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Andreas Meier: [Interpreted] Ladies and gentlemen, good morning, and a warm welcome to BASF in Ludwigshafen. We are very pleased that you have accepted the invitation to our annual press conference. Some of you could not be present here in Ludwigshafen and will be connected with us live on the Internet. So warm welcome to you, too. You will be talking today to Markus Kamieth, Chairman of the Board of Executive Directors; and Dirk Elvermann, the CFO of BASF. The conference, as mentioned, will be broadcast live on the Internet on our homepage and also on LinkedIn. The conference language is German with a simultaneous interpretation into English. During the discussion later, English questions will be answered in English. So if you're using a headset for the simultaneous interpretation or want to use them, you find the English channel on channel 1 and the German channel on channel 2. For the photographers here in the room, during the first 5 minutes, you can take photos during the presentation. But afterwards or during these [ photos ], please switch off the flashlight and afterwards, please take your seats. All accredited guests should have received an electronic press folder with all the important documents via e-mail. And that's all on housekeeping, and I give the floor to you, Markus. Markus Kamieth: [Interpreted] Thank you, Andreas. Good morning, and welcome to Ludwigshafen, and also to those in front of the monitors. First of all, thank you, Andreas, for you, for having taken over this job. You are doing this for the first time or have been doing this for the first time for a long time because Nina Schwab-Hautzinger left to join Roche, but you probably heard yesterday that we will welcome Thomas Biegi as successor of Nina Schwab-Hautzinger soon. And I think in future, he will take this job, but well, you will have to agree with him. Dirk Elvermann and I will present and explain the most important figures and developments of the 2025 business year. 2025 marked by many geopolitical and headwinds in the world that unfortunately had a negative impact. Consequently, we, in the chemical industry, faced an uncertain and very volatile global market environment and with considerable headwinds. As previously stated, we, therefore, focus primarily on the things we can control within the framework of our Winning Ways strategy. We successfully started up the major assets at our new Verbund site in Zhanjiang, and we also accelerated our cost savings programs and significantly streamlined BASF's organization. Moreover, we progressed swiftly and successfully with the announced portfolio measures. But let me also mention that the year 2025 and particularly the fourth quarter did not develop as we had anticipated. Our prerelease on January 22 already gave you an indication of this. Let's now turn to the details of BASF's financial performance in the fourth quarter of 2025, always compared with the prior year quarter. Overall, sales declined considerably because of strong currency headwinds and slightly lower prices. At the same time, we achieved slightly higher volumes. All segments reported volume growth, except for the Chemicals segment. Volumes rose particularly in Surface Technologies, Agricultural Solutions and Nutrition & Care segments. From a regional perspective, we achieved a remarkable volume increase of 13% in China and posted solid growth in North America. In Europe, we recorded slightly lower sales volumes. Compared with the fourth quarter of 2024, prices declined in 5 of our 6 segments, most notably in Chemicals and Materials due to ongoing competitive pressure. We could only increase prices in the Surface Technologies segment, primarily owing to higher precious metal prices. Currency effects burdened sales in all divisions and were mainly caused by the strong depreciation of the U.S. dollar, the Chinese renminbi and Indian rupee. Portfolio effects slightly dampened sales growth, and this was mostly related to the sale of our Decorative Paints business. Based on this underlying sales development, EBITDA before special items came in at EUR 1 billion compared with EUR 1.4 billion in the prior year quarter. Currency headwinds lowered EBITDA before special items in the fourth quarter of 2025 by around EUR 110 million. Ladies and gentlemen, overall, BASF Group's EBITDA before special items reached EUR 6.6 billion in the full year of 2025. The decline compared with 2024 was mainly due to lower margins and negative currency effects, and the latter amounted to EUR 235 million in the full year 2025. Due to continued low market demand and pressure on margins, earnings in BASF's core businesses, especially in the Chemicals segment, declined considerably. Higher contributions from BASF's stand-alone businesses could only partially compensate for this decrease. Let's now turn to our portfolio measures. Our agreement with Carlyle marks an important milestone in realizing the full value of our Coatings business. Prior to that, we had divested our Decorative Paints business to Sherwin-Williams. Under Carlyle's operational leadership, we want to continue to strengthen the leading position of the Coatings business. This will create further upside potential for the 40% equity share we will continue to hold after closing. We are on track to close the transaction in the second quarter, as previously announced. On the basis of the 2 transactions, BASF's Coatings business is valued at an enterprise value of EUR 8.7 billion. Let's move on to Agricultural Solutions. Our team here once again delivered a very strong performance in 2025 and achieved an EBITDA margin before special items of 22%. We are on track to reach IPO readiness in 2027. Last year, excellent progress was made on the legal entity and ERP separation. By early 2027, the separation will be completed in all regions. In November, we announced the future management Board for the Ag business. Its members combine extensive industry expertise with the required capital market experience. The management team headed by Livio Tedeschi will drive the transformation of Ag Solutions into an independently steered company focusing solely on the agricultural sector. The planned listing of our Agricultural Solutions business will mark the next decisive step to unlock additional value for our shareholders. The planned IPO is targeted to take place on the Frankfurt Stock Exchange. And what is also good news is another piece of news. In January, we announced that BASF Agricultural Solutions is acquiring AgBiTech, a supplier of biological solutions to control insect pests. It has pioneered the use of nucleopolyhedrovirus technology to develop insect control solutions based on naturally occurring viruses. With operations in Brazil, the United States and Australia, AgBiTech serves farmers growing soybean, corn, and cotton as well as specialty crops. This acquisition is an important step in the value creation journey of Agricultural Solutions. The new technology will complement BASF's existing biosolutions portfolio and underscores the commitment to a more sustainable, holistic approach in agriculture, in line with the business strategy of Ag Solutions. The transaction is expected to close in the first half of 2026. From the stand-alone Ag business, let's return to the beginnings of our value chain. We successfully started up all 32 key production lines at our Zhanjiang-Verbund site on time and below budget, a remarkable achievement and a testament to the capabilities of our teams. We also started up the steam cracker, the heart of the Verbund, without any lost time. This steam cracker is flexible, so we can use both naphtha and butane as feedstocks. I was very pleased to hear Linde's CEO, Sanjiv Lamba, describe this as one of the fastest cracker starts up ever. Linde supports us with their cracker technology and engineering expertise and contributed to this major achievement of our teams in Zhanjiang. The team executed this complex task with outstanding dedication and success. We are confident that we will operate the site at high utilization rates even in the current market environment. Nevertheless, I want to note that we expect a slightly negative earnings contribution from the Zhanjiang-Verbund site in the first year of operations, mainly due to start-up related costs. From 2027, we expect the site to contribute positive earnings. Ladies and gentlemen, MDI is an important product for BASF and a key component of our polyurethane value chain. It is indispensable in the construction, automotive, coatings, adhesives and furniture sectors. Classic applications include rigid and flexible foams. It can be found as insulation and upholstery material in your car. For example, I think you're not sitting on such a chair at the moment. In the United States, we are currently expanding our MDI plant in Geismar, Louisiana. The final phase is on track, and we are planning to start up production in the third quarter of 2026. At USD 1 billion in total, the project marks BASF's largest investment ever in the United States. Through this expansion, we are doubling our MDI capacity in Geismar to around 600,000 metric tons per year to serve the growing U.S. market. With that, I will hand over to Dirk Elvermann. Dirk Elvermann: [Interpreted] Well, thank you very much, Markus, and good morning. I would like to start by looking at the financial figures of BASF Group for the full year 2025 compared with 2024 as usual. EBITDA before special items came in at EUR 6.6 billion, representing a decline compared with the prior year. However, the EBITDA margin before special items, excluding metals, remained almost stable at 12.3%. Net income improved by 25% to EUR 1.6 billion. Net income from shareholdings in 2025 amounted to EUR 1.3 billion compared with EUR 602 million in the prior year. This increase mainly resulted from higher earnings contributions from the at equity consolidated participation in Wintershall Dea. Free cash flow increased by around EUR 600 million compared with 2024, and more information is provided on the next slide. Cash flow from operating activities amounted to EUR 5.6 billion as compared to EUR 6.9 billion in 2024. The decline was primarily driven by changes in other operating assets caused by an increase in precious metal trading positions. Furthermore, net income included higher noncash items and reclassifications than in the prior year. Ladies and gentlemen, in 2025, cash flows from operating activities included a dividend from Wintershall Dea. Reimbursements that Wintershall Dea received under the federal investment guarantees were distributed to its shareholders as dividends. BASF, which holds 72.7% in Wintershall Dea, received around EUR 900 million after tax in 2025. In the first half of 2026, we expect to receive almost EUR 800 million after tax through the same mechanism of which around EUR 500 million was already paid out in January. I think it is important to further explain this. Federal investment guarantees are insurance against political risks such as expropriation or the consequences of war. As with any insurance policy, coverage does not come for free. The guarantee beneficiary, in this case Wintershall Dea, paid insurance premiums for many years, a triple-digit million euro amount in total. Now Wintershall Dea is entitled to and has asserted its claim to insurance coverage. Let's now turn to payments made from property, plant and equipment and intangible assets. In 2025, these decreased by almost EUR 2 billion to EUR 4.3 billion, which demonstrates that we have passed the peak investment phase for the Zhanjiang-Verbund site. Overall, free cash flow improved strongly and amounted to EUR 1.3 billion. In terms of our balance sheet, total assets amounted to EUR 76.2 billion as of December 31, 2025, down by EUR 4.2 billion compared with year-end 2024. But this decline was caused by lower noncurrent assets, mainly on account of currency effects. At 45.1%, BASF's equity ratio remained stable and very solid. By year-end 2025, we have reduced our net debt to EUR 18.3 billion. In 2026, we will use a substantial part of the cash proceeds from our portfolio measures to further strengthen our balance sheet. The maturity profile of outstanding bonds will allow us to further reduce net debt considerably this year, hereby underpinning our current single A rating. Let's look ahead to BASF's capital expenditures between 2026 and 2029. We aim to grow with high capital efficiency by reducing capital expenditures, increasing the utilization of existing assets and optimizing our net working capital. After the successful start-up of our Zhanjiang-Verbund site, we are now bringing down CapEx below the level of depreciation. For BASF Group, we plan capital expenditures of EUR 13 billion between 2026 and 2029. This is 20% lower than the 4-year forecast we gave you last year and more than 30% lower than our planning for 2024 to 2027. In 2026, we planned total capital expenditures of EUR 3.3 billion compared with EUR 4 billion in 2025. The reduction reflects lower CapEx for the Zhanjiang investment. We now expect only a further EUR 600 million in 2026 after EUR 1.6 billion in 2025. With our good current site and planned setup, we have sufficient own capacities in key markets to support our volume growth without requiring major new investments. And we say we are well invested by now. Ladies and gentlemen, where do we stand with BASF's cost-saving programs? In a nutshell, we have accelerated the implementation. By the end of 2025, we already achieved a total annual cost reduction run rate of around EUR 1.7 billion, and this represents an increase of EUR 100 million compared with our original savings target for this date. In 2025, the associated onetime costs amounted to EUR 700 million, and this increase in onetime costs of around EUR 300 million was caused by higher provisions for severance payments. In contrast, the planned onetime costs for 2026 will be reduced from EUR 500 million to EUR 300 million. By the end of 2026, we now expect annual cost savings of EUR 2.3 billion instead of EUR 2.1 billion as planned. The cumulative onetime costs are now expected to amount to EUR 1.9 billion in total. And this shows our positive momentum in bringing down our cost base and our ongoing focus on this crucial topic that we are dedicated to. On the right-hand side of this slide, you can see that between December 2023 and December 2025, we reduced the number of BASF senior executives by 11%. The number of employees decreased by 4,800 if we exclude the around 1,000 employees who were recruited at the Verbund site in China in the same period. This demonstrates that we are actively streamlining our global organization at all levels. In 2026, we will further advance in this direction. We recently communicated our next steps to create more value, which will happen in BASF's service organizations. And these are Global Digital Services and Global Business Services. Why are we doing this? Against the backdrop of our successful portfolio measures and the differentiation between core and stand-alone businesses, we now also want to streamline IT, finance and HR services to meet the needs of BASF's core businesses. In Global Digital Services, we are rationalizing and harmonizing BASF's IT application landscape and sharpening the Digital Service portfolio through consolidation and standardization. In this context, we plan to open a cost-efficient digital hub in Hyderabad, India. We will adjust our existing location footprint and take out significant costs. Building on competitive service levels and focused digitalization, these measures allow us to capture efficiency gains and achieve a significant reduction in the Digital Services workforce. Similarly, in Global Business Services, we intend to streamline the service portfolio, drive automation and establish cost-efficient global hubs. We, therefore, aim to bundle a significant portion of our business services in 2 global hubs in Asia. At the new global hub in India, we intend to bundle services with a focus on finance and HR. And the established hub in Kuala Lumpur in Malaysia is foreseen to focus on global supply chain services in the future. Existing regional hubs will complement this setup. With these decisive steps, we aim to harvest synergies and secure structural cost advantages. Markus? Markus Kamieth: [Interpreted] Thank you, Dirk. A key objective of our Winning Ways strategy is attractive shareholder distributions via dividends and share buybacks. That is why we will propose a dividend of EUR 2.25 per share for the 2025 business year to the Annual Shareholders' Meeting. Based on the year-end share price, this represents an attractive dividend yield of 5.1%. The second pillar of our attractive shareholder distribution policy is our buyback program. In view of cash proceeds already received and further proceeds expected, particularly from portfolio measures, we started buying back shares in November 2025. By year-end 2025, we had repurchased shares of around EUR 355 million. Moving on to our outlook for 2026. From today's perspective, we do not expect a meaningful market upswing or a significant easing of geopolitical tensions in the near term. Our forecast for the BASF Group assumes that GDP growth will be slightly lower and that global industrial production growth will be significantly lower than the 2025 level. We expect a further decline in chemical production in the mature economies and weaker growth in the emerging markets. Our planning is based on an average oil price of USD 65 per barrel of Brent crude and an exchange rate of $1.20 per euro. Based on these assumptions, we expect EBITDA before special items to be between EUR 6.2 billion and EUR 7 billion in 2026. BASF Group's free cash flow is expected to be between EUR 1.5 billion and EUR 2.3 billion. Payments made for property, plant and equipment and intangible assets are estimated to be reduced to EUR 3.4 billion. I'd like to add that from a market perspective, the start to the first quarter has been as challenging as expected. In January, volumes in China continued to develop very positively, which is partly related to the timing of the Chinese New Year. But in the remaining regions, volume development has been weak. Given the considerably stronger U.S. dollar in the prior year quarter, currency headwinds on EBITDA before special items could amount to up to EUR 200 million in the first quarter of 2026 alone. So 2026 is likely to be another transitional year with significant headwinds for our industry. Most of the improvements we aim to achieve will need to be driven by our own efforts. We expect a gradual recovery of market conditions in the later part of this year and in 2027 and see promising early indications. However, we are also mindful of short-term demand constraints due to geopolitical and trade-related effects. Let me highlight 3 topics that we will continue to prioritize in 2026. We will continue to actively drive measures to structurally reduce costs by rigorously implementing our cost savings programs, and we will bring down CapEx significantly below the level of depreciation. In parallel, we will hunt for volumes to increase the utilization rates of our plants. And after the successful start-up of our new Verbund site in China, it's now all about filling the asset's increasing utilization rates. Based on our highly competitive cost position, we are confident that we will achieve this goal fairly quickly. Furthermore, we will focus on the completion of the final phase of the MDI capacity expansion in Geismar to capture further profitable growth in North America. And we will build on our successful portfolio measures to crystallize and unlock the value of our stand-alone businesses. We will stay on course to further strengthen our core businesses by implementing the necessary measures. In summary, delivering on our Winning Ways strategy means combining active portfolio steering with capital discipline and strong operational execution when it comes to CapEx and costs. And this way, we will create value for our company. Thank you very much, Dirk and I are looking forward to your questions now. Andreas Meier: [Interpreted] Thank you very much for your presentations. Now the Q&A session. And well, just raise a hand if you would like to take the floor, and I will call your name. [Operator Instructions] We will try to finish the conference by 11:30. [ Mr. Lisman ], Rheinpfalz, you are the first. Unknown Attendee: [Interpreted] Yes. [ Lisman ], Rheinpfalz. You just mentioned that you had to really ask for getting the insurance payment based on the federal guarantee. So were there court proceedings? And secondly, you announced that 4,400 flats in Ludwigshafen will be sold. What about the earnings you expect there? How do you want to use these funds? Does this mean strengthening the balance sheet in order to reduce indebtedness? Markus Kamieth: [Interpreted] Okay. Let me start with the federal guarantee. No, no litigation, no court proceedings, [ Mr. Lisman ]. That we really had to request it actively means you have to request this. The money doesn't come automatically, but you have to report that damage occurred. This is what we did. And then the whole process was handled very constructively and within the time line. So no litigation, but just handing in a justified request. Well, in case of sums like this, nobody just says, yes. So it has been looked into. The flats. Well, I think as of now, we cannot give you a figure here that we expect. The process is starting now. We announced that this is a step we want to take. We asked a company to take care of selling the lion's share of these flats, and we will then wait and see what is being offered. But of course, on the basis of the flats, you can calculate for yourselves what the sum will look like. And what we will use the funds for? Well, we cannot give you exactly what we will do, but strengthening the balance sheet means we free the capital tied up in the flats and make it available for the company. And you are familiar with our general strategy when it comes to investing in our future at Ludwigshafen, including new capacities, and it's about payouts to our shareholders. And we have of course, other opportunities to use our capital. So no clear definition how these funds will be used. Andreas Meier: [Interpreted] Then Ms. Weiss, Thomson Reuters, please. Patricia Weiss: [Interpreted] Well, thank you very much. The worth or value increasing, portfolio increases were on your own set of priorities for 2026. And now there were some clear points that you already started. What's open on your list, what you have planned for when you took your term of office, and what can be still expected? And tariffs, the last verdict from the Supreme Court in the United States. So there are repayments of your U.S. company to -- well, into proceedings to gain back the monies from the tariff policy. Markus Kamieth: [Interpreted] Well, tariff policies can be done by Dirk Elvermann. And I take the other question. So let me remind you that the transaction of Carlyle with Coatings still has to be concluded this year. We expect that for Q2, and it looks very well. But as I said, this still has to succeed. And then there is the big ambition when there is the IPO for Agricultural Solutions for 2027. This is what we aspire. We take all the preparations and that is, well, a lot of work still for 2026. So let me say we are in the middle of everything still, and with our stand-alone businesses, we stick with ECMS too. So that is the quasi-automotive catalyst business that we have. So we want to proceed with our stand-alone business journey completed and then lifted to a new level of ambition, but under the ownership of BASF. So we said we do not want to sell this business. And with batteries, the situation is as is. We focus on ourselves, but we are open for partnerships. And here, too, we have to check whether there are opportunities and possibilities to increase the value of our battery and battery materials business. So we are in the middle of everything, and there's still a lot of work to be done. Tariffs? Dirk Elvermann: [Interpreted] Well, for the tariffs, the most recent developments, of course, have increased uncertainties. And we still don't have a final evaluation of the situation and how high the effects would be and what to do. I think last year, we already made it very clear that it is still valid that the direct effects of tariffs to us and our subsidiaries are relatively low, because we have a very strong local-for-local business, 80% to 90%, and that is still valid. And what concerns us most is the general uncertainty caused by these short-term tariff changes taking place, and that also affects our customer industries or mainly them, and that's still the state of the situation. But still proceedings, litigations, well, this is mainly discussed very often. It is quite obvious. So if the entire regulatory situation changes, then there is a legal claim for BASF Corp to really follow up on this. But the question is, will this really happen, and to which extent? This is not quite clear. And many people are already dealing with it, and you can see it with other companies, too, that at the moment, the situation is very dynamic. And yes, we follow it closely. Andreas Meier: [Interpreted] Okay. Let's continue with Mr. [indiscernible], please. Unknown Attendee: [Interpreted] Yes, you mentioned, well, investing -- going through with your investing, so that the world markets are productively tapped, so to speak. And BASF is still generating money. So this money is used for a restructuring or transforming of assets towards a green chemistry situation? Or is your track that you take rather that you check what you could acquire, that you could buy? Markus Kamieth: [Interpreted] Thank you. So first of all, well, do we invest in Germany? So to invest through to take our money and go through with it, that's not very obvious to explain. It is something that we use to explain that we use this wave of new investments. So we invested a lot of money in new capacities at the Ludwigshafen site, but also in Antwerp. We invested also in the United States and, of course, in Asia, particularly in China. So we come out of this wave now where we wanted to invest in new CapEx. So now we are through with our investment for the moment. So we used everything which was available for us on the market. Of course, we will continue investing in maintenance and optimization of our asset portfolio. Also in Ludwigshafen, we significantly invest into maintenance at the site, and this is large amounts of money. So it shouldn't just sound like we turn off the tap and we don't invest any longer. But you're quite right, of course, that there are also other possibilities to change the portfolio. And in our strategy, we said that acquisitions in order to further strengthen the core of BASF and to prepare it for the next decade, make it stronger for our growth, and this is still the target of our strategy. But in today's market environment, this is not our highest priority. It still, however, remains an opportunity for BASF to establish in the consolidating European market, but also in the strong Asian market. Andreas Meier: [Interpreted] Matthias Kros from Rhein-Neckar-Zeitung, please. Matthias Kros: [Interpreted] So first of all, on the cost savings, you said that the program was accelerated. You might say that you expanded it too because the sum that you want to save is even higher. So what's the reason for it? Was it necessary to save more? Or did it just come along because you wanted to go through with it faster or deeper going? What is the background here? Then headcount reduction, 4,800 was the number that you gave. Could you tell me how much of this number goes to the Ludwigshafen side? And this process is not concluded, obviously. Do we have to expect that the headcount here in Ludwigshafen goes below 30,000, would you say? And we also talked about shutting down assets last year. So to which extent will further shutdowns come for Ludwigshafen. Markus Kamieth: [Interpreted] Well, that's many, many questions all at once. On the cost-saving programs, Dirk, you can certainly add to what I now say. So accelerating and adding, you mentioned both. Well, this program, it always seems as if this program ends at a certain point, and then we don't continue it. But productivity increased and, of course, also cost saving never ends at the end of a program. So an acceleration always looks as if the last bar is higher, as if anything is added. But we always continuously continue that. So the market for chemistry worldwide shows a certain picture, particularly in Europe, particularly with chemistry growth, which in Europe was negative. In Germany, very negative. So here, the cost pressure will stay. And so in the next years, from my point of view, we will have to look to increasing productivity and stabilizing costs and saving costs. So we will not get out of this phase. And our message to our employees is, and we really want to be very transparent here. There's never the moment when we are finished with saving costs. So the market and our competition will put pressure on us. And you saw it in the subject of services. We want to see the perspectives. We want to develop in a way that we can be better in competition. Dirk Elvermann: [Interpreted] So let me complement on that. You asked whether it's necessary. Yes, in a way, it is. BASF was in a difficult environment in 2025, but everybody did a very good job. But at the same time, for Germany, with our earnings, we are in a negative situation. And this is why there is no alternative to continuing our cost saving, but also to take it one step further to see where we can increase productivity. The earnings situation of the company is at a low level right now. And I told you before, looking at our EBITDA margin, you can see very clearly that we have to make further efforts, and we do that continuously and very consistently. Markus Kamieth: [Interpreted] And back to your other question, a split of the number, 4,800 that Dirk mentioned before, I don't know the exact split. We do publish sometimes. Maybe [ Mr. Lisman ] has checked it up already, but I don't know what the exact split is for this number. A significant part of these 4,800 are in Europe. And a significant share of that, again, is in Ludwigshafen. But of course, we can do a fact check here because I don't have the exact figures now. With a perspective, looking into the future for Ludwigshafen, what we want to do is we want to make Ludwigshafen leaner and stronger. Leaner and stronger means that we want to invest in our assets where we see the opportunity to be successful. Just now at the site, we see a lot of expansion investments that we mentioned before. We also have some small adjustments, but we are not planning for any major shutdowns at the core of the Verbund site at Ludwigshafen. But I cannot exclude it for all times. This is the dynamics that we're in. We have to adjust to the market. We did that for tens of years, and we will do so in the future. But what is continuing to happen in Ludwigshafen, and you will have learned about that, too, we have a very strong program when it comes to cost savings, when it comes to personnel cost savings. And in 2025, we took a significant step forward here. You can see it in the one-off costs that Dirk mentioned before, and we will continue to do so in 2026 and 2027, and even accelerate this. So the reduction of headcount here at Ludwigshafen in production, but also in nonproduction areas will continue. And where we will land, what figure it will be? Well, I can't give you any figure here. I've always said this. And I think with the benefit of hindsight, it was a good idea not to give any figures, because the situation has strongly changed already. So let's not forget, it always feels as if time flies since the day when Trump stood in the, yes, Rose Garden with his sign. And the world has changed. And we have to really keep adjusting and keep being flexible. So it was a good idea not to give you one exact factor. We work together with the employee and representatives. We work through the individual projects as best as possible. So today, again, you don't get a target figure. Andreas Meier: [Interpreted] Okay. Mr. Freytag, FAZ, please. Bernd Freytag: [Interpreted] Regarding Ludwigshafen, one follow-up question. So what range is the loss? And what do you expect this year? Second question, Mr. Elvermann, when you ask tariffs to be back, how much have you paid here, to give us an idea? Mr. Kamieth, regarding the European chemicals policy in general. The EU with the critical chemical alliance would like to pick value chains which may be protected or are seen as worth to continue, may probably be subsidized. What are you hoping for here? Markus Kamieth: [Interpreted] Very complex questions. Let me start with chemicals, legislation, EU. Maybe you can take over then. Complicated issue, Mr. Freytag. Let me limit myself to Critical Chemicals Alliance. Otherwise, so many other topics will be added that are decided for us in Brussels. Critical Chemicals Alliance, developed from 2 different types of motivation. It's an initiative by the EU Commission. On the one hand, the shock after corona, because we realized in many value chains, Europe is not in a robust situation. And if we don't watch out, we will lose more value chains in Europe, and we will become even more dependent on other regions or even individual countries. Buzzword, rare earths. Buzzword, antibiotics. During COVID, it turned out, oh, it's not a good thing to be in that weak situation in Europe. Secondly, a short-term aspect, and that's the import pressure that we experienced from the U.S. and from China regarding the chemical industry in Europe, because they put capacities in Europe under pressure. I say we caused this problem, of course, to a large extent, because competitiveness situation is very difficult here. So I welcome this approach. The industry, the EU Commission and many advisers want to sit down and discuss how can we come up with a regulatory framework to make sure that on the one hand, we maintain the European chemical industry. And on the other hand, we do away with the critical dependencies. But I think we must not switch it in a way to come up with an island solution for Europe. We must not have a protectionist development in the chemical industry in Europe. That would be the wrong development. This is why we say we need a balanced approach where protection is necessary for reasons of resilience or, maybe in some cases, in a targeted way for competitive reasons. We are in favor. If it means that it will help, it's okay. But if it continues with noncompetitive situations in Europe, we are against. As a chemical industry in Europe, we don't want to live in a zoo. We want to still live out in the wild. So my appeal to the EU Commission often is do not come up with too many specific aid packages, just make sure you take away the load from our shoulders, so that we can continue breathing. So that's my approach here. But of course, I could spend hours discussing this. Dirk Elvermann: [Interpreted] Mr. Freytag, the other questions. Well, tariffs, I think it's too early to give you exact figures here. Let me tell you, we don't have such a high direct tariff burden, not even in the U.S. I mean, we're not talking about very, very high sums of money. But as Markus said, we look at this specifically. And once we have an opinion, we will announce it. But there is still a lot of momentum in this. BASF SE, well, maybe I can give you one figure. EBIT of BASF SE this year, more than EUR 1 billion negative, of course, for different reasons. Let me start by saying, here on site, people are doing a great job and earnings figures increased on site compared to the prior year. We have a slightly higher capacity utilization, and a lot of things are developing in the right direction with a lot of helping hands. However, the structural weakness in Germany and Europe is continuing. It continues to be a burden. And due to restructuring, of course, we have one-off costs now. We cannot avoid that. And this is reflected also in the figures of our operating activities, but more than EUR 1 billion negative at SE level. This is more than compensated by the positive contributions from the group as a whole. But let me add, that's really important. I understand that this is an interesting figure for you. And well, the earnings of BASF SE, but please bear in mind, BASF SE includes a lot of things. It's the company for our biggest production site, the competitiveness of which is dear to our heart, because people are doing a great job here to make sure that this site becomes fitter. On the other hand, BASF SE is the group company, the parent company here of the group. So it includes a lot of things that are not directly related to the production of this site. So it's a charged figure, so to say. We need to interpret it cautiously. And I always warn against to overinterpret fluctuations in this figure and then thinking you know about the competitiveness of the site. I take a close look. It's important to us to make the site of future fit for the future, fit for a green future, and we are right on track here. Andreas Meier: [Interpreted] Okay. Did this answer all your questions? Thank you. Mr. Leo, Xinhua. Unknown Attendee: [Interpreted] Mr. Kamieth, in today's press release, we read that last year, the Zhanjiang-Verbund site was started up successfully. It's the third biggest production site of BASF globally. Why is BASF continuing to invest so much money in China? Looking at today's uncertain times, how important is the Chinese market in the global strategic approach of BASF? Markus Kamieth: [Interpreted] Thank you for the question. Yes, you are right. In the fourth quarter, so with the highlight of the steam cracker very early in January, we, from our point of view, successfully started up the site. As I said, 32 production assets were started up within only 4 weeks. And I would say, looking at the complexity and the success, I'm only talking about the technical start-up, not the construction, which was also great. But to achieving this with such a quality, I think this is