can be expanded to as many applications within material handling as possible. And we believe that as time goes by, we will be able to unlock further markets within the material handling business. Jason Tilchen: Great. That's very helpful. And one follow-up. In the release, you talked about launching multiple follow-on actions to continue reducing costs and improving cash flow in '26, wondering if you could share a little bit more about specifics of some of those initiatives? Jose Luis Crespo: Do you want to cover that, Paul? Paul Middleton: Yes. I think we are constantly looking at things like our bill of materials or designs. We have opportunities to look at our manufacturing processes and think about how to streamline those. We're thinking about how we -- where we deliver from a distribution standpoint, a fabrication standpoint, our network for electrolyzers as an example. There's just -- we -- if you look at the last 10, 12 years, the things that we've done and from looking at -- working with vendors on the supply cost to structures that we have with how we manage the supply chain to our manufacturing processes to even additional ways to optimize facilities. As we continue to reduce inventory, we need less warehouses as an example. So we look at it holistically. And there's -- we just -- we believe we're still very early in the curve of opportunities over the next couple of years. So those are just some of the examples and ideas of things that we have active efforts around. We've had some very conscious efforts in the last 2 years to deliver these specific targets and improvements. And we think that it's just themes that we can continue to optimize the overall company to continue driving the margin profile. Operator: Next question is coming from Chris Dendrinos from RBC Capital Markets. Christopher Dendrinos: Maybe just to echo the congratulations on the positive EBIT -- positive gross margins this quarter. Following up on the last question, the press release, I think, also says that you're potentially looking at other asset monetizations that had been impaired. Can you maybe discuss what those might be, potential time lines on those opportunities? Jose Luis Crespo: You want to... Paul Middleton: Well, let me say it this way. If you think -- if you go back the last couple of years, the themes that we've been talking about in some of these markets, haven't kind of developed as fast as we thought. And so from an accounting standpoint, you do -- you go through your accounting exercises and it kind of -- you land on the conclusions of what you can include in your forecast and so forth that may or may not create those impairments. But we still -- we have an incredible portfolio of assets and opportunities that we can either look for alternative ways to monetize it, like the data center sales, or we still have opportunities in the pipeline in these different markets that can manifest. And as they start to manifest -- and we really believe it's a question of when. I mean, I don't think anybody doesn't believe markets like mobility and high-power stationary, just to pick a few, aren't going to happen. It's just a question of when. And so as those things start to unfold, we still have all of these assets that we can really, truly leverage. And so it could be a combination of sales in those spaces, or it could be a combination of alternative uses that we look at. So it happens. It's just one of the ways that we're really centering in with how do we think get the best value of this big asset portfolio in the short term. Christopher Dendrinos: Got it. And then I guess maybe as a follow-up here. You've got the $8 billion pipeline. And just trying to think through, maybe how much of this year's outlook is secured by that pipe, or maybe what's in the backlog, and just how you're thinking about, I guess, overall kind of confidence in the year, given kind of existing commitments. Jose Luis Crespo: So for the year, on the outlook that we just discussed, which it is a growth similar to what we saw in 2025, we have very high confidence of probably close to 80% of that revenue amount. And also, high confidence that we would -- confidence that we will be able to close the additional 20%. So entering the year with that high backlog, if you want to call it that way, it is a very good position to be able to project where we think we're going to end the year. Obviously, years advance as they go. But at this moment, we feel pretty confident on the projection that we just gave for similar growth as 2025. Operator: Our next question today is coming from Sherif Elmaghrabi from BTIG. Sherif Elmaghrabi: When you think about a potential hydrogen plant like New York versus the liquidity opportunity that presents, any insight you can share as to how you balance that cash with your hydrogen fuel demand 2 years down the road, 5 years down the road? Jose Luis Crespo: Sherif, thank you for the question. So we have looked very carefully at our hydrogen needs and the potential or the probability or the possibility to monetize the assets like we did, that we're planning to do in New York. We mentioned this also in the prior earnings call. What we have been able to do is we have been able to get to an agreement with one of the largest IGCs to provide hydrogen for us at reasonable cost, much better cost than we were getting before. And that added to the current capacity that we have right now, which is about 40 tons a day nominal capacity. And added to the possibility that we have also, and we are discussing with some customers that are planning to do liquefaction to take some offtake from those potential projects. We're comfortable that we have a good path for -- to cover the demand in the next few years based on our projections for growth, especially in the material handling market. So we found that the capability to be able to monetize those assets was something that it was more valuable for Plug at this moment than making the investment of building a plant in New York. We have not -- we put all those plans for growth for production on hold at this moment. That doesn't mean that in the future, we may not pick up some of these plans when we are able to show that we can perform financially, and maybe able to finance these projects in a much more efficient way. But at the moment, monetizing those projects and with the hydrogen availability that we have visibility for, we feel that this is the best solution and the best path forward for Plug. Sherif Elmaghrabi: Got it. And then the One Big Beautiful Bill Act reinstated tax credits, but it also introduced stricter requirements for eligibility, and that's something that's been a supply chain headache for some renewables players. So I'm wondering if Plug Power has had to retool its supply chain meaningfully? Jose Luis Crespo: So for the ITC, the investment tax credit, what we have seen is that the requirements to be able to take advantage of the tax credit were meaningfully simplified from what they were before the bill that passed last year in Congress. So at this moment, actually, this 30% tax credit has become even a simpler way for our customers to take advantage of. And we've been discussing with many of our customers on this and they agree on this point. So it's actually been an improvement on the tax credit process for our customers. Operator: Your next question is coming from Sameer Joshi from H.C. Wainwright. Sameer Joshi: Congrats on the new role, officially the new role. So I think, I just wanted to hit on two broad categories on revenues from material handling. Are we looking to add additional pedestal customers just like the flooring company that was at the symposium? And then how -- on the electrolyte front -- electrolyzer front, the 8-gigawatt (sic) [ $8 billion ] pipeline that you spoke about, how is that planned to be converted into orders? Jose Luis Crespo: So on -- thank you, Sameer. On the material handling side, we are talking to many new potential customers. I think we're going to see some new customers being signed. And some of them, like you mentioned Floor and Decor, can be multi-site, or what we call pedestal customers. So there is an open door for new pedestal customers in 2026 and beyond. On the $8 billion funnel for electrolyzers, we continue working with many of the companies that we have in that funnel towards FID, towards the financial investment decision -- final investment decision. What we're seeing in many cases is with some -- especially in the European market, but also, as I said, we saw -- we're going to see some new opportunities closing in Australia, and we closed the opportunity in the U.K. with Carlton Power and Schroders at the end of last year, which will be executed this year. What we're seeing in the European market is that the RED III regulation is being converted into law in many of the countries in Europe, which requires certain -- especially for the transportation sector, which requires a certain percentage of the hydrogen use for transportation purposes, including refineries, to convert to green hydrogen at a rate of about 1% by 2030. This means that refineries like BP or GALP or other refineries in Europe are looking to ways to meet that -- those requirements. And this is what is accelerating the investment decision in many of these projects. What we're going to see is in the next 12 to 24 months, as the mandate becomes law, we're going to see these projects coming to fruition, and we're expecting to take a fair share of that funnel. So that is kind of the time line that I'm looking at right now for conversion of the funnel. Sameer Joshi: And then on the margin front, I mean, really congratulations on the success on bringing margins down, especially on the services and also on the equipment. On the equipment sales going forward, should we continue -- like should we see 1Q positive gross margins or because of lower revenues expected seasonally margins will be still in sort of negative teens? Jose Luis Crespo: Do you want to cover that, Paul? Sameer Joshi: For equipment in specific. Yes. Paul Middleton: Yes. Sameer, it's Paul. Yes. I would say if you just look at it mathematically with how Q1 typically is in relation to our annual sale on a seasonality standpoint and you kind of apply that to the math that Jose shared with looking at sales projections, next year, I think you would see sequentially, it coming down from Q4. It should be probably better than in that range of that same percentage from last year's Q1 but just sequentially with the lower volume. Equipment really is tied to leverage. So -- and most of it is just timing of those sales. And so without that incremental volume in the quarter, comparatively speaking, it's definitely going to affect margin. So you probably see a bit of a dip on the absolute and on the equipment margin in particular. But there are some favorable events. We definitely -- all the rooftop consolidations, all the things we've been doing last year that play well in terms of mitigating some of that. So on the whole, yes, but probably directionally better -- certainly better than Q1 last year. You're going to see progress both on sales and margin quarter-over-quarter -- I'm sorry, year-over-year on each quarter. So you probably -- but if you look at 1/3 of sales happening in the first half of the year and 2/3 in the second half, a lot of it is tied to volume. And when you look at what we've talked about for Q4, in particular, of getting to that EBITDAS positive range with kind of a $300 million sales proxy, it just gives you a tone of how that might play for the year. So hopefully, that helps. Sameer Joshi: Yes. No, that is really helpful. And I wanted to reconfirm that you're still targeting -- or from where you sit right now, you still are seeing 2/3 of the sales in second half, right? Jose Luis Crespo: Yes. Paul Middleton: Yes. Operator: [Operator Instructions] Our next question is coming from Chris Senyek from Wolfe Search. Christopher Senyek: Congrats, Jose, on first day on the job. Yes, so most of my questions have already been asked. But I guess if you were to just provide some sort of guidance on your outlook for '26, are you able to share the segment mix you're assuming across materials handling, electrolyzers, fueling, et cetera? Jose Luis Crespo: So it's going to be similar to what we've seen in 2025. Probably we're talking in the -- I will have to get the numbers, a little bit more detail in there. But probably material handling will be in the 30% to 40% of revenues, right? Paul Middleton: Yes. Jose Luis Crespo: And then you're going to see a similar amount, probably a little bit less on electrolyzers, and then the rest is going to be our fuel and cryo business. So that's kind of the mix that we're going to see. Material handling is still going to be the largest revenue generator for the company in 2026. Christopher Senyek: Right. And that makes sense. And just a quick follow-up on one of your responses earlier about 80% of '26 kind of like firm or high confidence in the other 20%. Is that kind of -- is the right way to think about that, the 20% are external factors for customers that are -- that need to hit like specific milestones, or like outside of your control? Or how do you think about that? Jose Luis Crespo: That 20% is projects that we are in the process of closing right now, that probably we're looking into closing them in the next few months that will secure the revenue for 2026. The other 80% -- 77% to 80%, is what I calculated that we have in high probability are projects that we either have a firm commitment from the customer, or it's being finalized, the commitment. So that 20% is projects that are right now being negotiated, and we're expecting to close them within the year, to be able to realize revenue within the year as well. Christopher Senyek: Congrats again on a nice quarter. Operator: Our next question today is coming from Ameet Thakkar from BMO Capital Markets. Ameet Thakkar: Just one quick one for -- Jose, congrats. Just you mentioned kind of momentum in kind of growing with your existing pedestal customers. One of your larger pedestal customers, Walmart, you executed a release event license agreement with them earlier in this year. I was just wondering with your larger pedestal customers, to the extent they want to add more sites with you, do you anticipate kind of executing similar agreements with them before kind of doing so, and throughout 2026? Jose Luis Crespo: Yes, you're referring to the licensing agreement. No, that was a very specific agreement with Walmart that we executed. An agreement that actually will help us to continue building and growing the relationship with Walmart, but I'm not expecting any similar agreements with any other customers in 2026. Ameet Thakkar: Okay. And just maybe one quick follow-up on a different topic. I know Moeve in Spain, in Andalusian kind of greenlit a fairly large electrolyzer project today. I was just wondering if you guys have any kind of role in that project while I have you. Jose Luis Crespo: No, that was a project that was announced earlier in 2024. So it's been a project that has been out there for a while. It seems like it went FID this week, today. And as far as I know, and I will have to kind of look at that, it is an alkaline project. It's a 300-megawatt alkaline project, and we are not part of that project. We are talking to other -- and we're talking to refineries in Spain about projects as well, but that project, in particular, is a 2024 project that seems to be going FID at this moment. But I think it's good news in terms of the conversion that we're going to start seeing, as I was saying before, of projects to FID. These are projects that have been hanging for the last 24 months, and now they're coming to fruition. This is kind of what we're expecting to see in the near future with the projects that we have in our funnels. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Jose Luis for any further or closing comments. Jose Luis Crespo: Well, thank you, everyone, for the thoughtful questions and for your continued engagement, and for joining us on, my first, earnings call as the CEO. Let me leave you with this: 2025 mark a structural turning point for Plug. We demonstrated that we can grow revenue while restoring margin discipline, and that combination matters. In 2026, our focus and targets are clear: execute with discipline, reduce cash usage and deliver EBITDAS positive in the fourth quarter. The foundation is in place. The cost structure is improving, and the demand drivers are strengthening. We really appreciate your support and look forward to updating you on our progress next quarter. And also, you are free -- Friday, I'm going to be closing the bell at Nasdaq. So you can go to our website, and you're going to have a link to see me and a big part of the Plug team that has made the results this year in 2025 possible, closing the bell with me. Thank you, everyone. Really appreciate your time. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Olivier Roussat: [Interpreted] Hello. Good morning. We may as well start now a few seconds ahead of schedule. We have a little video by way of introduction. But before this, I would like to say a few words about the setting up of our Construction division. Well, more to the point, we are bringing within our group, the 3 businesses involved in Construction, Colas, Bouygues Construction and Bouygues Immobilier. So we decided to have this division because it enables us to generate revenue synergies, and it can also boost our -- both the sales and the profitability of our businesses. We do have some differentiation at -- in governance. At Bouygues Construction, the Pascal Minault, who was Chair of the Board, CEO, Minault is now Chair and Pierre-Eric Saint-Andre becomes CEO, Managing Director as it were. He was in charge of Batiment International. At Colas, we appointed Pascal Minault as Chairman of the Board and Pierre Vanstoflegatte is now CEO. And at Bouygues Immobilier, as you know, we had already distinguished between the Chair and the CEO, Pascal being the Chair of the Board; and Emmanuel Desmaizieres becoming the CEO of Bouygues Immobilier. So at the Construction division, the head is Pascal Minault, who chairs each of -- the Boards of each of the 3 BUs. And so let's move on to our little new institutional video. Off we go. [Presentation] Olivier Roussat: [Interpreted] Right. So this new video. This is our opportunity to display and show up all our skills and some of the businesses we engage in and all the work of our -- the good work of our employees. Let's move on to Page 4. Revenue was stable year-on-year. It was -- it suffered from currency effects to the tune of EUR 560 million in H2. The overall effect for the year was EUR 580 million. On a constant exchange rate basis, revenue was up 1.3% over the year. So the results for 2025 are sound. COPA is significantly up over the year, driven mostly by the Construction businesses, but also by Equans, and that has enabled us to get beyond expectations. The net income attributable to the group was up over the year in spite of a heavier tax burden in France. Free cash flow before and after WCR stood at a historically high level, up for the third year running. Change in WCR stood at plus EUR 941 million over the year, a cumulated amount of EUR 3 billion over 3 years. And then the net debt is much less than it was at the end of 2024. The cash positions of Colas and Bouygues Construction both at historically high levels. And then -- and we'll get to that in detail. The Perform plan of Equans has been running smoothly, both in terms of profitability and cash generation. In this context, the Board of Directors will suggest to the AGM in April a payout of EUR 2.10 per share, up 5% compared to '24, again, an increase for the third year running. If you look at on Page 5, the key figures, revenue stood at EUR 56.9 billion, stable over the year, slightly up on a constant scope and FX basis. COPA stood at EUR 2.655 billion, up EUR 120 million. Net income for the group stood at EUR 1.138 billion, up EUR 80 million. But if you restate this for exceptional tax contribution, the actual improvement was EUR 149 million. The effects of the new budget, the tax law and the special tax on social security, which was voted in Q1 2025, that weighed about EUR 93 million altogether in line with our expectations. And then good news regarding the net debt position, standing at EUR 4.2 billion at end December 2025, a significant improvement, about EUR 1.9 billion over the year, an excellent performance, reflecting the efforts deployed on cash management and the good cooperation between our operation people and our financial people. Now let's look at our greenhouse gas emissions, where we stand at 2025 compared to 2024. Our global footprint stood at about 19.5 million tonne equivalent of CO2 in 2025. So that's a 1.5 million tonne improvement over the year. The carbon intensity was also down. And that, of course, is a reflection of our commitments with SBTi. We've been producing solutions with lower carbon footprint. So this is reflected in practice. But of course, in some parts of the world, the carbon footprint are de facto higher because of the source of energy used in various parts of the world. Let's move on to the order book. Our backlog for the construction business stands at EUR 32 billion, giving us good visibility for the future. On a constant change and scope basis, order book was up 1% over the year. The currency effects weighed down to the tune of EUR 600 million, but that order book was stable in France, slightly up in Europe outside France and the international region outside Europe was down, but we did have significant contracts at the end of 2024. I'll get back to that later. Let's look at a breakdown of the order book in the various businesses. The portion of orders to be performed in the next 12 months was stable over 1 year. And this is, of course, reassuring in terms of revenue generated -- to be generated rather in 2026. In Colas, the order book stood at EUR 13.7 billion, up 4% over the year, 6% on a constant scope and exchange basis. That was driven by Rail. The order book was up 17%. Roadwork was down 3%, in particular in France because of the context of municipal elections ahead of local elections, there's very little done in terms of public works. At Bouygues Construction, order book stood at EUR 17.5 billion, down 4% over the year and down 2% on a constant scope and FX basis. It was up inside Batiment France, also up at Batiment International, but down for public works. Of course, there was an unfavorable basis of comparison in 2024. We had the T2D contract in Australia worth upwards of EUR 2 billion. Having said that, I would qualify this by saying that when we -- with the order of size, well, we'll have about 1/3 of the whole project, about EUR 3 billion. We haven't recognized EUR 3 billion. We only recognized EUR 200 million or EUR 300 million because the project will go batch by batch. But we know that the future years, altogether, it will some up to EUR 3 billion. So it depends on how we recognize projects. I mean, we could have more change in the order book depending on how we record it. At Bouygues Immobilier, the order book was EUR 800 million, down 16% over the year, 9% on a constant scope and exchange rate basis. We decided to dispose of Bouygues Immobilier in Poland in 2025. And of course, that is reflected on the order book. Colas orders -- order taking stood at EUR 13.7 billion over the year. In France, new orders were slightly down. Again, there the local elections that doesn't help. But abroad, the orders were up in Northern Europe and also in Asia Pacific and Canada. And for instance, in Q4, Miller, that is our roadworks company in Toronto in Canada, took in an order worth EUR 100 million for the maintenance of road infrastructure. In the Rail, the order taking was up, significantly up. There was a train contract in Britain, a high-speed train line in Morocco. There's a contract in France. In Northern Europe, there's a contract for tramway. You may remember our Finnish branch, Destia got a EUR 100 million -- EUR 200 million contract for tramways in Vantaa. Bouygues Construction order taking stood at EUR 10.1 billion. You have run-of-the-mill activities at a high level in 2025, a record level, what we call run of the mill at Bouygues Construction is all businesses worth less than EUR 100 million. So that's a pretty significant amount anyway. But when that business increases, we're looking at businesses where we have more competition because these are smaller projects. And so it goes to show that Bouygues Construction is gaining market shares in a very competitive business. So this is very good news indeed. And you do have a few projects worth more than EUR 100 million. We have 2 data centers, one in Australia, one in France worth EUR 400 million. At Bouygues Immobilier, the market is still challenged and has been throughout 2025. We do have a few indicators indicating some resumption of business. We have building permits. We have reservations. Also, the cancellation rates was down, and that's rather good news. By contrast, the office business is slowed down. It's actually ground to a halt. Right now, there's not much going on at all, when -- but things may change when people working from home will go back to the office, in particular, the banking industry, the insurance industry are having their employees going back to work at the office. And so that might mean more office space. We'll see how it pans out in the future. Looking at the Construction division again, the revenue stood at EUR 27.8 billion, up 1% over the year, up 3% on a constant scope and exchange basis. Colas' revenue was slightly increased over the year, thanks to the Rail business, up 13% and the roadworks revenue was stable over the year, slightly up in France, slightly down overseas, but more in EMEA and North America. Colas' revenue was hit by a negative exchange effect to the tune of upwards of EUR 270 million, mostly to do with the Canadian and the U.S. dollars. But on a constant scope and exchange basis, Colas' revenue would have been up 2% over the year. Bouygues Construction's own revenue was up 3%, driven by its 3 divisions, Batiment International, Batiment France and Public Works. That also suffered a EUR 150 million effect on currencies and that's to do with the Australian dollar, but also the Hong Kong dollar and to a lesser extent because of the American dollar. Bouygues Construction's revenue on a constant basis would have been up 4% over the year. Finally, Bouygues Immobilier's revenue on the face value was down 4% over the year. But in fact, on a constant scope, again, an exchange basis, it would have been up. And that was because, of course, we disposed of our business in Poland in July 2025. Let's look at the operating performance of these various businesses. The Construction division's COPA stood at EUR 982 million in 2025, up EUR 155 million over the year, again, on all 3 fronts. At Colas, COPA stood at EUR 586 million. Margin from activities improved to 0.2 percentage points to 3.7%. At Bouygues Construction, COPA stood at EUR 376 million. Margin from activities improved to 0.3 percentage points to 3.5%. And at Bouygues Immobilier, COPA reached EUR 20 million, but that was because we disposed of our business in Poland. But there is one structural positive item, the restructuring gains, restructuring conducted in 2024, EUR 24 million are now bearing fruition. So we can feel the benefit of that. Now let's move on to Equans. At end December 2025, Equans' order book stood at EUR 25.4 billion, and that's stable over the year, year-on-year on a constant rate and scope basis, it would have been up 1% compared to December 2024. In 2025, it had orders worth EUR 18.3 billion, stable over the year. And that stability reflects our selectiveness in contracts. At Equans, we consider contract to be big if it's worth more than EUR 5 million. Bouygues Construction, it's worth more than EUR 100 million. But anyway, orders worth more than EUR 5 million were up -- sorry, contracts worth less than EUR 5 million accounted for 2/3 of all orders for the year. We worked a lot on data centers. You may remember that business slowed down in Europe and now it started again in the U.S. and we have the -- apparently a sign of that business resuming in Europe. There were 2 data center contracts taken by Bouygues Construction. Of course, before Equans provides services, we have to build the centers themselves. So when we see the concrete coming in, well, then later on, at the next stage, we'll have machines bring in HVAC and such like, and that's Equans' business. Anyway, Equans' revenue stood at EUR 18.7 billion year -- over the year, slightly down, down 2% year-on-year. Now that reflects the fact that, well, there was some wait and see with data centers, also the giga fabs in 2025, but also a proactive decision to pull out of nonprofitable businesses, nonperforming or at least not in line with the ratios we expect. And then to some extent, there was some currency effects worth about EUR 160 million. The very good news, though, is COPA. COPA was significantly up to EUR 820 million. Margin from activities up 0.8 percentage points to 4.4%. That is -- that performance is better than what we expected when we had our Capital Markets Day in 2023. The target we set was close to 4%, but 4.4% is significantly more than that. If you look at the Perform plan that Jerome and his team rolled out, you may remember that is supposed to go from '23, '24, '25 and '26. This is now -- we are now at the beginning of 2026. If we look back on this plan, we have this on the next 3 lines, the trend in revenue -- well, found the actual trend was better than what we expected. All in all, we have a 6% growth for the period, but that growth was driven by contradictory factors. On the one hand, they were proactive pulling out of nonstrategic businesses, and that weighed about EUR 600 million over the past 2 years. There was, as I said, this wait-and-see business with the giga fabs and data centers. But the revenue in 2025 turned out to be in line with expectations when we introduced the Perform plan. Having said that, 2025 was the first year where we actually materialized on M&A operations. You may remember that Equans through small acquisitions, I think there were 5, 6 or maybe 7 of them. Equans made acquisitions worth, I mean, in terms of revenue, about EUR 200 million worth over a full year. If we -- amongst the sources of satisfaction we have with the Equans and Jerome's teams, we have excellent news on profit margin. You may remember that when we acquired Equans, the margin stood at about 2.2%, 2.3%. It's now -- in 2025, it stood at 4.4%, so ahead of schedule as it were. And you can see on the slide, the yellow areas there are where we expected to fall back on our feet. In 2023, we were upwards of our bracket. In 2025, we were above the range announced. And again, we have to pay tribute to Jerome's teams who did a fine job there. When we showed the outlook in 2023, a few people believed it. Anyway, we had 5 ways of getting there and all 5 ways were pursued, and there's still more to do. So that's very promising. The other positive item, of course, is cash generation, cash to COPA to cash generation. You may remember that we were banking on 80% to 100%. But we are right there now. We are upwards of that range. I mean, we stood at 98%, now 96.3%, way up there. And on the right-hand side of the slide, you find the net cash position, a significant improvement compared to 2022. And if we take on board the position of Equans when we acquired it, it stood at EUR 200 million in net debt. At closing, the position at end December 2025 was EUR 2.097 billion plus. So the improvement is EUR 2.3 billion. It should be pointed out that over that period, Equans paid out to its favorite shareholders EUR 730 million in dividends. So we're looking at EUR 3 billion generated. So again, congratulations to [ Etienne ] and his teams that we were able to generate so much cash. I mean, it's financial and operating performance. Now by way of conclusion, Equans has been pursuing its strategic plan. Well, you may remember that Equans plan was -- well, a turnaround plan that was to be completed by 2026. Now where do we stand? What's the guidance for Equans? We're looking at stable revenue compared to 2025 on a constant exchange rate basis. Margin for activities should be 5%, 1 year ahead of the timetable we set during the Capital Markets Day in 2023. A cash conversion, well, of 80% to 100% from COPA to free cash flow before WCR. And then there will be another Capital Markets Day at the end of the year, so that Jerome and his team can give us the outlook for the following years, 2027, 2028 and '29. We'll get back to that. And now Bouygues Telecom. Bouygues Telecom has reached the targets it announced. Billings to clients up on 2024, including from La Poste Telecom. EBITDA after lease obligations close to 2024 and the gross operating CapEx, which we said would be around EUR 1.5 billion and ended up at EUR 1.48 billion. On the next page, we have a number of indicators on the left-hand side, a number of awards and classifications awarded by various institutions, in particular, by institutions that take its data from crowd sourcing. That's a real perception of how we fare by comparison our competitors. You'll see that we are #1 everywhere. We picked the ones we like best. I'm not sure that we're #1 absolutely across the board, but everything on that screen is true. I suppose the very pleasant side of that is that when we began in fixed line, we weren't very good. I was in charge of the company at the time. So I have to say, well done, Benoit, your people have done a great job. On this slide, we've shown you a photograph of a number of decoders because we -- the engineering department uses quite a number of decoders. One that's known as an AI boosted decoder. It's a better way of capturing screen. I think this is only the early days of artificial intelligence. Our commercial performance in terms of volume and value. The growth momentum has continued in fiber because Bouygues Telecom has gained another 510,000 clients over the year, including 139,000 in Q9. The total number of clients is now 4.7 million clients with fiber to the home, which is 86% of the whole national population with fiber to the home. A total of 5.4 million clients, which is an increase of 267,000 in 2025, an increase of 83,000 in Q4. Since the start of 2025, Bouygues Telecom is not marketing the ADSL plan anymore. So this is all non-ADSL, unlike our competitors. We feel that ADSL does not have a sufficiently good level of performance sell WiFi sets that have extraordinary performance with a little wire that's too small and it doesn't really enable us to reap the benefits of what we have at our disposal. ABPU is up EUR 0.40 over the last year. So in mobile phones, we performed well, good strong momentum in a market we could qualify as competitive. At the end of December, we had 18.6 million plan subscribers, not including machine-to-machine, which is an increase of 316,000 clients over the year, including 86,000 in the last quarter. This reflects, first of all, our improvement in terms of churn since we launched the big offering in October, November '24. Customer satisfaction, which has also improved. And of course, we've been successful with our convergence offering. Growth also comes from La Poste Telecom. Our ABPU in mobile, including La Poste Telecom stands at EUR 17.30. That's stable by comparison with the second and third quarters, but down over the last year because of the dilutive effect of La Poste Telecom, where the ABPU was lower than ours. And of course, there's considerable pressure on the acquisition costs when acquiring new clients in the market in 2025, particularly with a lot of aggression on the part of SFO. Bouygues Telecom's figures. This is ABPU for 2025, which rose by 4% over the year. In La Poste Telecom, that figure is almost stable over the year. Total sales up 4%, which includes other sales, [ terminals ], accessories and so on, which were up 5% over the year. EBITDA after lease obligations stood at over EUR 2 billion. That's stable for the last 12 months. There's a limited contribution on the part of La Poste Telecom so far. The stability of EBITDA is a reflection of the increase in sales build and of course, good cost control, thanks to Benoit and his people. But conversely, an increase in the cost of energy because Bouygues Telecom does no longer have the energy coverage that negotiated in 2020 and '21 before the war in Ukraine, which, of course, had consequences on the cost of energy in Europe. COPA was down in the year to EUR 674. This is largely because of amortization. We -- CapEx peaked a number of years ago. We now must depreciate that. And this, of course, reduces the value of our current operating profit from activities. The gross CapEx activities, I've already commented. In 2025, Bouygues Telecom made acquisitions for a total of EUR 374 million, which is a big increase over 2024, mainly the disposal of Infracos assets. Infracos is a joint company that generates part of our shared network with Bouygues Telecom and SFR. That transaction was finalized in December of 2025. What is the outlook for Bouygues Telecom in 2026? For 2026, we are targeting a billing to clients and EBITDA after lease obligations close to the level we achieved in 2025. As we announced at the end of 2024, the growth will be modest by comparison to 2023, not including La Poste Telecom. Gross operating CapEx is expected at EUR 1.3 billion, not including frequencies, which confirms that we have decreased our total CapEx over the last 5 years. Free cash flow before working capital requirements of approximately EUR 600 million, not including La Poste. This -- when we include La Poste SFO, we expect that the free cash flow from -- will be in the region of EUR 500 million. One final point here is that Bouygues Telecom will not be exercising its purchase option on the 51% of the joint venture called SDAIF, which rolls out fiber in medium density zones. TF1. In 2025, the TF1 Group confirmed its leadership in terms of viewership. The share of viewership among 50-year-old women is 34.5%. These are decision-makers in the home, share of audience, share of viewership at 30.9% between 20 and 49. In digital, TF1+ has become the reference in -- as a streaming platform with 38 million streamers per month on average, up from a mere 33 million in 2024. Sales in 2021 totaled EUR 2.3 billion, down fractionally over the year on a like-for-like basis. This is despite the fact that the advertising market deteriorated, especially in Q4. The media figure was EUR 1.9 billion, down 4% over the year. This includes advertising revenue down 4%. Advertising in linear television, that's traditional television, if you like, has been adversely -- seriously adversely affected by the market conditions we had at the end of last year, given the political instability in France, in particular, which led to a lot of advertisers waiting to see. In digital plus TF1+, we have continued to perform very well with advertising revenue up 36% over the year, thus confirming just how attractive this platform is to advertisers. The sales figure of Studio TF1 reached EUR 376 million, up 9% over the year. And that includes a contribution of EUR 44 million from JPG, which is mostly focused on the latter part of the year. These are studio activities that are very close to the various orders placed. TF1 Studios figure -- sales figure increased by [ 6% ] over the year. TF1's COPA was down to EUR 252 million because of a relatively stable cost of programs at EUR 967 million. I should remind you that this COPA figure includes capital gains for EUR 38 million in 2025. In 2024, these included capital gains for EUR 27 million. So the margin was actually 11%, in line with the objective announced by [ Rudolph ]. When we published the results after 9 months, we were targeting a COPA of between -- COPA margin of between 10.5% and 11.5%. What's the outlook for TF1? Well, thanks to its strategy and the various new initiatives in digital, its strong financial position as well. Well, the group has the following targets: sustained double-digit growth in 2026, that's sales growth, a dividend policy on the up in the years to come. And of course, customers are changing. The macroeconomic and political environments are unstable. We fear that the advertising market is and will be under severe pressure in 2026. And during this phase towards advertising, which will be mainly digital, TF1 intends to maintain its margin on activities, not including capital gains, of course, in the mid- to high single-digit range, in line with the linear market. Now I'm going to give the floor to Pascal Grange, who will give you a detailed presentation of the accounts. Pascal will be giving this presentation for the last time because Pascal is about to retire. He'll be leaving the company tomorrow. So dear Pascal, you have the floor. And may I thank you for everything we have done over the last years. Pascal says, you talk too fast, you don't smile, you'll finish your sentences. I don't know how you -- I did today, but I did my best. You can tell me what you think afterwards. Pascal, leave my notes open on Page 38, please. Pascal Grange: [Interpreted] Good morning, everybody. Thank you so much, Olivier, for these kind words. Olivier has already spoken about the sales and COPA of the various businesses. I'm going to add a few items concerning the profit and loss account on Page 32, Slide 32. In 2025, we recorded EUR 100 million in amortization of PPAs, which is comparable to 2024. This EUR 100 million comprised mainly EUR 46 million linked to Equans carried by Bouygues SA and EUR 35 million linked to Bouygues Telecom. Secondly, nonrecurring items, which are not representative of the business, they totaled a nonrecurring expense of EUR 224 million, broadly comparable to 2024. Of course, the breakdown of this nonrecurring result in 2025 is different from the previous year. This year, the components include something we already had last year. That is the Equans management incentive plan given the good performance. This is partly carried by Equans and partly carried by Bouygues SA. Over the year, that represented in the region of EUR 100 million. Secondly, provisions at Bouygues Construction due to the change of fireproofing regulations in the U.K. This amounted to EUR 74 million over the period. Thirdly, expenses concerning litigation expenses at Colas for EUR 42 million. And finally, a net balance of nonrecurring income and expenses at Bouygues Telecom for EUR 9 million. This included capital gains on the disposal of sites, data centers, various expenses concerning litigation. Thirdly, the financial results, which includes the net cost of finance, net interest expense on lease obligations and other financial income and expenses totaled an expense of EUR 410 million, up from EUR 392 million in 2024. Finally, the share of net profits of joint ventures associates totaled EUR 6 million after an expense of EUR 11 million last year. As a result of our share of the exceptional surtax mentioned earlier on, that's EUR 69 million, our group net share of net income was EUR 1,138 million in 2025, up EUR 80 million. Barring that surtax, we would have had an additional increase of EUR 149 million over the year. Overall, if we look at the impact of the Budget Act and the Social Security Budget Act voted in '25 for 2025, this impact totaled a combined EUR 93 million, which was consistent with our initial estimations. As you can see on Page 33 now, our net debt at the end of 2025 totaled EUR 4.2 billion, down from EUR 6.1 billion at the end of 2024. That's a very substantial increase, EUR 1.9 billion less over the year, as Olivier said earlier on. The variation by comparison at the end of 2024 is mainly due to the following: acquisitions net of disposals for a total of minus EUR 76 million, which includes a number of acquisitions and disposals at Equans, Colas, Bouygues Immobilier and TF1 and investments in joint ventures by Bouygues Telecom. I should take this opportunity to remind you that the proposed acquisition of Suit-Kote by Colas is still being dealt with by the U.S. antitrust authorities. Change in debt also factors in the variations in share capital for plus EUR 251 million, mainly including the exercising of stock options by employees in 2025. Secondly, the dividend payout of EUR 865 million, including EUR 755 million, paid to shareholders of Bouygues, the remainder being almost entirely paid to minority shareholders in TF1 and Bouygues Telecom. Finally, operations and other contributed a total of EUR 2.6 billion. And we're going to look at this. This is free cash flow from operations and other, beginning with net -- this is a figure that is very comparable to 2024. Excluding frequencies, this was EUR 1 billion, which is considerably less than last year. It also includes disposals of Bouygues Telecom for -- mainly due to the disposal of assets held by Infracos. Free cash flow before working capital requirements was EUR 1.808 billion, and this record level is a reflection of the efforts made by all our business lines throughout the year. The figure also includes transactions carried out by Bouygues Telecom in 2025 for a total of EUR 220 million, including the disposal of assets held by Infracos and the resolution of litigation. Variations in working capital requirements, as we said earlier, totaled EUR 941 million. This is a positive amount for the third year in succession and represents close to EUR 3 billion in aggregate over 3 years. This very positive variation is lessened by the impact of foreign exchange, which burdened us by EUR 197 million this year. Page 35. Our net debt at the end of 2022 was EUR 7.6 billion following the acquisition of Equans. Our strong financial discipline has led us to significantly reduce that debt over the last 3 years, notwithstanding the financial transactions during the period. And I'm thinking in particular to the withdrawal offer on Colas in 2023 and the acquisition of La Poste Telecom in 2024. Our net debt has been reduced since we acquired Equans by close to EUR 3.3 billion. Our financial situation is very strong. The outlook is good. So we have raised the dividend proposal, which, as you know, is part and parcel of a long-term strategy. This year, the Board of Directors will be asking the shareholders to approve at the AGM April 23, a new increase in the dividend for the third consecutive year by increasing that dividend from EUR 2 to EUR 2.10. If the resolution is approved, the dividend that we will pay to our shareholders will have increased by close to 17% in the space of 3 years. Let's finish with a few words about our financial structure. Our net debt has diminished, leaving us with a gearing of 28%, which is a 14-point improvement over a year. May I also remind you that the rating agencies have given the group very strong ratings. S&P have given us an A- rating with a positive -- sorry, a stable outlook. Moody's have given us an A3 rating, again with a stable outlook. The group's cash situation stands at EUR 17.6 billion at the end of 2025, which is a very high level. It's comprised of EUR 6.4 billion in cash and cash equivalents and EUR 11.2 billion in medium- and long-term credit facilities that have not been drawn down. And finally, as you can see in the graph on the bottom right, the debt schedule is well spread over time. That brings me to the end of this presentation of our accounts. If I could say a word on a more personal note before giving the floor back to Olivier Roussat. Over the last 6 years, I've had the pleasure and honor of meeting you and presenting the group's accounts every half year in a very interesting circumstances, sometimes very unusual circumstances. And I think, of course, the COVID period, the acquisition of Equans, the acquisition of EIT and La Poste Telecom, with a certain amount of emotion, I'm passing the baton to Stephane Stoll, who was appointed Group CFO in July 25. He knows the group particularly well. He joined 30 years ago and has performed brilliantly ever since. As for myself, after 40 years in the Bouygues Group, including 6 years -- the last 6 years at the senior management level, I've decided to retire. As you know, though we live in a very turbulent world, the group is in a very, very good position. This is thanks to the great work of the men and women in the group year after year, and I'd like to thank them for their contribution. Under the Chairmanship of Martin Bouygues, under the leadership of Olivier and now Stephane, the heads of the business lines and the members of the Management Committee, I have great confidence in the group's future and in its development. Thank you for your attention. And now, Olivier, you have the floor. Olivier Roussat: Thank you, Pascal. I'm sure we will get them to answer a few questions with Stephane. Okay. I think we can -- before moving on to Q&A, let's say a few words about the outlook for the group. Just a paragraph that doesn't change much when we describe our environment year in, year out. We keep saying that this is a rather chaotic disrupted environment, the macroeconomic and geopolitical situations are very shaky at the moment, and the group will continue to be agile and adapt to changes in these different markets. What we're aiming for in 2026 is stability of our sales figure at constant exchange rates. We want to maintain our COPA at an all-time high level after several years of significant improvement. The improved COPA of Equans will enable us to offset the expected or anticipated falloff in COPA at TF1 because of tensions in the linear advertising market and that [ Bouygues ] Telecom which is again the result of its previous investments. Next slide, just as a quick reminder of the upcoming rendezvous, the AGM on the 23rd of April, dividend results in May -- for the first quarter in May, the first half year in July, the end of July -- 30th of July, but still July. There was pressure on us to finish everything before 31st. Thank you, Pascal. Thank you, Stephane, because he will be at the home with them. That may at the end of the presentation. We now to take your questions with the heads of the various business segments. You have the floor. Operator: [Operator Instructions] Unknown Analyst: And many thanks to Pascal for the present exchanges over the years, and welcome to the new CFO. I had a couple of questions, one on Equans. You -- In 2025, you mentioned a wait-and-see attitude from your customers on data centers. You see there's some sort of glimmer of hope there. Is there a resumption of growth in 2026? Are you confident? Are you optimistic? That's question number one. Question number two is on working capital. You never give guidance. Olivier Roussat: It's good you know that, yes. But you will still ask a question. Unknown Analyst: Yes, that's my job. Olivier Roussat: And we'll give you the usual answer. All right. We will ask may be you'll come up with a different answer. I doubt it, but we'll see it. All right then. I've been managing figures. Unknown Analyst: Over the past 10 years, we find that working capital contribution levels out. If I look at the past 2 years, you were above 0. So do you believe that Equans, which is a new item in the group, does Equans bring a structurally positive dimension to cash -- generation of cash from working capital. And then third, maybe a provocative question, but on telecoms, can you say anything at all about talks regarding the acquisition of Altice. Can you share anything with us? And stepping back from this, of course, money counts. But in light of Altice's operating performances, which really aren't that good. And I don't see how they will improve after a while, it's just not worth waiting because the assets will be back on the market probably at a low price in view of the trends. Unknown Executive: Right. Well, [indiscernible]. The data center market has 3 items: the cloud, AI and then in terms of cloud has a stable influence, and we've had a few businesses in France. There's lots of capital expenditure on the AI more in the U.S. than in France. For the dual reason, fast access to capacity at least access to data centers was much faster in the U.S., and we benefited from that because we started a few data centers in the U.S. And then the second item is technological development, significant developments and players who are hesitating between 2 cooling technologies for data centers, and that slowed things down in terms of orders. That were lots of studies conducted in Europe, and we believe that they will be ordered soon because these studies have borne fruit. But right now until such time as we get orders from AI data centers, we will be waiting. Now Stephane, on the working capital. Stéphane Stoll: This company likes continuity. So we do not give guidance on working capital, but for a simple reason because as you know, a significant portion of our business is related to projects and projects follow a different timetable than the fiscal year. And so they are -- of course, accounts don't or cash flows don't stop at 31 December. So we don't want to give guidance on things that might change over a short period of time. But you're right to point out that things have changed. Five years ago, we acquired Equans, an outside company, we knew that it showed great potential in improving its cash position. We humbly believe that with our background and our culture in the construction business, we have a pretty healthy financial culture -- corporate culture at Bouygues. And so when we acquired Equans, we had reason to believe that if we apply the self-same discipline at Equans, we could gain from that, and that's exactly what you saw on Olivier's slide on cash generation upwards of EUR 3 billion over the past few years. And so that reflects the tight management of WCR by the management teams. And third question on telecoms. The whole rally started off in April of last year. That's when we received the first visit from Altice saying that they were contemplating disposal of the assets. And at the time, we wonder whether what we could do about it, could we come up with our own offer, our own bid, or should we do -- should we work with others? But in terms of competition, of course, all 3 companies outside SFR had be aligned. And for that to happen, it had to be a joint offer. But you're right. As time goes by, the value of the asset may well come down. If there are 3 partners on the boat as it were, there are inevitably exchanges between the 3. We published something mid-October. Talks, it started back in April. So it took that much. It took that time to arrive at something of a position, which is an achievement in itself because in the syndicate, you have 2 companies that are not exactly best chums. So to arrive at a joint position was not an easy matter. Now regarding the talks, there are confidentiality nondisclosure agreements we've signed with Altice. The latest press leak that you found on 22 January was fully orchestrated by Altice having listed a careful protocol of what would happen if there was a leak, but the leak happened that self same day. So I imagine they are happy with the protocol. Anyway, we are in -- still in the process of due diligence. This process takes several weeks. We have to see how things happen inside the company to try and get what -- to find what synergies might come out of a deal. And so that's very careful work we are conducting after this due diligence work with our partners to see -- rather opposite numbers to see what the company is worth, really, and then we'll come up with an offer and then things become fairly simple, the sellers' expectations should be in line what we find. I'm not in a position to tell you whether that is the case because we haven't had a chance to exchange on that, but it's a dual issue here. On the one hand, we want to keep the agreement amongst the 3 of us, which isn't easy and then the big question is, are we in a position to come up with something that meets the sellers' expectations. But I do agree with you the present trend. For Altice is downwards and I find it difficult -- it probably will be difficult to slow this down or indeed to turn it around. I'm not the one driving Altice. And well, you go to the French Pentagon and you'll see the people there who can give you an answer. But we're not in a position at this point to say whether we will come up with anything. It depends on the sellers' own idea of the value of the asset. The asset has come down already and maybe we'll get to a point where we see eye to eye. Eric Ravary: Eric Ravary from CIC CIB. And I would like to thank Pascal Grange for his fine work over the years. I had a couple of questions again about Bouygues Telecom. Can you give us details on the on the competition. We see that ABPU stabilized over Q4? And what's the outlook? What can we expect of mobile ABPU in 2026? About this SFR business, we've -- you've worked out value rather division of the [ cake ] as it were in October. Is this a stepping stone? Or might this change with your 2 -- with 2 other operators? And then to other questions on Bouygues Construction, excellent profit margin in 2025 upwards of 5%, so at the top of the range, I mean, 3.5%, you announced a guidance anywhere between 3.5% and 3.7%. Are we expecting the margin to be above that? Or have you leveled off? And on Equans, we find that some segments are slowing down. Can you give any color on what drives growth at Equans and what doesn't? Olivier Roussat: All right, on the -- what we call the [ Mobillere ] project and that is the acquisition of SFR, there will be marginal adjustments, but if we agree on a given base, there might be adjustments, but there will be marginal adjustments as to the market itself. Both for the mobile and the fixed business, 1 item you should keep in mind on the French mobile market since the end of 2023, the market as a whole hasn't grown. It's stable, it's mature. So the equipment rate will not grow any further. You can look at the asset publications. The contract market had maybe 4 million lines compared to several hundred years before. So what we have is multiconvergent offers and our competitors are doing the same. So what we're doing is working on customer loyalty. We started this in 2024. This is bearing fruit. We have a lower churn, but the convergence promotions also bringing down or at least weighing down the ABPU curve. And then there's strong competition on digital plants, digital contracts, very much driven by SFR itself. And so in that category of contracts, the competition is tough and pressure on ABPU. As a result of that, we're looking at ABPU remaining flat on the mobile business. Of course, we can compensate with more volume and lower churn and generate good revenue and ABPU -- fixed ABPU is following an upward trend. One thing in what Benoit said in the -- on the scene on the face with the competition, we work -- we don't want to bring prices down to keep our market shares. We're working on churn and loyalty, but of course, the idea is not to bring prices down. Eric Ravary: Now on Bouygues Construction, we have -- we stand at 3.5%. Is that a new trend? Olivier Roussat: Yes. Well, our numbers, we ended up at 3.5%. So that's the upper limit of the range we announced. We are not changing that range, but there's no reason not to believe -- I mean, we might be able to be, again, next year within that range or at the top part of that range. And then Jerome? Jerome Stubler: Well, there are a number of markets growing, the solar plants, data centers, they slowed down, but they are promising. And hospitals, we don't mention that much, but there is big growth there. And of course, the grid, the high-voltage networks, high-voltage grids in Europe. Biopharma airports, the defense industry, we have little exposure there, but the demand is strong. And then there's another market, not much mentioned, but that is security, electronic security and in the longer run, the nuclear industry. So that's our bread and butter as it were. Operator: All right. The next question, Nicolas Mora from Morgan Stanley. Nicolas Mora: About free cash flow in WCR, that is a question maybe for Pascal. But over the past 3 years, we generated EUR 3 billion inflow from WCR, can you account for this? So is that a conservative accounting that generated the surplus that is now in WCR? Or more structurally, is it at Equans better payment terms or service offer lower than demand so that you can have advanced payments and such like that's WCR? About Equans, the guidance, a bit conservative, isn't it on revenue on a like-for-like basis. You can see that order taking has been moving since Q3 and Q4 of last year. Based on that surely, you could be a bit more aggressive on revenue, I mean, if not volumes, but as there's improvement in order taking since the low point of 2025, isn't that the beginning of a turnaround. And on the Equans brand, the year 2025 was exceptional wasn't it? There was an acceleration in gains in profit margins. Well, things are never linear, but how can you account for this remarkable turnaround in 2025, especially at the end of the year. Now 2026, the guidance gives us 60 basis points. That seems to be the average over 3 years. Can you project yourselves all the way to 2028. Well, there will be a Capital Markets Day at the end of 2026. Well, there again, the profit margin seems to be bouncing back heading towards 4%. So we'd like to know whether this aspirational profit margin is that going to happen? Is that becoming real? And what's the expectation in the shorter term? Olivier Roussat: Just a word about the different COPA figures that we gave you particularly Equans COPA. The figure we gave you 3 years ago now on Equans COPA was the margin. We said we'll be at 5%. We're telling you that we will be at 5% at the end of '26. That's not saying we won't do better, but it still leaves us a year ahead of schedule. As for the projection, remember that there's no reason why our performance on paper should be below those of our peers. And we do the same work as them, same business as them. When you look at the way we book this or that because self-advanced are treated differently, but there is no reason in theory anyway, why Equans should not achieve what its peers are achieving, give or take, not saying to be exactly the same figures, but put it differently, Jerome has a bit of leeway, he is not flat out and really tell you how we exteriorize all this. But it's too early at this point in time. But that said, Jerome, we will come back to that. Let's come back to the strict financial questions to begin with. Do you feel that there is a -- the beginning of a pickup? Now I'm going to stick to the guidance. It was only 5 minutes ago. I haven't changed in the last 5 minutes. So I haven't got much to add. I gave you the guidance 5 minutes ago. And yes, okay, the order intake picked up slightly in the third and fourth quarters. As a result, we are beginning the year on a better foot, but not much more I can say. The ForEx impact this year is not something we anticipated. It's not something we have any control over. And secondly, it's a significant impact, bordering on EUR 600 million negative impact in 2025 over a very short period because all happened in the second half year. And I'm talking about at group level. This is quite an impact. Now we'll continue with Stephane, who is now passing his test on. Stéphane Stoll: Okay, this is my test. Okay. Just to say a little bit more about the mechanics of this issue, which is really the work of an apothecary on a day-to-day basis. It's -- first of all, it's self-evident, but I'd say it all the same. We refused to act on the terms of payment to our suppliers. We abide by our commitments to our subcontractors and suppliers, which means that we really focus on the client side of working capital requirements. This is an ongoing process because, first of all, it's important to negotiate the best possible terms and conditions, advances on payments, the payment schedule, which leaves us secured, very important to ensure that we have guarantees of payment for our projects. But there's also a lot of work that goes into the field of energy and services and I feel I'm very familiar with. There's a lot of work that goes into invoicing and payment through -- receiving of payment, improving working capital requirements is that the sum of a small little day-to-day series of tasks that consist in getting paid sooner. This is I said there's a lot of nitty-gritty in this because from a profit center, we're talking about a very, very substantial amount of money and a very, very large number of projects. So as I said earlier on to Matthew's in answer to Matthew's question, this is something that we've undertaken with great discipline. It requires great discipline, and it's something that we knew, maybe hadn't been done as rigorously at Equans as we are used to doing it in our Construction division. So this, of course, has produced results. We're doing this very carefully. We're not up to speed right across the board, particularly in terms of days of sales outstanding, what we call DSO. Now I would being cautious because, yes, okay, there are income booked in advance. Are we being cautious maybe. And if anything, it's a good thing to be cautious. I think this is a characteristic of our financial prudence. Operator: The next question is Sven DeVelde from ODDO. Sven Edelfelt: I have 2 questions, in fact. I will come back to working capital requirements, but would you give us some guidance on free cash flow as one of your competitors has done. My second question is on Colas. When I look at the order intake, I'm a little surprised not to see the U.S. as a potential source of growth. I think there are still over 50% of the infrastructure jog-packed funds that haven't been deployed. So how do you gauge demand in the U.S. infrastructure market unless I'm mistaken, Colas' margin in the U.S. is higher than in Europe. Olivier Roussat: Just to comment before we answer about free cash flow, it will be a very simple answer for Stephane. But to come back to Colas. I realized that I didn't answer the previous question about what we could eke out because we're looking for a COPA margin of 4%, and we feel that 4% is a realistic target. So the question is when or by when? Well, we've never been closer, but and it is very realistic. Okay. In the U.S., margins are indeed higher than in Europe, but the particularity of the sectors we operate in, is that -- when I started this job in 2016, all the plans of Obama and others, every time a major infrastructure plan was announced we never thought actually materialize in our figures. We're very neutral with regard to that. But the reality of the situation is that our presence in the U.S. is quite rural depending on the states, things we could do, requires a lot of subsidies here, a little bit of help from a stimulus plan there. But I don't know Pierre if you'd like to add anything, but with he mic, please? Pierre Vanstoflegatte: In the private market, we work a lot in the public works market. And even though the stimulus plan is beginning to come through, it's not exactly booming, but the private investment market in renewables or large harbor logistics platforms. They haven't really commenced. So there are a lot of things on standby because of the majority of large private investors and entirely reassured by the constant changes in policy in the U.S.A. So a lot of things on standby as a result of which there is more competition because broadly speaking, the companies that were working in this market are now turning to the public market to get through the winter. Olivier Roussat: Free cash flow? Stéphane Stoll: I didn't know I was passing so many examples today. There's one thing sitting the exam, there's another thing passing it. We use 2 different words. You sit the exam or you may or may not pass it. You're disrupting me there. Okay. No guidance on free cash flow at group level. We do give some guidance where it makes sense in the business lines or segments. So we do give guidance on telecoms. We give guidance, which I think makes sense in the field of energy and services, where our intention is to ensure that we can transform between 80% and 100% of our COPA elsewhere. We're very dependent on contracting with this notion and doesn't have the same sense at all for all sorts of reasons that we could develop at length, work starts, the delays, the temporality of our projects, which isn't aligned with the calendar year, which means that we could start on a project in late December and have to order CapEx in January. But in the world of contracting more, generally speaking, the cash curve and the income curve do not run in parallel. It's really at the end of the project that the income looks like it should. That's why we don't give guidance in these areas. And that is why we do not give any guidance at group level. Olivier Roussat: Thank you, Stephane. Next question. Operator: Next question from Mollie Witcombe from Goldman Sachs. Mollie Witcombe: I have just 2, I think. Talking about AI, there has been a lot of talk about the AI economy. We haven't really mentioned it today. Could you give us some information on your strategy in AI, particularly in the field of telecommunications. And I'm pretty interested in your CapEx projections. My next question, and I apologize in advance. Could we talk a bit more about the [ SFO ] project? Maybe we've been some people's interest to reach an agreement quicker than in yours. Is there any timing conflict between you and other parties? And could it be that the increase in your dividend means that you do not see an agreement being arrived at in the near future? Olivier Roussat: Well, the increase in the dividend is a very, very small amount by comparison with the investment that SFO would require. But to submit an offer to a potential buyer. We would have to agree among ourselves about the price to put on the table based on the synergies we anticipate. But for a project to be approved by the antitrust authorities, it's important that we table a project that has synergies. If there are no synergies, while the antitrust authority will tell us that they say this doesn't fit. We have to be able to show that we're capable of delivering this, we have to convince the antitrust authority. So that's the capability. The first discussion we have to have among ourselves to put a figure on this. Then we have to reach an agreement with the seller. The seller has expectations as regards the whole structure of the deal, the price. There's a lot of aspects, a lot of components. And you have to agree under these various components. So the process is underway. It takes time. We're talking about a project somewhere in the region of EUR 15 billion to EUR 20 billion. But it's so big that we have to take time to reach an agreement given the size of the project. There are 2 businesses where we do a lot of AI -- to be efficient in artificial intelligence, you need digitalized processors, and we have 2 completely digitalized processes, TF1 on the 1 hand and Bouygues Telecom on the other one. We have processes that are digitalized in other segments, but there's less digitalization. People work in very concrete areas. But the 2 areas where we use a lot of as I said, Bouygues Telecom and TF1. Benoit concerning Bouygues Telecom, would you like to answer that? Unknown Executive: On AI, there are 2 areas in which we work in AI for our own internal processes to help employees with the activities, but secondly, to provide new services to our clients. We began with Gigafactory sometime back to upscale and to progress. There are areas where we've made good strides forward in customer relations to help our customer relations managers with generative AI. In IT development. We also use AI tools. But broadly speaking, we're now at a stage where we will move on from experimentation to upscaling. We are now citing a tool for our employees in-house. We've over 1,000 agents involved with over 100 are multi-business cost-cutting. We're now at a phase where we are going to scale up. And of course, for our clients, as Olivier said earlier on, we've begun, including an AI processor in Italy. That enables us to improve the quality of picture. We have HD high-definition resolution which will enable us to provide other functions in the months to come, fractions I won't tell you about today. But that will be enabled on our TV box in the future. In the liquid CapEx. Of course, we need to optimize networks. And of course, maybe some savings possible here, but it's way too early between what we're talking about and what's going to happen. We need to check things. Unknown Analyst: Thank you, and thank you to Pascal to whom I wish a very happy retirement. Operator: Next question comes from Nicolas Mora from Morgan Stanley. Nicolas Mora: Good afternoon. One final question. We saw that your balance sheet is exceptionally good, exceptionally strong. You began with bolt-ons with Equans in a very measured manner. Have you got a pipeline that includes a bigger target in what region or what -- and what business segments would you like to expand within Equans? And of course, the U.S. deals for Colas, the deal that wasn't closed at the end of last year. what's the life of the land? Is it an antitrust issue or a price issue. Olivier Roussat: Now [indiscernible] which is the topic we discussed together last August, the deal hasn't been closed because it's in Phase II before the antitrust authorities. This usually lasts an average of about 9 months. We began Phase 2 last October. So I don't think the deal will move in the very short term. When it moves on, we will be very happy to close it out and tell you about it. We have 2 areas where we need M&A to improve our profitability. There are 2 big businesses, Colas and Equans. And in these 2 areas, it's only natural that we should seek to densify our presence because that will mechanically help us improve the profitability of our operations. That's the case with Colas with Suit-Kote. It's also the case with Equans. Once we've said that, let me give you an example of an area where we'd like to expand. That is Germany. In Germany, Hasselmann, is a railway company. We felt at the time that this will be the first of a series of targets in Germany. To date, that list totals 1 company. It's not that we don't want to go any further. We're not buying for the sake of buying. The targets must be of interest. At Equans, there is an eagerness to expand. But where do we want to expand is the former Western civilization of Northern Europe, North America, Australia and potentially Southern Europe. But broadly speaking, for M&A deals to come through where we need a pipeline, the sales in Germany are just below the EUR 1 billion mark, mostly by Equans. We'd be very, very happy to do more, but we need reasonably priced targets. A number of small acquisitions, Jerome, you're quite right. There are areas where deals and until they're signed, well, they're not done. Last year, we thought we would close out one. And just the day before, we lost our grip on it. The process isn't very industrialized, but it's a very professionalized industry. At Colas and at Equans, the companies are structured in such a way as to analyze the deal flow and these bolt-ons are part and parcel of the business model of these companies. So we will do deals when good deals arise. With Bouygues Construction, the idea of improving our footprint or even of establishing a footprint in a country as we did A W Edwards in Australia, which was a new venture for us, can be of interest to Bouygues Construction. But the real rationale behind M&A that will improve profitability, the real rationale is in countries where we already exist. And that's what we're looking at with Colas and EQUANS when the opportunities arise. And of course, we are pretty much dependent on vendors. It's not a case of buying for the sake of buying. But you're quite right, there are and will be deals when and if they become available. We have buyers. We are seeking sellers. Operator: The next question comes from Akhil Dattani from JPMorgan. [Operator Instructions] The next question comes from Abhilash Mohapatra from BNP Paribas. Abhilash Mohapatra: I've got 2, please. Firstly, on [ Equans ], I guess, this has already been answered. Just in terms of your top line trajectory, you're obviously guiding to stable in 2025, which is an improvement -- sorry, in 2026, which is already an improvement versus last year as you sort of execute on your plan. Do you see this business returning to top line growth in '27? I know you've talked about there's no reason why you can't catch up with your peers given these are very similar businesses. But just wondering if you have -- if you can give us some color on when we can see the business returning to top line growth. And then just on the telecom side, we saw an announce -- recent announcement of one of your competitors continuing to expand their network that signed a build-to-suit agreement for 2,500 towers. Just wondering, is that something on the cards for you? Or do you think that your network and towers are currently in the sort of right area? Olivier Roussat: Just to start, we start with telecommunications at the time that Jerome prepared the answer to the first one. So Benoit, about the build-to-suit trend? Unknown Executive: So this was an announcement by our competitors that they have a partnership with [indiscernible] to expand the network, the mobile network. Well, we do have similar partnerships at Bouygues Telecom. We've been doing this, and it is a sort of thing that does happen in a telecom industry in Europe or in France. We've been rolling out our own network. As we speak, we're increasing the number of sites on the territory. We do not announce it ahead of time because as you can imagine, this is highly competitive and highly confidential. But when we display all the awards, the fact that we've been recognized as service providers, not just for mobile -- not just for fixed, but also for mobile telephony. So our intention is to provide best possible service to our customers, both in the mobile and in the fixed business. And so we are also expanding on our mobile network. Jerome, on top line at Equans, I believe we've already given the answer. We're pretty confident in the guidance we gave for 2026. All right. Well, thank you, Jerome. I'm afraid that was that. Operator: The next question comes from Rohit Modi from Citi. Rohit Modi: I have 2, please, as well. Firstly, again, on Equans. That on the COPA margins. You are exiting Equans COPA in 4Q at 5.2%, but you're guiding 5% for 2026. Just trying to understand if there's a step down in the margins that you're seeing sequentially from here whether in the first half or over the year? Any color there would be very helpful. And second question, again, sorry, on the SFR deal. We have seen some headlines today about the remedies that you spoke about. There could be some remedies. Now we have seen different level of remedies in the sector ranging from introducing a new operator, literally fourth operator to very benign remedies recently. Directionally, where you see France -- now it's a different market, but directionally where you see France stand? Or what do you sense from the discussions with the regulator, given that this might be one of the basis for the deal going ahead. So any color on that would be very helpful. Olivier Roussat: We start with the telecommunication answer, and then I will let Jerome give this guidance that when we give a guidance doesn't mean that we won't do it better than what we say, but we will cover this later. And the first one is about -- I understand this is about the antitrust remedy that we could have. This is a discussion when -- if we do the deal, there is one thing, which is who will be the antitrust authority able to analyze it. And according to the -- there is 2 possibilities, either it could be done through the antitrust -- the French antitrust authority, either it could be done through Brussels. And the question is we have to talk with the one who will be designated as the antitrust authority. We think that there will be, at the end of the day, only one antitrust. There won't be -- we don't think there will be a situation. There will be part of the deal done through Brussels, part of the deal done through the French one. We consider that there is -- logically, it could be done only one place at the -- all the procedure will be done at the same place because I remind you that there is not one procedure for the antitrust. There is 3 of them, one with Iliad and SFR, one with Orange with SFR and one with us with SFR. So as there will be the 3 one. And when we know which antitrust authority will be in charge of it, we will discuss with them that's what we could do. There is theoretical approach where we consider that there is a few things as we know the antitrust practice that could be asked from us to for the bid. There is also maybe some change with the new [ Drahi ] report to give us some opportunity to enhance the remedy process. But at this stage, I cannot answer. First, I don't know which entity will be in charge of it. And second, we need to talk to them to be able to see what they will request. But for sure, it could be a situation. If the remedy is to be able to consolidate the market from 4 to 3, we need to have a fourth one, I consider this is not exactly the definition of consolidation. Jerome, do you want to? Jerome Stubler: Yes, in Q4, 5.2% on Q4 alone. So you have a roller coaster effect. And it is often the case that the performance is better in Q4. Back in February 2023, I did answer one of your questions back then. You asked whether the first steps of improvement on these steps easier than the following ones. And I said something that remains true. The first steps are those where you address issues of organizational improvement, things that you -- well known issues. And then the next steps are changes in corporate culture and that is where you can generate a better performance down to a very fine level. Now as Olivier pointed out, the big advantage is our competitors are ahead of us in terms of profitability. Some are doing even better. So we have reason to believe that -- well, this can drive us upwards. Having said that, the guidance was given for '26 at 20 -- at 5%. It hasn't changed. And we shall remain humble and focused to achieve just that. Operator: No further questions by phone. I'll give the floor to the speakers. And no further questions from the audience. So enjoy the rest of the day. And we shall see you again. We shall see you again in July in this very room.
Carlos Almagro: Good morning, everyone. I'm Carlos Almagro, Head of Investor Relations. I would like to welcome everyone to TGS' Fourth Quarter 2025 Earnings Video Conference. TGS issued its earnings release last Friday. If you didn't receive a copy of the release, please contact us at investor.tgs.com.ar. Before we begin the call, I would like to inform you that this event is being recorded. [Operator Instructions] I would also like to remind you that forward-looking statements made during today's video conference do not account for future economic circumstances, industry conditions, or company performance and final results. These statements are subject to a number of risks and uncertainties. All figures included herein were prepared in accordance with International Accounting Reporting Standards, IFRS and are stated in constant Argentine pesos as of December 31, 2025, unless otherwise noted. Joining us today from TGS in Buenos Aires is Alejandro Basso, Chief Financial Officer. I will now turn the video conference over to Mr. Basso. Alejandro, please begin. Alejandro Basso: Thank you, Carlos. Good morning, everyone, and thank you for joining us today to discuss TGS' 2025 fourth quarter earnings and highlights. To begin today's call, I'd like to share some of the most recent corporate developments. Back in November, we successfully issued a new ARS 500 million bond with a 10-year tenure at an 8% yield. Demand was very strong, and the transaction was oversubscribed with the total order book reaching $1.3 billion. Proceeds from this issuance are being used to fund approximately $780 million of capital expenditures related to the expansion of the Perito Moreno pipeline which would add 14 million cubic per day of transportation capacity as well as the final tranches expansion of our regulated pipeline, adding 12 million cubic per day. In addition, we also executed bank loan agreements totaling $67 million to finance imports related to this project. Finally, turning to the commercial side. On February 9, we launched the open seasons during which incremental capacity can be contracted on a firm basis. On March 16, we will receive the bids for the capacity, which will be repaid. Bids for the remaining capacity will be received once ENARSA completes the reallocation of the existing 21 million cubic per day, which are currently assigned to CAMMESA. Moving to Slide 4, I will briefly highlight the key financial results for the fourth quarter of 2025. Please keep in mind that all figures presented for this quarter and comparisons made with the previous quarters are expressed in constant Argentine pesos as of December 31, 2025, following the provisions established by the IFRS for financial reporting in hyperinflationary economies. As seen in the slide, we reported a total net income of ARS 124 billion during the fourth quarter of 2025 compared to ARS 170.5 billion reported in the same quarter of '24. Overall, earnings were lower mainly due to a few factors. First, we had the reversal of the property, plan and equipment impairment provision amounting to ARS 52.1 billion, which was recorded in the fourth quarter of '24. In addition, our financial results were impacted by a negative variation of ARS 17.9 billion and the liquids EBITDA declined by ARS 18.1 billion. That said, these effects were partially offset by the solid performance of our midstream business which delivered higher EBITDA totaling ARS 16.2 billion during the period and a slight increase of natural gas transportation EBITDA by ARS 2.7 billion. Moving on to Slide 5. EBITDA for Natural Gas Transportation business in the fourth quarter of '25 totaled ARS 109.8 billion, which is slightly higher than the almost ARS 107.1 billion recorded in the fourth quarter of '24. It is worth noting that even when we recorded an increase in revenue with tariff adjustment of ARS 31.9 billion, the adjustments were not enough to offset the inflation loss effect of ARS 40.9 billion. However, the higher transportation services, mainly interrupted transportation of ARS 9.6 billion and lower operating expenses of ARS 540 million contributed to generate a slight increase of the EBITDA. On Slide 6, you can see how EBITDA for the Liquids segment decreased to ARS 83.9 billion during the fourth quarter of 2025 compared to ARS 102 billion reported in the same quarter of '24. The decrease in EBITDA was mainly attributed to lower export prices, which fell between 17% and 33% and reduced EBITDA in ARS 31.1 billion. In addition, higher operating costs and insurance reimbursable expenses incurred following the climate event occurred in March '25 reduced EBITDA by ARS 12.8 billion and ARS 4.9 billion, respectively. These negative effects on EBITDA were partially offset by a few positive factors. First, we recorded a positive monetary effect of ARS 13.7 billion as the exchange rate increased above the inflation rate, 43.5% versus 31.5%. Second, butane prices in the domestic market improved following the deregulation under the Programa Hogar starting January '25. This allowed us to sell at export parity prices, generating an additional ARS 9.9 billion in revenues. And finally, higher sales volumes also contributed with a 4.4% increase year-over-year from 338,000 metric tons in the fourth quarter of '24 to 353,000 metric tons in the same year period of '25, resulting in a ARS 7 billion of incremental EBITDA. It is worth noting that the average natural gas price, which is the main variable cost for the Liquids business segment remained stable at $1.6 per million BTU year-over-year. Turning to Slide 7. EBITDA from midstream and other services rose by 36% to ARS 60.7 billion compared to ARS 44.5 billion in the fourth quarter of '24. This increase was mainly driven by higher sales derived from the incremental billed volume of natural gas transported and conditioned in Vaca Muerta totaling almost ARS 20.3 billion. Transported natural gas billed volume rose from an average of 28 million cubic per day in the fourth quarter of '24 to 33 million cubic per day during this quarter. The natural gas conditioning volume also increased from an average of 19 million to 27 million cubic per day. In addition, the monetary effect increased EBITDA by ARS 5 billion. These effects were partially offset by a ARS 8.1 billion in higher operating expenses. As seen on Slide 8, we recorded a negative variation in the financial results amounting to ARS 17.9 billion. This was mainly due to a ARS 12.3 billion higher interest cost, mostly explained by a higher indebtedness, which increased principally by the issuance of the $500 million bond in last November. In addition, we had an ARS 8.1 billion decrease in income from financial assets, given the lower yields achieved in the domestic financial investment and inflation exposure loss increased by ARS 2.1 billion. These negative effects were partially offset by the price import tax charge of ARS 5.9 billion recorded in the fourth quarter of '24. Following the elimination of this tax at the end of '24, no charge was incurred in the fourth quarter of '25. In the last quarter of '24, the tax applied rate was 7.5% for the imports of food and 25% for the imports of services. Finally, turning to the cash flow in Slide 9 -- on Slide 9. Our cash position in real terms increased by ARS 864 billion during the fourth quarter of '25 to ARS 1,808 billion, equivalent to approximately $1.25 billion at the official exchange rate. This steep increase in our cash position stems from the $500 million bond issued in last November. EBITDA generation in the fourth quarter reached nearly ARS 259 billion, which with 57% generated by the nonregulated business even after considering the full normalization of the Natural Gas Transportation segment. This performance highlights the increased relevance of nonregulated activities within the company's overall results. CapEx reached almost ARS 96 billion for the period and working capital rose by ARS 76 billion. We also paid ARS 5.7 billion in interest and ARS 61.6 billion in income taxes while obtaining ARS 150.3 billion in short-term loans. Lastly, real returns from financial investments declined by ARS 11.8 billion, mainly due to the exchange rate rising less than inflation during the fourth quarter. This concludes our presentation. I will now turn it over to Carlos who will open the floor for questions. Thank you. Carlos Almagro: [Operator Instructions] Well, the question is from Daniel Guardiola from BTG Pactual. He's asking about to give him or give them, the audience a more color about the NGL projects. If there is something that is delaying in order to reach the FID. Alejandro Basso: Daniel, how are you doing? Well, the project is moving on. We right now are negotiating with gas producers, the terms of the project, and we are expecting to have the FID before June, maybe in May. So we are very confident with the project moving ahead. Carlos Almagro: Second question for him is, we are facing competition from YPF to extend in shale capabilities. Alejandro Basso: Well, competition is always a risk. But nevertheless, we are working with YPF, another gas producers right now. So we -- as I said, we are expecting to move forward in the near future. Carlos Almagro: Well, another question, someone who doesn't introduce himself is, regarding how is evolving the tariff in the transportation business? Alejandro Basso: Well, tariff adjustment are moving smoothly. We have obtained all the tariff adjustment that we are due to which is the inflation calculation. The monthly inflation based on the wholesale price index and the CPI half-on-half. So everything is going okay. You may see some differences in the dollar revenues or dollar EBITDA from this business because the tariffs are adjusting with inflation. So when the depreciation of the peso is higher than inflation, we may have lower revenues in dollars and the other way around. Carlos Almagro: We have a question from George Gasztowtt from Latin Securities. The question is regarding the Surrey insurance divestment, if we expect to have it this quarter, or when we expect to have the -- when we will collect this investment? Alejandro Basso: George, in fact, we have already collected advance payments amounting to almost to $10 million. We are expecting right now a final audit from the liquidator of the insurance this month. Well, after that, I don't know exactly the timing, but we are expecting maybe by June or July. Nevertheless, I think that the magnitude of the recovery could be higher than the expenses that we have, expenses and CapEx that we had because we had some other items in the calculation. Carlos Almagro: A question from Mat as Cattaruzzi from Adcap. First question regarding the initial project that Alejandro answered. And his second question is regarding the recent weakness in international NGL prices. How do we see the outlook for liquid pricing into 2026? Does the current geopolitical shock positive affect this segment? Alejandro Basso: Okay. Well, it's true that international NGL prices are weak last month. Nevertheless, we are having a very good margin altogether in this business. So we -- our outlook for liquids prices right now is quite similar to the previous year. So we are not expecting any significant change. Nevertheless, well, current geopolitical conflicts that we are seeing in these days may affect positively this segment. Especially in the natural gasoline price, which is the more related to the Brent prices. The propane and butane maybe it's different. It depends on offer and supply and demand. Carlos Almagro: Other question from Daniel Guardiola regarding the -- about the potential dividend payment in 2026. Alejandro Basso: Well, it is my opinion, I am not seeing any potential dividend payments as we are moving forward with the project. Okay? With NGL's project. Obviously, it depends on our shareholders' decision. Carlos Almagro: Then we have a question from Agustin Pacheco from Banco Mariva. The first question, what is planned strong increase in cash? It was explained by Alejandro that it was regarding the bond that we issued in November that added cash for $500 million. This is the main reason. And his second question, what percentage of total CapEx was allocated to the expansion project? I think that he is talking about the GPM, the transportation expansion. Alejandro Basso: Well, total CapEx for that project is around $780 million. So the bulk of that amount is going to be invested this year, '26. The project has already started last November, and we should put in service, the 3 new compressor stations by May '27. Carlos Almagro: Now a question from Daniel Guardiola. I think that you answered that the current area adjustment fully preserve the real return. Are we then seeing a relatively lag eroding EBITDA in real terms. It's no. We have a question from Andres Cirnigliaro from Balanz. The first question is we are planning to participate in the dedicated pipeline for the Southern Energy LNG project? Alejandro Basso: No, no, we aren't. Carlos Almagro: His second question is how much incremental gas production do you estimate is necessary to supply our NGL project? Alejandro Basso: Not much. We already calculated the production of LNG based on current natural gas supplied plus the additional supply that is going to be injected in the GPM once our expansion is in place. We are very confident on gas supply for this project. We may face higher supply than expected. Carlos Almagro: We have another question from Daniel Guardiola about what is the situation of the progress in the construction of the Perito Moreno expansion, and what is the expected CapEx to be deployed in 2026 and 2027? Alejandro Basso: Okay. The progress is very, very okay as expected. And well, the CapEx deployment, I think it's around $100 million in '25, with the main advances to suppliers, then around more than $500 million this year, and the remainder in '27. Carlos Almagro: Mattia Castagnino is concerned about the -- yes, it was answered. And his second question is regarding the FID of NGL project was answered. Luisa Belem, her question is regarding CapEx outlook for 2026. It was answered. Alejandro Basso: Yes. Well, I told about more than $500 million in the expansion and another $100 million in our maintenance CapEx, so more than $600 million over this year. Carlos Almagro: What about the working capital and tax payment? Alejandro Basso: Yes, tax payment -- on the cash flow, we -- were a very high figure given that we don't have any advances the previous year. Moving forward, tax payments should be something lower than we see this year. Not in the quarter, the quarter, I think that -- well, also in the quarter high advances than we are expecting for the second half of '26. And working lines, I don't know. Working capital... Carlos Almagro: His last question, if I need pipeline, but we don't have any pipeline, just only the expansion of the Perito Moreno and Penal tranches. So there is no pipeline project right now. We have a question from Andres Cardona. How much we estimate the CapEx related with the NGL project. Alejandro Basso: Well, we -- currently, we have a more accurate estimation of this -- of the project, given that we have already run most of the bids for the construction and also for the equipment. So we're estimating this around $2.9 billion approximately. Carlos Almagro: We have some questions from Juan Ignacio Lopez were answered. Thank you, Juan. Another question from Armando Moretti. Well, question regarding dividend that was answered. We have some questions that were answered from Guido Vissacero from Allaria. Very answered. A question from Ignacio Irarr zaval regarding the Perito Moreno expansion. When are the biddings for the capacity happening? Alejandro Basso: Well, as I said in the call, we are expecting bidding for the repaid capacity or prepaid capacity, which 40% of total capacity for next 16th, March 16. And once the Security of Energy and ENARGAS decided the reallocation of the capacity of Gasoducto Perito Moreno, after that, we are going to run the open season for the remainder capacity, 60% of capacity. I think that it may occur before May, as a final due date for that. Carlos Almagro: The second question is... Alejandro Basso: And the second question is around the mix of the takers... Carlos Almagro: What the mix of taker, we are expecting and what regions? Alejandro Basso: For the expansion to Perito Moreno. Yes, mainly in power plants and industries, okay? As the government is reallocation the capacity to the 21 million cubic meters per day capacity of the GPM mainly to distribution companies, we are not expecting significant distribution companies bid for the capacity that we are currently in the open season. On the regions, well, a very significant part of the capacity could go to the TCS zone via the Mercedes-Cardales pipeline that was already built because the replacement of the liquids imports for the power plants may occur there mainly, and some part of the capacity, obviously going to be to the GBA area also. Carlos Almagro: We have a question from Santiago Herrera from Allaria. How much of the investment in the initial projects will be financed by project finance? Alejandro Basso: Well, maybe it's early to say, but right now, we are working with a group of banks, so maybe around $1 billion, something like that. This project is going to be divided in 2 SPVs, 1/3 in TGS Tratayen processing plant. There, we are expecting to finance that project with some bonds in the TCS balance sheet or in the new SPV balance sheet, also have some finance -- import finance from banks or the advances for imported equipment. And then as I said, 1 billion project finance in the second SPV, which is the SPV that is going to have the polyduct, the fractioning and the storage and dispatching facilities. Carlos Almagro: Another question from Jorgasto. He want to have some color on the decline from revenue as percentage of transportation contract this quarter. It was because the interruptible services revenue increased. This was not because the firm revenue is declining. So this is the reason. Well, we don't have more questions. Well, this concludes the question-and-answer section. Now we will turn to Alejandro for the final remarks. Alejandro Basso: Well, thank you all for participating in TGS's fourth quarter 2025 conference call. We look forward to speaking with you again when we release our 2026 first quarter results. If you have any questions in the meantime, please do not hesitate to contact our Investor Relations department. Have a good day.