the first ever in the chemical industry. So great performance by the team. And this goes to show that this is what our workforce really, really is able to do. We are very proud of this. Of course, this does not protect us against a very difficult market in China. I said, well, the market is growing. There is volume growth in China. However, prices are under enormous pressure because of high overcapacities in China. This does not only go for the chemical industry. In China, for 40 months in a row, we have producer price inflation. So this producer price inflation is not what the consumer sees, but what the producing industry sees, and there is a strong margin pressure because of this in all Chinese industry. But we think in the mid to long term, this will be a successful site for BASF because the strategic location is fine in South China, in the Guangdong Province, where the heart of Chinese growth is to be found, and we are very competitive. China represents almost 54% of the global chemical market. We are at the right location, with the right assets, with a site which, especially within China, but also at global level is producing with a very, very low CO2 footprint. So strategically speaking, very good. Operationally, in the short term, more difficult than expected. But still, we are convinced that this was the right decision. Even though in '26, 2027, the financial performance will be a little more difficult. In China, we generate around 13% of group sales of the BASF Group. This will increase slightly with the new site to between 15% and 20% probably, but China will become more important for us. And you have to put it in perspective. I tend to compare this with the U.S. The U.S. will still be a much bigger, much more important market than China in future. Sometimes the press says, well, we are somewhat biased here, but we are not. Andreas Meier: [Interpreted] I have 8 further questions. So let us please be brief, and also with the answers, brief answers, please. Ms. [indiscernible] next. Unknown Attendee: [Interpreted] Yes, I would like to come back to China for a minute. So you said Zhanjiang will be profitable starting 2027. I think that's what you said. Could you please go a little more in depth what about the development of the margins and why you assume that things are going to be better? Will overcapacities go down? Or is BASF so cost efficient? Or are the Chinese customers prepared to pay more for carbon or low-carbon products? And maybe one question on India on top of that. So with the trade agreement with India, is the market more attractive now for BASF? Or, yes, the service centers that you established there, is that to do with the trade agreements? Or is it just a matter of time? Markus Kamieth: [Interpreted] Well, the elements that you just mentioned for the potential increase of profitabilities are all correct, but they will not happen in 2026 or 2027. So not on short time. The reason for increase in profitability, 2025, '26 and '27. '25, of course, we had high costs in investing. Now in '26, the direction will be better, but it is still below the 0 line. In 2027, it's getting better. So we are in a ramp-up situation just now, a gradient. And then in 2027, we will have a site which is full up and running with no ramp-up costs. So the ramp-up costs, required additional employees, people who help, additional costs occur. And now we expect a gradual recovery of margins in China, nothing dramatic, but a steady development, I'd say, of the margins. And that's a scenario for the site. So in 2027, we will enter the positive region. But then medium term, some things will come in that you also mentioned. For example, the high attractiveness for low-carbon products that will come at the end of the decade in China. Then there's going to be a recalibration taking place of capacities in China, not very speedily, but over time. So all these things will then come, and this is why we stick to our profitability statements for 2030. No, India -- sorry, India, maybe you? Dirk Elvermann: [Interpreted] Well, it happens at the same time. So your second option. So in India, of course, we look at the growing market in India, and it is an interesting market for us. We said so in the strategy too. And it is also the location for competitive services, particularly in the transactional regions. So it happens at the same time. So we went there, and we also announced the hubs, but it is not as if a lot more has to be interpreted into that situation. And the free trade agreement with India and also the free trade agreement with Mercosur, once it happens, both have no major impact on the chemical industry, because the chemical volumes in India are relatively low compared to the overall trade volume. So it's smaller portions. But there is a potential positive effect to the overall industry in Europe and particularly in Germany. So we really support free trade agreements. So we don't want to erect walls. We want to have free trade agreements. That's what we want to invest in. And that's what we like India, we like Mercosur, but the direct impact on BASF is small. Andreas Meier: [Interpreted] Bettina Eschbach. Bettina Eschbach: [Interpreted] I have 2 questions on India. The 2 new hubs, can you give us a figure, how many jobs will be created and maybe also how many come from Berlin, how many people will be maybe transferred from Ludwigshafen to the hubs? Markus Kamieth: [Interpreted] Well, first of all, Ms. Eschbach, it's going to be global hubs. They will be very important, and that goes both for the digital services, but also for the business services, and particularly for the transactional services. For business services, that is finance and personnel, so HR. So those are going to be global hubs. And let me be very clear about this, for the further hubs that we have, particularly in Berlin, we do not plan to shut down Berlin. We want to continue our hub in Berlin, and the hub is going to be smaller when it comes to the jobs there, but it will play a major role for us and for the services rendered there. A concrete figure, how much less Berlin will have and how much more India? Well, I can't give you that now. We have our direction of travel. We communicated that. We will further work on that. And of course, we, first of all, have to speak with the employee representatives. We have a very good exchange with them going on, and then there's going to be figures afterwards. Now it's early times. Andreas Meier: [Interpreted] Okay. Ms. Martin, please, from Bloomberg. Marilen Martin: [Interpreted] Well, one question on China, please. So what is the capacity utilization that you expect in 2026 and '27 and further? And another question on Wintershall. What about the situation there? Is it the payments that you set for 2026? Are those the last ones? Or will you receive further ones? Markus Kamieth: [Interpreted] Well, let me take the China question. We are very fast when it comes to high capacity utilization. And last year, we already communicated and discussed that with you. And in February, I saw that the steam cracker in Zhanjiang has full capacity utilization, and all downstream plants that you can ramp up quickly, because it's products that you can bring into the market without qualifications, they have high capacity utilization. And in 2026, they will already have a target capacity utilization of very high percentages. And that goes for many products. There are a few exceptions where we are quite aware of being slower because the market situation looks difficult. That's the exception. But there are a few assets where only with the new products, we have to go through the specification and qualification process. We have our surfactants, for example, that's the detergents that go into consumer products. And here, typically, when you produce that from a new plant, a new asset, you have to go through a test period with the customer, and that's about 6 months' time. So here, the ramp-up is a little slower. So this time of the year, half capacity utilization, next year then 100%. But we do use the capacity utilization because it has a very cost-efficient position in China, so we can be quick here. And on Wintershall, for 2025, we had EUR 900 million that we received. And in January, we got another EUR 500 million, and there's going to be EUR 300 additional millions to come. and that then fulfills our claim that we have into this capital coverage of Wintershall. So that's our share, the full share. And then there's going to be another EUR 100 million payment in 2027 and '28, but that will not come from guarantee payments, but it will come from a tax refund, because part of this amount is capital income tax. And then in end of 2027, the rest will come depending on how quickly the tax authorities will work. Andreas Meier: [Interpreted] On my list, I still have Mr. Reitz, Ms. Dostert, Mr. Schreiber, Ms. Nehren-Essing, and Tom Brown. I hope that everything will be covered. And we do have a few minutes left. So let's continue with Mr. Reitz. Hartmut Reitz: [Interpreted] Thank you. I have a question regarding the capacity utilization at the Ludwigshafen site. You mentioned that you are making progress. Maybe you can comment on the situation and the challenges ahead of you. And when it comes to selling the BASF-owned flats. To keep such a number of flats owned by the company is regarded as a commitment to society on part of the company. So are there financial reasons for selling this? Is the pressure too much? Markus Kamieth: [Interpreted] Okay. It's important, regarding your second question, to stress the following. We do understand that the news really made a lot of people uncertain in and around Ludwigshafen. That's understandable. And we do understand the irritation we triggered given those who are in charge at political level and of course, also the tenants in these flats. That's obvious. I experienced this personally. I grew up in a flat owned by [indiscernible] AG and my parents understood they sold the flat and my parents were very concerned what will happen to us now. But well, everything was fine in the end. But I do understand these concerns. Of course, you can say social responsibility, yes, that is one aspect, definitely. But on the other hand, just as an experiment in theory, if we didn't have these flats today, and we stand here today and say, we have income, we have money, we'd like to buy 4,500 flats. There would be a lot of question marks. Why is BASF buying flats? So from a point of view of the company, it is capital tied up, which is a significant amount. And it shows where we have other challenges and where this capital could be used in a better way. I think you need a balanced approach. And of course, we care about the responsibility we have for the Ludwigshafen site and the region. And this is why we will approach the process of this sale, as we announced, in a very responsible manner. And of course, we expect guarantees on part of the buyers that comply with our responsibility. We do not just want to neglect any kind of responsibility, but this is capital that can be used very well in different areas of the company. And from my point of view, for the tenants in Ludwigshafen, it can all be really, really fine. But we have to be successful, and we do everything we can to make it successful. Now capacity utilization in Ludwigshafen, I don't have the figure. I don't know it. You indicated the capacity utilization in Ludwigshafen is going in the right direction. I cannot confirm this. Let me tell you, we are still at a low level. I cannot give you a clear figure. And I just mentioned, and that's correct. Capacity utilization compared to the prior year, which was at a low level, is going in the same direction. So this is the trend I can give you, but there are no significant changes that would be worth a headline. This is just saying a first step in the right direction. But these are just nuances in Europe. In the region of Europe, the figure went down. But in all regions, we grew above market level. Maybe I should have made this part of my speech. So volume-wise, we grew ahead of the market. In Europe, we say our shrinkage was lower compared to the market. Ludwigshafen and Antwerp remain under pressure. If we have a slightly higher capacity utilization compared to prior year, it's minor figures. Capacity utilization-wise, we are still very much under pressure in Europe. This is why we have such a cost pressure, because we need to adjust to this situation. Andreas Meier: [Interpreted] Ms. Dostert, SZ. Elisabeth Dostert: [Interpreted] Last year, you said you had a capacity utilization of 80%. Is that the bad type of capacity utilization? First question. Second question, in Ludwigshafen, when does BASF SE want to make a profit again? Or will you remain at the level where you are at the moment figure-wise? And number three, is there any segment which your new Verbund site in China covers where there are no overcapacities at the moment? Markus Kamieth: [Interpreted] The last question is a difficult one. Yes, yes, there are products we produce in Zhanjiang where there are no overcapacities. That's a matter of fact. But the majority of products we produce there, it's maybe 30 or 40. This operates in a well-supplied market of the chemical industry, well-supplied market that includes different degrees of available capacities ranging from balance to slight overcapacity, up to products which are under enormous pressure at the moment. So we have everything at the Zhanjiang site. But if you take the average with this site today, we enter an oversupplied market in China. I don't want to tell you anything about individual products, maybe I would make a mistake, so I do not want to do this. The 80% last year for Ludwigshafen capacity utilization. The capacity utilization of Ludwigshafen site or of the BASF Group is not a figure I often take a look at, because it's such a huge KPI that doesn't help you when you control the company. It's easy to communicate. It's easy to remember, but I don't look at it so often. So I don't know what the 80% were. The capacity utilization at Ludwigshafen is at a historically low level. There was some tailwind because we took out some capacities over the last 5 years, TDI, adipic acid, caprolactam closures. Of course, this helps. But capacity utilization has not changed considerably, and this is because the European market is shrinking rather than growing. And so I cannot give you more details on the 80%. Well, when will BASF have black figures? Well, as soon as possible. We don't have a specific BASF planning in our strategy, but we are working on whatever we have as part of the [ Lucid ] program as part of the strategy to make it a profit-generating pillar of the group. Otherwise, we will not reach the ambitious targets we have. Ludwigshafen should not be a drain on the group. So this is why there are a lot of expectations when it comes to Ludwigshafen. But we don't have a year I can give you now when we want to be in the area where we have positive figures again, but this is also how we communicate it to our team. Andreas Meier: [Interpreted] Mr. Schreiber, please, brief question. Unknown Attendee: [Interpreted] Well, we heard about overcapacities in China. This means that a lot of chemicals are entering Germany and Europe. Prices are going down. Do you think prices will recover? Do you have a forecast here? And you said emission certificates were in the 3-digit million range. Can you give us a figure for 2025 here? Markus Kamieth: [Interpreted] 2025, it was a little more compared to 2024. Just look at the ETS price and then you will know. But the statement is true, in '25, it was slightly higher than 2024. We think prices will not go down dramatically. In case of many products, we still reached a level where many companies in the chemical industry are not really making a profit. You see how many companies are going bust in Europe. In China as well, a lot of companies are no longer operating profitably. So we have reached the bottom, so to say. Recovering -- well, I think in many products, we will not go down any further. But let me also tell you, we see so many products from China in Europe now. It's important to state Europe is still a net exporter of chemical products. We, value-wise, export more products from Europe than importing them to Europe. But there is an imbalance, because we have a lot of import pressure from the U.S. and China when it comes to energy-intensive, high-volume products. And in public, this then rules the discussion about the chemical industry. But we are by far the biggest producer of specialty chemicals in Europe. Very often, we talk about ETS, about imports from China. These are the base products, what we call upstream products. But the BASF is not a pure upstream company. Pressure is enormous, but when it comes to specialty chemicals, Europe is very strong and a net exporter. That's important. I mean, import pressure from China is an issue, but not that much. Andreas Meier: [Interpreted] Ms. Nehren-Essing. Michaela Nehren-Essing: [Interpreted] Well, many questions were already answered and were also already questioned, but I have one more. At the beginning of your presentation, you said that there are also signs heading into the direction of improvement of the situation. Maybe you can go into that a little more in detail. Where do you see this? And I have a question on the selling of the 4,400 flats of BASF. How high are the costs, the annual costs, because that will also play an important role once you sell flats, because they have to be maintained and all that. Markus Kamieth: Well, second question, I don't have an answer. Maybe you, Dirk. Dirk Elvermann: Well, I do not have an answer on the running costs, but maybe I can put it into perspective. So the flats, what we do not want to do is that we want to save costs here. What we're talking about is how can we use the money reasonably for the company. And I said we have to focus, and we want to use our funds for good chemical production also here in Germany and at the site. And this is why we said, well, real estate administration is not what we want to do really. If we find a buyer that also takes over the social charter that we arranged for our rentees, then we can, of course, find a good solution and with our tenants. And I do not see any, well, proper costs or expenditures in our budget. We just want to use the funds where they best fit. Let me just put it very simply. So the flats are operated today by BASF Bauen and Wohnen, that is a real estate administrator for us, and they actually have a business model that they do it as good as possible as a real estate administrator can do. So for us, it is not something where we say we can save costs here, because these costs remain in this real estate cycle with the tenants, and it's a different cycle. Markus Kamieth: [Interpreted] Positive signals. That's another subject that you alluded to. Looking at what is happening in the world just now, there's many things that can go wrong, a very high volatility, nervousness, well the tariff verdict in the United States, the war planes went into the Gulf War, U.S. war planes. So these are things that are difficult to rate. So it is sometimes also difficult to see positive signals. But let me start in Germany. The infrastructural package was announced with a lot of attention. And last year, we had to say, particularly for our Anglo-Saxon investors, we said it's not going to start in 3 months. But in 2026, we see the first signs and it really gets started. I talk to people who, for example, work in the construction building business. They get this incentive from the government to invest in new buildings, in new barracks for the Army. Maybe you saw recently the purchasing index was mentioned with a figure of over 50. I don't remember the last time when it was over 50, that has to be many, many years ago. But there is a certain optimism, obviously, that in Germany, positive activity is to be expected. But it's too early to celebrate because there are other indicators that point in the different or in the other direction. All in all, we see increased confidence with our consumer and customer partners that goes into the right direction. So well, we reached the trough, so to speak. And that's all I can say at this point. There are some signs for positive growth signals. But if that is going to be sufficient impulses to push us over the 0 line, so to speak, let's see. But if you look into the media, you can find a lot of connecting points to be a little more optimistic for the second half of 2026 and then in 2027 compared to looking back. Michaela Nehren-Essing: [Interpreted] Can I have an additional question, please? Coming back to the flats that you want to sell. You said you manage the flats from yourself, for your own company, as an own unit, you say. But once you sell the flats, that means that you need less people to administer these flats and maintain them, which again means, well, headcount reduction. Markus Kamieth: [Interpreted] Well, it can and might happen, but it doesn't have to. It's early times in this process. So we communicate things very early. We make a decision, and then we don't have all the answers right at the beginning. At BASF Bauen and Wohnen, as far as I remember, they have 80 to 90 staff. And then you have to see, in a potential new construction that has to take over Bauen and Wohnen. And of course, we will keep 1,400 flats because they are near the site, and we want to keep it. But you can see that it is not a subject which will have a big effect on our portfolio and our budget. But we have to accept that there are people who are concerned now, and we shouldn't speculate. But it might be that if the buyer doesn't have any capacities to do the administration of these flats and to maintain them, that these people will be again employed by this buyer. But it's early times, as I said. Andreas Meier: [Interpreted] Tom Brown. Tom Brown: Just a quick one to close off. In light of the bearish environment this year and the insolvencies we've seen in Germany, especially, like do you have a projection on how much capacity you expect to leave the European market? And just kind of building from that, looking at Ursula von der Leyen's comments in Antwerp and the delays in EU Mercosur as well as the delays to funding for Ukraine, do you think there's an argument for centralizing greater power in Europe at the Brussels level? Markus Kamieth: The second question, it's a very fundamental question. I think if you would ask anybody in Europe, [indiscernible] form of the European Union and its constituents or processes, so to say, you would find a high vote. And I would say even people in the European Commission would say, yes, it would be needed because we are struggling with the 27 votes, 27 Unity votes on a lot of big decisions. But there's also no easy answer. And I think, for me, it is not appropriate to now use the word like you used, centralization. It's an oversimplification of what is needed. Everybody wants to make Europe successful. We want to make Europe successful. We have to make Europe successful. I can only warn that especially parties that are making public noise around criticizing that the EU is maybe not good for Germany, that they don't get, let's say, too much airtime with their oversimplistic arguments, because Europe is good for us, Europe is good for European industry, Europe is good for most citizens in Europe, but we could use a more future-ready European Union, so to say, I would say. And I think there probably even Mrs. von der Leyen would subscribe to this. Your first question was on insolvencies... Tom Brown: Yes, insolvencies... Markus Kamieth: I don't know. We have published this -- the Cefic has published this in January. You have maybe seen this if you were in Antwerp, that over the last 3, 4 years, already 9% of the European chemical capacity has been closed with a consequence that 90,000 jobs have already been -- direct and indirect jobs have been affected. And if you look at the dynamics, we are not at the end. So there is more capacity that will be closed. There are insolvencies, there's restructuring. And I would say there's also delayed restructuring now with some asset sales that are happening in Europe. So I would say the time of restructuring in the European chemical industry is not yet over from a BASF perspective. This is also something we feel is necessary. So that's why I said earlier, a protectionism in Europe is not good for the industry, and it's also not good for BASF, because to some extent, the overcapacity also in Europe has to be addressed. The overcapacity is not only in China, it's also in Europe. And noncompetitive assets have to also be restructured. And we believe that this actually is a source of relative competitive advantage for BASF, because we have, in Europe, very competitive assets. In sites like Ludwigshafen and Antwerp, with a high degree of integration, a low cost base in terms of asset cost and good energy integration will actually play out their relative advantage compared to many other chemical sites in Europe, smaller nonintegrated that will get into difficulties. Andreas Meier: [Interpreted] Thanks. We have to come to an end because we have some other calls coming on. And if you have any further questions, we will have to do that later. So thank you very much for the presentation. Thank you very much for your questions and your interest. And before we close the conference, I would like to give you a few points of housekeeping. Today's AGM is going to take place on the 30th of April in the Congress Center Rosengarten in-person attendance, and we will inform you also on the results of the first quarter 2026. We will have a media office area installed for you, and we would love to welcome you there. For the TV and radio teams registered for short interviews with Mr. Kamieth and Mr. Elvermann, please don't approach us here. We have reserved some quiet rooms. Please just contact my colleagues at the door to the lobby. So that's the end of our annual press conference. Thank you very much for your interest. We are looking forward to further exchanges with you and invite you for a little refreshment in the lobby. Thank you very much.
Operator: Good morning, ladies and gentlemen, and welcome to B3's Earnings Results Presentation for the Fourth Quarter of 2025, where Andre Milanez, B3's CFO, will discuss the results; along Fernando Campos, Investor Relations Associate Director. [Operator Instructions] As a reminder, this conference is being broadcasted live via webcast. The replay will be available after the event is concluded. Fernando Tavares de Campos: This is Fernando Campos from B3's Investor Relations team, and I'm here with our CFO, Andre Milanez, to discuss the results for the fourth quarter of 2025. To start, I'll ask Andre to comment on the extraordinary tax effects that mark the quarter and then provide a more general view of the revenues. Andre Milanez: Thank you, Fernando. Starting with the nonrecurring tax effect that impacted the company's net income for the quarter. First, we had the increase -- with the increase of the social contribution announced at the end of last year, we recognized during the fourth quarter, a negative accounting impact from the update of the deferred taxes. Related to the tax amortization of goodwill an impact totaling approximately BRL 1 billion. It is important to emphasize that the fiscal benefit has already been fully used and therefore, we will not have any other impact on the company's cash generation in the future as a result of this adjustment. This is solely a one-off and extraordinary accounting adjustment that we had during the quarter. On the other hand, we distributed BRL 1.5 billion in nonrecurring interest on capital as well, which was -- which helped to partially offset the negative impact from the deferred tax adjustment that I mentioned before. It is also worth to highlight that we still have around BRL 4 billion in nonrecurring IoC interest on capital to be distributed over the next years, which this will have a positive effect on the company's cash generation. If we were to exclude those two effects in the quarter, net income would have reached BRL 1.4 billion, which represented an increase of 22% in relation to last year. Speaking about performance, the quarter delivered solid results with an 11% increase in total revenues and growth across all segments. I would like to highlight the rise that we saw in ADTV throughout the quarter, which ended December at a level significantly higher than in September, showing a consistent recovery trend, which has been reinforced by the volumes that we have been observing in January and more recently during February as well. Fernando will now provide a bit more detail on the operational performance. Fernando? Fernando Tavares de Campos: Thank You, Andre. In the derivatives market, even with a slight annual decrease in total ADV, we observed a relevant sequential recovery with increases in mainly all contract groups during the quarter. Indexes and interest rates in Brazillian Reals, products continued to show strong momentum supporting the segment's performance, which was negatively impacted by FX and crypto products due to the devaluation of the USD against the BRL that impacted the RPCs of those contracts. In equities, ADTV reached 26.2 billion, an increase of 2% compared to fourth quarter 2024 and 20% compared to 3Q '25. ETFs, BDRs and listed funds continue to gain relevance, representing more than 17% of the total volume reinforcing the trend of investor diversification and the importance of the company's product diversification strategy. Fixed income remains one of the Big 3 key growth pillars. The corporate debt market continues to show strong progress with issuances and outstanding balances growing consistently. Treasury Direct also had another strong quarter with increases in both the number of investors and outstanding balance. Data, analytics and in technology, we delivered another quarter of solid results. data analytics solutions grew nearly 20%, reflecting strong demand from the credit, loss prevention and insurance vertical. In technology, we expanded the number of clients in the monthly utilization service and observed robust growth in market support services. It's worth noting that starting this quarter, we are including Shipay in this line, which contributed with BRL 5 million in revenue from November to the end of the quarter and added new capabilities to the ecosystem. Now Andre will comment on the remainder of the financial performance. Andre Milanez: Well, on the expense side, we remained with our cost discipline. Total expenses grew only 1.5% year-over-year with our adjusted expenses up by 4.7%, which was in line with the inflation for the period. We saw some stability in information technology expenses and a decrease in third-party services, which helped to offset increases related to the annual bargaining agreement and the structures that were merged into B3 in the beginning of the year. As a result of that, our recurring EBITDA reached BRL 1.83 billion, an increase of 15%, with a margin of 69%, consolidating another quarter of high operational efficiency. Our recurring earnings per share reached BRL 0.29 per share, a growth of almost 30% when compared to the fourth quarter of last year. Regarding new products, in November and December, we brought to the market new weekly option expiries for the Ibovespa global financial event contracts and the family of products linked to the S&P B3 Ibovespa VIX Index, reinforcing our strategy to broaden our portfolio and offer new hedging and exposure alternatives to investors. Still in the product pipeline, we received very recently authorization from CVM to launch the digital options on interest rates, FX, bitcoin inflation and GDP for professional investors at this moment. Our goal is to continue to work to offer this type of products to more investors and to expand also the products across other asset classes. Another important milestone was the launch in February of this year of the new positioning of B3's data and applied intelligence business under the new brand called Trillia which brings together Neoway, Neurotech, the infrastructure for financing unit, PDtec and DataStock reinforcing the construction of a new culture and strengthening our data and analytics offering. Thank you very much, see you soon. Operator: [Operator Instructions] Our first question comes from Renato Meloni from Autonomous Research. Renato Meloni: Just two quick questions. Wondering if you can just give some perspectives for ADTV for the rest of first Q here, really solid numbers on 4Q, and I think we're seeing similar trends here, but I'm just wondering if you have a more informed view to share with us? And then secondly, I'm curious on AI here, if -- how you're discussing potentially with partners or internally any opportunities that you could capture by integrating like data that you have with AI offerings? And how are those discussions there going? Andre Milanez: In relation to the ADTV, we saw improvements as you've seen in the numbers during the last quarter. January has continued that trend we already released the operational data on January and the average volume in January was around BRL 33 million, BRL 34 billion. February is still showing a good trend with volumes until now going over that mark. So far, it has been a positive trend that continued throughout January and February. As we discussed mainly so far, driven by international investors that have been allocating in equities. Regarding artificial intelligence, we have been exploring opportunities in terms of efficiency in software development and activities that can be -- can benefit from the use of AI. Last year, I think it was a year where there was a lot of knowledge building throughout the organization on the tools and how to use it. And we started to see an increase in the usage of those tools in daily activities in several areas throughout the company. But there is also a lot of opportunities particularly on the data side. Some of our offerings already have the use of artificial intelligence with machine learning and stuff, but we do see room for continue to improve that with Gen AI, with developing solutions that can be sold through agents and these kind of things. So this is going to be also an area of focus on the revenue side on how can we improve or increase our offering in terms of data solutions with the use of Gen AI. Operator: Our next question comes from William Barranjard from Itaú BBA. William Buonsanti Barranjard: I have two questions. The first one regarding the ADTV, right, you told us it's going strong in the first quarter. I would like to understand how the margins charged here is faring. If it's similar to what we saw in the fourth quarter if it's going down due to volumes and higher discounts to those volumes or not? And I have a second question regarding predictive markets. Last year, December, we've heard an interview from [ Juan ] from [ Kalshi ] that they were willing to come to Brazil. I would like to understand how you see B3 going forward acting in this market if this eventual [ Kalshi ] operation here in Brazil is something that you worry about or is a different business that you don't want to go to? Those are the two ones. Andre Milanez: I'll start with the second question, and then Fernando can comment on margins. As we discussed during the presentation here, we are moving towards this agenda of prediction markets, digital options. We just received approval from the Securities Commission to launch the first digital options with certain financial indicators, bitcoin, FX, the Ibovespa index, GDP and inflation, those at this stage are going to be only allowed or for professional investors. We are working towards expanding the access to these products to other types of investors and expanding the asset classes. So this is something that we will be exploring with the market over the course of this year which is not necessarily slightly different from what you've seen in other markets in terms of volumes. They are more concentrated towards other things such as sports and et cetera. This is not something that we will be pursuing at this stage. So it's going to be focused digital options or prediction contracts, whatever you want to call it, focused on financial indicators, which we believe could be very interesting and helpful to the market to investors. Fernando Tavares de Campos: So regarding margins, equities margins, given how our pricing scheme is structured, there are two main components that you have to think about it. So the first one is volumes. So when you think about volumes, this is something that probably is making our prices and our margins in the first quarter to be a little lower. But on the other hand, you have the mix. And the mix when you have more real money on the market, and that's what we've been seeing in the first 2 months for in flows, mainly from real money and massive managers and not HFTs, so this brings prices up a little. So all in all, we are seeing margins flat compared to the fourth quarter, given those two different dynamics. For the year, it's super hard to predict given that those two components, although the market is optimistic about our volumes, the mix is something that we do not have. It's super hard to predict. So hoping that answers your question. Operator: Our next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: A couple of questions also. Just a follow-up on the margins, right? Because last time we saw volumes spiked significantly, like in '21, '22 margin reached 80%. I'm not saying margins are going to go back to those levels. But just at least in the short term, should we see some benefits to margins just given this spike that we're seeing in volumes and then that sort of normalizes over time, which is what we saw some what happened last time, just to try to think about how much room there is for maybe some short-term margin expansion as volumes sort of pick up immediately. Any color on that would be helpful. And then second question, you still have BRL 4 billion in IoC benefits that you can realize. Just any color on the time line for realizing that? And then