Operator: Thank you for standing by, and welcome to the WiseTech Global Limited First Half 2026 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Zubin Appoo, CEO. Please go ahead. Zubin Appoo: Good morning, everyone, and thank you for joining us at our first half FY '26 results briefing. This half, we delivered in line with our expectations. Reported revenue growth was 76% and reported EBITDA margin was 38%. There are 4 key points to focus on today. First, we executed with discipline and delivered results in line with our expectations, and we are confident in our outlook. Second, we continue on our deliberate AI transformation journey. And today, we are announcing a further significant step towards that goal. We have been building toward this for some time. And as we lean in further, AI is strengthening our advantage, enabling significantly more automation and value for our customers, embedding our products more deeply into their daily operations and unlocking levels of efficiency gains across WiseTech that were previously out of reach. Third, our new commercial model is now live with CargoWise Value Packs rolled out to approximately 95% of CargoWise customers. The CargoWise Value Packs align pricing directly to value delivered by removing seat or user fees and charging only on a transactional basis. As AI reshapes labor dynamics across Global Logistics, our new commercial model ensures labor efficiencies and headcount do not negatively impact our revenue. For customers on long-term commitment agreements, the expanded functionality available through the CargoWise Value Packs, particularly embedded AI driving measurable productivity and risk reduction creates a strong incentive to transition ahead of commitment agreement expiry. Importantly, this cohort represents approximately 30% of our CargoWise revenue. So as they move on to CargoWise Value Packs, this will drive increased revenue growth. Container transport optimization is in the process of implementation with our launch partner, ACFS Port Logistics. And fourth, e2open integration is well progressed. We've taken clear steps to align products, teams and operating models with the WiseTech way, and we have achieved our Horizon 1 FY '27 cost synergy target of $50 million annualized run rate savings nearly 1.5 years earlier than planned. This half has been about disciplined delivery, positioning the business for the next phase of growth and doing the work that matters most, executing on our commercial model, integration of e2open and AI transformations while maintaining a focus on long-term customer and shareholder value. Before proceeding further, I want to address what AI means for WiseTech. AI has fundamentally reshaped how software is built and how businesses operate. We are approaching this shift with discipline, intent and a clear focus on long-term value creation while maintaining and advancing our meticulous approach to cybersecurity. Throughout our more than 30-year history, WiseTech has always been a disruptor. We lead and make changes even when challenging, knowing the benefits will lead to a stronger and better WiseTech. We have been building toward this moment for some time through the adoption of AI internally and for our customers, and we are now taking the next decisive steps to becoming a truly AI-focused organization. From late 2024 to December 2025, we conceived, iterated and launched the new commercial model, moving away from seat-based pricing toward value and transactions, a fundamental redesign of how we monetize our products in an AI-enabled world. From early 2025, we increased investment in AI capabilities for our teams and announced our AI workflow and AI management engines for customer efficiency whilst beginning to reshape our workforce and operating model to become AI-led. Today, with the step change in AI capability, particularly in software development, we are entering the next phase of that strategy. This is the continuation and acceleration of a plan that we are executing with intent, conviction and pace. Software development has experienced its most significant shift in decades. Large language models have fundamentally changed how code is written, tested and maintained. I am prepared to say this clearly, the era of manually writing code as the core act of engineering is over. What has not changed is the importance of deep domain expertise, knowing what to build, which problems matter and how global trade and logistics operate. AI amplifies the productivity of our expertise in logistics and trade, the rich data sets that WiseTech holds and the network advantage that we have built over 30 years. And it allows us to move faster from ideas to real customer value through the efficiencies it brings in software development and product creation. Since my appointment as CEO, a key area of focus has been identifying how we leverage AI to drive meaningful productivity gains and structural efficiencies across the business. Over the past 6 months, I have worked closely with our senior product and development leaders to embed AI directly into our workflows as a core operating capability. As a result, we see clear evidence that we can deliver greater output in shorter time frames with smaller AI-enabled teams. Teams are already demonstrating what is possible when this capability is embedded deeply into design, build, testing and deployment workflows. AI is executing code reviews, generating automated test cases, identifying edge cases missed by humans, resolving defects end-to-end using agentic workflows and accelerating the pace at which we can deliver value to customers. We have seen the productivity improvements firsthand in our build of our AI workflow engine and other product development work in CargoWise. We have made more than 500 role reductions during FY '26 as part of our efficiency program to align to our high-performance culture and drive AI use across the business. This phase of our efficiency program delivered net cost savings ahead of plan and ahead of schedule. We will continue to make changes across our business as we continue to redesign work in an AI operating model. We are now systematically mapping our software development workflows around these AI-enabled ways of working. The results achieved give us strong confidence that AI will materially reshape the economics of software development inside WiseTech over time. Very recent developments, particularly Anthropic's Claude OPUS 4.6 and OpenAI's GPT 5.3 codecs mean that we can now execute the next phase of this program with precision. Starting in the second half of FY '26 and continuing into FY '27, we expect to reduce teams initially product and development and customer service across the company, including e2open, by up to 50% in terms of headcount. For our product and development teams, these reductions will focus on roles where we have seen AI dramatically improve throughput. Those with deep domain expertise and the ability to deconstruct and solve complex problems remain critical to our success. And as we further enhance our ACE AI agent, an AI-powered assistant across all of our product suites, this will continue to drive increased efficiency as customers gain access to increased self-service. As part of our long-term strategic focus on higher-margin recurring revenue and our commitment to building a higher performance culture, this program will likely result in a reduction of approximately 2,000 roles in FY '26 and into FY '27. As AI capability continues to advance, we expect further efficiency gains over time. We recognize this will be difficult for our people. We're communicating these planned changes to our team following announcement to the market in line with our disclosure obligations. This decision was not taken lightly, but it is necessary to ensure we remain disciplined, nimble, competitive and future-ready. A transformation of this scale will fundamentally reshape our cost base whilst allowing for an uplift in productivity. While the impact is not expected to be material to FY '26 outcomes with execution costs likely offsetting any savings, the financial effects of the program will reflect a combination of cost savings, restructuring costs and capitalized development. Going forward, we expect a leaner, more efficient AI-led organization with a structurally lower cost base and improved scalability. Now let me directly address the idea that AI can replace the solutions we deliver to the industry, including CargoWise. As AI becomes more powerful, the value of trusted, deeply embedded systems of record operating inside regulated and rule-based workflows increases. That is where WiseTech is positioned. Our moat extends far beyond our source code. It is our global many-to-many network we have built across the global trade and logistics ecosystem, deeply interconnected participants operating in live workflows through our vertical SaaS platforms. Today, our software supports approximately 80% of manufactured trade flows through our custom solutions, over 90 million ocean containers operates across 193 countries, connects more than 400 airlines and over 150 ocean carriers alongside supply chain participants globally. We have 735 partners and support over 42,000 CargoWise certified professionals worldwide, but scale alone is not our moat. The data flowing through our ecosystem is permissioned, contractual and governed, embedded inside operational systems. Our software is not an overlay. It is the execution layer for government-regulated customs, compliance, transport and documentation across a magnitude of jurisdictions. Our embedded legal business rules, risk management tools that handle financial and trade complexity and the accumulated domain expertise cannot be replicated by prompting an AI model. As adoption accelerates, the value of our ecosystem, domain expertise, curated and trusted data and government regulatory alignment becomes even more important. That dynamic derisks the operating environment for our customers, reinforces our competitive position and cements our strong position. For SaaS businesses that monetize based on seats or users, AI will disrupt them. WiseTech made the early and deliberate decision to transition away from seat fees to focus on monetizing transactions. With approximately 95% of CargoWise customers now on CargoWise Value Packs, our pricing is aligned to value delivered through automation, throughput and scale. This positions us well because our revenue is not diluted by customers becoming more productive, including through the AI capabilities we deliver. For our customers, AI is already delivering measurable outcomes inside CargoWise today. It's ingesting documents rapidly, performing complex customs classification with higher accuracy and speed, assessing trade compliance risk in real time and automating multistep workflows that previously required significant manual effort. Over time, these capabilities will materially reduce labor, improve service quality and strengthen compliance for customers. Our AI workflow and AI management engines are focused on turning that potential into practical outcomes, faster processing, fewer errors, better compliance and lower operational cost. Businesses running on CargoWise will operate at productivity levels multiple times higher than those relying on fragmented legacy systems or in-house builds. We continue to invest deeply in innovation and development with more than $175 million invested in R&D in first half '26, accelerating the development and deployment of AI capabilities across our platforms. To summarize, we expect our AI transformation journey to deliver a leaner, more efficient AI-led organization, supporting a structurally lower cost base and improved scalability, a stronger, more deeply embedded platform as AI-driven automation, labor efficiency and risk reduction becomes even more paramount to customers, the ability to leverage our transaction-based commercial model deliberately aligned to value rather than number of users and significantly higher productivity and efficiency in software development, turning investment into customer value faster. This marks one of the most important inflection points in our 30-plus year history. We are leading deliberately and executing with discipline, strengthening our moat, enhancing customer outcomes, reshaping our workforce and positioning WiseTech for sustained long-term growth. I'll now cover our financial highlights. For the first half, revenue was in line with our expectations. We delivered total revenue of $672 million, up 76% on a reported basis on first half '25. Organically, total revenue grew by 7%. CargoWise revenue grew by 12% to $372.4 million, 9% organically with recurring revenue at 99%. EBITDA was up 31% on first half '25 to $252.1 million with a corresponding EBITDA margin of 38%. Our organic EBITDA margin rate was consistent at 51%. Underlying NPAT of $114.5 million was up 2% and free cash flow of $153.6 million was up 24% on first half '25. The Board determined an interim dividend of $0.068 per share, up 1% on first half '25, representing a payout ratio of 20% of underlying NPAT. The takeaway here is discipline. We're delivering growth, margins and integration as planned. As we indicated at our FY '25 results, we expect second half performance to accelerate as our FY '26 strategic initiatives move from launch into execution, subject to timing and take-up of our revenue initiatives. Caroline will now provide you with a detailed overview of our first half '26 financial performance before I discuss our strategic highlights. Caroline Pham: Thank you, Zubin, and good morning, everyone. It's great to be speaking with you today. I'll start with an overview of our financial performance, which now includes the acquisition of e2open. Following the completion of the acquisition on the 4th of August 2025, there are now 2 reportable operating segments, reflecting the way we review financial and operational information to make strategic decisions. You can find further detail on our segments in Note 12 of the financial statements and in the investor presentation today. Overall for the Group, revenue was in line with our expectations. As Zubin mentioned, we grew total revenue by 76%, driven by 5 months of contribution from e2open and continued growth in the CargoWise business. E2open contributed $249.4 million to total revenue in this half. The integration is progressing well with product team alignment continuing and the sales and marketing teams integrated. Pleasingly, we achieved in January our cost synergy target of $50 million in annualized savings nearly 1.5 years earlier than planned. Total CargoWise revenue was up 12%. This included organic CargoWise revenue growth of 9%, $6.6 million from M&A in 1H '26 and a $3.7 million FX tailwind with incremental revenue from the CargoWise Value Packs launched on 1 December. Gross profit was up 61% on 1H '25 and 11% excluding e2open. Gross profit margin was 79%, down 7 percentage points, largely driven by e2open. E2open has a higher proportion of professional services revenue with higher headcount and cost of revenues. This structurally higher cost base means e2open's gross margin is lower and has a dilutive impact on our group margin when consolidated. Excluding e2open, gross profit margins were consistent with 1H '25 at 87%. Over time, as we focus on our long-term strategy of high-margin recurring revenue and have the professional services work delivered by trusted partners as well as capture continued synergies and efficiencies from AI for customer support across the group, this should lift overall gross profit margins. Reported EBITDA was up 31% to $252.1 million with the corresponding EBITDA margin of 38%, down 13 percentage points on the previous period. This reflects the e2open consolidation, restructuring and M&A costs in line with our expectations. Excluding these items and FX, organic EBITDA was up 7% and EBITDA margin was 51%, in line with 1H '25. Whilst revenue growth reflects the timing of the CargoWise Value Packs launch, which occurred late in the half as planned, margins were supported by strong cost execution with the first phase of the restructuring program announced in the FY '25 results now complete with both the FY '27 target of approximately $18 million in annual run rate EBITDA savings and the FY '26 target of approximately $9 million net cost out achieved in 1H '26 ahead of plan. E2open delivered EBITDA margins of 22%. However, this includes $30.6 million of restructuring and break costs. Excluding these items results in EBITDA margin of 34%, a 6 percentage point margin expansion versus FY '25 pro forma provided in the FY '25 results, a significant improvement in margins in the first 5 months post completion from the acceleration of cost synergy initiatives. Completing the program ahead of plan brings forward both the cost savings and execution costs, resulting in a broadly neutral EBITDA impact for the first year as initially outlined. Across the group, the achievement of cost and net savings targets ahead of plan demonstrates continued cost discipline and program execution. EBIT was in line with the prior period with earnings increase offset by a $59.9 million increase in depreciation and amortization, predominantly from e2open acquired amortization as expected with $41 million. Our net financing costs increased to $68.3 million during the half, reflecting increased interest expense from the debt facility to fund the e2open acquisition. Importantly, we've taken a disciplined approach to manage the exposure with interest rate swaps to manage volatility and provide greater certainty over future interest expense. Underlying net profit after tax of $114.5 million was up 2% on 1H '25. You can see the reconciliation to statutory NPAT in the appendix. Underlying EPS was up 2% to $0.343 per share. On this slide, you can see the split between recurring and nonrecurring revenues and between the CargoWise, non-CargoWise and e2open revenues. Recurring revenue grew by 70% or $260.2 million, reflecting $231.6 million from FY '25 M&A and e2open but excludes $4.6 million in FX tailwinds. The growth in revenue was driven by large global freight forwarder rollouts, including increased usage by new and existing customers, price increases to offset impacts of inflation and to generate returns on product investment and our new commercial model, which was launched in December 2025. CargoWise revenue was up $30.4 million or 9% organically. $20.3 million of this was from existing CargoWise customers and $10.1 million from new customers. This excludes both $6.6 million from FY '25 M&A and a $3.7 million FX tailwind. Non-CargoWise revenue included $3.5 million from FY '25 M&A and organically continued to decline as expected related to earlier acquisitions. Here, you can see overall operating expenses for 1H '26, now including e2open. As expected, the inclusion of e2open changes the shape of our cost base and our focus moving forward is managing this throughout the integration and driving efficiencies over time, accelerated and enhanced by the restructuring plans announced today, particularly in product design and development. As a percentage of revenue, expenses, excluding e2open, restructuring and e2open M&A costs were flat versus 1H '25. Product design and development expenses increased by $27.8 million on 1H '25, driven by e2open. These expenses represented 13% of revenue in 1H '26, down 3 percentage points. This reflects the impact of e2open's approach to R&D, which has a lower proportion of product design and development headcount and a lower R&D capitalization rate compared to the remaining WiseTech business. Excluding e2open, product design and development expenses were 15% of revenue, reflecting our continued investment in CargoWise innovation and development, partially offset by savings delivered through the phased restructuring program announced in our FY '25 results. Sales and marketing expenses increased by $25.5 million on 1H '25 or 1 percentage point of total revenue, reflecting the consolidation of e2open and their sales-led go-to-market approach. Our strategy is to progressively adopt WiseTech's proven product and content-led model across the combined group. Over time, this should reduce sales and marketing expenses while enhancing go-to-market effectiveness to drive deeper customer penetration. Importantly, the first step is now complete with an integrated sales and marketing model under single leadership across the group. General and administration expenses as a percentage of total revenue was 21%, up 7 percentage points versus 1H '25, reflecting 4 percentage points from restructuring costs and e2open M&A costs and 1 percentage point from the consolidation of e2open. Excluding these costs, general and administration expenses was up 2 percentage points as a percentage of revenue on 1H '25, which reflects operational investments to support future growth, M&A as well as ongoing legal and advisory, including the shareholder class action defense and other legal and Board advisory matters. Turning to the next slide. You can see our continued R&D investment in product innovation, a key differentiator and value driver for the group. Our overall investment increased by $38.3 million or 28% on 1H '25, reflecting the e2open acquisition and continued investment in CargoWise platform development. In the half, we reinvested 26% of revenue into R&D, down 10 percentage points on 1H '25 and 48% of R&D investment was capitalized, down 6 points on 1H '25. This reflects the impact of e2open's business model, which places more emphasis on sales, resulting in lower product investment and capitalization rates compared to the remaining WiseTech business. This is expected to evolve as e2open transitions towards a more product-led model and as the wider group progresses with the restructuring and future benefits of AI. Excluding e2open, 33% of revenue was invested in R&D. Capitalized development was up 54%, in line with 1H '25. There has been a reduction in the balance of development costs during the period. The WIP balance decreased by 18% from $70.3 million at December 2024 to $57.9 million at December 2025. Over the past few years, WIP continued to build as we invested in large multiyear development projects. In 1H '26, a number of those products were commercialized and as a result, costs moved out of WIP. This outcome reflects the normal progression of R&D investment with prior period spend converting from WIP into commercial products, while ongoing development investment continues. In 1H '26, we delivered 1,060 new product enhancements on the CargoWise application suite, bringing total enhancements delivered to more than 6,300 over the last 5 years from a total investment of more than $1 billion. Particularly with the restructuring announcement today, we will continue to monitor future benefits of AI to capitalize development and headcount. Moving to the balance sheet. You'll see the significant liquidity available, providing a strong platform for future growth. And as at 31 December 2025, we had a strong cash position of $358.4 million. Following the acquisition of e2open, there have been significant changes to our balance sheet. Receivables increased to $205.4 million, reflecting the contribution from e2open and revenue growth. Intangible assets grew by $2.3 billion, mostly from e2open and investment in capitalized development, partially offset by amortization. As detailed when we announced the e2open acquisition, we replaced our previous unsecured debt facility with a new unsecured $3 billion syndicated facility with $2.4 billion drawn to complete the acquisition, refinance existing debt and provide additional working capital. The $3 billion debt facility was underwritten by 9 leading domestic and international banks with subsequent market syndications successfully completed in August 2025 to a strong group of more than 15 additional syndicate banks. Net leverage at 31 December 2025 was 3.2x, and we expect to deleverage to approximately 3x by the end of FY '26 and approximately 2.5x by the end of FY '27, progressing toward our long-term target of less than 2x by August 2028. The $85.2 million increase in share capital is mainly due to new shares issued to the employee share trust to fund our employee equity program. Importantly, our employee equity program is a key component of our remuneration framework to support staff retention, attract high-quality talent and encourage long-term value creation across our workforce. As at 31 December 2025, we had over 90% of our employees holding shares or share rights, excluding e2open or 48% of all employees. As with our previous integrations where employee benefits alignment is an important step, e2open will over time be aligned with our employee equity program, which we expect to increase participation across the group. Lastly, turning to our 1H '26 cash flow performance. Operating cash flows increased by 14% to $231.7 million, demonstrating our highly cash-generative operating model. Our operating cash flow conversion rate of 92% is down 13 percentage points on 1H '25 as a result of e2open and e2open M&A costs. The e2open acquisition also resulted in a significant increase in working capital outflows related to M&A costs and trade receivables. Free cash flow was up 24% to $153.6 million and free cash flow conversion was down 4 percentage points on 1H '25 to 61%. We continue to reinvest more of our cash into long-term growth with $78.1 million primarily invested in product development and continuing to build out our data center capacity. Taking the sum of our total revenue growth and free cash flow margins, we delivered a Rule of 40 of 99% in 1H '26, up 49 percentage points driven by the first-time consolidation of e2open. As we continue to execute on our revenue initiatives, including the CargoWise Value Packs and CTO, alongside e2open synergies in line with our integration horizons and as the benefits of the restructuring actions announced today flow through, we expect cash generation to improve. So to sum up, we delivered a first half performance with revenue and EBITDA in line with our expectations, reflecting, in particular, the launch of the CargoWise Value Packs on 1 December as well as the e2open cost synergies and first phase of the restructuring program with targets achieved ahead of plan. We also exited the half with a strong liquidity position, providing flexibility to support our longer-term growth objectives and the ongoing needs of the business. I'll now hand back to Zubin. Zubin Appoo: Thanks, Caroline. This slide captures our vision and more importantly, it reflects the business we're building. For decades, WiseTech has been the proven operating system for logistics execution, freight forwarding, customs and compliance, warehousing and cross-border movement. That remains our foundation, and it's a position earned through 30 years of sustained investment, innovation, growth and deep industry involvement. What has evolved is the scope of the problems the logistics and trade industries need solved. Logistics does not operate in isolation. Decisions are made well before goods move and consequences extend long after delivery. With the expansion of our ecosystem and particularly through e2open, we're now connecting execution, trade and planning into a single integrated environment across a far greater portion of the global trade life cycle. This shift is already visible in 3 ways. First, the types of customers we serve have broadened. Alongside logistics service providers, we now work with large manufacturers, importers, exporters, retailers, brand owners, carriers and increasingly, government agencies, organizations operating complex global multi-tier supply chains. Many of the world's most well-known brands are powered by WiseTech. Second, the problems we're solving have expanded. In addition to execution, we're addressing supply and demand planning, trade management and coordination across large networks. These are decisions that sit upstream and downstream of traditional logistics, but they directly affect cost, risk and service performance. And third, the opportunity has expanded because complexity has expanded. Global trade and logistics represent over $35 trillion of economic activity. This is still a highly fragmented, largely manual industry, and the inefficiencies are real and measurable, yet complexity is increasing daily. CargoWise and our wider product suite solve that complexity. This is not discretionary software we're talking about. Our platforms sit directly in the flow of goods, money and compliance. When systems fail, the impact is immediate and tangible, delays, penalties, inventory accumulation, working capital strain and a real impact on consumers and the economy. What we're building is different. It is a connected multisided marketplace that links these participants together through shared data, shared workflows and shared intelligence, not a collection of point system or tools, but a system designed to work end-to-end across global trade and logistics. We're able to do this because we already have the scale to invest for the long term, deep domain knowledge, data built over decades and a proven ability to integrate complex businesses and turn them into scalable platforms. This is the strategy. This is the execution, and this is why we see a very large and long-term opportunity ahead of us. This slide shows you how our 3P strategy, Product; Penetration; and Profitability, is translating into delivery and the progress we have made against our product and innovation priorities in the first half. I've said that the move to CargoWise Value Packs was a deliberate and necessary decision for WiseTech. The objective was clear: align pricing with value delivered through throughput, automation and outcomes so that WiseTech and our customers benefit as efficiency increases. That decision was and is critical to sustain long-term recurring revenue growth in an AI-driven world. While change of this nature is always disruptive, what we see across the technology industry is reinforcing why this change was necessary. Moving early has given us room to stabilize, refine and put the right foundations in place for long-term growth. We have led necessary industry-defining shifts before, and we are leading again. Monetizing seats when much of the value we deliver comes from driving efficiency created a misalignment in incentives. Encouragingly, we're seeing growing engagement with new AI capabilities across document ingestion, our AI agent, compliance-wise and classification assistant with usage up to 4x higher since launch. Pleasingly, since the start of this calendar year, we've had 2 new large global freight forwarder rollouts sign up on our CargoWise Value Packs, Blue Water Shipping and XPD Global. Looking ahead, as larger customer commitment contracts transition and usage deepens, we expect momentum to build progressively and further growth benefits for CargoWise. Turning to container transport optimization. CTO represents a significant long-term opportunity for WiseTech because container transport is a problem defined by scale, complexity and a deep understanding of network effects, not by simple automation or applying AI in isolation. The product is in the process of implementation with our launch partner, ACFS Port Logistics, one of Australia's largest landside logistics providers. Our focus has been on building a solution that works reliably at scale with a focus on long-term outcomes. We expect capability and value to build progressively with Australian product and model maturation in FY '27 and beyond. With e2open in the first half, we focused on organizational integration, efficiency gains and aligning operating models to support implementation of the WiseTech Way. Internally, for our teams, this means shifting from a sales-led business to a product-led business, embedding our software development practices, focusing on product standardization rather than customizations and integrating our sales and marketing teams and models while driving a high-performance culture. As I mentioned, in January, we successfully achieved our e2open cost synergy target of $50 million annualized run rate savings, nearly 1.5 years earlier than planned. We're also expanding the value INTTRA brings across our customer base and the broader industry. INTTRA operates the largest multi-carrier network connecting shippers and ocean liners, enabling ocean scheduling, booking, visibility, compliance and bills of lading at a global scale. As we integrate INTTRA more deeply into the CargoWise and global trade ecosystem, we see meaningful opportunity to expand the value of that network. When combined with our electronic bill of lading technology through an earlier acquisition, Bolero, we are positioned to deliver greater automation and connectivity across ocean freight, documentation and trade finance workflows. The efficiency gains across these interconnected processes are significant. In summary, we're executing well against our key priorities, progressing complex initiatives at pace and positioning the business for increasing momentum in the second half, particularly across CargoWise Value Packs and AI. Now on to penetration. Momentum continues with 4 new large global freight forwarder rollouts of CargoWise signed in FY '26 to date, with Sankyu and CJ Logistics further extending our reach into the Asian market as well as Blue Water Shipping and XPD Global, both of which have signed up since the start of 2026 on our new commercial model, the CargoWise Value Packs. We've also added an additional organic global rollout of Neptune Pacific, meaning we now have 59 large global freight forwarders with 46 in production and 13 in contracted rollouts. 11 of these 59 are in the top 25 global freight forwarders. On our global trade and supply chain penetration led by e2open, there continues to be strong penetration across some of the largest brands in the world with an extensive customer base, including Dell Technologies, NVIDIA, Ford Motor Company, L'Oreal and Schneider Electric. Both Caroline and I have already covered the points on this profitability slide, so I won't go into the detail. What it does highlight is our track record of strong financial discipline and operating leverage. And now to our guidance. Our guidance is based on the assumptions we've set out here and in the appendix of our investor presentation. We are reaffirming our guidance for FY '26, excluding the impacts of restructuring plans announced today. While the impact of this phased restructure program is not expected to be material to FY '26 outcomes with execution costs offsetting any savings in FY '26. The financial effects of the program will reflect a combination of cost savings, restructuring costs and capitalized development. Going forward, we expect a leaner, more efficient AI-led organization with a structurally lower cost base and improved scalability. In addition, based on CargoWise first half '26 revenue, we now expect the CargoWise revenue in first half, second half SKU for FY '26 to be in line with FY '25. E2open revenue is included from the 4th of August 2025. And as previously stated, we expect a reduction in services revenue, reflecting our long-term strategic focus on recurring revenue and minor customer attrition in subscription revenue for the same reason. That brings us back to the 4 key points for today. First, our first half '26 results are in line with our expectations, and we continue to expect stronger growth in the second half, subject to timing and take-up of revenue initiatives. Second, we are undergoing a deep AI transformation. We continue to embed AI across our software for our customers and our own operations. This will accelerate productivity, automation and decision-making across the industry's complex regulated workflows and across our own operations as seen by the substantial phased efficiency program we are continuing today. AI is arguably the most powerful accelerant we have seen for our competitive moat and for future innovation, and we are well prepared to lead it. Third, we continue to execute relentlessly on product and innovation. CargoWise Next and CargoWise Value Packs are now largely rolled out, establishing a commercial model aligned with automation, AI and the future operating realities of the industries we serve. Container transport optimization is in the process of implementation, building a foundation for long-term growth. And fourth, the integration of e2open is progressing well. Products, teams and operating models are aligning. Cost synergies have been achieved nearly 1.5 years ahead of plan, and the business is shifting toward a product-led scalable operation. The most important message today is that we continue on our deliberate path to being an AI-led organization. This is about delivering durable and responsible customer and shareholder outcomes. As AI reshapes how software is built and operated, scale, domain expertise, rich embedded data, sustained investment and long-term thinking matter more than ever. That dynamic reinforces the strength of WiseTech's platforms and the value we deliver to customers who choose to focus on their core business rather than replicating complex technology internally. The gap between customers who run on our platforms and those who don't will widen significantly in productivity, cost efficiency and competitive advantage. WiseTech operates at the center of global trade and logistics, industries that are large, complex and underdigitized, where trusted integrated systems of record are essential for efficiency, resilience and compliance. We have the scale, technology, data, network and execution discipline to continue investing deeply and converting that investment into long-term value. For customers, that means higher productivity, better risk management and greater automation. For shareholders, it means a business with strong recurring revenues, significantly improving efficiency and a strategy designed to deliver sustainable growth for many decades to come in a market that continues to expand. That is the future we are building. AI at our core, high performance, a deeper and wider moat, increased customer value, and we will execute with absolute focus, uncompromising discipline and relentless pace. Now over to Richard for his perspective. Richard White: Thanks, Zubin, and good morning, everyone. From the founding of WiseTech to this very day, my focus has always been on product and commercial model innovation. My driving ambition has been to revolutionize logistics. And now with e2open, we have expanded that ambition to also revolutionize global trade. Global trade and logistics was and still is full of fragmentation, disconnected point systems, manual workloads and duplicated or disconnected data entry across many point systems with high manual error rates. As with many habitual problems, the industry thinks that's just the way it is. But we continue to challenge the status quo. We act with purpose to redesign the systems itself and the way the world does logistics. Our innovations often surprise and even shock customers. However, we ultimately delight customers once they understand the value we create. So that is what I'm going to talk to. My continued focus on accelerating product innovation, the AI journey we are on and our drive to the future, the commercial model and its AI-driven inception and how we leverage the enormous moat that we have built and how we drive AI into every facet of our product, our business and our customers' business. These days, my role and focus as Chief Innovation Officer, supported by our CEO, Zubin, and a highly motivated senior leadership team allows me to spend the majority of my time on product design, product expansion and the commercial models of our products. This has always been my strength, and I now have far greater capacity and capability to drive and accelerate these outcomes. The WiseTech Gen AI journey slide represents a major and continued focus of mine and extends from late 2022 when Gen AI finally broke through, led by GPT 3.5. The slide speaks for itself, and you can see how much innovation we have put in over this time line, perhaps too quietly, not wishing to brag about AI as many have done. We did the work, and we have the results clearly in focus. In understanding the coming revolution with AI, we also looked at the commercial model. And in November 2024, we started to plan to rebuild the commercial model to solve a number of problems, the most important of which was the fact that agentic AI would put SaaS seat-based licenses at substantial risk and negatively impact revenue. The planning for a deep commercial model change is complex, and we worked on this throughout 2025 and implemented it starting in early December 2025. There is more work to do with larger customers that are on commitment agreements, but this is already underway, and there is a major upside for those customers and for WiseTech. So we remain focused on that CargoWise Next agentic AI-led transition. The new commercial model and the CargoWise Value Packs are designed to leverage our sustainable competitive advantage and to assist our core customers to leverage CargoWise Next through driving cost, complexity and risk out of their businesses. We are already seeing a stronger value proposition, a simplified sales process and easier wins from new customers because of the new commercial model and the CargoWise Value Packs. Over time, we believe this will expand into something incredibly powerful and should drive higher rates of adoption and sales success. We are very confident about how deep and wide our moat is. However, many use the word moat far too often and without proper understanding of its real meaning. If you look at the sustainable competitive advantage slide, you will find a more in-depth understanding of how CargoWise Next and the agentic AI workflow engine and AI management engine will drive that advantage even further. None of this is slowing us down. Although in any major transition, there is a period of time to implement that change and then accelerate into the advantages that change brings. Finally, we have a little surprise. We're adding a new agentic AI credo to our vision, mission and existing credo. For those well versed in AI, you will know that you converse in a very direct and conversational way. The extraordinary thing about AI is it exhibits many qualities we normally understand as human that make it appear and act as an independent agent. With that in mind and using a number of conversations with several Gen AI agents, we have created our own agentic AI credo to give our AI agents a voice and to lay to understand what their mission is and how they will create value for WiseTech and our customers. On this slide, you will see our vision, mission and credo and now the credo of our agentic AI agents. The future is bright, and we are strengthened by the new powers we have acquired with agentic AI and other AI tools across the business in our product and for our customers. I will now pass back to Zubin. Operator: [Operator Instructions] The first question comes from Eric Choi from Barrenjoey. Eric Choi: Sorry, could I ask a boring guidance question, probably for Caroline. Just wondering if there's an element of conservatism in your CargoWise guidance. If we just take your SKU comments at face value, it implies revenues only grow $35 million sequentially and actually less excluding FX. So that's sort of just 8% half-on-half revenue growth, which is hard to reconcile given you've moved the majority of your customers across by revenue to CVP and most of the industry feedback is -- ARPUs are lifting double digit on the CVP. So is that just conservatism, Caroline? Or what are we seeing? Caroline Pham: Eric, thanks for your question. So no, there's not any conservatism. I think there's a couple of things here. So the first one is what we were indicating is that the 1H 2H SKU is more aligned to FY '25, not necessarily saying that it's exactly the same. And one of the main reasons for this is that, as you might know, 1H was actually slightly ahead of expectations. And so it makes sense that the 1H 2H SKU is a bit more balanced. The key thing here, though, is that we are still reaffirming the FY '26 guidance and the CargoWise revenue growth of 14% to 21%. The extent of the second half SKU is, as we've said before, it's really dependent on the timing and take-up of our initiatives, particularly, as you noted, the opportunity to convert our larger customers currently on commitment or [indiscernible] agreements to the new commercial model. Eric Choi: Awesome. Can I ask a quick follow-up, Caroline? Super quick. Just on -- you previously said you'll get back to 50% margins. And I'm just wondering if that's still the case with the 2,000 headcount reduction initially and then whatever else you announced across the rest of the business. Because I guess if those margin targets don't change, do you think we should -- I guess, we just get there a different way, maybe slower top line assumptions versus what we thought previously, but better cost out? Caroline Pham: Look, so the answer is absolutely. Our plan is to get back to margins above 50%. And in fact, even before the restructuring program that was announced today, that was always our goal. And if you look at our history, we've had at least 2 times where due to the consolidation impact of acquisitions, the EBITDA margin has had a dilutive impact, but we've been successful in bringing those back up to 50% each time. And so this is no different. In terms of the path back to 50%, I would say that the restructuring program is just an additional aspect as to how we will get there, but it's not the necessary component for us to achieve it. Richard White: I'll just add one more thing, it's Richard. The -- during the transition to the CVP, to the new commercial model, it's quite hard to do any substantial sales or signed contracts. Since that has happened, we've had a number of signings quite rapidly, and we have strong reason to believe that sales are far easier now under the new model, particularly for new customers. And I think that's going to drive long-term revenues in a very effective way. Sales has got a big impact on the long-term capability that we're delivering with CVP. Operator: The next question comes from Bob Chen with JPMorgan. Bob Chen: Just a question for me around engagement with your larger commitment customers. I mean we've got one of your really big customers out there publicly talking about transitioning away from CargoWise onto their own software. Like how do you sort of deal with that sort of scenario? Do you sort of try and engage with them to limit that sort of churn? And then also, I guess, given you're sort of taking a big cost out step in your product development, part of the business as well, does that sort of imply the barriers to developing the CargoWise One software is lower now and you're more reliant on the network effects across the business? Zubin Appoo: Thanks, Bob. Look, let me go through the first part of your question first. So I'm not going to comment on any individual customers, but let's just talk about all of our customers here. We spend a lot of time with our customers, and we have strong relationships with them. The really important point to call out here is the CargoWise Value Packs and why it is such an essential ingredient here. You referenced CargoWise One, but what we're talking about here really is CargoWise Next and the CargoWise Value Packs, which are now rolled out to 95% of our customers. And remember that the 5% of customers that are not yet on that represent these very large customers that are on long-term commitment agreements. And they do not get access to the benefits that we are releasing through the Value Packs. Most importantly, those would be the AI automation and efficiency benefits. If you think about what I said during the presentation, customers that are on CargoWise Next and are using the Value Pack, particularly the 4 agentic AI capabilities and our future AI workflow engine capabilities, they will be far more productive and far more efficient than those that use other systems or spend their time building in-house systems. We've spent 30 years building this product. We've invested close to USD 1 billion over the last 5 years in R&D. And what we are building is something we are very proud of, and we are convinced it totally reshapes labor in the industry. So that's to the first part. Now to the second part of your question as to what this does to productivity and CargoWise Next build, it's important to say that this is a program that we are not just doing today. This is a journey we have been on now for quite some time. Since last year, we've invested heavily into AI tooling, AI training, showcasing for our team. And most importantly, we have a number of examples, deep examples within the team where we're seeing productivity accelerate. We're seeing language translation of the product done in much faster times. We're seeing the build of our global custom system now accelerate because of large language model coding. We're able to modernize and maintain our code bases and patch our code bases much faster. We're even seeing examples where we can solve defects and system defects system bugs nearly autonomously in some cases, using a swarm of agents. We're building tests. We're doing code reviews. We're identifying edge cases. We're obviously resolving customer service incidents now using our ACE AI agent that's been part of our product since the CVP launch. And then over the last few months, when we've seen how rapidly tools like Claude OPUS 4.5 and even OpenAI's GPT 5.3 codecs have developed, we are now ready to take that next step. In terms of what this does to CargoWise, in the short term, this probably doesn't have much impact on output, but it means we can get that same level of output with far less input. In the long term, however, this is a real breakthrough for us. This means that we can achieve far greater levels of output for far greater levels of input across product development, customer service and potentially other parts of the business as well. Operator: The next question comes from Lucy Huang with UBS. Lucy Huang: My question is just on the 30% of revenues that are yet to move on to CVP and presumably the larger customers. Like how early are we expecting to see some of these contracts coming up for expiry and therefore, potential for some of those revenues to move on to the CVP? And then just a follow-on, sorry, on the kind of cost question, big cost reductions coming through on headcount. Are you expecting a bit of offset through kind of AI token costs increasing as a result of increased usage. So just trying to think through how the cost base will look like in the next year or 2 post the headcount reduction. Zubin Appoo: Thanks, Lucy. I'll answer some of that, and Caroline might chime in with some thoughts as well. So to the first part of your question, obviously, it's still quite early days. We launched the CargoWise Value Pack on the 1st of December. We migrated 95% of customers across to that Value Pack model quite quickly. And now we are spending time talking to those 5% of customers that you correctly call out, representing 30% of CargoWise revenue. Now we've had conversations with many of that cohort. Those conversations have been very positive. And as I was suggesting earlier, these AI features, particularly the impact they have on labor savings within these businesses, they're really going to be most profound in these very large customers because these large customers have generally offshore BPO business process outsourcing centers or shared service centers where they have a lot of labor that is doing quite repetitive parts of forwarding and customs and other logistics workflows. That is exactly what our AI workflow engine accelerates. It allows for that labor to be taken out over time and to be replaced using agentic AI capabilities. So that 5% of customers are very motivated to move across given that they only get access to these features through the Value Packs. The conversations have been positive. Keep in mind, these customers being larger, it takes time for them to make decisions like this and to transition across. But we remain confident and hopeful that we will migrate some of them across this financial year. Caroline Pham: One thing I might add as well in addition to what Zubin said is you mentioned the expiry of the contracts. And so whilst that's a natural point in time for them to move across to the CargoWise Value Packs, we're not waiting for the contracts to expire. Many of the conversations that we're having with customers today are actually us taking a proactive approach, reaching out to customers whose expiries are -- could be many years into the future and actually looking at getting them to come and convert to CVP even earlier than expiration for all the reasons that Zubin said. Richard White: I might just add a bit more flesh to that particular set of understandings. If you look at the -- if you take out the direct freight costs of a freight forwarder, you're left with the expenses in your P&L, about 70% of that expense is labor. A tiny, tiny part of that expense is software cost. If you focus on the cost of software, we're an expensive product. If you focus on the labor saving that we can create, and we're saying very strongly that within 2 years, we'll have half of the total labor, operational labor and line management labor out of our customers' businesses, obviously, it's their choice to do that, but it's entirely possible from our perspective. You're taking out 35% of their expense rate, half of the 70%. That's orders of magnitude larger than our software cost. And any company that wants to spend time building software or take a piece of software that's already in the industry and use it, will never have the capability, the moat, the integrations to airlines, shipping lines to ports, to customs authorities, penetration to 193 countries in all the territories that we go to. Those things can't be replaced and can't be built easily. That took us more than 2 decades, more than 2 decades. And we are absolutely confident that over the next 2 years, we will have an enormous impact on the labor savings in this industry. Zubin Appoo: Something that's worth pointing out there also is there are many companies out there and many products out there that report that they can add AI capabilities that lead to labor savings on top of existing systems like CargoWise. Now I don't have that view at all. I do not think that is practical at all. What we are talking about here with our AI workflow engine and AI management engine, which includes the 4 AI capabilities we've already released is integrating AI and large language models and automation into what we call our workflow engine. That has been a part of the product now for many, many years, more than 10 or 15 years now and is at a fundamental layer of CargoWise Next. It is how all operational workflows and all operational behaviors in the system operate. By us putting AI at that layer and by us leveraging the rich data sets that we have curated over time from customers, that is what gives our AI such strength and such might compared to just sticking AI on top of a product. That is not at all what we are doing. Now for the second part of your question on AI token cost, I'll ask Caroline to comment on that. Caroline Pham: Yes. So yes, Lucy, you're exactly right. There is definitely a factor here about investment in that we will likely need to make. For FY '26, we're not expecting this to be material. There is a level of technology investment that we've already got factored into our FY '26 guidance. Operator: The next question comes from Nick Basile with CLSA. Nicholas Basile: Just had a question on, I guess, Richard's comments about the ability to take out up to 50% of labor costs for your customers over time through AI. Where are your conversations at with the largest customers? Have they kind of subscribed to that vision yet? Or where do you think or when will we see a tipping point in that? And to what extent is it connected to the Value Pack rollout? Zubin Appoo: Nick, good to hear from you. So as I was suggesting, we've had very positive conversations with a large part of that cohort. They are all deeply interested in the AI capabilities that we're building, particularly compliance-wise, AI classification assistant, document ingestion and of course, also the Ace AI agent. But more so, they are interested in what we have talked about in the AI workflow engine. They want to understand how we can help reduce labor substantially, as Richard said, by potentially 50% over the next few years by replicating parts of that workflow. So the conversations are going exceptionally well. But as I suggested, they do take time given these companies are large, they have governance, they have boards that they need to get decisions put through. But the conversations are going well. Richard, do you want to add anything? Richard White: Yes. It's important to recognize how long we have been planning to do this and how it's integrated into the core architecture of CargoWise Next. The data layer that we represent is enormous, and it's directly integrated in the AI engine. That can't be done from an outside agent. An agent that works on the outside is not much better than RPA, which is a very trivial way of automating software. We are talking about the ability to work and operate inside the system at all levels of data, being able to communicate to the port authorities, to the carriers, to the airlines, to the customs authorities and to the users and to the customers through an AI agent. And we've got a fairly strong model for that, a very strong model for that. In fact, we've really been working that for that particular architecture for more than a year and on the automation of this for preparing for the AI journey, we've kind of predicted in about 2023 that this was going to happen. We just didn't have all of the pieces of the AI, the external LLMs that we use were getting more and more mature. And there's been a number of big breakthroughs in the last 9 months with agentic AI and more particularly with Claude code on writing code. So we've got a number of drivers here that enable us to get to that capability. We are going to embed and infuse the entire product with agentic AI capabilities and personas that know how to do the work specifically to each of the job types and work processes. Zubin Appoo: Nick, also, just as Caroline mentioned in an earlier answer, we are reaffirming our guidance, and that means that these large customers don't need to come across for us to achieve what we are saying we will achieve. Of course, we are very confident and hopeful that some do, and that's why we're having those conversations. But there are a number of revenue drivers here. We are -- we've got 95% of our customers now, which represents 75% of CargoWise revenue on the Value Packs. As these businesses use and adopt more and more of the features in the Value Packs, and we've already seen an uptake of 2x to 4x increase in those agentic AI features, they will be able to be much more efficient and handle more business. As they handle more business, that's more volume, more transactions through CargoWise, which is obviously more revenue for us. Then the other lever is that as we grow capabilities in the Value Pack, and this is obviously a medium- and a long-term thing. But as we add more capability, again, particularly through the AI features, we'll be able to capture more of that revenue. And then as Richard said, we've already had -- we've seen an easier sign-up of customers. There's a number of customers of all sizes that have signed up since 1st of December. Obviously, there are 2 large global freight forwarders, XPD, Global and Blue Water. So those are all very positive signs that go to our growth drivers. And then, of course, if these long-term STL customers do move across sooner, that affects and accelerates that second half, first half SKU. Operator: The next question comes from Siraj Ahmed with Citigroup. Siraj Ahmed: So I have -- it's going to be a 3-part question on the same thing. Just first thing, just Caroline, just can you clarify that CargoWise revenue growth guidance of 14% to 21%, right? I mean we are 2 months into the second half. You've got 4 months to go. I mean even if one of the largest -- I mean, let's say, 10% or 20% converts 20% uplift in price, you still can't sort of -- you can't move the dial here. So just confirming that you're tracking towards the low end of that 14%, 21%, especially given the SKU that you mentioned. And on that, maybe one for Zubin. I mean, is that growth rate being compressed because of transitional pricing protection that you put in? And I'm also hearing incentives for disbursement billing. And third thing on that, how should we think about FY '27? Because the early discussions was this a 20% to 30% grower second half run rate implies it's like high teens, right? So just keen to understand what's changed here in this whole dynamic. Caroline Pham: Yes. Sure. No problem. So I'll take the first one and then when we talk about the transitional pricing protection, I'll move to Zubin. So look, in terms of the CargoWise revenue growth rate range, as I mentioned earlier, we are reaffirming FY '26 guidance, which includes the confirmation of that 14% to 21% range. The comment I was making earlier around the SKU, which is what I think you're trying to get to, is to say that the second half SKU is more aligned with where we were in FY '25, but it may not be exactly that, right? And so with the potential for customers to come across to the new commercial model and because we are already in the process of discussing this with customers, as I mentioned to Lucy earlier, we're not just starting the conversation with customers now. And in fact, a few of the customers, we've been in conversations with for months now around moving them across because as we know, larger customers tend to take a bit more time and they need some more information. And so the weighting of the second half SKU, which don't forget, as you pointed out, these are the largest customers. And so the incremental revenue that we stand to benefit from when they move across is generally higher if we get a handful, which we're obviously hopeful to do. So that's really what's going to drive that second half SKU. But as I mentioned, we are still reaffirming the CargoWise revenue growth range of 14% to 21%. Zubin Appoo: Siraj, to the second part of your question, so let's just think back to FY '25 and what we said at full year results. We held back a number of features for 12 or 18 months to include them in that CargoWise value pack. And that led to lower growth rates in FY '25. We're seeing the carryover from that, but we are very confident in getting back to that 14% to 21% growth rate, especially given that as we add value to the value pack, and again, I'll point out how important those labor savings and efficiencies are compared to the price of our software. As we introduce more and more labor savings and AI-driven efficiency in the medium term, that allows us to capture much more value from the value we deliver to customers. The incentives that you talk about and the TPP don't really come into that. The TPP was a promise we made customers that they would pay the same as what they were paying on the old agreement for a period of time. That doesn't really come into this at all. Caroline Pham: Yes, I'll just take the last question you had as well around the FY '27 and growth rates. Obviously, look, we can't guide to what FY '27 is going to be. But what we're talking about in terms of the drivers of revenue growth, they're still the things that we talk about, right? So it's going to be new and existing customer growth. And with the points that Zubin made earlier around the new commercial model and the features that are available, customers should be more efficient, more productive and therefore, their ability to increase their own market share increases, which means they should then transact more on our system and generate more revenue. So that will be a driver. There will be the point that Richard made earlier around our ability to more easily win new customers with the new commercial model. And then lastly, it will be what we've just been talking about, which is the potential to convert those longer-term commitment [indiscernible] customers on to TPP? Siraj Ahmed: Can I clarify, sorry. So Zubin, your comment on TPP, can you just confirm if it's a net benefit or either positive or negative to revenue growth in the second half? And if it's -- so understand it impacts it. And then Caroline, in your 14% to 21%, how is DB Schenker coming in? Because I thought that volumes are supposed to pick up based on what DSV is saying. So can you just clarify that as well, what you've assumed? Zubin Appoo: So Siraj, on the TPP, we're not going to go into specifics about how it impacts each customer. But what I can say is that for some customers, it is a benefit for them in the sense that it reduces their CVP back to what they were paying on STL. In some cases, it pushes up what they're paying on CVP to what they were paying on STL. The main message to customers, and this has been something we've communicated quite deeply with them over the last few months directly, but also through the 4 industry association engagements that we did in December and January is that these customers now all have access to 216 features, about half of them being brand-new features, and they are paying what they used to pay under STL as if they had not transitioned. But I won't comment on how it impacts individual customers. Caroline Pham: Yes. And then just on the DB Schenker one. So in the FY '26 guidance, it does factor in the known transition of DB Schenker on to DSV. And with the numbers that we're seeing, which we obviously can't go into detail, it's in line with our expectations, which suggests that the integration is progressing well, which is aligned with the comments they've made publicly as well. Operator: The next question comes from Roger Samuel with Jefferies. Roger Samuel: Can I just ask you about the new product, in particular, CTO. It looks like the contribution was quite muted in the first half and maybe in FY '26 as well. So can we expect some acceleration in CTO revenue in FY '27? Zubin Appoo: Thanks for the question. So look, we had always suggested or at least in the last round of conversations, we had always suggested that CTO was a much smaller part of our FY '26 revenue growth. Our focus has really been deeply on CargoWise Value Packs and the AI capabilities. The good news with CTO is that we are in the process of implementation right now with our launch partner. Now I've suggested this before. This could be bigger than CargoWise, but therefore, it takes time. It is disruptive, and we are changing established ways of working, and it will take time for customers to adopt to those practices and change how they work. It's really a human change management process. But yes, as we implement with ACFS and as we process through that implementation, then we will look at other customers in Australia and also the U.S., as we've mentioned before. Operator: The next question comes from Tom Beadle with Jarden. Thomas Beadle: It's probably actually just a follow-up on Roger's question around CTO. I mean, obviously, it's still in the process of implementation with your partner. I guess can you just talk about some of the factors which are driving the delay to that implementation, just given we thought it would be up and running? And just given the reduction to your product development headcount, how should we be thinking about the timing of the launch of CTO in other markets? Zubin Appoo: So to the second part of your question, I will say that the headcount reduction program phase that we're talking about today will not impact productivity in the short term. It will have a positive impact in the long term. So we are not making this change and having any expectation that it will slow us down at all. To the first part of the question, I'll answer it initially, and then I'll ask Richard to throw some thoughts in as well. CTO is a product that we have evolved over the last few years. We have added more and more optimizations to that. We have spent more time with ACFS and with the industry, understanding the pain points in port and container transport, and we have enhanced that product. The really large part of this really is the human change management process and disrupting ways of working that have been the case for 10 or 20 years. Richard? Richard White: I would actually say 50 years. Containerization happened in the 1970s. And there's a substantial amount of inertia and we're working -- ACFS is a very good partner, and we're working to make sure that they can transition in a way which doesn't damage their existing business, but adds a substantial amount of opportunity to them. And that just takes a bit of time. It's just -- and it was over the Christmas period that a lot of this work would have happened. And as you would rightly expect, there's a lull in the Christmas period. And so most of these senior transport people take their holidays and go overseas and so forth. So there's just -- it's just a management issue of the transitional issues that we have to work through. And I just want to compliment ACFS because the industry is very reticent to change its processes because they've been around for a long time, even though they're inefficient, even though we can show that inefficiency, we've got to hold our partner harmless and actually deliver additional business to them so that they can reuse the yield that comes from the efficiency that we create. Otherwise, the efficiency is actually a damaging thing for them. It's a commercially complex thing to prove the first time. Once we have that done, I'm sure there'll be a rush to sign. But right now, we're working very carefully and very closely with ACFS, and we're very happy with the partnership. Operator: The next question comes from Andrew Gillies with Macquarie. Andrew Gillies: Perfect. Just 2 main ones from me. Just around the large customers yet to come across about the 30% of revenues on those larger term-based contracts. Can you maybe give some sort of insight into those conversations, Zubin, that you're having? What are kind of the things you're able to communicate to them? Like obviously, Richard went through some detail around a demonstrable ROI and saving on labor costs. But are some of those customers already taking early release products that maybe could be switched off if they weren't to come across sooner? Like can you talk to some of the drivers or levers you have in that process, please? Zubin Appoo: It's a great question, Andrew. So you're absolutely right. We -- for some time, we had something called an EAA, an early access agreement. We've now transitioned that to a trial access agreement. And that allows customers who have not yet migrated to the CVP to access individual features that are of benefit to them or of interest to them for a very time-restricted basis. And obviously, that is a strong carrot for them to then use those features, ingrain those features into their practices and understand the benefits of those features and see the labor efficiency and risk reduction benefits of those features and then migrate over to the CVP. So a number of those customers in that 5% cohort that represent 30% of CargoWise revenue are using trial access agreements for some features, including the AI features, including Neo and a number of other features that are well liked, certificates of origin, electronic bills of lading and many other features. And those are very time restricted so that we can move them across to the CVP. To the other sort of contents of those conversations, obviously, disbursement billing, which is the ability for them to recover the cost from their customer takes up a significant part of some of those conversations. And in those conversations, we explain the benefits. We show how we have seen a number of customers adopt that practice, and those conversations also go very well. Andrew Gillies: Perfect. And then just a second one around a lot of the start-ups we've seen popping up in the industry that might do a specific product or module. The workflow commentary that you made earlier sort of talks to the sustainable competitive advantage that you have. Are there any ways in terms of like charging for data egress or ingress to the CargoWise platform that could prevent those new start-ups from even really operating with some of your key customers? Zubin Appoo: Look, it's a good question. I don't think we have to do that. Really, we stand behind the strength of our product. The value of having all of these modules and features and capabilities surrounded by our AI workflow engine deeply in one global operating system, that is the real advantage. These point systems, they previously had a place with the CargoWise Value Pack, where all of those modules and additional features are included in the Value Pack at no additional cost. It means customers get the benefit of having them all in one single system. Richard White: I'll just add one more piece of detail to that. Normally, when you're doing an external AI agent, you'll build an MCP or some other form of connector that allows data integration. Now we have -- because we're a system of record, we do not allow access, writable access to the core database of the system. There are external APIs that we provide, but those, again, are very much our APIs and you have to be inside our product and you have to have the full product stack. Remember that we get paid per transaction now. There's no user count. We don't care if a customer has one user, 100 users, 1,000 users or 10,000 users. The transaction is the only thing that matters to us now. There's no overheads from a hosting perspective from a cloud perspective, and there's no overhead for customers. So as long as there's a transaction in the system, then we get paid. And because we connect to terminals and port authorities, customs authorities, shipping lines, airlines, trucking companies, rail companies and those have -- and we bought 57 businesses in order to integrate globally. We as not just a system of record, but also the moderator and the way that everybody has to connect to those sys -- is inside CargoWise. So even if someone was to build a massively capable external agent and use our APIs to connect to it, it will create a transaction in CargoWise and we'd be paid for it. However, that's not the efficient way to do it because the AI personas that we've got are tightly integrated with the data, can write back to the database and can talk directly to those authorities, can talk to the operators inside the system and can talk to the customers in a sort of self-service model, very typically to how airlines and banks are now doing those sort of things. with customers. We have got -- we've been working on this for a long time now, and the AI piece just gives us additional advantage. And I'll be a bit more bold in terms of the software development. Yes, it is a hard thing to do to transition the company from a model where most of the code is written by humans to a model where most of the coding is an orchestration of a very senior person who is a product person or a software architect. But that is the new model. And that model could actually have efficiencies of maybe 2x to 10x more than what you can get out of any software development team. So individually, people can do far, far more work with AI than they could have done even 9 months ago. And we're certainly on that journey, and we're very closely connected to what we're doing with Claude Code, what we're doing with ChatGPT, what we're doing with Gemini. And there's a huge competition here. There's an arms race going on between the LLMs to make the most efficient thing they can use. And we can take those efficiencies and plug them into a fundamental moat that we have and it just really can't be displaced, but it can be accelerated. Operator: The next question comes from Paul Mason with E&P. Paul Mason: Just wanted to ask for a couple of clarifying points around the transition pricing protection mechanism. So the first thing, just with the really large forwarders that had quite significant discounts, some of which obviously you have transitioned across to the new model, would they be very likely to be on TPP and therefore, like the actual sort of price rise associated with the new commercial model won't be embedded in second half yet and maybe won't come for a couple of years. I just want to clarify that around like what's happening with the really large ones that would have -- some of them maybe had 50% discounts and things like that at point in time. And then the second element I wanted to just get some guidance on was just in terms of how disbursement works with TPP because based on the TPP, it would appear that basically everybody's imputed price per transaction is still different. So what are you sending through to the final invoice? Zubin Appoo: Yes. Good questions, Paul. So to the first part of your question, no, it's not correct to say that TPP is sort of subduing revenue for those large customers. The TPP was a commitment to some customers to support the transition period. There are a number of customers that have seen price rises. And that, of course, is one of the ways that we are talking about our revenue growth in the first half and into the second half. To the second question about disbursements and what that looks like. Let's just think back to the model before we had community pricing and before we had the CVP. We had a quite complex billing algorithm where there were many overheads, including seat fees, including cloud hosting fees and then many different transaction fees rather than just a single transaction fee. And our customers were doing whatever they wanted with that. Some were treating them as overheads, some were passing through an average, some were trying to figure out how to sum them up and pass them through. Regardless of whether a customer is now on the TPP or not on the TPP, they can now pass through part or all of that transaction very clearly. So for customers not on TPP, they can recover the whole cost as a disbursement. For customers that do have TPP, they can recover a large part of the cost, that is the transactional part very easily. What they do with the TPP is exactly what they were doing with the pre-CVP pricing as well. This makes it a much better proposition for them in all ways. Operator: The next question comes from Max Andrews with Unified Capital Partners. Max Andrews: I was just going to ask on the cost out. So obviously, 2,000 headcount reduction is a big number that's going to get taken out of the business on a gross impact versus the net impact you're saying. Could you just sort of unpack the execution costs and whether those costs are sticky going forward? Caroline Pham: Yes. Sure. So as we mentioned when we reaffirmed guidance, it does exclude the impact of this program, but we aren't expecting there to be a material impact to FY '26. And that's really because there's a number of factors that you have to take into account. There's the cost savings, as you say, but also the restructuring costs. So there's a few things in there in terms of termination and other support and then also the impact of capitalized development as well. And so we've not guided to what those numbers will be, but we have said that for FY '26, we don't expect them to be material. Operator: The next question comes from Sriharsh Singh from Bank of America. Sriharsh Singh: Three quick questions from my side. One on e2open. How should we think about the growth in subscription revenues into FY '27 is mid-single-digit revenue growth for e2open's subscription part of things doable? Second question, any incremental customer feedback? Or how has the latest customer feedback been on disbursement, the adoption of disbursement billing on CVP? Are they warming up more to it after 2 or 3 months, there was some initial pushback. And lastly, headcount reduction, 2,000 people, is it more -- any color on whether it's more concentrated into e2opens business? Or is it more concentrated into [indiscernible] Zubin Appoo: Thanks for the question. So for the first part, what we have said since the acquisition of e2open is that we are very focused on what we call Horizon 1. Horizon 1 was the $50 million annualized run rate cost savings, which we've achieved nearly 18 months ahead of schedule. It was really embedding what we call the WiseTech Way into how e2open builds products and delivers value to customers. That is moving from customization to standardization. That is aligning our commercial models, and that's strengthening relationships with customers and with the industry. Now that will have some short-term impact on customers and on revenue. But in the medium term and in the long term, this is how we build long-term sustained value. To the second part of your question, which was the adoption of disbursement, the adoption of disbursement is in line with where we thought it would be sort of 2.5 months in. We are seeing a number of customers, both in forwarding and in brokerage disburse and recover the fees from customers. Obviously, it's a disruptive change. It's not how they have treated software fees in the past, but it is actually exactly how they treat many, many other third-party charges like port charges, customs charges, duties, taxes, storage, detention, demurrage. So it is being adopted at the pace that we thought it would be adopted. And then to your last question about headcount reduction and where it is concentrated. Look, we are -- we see the company as one company. So we are talking about the 50% reduction -- up to 50% reduction in product and development and customer service across the entire WiseTech. And we will then look at all functions across the entire business. Operator: This concludes our question-and-answer session and does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrew Wessel, Head of Investor Relations. Please go ahead. Andrew Wessel: Thank you, Tanya, and hello to everyone joining us today to discuss our fourth quarter 2025 financial results. On with us are Scott Peyree, President and CEO; and Jason Bengel, CFO. This afternoon, we posted a detailed letter to shareholders on our Investor Relations website. And for the purposes of today's discussion, we will assume that listeners have read that letter, and we will focus on Q&A. Before I hand the call over to Scott for his remarks, I remind everyone that during this call, we may discuss LendingTree's expectations for future performance. Any forward-looking statements that we make are subject to risks and uncertainties, and LendingTree's actual results could differ materially from the views expressed today. Many, but not all of the risks we face are described in our periodic reports filed with the SEC. We will also discuss a variety of non-GAAP measures on the call, and I refer you to today's press release and shareholder letter, both available on our website for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP. And with that, Scott, please go ahead. Scott Peyree: Thanks, Andrew, and thanks to everyone joining us today as we discuss our very strong fourth quarter and full year 2025 results. I will first touch on some of the highlights from our earnings release, and then I'd like to take everyone through our '26 strategy before opening it up for questions. First off, we had a fantastic 2025. VMD was up 14%. Adjusted EBITDA grew at double that pace, 28%. Each of our 3 reportable segments grew VMD at double-digit rates. Insurance again led the way as very strong demand from carriers, combined with our ability to take market share from competitors, generated $174 million of VMD, a 10% increase over the previous year. We have heard some of our peers call out slowing demand from the largest insurers in Q1. I just want to tell everyone, we are not seeing that at all ourselves as top carriers budgets with us remain robust as they're targeting our high-quality consumers. In fact, we expect Q1 to be yet another record revenue quarter. The #4 through #10 insurers on our network grew revenue by 65% with us in '25 from the previous year, a testament to the strength and breadth of partners in our marketplace. Insurance gathered strength as the year progressed, finishing with record performance in the fourth quarter that was just ahead of our previous record, the year ago period. The momentum has carried through the start of '26, and we expect another record year from the insurance division this year. Consumer segment -- consumer grew segment profit by 17% last year, anchored by a 60% revenue growth from our small business team. Similar to the Insurance segment, our consumer group of businesses strengthened throughout the course of the year, with segment profit increasing 24% in Q4 from the prior year and small business revenue growing a remarkable 78% year-over-year. Importantly, we have not sacrificed margin to generate this growth as segment margin for both the quarter and full year was stable at 51%. As a reminder, we have continually invested in additions to our small business concierge sales force, allowing us as well as lenders on the network, allowing us to help a greater number of business owners find the best loan options for them while guiding them through the often complex process of completing their application through to funding. Continuing the build-out of this team is in our plans for '26. The Home segment recorded 6% year-over-year in revenue -- growth in revenue for the fourth quarter, although increasing media costs and lower conversion rates for our lender partners pressured segment margins. The national 30-year mortgage rate just dipped below 6% for the first time since 2022. We are hopeful lower rates will finally start to unlock what has historically been -- which has been a historically slow mortgage market. The guidance we published today does not assume any continued improvement in rates. So we hope this means our home segment forecast will end up being conservative. The pace of AI and AI-enabled search innovation has continued to accelerate. As I have said on previous calls, we view these new tools as fantastic opportunities for our business and are a key component of the strategy we have developed to increase the number of high-intent visitors to our sites to compare and shop for financial products. We understand investor fears around the threat of disintermediation to our business model. There are many legal and regulatory structures in place that will make it difficult for Agentic AI to overcome, not to mention our own partners' incentive structures that would negate the outcome. Instead of focusing on playing defense, though against these low probability outcomes, we are embracing this innovative technology. I cannot be more excited about the AI-powered improvements that we are making to our consumer experience. We have already driven results with our use of AI voice in our call center. As mentioned in the letter, we've seen significant revenue growth to the tune of $10-plus million in revenue growth per quarter over the last 6 quarters compared to OpEx growth of a few hundred thousand dollars per quarter over the last 6 quarters in our call center operations. We've also seen efficient improvements that our marketing team has generated using AI-enabled technology to speed up design, ad testing and funnel testing. This is shown with a 17% increase in overall conversions coming through our network year-over-year in the fourth quarter, and that is with the headwind of legacy SEO coming down. Our North Star as a company continues to be -- I'm sorry, the North Star of our company is to be the #1 destination to shop for financial products. Everything that goes into forming our long-term initiatives is based on this aspiration. We have the right to win as LendingTree has the broadest network of financial partners of any consumer finance shopping site, sourcing millions of visitors who are in the market for these products and want the best deal is our core competency. We will use these strengths as the bedrock to scale customer volumes and improve outcomes with enhanced experiences, new tools and better matching. Our North Star strategy has 4 strategic pillars: number one, accelerate the core business; number two, improve the consumer experience; number three, expand product offerings; and finally, number four, rebuild and reposition our brand. I'd like to briefly hit on each of these pillars for the investors today. Number one, accelerate the core business. Initiatives in this growth area focus on our existing businesses, to support ongoing double-digit growth. These strategic initiatives support driving more consumers to our network, providing more purchase options to consumers and increasing monetization of our traffic via our distribution networks. Examples of areas we're focusing on now include the continued expansion of our SMB concierge sales force and network of lenders in SMB, the development of a concierge sales force in auto lending, investments into tech product and sales teams for rapid expansion of our media business development capabilities and tech investment into major upgrades of our marketing technology platforms. Number two, improve the consumer experience. In this pillar, the CX team is systematically resolving consumer pain points, often with the use of AI technology. Initiatives in this pillar focused on making shopping easier for what are often complicated financial products. We are seeking to serve both consumers looking to transact as well as consumers who are just window shopping. The goal of this pillar is to become a trusted partner for the consumer when seeking financial products to drive an increase in return visits and referrals. Examples of this area of focusing on -- that we're focusing on now include improving our logged-in experience, taking learnings from our Spring app to our website, such as making it easier to log in and customizing the homepage for logged in users based on products they are shopping for, also simplifying the process to find and review offers they had previously received. Second, develop a personal loan rate table using our proprietary rate data we gather from millions of consumers shopping for loans on our network, which will allow consumers to know what rates they should expect before applying. This tool can be provided on our website, in our app, it can be embedded with our business development partners and importantly, embedded within [ LLMs ]. Third pillar, expand our product offerings. This pillar focuses on the addition of categories of financial products offered to consumers. Our long-term strategic goal is to provide a representation of all financial products that consumer could want. We do not have to manufacture a shopping experience for some products when we can instead identify and partner with industry-leading service providers. The focus over the next 18 months is to sign partnerships in areas such as commercial insurance, pet insurance, boat and RV insurance, wealth management, robo-advisers, student lending and others. Finally, our fourth pillar, rebuild and reposition our brand. We have strong brand resilience with aided awareness but need to rebuild the brand from an unaided awareness perspective. We also are focused on repositioning our brand to be a destination to shop for a wide variety of insurance, lending and other financial products where historically, we've been associated more specifically with mortgage products. In Q1, we made key brand hires and have begun the redesign of our homepage. Our goal is to target brand spend in several large geographic markets in the second half of this year, introducing new customers to our redesigned experience. So thank you, everyone. I know that was a lot, but I thought it was important with our North Star and our new strategic focus to really lay it out for all of our investors. It was a little long-winded there. So thank you for bearing with me. And so with that, I'll pause there and open the line to your questions about our results, outlook and strategy. Operator: [Operator Instructions] Our first question will be coming from the line of Youssef Squali of Truist Securities. Youssef Squali: Congrats on the strong quarter. Scott, maybe can you talk a little bit about the sustainability of growth in insurance? And really just trying to understand what the main drivers are. I think you talked about how 4 out of the 10 insurance partners grew revenues, I think, by 60% or 65%. Maybe can you peel that onion one more layer and just kind of describe exactly what's going on that's driving all that growth? And then I have a follow-up, please. Scott Peyree: Yes, sure. No problem, Youssef. Thanks for the question. And just to clarify, what I was talking about with the insurance providers is our carriers 4 through 10. So like after our top 3 carriers, the next 7 carriers combined grew by 65% year-over-year. And I just wanted to illustrate in that statement how it's just -- we aren't solely dependent, but the top 3 carriers also grew a lot year-over-year, but just the growth is broad-based. It's not just purely based off the top 3 carriers. Even though our top 3 carriers, I mean, it's fair to say they still represent an outsized portion of our overall insurance revenue. So just to discuss on the sustainability of the insurance marketplace right now. The bottom line, I would start with the insurance carriers themselves remain very profitable. They had a great year last year. They've started the year well this year. And after many years of -- a few years of unprofitability and pulling back marketing spend amongst all other spends for a long time, they are now all very aggressive in growing market share, especially the top carriers. And it is -- and honestly, I would say, over the past 3 to 6 months, they've become more aggressive, if anything, of trying to fight over market share. And we have just a lot of high-quality, high-intent consumers coming through our network. And the carriers know that our network is an extremely cost-effective way for them to get their insurance products in front of targeted high-intent insurance consumers. As the year goes on, we expect to start seeing some rate decreases more aggressively from our carriers, which will bring more consumers shopping into the marketplace. Carriers have continued to open up geographies. They're getting very open at this point, but that is -- I mean more geographies are open today than were a year ago as a general statement for carriers being willing to offer consumers product. And then finally, just internally, as I mentioned with our marketing strategy, we've just done a very good job of increasing consumer traffic coming through our site. We're out there, and we're in front of a lot more consumers now today than we were a year ago. And honestly, we look at our opportunities in front of us over the next year, we are very excited about continued growth in consumer traffic coming through our site for insurance products. Youssef Squali: That's very helpful. And then on the AI disintermediation topic, how are you currently working or integrating with some of these LLMs to try to stay visible basically as search transitions to more of a conversational kind of interface? Scott Peyree: Yes. I would say there's a number of fronts we're working on there. There's obviously the SEO front where you're getting referenced by the LLMs, driving consumers to our site. We continue to focus on that, and it continues to grow. It's very high-intent consumers, as I've mentioned on previous calls. I would say materially, it's still a pretty small percentage of our overall consumer base, but it's continuing to grow. Some of the LLMs, ChatGPT being an example, are looking to start testing some advertising, which we're excited about participating in. Again, I don't know how material to expect it to be in the calendar year 2026 as far as quantity of consumers, but it's -- being that we are very, very good at paid advertising to get in front of consumers, we're excited about the LLM starting to open up that. And just from a technology development standpoint, we've been working at our teams on using AI development, conversational funnels, agentic AI bots to help get documentation necessary to finish application processes, developing comparison tools that helps consumers compare their offers apples-to-apples. The personal loans rate table, I mentioned in my opening statements as an example, I mean we're building our -- a lot of technical chops on how to use AI and LLM style technology for front-end consumer products. I would say that there's been varying levels of success on the consumer engagement standpoint at this point. But I mean -- but we're getting better and better at building it. And as that consumer behavior starts to change, I think we'll be a leader in that space. Operator: And our next question will be coming from the line of Ryan Tomasello of KBW. Unknown Analyst: This is Juan on for Ryan. Can you talk about the targeted brand investments in the second half of the year? What's driving that decision? And if you could size the amount of the investment relative to 2025? Scott Peyree: Yes. I'll just start at a high level, and Jason, you can throw in like the level of investments. I want to -- if you want to talk about that. But that was -- it's just a critical part of our North Star strategy is to be the #1 destination to shop for financial products. And as we look at the landscape in our brand, we've got a really strong brand, and we're very proud of the brand we've developed. The 2 -- we haven't invested a ton on the pure basis of our brand over the past few years. And so whereas our brand is very good on an aided awareness perspective with consumers, it's not very good on an unaided awareness. So we feel it's important to get out there, especially now that we want to reposition ourselves as a destination for all financial product shopping, whereas historically, a lot of consumers really associate us specifically with mortgage and mortgage shopping. So we want to -- the goal is at the end of the day to really get to the point where an average consumer on the street, we are one of the first companies that comes to their mind as they're thinking about shopping for financial products. And that's really what we want to start. And so we want to go in the second half of this year with the redesigned homepage experience, a couple of pages with different messaging, some different types of messaging from a brand advertising perspective and go into some large markets where we have good positioning with all of our financial products, some geographic markets where we can test different messaging and see what sticks and lands with the consumers well before we really roll it out on a national basis. And so that will probably start happening kind of mid-Q3 to mid-Q4. Jason, do you want to hit on just the investment levels we're looking at? Jason Bengel: Yes. That's -- like Scott said, this is probably more in the second half. And the amount that we spend is going to be a function of how well we're performing, I guess, is one and then also how well that brand spend itself is performing as well. So if it performs and exceeds our expectations, then we may wind up leaning into it. And the guidance does contemplate at least an initial investment where we're starting to roll this out and starting to do some testing. But the investment itself is at least initially probably less than $10 million as we're thinking about it in guidance. Unknown Analyst: Got it. That's very clear. And just a quick follow-up. In terms of the outlook, can you provide a bit more granularity at the segment level for revenue and VMD growth as well as VMD margins? Jason Bengel: Yes, sure. Happy to. So yes, I'll just talk through segment by segment, how we're thinking about the guide. So first, home, the backdrop for home, we're not assuming any real rate benefit for home. We've seen some rate decreases coming through, but we're not assuming any going forward. That would be upside to the guide. Generally, home equity should have support with record home equity balances. But at the end of the day, there's still not a lot of consumers out there shopping, and we have seen some increase in competition with causing media cost to increase. So margin-wise, I would say we expect home to be roughly where it was landing in Q4. We are investing in quality to win a prominent space in our marketing channels, and we are investing in expanding our small lender network, which will provide some margin support. Going on to consumer. Consumer, the real driver is going to be small business. The merchant cash advance market is a strong market that's growing. We've been investing in our concierge experience, the staffing, the marketing channel placements to drive high-quality traffic. We expect all of that to continue into 2026. That's a model that's really working well for us. Personal loans, we move on to personal loans. Record credit card balances provide a great use case for debt consolidation in 2026. But 2025 did see quite a bit of expansions, buybox expansions, which we're not expecting to repeat in 2026. So we're being maybe a little bit more measured when it comes to PL growth expectations. And there, we're focused on better matching consumers with lenders and finding additional sources of traffic to feed those lenders. Margin-wise, it's generally where we have been in Q4, I think, is probably fair. It will bounce around, but I think Q4 is generally a decent starting point. And then insurance, when it comes to insurance, that backdrop is very favorable, like for all the reasons Scott said, carriers are becoming more competitive for market share and policies. They really want to grow policies. Their profitability is extremely strong. And with selective rate decreases coming through, that should spur additional traffic, which should support the CPL side of the house, the cost per lead. So the backdrop is really strong. Things we're doing, we're really focused on improving our margin. We're making some key investments in martech to make sure we grab more margin. And we're seeing a lot of that come through already in January and February in Q1. We've noticed a material increase in margin from where we were in Q4, and we expect that generally to continue throughout the year. And so I think just candidly, we are running hotter than we expected in Q1 in insurance. And so the backdrop is favorable. We have no indications that it's going to slow down, but it's -- when it comes to the guide, we're also being a little bit cautious. It's only been 2 months. We kind of -- we don't want to bake in this very, very strong performance for the rest of the year yet. So to be totally candid, we are pulling that down a little bit and being a little bit more conservative just to be prudent when it comes to the insurance segment. And then like we said, we do want to allow ourselves room to spend in brand as it relates to the strategy. So I mean I think that's generally some color on each of the pieces there. Hopefully, that's helpful. Operator: And our next question will be coming from the line of Jed Kelly of Oppenheimer & Co. Jed Kelly: Yes. Just -- can you just -- in your shareholder letter, can you kind of explain more of like what's going on with these trigger leads and how that benefits? And then kind of I'm kind of taking the last comments around the guidance, are we kind of coming into an environment when the insurance segment is just now a lot more predictable and easier for you guys to forecast than it has been in the last 5 years? Then I have a follow-up. Scott Peyree: All right. I'll start with hitting on the trigger leads, Jed, and then we can go to the insurance. So the trigger leads is -- for those that don't know the trigger leads, the very basic version of that is when, for example, when we develop a lead and sell to our mortgage providers and then they do a hard credit poll to provide a firm offer to the consumers, then the credit bureaus will send -- it will trigger them. That's why they call it trigger leads. They'll be triggered to sell it off to a bunch of like third-party buyers that we have no association with, our clients have no association with, but it's basically saying like, hey, this consumer just got a hard pull on their credit from an insurance -- from -- I'm sorry, a mortgage company. So maybe you might want to call them to see if -- so it turns into a really horrible consumer experience where like they're about to close a mortgage and then all of a sudden, they're getting another 50 or 60 calls from -- who knows who. So the long story short is Congress passed a bill that basically said that can no longer happen. And that's coming in, Jason, Andrew, I don't know the exact date. It's quick, this week that's coming out. So it helps us on the front end of the quality of our traffic because now you don't have our clients when they're giving their firm offers to the consumers, it's not triggering like 50 calls on the back end. So like that will really help the consumer experience and the quality of our leads to our direct clients. Secondly, how it helps us, there's a lot of buyers of these trigger leads that will no longer be able to buy these leads. And so we think that will drive many companies to come to buy these consumers on the front end from the likes of us, which should help our monetization. And I'm sorry, Jed, what was your second question around insurance? Jed Kelly: Just are we kind of entering this period, like the predictability following like last 5 years of a decent amount of volatility? Scott Peyree: Yes. I think the short answer there is yes. It seems not that there is -- I mean there will always be some level of carriers leaning in and leaning out, and that's why we manage a large network and keep all of that. But I do feel like the past 2 quarters has been -- there's been a lot more stability than maybe the previous 8 quarters were, and I expect that to continue. And I expect the changes in geographic targeting, demographic targeting, total ad spend to be a lot -- a lot lower swings than they've been in recent history. Jason, do you have anything to add to that? Jason Bengel: Yes. Yes, I agree. I would just add on like the market will be less defined by 2 carriers, I think, as we progress throughout 2026. As we said, we saw a lot of strong growth from the next 7 carriers. And so as it becomes more competitive, as more carriers really start to come into the market and play a more prominent position in our market, we'll be less defined by a smaller number of carriers. So that should help with predictability. Jed Kelly: And can I just sneak one more in? Jason Bengel: Sure. Jed Kelly: Just we've had a drawdown in valuations in most of the sector. Can you just talk about -- I get wanting to get your debt down below $200 million and potentially maybe do buybacks. But can you talk about just potentially the acquisition landscape where you've seen valuations come in quite a bit with what's been going on over the last couple of months? Scott Peyree: Sure. I'll start on that. And Jason, you can feel free to add in. I mean there's -- it is a big priority for us to bring down our total debt load and especially as a multiple. So we are very focused on continuing to do that and looking at that. Jed, as you said, with valuations coming down pretty significantly across the board, there's no denying that, that makes opportunities out there become a lot more interesting. Now it's always the classic. It takes 2 to tango, right? You deal with a scenario where some others out there view that their value is way below where it should be, and that makes them less interested in M&A sort of activity, which I totally understand personally. But yes, that could -- yes, could potentially drive -- because if it sustains over a longer period of time, could it potentially drive consolidation? I think absolutely, it could. Are we interested in it? Yes. Are we aggressively pursuing it at this point in time? No. Jason Bengel: Yes. I would just tack on our soft -- we had one-on-one soft call on our term loan. That was up in February. So we are free now to pay down debt at par. But kind of like we're saying here, like the uncertainty is significant out there. So right now, when you have that much uncertainty, like let's just hold on cash. And let's -- for at least the short term here, like let's -- we're not going to pay down debt, we're going to accumulate cash and maintain flexibility, just given how dynamic things are at the moment. Operator: Our next question will be coming from the line of Mike Grondahl of Northland. Mike Grondahl: Scott, if you could -- could you maybe talk about the visibility you have in the business today for revenue versus maybe 6 months or a year ago? Scott Peyree: Yes. Yes, sure. I mean I think the visibility for revenue in '26 is pretty solid. I mean I don't expect massive pendulum swings. I mean I do think our ability to drive more consumer traffic at an outsized pace will continue to drive revenue growth because I think I would say pretty much every industry we're in right now, if we have the ability to drive more quality consumers at the existing monetization levels, our clients will keep buying those consumers and wanting to get their products in front of those consumers. So it's -- I would almost argue our revenue is much more dependent now on our ability to continue driving more and more consumers to our network than it is on clients opening up a lot more budget. And so that does go to like creating more predictability in the revenue. Mike Grondahl: Got it. And on the mortgage side, not home equity now, but sort of mortgage purchase and refi, how close are we to a tipping point? I think last quarter, you talked about maybe 5.75%. Just kind of what's your thoughts there? How should we handicap that? Scott Peyree: Yes. I mean it's still -- it's nice seeing a 5 handle on the 30-year rate right now. I mean that feels good. it's still too high to really drive a lot of consumer traffic on specifically the refi side, home purchase -- home purchase can be a lot more around just there's a lot bigger affordability issues more than just pure interest rates. But I mean, there's still like -- when people are stuck -- when people sit on a 2.5%, 3% interest rate, it's hard to convince them to go and buy a new house at a 6% rate or 5.98% or whatever it is. But I do think 5.75%, as we've mentioned on previous calls, that is where you really start to see the snowball start to build, where -- and there's -- the mortgage industry has lots of metrics that you can look at as well. But like the 5.75% is really where you have more and more homeowners "in the money" on a cash out refi. And then 5.5 -- at 5.5%, it really starts to build. And then if you get below 5%, it can really start being a tidal wave. But I mean I think we're a ways away from that. So hopefully, that answers your question. Operator: And our next question is a follow-up. from the line of Youssef Squali of Truist Securities. Youssef Squali: Scott, I think in the letter you mentioned something to the effect that partners were not incentivized to provide actionable quotes for automated bots. And I think you singled out insurance. Can you maybe just expand on that a little bit, please? Scott Peyree: I mean I want to just -- I mean insurance is a big one. I want to just single out insurance. I think there's a number of levels where there's incentivation to do it and then I would also say there's capability to do it. Starting on the incentivation front, and it's like you don't need AI or agentic AI for like these insurance companies, for example, they could have made their actuarial tables available as a commodity 20 years ago to Google if they wanted to. There was nothing stopping it from being embedded, but they've just -- they've built big brands. They consider their rate information probably the most proprietary thing that they have as a company. And so they have always been always, not just recently, extremely resistant to any sort of bot, agentic or not, like coming in and accessing their rate information. And they -- all indications in our conversations is they -- I mean, they're very profitable. They are offering rates direct to consumers that they want to and writing a lot of policies and there's no real incentive or desire for them to really open the kimono there at the end of the day. And then there's a lot of insurance carriers that just simply aren't -- you go to their website today, you could not get a rate online. I would say the majority of carriers are that way. Those basically say like, hey, we're going to connect you to an agent or a call center rep, but you got to talk to someone over the phone or in person to get a rate. And a lot of that's just simple capabilities, technical capabilities of providing rates. And I -- and you go into the lending world, there's a lot of similarities in the lending world. A lot of our -- like small business lenders, for example, they don't even write direct to merchants. They write loans through brokers like us. So it's like deep API logged-in access we have to get their loan information, like these consumers won't even know that these companies exist outside of talking to us to get a loan. So I mean -- so there's a bunch of hurdles from that side where I just don't think agentic AI overlay on going out and filling out a bunch of forms is really going to solve any consumers' problems anytime soon. in these industries specifically. you take like real estate, there's a lot of publicly available information there. So it's a little easier to implement like a ChatGPT app there. Operator: And I'm showing no further questions. I would now like to turn the conference back to Scott for closing remarks. Scott Peyree: All right. Thank you, everybody, for joining, for all of your questions today. I hope we've given you a helpful context around some of the incredible opportunities we're working on to enhance the marketplace. We're very excited about our path ahead and look forward to connecting with you again soon when we report our first quarter earnings. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Riot Platforms Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please also be advised that today's call is being recorded. I would now like to hand the conference over to Joshua Kane, Head of Investor Relations at Riot Platforms. Please go ahead. Joshua Kane: Thank you, operator. Good afternoon, and welcome to Riot Platforms Fiscal Year 2025 Earnings Conference Call. My name is Josh Kane, Head of Investor Relations. And joining me on today's call from Riot are Jason Les, Chief Executive Officer; and Jason Chung, Chief Financial Officer. On the Riot Investor Relations website, you can find our fiscal year 2025 earnings press release and accompanying earnings presentation, which are intended to supplement today's prepared remarks and which include a discussion of certain non-GAAP items. Non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP and are included as additional clarifying items to aid investors in further understanding the company's fiscal year 2025 performance. Forward-looking statements may include, but are not limited to, statements that predict future events or trends, forecast for performance and may contain words such as believe, expect, intend, project, plan, words or phrases with similar meaning. Actual results could materially different due to factors discussed in today's earnings press release and comments and responses made during today's call and in the Risk Factors section of our Form 10-K for the year ended December 31, 2025, which will be filed later today as well as other filings with the Securities and Exchange Commission. With that, I will turn the call over to Jason Les, CEO of Riot Platforms. Jason Les: Thank you, Josh. 2025 was a transformational year for Riot Platforms. It was the year we fundamentally repositioned this company to be at the forefront of the data center industry. Today, I am exceptionally proud to share the significant milestones we have achieved and outline the path forward as we continue executing on our strategy to maximize the value of our power portfolio for shareholders. Riot has evolved from a Bitcoin Mining company with data center potential into a proven data center developer with a track record of rapid execution. I'd like to take a minute now to walk through some of the key achievements that made 2025 truly transformational for Riot. We completed the fee simple acquisition of our Rockdale site, securing 200 acres of critical land now under our full ownership. We also completed our basis of design platform that positions us to deliver data center capacity at the scale and speed the market demands. We built substantial internal expertise by recruiting veteran data center talent across every critical function. Our team now includes leadership across product development, construction, engineering, sales and marketing with collective experience completing over 200 data center projects totaling nearly 4.8 gigawatts of design and construction experience. This depth of experience is critical. It's what enabled us to give prospective tenants confidence in our ability to deliver mission-critical infrastructure on aggressive time lines. Data center development talent is in high demand, and we are incredibly proud of the depth of capabilities and experience that we have been able to attract to Riot. The quality of our data center team is a critical advantage in ensuring that potential tenants and partners are confident in our ability to deliver at scale. We have also significantly expanded our land portfolio to support full utilization of our approved power capacity. We acquired 3 additional parcels adjacent to and near our original Corsicana site, bringing our total land footprint at Corsicana to approximately 900 acres. This acquisition simplifies and expedites the planned development of our full 1 gigawatt of approved power capacity at Corsicana, all on Riot-owned land in a connected campus layout. In the fourth quarter of 2025, we closed on the previously leased 200-acre Rockdale site for a total consideration of $96 million, funded entirely through the sale of approximately 1,080 Bitcoin from our balance sheet. This purchase was a strategic imperative, converting our interest from a ground lease to full ownership unlocked our ability to develop data centers at Rockdale and eliminated approximately $130 million in future rental payments that would have been due over the remaining lease term and extension options. And finally, we completed our standard basis of design, which was a critical step in engaging potential tenants on both technical and commercial discussions. Together, these achievements have positioned Riot for substantial data center development in 2026 and beyond. On the leasing front, we announced our first lease with AMD in January of 2026, demonstrating Riot's capabilities as a credible developer and operator. When a company of AMD's caliber chooses Riot for mission-critical infrastructure, it sends a clear signal to the market about the strength of our capabilities and our team. Our focus for 2026 is clear: one, the delivery of the full 25 megawatts of compute for our AMD lease; two, executing on additional leases at both Corsicana and Rockdale, beginning with the development of our first core and shell at Corsicana; and three, secure attractive low-cost financing that reflects the quality of our tenants and sites. We now have active discussions ongoing with multiple high-quality tenants who have expressed strong interest at both our Corsicana and Rockdale sites. The absolute certainty to large-scale power our sites offer is incredibly rare in today's market and has led to numerous interested parties actively engaging. Our sales strategy accommodates leasing outcomes that result in either single tenant or multitenant campuses at both locations, maximizing our flexibility. On the development front, our execution is already speaking for itself. We delivered the initial phase of power capacity to AMD on time and on budget, and we are already generating revenue. In an industry where delays are common, delivering on time to a world-class tenant is a powerful validation of our execution capabilities. Core and shell development is underway and progressing at Corsicana. Our Corsicana substation expansion remains on schedule with total power capacity reaching 1 gigawatt over the next 12 months. On capital management, Riot is maintaining a disciplined front framework to efficiently fund our data center business. We are activating our strong balance sheet to fund upfront development costs without relying on dilutive equity financing. We will efficiently access project finance and debt capital markets to deliver on high credit quality leases. Upon stabilization of our assets, we plan to refinance with permanent debt to recycle capital into higher return projects, creating a compounding flywheel of development. Initial work is underway to assess financing options for the AMD lease, including additional capacity for future potential expansions in anticipation of AMD exercising their options. Moving to Slide 8. I want to underscore the philosophy driving our leasing strategy. We are not simply looking to fill capacity. We are focused on strong high creditworthy tenants to match our high-quality assets. The reason for this focus comes down to capital efficiency and asset valuation. In the digital infrastructure space, cost of capital is highly correlated to the credit quality of the tenant, often pricing off the back of their underlying credit rating. By partnering with highly creditworthy counterparties, we secure the most favorable, lowest-cost financing available in the market. This minimizes our equity investment requirements and maximizes our return on invested capital. From a capital markets perspective, this also drives premium valuation multiples, leading to significant value creation for our shareholders. The AMD lease serves as a validation of our strategy. AMD is a global leader in the AI ecosystem with an S&P credit rating of A and to have a tenant of AMD's caliber entrust Riot to deliver mission-critical infrastructure sends a definitive message to the broader market. This message is that our team, our sites, and our execution strategy are operating at the highest possible level and this paves the way for ongoing discussions with other high-quality partners. Now I'd like to pause and highlight the importance of the achievement that Riot has made. We have successfully commenced Phase 1 of the AMD lease on schedule in January and remain on track to deliver Phase 2 as planned in May. This execution validates the capabilities of our data center team and demonstrates our ability to meet the demanding time lines of premier technology tenants. The speed of our execution was remarkable. We announced the lease in January and delivered the first phase of capacity within the same month, which is something that traditional greenfield developers simply cannot match. We are delivering capacity in 2 phases to derisk execution. The first 5-megawatt phase was delivered and commenced rent in January of 2026. The remaining 20 megawatts will follow in May 2026, bringing the total initial deployment to 25 megawatts of critical IT load. The capital required for this initial deployment is approximately $90 million, which translates to roughly $3.6 million for critical IT megawatts, significantly below what traditional new build projects typically require. The expansion potential is significant. AMD holds an option to expand by an additional 75 megawatts of critical IT load, which can be accommodated within the remainder of Building G and Building F using the same capital-efficient retrofit model. Beyond that, AMD holds a right of first refusal on an additional 100 megawatts of capacity. If AMD were to fully exercise both the expansion option and the ROFR their total footprint at Rockdale would reach 200 megawatts of critical IT load. This slide reviews the key terms of our previously announced deal. With this lease, we have entered into a 10-year agreement to provide customized data center space at our now fully owned Rockdale site. The lease includes 3 5-year extension options, creating the potential for a 25-year partnership. From a financial perspective, the total contract value for this initial 25-megawatt deployment over the 10-year base term is $311 million. We expect this to generate average annual net operating income of approximately $25 million, representing highly visible contracted cash flows with an investment-grade counterparty. Our Power First strategy underpins everything we do at Riot. The majority of Riot's operating power capacity is currently monetized through Bitcoin Mining, which generates strong cash flows to support our operations and development activities. Going forward, we will continue to convert power capacity and pursue data center leases that maximize value for our shareholders. The AMD lease demonstrates this strategy in action. We leveraged existing infrastructure to deliver at speed and at scale, translating into highly profitable and predictable long-term contracted cash flows with an investment-grade counterparty. The economic comparison is compelling. The AMD lease generates 2.5x more gross profit per megawatt than Bitcoin Mining. This economic framework will guide our capital allocation decisions going forward, where we can generate higher risk-adjusted returns through data center leasing with creditworthy counterparties. We will prioritize data center development, where Bitcoin Mining remains the highest and best use of our power, we will continue mining while remaining flexible to convert that capacity to data center use. Slide 14 highlights the significant scale and quality of Riot's power portfolio in Texas. Riot has 1.7 gigawatts of fully approved firm power across our Corsicana and Rockdale sites. This is not a prospective pipeline or speculative capacity, but rather power that is in use and available for development and utilization today. At Rockdale, we have 700 megawatts of total approved capacity. This power was originally approved in the fourth quarter of 2019 and energized in the second quarter of 2020. In fiscal year 2025, we had an average load of 351 megawatts at Rockdale. The site features a direct non-interruptible evergreen connection to the grid with no intermediaries between Riot and the utility, supported by a 700-megawatt substation already on site and operating. At Corsicana, we have 1,000 megawatts or 1 gigawatt of total approved capacity. This power was approved in the fourth quarter of 2022 and energized in the second quarter of 2024. In fiscal year 2025, we had an average load of 335 megawatts at Corsicana. The substation expansion remains on schedule to deliver our full 1 gigawatt of capacity over the next 12 months. Both Rockdale and Corsicana are fully approved sites with firm power located in some of the most attractive data center markets in the country. This distinction gives us a major competitive advantage in today's power constrained environment. Current time lines to procure new power within the Texas triangle are estimated at 4 or more years. So having large-scale energized power today in the right locations is extraordinarily valuable. This scale of energized power is an extremely high demand asset and forms the foundation of our financial profile. I will now turn the call over to Jason Chung to present our fiscal year 2025 financial update. Jason Chung: Thank you, Jason. For fiscal year 2025, I am excited to present Riot's financial results, which demonstrate both the strength of our operating model and the significant progress we have made in positioning the company for long-term value creation. For the full year, Riot reported total revenue of $647 million, representing a 72% increase year-over-year. This substantial growth was driven primarily by strong performance in our Bitcoin Mining business, which contributed $576 million or 89% of total revenue and supported by our Engineering and other revenues, which contributed an additional $71 million or approximately 11% of total revenue. Our Bitcoin Mining business achieved its highest annual revenue and gross profit on record with fiscal year 2025 revenue of $576.3 million and gross profit of $294 million when including power curtailment credits. This performance reflects the scale and ongoing efficiency improvements in our operations, including our industry-leading power strategy. Net loss for the year was $663 million or $1.95 per diluted share. Now it's important for investors to understand the components behind this result. This net loss reflects several significant noncash charges and mark-to-market pricing adjustments on Bitcoin held on our balance sheet, including depreciation and amortization expense of $346.8 million, stock-based compensation expense of $125.7 million, a $158.1 million loss on contract settlement with Rhodium and unrealized mark-to-market adjustments on our Bitcoin holdings of $115.9 million as required by FASB accounting standards. Non-GAAP adjusted EBITDA for the year was $13 million when adjusted for noncash and unusual items. Non-GAAP adjusted EBITDA eliminates the effects of certain noncash and nonrecurring items that do not reflect our ongoing strategic business operations. and provides investors with a clear view of our underlying operational performance. Our net cost of power for 2025 was $0.037 per kilowatt hour, representing one of the lowest power costs in our industry. Our power strategy generated power curtailment credits totaling $56.7 million for the full year, equivalent to nearly $10,000 per Bitcoin mined. This power strategy remains a critical competitive advantage for Riot. Turning to our Bitcoin Mining operational metrics. We produced 5,686 Bitcoin during 2025, equivalent to production of 15.3 Bitcoin per day on average. This represents an 18% increase compared to the 4,828 Bitcoin we produced in fiscal year 2024. We ended the year with 18,005 Bitcoin on our balance sheet with a year-end value of $1.6 billion based on the closing price of $87,498 per Bitcoin on December 31, 2025. Our hash rate deployed reached 38.5 exahash by year-end, accounting for approximately 3.5% of the global network hash rate. This represents a 22% increase from the 31.5 exahash we ended fiscal year 2024 with, approximately matching the pace of global network hash rate growth and maintaining our significant share of the overall network. Our cost to mine per bitcoin was $49,645 for 2025. While this increased from $32,216 in 2024, it's important to contextualize this in the broader industry environment. The average global network hash rate increased 47% year-over-year, from 630 exahash to 923 exahash. Despite the significant increase in network difficulty our vertical integration and power strategy continued to drive industry-leading cost efficiency relative to our peers. Hash rate utilization averaged 87% for the year, a significant improvement from 70% utilization in 2024. This improvement reflects the operational excellence initiatives our teams have implemented across our facilities. Our Engineering business continues to demonstrate significant strategic value for Riot and represents a key component of our vertical integration strategy. Engineering backlog reached a record $224.6 million at the end of 2025, up dramatically from $55.9 million at the end of 2024, representing a 302% increase over the course of the year. The data center sector represents 90% of our current backlog, reflecting both the strength of industry demand and the positioning of our Engineering business to capture it. ESS Metron manufactures low- and medium-voltage switchgear and power distribution centers. These are components that are essential for data center development and power distribution. As industry analysts have noted, transformer and switchgear lead times have quietly become one of the defining constraints in modern data center development. These are the hidden bottlenecks shaping 2026 project schedules industry-wide. Our Engineering business creates significant operational advantages for Riot. By vertically integrating the manufacturing of these critical components, we reduce procurement risk improve speed to market and maintain control over equipment that is in short supply across the industry. Additionally, our servicing and maintenance expertise improved start-up and commissioning processes, enhances uptime, and extends the life cycle of our equipment. This work generates significant CapEx savings across Riot platforms development activities. Since our acquisition of ESS Metron in December 2021, Riot has already realized $23.2 million in cumulative CapEx savings on equipment purchases alone. And we expect these synergies to continue to scale as we expand the scope of our data center development further. With that, I will now turn the call back over to Jason Les to discuss how all this translates to Riot's valuation rerating opportunity and our path forward. Jason Les: Thank you, Jason. Slide 19 presents enterprise value per megawatt multiples across selected peers in our sector, which we view as a useful lens for how the market values power portfolios today. Riot currently trades at approximately $2.2 million for 2027 available megawatt. This represents a significant discount compared to peers with signed data center leases despite us having 1 of the largest fully approved and readily available power portfolios in the industry. We do not just view this as a discount. We view this as a clear road map for shareholder value creation. The signing of our AMD lease is the first milestone towards a rerating of the underlying value of our power portfolio from a data center perspective. As we continue executing our data center strategy and converting additional megawatts into contracted data center leases with creditworthy tenants, we anticipate the market will increasingly rerate the value of our assets leading to multiple expansion on our valuation. I want to conclude today's call by reinforcing why we believe Riot is uniquely positioned to create substantial long-term value for our shareholders. The opportunity in front of us is significant. Data center demand continues to grow rapidly, driven by the AI revolution and the accelerating need for high-density compute. At the same time, power remains the binding constraint with time lines for new capacity extending further every year. Riot is on the right side of both of these trends. We control one of the most compelling fully approved power portfolios in North America located in exactly the right markets and available for development today. Our Rockdale and Corsicana campuses with a combined 1.7 gigawatts of firm energized power, give us a scalable strategic platform that is exceptionally difficult to replicate. As we execute our strategy, we are aiming to systematically convert that power into long-term contracted data center cash flows with creditworthy tenants. The AMD lease is an important proof point of this approach. It validates our team, our sites and our development model, and it is the first step in building a diversified portfolio of high-quality leases that can support potential portfolio NOI in the range of $1.6 billion to $2.1 billion upon full buildout. Our focus from here is clear, continue to execute with discipline, deepen and expand our tenant relationships, secure attractive long-term project financing and recycle capital into the next wave of development. As we demonstrate repeatable execution of this model, we expect the market to increasingly recognize the quality and scale of our platform and to rerate Riot valuation to better reflect the strength of our underlying assets and contracted cash flows. We are in the early innings of transforming Riot into one of the most meaningful digital infrastructure platforms in the industry. On behalf of our entire management team, I want to thank our shareholders, our partners and our employees for their continued support as we execute against this opportunity. Before we open the line for questions, I would like to take a moment to recognize an important leadership transition at Riot. First, I want to sincerely thank Colin Yee for his leadership and service as our Chief Financial Officer since 2022. Colin has played a vital role in strengthening Riot's financial foundation, building out our internal reporting infrastructure and guiding the company through several key phases of growth. We are grateful that Colin will continue to support Riot as a senior adviser, and we look forward to benefiting from his counsel as we execute on our long-term strategy. At the same time, I am very pleased to officially welcome Jason Chung as Riot's new Chief Financial Officer. Jason joined Riot in 2022 as our Head of Corporate Development and brings nearly 2 decades of experience in investment banking and corporate finance. And he has already been instrumental in shaping our capital market strategy, corporate development, and investor relations efforts. Consolidating our finance and strategy functions under Jason's leadership will further align our capital allocation framework with the growth ambitions of our data center platform. With that, we will now open the call up for questions. Operator? Operator: [Operator Instructions] Our first question comes from Paul Golding with Macquarie. Paul Golding: Congrats on all the progress with delivering the first 5 megawatts. I wanted to ask, around the AMD lease and how things are progressing there, have you come away with any best practices or interesting takeaways like gating factors on conversion with the first 5 megawatts that you're putting to work on the next phase of delivery. And maybe as part of that question, how conversations may be progressing with the expansion and right of first refusal with AMD? And then I have a follow-up. Jason Les: Thanks for the question, Paul. So I would say the first key lesson is a validation of our commercial approach where we start the conversation with a discussion and understanding of what our customer is looking for and exactly how we're going to deliver that. We think that is an important foundation for approaching these discussions so that we ensure that we can deliver exactly what the customer is looking for on the timeline that they need. So I would say that was the approach that we took with AMD and the fact that we've been able to deliver on such an aggressive timeline is validation of that. I think another thing it validates is the strategic advantage of our internal engineering capability. A huge part of how we were able to deliver for AMD on such an accelerated timeline was the fact that we have the internal capability to engineer and manufacture low medium voltage switchgear and other important power components for data center development. So Riot's ESS Metron was one of the biggest suppliers to the development for the capacity that we are leasing to AMD. So I would say it's more of a validation of our approach than anything. And it is a playbook that we are looking to take for -- to the rest of our pipeline and employ that same playbook, the same strategy to ensure that we are giving our customers what they want, and we are meeting the timelines that we agreed to. As far as expansion goes, I don't want to comment on specific discussions, but I would say that we are very encouraged by our partnership. I believe that delivering on the initial 2 phases on our aggressive timeline is an important step in growing that partnership. The way we think about the AMD relationship is not a one-off deal. We are aiming to build a sophisticated long-term infrastructure partnership with a well-capitalized and high creditworthy company, such as AMD, as they build out infrastructure to support their AI road map. And the only way that we can build that partnership is if we deliver and meet our commitments to our customer AMD. So that's what we're focused on there. And of course, if expansion options are realized in the future, we'll be updating the market on those -- when those announcements can be made. Paul Golding: And then you did mention that you're in discussions on financing. I guess given all the commentary in the marketplace around private credit, how are discussions progressing? Any additional color you could provide would be super helpful on available liquidity in the marketplace, cost of capital or anything around that? Jason Les: Sure. I'll turn that question over to Jason Chung, our CFO. Jason Chung: Thank you, Jason. We've been actively engaging with a number of different banks across the board and of course, have been keeping a close eye on developments in the debt capital markets in parallel. I think when we think about the AMD lease itself, we're really talking about 2 distinct risk profiles within the same lease. There's the initial stabilized portion of the deployment and second to that is the future expansion option itself. And so when it comes to the first portion, that's stabilized deployment, we anticipate that given the highly predictable contracted cash flows of the initial 25-megawatt deployment backed by AMD's strong credit. We think we can get a really low cost of capital that essentially removes the development or execution risk that lenders would typically price in. Then when it comes to the second portion on the expansion option that could potentially be structured as sort of a separate delayed draw type facility, specifically intended to support AMD's 75-megawatt expansion development. So by separating these 2 distinct credit profiles, what we're able to do is avoid paying a blended sort of construction premium across the entire facility. And so we think that will really result in 3 particular outcomes. The first is we should be able to get a significantly lower overall cost of capital on a facility like this. The second is that it will allow us to pull out our initial equity and the third is that will enable us to efficiently recycle that capital to finance additional growth CapEx in the future. So when it comes to discussions with the banks right now, this is where our primary focus is on we're seeing an incredible amount of liquidity and depth in the project finance markets. And we think that the interest in exploring an opportunity to partner with Riot on this type of facility is very strong. Operator: Our next question comes from John Todaro with Needham & Company. John Todaro: Congrats on the progress with AMD and then also some of the additional stuff going on at Corsicana. I was wondering if we could just drill a little bit more into that leasing pipeline, the demand environment, how those conversations have evolved and kind of any timeline guardrails or just how advanced those discussions are? And then I have a follow-up as well. Jason Les: Sure, John. So kind of set the stage, we have 1.7 gigawatts of approved power capacity in Texas. And as we see the industry develop, that asset becomes more scarce and more appreciating. So our responsibility here to shareholders is to maximize the value of that capacity, and that's what we're focused on. I want to zoom out and take a look -- reflect on the road map that we've been on. On our second quarter '25 earnings call, we outlined that the next step we were doing was completing our basis of design, and that would lead to technical discussions with the market. And then on our Q3 '25 earnings call, we shared our basis of design that had been completed and that we were initiating technical discussions, engineering discussions with various customer segments out there. We've done that. We've been able to enhance our design as a result of those discussions. And now we are in the commercial phase. We are in active conversations with multiple parties. That's across hyperscaler, enterprise, neocloud and AI customer segments. The AMD deal validated us as a credible counterparty. And I'd say that has materially increased the quality and the seriousness of the inbound interest that we've received. Now of course, it's difficult to predict the exact timing for leases. We are preparing these deals can go through different phases. We've heard our peers talk about it's stopping and starting -- starting and stopping with various different deals before they got to the final one. But we are absolutely targeting additional announcements in 2026. We believe we are incredibly well positioned to execute on that, and we will disclose more details when we are in a position to do so. John Todaro: That's great. That's very helpful. And I know from the prepared remarks, you said these sites could go single tenant or multi-tenant, is there a preference from you guys? Do you want to kind of mix in a couple of these different segments or hyperscaler does have demand for the whole thing? Would you prefer that? Jason Les: Yes. That's a good question. In the prepared remarks, what we wanted to highlight is that we have the flexibility here. The way our campuses are laid out, they can be single tenant or they can be multi-tenant campuses. We have optionality to maximize the value of our assets here. And that being said, our focus is on high creditworthy counterparties. And in Corsicana, for example, while we have the flexibility to accommodate multi-tenant, I can tell you all of the real interest so far from potential customers has been for the entire site. So I tend to believe that is the most likely outcome for a leasing scenario at Corsicana. Perhaps it ends up being different in the end. Perhaps there's a mix at Rockdale. The important thing is getting good quality leases with good quality counterparties and we have flexibility in how we put that together to end the -- to create the final tenant composition of a site, whether it's one or more tenants. Operator: Our next question comes from Reggie Smith with JPMorgan. Reggie, your line might be on mute. Our next question will come from Mike Grondahl with Northland. Mike Grondahl: With all the questions around ERCOT recently. I believe Riot's power is approved at Corsicana. But can you confirm that. And then secondly, does ERCOT's batch process affect Riot in any way going forward sort of positively or negatively? Jason Les: Thanks for the question, Mike. So the short answer to your question, the power at Corsicana has been completely approved. We received that approval back in the fourth quarter of 2022. So that site is in operation, received the approvals back then, and we are fully available to scale up to our 1 gigawatt from there when we're ready. The batch process does not impact Riot. The new ERCOT batch process that was proposed, not implemented, pertained to loads that had been in different stages of the planning or approval process already before final approval and certainly before energization. So that would affect new sites that have not been energized would not impact Riot sites that have been approved for years and have already been in operation. So we think that just further validates the value of these sites, the fact that they're already approved, and we don't have that same level of risk for them. Operator: Our next question comes from Stephen Glagola with KBW. Stephen Glagola: Just a quick one for me. On the financing side, can you just talk about how Bitcoin sales are going to continue or not continue to play a role in funding the CapEx going forward here. Jason Les: Thanks, Stephen. I'll turn that over to Jason Chung. Jason Chung: Thanks, Jason. On our financing plan, our funding hierarchy, if you will, starts with the Bitcoin treasury. So in addition to selling all of our ongoing Bitcoin monthly production, we have and will continue to sell Bitcoin directly from our balance sheet in order to fund our operational needs and growth CapEx. So one clear example of this was when we announced the acquisition of the Rockdale site, the $96 million consideration was funded entirely through the sale of nearly 1,100 Bitcoin off the balance sheet, and we'll continue to do so going forward. That being said, our strategic evolution towards data center development also opens up access to new pools of low-cost capital. So you should expect to see us look to tap into these lower cost non-dilutive debt structures as well to fund our build-out in conjunction with our Bitcoin sales off the balance sheet. We believe this combination is the most accretive financing strategy for our shareholders going forward. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Yes, I want to commend Colin and congratulate you, Jason Chung on your appointment. My question was really just how you're thinking about M&A of new sites and how that could have shifted recently? Have these aircraft developments change things. Some of your peers are either talking about and have already taken action towards adding generation capabilities on site. So is that something you'd consider? Or are you really only interested in opportunities with greater interconnection are ones that really don't require you to operate the generating assets. Jason Les: Nick. So thanks for the question. As far as developing pipeline goes, there's a question earlier about the ERCOT batch process. Besides that, we've seen it becoming increasingly difficult for new grid interconnections to be approved. So that's to be a double-edged sword in our case. On 1 hand, that makes it harder to get new grid interconnections approved. On the other hand, it makes our massive existing portfolio already that more valuable. And so when we think about our pipeline, the first thing that we're mindful of is we have a massive pipeline in front of us. We have nearly 2 gigawatts, 1.7 gigawatts just between Rockdale and Corsicana, 2 mega flagship sites that we're able to act on. That is an enormous value creation opportunity for Riot in and of itself. That being said, we are thinking for the long term. We're not just trying to monetize 2 sites here, we are building a durable platform, like, durable data center business, and we want to have a repeatable process for future sites. We repeat the process like we've demonstrated with AMD. We have been evaluating an enormous amount of opportunities. You can imagine, there's lots out there. It goes through a very intensive process within our organization, and we filtered down to a few, and we are now involved in several active processes to acquire potential new developments. But I think you raised a really good point on generation. I think the environment that we're in, where it's difficult to procure additional power capacity means that you need to be more creative in how you are solving that problem. It can't just be relying on grid power. The future of this industry is clearly bringing your own power. That is an area where I think Riot has a tremendous advantage, a lot of our engineering team and operations team come from a generation background. So I can tell you this is something we are looking at very closely and taking very seriously and using all of the resources at our disposal to help build that durable pipeline for us to continue replicating our success on. Nick Giles: Jason, appreciate that perspective. My second question was you've proven your ability to generate revenue very quickly through the AMD contract. That being said, there's still a really high degree of urgency in the market around other megawatts. So my question is really, are there ways that you could accelerate the ultimate energization of data center megawatts in either asset? And we kind of have the 112-megawatt target at Corsicana, but can you give us a sense for maybe how many kind of energized data center megawatts could be brought online by '27. Jason Les: Yes. Nick, the very reason that we initiated on that core and shell development without a lease in hand was to ensure that we could deliver capacity starting in 2027 and be very competitive with our offering there. Those first 2 buildings, that is just the beginning. We are obviously in a commercial process and we are looking -- we are out there marketing and attempting to lease the entire site. And ultimately, we'll have a build strategy reflective of what our customer requirements are. But we have these processes underway. To further enhance our ability to deliver timely, we have begun procuring long-lead equipment. In fact, we procured most of the more supply-constrained long-lead equipment that you would need for those first 2 buildings. So when we are having commercial discussions, it's not about 112 megawatts. It's about how we are delivering the full capacity, the 1 gigawatt of utility load available at that site, and those are just the initial parts of that deployment, but we are ensuring we can be very competitive with the delivery time line. Nick Giles: Great. Well, I appreciate all the detail and keep up the good work. Operator: Our next question comes from Reggie Smith with JPMorgan. Reginald Smith: My first question is kind of a follow-up to the last point you made, Jason. Obviously, you guys have a massive site that's right outside of Dallas, and your peers have talked about, I guess, contract terms and discussions seem to be getting better where operators are getting better and better economics. A question for you is thinking about that site and something that I've been telling investors for a while now. I kind of want to verify, your proximity to Dallas. Like is there a premium? Or can you extract or get a premium for that proximity, how do you think about valuing that element of it and even the size of the site. There aren't many gigawatt sites for sale or for lease rather out there. So how do you think about those features of your property and how you can price for that. Obviously, you're dealing with top-tier tenants, and there's some negotiation back and forth there. But anything you could share about like how you guys think about that and how it should show up in any deal that you may sign? Jason Les: Yes, Reggie, thank you for the question. So the attributes of the sites, the sizes, the proximity to Tier 1 markets, Corsicana in particular, it is not as much as an impact on deal economics. Well, I think there's some impact there. The bigger point is the impact it has on the types of tenants that we're able to attract there. The types of tenants that we want to enter into leases with, the types that we can get strong financing and the best valuation multiples off of, they are the tenants that are more selective on location, and they are looking to be placed closer to the Tier 1 markets. That, I think, is the biggest factor there is it's widen the doors of the conversations that we're able to have to the best names out there. Reginald Smith: Got it. That makes sense. And then if I could get one quick follow-up. Thinking about kind of milestones, both on the development side and even like contract discussions, what are some of the key things that maybe internally you guys are looking for on the contract side that lets you know that, hey, this is progressing. Maybe educate us on like how those discussions progress and play out. And then again, on the development side, like what should we be looking for over the next couple of quarters to let us know that, hey, the site's being developed on time, et cetera. So anything you can share there would be fantastic. Jason Les: Yes. So I think that's an important indicator of the serious discussions is how much they end up going to a technical product discussion and how quickly they do. I think that is a strong indicator of how serious the counterparty is with moving forward. That's what we've taken the approach that we have. We wanted to ensure that we had a technically sound offering a product that hyperscaler and high creditworthy investment-grade tenants we're looking for. So the level of technical interest, the level of details that we're getting into for us is a signal of the seriousness of what's going on. But we are very focused on leasing these sites with the right agreements as quickly as we can. So we've been cautious to keep our optionality open. We're engaging, obviously, with multiple counterparties at once to ensure that we can move along in a timely fashion and deliver high-quality outcome for shareholders as quickly as we can. Operator: Our last question comes from the line of Greg Lewis with BTIG. Gregory Lewis: Thanks for squeezing me in here. I guess, Jason, you mentioned that a few times on the call about the benefit of ESS Metron and that acquisition. I guess I'd be curious, it's clearly good to have that inside the portfolio. But as we try to think about the benefits of ESS Metron, is that -- could -- is that more of a speed to market? Or could we actually also see it potentially make projects more economically compelling, i.e., lower upfront costs maybe than some of your competitors? Jason Les: That's a good question, Greg. For us, the main benefit has been strategic and supply chain visibility. I touched on it on the earlier question from Paul about delivering from AMD. The only way that we were able to do that to deliver on that timeline that AMD needed was having this internal engineering and manufacturing capability, where we could develop a customized solution and prioritize that overall other work out there. No other third-party OEM would be able to do that for Riot or want to do that for Riot. So it has really changed the way in what we're able to offer solutions for customers. And I'll tell you, from the recruiting standpoint, building a high-quality team here is obviously very important for delivery and execution on the data center strategy, a lot of the talent that we've recruited has been particularly compelled and interested by the capabilities that we have with ESS Metron and E4A. So the people that live and execute this for us, they certainly see the benefit for this as well. So supply chain strategic, but there is a cost savings there as well. On one of our slides showed that since we've acquired ESS Metron, we've saved approximately $23 million on CapEx since that acquisition. We did that acquisition 4 years ago for approximately $52 million in consideration and we've nearly recouped half of that already just in CapEx savings. And that -- those savings have only been realized on relatively smaller scale Bitcoin mining developments and now this AMD development as well. When you talk about the broader development in front of us building out 1 gigawatt of utility capacity at Corsicana and eventually, all 700 megawatts of capacity at Rockdale. That's substantially more business than we've done with ESS Metron in the past. So presumably, the CapEx savings would even be more considerable over the term of that larger and longer-term project. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Jason Les for closing remarks. Jason Les: I want to thank all of our shareholders, investors, analysts for coming on to our call today. Appreciate all the questions, materials available on our website, and our IR team is available for any follow-up questions. We look forward to continue executing on the incredible opportunity in front of us, and we will speak with you again next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello. Welcome to Ouster's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. The call today is being recorded, and a replay of the call will be available on the Ouster Investor Relations website an hour after the completion of this call. I'd like to now turn the conference over to Chen Geng, Senior Vice President of Strategic Finance and Treasurer. Please go ahead. Chen Geng: Thank you, operator, and good afternoon, everyone. Thank you for joining our Fourth Quarter 2025 Earnings Call. Today on the call, we have Chief Executive Officer, Angus Pacala; and Chief Financial Officer, Ken Gianella. As a reminder, after the market closed today, Ouster issued its financial news release, which was also furnished on a Form 8-K and is posted in the Investor Relations section of the Ouster website. Today's conference call will be available for webcast replay in the Investor Relations section of our website. I want to remind everyone that on this call, we will make certain forward-looking statements. These include all statements about our competitive position and growth opportunities, anticipated industry trends, our business and strategic priorities, our operating expense targets, the impact of our recent acquisition, the development and expansion of our products and our revenue guidance for the first quarter of 2026. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause actual results and trends to differ materially from those contained in or implied by these forward-looking statements are set forth in the fourth quarter 2025 financial results release and in the quarterly and annual reports we file with the Securities and Exchange Commission. Any forward-looking statements that we make on this call are based on the assumptions as of today, and other than as may be required by law, Ouster assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. In today's conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed today is included in the financial results release. I would now like to turn the call over to Angus. Charles Pacala: Hello, everyone, and thank you for joining. I'll start with a brief recap of the quarter and review of our strategic priorities for 2025. Ken will cover our financial results in more detail before I close with our goals for 2026. The fourth quarter capped off a year of exceptional execution for Ouster. Our fourth quarter revenue of $62 million, including $41 million of product revenue, reflects the continued demand we see across our lidar business and represents our 12th straight quarter of product revenue growth. GAAP gross margin was strong at 60%, and we set a new quarterly record with over 8,100 sensors shipped, bringing physical AI to life across multiple applications, including warehouse automation, robotaxis and mapping. Our strong results are a testament to our disciplined execution across our business. This is supported by durable global growth drivers for increasing automation, efficiency and safety. These secular themes strengthened during 2025, a year where we set and executed on 3 strategic priorities: scaling the software attached business, transforming the product portfolio and executing towards profitability. First, we committed to scaling our software attached business. Software attached bookings more than doubled in 2025 and represented over 15% of our sensors shipped, which is up over 120% year-on-year. In addition, I'm excited to share that today, our in-house trained AI models are now running 24 hours a day at over 1,200 Gemini and BlueCity sites, spanning over 65 million square feet of roadways and facilities around the world. We are delivering physical AI at enterprise scale. We drove significant Gemini renewals, including a 7-figure annual license with a leading global technology company and secured landmark BlueCity agreements to accelerate the adoption of AI-powered lidar detection across Tennessee, Utah and New Jersey. This growth was driven by the increased capabilities of Ouster Gemini and BlueCity validating our continued investments in proprietary AI model training as well as the expansion of distribution partnerships across nearly the entirety of North America. Second, we set out to further transform our product portfolio. In 2025, we introduced powerful new features, unlocked greater performance and reshaped how our customers integrate, manage and utilize lidar data through a series of major software releases. We launched 4 new versions of our SDK, which included revolutionary new features. This included on sensor 3D zone monitoring, which is the first time perception logic has been embedded directly into 3D digital lidar. This feature supports collision avoidance warnings, deceleration and emergency stops and was the result of significant demand from customers. Many of the world's largest material handling companies are using this as a critical aspect in their collision avoidance technology. We also released real-time localization, empowering customers to track the position of their assets with centimeter level accuracy and implement features like geofencing and automatic speed limit enforcement without requiring the installation of expensive and complex infrastructure. We continue to strategically invest in our proprietary AI model training, leveraging real-world data to iterate, retrain, improve and deliver increased capabilities to our customers. Our breakthrough multisensor AI model powering Ouster Gemini and BlueCity is trained on millions of labeled objects collected from hundreds of sites around the world, spanning diverse environments and weather conditions. By dramatically improving detection accuracy, efficiency and long-term object identity persistence, we have unlocked new use cases, allowing us to support large-scale installations of 40 lidar sensors at a single site. We also advanced BlueCity features from prototype to real-world deployments with the addition of intelligent signal actuation, which catalyzes Ouster scaling across hundreds of intersections in 2025. Within Ouster Gemini, we released new features like Cloud Portal and Event Server. Gemini Cloud Portal allows customers to securely configure and manage deployments from any location, while Gemini Event Server creates a no-code environment that enables customers to build custom logic for applications like intrusion detection and zone occupancy without requiring heavy engineering. Finally, we made major progress in validating our next-generation L4 and Chronos custom silicon as we look to redefine what's possible with digital lidar. Our digital lidar road map continues to drive dramatic improvements in performance and reliability, reinforcing the core advantages of our architecture. Importantly, these breakthrough chips will power our next-generation sensors, which represent a major step forward in capability, scalability and value for our customers. These advancements are expected to more than double our current addressable market for lidar, unlocking new applications and expanding opportunities across each of our industry verticals. We're excited to share much more on this front soon. Our execution in 2025 aligned with our long-term financial framework, progressing us further on our path towards profitability. Our core business delivered on all target metrics for 2025. Excluding the benefit of royalties, full year product revenue increased by 32% year-over-year, and we successfully navigated a volatile macroeconomic environment and the headwind of tariffs to deliver 41% gross margin. We maintained our operating expense discipline even as we absorbed the operational and compliance requirements of a growing global business. We continue to have one of the strongest balance sheets in the industry, demonstrating our ability to achieve both high growth and financial prudence. I'll now turn the call over to Ken to discuss our financial results in detail. Kenneth Gianella: Thank you, Angus, and hello, everyone. As Angus mentioned, we closed fiscal 2025 with a strong finish, underscoring our continued operational execution. Our results demonstrate the resilience of our operating model and the disciplined financial management across the business as we continue to perform within our long-term financial framework, keeping us firmly on the path to profitability. Turning to the fourth quarter financial performance. Operating results were strong with revenue of $62 million, GAAP gross margin of 60% and shipments of over 8,100 sensors. During the quarter, we recorded royalties of approximately $21 million that were primarily onetime and related to long-term IP license contracts. These royalties demonstrate the strength of our IP portfolio. For 2026, total royalty revenue is expected to be less than $5 million, with the majority of that amount expected to be recognized in the back half of the year. Looking ahead, we expect additional royalty revenue to be relatively modest, and it will be included in our revenue guidance. Turning back to our fourth quarter results. Absent the impact of royalties, our fourth quarter product revenue was $41 million, representing an increase of 36% compared to the same quarter a year ago. The industrial vertical was the largest contributor to fourth quarter revenue, followed by robotics and smart infrastructure. Demand for our Gemini and BlueCity solutions remained strong and were important contributors to our quarterly results. GAAP gross margin of 60% reflected the impact of royalties, continued revenue growth in our digital lidar business and improvements in our operational performance. Royalties impacted our fourth quarter GAAP gross margin by approximately 20 percentage points. GAAP operating expenses were $37 million in the fourth quarter, a decrease of 6% from the same quarter last year. The decline was primarily due to a favorable employment tax refund received during the quarter. As we continue to focus on our path to profitability, we will remain diligent on managing our operating expenses. Adjusted EBITDA was a positive $11 million, which reflects the impact of the royalty payments. Next, our balance sheet continues to be one of the strongest in the industry, ending the quarter with cash, cash equivalents, restricted cash and short-term investments of $211 million and no debt. The strength of our balance sheet gives Ouster the strategic and financial flexibility to operate our business as it's also vitally important to our customers who rely on Ouster as a key physical AI partner on their long-term autonomy journey. Turning to our full year results. We generated revenue of $169 million, of which approximately $23 million was attributable to royalty revenue that were primarily onetime and related to long-term IP license contracts. This represents growth of 52% year-over-year or 32% excluding the impact of royalties. We shipped over 25,000 sensors, an increase of 48% compared to 2024, with help from record bookings of $177 million, delivering a robust product book-to-bill of 1.2x in 2025. GAAP gross margin was 49%, up 13 points year-over-year. Royalties contributed 8 points of gross margin. GAAP operating expense was $157 million, up 9% from $145 million in 2024. This reflects increased investment to support our product road map, expenses related to the StereoLabs acquisition and the implementation of operational and compliance tools that support our growing business. These expenses were partially offset by proceeds received from favorable employment tax refund. Adjusted EBITDA was a loss of $12 million compared to a loss of $42 million in 2024. This reflects the benefit of royalty revenue combined with the continued operational improvement of the business. Now turning to guidance. Our outlook for the first quarter of 2026, we expect to achieve total revenue between $45 million and $48 million. This will include approximately 7 weeks of revenue from StereoLabs following the close of the transaction on February 4. Next, I would like to add some color to our long-term financial framework following the acquisition of StereoLabs. While StereoLabs is currently a small portion of our overall revenue mix, we expect this high-growth, high-margin business to be accretive to our consolidated results and anticipate it to have a positive impact on our long-term financial framework. With the combined companies, we are reiterating our long-term targets of 30% to 50% annual revenue growth and 35% to 40% GAAP gross margin. This outlook reflects the continued strong demand from our digital lidar products layered with accretive growth profile of our new vision and compute portfolio. Our focus remains on driving towards profitability. By pairing sustained top line growth, strong margins and disciplined cost management, we remain firmly on our path to profitability. Finally, applying the long-term framework, let me give some color to the full year 2026. Excluding the revenue and gross margin impact of royalties in 2025, we remain confident in the combined Ouster and StereoLabs 2026 revenue and margin profile to be in line with our long-term financial framework when measured against the consolidated pro forma baseline in 2025. Going forward, we will be reporting revenues on a combined basis. However, for some additional context, I would note that StereoLabs' historical revenue has tended to be seasonally stronger in the second half of the year with approximately 60% of the revenue occurring during this period. Next, turning to GAAP operating expense for 2026 factoring in StereoLabs operating and integration expenses, we anticipate GAAP operating expense growth at 5% to 8% from our full year 2025 levels. We also expect our 2026 quarterly operating expenses to follow a similar quarterly profile as 2025. This outlook underscores the strength and durability of our digital lidar business, which remains firmly on track. As we scale the combined business, we anticipate growth, combined with improved operating leverage, provides a clear path to achieving positive operating free cash flow and profitability. Thank you for your continued interest in Ouster. I'll now turn the call back to Angus to discuss our goals for 2026. Charles Pacala: Thank you, Ken. Our execution on our 2025 goals has been further complemented by our recent acquisition of StereoLabs, a pioneer in AI camera vision and perception solutions. As we start the year, Ouster now offers physical AI's first unified sensing and perception platform, combining high-performance digital lidar with cameras, AI compute, sensor fusion and perception software and cutting-edge AI models. Our customers can harness the precision of lidar along with the richness of vision, powered by our combined investments in AI training. By delivering seamlessly synchronized and calibrated data out of the box, we simplify and accelerate customer development and reduce costs. StereoLabs also brings deep expertise in foundational AI model training and core perception functions, along with immediate commercial scale, adding top-tier OEMs, Fortune 500 companies and high-growth technology firms to our customer base. This acquisition strategically positions Ouster as the foundational end-to-end sensing and perception platform for physical AI and initial feedback from our customer base has been resoundingly positive. Our expanded portfolio is resonating with the demands of the market, and customers are excited by the strengthened support and operational capacity of the combined company. For 2026, our road map is built on 3 strategic priorities designed to compound our combined competitive advantages and accelerate our financial performance. One, revolutionize our lidar camera and AI compute products; two, extend our leadership in physical AI solutions; and three, execute to profitability. Our first goal for 2026 is clear: to revolutionize our lidar camera and AI compute products. This year, we will commercialize the most significant product overhaul in our company's history and release more products than ever before. Ouster invented digital lidar, and we will continue to advance the industry with next-generation sensors built on our custom silicon. This powerful digital lidar road map is built on silicon architecture that drives exponential improvements that compound over time, delivering industry-leading performance, reliability and scalability. Building on StereoLabs' legacy as a pioneer in AI vision, we will continue to develop leading-edge products designed to support customers building the future of physical AI. Our next-generation AI compute will support real-time reasoning at the edge for larger workloads that were previously too slow to run in dynamic real-world environments. We will also bring expanded connectivity features to our industry-leading camera portfolio to align with the market demands of our customers. Simultaneously, we will further unify our products to support plug-and-play sensor fusion. With the industry's first unified sensing and perception platform for physical AI, we are creating a one-stop shop for customers to deploy tightly integrated perception solutions out of the box. These product launches are expected to bring unprecedented new features to our portfolio, help us gain market share in billion-dollar brownfield markets and support new use cases across industrial, robotics, automotive and smart infrastructure. 2026 marks the beginning of a new era for our product portfolio, the broadest, most capable and most integrated lineup we have ever delivered to further accelerate real-world autonomy across industries. Our second goal is to extend our leadership in physical AI solutions, including cementing our lead in smart infrastructure and deepening our presence in industrial AI. We have already established a leading position in lidar power detection for transportation, security, logistics and crowd analytics with Ouster BlueCity and Gemini. In 2026, we are leveraging the partnerships we have built to further expand BlueCity across the United States as well as launch additional pilots in Europe and the Middle East. Following recent wins, we are deploying additional Gemini pilots for perimeter security in 2026 to tap into an existing multibillion-dollar security market. We are also aggressively targeting the industrial vertical, where we see a broad swath of opportunities that can quickly realize the benefits of the StereoLabs acquisition. StereoLabs is a perfect complement to augment Ouster's perception road map to meet physical AI's increasing demand for sophisticated multi-sensor fusion. By merging our proprietary AI models with StereoLabs' vision capabilities, we are delivering the specialized perception logic and application-specific software required to revolutionize safety and efficiency across the global supply chain. Finally, we will continue our operational execution as we drive towards profitability. Through a growing addressable market served by our expanded portfolio, disciplined cost management and clear operational priorities, we have a line of sight to deliver on our long-term financial framework. The strength of our digital lidar business, combined with the acquisition of StereoLabs, positions Ouster as the foundational sensing and perception platform for physical AI. By expanding our capabilities across the entire stack from sensors and software to specialized applications and AI modeling, we will continue to drive our business on a path of sustainable growth. We are uniquely equipped to accelerate customer development of solutions that sense, think, act and learn in the physical world. The era of physical AI is here and Ouster is powering it. With that, I'd like to now open up the call for Q&A. Operator: [Operator Instructions]. Our first question will come from the line of Colin Rusch from Oppenheimer. Colin Rusch: And I appreciate all the detail on the perception platform into the software side. And I guess that's the heart of what I'm interested in here is really looking at how you guys can quantify the pace of learning with those systems, obviously, with all these sensors deployed at various places, both on traffic lights as well as some of the perimeter sites. Just curious how quickly you can actually optimize those systems and really monetize some of that efficiency. Charles Pacala: Thanks for the question, Colin. Yes, this is a great point. So -- the idea of Sense, Think, Act, Learn is it's really a virtuous cycle of improvement and iterative development that has been embraced by any company that is doing cutting-edge AI development. You really have to iterate to your solution because of the massive amounts of data collection and retraining that are required to achieve cutting-edge safety-critical, capable physical AI and real-world deployments. And I can speak from experience now having over 1,200 sites deployed with this technology over the last couple of years across Gemini and BlueCity deployments that we see the pace of improvement accelerating over these last couple of years simply by investing in the machine that builds the machine, that iterative cycle of Sense, Think, Act and Learn, collecting data from the field, annotating it, retraining and building new insight into the capabilities of our system. It's an absolute acceleration. I think that you can measure it in how quickly you can deploy new versions of the product out to the field. We probably have another order of magnitude of iteration speed that we can still build into this set of products, specifically Gemini and BlueCity. And now the opportunity is both to continue that iterative speed of development on those products, but also to bring that iteration to our industrial AI and broader ecosystem. And that's where StereoLabs acquisition comes in, the ability to provide autonomous intelligent systems that are iterating very rapidly based on our core investments into machine learning training. So an order of magnitude at least to go and a brand-new greenfield opportunity in industrial AI to bring exactly that mentality to that product set. Colin Rusch: That's super helpful. And then I just want to get a sense of the trend lines in terms of customer engagement in the defense sector. Obviously, you guys went through the Blue UAS approval last year, and it's pretty topical now in terms of thinking about automated warfare. Just want to get a sense of how those engagements have trended over the last year or so and how quickly we might start to see a real inflection point on some of the revenue growth that seems like is pretty available to you guys here. Charles Pacala: Yes. I think here, I -- there's a lot of interest in the automation -- on the battlefield. But there's a big difference between what is happening today in Ukraine and -- which is robotics, but it's actually still human-controlled remote-operated vehicles and fully autonomous systems. Actually, there's a really wide gap. And so the sphere where we play fully automated systems is still in the research and development phase, whether it's in defense or just looking across our broader swath of customers, whereas what is fielded on the battlefield today is glorified remote-operated vehicles with increasing intelligence, but still they're remote operated vehicles. And so I think it's going to be a number of more years before there's a significant shift in that composition, just given the development cycles in defense. They roughly resemble the development cycles that happen in the automotive industry, for instance. It's more like that versus what we just talked about with rapid iteration in something like Gemini or BlueCity. So it's an important industry. It's one that Ouster is definitely plays in, and we have some great evidence of that, things like the Blue UAS certification for drone payloads. But there's a big divide between where the -- what exists today and the automation that is under development and we will be here in -- it's going to be a couple more years for sure. Operator: Next question will come from the line of Kevin Cassidy from Rosenblatt Securities. Kevin Cassidy: Congratulations on the great year. Just as you're looking at your backlog and looking out to 2026, which one of the industries that you service, which one do you think is going to grow the fastest? Charles Pacala: Well, that's a great question, Kevin. I think that we -- I have been very bullish on smart infrastructure because of the full solutions that we've been bringing to the table for the past year. I think I said at the beginning of 2025 that given all the investment we've made into Gemini and BlueCity solutions for traffic management, for security, for yard logistics that I expected smart infrastructure to start to play a much more significant role in our revenue composition and our growth trajectory. And I think that, that's definitely played out in the last year. So I'm still incredibly bullish on the success we've had there and its continued success because these are major new opportunities for lidar, places where lidar has never played before that are multibillion-dollar industries. And we've just shown that we are able to execute in this domain. That being said, the StereoLabs acquisition is our ability to inflect the physical AI sphere for mobile robotics, for industrial robotics. And so the -- for the same reasons why smart infrastructure has taken off basically that we're providing total solutions and speeding the time to market for our customers because they can buy something off the shelf from Ouster. Now we're doing that with StereoLabs and Ouster combined, a unified sensing and perception platform that is a drop-in replacement for the legacy systems that have been used in the industrial and robotics sphere. Now you can come to Ouster by AI compute, lidars and cameras and the software and perception, software suite that goes on top of those and get to market quicker. So that's the vision for where Ouster is going is really this two-pronged approach of solutions in smart infrastructure, where it's fixed, fixed installations and solutions in mobile autonomy for physical AI, things like industrial, automotive and robotics. Kevin Cassidy: Great. Yes. And that kind of plays into what was going to be my second question was how you're training models using both the StereoLabs and Ouster's lidar, whether that combine those 2 models, if that's going to be much more robust than what your competitors would be offering? Charles Pacala: Yes. I think that there's so much to do with the advancements in AI in the last couple of years. There's both opportunities for us to push the frontier of -- so StereoLabs, they built neural depth models that produce incredible point clouds from stereo cameras better than the competition and to push that domain forward. Ouster has invested in our neural perception algorithms for BlueCity and Gemini to perceive what's going on in the environment. And there's a natural cross-pollinate -- cross-pollination at play where we can bring the insights from each one of those core competencies to each other's customers, but also start to do multimodal AI training. So lidar and cameras fused and trained together is the obvious next step if you really want to build the world's most capable perception -- machine learning-driven perception solutions. So there's a ton we can talk about there, but I'll leave it at that. I'm definitely excited about what the future holds for our AI training. Operator: The next question will come from the line of Tim Savageaux from Northland Capital Markets. Timothy Savageaux: I wanted to ask if you had a pretty -- well, at least from a customer standpoint, CES seemed to be a pretty important show for you guys, a lot of focus on autonomy there for machines, both large and small. I wonder if you had any takeaways from that show in terms of market opportunities coming out or specific customer developments. Charles Pacala: Yes, absolutely. No. So we were just -- Ken and I were both at CES walking around with a number of investors, analysts. And it was a great embodiment of physical AI, like literal robots, industrial machines, autonomous systems, just ubiquitous on the show floor, no matter where you went, physical AI was in your face as real hardware. And so I think the takeaway for me is when you actually looked at those machines, whether it was an autonomous forklift or a humanoid robot or a big industrial mining machine, what were the commonalities between those systems? They had lidar sensors, they had cameras. They had almost certainly an NVIDIA GPU AI computer, and there was a suite of software that was largely similar in the underpinnings of robotic perceptions, localization, path planning, perception of objects around the vehicle. So the commonality is that's the play for Ouster with this -- both on the hardware and on the software. We think that with the StereoLabs acquisition, we can become the one-stop shop for lidar, cameras, potentially other sensors in the future, AI computers and all the software that runs the underpinning of an intelligent autonomous machine. That's where Ouster wants to play, and that's where we've made a major step forward. So I mean, it's -- CES was just the perfect representation of where the future is going and also the representation of Ouster's business model for the next 10 years. Kenneth Gianella: Yes. And I'll add to it, Tim, seeing our customers' success and their time to market and getting out there quicker, that's our success. So the quicker that these things get out of prototype and into production, that's the growth that we follow along with those partners. Timothy Savageaux: Great. And if I could follow up on a separate topic, and that is on the royalties in the quarter. I wonder if you had any more color about what's -- whether it's a certain type of technology or application. I don't know if that has anything to do with the litigation ongoing, but any more color, it's a pretty good number. So looking for any more details on what drove that and whether that was anticipated, I guess? Kenneth Gianella: First off, it highlights the strength of our IP portfolio, Tim. And it was predominantly onetime, as we mentioned, and we also talked about it will be de minimis going forward. Strategically, we are looking prioritize on this sense, think, run, learn and driving our own product portfolio forward. So we have the royalty piece behind us. And I think all those litigation items in the past are all behind us. And so now it's really focused on our strategic priorities and growth. Operator: Our next question will come from the line of Andres Sheppard from Cantor Fitzgerald. Andres Sheppard-Slinger: Congratulations on the strong quarter. I think a lot of our questions have been asked. But Angus, I was hoping to maybe have you elaborate a bit further on the opportunities that you see regarding drones and humanoids in particularly following the recent certification and the recent acquisition. Can you maybe help quantify opportunities that you see there in the near term and maybe medium term? Or just any granularity as to how we should be thinking about these industries translating into revenue? Charles Pacala: Thanks, Andres. Yes. So the common thread for drones and humanoids is really the volume. They're generally industrial adjacent, more robotics than industrial. And there's a volume increase from things, the smaller, the cheaper, the more ubiquitous the technology, the more -- the types of payloads and sensors and AI compute that goes on those robots is different than a big mining machine. And so some humanoids use lidar, some don't use lidar. Every humanoid uses cameras. And so that's part of the play for Ouster. And the same goes for drones. Some drones use lidar, some drones and all drones use cameras. And so this is part of investing and becoming a combined lidar and camera sensing company is just being able to play across all physical AI applications by providing the 2 most pervasive sensor modalities that are out there. And so -- and then we layer on top the fact that Ouster has invested in things like the Blue UAS certification, it just builds more opportunity for us in the sphere. So I see drones and humanoids. Drones is a much more of a proven technology and market opportunity for Ouster, and that's why we have things like a certification. Humanoids are an emerging opportunity that we are playing in today because of the StereoLabs acquisition and because of some of the lidar sensors and customers we have there. But I think the time line is a little longer for humanoids to reach market in the scale that's going to start to impact our top line revenue. And I liken this to 10 years ago with the robotaxi industry. It's an emerging technology. It's an exciting technology, and it will happen. But the time line is less known because it's pioneering research, getting humanoid robotics out into the market. And it's also a pioneering business model. It's a new business model to do it. So there are categories of things where Ouster builds the business on today, and there are categories of pans in the fire that will hit eventually and help Ouster build the business of the future. And we're playing across both. But it's definitely exciting times and the StereoLabs acquisition is a key to making sure that we can go to both those use cases and provide something valuable to those customers. Kenneth Gianella: Yes. And wrapping numbers around it, if you look at the prior 3 quarters coming off of 40% year-over-year growth this quarter, just our core product line with the digital lidar growing 36% year-over-year. We continue to see that core underlying business continuing to trend in that 36% range plus. And so we're really proud of what the core business is doing. And so now you combine in the tailwinds of a really high-growth, high-margin business such like StereoLabs makes us really excited for that future. Andres Sheppard-Slinger: Wonderful. That's super helpful. Really appreciate all that color. Maybe just as a quick follow-up, Ken, maybe a quick one for you. Can you just remind us liquidity, capital needs, cash burn? Are you still targeting to remain active in the M&A market? How are you thinking about future capital needs and cash runway? Kenneth Gianella: Yes. So we ended the year at $211 million before the StereoLabs acquisition. We gave the number out there, roughly around $35 million in cash for that. On a strict operating basis, even -- we talked prior calls, having the dry powder to be strategic was very, very important in this current marketplace. So I think this acquisition demonstrated having that dry powder on hand allowed us to act quickly and take advantage of a very unique strategic situation. Even after that strategic acquisition, we still have plenty of operating runway until we're operating cash flow positive. So if you look at the numbers out there, it's somewhere in the 4- to 5-year range. So from a continuing in the marketplace, we're going to take it day by day and see what results with it. But our current cash position, we feel is strategically right where it needs to be, as I mentioned, for our customers because these customers that we work with, they're running 3- to 5-year programs, and they want a partner that can be out there operating with them in that space. So we feel really good about our capitalization. We'll always continue to look for what the future brings. And from the M&A, just answering your last question, if the right strategic opportunity comes along like it did with StereoLabs, we're really happy to be in a place that we can act on it. Operator: [Operator Instructions]. Our next question will come from the line of Richard Shannon from Craig-Hallum. Tyler Perry Anderson: This is Tyler on for Richard. I was just wondering how the customer conversations shifted since the acquisition? Are you getting new customers or existing customers looking for new opportunities to either combine the sensors or thinking of other use cases to get their hands on the sensor that they don't have? Just any color on that would be helpful. Charles Pacala: Yes. I can say having been on a number of customer calls since acquiring StereoLabs that the reception to this acquisition has been resoundingly positive. I can't stress that enough. Ouster and StereoLabs have each built incredible brands built on quality, trust and performance of the products and the support that they provide. And by -- when you have 2 great companies combining and it allows a customer to then purchase from one even more dependable and well-resourced company, I mean that's music to their ears. So there's just the ability to work with one great company sourcing critical technology like we are. And then there's all the opportunity of building to the future. We're taking more of the feedback from customers around their total sensing needs and actually building the software and system capabilities that they have this enormous appetite for. I think that's probably the most surprising thing for me is how much appetite there has been for buying combined systems. Now that we're positioned and capable of selling combined systems, compute, software and the sensors, customers are asking for it. And that's just a great place to be. It's one thing to say we're going to do it. It's another for there to be a pull from the end customer now that they're aware we're capable of doing it. So had customers literally ask us, well, when can we just start buying the whole suite of hardware and software from you guys, couldn't happen soon enough. So I'm really pleased with how this has gone. And I think, yes, it's been extremely well received by customers. Kenneth Gianella: And, by the way, it's available today. They're not waiting because one of the great things that we announced at the launch was that our platforms are already unified and people can buy our unified sensing platform today. Charles Pacala: Absolutely, yes. I mean we're actually able to tell them, well, you can get started immediately. Tyler Perry Anderson: That's great to hear. You had also mentioned enhanced connectivity features. Could you expand on that and specifically what that enables for customers? Charles Pacala: This is with respect to the StereoLabs unified -- yes. Tyler Perry Anderson: You said for this year, what you wanted to focus on? Charles Pacala: Yes, absolutely. So the connectivity features is it's -- this is all about building an ecosystem that is interoperable with many different subcomponents of a physical AI system. So while we are today positioned to provide lidar cameras and AI compute and the software that runs them, we also want to make sure that the AI compute and the software on it is interoperable with all manner of other sensors, maybe GPS, maybe inertial measurement units, maybe just -- it's something as simple as radio connectivity or RTK systems or -- so the wheel encoders, there are just so many auxiliary systems that are required to build a domain-specific robot that we want to make sure that we really are providing all those little connectors in our software so that we can play really be that platform that you can build your entire solution on. And we don't want to have caveats when we're selling saying, "Oh, you can't go and use that existing GPS receiver that you've already selected and qualified." Quite the opposite. We're focused on saying you can use it, and we're implementing the low-level drivers for you. So that's kind of the vision there is -- and that all goes back to speeding time to market. The biggest thing holding back a lot of these customers in robotics and industrial is their development time to bring products to market. And we're cutting that down significantly by doing the work for them. Tyler Perry Anderson: Okay. That just begets another question real quick for me. So when you're adding these different sensors, are these drivers something that are universal such that you can develop the drivers in your system for one type of GPS, but that works with any of the GPS providers or the inertial providers? Charles Pacala: No, this is all hard work. It's just every single implementation is unique, and that's where the value comes in. You have to -- someone has to do the work and the companies that do that well and provide high-quality interoperability is where the value comes in. Operator: Our next question will come from the line of Casey Ryan from WestPark Capital. Casey Ryan: It's a great quarterly update. Yes, I just want to follow up a little more on this software component Angus that you're laying out. I mean it sounds like you guys start to move into being the operating system for any industrial manufacturer of physical AI systems. But does this sort of change the competitor matrix, I guess? And do we start competing with Open Mind and the Google Intrinsic thing and other kind of operating system physical AI companies? Charles Pacala: I -- there's so much opportunity right now that I wouldn't call it changing the competitive landscape. There's a lot of companies pushing the frontier of this technology in ways -- in new and unexpected ways. Ouster is focused on being a unified sensing and perception platform, which could eventually become a complete operating system for these robots. That's definitely -- but saying -- I couldn't tell you today that there's immediate overlap of our eventual success with some of the companies that you mentioned because there's just so many different ways to approach these problems that are being researched right now, let alone deployed. So Ouster has always done a good job of finding the line between research and real deployed solutions that can generate revenue and grow a business today. And so that's what we're doing right now. We see -- we've narrowed down the solution to sensing and perception. And -- but that gives us opportunity, certainly with success, it gives us the opportunity to become more of the operating system of these robots in the future. Casey Ryan: Yes. So maybe being more modest, I think maybe the company's vision of what it could accomplish has been expanded in some sense with what you're sharing with us today. Charles Pacala: No question. The same way that lidar was our opening to build strong relationships with our customers. This is the next step in building an even stronger cohesive relationship, and that may be a jumping off point for a future where we're even more deeply embedded. Casey Ryan: Right. Okay. Terrific. And then just sort of simply on the hardware, it sounds like what you're saying is we want to work with all and make it easy to use any kind of hardware components ultimately. Is it part of your vision that Ouster would want to provide at least one version of that, say, radar or GPS or something? Or were cameras kind of unique in terms of its importance to combined solutions, I guess? Charles Pacala: Yes. We've really focused -- so the answer is yes to both things you asked. We want to work well with peripheral components, but there's a good reason why lidar and cameras have a special place. They really are the most important, most capable sensory inputs to these robots, and they're also the most unique and difficult to develop to the quality standard required by physical AI. So -- and so yes, we're so focused on making sure that we have the best-in-class lidar and camera combined sensing systems. And there's a lot of detailed work to be interoperable with other things, but they are secondary in these systems to the lidar and the cameras. Kenneth Gianella: And the fusing of the 2 together to operate simultaneously, that is one of the toughest problems that all of our customers have today. And so being able to offer that unified platform with those 2 sensors together, it's a game changer. Casey Ryan: Yes. Okay. That clarification is helpful. But I think putting a stake in the ground, it feels like the vision has gotten a little bit bigger, which is exciting. So I'm looking forward to '26. And yes, great job, obviously, in Q4 and looking forward. Operator: I'm not showing any further questions in the queue at this moment. I'd like to turn it over to Angus Pacala for any closing remarks. Charles Pacala: Well, thank you all for joining the call. We look forward to speaking with you again when we report our first quarter earnings. So have a good day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Good day, everyone, and welcome to Senseonics Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note, today's call will be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Jeremy Feffer from LifeSci Advisors. Please go ahead. Jeremy Feffer: Thank you. This is Jeremy Feffer from LifeSci Advisors. Before we begin today, let me remind you that the company's remarks include forward-looking statements. These statements reflect management's expectations about future events, operating plans, regulatory matters, product enhancements, company performance and other matters and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under Risk Factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2025, and our 10-Qs and our other reports filed with the SEC. These documents are available on the Investor Relations section of our website at www.senseonics.