also not how can we think about the underlying factory, particularly over the next few years as you have to incorporate a higher tax rate. Andre Milanez: Thanks for the question, Tito. So in relation to your point about margins our -- in general terms, our schedule of prices share some of the operational leverage with clients as we reach high volumes. Having said that, not all of that operational leverage is shared. So on average, prices can be -- average prices can be lower. But that's the benefit of having a business model that has this high degree of operational leverage. So we pretty much need the same cost structure, the same setup to deal with volumes of BRL 20 billion or volumes over BRL 30 billion. So pretty much all of that increase that we see on revenues will flow straight to the EBITDA to the bottom line. So directly to your point, it is possible that we see some margin expansion as a result of that benefit of the operational leverage that our business model has. Regarding the IoC question, so yes, we still have a balance of around BRL 4 billion to be distributed in terms of IoC that was identified not used in the past. This was only possible because of a judicial measure that we took plus the fact that, that was rule as part of a leading case by the superior court. We -- the time line for you to use that will depend a lot on the limits that we will have to deduct that interest on capital, which is the higher of half of our reserves or half of our net income in general terms. So if we have one of those limits allowing us to deduct or to use more of the IoC, we will do that. So as a result of that, this is probably something that we will be discussing and announcing more towards the second half of the year where we will have more visibility as to the level of those limits to maximize how much we can distribute in '26. Daer Labarta: Great. And just -- excluding that, how should we think about the tax rates, particularly as it's going to be going up a bit? Andre Milanez: Well, as from the first of April, we will start to see an increase in our social contribution by 3%. That will then be increased by another 3% starting in '28. For the -- as we discussed for the short term, this IoC from prior years will help to more than offset that impact. I think there are things that we have been working on to try to reduce the tax burden that this increase will have in the company. But we will be somehow affected by that increase. I think there are ways, as I said, to reduce the impact of those measures, but this is something that we are still working on. Operator: Our next question comes from Yuri Fernandes from JPMorgan. Yuri Fernandes: I have one on operating leverage. Given we are seeing an acceleration on revenues, especially on ADTV and all those questions about margins and how they should track. My question is on the OpEx and CapEx lines. We know you have a guidance right for this year. But just checking given you have new products, new investments, modernization, AI, all those things combined, any chance that in the case you are positively surprised by revenues? We could see maybe a little bit of more higher expenses. I know the business model is its pre-leverage, right? So more revenues not necessarily meaning more expenses, but just checking if we see better revenues, you could kind of anticipate some cost. And then I would like to ask also on data analytics and technology. I think these lines, they have been pretty good lately. There is a little bit of price component, but we also see new products or new verticals doing fine. And this quarter, Trademate that I don't remember if you had a number for revenues, you start disclosing like a number for revenues. So if you can comment on in general terms on those lines data and technology, how should we think how much growth could we expect for this year? Andre Milanez: So the first one about expenses or operational leverage. Look, I think we have been trying to continuously find efficiencies in our, let's say, more mature activities in order to finance investments that we will continue to do in new products and new services expanding our portfolio modernizing our infrastructure. So at the moment, we do believe that the current level allows us to do that, so we can have a more controlled growth in terms of our expenses and CapEx without having to compromise investments in modernization and expansion of portfolio, et cetera. And that also imposes us a challenge to continuously find those efficiencies. So I don't think the positive trend in revenues changes that dynamic. I think the only variable that we have here is in relation to the what we call the revenue-linked expenses, which we have less control, right, so which are almost a consequence of a positive performance in revenues. If that happens, those should grow. But as a direct -- almost a direct impact of the growth that we will see on revenue. So I think that remains being the case. In relation to the data and technology, I'll pass it on to Fernando to give you a little bit more color, but I can come back at the end as well. Fernando Tavares de Campos: Regarding data, I think, like you said, we -- it's been a sequential -- we have been seeing sequential good quarters, good growth and it's a quality growth. We have been seeing in 2025 of the growth in data and technology, mainly on the analytics close to 70% was in recurring revenues, which gives us confidence for the future. So like I said, it's been in all the verticals, credit, insurance, even sales and marketing, loss prevention, and it's been mainly with recurring revenues. Although in the fourth quarter, we have more what we say here, one shot revenues, which is common. You guys saw that on the last few years, but it's a quality growth on data. In technology, it's like it's super stable as well. We do have all the access to our platforms and we have inflation adjustment for prices, and we have new initiatives. Regarding Trademate, it's something that you know we've been talking about it for a few in the past. It's something that excites us. In the year, the revenue was almost BRL 20 million. It's basically concentrated still on govies on the trading of government bonds. And we do have plans this year to increase and expand that to the revenues in corporate bonds as well. I don't know if Andre wants to complement. Andre Milanez: Yes, I think the revenues are on Trademate are still being -- the prices there are still being subsidized at this stage. We are more focused now in increasing liquidity, increasing volumes that are being traded electronically. There's still a lot of room for further electronification in that market, but we are so far happy with the results that we have been achieving, but that can be going forward a more relevant revenue stream for the company besides all the benefits that the market will have as a result of that increasing electronification. I think the only thing I would add is that with the merger that from the companies that we have last year, we are more and more working with all these companies together that was, let's say, marked by the launch of a new identity and brand for this data initiative and the idea is to work more and more closely combining all the skills and capabilities of these companies or the businesses that we had. And in our view, this will help to maximize and accelerate the potential that we have in terms of new products and solutions within that segment. So yes, we are very excited with the potential here and the results that we have been achieving so far. Operator: Our next question comes from Kaio Prato from UBS. Kaio Penso Da Prato: I just have a quick follow-up from this question from Yuri, but basically expanded a little bit. You're talking about data and technology, but we have been seeing like really good growth in all of these revenues lines, excluding the volume-linked such as equities and derivatives. So if you look to the rest of the business, the noncyclical part, just wondering if you can share probably this is a little bit more predictable what could be, say, targets of revenue growth going forward for 2026 or even further? Just to understand if you can maintain this double-digit pace or so, if this is a base effect. We are also seeing quite strong growth on the vehicle real estate, the OTC business as a whole. If you can share a little bit more about your thoughts on that would be good. Andre Milanez: Look, as you said, I think that was part of our strategy. The diversification provides us with different sources of revenue, sources of revenues that are less dependent on the cycles without necessarily raising the benefits of having those also cyclical business that can grow a lot in more favorable moments such as the one we have been seeing or a brief moment that we have been seeing now in the beginning of this year. That's why we also wanted to reinforce or bring -- call the attention of investors and analysts to that point during our Investor Day last year. I think we do believe with the without going into the detail of every line, and I think Fernando can provide more color here, but we do believe that those businesses can continue to grow double digits, some products with maybe high double digits, others low double digits. But we do believe that these businesses have -- we have the ability to continue to grow them at that pace. A lot of that will come from further penetration of existing products, cross-selling of solutions, et cetera, but a lot of that also coming from new products that we have on the pipeline to launch and bring to the market. So at least for the -- for this year and next year, I think this is -- and part of that growth already in some cases, already guaranteed given the nature of recurrency that we have in certain revenue streams. Operator: Our next question comes from Maria Guedes from Safra. Maria Guedes: Congrats on the results. So you have been heard for lines that have been performing really well recently, have equities, fixed income data and technology. But derivatives has been some kind of a laggard during last year. And we saw some acceleration in the fourth quarter. But I just wanted to understand what are the expectations for 2026. I mean you have some potential catalysts. You have new products to be launched. You have some moves in interest rates once Central Bank starts to cut SELIC. So do we -- should we expect to see some growth acceleration in the line? Just wanted to hear from you. Andre Milanez: Look, I think when you talk about derivatives and looking to what we saw last year, right? First, I think we had a very high comparison base, '24 was a very strong year for certain asset classes, particularly for derivatives on interest rates. We have to remember that there was a lot of volatility in the interest rate curve. We saw -- we started with the Central Bank cutting rates and then very suddenly changing hands and starting increase rates, again, that helped or triggered a lot of volatility and therefore, a lot of trading activity on derivatives last year. So that made the comparison more difficult. We also had the event that we discussed previously in terms of the increasing margin requirements that have had an impact on the volumes for the crypto derivatives. But in general terms, I think with the agenda of continuously launching new products with an expectation that given that this is an election year, that we will have more volatility and also with, as you said, expectation that we might get in closer and closer to the beginning of an easing cycle, I think all of those factors will benefit that business segment, and therefore, we can expect a better performance here than we saw last year. But again, not all of that is under our control. But the perspective is definitely more positive for that segment for those reasons that I described. Operator: [Operator Instructions] This does conclude today's Q&A section. I would now like to invite Andre Milanez to proceed with his closing statements. Andre Milanez: I just wanted to thank you all for your support for joining the call and listening to us. I think '25 was a very positive year for the company, a year where we were able to see the results of our strategy, playing an important role in delivering growth A lot of initiatives that were launched and worked on doing '25 that are going to also be important to the future growth of the company. And we entered '26 very optimistic and very excited with the opportunities that we have ahead of us and hope to continue to count on your support. Thank you very much. Have a nice day. Operator: That does conclude B3's presentation for today. Thank you very much for your participation, and have a wonderful day.
Operator: Good morning or good afternoon. Welcome to Swiss Re's Annual Results 2025 Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group CEO. Please go ahead. Alexander Andreas Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate you taking the time to join us today. Before our Group CFO, Anders Malmstrom, will walk you through the detailed numbers, I'd like to start with some brief remarks as usual. It was a good day. 2025 has been a successful year for Swiss Re, but also for all key stakeholders, our clients and partners, our investors, but also our employees. We have two priorities: first, delivering on our group net income; and second, increasing the resilience of Swiss Re to improve the consistency of earnings delivery over time. In 2025, we delivered against both priorities, also allowing us to increase our capital repatriation to shareholders. We achieved a record group net income of USD 4.8 billion against our target of more than USD 4.4 billion and an ROE of 20%. This result reflects disciplined underwriting, strong recurring investment income and low burden of large losses outside of the first quarter last year. At the same time, and this is equally important, we further strengthened the resilience of the group. We completed the Life & Health Re portfolio review, added to the current and prior year reserves in P&C Re, continued to increase initial loss assumptions well in excess of economic inflation and applied the uncertainty load on new business across the Swiss Re Group. In addition, we achieved more than USD 100 million of cost savings in 2025. Therefore, we're well on track to deliver our targeted USD 300 million reduction in the operating cost run rate by 2027. P&C Re and Corporate Solutions achieved an excellent result, supported by strong underwriting performance and lower-than-expected large claims. P&C Re achieved a combined ratio of 79.4%, well within its target of below 85%, while Corporate Solutions delivered a combined ratio of 86.5% comfortably meeting its target of below 91%. Just as a reminder, the 86.5% combined ratio for Corporate Solutions is calculated on a different basis than that of P&C Re, reflecting a gross revenue view and including all expenses. On a like-for-like basis, Corporate Solutions combined ratio would have been 80%. These outcomes reflect the actions we have taken in recent years to build the highest quality portfolio we've ever had in both P&C businesses. And against this backdrop, we entered the renewal for January 2026. The outcome was in line with expectations with no real surprises. We executed on our priorities: first, to lead with confidence in segments where we have differentiating value propositions; secondly, to actively manage our sub-portfolios to respond to the more competitive market, including prioritizing sustainable structures; and third, to grow together with our clients by offering solutions that address challenging concentration risks. Overall, while demand increased competition intensified, especially in nat cat. Although clients selectively increased retentions, Swiss Re selectively or successfully, I should say, preserved our share of wallet. Casualty prices were up, but we remain cautious even as our repositioning actions are complete. We expect similar conditions in the upcoming renewals, always obviously subject to loss activity. What does that mean in terms of numbers? On volume, we renewed treaty contracts representing USD 12.4 billion of gross premium in line with the business up for renewal. Overall, nominal pricing was broadly flat, with mid-single-digit improvements in casualty, offset by similar declines in property, particularly for nat cat covers. The gross premium volume developments mirror this divergence. At the same time, based on a prudent view on inflation and updated loss models, we increased loss assumptions by 4.6%, resulting in a net price decrease of 4.3%. Importantly, and I repeat importantly, terms and conditions remain stable. In addition, we reduced our external retro for nat cat at the 1/1 renewals, as flagged already at the management dialogue in December, thereby increasing our nat cat exposures. Now turning to Life & Health Re. In 2025, we completed the review of underperforming portfolios and took targeted actions to address related sources of volatility. The assumptions updates booked in the fourth quarter that impacted the insurance service results and CSM balance are in line with our guidance provided at the management dialogue. Despite all these actions, Life & Health Re delivered a net income of USD 1.3 billion for the full year. As a consequence, Life & Health Re is on a much stronger footing with clearer visibility on earnings delivery. This gives us confidence in achieving the increased net income target of USD 1.7 billion for 2026. And in Life Health Re's ability to be the stable earnings provider to the group, covering the majority of our ordinary dividend. Our earnings were underpinned by a strong investments contribution, with a return on investments of 4% and the recurring income yield of 4.2%, providing an important and stable contribution to our earnings. We've also made substantial progress on our decision to withdraw from iptiQ with all remaining parts now being either sold or to be placed into runoff in due course. Looking ahead, we confirm the financial targets we communicated at our management dialogue in December. For 2026, we are targeting a group net income of USD 4.5 billion, reflecting our confidence in the resilience of our business units, disciplined underwriting and active cycle management. In closing, I would really like to thank our employees for their strong commitment and hard work throughout the year 2025. I'd like to thank our clients and partners for their continued trust. And you, I'd like to thank you, our investors and analysts for your engagement and support. Now with that, I'll hand over to Anders to you for a closer look at the financial details of the 2025 results. Anders Malmstrom: Thank you, Andreas, and good morning or good afternoon to everyone on the call. I will make a few remarks on the results we released this morning before we move to the Q&A. Let me start with the insurance service results of our businesses. P&C Re reported an insurance service result of USD 3.6 billion for 2025, significantly above the prior year level. The increase was driven by favorable experience variance, partly offset by lower CSM release, reflecting the earn-through of prudent initial loss picks, including the impact of the uncertainty allowance on new business as well as slightly lower margins. Experience, variance and other which captures deviations from initial reserving assumptions contributed a positive $698 million in 2025. This was primarily driven by large nat cat losses that came in USD 1.2 billion below expectations. Against this highly favorable backdrop, we further strengthened P&C Re's resilience by selectively adding to both current and prior year reserves. For the full year, we added about USD 200 million to current year reserves and around USD 100 million to prior year reserves in nominal terms. These prior year reserve additions are net of releases. We have substantial reserve redundancies on short tail lines close to USD 1 billion, which we recycled into longer tail lines in the form of IBNR reserves. This obviously benefits overall resilience. On the back of these actions, P&C Re reported a very strong combined ratio of 79.4% for the year, comfortably achieving its full year target of below 85%. Turning to Corporate Solutions. The business unit delivered another strong year, achieving a full year combined ratio of 86.5%, comfortably meeting its target of less than 91%. The insurance service result increased to $1.2 billion in 2025, up approximately $200 million year-on-year, primarily driven by higher CSM release, reflecting stronger in-force margins. Experience, variance and other was positive at USD 217 million, reflecting favorable large loss experience and a positive prior year reserving result, partially offset by reserve additions for the current year. Large nat cat claims of USD 148 million were below full year expectations, while large man-made claims of $351 million, were slightly above, partially offsetting the favorable nat cat experience. Finally, in Life & Health Reinsurance, the insurance service result was USD 1.2 billion in 2025 compared with $1.5 billion for 2024, reflecting the impact of detailed reviews of underperforming portfolios concluding in 2025. For the full year, the negative assumption updates related to these reviews impacted the P&L by around USD 650 million, of which approximately USD 250 million in the fourth quarter. This is in line with the guidance provided at the management dialogue. Both the full year and fourth quarter assumption update, we're focused on three markets: Australia, Israel and South Korea. In addition, adverse experience impacted the insurance service result by approximately USD 300 million for the full year with close to $200 million of the impact attributable to the market mentioned before. Despite these actions, Life & Health Re delivered a net income of USD 1.3 billion for 2025. While the assumption reviews also impacted the CSM balance, in addition to the P&L, the CSM remains robust at USD 17 billion, supported by prudently priced new business and favorable FX movements. On revenues, the group's insurance revenue amounted to USD 43.1 billion compared with $45.6 billion in the prior year, reflecting several key drivers that were already flagged throughout the year. As we have said repeatedly, we do not manage for top line. Earnings are what matter and the quality and resilience of earnings continue to improve in 2025. Moving on to investments. Asset Management delivered another year of strong returns with an ROI of 4.0%, in line with last year, reflecting a recurring investment income of USD 4 billion. In 2025, we benefited from the sale of Definity, offset by targeted losses within the fixed income portfolio. So let me conclude with capital. Swiss Re's Board of Directors will propose a dividend of USD 8 per share, representing a 9% increase, thereby delivering against our stated objective of growing the ordinary dividend paid between 2025 and 2027 by at least 7% per year. On the announced buyback, last December we added important changes to our regular long-term capital distribution policy, which focuses on growing the ordinary dividend and complementing this with a sustainable buyback that is linked to the achievement of our annual group net income target. Beyond this, we have been clear that we do not rule out the possibility of additional excess capital repatriation in the form of extraordinary buybacks. Today's announcement of USD 1 billion extraordinary buyback on top of the dividend and the $500 million sustainable buyback should be seen in that context. The $500 million sustainable buyback is here because we have achieved our group net income target. The additional USD 1 billion extraordinary buyback reflects all the key drivers. Firstly, we generated USD 4.7 billion of SST capital in 2025 despite the various actions we took to increase the resilience of the group, in particular on the Life & Health Re side. Secondly, the extraordinary buyback is consistent with our focus on managing this important phase of the P&C Re pricing cycle. And thirdly, the extraordinary buyback reflects our confidence in the overall resilience of the group, having successfully completed a host of actions across our businesses in the last 2 years. We expect to launch the buyback in early March with completion targeted by the end of 2026. Our announced capital actions today imply total payout of USD 3.9 billion or approximately 80% of our full year 2025 earnings. The group's SST ratio, including all of the announced capital actions remains at a strong 250%. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A. Thomas Bohun: Thank you, Andreas. Thank you, Anders. As usual, before we start the questions, if I could just remind you to limit yourself to two questions. Should you have additional questions, please rejoin the line. With that, could we have the first question, please? Operator: Sure. The first question comes from Will Hardcastle from UBS. William Hardcastle: Will Hardcastle from UBS. First one is just trying to really triangulate and work out where the starting point to think of the '26 combined ratio is. I wonder if you can try and help with some of that working out to the underlying, so we can compare it to that better than 85% bridging with the 3 points worse combined ratio from January renewal, that would be helpful. And then secondly, can you talk me through the rationale of buying less retro year-on-year and therefore, adding greater volatility? I guess it comes slightly in conflict to your added resiliency. So just trying to understand why that happened. I'm trying to think that presumably return on capital, I guess, the belly of the risk as well or is it just on the tail? Anders Malmstrom: Okay. Maybe I'll start here. And I think your first question is the starting point of the combined ratio. And basically, I think what we've tried to figure out is what's the normalized combined ratio after the renewals, in a way and then where do you get that. And look, I think if we do that, I think we obviously have to normalize for seasonality, we have to normalize for the smaller FX and then incorporate the new information we have with the renewals, which I think we stated as being around 3% nominal. So in our view, this would bring us somewhere between 84% and 84.5%, somewhere there for the year. But I think this already incorporates all the prudent assumptions that we took. When you look at the -- our assumption that we increased the loss picks by 4.6%. That's significantly higher than inflation. So I think there's some, call it, prudency in. I think we have the uncertainty load. And then at the same time, we bring the -- we have all the expense actions. So I think this brings us well in line with the target also for 2026 to be below the 85% target that we have. I hope that helps. Alexander Andreas Berger: On the retro? Anders Malmstrom: On retro, yes. Alexander Andreas Berger: Yes. I mean, I can maybe start there. I think we're not known to depend on retro. We have a strong balance sheet, and we believe and trust our underwriting. We were using retro historically, yes. But when we believe that the margins remain with us and that we can deploy the capacity that we have allocated to nat cat in particular, that situation occurred. And then we said, why not benefiting from it in-house. And I think this is something -- that is a strong statement actually for the underwriting that we have in the underlying quality of the book supports it. So we'll take decisions in future and weigh up whether or not it makes sense. On the other hand, it's also important from a capacity deployment perspective, not to add to the fire, fuel -- oil into the fire, because if you add more capacity in a rate declining an environment, you will actually obviously intensify the competition. And this would be counterintuitive for the stability of rate adequacy that we would like to achieve. So that's the context for this decision, and then we'll revisit it. But at the moment, we feel very comfortable with this decision. Thomas Bohun: Could we have the next question, please? Operator: Next question comes from Kamran Hossain from JPMorgan. Kamran Hossain: I've got two questions. The first one is on the buyback. If I think back to December in the IR Day, I think, Andreas, you made quite a few references to the term, kind of the lemon tree, and I think you talked about sustainability, consistency and not wanting to squeeze the lemon tree too hard. How should we -- how should I interpret those messages that you were trying to give in December and the extraordinary buyback today? Was it just 2025 was extraordinary and therefore, don't think about it that don't plug that in or an additional buyback into later years because it simply is just an extraordinary set of circumstances? Or are you planning to squeeze things a little bit more? The second question is on Life & Health. So in the fourth quarter, obviously, you had the assumption changes, which were in line with your expectations. You then have some other kind of negative experience, variance in the fourth quarter. How comfortable are you that the kind of negative experience rate from kind of Q1 '26 just goes away completely? Should we -- is that what you assume and that's what we should assume? Alexander Andreas Berger: Yes. Okay. Let me take the first one and second one. I can pass on to Anders on the Life & Health side. 2025 should not be seen as a new normal in the nat cat activities. We had a Q1 where we exceeded our budget, nat cat budget, but then we had a very benign rest of the year in nat cat. That's not the new normal. Exposures exposure can happen any time. And that is reflected also in the budget that we set up. We've got a budget of $2.1 billion for nat cat. And let's see. So this can happen any time. So what we wanted to do is really bring in that professional underwriting view from a technical perspective that we are managing cycles. Cycle management is what we do. And then we look at our portfolio and see what lines of business are correlating with each other, in particular, when we assume certain cycle developments. We see a decline in property in particular in cat. And as I said before, we don't want to fuel the fire by adding more capacity to a declining market. So the quality of the rates and the rate adequacy is really important. So in that context, you should see the comments that we did in December at our management dialogue. And if you now look forward into '26 and maybe even beyond, we will see maybe similar behavior in the '26 renewals. So let's see. But it just requires one big event, loss event and then the whole dynamics will change. And that's the message I wanted to get across. And that's why we said don't take this as a new normal. We don't want to squeeze the lemon now. We're managing expectations in the sense of what does the market say and what do the cycles tell us. So we want to create a lemon tree here, and that's what we did and starting and continuing to do, because we need to manage the cycles and the volatility. We've got a diversification benefit through Life & Health, which is helping. But I think within the P&C businesses, that cycle management is key, in particular, at the moment, applying disciplined underwriting. Anders Malmstrom: Yes. Maybe just to reiterate back on Life & Health, what I already just said on the call. I think we really finished now all the reviews. I think we strengthened the reserves significantly during that review. And then we actually look where the volatility that we had, the negative experience where it's really coming from out of the USD 300 million that we had, USD 200 million came from these underperforming markets that we just strengthened. So I feel very comfortable now that after all that work that you will not see this adverse experience in the future years. And look, I think now we're going to continue to just do -- every year, we do the updates and go through the portfolios, and you will not see large movements because you do it on a regular basis. And of course, we can always have some volatility, but we feel very comfortable now that all the assumptions are set to what we have experienced and what we expect in the future years. Thomas Bohun: Can we have the next question, please? Operator: The next question comes from Shanti Kang from Bank of America. Shanti Kang: So just on the prudence that you've added today, you mentioned the skew between shorter and long-tail lines. And I was just wondering if you could give us some color on what particular lines you address more heavily or if that was more evenly spread across risk lines? And then just on the renewals, I noticed that you offset some of the volume decline in property and nat cat with some gains in specialty and casualty. Can you just characterize the specialty lines that you felt were most attractive to grow? And also on casualty, which areas feature interest there? Anders Malmstrom: Okay. So maybe I'll start with the first one and Andreas will take the prudence. And I think very clear that we had on the short-term business, we had releases of basically close to USD 1 billion, and we moved them over to the long term. And I think we evenly spread that. It's not that one particular line had a problem because we are not talking about problems here. We're talking about strengthening resilience. So this is not one particular line that got that. And I think it's important, this is all IBNR. This is all IBNR that we use to strengthen the resilience. Alexander Andreas Berger: Maybe on the renewals, in particular, you said we were offsetting casualty by property by growth in casualty and some specialty lines. On the casualty, I can specifically say it was rate developments, positive rate developments. We are not -- we're still very conservative because we think it's still a market or a line of business where you have to apply prudence, not only in U.S. liability, but also in EMEA and Europe, where you don't want to pick up through the back door the U.S. casualty or U.S. liability exposures through European treaties. In Europe, particularly, the growth came from motor portfolios in particular on the casualty side. On the specialty side, I think overall, I think we were very happy with the lines of businesses. We're a bit cautious in the marine and energy space. We see very healthy situations in engineering, although competition is increasing in this line of business as well, so something to watch. And then the aviation market, we've seen positive price changes on a nominal basis on the adjusted risk-adjusted basis, it was almost flat. So that's the picture we can see at the moment. On the cyber side, I can say risk-adjusted, we don't see a very positive picture. So we've got slight decline. So we're very prudent there in the underwriting. And you see it in the market also that some of the players were also pulling back some capacity because we need to watch the rate adequacy. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Andrew Baker from Goldman Sachs. Andrew Baker: The first one, probably a little bit of a follow-up on Will's question. But can you help me try and reconcile the 5% year-on-year increase in cat budget with your P&L losses to weather events have sort of increased 20% to 30% or so. Does this just mean that you're writing a lot of the incremental cat exposure in the higher layers? Or is there something else going on here? And then secondly, on insurance revenue. So I appreciate what you're saying on the focus on the bottom line, but it has been a pretty volatile top line in '25 and been quite difficult for us to forecast. I think you made the comment in December and correct me if I'm wrong, that you expect the group number in '26 to be broadly flat versus '25. Is this still the case? And I guess, is there any variation divisionally we should take into account? Anders Malmstrom: I think the first question was more about the cat budget. So I think the nat cat budget increased, as you say, by 5% from USD 2 billion to USD 2.1 billion. I think the reduction in retro doesn't really impact the expected nat cat. So this is much more in the tail. So this is a capacity that we increased, but that's in the tail. So the expected nat cat should not really be impacted by that decision. So that's why I think it's, say, a natural increase of 5% of the nat cat budget to USD 2.1 billion. And second question? Alexander Andreas Berger: The insurance revenue. I mean, look, there's a mixed items here. So we've got the earn-through of the casualty, U.S. casualty pruning. We had some individual items, smaller items, also on CorSo, for instance, the medex book, the medical expense book on the A&H side that went to AXA from the Irish MGA that we were underwriting. So those were smaller items, and they added up, obviously, to that number. And in terms of guidance... Anders Malmstrom: Yes. I mean, we don't really give guidance in terms of revenues. But I think we mentioned many times that we don't manage to revenues, but you could probably see that the market generally grows with GDP or slightly above that. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Ivan Bokhmat from Barclays. Ivan Bokhmat: My first question will be fully also going back to one of the earlier questions on the combined ratio development. I'm just trying to understand, as we look into 2026 and perhaps in outer years, so if 84.5% at the starting point, we can assume delivery on cost savings, but -- which is 1.5 to 2 percentage points, this still leaves a little bit of a balance that would push combined ratio higher unless we assume some sustainable reserve releases. And of course, given the buffers you create, this is not unreasonable. But maybe you could talk a little bit about that progression and how the balance sheet could be deployed at what time frame? And the second question, I wanted to ask you about renewals and the new business CSM and P&C Re. So we've had this year in '25, the growth was negative 5%. I'm just wondering maybe you could try to separate the FX impact within that and also perhaps suggest some view into 2026 of how should that be affected by the renewals? Alexander Andreas Berger: Yes. Maybe let me just do here the intro, and then I'll hand over to Anders. Just on the cycle management piece. So you've got two elements, the cost obviously and then the loss ratios to look at. And cycle management, as far as the exposure is concerned, that's our day-to-day business. And we set the strong foundation now, the underlying portfolios are strong. And that's why we think we can manage those cycles very effectively. So with the bottom line view. Now expense management is becoming part of day-to-day business. We have introduced a philosophy here that we actively obviously optimize the setup of the group. That's what we did with the organizational effectiveness measures and also faster decision-making that translated automatically into expense savings, and we're going to continue there. I'm not going to talk about the productivity gains that we're going to get through AI because that is a new area, and we haven't factored that into our plans yet. So that's a general view. And then again, we are in an extremely volatile market. That's our business. So one big event can change the dynamics completely, and that would then lead automatically to a hardening of the market again. So I wouldn't rule out dynamics like that. Because the alternative capital that's coming into the industry also has to then experience the losses that are coming through. And we are a long-term player with strong balance sheets, and that's what we need to manage. Anders Malmstrom: Yes. So maybe just back to your question a bit on the numerical side, on the quantitative side. So I think as we mentioned before, I think you're going to get a normalized combined ratio of below 85%. This reflects the prudence. So I think you can expect if everything else as expected that we're going to see reserve releases. And then on top of that, the expense actions, that will continue. This is not over in 2025. We took the first 100 this year, we're going to have another 100 -- and another 200 over the next 2 years. So that will help. And then, yes, I mean, prices will not always go down. So I think we feel very confident and comfortable that I think we will stay below the 85% obviously, upset any huge nat cat events that clear when we budget. But I think it's really the combination of prudent reserving, expense actions and then disciplined underwriting. And then on the new business CSM, I mean, the new business CSM will come out in Q1. I think that's when we come with the exact number. I mean you've got now all in for how much the renewals impact the combined ratio. So that's a good proxy. But the exact number we're going to provide in Q1. Thomas Bohun: Could we have the next question, please. Operator: The next question comes from James Shuck from Citi. James Shuck: I just have to begin with just a couple of questions on some of the moving pieces in the combined ratio. So I appreciate the new business loss component is seasonal. However, the full year number is still a very large number. I think from memory, you were kind of guiding to around 1.5 to 2 percentage points as being the loss component and it's been 2.5% in '24 and around 3% in '25. So what's driving that? $500 million negative loss component is quite a large number in the context of the overall insurance service results. So just keen to get some insight into the outlook for that number. And also if you're able to just comment a little bit on the expense ratio, which went up from 4.8% to 5.4%. I presume that's just your ending front-loaded costs ahead of the reduction and efficiency program. And then finally, just on the group items, iptiQ now largely disposed or fully in runoff. I know you guided to sort of a $50 million reduction in the loss at iptiQ on an annual basis. But has that been accelerated in the period? The Q4 loss in group items was bigger than anticipated. So what was the iptiQ loss booked in Q4 and the outlook there, please? Anders Malmstrom: Okay. Maybe I'll start on the first one. Again, I think your question about the new business loss component. And I mean, look, I think the way I think about this is, this is really driven by the prudent loss picks and you should then see that coming through positive variance going forward. That's really how I look at because we write profitable business. It's not that we don't write profitability. It's just the way you reserve for, it becomes onerous day 1, and then it releases over the -- to positive experience. Alexander Andreas Berger: Maybe just on iptiQ, no, there's no acceleration. Just to remind us, we have first sold the P&C iptiQ Europe business to Allianz. And then we sold the U.S. Solutions -- the Health Solutions business that was, call it, a lead management company that we had. And then we were busy looking at the individual portfolios. So we had a remaining EMEA Life & Health book, but also the U.S. book, and we could successfully then conclude on the U.S. book. So that's also sold. And we have the remaining piece, the EMEA Life book. And here, we decided to send this EMEA Life & Health book into runoff. So that's going now into the normal runoff activities and manage runoff as we always do and see what opportunities occur in the runoff process. Thomas Bohun: And so there's no change on iptiQ guidance, which we said should be at around minus $50 million in 2027. And to the question, in Q4, there is an amount of around minus $100 million related to the sales of iptiQ. Operator: Next question comes from Chris Hartwell from Autonomous. Chris Hartwell: A couple of questions, please. First of all, just going back to the Life side, and I think it builds an extension from Kamran's question earlier. If I look at the start point of 2025 and add back the experience variance, that gets me to a much higher number than what you are implying in your 2026 target. So I was wondering if you could just help me understand maybe some of the moving parts between, I guess, what we saw last year and that 2026 target? And the second question just really reflecting back on the renewals. Obviously, we've seen quite a significant reduction in price. You and I think many of your peers have confirmed that terms and conditions have remained stable. I'm just wondering what your feelings are about how much room there is or willingness there is for T&Cs to soften as we go through this year. And obviously, notwithstanding the fact that you have mentioned that the market is fairly balanced. But I just wondering really on your sort of the outlook for terms as we go through the year. Anders Malmstrom: Yes. So maybe I'll start on the Life & Health side. And I think you're absolutely right. If I just take the experience out and add it back in, I think I get higher. Now I think when we discussed about that before, I think the CSM release was higher than what we expected, and that's what we were guiding for. And I think that's something we discussed. I think we clearly understand this is really driven by the assumption changes themselves, but also just management actions, BAU management actions like recaptures and so basically drove the CSM release up. And so if I normalize for that, I get back to a CSM release of in the range of 8% to 9%. And if I then back that -- to take that together with the non-repeat of the experience variance, I get back to the targets that we basically put out for Life & Health. That's really how to triangulate. Alexander Andreas Berger: Just quickly on the renewals. Again, I can repeat myself. By the way, there's some good news. The broker reports all predicted a steeper decline of rates, and I think that didn't materialize. So that's the good news. So the market was still broadly constructive or professional actually because there's still demand, but in the negotiations, the reinsurers stayed pretty disciplined. And the rest will be seen for this year. I expect a very competitive market still, nevertheless. The next renewals are the 1st of April renewals and mainly Japan renewals. And again, Japan is a different market and different dynamics in the market. We had a good renewal last year, and we'll see what the renewal brings this year. And then we will have obviously the 1st of June, 1st of July renewals in the U.S. Those are the important data points to look at. First, I see still a constructive market. We'll have to see how the buyers' behavior is. The fact is that the buyers all need strong lead reinsurers. And you could see that the market share didn't reduce. So we didn't reduce our market share even though the absolute -- I mean, the pie was shrinking that people were taking more risk on their own balance sheet. That created another opportunity for us to go into software solutions, et cetera. But overall, we were not signed down. So they need still strong lead capacity, lead underwriters with the expertise that gives me comfort for the next renewals. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Iain Pearce from BNP Paribas. Iain Pearce: So just on net operating capital generation. So the 21 points net capital generation this year, do you view that as a relatively clean number or a good starting point to use going forward? Obviously, there's a lot going on this year in terms of Clean Care, Life & Health review. But is that a good number going forward? And also, does that new business strain, the 0.5 in the increase in total capital include the changes in the retro very long, because it's the 1st of January '26, I think. If you could just clarify those two points, that would be great. Anders Malmstrom: Yes. So look, I think this is a good proxy for the capital generation. So I think in general, that was, I think, the year think really showed more or less in certain areas, we obviously have the assumption changes. But other than that, I think it's -- you can expect -- I always guide to around 25 percentage points of net capital generation -- gross capital generation before repatriation. So that's a good proxy. Thomas Bohun: And then the target capital that already includes the reduction in retro, capital requirement. Anders Malmstrom: I missed that. Yes, that's already -- that's all reflected. Correct, yes. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Vinit Malhotra from Mediobanca. Vinit Malhotra: I hope you can hear me. So my first question is just -- and apologies, a bit repetitive, but I want to be clearer from my side. The extraordinary buyback, if you could just please elaborate what conditions we should look at as triggers or a possible trigger for another such extraordinary buyback in the future? So that's my first question on extraordinary buyback. Second question is actually on the nat cat increased exposure. So just to be very clear, the fact that you have increased your net nat cat exposure probably had a favorable impact on the 3 percentage points of the nominal combined ratio. Is that a correct understanding? Are you able to give some idea of how much benefit that was from this strategy? Anders Malmstrom: Okay. I maybe start again with the extraordinary buyback and maybe I just kind of emphasize what I said before. I mean you have the main part of the -- call it, on our capital return policy is dividend and sustainable buyback. That's the -- I would say that's the core. And then if we're in a situation where we have excess capital, and we don't believe that we want to and have the opportunity to deploy it with the right return, that's when we consider ordinary -- an extraordinary buyback. So you can't bake that in. So you should -- it's quantitative and qualitative, but that's really the way we think about it. And this was this year very clear, that is qualified. Alexander Andreas Berger: Just quickly on nat cats question. Just to clarify, the renewals are growth. That's before retro. Thomas Bohun: So the information on the slide is our growth, and we show you the impact just based on that. So any changes in retro are not accounted for in that estimate of... Operator: The next question comes from Ben Cohen from RBC. Benjamin Cohen: I had two questions, please. Firstly, just on M&A. Could you just sort of reiterate kind of what your priorities are there? And with regards to the deal that you announced last week, should we assume that, that will achieve the targets that you have for CorSo as a whole? Or is there anything that you want to call out there? And the second question was just on the return on investments going forward. Do you expect that, that yield will rise going into 2026? I just asked because I think there have been periods in the past, say, at the end of 2024 when you had a very high reinvestment yield and actually the sort of the ROI hasn't or didn't go up last year. Alexander Andreas Berger: Let me take the M&A question. So our M&A priorities didn't change. We always were very clear to say we don't see at this stage any transformational M&A opportunities. But what we would look at is additions to the portfolios, and particularly in Corporate Solutions, we said that we are happy to add in the areas, we call them focused growth areas that are decorrelated to the property and cat cycles. And that, in particular, was credit and surety, and we were very open about this. Now we only do these bolt-on acquisitions when they really make sense. Here, we have the opportunity to add the portfolio that QBE wanted to discontinue or divest. And that, in particular, is a trade credit and surety portfolio, their global portfolio with a strong presence in Australia. Why is it so interesting? Within the trade credit -- within the credit and surety book that we have in Swiss Re, it added another nice diversification. So all-in-all, very positive. And we will continue to look into those bolt-on acquisitions if they make sense and if they are in the areas that help us to further strengthen the resilience of our liability portfolio, target liability portfolio. Anders Malmstrom: And just on the investments, so just to reiterate what we have said. So the ROI itself was 4%. The recurring investment yield is 4.2% right now. And the reinvestment yield was 4.4%. So all pretty close to each other. And obviously, when you then calculate how -- over time, how this develops, yes, you bring 4.4% in, but the question is always how much actually goes out. And you can expect that this has very little impact. It should have a slight positive impact, but it depends what actually matures over time. So I would expect that to remain pretty stable. Thomas Bohun: Could we have the next question, please? Operator: We now have a follow-up from James Shuck from Citi. James Shuck: I just had a couple more things, please. CorSo's revenues in the fourth quarter were very weak, with down 10% year-on-year. Just keen to understand that development, please. I also wanted to ask a question on the expense ratio again, which I think was answered last time. I just keen to know it went from 4.8% to 5.4%. Is that just a temporary jump? Does it go back to 4.8% in '26? And then just on your new CTO, I thought it was interesting what are the first priorities for this Chief Technology Officer? Alexander Andreas Berger: Yes. Maybe I'll take the CorSo one and the CTO and then maybe you can elaborate on the expense ratio. Just on CorSo revenues, it's very simple. This is the portfolio of the Irish medex book, that was taken over by AXA. And this is -- to be concrete, it's $200 million. So that is sort of the decline. Otherwise, CorSo had some healthy new business opportunities, in particular in the differentiating propositions in international programs and alternative risk transfer. Those were the most attractive ones. On the CTO, it's not the Chief Technology Officer, because we already have a Chief Data and Technology Officer. It is a Chief Transformation Officer. What is this? We are in a transformation process. The company went not only on a cultural transformation, but also we were streamlining processes, increasing proximity to markets by delayering the organization. And we do have ambitions and concrete use cases also around Agentic AI. This needs to be embedded into the organization, cascade through the organizations from top to bottom. And I think here, we need specific focus, in particular, on execution rigor and delivery here so that we don't increase again, the complexity of the organization, which will end up in increased costs again. So this is the idea of this new role that we created. AI, but not only AI is really changing the way we organize our business and the way we process our business. Anders Malmstrom: Okay. And then on the expense ratio in CorSo, I think we saw that increase in P&C Re. Thomas Bohun: The question was on P&C Re. Anders Malmstrom: I thought it was on CorSo. Thomas Bohun: So in P&C Re, we have some one-off effects from year-end accruals, and it's always better to look at the full year number. Also last year, we had an impact under the first year of IFRS or some out-of-period adjustment. So we would suggest just to look at the full year '25 number as the basis. Alexander Andreas Berger: Yes. We have seasonality in the cost, project costs, et cetera, that are then coming in late in the year. So that's the effect. Thomas Bohun: Could we have the next question, please. We have time for one more. Operator: The next question comes from Roland Pfaender from ODDO BHF. Roland Pfänder: Two questions, please. First one on Life & Health. Could you speak about your CSM new business growth ambitions, let's say, if you strip out large deals, what would be the underlying growth target you have for '26, '27? Just to understand it a little bit better. I think it was flat year-over-year for the year. Second question on CorSo. Rates are coming down. Do you need to execute cycle management here? Or do you still see some growth pockets like specialty or other things, which might keep growing? That would be also interesting. Anders Malmstrom: So on the growth ambition, for Life & Health, maybe before I talk about the ambition itself, I think we have a very strong in-force business here. And the in-force itself brings us sustainable kind of new business. And I think you saw that kind of without any large transactions, we were actually able to sustain the new CSM just through new business CSM. And that's really the core here. That's important. And that's what we want to maintain that make sure that the in-force produces the new business itself. And then on top of that, we're always looking at transactions. If they make sense, they have to make financially sense. Otherwise, we pull back, but that's in a way, the upside, but the in-force itself allows us to keep the CSM flat. Alexander Andreas Berger: Yes. So on the CorSo side, in addition to rigorous and disciplined underwriting and cycle management, there are obviously business opportunities, in particular, when you look at geographical opportunities. And we try to optimize -- continue to optimize the setup. We partner where partnerships make sense. We have a very well-run joint venture in Brazil and in those kind of emerging markets, you could expect maybe also some partnership models that we would do rather than planting the flag and have from scratch organic growth opportunities. So this is something that the team is looking at. But in particular, we're looking for expansions in the differentiation that we have in international programs and alternative risk transfer. Alternative risk transfer, why? Because like we discussed it for the large cedents, the primary insurance companies who take our premium from the market, that same phenomenon happens with large corporates. They take on more risk on their balance sheets and they create their captives. And with the captives, we have a leading position in managing helping captives at the fronting before the captive and within the captive and behind the captive with capacity, reinsurance capacity. So it's a unique one-stop shop proposition, which is very successful. Thomas Bohun: Thank you, Roland. With that, I would like to thank you all for your interest, for your questions. Should you have any follow-up questions, please do not hesitate to contact any member of the IR team. Thank you again. We wish you a nice weekend. Operator: Thank you all for your participation. You may now disconnect.
Operator: Good morning or good afternoon. Welcome to Swiss Re's Annual Results 2025 Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group CEO. Please go ahead. Alexander Andreas Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate you taking the time to join us today. Before our Group CFO, Anders Malmstrom, will walk you through the detailed numbers, I'd like to start with some brief remarks as usual. It was a good day. 2025 has been a successful year for Swiss Re, but also for all key stakeholders, our clients and partners, our investors, but also our employees. We have two priorities: first, delivering on our group net income; and second, increasing the resilience of Swiss Re to improve the consistency of earnings delivery over time. In 2025, we delivered against both priorities, also allowing us to increase our capital repatriation to shareholders. We achieved a record group net income of USD 4.8 billion against our target of more than USD 4.4 billion and an ROE of 20%. This result reflects disciplined underwriting, strong recurring investment income and low burden of large losses outside of the first quarter last year. At the same time, and this is equally important, we further strengthened the resilience of the group. We completed the Life & Health Re portfolio review, added to the current and prior year reserves in P&C Re, continued to increase initial loss assumptions well in excess of economic inflation and applied the uncertainty load on new business across the Swiss Re Group. In addition, we achieved more than USD 100 million of cost savings in 2025. Therefore, we're well on track to deliver our targeted USD 300 million reduction in the operating cost run rate by 2027. P&C Re and Corporate Solutions achieved an excellent result, supported by strong underwriting performance and lower-than-expected large claims. P&C Re achieved a combined ratio of 79.4%, well within its target of below 85%, while Corporate Solutions delivered a combined ratio of 86.5% comfortably meeting its target of below 91%. Just as a reminder, the 86.5% combined ratio for Corporate Solutions is calculated on a different basis than that of P&C Re, reflecting a gross revenue view and including all expenses. On a like-for-like basis, Corporate Solutions combined ratio would have been 80%. These outcomes reflect the actions we have taken in recent years to build the highest quality portfolio we've ever had in both P&C businesses. And against this backdrop, we entered the renewal for January 2026. The outcome was in line with expectations with no real surprises. We executed on our priorities: first, to lead with confidence in segments where we have differentiating value propositions; secondly, to actively manage our sub-portfolios to respond to the more competitive market, including prioritizing sustainable structures; and third, to grow together with our clients by offering solutions that address challenging concentration risks. Overall, while demand increased competition intensified, especially in nat cat. Although clients selectively increased retentions, Swiss Re selectively or successfully, I should say, preserved our share of wallet. Casualty prices were up, but we remain cautious even as our repositioning actions are complete. We expect similar conditions in the upcoming renewals, always obviously subject to loss activity. What does that mean in terms of numbers? On volume, we renewed treaty contracts representing USD 12.4 billion of gross premium in line with the business up for renewal. Overall, nominal pricing was broadly flat, with mid-single-digit improvements in casualty, offset by similar declines in property, particularly for nat cat covers. The gross premium volume developments mirror this divergence. At the same time, based on a prudent view on inflation and updated loss models, we increased loss assumptions by 4.6%, resulting in a net price decrease of 4.3%. Importantly, and I repeat importantly, terms and conditions remain stable. In addition, we reduced our external retro for nat cat at the 1/1 renewals, as flagged already at the management dialogue in December, thereby increasing our nat cat exposures. Now turning to Life & Health Re. In 2025, we completed the review of underperforming portfolios and took targeted actions to address related sources of volatility. The assumptions updates booked in the fourth quarter that impacted the insurance service results and CSM balance are in line with our guidance provided at the management dialogue. Despite all these actions, Life & Health Re delivered a net income of USD 1.3 billion for the full year. As a consequence, Life & Health Re is on a much stronger footing with clearer visibility on earnings delivery. This gives us confidence in achieving the increased net income target of USD 1.7 billion for 2026. And in Life Health Re's ability to be the stable earnings provider to the group, covering the majority of our ordinary dividend. Our earnings were underpinned by a strong investments contribution, with a return on investments of 4% and the recurring income yield of 4.2%, providing an important and stable contribution to our earnings. We've also made substantial progress on our decision to withdraw from iptiQ with all remaining parts now being either sold or to be placed into runoff in due course. Looking ahead, we confirm the financial targets we communicated at our management dialogue in December. For 2026, we are targeting a group net income of USD 4.5 billion, reflecting our confidence in the resilience of our business units, disciplined underwriting and active cycle management. In closing, I would really like to thank our employees for their strong commitment and hard work throughout the year 2025. I'd like to thank our clients and partners for their continued trust. And you, I'd like to thank you, our investors and analysts for your engagement and support. Now with that, I'll hand over to Anders to you for a closer look at the financial details of the 2025 results. Anders Malmstrom: Thank you, Andreas, and good morning or good afternoon to everyone on the call. I will make a few remarks on the results we released this morning before we move to the Q&A. Let me start with the insurance service results of our businesses. P&C Re reported an insurance service result of USD 3.6 billion for 2025, significantly above the prior year level. The increase was driven by favorable experience variance, partly offset by lower CSM release, reflecting the earn-through of prudent initial loss picks, including the impact of the uncertainty allowance on new business as well as slightly lower margins. Experience, variance and other which captures deviations from initial reserving assumptions contributed a positive $698 million in 2025. This was primarily driven by large nat cat losses that came in USD 1.2 billion below expectations. Against this highly favorable backdrop, we further strengthened P&C Re's resilience by selectively adding to both current and prior year reserves. For the full year, we added about USD 200 million to current year reserves and around USD 100 million to prior year reserves in nominal terms. These prior year reserve additions are net of releases. We have substantial reserve redundancies on short tail lines close to USD 1 billion, which we recycled into longer tail lines in the form of IBNR reserves. This obviously benefits overall resilience. On the back of these actions, P&C Re reported a very strong combined ratio of 79.4% for the year, comfortably achieving its full year target of below 85%. Turning to Corporate Solutions. The business unit delivered another strong year, achieving a full year combined ratio of 86.5%, comfortably meeting its target of less than 91%. The insurance service result increased to $1.2 billion in 2025, up approximately $200 million year-on-year, primarily driven by higher CSM release, reflecting stronger in-force margins. Experience, variance and other was positive at USD 217 million, reflecting favorable large loss experience and a positive prior year reserving result, partially offset by reserve additions for the current year. Large nat cat claims of USD 148 million were below full year expectations, while large man-made claims of $351 million, were slightly above, partially offsetting the favorable nat cat experience. Finally, in Life & Health Reinsurance, the insurance service result was USD 1.2 billion in 2025 compared with $1.5 billion for 2024, reflecting the impact of detailed reviews of underperforming portfolios concluding in 2025. For the full year, the negative assumption updates related to these reviews impacted the P&L by around USD 650 million, of which approximately USD 250 million in the fourth quarter. This is in line with the guidance provided at the management dialogue. Both the full year and fourth quarter assumption update, we're focused on three markets: Australia, Israel and South Korea. In addition, adverse experience impacted the insurance service result by approximately USD 300 million for the full year with close to $200 million of the impact attributable to the market mentioned before. Despite these actions, Life & Health Re delivered a net income of USD 1.3 billion for 2025. While the assumption reviews also impacted the CSM balance, in addition to the P&L, the CSM remains robust at USD 17 billion, supported by prudently priced new business and favorable FX movements. On revenues, the group's insurance revenue amounted to USD 43.1 billion compared with $45.6 billion in the prior year, reflecting several key drivers that were already flagged throughout the year. As we have said repeatedly, we do not manage for top line. Earnings are what matter and the quality and resilience of earnings continue to improve in 2025. Moving on to investments. Asset Management delivered another year of strong returns with an ROI of 4.0%, in line with last year, reflecting a recurring investment income of USD 4 billion. In 2025, we benefited from the sale of Definity, offset by targeted losses within the fixed income portfolio. So let me conclude with capital. Swiss Re's Board of Directors will propose a dividend of USD 8 per share, representing a 9% increase, thereby delivering against our stated objective of growing the ordinary dividend paid between 2025 and 2027 by at least 7% per year. On the announced buyback, last December we added important changes to our regular long-term capital distribution policy, which focuses on growing the ordinary dividend and complementing this with a sustainable buyback that is linked to the achievement of our annual group net income target. Beyond this, we have been clear that we do not rule out the possibility of additional excess capital repatriation in the form of extraordinary buybacks. Today's announcement of USD 1 billion extraordinary buyback on top of the dividend and the $500 million sustainable buyback should be seen in that context. The $500 million sustainable buyback is here because we have achieved our group net income target. The additional USD 1 billion extraordinary buyback reflects all the key drivers. Firstly, we generated USD 4.7 billion of SST capital in 2025 despite the various actions we took to increase the resilience of the group, in particular on the Life & Health Re side. Secondly, the extraordinary buyback is consistent with our focus on managing this important phase of the P&C Re pricing cycle. And thirdly, the extraordinary buyback reflects our confidence in the overall resilience of the group, having successfully completed a host of actions across our businesses in the last 2 years. We expect to launch the buyback in early March with completion targeted by the end of 2026. Our announced capital actions today imply total payout of USD 3.9 billion or approximately 80% of our full year 2025 earnings. The group's SST ratio, including all of the announced capital actions remains at a strong 250%. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A. Thomas Bohun: Thank you, Andreas. Thank you, Anders. As usual, before we start the questions, if I could just remind you to limit yourself to two questions. Should you have additional questions, please rejoin the line. With that, could we have the first question, please? Operator: Sure. The first question comes from Will Hardcastle from UBS. William Hardcastle: Will Hardcastle from UBS. First one is just trying to really triangulate and work out where the starting point to think of the '26 combined ratio is. I wonder if you can try and help with some of that working out to the underlying, so we can compare it to that better than 85% bridging with the 3 points worse combined ratio from January renewal, that would be helpful. And then secondly, can you talk me through the rationale of buying less retro year-on-year and therefore, adding greater volatility? I guess it comes slightly in conflict to your added resiliency. So just trying to understand why that happened. I'm trying to think that presumably return on capital, I guess, the belly of the risk as well or is it just on the tail? Anders Malmstrom: Okay. Maybe I'll start here. And I think your first question is the starting point of the combined ratio. And basically, I think what we've tried to figure out is what's the normalized combined ratio after the renewals, in a way and then where do you get that. And look, I think if we do that, I think we obviously have to normalize for seasonality, we have to normalize for the smaller FX and then incorporate the new information we have with the renewals, which I think we stated as being around 3% nominal. So in our view, this would bring us somewhere between 84% and 84.5%, somewhere there for the year. But I think this already incorporates all the prudent assumptions that we took. When you look at the -- our assumption that we increased the loss picks by 4.6%. That's significantly higher than inflation. So I think there's some, call it, prudency in. I think we have the uncertainty load. And then at the same time, we bring the -- we have all the expense actions. So I think this brings us well in line with the target also for 2026 to be below the 85% target that we have. I hope that helps. Alexander Andreas Berger: On the retro? Anders Malmstrom: On retro, yes. Alexander Andreas Berger: Yes. I mean, I can maybe start there. I think we're not known to depend on retro. We have a strong balance sheet, and we believe and trust our underwriting. We were using retro historically, yes. But when we believe that the margins remain with us and that we can deploy the capacity that we have allocated to nat cat in particular, that situation occurred. And then we said, why not benefiting from it in-house. And I think this is something -- that is a strong statement actually for the underwriting that we have in the underlying quality of the book supports it. So we'll take decisions in future and weigh up whether or not it makes sense. On the other hand, it's also important from a capacity deployment perspective, not to add to the fire, fuel -- oil into the fire, because if you add more capacity in a rate declining an environment, you will actually obviously intensify the competition. And this would be counterintuitive for the stability of rate adequacy that we would like to achieve. So that's the context for this decision, and then we'll revisit it. But at the moment, we feel very comfortable with this decision. Thomas Bohun: Could we have the next question, please? Operator: Next question comes from Kamran Hossain from JPMorgan. Kamran Hossain: I've got two questions. The first one is on the buyback. If I think back to December in the IR Day, I think, Andreas, you made quite a few references to the term, kind of the lemon tree, and I think you talked about sustainability, consistency and not wanting to squeeze the lemon tree too hard. How should we -- how should I interpret those messages that you were trying to give in December and the extraordinary buyback today? Was it just 2025 was extraordinary and therefore, don't think about it that don't plug that in or an additional buyback into later years because it simply is just an extraordinary set of circumstances? Or are you planning to squeeze things a little bit more? The second question is on Life & Health. So in the fourth quarter, obviously, you had the assumption changes, which were in line with your expectations. You then have some other kind of negative experience, variance in the fourth quarter. How comfortable are you that the kind of negative experience rate from kind of Q1 '26 just goes away completely? Should we -- is that what you assume and that's what we should assume? Alexander Andreas Berger: Yes. Okay. Let me take the first one and second one. I can pass on to Anders on the Life & Health side. 2025 should not be seen as a new normal in the nat cat activities. We had a Q1 where we exceeded our budget, nat cat budget, but then we had a very benign rest of the year in nat cat. That's not the new normal. Exposures exposure can happen any time. And that is reflected also in the budget that we set up. We've got a budget of $2.1 billion for nat cat. And let's see. So this can happen any time. So what we wanted to do is really bring in that professional underwriting view from a technical perspective that we are managing cycles. Cycle management is what we do. And then we look at our portfolio and see what lines of business are correlating with each other, in particular, when we assume certain cycle developments. We see a decline in property in particular in cat. And as I said before, we don't want to fuel the fire by adding more capacity to a declining market. So the quality of the rates and the rate adequacy is really important. So in that context, you should see the comments that we did in December at our management dialogue. And if you now look forward into '26 and maybe even beyond, we will see maybe similar behavior in the '26 renewals. So let's see. But it just requires one big event, loss event and then the whole dynamics will change. And that's the message I wanted to get across. And that's why we said don't take this as a new normal. We don't want to squeeze the lemon now. We're managing expectations in the sense of what does the market say and what do the cycles tell us. So we want to create a lemon tree here, and that's what we did and starting and continuing to do, because we need to manage the cycles and the volatility. We've got a diversification benefit through Life & Health, which is helping. But I think within the P&C businesses, that cycle management is key, in particular, at the moment, applying disciplined underwriting. Anders Malmstrom: Yes. Maybe just to reiterate back on Life & Health, what I already just said on the call. I think we really finished now all the reviews. I think we strengthened the reserves significantly during that review. And then we actually look where the volatility that we had, the negative experience where it's really coming from out of the USD 300 million that we had, USD 200 million came from these underperforming markets that we just strengthened. So I feel very comfortable now that after all that work that you will not see this adverse experience in the future years. And look, I think now we're going to continue to just do -- every year, we do the updates and go through the portfolios, and you will not see large movements because you do it on a regular basis. And of course, we can always have some volatility, but we feel very comfortable now that all the assumptions are set to what we have experienced and what we expect in the future years. Thomas Bohun: Can we have the next question, please? Operator: The next question comes from Shanti Kang from Bank of America. Shanti Kang: So just on the prudence that you've added today, you mentioned the skew between shorter and long-tail lines. And I was just wondering if you could give us some color on what particular lines you address more heavily or if that was more evenly spread across risk lines? And then just on the renewals, I noticed that you offset some of the volume decline in property and nat cat with some gains in specialty and casualty. Can you just characterize the specialty lines that you felt were most attractive to grow? And also on casualty, which areas feature interest there? Anders Malmstrom: Okay. So maybe I'll start with the first one and Andreas will take the prudence. And I think very clear that we had on the short-term business, we had releases of basically close to USD 1 billion, and we moved them over to the long term. And I think we evenly spread that. It's not that one particular line had a problem because we are not talking about problems here. We're talking about strengthening resilience. So this is not one particular line that got that. And I think it's important, this is all IBNR. This is all IBNR that we use to strengthen the resilience. Alexander Andreas Berger: Maybe on the renewals, in particular, you said we were offsetting casualty by property by growth in casualty and some specialty lines. On the casualty, I can specifically say it was rate developments, positive rate developments. We are not -- we're still very conservative because we think it's still a market or a line of business where you have to apply prudence, not only in U.S. liability, but also in EMEA and Europe, where you don't want to pick up through the back door the U.S. casualty or U.S. liability exposures through European treaties. In Europe, particularly, the growth came from motor portfolios in particular on the casualty side. On the specialty side, I think overall, I think we were very happy with the lines of businesses. We're a bit cautious in the marine and energy space. We see very healthy situations in engineering, although competition is increasing in this line of business as well, so something to watch. And then the aviation market, we've seen positive price changes on a nominal basis on the adjusted risk-adjusted basis, it was almost flat. So that's the picture we can see at the moment. On the cyber side, I can say risk-adjusted, we don't see a very positive picture. So we've got slight decline. So we're very prudent there in the underwriting. And you see it in the market also that some of the players were also pulling back some capacity because we need to watch the rate adequacy. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Andrew Baker from Goldman Sachs. Andrew Baker: The first one, probably a little bit of a follow-up on Will's question. But can you help me try and reconcile the 5% year-on-year increase in cat budget with your P&L losses to weather events have sort of increased 20% to 30% or so. Does this just mean that you're writing a lot of the incremental cat exposure in the higher layers? Or is there something else going on here? And then secondly, on insurance revenue. So I appreciate what you're saying on the focus on the bottom line, but it has been a pretty volatile top line in '25 and been quite difficult for us to forecast. I think you made the comment in December and correct me if I'm wrong, that you expect the group number in '26 to be broadly flat versus '25. Is this still the case? And I guess, is there any variation divisionally we should take into account? Anders Malmstrom: I think the first question was more about the cat budget. So I think the nat cat budget increased, as you say, by 5% from USD 2 billion to USD 2.1 billion. I think the reduction in retro doesn't really impact the expected nat cat. So this is much more in the tail. So this is a capacity that we increased, but that's in the tail. So the expected nat cat should not really be impacted by that decision. So that's why I think it's, say, a natural increase of 5% of the nat cat budget to USD 2.1 billion. And second question? Alexander Andreas Berger: The insurance revenue. I mean, look, there's a mixed items here. So we've got the earn-through of the casualty, U.S. casualty pruning. We had some individual items, smaller items, also on CorSo, for instance, the medex book, the medical expense book on the A&H side that went to AXA from the Irish MGA that we were underwriting. So those were smaller items, and they added up, obviously, to that number. And in terms of guidance... Anders Malmstrom: Yes. I mean, we don't really give guidance in terms of revenues. But I think we mentioned many times that we don't manage to revenues, but you could probably see that the market generally grows with GDP or slightly above that. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Ivan Bokhmat from Barclays. Ivan Bokhmat: My first question will be fully also going back to one of the earlier questions on the combined ratio development. I'm just trying to understand, as we look into 2026 and perhaps in outer years, so if 84.5% at the starting point, we can assume delivery on cost savings, but -- which is 1.5 to 2 percentage points, this still leaves a little bit of a balance that would push combined ratio higher unless we assume some sustainable reserve releases. And of course, given the buffers you create, this is not unreasonable. But maybe you could talk a little bit about that progression and how the balance sheet could be deployed at what time frame? And the second question, I wanted to ask you about renewals and the new business CSM and P&C Re. So we've had this year in '25, the growth was negative 5%. I'm just wondering maybe you could try to separate the FX impact within that and also perhaps suggest some view into 2026 of how should that be affected by the renewals? Alexander Andreas Berger: Yes. Maybe let me just do here the intro, and then I'll hand over to Anders. Just on the cycle management piece. So you've got two elements, the cost obviously and then the loss ratios to look at. And cycle management, as far as the exposure is concerned, that's our day-to-day business. And we set the strong foundation now, the underlying portfolios are strong. And that's why we think we can manage those cycles very effectively. So with the bottom line view. Now expense management is becoming part of day-to-day business. We have introduced a philosophy here that we actively obviously optimize the setup of the group. That's what we did with the organizational effectiveness measures and also faster decision-making that translated automatically into expense savings, and we're going to continue there. I'm not going to talk about the productivity gains that we're going to get through AI because that is a new area, and we haven't factored that into our plans yet. So that's a general view. And then again, we are in an extremely volatile market. That's our business. So one big event can change the dynamics completely, and that would then lead automatically to a hardening of the market again. So I wouldn't rule out dynamics like that. Because the alternative capital that's coming into the industry also has to then experience the losses that are coming through. And we are a long-term player with strong balance sheets, and that's what we need to manage. Anders Malmstrom: Yes. So maybe just back to your question a bit on the numerical side, on the quantitative side. So I think as we mentioned before, I think you're going to get a normalized combined ratio of below 85%. This reflects the prudence. So I think you can expect if everything else as expected that we're going to see reserve releases. And then on top of that, the expense actions, that will continue. This is not over in 2025. We took the first 100 this year, we're going to have another 100 -- and another 200 over the next 2 years. So that will help. And then, yes, I mean, prices will not always go down. So I think we feel very confident and comfortable that I think we will stay below the 85% obviously, upset any huge nat cat events that clear when we budget. But I think it's really the combination of prudent reserving, expense actions and then disciplined underwriting. And then on the new business CSM, I mean, the new business CSM will come out in Q1. I think that's when we come with the exact number. I mean you've got now all in for how much the renewals impact the combined ratio. So that's a good proxy. But the exact number we're going to provide in Q1. Thomas Bohun: Could we have the next question, please. Operator: The next question comes from James Shuck from Citi. James Shuck: I just have to begin with just a couple of questions on some of the moving pieces in the combined ratio. So I appreciate the new business loss component is seasonal. However, the full year number is still a very large number. I think from memory, you were kind of guiding to around 1.5 to 2 percentage points as being the loss component and it's been 2.5% in '24 and around 3% in '25. So what's driving that? $500 million negative loss component is quite a large number in the context of the overall insurance service results. So just keen to get some insight into the outlook for that number. And also if you're able to just comment a little bit on the expense ratio, which went up from 4.8% to 5.4%. I presume that's just your ending front-loaded costs ahead of the reduction and efficiency program. And then finally, just on the group items, iptiQ now largely disposed or fully in runoff. I know you guided to sort of a $50 million reduction in the loss at iptiQ on an annual basis. But has that been accelerated in the period? The Q4 loss in group items was bigger than anticipated. So what was the iptiQ loss booked in Q4 and the outlook there, please? Anders Malmstrom: Okay. Maybe I'll start on the first one. Again, I think your question about the new business loss component. And I mean, look, I think the way I think about this is, this is really driven by the prudent loss picks and you should then see that coming through positive variance going forward. That's really how I look at because we write profitable business. It's not that we don't write profitability. It's just the way you reserve for, it becomes onerous day 1, and then it releases over the -- to positive experience. Alexander Andreas Berger: Maybe just on iptiQ, no, there's no acceleration. Just to remind us, we have first sold the P&C iptiQ Europe business to Allianz. And then we sold the U.S. Solutions -- the Health Solutions business that was, call it, a lead management company that we had. And then we were busy looking at the individual portfolios. So we had a remaining EMEA Life & Health book, but also the U.S. book, and we could successfully then conclude on the U.S. book. So that's also sold. And we have the remaining piece, the EMEA Life book. And here, we decided to send this EMEA Life & Health book into runoff. So that's going now into the normal runoff activities and manage runoff as we always do and see what opportunities occur in the runoff process. Thomas Bohun: And so there's no change on iptiQ guidance, which we said should be at around minus $50 million in 2027. And to the question, in Q4, there is an amount of around minus $100 million related to the sales of iptiQ. Operator: Next question comes from Chris Hartwell from Autonomous. Chris Hartwell: A couple of questions, please. First of all, just going back to the Life side, and I think it builds an extension from Kamran's question earlier. If I look at the start point of 2025 and add back the experience variance, that gets me to a much higher number than what you are implying in your 2026 target. So I was wondering if you could just help me understand maybe some of the moving parts between, I guess, what we saw last year and that 2026 target? And the second question just really reflecting back on the renewals. Obviously, we've seen quite a significant reduction in price. You and I think many of your peers have confirmed that terms and conditions have remained stable. I'm just wondering what your feelings are about how much room there is or willingness there is for T&Cs to soften as we go through this year. And obviously, notwithstanding the fact that you have mentioned that the market is fairly balanced. But I just wondering really on your sort of the outlook for terms as we go through the year. Anders Malmstrom: Yes. So maybe I'll start on the Life & Health side. And I think you're absolutely right. If I just take the experience out and add it back in, I think I get higher. Now I think when we discussed about that before, I think the CSM release was higher than what we expected, and that's what we were guiding for. And I think that's something we discussed. I think we clearly understand this is really driven by the assumption changes themselves, but also just management actions, BAU management actions like recaptures and so basically drove the CSM release up. And so if I normalize for that, I get back to a CSM release of in the range of 8% to 9%. And if I then back that -- to take that together with the non-repeat of the experience variance, I get back to the targets that we basically put out for Life & Health. That's really how to triangulate. Alexander Andreas Berger: Just quickly on the renewals. Again, I can repeat myself. By the way, there's some good news. The broker reports all predicted a steeper decline of rates, and I think that didn't materialize. So that's the good news. So the market was still broadly constructive or professional actually because there's still demand, but in the negotiations, the reinsurers stayed pretty disciplined. And the rest will be seen for this year. I expect a very competitive market still, nevertheless. The next renewals are the 1st of April renewals and mainly Japan renewals. And again, Japan is a different market and different dynamics in the market. We had a good renewal last year, and we'll see what the renewal brings this year. And then we will have obviously the 1st of June, 1st of July renewals in the U.S. Those are the important data points to look at. First, I see still a constructive market. We'll have to see how the buyers' behavior is. The fact is that the buyers all need strong lead reinsurers. And you could see that the market share didn't reduce. So we didn't reduce our market share even though the absolute -- I mean, the pie was shrinking that people were taking more risk on their own balance sheet. That created another opportunity for us to go into software solutions, et cetera. But overall, we were not signed down. So they need still strong lead capacity, lead underwriters with the expertise that gives me comfort for the next renewals. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Iain Pearce from BNP Paribas. Iain Pearce: So just on net operating capital generation. So the 21 points net capital generation this year, do you view that as a relatively clean number or a good starting point to use going forward? Obviously, there's a lot going on this year in terms of Clean Care, Life & Health review. But is that a good number going forward? And also, does that new business strain, the 0.5 in the increase in total capital include the changes in the retro very long, because it's the 1st of January '26, I think. If you could just clarify those two points, that would be great. Anders Malmstrom: Yes. So look, I think this is a good proxy for the capital generation. So I think in general, that was, I think, the year think really showed more or less in certain areas, we obviously have the assumption changes. But other than that, I think it's -- you can expect -- I always guide to around 25 percentage points of net capital generation -- gross capital generation before repatriation. So that's a good proxy. Thomas Bohun: And then the target capital that already includes the reduction in retro, capital requirement. Anders Malmstrom: I missed that. Yes, that's already -- that's all reflected. Correct, yes. Thomas Bohun: Could we have the next question, please? Operator: The next question comes from Vinit Malhotra from Mediobanca. Vinit Malhotra: I hope you can hear me. So my first question is just -- and apologies, a bit repetitive, but I want to be clearer from my side. The extraordinary buyback, if you could just please elaborate what conditions we should look at as triggers or a possible trigger for another such extraordinary buyback in the future? So that's my first question on extraordinary buyback. Second question is actually on the nat cat increased exposure. So just to be very clear, the fact that you have increased your net nat cat exposure probably had a favorable impact on the 3 percentage points of the nominal combined ratio. Is that a correct understanding? Are you able to give some idea of how much benefit that was from this strategy? Anders Malmstrom: Okay. I maybe start again with the extraordinary buyback and maybe I just kind of emphasize what I said before. I mean you have the main part of the -- call it, on our capital return policy is dividend and sustainable buyback. That's the -- I would say that's the core. And then if we're in a situation where we have excess capital, and we don't believe that we want to and have the opportunity to deploy it with the right return, that's when we consider ordinary -- an extraordinary buyback. So you can't bake that in. So you should -- it's quantitative and qualitative, but that's really the way we think about it. And this was this year very clear, that is qualified. Alexander Andreas Berger: Just quickly on nat cats question. Just to clarify, the renewals are growth. That's before retro. Thomas Bohun: So the information on the slide is our growth, and we show you the impact just based on that. So any changes in retro are not accounted for in that estimate of... Operator: The next question comes from Ben Cohen from RBC. Benjamin Cohen: I had two questions, please. Firstly, just on M&A. Could you just sort of reiterate kind of what your priorities are there? And with regards to the deal that you announced last week, should we assume that, that will achieve the targets that you have for CorSo as a whole? Or is there anything that you want to call out there? And the second question was just on the return on investments going forward. Do you expect that, that yield will rise going into 2026? I just asked because I think there have been periods in the past, say, at the end of 2024 when you had a very high reinvestment yield and actually the sort of the ROI hasn't or didn't go up last year. Alexander Andreas Berger: Let me take the M&A question. So our M&A priorities didn't change. We always were very clear to say we don't see at this stage any transformational M&A opportunities. But what we would look at is additions to the portfolios, and particularly in Corporate Solutions, we said that we are happy to add in the areas, we call them focused growth areas that are decorrelated to the property and cat cycles. And that, in particular, was credit and surety, and we were very open about this. Now we only do these bolt-on acquisitions when they really make sense. Here, we have the opportunity to add the portfolio that QBE wanted to discontinue or divest. And that, in particular, is a trade credit and surety portfolio, their global portfolio with a strong presence in Australia. Why is it so interesting? Within the trade credit -- within the credit and surety book that we have in Swiss Re, it added another nice diversification. So all-in-all, very positive. And we will continue to look into those bolt-on acquisitions if they make sense and if they are in the areas that help us to further strengthen the resilience of our liability portfolio, target liability portfolio. Anders Malmstrom: And just on the investments, so just to reiterate what we have said. So the ROI itself was 4%. The recurring investment yield is 4.2% right now. And the reinvestment yield was 4.4%. So all pretty close to each other. And obviously, when you then calculate how -- over time, how this develops, yes, you bring 4.4% in, but the question is always how much actually goes out. And you can expect that this has very little impact. It should have a slight positive impact, but it depends what actually matures over time. So I would expect that to remain pretty stable. Thomas Bohun: Could we have the next question, please? Operator: We now have a follow-up from James Shuck from Citi. James Shuck: I just had a couple more things, please. CorSo's revenues in the fourth quarter were very weak, with down 10% year-on-year. Just keen to understand that development, please. I also wanted to ask a question on the expense ratio again, which I think was answered last time. I just keen to know it went from 4.8% to 5.4%. Is that just a temporary jump? Does it go back to 4.8% in '26? And then just on your new CTO, I thought it was interesting what are the first priorities for this Chief Technology Officer? Alexander Andreas Berger: Yes. Maybe I'll take the CorSo one and the CTO and then maybe you can elaborate on the expense ratio. Just on CorSo revenues, it's very simple. This is the portfolio of the Irish medex book, that was taken over by AXA. And this is -- to be concrete, it's $200 million. So that is sort of the decline. Otherwise, CorSo had some healthy new business opportunities, in particular in the differentiating propositions in international programs and alternative risk transfer. Those were the most attractive ones. On the CTO, it's not the Chief Technology Officer, because we already have a Chief Data and Technology Officer. It is a Chief Transformation Officer. What is this? We are in a transformation process. The company went not only on a cultural transformation, but also we were streamlining processes, increasing proximity to markets by delayering the organization. And we do have ambitions and concrete use cases also around Agentic AI. This needs to be embedded into the organization, cascade through the organizations from top to bottom. And I think here, we need specific focus, in particular, on execution rigor and delivery here so that we don't increase again, the complexity of the organization, which will end up in increased costs again. So this is the idea of this new role that we created. AI, but not only AI is really changing the way we organize our business and the way we process our business. Anders Malmstrom: Okay. And then on the expense ratio in CorSo, I think we saw that increase in P&C Re. Thomas Bohun: The question was on P&C Re. Anders Malmstrom: I thought it was on CorSo. Thomas Bohun: So in P&C Re, we have some one-off effects from year-end accruals, and it's always better to look at the full year number. Also last year, we had an impact under the first year of IFRS or some out-of-period adjustment. So we would suggest just to look at the full year '25 number as the basis. Alexander Andreas Berger: Yes. We have seasonality in the cost, project costs, et cetera, that are then coming in late in the year. So that's the effect. Thomas Bohun: Could we have the next question, please. We have time for one more. Operator: The next question comes from Roland Pfaender from ODDO BHF. Roland Pfänder: Two questions, please. First one on Life & Health. Could you speak about your CSM new business growth ambitions, let's say, if you strip out large deals, what would be the underlying growth target you have for '26, '27? Just to understand it a little bit better. I think it was flat year-over-year for the year. Second question on CorSo. Rates are coming down. Do you need to execute cycle management here? Or do you still see some growth pockets like specialty or other things, which might keep growing? That would be also interesting. Anders Malmstrom: So on the growth ambition, for Life & Health, maybe before I talk about the ambition itself, I think we have a very strong in-force business here. And the in-force itself brings us sustainable kind of new business. And I think you saw that kind of without any large transactions, we were actually able to sustain the new CSM just through new business CSM. And that's really the core here. That's important. And that's what we want to maintain that make sure that the in-force produces the new business itself. And then on top of that, we're always looking at transactions. If they make sense, they have to make financially sense. Otherwise, we pull back, but that's in a way, the upside, but the in-force itself allows us to keep the CSM flat. Alexander Andreas Berger: Yes. So on the CorSo side, in addition to rigorous and disciplined underwriting and cycle management, there are obviously business opportunities, in particular, when you look at geographical opportunities. And we try to optimize -- continue to optimize the setup. We partner where partnerships make sense. We have a very well-run joint venture in Brazil and in those kind of emerging markets, you could expect maybe also some partnership models that we would do rather than planting the flag and have from scratch organic growth opportunities. So this is something that the team is looking at. But in particular, we're looking for expansions in the differentiation that we have in international programs and alternative risk transfer. Alternative risk transfer, why? Because like we discussed it for the large cedents, the primary insurance companies who take our premium from the market, that same phenomenon happens with large corporates. They take on more risk on their balance sheets and they create their captives. And with the captives, we have a leading position in managing helping captives at the fronting before the captive and within the captive and behind the captive with capacity, reinsurance capacity. So it's a unique one-stop shop proposition, which is very successful. Thomas Bohun: Thank you, Roland. With that, I would like to thank you all for your interest, for your questions. Should you have any follow-up questions, please do not hesitate to contact any member of the IR team. Thank you again. We wish you a nice weekend. Operator: Thank you all for your participation. You may now disconnect.
Kurt Mueffelmann: All right. Great. Well, good morning, everybody. Welcome to archTIS's first half of fiscal '26 update for the period ending December 2025. I'm Kurt Mueffelmann, and I'm joined by our CEO and Managing Director, Daniel Lai. We generally don't have these types of updates on the first half results, however, given the level of excitement around kind of the defense sales pipeline and technology motion, we thought it would be a good opportunity to kind of address the market and really create more excitement about where we see the market opportunity and the business going today. So during today's session, we'll update you on the half year performance, provide an in-depth financial review, update the U.S. DoD opportunity, somewhat of a resurgence that we're seeing in the Australian defense and a big military alliance win. We'll also discuss the go-forward strategy around market focus and growth, surrounding a really exciting topic around AI and the effects in the markets, product and sales opportunities. Why don't I kick it over to Dan for a quick minute or 2 overview on the first half of the year and just kind of overall thoughts? Chun Leung Lai: Yes. Thanks very much, Kurt, and welcome, everybody, to our half year update. Look, it's been a very productive first half of the year. And I think that, obviously, with the acquisition of Spirion has been very active, but I think the most pleasing aspect of all of this is that we've completed that integration. We've identified synergies in terms of savings, and we're seeing the pipeline grow. But most importantly, we're seeing active deals come out of this process and the execution. So the activity in the marketplace has certainly increased as well, which is giving us a lot of confidence. And of course, our execution in that defense and intelligence marketplace is very, very promising for the rest of this year. Kurt Mueffelmann: Great. So why don't we go through -- so the first half of fiscal '26 we really saw scalable changes, obviously, with archTIS with the inclusion of Spirion and its successful completion, as Dan said. ARR reached $16.3 million, while the prior comparative period for revenue grew 120%, to $6.1 million. We've really seen strong gross margins where it's increased 124%, to $4.6 million, which shows the operating leverage we've continued to talk about quarter after quarter, really driving that scalable higher-margin software. Operation expenses was $7.6 million, excluding acquisition-related items. This included, and we'll look at this in the appendix, an additional $2.9 million of nonrecurring transactional expenses from the acquisition. Again, we really detailed that and broke that out below the line from the acquisition costs and where we see the business going. And additionally, as we mentioned at the end of our quarterly 4C, we've created integration synergies that are expected to be close to $4.5 million in cost savings during 2026. So I think we've done a really good job at not only managing where the business goes from an integration standpoint, but also really managing that cost and looking for those synergies across the business. And as we announced yesterday, we also strengthened our balance sheet with another $8 million through a CBA facility, providing nondilutive capital to execute our growth strategy. So these results position us really for that accelerated ARR expansion, improved margins, and continued scalable growth. So Dan, any comments on the actual quarter from a financial standpoint? Chun Leung Lai: No, no. I think that we -- had a strong performance there. And obviously, now it's about accelerating the growth moving forward. Kurt Mueffelmann: Yes. I think -- I'd urge shareholders to really look at that appendix around the $7.6 million of acquisition-related items. I think there's some really strong work that was done there by our CFO, Andrew Burns, and the integration teams and really how we're driving that forward. So we feel like we're really in good shape from a cash as well as from an operating expense standpoint heading into the second half of the year. But at the end of the day, we know expenses don't drive business. I think I've been caught on making a statement or 2 about sales previously. So Dan, why don't we update everybody on a little bit about the sales opportunities that are out there, and really, the exciting one, I think, that we have on the right side of the slide here that's just closed earlier this week? Chun Leung Lai: Yes. Obviously, we've just made the announcement 24 hours ago. But a global military alliance or what we've described in the announcement as the U.S.-European military alliance. I guess, there's not too many of those, so I think we can work it out pretty quickly. But NC Protect, to be able to do the policy enforce data-centric security, and it is with that organization and obviously has a lot of member states, and we see a potential growth opportunity inside that. But it is a strong win. It has followed a life cycle of a proof of concept, engagement, competitive process, of course, which we have announced that we are the winners of. So I think that is -- one of the foundation building blocks of this year moving forward is this conversation about how we become the preferred provider of data-centric security for military alliances across the globe. And we're seeing how important that is with the activity that's going on around us constantly and the amount of money that's being increased in terms of the spending. What I'm happy about seeing now is the urgency from some of these clients to get these things completed. And that's certainly something that's been out of our control. We've been saying to shareholders for a period of time now it's coming, it's coming, believe us. And we're starting to see that action on the defense side now globally. So that's really, really important win. And of course, a massive, massive client to be successful with. So that's good. Obviously, everybody else wants to know about what's going on with this U.S. DoD deal. What's exciting for us is, again, I keep saying this, we are in constant contact with them, and we are confident about this deal coming to completion. Timing, yes, still working through that. Sometimes they get distracted with things like activities in Iran and discussions that are going on there. But that also gives you an indication of where this is really being deployed and being tested. It's at the cutting edge here, and get this right and it's going to definitely explode in terms of growth across that department if it's successful. So we're very excited by that. We know the tranche is still out there for the 125,000 users. We are making progress. It has been deployed, and we're just waiting for feedback on how those activities are going. But I think in the short-term, we will see something happen there. And finally, the Australian government in terms of their Department of Defense, I'm really pleased to say that we've completed a TDI, trusted data integration, which is really the foundation of what we discussed at the last 4C webinar of becoming a platform. This was off the back of that Direktiv acquisition in February. And of course, we've done a trial there. It is the foundation of the NEC deal in Japan as well. So we're seeing real traction with this, and we're really kind of excited about where this is heading and the interest from departments, military organizations on this product as well. Kojensi has also come very active. We've got signed up recently a couple of different resellers, one in the U.K. and one here in Australia that want to attack that defense industrial base and make it an offering to the market. So the activity there is strong. Spirion data protector, that's another defense industrial base, but it's for shipbuilding activities. You can guess there's a couple of major programs being highly invested in Australia currently, one in Adelaide and one in Perth, and they're looking at deployment of this and how do they secure their data across that. So we're very excited about the current opportunities in the pipeline. Again, all of these nuggets promote us as the #1 option for data-centric security across defense and defense industrial base. And I'm very happy that we're seeing that execution across that strategy. Kurt Mueffelmann: Yes. I think one of the highlights I'm personally seeing being on a lot of the calls across the enterprise as well as with the defense coalitions is really the interest in the model that we brought to bear on the kind of Spirion and NC Protect integration where we're going from identifying to labeling to enforcing to governing. That methodology is really catching on. So you see it with the shipbuilding infrastructure. I'm up in D.C. next week talking to Microsoft about that and how our Microsoft message with SDP, which is Spirion data protector. And Purview is a better together story. And we're going to be talking to about half a dozen different devs that are out there currently. That latest global military alliance win, that next step could be Spirion opportunity that we're looking at, because again, everybody needs to identify the data before they can do anything with it. You can't do anything with it unless you know what it is. So we're really seeing that traction out there. So I'm really pleased to see that. And I know, just from a pipeline standpoint, that we continue to have constant demos, consistent pipeline building on it. And I think there's even one or 2 different webinars that may be online if our investors would like to check that out. So really exciting stuff there with Spirion that's going on. So I think one of the things that's really -- we're seeing hard, and we want to spend a little bit of time on this within the markets. We're doing some work with a number of investment bankers in the U.S. And so -- you see what we're doing with the U.S. DoD. You see what we're doing with Spirion. You see the level of investment that we're making in the U.S. itself. So we're getting some really good professional feedbacks from people that have feet on the ground here and have really looked through where the business has gone. And you saw the market take a crash a couple of weeks ago, and it was really around this, hey, can AI replace the whole SaaS ERP, security, what have you. And so it's going that structural reset where software companies based on AI readiness and system-level importance rather than this traditional SaaS growth. And we're seeing the model shifting a little bit to what can AI do across the business? and so when you look at autonomous agents and how they work. So we look at this chart, and I thought this is a really big chart. And it's pretty complicated. So if you're into the quants like I am and into where valuations are about the industry and competitors, really look at this because I think what we're seeing, and my personal belief is you're seeing a decoupling of where traditional SaaS companies go and where AI agents and where AI as a valuation within a business come into play. And that's something -- Dan and I were on a call. Boy, it must have been 2 days ago at my 2:00 a.m. in the morning. It's one of those 2:00 a.m. you can't sleep type things. And we're talking about AI and the strategy that we're bringing to bear. And so we want to talk about this as it relates to the market, but I think it's also more important how we present AI across the business. So Dan, from a strategic standpoint, let's talk about the kind of the 3 stages that we see as a business and then how we bring that into play from a revenue and scalability standpoint? Chun Leung Lai: Yes. Look, AI means different things to different people, and there's a lot of, I guess, hype around it and what it's going to do and people are still feeling their way through it. But in the areas that we target from a market perspective, where it's classified information or sensitive information, there's a real concern about how AI is introduced into those highly regulated industries. So -- but overall, there's also the promise of productivity gains for the archTIS themselves and how -- and also product enhancement. So we've taken a 3-activity approach. These things will run in parallel. So first, of course, is how do we make our teams more productive and deliver product faster to the market? How do we accelerate? What we're doing in every aspect of the business from marketing to finance to product development, to testing, all of those things? That's the first activity. And we have got a strategy of how to implement that. And obviously, we are trialing our own different use cases for AI. Activity 2 is product innovations. How do we embed AI into our product offerings? And a good example of that is, when we have to write policy rules which match against compliance frameworks, can we automate that process, have a lot of those things out of the boxes and have that translated into plain English? Can we test those things before they get deployed and inform the user and make it much more friendly from that perspective? And the activity 3 is, what can our products do to make organizations feel more secure about adopting AI and how it gets implemented across their enterprises? And I think that's really the big, big opportunity. We previously discussed that we're going from best-of-breed to a platform offering. And one of the things that we really saw early on with the Direktiv acquisition and the launching of trusted data integration is its ability to manage AI and where it gets published and what information and services it transacts on. And that ability was -- we identified very early as part of the foundation of building out the platform so that we've got an offering to help highly classified areas or sensitive IP or manufacturing or help understand how they control and adopt AI into their organizations securely and having it governed. Do you want to add anything to that, Kurt? Kurt Mueffelmann: Talking on staff, I think it's -- the fun part is, I think the first one is we're getting people coming into the business, all employees and contractors coming in and saying, how can we help, how can we deploy AI and make us more efficient, more productive, whether it's support being more proactive to customer needs, whether it's sales going through pipeline and looking at each opportunity and really going in and digging, whether it's IT or operations, everybody across the business is looking at that, and we're promoting that very heavily across the business. It's really creating a culture of participation and a culture of real drive to really look at how do you peel the onion back to see how can we create and maybe lower things such as operating costs, how can we become more effective, how can we do more with less, which is something we always see in microcap companies. And that will obviously drip through -- all the way through how we're doing that development. As Dan said, the AI market readiness is where we are today. And we're seeing kind of a number of kind of Open AI issues that not a lot of people are dealing with. And so Dan, we've talked about this. We've talked to, I would say, half a dozen different customers and prospects about their challenges. So why don't we talk a little bit about the challenges that those customers are seeing? Chun Leung Lai: Yes. Look, it's very, very true that it's very easy to talk about the benefits. It's very difficult to implement it and get those benefits, measurable outcomes for the business. So one -- the first one is, obviously, when you have an AI which can make calls for services and to data resources, how do I know I'm getting the right data exposures and I'm not creating data leaks? That's very important to the customer base that we deal with. So uncontrolled data exposure is a big issue, and it's something that they fear a lot. Compliance. How do they make sure that they're adhering to the compliance requirements? Again, defense industrial base, which we deal with, they're regulated a lot by information, trade and arms regulation controls. How do they know that, that information is still being adhered to in terms of the compliance requirements, which have massive penalties for them to do? Data boundaries. They just don't exist anymore. We've talked about this before, about customers operating in hybrid environments. They're using SaaS platforms. They've got information in the cloud. They're using cloud services. They've got legacy systems, this sort of thing as well. And how do I know what the AI and the MCP can actually call in terms of services and data? We've looked at all of these issues. We have to look at this also for ourselves, which is also helping us look at how we design our responses as well. And most importantly, I think when you integrate AI across the organization and start to add agentic agents, it's the nonhuman identities which become so problematic because they expand exponentially. So how do I also identify what services I'm calling? Where this information is going? So it's becoming quite a problem. And obviously, there's a very sweet spot. Therefore, if I can resolve that issue, there's a massive marketplace for products such as TDI. Kurt Mueffelmann: Yes. I mean you look at that, right? We were on with an investor the other day, and they're like, "Oh, you're making a shift from data-centric security over to AI." And I said, "Well, they're really coupled together" because I think as organizations scale towards AI, the requirement is really shifting from that visibility to real-time policy enforcement. So we're going from data-centric or data security policy orchestration and leveraging that into AI. We're ensuring the right data is used by the right user, the right model, the right agent, and we're doing that by design. So I think it's a nice segue into, again, as we talk about valuations within business and we talk about that kind of the chart about decoupling where AI can go and coupling back -- that back into the archTIS message around data-centric or data security policy orchestration and how we leverage across AI. So if we start to look -- sorry, I double hit there by mistake. As we start to look about that, Dan, where do you see that? Because we talked that last time a little bit around the control plane where archTIS enables organizations to scale safely by delivering that single policy? Chun Leung Lai: Well, again, it all comes down to context, and that's the biggest issue that people are trying to solve today. And it comes down to, as I mentioned before, that hybrid environment and having transparency about being able to govern all of those components together. AI cannot work in isolation to the rest of the organization, to the people that have to interface with it, to the other machines that have to interface to it. Having a single place that you can control and govern that information and put your rules in about how that information will be retrieved and in what context it will be released and how it will be released, how it can be used, becomes very much an incentive for all organizations to know that they've got a single point where they can control that. And again, we've talked about this. We're not here to compete against everybody. We're here to enable that to happen through security and governance of those services and of that data. And really, that becomes something where we have an opportunity to do that. And one of the early use cases, I might just add, for when we looked at Direktiv was -- and I think I've mentioned this use case before, was Viasat, which have all the U.S. deployments for satellite contracts. Now a young fellow there at Viasat puts some coding to be checked by ChatGPT and caused a data spill. So how do I use -- get the benefits of that AI and -- but also not publish -- know where that information gets published? I want to control where that information gets published. And in that particular case, Direktiv was used to intercept that and transfer that information to a secure place that it wasn't publicly available or be able to be reused by other users on that ChatGPT tool. And that's really where we're heading. As this gets adopted and Agentic AI really comes into it, we're going to see this -- the environments become more and more complex, which means they need a central place, which can interface into all of those aspects and be controlled through a single policy. That is what the purpose of the control plan is. Kurt Mueffelmann: Yes. I mean we're providing that execution level control, ensuring that every interaction, output, everything that is going through is critically related to the governance guidelines of an organization. So we're not actually being the AI, but we're being that layer above. So we don't have to tie into specific engines. We're actually being that layer across all models and providers, really providing that security across that multimodal AI adoption, which we're really looking to play. So we really become that additional layer from a governance or that control plane that we drive. And that starts to lead us into kind of where we see the strategic differences and next steps where we think we can be that competitive differentiation around preventive control versus post-event, that data level enforcement, not just at the app layer that Dan talked about, become that neutral aspect or become Switzerland of where we can go from that neutrality standpoint. And Dan, talk a little bit about where we see the market opportunity through the growth vectors themselves? Chun Leung Lai: Yes. Look, really, this is part of that land and expand. Customers already have made heavy investments in things like DLP management, data loss prevention, in this case, identities, Microsoft. And it's about connecting those things together so that they get full transparency in a single point of control. Large-scale defense programs out there, they're also trying to integrate and do interoperability. We've seen declarations from -- recently from the Japanese Ministry of Defense about deploying air service missiles on islands and these sort of things, but they can't work in isolation. They have to work with their allies and share that information. NATO is an excellent example of that, what they're trying to achieve and the U.S. DoD through the Five Eyes and AUKUS are 2 other examples of how do they do that. And then, of course, the supply chain for nuclear submarines, et cetera, they're all perfect examples of how we're doing this. But all of them are trying to adopt AI in all of these different areas to, again, increase productivity, do more with less, get more accurate results. And the thing that's stopping them is how do we do that securely. And that's where we see the opportunities really in this space. It's about integration and solving the integration and interoperability problem and playing that layer. And I think that, that's a niche where out of the 4,500 vendors, we are certainly in the lead on, we're certainly getting acknowledged, and we're certainly getting referenceability, and I think that that's what's really exciting. It doesn't change what we have to do today in the short-term. We have to win with the products we've got and win big awards and grow them from expanding to solve that strategic problem with them as we develop the platform out. And that brings us to our 3 horizons of growth, and you can talk through that, Kurt. Kurt Mueffelmann: Yes. [indiscernible] The AI doesn't change the model, right? We still have the strategy that we're going forward with. It just adds another layer of what we believe we can differentiate and bring them to market. And so when we talk about the 3 horizons over the 6 to 18-month time line that we look at, where we have to deliver today. We have to deliver consistent earnings through stronger ARR, controlled operating expenses and what have you, right? And so we've talked already about the left-hand side of [ EU ], where are we updating across the U.S. DoD. We talked about the recent win for 2,500 users, which is just a small component of a major U.S.-European military alliance. That reassurance of -- kind of resurgence, I should say, of Australian DoD that we're seeing with a number of real pipeline opportunities, and we know pipeline opportunities in Australia are generally seasonality, which is Q3, Q4, which is now until June. That's where they've always fallen historically. Again, we're going up to see Microsoft on Monday. And Spirion we're seeing some really strong cross-sell opportunities, not only in defense, but we're actually seeing it the other way where the Spirion enterprises are actually coming to us and saying, "All right, now that we've identified our data for Spirion, how do we push NC Protect and how do we enforce that data?" And so really trying to defend and extend that base across where we are today and drive that. And that carries us into -- Dan, take us through horizons 2 and 3? Chun Leung Lai: Horizon 2 and 3 are really about having that TDI function, all of those other services such as Spirion. When do I go out and do the discovery now? What do I do with it? I'll automate NC Protect coming in and protecting that. I'll take that and I need to set up an instant in Teams where only certain people can access that and I need to validate who's accessing that. It starts to become very automated, very machine-driven. And I might need some AI technology in there that's going to be doing certain services or repositioning captured data and regenerating that into a different view, context. Who can see that? Why can they see that? Where can they see that? And suddenly, you're starting to see that full picture. Finally, when we get all of that integrated completely, and we are building in other people's services such as BigID, Varonis, Microsoft, AWSs, when we can start to link all of those things together, you've got a platform which we're calling DSPO, and that can completely disrupt the market because what we then do is have all of those other providers' customer list is our potential customers. And that's where you get that real hyper growth based off the credibility that you've done in Horizon 1, the expansion of that strategic opportunity through the platform development in Horizon 2 and complete disruption in Horizon 3, where you start to own a particular niche market, which is being supported by all of the big guns out there. So that's really the nuts and bolts of that strategy. And I think you're starting to see now why we've done what we've done in terms of those acquisitions, why we see that data-centric security life cycle is being so important, and how that fits in and that IA isn't a threat. It's a genuine opportunity. Kurt Mueffelmann: Great. Why don't we -- and as we look at a couple of questions, I know that -- a couple of questions already in here are around kind of, with the market consolidating, are you likely to generate takeover offers? And what are your thoughts around that in the business itself? Chun Leung Lai: Great question. We're a publicly listed company. Obviously, if there's takeover offers, we have to consider them all and what's in the best interest of shareholders. Look, there is a huge amount of consolidation activity going on. We're not blind to that. We watch it very carefully. We obviously have plans, and we obviously have models that we look at where we think we're going to maximize shareholder value, but also what we think our potential is in the marketplace. But we need the offers. We will look at that forward to getting those offers, but I think that will be off the back more announcements of success and demonstrating a few more validation points in our strategy that we're executing. And if we do that, I have no doubts that we will be an attractive target to other large providers out there. Is that what's best for the company? We'll make those calls when we actually get those offers, but any offers, we may have to take seriously. Kurt Mueffelmann: Yes. Listen, the market is consolidating out there very aggressively, right? We have to do what's right for the shareholders. But as we've shown through the acquisition of Direktiv as well as Spirion, we're not afraid to go and punch above our weight and go make further acquisitions if it fits what we need to do and it fits in the best interest of the shareholders going forward. Listen, Direktiv has brought us TDI, which we think is going to be really driving where the AI next stage goes. And Spirion is bringing us some fabulous ARR, which is scalability. It's bringing us that U.S. presence. Now that we're tearing the cost through it a little bit and blowing out the operating expenses, it's going to start to drive cash that will drive us into more investment in other areas within the business, whether it's additional product, whether it's additional marketing or what have you. So I think we're pushing the right buttons, and we're not afraid to make those acquisition decisions on both sides of the fence. Dan, so the next question -- I love this one because it's -- we talk about this all the time. With the DoD opportunity -- I'll boil it down -- is the delay technical, budget or bureaucratic? Chun Leung Lai: Technical, budget or bureaucratic. It's a great question. Kurt Mueffelmann: How's D, all of the above? Chun Leung Lai: All of the above. Look, let me put some some of these aside. It's not budget. I think we've confirmed that the budget is there and it's -- that they've already budgeted for this, which is a definite sign of intent, isn't it? It is bureaucratic. It's not so much technical, but we do keep coming across some technical things. And again, that's because the different -- there are different environments where this is being tested. When we talk about co-command is that co-command is very different to the central agency, which we're putting in and there's tweaks and those sorts of things. But I don't think there's any major technical obstacles. In fact, I think we've resolved most of those things through that piece of work that we did in terms of software configuration development and interoperability. It's really now just going through the hoops, getting through the process, and that's what's exciting to us. Kurt Mueffelmann: Great. There's a couple of questions on the CBA credit facility and a little bit of, I guess, confusion around where that relates to the Regal that we announced at the end of last quarter as well and what the relationship between that is? Chun Leung Lai: Obviously, with some of these delays, we want to make sure that we can continue to execute the strategy that we -- and with the momentum and accelerate that momentum. So we need to make sure that the business is well financed. We looked at the share price. We looked at -- we have other options to go-to-market to raise capital. We thought it was in the best interest of shareholders not to do that, that we should look at some debt facilities to get out of those bumps and little hurdles and delays. So we looked at debt facilities instead of going out to the market to raise capital, which was the objective of all of this. We looked at Regal. We already had established fund with CBA. We've got both available to us at this point in time. Now that we've actually completed and signed the CBA, we'll relook at the Regal facility as to whether or not we still need it. But at this point in time, we still have a terms of agreement signed. And if there's any changes to that, we'll make those announcements when they happen. Kurt Mueffelmann: Great. Yes. Why don't we grab one more? How does Varonis on-premise transition impact your bottom line? And how are we dealing with that as we move forward? Chun Leung Lai: Do you want to take that one? Kurt Mueffelmann: Yes, I think so. So we always look at Varonis, right? Varonis, we look at as -- we look at a couple of companies as the North Star companies, want to emulate, fabulous growth, fabulous story. They've done a nice job in the data security posture management. And they are looking to go towards an all-cloud offering. And so that leaves them with the on-premise of a major significant share point market, file shares, on-prem, kind of [indiscernible]. And so we've taken a proactive stance. We've gone and done some competitive positioning against them from a webinar standpoint, going out there, playing the -- these -- the keyword search and really trying to drive SEO and pushing that. So we're seeing some opportunities where people come to us and say, "Hey, we feel abandoned." That's fine. If that's their strategy to go 100% cloud, listen, great companies are going in that direction, and I applaud them for that. But we really look at being the ability to grab all types of data in a hybrid environment, whether it's on-prem, whether it's in Azure, whether it's on AWS, Google or what have you. So we want to really keep that flexibility around those technology formats and bases that we have. So I think we're positioning ourselves well. The NC Protect, the Spirion do really well in those on-prem, off-prem environments and in the cloud. So we feel we can handle all those opportunities that are out there today. So we feel really... Chun Leung Lai: I think it just validates our strategy. As these big companies move to consolidate their cost base and target on their markets with cloud-only solutions, it proves the point that the customers still exist in a hybrid world. And that opens up opportunities for us to do that value-add and extension from Varonis to working with their on-prem problems because they can't get off them quickly. They've got legacy systems. But it proves the point of the strategy that we're taking is a very viable strategy. Kurt Mueffelmann: Yes. Dan, why don't we hit one last question, and then I'll pick you up with some closing comments. Spirion, how is that delivering new opportunities for the business? And where do you see that going in the near and mid-term future? Chun Leung Lai: Yes. Look, Spirion is -- no, we acquired Spirion as a strategic acquisition to reposition the business into the U.S. Let me be frank about that. We see the opportunities with the U.S. DoD. We see that is creating not only accelerated revenue and increase in ARR, but also a reference point to also move into the commercial markets, to extend our relationships with Microsoft into other military alliances partners, et cetera, et cetera. So we need to have a base there which can execute that and is in the U.S. to support that. That's really where the desire for taking on a data-centric security company in the U.S. came from. The software that, that [indiscernible] is an added bonus. We've talked about the discover, classify, enforced life cycle and [ governed ] life cycle of data-centric security. They give us that ability to do that discovery. So that's a beautiful segue. And a good example of that is, one of those opportunities we put up there about the shipbuilding yards is that they've got 44 terabytes of data that they don't know how they should protect it. Spirion is a perfect play to take into that organization and do that data discovery. So it fits in terms of the model of the customer problem that we're solving. The other thing that's really good about Spirion is they can do on-prem as well as in the cloud, and that's something we've just discussed in that Varonis example. So I think they're going to add a lot to us. And of course, the final statement there is they've got 150 customers that are already investing in data-centric security, which we can cross and upsell to. And we are providing incentives to those customers to do that as quickly as possible. And we are discovering opportunities that -- not opportunities that are going to turnover in 6 weeks. So there's a bit of work there to get that machine humming. But I think we can do that, and I think we can successfully do that. We've done the cultural integration. We've done the systems integration. Now we need to get into that sales and really start to drive that pipeline growth. So I'm excited by the opportunity. It's an important acquisition, and I think it will pay its dividends, but it's just a matter of time to make sure that we get it right. Kurt Mueffelmann: Yes. I would just add, I was up in Tampa earlier today meeting with Kevin Coppins and the team from Spirion. And you're starting to really see how it fits in. You're starting to see the adoption by the reps and bringing it into their sales pitch in the way that they can bring a fully integrated solution to market. It's just not a, hey, let's sell NC Protect or hey, let's sell Spirion. It's becoming this more integrated platform, which we talked about before. And you hear it on the sales calls. You hear it on the sales recordings that we listen to, for that. You hear it in the pipeline reports and what we're doing with forecast every week and where it goes. So I think you'll see more and more of that. And we're not going to be able to announce every deal, obviously, from the space we're in, but we're seeing good traction as we build the business through that. And I think it's a really good add of what we're doing. So Dan, with that, why don't we spend 2 or 3 minutes just wrapping up and summarizing up again the quarter? Chun Leung Lai: Yes. Look, to me, I think it's been a exciting half year. I think we're reasonably happy with the results. You can always do better, you can always do worse. But I think we are in a solid position to push the business growth forward over the next 6 months. And I think -- and I often say this, but I'm expecting a good 6 months ahead of us in terms of the business and the execution. There are a number of deals just hanging out there ready to drop. And I think that, that's going to really change the perspective of the company to our investment base. I think there's a lot of people out there waiting and watching. And I think when -- if we can execute a couple of strong deals, which -- more validation points in our strategic direction and our strategic plan, I think people will start to truly believe, and I think that we'll see that reflected in activity in the marketplace supporting the company. Kurt Mueffelmann: Excellent. Great. Well, thank you very much. And I'd like to thank everybody for your time. Enjoy the weekend. If there are further questions as you move forward through the financials and through the half year results, please feel free to hit us up at investor@archtis.com, and we'll do our best to answer as many questions as possibly as we can within the parameters set by the ASX. So enjoy the weekend, and thank you very much for your time. Take care. Chun Leung Lai: Thank you, everyone.
Unknown Executive: Hi. Good morning, everyone, and welcome to TR's Full Year 2025 Results Presentation. It's going to be conducted, as usual, by our Chairman, Juan Llado; and our CEO, Eduardo San Miguel. It will last approximately 25 minutes, and you will be able to post your questions after our final -- Chairman's final remarks. I now leave the floor to our Chairman, Juan Llado. Juan Arburua: Hi. Hello, everyone. As usual, as Antonio has said, Eduardo San Miguel and I will guide you through these most relevant points that we're going to be covering in the presentation today. I will first walk you through the main financial and commercial milestones that we have achieved by this 2025 year. And all of this will be very much enhanced by Eduardo with much further detail and color. Eduardo also will continue with the financial section of the presentation. And finally, I will conclude with some financial remarks. Thank you. Here, this is different than other presentations. Let's start, which I think is a real highlight, with the financial performance of TR. Financial performance in 2025, which has been extremely solid and has definitely exceeded all initial expectations from the very beginning of the year. As shown in this slide, 2025 sales reached EUR 6.5 billion, representing 45% increase compared with the 2024 and therefore, exceeding the guidance set for the year. If we move to the EBIT level, 2025 reached EUR 291 million, which is 61% above 2024, which results in an EBIT margin of 4.5%, very much complying with the guidance established for the year. Nevertheless, that's important to note as well, we gained, in nominal terms, EUR 57 million above our initial goal, which is due to the sales increase. And finally, net profit amounted to EUR 156 million, reflecting an increase of 75% compared to the previous year. After these results, this performance, it has resulted, as you all were well known, in early repayment of our SEPI loan, which finally took place last December 1. This repayment of the loan has given us the financial flexibility to return to the shareholder remuneration policy with dividend payments resuming again this 2026 year results. And this is new as we never start with guidance. But with the solid financial foundations, I'd like to anticipate our guidance for 2026. We do expect sales to exceed EUR 6.5 billion with an EBIT margin above 5%, which translates into more than EUR 325 million. Our guidance for net profit is projected to reach the neighborhood of EUR 200 million. But it is important to note that the EBIT grows by more than 10% from EUR 291 million to more than EUR 325 million. And it is also important to see that net profit increases as well by more than 20%. However, this 2025 has not only been a year of outstanding financial results and very good execution and performance. But probably, I think it's more important that 2025, it's important to say and to explain to all of you, has been a year of quality, of positioning and has been a year of a real inflection point. In 2025, we have managed to place TR where we wanted TR to be. And let me go through why. First, we've positioned TR as a much stronger company in the Middle East. Second, with the leadership in the power business. Third, confirming TR as a trusted engineer service partner. And fourth, and this is very important, a very strong foundation in North America. And before Eduardo gets into details, let me give you some examples. On March 25, it was very well announced. We got the award of the Lower Zakum project for EUR 3.1 billion. We have been present for more than 20 years in the Middle East. But now today, I can confirm that we are positioned better than ever. We have strengthened this year our leadership in the power business. We have a strong backlog. And with the expansion of the combined cycle in Saudi Arabia, together with the new job for RWE in Germany, we talk in Saudi Arabia and we talk in Germany, that confirms that we are in this business well positioned to grow. Our engineering service has closed in 2025 with awards of EUR 333 million. And this is remarkable. This is a remarkable milestone that was defined only 2 years ago. But most important and very important is that of this EUR 333 million, more than EUR 70 million have taken place in North America which confirms our quality and definitely our growth potential. So all I wanted to do, this introduction of financials, our guidance and our positioning. And now I pass the floor to Eduardo, who will continue with the presentation. Eduardo San Miguel Gonzalez De Heredia: Okay. Thank you, Juan. Good morning, everyone. As Juan has explained, year 2025 has been a year plenty of solid achievements, repayment of SEPI, best ever EBIT. We're filling the backlog with a strategic new project. But there is also a deep transformation process inside TR moving forward that supports these achievements and is slowly reshaping the future of Tecnicas Reunidas. There are a number of drivers for this transformation, but I want to focus on 4 of them. First, expansion of our services business line. Second, our new strategy for the Power division. Third, the leadership we are settling in digital, artificial intelligence and robotics. And fourth, our presence in the geographical areas with the highest concentration of future investment. I will cover in the next slides where we are in those 4 drivers, but let me first devote this slide to explain to you why it is a real game changer. Expansion of the services business line obviously delivers a volume of profitable and less risky projects, but it is also the way to enter into the U.S. market and to keep on working in the world of energy transition. The new strategy for power that has to do with the spin-off of our Power unit that we expect to be completed before summer. Well, it has a purpose and its purpose is to maximize the opportunities for this sector based on more resources devoted and more focus. Through investing in artificial intelligence, digitalization and robotics, we will get cost efficiencies. We will increase our competitiveness, and we will generate opportunities to deliver digital services. And most importantly, it will contribute to redefine how our clients perceive us. And eventually, to complete our footprint with a solid presence in the U.S. was a must last year if we wanted to capture immediate future investments. And we have succeeded in consolidating our presence in the States. Together with the Middle East, we are where we want to be. So let's go one by one. First, the engineering services business line. 2025 figures are good and also promising. EUR 333 million in awards, more than 40 new contracts signed, a total of 11 frame agreements signed with major clients, 23 new clients we have started to work with through this business line. And the revenues amounted to EUR 254 million, halfway to our 2028 ambition of EUR 500 million of revenues and margins are in the range from 25% to 30%. So it has finally been a very, very good year. Second, artificial intelligence, digitalization and robotics. We launched a month ago a project called Reimagine TR. And our conclusion is we can fully transform the way of doing projects. It will take time. But in the meantime, it's an unlimited source of cost efficiencies. What is clear to us now is it is time to invest, and we will do it. That is why we have decided to increase our investment up to EUR 35 million per year from 2026 and onwards. And that is why we are planning to more than double the staff devoted to develop our programs. More than 400 people will be involved in digitalization and robotics by the end of 2026. And also, this investment will be partially paid by the clients because digitalization is becoming a source of services contracts with our clients. In fact, we have already contracts amounting EUR 65 million and another EUR 50 million under negotiation. And regardless if it is paid or not by the clients, digitalization and robotics are definitely a game changer in our sector. From civil works, structures, electromechanics, procurement, site and project control, everything can be digitalized. In fact, around 60% of the man hours in our sector can be automated with today's technology. Our internal estimation is we can capture EUR 200 million per year in cost efficiencies that will be translated into better margins or more competitiveness depending on the market situation. In any case, we will invest. We have to be ready for the future. The third driver is the power sector. $100 billion is expected to be invested annually by our clients next decade. And we have a business unit that has installed 25 gigawatts in the last 20 years, creating a unique relationship with the 4 existing turbine suppliers, GE, Mitsubishi, Siemens and Ansaldo. In our October Investor Day, we fixed our target of revenues being EUR 1 billion per year. It is not a major challenge considering the size of the market. But to secure the achievement of this target last December, we launched the spin-off of this business unit, and we have created TR Power. The new logo is up there in the slide. We have more resources. With the sole focus in constructing combined cycles moved by gas turbines, with fully separated financial accounts, with an identity distinct from TR that allows clients to better identify TR Power management team, we firmly believe the achievement of our target is closer. And eventually, the fourth driver is to consolidate our presence in the most promising markets. You have some numbers in the slide. They have been provided by McKinsey in its Global Energy Perspective. They may be slightly obsolete because they come from 2024, but it is an undisputed fact that a very relevant portion of the global investment will take place in North America, mainly in the U.S. and in the Middle East. Regarding the Middle East, TR has strengthened in the last 2 years a position that was already important in itself. We are developing local engineering services. We acquire equipment that is exported all around the world. We construct workshops to build robotic solutions, and we use it just to construct modules used in other geographies. On top of that, we are executing massive projects in terms of size and the most advanced projects in the world of the energy transition. So all those are very good reasons to be optimistic in the Middle East. A vast pipeline amounting EUR 35 billion is ahead of us in the next 18 months. And for North America, 2025 has been a year of consolidation. The strategic framework