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason, except as required by law. Joining me today from Senseonics are Tim Goodnow, President and Chief Executive Officer; Rick Sullivan, Chief Financial Officer; and Brian Hansen, Chief Commercial Officer. And now I'll turn the call over to Tim. Tim Goodnow: Thanks, Jeremy, and I appreciate everyone joining us today. Looking back over 2025, it's hard to believe how much has changed at Senseonics. This time last year, Eversense 365 had only been available in the United States for a few months, and we were partnered with Ascensia Diabetes Care for all commercialization and sales operations globally. And we were conducting feasibility studies for our Gemini product. On the financial front, our gross margins were hovering around 25%, annual revenue was less than $23 million, and we were in the process of executing a successful cost savings initiative to lower operating expenses. Today, just 1 year later, Senseonics is a fully integrated developer, manufacturer and once again, seller of Eversense. We have an exceptional sales and marketing team led by Brian Hansen, our new Chief Commercial Officer, and Eversense 365 is now approved in both the United States and in the European Union. In 2025, we achieved full-year revenue of over $35 million, growing approximately 60% year-over-year. Our year-long sensor, our continued partnership with health care providers and our enhanced direct-to-consumer marketing strategy have delivered tangible results with a doubling of patients on Eversense in the U.S., with new patient starts growing 103%, and we have already accomplished margin improvements to greater than 50% to finish the year. 2025 was certainly a year of transformation at Senseonics. The strategic decisions we made last year established a strong foundation for growth in 2026 and beyond. The biggest decision we made in 2025 was to transition all commercial activities from Ascensia Diabetes Care back to Senseonics, removing a layer of complexity from our operations and providing us with a new level of control and agility to execute on our focused strategy. By bringing the sales, customer service, marketing and sales operations functions in-house, we both eliminate revenue sharing with Ascensia and have the opportunity to respond quickly to meet the needs of people with diabetes. This change also brings an impressive team of commercial professionals to Senseonics. This end-to-end responsibility for Eversense 365 unlocks operational efficiency, enhances our financial profile, enables more integration between our corporate objectives and commercial results. Additionally, this change simplifies revenue recognition and provides critical insights into the effectiveness of our DTC efforts. PHC remains a meaningful shareholder in Senseonics and will continue to support the European commercialization of Eversense under transition service agreements through the anticipated closing in Europe in the second quarter and establishment of our own in-country operations. To implement this commercial evolution and drive long-term revenue growth, Brian Hansen transitioned to Senseonics and brought with him his complete leadership and sales force team. Brian was formerly the Head of Ascensia's CGM division and prior to that, the Chief Commercial Officer for Tandem, bringing a tremendous amount of experience and expertise from his accomplished career in diabetes care. In just a few minutes, I'll turn the call over to Brian so that he can give you a firsthand account of what has been a smooth and successful commercial transition. He'll also give his thoughts on our growth trajectory, which he will be instrumental in driving. Excitedly, our integration with Sequel's twiist automated insulin delivery system was another significant milestone in 2025, not just for us, but for the diabetes community at large. Patients utilizing the twiist insulin pump can now use Eversense 365 to send glucose readings seamlessly to their pump for an entire year. This means eliminating a CGM change every 10 to 15 days and providing our type 1 patients with reliable and accurate glucose monitoring 365 days at a time. Our collaboration with Sequel combines the world's most sophisticated glucose sensing, algorithm control and pumping technologies and is just the first of many collaborations we hope to establish with pump partners. Finally, in 2025, we made improvements in our financials, raised capital from institutional investors and strategic partners, executed a reverse stock split and began trading on the NASDAQ exchange. Similar to our other transformation initiatives, we believe these accomplishments set Senseonics up for long-term growth and disciplined financial execution. Moving on to the leading indicators for 2026. I'll start with a quick reminder that our business is seasonal. The fourth quarter is typically our strongest quarter due to insurance deductibles being met. Further, a higher number of existing customers are available for reorders of Eversense in the quarter because the U.S. commercial launch of Eversense 365 took place in the fourth quarter of 2024. So early adopters translate into annual reorders beginning in this fourth quarter. Through this, we saw meaningful quarter-over-quarter growth for the entirety of 2025, including growth in leads, conversions, new patient starts and prescribers of our sensor for the first time. We expect this momentum to continue in 2026, buoyed by our growth initiatives and investments, the twiist integration and expansion of Eversense into new markets. In January, we received CE marking for Eversense 365, and we expect to launch global product to Germany, Italy, Spain and Sweden in the coming months with our own dedicated European sales force. We recognize that patients and providers in Europe have been waiting for us to deliver on our promise of 1 year, 1 CGM in their markets, and we now have the approval. We anticipate a similar uptake in interest in new patients on Eversense as we had in the United States. On the product pipeline front, we continue to advance development of both the Gemini and Freedom products. We expect to complete the Gemini pivotal trials before the end of the year with the launch expected to follow in 2027. Gemini improves on the capabilities of Eversense 365 with an integrated 1-year battery and flash glucose monitoring capabilities without a transmitter. And Freedom is close behind with launch planned for 2028. The Freedom system further improves on Gemini, incorporating direct wireless communication between the sensor and the patient's phone. I'm confident that our decisions on execution in 2025 will form the foundation of our 2026 growth. We have the right team, the right financial structure and the world's first and only year-long CGM to improve and simplify the lives of millions of patients worldwide. And with that, I'll now turn the call over to Brian. Brian Hansen: Thanks, Tim, and hello to everybody on today's call. I would like to begin by expressing my excitement to be part of Senseonics and my gratitude to the U.S. commercial team that has transitioned to Senseonics from Ascensia. Here in the United States, the move was fairly straightforward, and we were very happy to see nearly 100% of the employees transition with us. We were also able to recognize a few synergies in the move as well as shifting several roles around to better align our teams for success in the new year. The same effort is underway in Europe, where I expect the same result, and we have the launch of Eversense 365 right around the corner. More on that later. As Tim mentioned, the strategic decisions taken in 2025 sets us up for continued success in 2026 and beyond. Our direct-to-consumer spend was a big growth driver for us in 2025, and we will continue to invest heavily in that channel this year. It was clear with our revamped DTC campaign and enhanced spend that we could drive significant lead volume and leads drive awareness, patient interest, prescriptions and ultimately new insertions translating into top line revenue. There were multiple learnings from our work in 2025. Last year's back-end loaded DTC spend showed there is a sweet spot of investment for us. While we plan to spend a similar amount this year of roughly $12 million to $15 million, we will spend it a little more evenly over the entire year, building into the third and fourth quarters. This should allow us to be more efficient with our resources, targeting higher quality opportunities, a higher close rate and a lower cost per lead. Another important initiative for 2026 is patient retention. While we are early in the renewals from our first patients on the Eversense 365 sensor, we are happy to report that patient retention is in line with our expectations. This is and will continue to become a more meaningful part of our business going forward. Programs put in place in 2025, as well as allocating resources to refine and enhance the patient journey with our product and our company, have positioned us nicely for the upcoming year. I would also like to express my gratitude to the legacy employees of Senseonics that have built such an amazing product. Not only does it last a full year as expected, its performance is unsurpassed. We've also been working diligently to support the Sequel twiist, Eversense 365 rollout and expect to see an increase in the type 1 patients we serve as a result. As Tim mentioned, this collaboration enables us to combine 2 of the world's leading diabetes technologies to simplify life for patients requiring insulin. Anecdotally, I can tell you that from the team being at the Sequel Annual Sales Meeting held earlier this month, we are both aligned and excited. Sequel has a large commercial presence in the United States, and I can confidently say that both teams have fully bought into this partnership. And now with Eversense 365 compatibility, Sequel is able to offer customers choice in selecting the continuous glucose monitor that works best for them. As a company, we more than doubled the number of Eversense users in the United States from 2024 to 2025. And for this year, our goal is to continue that momentum and double our patient base once again. We believe that we can accomplish this through successful renewal of our existing customers, driving new patient starts in the U.S. and abroad and having pump integration, which patients have requested for years. Acknowledging we are only a few weeks into the general availability of the combined offering, the results have exceeded my expectations. We have detailed the success of our DTC campaign from last year. So let's turn to our health care provider channel that continues to grow as well. The number of providers actively prescribing Eversense grew more than 80% year-over-year, reflecting broadening awareness and confidence in the 365-day system. Access to the diabetes centers continues to grow, and we look forward to working closely with the Sequel commercial team to expand our combined reach. We also saw continued expansion of the EON Care Group, our in-house inserter network. We finished the year with approximately 60 providers performing nearly 1/4 of all U.S. Eversense insertions. We will continue to add to this team in 2026, planning to end the year with approximately 100 providers driving an even greater percentage of the U.S. procedures. Turning to the European launch and transition for a moment. We are in the final stage of completing our European arrangements with Ascensia, and both companies' teams are collaborating well to smoothly transition the European CGM business. Our team is working to establish the full organization we need in Europe, and we will utilize transition agreements with Ascensia in countries where we are currently building out our capabilities. Overall, we made great progress with the transition since the announcement in early September. Coming off our national sales meeting to unveil the new Senseonics, the team is energized and off to a good start to the year. This is a testament to our employees' hard work in getting here, their dedication, their belief in the product as well as the potential future growth ahead of us. I'll now turn the call over to Rick to walk through the numbers. Frederick Sullivan: Thanks, Brian, and thanks to everyone joining us this afternoon. Starting with the quarterly results. In the fourth quarter of 2025, net revenue grew 72% to $14.3 million compared to $8.3 million in the prior year period on the continued strength of top line Eversense 365 revenue. U.S. revenue for the fourth quarter was $12.1 million and revenue outside the U.S. was $2.2 million. Importantly, in Q4 of 2025, we continued to recognize revenue through the collaboration agreement with Ascensia. We anticipate recognizing 100% of revenues going forward. We expect a similar channel mix going through our 2 primary sales channels in the U.S., direct shipments to DME distributors and through bundled payment of the procedure and product, primarily through our consignment program. Outside the U.S., we will sell both through tender agreements and to distributors depending on the region. In Q4 2025, gross profit was $7.7 million, an increase of $3.7 million from the prior year period. This increase in gross profit was primarily driven by a full year of sales of Eversense 365 with more of our business going through our consignment sales channel where we recognized 100% of the revenue and recorded a sales commission expense to Ascensia based on the current year's revenue sharing percentage. Research and development expenses in Q4 2025 were $8.8 million, a decrease of $0.6 million compared to the prior year period. The decrease was primarily due to the completion of the Eversense 365 system clinical trials and development efforts as well as a reduction in headcount. Fourth quarter 2025 selling, general and administrative expenses were $19.8 million, an increase of $10.9 million compared to $8.9 million in the prior year period, primarily driven by higher selling and marketing personnel costs, promotional expenses mainly due to the DTC investments, sales commission expenses as our consignment program expanded and other general and administrative costs, including transition costs incurred to support the commercial transition from Ascensia. Net loss was $20.8 million or a $0.46 loss per share in the fourth quarter of 2025 compared to a net loss of $15.5 million or a $0.40 loss per share in the fourth quarter of 2024. Net loss increased by $5.3 million, primarily due to increased sales commissions and other costs related to taking over the commercialization and distribution of Eversense. For the full year, total revenue was $35.3 million compared to $22.5 million in 2024. U.S. revenue was $27.9 million in 2025 compared to $15.3 million in the prior year, and the revenue outside the U.S. was $7.4 million in 2025 compared to $7.2 million in 2024. Net loss for 2025 was $69.1 million, a decrease of $78.6 million in 2024. The decrease in net loss was primarily driven by improved margins in our business from Eversense 365. Selling, general and administrative expenses for 2025 increased by $18.3 million year-over-year to $52.5 million. The increase was primarily driven by our direct-to-consumer campaign investments, sales commission expenses as we increased consignment sales and costs related to the Ascensia transition. Research and development expenses for 2025 decreased by $9.5 million from 2024 to $31.6 million. The decrease was primarily due to the completion of the Eversense 365 system clinical trials and development efforts as well as a reduction in headcount. As of December 31, 2025, cash, restricted cash and cash equivalents totaled $94.3 million, and debt and accrued interest was $35.3 million. We expect full year 2026 global net revenue to be approximately $58 million to $62 million, representing year-over-year growth of 65% to 76% as the company completes the transition of Eversense commercialization from Ascensia and brings the entire sales and marketing infrastructure in-house. Due to the seasonality of our business with deductibles resetting at the beginning of the year and higher utilization of patient assistance programs, we expect to receive the majority of our revenue in the second half of 2026, consistent with what we saw in 2025. Taking into consideration our margin performance to date, along with the planned launch of Eversense 365 in Europe, which will allow us to be on a single product globally, we expect full year 2026 gross profit margin to be greater than 50% beginning slightly lower and increasing sequentially. We are excited to simplify our business model, the integration of the commercial organization and will recognize improvements in our top line and the expansion of our gross profit margins. Due to the integration of the commercial organization and supporting transition service agreements from Ascensia, we expect operating expenses to increase by about $70 million, consistent with Ascensia's prior commercial spend. In 2026, we expect total operating expenses to be between $150 million and $160 million with increases primarily in SG&A and a smaller increase in R&D for the Gemini pivotal trial. We expect cash utilization in 2026 to be between $110 million and $120 million, largely as a result increasing SG&A due to bringing the sales and marketing teams in-house. Last year, we expanded our debt facility with Hercules Capital up to $100 million, providing access for up to an additional $65 million of non-dilutive capital to help fund our increased operating expenses for the integrated business. With that, I'll turn it back to Tim. Tim Goodnow: Thank you, Rick. These are exciting times for Eversense with the accelerating growth of our revolutionary 365-day product. We've delivered significant new patient additions and top line growth across 2025, driven by expanding awareness and adoption of Eversense in the U.S. DTC investments continued to pay dividends as more people become aware of our compelling benefits of our product, and we now have access to a whole new population of patients following the launch of our first AID combination. Our margins are improving and the sales force continues to gain traction with a productive and energized sales force post transition. We are already seeing encouraging retention with many early adopters now on their second year-long sensor, restarting the clock on 365 days of the best-in-class continuous glucose monitoring system. In our exciting pipeline, the disruptive Gemini and Freedom programs are advancing, and we look forward to updating the market on continued progress in due course. Overall, this was a record-breaking year for Senseonics, but is only just the beginning. Having demonstrated strong commercial progress, we have more confidence than ever in the clinical and commercial potential of Eversense. We also have the control of our destiny following the transition with the right strategy in place and the right people leading the charge. Thank you all for joining us today and for your continued support. We look forward to building on the momentum from the first year of Eversense 365 with another year of growth in 2026. With that, I'll now turn the call over to the operator to answer any questions that you may have. Thanks once again for your time today. Operator, let's go ahead and open up the call for questions. Operator: [Operator Instructions] We'll take our first question from Anthony Petrone with Mizuho Group. Anthony Petrone: Congrats on a strong 2025 execution year. Maybe, Tim, Rick, Brian, I'll start with maybe perhaps some of the trends you're seeing here early in the year. You're coming off 2025, 103% new patient starts for the year, hits a new high in the fourth quarter. And I know, Rick, obviously, there's a little bit of seasonality on policy resets here as you start the year. But anything you can provide just in terms of U.S. new starts at the beginning of the year here? And then I'll have a couple of follow-ups. Tim Goodnow: Sure, Anthony. Thanks for the question and time. We continue to do very nice on new patient starts. 365 product continues to perform just as we expect. Excitedly, we're now into the more routine cycle of getting the reinsertions. So new patient growth continues as we've expected it to, as we planned it to. January typically is our softest month with the patient resets, but we planned for that. Very encouraging, we've seen a surprising amount of encouraging interest with the Sequel product and new patient starts associated with that. So that's very encouraging to see. And we continue to make progress, as you know, with the CE marking for the 365 in Europe. So we're looking for that region to really take off as well here later in '26. Anthony Petrone: Yes. The follow-up is on that top line guide, $58 million to $62 million. You have the U.S. clearance here earlier in this year as well as the twiist product launched February 19. So to what extent in that range do you have some contribution for Europe and twiist? And maybe just a recap on twiist specifically, how the economics are split between Sequel and Senseonics? Tim Goodnow: Sure. I'll let Rick speak to Europe. From an economic perspective, it's 2 companies that work together with -- from a marketing and awareness perspective, but the economics are unique to each company. So we sell a sensor. We recognize the associated economics. They sell a pump. And then through the integration that the iCGM enables, the patient enjoys that combination. So there's really no difference economically on a brand-new patient start that's on an MDI versus somebody that's on a Sequel pump. Frederick Sullivan: And then for Europe, the past couple of years, we've seen fairly consistent revenue in Europe, really expecting the growth with the 365-day launch in Q2. And so that, along with the elimination of that revenue share to Ascensia, we do expect Europe to be about 20% of our revenue in 2026. Operator: We'll move next to Josh Jennings with TD Cowen. Joshua Jennings: It's great to see that you're on track to double new patient starts and the patient base again this year. I just wanted to check in on the takeover of the commercial organization in the United States and from Ascensia. It seems like it has been seamless. All the sales reps converted over to under the Senseonics roof. But has it been as seamless as it sound? And have there been any friction points? Tim Goodnow: Yes, Josh, thanks for that. It's a good question. They're really as simple in the U.S. as it sound, it was as straightforward as we expected. They changed business cards. They got a new computer. They had to do a few things. We even pulled their cars over with them. So quite frankly, it went that simply. And we have a full boat and they all stayed and so we're very fortunate. OUS, we have a little bit more work to do as we go through the transition here in the first half of the year, and we're hiring new folks to replace our BGM reps that were kind of supporting both products. OUS has a few moving parts to it differently than the U.S. But so far, the U.S. -- I mean, we had our kickoff meeting in January, late January in D.C. and everybody was there and excited and focused. And so as I said in my comments, that one has gone very well, knock on wood. Joshua Jennings: Excellent. And do you mind just reviewing just where maybe some deficiencies were with Ascensia at the helm of the commercial effort? Was it investment levels in DCT? Was it aggressiveness in pursuing new prescribers? And how -- just review how you guys are filling any voids that were in play prior to taking over the commercial effort in the U.S. Tim Goodnow: Yes. The strategic execution around the commercial activities really did hand over one for one, even in Europe. Where we had some opportunities in the operational part of the organization, for example, there were some quality... Brian Hansen: Duplication of... Tim Goodnow: Duplications that happened, some strategy elements that happened. So in those cases, we did do some rationalization. But obviously, since there was just a little bit of upstream marketing around product development that existed in the prior Senseonics organization, that's now been folded into the new Senseonics commercial team. And Brian and Rick and Ken, our GC just really did an exemplary job just leading this transition. To be able to get every sales rep, every inside sales rep to go over and be part of Ascensia at 5:00 p.m. on Friday and show up at 8:00 a.m. on Monday as a Senseonics employee was really, really impressive. So -- and absolutely 0 knock on wood customer impact through that transition. So it's just been managed and executed with a great ability. Joshua Jennings: That's impressive. And just with the active prescriber base growing 80% last year and with Senseonics now in control of the commercial efforts and the sales team, how do you expect that prescriber base to grow, one? And then two, I mean, just you guys are on track, your guidance when Ascensia was in control, the commercial effort was to double your patient base in '25 and '26 on the heels of the Eversense 365 launch with control now, complete control. I mean, could you do better than that? Could you see an acceleration in the prescriber base and new patient starts from this doubling, which is an impressive number, don't get me wrong, but... Brian Hansen: Easy job. Tim Goodnow: Yes, certainly, it sounds like Brian is signing up for more than that. No, in all seriousness, obviously, it's a significant push in 2025. We did accelerate the DTC under the expectation, and I think we validated that perspective that this is really about awareness, right? So as we spent the DTC, we made more and more patients who then in turn worked with their providers and made more and more providers aware of the opportunity with Eversense, the excitement around 365. For us to continue to sustain that level of growth, obviously, as Brian said, we are going to spend a significant amount in DTC, but about the same that we spent last year. We just did back-end loaded at the back half of the year. So the ramp is commensurate with that investment. So we expect that ramp to slow down a little bit over the -- with the normalization of that spend over the year, but still supporting that doubling of growth or that approximately 70% of revenue growth across the whole company. Operator: We'll take our next question from Matt Miksic with Barclays. Matthew Miksic: Congrats on the great progress and results. So maybe some follow-ups. Lastly, on the investment in DTC has proved to be pretty successful last year. Within the spend this year, how are you thinking about it? Are you front-end loading it, back-end loading it? Is it just become sort of a reliable and important budget item? Just any color you can give us on the size or the direction of DTC spend would be great. And I have a couple of quick follow-ups. Brian Hansen: Yes. So Brian here. We spread it out a little bit more this year. It was, again, as Tim said, more in that last 6 months, and we really put quite a bit in that September, October, November time frame. That's when you want to put a bunch in as the fourth quarter is so strong. But we also really stressed our team by doing that. And now to kind of level load it a little bit more, spending not quite half in the first half of the year and then saving a little bit to push into that really important third and fourth quarter is how we're looking at it. And we also learned a lot last year of what works and what doesn't work, what segments we were getting better returns versus others. And so I think we're going to do a much better job this year taking our same spend, but maximizing it. And our team is rightsized for that as well right now. So we're expecting to spend the same but get better results as we spread it out across the year, $12 million to $15 million is what we said in our prepared remarks. Matthew Miksic: Okay. That's helpful. And then I guess the challenges or the sort of friction around getting more implanters up and running, getting more education out there, the DTC is part of that. What do you see as the primary constraints right now in terms of growth, in terms of your ability to address new patient interest and new clinician interest? What are the things you're trying to address to kind of feed things and make the most of the opportunity you have? And then I have just one last question, if that's okay. Tim Goodnow: Yes. Sure #1, Matt, it continues to be, as I said, it's around awareness. And that's where the DTC really helped that drove it from the consumer level. And then we would certainly augment that with a strong internal team that takes the inbound interest, does the facilitation, the adjudication, the communication of the economics. And frankly, does work with the outside sales team, which also plays a very big role in the awareness on the clinical side, on the professionals. So we're going to continue to do that. We have 45 regions right now that are focused in the primary areas, and they are working hard to not only expand their reach, but also to go deeper within the clinics. So we think that's an opportunity as well to make sure that instead of 1 or 2 doctors in a clinic being heavy prescribers, we're going to turn that into 3, 4, 5 prescribers. So #1 is certainly about awareness. #2, from insertion, you're absolutely right. We're going to continue to focus on it. That said, recall that our Eon program is a major initiative for us, right? We ended the year just about 60 nurse folks that were contracted with us to do the insertions, and we are absolutely on target here as we are now 2 months into it to end the year at 100 nurses. And we anticipate they'll be doing 30% to 35% of all of our insertions in that time period. So a lot of organic growth through that support initiative as well. Matthew Miksic: Okay. And then just finally... Brian Hansen: [indiscernible] Matthew Miksic: Go ahead. Sorry. Brian Hansen: No, just we saw a lot of changes in reimbursement last year going from 180 to 365. And certainly, in the first 3, 4 months of the year, we had some things to work through. We've revamped that team. We've seen quite a few good results from that and really getting a clearer picture of reimbursement and make it easier for the physician and the patient to know exactly how this is all going to work. And as Tim said, the insertion and reimbursement piece, we've come a long way over the last 12 months of that. And so we really believe we'll benefit from that here in 2026. We're becoming easier to work with and the volume has certainly helped with that. Tim Goodnow: And Matt, you'll recall, there was a little bit of a hurdle in early 2025 with the physician fee schedule. They first came out with G codes and then transitioned to the standard CPT codes. Well, we don't have it this year, right? They've republished the results or published the results for 2026. That started right away. So we've been into the economics and implementation of those right from the very beginning of this year. Matthew Miksic: That's great. And then just lastly, just on the type of new folks signing up, new users, experienced users, where they're coming from, the reasons -- I mean there's lots of reasons why they might choose to choose Eversense. But what are some of the major reason? Tim Goodnow: Yes, I'll let Brian speak to the... Matthew Miksic: Yes, maybe how that's changing -- if at all, how it's changing? Tim Goodnow: Yes, Matt, I will let Brian speak to the change, which we're absolutely seeing now with an AID partner. But from an investment perspective, much of our DTC and quite frankly, the facile nature of the buy and bill really makes this attractive product for people that are on Medicare. So we have transitioned to probably 70% type 2 patients in 2025 or at least coming out of 2025. I expect that, that proportion will actually change back more towards type 1 now here with the pump partner. But we continue to see the majority of our patients are switchers that are either coming from 1 of the 2 transcutaneous sensors with about 15% or 20% are brand new to the space. Is that about right? So -- and then on the new pump rollout has been very encouraging. Brian Hansen: Not much add to there, Tim. Spot on. Operator: We'll take our next question from Marie Thibault with BTIG. Marie Thibault: Nice job on this quarter for sure. I wanted to ask a follow-up here on the EON Care inserter network. You mentioned moving from 60 to 100 this year. What's sort of the gating factor on expanding that more quickly? I know they're doing about 1/4 of volumes. It seems like you could move to 1/3 or better of volume. So I guess what challenges, if any, are there in kind of expanding that network and moving more quickly on that opportunity? Brian Hansen: Yes, Marie, there really isn't. It's really about volume and having enough work for them. And there's really no downside to going to 125 or 150 if the volume justifies it, we can keep them busy and we can identify folks in the areas where we need them. And so that 100 mark seems like a sweet spot, getting an increase in the percentage of insertions that they do is good for everybody, our economics as well as the quality of the work, and it frees up the physicians in the prescriber-only areas where they really don't want to do it. So that's kind of a goal, but it could exceed that. There's nothing that stops us from doing more. We just need to have the volume to keep them busy and justify putting those in places and getting accredited and certified and trained. But it's a good question. There really is no barrier. Marie Thibault: Okay. Good to hear. And as a follow-up, on the operating spend level that you discussed, I think, $150 million to $160 million this year. I understand that the bulk of that is kind of picking up where Ascensia left off in terms of the spend. But maybe we can sort of get longer term and understand, is this sort of a -- are you expecting a multiyear investment here? Should we expect continued step-ups in the out years? Certainly, I just want to understand it now that everything is under the Senseonics roof, if you will. Frederick Sullivan: Yes. From the commercial spend perspective, it will certainly continue to grow as our revenue grows, but not at the magnitude that it is in 2026. And so it'll be more efficient. But as we launch new products, we'll expand the number of territories, increase the number of providers from the EON Care, et cetera. But again, it will not -- it will decrease as a percentage of revenue going forward. And then this year, we do have a Gemini clinical trial, which is about $5 million of an increase in our R&D line. We'll see a similar amount next year for the Freedom trial, but then R&D should go down for further out years. Operator: We'll move next to Jon Block with Stifel. Jonathan Block: Tim or Brian, anything around the timing of additional pump partnerships coming on board? Do you expect that in 2026? And then, Rick, does the guidance arguably take into account any thoughts or additional pump partnerships this year? Tim Goodnow: Thanks, Jon. We do continue to work with additional pump opportunities. We're not yet announcing any of those or going public with them, but we do have quite a bit of interest. Obviously, getting the first one out creates a little bit of a dynamic of there's only one pump company right now that has access to the Eversense, and they've seen an encouraging conversion as a result of that. So we certainly expect that's going to work in our favor. But we have not, as of yet, modeled additional pump companies in. We would look for that to be upsides, but still not announcing timing on the next one yet. Jonathan Block: Okay. And then I'll just try to get a little bit more granular on the revenue. Rick, you provided some details on the cadence. It was more, I believe, what you alluded to, call it, like 2H '26 versus 1H. But any more details you can give, just even, call it, 1Q due to some of the moving parts with Ascensia? When I look at straight around $10 million and those moving parts and here we are in early March. Is that sort of a good figure to, call it, set ourselves and then think about the other commentary you provided 2H versus 1H? Frederick Sullivan: Yes. From a revenue perspective, we know that we have a seasonality in Q1 with the deductibles resetting and higher utilization of our patient assistance programs, which impacts that ASP through that channel. And then also the second half of the year is typically where we have now some large -- of our renewals from the past couple of years with the 365 launch. And so the revenue is certainly back-half loaded, and I do expect it to be similar to 2025, thinking about 40% in the first half, 60% in the second half, approximately. And we will see certainly a step down in Q1 because of that seasonality from where we were in Q4. Operator: We'll move next to Ben Haynor with Lake Street Capital Markets. Benjamin Haynor: First off for me, on the DTC marketing, are you -- what sort of lessons are you learning there? Or, for instance, areas where you have more users, do you see a greater impact from advertising? Does greater awareness in a given area kind of translate to cheaper user acquisition? What -- how should we think about some of the dynamics of the DTC marketing? Brian Hansen: Yes, we could talk about that for hours. The first and foremost is we tend to really focus where we have qualified inserters. And so we've played with that geography boundary. We can geofence our spend. It's very interesting when you start moving it 75, 100, 125 miles, how you start to reduce the effectiveness of it when you get too far away from an inserter. So to Marie's question earlier of getting more insertion areas and coverage really helps us then maximize our DTC efforts going forward. Then you get into the different channels, you get into the different markets that you try to pour a little bit more into and it typically success breeds success there. And so we watch that very closely when we see areas that we get a better return, lower cost per workable lead, all the things that we follow very well. We continue to pour more in until we see it diminish at that point. And then we certainly test a whole bunch of different ads and methods that we go through. And the team is constantly changing those almost on a week or 2-week basis in different markets at times as well. So sophistication is very, very interesting. And what we found last year is we did fairly well, especially with the robust Medicare reimbursement we had, we really started to lean into some of those areas and again, where we had proper coverage for insertion. So I can go on and on to the different levers that we pull, but you really do start to lean into those areas you're doing very well and continue to invest more and more in those until you see it start to slow down a little bit. And that's some of the learnings we really got from last year and will continue this year, but I think we've got a more focused effort as we go into '26. Benjamin Haynor: Great. That's helpful color. And then are you seeing any changes to kind of the behavior of new prescribers with the 365-day version? Tim Goodnow: No, I wouldn't say there's been a change in behavior. Certainly, interest level, the recognition and now the feedback, it's much more common to see feedback from users now that have gone on to their second sensor. The retention rates are encouraging, right? People love the product. When they use it for as long as a year, it becomes part of their life, right? So I would say from that perspective, a convert is very, very attractive to us. But from a new patient perspective, I don't think we see any real behavior differences from -- as we've seen before nor from the prescriber side. Benjamin Haynor: Okay. Got it. And then on that retention comment, can you remind us kind of where the expectations are for retention and that are being exceeded? Tim Goodnow: Yes. We haven't updated those as yet as we're still honestly pretty early into the 1-year renewal cycle. But our history had been from first to second sensor, it was in the 70s. Second to third sensor was in the 80%. And then by the time people were on the third sensor, it was 90% retention or sometimes even higher as is evidenced in our European market. So I would anticipate that the largest drop-off is from first to second, but still some pretty attractive rates. Operator: [Operator Instructions] We'll move next to Sean Lee with H.C. Wainwright. Xun Lee: I just have 2 of them. So first, for the European market, what's the expected time line for the rollout there? Are you seeing any hurdles from the transition, especially as I know some of these are affected by local purchase agreements? Tim Goodnow: Yes. The timing is consistent as we've guided since the beginning of the year, that being -- we expect the transition to occur in the second quarter. That is gated by the transitions that we're going through right now. Many of these markets are tender markets, so they're contracted with Ascensia, and we are transitioning those to Senseonics. We're in that process right now. We did receive the approval of the CE Mark. So we have the authorization to go. And we'd anticipate mid-second quarter that we'll be rolling out the product into those markets. Some of the tenders will go -- frankly, go through the summer, even into early fall, depending on the contracts that we have. But say, May through September, October time period, we'll transition. Xun Lee: Great. My second question is on the Gemini study and how the potential approval would go for that. I was wondering, is the FDA requiring a second MARD for the flash mode for the Gemini because it has both -- 2 different functionalities versus Eversense 365? How does the inclusion of the dual modality impact the complexity of the trial? Tim Goodnow: Yes, the FDA will expect that in the flash mode or in the near-field mode with the transmitter, it will give you the same result. So the expectation is it's the same chemistry, the same sensor. Our expectation and their expectation should be that it's iCGM compliant. And as you recall, our MARD is around 8% that supports that, and we don't have any reason to expect that, that would change. But technologically, there should be no reason why you get a different result in flash or with near field. Operator: Thank you. This does conclude our question-and-answer session and today's conference. You may now disconnect your lines. Thank you for your time, and have a great day.
Operator: Ladies and gentlemen, greetings, and welcome to the Quantum Computing Inc. Fourth Quarter 2025 Shareholder Update Call. [Operator Instructions] Please note this conference is being recorded. Following management's remarks, the call line will be opened for questions. It is now my pleasure to introduce your host, Ros Christian with IMS Investor Relations. Rosalyn Christian: Thank you. And I want to welcome everyone to the Quantum Computing Inc. Fourth Quarter and Full Year 2025 Shareholder Update Call. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements based on our current expectations and projections regarding future events and are subject to change based on various important factors. In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this call. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission. On the call today, we have Dr. Yuping Huang, CEO and Chairman; and Chris Roberts, CFO. The team will provide an update on the business, followed by a question-and-answer session. With that, I would like to turn the call over to management. Please go ahead Yuping. Yuping Huang: Good afternoon, and thank you for joining us for Quantum Computing, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. 2025 was a transformational year for QCi. We made meaningful progress advancing our strategy to build a vertically integrated photonics and Quantum optics platform capable of supporting scalable, commercial applications across AI, high-performance computing, cyber security and remote sensing. Over the course of the year, we achieved several key milestones. We completed and opened our Thin-film lithium niobate photonic chip fabrication facility marking an important step towards domestic scalable production of high-performance specialized photonic integrated circuits. We continue to expand our foundry services business, which has now begun to generate early revenue and a customer engagement, and we are in planning phase for our second fabrication facility, which is what we call Fab 2. We strengthened our leadership team and the Board, adding experienced director and executives with deep expertise in scaling advanced technology companies and driving both organic and inorganic growth. I was appointed CEO effective January 1, 2026, after serving as interim CEO since May 2025. And we welcomed Chris Roberts as our new Chief Financial Officer; and Eric Schwartz as a new independent Board member each brings deep expertise and executional focus as we scale the business. And importantly, we recently completed the acquisition of Luminar Semiconductor Inc. or LSI, which enhances our design, fabrication and packaging capabilities and accelerates our path to scalable manufacturing. LSI also contributes a established customer base and a steady revenue to the combined organization. Those accomplishments reflect the steady execution of our long-term strategy and position us well as demand for energy-efficient room temperature photonic and Quantum solutions continue to grow. Turning into the fourth quarter. Revenue in the quarter reflects early contributions from our foundry service business and increasing customer engagement across our product portfolio. As many of you know, QCi operates Fab 1 as a rapid prototyping facility dedicated to Thin-film lithium niobate photonic integrated circuits in support of our Quantum machine development road map. This facility is not intended to serve as a large-scale commercial production foundry. But it does generate revenue by providing foundry services to our customers, but many functions as an internal innovation engine that fits validated designs and process knowledge into downstream manufacturing partners as technologies mature. That one enables rapid design, fabrication, test iteration cycles for advanced photonic devices century to QCi Quantum architectures. It allows us to explore novel Thin-film lithium niobate-based components validated system level concept and derisk emerging designs ahead of volume manufacturing. Fab 2 is intended to provide a domestic vertically integrated processing capability to support QCi's internal technology road map, particularly the development and scaling of our photonic Quantum machines and Quantum-enabled systems. It will focus on producing specialized Quantum and nanophotonic chips and will complement not compete with the broader silicon photonic ecosystem. We expect to engage external foundries as partners as technologies scale. By combining internal vertical integration with external foundry partnerships, QCi and to strengthen supply chain resilience, accelerate innovation and support the responsible scaling of advanced photonic and Quantum technologies. In December 2025, we announced the acquisition of LSI, which closed in February 2026. This subsidiary brings existing customer base and additional semiconductor capabilities that expands our addressable market and strengthen our ability to deliver integrated photonic solutions at scale. Integration efforts are underway, and we are focused on aligning teams, processes and customer programs to accelerate growth in 2026 and beyond. From a product perspective, we continued advancing our Quantum authentication and networking technologies as well as our direct platform and the remote sensing initiatives, which remain areas of strong interest across government and commercial customers. In the fourth quarter, we also unveiled our photonic-based reservoir computing system Neurawave as Supercomputer 2025. Neurawave represents a significant milestone as it is designed to integrate with existing computing infrastructure and address emerging AI workloads with improved energy efficiency. We also announced a strategic collaboration with POET Technologies to develop next-generation high-speed thin-film lithium niobate-based modulator-based optical engines designed to support AI network infrastructure. Importantly, we continue to expand our global reach through continued industry engagement. We recently participated in many conferences, which just in the fourth quarter included OpticaQuantum Industry Summit supercompute and Q2B Silicon Valley. Finally, during the year, we formulized and communicated a focused multiyear technology road map, which is available on our website. This road map is centered on scalable room temperature photonic and Quantum products, systems and solutions. Our vision is to bring Quantum technology into real-world applications. That means putting the power of Quantum technology into the hands of people by moving it out of the laboratory and into enterprise, government, commercial and consumer environments through chip integrated, low-power deployable systems. At the core of our road map are three capabilities that define our platform, capture, compute, communicate. Capture information through Quantum sensing and photonic data acquisition, compute through photonic and Quantum processing systems, including our direct platform and photonic AI capabilities, communicate through Quantum secure networking authentication and encryption technologies. This framework aligns our product development manufacturing strategy and go-to-market efforts around delivering practical scalable Quantum enabled products and systems. Importantly, this road map represents our transition from a development stage company to a commercial manufacturing-driven platform business. We are evolving from a technology innovator into a company capable of delivering repeatable, high-performance photonic and Quantum hardware at industrial scale. Our differentiation remains clear. Unlike Cryogenic Quantum systems, our platform is built on thin-film lithium niobate photonics enabling room temperature operation, lower power consumption, smaller form factors and lower total cost of ownership, which we believe are critical for broad adoption. As we progress our chip manufacturing capabilities over time, we expect to support global deployment of chip integrated Quantum systems across high-performance computing, telecom, defense, space and enterprise markets. Our road map is designed to move QCi from innovation to industrial scale production, positioning us to deliver practical Quantum technologies that are accessible, scalable and commercially viable. Overall, we exited 2025 with a strong balance sheet supported by significant capital raised during the year, a growing commercial foundation through foundry services and product development. An expanded technology platform following the integration of LSI and a clear path towards scaling revenue through a combination of semiconductor services and Quantum-enabled products. Like many companies across the broader technology, AI and Quantum sectors, we have experienced recent volatility in our share price, which we believe reflects broader market conditions rather than any change in our underlying business performance or long-term outlook. Our focus remains squarely executing our strategy, advancing our technology road map and building a sustainable commercial business. We believe the long-term fundamentals for photonics, Quantum technology and AI infrastructure remains strong, and we are well positioned within these trends. With that, I will now turn the call over to our Chief Financial Officer, Chris Roberts. Christopher Roberts: Thank you, Yuping. Revenue for the fourth quarter totaled approximately $198,000 compared to $62,000 in the prior year quarter. The year-over-year increase was driven primarily by hardware sales and services associated with our Fab 1 facility, which began contributing revenue during the fourth quarter. As we previously mentioned, we completed the acquisition of Luminar Semiconductor, Inc. in February 2026. We expect this business to begin contributing revenue in the first quarter of '26. Operating expenses for the fourth quarter totaled $22.1 million compared to $8.9 million in the same quarter last year. The increase in operating expenses is the result of substantial growth in personnel for research and development, engineering, manufacturing and sales and marketing as we can position the company for long-term growth. M&A expenses in the fourth quarter also contributed to the higher expenses. We are scaling our organization across the Board to support this expansion, including all functional areas of the company. As a result, SG&A is expected to grow in the near term as we invest in the resources and personnel necessary to advance our technology and execution capabilities. The company reported a net loss of $1.6 million for the fourth quarter or $0.01 loss per share compared to a net loss of $51.2 million in the fourth quarter of 2024. The decrease in net loss this quarter was primarily due to a gain of $7 million from the mark-to-market of a derivative liability plus interest income of $13.6 million. For the year ended December 31, 2025, the company reported a net loss of $18.7 million or $0.11 per share compared to a loss of $68.5 million or $0.73 per share in the year ended December 31, 2024. As Yuping mentioned earlier, we continued to strengthen our balance sheet during the fourth quarter. In October, we announced that QCi entered into securities purchase agreements with a group of institutional investors for the purchase and sale of 37 million shares of common stock in a private placement, resulting in gross proceeds of $750 million, before deducting offering expenses. That brings the total capital raised in 2025 to $1.55 billion. As a result, we ended the year with cash and cash equivalents of $738 million and investments of $783 million on our balance sheet, roughly $1.52 billion in total. Our interest income for the 2025 year was $20.7 million, a substantial increase from $423,000 in 2024. As of December 31, 2025, total assets stood at $1.6 billion, up from $154 million at year-end 2024. The Stockholders' equity rose to $1.6 billion at 2025 year-end, reflecting our strengthened financial position. And now I'll turn the meeting back over to you, Yuping. Yuping Huang: Thank you, Chris. As we look ahead to 2026, our priorities are clear. Scaling our foundry services business and increasing customer engagements, advancing our product portfolio toward broader commercialization successfully integrating LSI and capturing synergies across our platform and continue to execute with this plan while preserving capital. We are building a differentiated technology platform based on room temperature, low-power photonic and Quantum solutions. And we believe QCi is uniquely positioned to address growing demand for energy-efficient, computing secure communications and advanced sensing technologies. We appreciate the continued support of our shareholders, customers and partners, and we look forward to updating you on our progress through 2026. Thank you. With that, we will now open the call for questions. Operator, please go ahead. Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. The first question comes from John McPeake with Rosenblatt Securities. John McPeake: Thank you, Yuping and Chris. Congrats on closing the LSI acquisition. Okay. I just want to make sure you guys could hear me for a second there. Great. So you have a step function revenue change happening here. Could you just remind us of the LSI revenues, how we should think about that going forward? And also their expenses a little bit as we try to take a stab at updating our models here... Yuping Huang: Chris, would you take this question? Christopher Roberts: Sure, I'd be happy to. John, I've seen a couple of analyst reports. I'll back up. As you know, we are not in the habit of giving revenue guidance. So I want to make clear that we're not doing that now. However, I understand the question. And there have been several analyst reports that have indicated that or projected that revenue would be in the $20 million to $25 million per year range. And I think that's a reasonable estimate right now. And in terms of costs, we have some work to do with LSI. This is a company we acquired out of the Luminar Technology bankruptcy, and they had a different shared services model. So we're reconstructing some things, probably not going to be profitable at this scale, but we're working on realigning and integrating the businesses. So we really don't want to be too specific at this point, but we're trying to grow both the core level side business and the QCi business and develop synergistic products. So there's a lot of spending that's going on around there. I think it's safe to say that we'll be investing a fair amount of money in growing the business. And we're not going to be trying to squeeze every nickel of our profitability in the near term. John McPeake: Okay. That's fair. And if I just have a follow-up on TFLN #2. You got some fabs with LSI -- could you give us a sense, do you think you're going to be able to co-locate with one of those fabs? And when should we think about the expenses, the CapEx, et cetera, kicking in for TFLN #2? And maybe I don't know if you can gauge what that might be like typically of the size you're thinking about? And that's all I got. Christopher Roberts: That's a really good question, John. In terms of co-locating, the -- let me take some steps. The current facility we have for Fab 1 is about 9,000 -- 9,600 square feet. And it's not possible to put Fab 2 in the same area. The space isn't there. It's not really set up that way. So what we're looking for is a larger facility, whether we end up doing a build-to-suit or acquire an existing facility and modify it, we're exploring multiple options. We're not likely to incur large costs this year, because we got a lot of design and evaluation work to do. So the larger cost would be two and three years out. The cost really hard to estimate at this point in time. Obviously, it's going to be several hundred million dollars to build any kind of sizable fab. But it's too early right now to be able to give you a hard number. We're still in the design and development phase. We've engaged some experienced design firms. And we're just beginning the process. So I don't have a hard number for you at this point, but nothing substantial is likely to happen in terms of CapEx outlays this year. Operator: The next question comes from Max Michaelis with Lake Street. Maxwell Michaelis: I just want to go back to the Luminar acquisition that was made -- so you mentioned $20 million to $25 million of revenue. I mean, can you help us out in terms of that 2026 revenue versus 2025? Is it at least growing? Or how should we think about that? Christopher Roberts: We are expecting some growth. It's a little early at this point to say how much, but we can say that the initial customer reaction to the acquisition has been positive. We -- QCi acquiring Luminar brings stability and substantial financial resources to the business, which their existing customer base greatly appreciate it. We have been working closely with the Luminar sales team to reassure their customers and drive some additional business. So we're hoping to at least stabilize and hopefully grow the business this year. Yuping Huang: Okay. Yes. Max, if I may, I wanted to add that in fact, so right now, we're about four weeks into the acquisitions. So we have already seen very good momentum. Maxwell Michaelis: Okay. That's good to hear. And it doesn't sound like nothing really to do on Fab 2 in 2026. But if we look out this year, I mean, what are the critical or the crucial milestones you guys are looking to hit, if you can help share sort of maybe from an internal perspective from you guys? Yuping Huang: Yes. So the first one is to successfully integrate Luminar semi. I think we have made a pretty good progress so far. So I'm actually very pleased with where we are now. As you know, Max, so we are a Quantum company, but all of our products and technology are based on optics and photonics. And what's nice is that our team members across the U.S. already speak the same language and synergies already high. In fact, these are areas, the synergies are higher than what I initially expected. Several cross-site collaborations are already underway. And the combined larger team is pursuing large-scale opportunities that would have not been possible without us join forces. So for 2026, the number one task is we successfully integrate the team now that with our head count doubled and with our product portfolio largely expanded. The second is that we will continue to push our Quantum product portfolio. As I said on the call, we're really focused on transitioning from a technology innovator to a company capable of scalable manufacturing of Quantum products based on photonics and our integrated circuits. And as we outlined in our road map that we have published online. So we do have a plan to roll out several products across computing, sensing, AI and our thin-film lithium niobate chips. And third would be that -- so we hope to continue to grow our team so that we can move up to the system level engineering for Quantum devices. We are very happy to have now lots of engineers and manufacturing technicians join us from the Luminar semi acquisition. The next step is -- so now we have the expertise in many aspects now in the same room. So how fast we can move to the manufacturing of Quantum products above the subsystem of above the component level. Operator: The next question comes from Antoine Legault with Wedbush Securities. Antoine Legault: You mentioned the various main potential addressable markets across -- you mentioned Quantum Computing, sensing, AI and thin-film lithium niobate. Where do you see the largest and the most immediately addressable market or use cases? And which market or submarket are you most excited about this year? Yuping Huang: For this year, I think the thin-film lithium niobate is an area that I feel particularly excited -- as you may recall, we constructed our fab last year and then we commissioned all the tools last fall. And since then, we have made prototype chips. And we have also utilized our resources to develop and refine recipes and the fabrication processes. And now -- so we are really in the phase of locking down the processes and to -- and we are ready to ramp up the manufacturing. So all of our current products now are designed to utilize this integrated photonic chip technology, which will make our product smaller, powerful, ready to be produced at the scale. So I'm very excited to see what could happen with the thin-film lithium niobate production line in the meanwhile. So now we are ramping up our Quantum communications development and commercialization following on the sale of system to a top 5 U.S. bank last year. I believe that Quantum communications, because this technology really address a network security issue that concerns almost everybody. If we can lower the entrance point for this Quantum technology, so it could be one of the very first Quantum technology that can be adopted by large population. Antoine Legault: That's very helpful. Last one for me, if I may. I know you recently completed the acquisition of LSI for just over $100 million. You clearly still have a lot of cash on the balance sheet and you have the ability to pursue strategic M&A. Are there any particular areas of interest or focus on the M&A front as you look ahead to 2026? Yuping Huang: Yes. We have been following very disciplined approach to M&A. So our strategy has been that the acquisition should accelerate our road map as we publish on our website. And while being able to help build our customer base. So the Luminar semi acquisition has been moved along this direction because it really helped fill some technology gaps that we had. I think the next move is to accelerate our road map on the scalable manufacturing, so we hope to quickly establish mass production capabilities for some of our Quantum machines. Operator: Okay. The next question comes from Ed Woo with Ascendiant. Edward Woo: Yes. Congratulations on the Luminar acquisition. My question is, is that going to make you guys much more exposed to international business. Christopher Roberts: Let me take this one. At the present time, the bulk of the customer base is domestic. There's a lot of U.S. government contracts. And business in the aerospace and defense field. But I think your larger point is that Photonics technology has a global market. We will look at opportunities overseas. We do source supplies parts from overseas. But in terms of pursuing a large overseas market, that will come in time. But in the near term, I would anticipate that the bulk of our revenue is going to be from domestic sources, certainly for the next few quarters. Operator: The next question is from Troy Jensen with Cantor Fitzgerald. Troy Jensen: Congrats on the great '25, just maybe question for you, my belief you guys are probably a couple of years away from commercializing a photonics-based kind of Quantum computer all-in. But near term, there's a lot of other cool applications and sensing, can you talk to us a little bit about what you're doing there? Is this an area that can inflect quicker? And maybe do you guys have exposure to security applications to Quantum. Yuping Huang: Thank you, Troy. Yes, I believe that general purpose can computing is still some time further down the road and this applies to all the approaches in terms of the practical utilities. On the other hand, I believe that there are some applications where specialized Quantum computers can be -- can find significant utilities without having to construct a data-based large-scale can computers. And so this is actually an area that we have been working on in our direct series Quantum optimization machine where we have seen that in many use cases, we already established appreciable Quantum advantages there. In terms of the remote sensing at QCi, so we mainly commercialize our proprietary technology in single photon detection added by the noise rejection, by what we have developed over the past 10 years using non-optics and our way of using time-gated photon detection to reduce the background noise. So far, we have commercialized a photonic vibrometer, which can measure very small amplitude vibration remotely. And in the meanwhile, so we have worked with NASA, as we announced in the past, to explore some Quantum sensing technology suitable for space deployment and in some cases, for earth science applications. We are continuing such research and development. And now with the addition of LUMINA 17, we are looking at other optical sensing and Quantum sensing opportunities by utilizing their laser technology, their detector technology and their very strong optical packaging capabilities. This is what we are working on, on the sensing side. Operator: I would now like to turn the floor back to management for any closing remarks. Yuping Huang: Thank you, everyone, for joining and participating in today's call. I encourage you to follow us on our social media channels, where we regularly post updates and insights into our business and technology. Should you have any questions, please reach out to the Investor Relations team. Have a good rest of your day. Thank you. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to AST SpaceMobile's Fourth Quarter 2025 Business Update. Please be advised that today's call is being recorded. I will now turn the conference over to Max Colbert, Investor Relations Manager of AST SpaceMobile. Thank you. You may begin. Maxwell Colbert: Thank you, and good afternoon, everyone. Today, I'm also joined by Chairman and CEO, Abel Avellan; President, Scott Wisniewski; and CFO and Chief Legal Officer, Andy Johnson. Let me refer you to Slide 2 of the presentation, which contains our safe harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements on this call. For more information about these risks and uncertainties, please refer to the Risk Factors section of AST SpaceMobile's annual report on Form 10-K for the year ended December 31, 2025, with the Securities and Exchange Commission and other documents filed by AST SpaceMobile with the SEC from time to time. Also, after our initial remarks, we will be starting our Q&A section with questions submitted in advance by our shareholders. For those of you who may be new to our company and mission, there are nearly 6 billion mobile phone venues today around the world, but many of us still experience gaps in coverage as we live, work and travel. Additionally, there are billions of people without cellular broadband and who remain unconnected to the global economy. The markets we are pursuing at AST SpaceMobile are massive, and the problem we are solving is important and touches nearly all of us. In this backdrop, AST SpaceMobile is building the first and only global cellular broadband network in space to operate directly with everyday unmodified mobile devices, supported by our extensive IP and patent portfolio. It is now my pleasure to pass this over to Chairman and CEO, Abel Avellan, who will go through our activities since our last public update. Abel Avellan: Thank you, Scott. For the first time in 2025, AST SpaceMobile became a revenue-generating business as we significantly advanced all key aspects of our operations, including commercial, government, manufacturing, spectrum rights, IP portfolio and capital position. The combination of these efforts resulted in the successful launch and unfolding of our next-generation BlueBird satellite, BlueBird 6, the largest ever commercial communication array deploying load at orbit to enable the first and only global space cellular broadband network for government and commercial customers. On the financial front, during 2025, we raised over $3.5 billion in capital and reported revenue of over $70 million for the full year and signed over $1 billion of minimum committed revenue. Operationally, we plan to ramp our satellite manufacturing efforts and launch cadence this year, while we're rapidly accelerating our government and commercial businesses. We entered 2026 with a strong momentum and clear vision as we led the space-based cellular broadband industry, a market that we invented. 2026 will be the year we scale our space-based direct-to-device constellation from initial commercial activation to start of commercial service with mobile network operator partners in key markets like United States, Europe, Japan, Saudi Arabia and other key strategic markets like the U.S. government. In just over one year since the orbital launch of our first five Block 1 BlueBird satellites, we developed our Block 2 BlueBird program, which is roughly 3.5x larger and 10x the capacity of BlueBird 1 to 5, breaking our previous record on both size and capabilities and then scale, test, launch and successfully unfolded BlueBird 6, our next-generation satellite of approximately 2,400 square feet. BlueBird 7, identical to BlueBird 6 is encapsulated and ready to launch within the next New Glenn launch vehicle at Cape Canaveral and is awaiting orbital launch, which is expected in March. Our upcoming launch advances, our deployment goals of New Glenn will feature a 7-meter faring, enabling twice the payload volume of the 5-meter class commercial launch vehicles to support up to eight of our largest ever Block 2 BlueBird satellites. We expect to fully utilize New Glenn faring capacity as we progress through our orbital launch plans. We are especially excited to share this milestone with many of you who we hope will join us in Florida during our next launch. Looking ahead, we're expecting 2026 to be a very active year, particularly as we progress into second half. We remain on track to achieve our target of deploying 45 to 60 satellites into loaded orbit by the end of this year, with current expectations closer to 60 satellites ready to ship and 45 satellites in orbit. We continue to expect launches planned every one to two months on average, starting with our first New Glenn launch expected in March. The New Glenn launch vehicle is completing final readiness for our fully encapsulated satellite, which was handed off on February 18. Importantly, this launch will be the first New Glenn launch to use a previously flown first stage, we support our launch cadence during 2026. As we expect the New Glenn boosted to be reused every 30 days or less after our upcoming launch. Our launch plans include a total of 12 additional contracted launches across several launch vehicles. Lastly, we also recently signed an additional agreement to integrate our satellites with a new heavy launch vehicle to be on a standby in their manifest. We are laser-focused and working tirelessly on delivering our micron phased arrays and full satellite production goals. On the manufacturing front, we continue to ramp our operations. We exited 2025 having reached a production capacity to support up to six satellites worth of micron and phase array per month, and we expect to achieve a testing assembly and integration cadence of six satellites per month in the first half of 2026. BlueBird 8 to 29 are in various stages of production, and we are scheduled to complete assembly of 40 satellites equivalent of micron by the first half of 2026, bringing us to BlueBird 46. A detailed cadence of our '25 and '26 deployment plan is shown in the accompanying quarterly presentation found on our IR website. After BlueBird 7, our satellite will support a stackable configuration of , six, four, eight satellite per launch, which allow us to meet our 2026 deployment goals. Additionally, we anticipate our novel ASIC chip will be integrated into our Block 2 BlueBird satellite during the first half of 2026 to support 10 gigahertz of processing bandwidth per satellite, which enable us to exceed the capabilities of up to 120 megabits per second on our in-orbit Block 1 BlueBird satellites. These data rates are high enough to achieve the native cellular capability that consumers now expect everywhere from areas not served or not served good enough by terrestrial connectivity. Another key enabler of producing the largest ever commercial communications array at scale is our 95% vertically integrated manufacturing strategy. Over the past several months, we have expanded our manufacturing site, both in Midland, Texas and Homestead, Florida, including acquiring a fourth site in Midland for dedicated micron production, the building block of our satellites. We will soon be over 0.5 million square feet of manufacturing and operational space globally, providing us with greater manufacturing and work capabilities with a tighter control over the manufacturing process from end to end. This rigorous effort strength by our skilled workforce enable us to proactively manage nearly every step in the process, including securing long lead materials well in advance of satellite assembly while keeping our materials and component costs low. Simply put, we are the first company in history of commercial satellite manufacturing to produce satellites of our site and power at a scale. Together, our key technology differentiation in the size of our satellite, spectrum availability and custom ASIC that support today's capability of cellular broadband from space supported by our extensive portfolio of over 3,100 patents and patent pending claims. 2026 is a year of we scale commercial operations. We are the only company capable of delivering 4G and 5G and in the future 6G broadband speed sufficient for voice calls, voice over LTE, live video calls, streaming and full Internet access directly to modified devices. Our technology is anchored by our ability to manufacture the largest commercial communications array ever placed into loaded orbits. Creating a durable technology advantage. Our satellites enable digital beam forming and are capable of multi-carrier aggregation in multiple frequencies, supporting simultaneous users per beam, behaving like a terrestrial cell tower from space. When combined with our integrated ground space gateway architecture and growing commercial ecosystem with over 50 leading global mobile network operator partners who collectively cover nearly 3 billion subscribers. As Scott will discuss in more detail, we continue to expand our commercial ecosystem. In the fourth quarter of 2025, we announced definitive commercial agreement with Verizon in the United States and stc Group in Saudi Arabia and other key markets across the Middle East and Africa. As part of our 10-year agreement with stc Group, we received a prepayment of $175 million in 2025 indicative of the ambition we both share in bringing connectivity gaps and deliver cellular broadband directly to devices. Recently, we announced partnership with Orange, Telefonica, CK Hutchison, Taiwan Mobile and progressing initiative with Vodafone to bring our direct-to-device cellular broadband service to their markets, who are now part of our commercial ecosystem with over 50 leading global mobile network operator partners who collectively recovered nearly 3 billion subscribers. To the date, our commercial advancements have positioned us to secure over $1 billion in total contracted revenue commitment from our commercial partners. As a reminder, our comprehensive spectrum strategy is defined by our access to approximately 1,150 megahertz of low-band and mid-band tunable MNO spectrum globally. which include 45 megahertz of MSS lower mid-band spectrum access in North America and 60 megahertz of licensed S-band spectrum priority rights outside North America. Our low-band spectrum strategy is centered around the use of premium multi-operator 850 megahertz cellular spectrum. We have important characteristics like longer reach, better penetration and compatibility with existing 3GPP standards and devices. We have further strengthened this advantage through strategic MSS and cellular spectrum, including both premium, lower band, mid-band, L-band and S-band spectrum priority rights, positioning us to reliably deliver cellular broadband service at a global scale. We also made significant progress in our government business as our satellite technology continue to be used by the United States government for dual use and dedicated applications. National security is a key priority for the United States, and we continue to see willingness to rapidly adopt innovate forward-looking technologies like ours. Taking together this accomplishment and the competitive advantages we have built give us a significant momentum as we progress to 2026 as the partner of choice for the global mobile network operators and unique noncommunication capability for the U.S. government. And with that, I will turn the call back to Scott. Scott Wisniewski: Thank you, Abel. I want to take this time to reflect on our business accomplishments in 2025 and how we see the business evolving over 2026 and 2027. Last year, 2025 was the year we activated our revenue engine with record revenue of over $70 million, achieving the upper end of our revenue guidance. We are no longer a pre-revenue company. During the year, revenue was primarily driven by commercial gateway deliveries and milestones completed from our government contracts. We delivered 15 commercial gateways to MNO partners in the second half of 2025. Importantly, these sales are a leading indicator that our MNO partners are preparing for SpaceMobile commercial service and making investments ahead of that rollout. This was also a well-diversified set of initial gateway deliveries across nine different customers across five continents, which starts to paint the picture of our initial commercial markets in the U.S., Canada, Europe, Japan, the Middle East and Africa. In terms of signing contracts, the major customer deals for 2025 were definitive commercial agreements with Verizon and stc Group joining AT&T and Vodafone. We continue to see heavy engagement from MNOs, resulting in good progress deepening and growing our partner ecosystem, taking advantage of our base of over 50 global MNOs with nearly 3 billion subscribers. We and our mobile network partners also recently announced additional specific initiatives with Vodafone, Orange, Telefonica, CK Hutchison, Taiwan Mobile, among others, while formally unveiling Satellite Connect Europe and its leadership team as our European distribution joint venture with Vodafone. In 2026, we expect more MNOs to join the AST Space Mobile network, and we expect to harvest our pipeline for many additional definitive commercial agreements as the contractual relationships mature with our existing partners beyond the investor MNOs. The U.S. government was also a significant contributor to 2025 revenue. During the year, we executed against our existing 10 contracts across an expanding list of interested agencies, developing and testing additional capabilities using our in-orbit infrastructure, capabilities critical to U.S. national security, including the Golden Dome project. The revenue derived from U.S. government is not dependent on full constellation deployment, but is more scalable by satellite count, which makes it an early reliable contributor to revenue. As a reminder, the goal of these contracts is to develop capabilities that could grow into programs of record with billions of annual revenue potential in aggregate for missions incredibly important to U.S. national security. We also recently announced our status as a prime contractor to the U.S. government and received a $30 million contract award from the United States Space Development Agency for the Europa Track 2 commercial solutions program. This contract focuses on developing immediate, resilient and low-latency tactical satellite communications directly between government and devices. The award demonstrates how commercial space innovation can be rapidly integrated into national security missions. The award further validates the dual-use nature of our technology for both commercial and national security applications. Regarding the Golden Dome project, we continue to execute against our current contract with the Space Development Agency, and we were recently awarded an IDIQ contract under the United States Missile Defense Agency's SHIELD program. These awards position us to compete for a wide range of future activities to support one of the largest and most significant United States defense programs in history. As we turn the page into 2026, we see this year as an inflection point as we enter commercial service with our initial MNO partners while also continuing to generate revenue from the commercial gateway and government strategies. Before the impact of commercial service revenue later in the year, we expect revenue to at least double versus 2025. In fact, our 2026 expectations are further derisked given our contracted pipeline, which provides upside with additional government contract wins. 2027 will be the first full year impact of commercial service revenue as the AST SpaceMobile cellular broadband service becomes available in some of the best markets worldwide to hundreds of millions of subscribers via a low-friction service offering provided when the subscriber needs it most. We also expect government revenue to continue to multiply in 2027 with significant upside depending on certain contract outcomes. We see the opportunity in 2027 approaching $1 billion in annual revenue, importantly comprised of revenue both long-term contracted or highly recurring in nature, subject to achievement of commercial and government service objectives. Going into the end of the decade, we see further multiples of revenue upside, driven by greater subscriber uptake and market extension. All told, we are confident that our business strategy has strong competitive differentiation and is supported by a growing list of industry tailwinds. We enter 2026 with the assurance and conviction needed to win in an ever-expanding TAM. I'm now happy to pass the call over to Andy to walk through our financial update. Andrew Johnson: Thanks, Scott, and good afternoon, everyone. During the fourth quarter of 2025, we continued to execute on our commercial objectives while expanding manufacturing and importantly, significantly strengthening our financial position to support our core objectives in 2026. 2025 was best described as the year of scaling at AST SpaceMobile. We began the year focused on building out manufacturing to support our targeted launch schedule through 2026, and we ended the year with the launch of our first Block II BlueBird satellite, BB 6, a seminal moment in the history of our company. As we speak with you today, we have 29 Block 2 BlueBird satellites in various states of production and are on target to complete the assembly of 40 satellites equivalent of microns during the first half of 2026. For 2026, AST SpaceMobile's global workforce is intensely focused on completing our Block 2 BlueBird satellites to support the orbital launch of 45 to 60 total satellites during the year as we work towards commercial service activation in the second half. As Scott described, our focus on launch cadence and commercial service activation in 2026 is complemented by our increasing revenue opportunities, both from commercial and U.S. government partners. We are now a revenue-generating company, and we will work hard to achieve profitability from our growing revenue initiatives that are intrinsically linked to the increasing number of Block 2 BlueBird satellites that we put into low earth orbit. Our rapid growth is supported by a fortified balance sheet. Not only do we now have the cash to support the full build-out and launch of a constellation of over 100 satellites to provide worldwide space mobile service, our most recent financing activities position us to accelerate the deployment of our controlled spectrum bands on a global basis, monetize the capabilities of our proprietary technology to capture the evolving commercial opportunities related to artificial intelligence, enhance investment in government space opportunities in the United States, reduce our higher interest debt and pursue opportunistic investments to accelerate our space mobile services and capabilities. All the while, we continue to balance a prudent approach to our spending while moving quickly to protect and capitalize on our first-mover advantage of bringing space-based broadband connectivity direct to unmodified smartphones in the rapidly growing direct-to-device market. Our intentional focus on investing in operational growth led to higher adjusted operating expenses and capital expenditures in Q4 of 2025, both consistent with our expectations and previously communicated during our Q3 2025 earnings call. Importantly, our revenue ramp continued in Q4 with significant revenue growth from commercial gateway deliveries, services and contracted milestones completed for the U.S. government, resulting in 2025 revenue near the top of our guidance range. Moving to the operating and capital metrics slide. Let's review the key metrics for the fourth quarter and full year of 2025 in more detail. On the first chart, for the fourth quarter, we incurred non-GAAP adjusted operating expenses of $95.7 million versus $67.7 million in the third quarter. As a reminder, non-GAAP adjusted operating expenses exclude noncash operating costs, including depreciation and amortization and stock-based compensation. The quarter-over-quarter increase of $28.0 million resulted primarily from a $23.4 million increase in adjusted cost of revenues related to gateway deliveries, the first revenue from our MNO partners together with a slight $3.5 million increase in adjusted R&D costs, a $3.0 million increase in adjusted engineering services costs, this partially offset by a $1.9 million decrease in adjusted general and administrative costs. Our Q4 adjusted operating expenses, excluding those adjusted costs of revenue, would be $66.8 million compared to $62.2 million in Q3 of 2025, which is in line with the mid-$60s million guidance that I previously provided. For the full year of 2025, non-GAAP adjusted operating expenses less adjusted cost of revenue totaled $224.8 million compared to $151.8 million for the full year of 2024. The primary drivers of the increase were growth in our workforce, including contractors and consultants, our expanded production facilities and other professional fees, including legal fees related to our spectrum and financing transactions. Turning now to the second chart on the slide. Our capital expenditures for the fourth quarter of 2025 were approximately $407 million versus approximately $259 million for the third quarter of 2025. This figure was made up primarily of capitalized direct materials, labor for our Block 2 BlueBird satellites and payments made in connection with multiple launch contracts with the balance relating to facility and production equipment expenditures. This amount was above the quarterly guidance of $275 million to $325 million that I provided during our last earnings call, mainly due to intentional growth investments to accelerate satellite material purchases and the timing of launch contract payments. For the first quarter of 2026, we estimate that our adjusted operating expenses, excluding cost of revenues, will be in the range of approximately $70 million to $80 million as we add to our workforce and continue to design, manufacture, launch and operate our growing satellite constellation as well as pursue the monetization of our L and S-band spectrum usage rights. We expect our capital expenditures to remain flat in Q1 2026 with the fourth quarter of 2025, and it will come in at a range of somewhere between $350 million to $425 million, primarily driven by the timing of launch payments related to our near-term launches, which, as I've previously explained, vary from quarter-to-quarter. We continue to estimate that the average capital cost, including direct materials and launch costs for our constellation of over 90 Block 2 BlueBird satellites will fall in the range of $21 million to $23 million per satellite. Our cost per satellite estimates are subject to fluctuations based on dynamic geopolitical factors, which could impact our costs. As a reminder, the timing of the changes in our adjusted operating expenses and capital expenditures, as I've just described, could be delayed or may not be realized due to a variety of factors. Our planned revenue ramp continued during the fourth quarter, and we expect to continue to grow in 2026 holistically. With respect to revenue generation, we believe we can enable continuous space mobile service across key markets such as the United States, Europe, Japan and other strategic markets with the launch and operation of approximately 45 to 60 BlueBird satellites and additional strategic worldwide markets with the launch and operation of approximately 90 BlueBird satellites. Further, as we continue to launch and deploy our constellation, we will continue to support U.S. government applications, currently ongoing and accelerating as our constellation grows. In the fourth quarter, we recognized revenue of $54.3 million, primarily driven by gateway hardware sales and various U.S. government service milestone achievements. Additionally, in Q4, we recognized revenue in connection with the provision of critical consulting services for an MNO partner. For the full year of 2025, we achieved revenue of $70.9 million, representing the top end of our 2025 revenue guidance range of $50 million to $75 million. Now turning to our revenue expectations in 2026. We manage the top line with a focus on full year performance given the quarterly variability inherent to our business, including the timing of contract signings, equipment sales and milestone achievements. As a result, we believe our revenue performance is best evaluated on a full year basis. As we continue advancing our launch and network activation initiatives, we expect revenue to grow meaningfully relative to our 2025 financial performance. Specifically, we expect to generate full year 2026 revenue in the range of $150 million to $200 million. We expect revenue to continue to be driven by gateway deliveries, achievement of contracted milestones for the U.S. government, MNO consulting services with potential upside related to the recognition of initial commercial service revenue. Quarterly revenue will likely vary significantly depending on achievement of milestones and the timing of customer activities. We believe that approximately half of the revenue opportunity within our commercial pipeline this year is already booked or contracted. The remaining portion consists of a combination of advanced stage opportunities that have not yet been signed as well as net new business we expect to secure over the course of the year. As previously noted, we anticipate government-related revenue growth to be driven by the factors outlined earlier in Scott's remarks. The achievement of our revenue plan remains subject to several contingencies, including the successful launch and deployment of Block 2 BlueBird satellites related to U.S. government applications, contractual milestone achievements, critical gateway equipment sales to our MNO partners in support of their anticipated commercialization efforts of SpaceMobile service and service revenues in connection with the activation of our commercial service provided by our existing and planned deployed and operational satellites. Finally, on the last chart on the slide, on a pro forma basis, inclusive of cash raised in February via the convertible notes offering with a 2.25% 10-year coupon at an effective strike price of $116.30 per share and the available liquidity under the at-the-market or ATM facility. Our cash, cash equivalents and restricted cash as of December 31, 2025, was approximately $3.9 billion. Primary drivers for this cash increase include the execution of the two convertible notes offerings in October of 2025 and February of 2026 for a total of approximately $2.2 billion of net proceeds and approximately $706 million of net proceeds raised from the 2025 ATM facilities during Q4, leaving approximately $80 million available under that facility. In addition to capital raised via the recent 2.25% 10-year convertible notes, we also took action since our last earnings call by further reducing our outstanding debt related to the January 2025 and July 2025 convertible notes each due in 2032. Following the February equitization transactions, we have now converted approximately $457 million of the outstanding $460 million of the January convertible notes into 19.2 million Class A shares and $250 million of the outstanding $575 million of the July notes into 4.5 million Class A shares. We will continue to look at attractive debt reduction efforts, including convertible notes as the year progresses. Given the current strength of our balance sheet that now includes cash, cash equivalents and restricted cash and available liquidity under the ATM facility of over $3.9 billion on a pro forma basis as of December 31, we are now not only fully funded to manufacture and launch a constellation of over 100 satellites to provide worldwide space mobile service, but we have increased our financial flexibility to make further investments to expedite the timing of and augment the capabilities of our SpaceMobile service. At this time, we do not have any plans to pursue additional convertible debt. The combination of increasing commercial and government opportunities rapidly scaling manufacturing and satellite launch operations and a fortified balance sheet firmly positions AST SpaceMobile to achieve our objectives on behalf of all of our stakeholders in 2026 and beyond. I am incredibly proud of the significant progress our company made in 2025, backed by the intense focus and tireless efforts of our worldwide workforce. It's now time to further execute on our launch cadence to bring SpaceMobile service to connect the unconnected in the coming periods. And with that, this completes the presentation component of our business update call, and I'll pass it back to Scott. Scott? Scott Wisniewski: Thank you, Andy. Before we go to the queue of analyst questions, I would like to address a few of the questions submitted by our investors. Operator, could you please start us off with the first question? Operator: Justin from Georgia asks, any interesting learnings from BB 6 and 7? Is the production of composite satellites going to be vastly different? Any unforeseen delays? Abel Avellan: Thank you, Justin, for the question. Yes, BB 6, it is the largest phase array ever deployed in space. It's 3.5x bigger than our previous deployments, which were also the world record on size. And going through that first deployment of 2,400 square feet successfully, learn how to capture, control and manage the satellite at that size will allow us to actually do it much more faster and we do 7, 8, 9, 10, 11, 12, 14 satellites sit that are common. So that -- yes, that was a very, very important milestone in learning how to operate, deploy and fly something of this size, which will help us to do it faster in the next deployments. The other thing that will happen going forward passing 6 and 7 is that we're stacking the satellites. So we're not relaunching individual satellites anymore. They will be packed in group of either three, four, six, or eight in a single launch. That is what will allow us to meet our launch cadence of this year, which is -- which we're expecting 45 satellites in orbit and 60 satellites ready to ship during 2026. Operator: Justin also asks, is there an updated time line for the mid-band constellation for using L and S-band spectrum? Abel Avellan: Yes, there is. We're planning to start launching the mid-band constellation by the end of the year. The mid-band constellation has the advantage of combining 3GPP standard operator own frequencies and also our L and S-bands, which combined give a great flexibility to the offering and also allow us to continue to increase the data rate capacity that we have in our system going way above our 120 megabit per second that we already have in Block 1. So that allows a combination of IMT spectrum, which we see it like a extension to extend capability in places where there is not spectrum, there is no spectrum light up to overlay spectrum in our LNS in order to cover all locations as a supplement and an augmentation of the terrestrial network with data rate that far exceeds our 120, our current 120 megabit per second in the low-band block and satellites. With the largest satellites and with access to combine in certain regions to over 100 megahertz of spectrum combining the spectrum of our network partners and our own, this will give a true broadband experience on a global basis. Operator: Liden from New Zealand asks, with the larger designs complete and being produced, do you anticipate future R&D or new product lines? This may be data centers, exclusive military constellations, collecting data on usage, providing aircraft and ship traffic, radar, et cetera. Abel Avellan: Thank you, Liden. Listen, the most difficult aspect of the R&D with the launch deployment and usage of our BB 6, the core aspect of it is complete. So the ability to produce a lot of power, the ability to have a very large aperture with very sensitive aperture, the ability to have many, many gigahertz of processing power with our own ASIC the ability to do it cost effectively with our own power generation technology. All of that R&D have been completed and it's integral part of what we have and where we're operating, and as you said, being completed. Now we do see many other opportunities for the technology that we're starting to see usage of them. One is radar. Another is power generation. Another one is multiplying the spectrum usage. So we believe in combining our large aperture with our AI capability will create a multiplier for the spectrum. So the 50 megahertz that we have, it will feel a multiple of that. It could be 3x that, it could be 10x that. So we see a lot of opportunity to combine in all this capability, including very precise geolocation, radar communications, all that wrap up with an AI infrastructure. We think there is a significant additional value that we can create with our infrastructure and the already invested R&D. Operator: Kevin from Vancouver asks, can you share more color on the most recent $1 billion convertible note offering? Many investors are confused as your current liquidity was already approximately $3 billion in sufficient for around 100 satellites. Were there any specific opportunities in mind when you issued the offering? Or is it really "just in case something pops up? Andrew Johnson: Thanks for that question, Kevin. This is Andy. It's absolutely the case that in Q4, when we finished the convertible in October, we were in a position to fully fund the worldwide constellation at 100-plus satellites. Nothing has changed on that front. And the convertible deal that we did at just over $1 billion in February provides us essentially extra flexibility to look at investments that go beyond that first 100 constellation. And what I mean by that is, number one, we can accelerate the deployment of our control global spectrum with this added fund. We also have the opportunity to monetize our technology to capture commercial opportunities related to AI, which are increasingly coming our way. We will look to deploy funds to enhance our investment in government space opportunities in the United States. We've talked about our debt profile. These funds provide us flexibility to look at reducing higher interest debt that we currently have. And finally, opportunistically, any investments that help us accelerate the time to bring space mobile service and capabilities will be a good use of these funds as well. And I would just close by noting that we've confirmed that we have no current plans to look at an additional convertible deal. We feel that the balance sheet is where it needs to be to provide us the opportunity to execute our objectives in the near and midterm. Scott Wisniewski: And with that, I'd like to thank our shareholders for submitting those questions. Operator, let's open up the call to analyst questions now. Operator: [Operator Instructions] Our first question comes from the line of Griffin Boss with B. Riley Securities. Griffin Boss: So, first, I just want to talk about this expanding TAM that you've talked about with the dual-use capabilities and government contracts. Do you see any scenario where you build and launch future block Bird satellites with different payloads that might be exclusively for government customers or applications? Abel Avellan: Listen, the satellites are really designed to manage all these applications in a single platform. So we do not need multiple satellites for multiple payloads. The core applications for our government contracts for our partnership with the MNOs are all possible through the same platform, which are, in fact, already being used in combination of the two. So we want to maximize and take advantage of a platform that can be used simultaneously for the two TAMs. Griffin Boss: Got it. Okay. Understood. And then just second one for me. You always mentioned your thousands of patents, and you talked about on this call, your expertise in building and deploying massive structures in low earth orbit that could be used for myriad opportunities and you specifically call out these burgeoning opportunities in AI. You called that out with the convertible raise too. But you have this one specific patent that's been of interest to us for a while for thermal management systems for structure in space. And that's a patent that describes a process for satellites wherein heat is dissipated locally at each antenna and heat could be directed to each antenna assembly during periods of extreme cold. So just curious if you could maybe elaborate on that specifically as well as your other capabilities and how that could potentially be used for opportunities in data centers in the space or why that makes AST satellites attractive for those types of capabilities? Abel Avellan: Yes. No, absolutely. I mean there are many key enablers that needed to be designed by us and deploying patent in order to solve probably the most difficult problem, which is connecting broadband regular handsets. So, for that, we needed to develop and vertically integrate 95% of our technology, had the technology to produce a low-cost power. That's a very significant satellite our size. We are on a factor of 10 lower per square meter power production of what historically manufacturers had been using, the size of the satellite. And then the ability to generate power at a low cost per square meter and then being able to dissipate and effectively run a lot of wattage per square meter within the power constraints of space. So we have -- that's why we have built up a significant portfolio of IP. That is a particular -- I think you hit it right, that's a particular technology that enable a lot of things. Then when we talk about the ability to manage the spectrum using AI capabilities, we call it spectrum AI spectrum management, the ability to use these satellites, not only for communications, but other applications like radar. And when you combine that with the ability to store, manage data, in a way that uses the spectrum very, very efficiently is -- it opened a lot of other opportunities on the TAM that we have. We believe the largest TAM is in broadband through broadband directly to the handset where you will be basically becoming what I call the third leg of communications. You have Wi-Fi, you have cellular and now you have space. And our belief is to participate at scale in a way that is meaningful for our global operators, the broadband capability is essential. And it's not -- and it's something that we have now. I mean that's what we have with the satellites that we're deploying right now. And we're extremely happy of the performance that we see on our BB 6 in the new 2,400 square feet platform that we just launched. Operator: Our next question comes from the line of Colin Canfield with Cantor Fitzgerald. Colin Canfield: As we parse out the comments that you talked about on 2028 revenue potential, just kind of thinking like the ball bear of what you said, so multiple versus $1 billion of potential in '27, which suggests, let's call it, $1.5 billion to $3 billion for '28. How does the team kind of think about the mix of opportunities between government and B2B customers? And then kind of within B2B, how do you think about tech discussions between communications, intelligent and then intelligence and on-orbit compute? Scott Wisniewski: Thanks, Colin. I'll take that. So, we put forward our expectations for revenue in 2026, building on the high end of our guidance that we achieved in 2025. And then we stated a goal for 2027. So we did not state anything for 2028. So I'll keep my comments to '27. But I think what we see is as we get this platform on a full year run rate, and we're able to put the consumer business, the D2D communications business in place in some of the most favorable markets globally. And then you put that alongside our government applications, giving some time to mature and some potential contract wins we're chasing. That's how we got to that 2027 goal number. And we think that that's probably more weighted towards commercial based on that framework. But of course, upside, I think, if government does better. And as you go out into 2028 and later in the decade, ultimately, we do think that our commercial business is going to be bigger. That's always been the premise. So, commercial, I think, at scale should be bigger than government. We think that market is really attractive. We think all the demand drivers we've tracked for seven, eight years of the company are intact and growing stronger by the day. But the government business is also very attractive. And as we said, with all the various use cases we're tracking, there's potential for multiple billions of annual revenue through those use cases as well. So we see a really bright picture. I'd say it's largely consistent with how we've always seen it, although government has trended up over the last year or two. But that's how we see the mix playing out. And -- and I think that's -- as we're deploying and as you saw, we put out a number of customer announcements today, we see the strength of that demand as strong as ever. Colin Canfield: Got it. I appreciate it. And then as we think of the progression of growth, is it fair to use the 4Q performance as a baseline for 2026 and then growing from there? Or is the commentary in terms of growth for '26 more aligned with just growing from the 2025 annual number? Scott Wisniewski: The way I'd think about it is before we initiate commercial service here, we're doing revenue that's kind of earlier stage, right? So the commercial revenue is not as consistent and the government revenue is building nicely, but much lower than where it can be. So, quarter-to-quarter, I wouldn't say we're planning on building quarter-to-quarter. I think about it annually like Andy put it in his speech. It's really about an annual target. And so I think at least doubling where we hit in 2025 is the right way to think about it with, of course, upside as we launch commercial service. But quarter-to-quarter, at least in the next few quarters before commercial service comes into play in the second half of 2026, that's how to think about it is we're going to be -- we're putting commercial infrastructure in place, and we're performing against our government pipeline. Operator: Our next question comes from the line of Bryan Kraft with Deutsche Bank. Bryan Kraft: I'm just trying to understand the manufacturing side a little bit better. Would you mind providing just some color on how many satellites beyond BB 7 are built and ready to ship today and maybe how many you expect to be built and ready to ship by midyear? I know you talked about the microns and those are the hardest part, but I think there is some assembly that takes some time beyond the microns themselves. And then just related to that, I mean, I think clearly, the manufacturing pace is somewhat behind where you had expected it to be. Perhaps you could maybe just give us some appreciation for the kinds of things that maybe took longer than you had expected and whether you think you've now worked through all those issues and you're kind of accelerated or accelerating the pace up to where you had expected it to get to? Abel Avellan: Yes. I think we are at a point where you see that acceleration. We certainly see that in the manufacturing of the key building block, which is the Micron, so which we were on satellite 30. We are on target to at least be ready to ship this year 60 satellites with a minimum of 45 into orbit. So we went through a phase and just a year ago, the satellites were 3.5x smaller. They were already very big. They were the biggest ever launch. These ones are 3.5x bigger. And that's BB 6 and 7. Past that, basically, what is something that help us to accelerate our cadence of satellites in orbit is we are able to stack them. And that stack is difficult. You need to be able to stack either three, four, six, or eight satellites. And that is near completion. So that you will -- you see batches of six in the -- getting out of the factory very soon here. Bryan Kraft: And -- okay. So on the stacking, if I may, just in layman's terms, are you saying that there are specific engineering things that you had to figure out in order to get the stacking right? Or are you just saying that getting that many done at once so that you could stack them and getting ready for a combined launch took some time? Just if you don't mind clarifying. Abel Avellan: Getting them ready for a combined launch is the ability -- I mean, you're talking about something like a 5-story building worth of satellites, stacking them in either blocks of three of them, four, six, or eight. And -- but that process is completed. And the next batch of six, you see the pictures in the deck that we put in the IR deck. And that -- we passed that phase and we get ready to resume the shipments to the Cape. Bryan Kraft: Okay. If I may sneak one more in. I know you said that BB 7 is expected to go up this month and then launches every one to two months. Could we expect possibly a launch with multiple satellites in April? Or is it likely to be two months post the March launch? Abel Avellan: Yes. I mean the -- all further launches are in stack configuration. We're not -- we don't have any more single launches like we did on BB 6 and BB 7. This next coming launch is super important for us as basically allows to reduce the first stage of the New Glenn, which is the only platform commercial that exists that can actually stack eight of our satellites. There are other platforms that stack six or three. But with the New Glenn, we get the maximum amount of satellites per launch. And that ability is becoming available with the new satellites. Scott Wisniewski: And Bryan, I'd just add, we expect to ship that next batch in April. So depending on timing and of course, under ideal conditions, it's about three weeks or so to launch from there. So we're not going to speculate on launch timing for that, but we are -- we look like we're going to be in a position to ship those in April, and you can see that on Page 10 in our deck. Operator: Our next question comes from the line of Louie DiPalma with William Blair. Louie Dipalma: Abel, Scott and Andy, congrats on all of the partnership announcements and the progress with your constellation. First, I was wondering, are you in Barcelona for the conference? And will there be more announcements this week besides what you've already announced? Are you holding back certain announcements? Scott Wisniewski: It's Scott here. Yes, we are in a conference room in Barcelona. So it's great to do the call this quarter on the road. But yes, we did -- we had a flurry of announcements today. And yes, you can expect more for the rest of the week as well. Louie Dipalma: Excellent. And my second question is, what service level will your network support when you launch the different beta offerings in the summer, will there be different phases in terms of the service capabilities as more satellites come online? Or like should like the initial beta that launches whenever that takes place, will that have like close to a true 5G experience? Abel Avellan: Yes. The way to think about this is peak data rate. So what peak data rate you can expect on the phone will be directionally proportional to the amount of spectrum that we get allocated. And with some partners we have between our spectrum and their spectrum and off to around 100 megahertz. And you can think -- you can put a multiple of that number of megahertz to think about what is the big data rate. Today, we're managing between 3 and 4 bits per hertz. So that multiple is in that order. So the initial launch of commercial services is with the lower end of that as the allocated spectrum, it will be less. But as we enable more spectrum, which the satellite support them now, they have great flexibility to keep adding spectrum and keep adding and later even combining low-band spectrum with mid-band spectrum. Then you see the peak data rates keep enhancing. So that's the way to think about the key performance metrics as we launch services. Louie Dipalma: That makes sense. And one financial question for the $1 billion revenue goal for 2027, how much of that is customer or subscriber usage based versus being like minimum revenue commitments that are contractually obligated with your MNO partners such that like if you actually are able to get like between the 45 and 50 satellites online by the end of the year, how much of that $1 billion is then like already in the bag, so to speak? Scott Wisniewski: Sure. So, remember, we're at $1.2 billion contracted backlog right now, which we're very proud of and is a testament to how we've built the ecosystem with our partners and how confident our partners are in the business that we're building, right? But that is still very, very low number compared to what our expectations are for the revenue potential of the business. So while it's a good indicator that backlog, which again is over $1.2 billion at this point, but in terms of its contribution to each individual year, it will be a minority for sure. So if we're -- in terms of a goal of $1 billion, you can think of that in the low hundreds of millions, somewhere in $100 million to $300 million range depending on the year. Operator: Our next question comes from the line of Chris Schoell with UBS. Christopher Schoell: Looking at your new disclosure, it appears your services gross margins are around 90%. Is this a good way to think about the business longer term? And as revenue generation starts to kick in, can you just remind us how you're thinking about operating leverage and where you believe steady-state EBITDA margins can reach for the business? Scott Wisniewski: Yes. We've been pretty consistent about this over time. And when you look at the history of the satellite industry, when it's been performing well, has margins in the 80-plus percent range. And even today, if you look across the market, there are businesses with 90-plus percent flow-through margins in certain segments of their business, they just might not report it that way. So this has just tremendous operating leverage in it, and we've always known that off of a fixed cost base. So, as we've built the business, nothing has really changed. I mean we struggle to find true variable cost in a meaningful way. And this is compounded by the fact that remember, our go-to-market strategy is with the revenue share. So that is a big way that we even get greater leverage in the business and make it not just wholesale, but super wholesale. So, at this point, our flow-through margins and our operating leverage, we think, over time, could contribute to an EBITDA margin in the 90% area or higher. Christopher Schoell: Great. If I can just fit in one more. I recognize that the 10-K talks about 90 satellites supporting your longer-term business goals. But does your ability to raise capital maybe incentivize you to perhaps go beyond what is contemplated in the original business plans? Abel Avellan: I'll pass it over to Andy. Andrew Johnson: I think having that flexibility, I mean, the market -- the capital markets have been wonderful for us over the past year. So that's absolutely the case. But the reality is when we get our constellation built, we're going to get leverage in the P&L to actually be cash flow from -- cash flow positive from operations. So we don't feel like at this point, we need to look beyond what we've raised right now. It provides us the flexibility to make additional investments, opportunistic and some of the other things that we're doing on our spectrum strategy. But the real goal is to generate revenue and profit from the constellation as we get to launch. So that's kind of how we're thinking about it right now, but it's certainly nice to have the balance sheet fortified the way it is. Operator: Our next question comes from the line of Greg Pendy with Clear Street. Gregory Pendy: Just a real quick one. On the operating expenses that you outlined, could you just remind us what you said? And does that include what will likely be spectrum licensing fees, maybe around $20 million a quarter or lease -- I'm sorry, spectrum lease payments? Andrew Johnson: Yes, this is Andy. So it's a bit of a walk here. You've got sort of the GAAP OpEx, which includes the normal noncash items, which we adjust out, which we've talked about. And then from there, we also have the cost of revenues, which when we get to service, we'll be moving into a more traditional COGS P&L that you'd be more used to there. But then when you net that out, my commentary was that we were just slightly over where we were in Q3 of '25 and right in that guidance that I gave for Q4 in the mid-60s. It does not include spectrum costs, as you described for licensing, given that those are capitalized until we actually start monetizing that asset. And of course, we're at the point where we're awaiting FCC approval. So we will speak to that as a specific item when it comes time to kind of build that into the operating expense. But right now, apples-to-apples, that's been out during the course of '25. Operator: And we have reached the end of the question-and-answer session. And therefore, I'll now turn the call back over to Scott Wisniewski for closing remarks. Scott Wisniewski: Thank you, operator. And we want to thank all of our shareholders and research analysts for joining the call. We hope to see many of you down in Florida at our upcoming launch. Thank you. Bye. Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Vincent Ippolito: Welcome to the webinar. I'm Vincent Ippolito, the Executive Chairman of the Board for Botanix Pharmaceuticals Limited here. It is the top of the hour. We're expecting close to 300 participants with preregistrations and those that are continuing to come on right now as we speak. But we're going to get started with today's webinar. Well, the company has come a long way since our highly successful commercial launch of Sofdra in February of 2025. It's really hard to believe that was just a little bit more than a year ago we launched. And we're pleased with the progress the company has made. And with the approval of the balance of the capital raise later this month, we believe that we'll be well positioned for future growth. Well, the purpose of this call today is to discuss the 2026 half year report. And at the end of the presentation, we'll have some time for some questions from the audience regarding the report. You could type them into the chat section there. We'll try to capture as many as we can. We got a few questions in advance as well of this webinar that we're going to incorporate into the Q&A as well. And for all participants, all questions are monitored and moderated. And I'm joined here, as you can see on the screen today by our Chief Executive Officer, Dr. Howie McKibbon; and the U.S. Chief Financial Officer, Chris Lesovitz, who will take you through today's presentation of the Botanix half year report for the period ending 31 December 2025. So with that, I'm going to turn the presentation over to Howie to get us started here. Howie McKibbon: All right. Thank you, Vince, and thank you to all the attendees for taking the time to join the call today. So today, I'm going to provide a summary, a brief company overview, and then we're going to quickly move over to our first half results. So Sofdra experienced strong growth in the first 11 months of its launch with 62,500 prescriptions shipped, almost $100 million in gross revenue and $21.2 million in net revenue over that time period. During that time period, Sofdra, our sales force and our platform performed above our expectations. The Botanix fulfillment platform created the opportunity for frictionless access for both patients and physicians. It has the capacity to add products, which can benefit from improved gross to net yield, a fill rate exceeding industry standards and a high rate of fully reimbursed prescriptions. Market conditions are favorable for M&A of products that would benefit from our platform, and our focus right now is to maximize its scalability with additional assets as they become available. Selection is underway for an alternate active pharmaceutical ingredient or API supplier, which is expected to decrease cost of goods sold by 25% to 40%. And given that Sofdra's IP or intellectual property runway goes all the way to 2040, it adds considerable value creation for both the profitability and can increase attractiveness to our potential acquirers in the future. So after the period ended, Botanix received firm commitments for a $45 million capital raise. We've received $14.9 million in funds to date under that raising, and the balance will be subject to shareholder approval at our meeting scheduled on April 1, 2026. And you can refer to our Notice of Meeting released to the ASX yesterday for further information. So let's transition over to the quick company overview, and we're excited to get to our first half results. Next slide, please. So most of you are very familiar with Botanix, but for those that are new, it's a fast-growing dermatology company that successfully launched Sofdra last February, as Vince said earlier, for the treatment of hyperhidrosis, which is commonly referred to as excessive sweating. So it's the first and only new chemical entity for primary axillary hyperhidrosis, and that affects over 10 million patients in the U.S. alone. So 2 things I want to put in perspective here. First and foremost, as a new chemical entity, there were only 46 NCEs approved in the U.S. across all therapeutic categories in 2025. So we're very fortunate to have one of these NCEs. And second, with a 10 million patient TAM, we are the third or in the third largest dermatological condition that exists. So a large underserved population with a new chemical entity with patent protection going all the way to 2040. Our platform has proven to increase patient compliance or adherence, which is the extent that patients stay on their drug treatment. That's very valuable for us. It makes those patients sticky. It's very valuable to the patient because they're getting the treatment that they need and ultimately the efficacy that goes along with it. It continues to exceed industry benchmarks at 2.5x the industry standard with regard to fill rate. And we'll discuss further the innovative platform and why it's a key asset to the company later in the presentation. And finally, the sales force expansion of 50 sales specialists was completed in 20 October last calendar year. Both the new hires and the existing sales professionals have been highly productive, and they're performing as expected or in some cases, better than expected. We expect the new sales specialists to build momentum as they penetrate new states, physicians, areas, and we look forward to them helping contribute in a meaningful way to increase Sofdra prescriptions in the future and helping to ensure that as many patients as possible get the treatment that they need for their hyperhidrosis. Next slide, please, David. Okay. So as we said earlier, Sofdra is indicated for primary axillary hyperhidrosis going all the way down to children 9 years of age and over. So a very large part of the population. It presents a novel, safe and effective solution for patients who lack treatment options for this socially challenging medical condition in the past. And we believe the novel mechanism of action of Sofdra allows it to reduce sweat at its source. selectively in a very targeted way, binds to the M3 receptor, which is the receptor implicated in sweat [ glands ]. So it blocks that, receptor does its job. It's rapidly metabolized once it's released and hits the bloodstream. And that helps, we believe, minimize the side effects or adverse events, which were told by patients and physicians are really living up to the clinical profile of the clinical trials. Doctors have also told us that the proprietary metered dose pump, which helps limit an unwanted drug contact to the hands is one of the key reasons they prescribe Sofdra in addition to the safety in the platform itself. Next slide, please. So let's talk about this TAM. It's a large market for Sofdra, and it's an underserved population. There haven't been many treatment options in the past. And just to put that in perspective, consider that primary hyperhidrosis affects twice as many patients as psoriasis. That's generally a very large disease state recognized within the U.S., both by patient numbers and by dollars sold. So it's the third largest dermatological condition after acne in atopic dermatitis. So that 10 million patients is a big opportunity for us over the product life cycle. Of those, about 3.7 million patients are actively seeking treatment, and those are the patients that our 50 sales representatives are going after and educating those physicians. So we'll transition over the next slide directly to the half year results. So we've seen solid growth of prescriptions shipped each half since launch. In the first half of fiscal year 2026, total prescriptions grew to 45,800 or 45,800 from 16,800 in the second half of fiscal year 2025. That increase in prescriptions and solid refill rates continue to indicate rapid acceptance of the benefits of Sofdra by both physicians and patients alike. Let's transition over to net revenue. Net revenue increased from $5.1 million in the second half of fiscal year 2025 to $16.2 million in the half year ending December 31, 2025. That's a 219% increase, and we expect net revenue to continue to grow into the foreseeable future for many of the reasons we've already discussed today. One of the reasons for our continued our optimism is what physicians are telling us. So we conducted market research back in Q2. And the results of the research show that Sofdra strongly resonates with health care professionals and that 90% of those surveys expect to increase Sofdra prescribing in the next 6 months. This gives us great confidence in the product and its potential growth. Sofdra use was driven primarily by streamlined access, strong efficacy, unique applicator and safety. Physicians also assured us that many patients remain -- I'm sorry, undiagnosed in their practice, which tells us that there's a large opportunity here for those patients they already know habit that are coming in and raising their hand, but also for those patients that see our materials in the waiting room that are reminded to talk about their condition to their physicians and actively bring that up. So the combination of this feedback does 2 things. First and foremost, they're happy with the safety and efficacy of the product. And knowing that we have this product until 2040 allows us confidence that we're going to be able to continue to build upon it. The second is their high rating of the reason to prescribe assigned to SendRx or our fulfillment platform. Also tells us that if we come in with other products, they already know how to use the platform, and they're looking at that as a benefit to any product that we bring in to put on that platform. Let's talk about the platform itself. It's a huge asset of the company. Like I said earlier, it provides streamlined fulfillment and access through a single pharmacy network that supports both dermatology practices and the patients. And that's important from a prescribing perspective, but also the patient getting their prescription and just as important, getting the refills that exceed the industry standard. Now a key value driver of the platform is its ability to improve insurance clearance rates. So we get a larger number of fully reimbursed prescriptions, ensures that patients can easily access the product, makes it convenient for physicians to prescribe. And what they tell us is that when they have the confidence that their patients will get the prescription they prescribe, they're more apt to prescribe the product more in the future. It allows for personal follow-up with patients by the pharmacy. This effectively drives the adherence and the refill rates that exceed the industry standard and ensures that Botanix has high visibility into pharmacy operations, which allows us to make rapid changes based on the insights that we get on a very frequent basis. I think just as important, if not more important, is that the platform is scalable. It's proven that it can handle the throughput and it positions Botanix for future growth. It can improve the gross to net yields for a new product, increase its refill rate and contribute significantly to net sales without incurring any additional development costs. So something that we might bring on, put on top of that platform can be immediately accretive. Now I'd like to introduce our Chief Financial Officer, Chris Lesovitz, and he's going to take us through the financial results, and I'll come back and close the presentation. Chris Lesovitz: Thank you, Howie. I'm pleased to walk through our operational and financial performance for the first half of fiscal year 2026. Let me begin with our operational progress. Over the last 6 months, we successfully completed the expansion of our sales force to 50 representatives. This was a core strategic priority for us, ensuring we have the commercial reach needed to support sustained growth. We also continue to enhance the performance of our Botanix fulfillment platform, which is driving greater patient compliance and improved gross to net. Our commercial execution translated into meaningful volume growth. Total prescriptions shipped in the first half grew by 171%, reaching 45,800 prescriptions. Importantly, sentiment among our health care professionals remain overwhelmingly positive with 90% of our providers indicating that they expect to increase their prescribing of Sofdra over the next 6 months. Now turning to our financial results for the period. We delivered $16.5 million in total revenue, which includes royalty revenue during the first half of fiscal year 2026. Materials and related expenses totaled $6 million. Our direct operating expenses totaled $36.6 million, which includes product sales and marketing, employee, corporate consulting and G&A expenses. These expenses reflect the investments we made in our commercial footprint and support functions as well as we scale. Our adjusted EBITDA loss for the half was $26.1 million, and we closed the period with $31.6 million in cash and equivalents. On the slide now is our statement of profit and loss. The total revenue increased to $16.5 million compared to $346,000 in the prior corresponding period. Sofdra was not fully launched yet in the first half of fiscal year 2025, whereas in the first half of fiscal year 2026, we generated $16.2 million of U.S. Sofdra revenue following its introduction in the second half of fiscal year 2025. So our operating expenses reflect a scaling commercial business. Expenses increased in line with the investments required to support a national U.S. launch. You can see here our materials and related expenses rose sharply to $6 million due to the uptick in prescription volumes as well as associated royalty payments we made during the half. Our sales and marketing increased to $24.7 million as we expand our promotional activity and field force coverage. Our internal employee costs grew to $7 million. This was driven by recognizing a full 6 months of internal headcount in the first half of fiscal year 2026 versus prior period of staffing was partial for fiscal year 2025. Our G&A expenses remain controlled, decreasing slightly year-over-year to $3.2 million. And now for our noncash expenses, our share-based payments declined significantly due to vesting timing, and we recognized a fair value gain on the financial liabilities for our debt instrument in the current period. Our loss before tax was $33.2 million. It's a modest increase from prior period. This reflects a typical early launch dynamic where investment proceeds revenue scale. The Sofdra adoption continues to grow, we expect our revenue growth to start outpacing our cost basis here. With that said, I will now turn it back over to Howie. Howie McKibbon: Thanks, Chris. Let's go to the next slide, David. So as we're looking at the future here, I want to discuss some of the catalysts that are going to drive company performance and value over time. Of course, we're going to continue our focus to deliver on Sofdra. We've talked about it. It's a new chemical entity, IP going out to 2040 and a very large TAM with which to go after here, not only with the physicians that we're calling on, but in the future and other ways to get to patients. So it's very important to us with regard to our flagship product. Now that said, our fulfillment platform provides opportunity. It's proven to be able to perform at much greater scale. It's proven that the insurance clearance rates over time are improving with the knowledge base and the implementation and physicians understanding how to interact with the platform itself. And gross to nets are going to continue to improve as we target that 30% to 40%. So putting something else or another asset onto this platform is something that we're very focused on and something that we believe will not only increase our net sales, our pathway to profitability being faster, but also it's something that is fairly accretive. It's not going to cost extra dollars. We have the same sales representatives. It's the same platform, and we don't have to add development costs. We also want to focus on our secondary supplier. We believe that we're going to decrease cost of goods 25% to 40%, and we're well on our way in that selection process. Next opportunity is to expand Sofdra licensing to other regions for increased revenue. So as you know, it's already out-licensed in Japan, but we do have -- and launched in Korea, but we also have the rest of the world with which there is opportunity to provide Sofdra to those patients through licensing deals. And finally, the long IP runway, as I stated multiple times to 2040, it elevates Botanix value proposition for mergers and acquisitions. In our experience, what other companies or potential suitors look for are the area under the curve with regard to the value, how long that product is going to last. And do you have the appropriate areas like supply derisked. So we are ensuring that we are maximizing all of those opportunities there. But again, focus is on Sofdra, but we do now have the opportunity to add additional products to this platform that's proven itself in the marketplace and most importantly, gotten very positive feedback from the physicians who ultimately will be using the platform. Next slide. Okay. As discussed earlier, after the period ended, Botanix received firm commitments for $45 million capital raise. We received $14.9 million in funds to date under that raise, and the balance will be subject to shareholder approval at our meeting scheduled on April 1, 2026. And again, you can refer to the Notice of Meeting released to the ASX yesterday for further information. The proceeds from the placement in SPP are intended to be applied towards API and manufacturing component purchases, alternate API supplier setup, advertising and marketing initiatives, operating expenses and working capital as well as the transaction cost, of course, of the raising. I encourage you to review the company's investor presentation from February 17 for further details regarding the proposed use of funds from the raising. And certainly, we'll be focusing on ensuring that these funds are used as intended. Next slide, please, David. So as I just mentioned, the company is obligation to purchase further API under its existing supply contract. And I wanted to go into further specifics here, just to clarify so we could all understand. Number one, Chris and his team are focused on making sure our expenses outside of API are very consistent and very predictable. With regard to our current API supply contract, we would have purchases in March of '26 and April of '26, then again on January of 2027. Now after that, the contract requires one purchase per year as late as December of that year in '28, '29 and '30. So what we're focused on now is moving the April 2026 payment as well as the January 2027 payment to future years to free up working capital during our launch phase to be able to focus our funds on generating demand. So we're currently in advanced negotiations with our existing API supplier, where Botanix is seeking to spread those upcoming purchases and payment obligations, which are currently scheduled for April and January. We want to do that over future years. Now separately, the company has been negotiating with alternate API suppliers with a view to reduce the cost of goods sold or COGS, increase our gross profit and decrease the company's current single-source supply chain by having another option. So we're focused on this initiative, frankly, because the 25% to 40% reduction in COGS is very meaningful to gross profit. And if we succeed in one or both of these negotiations, that could materially smooth future cash flows and likely -- not likely will decrease COGS significantly, we add a secondary supplier, which we'll be focused on in the coming year. Okay, David. next slide. So we'll close out here before we turn it over or back over to Vince for Q&A and closing comments. But we're pleased with the output and success of the first half of the fiscal 2026. The sales professionals have done an outstanding job. The fulfillment platform has operated above our expectation. And again, it's scalable. There's a strong opportunity for Sofdra. We talked about the 10 million patients in this underserved market and the perfect time to have a product with overwhelmingly high physician and patient satisfaction. So we're pleased that Sofdra is also performing even better than expected regarding its clinical and safety profile. More importantly, dermatologists are highly promotionally sensitive to the product, and we've continued to see double-digit prescription growth. And we're confident in the future of the product, both from a clinical, safety and adoption perspective and maximizing that opportunity until 2040. We've also discussed our differentiated platform and what it's doing for patients, physicians and refills. We talked about the fact that it can immediately improve margin for almost any product and it's scalable. So we have opportunity here with Sofdra, but a very bright future with regard to what this platform can do and the value of it, both to us and potentially to external seekers. We built a solid foundation for future growth and profitability. So clinical development was derisked when we got the approval of Sofdra. Execution was derisked with the hiring of the sales specialists and the expansion of the sales force. So they're out, they're performing, and we're looking forward to what the output is going to be as this market goes back into its growth phase over the summer. Operations were derisked with the validation of the platform, and we're moving toward that additional supplier to create manufacturing efficiencies, redundancy and a decrease of COGS by 25% to 40%. Each of these serve as a foundation for growth for Botanix with 50 high-performing sales specialists to continue to grow Sofdra in an environment where 90% of the doctors that we surveyed expect to increase prescribing in the fiscal year, we see a bright both near-term and long-term outcome. They also have the capacity and talent for additional products and our fulfillment platform is ready to meet the need at the appropriate time. So our focus is clear: perform on Sofdra, look for ways to maximize this platform and its scalability and maximize the value of Botanix. So now I'll turn it back over to our Executive Chairman, Vincent Ippolito, for closing comments and Q&A. Vincent Ippolito: Great. Thank you very much, Howie and Chris for the presentation. So this concludes the formal part of the presentation. And we're going to jump into the questions. We did get a lot of them here. I've tried to consolidate, as I mentioned earlier here, some of the questions together, and hopefully, we'll be able to address some of the questions that you had in this. We're going to focus on the questions related to the half year report that was presented in the presentation today and released also today. We'll do our best to answer as many as we can. But also note that we can't provide any additional color on questions that haven't already been publicly announced into the marketplace. So if you have questions about the raising, as mentioned during the presentation, we encourage you to review the announcements today, especially the ones released on February 17, the Notice of Meeting that was released yesterday and the prospective, which is expected to be made available very shortly here in mid-March. And as I mentioned earlier, all questions are monitored and moderated. So with that, I'm going to jump into the questions here. Howie, there was a number of questions regarding API here. And there's 3 of them. I'm going to go through for you here, all related to that. So the first one was why does it take so long to set up an additional API supplier? And why did you choose the current API vendor? Howie McKibbon: Yes. So there was only one API vendor at the time we bought Sofdra. And currently, no other vendor makes the API. It's a new chemical entity. So it's not something you can just purchase off the shelf. So Kaken, they launched the product first. And back in 2020, years before the launch of Sofdra, and they worked with a third-party supplier to develop the API for use in their own product, and that's where we got our API. So the only option at that time was to purchase the API from the world sole supplier. Now that said, the second part of that question, why does it take so long? Because they're not already set up, right, or existing there, we actually have to create the supplier. So we do partner with those who have the skill set -- but it takes time to transfer the technology, number one, to validate the process, go through the appropriate inspections with the FDA and ultimately create your validation batches. Now that's not a scenario like a drug approval where you're going through all of these trials and you don't necessarily know how they're going to end up. It's something that is done. There's a pathway to do it. It just does take time. It does take dollars in order to accomplish that. And when we first got the product, we didn't have the money to be able to do both. So we had to rely on this sole source. It is typical over time for companies to develop and then utilize an alternate supplier. And in this case, it's going to benefit us because we have the opportunity here to save 25% to 40% of COGS and frankly, create redundancy within the supply chain. But in a nutshell, you can't just go buy it off the shelf. Vincent Ippolito: Okay. The second question, Howie, around the API was one maybe just of a clarification here and whether or not the company has to purchase API 3 times a year going forward. And the question was referring to the March payment, the April payment in January. Is that the pattern for API purchases? Howie McKibbon: No, it's a good question, and I want to make that absolutely clear. We're not committed to purchasing API 3 times a year in the future. The next 3 purchases were scheduled for March, April of this year then January of 2027. That carries us to 2028. We'll onboard an alternate supplier by then. The current contract with our current API supplier just requires purchase per year in '28, '29 and '30. And it doesn't specify when. So said another way, they can be as late as December of each of those years. So this is a bit of an anomaly with some historical context. That said, we are currently in advanced negotiations with our existing API supplier to spread those payments over time. We'd like to be able to move the April and the January purchases and payment obligations out to future years, freeing up our working capital in the short term. Vincent Ippolito: The last one in this section here, Howie, is about -- there's been a lot of discussion about the API alternate supplier. Is this something new? And why is the company so highly focused on engaging an API supplier? Can you explain the rationale? Howie McKibbon: Yes, sure. I think it's 2 parts. We previously disclosed that we were exploring additional API suppliers and documents released as early as April of last year. And we found when we're evaluating those potential partners, that was significant cost savings to COGS and increased gross profit. As I said earlier, 25% to 40%. So it's twofold there, right? You're increasing your gross profit, but you're also derisking the supply chain with redundancy. And again, it's not something that's an anomaly in pharmaceutical companies. We typically do to the extent that we can and can afford it, need more than one supplier in the event of any type of stoppage or catastrophe, et cetera. So from a fiduciary responsibility, it's something we should be doing. In this case, it's actually going to contribute to gross profit in a very positive way. Vincent Ippolito: Great. Okay. Chris, this one is from you -- for you. Why did we raise $45 million in this last equity raise? And how is it going to be deployed? Chris Lesovitz: So in the previous slides that we just went through, you'll see a use of fund slide. Within that, it layers out all the costs associated with the $45 million. $12 million of it will go to the API and the manufacturing component purchases. $4 million of this will go to our API supplier setup. $13.5 million will be allocated to advertising and marketing initiatives. $13 million of it allocated to operating expenses and working capital, and there was about $2.5 million of transaction costs related to the raise. I encourage everybody to go read the company's investor presentation back on February 17, and you can get further details regarding the proposed use of the funds from the raise. Vincent Ippolito: Thank you, Chris. Howie an older question here on the synthetic cannabis platform here from a shareholder that purchased -- this must be a long-standing shareholder because he purchased shares back when it was just synthetic cannabis, and we were in development of those products and asking, are these products still under development? And if not, what's happened to them? Howie McKibbon: So let me speak to that directly and then just a general philosophy on this. So the focus right now is on Sofdra and potentially acquiring other products that will be successful on the platform. And the reason for it is there are no additional costs in adding those products to the platform. We believe it's better to acquire an approved revenue-generating asset at this point in the company's stage than to invest in clinical trials. And you think about that, the ability to get a revenue-generating asset that is maximized by a platform that gives us competitive advantage pays off immediately. Those Phase III trials that could be upwards of $30 million to $50 million moving forward may or may not pay off when they're finished. And there's different times you do this at a company stage. But our focus is on getting to profitability. And then from profitability, you then have optionality. And what we try to do is look at every opportunity each year, each quarter, agnostic to whether or not it's in our pipeline or not. What's the best product, the best opportunity for Botanix shareholders right now, whether we own it or whether we're going to acquire it. So that will be our focus, and we'll continue to operate that way so that we're just maximizing shareholder value. Vincent Ippolito: Thank you. Howie, a question came in on payer engagements. And so now we're in a new calendar year. Has there been any significant changes to our payer landscape, whether that's positive or negative? And can you just kind of explain how do those interactions on an annual basis work with payers? Howie McKibbon: We're actually in constant communication with the payers, either from administrative purposes. I do think they rebate us -- I'm sorry, they send us invoices for the rebates they're going to get every quarter. So there's obviously a high level of communication there. That said, the contracts that we signed have varying terms, but they're all longer than 1 year, right? Typically, in pharmaceuticals, you'll see them be 3-year contracts. And from our perspective, we're very confident in the levels of rebates that we've engaged in with our payer partners in this case to remain fairly consistent over time. We'll continue to have discussions. What we do see, Vince, and whoever asked the question is you'll see sometimes those plans who are part of a pharmacy benefit manager or managed by them, sometimes they'll opt in to a rebate and they'll cover Sofdra where they weren't previously covering Sofdra. But that said, we have commercial coverage for the vast majority of lives in the United States because of the work we did prior to the approval of the product. Vincent Ippolito: Thank you. A question here, Howie, on the platform and products on the platform. So it's really a couple of questions. I'll just put them together because they're very close here. So who owns the platform? And what's really the role between Botanix and SendRx? And if you think about additional products for the platform, what would fit nicely if you were to go out and seek some new products on there? Howie McKibbon: Okay. So we don't own pharmacies at Botanix. We partner with them. So SendRx is a partner for us in dermatology. Now this partnership is a little different than just signing up a vendor. We've actually linked in all of our data feeds to get de-identify data that go to our data warehouse on a very frequent basis to understand exactly what's happening for each patient, for each prescriber and the payer that's associated with reimbursing that prescription. So that partnership is something that we've contractually signed into that they're committed to. Also provides them with a significant amount of additional revenue to their business. So it's a very win-win situation and goal-aligned situation for us there. Now that said, a product that could go on the platform, look, there are plenty of underperforming products out in dermatology. We've cited in the past that the average fills per patient in derm is 1.8 to 2 fills per year, right? Our fill rate is 2 to 3x the industry standard there. So any product that is that industry standard is going to immediately or is likely to immediately increase simply because of the refills and the stickiness of the patient. Any product that has good coverage, but low insurance clearance rates because of the inability to navigate the clearance process will benefit from that as well. And third, the ability to put product there on consignment allows us to save considerable dollars on the gross to net because you're bypassing the wholesaler. So all these things lead to increased fills per patient and improved gross to net for those products that would by industry standard be typical. So we're looking constantly for those types of opportunities in larger markets where putting in our sales representatives bag, having them mention the product and letting the doctor know they can get it the same way that they get Sofdra would be immediately positive in our opinion, and frankly, based on the opinion of our physicians that we've surveyed. Vincent Ippolito: Howie, one quick one here. It's a clarification on definitions here. And just what's the difference in the early days, we spoke about a fully reimbursed script, mainly before we launched. What's the difference between a fully reimbursed script and now with the gross to nets that when we speak of gross to nets today, that amount of revenue that we're keeping. So it's mainly focused on the definition of what are these 2 things here. Howie McKibbon: Okay. I may have to ask you to repeat the second portion of that, but a fully reimbursed script, it's that prescription that has come in and the payer has paid the portion agreed to contractually and the patient has sent their prescription. In certain cases, if it's taking time to get through the clearance process, we'll make sure that the patient gets a prescription anyway. And that second prescription will be fully reimbursed. So the whole idea is to make sure that every patient gets it and that we go through the insurance clearance process for each patient. But for some reason, it's delayed, you ensure the patient gets it and that first prescription is not fully reimbursed. Was there a second -- a follow-up to that? Vincent Ippolito: Yes. Sorry, Howie. I noticed my audio cut out there for a second on that. The second part of that question is, how do you contrast then for the revenue that the company is keeping when we report our gross to net versus that fully reimbursed script because obviously, it's a lower amount. Howie McKibbon: Yes, that's right. It's all considered in your gross to net, right? That's why over time, that gross to net improves. You have a larger percentage of fully reimbursed prescriptions. You're having to provide less prescriptions that are not reimbursed. And certainly, as the refills continue, you're getting a higher number of prescriptions that are fully reimbursed. But for clarity, everything is included in that gross to net. Vincent Ippolito: That's it. Great. We only have time for just a couple more questions. And an additional question came in, Howie, on the API purchases here. It's a good one. So I wanted you to address it. So you mentioned in the deck, there are API purchases in March and April and in January of next year. Can you clarify the 2028 through the 2030 purchases you mentioned in the deck? Howie McKibbon: You bet. So there's one purchase required in each of those years, and it can be any time during that year. So think about it -- you could do it in January, but you can do it as late as December of that year. And that's what the current contract calls for. So again, you're not repeating this current requirement of 3 per year. It's 1 per year, and the timing of those purchases can be determined at a later date. Vincent Ippolito: Okay. Great. And I'm going to take this last one here before we conclude. It's why did you raise at $0.06 and include the option on a one-to-one basis. So when we considered raising and equity raising was the preferred way to raise the funds, the amount that we needed and at the time we needed them. We went to the marketplace, and we used 2 very highly reputable, experienced joint lean managers, well known in Australia to help us do the work on the fundraising. And the fundraising package, including the intention to offer one-to-one options to placement and SPP participants was the funding package that we were able to obtain in the market at the time we were seeking to raise the funds. And akin to that, as we announced yesterday, there's going to be an Annual General Meeting of Botanix shareholders here, the General Meeting of Shareholders on April 1, 2026. And we encourage all shareholders eligible to vote to lodge their proxy forms to this meeting as soon as they receive it and as soon as possible. So we'd like to thank you all for participating here. I'd like to thank Dr. Howie McKibbon and Chris Lesovitz for the presentations today and the large number of questions we received from all of you and your interest in Botanix. Thank you for participating and have a good day.
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Cerus Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Tim Lee, Cerus Head of Investor Relations. Tim, you may begin. Timothy Lee: Thank you, and good afternoon. I'd like to thank everyone for joining us today. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at ir.cerus.com. With me on the call are Obi Greenman, Cerus' President and Chief Executive Officer; Vivek Jayaraman, Cerus' Chief Operating Officer; and Kevin Green, Cerus' Chief Financial Officer. Cerus issued a press release today announcing our financial results for the fourth quarter and full year ended December 31, 2025, the company's recent business highlights and outlook. You can access a copy of the announcement on the company website at www.cerus.com. I'd like to remind you that some of the statements we will make on this call relate to future events and performance rather than historical facts and are forward-looking statements. Examples of forward-looking statements include those related to our future financial and operating results, including our 2026 product revenue guidance and our expectations for product gross margin, non-GAAP adjusted EBITDA performance, P&L leverage and our government reimbursed R&D expenses and corresponding revenue, expected future growth, the potential for us to reach GAAP profitability, the availability and related timing of data from clinical trials, our mission to establish INTERCEPT as a global standard of care, planned regulatory submissions, commercial expansion prospects, projected market opportunities for the INTERCEPT Blood System, including for IFC demand, expectations with respect to our group purchasing agreement with Blood Centers of America, our potential platelet opportunity in Germany, the anticipated impact of import tariffs and ongoing inflationary pressures and other statements that are not historical facts. These forward-looking statements involve risks and uncertainties that can cause actual events, performance and results to differ materially. They are identified and described in today's press release and our slide presentation and under Risk Factors in our Form 10-K for the year ended December 31, 2025, which we will file shortly. We undertake no duty or obligation to update our forward-looking statements. On today's call, we will also be discussing non-GAAP financial measures, including non-GAAP adjusted EBITDA and the percentage of growth in EMEA and total product revenue, excluding the impact of changes in foreign currency exchange rates. These non-GAAP measures should be considered a supplement to and not a replacement for measures presented in accordance with GAAP. For a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures to the extent reasonably available, please refer to today's press release and the slide presentation available on our website. We'll begin today with opening remarks from Obi, followed by Vivek to discuss recent business highlights, and Kevin to review our financial results and expectations for 2026 and lastly, closing remarks from Obi. And now it's my pleasure to introduce Obi Greenman, Cerus' President and Chief Executive Officer. William Greenman: Thank you, Tim, and good afternoon, everyone, and thank you for joining the call today. At Cerus, we are dedicated to safeguarding the world's blood supply. Every day, patients around the world rely on safe blood from patients undergoing cancer therapy to sickle cell and thalassemia patients to surgical trauma. Blood's availability is foundational for health care systems. Our INTERCEPT Blood System has been designed to prevent the risk of transfusion-transmitted infections and strengthen the safety profile and immediate availability of one of the most essential health care resources. Our mission is clear at Cerus to establish INTERCEPT as the global standard of care for all transfused blood components. In 2025, we made meaningful progress towards this goal. Based on kits sold, our blood center customers produced approximately 3 million INTERCEPT-treated blood components for patients in nearly 40 countries. We estimate that this has enabled roughly 600,000 patients to receive INTERCEPT-treated blood components over the course of last year. Put another way, every single minute, another patient somewhere in the world is benefiting from safer blood transfusion as a function of our technology. As the market leader in pathogen and activation of blood components, we continue to invest in innovation, manufacturing, regulatory approvals and commercial expansion. In 2025, we received European CE Mark approval and commercially launched the INT200 device, our next-generation LED-based illuminator and a foundational element for our global growth into the next decade. Customer feedback on the INT200 operational improvements continues to be very positive and reinforces our leadership and innovation in the field of transfusion medicine. In the U.S., we are on track to submit our PMA application for INT200 expected in mid-2026. Turning now to red blood cells, the most transfused blood component globally and our largest potential opportunity. In Europe, our regulatory submission has been under review at a notified body, TUV, which has completed its review of all the submission modules. The dossier is now being transferred to ANSM, the component authority for consultation and review of the active pharmaceutical ingredient. In the U.S., enrollment is complete, and we continue the patient follow-up in the RedeS study, our second Phase III clinical trial and expect to report top line results later this year. Vivek and Kevin will walk through the commercial and financial details shortly, but at a high level, 2025 was a milestone year. disciplined execution, strengthened our financial foundation, positioning us to expand INTERCEPT adoption globally while continuing to advance our pipeline. Before I turn the call over to Vivek, I wanted to thank and recognize the entire Cerus team. Without their hard work and dedication, none of the accomplishments I just outlined would have been possible. With that, I would like now to turn the call over to Vivek to discuss our fourth quarter and full year commercial results, along with color on our outlook for 2026. Vivek Jayaraman: Thank you, Obi, and good afternoon, everyone. We finished 2025 on a high note with another quarter of strong performance across our global platelet franchise, continued positive traction with the international launch of our INT200 illuminator and increasing the momentum in our U.S. IFC business. Combined, these efforts resulted in record fourth quarter and full year product revenue. We entered 2026 with solid momentum and a clear runway for continued growth. The U.S. platelet franchise continues to serve as the foundation for Cerus. INTERCEPT-treated platelets are the standard of care in the U.S., and we estimate our market share to be in the mid-60s. Furthermore, given progress in the fourth quarter, we believe we are well positioned for further penetration in this market. A key contributing factor to our belief is the opportunity represented by the recently signed group purchasing agreement with the Blood Centers of America, or BCA. We finalized this agreement last December, and it went into effect on January 1 of this year. BCA is the largest blood supply cooperative in the U.S. with its member centers accounting for approximately 50% of the nation's blood supply. While many BCA members are already INTERCEPT users, we estimate overall penetration within BCA is approximately 30%. We believe this agreement will help facilitate broader discussions across the BCA network, enable us to take advantage of their streamlined contracting process and leverage their supply chain network. Ultimately, we believe this will drive increased INTERCEPT adoption across the BCA network. We recently had the opportunity to present at the BCA Board of Directors meeting in Scottsdale, and I was very encouraged by the membership's enthusiasm for our agreement. Internationally, our EMEA franchise delivered robust growth in the fourth quarter and the full year. We experienced strong double-digit growth in both platelet and plasma kit sales. In addition, the rollout of INT200 continues to go well with very positive customer feedback. Looking forward, the EMEA region contains attractive growth opportunities over both the near and medium term. One example is Germany, the largest market in Europe. As we announced in January, DRK Baden-Württemberg-Hessen, the largest blood center in Germany has started enrollment in the INITIATE study, a post-market Phase IV study designed to evaluate the routine use of pathogen-activated platelets utilizing the INTERCEPT Blood System. We believe Germany represents a $30 million annual platelet opportunity. We are excited to see the INITIATE study commence and believe that Germany can contribute more meaningfully to revenues as early as 2027. Switching to IFC, customer demand continues to increase. As measured by therapeutic dose equivalents, demand increased by over 50% in the fourth quarter compared to the same period last year. From a revenue perspective, our IFC franchise grew by nearly 40% compared to Q4 of 2024. During the fourth quarter, nearly 70% of sales were in the form of kits sold to blood centers, up from approximately 50% in the prior year period. As we continue to shift our focus towards the kit model, we expect that nearly all IFC sales volume will be in the kit format by the end of this year. Looking ahead, we believe the BCA agreement will further support IFC demand by leveraging the reach of member centers and integrating the existing IFC production partners into the BCA agreement. We have already received inquiries from multiple BCA member blood centers interested in initiating IFC manufacturing. As mentioned before, we are very encouraged by the potential of the BCA partnership. In closing, 2025 was an excellent year for our commercial team. We meaningfully expanded access to INTERCEPT-treated blood products globally, and we entered 2026 with a tremendous amount of momentum across all of our product lines. With that, I'll turn the call over to Kevin to review our financial results in more detail. Kevin Green: Thanks, Vivek. I'd like to thank you all for your interest in Cerus and for your time with us today. Fourth quarter and full year financial tables are included in today's press release. As such, I'll focus most of my comments on key takeaways and insights as well as our product revenue guidance for 2026. To begin, our total revenues for 2025 were $233.8 million and represented a record level for Cerus and were up 16% from 2024. As we preannounced in January, we reported record product revenue, which resulted in a 14% increase for both the quarter and the year, exceeding the top end of our $202 million to $204 million prior guidance. Breaking down product revenue by geography. As you can see from this slide, Much of the growth in the quarter and for that matter, the full year were led by gains in EMEA, where we are seeing demand across both our platelet and plasma franchises as well as the early rollout of our new illuminator device, the INT200. As a reminder, we have an installed base of approximately 400 INT100s in EMEA, which we expect to replace completely over the next few years. In North America, full year product revenue growth was driven by increased IFC sales and our strong platelet business. Excluding the impact of foreign currency exchange rates, EMEA product revenue increased 25% in the fourth quarter and 14% for the full year. On a consolidated basis, FX provided a benefit of approximately 3% when comparing Q4 2025 to that of the prior year and a benefit of approximately 1.6% for the full year. IFC product revenue during the fourth quarter was $4.2 million compared to $3 million during the fourth quarter of 2024, representing an increase of approximately 40%. For the full year, IFC product sales totaled $16.7 million compared to $9.2 million in 2024, representing growth of approximately 80%. With that said, the underlying volume demand for IFC increased roughly 110%. The difference between the reported revenue growth and demand growth is a result of the continued sales shift focus from selling finished IFC therapeutics directly to hospitals to selling kits to blood centers who produce IFC for their own hospital accounts. Based on the robust sales momentum we delivered in 2025, we expect revenue growth to carry into 2026. And as such, today, we are reaffirming our 2026 product revenue guidance which we announced earlier this year, totaling $224 million to $228 million. This guidance represents a year-over-year increase of 9% to 11% compared to 2025 and does not take into account the effect of any potential changes to the tariff landscape. Included in our 2026 guidance range is expected IFC revenue of $20 million to $22 million representing year-over-year growth of approximately 20% to 30%. Given the mix shift to kits, our IFC revenue guidance may underestimate the enthusiasm we are seeing for this product. We estimate we exited 2025 with IFC market adoption at around 7%. And by the end of the year, we believe our penetration rate could increase more than 50%. Furthermore, we are witnessing strong increased use of fibrinogen replacement therapies, suggesting the market for our IFC product is continuing to grow. Switching now from product revenue. As you'll see, the reimbursements for government revenue covering our RBC programs and IFC development were up considerably this year. I'll address our expectations for the 2026 level of these activities later on. For the time being, let's now turn to product gross margin. For the fourth quarter, product gross margin was 51.5% compared to 53.9% in the same period last year. Higher IFC therapeutic production costs, the impact of import tariffs and ongoing inflationary pressures impacted product gross margin compared to the prior year period. We expect the impact of import tariffs and to a lesser extent, inflationary pressures to continue. The tariff landscape continues to be dynamic, and we cannot currently predict the ultimate tariff impact on our 2026 margins. However, assuming status quo, we expect 2026 product gross margin will continue to trend around the low 50% range. We could see quarterly variability due to a variety of factors. Moving down the income statement. Operating expenses for the fourth quarter and full year increased 7% and 10%, respectively, as we continue to deliver leverage in the P&L. Focusing on R&D expenses for a minute, the year-over-year changes were driven primarily by increased development costs associated with our red blood cell program, mainly reimbursed by BARDA, as well as costs for the pursuit of new PMAs driven by our planned submission to the FDA for premarket approval of the INT200. I would note that our 2016 BARDA contract will expire in September and with much of the work tied to our Phase III RedeS study now behind us, we expect government reimbursed R&D expenses as well as the corresponding revenue referred to earlier, to taper over the course of the year. Let's now turn to the bottom line and non-GAAP adjusted EBITDA results. For Q4 2025, GAAP net loss attributable to Cerus continued to approach equilibrium at a modest $2.2 million. For the full year, GAAP net loss attributable to Cerus was $15.6 million, down 25% from the prior year. We will continue our drive toward GAAP profitability as we move forward. On a non-GAAP basis, adjusted EBITDA for the fourth quarter totaled $3.4 million and marked our seventh consecutive quarter of posting positive adjusted EBITDA. For the full year, we are pleased to report our second consecutive year of positive adjusted EBITDA totaling $9.5 million. This performance reflects the strong execution by our organization with the stated growth in our top line, combined with the disciplined expense management and continued leverage inherent in our business model, which we have demonstrated over the course of 2025. Looking ahead now to 2026, we expect our third consecutive year of positive adjusted EBITDA, driven by the anticipated product revenue suggested by our guidance, gross profit dollar growth, and the continued leverage we expect to generate as a result of our business model and our continued scrutiny of operating expenses. Turning to the balance sheet and associated cash flows. We ended 2025 with almost $83 million of cash and short-term investments. We continue to manage our cash balances prudently while funding our growth initiatives. For the fourth quarter, we generated $6.2 million in operating cash flow. Combined with the $1.9 million generated during the third quarter, second half operating cash flow totaled $8.1 million, resulting in full year operating cash flow of $4.8 million, consistent with what we had anticipated and communicated throughout the year. This operating cash flow comes despite our increased investments made throughout 2025, in anticipation and support of our expected growth. With that, I'll turn the call back to Obi for some closing remarks. William Greenman: Thank you, Kevin. I'm incredibly proud of the progress the Cerus team made in 2025 as we continue to advance our mission to make the INTERCEPT Blood System the standard of care for transfused blood components worldwide. Every year, more patients benefit from the pathogen-reduced blood components, and that impact continues to grow because of the execution by and dedication of our employees and partners around the globe. With a strong, durable and growing core platelet franchise, increasing adoption of IFC and continued investment in innovation across the INTERCEPT platform, we entered 2026 with a solid financial foundation and improving operating leverage. We remain focused on disciplined execution, expanding patient access and thoughtfully advancing our pipeline as we continue to build an enduring company capable of delivering meaningful impact and sustainable value over the long term. Thank you for your continued interest in Cerus. Operator, we'll now be happy to take your questions. Operator: [Operator Instructions] Our first question comes from the line of Bill Bonello from Craig-Hallum Capital. William Bonello: So maybe you could just talk a little bit more about the BCA agreement? I know it's early days, but first of all, maybe just recap for us from -- if you're a blood center, what is different for you because of this contract? What sort of -- what is it about the contract that you expect to drive the penetration beyond where you are today? And then any kind of early anecdotes or anything from your interaction with those centers. William Greenman: Yes. Thanks a lot, Bill, for the question. Vivek, would you like to take this? Vivek Jayaraman: Yes, I'd be happy to. Bill, thanks for the question. A couple of things that excite us about the BCA contract. First, if you think about the volume they represent in terms of overall blood product distribution, it's roughly half the market. And if I were to take the platelet opportunity to start with, in that to roughly 50% of the market, we're approximately 30% penetrated. So if you think about near-term growth opportunities in the U.S. platelet market, it's disproportionately represented by BCA members. And through this contract, we're able to do -- through this purchasing agreement, we're able to leverage their existing supply chain network, their contracting platforms and also their education and awareness channels. And so in terms of leveraging their SG&A footprint and really being able to more effectively disseminate our sales and marketing offerings, it's a real enabler in that regard. And we're already seeing inbound inquiries so far this calendar year from BCA member institutions who haven't previously utilized INTERCEPT. So that's been encouraging. Furthermore, we're seeing increased depth with BCA users who started to use INTERCEPT but still have room to run in terms of increasing overall product adoption. On the IFC side, our legacy manufacturing partners will be moved under the BCA umbrella agreement. This will help to facilitate movement of product across the country where some of these members have BLAs in place and can distribute across state lines. It's also going to allow us to leverage their sales channels from a clinical education and awareness building standpoint. And just sort of one anecdote I'll point to is we're doing a series of webinars in collaboration with BCA, and we had our first webinar last month, and we had over 150 attendees joined. So just in terms of being able to quickly expand reach and access and then the enthusiasm from the BCA membership, all these things combined together to give us -- it's early days, but give us enthusiasm about the prospects of that collaboration. William Bonello: Great. That's helpful. And just one quick follow-up for Kevin. Thoughts on cash flow for this year? Kevin Green: For 2026, Bill? William Bonello: Yes. Kevin Green: Yes. I think it is going to be more of the same. We -- 2025 was bookended with heavy investment in working capital, in particular, inventory to meet the anticipated growth that we saw coming. We've continued to invest in that in the back half of the year, albeit at a slower pace, more reasonable pace. I think that's going to continue. We're going to continue to make sure that we've got sufficient inventory to serve the growth that we expect. But with that said, the business is at a scale now where we expect we'll be able to continue to generate operating cash flows. Operator: Our next question comes from the line of Mark Massaro from BTIG. Mark Massaro: I wanted to ask about EMEA, which clearly came in very strong. I think you reported 36% growth in Q4. You talked about this opportunity in Germany. I think you framed it as a $30 million annual opportunity, I think, in platelets. Can you just give us a sense for when this study is expected to read out in Germany? And I'm familiar with -- you have a very large business in France. But is the Germany opportunity all from a base of 0. Just give us a sense for how much activity Germany is today versus where you think it could be at scale? William Greenman: Yes. Thanks for the question, Mark. Vivek, I think this is another one for you. Vivek Jayaraman: Yes, sure, I'd be happy to answer, Mark, thanks for the question. So just to remind you, the INITIATE study in Germany is an observational Phase IV post-market study. So we're actually generating revenues for the products we sell that's utilized in the context of the study. It's really to generate real-world experience that can be used to build the dossier to support improved reimbursement and to further sort of convince clinicians and blood center operations folks that INTERCEPT can be used in routine practice to provide greater clinical utility and protection. And so we anticipate that study continuing to enroll over the course of this calendar year, so 2026, and likely leading to a more meaningful increase in revenue contribution in '27 and beyond. And as you correctly pointed out, we estimate this market opportunity to be roughly a $30 million annual opportunity. In addition to Germany, though, if you look at growth in the region, we've had favorable uptick in the Middle East. We continue to see opportunities in Southern Europe to drive growth. And as you pointed out, we have a really stable and important business in France. And what's been encouraging, too, you with the core business growing, we've had the opportunity to reengage both the existing and then engage new customers with the successful rollout of INT200. So we see quite a bit of opportunity for continued growth internationally. And certainly, the contributions of our international team were critical to not only our Q4 success, but the strength of the full 2025 result. Mark Massaro: Okay. That's really helpful. And then my second question is just -- I would love any type of update on red blood cells in Europe. I think I heard Obi talk about the TÜV-SÜD review has been completed and now moving over to ANSM. I know that timing is not something you can directly control, of course. But can you just give us a sense for when you think CE marking for the red blood cells in Europe? Is that more likely a 2027 event? Or do you think it could possibly sneak in in the back half of this year? William Greenman: Yes. Thanks for the question, Mark. So as we mentioned in the prepared remarks, TUV has completed a review of all the dossier segments that they have. Sections that they have, and now that will be transferred over to ANSM this month. And then once they accept it, there's roughly a 210-day clock that we believe they'll stick to given the historical review by other component authorities. So that's promising. Once we get those questions back, then we'll address them. And then it really would lead to a possible approval in the first half of 2027, assuming there's no issues with that submission or with that review of the file. And again, to remind you that it's really addressing the CMC-related part of the submission. So looking good there. And then just maybe a quick update on red cells in the United States. We have completed enrollment for the Phase III RedeS study, which is the second of our 2 Phase III studies required for a PMA submission. And that will read out in the Q4 time frame of this year. So we're looking forward to the outcome of that study. Mark Massaro: Okay. And if I can sneak in a third one, maybe for Vivek. I know you talked about strength in the Middle East, but can you just give us a sense from where this is coming from exactly? And how would you size the penetration rate in some of these larger countries? Vivek Jayaraman: So we have strength across the region, probably the single biggest opportunity from a volume standpoint would be represented in the Kingdom of Saudi Arabia. Obviously, kind of with some of the real-time geopolitical issues at play at the moment, things are a bit in flux. But the thing that's most encouraging about that marketplace is they tend to look at the AABB and the U.S. FDA standards, when they determine their procedures and protocols. So the fact that INTERCEPT platelets are standard of care in the U.S. has a pretty influential impact on that region, and we saw good progress in calendar year 2025, and so more to come there. But if you look at places like Kuwait, Qatar and then from a size standpoint, in Saudi Arabia, there's a lot of room for us to run in that part of the world. Operator: [Operator Instructions] At this time, I'm showing no further questions. I would now like to turn the conference back over to Obi Greenman for closing remarks. William Greenman: Thank you very much. We really appreciate your participation in the call today, and we -- Vivek, Kevin and I will all be participating in the TD Cowen health care conference tomorrow. So we encourage you to listen in to that fireside chat. Thanks very much. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the Tristel plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to the management team of Tristel. Matt, good morning to you. Matthew Sassone: Hi. Good morning. Thank you for joining us today for Tristel's interim results H1 financial year 2026. I'm joined today by Anna Wasyl, Tristel's CFO; and Julija Shabanova, who is Tristel's Executive Director. I appreciate that Julija may be a new name to some of the investors that are joining us today. So let me just give a brief background into her. She's been Executive Director at Tristel and President of our U.S. subsidiary. This year actually marks her 20th year with Tristel. So she's a very long-serving member of the team. Julija has really been an instrumental part of the leadership team. She executed the scientific program with the FDA, securing our U.S. market entry and really has been leading our commercial efforts with working on the launch of our 2 key products there, Ultrasound and OPH. As we go through the presentation, Julija will be updating you all on the progress we're making in the U.S.A. So that being said, let me just also take a moment to acknowledge the announcement that was made earlier this year that I will be stepping down as Chief Executive at the end of the financial year. This was a deeply considered personal decision. Tristel is a business with exceptional people, a strong depth in its leadership and a very clear strategic outlook and trajectory. A little bit of background as to my reason why. Essentially, I was offered a once-in-a-lifetime opportunity that was impossible to turn down. But I do leave Tristel with the thought that the future is very bright. I remain fully committed to the business until the end of the financial year and supporting with a smooth transition as the business looks to identify its next Chief Executive. I am very confident that the businesses are well positioned to deliver long-term shareholder value. And as you will see from the set of results that we present today, the company continues to go from strength to strength. And as I said, the future is very bright for Tristel. That being said, let's start with the presentation. I appreciate that there may be some new investors joining us today. So let me just take a brief moment to explain Tristel, who we are and what we do. Tristel is an infection prevention company. We use our highly differentiated chlorine dioxide chemistry in order to prevent the transmission of microbes from patient to patient or patient to caregiver. What we do is pretty unique, and we address an unmet need in the market by providing high-level disinfection at point of care. I can answer some further questions if people have questions about the products we offer and what we do. But what I suggest is I now hand over to Anna, who will take you through the financial performance in the first half of the year. Anna Wasyl: Thank you, Matt. Good morning, everyone. I will walk you through our financial highlights. I'm very proud to present a strong set of numbers for the first half of the financial year. These are unaudited figures in our interim figures. We've been very happy to see 14% growth in revenues, reaching a record level of GBP 25.6 million. The growth came up both from our home market, our U.K. market as well as overseas market, and we're very happy to see significant growth in the U.S. that we will tell you more about. That growth flowed through the P&L with expanding margins. So our adjusted profit before tax went up by 11% to GBP 5.5 million. Adjusted EBITDA was up by 17%, and our adjusted EPS is at 9.36p. The adjusted measures are adjusted basically for share-based payments and exceptional items, which are related to CEO and CFO succession costs. Our cash and deposits reached GBP 13.3 million. We remain debt free. And we are planning for the interim dividend of 5.68p to be paid in April. I will move on to show our key indicators. I believe they are a strong reflection of our very good track record historically of financial performance. The first graph shows revenue track record, which, as you can see, has been consistently growing with a very short flat period during COVID times. What I'm very happy to see is that both this year as well as last year, we see a big portion of the growth coming from volume rather than price gains, meaning that we are delivering more procedures and gaining market. In terms of expanding cash generation, another KPI we are very proud of, we have generated GBP 6.7 million in cash in the first half of the year, and we continuously improve the cash flow generation kind of quarter-by-quarter. And that, of course, allows us also to -- for progressive dividends. When it comes to profitability, the bottom graph, we are currently at 29% of adjusted EBITDA margin, which is well above our commitment of 25%, and we believe that the outlook for the year remains similar. I have a summarized income statement here. There is also a complete income statement in the appendix to the presentation and of course, in our interims. These are unaudited figures. I have already mentioned the top line growth. Maybe another thing that's worth attention here is impact on our gross margin. So we had 81% gross margin compared to 82% in the first half of last year. The reason for that is that we have in-sourced production of wipes, and we already see the full cost impact of that in the first half of the year, so with increased depreciation as well as production staff. However, the savings have just started to be realized in the first half of the year. And we believe that the full rate of savings will be visible in the second half of the year, which is GBP 300,000 per our estimate. And that's basically because we have to sell off the inventory of the wipes that were purchased from the supplier prior to the in-sourcing project. Another development you can see here is increased administration and distribution expenses. That's really reflecting our strategy to continue investment in sales and marketing. You will also notice probably an increase in depreciation and amortization, and that's partially driven by the in-sourcing of the wipes machine, but partially also by a GBP 300,000 write-off of intangibles. Our adjusted PBT margin it's at 21%. The adjusted profit before tax went up by 11%. And as I mentioned before, our margins remain above the commitment. Looking at some balance sheet KPIs that I would like to draw your attention to. So firstly, net working capital that we have continuously seen improving. Currently, if you look at net working capital over revenue ratio over annualized 12-month period revenue, is at 15%. That speaks to operational efficiencies and positions us well for growth. When it comes to return on capital employed, we also see very strong ratio. We are currently at 25% ROCE and that speaks very well to the long-term value creation. And finally, progressive dividends. So as many of you know, we have been every year paying -- increasing the dividends paid. And we also this year, we aim at honoring the commitment for progressive dividends in the year. And the announced interim dividend is at 5.68p. That's flat compared to the first half of last year. However, in the full year, we still plan to increase the dividend per share. Complete balance sheet or I would say, summarized balance sheet here with a complete one in the appendix. I will not go through the details here because there are no major movements. And the balance sheet remains strong, cash positive, which gives us really plenty of financial capacity to support our investments and growth initiatives. The following slide, I will spend a little bit more time on, that's our geographic performance. So on a constant currency basis, the group has grown by 12.4%. And in our home market, U.K., we've seen continuously strong growth, only nearly 13% growth, which benefited from both procedure increase as well as very strong performance of our surface disinfection product line. What's important here to acknowledge as well is that we had a bit of a positive seasonality impact with some large NHS orders at the end of last calendar year. When it comes to the other European countries, we are very encouraged by the recovery of French market, which grew at 13%. We have strong leadership there. We have seen growth there coming from our core products in the Tristel Medical Device disinfection range as well as some increased utilization in our large accounts. Italian market has also grown 13%, also coming from our core products in medical device decontamination range. What we have also seen in Italy is an increased number in tenders for high-level disinfection, which for us means a mixture of contracting existing sales as well as new demand as we won these tenders. In other European countries, we also see double-digit growth, and we continue to invest there with the expectation to see further growth in the future. The APAC region is a little bit of a mixed performance. As you can see here, we have grown 0.3%. There are pockets of business there where we have very strong growth, double-digit growth in Singapore and Malaysia, for example. However, in other markets, we had a bit of a challenge, and I think specifically China. Similarly to what other medical device companies have seen, we also saw a market slowdown in China in the first half of this year. We are traditionally targeting mostly private hospitals, and we have seen some bankruptcies of the customers there. It seems to be related to the change in local policy and how the health care system is being financed. So we will monitor the situation going forward. And of course, we are looking at also diversifying more into other hospital types. I believe this is everything about the geographical performance. I will spend a little bit more time on explaining the American revenue streams, which I'm sure you're interested to hear much more about. And following this section, Julija will present in depth the performance on the U.S. market. So here, if you would like to look at global currency, our direct product sale has performed very well. As you know, we have launched in the first half of this year, Tristel OPH product, and that growth is -- or growth related to that launch is in the first line of direct product sales. We are very happy with that performance. It has been really taken up by customers faster than we expected. Our royalties, which are related to Tristel ULT, sales have reached GBP 116,000. That's more than complete annual royalties from last year. So we're also very happy to see that. And finally, our distributor sales in Canada and Chile have also shown double-digit growth. And with that, I'm going to pass to Julija. Julija Shabanova: Good morning, everyone. Thank you, Anna. So I'll provide a little bit of insight into U.S.A. performance. We had a strong first half. For Tristel ULT, our high-level disinfectant of ultrasound probes, the in-market sales are approaching USD 1 million, contributing $153,000 in net profit through royalty income. The sales volumes represent 320,000 procedures, equating 3x the procedure numbers from the same period last year. The growth is well balanced. We are seeing increased utilization within existing accounts alongside a healthy pipeline of new opportunities. High-level disinfection of ultrasound probes is performed across various departments in hospitals. For example, urology, emergency departments, radiology. Once we enter the health care system to address their immediate clinical need, we then focus on expanding product use across additional departments. Over the past 3 months, our partners have onboarded 90 new sites, and the team is currently progressing with 150 hot leads in evaluation stage with a further 140 in active engagement. Based on our current momentum -- sorry, something happened on my screen. Based on the current momentum, we expect to exceed $2 million in in-market sales by year-end, providing a strong platform to achieve and potentially accelerate our 5-year projections for capturing 4% market share by 2030. We have -- opportunity in high-level disinfection of ultrasound probes is developed in partnership with Parker Laboratories, a privately owned market leader in ultrasound gels with a 60-year heritage. The Parker sales team is fully trained and well established, and Parker has invested over the last 2 years to build a team of 10 sales representatives. Parker operates through a well-established network of national distributors, including Medline, Henry Schein, Cardinal Health, ensuring broad market access. In addition, Parker has recently secured agreements with group purchasing organizations, further streamlining procurement processes and expanding product availability through users' preferred vendors. The strategic partnerships with ultrasound probe manufacturers create valuable opportunities for co-marketing and referrals. For example, our collaboration with BK Medical and Exact Imaging, both specialists in urology provides immediate referrals because Tristel ULT is the preferred solution for urology probes. Those specific devices do not fit into currently available automated reprocessing systems and allow us market entry into the hospitals. The strong OEM relationships also support ongoing device compatibility validation. We have more than 1,200 probes already confirmed compatible with Tristel ULT. Inclusion of Tristel ULT in clinical standards, together with positive feedback from a growing user base is strengthening user confidence. Since launch, 4 key standards and guidelines have included chlorine dioxide foam as an appropriate high-level disinfection solution for ultrasound probes. Tristel ULT has been selected for evaluation by ECRI, an independent not-for-profit organization that assesses medical technologies. The result in report and discussion will be published in ECRI's Membership magazine, and the Membership represents 50% of U.S. hospitals. This is a significant independent assessment of Tristel ULT and is also highlighting focus on ultrasound decontamination in clinical practices. We continue to receive excellent feedback from users, and Tristel ULT will be featured an educational session at APIC 2026, further raising awareness within the infection prevention community. Our progress with Tristel OPH is equally strong. First half of financial year, the revenues are $88,000 and are ahead of our initial expectations as we anticipated some lag within procurement process. We have an excellent distribution partner in Advancing Eyecare Group and Advancing Eyecare distributes Tristel OPH through its portfolio of well-established brands, which provides immediate access through its existing vendor contracts. In preparation to our Tristel OPH direct sales, we established a Boston-based team comprising 3 roles: business development, marketing and digital product specialists. With that, we have secured 43 active users and have 160 opportunities in evaluation and engagement stages. Some of America's leading eye providers are choosing Tristel OPH. The product is manufactured in the U.S. by Parker Laboratories and our gross margins are in line with group targets with the scope for further improvements as we scale up. To maintain momentum and build our initial user base, we're actively expanding our commercial footprint. We are recruiting sales representation in Midwest and West Coast. We have signed a distribution agreement with Keeler USA, a manufacturer and distributor of ophthalmic diagnostic devices as well as supplier of wider equipment and consumables for ophthalmology clinics. Keeler USA is primarily serving nonhospital ophthalmology clinics and private practices, making this a highly complementary expansion alongside our direct sales teams that targets hospitals. We are also developing partnership with ophthalmic device manufacturers. These collaborations create multiple commercial touch points for us through referrals, marketing opportunities and co-exhibition opportunities, educational webinar opportunities. Together, they will strengthen our market visibility and support adoption and accelerate access to new users. Inclusion in device-specific IFUs, instructions for use remain an ongoing priority, and we are around 50% through implementing the updates of those device instructions for use. The multicenter study is underway with the intention of publishing findings in peer-reviewed journals. The objectives of the study is to highlight the risks associated with the ophthalmic device use, point out the lack of current feasible disinfection procedures and lack of guidelines, document the experience, hand-on experience of Tristel OPH use and ultimately provide best practice recommendations for high-level disinfection of ophthalmic devices. Tristel OPH is unique in enabling high-level disinfection with minimal disruption to clinical workflows. This positions us strongly to establish a leading role in the high-level disinfection of ophthalmic devices. With this, I'll conclude my update and hand over to Matt to talk about our future development. Matthew Sassone: Excellent. Thank you, Julija. As you can see, some really encouraging progress in the U.S.A. and some real continued momentum in the 2 products that we now have there. As we look to the future, the Tristel story is one of continued investing for future growth and by realizing the opportunity ahead of ourselves. We do that in many different ways and have many different strategic levers that we are pulling. Obviously, the most obvious is the investments that we do into our commercial teams, and that has continued. And actually, the business has intentions to accelerate that investment as we look to the year ahead. As previously communicated to investors, the greatest opportunity for growth is the geographic expansion. And what I like to refer to as raising all boats. What do I mean by that? I mean by taking the market share and the leading position that we have in the U.K. market and replicating that in the other markets where we are present today. And as Anna outlined, you can see that we're starting to really get some great traction, especially in our European markets. To augment that, obviously, we invest in the teams. And our plan this financial year was to have a 9% increase in the number of heads that we had with the vast majority of those heads being invested in commercially facing customer-facing roles. Given the strength of the first half of this year and sort of the outlook that we have, we've decided to accelerate and increase that investment, and we'll be adding a further 13 heads to our commercial organization this year. 9 of those heads will be commercial salespeople and 4, which I'll come to talk about will be more clinically focused. Those investments are going where we are seeing the growth. So we're targeting those towards the likes of Germany, France, Italy, the Middle East and into Asia. And this really strengthens our route-to-market, it enables us to sort of build on what we have today to win more business as well as drive increased utilization in those accounts that are using us today. Alongside this, we are rolling out a database sales effectiveness program using [ sort of like ] globally adhere to salesforce.com CRM as well as increasing our spending on promotional efforts and attendees -- attending trade exhibitions, et cetera. We do recognize that as part of this, we have to continually reinforce and expand our clinical leadership. Tristel obviously is well known and respected in the market, but we recognize that physicians and health care providers buy from one another. They buy from the recommendations. And as the business grows and matures, it's also we need to continue to invest in this part of our sort of team today. Today, we have 3 full-time equivalents that are focused on driving our medical affairs, our clinical research. And we're going to add to that. We're underway with recruiting a Chief Medical Officer and also 3 clinical portfolio leads. And really, this is all about enhancing our medical affairs capability, being able to invest more into sort of clinical evidence generation, drive more with regards to sort of guidelines and also expand our key opinion leader engagement program and build that advocacy around the globe. We've spoken about our strategic intent to build on our sort of digital foundation and drive our digital leadership. Today, we have the 3T platform, which is our sort of train, track and trace platform that supports the products and supports our customers today. I've spoken about how we have this sort of great digital footprint with our customers and how we want to build on that and create a multi-tier Software-as-a-Service program. We are -- we have those development programs underway and the team are working hard to sort of take what we have today and build a scalable recurring digital revenue stream for the business in the future. In addition to this, we also, in the first half of this year, launched our own sort of like private internal AI agent, which is really about sort of improving our operational workflow and supporting us in our daily tasks. This isn't about replacing -- AI replacing people's jobs. This is just about sort of like taking our internal data in a very sort of controlled and closed way and embracing technology to make the teams more effective and enable them to do more. And then finally, with regards to our digital leadership, we continue to expand and sort of try to react to customer asks and requirements. And we've done that by -- sort of by enhancing our online commerce platform and having a web shop. We're in the process of launching this out to markets. So at the moment, it is only sort of like available in select geographical markets, but we are -- have plans and the program is underway to expand that out across the globe. And then continuing to develop into our products and ensuring that as we look to the future, we have our product leadership. What I can say is we launched VISICLEAN recently. That launch has been underway. The reaction from customers is extremely positive. It is really a wow product. It does genuinely get that kind of reaction from our customers when they see it. And we have some customers that have already purchased the product. But VISICLEAN is definitely reengaging us with customers sort of reinforcing Tristel's leadership in this high-level disinfection field and enabling us to sort of grow our business and expand our business. But we're not stopping there. Yes. We have plans underway for new products in the medical device disinfection as well as the surface disinfection. But we also have evolved in our approach. We are now sort of entering sort of a mentality about rapid prototyping and testing, failing fast and then refining and moving forward. And what do I mean by that? Well, if we look at the medical device disinfection, we have a new product that's meeting a current unmet need by the customer. And we have a program and a trial underway in one European market that we are sort of testing, evaluating, refining our approach before we then move forward with the product development and move to what we would class as a commercial launch. We're doing the same in the medical surface disinfection, where we have identified, again, a significant unmet need by the customer. The current products on the market are not satisfying the customer needs. It's becoming a far wider issue and something that we -- where we feel that our chlorine dioxide chemistry could play a role. So we have undertaken and currently have underway 7 different evaluations in multiple different European markets where we are testing, again, testing the water, that rapid prototyping and really refining our approach. So when we do move to commercial launch, we have a much greater belief in our ability to drive success in that arena. And we continue to sort of invest in sort of by reinforcing our long-term growth pipeline with new products. So as you can see, the first half has been a strong performance. We have committed to our investors these metrics. And our performance is also enabling us to invest to ensure that we will have confidence in being able to meet these metrics as we look to the future. So our targets are between financial year 2025 to financial year 2030. We want to be able to drive double-digit revenue growth annually. First half of this year, we achieved and delivered 14%. On the EBITDA margin, the adjusted EBITDA margin, our commitment is to maintain a minimum of 25% annually. In the first half of this year, we achieved 29%. And then on our dividend policy, we continue to pay a dividend. And as we've alluded to in this presentation, in the first half, we'll be paying a dividend of 5.68p per share. So as we look to the future, what I can say to investors is the results are in line with expectations. The business remains firmly on track to meet the market expectations for financial year 2026. We have our strategic plan, and we are investing and executing upon that plan. We continue to invest in our commercial leadership, our clinical leadership, for example. And we recognize that international market expansion is our greatest driver for growth. This raising all boats will lead to our future success. We are greatly encouraged by the progress we're making in the United States. That sort of commercial momentum is clear. The flywheel is driving faster, but it's also supported by the core underlying activities. As Julija spoke about, those guidelines, having had -- having now got 4 guidelines in place, something that normally takes many, many more years in other markets. The team have done a really fantastic job in getting to this point. Our awareness in the market, the understanding of the power of chlorine dioxide is there. We can see that coming through both on the ultrasound, but also on the OPH product as well. And that early customer adoption is incredibly encouraging. Our strategic focus remains the same, and Tristel remains well positioned to deliver long-term shareholder value. So with that being said, that wraps up our presentation, and we'll now move to the questions and answers. Operator: That's great. Thank you very much indeed for your presentation. [Operator Instructions] While the company take a few moments to view those questions submitted today, I would like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via our investor dashboard. Matt, Anna, Julija, we have received a number of questions from today's meeting. And I wanted to start off the Q&A session with the first one here, which reads as follows. What specifically is your strategy and operational actions for growing sales in the U.S. as traction appears to be slow? Matthew Sassone: [ Julija? ]. Julija Shabanova: Yes, I'll take it, of course. We have a strong diverse infrastructure for distribution in place for Tristel ULT. It's with Parker and direct sales team as well as multiple distributors. We are seeing real progress through the last 6 months. Initial pace may have been slower than expected, but the work that we have carried out, the inclusion of our technology in standards and guidelines, the work with key opinion leaders and positive feedback from existing users are all making the difference. And we can really see that the pace of our progress is picking up. And with continued execution of our strategy, we are confident in delivering on the expectations that are set for next 6 months and beyond. And for the OPH specifically, we're investing in recruitment and expansion of the sales team. Operator: Next up, 2 questions on trophon. Nanosonics recently opened an office in the U.K. What can you say to investors to ease the concerns about the competitive threat from trophon? And the next one is, how do you plan to outcompete trophon in the long run? Matthew Sassone: Let me take that one. It's interesting because Nanosonics has been direct in the U.K. market since 2013, 2014. So -- and I think they've had an office for a period of time. So I wouldn't say recently opened an office and nothing has changed with regards to their operations in the U.K. as far as we are aware. What I -- to add to and build on that is continue to see Nanosonics as a competitor. But when we look at our performance that we've had in the U.K. and both at a sort of like the macro level, but also down at a customer level, we continue to win share. We continue to be successful. We continue to drive growth. So we kind of coexist with regards to sort of Nanosonics. They do have customers in the U.K., but we do not see their presence having a negative impact on our performance in the U.K. market. And that's been the same for the last decade or so. Outside of the U.K. market, the same can be said for some other markets as well where sort of Nanosonics is present. I suppose the sort of the real market where Nanosonics is, is the U.S. market. And when you look at their financial results, you'll see that about 90% of their revenues come from the U.S.A. So this is really where we are sort of competing. Nanosonics have been present in the U.S. market for many more years than us. We're only just getting started. And what we're seeing is, is that there are a number of customers in the U.S.A. where we are sort of addressing an unmet need where the sort of Nanosonics offering is not sort of acceptable to them or ideal for them. And we're able to sort of like provide a solution to those customers. As our business builds and as we're seeing when we look to the U.S. market, there are some instances where we have fully replaced sort of Nanosonics in those accounts. But on the main, we are cohabiting with them, and we're providing the same sort of like sort of solution to customers, which is high-level disinfection. As we look to the future, we feel with sort of the guidelines endorsing us, the traction we're getting, the independent sort of like organizations recommending us that will become a much stronger competitive threat to Nanosonics in the future. Operator: Thank you, Matt. And I know you've spoken about the U.S. in the previous question, but we had another one here on U.S. tariffs. How have U.S. tariffs impacted the business? Matthew Sassone: Anna, Julija... Anna Wasyl: I can take it. I mean, we have not seen a significant impact from U.S. tariffs basically because our partner that Julija referred to Parker Laboratories are manufacturing the products sold in the U.S. on our licenses. So basically, we -- this is a way that we have hedged against changes in tariffs. Operator: Perfect. Thank you, Anna. Next one here is, are you targeting certain background types of salespeople? Matthew Sassone: Yes. I will say it's a personal frustration of mine that we can't recruit salespeople as fast as I would like. And I have lots of discussions with the sort of MDs around the world about their recruitment and trying to accelerate. We are very choosy about the people that we hire. And what we want to have is ensure that we're getting people that really are able to sell the value of chlorine dioxide. And that is part of our success, and I respect the fact that the MDs are really taking their time to find the right individuals. It's very easy to recruit a salesperson to sell a medical device. But what you want is you want someone who truly believes in what they're selling. A customer can tell the difference. Someone who is an expert in the field is able to be that consultant to that -- to the customer and really support them. And that's what we look for. So our recruitment is probably slower than I like -- would like from a time perspective, but I greatly respect and endorse the fact that we are taking our time to find the right candidates because if you have the right individuals, they're the ones that make a difference. Operator: Perfect. An investor asking here, do you sell to Scandinavian and Baltic markets? If not, do you plan to? Matthew Sassone: Yes, we do. We have distributors in -- for all of the Scandinavian countries, and we work through them. With regards to the Baltics, yes, we have distributors in that part of the world as well. Operator: Is sales profitability rather than volume to value part of any sales incentive program? Matthew Sassone: What I would argue is we enjoy sort of like -- we enjoy high gross margins. We're a very profitable business. So from our perspective, what we're looking to do is to drive the utilization of our products, expand the number of procedures that we're being used on and sort of like ensure that we don't -- sort of don't, as a result of those efforts, dilute our profitability by sort of controlling and incentivizing our teams accordingly. So what do I mean by that? Well, for us, we track the number of procedures that we've been used on as well as looking at the sort of headline revenues. We have a tight control over our pricing, both at a sort of a global level and then at a more local and regional level. And also, we focus on the product mix and the split. So what I would say is that we are focused on profitable sales, but what we're primarily focused on is expanding our reach and expanding our share and realizing the opportunity ahead because we know that when we get the sale, that flows right away through to the -- through the P&L. Operator: Moving on topics to patents. What patents do you have? And when do they expire? Matthew Sassone: We have a suite and a family of patents and they are both sort of like geographical in reach and also have a sort of a big reach in regards to sort of what they actually protect. As I've explained to investors in the past, IP is not our only protection and the only sort of moat that we have for our business. We have -- at our core, we have a sort of trade secret about the way and the mechanism that we're able to create chlorine dioxide safely at point of care. We also have all the regulatory approvals around the world and the national guidelines endorsing our chemistry. And then as mentioned in the presentation, the working with the OEM, the original equipment manufacturers to have us written into their IFUs and endorsing us is also another part of our defensive moat. So there are many different sort of layers with IP just being one part of it. Operator: And the last question we've got here is, what is the worldwide market opportunity for VISICLEAN? Matthew Sassone: Yes. I would point investors to our sort of presentation that we gave in October where we gave a bit more details on VISICLEAN. So VISICLEAN is a visible verification that the health care provider has adequately cleaned the sort of ultrasound probe or the medical device and also it's a visible verification that the chlorine dioxide chemistry is being effective. So if you sort of like go and have a look at our presentation or some of the videos at the Investor Meet video from October last year, you'll be able to see us demonstrating that and see it working in practice. It is a sort of like an ancillary product to our DUO foam offering that we have, and it really is about sot of addressing the cleaning step before the higher level disinfection. So in the presentation we gave in October, we basically said, look, if we were to take -- if there was to be a one-to-one relationship between the number of DUO procedures that we sell and all of those customers then sort of using VISICLEAN, we're looking at somewhere in the region of 15 million sort of procedures being done with VISICLEAN. So there's a nice opportunity there for us with VISICLEAN. And we recognize it as a sort of like interesting and potentially profitable product within our fleet and our offering. Operator: Perfect. That's great. Thank you for addressing those questions from investors today. But before I redirect investors to provide you with their feedback, which I know is particularly important to you and the company, Matt, can I please just ask you for a few closing comments? Matthew Sassone: Yes. Absolutely. As investors can see, it's another set of strong results from Tristel. We continue just to sort of deliver as always against the market expectations, and we remain firmly sort of like on track to meet those guidelines. Tristel is a fantastic company with great products, brilliant people and the future remains very bright for the organization. Operator: Fantastic, Matt, Anna, Julija, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to you all.