agreements with the different energy players are already leading to significant results with more than EUR 70 million in services awards in 2025. Furthermore, these engineering services will allow us to access to EPCs where the pipeline of opportunities in the next 18 months stands at more than EUR 24 billion. Without any doubt, the recent alliance signed with Zachry will enable us to grow faster and solidly. And obviously, the volume of investment in power generation driven by the artificial intelligence will provide us a number of good opportunities this year. So these are the 4 main drivers. Now let me elaborate about the financial figures of the year although Juan has already given a glance of them. We closed this last quarter of the year with sales of EUR 1.9 billion. This represents a 52% increase compared to the fourth quarter of 2024. This strong sales performance reflects a healthy delivery of our backlog, the acceleration plans currently being implemented across our Middle East projects and the continued growth of the power business. EBIT for the last quarter reached EUR 86.6 million. This represents a 74% increase versus the fourth quarter of 2024. EBIT margin reached 4.6%, making the 13th consecutive quarter of margin expansion. EBIT margin obviously is being driven both by the healthy backlog I mentioned before and the expansion of our services business line. And finally, let's now take a quick look at 2 key figures of our balance sheet. The net cash position at the end of 2025 amounted to EUR 332 million, reflecting the impact of the early repayment to SEPI. Without this repayment, the year-end net cash position would have totaled EUR 507 million compared to EUR 427 million we had the year before. Regarding equity levels, we ended 2025 with EUR 564 million, a very, very robust figure. This is why and after repaying SEPI loans, TR will resume its remuneration policy, committing to a 30% dividend payout against fiscal year 2026 results. And the final decision about a potential interim dividend will be made after summer. And now let me give back the floor to Juan for his final remarks. Juan Arburua: Thank you, Eduardo. Let's now finish, say that 2025 has been definitely a very strong year. But a year, our transformation has reached, as we have both said, Eduardo and I, a true inflection point. We have set the foundations for growth and profitability. Today, we have product, we do have quality and we have strengthened very much in regions and markets and very important, very talented resources. In this sense, and that is what I said before, for 2026, we can forecast revenues over EUR 6.5 billion and, as I said before, EBIT to exceed EUR 325 million with a margin above 5%. But I'd also like to note that it should not be a great challenge to end 2026 with EUR 6 billion of new awards. It's not a great challenge, but it is a challenge. But it's not a great challenge. EUR 7 billion of new awards. Eduardo San Miguel Gonzalez De Heredia: You said EUR 6 billion. Juan Arburua: I said EUR 6 billion? Eduardo San Miguel Gonzalez De Heredia: Yes. Juan Arburua: Well, that was a Freudian slip. EUR 6 billion. No, EUR 7 billion, EUR 7 billion, EUR 7 billion. That might give you the hint that EUR 6 billion is very, very easy. But I mean, we target for EUR 7 billion, and we -- usually, we always have that question. And before you ask us that question, we decided to tell you. We are targeting for EUR 7 billion of new awards. So let me finish by saying that TR transformation is really moving forward. I am optimistic, very optimistic because our future has never been and has never looked more promising. So thank you very much. And now we are here and ready to answer any questions that you may want to pose. Operator: [Operator Instructions] And your first question comes from the line of Ignacio Domenech with JB Capital. Ignacio Doménech: Congratulations on the results. I have 2 questions. The first one is on the EUR 7 billion awards expected in 2026. I guess you have a high degree of visibility on this. So I was wondering if you could give us some color on the split of these awards, maybe what would be the weight on services versus EPC. And based on the performance that we've seen in 2025 with some of your clients requesting to accelerate some of these projects and given this EUR 7 billion of awards, you think that 2026 could follow a bit the same path, the same trajectory we've seen in 2025 and potentially the outlook that you have guided for 2026 could end up being revised throughout the year? And the second question that I have is related with Teesside. I noticed on the annual report that the final decision is expected in 2026. So I was wondering if you have some visibility there or any detail that you could provide, okay? Eduardo San Miguel Gonzalez De Heredia: It's good to know that you have realized it's EUR 7 billion after the confusion. I have to be honest with you. I think it's -- we have quite good clear visibility about those EUR 7 billion first because everything that has to do with power is booming. We are involved in a number of projects. We have already, in fact, been awarded with some projects that has to be converted now into EPCs, and it will happen probably by the end of the year, early 2027. So a relevant part of this EUR 7 billion will come from the Power division, and there is no major doubt about doing that -- achieving that target. And regarding the traditional businesses, oil, gas, petchem, LNG, again, I think the visibility is quite high. We are already involved. In fact, we are already bidding for very relevant large projects, mainly in the Middle East. And the perspectives are very good. We do really believe we are offering competitive prices. We are doing the kind of projects we are experts in. We have the recognition of the clients. So to be honest, it's always a challenge to convert all our expectations into reality. But being honest, we believe that the visibility is very clear for those EUR 7 billion. But it has to be done, obviously. Regarding 2025, that guidance is low. Yes, I have to accept that this year, we may look a bit conservative providing guidance because we have beaten 3 times in a row our previous guidance. But we are trying to be fair with the figure we are offering you for next year. I think to reach this EUR 6.5 billion of revenues, but -- we may be slightly above if everything goes right. But I think for your estimations, your numbers, EUR 6.5 billion is a correct number. And we have missed the last question because we believe you are thinking about dividend. Is this correct? Ignacio Doménech: No, it's on the decision on Teesside, on the litigation, but I think the date is on the first semester in 2026. So just wondering if there's any -- you have any visibility there or anything that you could share, okay? Any potential upside there or... Eduardo San Miguel Gonzalez De Heredia: We are positive about the final outcome of this arbitration. That's how we have been giving that message to the market for a long time. But the only visibility we have now is it is expected to have a final outcome next April -- end of March. That's very confidential. I cannot enter into more details. Operator: And your next question comes from the line of Kevin Roger with Kepler. Kevin Roger: I'm very sorry, you're going to tell me that I'm a bit pushy, but I wanted to get your sense on the post-2026 linked to 2 elements. The first one is that you have a backlog today of more than EUR 10 billion that provides you a lot of visibility for '26, but you're going to use a lot of volumes from those -- from this backlog, EUR 6.5 billion on the EUR 10 billion something. You're going to get a lot of volumes that will materialize as soon as this year. So I was wondering if you can share a bit with us how do you see really the order intake trend for the next, let's say, maybe 6 months and that can contribute to the '27 top line and then the chance and the rationale to keep the '27 top line flat or you do see maybe some risk on a slightly lower top line in '27 because '25 and '26 have been at the end very, let's say, well above your expectations. So just to understand a bit the phasing of the order intake and how it can contribute to the '27 top line. And then the second one, it's maybe focusing on the power generation business. So you have announced the spin-off of the entity. You do announce that the commercial pipeline is relatively huge in that space. So if you can share also a bit with us the kind of region, I guess, probably U.S. that matter and the typical size of the project that you are chasing there. Eduardo San Miguel Gonzalez De Heredia: Thank you for the question. Well, it is math. I mean, we know the volume of backlog we currently have, and we know how we are going to deliver it throughout 2026, 2027. So give or take, around 85% to 90% of the revenues coming -- expected in 2026 will be coming from the existing backlog, but there is still something to be done with the projects to be awarded within this year. So when we say EUR 6.5 billion, again, please don't believe I am being conservative. It is really what we believe it will happen. The good news is that we will be delivering a small part of all the awards of the year 2026 within 2026. This means that most of the revenues will come in 2027 and onwards. So I think we are well balanced, right? Well balanced. When we talk about the pipeline of power, yes, the pipeline of power is massive. But basically, I think we are focusing in 3 geographies, and I'm not going to tell you nothing extraordinary. In Middle East, we see still new relevant opportunities, not only in the Middle East, but not only in Saudi, but also in the Emirates. So we are bidding there, and we believe we have a real chance of being awarded with big, large projects. The United States, well, it's what we expect. And it's clear, there are many opportunities this year. We've had a solid alliance with Zachry. Zachry is specialized between all their specialty they have. We are specialized in constructing combined cycles. So if the market is booming, our partner is a good constructor of combined cycles, not only a constructor because they are also engineers. Obviously, we should be having a very good opportunity this year in that market. In the Investor Day, we told you that we expect the project to be awarded before year-end or early 2027. So we believe the first project, the first EPC, and probably it will be a power unit, is coming soon. And also there are opportunities in Europe. We are bidding in Europe. And -- well, there are many, many, many opportunities. And that's why we needed to create a devoted team exclusively focused in this sector because we don't want to miss any opportunity. Kevin Roger: Okay. And one follow-up, if I may. Services, so frankly, you are quite very successful with EUR 250 million generated this year. What kind of growth do you target this year? Sorry if I missed that during the presentation. But when you argue that you have an order intake of EUR 333 million in '25, is it fair to assume that it will be the kind of top line that you're going to get in '26? Eduardo San Miguel Gonzalez De Heredia: Kevin, it's not as easy because in the services business line we have little experience. We've been involved here for 3 years, no more than that. We will definitely grow. So the starting point is EUR 333 million. We are expecting to pass EUR 500 million by 2028. I think this year, we should be finishing close to EUR 400 million, but below EUR 400 million. That's -- I have to be honest. That's what we expect. It's difficult for me to give you a more accurate figure because this is not 2 big projects. It's maybe 50 projects of very different sizes. And when they are going to be awarded, end of the year, early 2027, it's very difficult for me to predict. But slightly below EUR 400 million should be the target of awards. Operator: And the next question comes from the line of Mick Pickup with Barclays. Mick Pickup: A couple of questions, if I may. So I'll ask them one by one. Can I just talk about the new bids you started talking about? So obviously, the digitalization, the robotics was a big one. And you talked about 60% of hours in our sector suitable for automation and that EUR 200 million saving, obviously, big, big numbers. Can you just talk to what's in that? Is that your man hours? Are you talking subcontractor man hours as well? So robot welders, automated deliveries, how extreme have you gone to get to that EUR 200 million? And on the cash side of it, the investment plan, EUR 25 million to EUR 30 million a year, is that expensed? Or is that going to be CapEx going up? Eduardo San Miguel Gonzalez De Heredia: Well, Mick, I have to be honest with you, when I was talking about EUR 200 million, I was conservative. The figure can go beyond that, okay? When we were talking about Reimagine TR, we were thinking about let's change everything. And when we talk about change everything, we were talking about the construction as well. So there are -- when I'm talking about saving 60% of man hours, I'm talking about everything, both engineering services, procurement services and construction man hours. So yes, the future is going to be very different to what we see today. So for me to say this EUR 200 million are directly linked to the engineering or the procurement it's a bit complicated because it's not EUR 200 million. It's more than that. But there are potential savings in the whole chain. That's a fact. Antonio is in front of me and he's telling me to insist that cost efficiency doesn't mean savings over profit. It can be converted into being more competitive. So we have to be very careful when throwing these figures because you may believe that, well, those guys are going to multiply its EBITDA by 3 in the forthcoming years, and it's not the case. But we have those savings and we have to invest on it. And regarding if it's going to be CapEx or OpEx, I have to be honest with you, there are very clear accounting rules. And not everything can be CapEx. I mean there will be lots of expenses that has to be -- has to do with internal hours we will devote that probably will not be converted into CapEx. So for me, it's difficult to predict what percentage of this EUR 35 million will be CapEx. My purpose is not to create a big ball of fixed asset called digitalization investments. No. The idea is, well, let's try to find a way to balance it. And it's absolutely impossible for me to tell you today which percentage will be expense and what percentage will be CapEx. But it will be a mix of both. Mick Pickup: Okay. And then a second question on power. Clearly, you talk about opportunity sets on power and having good relationships with all the big OEMs for the turbines. But all I hear from my cap goods analyst is that if you want a turbine, get in the queue and you can have that turbine in 2030. So how does TR get in that queue? Eduardo San Miguel Gonzalez De Heredia: Sorry, there has been a little debate inside about how to answer you. But I think what makes a difference is we are extremely reliable for the [ EOMs ]. They know us very well. And when they have an opportunity, they ask us to be in the project. I mean they call us. They want to be partners of them. Obviously, this is -- there is a competition. But when you are with General Electric and you are constructing simultaneously 4 projects with them, it is obvious that once they have awarded a turbine to any specific client and if we are partners of them, for us, it's easier to be awarded with the construction of the plant. So sometimes clients are asking us, do you have a turbine for me? No, we don't have a turbine for you. That's something you have to talk with the supplier of the turbine. But it's how the [ EOMs ] are pushing us and they are offering us good opportunities all around the world. That's why we believe this good relationship with them is so critical. We are not opportunistic. There are many local companies constructing combined cycles around the world, but it's just one project. We have a track record of 25 projects in the last 10 years. And also, it's important the services division that also works in power is involved in the very early stages in the construction of combined cycles. So when you start early, it's easier for you to be the final company that will construct the plant. So there are many reasons to understand that being close to the [ EOMs ], you are in a better position to be awarded with the project. Operator: [Operator Instructions] Your next question comes from the line of Filipe Leite with CaixaBank. Filipe Leite: I have 2 questions, if I may. First one related with service activity and if you can give us the amount of EBITDA or the gross margin of service-related activity in full year '25. Second one on the artificial intelligence trend, just to confirm if you are involved or have any data center-related projects in your pipeline. Eduardo San Miguel Gonzalez De Heredia: Filipe, yes -- well, I don't want to say anything different to what I said in my presentation, from 25% to 30% is what we are currently doing, and that's what we expect for next year as well. And regarding data centers, not in the data center itself, but in the power units that should generate the electricity for the data centers we are currently involved. It would be a good source of business, mainly in the States from now on. Operator: [Operator Instructions] And we have no further questions at this time. I would like to turn it back to our speakers for closing remarks. Juan Arburua: Okay. Thank you very much. It's been a good year, and it has also been shorter than expected. So thank you very much for listening to us. Thank you very much for posing questions, which clarifies many other things we have presented to you and looking forward to talk and see you over the coming months. Thanks a lot. Bye-bye. Operator: Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Welcome to Laurentian Bank Financial Results Call. Please note that this call is being recorded. I would now like to turn the meeting over to Raphael Ambeault, Vice President, Finance and Investor Relations. Please go ahead, Raphael. Raphael Ambeault: [Foreign Language] Good morning, and thank you for joining us. Today's opening remarks will be delivered by Eric Provost, President and CEO, and the review of the first quarter financial results will be presented by Yvan Deschamps, Executive Vice President and CFO, after which we'll invite questions from the phone. Also joining us for the question period is Christian De Broux, Executive Vice President and CRO. All documents pertaining to the quarter can be found on our website in the Investor Relations section. I'd like to remind you that during this conference call, forward-looking statements may be made, and it is possible that actual results may differ materially from those projected in such statements. For the complete cautionary note regarding forward-looking statements, please refer to our press release or to Slide 2 of the presentation. I would also like to remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Eric and Yvan will be referring to adjusted results in their remarks unless otherwise noted as reported. I will now turn the call over to Eric. Eric Provost: [Foreign Language] Good morning, and thank you for being with us today. For the first quarter of 2026, we're pleased with the progress we've made on our key priorities. Our core commercial businesses showed solid underlying momentum with a total loan growth of 4% in the first quarter, which is right in line with our transformation plan. I want to take a moment to recognize our employees. Their commitment and professionalism stand out. They continue to navigate this period of change with resilience, integrity and a strong focus on serving our customers. This quarter, we recorded after-tax adjusting items of $54.7 million, reflecting charges related to the transactions announced in December. At the same time, the team has also established high momentum as it relates to the transaction. On that front, we reached an important milestone. As announced on February 5, our shareholders voted 98.8% in favor of the resolution approving the acquisition transaction. This vote confirms strong support for a future in which the bank can accelerate its strategic growth plan. Another milestone came on February 17 when we completed the sale of our syndication portfolio to National Bank. The process went smoothly, and we will continue to monitor the transition to ensure everything remains seamless for the clients. While several steps remain to complete the transaction, including obtaining regulatory approvals, we are progressing steadily. We remain confident that we have the right team in place to successfully execute. Our mix of commercial loans continued to move in the right direction, increasing by 1% to reach 51% of total loan portfolio. As mentioned earlier, our commercial teams delivered a strong first quarter with notable momentum in key areas. Inventory financing grew 7% quarter-over-quarter and utilization improved by 5 percentage points sequentially, reaching 45%. In commercial real estate, both the portfolio and the pipeline continued to show steady progress, each increasing by 5%. In essence, our commercial specialization demonstrated solid underlying growth, consistent with our transformation plan. In terms of provision for credit losses, the ratio decreased to 18 bps, reflecting the strength of our specialized underwriting, consistent education practices and disciplined portfolio management. We also saw an improvement in asset quality with gross impaired loans decreasing by 19% to 96 bps. We remain confident that our current level of provisions is prudent and appropriate given the overall quality and performance of our portfolio. Finally, our solid capital and liquidity positions allows us to move forward with confidence. I would now like to turn the call over to Yvan to review our financial performance. Yvan Deschamps: [Foreign Language]. I would like to begin by turning to Slide 6, which has been added to provide details on the adjusting items for the first quarter of 2026, which totaled $54.7 million after tax or $1.23 per share. We recorded the following charges stemming from the transactions announced in December, totaling $53.1 million after tax, including impairment of premises and equipment for $15.8 million, charges related to onerous contracts, leases and other for $10.8 million, severance and employee benefits for $8.4 million, accelerated amortization of software and other intangible assets for $5.2 million, impairment of software and other intangible assets for $4.8 million, transaction and conversion costs were $8.1 million. During the quarter, we also announced the purchase of group annuity contracts from a Canadian insurer that transfers approximately $60 million in obligations of our 2 registered defined benefit pension plans, which resulted in a net settlement loss of $1.6 million after tax. Quarterly comparison is available on Slide 21 and in the first quarter report to shareholders. Turning to Slide 7. It highlights the bank's financial performance for the first quarter of 2026. Total revenue for the quarter was $251.6 million, up 1% compared to last year and up 3% quarter-over-quarter. On a reported basis, net loss and diluted loss per share were $20.5 million and $0.58, respectively. The remainder of my comments will be on an adjusted basis and also be on a total loans and total deposits basis as the balance sheet outlined separately for Q1, the assets held for sale and the liabilities directly associated with them. The diluted EPS of $0.65 decreased by 17% year-over-year and 11% quarter-over-quarter. Net income of 34.2%, $24.2 million was down by 13% compared to last year and stable sequentially. The bank's efficiency ratio increased by 240 basis points compared to last year due to our strategic investments and by 110 basis points sequentially, mainly from the regular annual salary increases and seasonally higher employee benefits. Our ROE for the quarter stood at 4.5%, down 80 basis points year-over-year and 50 basis points quarter-over-quarter. Slide 8 shows net interest income, up by $8.7 million or 5% year-over-year from the growth of average earning assets and higher commercial loan concentration as well as favorable loan repayments. On a sequential basis, net interest income was up by $12.2 million or 7% for the same reasons in addition to the impact from favorable loan repricing lags due to the reduction of the U.S. Federal Reserve rate last December. Our net interest margin at 1.89% was up 4 basis points year-over-year and up 10 basis points sequentially, including about half from nonrecurring elements. Slide 9 highlights the bank's funding position. On a sequential basis, total funding was stable. The bank maintained a healthy liquidity coverage ratio through the quarter, which remained at the high end of the industry. For the remainder of the year, the level of liquidity will remain very high, considering the proceeds of the sale of the syndicated loan portfolio closed on February 17. Slide 10 presents other income of $56.7 million, which was lower by 9% compared to last year and compared to last quarter. The decrease mostly came from income from financial instruments. Slide 11 shows noninterest expenses of $192.9 million, up 4% year-over-year and sequentially, mainly from the seasonal higher employee benefits and vacation accruals. On Slide 12, you'll see that our CET1 ratio decreased by 40 basis points to 10.9% due to the charges stemming from the transactions announced in December and commercial loan portfolio growth. Slide 13 highlights our total commercial loan portfolio, which grew by about $1.4 billion year-over-year and by about $700 million sequentially. This quarter, the seasonal dealers' inventory restocking was positive and fueled the loan growth to 7% quarter-over-quarter. Also, commercial real estate delivered 5% loan and pipeline growth. Slide 14 provides details of our inventory financing portfolio. This quarter, utilization rate was 45%, an increase of 5% quarter-over-quarter. Slide 15 illustrates that 2/3 of our commercial real estate portfolio is residential with most of it in multi-residential housing. The LTV on the uninsured multi-residential portfolio stood prudently at 61%. Slide 16 presents the bank's total residential mortgage portfolio. Total residential mortgage loans were down 3% year-over-year and down 2% on a sequential basis. We adhere to cautious underwriting standards and are confident in the quality of our portfolio. This is reflected in our 65% proportion of insured mortgages and a low loan-to-value ratio of 51% on the uninsured portion. Total allowances for credit losses on Slide 17 totaled $192.6 million, up $3.8 million compared to last quarter, mostly from higher allowances on commercial loans. Turning to Slide 18. The provision for credit losses was $16.5 million, an increase of $1.3 million from a year ago from higher provisions on performing loans, partly offset by lower provisions on impaired loans. Sequentially, PCLs were down $1.5 million from lower provisions on impaired commercial loans, partly offset by lower releases of provisions on performing loans. As a percentage of average loans, PCLs increased by 1 basis point year-over-year and decreased by 2 basis points quarter-over-quarter to 18 bps. Slide 19 provides an overview of impaired loans. Gross impaired loans decreased by $49 million year-over-year and $75.1 million sequentially, driven by changes in commercial loans. Thanks to our prudent underwriting standards and the strong credit quality of our loan portfolio by about 95% of which is collateralized, we're able to manage credit migration effectively with minimal impact on our ACL and PCL outcomes. As we look ahead to the second quarter of 2026, I would like to provide some remarks. We will incur additional transaction-related charges in Q2 in the $40 million range post tax, including from the loss due to the discount on the sale of the syndicated loan portfolio to National Bank concluded on February 17. The expected Q2 impact from the sale of the syndicated loan portfolio is a loss of about $0.04 on adjusted EPS. We expect loans to decline by roughly 2% to 3%, mainly due to the syndicated loan portfolio sale. Excluding this transaction, the loans should remain relatively stable. The NIM is expected to be slightly lower due to some nonrecurring items in Q1. Regarding the adjusted efficiency ratio, Q2 should be relatively in line with Q1. We expect PCLs to remain in the high teens. Our tax rate is also expected to be in the high teens. Capital and liquidity levels are solid and expected to remain strong for Q2. I will now turn the call back to the operator. Operator: [Operator Instructions] And your first question will be from Stephen Boland at Raymond James. Stephen Boland: Just -- I know you said you still need regulatory approval. Could you just -- is that just OSFI and Minister approval? Is that the only 2 that are left at this point? Eric Provost: Stephen, it's Eric. Actually, we're -- the main ones we're waiting for is OSFI as well as the Competition Bureau. And after that would follow the Minister approval. Stephen Boland: Okay. And the timing is, I think, in the disclosure, it is late 2026. That's the -- is there any more specific timing? I know dealing with OSFI and the Minister is always a bit of a crapshoot. So late 2026 is still the guidance? Eric Provost: Yes, yes. We're still aiming for that. Stephen Boland: Okay. Second question is continued good growth in inventory finance. You talked a little bit about utilization. But what's driving that growth? Is it more dealers utilization? Is it Canada, U.S.? Maybe you could just flesh that out a bit, please? Eric Provost: Yes, Stephen. It's really a mix. Like we definitely continue our success track record in terms of onboarding. The newest program we actually won is Arctic Cat, which is an exclusivity, generating good traction again and will fuel future growth and continue on that side. But also the dealers have been restocking prudently, but still a good momentum there. So I think they anticipate, again, an okay season for 2026, and we're benefiting from that sentiment. Stephen Boland: Okay. And I mean, obviously, I presume the people in the field are letting the clients know that there is a change in ownership with you potentially. What's the feedback? Is there -- is it positive? Do they care? I'm just curious what the message was to your salespeople, to top clients? Eric Provost: Well, actually, I had a great opportunity to be out there in the field with our people, meeting customers and the reaction is quite good. They understand the rationale of the transaction, and they're quite supportive. So far, we've seen that in additional volume and then good pipeline for future growth. So we're in good shape there. Operator: [Operator Instructions] Seeing there's no further questions registered. This concludes the Q&A session. I will now hand the meeting over to Eric Provost for closing remarks. Eric Provost: Thank you. We're making steady progress towards closing the agreements with Fairstone and National Bank, all while keeping our customers and employees' best interest at the forefront. This is still work ahead of us, but I'm confident that we will achieve our objectives. Thank you, and have a great rest of the day. Operator: Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for joining and ask that you please disconnect your lines. Thank you.
Cristina Fernandez: Hello, everyone. We're delighted to be here. Thank you for coming. Welcome to our 2025 results presentation. Our CEO, Luis Maroto; and our CFO, Carol Borg, are going to be presenting on our performance, our key developments, our outlook, and we will follow this with a Q&A session. We have invited Decius Valmorbida, President of Travel Unit; and Nikolaus Samberger, Senior VP in Technology and Engineering, to join us for the Q&A session. [Operator Instructions] And finally, today, we're going to be making forward-looking statements that may differ materially from actual results. So we ask that you please review the legal disclaimer that we have inserted in our presentation. The presentation has been uploaded to our corporate website. On this note, I'd like to ask Mr. Luis Maroto, to please join us. Luis Camino: So good afternoon. Thank you very much for joining us in person and here at the London Stock Exchange and for those of you online. A pleasure to see you interest in Amadeus and for us to present the progress we are making on our strategy, our solid '25 results and our midterm outlook. I would like to start with a few key takeaways. Fourth quarter revenues expanded 10%, adjusted EBIT 15% at constant currency. This result was largely due to acceleration in both our Air IT and Hospitality and Other Solutions segments. Full year '25 group revenue and adjusted EBIT grew 9% and 10%, respectively, at constant currency. Our free cash flow generation in '25 amounted to EUR 1.3 billion, 7% above '24, excluding positive nonrecurring impacts, and we completed the EUR 1.3 billion share buyback program in quarter 4 '25. So despite that challenging and evolving macro and geopolitical environment, we ended '25 strongly with revenue growth and profitability accelerating and successfully delivered on our '25 outlook. In terms of commercial activities, we continue to see a strong momentum in the fourth quarter. I will go into details a little later, but we are proud that Lufthansa Group plans to adopt Amadeus Nevio. TUI Airlines and Volotea have selected Navitaire Stratos. We delivered strong volume growth supported by market share gains and new customer implementations across our businesses. Progress continued in our industry transforming Hotel IT, ACRS, implementations, and we signed a strategic agreement are Direct Travel, one of the top 10 travel management companies globally. And finally, we continue to see good growth in our Professional Services, Airport IT and Payment Businesses. We continue to invest with conviction for the long-term future. We deployed over EUR 1.4 billion in R&D investment across our businesses and technology in '25 and expect to continue this level of investment to underpin long-term growth. As a leader in the travel and technology space, our objective is to be the orchestrator in an AI-enabled travel ecosystem, connecting suppliers, sellers and AI assistance to trusted dynamic travel data to scale in a neutral, secure and responsible way. Our decades of expertise in travel technology, deep integration within the travel ecosystem and unique competitive advantages give us a continued right to win. As AI assistance may gain a space with the primary interface in travel, we believe Amadeus will capture value as the essential infrastructure powering them, expanding our role and gaining further relevance. We remain committed to deliver against our strategy, continuing to build on our proven track record. We have confidence in our solid growth prospects for the coming years. And today, we are also announcing our midterm outlook. We are focused on driving value creation for our customers, employees and shareholders, delivering strong operating and financial performance into the midterm. We are targeting high single-digit group revenue growth, low double-digit adjusted diluted EPS growth and high single-digit free cash flow generation growth. Now let's turn to our quarter 4 highlights demonstrating how this fits into our overall strategic position. Amadeus is leading the airline industries retailing transformation with Nevio, our AI native next-generation Airline IT platform. As I mentioned earlier, we are pleased to announce that 9 airlines within the Lufthansa Group plan to adopt Amadeus Nevio. With this, British Airways, Air France-KLM and Lufthansa Group are all engaging with Nevio to advance model retailing. We have reached a tipping point. Today, 25% of Altéa PBs are engaged in Nevio program. And looking forward, we continue to see a strong engagement across all regions and expect momentum to build on Europe. Our Nevio implementations continue to progress, and I am pleased to say that Fin Air, an early Nevio customer, following its implementation of Amadeus product catalog and dynamic pricing reported new benefits, including increased ancillary revenues and optimized ticket pricing. Additionally, TUI Airlines and Volotea in Europe have selected Navitaire Stratos, our next-generation retailing portfolio for low cost and hybrid airlines. Navitaire Stratos is aligned with IATA offer and order standards and is being developed on an AI-powered flexible and cloud-native technology stack. In the airport space, Melbourne Airport will become the first airport to deploy new Amadeus seamless backdrop solutions. This incorporates the latest advances in self-service, making it easier to load backs and maneuver large items, thus reducing manual intervention and improving the passenger experience. In Hospitality and Other Solutions, revenue growth continued to accelerate as we anticipated through the fourth quarter, largely due to customer implementations and continued commercial momentum. Amadeus Hospitality platform offers the most comprehensive AI-powered portfolio of core capabilities to the hotel industry and is the most broadly connected ecosystem of partners. We are creating a global community platform of world-leading hotels on a mission to transform relationships with guests. We are advancing with Marriott International, Accor and The Ascot Limited to join Amadeus Hospitality Platform. We are pleased to say that the first Marriott International properties are now live on CRS with implementation plan going as expected and a meaningful number of Marriott properties scheduled to migrate gradually throughout '26. Also leveraging our e-money license, we have renewed and expanded our partnership with Mastercard, allowing Amadeus to operate as full scheme member with self-issuing capabilities. As for the Amadeus travel platform, which enables travel providers to retail through third parties worldwide, we continue to see steady volume growth and strong revenue per booking growth through the platform in quarter 4. We enriched