George Kopsiaftis: Good morning, everyone, and welcome to the Lumos Diagnostics First Half FY '26 Results Investor Briefing. My name is George Kopsiaftis, and I'll be your moderator for today. The webinar is being recorded today and will be available on Lumos' website. With us today, from Lumos Diagnostics, we have the CEO, Doug Ward; and the CFO, Barrie Lambert. Good morning to you both. Douglas Ward: Good morning, George. Thank you for being here today. Barrie Lambert: Good morning, George. Good morning, everyone. George Kopsiaftis: The format for today is for Doug and Barrie to walk you through the presentation that was released to the ASX this morning. This should take about 15 to 20 minutes. And then it will be followed by a question-and-answer session. [Operator Instructions] And with that, I'd now like to hand it over to Doug to get us started. Douglas Ward: Okay. Thank you very much, George. Thank you, everyone, for being on today's webinar. I greatly appreciate it. As George said, the presentation was announced today on the ASX. So feel free to pull that off, and you can have a read at your leisure. So with that, Barrie, do you mind going to the first presentation slide. One of the things that we typically always talk about here, even though most of you probably are very familiar with the Lumos story and have followed us for quite some time is who is Lumos. So I always like to put it in the perspective of, hey, Lumos is trying to change the practice of medicine. right? We are very bullish about what we do, how we do it, and we have the ability to develop our products, manufacture them and then commercialize and bring those to market. And we do that with a technology that allows us to do it very close to the patient, which -- that testing is known as point-of-care testing. So next slide, Barrie. So the history for Lumos really dates back where Lumos initially started out as what we call a commercial services business, meaning we were more of a contract developer or a contract manufacturing org for other IVD diagnostic companies. And with that, right, we've built a tremendous, not only competency and expertise, but also the infrastructure, the people with the skill sets necessary to develop and manufacture the IVD products. Those same resources that we were using to help other companies, we also use those for ourselves and bring our own products to market. And over the last, I would say, 2 years, 3 years, we've started to bring some of those products to market. And without a doubt, right, that flagship for this company is FebriDx. We'll talk more about that shortly. We've also announced, right, we've started initial feasibility work on our women's health portfolio as well. We'll speak less about that because it's very, very early days. But very excited about the business and its structure and the people within the company. Go ahead, Barrie. So listen, I can honestly sit here in reflection over the last 6 months. And I would say in the 3.5 years now that I've been here with the business, that was the best 6 months that we've had with the company. I'm very, very pleased with the performance. I feel, and hopefully, most of you who are familiar with the company, can think about us as we actually do what we say we are going to do. So all the accomplishments that you see here, which I think are transformative relative to the company, we have made it clear to people in advance these were the things that we had aimed to do in this first -- the first 6 months of 2026. With the signing of the PHASE deal and again, reminding new people what that agreement was, they're our exclusive distributor for FebriDx in the United States. And a lot is positioned on the pending CLIA waiver grant that we're expecting from the FDA. But with that, what we've signed is a 6-year agreement with PHASE as our exclusive distributor in the U.S. and they will bring a minimum of USD 317 million in sales to Lumos over that time horizon. So we're very, very excited about that. And obviously, we've already initiated work since we signed that agreement back in -- I think it was July, it was the first month of the year, in fact. Right after that, in August, we did complete our CLIA waiver study and submit to the U.S. FDA for grant of the CLIA waiver. As we've talked about many, many times, one, this -- hopefully, next quarter, I can talk about, that's our greatest quarter ever because we can sit here and we expect that we're going to have our FDA clearance here or grant of CLIA waiver by the end of this month. We continue to have great dialogue with the FDA, and we remain very bullish that, that event will occur here in the month of March, which we are now in. So very, very short timing to us being able to make that announcement, I hope, here in the coming weeks. So the next item, listen, in the U.S., it's one thing to have CLIA waiver or a 510(k), and it's -- as well as having a great relationship with an exclusive dealer signing up for 317 million. But for any of that to actually happen, in the U.S., you must get reimbursement for your product. We have reimbursement. We secured that right, a year ago for USD 41.38 per test for the physician to be paid by CMS or not paid by CMS, but it was set by CMS and the MACs or the Medicare groups within the U.S. or 7 of them have all now agreed to pay that full reimbursement for FebriDx. So again, it's critical that you actually -- the doctors get paid to do the test. If they don't get paid, quite frankly, people won't order the test. So it's really important again to have clinical benefit, which addresses an unmet medical need, which FebriDx obviously does by saying whether or not someone has a bacterial infection or not. Second is the whole issue around economics and that people, the doctors and the dealers and the distributors are getting paid and make margin, including Lumos. And then lastly, it needs to be done in a way that's easy to do. And obviously, FebriDx being such a great product, it's so easy to use and it's very fast and they can use it while the patients there at the doctor's office, once it's CLIA-waived, and it's a very, very simple test to do. So if you have those 3 things, you can be very, very successful in building this potential USD 1 billion market opportunity that we have. In addition to that, as you know, our -- the original CLIA waiver trial was paid for by BARDA, a part of the U.S. government. We did secure additional funding. I think it was approximately USD 6.2 million to fund our pediatric trial and extend our label to children 2 to 12 years of age, and we're expecting that trial to wrap up at the end of the calendar year at this stage. And then the last thing, again, given that we have such great partners in our top 2 investors, Tenmile and Ryder Capital and that they did work with us to establish a loan facility that if we need cash prior to the CLIA waiver event occurring, which on that event, right, very close after that PHASE will pay us an additional $5 million for prepayment of product. So we're sitting in a very, very good place from a financial standpoint. And I'd like to really, really stress to everyone that we've -- I think we've done a really good job over the last, I'd call it, 2 years in trying to bring as much nondilutive funding into the company, right? We did that with the Hologic IP. We also did a sales leaseback agreement with Hologic. And certainly, with the BARDA agreements and with the agreements with PHASE, we were able to bring in capital into the company that was nondilutive, right? So we'll continue to try to do that throughout this fiscal year and calendar year as well. So next slide, Barrie. And then I'm going to pass it over to Barrie for the next 2 slides. The only thing that I'd set it up, if you don't mind, Barrie, is just financials came in exactly where we were expecting them, given where we are with CLIA waiver. So very pleased with the results that we had here. And go ahead, you can go through the detail, Barrie. Barrie Lambert: Okay. Thanks, Doug. Just a couple of slides on the first half results. And obviously, these should be looked at in conjunction with the ASX announcements we've made in the first half financial statements, which we released on Friday last week. So just revenue and gross profit on this slide. So on the revenue chart on the left there, first of all. So first half revenue was USD 6.1 million. And just to remind everyone, again, our reporting currency is in U.S. dollars. So all these numbers are in U.S. dollars. So USD 6.1 million for the first half, as Doug said, was exactly where we expected it to be. So very happy with the result. There is a little bit of a change in the mix -- revenue mix here, which I just wanted to point out as, again, I guess, how that's changed over the first half. So products revenue made up USD 1.7 million. out of the USD 6.1 million versus USD 0.8 million in the prior corresponding period, so double the previous half year in FY '25. So largely FebriDx revenue, which was up significantly on the prior corresponding period with the increase in FebriDx revenue more than offsetting the reduction in revenue from the loss of ViraDx sales, which we've talked about in the past. So very happy with that result. On the services revenue, it was USD 4.4 million for the first half versus USD 5.5 million in the prior corresponding period. It was down on the prior period. I just put some notes there to explain the reduction. So as the length of the fFN project with Hologic has extended, primarily as Hologic changes the scope and we have to do extra work, we did recognize a lot less IP revenue in first half of FY '26, which was only USD 1 million versus USD 2.6 million we recognized in the prior half. So that's obviously the main driver for the reduction in service revenue, but that was largely backfilled with ongoing project work. And just in the last couple of months, we've actually been working on about 14 projects. So very happy with that sort of change in mix and being able to backfill that revenue with project work. Moving to the right, gross profit and margin. So we reported USD 4.2 million for the first half. Very happy with that number, considering the revenue was a little bit lower. 68% gross margin, also a very strong number there, was up 1% on the prior corresponding period and actually up 13 percentage points on -- 2 years ago. So a really good result on gross profit and margin. And I'll just move to the next slide. A couple of comments on EBITDA and cash flow. So there's a full reconciliation of how we drive these EBITDA numbers in the financial statements. So please take a look at that. So adjusted EBITDA loss for the first half was USD 1.4 million, slightly above the prior corresponding period, but a significant improvement over the first half of FY '24, which was a loss of USD 4.2 million. OpEx was up a little bit, which is to be expected when you -- we're running the 2 trials there, the CLIA waiver trial and the pediatric trial. That was the main reason for the increase in OpEx. But just a reminder, those costs are fully offset by the BARDA grants. So even though OpEx is up, it doesn't actually have any significant impact on the EBITDA number because it's offset by the grant income. We did increase some expenditure in sales and marketing spend for FebriDx in the U.S., and we did have some new hires to scale up. And unfortunately, in the U.S., medical insurance costs tend to go up on a regular basis, which is something we need to manage each year. And just a comment below that box there. So adjusted EBITDA excludes the share-based payments and one-off impairments or expenses. We did not actually have any one-off impairments or expenses in the first half. Nothing unusual there in none of those items. Final comments on the cash flow. You can see there is a significant improvement in operating cash flow for the first half. It was actually positive, USD 0.1 million versus an outflow of USD 6.8 million in the prior corresponding period and USD 5.5 million the year before that. As Doug mentioned, we had the nondilutive funding from BARDA. We received USD 2.8 million in the first half. And as we've mentioned several times, we're containing any spend on property, plant and equipment. That was minimal in the first half. So net cash flow generation, so that's operating cash flow, investing cash flow plus lease payments, was actually a positive USD 0.1 million for the first half versus the -- you can see the prior periods there. So big improvement in operating net cash generation. And as Doug said, we've got the finance facility there. You'll see in the financial statements, we did draw down USD 1 million a couple of weeks ago, and there's a USD 4 million remaining on that facility to provide working capital through to CLIA waiver. So I think that's it, Doug, I'm happy to take questions at the end. But as I said, there's a lot more detail in the financial statements that we lodged last Friday. I'll pass it back to you, Doug. Douglas Ward: Yes. Thank you very much, Barrie. I love looking at these numbers these days. So with this, listen, I'll just wrap it up with an overview of the key priorities and where things stand. So like I said, we are very bullish that this month, we will have CLIA waiver. So with that, obviously, a lot of activity can go into motion. Right now, we're still limited in terms of being able to market FebriDx into the CLIA-waived environment. So once we have that, we can really start to initiate that work. And likewise, right, PHASE will then continue to work with us in regard to getting their sub-distributors on and starting to gear up the supply chain activity around the FebriDx product itself. Together, we'll both continue to drive the key aspect of what I call reimbursement coverage, that's to get the private payers, the insurance companies, those companies like United, Aetna, Blue Cross Blue Shield. You want to get your products into what's called a policy coverage. It's a written coverage where it's automatically paid. And that becomes a volume-dependent process. So with CLIA waiver, volume should jump significantly such that then we can get into the coverage policy documents from -- with those payers. And we'll continue to work the pediatric study, as we've discussed before, right, that will expand our market an additional 20% or so. So looking forward to that for, again, wrapping up that study toward the end of the calendar year. We just talked about what's going on in the services side of the business. Actually, it's doing very well right now. This part of the business is cash flow positive for us. And we have a great partner in Hologic. That continues to move forward in a very positive way. And the team has been able to sign up a couple of new large opportunities like the Aptatek deal that we disclosed earlier in the half. And then lastly is we'll continue to look to bring more products to market over time. And we've talked about bringing a women's health portfolio product that's in the feasibility stage within our research and development group here. So with that, we have one more slide that we did put into the deck. It just gives you a lot more detail. I think it's a good slide for investors to consider and have a look. I'm not going to go through this. Feel free at your leisure to go through it, if you wish. It's again, on the ASX and the announcement. And with that, we'll wrap up the presentation part. And George, we'll turn it over to you for any questions that people may have. George Kopsiaftis: Right. Thanks, Doug, and thanks, Barrie. [Operator Instructions] So we've got a few questions here, Doug and Barrie. First one for you, Doug. What's the initial FebriDx product volume that Lumos is able to manufacture and ship, say, in the April to June quarter? Douglas Ward: Yes. Good question. Listen, we don't give guidance around our revenue and certainly around the volume, which is just, if you will, a way to think about revenue to be quite frank, since it drives the revenue number. I would probably kind of go back to what we have said all along, which is, one, we have a great partnership in PHASE Scientific. And we meet with them on a regular basis, preparing for CLIA waiver and getting ready for the volume requirements that they'll have. And both PHASE and us, we feel very, very good about where we stand in our ability to supply them with the volumes that they will need. And I would just say, kind of added on to this, although it's not the exact question that's being asked, we also feel, for the first 2 years of the agreement, we have the capacity and capability to supply the demand that both we and PHASE expect for the product. And, right, we've also communicated to people. We will need to eventually make some investments into growing the capabilities for increasing capacity, probably getting ready for that year 2 and beyond, if you will. So hopefully, that answers some of your question. I just appreciate, can't and we choose not to give all the detail of our volume capacity. George Kopsiaftis: Great. Thanks, Doug. The next one, there's a couple of parties that have asked a very similar question. So I'll just amalgamate. It's around the women's health product. It says, when do you expect to see some updates on Lumos' other products under development? And when do you expect to have a marketable product? Douglas Ward: Yes, 2 good questions. So listen, the first one -- and that's why we don't have a ton of information in detail here is because in feasibility. And we started out with a menu of products and some things are going to go well, some things are not going to go well. That's the way it works. So once those are at a stage that they can either -- right, what's going to happen is either you're going to say, hey, they didn't make it through feasibility or it's going to go into development, right? So from that standpoint, when it goes into development, we'll be able to give people a lot more information around what those products are and time frames and so forth. To answer that second question, though, about, well, when might these products get to market? Listen, to bring a diagnostic product to market in this setting with this technology and so forth, think of it as a 2- to 3-year window that it takes to develop your clinicals and then get your regulatory clearance in order to bring the products to market. George Kopsiaftis: Right. I'm not sure you can answer this next one, but I'll ask it of you anyway. If the waiver is granted, are there any plans to merge with or take over Atomo? Douglas Ward: Yes. Listen, I can't comment on that other than to say like, yes, we don't anticipate right now that we have that going on. Who knows what the future would hold, but we don't have plans to that right now. Anything to add to that, Barrie? Barrie Lambert: No. I think you covered it. George Kopsiaftis: All right. Great. Next question. If IP revenue is 100% margin, the increase of overall margin to 68% on a lesser IP of USD 1 million must mean that the other margin is very, very good. Is this correct? Barrie Lambert: Yes. I mean there's a change in -- obviously, the revenue from the IP agreement with Hologic does not have any cost, so it's 100% margin. So that reduction in IP revenue does obviously make the margin decrease. However, as we announced previously with the PHASE agreement, there is an exclusivity fee was paid by Phase of USD 1 million. So that was recognized in the first half revenue, which is obviously 100% margin as well. So it does offset it to some extent, George. And that's why we were able to maintain such a good high GP margin of 68% in the first half. Douglas Ward: I would say, though, Barrie, also the difference between FebriDx and ViraDx, right, also has... Barrie Lambert: Yes. No, good point. ViraDx was obviously a much lower margin product versus FebriDx, which is north of 60%, correct. George Kopsiaftis: All right. Great. Just one final question. This one actually was sent in earlier today. Is the total U.S. revenue for PHASE Scientific currently less than USD 15 million primarily from the sale of at-home tests? Douglas Ward: Okay. Yes, I would just say, listen, we can't comment on PHASE's mix nor their revenue numbers. So sorry, wouldn't be appropriate for me to comment on PHASE. George Kopsiaftis: Fair enough. All right. Well, there's no more questions at this time. So Doug, I might just hand it back to you for any closing remarks. Douglas Ward: Yes. Thanks, George. Greatly appreciate it, and thank you very much for the questions. Listen, I am extraordinarily positive about where we are as a business right now. I think operationally, we executed exactly the game plan that we thought that we would. And that has also resulted in line with exactly where we thought we would be from a financial standpoint. So I think those 2 things combined have put us in a great place just prior to, hopefully, the most significant announcement in this company's history, which I expect to come sometime later this month. So be on the lookout, we're happy where we're headed, and I look forward to the next time I talk to everyone about CLIA waiver here with FebriDx. George Kopsiaftis: Right. Well, with that, Doug, thank you. Barrie, thank you. That now concludes the presentation. You can all now disconnect. Thank you for your time today. Barrie Lambert: Thanks, everyone. Douglas Ward: Thank you.
Massimo Battaini: Welcome all, and thank you for taking your time to attend the earnings call for 2025 full year results. I would like to highlight the main achievement '25. You see a record results across all KPIs, strong performance in EBITDA with EUR 2.4 billion, which is itself a EUR 500 million growth in terms of EBITDA over the '24 performance. A strong net income, EUR 1.3 billion, of course, supported by the disposal of the YOFC share, but still remain an outstanding net income result. And our cash generation with a 50% conversion vis-a-vis EBITDA, EUR 1.2 billion, again, a record result in free cash flow generation. EBITDA margin growth over 2024, depreciation, we wait for the next slide and strong growth in EPS also with 18%, which is well above the range that we committed to achieving at the Capital Market Day that was 15%/17%. I will jump to the next one to deploy to display the significant acceleration in our performance. You see stability with slight growth in '22, '23 and a first step up of EUR 1.9 billion EBITDA and EUR 2.4 billion this year. This EUR 500 million a significant hike in EBITDA, mainly coming from perimeter change, the full recognition of Encore Wire impact in '25, the new acquisition Channell and the strongest ever performance came from -- that comes from transmission with EUR 200 million growth in EBITDA. To be honest, there is another EUR 80 million benefit in terms of organic growth in the '25 result that is hidden by the ForEx that was EUR 80 million, EUR 75 million to be specific adverse in '25 versus '24. I will not comment on the guidance now, but you see that EUR 2.7 billion already position us, I would say, slightly ahead of what is the target that we have to achieve by 2028, considering that we still have 2 years to go. Free cash flow, similar trend, significant acceleration. EUR 1.2 billion is a very good conversion rate for the current EBITDA. 1.350 is again another step up. This definitely position us ahead of the target of 2028. Let me move to the important contributors to the growth of the company in the last 18 months. This is an 18-month worth of effort in reshaping our portfolio, making it more suited to our goal of become a stronger solution provider. You see in '24 in electrification, Encore Wire gave us the access to electrification space in the United States. And thanks to that access, now we have a unique asset and a unique opportunity to leverage the expansion of data center. We followed this with the digital solution expansion portfolio with connectivity with Warren & Brown in '24 in Asia Pac and Channell in U.S. and also outside the U.S. And lately, we had this 2 important acquisition, although small, The Xtera and The ACSM. Xtera gives us access to the submarine telecom long-distance connection, helping us complement the strength that we have in the submarine energy business with submarine telecom opportunities. ACSM is again an important step-up in verticalizing our capabilities and in sourcing one of the most critical phase of the execution of the project, the survey assessment and the route preparation, which will help us become more efficient on the one end, but even also able to stand the possible risk that start -- that comes from the [indiscernible] that always rely on customer survey and not our own survey. We also work on our portfolio in terms of disposing shares of YOFC, which is not considered any longer a crucial asset for us. And we made a couple of actually factory reduction in the automotive perimeter to help us avoid the dilution coming from the difficult time that automotive is living worldwide. Also outstanding remarkable achievement in the -- I mean the new one on the sustainability journey. Our newly defined target is to move to sustainability linked revenues. So the revenues that are associated to low-carbon products, sustainable solution, 44% is the target is the achievement for '25, our target for '28 that we declared at the Capital Market Day is 55%. So more than EUR 11 billion, EUR 12 billion revenues in '28, and who knows whether this will be EUR 11 billion or EUR 12 billion or more depending on the perimeter change, will be solutions that can offer benefit to our customers in terms of sustainability. Significant hike in the recycled content from 16% to 21%, and we continue our consistent journey of reducing Scope 1, 2 and 3 to achieve and meet our commitment to be net zero by 2035. We are also particularly proud of this record 50% achievement in share of our employees that hold shares in the company, which is a sign of consistent and growing confidence in the future of our company. Yes. Let me start with the start of '25. there are many KPIs, but I will draw your attention to the right-hand side of the page, 30% organic growth, which equates to almost EUR 800 million of revenues in 1 year in terms of capacity expansion and execution of the projects. Second, EUR 582 million EBITDA, EUR 220 million additional to 2024. The step increase is amazing. And third, the EBITDA margin, 18.3% full year '25, supported by 21% in quarter 4 explains and give confidence and actually show that we are going to beat the target that we set for 2028 that was set at 18%, 20%. We are already there in '25 with an exit speed that goes beyond the range that we set for 2028. Amazing also the growth of the backlog, EUR 17 billion with EUR 2 billion worth of projects being awarded to us. They are not in the backlog because they are waiting for the not to proceed that will come in the next few quarters. Power Distribution, we continue with a sustained growth in the quarter was pretty strong, 13% in the full year, still very strong, 8% certainly supported by 2 large regions, U.S. and North America and Europe. EBITDA margin full year is slightly down on 2024 because the quarter 4 is slightly down year-over-year on quarter 4 '24. Again, the same point that I mentioned last time, there is this Midwest spike in cost due to the tariffs, unfortunately, that we could not pass to customers in the overhead transmission space in U.S. because this is a fixed price business. Now we are moving to different -- we're trying to define different solution. But until we have flushed out the whole backlog, which was set when the Midwest was lower than this, we will suffer some contraction in the overhead transmission line that has a repercussion on the total power grid space. Electrification is showing a sluggish I&C growth overall, but with a promising growth in quarter 4 in North America with almost 6% year-over-year growth, which is supported by what we see already in quarter 1, 2026. So we suffer a lot in terms of organic growth in '25 in the space in North America because the whole market with the exclusion of data center, so the residential and the nonresidential market was 6% down in 2024. This is a public number of the spend occurred in U.S. in Construction business. The expectation, the outlook for '26 is much more promising and the start of the year as well as the exit of the last month of 2025 are extremely promising. The EBITDA margin full year grew by 900 basis points over '24. And this is again the level and the value of the accretion due to the acquisition of Encore Wire in our perimeter, full perimeter. Specialties is nothing that was not foreseen, but it is still disappointing. We have full year '24 reported EUR 110 million EBITDA and now EUR 280 million. There is a EUR 10 million ForEx headwind, of course. But besides this, there is a weaker demand in automotive, in Elevator, U.S. and in Oil and Gas. So contraction of margin in this business has caused this let me say, EUR 20 million organic decline. The rest is the ForEx effect. The profitability full year remained pretty consistent with the past. And we have finally disposed the asset that we want to dispose in automotive towards the beginning of this year, January and February. So we should not see any longer the dilution coming from automotive, and we hope to see the rebound of the business in the rest of the verticals that we play in the different regions. Digital Solutions speak for itself. It's a significant growth organic, 7% full year, supported by the rebound of business in the United States with stability in Europe and other countries. And then there is a perimeter change that inside the EUR 268 million equates for more or less EUR 100 million is the Channell. You see how accretive Channell is with a quarter impact, which brought the EBITDA margin 5 points higher than what it was 24 and overall EBITDA margin at 17.3% for the full year. Core Channell will continue. It will also, as we did in the optical business, U.S. benefit from the rebound in the market. And now we can finally work on the integration and leverage the bundling of connectivity cables and leverage the synergies that we have to achieve, thanks to the cross-selling opportunity. Let me hand over to Francesco for more insight into the financial details. Pier Facchini: Thank you very much, Massimo, and good morning to everybody. I'll be quick the profit and loss statement. As Massimo said, EBITDA closed at EUR 2.4 billion, exactly in the midpoint our guidance with a great margin expansion at standard metal price and expansion of 130 basis points up to 14.2%, driven inorganically by the full year inclusion -- the full year effect of the accretive Encore Wire acquisition in terms of margin and also by the inclusion of Channell acquisition since June 2025, organically, mainly driven by the outstanding margin expansion of the transmission business on a full year basis around 400 basis points, 4 percentage points. drawing your attention on the right part of this slide, you see the bridge of our '24 to '25 adjusted EBITDA with a total growth of close to EUR 500 million, EUR 470 million despite the adverse ForEx effect worth EUR 75 million. Business by business, transmission was the strongest part of this growth, almost EUR 230 million, driven by an almost 30% organic growth and as I said, an excellent margin expansion. Power Grid also performed well, EUR 24 million growth, of course, clean of the ForEx effect, performing very well in power distribution and in high-voltage AC across all the regions with only an adverse effect in North America overhead line business. But despite this performed a significant growth also top line organically grew by around 8% on a full year basis. Electrification grew by EUR 176 million, of which I&C contributed more than EUR 200 million, whereas specialties dropped driven by weak oil and gas, elevator and automotive. As Massimo mentioned, a very promising exit experience start of the year in the I&C business in North America after the challenging first half, the first 2 quarters with pretty tough market conditions. Digital Solutions, up almost EUR 130 million. Obviously, here, we benefit of the inclusion since June of the Channell acquisition, but I'd like to stress that also organically and mainly in the U.S. EBITDA grew significantly on a like-for-like base. The little adverse perimeter effect of YOFC. We gradually exited in the second and third quarter. And as I said, the ForEx effect. The other outstanding achievement is obviously net income close to EUR 1.3 billion. Of course, this includes the gains from YOFC net of tax in the region of EUR 345 million, but still taking out this effect, the growth from 2024 is really outstanding. And by the way, the EUR 3.31 a share of EPS, growing 18% since last year that Massimo already mentioned, I want to be very clear, is totally cleaned of the YOFC gains effect. So it's a normalized growth of our earnings per share. We can move to the cash flow generation and one more outstanding achievement of this 2025, close to EUR 1.2 billion free cash flow generation. This was also benefiting of some extraordinary low level of paid taxes in U.S. benefiting of a couple of positive one-off effects. But as you see, we performed really well in terms of working capital changes, down by almost EUR 200 million, mainly in the transmission business and despite the adverse effect of the rising metal price that unfortunately may be there also for this year 2026 impacting our cash flow. You see that we deleveraged down to EUR 3.1 billion debt with the acquisition, which is almost entirely or entirely the acquisition of Channell, including the earn-out of EUR 1,069 million, which is almost fully covered by the issuance of the hybrid bond close to EUR 1 billion. And you see here totally taken out from the free cash flow, the effect of the disposal proceedings, EUR 675 million, out of which EUR 565 million are related to the YOFC disposal. That's it. Back to Massimo for the outlook. Massimo Battaini: Thank you, Francesco. The outlook is pretty straightforward, and it is actually very outstanding in terms of confidence and commitment of the company to make it happen. EUR 2.7 million (sic) [ EUR 2.7 billion ] midpoint in the EBITDA guidance, which sets EUR 300 million EBITDA increase over the ending point of '25. But in reality, considering there is EUR 80 million perimeter adverse impact between -- sorry, the EUR 80 million ForEx effect adverse. It is actually a EUR 380 million EBITDA increase. if you neutralize the ForEx. You see on the right-hand chart that the bridge explained that there is a significant organic growth. On top of it, there is a perimeter effect that is more or less EUR 80 million. So by coincidence, is that size that needs to be in place to offset the ForEx impact. I think it's very -- I would say brave, but we are very confident to achieving it. It's much better than what we've seen across the other peers, not necessarily in the cable space, but in general. And we are very committed to achieving it. The free cash flow even stronger. Again, 50% conversion rate, EUR 1.3 billion, EUR 1.5 billion well ahead of what we need to be or where we need to be in '26 to underpin the 2028 Capital Market Day target. So we're confident to achieving both and continue the journey with organic growth and the M&As. The sustainability-linked revenues will move from 44%, 25% to 48% midpoint. One important remark in our EBITDA, there is not any possible benefit, any coming from the tariff situation. We haven't seen it yet in the past months. As I told you, we will take a little bit for the importers to change behavior in the market and allow us to gain share. And we didn't want to build any speculative benefit coming from the tariff situation, which has changed in a certain extent, but not much at all. We will see upside possibly coming from tariff in the coming months or coming quarters. Having said so, I close saying that we confirm the strong drive in transmission business also for 2026. The China integration is a successful integration, considering that after concluding the earnout payment that we have paid this company with a multiple of less than 7 and the synergy will kick in, in '26, adding additional accretion to the Digital Solutions EBITDA margin. The outstanding cash generation in '22 will -- '25, sorry, will be supported in '26 with additional cash flow. The dividend will increase from EUR 0.80 to EUR 0.90. And of course, this is what we see organically, but you know that we keep working on the M&A. When this will happen, we cannot tell you yet, but there will be something happening in the next short term, let me say this. Thank you for your attention. I'd like to move on to the Q&A session. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Akash Gupta from JPMorgan. Akash Gupta: I have 2. The first one is on guidance. At the midpoint, you target roughly EUR 300 million increase year-on-year in EBITDA. I guess EUR 140 million of that could be coming from transmission to get to EUR 1 billion by 2028. And I think you said EUR 80 million is coming from perimeter. So maybe if you can talk about how should we think about the remaining EUR 80 million between the 3 segments, Grid Electrification and Digital Solutions on an organic basis? And same on guidance, your free cash flow guidance imply 50% FCF conversion at the midpoint, which is higher than what we have seen historically. So any color on that? That's the first one. Massimo Battaini: Thank you, Akash. Yes, you're right. So let's call it EUR 300 million net, but organically. In terms of the offset of the ForEx, it EUR 380 million. So EUR 150 million, yes, more or less will come from transmission. Remaining is EUR 80 million. And so this brings us to EUR 230 million, and there is another EUR 150 million organically coming from the rest of the business. So there is some organic growth in Digital Solutions because we will continue to leverage on the strong demand in the United States which is driven certainly by broadband deployment, but even more by data center expansion. They are desperate for additional volume, additional supply in optical space, likewise in the energy space. And there will be strong growth in power distribution. So despite the dip in EBITDA margin that you've seen in quarter 4, which was totally anticipated, the market demand in U.S. for medium voltage and high voltage is extremely strong. We can't cope with this demand. If you have more capacity available, we would sell it. And luckily in January 27, we will have the first wave of new medium voltage capacity coming on stream in the Encore side. this will be a powerful combination, the service level of Encore with the power of medium voltage cable for I&C, industrial construction, Power Grid. So Power Grid will also grow. And electrification, as I said, we exit quarter 4 with a strong rebound in I&C North America, not followed by Europe. Europe is pretty weak in I&C currently. But North America rebound in quarter 4 is what also we noticed in quarter 1. I don't think that has nothing to do with the tariff. If anything, it's due to the contraction that the market suffered in 2025 that finally is resulting in a surge in demand in 2026. So to cut the story short, there will be organic growth trend in our EUR 2.70 billion coming from all businesses of course, with much more visibility in transmission, but with strong market demand in I&C North America, in Digital Solutions North America and in Power Grid Europe and United States. I'll leave hand over to defer to Francesco, the answer on the 50% conversion. Pier Facchini: Yes. Thank you, Massimo. No, definitely, let me say, an ambitious, still totally realistic target on which we are very confident. Let me, first of all, remark that already 2025 is very close to the 50% conversion rate. This improvement in free cash flow at the midpoint is around EUR 180 million versus the 2025 actual. We come, first of all, from the additional EBITDA. So if you take the EUR 300 million additional EBITDA net of tax contributes around EUR 220 million, EUR 230 million. And then we will certainly have higher cash taxes. I mentioned that 2025 was kind of supported by a particularly low level of cash taxes in U.S. This will come back in 2026. And this means that we are committed to further improve our working capital. As I said, in 2025, most of the improvement came still from transmission. This will be a little bit different in 2026. And we should think that in 2026, we have pretty significant room to recover and to gain efficiency in terms of working capital. And this will be key in order to deliver the EUR 1.35 billion free cash flow guidance. Massimo Battaini: And to give you a little bit of more nuance, there is not any reduction in CapEx that support the free cash flow generation. If anything, '26, we continue with a strong CapEx deployment across all businesses because this time, we continue with transmission, we continue with Power Grid. We need to add digital solutions. We are at capacity in fiber and cables. And so we will maintain a level of EUR 800 million CapEx also for 2026 to support the organic growth across all the 3 businesses that I mentioned. Pier Facchini: Let me also add one point that I missed that the debt with this kind of cash generation in '25 and expected for '26 our net debt will be in the region of EUR 2.6, 2.65, including, by the way, the 2 already announced acquisitions, which are worth an effect, increasing our debt by EUR 210 million to EUR 220 million. And this means that year-end 2026, our leverage will be lower than 1 based on the midpoint of the guidance. And that's really a great situation to be in, and I would say, a better situation than we expect. Massimo Battaini: Much more better than expect. Operator: We are now going to proceed with our next question. And the questions come from the line of Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions. I'll ask them one at a time. The first one, just wanted to ask on power grids and on this, what you call the temporary metal headwinds. Should we -- maybe can you quantify how much the hit was? And then should we expect that they will no longer be there from 1Q onwards? Massimo Battaini: Thank you, Daniela. Yes, the temporary effect is temporary because due to the Midwest spike and translation where the margin -- sorry, where the price is fixed. Yes, I can't tell you the number was for the full year, but basically impacted quarter 3 and quarter 4 was a $30-plus million worth of cost or margin contraction. the hit is visible at the group level because you know that Power Grid in North America accounts for, let's say, 2/3 of the total EBITDA margin of the group. It will be there also in quarter 1 because the Midwest keep increasing, and we still have significant volume associated to backlog that we landed in quarter 1 and quarter 2, '25 when the Midwest was pretty low prior to the time. So we see it in quarter 1 and milder in quarter 2. Gradually, we will come out because what we are reporting today, the project that we are landing today for execution in quarter 3, quarter 4 have a fantastic margin, as you can imagine. But until we flush out the order backlog, we will be in the same situation. That's why we call it temporary. Daniela Costa: Got it. And then just on -- I think you very clearly don't have in your guidance the tariff benefits. We have already seen, I guess, on the market data in copper wire and cable imports into the U.S., like the November data was down massively on the imports. We don't see very strong growth in your U.S. electrification business yet in Q4. Can you explain, is it because it's a different mix, maybe you're more indexed to things which haven't been included in the codes which haven't been included in the tariff yet? Is it just timing with distribution? Sort of how should we think about that data versus what you are printing in the U.S.? Massimo Battaini: Yes. To full answer, in the copper space, there are no tariffs at all. The tariffs are applied to metal and not to the derivative products. And this seems not to be the intention of the administration. So the market is still free as it was before. Everyone is bearing the extra cost of the copper. The cathode premium and the copper comments and the market is the same as before. So this is the space where we never expect -- where we didn't expect to have any potential gain from the tariff. On the contrary, in the aluminum wire, we still have this 232 tariff to the metal content of cable imported from importers. But for the time being, we haven't seen a real change in behavior. They -- basically is volume the cost of the 50% in their margin, their price, the importers, the distributors importing cable from overseas. That was my point. I don't know how long they can continue with this margin contraction. They haven't increased significantly the price. Yes, it is true, they have increased a little bit the price, but we still have a significant price gap like 5%, 10%, 15% between our price in the U.S. and their price coming in. And so maybe they will not be able to bear the current margin pressure for too long, which is what we hope. But as why we didn't speculate on the possible advantage coming from the tariff. We have seen, to be honest, in the last 2 months, a different trend in the aluminum building wire space inside [ Encore ], whereby we've been able to raise prices, we didn't lose volume, and we didn't lose share of wallet. So this is a first sign of possible advantage, but again, give us 2, 3, 4 more months to see if this trend materializes as a strong trend. Daniela Costa: Got it. And then just on some of the recent M&A you did. It seems like you've been -- these 2 deals, bolt-ons on submarine telecom cable or submarine fiber cables, which is an area you weren't very present on in the past. Can you talk through about sort of the synergies you see on that area, the potential for growth there is out there? Why -- yes, maybe give us a bit of context of sort of like how relevant it might become in the future in the group. Massimo Battaini: Thank you, Daniela. Interesting question. The space we were in, in submarine telco was only the regional connection without repeaters. And the market is -- made the market 100, only 10% of the market is confined into regional short distance connection. So without repeaters, we cannot play in the big market, so the long-distance connectors. The market has grown a lot on the back of the expansion of data center and AI buildup. So we will, with the repeaters provided by Xtera, be able to amplify the optical signal in our cables and be a player also in the long-haul connection. So we have access, thanks to this technology to a market that was before forbidden to us. We have all the rest of the know-how, the cable we have, the installation capability we have. This was the piece that we needed to be considered a player in the market. And we will -- so today, we make not big number, we make EUR 100 million revenues in this submarine space, telecom space without repeaters. The addition of terra will help us grow significantly this scale in the submarine telco. Operator: We are now going to proceed with our next question, and it comes from the line of Vivek Midha from Citi. Vivek Midha: I have 3, and I'll go one at a time. So the first question is just a follow-up on your comments around the aluminum cable business in the U.S. potential for upside there driven by tariffs. Some of the press reporting from the Financial Times had suggested the U.S. government had been considering rolling back some of the metal derivative tariffs given the difficulty of implementation. In your conversations with the administration, do you get any sense that the current situation could change? Massimo Battaini: No, we have no sign of possible changes to the current discipline as far as the 232 tariff is concerned. The only change would be the reciprocal country tariff, as you say, due to the Supreme Court ruling. And -- but this will have a minor impact to our competition and also to our situation in U.S. So I think we're still positive about the fact that being local with a strong asset in terms of capacity and also lead time. And bear in mind, I'm not saying this for the sake of saying it, data center requires significant service with scale -- large scale capacity. If you could take share in the market of the others is because we can respond, thanks to the spare capacity we have in McKinney to this demanding data center requirement in terms of volume and service. So we are really not worried and we don't care much about importance. First of all, the aluminum middle wire is a small space in the total I&C space in the United States. Secondly, the strength that we have, thanks to acquisition are unique. that no one inside the United States, any of the players in the United States can copy nor anyone from our side. Vivek Midha: Very clear. My second question is around the very healthy demand in the U.S. for fiber, particularly from data centers. Could you give us an indication of what you expect the potential growth in the U.S. could be? And also just a view on where you stand versus your capacity? Are you capacity constrained in the U.S. given that you're investing in capacity right now? Massimo Battaini: Yes, the demand remains as strong as it was in 2025. So we continue with the same pace. And if anything, we see even more demand from data center because now they are worried about the ability of customer or suppliers to supply energy cable and optical cables. And we're entering into some deals with those hyperscalers to provide security supply and receive some down payment in return. Energy demand is strong in cable demand for energy cables is stronger. Cable demand for optical cable is even stronger. We are about to unlock investment in fiber capacity and cable -- optical cable capacity because we, as everybody else in the United States are at capacity. If you search -- if you wanted fiber in U.S., you don't find it. If you wanted fiber inside the U.S., you don't find it either. not only from U.S. player, but also from Japan, from China, from anyone. So the market is extremely tight. And this is the best condition for us to leverage on the one hand, pricing power and also technological leadership that we have in the optical space, which is well recognized by the hyperscalers. Vivek Midha: Very clear. My final question is on the technology side, again, the data centers. Do you have any more views or color on the potential implications to your business from the transition to 800V DC architecture? Any sort of views around the impact on the length of cable required, the value of the cable and so on? Massimo Battaini: Yes. It's a technology that we developed already, the 800-volt direct current solution. Yes, it is true if there is shifted from AC to DC, which is kind of a no-brainer because they will save a lot of losses that the current AC solution incurred. There will be a reduction in volume. But at the same time, the growth of the data center is so large that even if specifically per megawatt, we see a reduction, there will be more compensation coming from the additional demand. Anyway, we own this technology. We were one of the first to develop. So we'll be happy to see and to participate to this conversion, which will never be deployed at scale, by the way. Operator: And the questions come from the line of Monica Bosio from Intesa Sanpaolo. I hope you can hear me. Monica Bosio: I have 3 questions. Sir Massimo, Sir Francesco and Cristina. The first question is on the data center revenues. Massimo, you anticipated that the weight of the data center revenues will achieve 10%. But what is the time frame do you have in mind for this weight? And what kind of margins should we figure out for the data center? This is the first question, and then I will move to the other. Massimo Battaini: Yes. So yes, we achieved already in '25, a level of EUR 1 billion direct sales and EUR 0.5 billion in direct sales. We believe that at the current pace, we will hit the EUR 2 billion target in so 10% of the total revenue. Yes, the margin is a bit of a complex situation. It is very high margin in digital solutions with a sophisticated optical cables. It's also very high margin in medium voltage, so powerful cables to interconnect buildings and connect data center campus among them. It's, of course, lower margin in low-voltage cable, but it's lower revenue to medium voltage. In electrification with assets like Encore, we supply low-voltic cable to data center, and we make 15%, 16%, 17% EBITDA margin. So it's a very accretive margin in one word. Monica Bosio: Okay. And if I may ask, maybe I didn't get within the I&C U.S.A. business in the fourth quarter, can you outline the margins in North America because the exit speed was strong, but I didn't manage the margins? Massimo Battaini: I didn't mention the margin, I believe, but it was as strong as quarter 3. Quarter 3 was particularly strong due to the spike of tariffs that played in our favor when the copper tariffs were removed. But given the strong demand in quarter 4 and despite the normalization of the copper price due to the tariff removal, we still have -- I mean, when I say high, it means in the high teen digit numbers. Monica Bosio: Perfect. And the very last, it's more qualitative. Let's say that the consensus is close to the midpoint, even a little bit higher to the midpoint of the new guidance. What are the main assumptions behind the upper part of your guidance range that could move towards the upper part? Massimo Battaini: Are 2 strong variables that in a way or the other have an impact on our results. One is the ForEx. Should it strengthen, we will have, of course, more chance to beat the midpoint and go beyond even the top of the range. And second, more organic growth, which is what we think is what we see in January and February. But as I said before, I mean, 2 months doesn't tell us the whole story. So we have to wait a few months to see if there is a stronger growth continuing in the coming months. And as I said before, we didn't bank on any tariffs. So if that came in, we will be in a different scenario. If the tariff benefit, as one imagine, I think some of you imagine hundreds of millions of benefit from tariff, and I think this is a bit ambitious as a consideration. But if tariff were to impact the business in U.S., there will be significant upside beyond the current guidance. Operator: We are now going to proceed with our next question. And the questions come from the line of Uma Samlin from Bank of America. Uma Samlin: My first one is a follow-up on your tariff comments earlier. I think if I heard correctly, you said that you haven't seen much of behavioral change from the imports, but you have started to raise prices without losing much market share there. So what's your strategy going forward in terms of the balance between market share and pricing? And if you are raising prices without losing market share, then can we expect a margin tailwind here? Massimo Battaini: We sit today on a very good margin in I&C in North America. This margin is split between different segments. Copper business is extremely high regardless of tariff. In the aluminum business, it was not that high in quarter 4. As I said before, we raised the prices and the market follow, and we didn't lose market share. This all depends on the balance between price and market share depends on the market demand. The market demand has said rebounded. We foresee talking to our customer and talking also to data center customer, a stronger outlook for 2026. So all the conditional there for us to benefit from a continued strong growth with high margin in the -- across the board, all the I&C segment of business. Uma Samlin: That's super clear. My second question is on M&A. I guess you're interested in doing a bit more deals in the next year or 2. And what are the types of targets you're interested in? And what are the key markets you have in mind? Massimo Battaini: We have explored and we are still assessing different geographies and different opportunity in 3 main regions and start from priority 1, U.S., priority 2, Europe, priority 3, LatAm. Different size of business, different size of opportunity in which businesses, I mean, we have electrification is, of course, interesting space in U.S., but equally also power grid. In Europe will be also electrification and Power Grid and LatAm is pretty much the same. So the businesses that are involved in this M&A are the ones that I mentioned. Then priorities are not priorities, we have to find the right one. and proceed with the negotiation on the rest, but these are the areas where we focus on business-wise and geography-wise. Operator: We are now going to proceed with our next question. And the questions come from the line of Sean McLoughlin from HSBC. Sean McLoughlin: My first is on transmission. The margin trajectory continues to surprise. You're already over 18% in 2025. I mean what kind of -- well, first of all, what is driving it? Is this just execution? Is this just better operational leverage on your increased capacity, what kind of further improvements can we expect in '26? And how far ahead could we be coming versus your 2028 targets? That's the first question. Massimo Battaini: Thank you, Sean. You mentioned 2 key factors, certainly the operational leverage and the execution, which is an important driver of margin increase. The third one is the projects margin that we have in our backlog is better than what we executed in '25 or '24 or '23. And so we will continue leveraging the 3 factors. And yes, where we could be in '28, I mean, at a certain point, we will go up with a new Capital Market Day, not because we organically want to change '28, but because hopefully, there will be a perimeter change. At that point, we can -- we will unveil and reveal the expectation for this EBITDA margin in transmission business. But of course, as you said, if you achieved already the, let's say, 20-ish level of EBITDA margin in quarter 4 2025, the expectation that we go well beyond what we committed to at the Capital Market Day. And by the way, there's another player here that in Europe mentioned very ambitious margins in transmission by 2030. So we want to beat that player, just to give you a sense of the ambition. Sean McLoughlin: Fantastic. And if I could just continue on transmission. Just if there's any sign of change from your transmission customers in terms of absorbing the 30% increase in copper prices over the last 3 months, thinking out over the next years, if there's been any change in terms of CapEx ambitions, project time lines as a result of that? Massimo Battaini: I think the transmission -- TSOs, transmission system operator has to digest the wave of order and the significant surge in order intake orders that they sent to the market in '23. So we don't see a slowdown in itself. We see that for the next 5 years, we are flat out in terms of capacity and we are flat out in terms of delivery of the backlog and the level of market we see will remain around this EUR 15 billion in the coming years. And of course, project cost has increased due to the copper, but also some projects are in aluminum, I don't get me wrong. I think the point is we are all focused on the execution and the transmission system operator. And that's why we don't anticipate to see another wave of EUR 30 billion market intake as the one we've seen in 2023. But if the market continue with this EUR 15 billion per year, we will be able to read beyond 2028 with sustainability of EBITDA margin, sustainability of EBITDA and possibility to further expand the capacity to absorb this continued demand in transmission business. You never know to cut across, one day, we might have more transmission opportunity also in U.S. I appreciate that the wind offshore is off the table in U.S. But thanks to data center, transmission interconnectors are becoming the key priority to spread the electricity capacity across different network and allow data center expansion to continue. Sean McLoughlin: Just lastly on M&A. I saw a press quote earlier where you were quoting saying you're ready for large targets. I guess higher free cash flow is driving this ambition. Just in terms of -- is this a change maybe from previous communication, you talked about deferring large M&A out for the next couple of years. So should we infer that you're now a little bit more ambitious on larger targets sooner? Massimo Battaini: Yes. Good question. To be honest, yes, for sure, it's a change, but we have many factors making us open to this change, like the disposal of YOFC that has been a particularly successful operation. Second, the performance in EBITDA in 2024 -- '25, sorry, and the performance in free cash flow. So we are deleveraging faster than anticipated. And so as you know, as we delever faster, we have more power ammunition to address large M&As. Larger, as we said, as we always say, is something similar to Encore Wire. I don't think of something that is like a cost of acquisition. And so we are ready. We are ready and also be aware that between starting the M&A and having the opportunity to come on stream will take 6, 8 months, but we are ready to go for that one. Sorry, I said CommScope to say -- CommScope is a large M&A that we had analyzed 1 year ago, but was too large. And so we will not go for EUR 10 billion M&A, that's to clarify. But the EUR 3 billion, EUR 4 billion M&A is something that is within reach. Operator: We are now going to proceed with our next question, and the question comes from the line of Chris Leonard from UBS. Christopher Leonard: Two from me as well, please. And starting on the M&A point. Could you -- I know you said Europe was maybe second in line in terms of geographies of priority for you. Could you maybe comment if you can see the opportunity for margins to improve and expand across the power grid and electrification business within Europe without M&A? Or do you think M&A and the consolidation in the market that M&A could offer would be an important driver for you to improve that European margin? Massimo Battaini: I think your comments are correct. Now organically, we can do a lot in terms of increasing the EBITDA margin because the demand is so strong that we are working in expanding capacity. So there will be pricing power, more pricing power, there will be more efficiency and more operational leverage. Of course, the M&A remain the main catalyst to -- for a significant step change in profitability. because when you combine 2 companies, there are plenty of synergies, cost synergies and commercial synergies that will help the EBITDA margins enhance pretty fast. Christopher Leonard: That's really helpful. And just the second one was a follow-up on the fiber market and optical cables in the U.S. Can you speak maybe about -- I know you're investing more here, but could you speak about any kind of metric for what your capacity is today in the U.S. and what you're seeing in terms of what the potential increase could be? And secondly, I think historically, you said you're -- in the data center market, you're slightly different to Corning here in the U.S. And I wonder because now there's a lot of capacity booked out, is there scope for you to maybe win share to move inside the data center? I think previously, you said you were more outside the data center on the fiber business. But yes, any color there would be helpful. Massimo Battaini: Yes. So we will not share much about our capacity and the increase. But definitely, the market has grown by a factor of 30% between '25 and '24, and we would like to maintain our share of wallet. So you can derive what will be our capacity effort increase to meet and maintain the market share. Data center is not that we are not in the data center. We are not in the inside building. So we are -- we deploy a lot of optical cables to connect the individual buildings of a campus among them. Inside the building, there's a lot of connectivity, less cables. In that space, there is -- there are basically 2 players Corning and CommScope/Amphenol and AFL. We have opportunity to grow in this space, but not in hyperscale data center, but in enterprise data center. Operator: We are now going to proceed with our next question. And the question comes from the line of Alessandro Tortora from Mediobanca. Alessandro Tortora: I have 3 questions, if I may. The first one, if you can come back a little bit to the, let's say, profitability expectation on the Digital Solutions business considering that in 2026, we will have the full consolidation of Channell, but also the synergies that you mentioned also because now you were expecting also some organic improvement into, let's say, the legacy business. The second question is related to your comment on the approach that discussion you're having with the U.S. hyperscalers. So we also saw in the past the recent past, some deals signed by [ Meta ] with Corning. Is it something considering your product portfolio that you could do in the sense, do you see, let's say, the same business possibility for you for just signing some multiyear frame of agreement? So this is, let's say, the second question. And the third question is on the perimeter effect. Can you just, let's say, tell me exactly because if I understood well, you will have the consolidation of Channell, then ACSM, the Spanish one, also Xtera should be there. So just to understand the perimeter, how the contribution, let's say, between the acquisition you made. Pier Facchini: Okay. I take this. The first one on profitability of Digital Solutions for 2026. Well, it's not only Channell. Certainly, Channell will -- is a great accretion. By the way, Channell obviously will impact on a full year base on 2026, having 5 months to the 7 months of 2025. But we definitely expect a growth organically also driven by the very strong U.S. market that we are seeing, which is not only volume, we expect also pricing to improve. So we have a double dual component of this profitability enhancement that we expect for Digital Solutions. And of course, the synergies also coming from the Channell deal. which are definitely interesting in terms of cross-selling opportunities. Maybe this is more potential expansion of our top line than margin accretion on the synergy side. The second one on U.S. hyperscaler. U.S. hyperscaler, I think that certainly for the inside the data center, we would need to strengthen our product range. The discussions that we are having is more for outside data center. So driving basically all the fiber connections to transmit data to data center. But this is also the so-called long-haul business. This is also a very strongly growing business. So not only inside where definitely to improve our product range, we would need maybe also a perimeter change, but we are organically mainly focused on long-haul growth, also talking directly with the hyperscaler. Massimo Battaini: As we are going to have -- we are having discussion about frame agreements or capacity reservation fees or kind of the stuff down payment to provide security supply to the hyperscalers customer. Not necessarily only in the optical space as correlated with -- by the way, was Meta, not Microsoft and -- but also the energy [indiscernible]. Alessandro Tortora: Okay. And yes, sorry. And on the perimeter effect, just if you can help me, let's say, to reconcile the contribution you expect this year? Massimo Battaini: So your question is about the split of the 3 components okay. It's -- I don't know, the Channell is pretty simple. You take the EUR 100 million we mentioned for '25, 7 months and you extrapolate it to full year, you will basically end up with -- I give you the answer, EUR 60 million additional EBITDA coming from Channell. And then there is a kind of EUR 25 million coming from the combination of the 2, ACSM and Xtera, also take into account another change of perimeter adverse, which is the YOFC disposal, which accounts for EUR 10 million. And so you end up with a number that we mentioned, EUR 80 million plus from Channell, 25 from Xtera, ACSM minus the YOFC share. Alessandro Tortora: Okay. Okay. Sorry, because I forgot, let's say, one point to ask. Can you help me, let's say, to understand the level of pricing effect we are going to see this year in, let's say, in the power grid I&C due to the recent increase in copper prices because I see some wire now mentioning basically every week raising prices. I recall that you have some kind of price set in the field. So just to understand if you're talking about a high single-digit price component at top line level for you in this division. Massimo Battaini: Price is difficult to say because it depends on the cost. So we have a formula in the power grid that distribution the cost effect to price. So given -- but in terms of demand, we see strong power grid demand in North America as well as in Europe. And so the level of pricing will be pretty robust, not only due to the cost pass on, but also due to the demand. I&C, as I said, is still weak in performance of Europe. We see stable in quarter 1, '26 over quarter 4, '25. But in I in United States, the market is pretty buoyant. As I said before, there is a combination of 2 factors, the rebound of the nonresidential business in U.S. compounded by the strong demand in data center, making the I&C and medium voltage business for I&C customers in U.S. very strong. Operator: We are now going to proceed with our next question. The questions come from the line of Jean-Francois Granjon from ODDO BHF. Jean-Francois Granjon: Just one question regarding the CapEx. Could you mean an update on the CapEx spend expected for 2026? You have communicated on the accumulated CapEx until 2028 to EUR 2.6 billion. So what will be the range on the CapEx expected for 2026? If would you expect an average between EUR 6 million to EUR 7 million or a different amount for the CapEx expected in 2026? Massimo Battaini: I didn't capture exactly the question about '26 or the future, sorry. EUR 80 million Sorry, Jean, if you want -- if you can repeat the question, the number for '26 is EUR 800 million, which is a slight increase over 2025. '27 number would be pretty much the same. We will probably exceed a little bit given additional organic growth needs that we see in these 3 years, the Capital Market Day overall cumulative numbers because the demand in transmission is stronger than expected in Power Grid equally. And in telecom it's definitely -- Digital Solutions is definitely much stronger than anticipated in the original CapEx commitment for the Capital Market Day. If that hold the sense of your question, sorry. Operator: Thank you. We have no further questions at this time. So I'll now hand back to you for closing remarks. Massimo Battaini: Thank you for attending this call. It was a very -- it was a pleasure to share with you the exciting results in '24 and more importantly, the outstanding commitment for the 2026 target for our company, which we ensure we will honor and we commit to achieving and possibly, let's wait a few months to understand how the market will respond in the United States, especially. And for further update, we'll meet you in the end of quarter 1.
Massimo Battaini: Welcome all, and thank you for taking your time to attend the earnings call for 2025 full year results. I would like to highlight the main achievement '25. You see a record results across all KPIs, strong performance in EBITDA with EUR 2.4 billion, which is itself a EUR 500 million growth in terms of EBITDA over the '24 performance. A strong net income, EUR 1.3 billion, of course, supported by the disposal of the YOFC share, but still remain an outstanding net income result. And our cash generation with a 50% conversion vis-a-vis EBITDA, EUR 1.2 billion, again, a record result in free cash flow generation. EBITDA margin growth over 2024, depreciation, we wait for the next slide and strong growth in EPS also with 18%, which is well above the range that we committed to achieving at the Capital Market Day that was 15%/17%. I will jump to the next one to deploy to display the significant acceleration in our performance. You see stability with slight growth in '22, '23 and a first step up of EUR 1.9 billion EBITDA and EUR 2.4 billion this year. This EUR 500 million a significant hike in EBITDA, mainly coming from perimeter change, the full recognition of Encore Wire impact in '25, the new acquisition Channell and the strongest ever performance came from -- that comes from transmission with EUR 200 million growth in EBITDA. To be honest, there is another EUR 80 million benefit in terms of organic growth in the '25 result that is hidden by the ForEx that was EUR 80 million, EUR 75 million to be specific adverse in '25 versus '24. I will not comment on the guidance now, but you see that EUR 2.7 billion already position us, I would say, slightly ahead of what is the target that we have to achieve by 2028, considering that we still have 2 years to go. Free cash flow, similar trend, significant acceleration. EUR 1.2 billion is a very good conversion rate for the current EBITDA. 1.350 is again another step up. This definitely position us ahead of the target of 2028. Let me move to the important contributors to the growth of the company in the last 18 months. This is an 18-month worth of effort in reshaping our portfolio, making it more suited to our goal of become a stronger solution provider. You see in '24 in electrification, Encore Wire gave us the access to electrification space in the United States. And thanks to that access, now we have a unique asset and a unique opportunity to leverage the expansion of data center. We followed this with the digital solution expansion portfolio with connectivity with Warren & Brown in '24 in Asia Pac and Channell in U.S. and also outside the U.S. And lately, we had this 2 important acquisition, although small, The Xtera and The ACSM. Xtera gives us access to the submarine telecom long-distance connection, helping us complement the strength that we have in the submarine energy business with submarine telecom opportunities. ACSM is again an important step-up in verticalizing our capabilities and in sourcing one of the most critical phase of the execution of the project, the survey assessment and the route preparation, which will help us become more efficient on the one end, but even also able to stand the possible risk that start -- that comes from the [indiscernible] that always rely on customer survey and not our own survey. We also work on our portfolio in terms of disposing shares of YOFC, which is not considered any longer a crucial asset for us. And we made a couple of actually factory reduction in the automotive perimeter to help us avoid the dilution coming from the difficult time that automotive is living worldwide. Also outstanding remarkable achievement in the -- I mean the new one on the sustainability journey. Our newly defined target is to move to sustainability linked revenues. So the revenues that are associated to low-carbon products, sustainable solution, 44% is the target is the achievement for '25, our target for '28 that we declared at the Capital Market Day is 55%. So more than EUR 11 billion, EUR 12 billion revenues in '28, and who knows whether this will be EUR 11 billion or EUR 12 billion or more depending on the perimeter change, will be solutions that can offer benefit to our customers in terms of sustainability. Significant hike in the recycled content from 16% to 21%, and we continue our consistent journey of reducing Scope 1, 2 and 3 to achieve and meet our commitment to be net zero by 2035. We are also particularly proud of this record 50% achievement in share of our employees that hold shares in the company, which is a sign of consistent and growing confidence in the future of our company. Yes. Let me start with the start of '25. there are many KPIs, but I will draw your attention to the right-hand side of the page, 30% organic growth, which equates to almost EUR 800 million of revenues in 1 year in terms of capacity expansion and execution of the projects. Second, EUR 582 million EBITDA, EUR 220 million additional to 2024. The step increase is amazing. And third, the EBITDA margin, 18.3% full year '25, supported by 21% in quarter 4 explains and give confidence and actually show that we are going to beat the target that we set for 2028 that was set at 18%, 20%. We are already there in '25 with an exit speed that goes beyond the range that we set for 2028. Amazing also the growth of the backlog, EUR 17 billion with EUR 2 billion worth of projects being awarded to us. They are not in the backlog because they are waiting for the not to proceed that will come in the next few quarters. Power Distribution, we continue with a sustained growth in the quarter was pretty strong, 13% in the full year, still very strong, 8% certainly supported by 2 large regions, U.S. and North America and Europe. EBITDA margin full year is slightly down on 2024 because the quarter 4 is slightly down year-over-year on quarter 4 '24. Again, the same point that I mentioned last time, there is this Midwest spike in cost due to the tariffs, unfortunately, that we could not pass to customers in the overhead transmission space in U.S. because this is a fixed price business. Now we are moving to different -- we're trying to define different solution. But until we have flushed out the whole backlog, which was set when the Midwest was lower than this, we will suffer some contraction in the overhead transmission line that has a repercussion on the total power grid space. Electrification is showing a sluggish I&C growth overall, but with a promising growth in quarter 4 in North America with almost 6% year-over-year growth, which is supported by what we see already in quarter 1, 2026. So we suffer a lot in terms of organic growth in '25 in the space in North America because the whole market with the exclusion of data center, so the residential and the nonresidential market was 6% down in 2024. This is a public number of the spend occurred in U.S. in Construction business. The expectation, the outlook for '26 is much more promising and the start of the year as well as the exit of the last month of 2025 are extremely promising. The EBITDA margin full year grew by 900 basis points over '24. And this is again the level and the value of the accretion due to the acquisition of Encore Wire in our perimeter, full perimeter. Specialties is nothing that was not foreseen, but it is still disappointing. We have full year '24 reported EUR 110 million EBITDA and now EUR 280 million. There is a EUR 10 million ForEx headwind, of course. But besides this, there is a weaker demand in automotive, in Elevator, U.S. and in Oil and Gas. So contraction of margin in this business has caused this let me say, EUR 20 million organic decline. The rest is the ForEx effect. The profitability full year remained pretty consistent with the past. And we have finally disposed the asset that we want to dispose in automotive towards the beginning of this year, January and February. So we should not see any longer the dilution coming from automotive, and we hope to see the rebound of the business in the rest of the verticals that we play in the different regions. Digital Solutions speak for itself. It's a significant growth organic, 7% full year, supported by the rebound of business in the United States with stability in Europe and other countries. And then there is a perimeter change that inside the EUR 268 million equates for more or less EUR 100 million is the Channell. You see how accretive Channell is with a quarter impact, which brought the EBITDA margin 5 points higher than what it was 24 and overall EBITDA margin at 17.3% for the full year. Core Channell will continue. It will also, as we did in the optical business, U.S. benefit from the rebound in the market. And now we can finally work on the integration and leverage the bundling of connectivity cables and leverage the synergies that we have to achieve, thanks to the cross-selling opportunity. Let me hand over to Francesco for more insight into the financial details. Pier Facchini: Thank you very much, Massimo, and good morning to everybody. I'll be quick the profit and loss statement. As Massimo said, EBITDA closed at EUR 2.4 billion, exactly in the midpoint our guidance with a great margin expansion at standard metal price and expansion of 130 basis points up to 14.2%, driven inorganically by the full year inclusion -- the full year effect of the accretive Encore Wire acquisition in terms of margin and also by the inclusion of Channell acquisition since June 2025, organically, mainly driven by the outstanding margin expansion of the transmission business on a full year basis around 400 basis points, 4 percentage points. drawing your attention on the right part of this slide, you see the bridge of our '24 to '25 adjusted EBITDA with a total growth of close to EUR 500 million, EUR 470 million despite the adverse ForEx effect worth EUR 75 million. Business by business, transmission was the strongest part of this growth, almost EUR 230 million, driven by an almost 30% organic growth and as I said, an excellent margin expansion. Power Grid also performed well, EUR 24 million growth, of course, clean of the ForEx effect, performing very well in power distribution and in high-voltage AC across all the regions with only an adverse effect in North America overhead line business. But despite this performed a significant growth also top line organically grew by around 8% on a full year basis. Electrification grew by EUR 176 million, of which I&C contributed more than EUR 200 million, whereas specialties dropped driven by weak oil and gas, elevator and automotive. As Massimo mentioned, a very promising exit experience start of the year in the I&C business in North America after the challenging first half, the first 2 quarters with pretty tough market conditions. Digital Solutions, up almost EUR 130 million. Obviously, here, we benefit of the inclusion since June of the Channell acquisition, but I'd like to stress that also organically and mainly in the U.S. EBITDA grew significantly on a like-for-like base. The little adverse perimeter effect of YOFC. We gradually exited in the second and third quarter. And as I said, the ForEx effect. The other outstanding achievement is obviously net income close to EUR 1.3 billion. Of course, this includes the gains from YOFC net of tax in the region of EUR 345 million, but still taking out this effect, the growth from 2024 is really outstanding. And by the way, the EUR 3.31 a share of EPS, growing 18% since last year that Massimo already mentioned, I want to be very clear, is totally cleaned of the YOFC gains effect. So it's a normalized growth of our earnings per share. We can move to the cash flow generation and one more outstanding achievement of this 2025, close to EUR 1.2 billion free cash flow generation. This was also benefiting of some extraordinary low level of paid taxes in U.S. benefiting of a couple of positive one-off effects. But as you see, we performed really well in terms of working capital changes, down by almost EUR 200 million, mainly in the transmission business and despite the adverse effect of the rising metal price that unfortunately may be there also for this year 2026 impacting our cash flow. You see that we deleveraged down to EUR 3.1 billion debt with the acquisition, which is almost entirely or entirely the acquisition of Channell, including the earn-out of EUR 1,069 million, which is almost fully covered by the issuance of the hybrid bond close to EUR 1 billion. And you see here totally taken out from the free cash flow, the effect of the disposal proceedings, EUR 675 million, out of which EUR 565 million are related to the YOFC disposal. That's it. Back to Massimo for the outlook. Massimo Battaini: Thank you, Francesco. The outlook is pretty straightforward, and it is actually very outstanding in terms of confidence and commitment of the company to make it happen. EUR 2.7 million (sic) [ EUR 2.7 billion ] midpoint in the EBITDA guidance, which sets EUR 300 million EBITDA increase over the ending point of '25. But in reality, considering there is EUR 80 million perimeter adverse impact between -- sorry, the EUR 80 million ForEx effect adverse. It is actually a EUR 380 million EBITDA increase. if you neutralize the ForEx. You see on the right-hand chart that the bridge explained that there is a significant organic growth. On top of it, there is a perimeter effect that is more or less EUR 80 million. So by coincidence, is that size that needs to be in place to offset the ForEx impact. I think it's very -- I would say brave, but we are very confident to achieving it. It's much better than what we've seen across the other peers, not necessarily in the cable space, but in general. And we are very committed to achieving it. The free cash flow even stronger. Again, 50% conversion rate, EUR 1.3 billion, EUR 1.5 billion well ahead of what we need to be or where we need to be in '26 to underpin the 2028 Capital Market Day target. So we're confident to achieving both and continue the journey with organic growth and the M&As. The sustainability-linked revenues will move from 44%, 25% to 48% midpoint. One important remark in our EBITDA, there is not any possible benefit, any coming from the tariff situation. We haven't seen it yet in the past months. As I told you, we will take a little bit for the importers to change behavior in the market and allow us to gain share. And we didn't want to build any speculative benefit coming from the tariff situation, which has changed in a certain extent, but not much at all. We will see upside possibly coming from tariff in the coming months or coming quarters. Having said so, I close saying that we confirm the strong drive in transmission business also for 2026. The China integration is a successful integration, considering that after concluding the earnout payment that we have paid this company with a multiple of less than 7 and the synergy will kick in, in '26, adding additional accretion to the Digital Solutions EBITDA margin. The outstanding cash generation in '22 will -- '25, sorry, will be supported in '26 with additional cash flow. The dividend will increase from EUR 0.80 to EUR 0.90. And of course, this is what we see organically, but you know that we keep working on the M&A. When this will happen, we cannot tell you yet, but there will be something happening in the next short term, let me say this. Thank you for your attention. I'd like to move on to the Q&A session. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Akash Gupta from JPMorgan. Akash Gupta: I have 2. The first one is on guidance. At the midpoint, you target roughly EUR 300 million increase year-on-year in EBITDA. I guess EUR 140 million of that could be coming from transmission to get to EUR 1 billion by 2028. And I think you said EUR 80 million is coming from perimeter. So maybe if you can talk about how should we think about the remaining EUR 80 million between the 3 segments, Grid Electrification and Digital Solutions on an organic basis? And same on guidance, your free cash flow guidance imply 50% FCF conversion at the midpoint, which is higher than what we have seen historically. So any color on that? That's the first one. Massimo Battaini: Thank you, Akash. Yes, you're right. So let's call it EUR 300 million net, but organically. In terms of the offset of the ForEx, it EUR 380 million. So EUR 150 million, yes, more or less will come from transmission. Remaining is EUR 80 million. And so this brings us to EUR 230 million, and there is another EUR 150 million organically coming from the rest of the business. So there is some organic growth in Digital Solutions because we will continue to leverage on the strong demand in the United States which is driven certainly by broadband deployment, but even more by data center expansion. They are desperate for additional volume, additional supply in optical space, likewise in the energy space. And there will be strong growth in power distribution. So despite the dip in EBITDA margin that you've seen in quarter 4, which was totally anticipated, the market demand in U.S. for medium voltage and high voltage is extremely strong. We can't cope with this demand. If you have more capacity available, we would sell it. And luckily in January 27, we will have the first wave of new medium voltage capacity coming on stream in the Encore side. this will be a powerful combination, the service level of Encore with the power of medium voltage cable for I&C, industrial construction, Power Grid. So Power Grid will also grow. And electrification, as I said, we exit quarter 4 with a strong rebound in I&C North America, not followed by Europe. Europe is pretty weak in I&C currently. But North America rebound in quarter 4 is what also we noticed in quarter 1. I don't think that has nothing to do with the tariff. If anything, it's due to the contraction that the market suffered in 2025 that finally is resulting in a surge in demand in 2026. So to cut the story short, there will be organic growth trend in our EUR 2.70 billion coming from all businesses of course, with much more visibility in transmission, but with strong market demand in I&C North America, in Digital Solutions North America and in Power Grid Europe and United States. I'll leave hand over to defer to Francesco, the answer on the 50% conversion. Pier Facchini: Yes. Thank you, Massimo. No, definitely, let me say, an ambitious, still totally realistic target on which we are very confident. Let me, first of all, remark that already 2025 is very close to the 50% conversion rate. This improvement in free cash flow at the midpoint is around EUR 180 million versus the 2025 actual. We come, first of all, from the additional EBITDA. So if you take the EUR 300 million additional EBITDA net of tax contributes around EUR 220 million, EUR 230 million. And then we will certainly have higher cash taxes. I mentioned that 2025 was kind of supported by a particularly low level of cash taxes in U.S. This will come back in 2026. And this means that we are committed to further improve our working capital. As I said, in 2025, most of the improvement came still from transmission. This will be a little bit different in 2026. And we should think that in 2026, we have pretty significant room to recover and to gain efficiency in terms of working capital. And this will be key in order to deliver the EUR 1.35 billion free cash flow guidance. Massimo Battaini: And to give you a little bit of more nuance, there is not any reduction in CapEx that support the free cash flow generation. If anything, '26, we continue with a strong CapEx deployment across all businesses because this time, we continue with transmission, we continue with Power Grid. We need to add digital solutions. We are at capacity in fiber and cables. And so we will maintain a level of EUR 800 million CapEx also for 2026 to support the organic growth across all the 3 businesses that I mentioned. Pier Facchini: Let me also add one point that I missed that the debt with this kind of cash generation in '25 and expected for '26 our net debt will be in the region of EUR 2.6, 2.65, including, by the way, the 2 already announced acquisitions, which are worth an effect, increasing our debt by EUR 210 million to EUR 220 million. And this means that year-end 2026, our leverage will be lower than 1 based on the midpoint of the guidance. And that's really a great situation to be in, and I would say, a better situation than we expect. Massimo Battaini: Much more better than expect. Operator: We are now going to proceed with our next question. And the questions come from the line of Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions. I'll ask them one at a time. The first one, just wanted to ask on power grids and on this, what you call the temporary metal headwinds. Should we -- maybe can you quantify how much the hit was? And then should we expect that they will no longer be there from 1Q onwards? Massimo Battaini: Thank you, Daniela. Yes, the temporary effect is temporary because due to the Midwest spike and translation where the margin -- sorry, where the price is fixed. Yes, I can't tell you the number was for the full year, but basically impacted quarter 3 and quarter 4 was a $30-plus million worth of cost or margin contraction. the hit is visible at the group level because you know that Power Grid in North America accounts for, let's say, 2/3 of the total EBITDA margin of the group. It will be there also in quarter 1 because the Midwest keep increasing, and we still have significant volume associated to backlog that we landed in quarter 1 and quarter 2, '25 when the Midwest was pretty low prior to the time. So we see it in quarter 1 and milder in quarter 2. Gradually, we will come out because what we are reporting today, the project that we are landing today for execution in quarter 3, quarter 4 have a fantastic margin, as you can imagine. But until we flush out the order backlog, we will be in the same situation. That's why we call it temporary. Daniela Costa: Got it. And then just on -- I think you very clearly don't have in your guidance the tariff benefits. We have already seen, I guess, on the market data in copper wire and cable imports into the U.S., like the November data was down massively on the imports. We don't see very strong growth in your U.S. electrification business yet in Q4. Can you explain, is it because it's a different mix, maybe you're more indexed to things which haven't been included in the codes which haven't been included in the tariff yet? Is it just timing with distribution? Sort of how should we think about that data versus what you are printing in the U.S.? Massimo Battaini: Yes. To full answer, in the copper space, there are no tariffs at all. The tariffs are applied to metal and not to the derivative products. And this seems not to be the intention of the administration. So the market is still free as it was before. Everyone is bearing the extra cost of the copper. The cathode premium and the copper comments and the market is the same as before. So this is the space where we never expect -- where we didn't expect to have any potential gain from the tariff. On the contrary, in the aluminum wire, we still have this 232 tariff to the metal content of cable imported from importers. But for the time being, we haven't seen a real change in behavior. They -- basically is volume the cost of the 50% in their margin, their price, the importers, the distributors importing cable from overseas. That was my point. I don't know how long they can continue with this margin contraction. They haven't increased significantly the price. Yes, it is true, they have increased a little bit the price, but we still have a significant price gap like 5%, 10%, 15% between our price in the U.S. and their price coming in. And so maybe they will not be able to bear the current margin pressure for too long, which is what we hope. But as why we didn't speculate on the possible advantage coming from the tariff. We have seen, to be honest, in the last 2 months, a different trend in the aluminum building wire space inside [ Encore ], whereby we've been able to raise prices, we didn't lose volume, and we didn't lose share of wallet. So this is a first sign of possible advantage, but again, give us 2, 3, 4 more months to see if this trend materializes as a strong trend. Daniela Costa: Got it. And then just on some of the recent M&A you did. It seems like you've been -- these 2 deals, bolt-ons on submarine telecom cable or submarine fiber cables, which is an area you weren't very present on in the past. Can you talk through about sort of the synergies you see on that area, the potential for growth there is out there? Why -- yes, maybe give us a bit of context of sort of like how relevant it might become in the future in the group. Massimo Battaini: Thank you, Daniela. Interesting question. The space we were in, in submarine telco was only the regional connection without repeaters. And the market is -- made the market 100, only 10% of the market is confined into regional short distance connection. So without repeaters, we cannot play in the big market, so the long-distance connectors. The market has grown a lot on the back of the expansion of data center and AI buildup. So we will, with the repeaters provided by Xtera, be able to amplify the optical signal in our cables and be a player also in the long-haul connection. So we have access, thanks to this technology to a market that was before forbidden to us. We have all the rest of the know-how, the cable we have, the installation capability we have. This was the piece that we needed to be considered a player in the market. And we will -- so today, we make not big number, we make EUR 100 million revenues in this submarine space, telecom space without repeaters. The addition of terra will help us grow significantly this scale in the submarine telco. Operator: We are now going to proceed with our next question, and it comes from the line of Vivek Midha from Citi. Vivek Midha: I have 3, and I'll go one at a time. So the first question is just a follow-up on your comments around the aluminum cable business in the U.S. potential for upside there driven by tariffs. Some of the press reporting from the Financial Times had suggested the U.S. government had been considering rolling back some of the metal derivative tariffs given the difficulty of implementation. In your conversations with the administration, do you get any sense that the current situation could change? Massimo Battaini: No, we have no sign of possible changes to the current discipline as far as the 232 tariff is concerned. The only change would be the reciprocal country tariff, as you say, due to the Supreme Court ruling. And -- but this will have a minor impact to our competition and also to our situation in U.S. So I think we're still positive about the fact that being local with a strong asset in terms of capacity and also lead time. And bear in mind, I'm not saying this for the sake of saying it, data center requires significant service with scale -- large scale capacity. If you could take share in the market of the others is because we can respond, thanks to the spare capacity we have in McKinney to this demanding data center requirement in terms of volume and service. So we are really not worried and we don't care much about importance. First of all, the aluminum middle wire is a small space in the total I&C space in the United States. Secondly, the strength that we have, thanks to acquisition are unique. that no one inside the United States, any of the players in the United States can copy nor anyone from our side. Vivek Midha: Very clear. My second question is around the very healthy demand in the U.S. for fiber, particularly from data centers. Could you give us an indication of what you expect the potential growth in the U.S. could be? And also just a view on where you stand versus your capacity? Are you capacity constrained in the U.S. given that you're investing in capacity right now? Massimo Battaini: Yes, the demand remains as strong as it was in 2025. So we continue with the same pace. And if anything, we see even more demand from data center because now they are worried about the ability of customer or suppliers to supply energy cable and optical cables. And we're entering into some deals with those hyperscalers to provide security supply and receive some down payment in return. Energy demand is strong in cable demand for energy cables is stronger. Cable demand for optical cable is even stronger. We are about to unlock investment in fiber capacity and cable -- optical cable capacity because we, as everybody else in the United States are at capacity. If you search -- if you wanted fiber in U.S., you don't find it. If you wanted fiber inside the U.S., you don't find it either. not only from U.S. player, but also from Japan, from China, from anyone. So the market is extremely tight. And this is the best condition for us to leverage on the one hand, pricing power and also technological leadership that we have in the optical space, which is well recognized by the hyperscalers. Vivek Midha: Very clear. My final question is on the technology side, again, the data centers. Do you have any more views or color on the potential implications to your business from the transition to 800V DC architecture? Any sort of views around the impact on the length of cable required, the value of the cable and so on? Massimo Battaini: Yes. It's a technology that we developed already, the 800-volt direct current solution. Yes, it is true if there is shifted from AC to DC, which is kind of a no-brainer because they will save a lot of losses that the current AC solution incurred. There will be a reduction in volume. But at the same time, the growth of the data center is so large that even if specifically per megawatt, we see a reduction, there will be more compensation coming from the additional demand. Anyway, we own this technology. We were one of the first to develop. So we'll be happy to see and to participate to this conversion, which will never be deployed at scale, by the way. Operator: And the questions come from the line of Monica Bosio from Intesa Sanpaolo. I hope you can hear me. Monica Bosio: I have 3 questions. Sir Massimo, Sir Francesco and Cristina. The first question is on the data center revenues. Massimo, you anticipated that the weight of the data center revenues will achieve 10%. But what is the time frame do you have in mind for this weight? And what kind of margins should we figure out for the data center? This is the first question, and then I will move to the other. Massimo Battaini: Yes. So yes, we achieved already in '25, a level of EUR 1 billion direct sales and EUR 0.5 billion in direct sales. We believe that at the current pace, we will hit the EUR 2 billion target in so 10% of the total revenue. Yes, the margin is a bit of a complex situation. It is very high margin in digital solutions with a sophisticated optical cables. It's also very high margin in medium voltage, so powerful cables to interconnect buildings and connect data center campus among them. It's, of course, lower margin in low-voltage cable, but it's lower revenue to medium voltage. In electrification with assets like Encore, we supply low-voltic cable to data center, and we make 15%, 16%, 17% EBITDA margin. So it's a very accretive margin in one word. Monica Bosio: Okay. And if I may ask, maybe I didn't get within the I&C U.S.A. business in the fourth quarter, can you outline the margins in North America because the exit speed was strong, but I didn't manage the margins? Massimo Battaini: I didn't mention the margin, I believe, but it was as strong as quarter 3. Quarter 3 was particularly strong due to the spike of tariffs that played in our favor when the copper tariffs were removed. But given the strong demand in quarter 4 and despite the normalization of the copper price due to the tariff removal, we still have -- I mean, when I say high, it means in the high teen digit numbers. Monica Bosio: Perfect. And the very last, it's more qualitative. Let's say that the consensus is close to the midpoint, even a little bit higher to the midpoint of the new guidance. What are the main assumptions behind the upper part of your guidance range that could move towards the upper part? Massimo Battaini: Are 2 strong variables that in a way or the other have an impact on our results. One is the ForEx. Should it strengthen, we will have, of course, more chance to beat the midpoint and go beyond even the top of the range. And second, more organic growth, which is what we think is what we see in January and February. But as I said before, I mean, 2 months doesn't tell us the whole story. So we have to wait a few months to see if there is a stronger growth continuing in the coming months. And as I said before, we didn't bank on any tariffs. So if that came in, we will be in a different scenario. If the tariff benefit, as one imagine, I think some of you imagine hundreds of millions of benefit from tariff, and I think this is a bit ambitious as a consideration. But if tariff were to impact the business in U.S., there will be significant upside beyond the current guidance. Operator: We are now going to proceed with our next question. And the questions come from the line of Uma Samlin from Bank of America. Uma Samlin: My first one is a follow-up on your tariff comments earlier. I think if I heard correctly, you said that you haven't seen much of behavioral change from the imports, but you have started to raise prices without losing much market share there. So what's your strategy going forward in terms of the balance between market share and pricing? And if you are raising prices without losing market share, then can we expect a margin tailwind here? Massimo Battaini: We sit today on a very good margin in I&C in North America. This margin is split between different segments. Copper business is extremely high regardless of tariff. In the aluminum business, it was not that high in quarter 4. As I said before, we raised the prices and the market follow, and we didn't lose market share. This all depends on the balance between price and market share depends on the market demand. The market demand has said rebounded. We foresee talking to our customer and talking also to data center customer, a stronger outlook for 2026. So all the conditional there for us to benefit from a continued strong growth with high margin in the -- across the board, all the I&C segment of business. Uma Samlin: That's super clear. My second question is on M&A. I guess you're interested in doing a bit more deals in the next year or 2. And what are the types of targets you're interested in? And what are the key markets you have in mind? Massimo Battaini: We have explored and we are still assessing different geographies and different opportunity in 3 main regions and start from priority 1, U.S., priority 2, Europe, priority 3, LatAm. Different size of business, different size of opportunity in which businesses, I mean, we have electrification is, of course, interesting space in U.S., but equally also power grid. In Europe will be also electrification and Power Grid and LatAm is pretty much the same. So the businesses that are involved in this M&A are the ones that I mentioned. Then priorities are not priorities, we have to find the right one. and proceed with the negotiation on the rest, but these are the areas where we focus on business-wise and geography-wise. Operator: We are now going to proceed with our next question. And the questions come from the line of Sean McLoughlin from HSBC. Sean McLoughlin: My first is on transmission. The margin trajectory continues to surprise. You're already over 18% in 2025. I mean what kind of -- well, first of all, what is driving it? Is this just execution? Is this just better operational leverage on your increased capacity, what kind of further improvements can we expect in '26? And how far ahead could we be coming versus your 2028 targets? That's the first question. Massimo Battaini: Thank you, Sean. You mentioned 2 key factors, certainly the operational leverage and the execution, which is an important driver of margin increase. The third one is the projects margin that we have in our backlog is better than what we executed in '25 or '24 or '23. And so we will continue leveraging the 3 factors. And yes, where we could be in '28, I mean, at a certain point, we will go up with a new Capital Market Day, not because we organically want to change '28, but because hopefully, there will be a perimeter change. At that point, we can -- we will unveil and reveal the expectation for this EBITDA margin in transmission business. But of course, as you said, if you achieved already the, let's say, 20-ish level of EBITDA margin in quarter 4 2025, the expectation that we go well beyond what we committed to at the Capital Market Day. And by the way, there's another player here that in Europe mentioned very ambitious margins in transmission by 2030. So we want to beat that player, just to give you a sense of the ambition. Sean McLoughlin: Fantastic. And if I could just continue on transmission. Just if there's any sign of change from your transmission customers in terms of absorbing the 30% increase in copper prices over the last 3 months, thinking out over the next years, if there's been any change in terms of CapEx ambitions, project time lines as a result of that? Massimo Battaini: I think the transmission -- TSOs, transmission system operator has to digest the wave of order and the significant surge in order intake orders that they sent to the market in '23. So we don't see a slowdown in itself. We see that for the next 5 years, we are flat out in terms of capacity and we are flat out in terms of delivery of the backlog and the level of market we see will remain around this EUR 15 billion in the coming years. And of course, project cost has increased due to the copper, but also some projects are in aluminum, I don't get me wrong. I think the point is we are all focused on the execution and the transmission system operator. And that's why we don't anticipate to see another wave of EUR 30 billion market intake as the one we've seen in 2023. But if the market continue with this EUR 15 billion per year, we will be able to read beyond 2028 with sustainability of EBITDA margin, sustainability of EBITDA and possibility to further expand the capacity to absorb this continued demand in transmission business. You never know to cut across, one day, we might have more transmission opportunity also in U.S. I appreciate that the wind offshore is off the table in U.S. But thanks to data center, transmission interconnectors are becoming the key priority to spread the electricity capacity across different network and allow data center expansion to continue. Sean McLoughlin: Just lastly on M&A. I saw a press quote earlier where you were quoting saying you're ready for large targets. I guess higher free cash flow is driving this ambition. Just in terms of -- is this a change maybe from previous communication, you talked about deferring large M&A out for the next couple of years. So should we infer that you're now a little bit more ambitious on larger targets sooner? Massimo Battaini: Yes. Good question. To be honest, yes, for sure, it's a change, but we have many factors making us open to this change, like the disposal of YOFC that has been a particularly successful operation. Second, the performance in EBITDA in 2024 -- '25, sorry, and the performance in free cash flow. So we are deleveraging faster than anticipated. And so as you know, as we delever faster, we have more power ammunition to address large M&As. Larger, as we said, as we always say, is something similar to Encore Wire. I don't think of something that is like a cost of acquisition. And so we are ready. We are ready and also be aware that between starting the M&A and having the opportunity to come on stream will take 6, 8 months, but we are ready to go for that one. Sorry, I said CommScope to say -- CommScope is a large M&A that we had analyzed 1 year ago, but was too large. And so we will not go for EUR 10 billion M&A, that's to clarify. But the EUR 3 billion, EUR 4 billion M&A is something that is within reach. Operator: We are now going to proceed with our next question, and the question comes from the line of Chris Leonard from UBS. Christopher Leonard: Two from me as well, please. And starting on the M&A point. Could you -- I know you said Europe was maybe second in line in terms of geographies of priority for you. Could you maybe comment if you can see the opportunity for margins to improve and expand across the power grid and electrification business within Europe without M&A? Or do you think M&A and the consolidation in the market that M&A could offer would be an important driver for you to improve that European margin? Massimo Battaini: I think your comments are correct. Now organically, we can do a lot in terms of increasing the EBITDA margin because the demand is so strong that we are working in expanding capacity. So there will be pricing power, more pricing power, there will be more efficiency and more operational leverage. Of course, the M&A remain the main catalyst to -- for a significant step change in profitability. because when you combine 2 companies, there are plenty of synergies, cost synergies and commercial synergies that will help the EBITDA margins enhance pretty fast. Christopher Leonard: That's really helpful. And just the second one was a follow-up on the fiber market and optical cables in the U.S. Can you speak maybe about -- I know you're investing more here, but could you speak about any kind of metric for what your capacity is today in the U.S. and what you're seeing in terms of what the potential increase could be? And secondly, I think historically, you said you're -- in the data center market, you're slightly different to Corning here in the U.S. And I wonder because now there's a lot of capacity booked out, is there scope for you to maybe win share to move inside the data center? I think previously, you said you were more outside the data center on the fiber business. But yes, any color there would be helpful. Massimo Battaini: Yes. So we will not share much about our capacity and the increase. But definitely, the market has grown by a factor of 30% between '25 and '24, and we would like to maintain our share of wallet. So you can derive what will be our capacity effort increase to meet and maintain the market share. Data center is not that we are not in the data center. We are not in the inside building. So we are -- we deploy a lot of optical cables to connect the individual buildings of a campus among them. Inside the building, there's a lot of connectivity, less cables. In that space, there is -- there are basically 2 players Corning and CommScope/Amphenol and AFL. We have opportunity to grow in this space, but not in hyperscale data center, but in enterprise data center. Operator: We are now going to proceed with our next question. And the question comes from the line of Alessandro Tortora from Mediobanca. Alessandro Tortora: I have 3 questions, if I may. The first one, if you can come back a little bit to the, let's say, profitability expectation on the Digital Solutions business considering that in 2026, we will have the full consolidation of Channell, but also the synergies that you mentioned also because now you were expecting also some organic improvement into, let's say, the legacy business. The second question is related to your comment on the approach that discussion you're having with the U.S. hyperscalers. So we also saw in the past the recent past, some deals signed by [ Meta ] with Corning. Is it something considering your product portfolio that you could do in the sense, do you see, let's say, the same business possibility for you for just signing some multiyear frame of agreement? So this is, let's say, the second question. And the third question is on the perimeter effect. Can you just, let's say, tell me exactly because if I understood well, you will have the consolidation of Channell, then ACSM, the Spanish one, also Xtera should be there. So just to understand the perimeter, how the contribution, let's say, between the acquisition you made. Pier Facchini: Okay. I take this. The first one on profitability of Digital Solutions for 2026. Well, it's not only Channell. Certainly, Channell will -- is a great accretion. By the way, Channell obviously will impact on a full year base on 2026, having 5 months to the 7 months of 2025. But we definitely expect a growth organically also driven by the very strong U.S. market that we are seeing, which is not only volume, we expect also pricing to improve. So we have a double dual component of this profitability enhancement that we expect for Digital Solutions. And of course, the synergies also coming from the Channell deal. which are definitely interesting in terms of cross-selling opportunities. Maybe this is more potential expansion of our top line than margin accretion on the synergy side. The second one on U.S. hyperscaler. U.S. hyperscaler, I think that certainly for the inside the data center, we would need to strengthen our product range. The discussions that we are having is more for outside data center. So driving basically all the fiber connections to transmit data to data center. But this is also the so-called long-haul business. This is also a very strongly growing business. So not only inside where definitely to improve our product range, we would need maybe also a perimeter change, but we are organically mainly focused on long-haul growth, also talking directly with the hyperscaler. Massimo Battaini: As we are going to have -- we are having discussion about frame agreements or capacity reservation fees or kind of the stuff down payment to provide security supply to the hyperscalers customer. Not necessarily only in the optical space as correlated with -- by the way, was Meta, not Microsoft and -- but also the energy [indiscernible]. Alessandro Tortora: Okay. And yes, sorry. And on the perimeter effect, just if you can help me, let's say, to reconcile the contribution you expect this year? Massimo Battaini: So your question is about the split of the 3 components okay. It's -- I don't know, the Channell is pretty simple. You take the EUR 100 million we mentioned for '25, 7 months and you extrapolate it to full year, you will basically end up with -- I give you the answer, EUR 60 million additional EBITDA coming from Channell. And then there is a kind of EUR 25 million coming from the combination of the 2, ACSM and Xtera, also take into account another change of perimeter adverse, which is the YOFC disposal, which accounts for EUR 10 million. And so you end up with a number that we mentioned, EUR 80 million plus from Channell, 25 from Xtera, ACSM minus the YOFC share. Alessandro Tortora: Okay. Okay. Sorry, because I forgot, let's say, one point to ask. Can you help me, let's say, to understand the level of pricing effect we are going to see this year in, let's say, in the power grid I&C due to the recent increase in copper prices because I see some wire now mentioning basically every week raising prices. I recall that you have some kind of price set in the field. So just to understand if you're talking about a high single-digit price component at top line level for you in this division. Massimo Battaini: Price is difficult to say because it depends on the cost. So we have a formula in the power grid that distribution the cost effect to price. So given -- but in terms of demand, we see strong power grid demand in North America as well as in Europe. And so the level of pricing will be pretty robust, not only due to the cost pass on, but also due to the demand. I&C, as I said, is still weak in performance of Europe. We see stable in quarter 1, '26 over quarter 4, '25. But in I in United States, the market is pretty buoyant. As I said before, there is a combination of 2 factors, the rebound of the nonresidential business in U.S. compounded by the strong demand in data center, making the I&C and medium voltage business for I&C customers in U.S. very strong. Operator: We are now going to proceed with our next question. The questions come from the line of Jean-Francois Granjon from ODDO BHF. Jean-Francois Granjon: Just one question regarding the CapEx. Could you mean an update on the CapEx spend expected for 2026? You have communicated on the accumulated CapEx until 2028 to EUR 2.6 billion. So what will be the range on the CapEx expected for 2026? If would you expect an average between EUR 6 million to EUR 7 million or a different amount for the CapEx expected in 2026? Massimo Battaini: I didn't capture exactly the question about '26 or the future, sorry. EUR 80 million Sorry, Jean, if you want -- if you can repeat the question, the number for '26 is EUR 800 million, which is a slight increase over 2025. '27 number would be pretty much the same. We will probably exceed a little bit given additional organic growth needs that we see in these 3 years, the Capital Market Day overall cumulative numbers because the demand in transmission is stronger than expected in Power Grid equally. And in telecom it's definitely -- Digital Solutions is definitely much stronger than anticipated in the original CapEx commitment for the Capital Market Day. If that hold the sense of your question, sorry. Operator: Thank you. We have no further questions at this time. So I'll now hand back to you for closing remarks. Massimo Battaini: Thank you for attending this call. It was a very -- it was a pleasure to share with you the exciting results in '24 and more importantly, the outstanding commitment for the 2026 target for our company, which we ensure we will honor and we commit to achieving and possibly, let's wait a few months to understand how the market will respond in the United States, especially. And for further update, we'll meet you in the end of quarter 1.
Operator: Greetings, and welcome to the Ingram Micro Fourth Quarter and Fiscal Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Willa Mcmanmon, Vice President of Investor Relations. Please go ahead. Willa Mcmanmon: Thank you, operator. I'm here today with Paul Bay, Ingram Micro's CEO; and Mike Zilis, our CFO. Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events, statements about our strategy, demand plans and positioning, growth, cash flow, capital allocation and stockholder return as well as our expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the SEC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information. Reconciliations of non-GAAP results to GAAP results are included in our earnings press release and the related Form 8-K available on the SEC website or on our Investor Relations website. With that, I'll turn the call over to Paul. Paul Bay: Thank you, Willa. Good afternoon, and thank you, everyone, for joining today's call. I'm pleased with our strong execution and results in the quarter and for the full year. In the fourth quarter, we grew revenue by 11.5% with growth across all regions and delivered EPS of $0.96, both exceeding the high end of our guidance. We also delivered adjusted free cash flow of $1.6 billion in the quarter, the highest quarterly level in more than a decade, allowing us to well surpass our goal of generating adjusted free cash flow at a rate of 30% or more of adjusted EBITDA for the year. The top line strength in the quarter was driven by client and endpoint solutions business, and we again had significant sales of GPU and other AI-related products in our advanced solutions business, which we believe positions us well to further pursue AI attach opportunities as customers move from the compute to application layer. From a customer category perspective, enterprise remained quite strong, while SMB continued to improve for a fourth straight quarter of sequential growth. Geographically, we had top line growth across all four regions. Over time, we expect mix to improve favorably from a margin perspective as client and endpoint solution sales moderate and we execute on our advanced solutions and cloud initiatives, driven by our Xvantage platform. We are also very pleased with our strong results for the full year 2025 with net revenue up 9.5% and non-GAAP net income up 8.6%. We were able to support the strong pipeline of growth while demonstrating solid operating leverage. Because of our Xvantage platform and our ongoing AI initiatives, we are able to redeploy many of our associates to high value-add go-to-market initiatives to better support our customers. We say that Ingram Micro has transformed to become aggressively digital while remaining amazingly human. And it is this combination of skills that is allowing us to deliver value to our customers in an increasingly complex market. Our Xvantage platform uniquely positions us to help our customers succeed by digitally connecting vendors and customers at scale across the ecosystem, where we play end-to-end across the demand and supply chains. As we have previously discussed, we are moving through the three phases of Xvantage value creation, with the first being OpEx efficiency; the second top line growth; and the third using data to drive growth and enhance margins and operating leverage. In 2025, we made great strides implementing the second phase of revenue growth and put in place the building blocks to capture the third phase, which will begin taking effect this year. During 2025, we delivered billions of dollars of revenue through the Xvantage platform as we meaningfully scaled critical enablement capabilities for our customers and increase the consistency and predictability of revenue and operating income. We have been building Xvantage for 3 years with proprietary data, a real-time global data mesh and over 400 embedded AI and machine learning models, powering our AI differentiation. With AI, architecture matters and an ERP-agnostic digital platform can deliver capabilities that a portal simply cannot. Through our proprietary real-time AI Factory, which includes product ingestion, data enrichment, intelligent pricing, forecasting and agentic workflows, we are improving the sales productivity, pricing discipline, forecasting accuracy and cost to serve. While the high-growth AI infrastructure category may temporarily compress margins in the near term, our platform-led AI architecture is designed to convert revenue scale into structural operating leverage and sustainable profit expansion. With Xvantage capabilities, we are better serving our customers while empowering them to better serve the millions of end customers that rely on their competencies and capabilities. An example of how we are doing this is our intelligent digital assistant, which we call IDA, and I have discussed in prior quarters. During 2025, IDA enabled over 0.5 million proactive engagements, assisting our customers in converting over 100,000 opportunities in orders worth billions of dollars. IDA had a multiplier effect on our partners' outcomes, enabling the conversion of opportunities to sales orders at almost 3x normal conversion ratios. And those solutions contain higher-value advanced solutions and cloud products almost twice as often as our non-IDA transactions. IDA enables us to accelerate the sales cycles of our partners, increase their opportunity to sale conversion ratio and focus on higher-value segments. While revenue from IDA is still in mid-single digits as a percentage of our overall revenue, we see that a majority of IDA orders contain higher-margin advanced solution and cloud products, and we believe we will exit 2026 with IDA representing double-digit percentage of the total revenue. While we continue to scale IDA across our operations, we also piloted our Agentic Assistant, which we call Sales Brief Agent. This interactive agent combines multiple internal and external data sources, enabling associates to identify new opportunities with our customers and convert them into value-added conversations. The agent also assists with value proposition development and the creation of appointments and follow-up tasks. It also helps customers convert these opportunities into sales orders with their end customers. An example of the power of Sales Brief Agent comes from our Canadian operation. Using the agent, our team identified opportunities with the customer to provide a solution for a large multi-quarter implementation with one of their end customers and highlighted an additional opportunity to migrate the software solution of another customer to high-value cloud-based alternatives. We are in the early stage of unleashing the full potential of our agentic road map, and we plan on expanding Sales Brief Agent globally during the first half of this year. In addition to IDA and Sales Brief Agent, we are seeing tangible impacts across the platform. For example, in 2025, on the Xvantage platform, self-service orders were up over 100% versus a year ago, improving productivity and enhancing customer experience. Average revenue per customer on Xvantage increased by 14% sequentially from Q3 to Q4 and over 30% year-over-year. In the largest country where we have rolled out Xvantage, overall headcount has decreased and the revenue and gross profit per go-to-market head have increased. These points are representative of how Xvantage is driving efficiency while freeing up time for high-value personal customer engagement. Underscoring how differentiated our technology is, we were recently granted 2 patents. And as we have mentioned, we have over 35 patents pending to further automate and accelerate our customers' go-to-market. A recently approved patent is for e-mail to order or what we call ETO. This patent recognizes our automated solution that converts e-mail orders into touchless order entries using generative AI technology. We received millions of e-mails annually that we can now process through ETO. This patent is a significant milestone for our team, and there are more to come. Proprietary capabilities like ETO further illustrate how the Xvantage platform is driving optimizations from days to minutes in many areas of the business. For the last 3 years, we have been building Xvantage on a modern data foundation. This has enabled us to incorporate AI quickly and organically into our own platform and transform the way in which we operate. We wanted to bring the lessons we have learned during this process to our partners and customers. So in 2025, we launched Enable AI to help them accelerate their own AI journeys. This program is already delivering tangible results, and we are seeing more partners join every quarter. Through our digital journey with Xvantage, we can help our customers to first understand, then sell and deliver AI to their end customers. Although it's early days, we are encouraged as more customers move from awareness to delivering outcomes to their customers. One example of how customers are using Enable AI is a U.S.-based managed service provider, or MSP, serving the regulated and industrial verticals. After the MSP took the Enable AI assessment, our team facilitated a structured workshop to educate them on growth tracks for data, AI platform and cloud. We provided targeted training sessions with our respective technical experts along the way. The customer went from chasing custom one-off AI projects to delivering consistent, repeatable solutions for their strategic vendors. Across their customer base, they are now deploying agentic automation for customer support, rolling out AI-enabled inventory, supplier workflow automation, intelligent document processing and AI governance solutions. What was unstructured AI ambition is now a repeatable revenue motion they are deploying across multiple industries with initial 6-figure engagements. Looking back on 2025 and all that we have accomplished with the initiatives I just discussed, I am incredibly proud of our team members. Together, we have navigated through complex issues, including tariffs, interest rates and geopolitical uncertainty as well as the cybersecurity incident in July, which we effectively remediated within days. Our associates' ability to deliver to over 165,000 customers and 1,500 vendor partners in 57 countries during this time is truly a testament to their talent, determination and resilience. In 2025, thanks to our team members' global reach, decades of customer relationships and our Xvantage platform, we grew better than the market. Our full year results highlight our focus on working capital management and profitable growth, while in tandem transforming the way distribution operates. For over 4 decades, we have stayed nimble in responding to the ever-changing IT spend environment and the speed of change is faster today than it's ever been. As we look forward to the full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market as we have done in past cycles. And considering the data points and initiatives I have shared, we are poised to further leverage the power of our platform while maintaining the core customer-centric foundation that has made us successful. We have the people, the platform and the programs to empower our customers in a new era of technology. Thank you, as always, to our team members, our customers and our vendors who have worked beside us as we transform. We look forward to another year of relentless execution and innovation. And with that, I'll turn the call over to Mike. Mike? Michael Zilis: Thank you, Paul, and good afternoon. I'd like to reiterate how pleased we are with how we closed out the year, exceeding the high end of our guidance range for both net sales and earnings per share and generating $1.6 billion of adjusted free cash flow in the quarter. I'd like to start my comments today by touching on a few fiscal 2025 highlights. As with prior quarters, I will be focusing primarily on our non-GAAP numbers. Net sales for the full year 2025 were $52.6 billion, representing an increase of 9.5% from 2024 and up 9.0% on an FX-neutral basis. We saw year-over-year increases in net sales across each of our geographic segments, punctuated by our Asia Pacific region, which drove solid double-digit growth throughout the year. As Paul touched on, and as we have noted before, we saw a significant sales mix shift towards our lower-margin client and endpoint solutions across all of our geographic segments. We also saw strength in large enterprise customers, servers and GPU and AI infrastructure projects and geographically towards our Asia Pacific region. All of these trends yield lower average margins, but also lower cost to serve. Full year operating expenses were $2.63 billion or 5.0% of net sales, representing a 47 basis point improvement in OpEx leverage from 2024. While a portion of this leverage is a result of the sales mix I just noted, it is also reflective of the benefits of the cost reductions we have taken over the last 2 years. We also continue to see increased operational efficiencies play out as part of the Xvantage road map we have been discussing now for some time. Non-GAAP net income for the year was $681.9 million, up 8.6% over the prior year, and non-GAAP diluted EPS was $2.90. Adjusted EBITDA for the year was $1.36 billion, up from $1.32 billion in 2024. Moving now to the fourth quarter. Net sales were $14.88 billion, up 11.5% year-over-year in U.S. dollars and up 9.1% on an FX-neutral basis. I'm pleased to report that advanced solutions returned to growth with net sales up 11.3% on an FX-neutral basis. This was driven by server, storage and cybersecurity, but also includes continued large-scale enterprise deals in GPU and AI infrastructure product sets. Client and endpoint solutions grew 8.8% with strong demand for notebooks and desktops as the refresh cycle has continued through 2025 and now into 2026. From a geographical perspective, we had FX-neutral growth across all 4 of our regions, led by 14.6% year-over-year growth in APAC. And with North America not far behind, generating net sales of $5.10 billion, up 9.3% over prior year. Both Asia Pacific and North America sales benefited from the large enterprise, GPU and AI infrastructure projects I just mentioned. North America also saw strong growth in server and storage categories, and both regions saw strength in client and endpoint solutions driven by PCs. EMEA net sales of $4.63 billion were up 13.9% year-over-year in U.S. dollars and up 5.9% on an FX-neutral basis, with growth across all lines of business, including strong double-digit growth in cloud. Finally, net sales in Latin America were $1.08 billion, up 6.6% in U.S. dollars and up 1.2% in constant currency, driven by strength in sales of client and endpoint solutions, offset partially by softer results in advanced solutions and cloud. Turning to our customer categories. We saw the fourth consecutive quarter of sequential growth in SMB. We remain encouraged by this trend and the role Xvantage is playing in helping us serve this and all of our customer categories. Fourth quarter gross profit came in at $966.4 million or 6.50% of net sales, down 51 basis points from the same period last year. The year-over-year decrease in gross margin was driven primarily by a continued heavy sales mix in our lower-margin client and endpoint solutions as well as higher business growth coming from our Asia Pacific region. To elaborate on this geographic impact, as an example, our Asia Pacific gross margin averaged roughly 250 basis points less than the overall average margins of the company. But it's also worth pointing out that our cost to serve across Asia Pacific is also much better than the rest of the world. In addition to these factors, gross margin was also impacted by continued strength in large enterprise customers and significant project-based business in GPU and AI infrastructure product sets. These AI-related project sales alone drove an impact in Q4 of more than 15 basis points on gross margins as these projects continue to be large enterprise deals that are sold on more of a fulfillment basis, which also makes them lower cost to serve and very working capital efficient. But as we've talked about in the past, this investment into GPU and AI infrastructure is also strategically important in the long term as AI becomes more accessible and we move across our broader customer base from enterprise, where our complementary services capabilities also yield greater profit. Q4 operating expenses were $656.7 million or 4.41% of net sales compared to 5.15% in the same period last year. The year-over-year improvement in operating leverage of 74 basis points reflects the continued benefits of optimization and automation from Xvantage as well as a positive recovery via insurance proceeds that we expect to receive related to a previously disclosed matter. While these proceeds drove a net benefit in Q4, most of which we had baked into our guidance for the quarter, it is offset to a decent extent by reserves and expenses in this quarter for final settlements associated with this matter as well as the loss of business impacts incurred earlier in the year. During the quarter, adjusted income from operations totaled $350.0 million and adjusted income from operations margin came in at 2.35% compared to 2.29% in the same period last year. Our non-GAAP net income for the quarter was $226.7 million compared to $213.1 million in the comparable period last year. Fourth quarter non-GAAP diluted EPS was $0.96 compared to $0.92 in the same period last year and above the high end of our guidance range for the quarter. Fourth quarter adjusted EBITDA grew to $430.9 million compared to $418.1 million in the comparable period last year. Turning now to our balance sheet. At the end of Q4, net working capital was $3.6 billion compared to $4.1 billion at the same point last year, reflecting significant reductions in working capital investment to close out the year. Fourth quarter working capital days improved to 24 days from 26 in the same period last year. Our continued focus on return on working capital, including the expanded use of channel financing solutions to accelerate cash conversion allowed us to end the quarter with $1.86 billion of cash and cash equivalents and debt of $3.2 billion. This resulted in our net debt to adjusted EBITDA leverage ratio improving sequentially from 2.2x to 1.0x. As a result of these factors, our fourth quarter adjusted free cash flow was $1.63 billion compared to $337.2 million in the prior fiscal fourth quarter, representing our highest quarterly result in more than a decade. This landed our adjusted free cash flow for the full year at $1.10 billion compared to $443.3 million in the prior fiscal year. I've previously discussed the seasonality of our free cash flow, and I'm pleased to have well exceeded our goal of realizing 30% or more of our full year adjusted EBITDA to free cash flow in 2025. During 2025, we also paid down $125 million of our term loan balance, and we repaid an incremental $200 million in February of this year. This brings our total repayments on term loans to $1.89 billion since the beginning of 2022. During 2025, our interest expense was lower by $35.8 million year-over-year, primarily as a result of these debt paydowns. Shifting now to our guidance for Q1 of 2026. We are guiding net sales of $12.45 billion to $12.80 billion, which represents year-over-year growth of approximately 2.8% at the midpoint. This is comprised of flat to low single-digit growth in client and endpoint solutions, low to mid-single-digit growth in advanced solutions and double-digit growth in cloud. We expect first quarter gross profit of $840 million to $895 million, which would represent gross margins of roughly 6.87% at the midpoint. We see mix improving in the new year, so this represents a very solid 38 basis point sequential improvement over Q4 2025 and 12 basis point improvement versus Q1 of 2025 at the midpoint of this guidance. We expect non-GAAP diluted EPS to be in the range of $0.67 to $0.75 per diluted share, which is based on weighted average shares outstanding of approximately 236 million and a non-GAAP tax rate of 27% for the quarter. Finally, while we don't guide on free cash flow, it is likely that we will see a higher-than-seasonal normal use of cash in the first quarter of 2026 as we came out of 2025 with a very low level of working capital, as I touched on earlier. But our commitment to generating free cash flows remains, and we still expect to realize well over 30% of our adjusted EBITDA generation to free cash flow over 2025 and '26 combined, while we continue to manage our balance sheet with a focus on investing in the business, profitable growth and quality of sales over time. In closing, I am very happy with how our team continued to execute on overall operating efficiency. We continue to optimize, setting us up very well to capitalize on a curve of upward profitability as we see higher margin growth opportunities present themselves going forward. With that, operator, we are ready for the question-and-answer session. Operator: [Operator Instructions] Our first question is from Erik Woodring with Morgan Stanley. Erik Woodring: I would love if you could maybe unpack the exact drivers underlying the revenue guidance in the first quarter. I see the really strong gross margin improvement sequentially and modest year-over-year. I understand the kind of segment level guidance that you've given. But can you just maybe give us a little bit better flavor on, for example, PC refresh or AI and GPU-enabled sales, Asia Pac? Just want to understand maybe a little bit more detail what you're kind of seeing or what you expect to see in 1Q? And then a quick follow-up, please. Michael Zilis: Sure, Erik. This is Mike. I'll start on that, and Paul will add. So as we said in our prepared remarks, we're assuming on the CES side, flat to low single-digit growth. And the real factor there is we do still see runway on the PC refresh going out for still a couple of quarters as we see demand still pretty strong there. But the compare is certainly a much bigger compare to Q1 of last year, where we also saw great strength in that category. We also had quite a bit of mobility sales in our Q1 of last year. So our mobility subcategory, which is the second biggest, we don't break out the specifics of the subcategories, but it's the second biggest within CES, and that's actually forecast to be down year-over-year. So you end up with, again, kind of flattish to low single-digit growth in client and endpoint. But we're encouraged where we see continued solid growth more in the low to mid-single digits in advanced solutions with server, storage, and cyber still being quite strong. We're not assuming any notable GPU deals. It doesn't mean we aren't still participating in those GPU and AI infrastructure deals, but they are large and they come along every so often in a handful of our countries, and we're not assuming any notable of those in Q1. And then lastly, cloud growing at double digits, where we continue to see strength in Infrastructure as a Service, modern workplace and a handful of other areas. The only other thing I would just touch on quickly because you alluded to it is where do we see sort of supply constraints. I think overall, I would call our revenue estimates conservative in this regard because we are starting in Q1, starting to see ASPs increase. We did not really see that in Q4. We didn't see any notable pull forward in Q4 either. But we are starting to see those price increases kick in, which would have an increase in revenue as well as cost of sales. And -- but the wildcard there is where is the sort of fungibility of the demand cycle through that, and it's also taking a little bit longer to get the product because of the constraints that exist. So we sort of offset some of the revenue growth from the ASP standpoint with some of those other more broader demand and timing factors. So hopefully, that gives you a little bit more color. Erik Woodring: No, that's great. And then just a quick follow-up was, and you touched on it, was just commentary or thoughts around pull forward. It was an above seasonal quarter. We've heard that from some of your peers, but I would just love to kind of understand what exactly you saw and more importantly, how you protect yourself from that as we look into this period of higher prices and the potential for that to happen. Michael Zilis: Yes. So I can again take the first pass of that one, too. I think yes, as I just said, yes, we really did not see anything notable for pull forward in Q4. It remains to be seen how that plays out in Q1. But I sort of gave you a bit of that color on how we're thinking about it from a revenue perspective just now. How we protect ourselves. We're constantly discussing with our OEM partners. We know well in advance or at least decently in advance when and if price increases are coming in, that can afford some opportunity to do buy-in strategically that we may pursue. And that's another reason why we also assume, as we look out at Q1, as I mentioned in my prepared remarks, a lower -- a more -- a bigger than normal seasonal potential outflow of free cash in Q1 as we do work with the vendors to capture those opportunities when they arise. Paul Bay: So the only other thing -- this is Paul, I'll give you a little bit more color kind of on the demand and the conversation we've been having with our customers and our vendors. So we kind of look at the demand in two kind of dimensions. One is the price elasticity and two is the demand. And so we're really gauging the elasticity of demand and particularly in the SMB markets. As you know, we serve and it's too early to see the impact on that right now. On the supply side, so I've had conversations with many of the top largest -- our vendor partner CEOs over the last couple of weeks, primarily around advanced solutions and then to some extent, the PC, so server storage and kind of what the allocation will look like for the mid-market and SMB channels if there is demand. So they've all confirmed that there will be allocation from a demand perspective or there will be allocation if there is demand. So I think the real question will be kind of that price elasticity and how that does potentially impact demand and how those prices get absorbed within each of the different product sets. So we're working -- the last thing I would say is we're working with our vendors on potentially alternative solutions, things like on the enterprise level, shifting from what we call CTO or configure to order, now moving it to build-to-order, which help minimize impacts to pricing and leverages the current available inventory to help make those solutions work. So those are a couple of things we're doing kind of real time with our vendor partners and our customers. Operator: Our next question is from Katherine Murphy with Goldman Sachs. Katherine Murphy: I was wondering if you could talk more about the momentum you're seeing in the AI infrastructure enablement side. If you could talk more about the role that Ingram and distributors more broadly play in addressing enterprise needs for AI and the infrastructure that you may be selling beyond GPUs. And if there's anything you could share to help us quantify how big this opportunity was in the quarter and where the opportunity could go to for the full year? Paul Bay: Yes. So I'll start, and Mike, you can jump in. Mike called it out in his prepared remarks about a 15 basis point impact that those products that we define as both GPU and AI-enabled infrastructure is what we're looking at. So it did have an impact. We don't call out the revenue necessarily, Katherine. But if I take a step back, this is all about how do we monetize GPU and the related product set. So as I mentioned, the AI-enabled program that we've had. So there's really three growth tracks that we have there. It's about preparation and awareness; execution and training; and then third, which is most important, which is monetizing and driving outcomes. So if we look at kind of the people that were coming through the funnel and the prep and awareness versus actually working through the outcomes, we've seen significant increases in the percent of partners that are not just coming into that first step, but getting to the second and the third step. And I called some of that out, one example or use case that we had in this last quarter in my prepared remarks. So we are definitely seeing that opportunity for us to play a role in that. I think it's similar to if you go back, but even at a much quicker pace, if we go back a dozen years ago around cloud, there was a lot of education before it kind of came to the monetization, we're seeing that happen at a much quicker pace now with GPU and/or these AI-enabled infrastructure products. So we'll continue to monitor that and see as people continue to move through that pipeline and getting really to working on those outcomes. As I mentioned, we played a pivotal role in that most recent use case that I mentioned in the prepared remarks. Katherine Murphy: And just as a quick follow-up, I noted that these deals are dilutive from a gross margin perspective, but how should we think about the cost to serve and overall EBIT margin profile for some of these AI deals? Michael Zilis: Yes. They are quite low cost to serve because most of these are sold on -- right now, what we're selling is more on a fulfillment basis. So not a lot of costs attached to that and also very working capital efficient. We aren't stocking these deals in advance. They are bespoke and run through on a very quick manner through our balance sheet. Operator: Our next question is from Samik Chatterjee with JPMorgan. Samik Chatterjee: And maybe, Paul, if I can start on the first one, just in relation to what you're hearing from your customers about any visibility into the second half? And given their current sort of purchasing behavior, what are they telling you about any sort of demand drivers for the second half? And curious if you're seeing the same level of visibility that you see typically at this time of the year into the second half. Any thoughts around that? And I have a follow-up. Paul Bay: Yes. So this is Paul. So we haven't seen -- and we only guide, obviously, one quarter out, but I'll give you kind of the conversation that we're seeing from a customer perspective. Again, working with our vendors and our customers. I think the enterprise, when you look at budgets is preparing for what they're seeing for the remainder of the year and scheduling that out. As you trickle down more into kind of mid-market, but really SMB, I think it's more fluid right now in terms of what those opportunities are and what the challenges and headwinds and kind of like I mentioned, the price elasticity. So we're seeing more planning at the enterprise level for budgets for the remainder of the year and SMB is starting to have more conversations around what that looks like. Again, we're working -- and I think this is where we go back to that in uncertain environments, we have a great track record of navigating uncertain markets. And because of our reach and scale, we get good visibility globally on kind of all the moving activities. So we're staying very connected. to our vendor community and making sure we're having conversations down in through our channels throughout each of the different geographic regions. So I would say, in the end, it's a little bit still fluid as we sit here today, and we haven't seen -- as Mike mentioned, we haven't seen a material pull forward and/or anything as we sit here where we are in our Q1. Samik Chatterjee: Got it. Got it. And maybe just a follow-up for Mike. Mike, you did mention for the 1Q guide that you're not assuming any GPU enablement deals as such for now. If you were to see some of those come through, would we expect the same sort of trade-off on gross margin that you had in 4Q, which is a slightly lower margin percentage on the gross margin side and then essentially being accretive to operating level. Is that sort of the way to think about the 1Q guide in terms of when you see those revenues come in? Michael Zilis: Yes, that's exactly right, Samik. That would be the characteristics we would expect if we do capture some of those deals... Paul Bay: But what I want to make sure in Mike's prepared remarks or what he spoke about, it was no material difference than what we've already seen. So we'll still be participating in that business in Q1. It's just that we're not seeing anything different than what we've seen and discussed over the last couple of quarters. Operator: Our next question is from David Paige with RBC. David Paige Papadogonas: I know it's early, not sure if you'll be able to answer this, but there's been, I guess, a fluid situation with how tariffs are working and just geopolitics. I was wondering if that was baked into the 1Q guide and how you're thinking about 2026. Michael Zilis: Yes. So I think certainly, we wouldn't have a quarter without more tariff news, I guess. So -- but it's something we've been living with, quite frankly, since the first Trump administration really is a heightened tariff environment. So I would just reiterate, they are passed through for us. So we aren't absorbing tariffs. And in fact, in the U.S., we are importer of record on a minority of products we purchase. So usually, that price is already baked in from the vendor. We do continue to monitor it because as you've heard us say before, certainly, anything that will spark a more inflationary environment can have some impact on demand and probably even a little bit more so in the more profitable SMB categories where there's more sensitivity there than perhaps in the large enterprise where we've seen that category of customers be a little bit more impervious to the tariff environment. But we just continue to watch it just like everybody else at this point. Operator: Our next question is from Ruplu Katakaria with Bank of America. Ruplu Bhattacharya: Mike and Paul, you talked about the PC refresh cycle continuing. How long do you think that continues? And how are you thinking about the mix of client and endpoint versus advanced solutions in fiscal 1Q and maybe overall in fiscal '26, you've guided -- it looks like gross margin to about 6.9% in fiscal 1Q. What are the puts and takes that we should keep in mind as that progresses throughout the year? And I have a follow-up. Paul Bay: Yes. This is Paul. So I'll start off. So we saw double-digit growth in Q4. And as we mentioned, we were -- as we talked about going into 2025, the refresh was a little delayed and then it accelerated. So we had good growth through each of the quarters and again, solid double-digit growth in Q4. I would define it as we're in the middle to the beginning of maybe the back half of the refresh. There's still hundreds of millions of units that need to be replaced out there, which implies that there's still a refresh that could go well into 2026. As you've heard from probably our OEM partners, some have said upwards of 40% haven't been upgraded. The market remains durable with a significant portion not refreshed from a Windows 11 standpoint. And again, the industry analysts would say there's still hundreds of millions that are out there. If you look at a little bit, we get asked about AI PCs and the refresh that was happening there, and we're still seeing that kind of being in the middle teens with regard to AI PCs. I think the question comes down to is what I touched on briefly, which is around the price sensitivity or price elasticity as prices go up on components, what are their other alternatives. So we're looking at are there other alternatives? How do you look at potentially different features within PCs. Maybe everyone doesn't need to have a touchscreen, maybe not the same memory. So we're looking at alternatives. And I point back to Ruplu that in uncertain environments, we figured out how to manage through this, and I think with success. And one of the differentiating value propositions that Ingram Micro has is our global reach. So as vendors look to be more narrow about their supply potentially, supply and demand, a lot of times, we benefit because we have that reach into all the different regions, and we could be more pinpoint in making sure that we're delivering on that demand. And again, on the other product that, as we talked about, we're just now starting to see those price increases starting to hit. But as we sit here today, it hasn't impacted our demand so far. Ruplu Bhattacharya: Okay. Mike, as a follow-up, can you talk about your capital allocation priorities either in terms of debt paydown versus buybacks versus M&A? And also talk about areas of investment. I think you said average revenue per customer on Xvantage grew 14% sequentially. Does that factor out other factors like just the growth of the overall economy? Is that specifically related to the benefit of Xvantage? And if so, then is that an area that you continue to invest in? Paul Bay: Yes. So this is Paul. I'll answer the first -- the last question, and then Mike will get into the financials and kind of the capital allocation. So to reiterate, self-service orders were up over 100% versus a year ago, which is driving more productivity across the entire ecosystem and a better customer experience. our average revenue per customer is up 14% sequentially and 30% year-over-year. These are Xvantage stats, so independent of kind of the overall company stats for the businesses that are not on Xvantage. And then in the largest countries where Xvantage is deployed, total headcount in those countries were down, but both revenue and our gross profit per go-to-market have increased. So again, we're driving productivity, and that's related to Xvantage, too. So we're seeing the benefits. And the last thing I would say is the 3 phases of Xvantage' about driving frictionless and streamlining operations, driving OpEx. The second one is around demand generation and growth. And then that third one that we're just entering kind of the arena on 2026 is around profitable organic growth and making sure we're matching supply and demand more intelligently. And I'll let Mike speak about the capital allocation. Michael Zilis: Yes. So Ruplu, on the capital allocation, I think we're going to continue to just stay the course with what you've seen us been doing, which I'm pretty pleased with where we've been landing. We -- as we just announced in this earnings, we repaid another $200 million of our term loan in February after year-end and have now brought -- we're approaching $2 billion in total paydowns of debt over the last handful of years. So we've continued to delever very well with cash flow generation. While we are investing in Xvantage organically, we haven't done a lot of M&A. We still have the dry powder to do that very easily, especially with smaller tuck-in acquisitions having been more of the wheelhouse of the last few years that don't cost a lot of money, but they really bring in tremendous skill sets or technical skills or vendor alignment in different ways. It doesn't mean we can't also with our capital structure, pursue a larger deal if that opportunity presented itself. And so I would never say never to that, but that hasn't been our main strategy. And then lastly, from a return to shareholder perspective, we're proud to continue to be paying a dividend really right out of the gate when we went public, but we've also sequentially raised that dividend by about 2.5% every quarter, and we did that again for this quarter to be paid in a handful of weeks. So we continue to drive that part of the return to shareholders as well. Certainly, longer term, when we have a different kind of overall holding structure from an ownership perspective, share buybacks would also be -- in normal course would also be a potential tool. But last but not least, I would just point out, we did authorize also a $100 million share buyback in the -- that we just announced in this release as well, which is really more of purchasing additional shares from Platinum that would happen adjacent to any follow-on offerings of stock. Operator: Our next question is from Adam Tindle with Raymond James. Adam Tindle: Paul, I wanted to start with the topic du jour on component and memory costs. Some of your vendors have been pretty explicit on their intention to revisit contract terms with channel partners. I think Cisco was pretty explicit in their prepared remarks and some of the others have followed with some of that. I wonder, based on the Q1 guidance here, it looks like gross margin is getting better. So I'm not seeing that guided in the numbers. But maybe you could talk qualitatively on what you're seeing in terms of the vendor OEMs and those contract terms with channel partners, any impact you're seeing or expecting from here? Paul Bay: Yes. Thanks, Adam. So as it relates to the terms, yes, there are multiple vendors, and it depends on what categories to. That you're looking at, some are in terms of how long prices are good for. Some are end user dependent on a purchase order, pricing fluctuations. So yes, there are a number of different things, and we're used to managing that complexity and being able to do that. And again, I go back to my comments I made around one of the advantages of Ingram Micro is that our global reach. So as vendors are looking for a clean supply chain down to demand, meaning the end user, it comes back very quickly back into us and we can communicate to them. So we've got "war rooms right now going on to make sure we're looking at that demand. And back to my comments of the CEOs that I've been speaking with, which is we'll manage to what their contractual terms that they're trying to get out there because they're all trying to figure out what's their competitive advantage with regard to capturing share in this uncertain environment and kind of price increases. So we're sitting right in the middle of that. And again, the fact that we have 1,500 different vendors on a global basis and 165,000 customers globally, it allows us to look at what are the alternatives to other solutions at the same point. So you're right, you're seeing what we're hearing, too, which is vendors are changing their terms, whether it's time to contract, whether it's how long pricings are good for back orders, you have to have a PO from an end user all the way back through the supply chain. And again, we've managed through this in a number of different areas in the past. Adam Tindle: Got it. Maybe just a follow-up. AI is the other topic and obviously driving upside in the quarter. I wonder, Paul, with the significant sales of GPU, your philosophy on capturing AI growth. And I mentioned that because it seems like you're participating in some of the fulfillment aspects. Some of the competitors out there go beyond that and do build and assembly and things like that in AI data centers. I'm wondering if you're inching your way in that direction or how you kind of think about investing in AI and where it makes sense to participate versus where it doesn't. And if I could sneak just one quick one in for Mike to clarify that free cash flow comment, the 30% combined of adjusted EBITDA for 2025 and 2026, I'm thinking that's implying that 2026 may be a cash use year, but I just wanted to clarify because there's a couple of different ways to do this. Michael Zilis: Yes, I'll just hit that one real quick first and then let Paul talk on the AI piece. Well, we said we would be -- we expect to be well over that 30% threshold for the 2 years. So we do expect and we're pushing the business towards being cash flow positive, just not to the same degree as what we saw in this last quarter and last fiscal year, given where we closed the year at. And the big variable there, Adam, as I said earlier, would be whether we do see buy-ins coming on a quarter-by-quarter basis. But for the full year, we still expect to be cash flow positive when it all settles down. Paul Bay: And so I'll answer the question around GPU. So we've expanded it a little bit more. You've heard us talk about GPU and monetization of the GPUs. And I've said it kind of goes from proof of concepts and high-end compute kind of moves downstream. And that's where our Enable AI really participate. So helping partners not only just understand but sell and deliver AI at scale, which some of that is GPU and the monetization around that. There's services that we can provide. I gave a little bit of color in my prepared remarks about the use case. So actually, we're looking at it, we think differently than some of the other markets and on a global basis of how we can capture not just GPU monetization, but we call it GPU and AI infrastructure on a go-forward basis. So it is on that GPU specifically much lower cost to serve. So it's still good return on working capital and profit to the bottom line. And we're going to continue to support that because we sit right in the middle of an ecosystem where we're going to capitalize on where those opportunities are. But what you'll see us continue to build services and capabilities around how we can help our customers deliver -- really understand, deliver and service AI at scale on a go-forward basis. Operator: Our next question is from Maggie Nolan with William Blair. Margaret Nolan: So there are a lot of companies and a lot of distributors talking about AI enablement and digital platforms. And I'd like you to maybe double-click on your competitive positioning and what, in particular, you think are the capabilities within Xvantage or elsewhere in the business that would be hardest for your competitors to replicate over the next couple of years? Paul Bay: I'll take that, Maggie. Thank you for the question. This is Paul. So if you look at -- we've been on this journey for 3 years. There's really 3 different areas. First, we created a data mesh, which is not a data lake. It allows us to really use infrastructure and the information differently from an overall architecture. We say architecture matters. And so first, we got you have to have the clean data, we pulled that out. Secondarily, we talk about our 400 models that we've been training for over a year, which is AI machine learning models and which has allowed us, as we mentioned last earnings call, to really get into now doing journey and process mapping, how to best deliver AI agents on a go-forward basis. And that's what we were able to do with our Sales Brief Agents. So we think architecture is completely different. Said another way, we're building innovation. We're not just integrating or connecting like legacy distribution had done before. I'd like to say intelligence and data, ultimately, where we're going is the new business-to-business operating system. So we're going to continue to build and innovate, not just integrate and connect with regard to our systems. And it's all real time. It's global. We've got 35 patents pending. We had 2 approved, which again demonstrates the innovation that we're building. And so we're going to continue to make that investment and making sure that ultimately, we have the intelligence and data to really help drive our customers to better outcomes more efficiently and effectively with their end businesses. Michael Zilis: Maggie, one other thing I would just add to that is also geographic presence. So these larger GPU deals that we're talking about are tending to happen probably more predominantly in North America and APAC regions and our presence across APAC and ability to serve that and actually have a global conversation with these OEMs that others would not be able to have as readily is another function of our footprint that is advantageous in this regard. Paul Bay: And the last thing I would say, Maggie, global, but really a single pane of glass. So for me, a single pane of glass as we started this journey, you have hardware, you have software, you have services and you have cloud, all in a single platform to be able to transact as opposed to having multiple different systems, multiple different people attached to it. So you can basically deliver an end-to-end experience through all things technology. Margaret Nolan: Okay. And then mix improvement in 2026, should we expect like a linear gross margin improvement quarter-over-quarter? Or are these large AI infrastructure projects going to introduce some lumpiness? Michael Zilis: Yes. I can take a first pass at that, Maggie. This is Mike. So I think we aren't guiding beyond Q1, but you can see our guide implies a pretty healthy sequential increase, but also year-over-year double-digit basis point improvement in gross margins, which is really a function of how we see that mix play out, as I mentioned in my prepared remarks and also in answering the question earlier. Now if we were to see more outsized AI infrastructure and GPU deals come into play that skew more towards that, it would be a bit dilutive to that margin, but it would be accretive to gross profit dollars. and accretive to overall OI dollars as those deals are. So that's the only thing I would just call out that could be a variable as far as seeing that margin improvement in Q1. As we look out further, we're focused on driving growth of advanced solutions and cloud faster than market and to grow client and endpoint with market, whatever market may be across those categories. That's not anything new, but we expect to continue to do that. And that would -- that too, would create accretion to margin over time. Operator: There are no further questions at this time. I would like to hand the floor back over to Paul Bay for any closing comments. Paul Bay: Thank you for joining today's call. We're proud of the progress we are making and our Q4 performance and results. We exceeded the high end of our guidance in revenue and EPS, along with strong free cash flow generation at the highest quarterly level in more than a decade. As we look forward to full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market as we have done so in past cycles. To reiterate again, we have the people, the platform and the programs to empower our customers in a new era of technology and look forward to continued execution and innovation into 2026. Have a great rest of your day. Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by, and welcome to Asana's Fourth Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Eva Leung, Head of Investor Relations. Eva Leung: Good afternoon and thank you for joining us on today's conference call to discuss the financial results for Asana's fourth quarter and fiscal year 2026. With me on today's call are Dan Rogers, our Chief Executive Officer; and Sonalee Parekh, our Chief Financial Officer. Today's call will include forward-looking statements, including statements regarding the expected release and benefits of our product offerings and our expectations for revenue to be generated by those offerings, our retention and expansion opportunities, our expectation for our financial outlook, including our FY '27 full-year guidance, strategic plans, our market position and growth opportunities and our capital allocation strategy including our stock repurchase program, among other items. Forward-looking statements include risks, uncertainties, and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward-looking statements. Please refer to our filings with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, for additional information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents are available in our earnings release, which is posted on our Investor Relations web page at investors.asana.com. And with that I'd like to turn the call over to Dan. Daniel Rogers: FY '26 was a year of progress for Asana, we exited the year with solid momentum. We evolved into a multi-product platform with the launch of AI Studio, and we advanced our AI capabilities with the introduction of AI Teammates, all of which helped us build a foundation layer of Agentic Enterprise. Importantly, we stabilized NRR, materially expanded our operating margins and free cash flows, and we set the structural foundation for long-term profitable growth. So let me share few highlights of the quarter. Q4 revenues with $205.6 million grew 9% year over year. We generated non-GAAP operating income of $18.2 million, or a 9% non-GAAP operating margin. Our operating margin reflects disciplined cost management as well as thoughtful reallocation of spending toward these higher-leverage areas and we still preserved capacity to invest in our AI platform. Our adjusted free cash flow was also strong at $25.7 million in the quarter, or 13% on a margin basis. Customer health improvements continued to take hold. Our reported NRR remained stable, and for the third consecutive quarter, our in-quarter NRR improved. Our top 10 renewals in the quarter delivered net revenue retention above 100%. This reflects a long-term commitment of our largest customers, sustained that the value platform continues to deliver for the world's leading companies. Key renewals with expansions this quarter included a leading global advertising and marketing organization, a top-tier European markets infrastructure provider, and several large tech sector customers including a Fortune 10 tech platform. Looking at our AI momentum, it continues to be strong across both monetization and engagement. AI Studio continued to scale rapidly, in fact, we exited FY '26 with over $6M in ARR and grew over 50% quarter-on-quarter in Q4. Our customers are embedding AI Studio in their business-critical workflows like campaign launches, product intake, and service ticketing, where human and AI collaboration accelerates coordination, reduces cycle times, and improves quality across teams. Our U.S. revenue growth accelerated in Q4, and our technology vertical returned to flat year-over-year performance after nearly two years of quarterly declines. This stabilization was driven by strong renewal performance within our largest tech accounts and improved business execution. We secured one of our largest new enterprise wins with a global leader in data integration and analytics serving enterprises worldwide, where they consolidated critical workflows from multiple tools right onto Asana. We also delivered a significant seat expansion and AI Studio deployment with a global leader in collaborative design. This customer powers digital product teams at thousands of organizations and is now deepening its commitment to Asana as its execution foundation. International markets remain a strength for our business. Our international revenue grew at 11% year over year. We continue to increase our presence in non-tech, with those sectors once again growing in the teens. Manufacturing, Energy & Utilities verticals, along with retail and consumer goods, and Healthcare continues to do well. Some notable international vertical wins included a top 10 European multinational hospitality company, a major Japanese energy provider, and one the largest energy retailers in Australia. Government represents an important new opportunity for TAM expansion. These early wins include a major public health agency, as well as a marquee deployment with a prominent defense innovation accelerator. Our channel ecosystem delivered consistent progress in FY '26, with the percentage of partner-attached deals improving every single quarter. In Q4, 20% of AI Studio deals included a partner and we believe we are still early in unlocking the potential of this motion. As enterprises scale AI across business-critical workflows, partners play an increasingly important role in implementation, change management, and expansion. This positions the channel as a meaningful driver of incremental ARR in the long-term. Notably, through a partner, we secured a large AI Studio deployment with one of Japan's leading global technology and infrastructure providers. We also drove expansion with one of South Korea's largest global automotive manufacturers and signed the National Institute of Cyber Security in the Asia-Pacific region. These wins demonstrate how our partner ecosystem is unlocking scaled enterprise opportunities across the globe. Our forward-looking indicators in Q4 were strong. Billings, and current RPO accelerated this quarter, reflecting enterprise demand strength and their commitment to multi-year, multi-product deployments. Last quarter, we outlined three waves of work transformation. We believe we are now firmly in the third wave, the Agentic Enterprise. This has the potential to fundamentally redefine how organizations collaborate. It is increasingly clear that the future of work is one where humans and AI agents are working together. An agent won't just drive small incremental productivity gains; it'll reshape how work is coordinated, how decisions are made, and how execution scales across the organization. From individual productivity to enterprise-wide orchestration is the foundation of the Agentic Enterprise. Asana is the foundational system of action layer that gives that progression context, accountability, and structure. For that orchestration to work in practice, agents have to operate against shared, real-time context, not in isolation. So delivering on this vision requires deep visibility into how individuals work and how teams operate across the organization. At Asana, that context is captured and structured through our Work Graph, which creates a semantic memory of how work connects across people, teams, and outcomes. Agents need this rich individual context, what I'm working on, what's blocked, what's at risk. They also need workflow and portfolio context, how does your work connect across systems, across teams, and to outcomes. The more context that's captured within the system of action, the more capable agents become. That foundation of context is what powers AI Teammates and AI Studio enabling our agents to operate with clarity, accountability, and precision. AI Teammates is where this context turns into action. Unlike isolated chat threads, these teammates work directly inside Asana workflows with full visibility and full governance. And when you look at what's happening in the market, three things clearly differentiate us. First, AI Teammates are inherently multiplayer. This is important, it means teams can work together with each other and with those AI agents. Second, our agents have operational context from the Work Graph. And thirdly, our AI Teammates get the benefit from compounding institutional memory. They learn from team feedback and improve over time, while respecting permission boundaries that are already established for those teams. This is AI embedded in execution, not layered on top of it. We've now onboarded over 200 customers into the beta program of AI Teammates. What's encouraging is not just the sign-up number; it's how quickly those customers are able to drive productivity. Let's look at a few examples. KW Automotive, a large automotive organization, they deployed AI Teammates across Marketing, IT, and Support and they are driving measurable ROI. For example, the analyst teammate saves up to three hours per report by proactively correlating cross-project data, while their Support teams are achieving higher-quality, multi-lingual resolutions. Their vision is to scale this digital workforce to replace traditional forms with conversational AI and to modernize both the employee and customer experiences. Let's look at another example. Living Spaces, a home furniture retailer, they're leveraging AI Teammates to audit their legacy automation for data accuracy and rewrite complex operating procedures. Their team found that the platform works out of the box, quickly able to replace detailed prompt engineering with natural, conversational training. The ease of setup allows them to resolve unreliable workflows and standardize operating procedures with minimal configuration. When AI is embedded across workflows in marketing, sales, operations, and IT, it becomes part of how the company runs. This expands our platform footprint, it increases our stickiness, gives us new buying centers to talk to, and compounds our value over time. We expect AI Teammates will become generally available to sales-led customers by the end of Q1 and our self-serve customers in the second half of the year. Now let's look at AI Studio. AI Studio brings intelligence into the workflow architecture itself. AI Studio places LLM reasoning directly inside workflow nodes, so humans and systems collaborate at each step of a process. Customers are not just automating tasks. They are designing intelligent workflows in natural language that span across their portfolios, systems, functions, and business units. With AI Studio, customers can encode operational logic into workflows, connect structured and unstructured context, automate cross functional processes, and reduce manual coordination at scale. This shifts Asana from a coordination system to a programmable operating layer. As I noted earlier, AI Studio delivered strong sequential growth in Q4. That acceleration was driven by deeper expansion within our existing customers and larger initial enterprise commitments for our new deployments. We now have 8 customers, for example across North America, EMEA and APJ, spending over $100,000 annually on AI Studio alone. This is in addition to their core seat subscriptions. Let me share a couple of use cases of Q4 that really brings to life. A premier UK-based fashion and home retailer, has already realized a meaningful impact from AI Studio, using it to identify production risks in real time. This quarter, they expanded their investment to power a new SKU-to-factory workflow, streamlining production, prioritizing accelerating approvals across global teams. E.ON Next, a sustainable European energy provider, is using AI Studio to automate intake and triage processes that historically slowed complex energy projects. By deploying custom AI agents, the team now clarifies project briefs and surfaces missing information immediately before work begins and that increases request capacity by nearly 500% while improving cross-functional visibility. Taken together, AI Studio and AI Teammates are becoming foundational to our platform strategy. We are seeing meaningful ARR growth, enterprise expansion, deeper workflow penetration, and measurable productivity gains and improved business outcomes for our customers. Let's look at our differentiation. Asana is uniquely architected for the Agentic Enterprise. We provide the rails upon which enterprise agents run. As foundational models become more powerful, the bottleneck is no longer the intelligence of these engines. It's a lack of persistent memory and structured execution. A model can think, but it can't act without that context, accountability, and a system of record. There are four areas of our differentiation. The first is our Work Graph. This is the Memory Layer. It's a Context Fabric of the enterprise. While traditional infrastructure provides the plumbing for data, Asana provides a vectorized, structured, and semantic map of an organization's intent. Without this infrastructure, agents have no home, they have no memory, no sense of priority, no sense of understanding of who is doing what and why. The second area of differentiation is that we have built our System of Action around a fundamental unit that we called the task. And the task is the unit of work that an agent consumes and executes. By capturing the institutional memory of how an organization operates, the ownership, the dependencies, and the goals we provide the necessary structure that transforms raw model intelligence into business results. Thirdly, as we discussed with AI Teammates, our environment is inherently multiplayer, so the AI Teammates operate within the context of existing projects alongside human team members. They collaborate natively within the system of record. Fourth and finally, our differentiation is our enterprise-grade by design, which means our agents operate with auditability and the governance required them to operate at scale. So the combination of persistent memory, task-based accountability, multiplayer collaboration, and governance is what enables our agents to move from experimentation to trusted enterprise deployment. We are the orchestration layer for agents. This is why the world's most sophisticated enterprises and leading AI innovators are deepening their investment in Asana. In FY '26, two of the world's five most valuable public companies expanded with us. One of the world's leading AI labs continued their seat expansion again this quarter. They now deploy Asana across thousands of employees themselves to coordinate their mission-critical workflows spanning compliance, finance, product, and engineering. In addition, they leverage AI Studio to automate elements of their risk register and compliance operations, embedding AI directly into how mission-critical work is governed and executed. For that company that builds the foundational AI models, Asana is how their own work gets coordinated and governed at scale. Together, these customers validate our position as the foundational system of action layer for the modern enterprise. Looking at our FY '27 Priorities. Our leadership ambitions in the Agentic Enterprise directly informs our FY '27 operating priorities. While AI momentum was strong in FY '26, accelerating and compounding that progress is critical to accelerating revenue growth in the long term and continued margin expansion. Converting early adoption into broader enterprise expansion and higher monetization requires disciplined execution across four priorities. Priority one, scaling the Agentic Enterprise platform. This is the focus of our R&D investments. We are expanding our R&D team to augment our AI platform talent pool and accelerate our roadmap. This investment is directed towards expanding the depth and breadth of workflows we address, increasing the operational surface area where agents and smart workflows can operate, and embedding more persona-based use cases across IT, engineering, operations, and professional services. This is about moving from strong early adoption to broader enterprise standardization, increasing context density, and embedding ourselves deeper into mission-critical workflows. Priority two, our focus on product-led-growth and here we are aiming to redefine how users discover Asana and how quickly they realize value once they enter. As we've discussed last quarter, PLG is currently a headwind to growth because of shifts in AI-driven search that is reshaping top-of-funnel. Sonalee will speak more directly to how that dynamic impacts us in our near-term. In response, we are aligning our entire PLG motion to this new environment. First, we are evolving our discovery strategy toward Answer Engine Optimization and high-authority use-case-driven content to capture intent where it starts today. At the same time, we are redesigning the product experience to deliver immediate value out-of-the-box. This includes prompt-to-project onboarding and AI-powered activation, using pre-configured, verticalized use cases to reduce friction and accelerate time-to-value. By sharpening our ICP toward teams with true collaborative intent and improving early engagement, we aim to improve our conversion efficiency, strengthen our retention, and rebuild PLG as a durable growth driver over time. Our third priority is go-to-market excellence. We drove meaningful productivity and sales efficiency gains in Q4. Our focus in FY '27 is to compound that progress. We are redesigning our territory towards the highest propensity opportunity to align our coverage. We are also equipping our sellers with AI-powered tools to prioritize high-intent leads and surface clear next-best actions in real time. We are investing in channel tooling and enablement, and we are going to better align our incentives between our field teams and partners to scale enterprise expansion more efficiently. At the same time, we are going to be strengthening that connection between our PLG and SLG by better surfacing product-qualified leads with demonstrated intent and higher conversion propensity. Together, these initiatives position go-to-market execution as both a growth lever and a sales efficiency lever. Our final priority is around our speed and discipline. Realizing our potential as the foundational system of action layer of the Agentic Enterprise requires greater velocity and disciplined capital allocation. We are accelerating the build-out of our lower-cost R&D hubs, which we expect to meaningfully expand our development capacity by the end of FY '27 while improving our cost structure. At the same time, we are prioritizing the highest-leverage initiatives, reallocating resources toward areas of strongest return, and embedding AI throughout our internal operations to drive productivity and efficiency. We believe these actions increase execution velocity, also freeing up capital to reinvest in growth and expand our margins. For us, accelerating growth and expanding margins are not tradeoffs this year or going forward, they are mutually reinforcing outcomes of disciplined execution. Taken together, our structural differentiation, our role as the semantic memory and execution layer for enterprise work, and the accelerating enterprise adoption of our AI platform underscore that Asana is becoming the foundational system of action layer of the Agentic Enterprise. Before I pass it to Sonalee, I want to share a leadership update. Sonalee has decided to pursue another opportunity in a non-competitive, non-adjacent space. While we will certainly miss her, we're grateful for the leadership, partnership, and financial discipline she has brought to Asana. But more importantly, I'm excited to announce our new CFO, Aziz Megji. Sonalee brought Aziz Megji into Asana as her first priority hire, and he currently leads our FP&A and Investor Relations functions. Many of you on this call are already familiar with Aziz. He has been and continues to be a driving force in shaping our financial strategy, operating rigor, and investor and analyst engagement. Aziz brings with him more than 20 years of experience leading technology companies across strategy, capital markets, and FP&A. I've been intentionally pulling him into broader strategic work, including spearheading key initiatives within our go-to-market strategy. His impact there combined with his deep institutional knowledge makes him the natural choice to lead our finance organization going forward. This is a well-deserved promotion, I couldn't be more excited, and I expect a seamless transition that allows us to maintain our momentum without missing a beat. I want to thank Sonalee for her contributions and leadership, and I'll now turn it over to her. Sonalee Parekh: Thanks, Dan. It has been a privilege to serve as CFO of Asana and to partner with you, Dustin, and the leadership team. I'm incredibly proud of the financial foundation and operating strength we've built together, and I'm confident in the company's strategy and trajectory as we scale into the Agentic Enterprise opportunity. I'm also deeply confident in Aziz's ability to step seamlessly into this role. He has been my partner in driving our financial strategy, and his impact has extended well beyond the finance function. He brings deep financial expertise, strong operational judgment, and a clear understanding of how we drive durable growth and profitability. I'm proud of the team we've built, and I know the company is in excellent hands. Now, turning to our results for the quarter. Q4 revenues came in at $205.6 million, up 9% year over year. We have 25,928 Core customers, or customers spending $5,000 or more on an annualized basis. Revenues from Core customers grew 10% year over year. This cohort represented 76% of our revenues in Q4. We have 817 customers spending $100,000 or more on an annualized basis and this customer cohort grew at 13% year over year. As a reminder, we define this customer cohorts based on annualized GAAP revenues in a given quarter. Our overall dollar-based net retention rate was 96%. Core customer NRR was 97%, and among customers spending $100,000 or more NRR was 96%. As a reminder, our NRR is a trailing four-quarter average and therefore a lagging indicator of more recent trends. Our in-quarter NRRs improved again this quarter and marked our third consecutive quarter of in-quarter improvement. The improvement was mostly due to improvements in gross retention and expansion thanks to our multi-product strategy and seat expansion. Improving NRR remains a key focus area, and we are confident in our strategy for continued improvement over the intermediate and long term. The initiatives we have in place on the retention side, combined with the expansion opportunity presented by our AI platform, position us well for ongoing progress. In the Enterprise and Corporate segments, execution strengthened this quarter. Sales productivity and attainment both increased, and our top 10 renewals were above 100% NRR. In our SMB business, we continue to see the impact of evolving top-of-funnel dynamics, specifically LLM-driven changes in search and paid media. We are seeing modest quarter-over-quarter traffic recovery and improvements in web conversion and retention. Our efforts to date have helped but are not yet sufficient to offset the top of funnel dynamics. As a result, we expect these dynamics to remain a headwind throughout fiscal year '27. Now moving to profitability, where I will be discussing our non-GAAP results. Our gross margin was 88%. Our gross margin was modestly impacted by launch-related timing of expenditures for new products, including Asana Gov and AI Teammates. We expect to maintain these levels of gross margin in fiscal year '27, while expanding operating margin as we continue to scale. We continue to make meaningful improvements in our operating expenses as a percentage of revenue over the course of the year. R&D expenses were $47.7 million, or 23% of revenue, representing a 6-percentage point improvement from 29% of revenue in the year-ago quarter. Sales and Marketing expenses were $88.1 million, or 43% of revenue, representing a 2-percentage point improvement from 45% of revenue in the year-ago quarter. G&A expenses were $27.1 million, or 13% of revenue, representing a 4-percentage point improvement from 17% of revenue in the year-ago quarter. As a result of driving productivity and efficiency gains, we delivered a 9% operating margin or $18.2 million of operating income in the quarter, which is a 10-percentage point improvement year over year. Net income was $19.9 million, or $0.08 per share on a diluted basis. Our profitability improvement continues to be driven by operating leverage, reallocating spends to the highest ROI go-to-market motions, optimizing infrastructure and cloud costs, and exercising discipline across discretionary spend. We are aligning our talent footprint with industry benchmarks and shifting select roles to more cost-effective regions. This creates a structural foundation for robust innovation while driving sustained operational efficiency and multi-year margin expansion. Looking at highlights from the full fiscal year, fiscal year revenue grew 9% year over year to $790.8 million. We added over 1,800 Core customers during the year. Revenue from our Core customers grew over 11% year over year. This cohort represented 73% of our revenues for the full year. And we also added over 90 customers spending $100,000 or more on an annualized basis during the year and grew 13% year over year. Moving on to the balance sheet and cash flow. Cash, cash equivalents and marketable securities at the end of Q4 were approximately $434 million. Our remaining performance obligation, or RPO was $524.8 million, up 22% from the year-ago quarter. Current RPO grew 17% year over year, an acceleration from last quarter. This represents 78% of total RPO and will be recognized over the next twelve months. Our total ending Q4 deferred revenue was $333.9 million, up 10% year over year. Building on our operating margin strength, Q4 adjusted free cash flow was $25.7 million or 13% on a margin basis. This quarter, we bought back $58 million of our Class A common stock, or 4.5 million shares, at an average price of $12.75 per share. This activity is rooted in our disciplined approach to capital allocation and our primary objective of maximizing long-term shareholder value. Reflecting our conviction in the long-term opportunity ahead, our Board recently increased our share repurchase authorization by $160 million. Including the $39 million remaining under our prior authorization as of January 31, we now have almost $200 million available for future repurchases. We believe repurchasing shares at current levels represents an attractive capital allocation decision, while maintaining the financial flexibility to continue investing in innovation and growth. Before I walk through the guidance in detail, I want to highlight a few key assumptions that underpin our outlook for fiscal year '27. These assumptions reflect both the strength we are seeing in parts of the business and the headwinds we continue to navigate. Enterprise performance remains stronger than the company's overall growth rate. At the same time, self-serve, which is primarily SMB, remains a headwind. Headwinds in our PLG business are expected to create roughly a two-point drag on ARR growth. Our guidance does not assume a recovery in that motion in fiscal year '27. Importantly, this does not change our conviction in PLG as a long-term growth driver. We also saw encouraging signals in the tech vertical in Q4. However, it is too early to call a bottom. We are not embedding continued stabilization in our fiscal year '27 outlook. In addition, we are assuming only modest improvement in our net retention rates over the course of the year. Lastly, given the launch timing of AI Teammates, we expect minimal contribution in the first half of fiscal year '27, with a more meaningful ramp in Q4. In aggregate, we expect our AI offerings to represent nearly 15% of new ARR in fiscal year '27. We also believe these products will contribute meaningfully to PLG over time; however, given the timing of the self-serve AI Teammates launch in the second half of the year, we have not factored incremental PLG upside into our guidance. Turning to margins, we expect gross margin to remain in the high 80s, consistent with our Q4 exit rate. Our operating model supports margin expansion while continuing to invest in our highest conviction growth areas, particularly AI and go-to-market productivity. In fiscal year '27, we plan to allocate approximately $10 million of incremental investment into AI R&D, focused on accelerating innovation across AI Studio and AI Teammates. At the same time, structural efficiencies are creating capacity to fund that innovation. We have reallocated resources toward higher-leverage growth areas, reduced lower-ROI spend, optimized our geographic mix, and improved productivity across go-to-market and support functions. These structural improvements provide a clear, multi-year path to margin expansion. As a result, we can expand profitability while continuing to invest in high-return growth initiatives. Now, moving to guidance. For Q1 fiscal 2027 we expect revenues of $202.5 million to $204.5 million, representing 8.1% to 9.2% growth year over year. Based on current rates, we expect an approximately 60 basis point tailwind to our Q1 revenue growth in constant currency. We expect non-GAAP operating income of $15 million to $17 million, representing an operating margin of 7.4% to 8.3%. And we expect non-GAAP net income per share of $0.07 to $0.08, assuming diluted weighted average shares outstanding of approximately 241 million. For the full fiscal year 2027, we expect revenues to be in a range of $850 million to $858 million, representing a growth rate of 7.5% to 8.5% year over year. Based on current rates, we expect an approximately 20 basis point tailwind to our full-year revenue growth in constant currency. We expect non-GAAP operating margin of at least 9.5%. And non-GAAP net income per share of $0.36 to $0.37 assuming diluted weighted average shares outstanding of approximately 243 million. We remain focused on positioning Asana for long-term success in the Agentic Enterprise. AI Studio momentum continues to build, and scaling AI Teammates will be a key driver of durable, profitable growth and expanding margins over time. And with that operator, we're ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Taylor McGinnis of UBS. Taylor McGinnis: Sonalee, it's been great working with you and wishing you all the best. And Aziz, congrats on the promotion, very well deserved. Maybe a 2-parter for me. First, I think there are a lot of questions on how sticky Asana workflows are in an AI world and what moat Asana has in developing its own AI solutions. I know you spoke a little bit about this in the prepared remarks, but maybe you can just provide a bit more color based on what you're seeing from your customer base. And then as a second part to that, could you talk about how the Asana app in Claude work? So does this create a risk that Claude is used to automate more Asana workflows? And I guess, how would Asana share in those economics? So maybe you could just provide more color and unpack why it makes sense for Asana to partner here and how that's being structured? Daniel Rogers: Taylor, thank you for the kind words to Sonalee and Aziz. They're both being over here. And yes, just I'll hit your question directly. The reason that we believe AI is a tailwind for Asana is because we're not just a collaboration application. We are the coordination layer for work. If you think about how work is structured, the ownership, the sequencing, the tracking, the completion across teams, that really is perfect for our platform. So as the foundational models get more sophisticated, it doesn't eliminate the need for coordination execution. It actually increases it. More AI output means more actions, more dependencies, more cross-functional complexity. So AI doesn't reduce that coordination, it multiplies it. So you heard in the prepared remarks why our strategy is to become the pioneer of the Agentic Enterprise. This is where Agentic Enterprises where humans and the AI agents are coordinating together at scale. And if you think about our history, 17 years ago, we created the Work Graph, which was around human-to-human coordination, which is about the who, the what, the why, the when of work. It's that same architecture that provides the framework for human to agent collaboration. So specifically to our differentiation, that Agentic enterprise requires 4 things, #1, context in the flow of work, which is about that unique understandings of who's doing what, by when and how across the enterprise. It also requires a durable institutional memory. So this means a persistent, permissioned understanding of those relationships between projects and people. It requires multiplayer orchestration. Think about that as a shared canvas for teams to work upon, where agents and humans can work together on the same projects. Then finally, it requires enterprise-grade confidence. Enterprises need auditability, broad-based access control, cost controls, ROI visibility. Now Asana was built with those enterprise controls from day 1. So one of our products is a real practical manifestation of that, which is AI Teammates. These are teammates that are working against structured enterprise memory. They have permissioned governance. They're coordinated across workflows. They're acting as collaborators with inside real teams and real projects. That's why we've had such strong feedback from the 200 customers that we have in beta today. So AI doesn't replace Asana, it actually amplifies the need for structured context, institutional memory, cross-functional orchestration and governed execution, and that's our architectural advantage. That is the foundational layer for AI, a system of action for work. With regards to your question around Claude, think of the Claude application as a way within the Claude context to access the Asana Work Graph and UI if you're an Asana customer. So you would need to be a Claude customer and an Asana customer. Then within your AI chats, you can turn those into actionable work inside Asana. Operator: Our next question comes from the line of Billy Fitzsimmons of Piper Sandler. William Fitzsimmons: Sonalee, best of luck in your future endeavor. And Aziz, congratulations. I want to double-click on the tech vertical commentary in the prepared remarks. In past quarters, we've seen indications that the tech vertical has stabilized. You had spoken to fewer tech downsells, better tech renewals. And last week, we had a fintech company radically downsize its workforce due to AI. That's an example of one, but it's an example that's on a lot of people's minds. So how is the potential for maybe AI-related workforce reduction, specifically in the tech vertical factored into guidance? And then what's Asana seeing and hearing in real time from customers? Daniel Rogers: Yes, first, a couple of notes on tech. As you noticed, this is our third straight quarter of in-quarter improvement in NRR from the tech sector. And our tech ARR is flat for the first time in 7 quarters. So we're obviously closely monitoring the fintech company that you discussed, but we feel much more isolated today than we did 12 to 18 months ago. There's a few reasons for that. #1, our tech exposure is structurally lower. Tech is now less than 25% of our revenue and continues to decline as a percentage of our mix. So our revenue base is way more diverse across non-tech industries and international. #2, the nature of our enterprise relationships continues to strengthen. We've discussed AI studio and AI Teammates. These allow us to go much deeper into core workflows and critical business processes that tie more directly to business outcomes, not just headcount. So this workflow level embedding trends continues to materially drive our NRR and help with our retention. Third, we just don't have the same level of concentrations of renewal exposure in FY '27 that we had over the prior 2 years. So the renewal profile is much more balanced. This doesn't mean we're immune to macro workforce changes, but it does mean that today, stabilization in tech, improving in-quarter NRR, stronger expansion activity suggests that trends are going to be much more durable than we experienced previously. And our strategy of Agentic Enterprise is directly aligned to making retention less seat volume dependent and more workflow value dependent. Sonalee Parekh: Sonalee here. Firstly, thank you, everyone, for your really kind comments. I've loved working with all of you, analysts covering our stock. But just with respect to the guide, as Dan called out, and you've heard me call out actually in the last couple of quarters, we have seen improvements in NRR, third consecutive quarter of in-quarter NRR improvement. Of our top 10 renewals this quarter, of which many were tech, they renewed above 100%. But the good news is we've only incorporated a modest improvement into our guide. But in terms of what we're actually seeing in front of us right now, we don't see big risk with respect to the tech renewals. This is purely prudence. And again, just wanting to see several quarters of that stability before calling a trend. I think what you've found with me, and I think you will find with Aziz is we guide based on what we have high confidence in today and what we see in front of us today. Operator: Our next question comes from the line of Rob Oliver of Baird. Robert Oliver: I'll also pass on my congrats to Aziz and certainly great working with you. My question is for you, Sonalee. Just around your comments around the top of funnel and some of the prolonged nature of the change in adapting to sort of the new environment around the open web and how people are accessing information. I was wondering if you could just help us understand, I know you guys said you still feel very good about the PLG motion. What sort of changes have you made today? What changes are working? And how do you expect that will play out here in FY '27 so you can get back to a more normalized top of funnel? Daniel Rogers: Thank you, Rob. Let me start, and I'll hand over to Sonalee. So first off, yes, there are a lot of headwinds in PLG. Buying behavior in self-serve and SMB has shifted meaningfully for many of the players in SaaS over the last 12 to 18 months. There is a structural shift in how customers are discovering and evaluating and experiencing software. That being said, we have seen improvements. We continue to see sequential improvements in our top of funnel and conversion. And our AEO search initiatives and channel mix adjustments are driving improvement, but the recovery is a bit more gradual than we initially expected. So you'll see us doubling down in PLG in the areas of AI-enhanced search, funnel optimization and product experience, channel mix evolution and monetization expansion within self-serve. We've also brought new leaders in place, our CMO and our PLG GM, to have clear accountability to these adjustments. So the phased road map for us in H1 looks like deeper product experience improvements and conversion optimization and in the second half, new product introductions into the self-service space, including some AI-driven offerings. So PLG and SMB remain an important growth segment for us. In fact, Asana is just so well suited to being bought and consumed digitally. So our objective is to rebuild PLG into a growth driver in the long term. Sonalee Parekh: Yes, if I can just add to that. If you look at our PLG contribution to the guidance for fiscal year '27, it's about a 2-percentage point drag on ARR growth and again, fully embedded in that fiscal year '27 guide. We're not modeling top-of-funnel pressure abatement despite this strong focus on reimagining the motion and hopefully offsetting those headwinds with all the initiatives Dan called out. And I think what's important to note here is that absent that 2-point drag from PLG, this would represent an acceleration in this guide. So I think that's super important to think about just in the context of the overall guide. The other thing I would just say with respect to the guide is it's not embedding any further improvement from tech stabilization, and it's only factoring in a very modest improvement from the NRR improvements that we've seen to date. So if any of those end up being better than expected, that would represent upside. Operator: Our next question comes from the line of Rishi Jaluria of RBC. Rishi Jaluria: Let me echo my colleagues. Sonalee, it's been fantastic working with you over the past 1.5 years and wishing you all the best in your next endeavors. Aziz, congratulations. Really looking forward to working even more closely with you in this function. Look, I want to maybe think about thinking about the growth trajectory of Asana. Sonalee, you talked about RPO, if I'm not mistaken, is accelerating. You're talking about AI SKUs is representing 15% of new ARR this year and maybe greater ramp in the back half of the year. As we think about all of these moving pieces, I know it's not in the guide for FY '27, but as we think maybe beyond that, what are kind of the building blocks to drive acceleration in Asana as a whole, including from Asana AI? Daniel Rogers: So let's start with our strategy. Our strategy is to be the pioneer of the Agentic enterprise. That is a strategy that fundamentally orientates us towards long-term growth acceleration. So we're positioning Asana not just as a C2M provider, but as a system of action, the layer for the Agentic Enterprise, which is a larger and faster-growing TAM. In the near term, it's a tale of 3 cities. Firstly, we are going to benefit from the AI tailwind. You saw that with AI Studio, where we achieved $6 million of ARR in Q4. And our AI products are going to be 15% of our new ARR in FY '27. Teammates will be [ GA-ing ] in late Q1, which allows us to have new reasons to talk to our installed base and approach net new buying centers. On the PLG side, that continues to be a near-term headwind. Our objective is to turn that into a long-term tailwind. And in the absence of that PLG headwind, we'd be reaccelerating in the near term. And the third point is around our SLG or sales-led business. And here, you're seeing positive proof points already, tech stabilization and NRR is encouraging, but we need some more quarters of proof points. So if we bring that all together, reacceleration for us is a combination of AI-driven monetization, PLG stabilization and rebuild, compounding SLG productivity, improved retention dynamics and expansion into the broader Agentic Enterprise TAM. We believe the structural advantages of our platform position us well to capture that opportunity over the long term. Sonalee Parekh: Rishi, just to add to Dan's comments. So you're right, both billings and CRPO accelerated in Q4. And I think that reflects the strong demand environment we're seeing from enterprise customers and their commitment to building long-term partnerships with us. The other data point is of those top 10 renewals in Q4 that were over 100% NRR, that was -- a fairly large proportion were tech customers. And then on AI products, the good news there is that AI Studio, we exited Q4 with over $6 million in ARR. But importantly, the velocity in the back half was much stronger than the front half. And we expect our AI platform to contribute about 15% of net new ARR in fiscal year '27. Add or layer on top of that, the launch of AI Teammates in the second half. And again, you see those potential drivers of growth as we look forward. Operator: Our next question comes from the line of Steve Enders of Citi. Steven Enders: Congrats to both Sonalee and Aziz. And maybe this question is for Aziz, if he's in the room. But just in terms of how we think about the guide and how you think about running the finance strategy moving forward, just any changes in terms of what that means moving forward or how this guide was built versus maybe how things were done before? Aziz Megji: Yes, Steve, it's good to be with you, and thanks for the question. So I've been -- I was fully involved in setting this guide as I have been since I arrived at Asana. So fully stand by it, fully support it, help Sonalee and Dan build it and get conviction over it. And there's no philosophical shift in the guidance strategy or the financial strategy. It will continue to be disciplined, continue to be close to the pin and reflect what we're seeing at the time of guide. It's a dynamic environment. There're upsides and potential risks. We factored that in the guide. So I'm fully supportive and aligned with it. So I appreciate the question. Operator: Our next question comes from the line of Josh Baer of Morgan Stanley. Josh Baer: Congrats Sonalee and Aziz. Dan, you were talking about growth not needing to come at the expense of margins. I think if we look like very broadly or high level at the past, there's a period of very rapid growth and negative margins, more recently, decelerating growth, but really nice margin expansion. So what is it about today that allows for both growth and margins? Is it as simple as AI driving both product cycle, driving top line and AI efficiencies internally driving margin expansion, a combo or other factors? But what gives you confidence in growth and margins? Daniel Rogers: Yes. Thanks for the question, Josh, and I know we're going to see you in a couple of days' time in person. As you mentioned, firstly, the advancement of the AI models, the foundational models actually help us manifest our vision of the Agentic Enterprise. As the foundational layer of the Agentic Enterprise, we do see this as an accelerant for us. It allows us to deliver on a very ambitious product road map over the next 12 to 18 months. So yes, this is a new growth driver for us. And in doing so, it also allows us to scale efficiently as we grow within our own operations as we seek to continually push the frontier of driving to that level of efficiency. So yes, the answer is both. Sonalee Parekh: Josh, I can't resist, but I have to add to that. You've seen strong margin expansion over the last couple of years. That's not something that is going to really change or abate. We think we can continue making investments in AI in a disciplined way, and we're confident we can continue expanding margins sequentially and, in many years, to come. And there are still meaningful levers to expand those margins, shifting our headcount to lower-cost regions, which we've already started, but there's more to come, third-party spend, increasing leverage in sales and marketing, where actually Aziz has been going deep in the last couple of months and then driving that AI-powered productivity gains, which you would all expect of us. So again, there's more goodness to come. Operator: Our next question comes from the line of Jackson Ader of KeyBanc Capital Markets. Jackson Ader: The one that I had was with AI expected to be 15% of net new ARR in the coming year. How should we be thinking about AI as truly additive and incremental versus maybe a replacement of what would have been broader platform spend within existing customers? Daniel Rogers: Yes. Let me jump in on that one. If you look at our AI Studio customers today, as an example, and AI Teammates, a lot of it is incremental that we are finding net new use cases and net new buying centers. And some of it is replacement. Some of it is being able to do the work that they were currently imagining that much more efficiently with an AI-enhanced solution. So a bit of a combination of both, I would say. Sonalee Parekh: And just if I could add there, these new products, AI Studio and then increasingly with AI Teammates in the second half, they've been great in terms of expansion in these renewal conversations. So again, in terms of mitigating potential downgrades, I think it's something that we're looking forward to having as that incremental thing to go out to our customers with. So it's downgrade mitigation and also a significant expansion opportunity. Operator: Thank you. I would now like to turn the conference back to Eva Leung for closing remarks. Madam? Eva Leung: Thank you, everyone, for joining the call. We'll be on the road attending the KeyBanc, Citizens and Morgan Stanley Conferences this week. Looking forward to seeing all of you. As always, if you have any questions, please reach out to me at ir@asana.com. Thank you very much. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
George Kopsiaftis: Good morning, everyone, and welcome to the Lumos Diagnostics First Half FY '26 Results Investor Briefing. My name is George Kopsiaftis, and I'll be your moderator for today. The webinar is being recorded today and will be available on Lumos' website. With us today, from Lumos Diagnostics, we have the CEO, Doug Ward; and the CFO, Barrie Lambert. Good morning to you both. Douglas Ward: Good morning, George. Thank you for being here today. Barrie Lambert: Good morning, George. Good morning, everyone. George Kopsiaftis: The format for today is for Doug and Barrie to walk you through the presentation that was released to the ASX this morning. This should take about 15 to 20 minutes. And then it will be followed by a question-and-answer session. [Operator Instructions] And with that, I'd now like to hand it over to Doug to get us started. Douglas Ward: Okay. Thank you very much, George. Thank you, everyone, for being on today's webinar. I greatly appreciate it. As George said, the presentation was announced today on the ASX. So feel free to pull that off, and you can have a read at your leisure. So with that, Barrie, do you mind going to the first presentation slide. One of the things that we typically always talk about here, even though most of you probably are very familiar with the Lumos story and have followed us for quite some time is who is Lumos. So I always like to put it in the perspective of, hey, Lumos is trying to change the practice of medicine. right? We are very bullish about what we do, how we do it, and we have the ability to develop our products, manufacture them and then commercialize and bring those to market. And we do that with a technology that allows us to do it very close to the patient, which -- that testing is known as point-of-care testing. So next slide, Barrie. So the history for Lumos really dates back where Lumos initially started out as what we call a commercial services business, meaning we were more of a contract developer or a contract manufacturing org for other IVD diagnostic companies. And with that, right, we've built a tremendous, not only competency and expertise, but also the infrastructure, the people with the skill sets necessary to develop and manufacture the IVD products. Those same resources that we were using to help other companies, we also use those for ourselves and bring our own products to market. And over the last, I would say, 2 years, 3 years, we've started to bring some of those products to market. And without a doubt, right, that flagship for this company is FebriDx. We'll talk more about that shortly. We've also announced, right, we've started initial feasibility work on our women's health portfolio as well. We'll speak less about that because it's very, very early days. But very excited about the business and its structure and the people within the company. Go ahead, Barrie. So listen, I can honestly sit here in reflection over the last 6 months. And I would say in the 3.5 years now that I've been here with the business, that was the best 6 months that we've had with the company. I'm very, very pleased with the performance. I feel, and hopefully, most of you who are familiar with the company, can think about us as we actually do what we say we are going to do. So all the accomplishments that you see here, which I think are transformative relative to the company, we have made it clear to people in advance these were the things that we had aimed to do in this first -- the first 6 months of 2026. With the signing of the PHASE deal and again, reminding new people what that agreement was, they're our exclusive distributor for FebriDx in the United States. And a lot is positioned on the pending CLIA waiver grant that we're expecting from the FDA. But with that, what we've signed is a 6-year agreement with PHASE as our exclusive distributor in the U.S. and they will bring a minimum of USD 317 million in sales to Lumos over that time horizon. So we're very, very excited about that. And obviously, we've already initiated work since we signed that agreement back in -- I think it was July, it was the first month of the year, in fact. Right after that, in August, we did complete our CLIA waiver study and submit to the U.S. FDA for grant of the CLIA waiver. As we've talked about many, many times, one, this -- hopefully, next quarter, I can talk about, that's our greatest quarter ever because we can sit here and we expect that we're going to have our FDA clearance here or grant of CLIA waiver by the end of this month. We continue to have great dialogue with the FDA, and we remain very bullish that, that event will occur here in the month of March, which we are now in. So very, very short timing to us being able to make that announcement, I hope, here in the coming weeks. So the next item, listen, in the U.S., it's one thing to have CLIA waiver or a 510(k), and it's -- as well as having a great relationship with an exclusive dealer signing up for 317 million. But for any of that to actually happen, in the U.S., you must get reimbursement for your product. We have reimbursement. We secured that right, a year ago for USD 41.38 per test for the physician to be paid by CMS or not paid by CMS, but it was set by CMS and the MACs or the Medicare groups within the U.S. or 7 of them have all now agreed to pay that full reimbursement for FebriDx. So again, it's critical that you actually -- the doctors get paid to do the test. If they don't get paid, quite frankly, people won't order the test. So it's really important again to have clinical benefit, which addresses an unmet medical need, which FebriDx obviously does by saying whether or not someone has a bacterial infection or not. Second is the whole issue around economics and that people, the doctors and the dealers and the distributors are getting paid and make margin, including Lumos. And then lastly, it needs to be done in a way that's easy to do. And obviously, FebriDx being such a great product, it's so easy to use and it's very fast and they can use it while the patients there at the doctor's office, once it's CLIA-waived, and it's a very, very simple test to do. So if you have those 3 things, you can be very, very successful in building this potential USD 1 billion market opportunity that we have. In addition to that, as you know, our -- the original CLIA waiver trial was paid for by BARDA, a part of the U.S. government. We did secure additional funding. I think it was approximately USD 6.2 million to fund our pediatric trial and extend our label to children 2 to 12 years of age, and we're expecting that trial to wrap up at the end of the calendar year at this stage. And then the last thing, again, given that we have such great partners in our top 2 investors, Tenmile and Ryder Capital and that they did work with us to establish a loan facility that if we need cash prior to the CLIA waiver event occurring, which on that event, right, very close after that PHASE will pay us an additional $5 million for prepayment of product. So we're sitting in a very, very good place from a financial standpoint. And I'd like to really, really stress to everyone that we've -- I think we've done a really good job over the last, I'd call it, 2 years in trying to bring as much nondilutive funding into the company, right? We did that with the Hologic IP. We also did a sales leaseback agreement with Hologic. And certainly, with the BARDA agreements and with the agreements with PHASE, we were able to bring in capital into the company that was nondilutive, right? So we'll continue to try to do that throughout this fiscal year and calendar year as well. So next slide, Barrie. And then I'm going to pass it over to Barrie for the next 2 slides. The only thing that I'd set it up, if you don't mind, Barrie, is just financials came in exactly where we were expecting them, given where we are with CLIA waiver. So very pleased with the results that we had here. And go ahead, you can go through the detail, Barrie. Barrie Lambert: Okay. Thanks, Doug. Just a couple of slides on the first half results. And obviously, these should be looked at in conjunction with the ASX announcements we've made in the first half financial statements, which we released on Friday last week. So just revenue and gross profit on this slide. So on the revenue chart on the left there, first of all. So first half revenue was USD 6.1 million. And just to remind everyone, again, our reporting currency is in U.S. dollars. So all these numbers are in U.S. dollars. So USD 6.1 million for the first half, as Doug said, was exactly where we expected it to be. So very happy with the result. There is a little bit of a change in the mix -- revenue mix here, which I just wanted to point out as, again, I guess, how that's changed over the first half. So products revenue made up USD 1.7 million. out of the USD 6.1 million versus USD 0.8 million in the prior corresponding period, so double the previous half year in FY '25. So largely FebriDx revenue, which was up significantly on the prior corresponding period with the increase in FebriDx revenue more than offsetting the reduction in revenue from the loss of ViraDx sales, which we've talked about in the past. So very happy with that result. On the services revenue, it was USD 4.4 million for the first half versus USD 5.5 million in the prior corresponding period. It was down on the prior period. I just put some notes there to explain the reduction. So as the length of the fFN project with Hologic has extended, primarily as Hologic changes the scope and we have to do extra work, we did recognize a lot less IP revenue in first half of FY '26, which was only USD 1 million versus USD 2.6 million we recognized in the prior half. So that's obviously the main driver for the reduction in service revenue, but that was largely backfilled with ongoing project work. And just in the last couple of months, we've actually been working on about 14 projects. So very happy with that sort of change in mix and being able to backfill that revenue with project work. Moving to the right, gross profit and margin. So we reported USD 4.2 million for the first half. Very happy with that number, considering the revenue was a little bit lower. 68% gross margin, also a very strong number there, was up 1% on the prior corresponding period and actually up 13 percentage points on -- 2 years ago. So a really good result on gross profit and margin. And I'll just move to the next slide. A couple of comments on EBITDA and cash flow. So there's a full reconciliation of how we drive these EBITDA numbers in the financial statements. So please take a look at that. So adjusted EBITDA loss for the first half was USD 1.4 million, slightly above the prior corresponding period, but a significant improvement over the first half of FY '24, which was a loss of USD 4.2 million. OpEx was up a little bit, which is to be expected when you -- we're running the 2 trials there, the CLIA waiver trial and the pediatric trial. That was the main reason for the increase in OpEx. But just a reminder, those costs are fully offset by the BARDA grants. So even though OpEx is up, it doesn't actually have any significant impact on the EBITDA number because it's offset by the grant income. We did increase some expenditure in sales and marketing spend for FebriDx in the U.S., and we did have some new hires to scale up. And unfortunately, in the U.S., medical insurance costs tend to go up on a regular basis, which is something we need to manage each year. And just a comment below that box there. So adjusted EBITDA excludes the share-based payments and one-off impairments or expenses. We did not actually have any one-off impairments or expenses in the first half. Nothing unusual there in none of those items. Final comments on the cash flow. You can see there is a significant improvement in operating cash flow for the first half. It was actually positive, USD 0.1 million versus an outflow of USD 6.8 million in the prior corresponding period and USD 5.5 million the year before that. As Doug mentioned, we had the nondilutive funding from BARDA. We received USD 2.8 million in the first half. And as we've mentioned several times, we're containing any spend on property, plant and equipment. That was minimal in the first half. So net cash flow generation, so that's operating cash flow, investing cash flow plus lease payments, was actually a positive USD 0.1 million for the first half versus the -- you can see the prior periods there. So big improvement in operating net cash generation. And as Doug said, we've got the finance facility there. You'll see in the financial statements, we did draw down USD 1 million a couple of weeks ago, and there's a USD 4 million remaining on that facility to provide working capital through to CLIA waiver. So I think that's it, Doug, I'm happy to take questions at the end. But as I said, there's a lot more detail in the financial statements that we lodged last Friday. I'll pass it back to you, Doug. Douglas Ward: Yes. Thank you very much, Barrie. I love looking at these numbers these days. So with this, listen, I'll just wrap it up with an overview of the key priorities and where things stand. So like I said, we are very bullish that this month, we will have CLIA waiver. So with that, obviously, a lot of activity can go into motion. Right now, we're still limited in terms of being able to market FebriDx into the CLIA-waived environment. So once we have that, we can really start to initiate that work. And likewise, right, PHASE will then continue to work with us in regard to getting their sub-distributors on and starting to gear up the supply chain activity around the FebriDx product itself. Together, we'll both continue to drive the key aspect of what I call reimbursement coverage, that's to get the private payers, the insurance companies, those companies like United, Aetna, Blue Cross Blue Shield. You want to get your products into what's called a policy coverage. It's a written coverage where it's automatically paid. And that becomes a volume-dependent process. So with CLIA waiver, volume should jump significantly such that then we can get into the coverage policy documents from -- with those payers. And we'll continue to work the pediatric study, as we've discussed before, right, that will expand our market an additional 20% or so. So looking forward to that for, again, wrapping up that study toward the end of the calendar year. We just talked about what's going on in the services side of the business. Actually, it's doing very well right now. This part of the business is cash flow positive for us. And we have a great partner in Hologic. That continues to move forward in a very positive way. And the team has been able to sign up a couple of new large opportunities like the Aptatek deal that we disclosed earlier in the half. And then lastly is we'll continue to look to bring more products to market over time. And we've talked about bringing a women's health portfolio product that's in the feasibility stage within our research and development group here. So with that, we have one more slide that we did put into the deck. It just gives you a lot more detail. I think it's a good slide for investors to consider and have a look. I'm not going to go through this. Feel free at your leisure to go through it, if you wish. It's again, on the ASX and the announcement. And with that, we'll wrap up the presentation part. And George, we'll turn it over to you for any questions that people may have. George Kopsiaftis: Right. Thanks, Doug, and thanks, Barrie. [Operator Instructions] So we've got a few questions here, Doug and Barrie. First one for you, Doug. What's the initial FebriDx product volume that Lumos is able to manufacture and ship, say, in the April to June quarter? Douglas Ward: Yes. Good question. Listen, we don't give guidance around our revenue and certainly around the volume, which is just, if you will, a way to think about revenue to be quite frank, since it drives the revenue number. I would probably kind of go back to what we have said all along, which is, one, we have a great partnership in PHASE Scientific. And we meet with them on a regular basis, preparing for CLIA waiver and getting ready for the volume requirements that they'll have. And both PHASE and us, we feel very, very good about where we stand in our ability to supply them with the volumes that they will need. And I would just say, kind of added on to this, although it's not the exact question that's being asked, we also feel, for the first 2 years of the agreement, we have the capacity and capability to supply the demand that both we and PHASE expect for the product. And, right, we've also communicated to people. We will need to eventually make some investments into growing the capabilities for increasing capacity, probably getting ready for that year 2 and beyond, if you will. So hopefully, that answers some of your question. I just appreciate, can't and we choose not to give all the detail of our volume capacity. George Kopsiaftis: Great. Thanks, Doug. The next one, there's a couple of parties that have asked a very similar question. So I'll just amalgamate. It's around the women's health product. It says, when do you expect to see some updates on Lumos' other products under development? And when do you expect to have a marketable product? Douglas Ward: Yes, 2 good questions. So listen, the first one -- and that's why we don't have a ton of information in detail here is because in feasibility. And we started out with a menu of products and some things are going to go well, some things are not going to go well. That's the way it works. So once those are at a stage that they can either -- right, what's going to happen is either you're going to say, hey, they didn't make it through feasibility or it's going to go into development, right? So from that standpoint, when it goes into development, we'll be able to give people a lot more information around what those products are and time frames and so forth. To answer that second question, though, about, well, when might these products get to market? Listen, to bring a diagnostic product to market in this setting with this technology and so forth, think of it as a 2- to 3-year window that it takes to develop your clinicals and then get your regulatory clearance in order to bring the products to market. George Kopsiaftis: Right. I'm not sure you can answer this next one, but I'll ask it of you anyway. If the waiver is granted, are there any plans to merge with or take over Atomo? Douglas Ward: Yes. Listen, I can't comment on that other than to say like, yes, we don't anticipate right now that we have that going on. Who knows what the future would hold, but we don't have plans to that right now. Anything to add to that, Barrie? Barrie Lambert: No. I think you covered it. George Kopsiaftis: All right. Great. Next question. If IP revenue is 100% margin, the increase of overall margin to 68% on a lesser IP of USD 1 million must mean that the other margin is very, very good. Is this correct? Barrie Lambert: Yes. I mean there's a change in -- obviously, the revenue from the IP agreement with Hologic does not have any cost, so it's 100% margin. So that reduction in IP revenue does obviously make the margin decrease. However, as we announced previously with the PHASE agreement, there is an exclusivity fee was paid by Phase of USD 1 million. So that was recognized in the first half revenue, which is obviously 100% margin as well. So it does offset it to some extent, George. And that's why we were able to maintain such a good high GP margin of 68% in the first half. Douglas Ward: I would say, though, Barrie, also the difference between FebriDx and ViraDx, right, also has... Barrie Lambert: Yes. No, good point. ViraDx was obviously a much lower margin product versus FebriDx, which is north of 60%, correct. George Kopsiaftis: All right. Great. Just one final question. This one actually was sent in earlier today. Is the total U.S. revenue for PHASE Scientific currently less than USD 15 million primarily from the sale of at-home tests? Douglas Ward: Okay. Yes, I would just say, listen, we can't comment on PHASE's mix nor their revenue numbers. So sorry, wouldn't be appropriate for me to comment on PHASE. George Kopsiaftis: Fair enough. All right. Well, there's no more questions at this time. So Doug, I might just hand it back to you for any closing remarks. Douglas Ward: Yes. Thanks, George. Greatly appreciate it, and thank you very much for the questions. Listen, I am extraordinarily positive about where we are as a business right now. I think operationally, we executed exactly the game plan that we thought that we would. And that has also resulted in line with exactly where we thought we would be from a financial standpoint. So I think those 2 things combined have put us in a great place just prior to, hopefully, the most significant announcement in this company's history, which I expect to come sometime later this month. So be on the lookout, we're happy where we're headed, and I look forward to the next time I talk to everyone about CLIA waiver here with FebriDx. George Kopsiaftis: Right. Well, with that, Doug, thank you. Barrie, thank you. That now concludes the presentation. You can all now disconnect. Thank you for your time today. Barrie Lambert: Thanks, everyone. Douglas Ward: Thank you.
Raymond Jones: Greetings everyone, and welcome to our Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. This call is being conducted as a Zoom audio webinar. [Operator Instructions] We will make forward-looking statements during this call which are subject to risks and uncertainties. A summary of these risks can be found in the risk factors section of our Form 10-K filed with the SEC today, March 2, 2026. These statements are based on assumptions we believe reasonable as of today, and we have no obligation to update them except as required by law. We will also present both GAAP and non-GAAP financial measures. Reconciliations are included in our earnings press release on our Investor Relations website. This is an audio-only call with no slides. Our updated investor deck is available as a reference on our Investor Relations website. We'll begin with a business update by CEO, Lauren Antonoff, then CFO Russell Burke will review financials, followed by Lauren's 2026 outlook, and then Q&A. Please limit questions to one per participant. I'll now turn the call over to Lauren. Lauren Antonoff: Good afternoon to everyone from the U.S., and good morning to those tuning in from Australia. Thank you for joining our fourth quarter and full year results call. We've got a lot of material today because there is a lot going on that deserves deeper discussion. 2025 was a landmark year for Life360. For the first time in company history, we achieved annual net income of over $32 million, even excluding a one-time non-cash tax benefit, reflecting both the fundamental strength of our freemium model and the operating discipline we've built over the past several years. Full year revenue grew 32% to nearly $490 million, adjusted EBITDA more than doubled to over $93 million and we exited the year with more than 95 million monthly active users and 2.8 million Paying Circles. Beyond the numbers, we made significant progress building our family super app platform. We introduced Pet GPS, our first fully in-house created device, which we launched simultaneously across five global markets. We acquired Fantix, enabling Place Ads and Uplift. And we completed the Nativo acquisition in January 2026, creating a full-stack advertising platform with Fortune 500 relationships and thousands of publishers. These platform investments position us well for the next major shift reshaping our world, AI. We see AI as an opportunity to accelerate our path and deepen our moat. We are well into the transition to an AI-first world, and I want to share why we're so confident in our position. First, our core use case is durable because it's anchored in real people moving through the physical world. While AI will reshape our product experience, it does not replace your child, your spouse or your pet. As for the market concern that AI will eliminate the need for software products, code is only a part of what we do. Family relationships and physical world services like crash detection, emergency response and roadside assistance go well beyond what software alone can provide and they are essential to the peace of mind that families rely on us to deliver. Second, AI makes our data more valuable. For many products, data doesn't need to be fresh. A year-old forum thread is nearly as useful as a new one, and once absorbed in a model, you may not need the source at all. But our data is fundamentally different because by its nature it's real-time, continuous and perishable. Where your child is right now can't be learned from a training set. We keep this dataset within our walled garden, and the market is already placing a premium on access to it, validating both its scarcity and its strategic value. Third, AI enhances our ability to delight customers. Today, members engage with Life360 by briefly checking the map or reading notifications. With AI, we can start to play a more active role in our members' lives, telling you that there's a soccer game at 3 or making sure you know you're the one getting the kids and that you have directions to the field, and reminding you that you need to leave in 30 minutes so you won't be late. AI connects the dots, so you can focus on real life. Where earlier apps have failed because they put the burden on parents to plan ahead, our location intelligence powered by AI can simplify organization for busy parents, deepening the value we offer families. Fourth, AI is improving our execution. The trajectory is promising as organization-wide AI adoption has grown from about 25% to almost 95% in the past year. This is already increasing the pace at which we're delivering product capabilities and experiences that drive growth, further bolstering our confidence in achieving our 20% MAU target for 2026. Over time, it will accelerate our path to creating significant operating leverage. Finally, we understand the power of platform shifts because we were born from one. Life360 was founded on the early recognition that mobile would reshape how families stay connected, and we look forward to leading the charge to help families navigate this transformational shift. At the same time as AI is transforming how we work and what we do, we enter 2026 on track to achieve our multi-year strategic goals, surpassing 150 million MAU and $1 billion in annual revenue, delivering continuous adjusted EBITDA margin expansion on our path to 35% plus, and becoming the #1 brand that makes everyday family life better. To achieve these goals, we continue to grow our user base, scale our paid offerings, expand our revenue streams and enhance our profitability. We'll touch on each of these briefly. Let's start with user growth, which is the engine that fuels both subscription and advertising revenue. In 2026, we expect 20% MAU growth for the full year, with significant quarterly variation in net adds and growth weighted toward H2. Our MAU growth engine operates through 2 complementary mechanisms: product improvements and marketing which supplements organic adoption. Both fluctuate due to the varied timing of product improvements and marketing investments, along with unpredictable acquisition spikes, especially in emerging markets. While user growth remains a bit volatile quarter-to-quarter, we expect to continue steady annual MAU growth. Remember that after strong acquisition quarters, a meaningful share of new users shift from active to passive. Think about a parent who checks the app regularly, while their spouse relies on notifications. Both are still getting value, but in this scenario, only one is counted in MAU after the first month. Product-led growth benefits from specific improvements and new features like driver reports, no-show alerts and device integration as well as network effects from happy members, and both of these compound over time. Across communities, word of mouth drives penetration as trust builds through social proof. At the platform level, our growing base of nearly 100 million users attracts partners like Uber and AccuWeather, and those partnerships in turn create new reasons for families to use and stay on Life360. Features like our Pet Finder Network and Pet GPS extend that flywheel further, broadening our relevance and fueling our progress toward super app status. Turning from product-led growth to marketing-led growth, our marketing now spans the full customer journey. At the top of the funnel, we focus on awareness with evocative video ads you may find on YouTube or premium placements like the Olympics. Mid-funnel, we work with influencers and podcasters to enhance consideration and reinforce our family positioning. At the bottom of the funnel, we deploy sophisticated performance marketing to drive installs and registration. We've validated our hypothesis that by investing more in the upper funnel, we improve efficiency of our lower funnel marketing, so we're putting more dollars behind our brand. To that end, during the Super Bowl, we launched the third chapter of our Family Proof Your Family brand campaign, which had prominent placements across NBC's streaming and broadcast networks during the Olympics. These campaigns represent a significant step forward in building Life360's reputation as the trusted family brand at scale. And we followed up with targeted campaigns leveraging the Life360 Advertising Platform further down the funnel. Our biggest growth opportunities are in international markets, where penetration averages low-single-digits compared to 16% in the US. In more developed markets like the U.K. and Australia, we're focused on deepening penetration and monetization. In emerging markets like Mexico and Brazil, we're in the earliest stages of penetration and we're focused on growing awareness and adoption, and we expect continued variability in growth rates. Our second key focus is on scaling our paid offerings. Paying Circles grew 26% in 2025 reflecting the increasing value we deliver for families and the impact of continuous funnel optimization, which is driving record conversion rates. As we expand the platform with capabilities like Pet GPS and eventually aging parents, families see more value and discover more reasons to move into premium tiers. At the same time, International ARPPC remains 40% to 50% below U.S. levels, representing a multi-year runway of natural monetization upside as those markets mature. Our near-term priorities are growth of our membership and subscriber base, but our wide remit addressing the needs of everyday family life opens limitless opportunities to create member value, presenting a pricing opportunity with significant headroom. Tile and Pet GPS extend Life360 into the physical world, giving families new reasons to join and deepening engagement with existing members. Devices serve as a subscription growth mechanism, not a standalone hardware business. For Tile specifically, we've decided to exit brick and mortar retail and focus distribution on direct and online channels where we can better control the full customer journey from purchase to subscription activation. Pet GPS launched exclusively through direct and online channels from day 1. To give you a perspective on the Pet GPS opportunity, in the few short months since we introduced our Pet Finder Network, we now have almost 5 million pets registered and nearly 90% of those are in free circles. That's a large, growing, identifiable audience we can convert to paid over time. Multi-year subscription revenue from converted users far exceeds the device investment, so we're prioritizing adoption over device margins and getting the model right over near-term device volumes. Initial response has validated our Pet GPS thesis, and now we're optimizing unit economics, pricing and supply chain to maximize subscription growth. This disciplined approach reflects our long-term focus. Our third area is expanding our revenue streams, with advertising as a transformational opportunity to build a high-margin business that complements subscriptions. With Fantix, which we acquired in early 2025, we built the intelligence and measurement layer that let us launch Place Ads and Uplift. With the acquisition of Nativo that closed in January 2026, we now have the pieces in place to operate a full-stack advertising technology platform. The logic of this combination is straightforward. We have nearly 100 million users and the richest first-party family location dataset in the market, but we were early in building the ad tech platform and off-site reach needed to scale. Nativo had hundreds of advertisers and thousands of publisher relationships, along with a mature ad-tech stack and salesforce built over more than a decade, but no first-party data or audience of its own. Let me explain what this combination means in practice. Before Nativo, we were effectively limited to showing ads inside the Life360 app, reaching approximately 40 million ad-eligible U.S. users. Now, we benefit from direct integrations with thousands of publishers, including news sites, lifestyle content and connected TV. We can take our first-party data, the fact that we know that this is a household with 2 kids, a dog, and a parent who drives to soccer practice every Saturday, and use it to serve ads not just inside Life360, but across that entire publisher network. When that parent is reading an article or streaming content, our data is powering the ad they see. And because we have real-world location data, we can close the loop and tell the advertiser whether the ad actually generated store visits. Importantly, this includes our passive users, members who rely on notifications rather than actively opening the app. Place Ads reach these users at the moment they're moving through the physical world, meaning that even members who are not counted in MAU represent monetizable audience inventory. And throughout all of this, the data never leaves our ecosystem. What our offsite platform enables is that every new publisher relationship becomes another canvas for our ads. That's what takes us from 16% reach to over 95% of ad-eligible adults in the U.S., and even more as we expand internationally. The U.S. digital advertising market is massive, over $400 billion and growing. The majority flows to 3 platforms, but more than $100 billion is spent across the open web, connected TV and premium publishers, where advertisers are actively seeking better data, better targeting and real-world measurement. That's exactly what our platform delivers and we're uniquely positioned to win in this market. Over the long term, we believe that advertising revenue can rival the scale of subscriptions and ensure that every family can access Life360 in the way that works best to them, whether that's a free ad-supported experience or a premium subscription. The result is a truly multi-engine platform with diverse high-margin revenue streams. Now, I'll hand it over to Russell to review the financials and discuss how we're enhancing profitability through operating leverage. Russell Burke: Thanks Lauren, and thanks everyone for joining the call today. As a reminder, the financials I'll be referencing are unaudited for Q4, audited for full year 2025 and denominated in U.S. dollars. Let's start with the fourth quarter. Q4 revenue increased 26% year-on-year to $146. million, reflecting strong performance across our business. Overall, subscription revenue increased 30% year-over-year to $102.5 million. Core Life360 Subscription, which excludes hardware subscriptions, increased 33% year-over-year to $97.3 million, driven by the 26% increase in global Paying Circles and 6% higher ARPPC. Total Paying Circles growth was supported by improved conversion globally, with Q4 quarterly subscriber net additions achieving a new record. Other revenue in Q4 increased 86% to $24.2 million, driven by continued scaling of our advertising platform and growth in data partnerships. The significant year-over-year increase reflects the ramping of our advertising capabilities and increasing advertiser demand. December annualized monthly revenue reached $478 million and increased 30% year-over-year, reflecting the strong performance of subscription and other recurring revenue. Hardware revenue for the quarter was $19.3 million. While hardware revenue declined 19% year-over-year due to promotional pricing and product mix, device unit shipments increased 3%, as we integrate hardware more deeply into the Life360 subscription experience. As we've stated previously, our strategic focus with hardware remains on expanding the member experience and ultimately our subscriber base rather than near-term hardware margins. In 2026, we've made the strategic decision to exit physical retail and focus exclusively on direct-to-consumer and online channels like Amazon. Unit volumes are expected to decline year-over-year as we eliminate retail margin pressure and optimize pricing in our digital channels where we control the full customer experience. Q4 gross profit of $109.7 million increased 28% year-over-year with gross margins of 75%, higher than the prior year. The stability in gross margin reflects the balance of high-margin subscription and other revenue with strategic investments in hardware. At the device level, Pet GPS margins were negative as we priced for market penetration rather than near-term profitability. We expect this approach to continue in 2026, with device margins fluctuating quarterly between breakeven and negative. In Q1 we expect negative device margins as we conduct extensive price testing with Pet GPS and absorb the impact of our exit from brick and mortar retail. However, our consolidated gross margins remain strong in the 75% to 78% range, driven by high margin subscription and other revenue which continue to become a larger part of the mix. Q4 total operating expenses remained flat as a percentage of revenue year-over-year at 69%. Q4 operating expenses excluding commissions increased 26% year-over-year versus subscription revenue growth of 30%. This demonstrates our continued operating discipline even as we made strategic investments in Pet GPS launch and international expansion. R&D costs increased 12% year-over-year to support our expanding product suite. And importantly, our AI investments are embedded within this existing cost structure and will help us build faster and work more efficiently. Sales and marketing costs increased 25% year-over-year, driven by higher commissions and planned Pet GPS and seasonal marketing. Q4 G&A increased 55% year-over-year, supporting company growth and our expanding advertising platform and importantly including transaction costs related to the Nativo acquisition. We expect G&A costs to normalize in 2026, inclusive of AI investments. We continue to make substantial progress in expanding profitability. First, we recorded positive net income of $129.7 million in Q4, up from $8.5 million in the prior year. And I note that it includes a one-time, non-cash tax benefit of $118.4 million. Next, adjusted EBITDA increased 53% to $32.4 million in Q4 from $21.2 million in the prior year, with adjusted EBITDA margin expanding to 22%, our highest quarterly margin to date. This performance demonstrates the significant operating leverage inherent in our business model as we scale. That operating leverage carries into 2026 as we expand high margin subscription and other revenues, even as we make growth-oriented investments and integrate Nativo in the first half. Advertising in particular creates high incremental margins as it scales in the second half, partly related to seasonality, but also importantly leveraging our existing infrastructure and user base. Looking briefly at the full year results for 2025, which exceeded guidance across the board. Total revenue increased 32% year-over-year to $489.5 million. Gross margin expanded to 78%, 3 percentage points higher than 2024. Total operating expenses grew 26% year-over-year, but declined as a percent of revenue, driving strong operating leverage. Net income for the year was $150.8 million compared to a $4.6 million loss in 2024. This marks our first fully profitable year in company history, even excluding the one-time non-cash tax benefit. Adjusted EBITDA increased $47.7 million year-over-year to reach $93.2 million, exceeding our outlook range with margin expanding from 12% in '24 to 19% in 2025. Turning now to the balance sheet and cash flow. Life360 ended 2025 with cash, cash equivalents and restricted cash of $495.8 million, a significant increase from $160.5 million at year end 2024. This increase was primarily driven by operating cash flow and the net proceeds from our June 2025 convertible notes offering, which provided $275.4 million in net proceeds, partially offset by the $25 million investment in Aura convertible notes. The result is a substantially stronger balance sheet with significant financial flexibility to invest in our highest return growth opportunities, while maintaining disciplined capital allocation. Operating cash flow was positive again in Q4. Net cash provided by operating activities of $36.8 million during the quarter increased nearly 200% from $12.3 million in the prior year, reflecting our strong and accelerating cash generation. For the full year, operating cash flow reached $88.6 million, up $56 million from 2024. Thanks for your attention, and I'll hand back to Lauren to discuss our 2026 guidance. Lauren Antonoff: In 2026, we're doing 3 things simultaneously; investing in our highest return opportunities, accelerating revenue growth and expanding margin. That combination is reflected in our full year outlook as follows. Annual MAU growth of 20%; consolidated revenue of $640 million to $680 million; subscription revenue of $460 million to $470 million; other revenue of $140 million to $160 million, driven by the rapid scaling of our Life360 advertising platform following the Nativo acquisition; hardware revenue of $40 million to $50 million, as we narrow distribution to focus on channels that drive stronger subscription attachment; and adjusted EBITDA of $128 million to $138 million. Stock-based compensation is anticipated to be 40% higher than last year largely due to increased headcount from Nativo. This range represents approximately a 20% adjusted EBITDA margin, another step in our multi-year path of continuous annual expansion toward our strategic target of over 35%. Given a few factors unique to 2026, we want to provide some additional color on quarterly modeling. Russell is going to walk through those points before we conclude. Russell Burke: Thanks Lauren. We have strong conviction in our full year guidance, and we take pride in delivering what we say. With that, there are a few quarterly dynamics worth walking through so that models reflect what we expect throughout 2026. Our strategic investments are concentrated in the first half of the year. At the same time, our revenue profile has shifted. Advertising in particular follows a seasonal pattern where growth concentrates in the second half. Our investments are front-loaded, our revenue acceleration back-loaded. That combination creates quarterly variability in MAU, revenue and margins that normalize as the year progresses, and that dynamic is fully reflected in our full year guidance. Let me walk through 3 Q1 factors specifically. First, adjusted EBITDA margin percentage in Q1 is expected to be in the low-double-digits, driven by Life360 advertising platform margin contribution timing, the Pet GPS promotional pricing, which is designed to maximize subscriber adoption and front-loaded advertising and marketing. These are all intentional investments concentrated early in the year to fuel growth as we scale. Second, device revenue in Q1 is expected to be approximately 50% lower than Q1 last year due to our brick and mortar retail exit. Hardware gross margin will also be negative in Q1. This impact is reflected in our full year guidance range. And third, on MAU, Q1 year-over-year growth will come in below our full year rate of approximately 20%. As Lauren discussed, quarterly MAU growth after a strong quarter tends to retrace. We expect MAU growth to be more back-half weighted, due to product-led growth investments and scaled marketing in new geographies building through the year. As our growth investments normalize during the year, we expect Q4 2026 margin to exceed the 22% that we just delivered in Q4 '25, reflecting continued build of operating leverage with subscription momentum, and the Life360 advertising platform delivering meaningful contributions in the second half. Additionally, for context on Nativo's contribution to our 2026 outlook: Nativo's unaudited 2025 revenue was approximately $63 million at effectively breakeven adjusted EBITDA. We expect a majority of that revenue base to carry forward into 2026 in the Life360 advertising platform, with incremental growth at significantly higher adjusted EBITDA margins in the second half, as integration completes and cross-platform campaigns ramp through the year. That concludes our prepared remarks. I'll now turn over the call over to RJ to manage Q&A. Raymond Jones: [Operator Instructions] First, we'd like to open it up to Mark Mahaney to ask a question. Mark Stephen Mahaney: Okay. 2 questions. The international growth, Lauren, that you talked about and wanting to lean into that, do you view that as needing to be run more by -- is that more driven by product or by marketing? Which of those 2 kind of gets that international penetration up even ballpark close to the U.S. level? And then you talked about these record net new adds in the December quarter. Just what's the source of those new adds? Anything interesting there in terms of different markets, I don't know, different demographics, different verticals? Any new color on where those net adds came from? Lauren Antonoff: Thanks, Mark. I'm going to focus on the international question because I think it's really important. There's often this question about is it product or is it marketing? And it really is the interplay between both. We're investing to make sure that the product works great for users outside of the U.S. And that means improvement in things like the Android platform, our localization and features really tailored towards those markets. But that only works if users in those markets know about our product. And so product improvements and marketing really go together and complement each other as we grow. Raymond Jones: Great. Thanks, Mark. Next, we're going to open it up to... Mark Stephen Mahaney: My second question? Raymond Jones: I'm sorry, Mark? Mark Stephen Mahaney: My second question about the... Raymond Jones: Q4 MAU growth. Russell Burke: Mark, I would say that there's not any one thing that stands out there. We got good contribution both from the U.S. across the board and from international, particularly the lead countries that we're really active in. Raymond Jones: Next, I'd like to open it up to James Bales with Morgan Stanley. James Bales: I guess, I'd like to understand a bit about what has driven the conversion improvement to paid and whether you have any thoughts on the relative growth that we should be expecting between subs and MAU growth in 2026? Lauren Antonoff: So the 2 things that drive improvement in conversion is the value that we create in the product and then optimizations we make in the funnel along the way. And these 2 things really go together. We've added new value, things like improvements we've made in our drive reports or things like Pet GPS, but we also do a lot of testing and experimentation in our funnel to find ways to help customers understand the value that we have in the product and suggest to them at those right moments. James Bales: Perfect. And your thoughts about the sustainability of that improvement? Lauren Antonoff: There's a lot of room. There's certainly a lot of room in creating value. And we're actually seeing a lot of -- we're going a lot faster using AI to speed up that kind of optimization. So it seems like we have a lot of headroom left. James Bales: Perfect. Maybe just one other question. You talked about the margin profile for Nativo. Could you maybe help us understand the gross margins that you expect to achieve in the first half on a run rate basis for the advertising business? And post integration, what those gross margins can get to? Russell Burke: Yes. James, I think what I would say is that really off the bat, we are going to get really good gross margins from the Life360 advertising platform. The thing to understand about Nativo is that it's really given us all of these extra tools. It's given us the infrastructure, the sales team, the relationships that will really help drive that growth, particularly in the second half. And there is an element of fixed cost that comes along with that. But the gross margins themselves are very strong. Raymond Jones: [Operator Instructions] Next, we'd like to open it up to Lafitani Sotiriou from MST. Lafitani Sotiriou: Congratulations on the strong result. And I appreciate the extra color on AI. Can I dive a little more into this? So you both said you want to build faster and work more efficiently. Can you just talk us through in terms of the build faster? I know that Nativo is new, but we previously had on the road map the seniors offering. I can see now that you've also got partner ecosystems listed. Can you talk us through what does that mean by running faster? So what's scheduled for this year? And then on the same time, if you are going to be able to work more efficiently, what's that mean from a cost perspective? Does that mean that you're pretty happy with the number of staff you've got now that you'll be able to sort of keep it pretty steady into the future? Lauren Antonoff: So I'll start by saying that we think of our company as very early in our growth trajectory, which means there's a lot of value for us to create. We have a lot of work to do, and we're excited to put more resources against those things. AI helps us do that more efficiently. I'll just give you one example. There's a certain period of time that when you have an idea for a new feature, it takes you to bring that feature to market. And there's all sorts of steps you go through from early ideation to writing the code to testing the code. And we're applying AI in every stage of that. It is helping us ideate and prototype faster. It's helping us get that code written very, very quickly. And it's helping us test and iterate on those features. So that helps us take these ideas, these ways that we can create value and deliver them faster. I am not going to preview and tell you all the features that we haven't yet released, but it's helping us accelerate our road map. One of those areas that we're invested in is partner ecosystem, and that's sort of the example of working with the AccuWeathers and the Ubers to bring third-party capabilities forward to our members through our experience. Raymond Jones: Next, we'd like to open it up... Lafitani Sotiriou: On the cost side? We didn't -- sorry, the part on the cost side efficiencies wasn't answered. Russell Burke: What I would say, Laf, is that we are continuing to see efficiency gains there. We want to play those gains into growth in '26, and there's a lot on our road map, as Lauren referred to, to do that. So we don't necessarily expect sort of gross cost claw backs in '26. Raymond Jones: Next, we'd like to open it up to Maria Ripps from Canaccord to ask a question. Maria Ripps: I think you mentioned nearly 5 million registered pets with nearly 90% of them in free circles. It sounds like your near-term goal is to sort of grow penetration here. But can you maybe help us think about sort of deepening monetization among the circles with -- these free circles with pets? And would that approach be different from sort of how you're thinking about sort of monetizing free circles more broadly? Lauren Antonoff: So it's really heartening for us to understand more about our members. And when we understand them better, we can serve them both through our subscriptions and through our advertising business. It sort of opens up both capabilities. So this is why experiences like our Pet Finder Network are useful. They create substantial value to families and another way to make sure that every pet is safe and protected, not just those for subscribers. And doing that also gives us insight that's certainly attractive to people advertising in the pet market. Was there another point in your question that you were interested in? It's a little hard to hear you. So if you can speak up, I can answer more. Maria Ripps: I was just trying to understand how that would be different from monetizing sort of free circles in general, but I think you sort of answered that. Raymond Jones: Next, we'd like to open it up to Bob Chen from JPMorgan. Bob Chen: Just a quick one for me around the partner ecosystem piece. I mean we saw that announcement with the partnership with Uber. Like how does that flow through into your financials? Does it come through as additional advertising type revenues? And is that what we're looking for in the partner ecosystem? Russell Burke: It will come through in a few different ways, definitely advertising, but there's also, as we get deeper into that relationship, both the subscription benefit on our side and also for Uber. So it will come through in a couple of different ways. Lauren Antonoff: And I'll add that you'll also see it come through in our product experiences and the value that we deliver for our members. Raymond Jones: We'd like to open it up to Mark Kelly or Brennan Robinson, if they're on the line. It looks like they might be on the dial. Not sure if they're there. Okay. We'll go back to them. Next, we'd like to open it up to Siraj from Citigroup. Siraj Ahmed: Lauren, just keen to double-click on your comment or just in terms of the guidance for MAU, the first quarter being lower than the 20% and then stronger in the second half. Maybe because you have the big advertising campaign with the Super Bowl, etc., in the first quarter, has that -- how has that tracked? It does seem like the guidance does -- as you said, the product improvement. Just keen to understand how you -- the confidence levels in the 20% growth given it could move around, right? So just keen to understand the confidence and what -- how much comfort do you have in that sort of 20% range? Lauren Antonoff: Our confidence is good, and we're coming off a lot of momentum in 2025 and setting a big goal for 2026, but we see that trajectory very clearly. The advertising campaigns that we do, especially brand-building campaigns like that are really designed to drive demand over a longer term horizon. And so they're letting more people know about us, and then we follow through and convert those people to registrations over time. And so it's not necessarily -- we don't necessarily see the impact in quarter. And the signals that we're seeing in terms of that awareness look really good to us. Raymond Jones: Next, we'd like to open up to Wei-Weng Chen from RBC. Wei-Weng Chen: Just a question from me on AI efficiency gains. I guess there have been a few corporates such as Block and WiseTech here locally that have cited AI efficiencies as the rationale for large scale reductions in workforces. Is this something that could be a potential reality for 360? And maybe more philosophically, can you give us your thoughts on these sorts of dramatic actions? Lauren Antonoff: Maybe I'll start this one, Russell, and then you take over. But we have been really intentional about how we grow and making sure that we are being efficient with our resources. The other thing that's really, really different is that we are much earlier in our growth prospects. We have a lot of room to go. And so for us, this helps us sort of punch above our weight and grow faster to achieve that sort of next wave of growth for us. It's different than more mature companies who have over-hired and need to slash back. And so I think you will expect to see something very different from us. But Russell, you take it from there. Russell Burke: I'd probably just reiterate several of the same things. We are so early. Our employee headcount is relatively low. We look at things like revenue per headcount, and we're very well positioned there. It's just not something that we're in that -- at that stage as some of these companies that did over-hire in COVID, for example, it's just not necessary, and it would disrupt our growth. Raymond Jones: Next, we'd like to open it up to Stephen Ju from UBS. Stephen Ju: Great. So it might be a little bit early to ask this question, but I wanted to see if you guys can shed any light on the type of advertisers that are on Nativo. Just kind of eyeballing the list of folks there. It seems like they're more awareness and brand oriented. But I guess, given the location data that you have, it seems like there's probably all kinds of opportunities to run performance advertising. So I'm just wondering what -- who are on there now and what the outreach effort is going to be to onboard some of the performance budgets? Lauren Antonoff: I'll say that the advertising base is quite diverse. And one of the things that being able to run offsite ads and different publishers lets us do is deliver different types of platforms, different types of advertising experiences for different advertisers with different needs. I don't have a long list of specific names, but a funny anecdote as we were preparing for this. There's at least some companies who said, like, we don't want you to use our name because we don't want you to tell everybody that we can see such positive outcomes that we're seeing. So I don't know, Russell, if you want to add anything more to that, but... Russell Burke: I guess the only other aspect is because we are now able to utilize both on-app and off-app, as Lauren said earlier, the range of people that we can access is very much more attractive to big corporate advertisers. And because of that, we're able to access sort of campaigns that we just weren't able to do before. Raymond Jones: Next, we'd like to open up to John Marrin. John, you can unmute. John Marrin: Unmuted. I'll try and ask one question. Maybe there'll be a few answers to the one question. I think I just wanted to tease out a little more about the Nativo acquisition. And I know it's a bit early, but maybe if you could just speak to their readiness to execute on the data opportunity that you basically handed them. Just maybe if you could talk about traction you've seen there to date and what your deterministic data might provide in terms of pricing uplift relative to the business they were doing previously. Maybe just a little more color around that and maybe the type of investments you have to make on that team in the first half of this year to help them win bigger engagements. Lauren Antonoff: Yes. I've actually been really impressed with the alignment we have between the teams. I've been through a lot of M&A. And this one, the puzzle pieces fit together better than typically. So we're seeing good traction. It is early on, but we feel great about where we're going. In terms of things like pricing, we actually -- we think we have a lot of efficiencies that come from things like having our own built-in audience, having the data set that we have. It really sort of optimizes the cost -- the margin profile quite a bit. We haven't focused as much on pricing yet. I think that's something we'll look at later on. Russell Burke: And the other thing I'd say is it's not -- we're excited about bringing that team on board. That team is excited about having the extra capabilities that Life360's first-party deterministic data provides to what they're out there selling. So, so far, it is just looking like a great combination. Lauren Antonoff: And I'll I just -- one thing that I'll add is that in bringing them together, it really helps us create a walled garden where we can reach those 95% of U.S. adults while keeping the data in the walled garden and providing the sort of privacy and family-safe experience that both our customers and advertisers want. Raymond Jones: Next, we'd like to open it up to Chris Smith. Chris, can you unmute? Chris Smith: Look, just really interesting, Lauren, in the point you made around pet and the opportunity there. Now clearly, you're cycling a very difficult comp in terms of MAU growth in first half -- first quarter '25, apologies. But if you look at the 5 million pets or 90% you said are in free MAUs, like that's the potential for you to take the Paying Circles up 50% if you convert them all. Could you maybe just help us think through, I guess, how we should think about that conversion opportunity through this year as you are investing in the pets through the first half? Lauren Antonoff: Yes. I'm super excited about that opportunity. And everything we've seen so far tells us that long term, this should make a significant step in that -- in our subscription penetration. The key thing is that we're early in introducing pets and Pet GPS to our audience. And we want to make sure that people understand it, that we know who they are, that we educate them that we're in the pet business and that we help them understand the value of the types of devices that we have. Right now, the notion of putting a GPS on your pet is still new to most people. And so it's going to take us some time to build that. And we're more focused on sort of a multi-year horizon than trying to rush to get the maximum sales in the short term. Russell Burke: Next, I could open up to Rob Sanderson with Loop. Robert Sanderson: Can we talk about investment priorities a little bit? Obviously, your margin guide -- EBITDA margin guide shows some nice operating leverage again in '26. But what areas do you expect to be spending relatively more? You're probably going to get some savings, not supporting Tile at brick and mortar, but any other areas you expect to maybe spend relatively less in '26? And Russell, I heard you comment on the Nativo margin being quite strong. But just compared to the nearly 90% gross profit margin you've been seeing in other revenue, can you give us kind of some sense of range we should be thinking about as you layer in revenue share to your publishing partners with the acquisition? Lauren Antonoff: Russell, do you want to take this one? Russell Burke: So I'll answer the first part of your -- the later part of your question first, Rob. In terms of margins, yes, we were -- had very strong margins in the early part of the Life360 advertising business because we were only delving in one part of that advertising ad tech stack. And it was a digital piece that really had very little sort of flow-through costs. But even when we bring in a broad range of addressing all of that stack, the margins will still be very strong, call it, in the sort of mid-70s range in terms of gross margins. So that is -- definitely continues to be a high-margin business for us. Robert Sanderson: Great. And more of a sales investment this year, tech investment, both or anything you could call out in areas you'd like to spend more and invest more? Russell Burke: Yes. Look, I mean, I think in terms of investments, it is the range of things. We have a lot of initiatives on the product road map that we'll be investing in. We've talked about Pet GPS. We're very much in testing mode for that. We want to roll that out aggressively. That is an acquisition vehicle for subscription. So that has a cost upfront that we really return over a period of time with subscription. And investing in international is going to be important for us in 2026. Raymond Jones: Next, I'd like to open up to Eric Choi from Barrenjoey. Eric Choi: I just had a quick question on FY '26 revenue guidance, probably for Russell. Just a couple of components I was just struggling with, and I've probably done it wrong. But just on the subscription revenues, nominally, you're guiding to $96 million of growth in FY '26, and you did $91 million already in FY '25. And you've also called out you're entering 2026 with accelerating PC growth. So just wondering on that piece, what I'm missing? And then on the other revenue, very helpful, Russell. You told us Nativo is worth $63 million. So if you back that out of your implicit FY '26 guidance, like that other revenue bucket did $32 million of growth in '25 and you're guiding for that to do $20 million or less in '26. I'm just wondering on those 2 pieces. Is it just conservatism or am I missing something? Russell Burke: Let me try and address both of those quickly, Eric. We are definitely seeing acceleration in PC growth in '26. That's a flow-through, the momentum that we're getting from '25 as we continue to really optimize that channel. So we do expect to see volume increases. We're not assuming that there's much in the way of price increases specifically in '26 because we want to deliver that value first. And when you look at that sort of straight dollar comparison from year-to-year, what I would say is that '24 benefited from fairly significant price increases flowing through. So it's not quite apples-to-apples to compare the dollar sort of increases year-to-year, but we are expecting 30% revenue growth in '26. And then in terms of the other revenue piece, what I would note is as I said, the majority of that $63 million will carry over. There's definitely pieces that we will decide not to do as Life360. So I wouldn't strip out the whole of that. When you look at our guidance for other revenue, including Nativo, I guess it's something like 120% increase. But even using that sort of $63 million, we're in the range of 30% increase as a base case, but it will be more than that because, as I say, not all of that $60 million will carry through. Raymond Jones: Next, I'd like to open it up for Lindsay Bettiol from Goldman Sachs. Lindsay Bettiol: Yes. I was just going to continue on from Eric's question actually just on this other revenue guidance. So if I take the -- I mean it's $140 million to $160 million range, if I take the bottom end of that range, take away Nativo, which is circa $60-ish million, let's say, take away $30 million for data, you end up with like the implied kind of advertising contribution is somewhere between $45 million and $65 million is kind of my math. You've just exited doing $16 million in Q4. So I know you're going to probably tell me some of that is seasonality. So I guess my question is like how much of Q4's $16 million should we attribute to seasonality? And like I said, just continuing kind of Eric's question is like it does feel a little bit conservative that you're exiting $16 million a quarter and guiding to something like $40 million for the full year. So just help us understand that, please. Lauren Antonoff: Russell, you take this one. Raymond Jones: Russell, I think you're on mute. Russell Burke: Typical Zoom problem. Lindsay, I would end up sort of saying something of the same thing. I wouldn't back out the whole 63 because there are pieces of that, that won't carry over. And it's sort of very much a base case from our perspective. There's a lot of work to do in the integration in the first half, and we definitely sort of see that growing and ramping quite quickly in the second half. But yes, it is, as we said, very much a seasonal business at this point. So even Q4 for last year had a good element of seasonality there. Lindsay Bettiol: Sorry, just continuing the question. Is there a way to put a finer point on that? Like the $16 million in Q4. Could you give us like what percentage or what proportion of that is seasonality? Is it that easy to break out? Russell Burke: It's really not that easy, but it's going to be more than sort of 30% of that number. Raymond Jones: Next, I'd like to open up to Chris Savage. Chris Savage: Lauren, probably more one for you. Have you completed the relocation of manufacturing for Pet GPS? And is there any update on the launch of an elderly tracking device, please? Lauren Antonoff: Right. It has taken us a little bit longer than we expected. We got stuck on some customs back and forth, but we are largely through that and we're almost done with moving Pet GPS. We haven't yet moved Tile. We're a little bit in wait and see as tariff policy is moving around. And then -- sorry, what was the second part? Chris Savage: Chris always spoke about potentially a launch of an elderly tracking product. Lauren Antonoff: Got it. That's something that's going to take a little bit longer. So we're starting our way in elderly -- in aging parents really focused on bringing them into our ecosystem, and we're working on devices for the future, but we don't expect to launch those this year. Raymond Jones: And this will be our last question. So we're running up on time from [ Annabel Kuhn ]. Unknown Analyst: One final one on advertising. Yes, you saw that quite significant acceleration in Q4. Obviously, part of that is seasonality. A part of that is with the new advertising products that you have released just with the Life360 platform. Maybe could we actually sort of dive into like particular advertising products you have in market right now with the platform? And then maybe could you give some like more granular examples of the advertising products you're going to have with the Nativo platform integrated in the second half? Lauren Antonoff: I think that's a long question. It may need an Investor Day. So just at a high level, I think one of the things that you saw hit in Q4 is the relationship that we have with some of our direct deals. And so that isn't necessarily a branded product like Uplift or something like that. We did introduce a couple of new products last year. And I expect with -- now that Nativo is with us, we'll sort of formulate how we describe that as a product, but it's probably a longer discussion than we have now. Raymond Jones: And with that, we're going to conclude our Q&A, and I'm going to turn it over to Lauren for closing remarks. Lauren Antonoff: Well, I am really proud of what the team has built and super excited for what we're going to deliver in 2026. So thank you all for joining us, and we'll see you next time.