our low-cost carrier content with the addition of West China and with expansion of Transavia content, the local airline of the Air France-KLM Group. At year-end, Amadeus had over 75 signed NDC airline distribution agreements. We also signed a strategic multiyear agreement with Direct Travel, one of the top 10 travel management companies globally under which Amadeus will provide direct travel with seamless access to the most comprehensive air hotel and ground transportation content through the Amadeus Travel platform. I would also like to point out that we have deployed advanced airline profile on Amadeus Travel Platform, a smart machine learning power solution to manage search traffic at scale. This solution significantly reduces unproductive traffic and make airlines and travel agents see a significantly lower look-to-book ratio in their systems as well as reduce infrastructure strain. Air France-KLM has reported major gains by implementing our solution as well as lastminute.com, who now has a significantly improved pull to book ratio and optimized search performance. And finally, regarding our technological capabilities, including AI, we have completed our cloud migration and continue to advance our partnerships with Google and Microsoft. Partnering with leading companies to transform travel, leveraging AI gives us confidence that the biggest and most advanced technology companies have chosen Amadeus as one of their strategic partners for travel. We all know there is a lot of sentiment in the market around AI. Agentic AI promises to transform travel in very positive ways, bringing increased personalization to travelers as well as productivity and efficiency gains across the value chain. Amadeus is uniquely placed to deliver Agentic AI functionality into products and solutions, supporting our customers on their own journey and to be the orchestrator in an AI-enabled travel ecosystem. I will elaborate more on this later. With this, I will now pass on to Carol to review our financial performance. Caroline Borg: Thank you, Luis. Let me just drop this a bit. I'm a bit shorter than Luis. We are good. Okay, great. Great to see so many of you in the room today. So thank you, and I'm delighted to communicate that we've delivered a strong Q4 to achieve a solid financial performance in 2025. We delivered high single-digit revenue growth and double-digit adjusted EBIT growth at constant currency, coupled with good free cash flow generation, achieving our 2025 guidance across all metrics. We display our performance of revenue and adjusted EBIT versus previous year also at constant currency to facilitate your understanding of Amadeus' underlying financial performance. More details on our foreign currency exposure and on our constant currency calculations as well as the complete information on our IFRS figures and their evolution are available in the appendix of this presentation and also in the Amadeus 2025 management review. So in 2025, we successfully delivered our 2025 constant currency outlook, reporting strong growth across our key financial metrics. Revenue of EUR 6,517 million, 9% growth at constant currency, 6% reported growth. Adjusted EBIT of EUR 1,894 million at 10% growth at constant currency or 9% reported growth. Profit of EUR 1,336 million, 7% growth. Adjusted diluted EPS growth of 9% at constant currency. Free cash flow of EUR 1,302 million, which is 7% growth, excluding nonrecurring flows in 2024. R&D investment of EUR 1,434 million, representing 22% of revenue. Pretax operating cash flow conversion of 94%, leverage at 0.9x net debt to the last 12 months EBITDA at the end of the year and our EUR 2 billion that was returned to shareholders in the year through both dividends and share repurchase programs. So in 2025, our group revenue grew by 8.5% at constant currency. Group revenue growth resulted from high single-digit revenue expansion across each of our segments, supported by volume expansion and customer implementations across our segments. Air IT Solutions revenue grew by 8.7%, the Hospitality and Other Solutions segment revenue delivered 9.6% growth and Air Distribution revenue expanded by 8%. Group revenue accelerated to 10% in Q4 at constant currency supported by double-digit revenue growth in both Air IT Solutions and Hospitality and Other Solutions and high single-digit revenue growth in Air Distribution. At constant currency, our adjusted EBIT grew 10.2%, resulting from the 8.5% revenue evolution discussed on the previous slide and also was contributed by cost of revenue growth of 3.2%, fundamentally driven by an increase in transactions, such as in air distribution and hotel distribution bookings and in payments due to the B2B wallet expansion. Reported fixed cost growth of 6.5% mostly resulted from an increase in resources, particularly in our R&D activity, coupled with a higher unitary cost, higher cloud costs due to a combination of our own volume growth and also to our progressive migration of the solutions to the public cloud; and finally, to the Vision-Box consolidation impact in Q1. Ordinary D&A expense increased by 4.4% as a result of higher amortization of internally developed software, partly offset by lower depreciation expense at our data center, given the migration of our systems to the public cloud. At constant currency, adjusted EBIT margin was 28.8%, a 0.5 percentage point expansion versus the previous year. And adjusted EBIT growth accelerated in Q4 to 15.4% at constant currency, supported by faster group revenue growth and softer fixed cost evolution. So now let's review the performance of our operating segments, starting with our Air IT Solutions business. Air IT Solutions revenue increased strongly in the year by 8.7% at constant currency. Full year revenue growth was driven by Amadeus PBs increasing by 3.8% and a 4.7% higher revenue per PB, which fundamentally resulted from positive pricing dynamics, including upselling to our new Nevio customers as well as from strong performance of our airline professional services and our airport IT businesses. Amadeus' PB growth in the year was driven by global air traffic evolution and the PB contribution from Vietnam Airlines, which migrated to Altéa in April 2024. Revenue growth expanded by 10.9% in Q4 at constant currency. This revenue growth is due to stronger PB volumes due to improved global air traffic evolution and an expansion of revenue per PB of 6.6%, an acceleration relative to Q3, mainly due to improving price effects and stronger performance of airline professional services. In Q4, our leadership in Air IT Solutions continued. In addition to the Lufthansa Group planning to adopt Amadeus Nevio as well as Volotea and TUI Airlines selecting Navitaire Stratos, as Luis just mentioned, we continue to grow our customer base with Pan American World Airways choosing our technology as the backbone for its core passenger and operational capabilities. We also broadened the scope of solutions adopted by our customers, such as Thai Airways that selected our AI-powered air dynamic pricing amongst other solutions and Jeju Air that selected Navitaire Edge shopping service, an innovative solution designed to give airlines greater control over look-to-book ratios and improve response times. In Airport IT, several airports at Indonesia and the Philippines will adopt our AI-enabled biometric technologies and airports across Australia and Japan will adopt our self-service bag drop solutions. Air IT Solutions contribution increased by 8.4% at constant currency, resulting from the revenue evolution that I've just described, offset by cost growth of 9.4%, which was fundamentally driven by an increased R&D investment, variable cost growth driven by the Airport IT business expansion and the consolidation of Vision-Box. Contribution margin was 70.7%, 0.2 percentage points below the previous year due to the Vision-Box consolidation impact, excluding which margin would have expanded year-on-year. Hospitality and Other Solutions revenue grew by 9.6% at constant currency in 2025. Revenue growth was driven across both hospitality and payments due to customer implementations and increased transaction volumes. Within Hospitality, the main revenue contributors were Amadeus Central Reservation System, sales and event management, hotel distribution and business intelligence. In payments, both our merchant services and our payout services reported strong growth. Hospitality and Other Solutions revenue growth in Q4 improved to 13.9% at constant currency, driven by stronger performances of both hospitality and payments supported by new customer implementations and higher transactions. In Q4, our growing relevance in hospitality continued to expand across our extensive portfolio, the most comprehensive in the industry, amongst others with -- sorry, beg your pardon, I missed something. We signed new customer agreements spanning across multiple verticals, including, amongst others, with Radisson Hotel Group and Travel Seller, Alibtrip in hotel distribution and Massanutten Resort in Hotel IT. In payments, travel sellers such as Fareportal selected our Outpayce B2B wallet. We also partnered with UnionPay to enable the acceptance of its cards and expanded our agreement with Mastercard to become a full Mastercard scheme member with self-issuing capabilities. Hospitality and Other Solutions contribution was 13.8% above the previous year as a result of the revenue growth I've just previously described, offset by cost growth of 7.4%, which resulted from higher variable costs driven by the volume expansion in both hospitality and payments and increased R&D investment. Contribution margin was 35.8%, 1.3 percentage points above the previous year. Air Distribution revenue increased by 8% in 2025 at constant currency, driven by 2.8% increased booking volumes and a revenue per booking growth of 5% primarily resulting from positive pricing effects. Amadeus' booking growth in the year was supported by continued commercial gains across the regions. Air Distribution revenue in Q4 softened slightly relative to Q3, largely due to booking evolution, which was negatively impacted by an increase in flight cancellations in the U.S. Beyond introducing advanced airline profile, addressing one of the biggest hurdles in NDC adoption by enabling search traffic management at scale and enriching our low-cost carrier content offering, we secured new travel seller customer wins, including L’alianX Travel Network in the Americas and Direct Travel, one of the top 10 TMCs globally. We also successfully delivered professional services to BCD, one of the world's leading corporate travel management companies. Air Distribution's contribution grew by 13.3% at constant currency as a result of the revenue growth I've just described, offset by a 3.2% cost increase, which mainly resulted from the bookings evolution. The contribution margin of the segment expanded by 2.3 percentage points to 49.6%. So now let's move on to review our R&D investment and capital expenditure. We continue to prioritize investment in R&D to deliver our organic growth, maintaining our leadership position. As Luis mentioned previously, we are proud of the commitment that we've made to make remaining relevant for our customers, ensuring that emerging technologies such as AI continue to be embedded across our entire portfolio. In 2025, R&D investment amounted to EUR 1.4 billion, growing by 7.6% versus the previous year. Half of that investment was dedicated to the expansion of our portfolio and the evolution of our solutions and AI capabilities, including Amadeus Nevio, Navitaire Stratos for airlines, our hospitality platform, NDC technology for airlines, travel sellers and corporations and solutions for airports and payment services. 1/4 to 1/3 was dedicated to our customer implementations across the business, such as Marriott International and Accor for ACRS, new Nevio customers and airline portfolio upselling and customers implementing NDC technology as well as efforts related to bespoke professional services provided to our customers. And the remainder was dedicated to our migration to the cloud and our partnerships with Microsoft and Google as well as the development of our internal technology systems. In the year, our capital expenditure increased by 5.6%, mainly driven by our continued investment in software development to maintain our leadership position. Capital expenditure represented 12.5% of revenue, consistent with the previous year. In 2025, we generated EUR 1,302 million of free cash flow. Free cash flow was slightly below previous year by 2.4% due to nonrecurring tax-related inflows in 2024. Excluding these nonrecurring effects, free cash flow in 2025 was 6.9% higher than the previous year as a result of our EBITDA expansion, a higher change in working capital inflow and a reduction in interest payments, partially offset by an increase in our capital expenditure deployed to strengthen our value proposition as well as higher taxes paid. We had a pretax operating free cash flow conversion of 94% in the year. Net debt amounted to EUR 2,141 million at the end of December 2025, EUR 30 million higher than at the same time last year, largely due to the acquisition of treasury shares under the share repurchase programs as well as the dividend payment, which was partially offset by our free cash flow generation and the conversion of bonds into shares. And finally, our leverage is at 0.9x net debt to EBITDA as at the end of December. So now on to our short-term organic outlook, our expectations for 2026. IATA forecasts global air traffic growth of between 4% and 5% in 2026. Based on this assumption, we expect our group revenue to grow at constant currency at high single-digit, supported by strong evolutions across all of our segments. We expect a stable adjusted EBIT margin performance in 2026 at constant currency, impacted by our cloud migration ramp-up during 2025, one of our key strategic investments over the past few years. Excluding this effect, adjusted EBIT margin in 2026 would expand. Please note that this timing effect impacts 2026 only, and therefore, we expect adjusted EBIT margin expansion in the midterm. More on that from Luis later. With respect to free cash flow, we expect to generate between EUR 1.35 billion and EUR 1.45 billion in 2026, with capital expenditure as a percentage of revenue in the range between 10% and 12% of group revenue. Again, please note that we expect to see some short-term seasonality with negative free cash flow growth in Q1 due to the timing of payments. Finally, our shareholder remuneration expectation. Ultimately, we seek to create sustainable value for our shareholders. Over the last 12 months, we grew earnings per share by 8.6% at constant currency. In addition, we returned EUR 2 billion of capital to shareholders through the ordinary dividend and the share repurchase program. The size of the buyback and the dividend both reflected our strong free cash flow generation, confidence that we have in our future and a desire to offset the dilution from the very important capital increase we made in 2020. As I've previously mentioned, we aim to create value through strong and sustainable earnings growth, compounding that growth through disciplined allocation of our capital on both inorganic opportunities and increased shareholder returns. Our confidence in continuing to create sustainable value for our shareholders going forward remains strong as evidenced by the fact for the first time, we have included an EPS growth target in the near- and medium-term outlook. We have a track record in delivering growth through evolution in technology, and we have the critical assets to lead in Agentic AI and power the future of travel tech with AI-enabled innovation. We will continue to generate cash and expand margins, all whilst maintaining a strong balance sheet to provide us with the optionality and flexibility to continue to deliver for our customers, employees and ultimately for our shareholders. Today, we are committing to low double-digit adjusted diluted EPS growth for 2026, given our confidence in the future, coupled with our strong 2025 performance. In 2026, we will distribute to our shareholders a dividend at the top end of our dividend policy range, which will amount to almost EUR 700 million, and we will launch a new additional share repurchase program of EUR 500 million to be executed within 6 months. Additional specification on the expected dynamics by segment at constant currency is as follows. So Air IT Solutions, we expect to see high single-digit revenue growth supported by PB growing in line with global traffic -- global air traffic growth, coupled with a positive revenue per PB growth, enhanced by continued upselling, new Nevio revenues as well as higher airline professional services and Airport IT revenues. In terms of contribution, we expect the margin to be dilutive versus previous year, driven by high growth in our airline professional services and Airport IT mix. Hospitality and Other Solutions. We are expecting double-digit revenue growth in 2026, accelerating from 2025. This volume growth will be supported by volume expansion and new customer acquisitions across our hospitality and payments portfolios. We expect contribution margin in this segment to continue expanding as we continue to gain operating leverage. And finally, Air Distribution. We expect our bookings to grow -- to continue to grow steadily, potentially faster than last year, supported by customer success and market share gains. We continue to expect an expanding unitary revenue per booking evolution, although it's likely to be a little slower than last year due to the expected timing of commercial negotiations. In terms of contribution margin in this segment, we expect stable margins in 2026. So I'll now hand back to Luis, who will close with our AI positioning, midterm outlook and final remarks. Luis Camino: Little bit higher. Thanks, Carol. And we are extremely proud of our '25 results in a challenging macroeconomic environment. So now let's pivot to our expectations over the midterm. But firstly, let me remind you of our core strengths. We are a large-scale mission-critical technology leader. We develop, build and support an impressive service-oriented architecture with over 600 applications and more than 10,000 micro services running fully on the cloud. We are the technology backbone for travel, enabling safe and efficient global operations. We openly work with others, build strategic partnerships and proactively deploy leading technologies to deliver value to our customers. We have deep, long-standing customer relationships at global scale. We are a trusted partner, combining our industry-wide scale and expertise, coupled with our deep customer relations to serve many of the world's largest airlines, hotel groups and travel sellers. We are the end-to-end travel data and intelligence leader. We understand, aggregate and convert complex fragmented data into true intelligence for our customers. Our in-depth knowledge of the complex process in travel, coupled with our deep access to relevant data allows us to provide the broadest end-to-end view of travel activity from inspiration to post-trip. We have a robust financial framework and resilient business model. We have a strategically aligned financial and capital framework with a proven track record of generating high single-digit revenue growth, solid and stable margins, high cash generation and long-cycle investments demonstrating resilience through industry cycles. We have a unique and diverse talent base empowered by a cohesive team culture and we are very proud of our talented, diverse and long-tenured workforce led by an experienced leadership team and power to drive a customer-centric, high-performing collaborative culture. I would like to take the opportunity to share our AI positioning and why we believe that AI augments and reinforces our core platform. We are uniquely positioned to orchestrate the AI-enabled travel ecosystem. We have embedded a neutral execution layer for the travel industry, and this is based on 3 strategic pillars: our status as trusted system of record in the industry, the power of our integrated and deeply connected business logic and our global scale. Firstly, we are the trusted system of record in the industry since 1987. Travel is a mission-critical industry with near zero tolerance for error. Availability, pricing, ticketing, passenger identity and airport operations, all demand accuracy, security and resilience. As a trusted system of record, we provide a single source of truth. Our customers trust Amadeus with reliable data that underpins safety, security, compliance and customer experience. That trust has been earned over decades through operational performance, regulatory compliance and institutional reliability. Secondly, the power of our integrated and deeply connected business logic. Our technology is deeply integrated across airlines, airports, rail, hotels, payments, identity and distribution, connecting hundreds of systems, products and workflows that have been built up over decades. This integration is not cosmetic. It is operational, contractual and regulatory and sits deep in the value chain. Replacing this level of integration and domain expertise is not a simple technological decision. It will require reengineering core workflows, retaining staff, recertifying systems and accepting significant operational risk. Being displaced is harder in practice than it appears in theory. The reality of integration creates a structural stickiness. We hold authoritative, reliable data and power workflows that are hard to unpick or replace. AI does not change this. In fact, AI depends on this level of integration. With our deeply connected systems and trusted data, AI remains superficial. And with them, it becomes transformative. We see an opportunity for us to be the orchestrator that digital assistants will rely on for travel, and we are actively engaging with AI platforms. This week, we also announced an acquisition of Skylink. This is an AI-first company specializing in orchestration and conversational automation for corporate travel. Over time, Amadeus will be expanding this AI-driven conversational capabilities beyond corporate travel across airlines, airports and hospitality. And finally, global scale. Scale is not just about size. It is about reliability, resilience, insight and operational learning at volume. Amadeus operates at global scale, processing up to 150,000 transactions per second at peak times, powering millions of searches and bookings every day. We support hundreds of petabytes of data, thousands of services and a platform used across travel verticals and more than 190 markets globally. This scale has been built over nearly 4 decades where we have been evolving, applying and adapting technologies such as AI in our products and solutions. Scale give us several critical advantages. First, investment capability in travel. We continue to invest in infrastructure, in security and in innovation, maintaining our leading position as a key player in the travel industry. Second, data and insight velocity. We power the leading brands in travel. This critical mass of customers bring unparalleled data breadth and operational insight. And third, making AI industrial rather than experimental. AI models improve with volume, diversity and real-world usage. Our scale allow us to deploy AI at a production level, focus on real business outcomes, not pilots or demos. These pillars complemented with our prioritized investment in R&D allow us to ensure that AI is deeply embedded across our portfolio and the number of AI use cases we operate today is countless. Agentic AI unlocks additional opportunities. We have consolidated hundreds of use cases focusing on the following end user solutions. Amadeus travel companion for the traveler. This enables our customers to power their traveler experience with AI through a travel servicing assistant across the different verticals in travel. We have kicked off with airline call centers automation with a strong early interest from our airline customers and for the hotel industry with the Ascott Limited as launch partner to be powered by Amadeus and Salesforce. Amadeus First Officer for professionals -- for travel professionals, sorry. This enhances our products and solutions with an AI conversation layer to help our customers better leverage the full product features and achieve superior outcomes. We have multiple solutions spanning all our customer verticals, such as guard for airports, Amadeus Advisor for hospitality and many productivity boosting AI agents for travel sellers. And finally, internal efficiencies. For employees, solutions designed to enhance internal efficiencies across the organization and from which we are already generating productivity improvements. We believe that for new players in the industry to become relevant channels, they will need the Amadeus execution layer in travel. We, therefore, see AI augmenting and reinforcing our position on our core platform. Our core strengths have enabled a proven and consistent track record of delivering strong and sustained profitable growth and high cash flow generation, giving us confidence in our midterm outlook. Finally, our midterm outlook. Our expectations are to continue to build on our commercial momentum and relevance as market leaders, executing our clear strategy to deliver the following financial metrics period over the '26-'28 period. Group revenue growing at high single-digit CAGR growth rate at constant currency, supported by a strong evolution across all our business segments. Adjusted EBIT margin expansion over the period, supported by operating leverage, Carol mentioned before. We expect to deliver low double-digit adjusted diluted EPS CAGR growth and also to generate solid and consistent free cash flow over the period, growing at a high single-digit CAGR growth rate, coupled with continued and disciplined investment program, through the period with capital expenditure at low double-digit percentage of group revenue to maintain our market and customer relevance. We are excited by the growth opportunities for Amadeus. The sector continues to evolve and no doubt Agentic AI will play a part in this evolution. Our core strengths provide us with the platform to embrace the changes in our space, demonstrated by our proven and consistent track record. We remain confident about our strategy and our ability to execute against it. With this, we have now finished our presentation. Thank you. Cristina Fernandez: Thank you, Luis. Thank you, Carol. I'm going to invite the management team, please to join us on stage, so we can start our Q&A session. So we're going to address the questions in the room first. [Operator Instructions] So Michael. Thank you. Michael Briest: Great. Michael Briest, UBS. Two from me on AI predictably. I mean there's a concern out there that with the coding tools driving down the cost of software development, maybe some of your airline customers might look to expand organically rather than buy some of the many modules that you sell on top of the PSS. What are your discussions there like? What are you doing to sort of prevent that or reassure investors that is not happening? And the second one there, Luis, I think you mentioned at the end, appreciate you working with Microsoft and Google. But are you doing anything with open AI or Anthropic do you expect to? Or do you see them as someone to keep sort of at arm's length? Luis Camino: Let me start with the last one and then Decius, you can take the first one. I mean, of course, we are engaging with all the AI platforms. But as you know, we have been working with Google and Microsoft as part of our cloud migration, as part of different agreements that we have with them. So we'll say we are more engaged with them, but this does not mean we are not talking to the rest of the platforms. We are. But I would say Microsoft and Google are more advanced than the others. Decius, about the customers? Decius Valmorbida: Yes. So today, on my conversations with the providers, airlines, mostly -- when we talk to them, where do you see the biggest opportunity? Is it on the revenue side? Or is it on the cost side in terms of efficiency? And I think that there is a lot of excitement on the revenue side, which is what this is going to allow them to do in terms of personalization, in terms of evolving, what is the mix of what they're selling to customers. And that's what they are gearing up to. So then the question is, if you have an IT team today and they are developing new features, you're saying, what is my focus. And it is like the focus is working together with us on saying how can we leverage the Amadeus building blocks to deliver what, let's say, that upside is going to be on the new channels that are going to be created rather than using those resources to replace infrastructure that already exists today. So I think that's how I see the dynamic today. George Webb: It's George Webb from Morgan Stanley. Also thank you for hosting in person. I think it's a good thing to do and it's appreciated. Couple of questions. I mean investors are obviously in the weeds and trying to work out what's happening. But I think also, it's helpful to have a kind of a simplified view of a company's strategy around AI. So maybe -- and maybe take back the level of detail we've had, if you just simplify at a higher level, how would you kind of characterize the operational strategy that you're going through with AI would be a good starting point from my perspective? I think the second question maybe a more specific one. We have seen good momentum around Nevio, Lufthansa Group being one of those examples. Could you perhaps share how the pipeline for Nevio is looking as you look forward, that would be helpful? Luis Camino: Okay. With AI, I mean, we have been working with AI for more than 20 years, and I would like Niko to complement that. So it's not new to us. It's part of our road map. We are implementing the new features, the advanced things that we see in our portfolio. So that's part of our core strategy. On top of that, we are also aiming to orchestrate the needs that the platforms, AI platforms may need in terms of data and connectivity with travel. So we are acting in both sides, and I explained why we believe we are in a very good position to do so. And I would like my colleagues also to elaborate a bit more. Nikolaus Samberger: Okay. Maybe I'll start. As Luis was saying, I mean, you may not realize it, but we have been using AI for many years. I joined Amadeus 20 years ago, and the team I joined at the moment now, we are calling it traditional AI was doing operational research. Then as we moved out of what we call TPF at the time, and we went on open systems. This opened completely the new door for us to adopt machine learning techniques, and so it has been embedded in our solutions, in our infrastructure, in our culture, I would say, our engineers are used to use this tool to develop any of our solutions. So to give you a bit of color, as I speak to you today, if by the end of today, we would have generated EUR 2.5 billion inference of machine learning in our system just for flight search. And if you take it globally, I would estimate roughly today EUR 15 billion inference of machine learning. And therefore, this, I believe, put us really in a good position when we had the ChatGPT moment end of 2022 that will adopt generative AI. And you heard Luis talking about it. We already embraced it. It's already part of our engineering and global set of tools that they have access to, not only engineers across the company. So I mean, yes, for us, it's a big opportunity. I mean we can talk about it, but I think it's best if Decius talk about the opportunity on the business. Decius Valmorbida: So let me go on the business and then tie in to the Nevio question that you just did. So it's like if we go into this AI world, I think it makes it very explicit that today, you have an industry that -- it is organized around supply. So you have supply that is marketing their products, but all of you are travelers. So it's like if you think as your travelers is are you buying a single element or are you buying a trip? So it is like on the moment. So the industry is selling flights, hotels and car rentals, but customers are buying trips. So it's how are you going to do that translation between trips and to the supply. So it is like that is the position of an orchestration layer. That is the position where you sit in the middle when you make that translation. Why? Because a romantic trip to Paris can have many solutions to it, and it can be a flight or it can be a car with a hotel or it can be something else. So then I think that's where we need to position ourselves. This requires every provider today that is looking at it to participate in this new market that is emerging and investing in technology. So I feel it is a quite interesting opportunity because it is the moment that we are going to harvest a lot of the foundational work that we have done. It is moving to the cloud, give us the scale. The years of diversification through all of the pillars travel allow us to have the integration. Having Nevio as the new flexible machine that will allow you to participate in that market and do retailing because you're going to be marketing trips rather than marketing only your own product comes at a very meaningful time. So it's like, I think that's what I see is what you see after the major European players, major players in the U.S., in Asia and the Middle East coming out with RFIs and RFPs. So we really see the market moving, and we expect now a lot more movement than these foundational customers, let's say, this way. James Goodall: James Goodall from Rothschild & Co Redburn. Maybe just a break trend and ask some non-AI questions. You talked to airlines being excited about the higher revenue environment. And we've also heard from BA this morning who are very quite bullish on revenue benefit they're driving on their new platform. So with airlines generating more revenue, how much of that benefit do you think you can look to share in? I think there's a number in the market of about 15% higher revenue per PB currently between an offer order system and a PSS. Do you think that could be higher in the long term, if airlines start generating a lot more revenue from these new systems? Secondly, just on the buyback. Are there any reasons why you didn't look to do more than EUR 500 million, given the strong free cash generation of the business and the outlook? And then, I guess, very finally, just on the EPS guidance of low double digit in the medium term. Is there a buyback assumption within that, please? Luis Camino: You want to start with the buyback and then I go back to... Caroline Borg: Yes. Sure. I was waiting for the buyback question. So thanks, James. So again, let me just reiterate in terms of the share buyback. We are committed to driving shareholder value, as I mentioned previously. Earnings growth, we are now guiding on earnings growth guidance. And then we want to compound that growth through disciplined use of our balance sheet. And again, just to remind everyone, I think we've been very clear on what we're saying in terms of our capital allocation policy, primarily organic growth investment, which we want to preserve our dividend policy and then M&A and shareholder -- additional shareholder returns are considered equally, yes? So the question really was around, well, why not more? James, give us a chance, like that we have announced today a double-digit growth. We feel the EUR 500 million that we've announced today represents about 90% of our free cash flow generation last year. So in our perspective, we think that this share buyback represents a good and compelling business model in conjunction with the outlook. I think the other thing I would say is that in this world that we're in, I believe -- we believe prudency in maintaining optionality and flexibility of our balance sheet is really relevant. So we think that we'll be at the lower end of our leverage range for a little while. But yes, this share buybacks feature as part of our algorithm, if you like, to increase value. To your point about, well, is there more coming? Again, we're taking this step by step, let us execute this. We're getting on with it. We're delivering it within 6 months. And then we will always consider share buybacks, M&A, additional organic growth as part of our capital allocation discipline. And what we commit is that we will achieve double-digit EPS growth. I'll start on the Nevio and then you give you the commercial answer. Decius Valmorbida: Yes, yes. Caroline Borg: We agree the T2RL assessment of mid-teens, 14% to 15% evolution or revenue gain as a result of airlines transitioning from PSS to OOSD, but maybe what are we seeing with our customers, Decius. Decius Valmorbida: Yes. I would say our growth in Airline IT, we have the 2 components of the growth equation. One are the PBs. So then you say, more people travel because of AI. So I think that one is more related to supply and it is more related to more planes. But then you go into the other equation, which is how many more modules and how much more scope and how much more work can I do on behalf of an airline if they're going. So typically, on a moment of very big transformation, do you want to be orchestrating 50, 60 providers that are everyone doing their own stuff? Or do you want to go with one partner that has, let's say, a lot of skin in the game and it is able to deliver your transformation from A to Z? So it's like, I think that's where we position ourselves, and we see that with all of the customers that we have done, the scope has increased, and you see that translated into higher revenue per PB because we are able to do more and innovation. If you point out our agreement that we have -- I'm sorry, with the project that we have now with Lufthansa, it evolves into something that we call delivery. So every time we were discussing about offers and orders, we're adding a step there. We are adding a whole new step that is called delivery. So delivery is about if you're going to do all of these fantastic things for the traveler, how you're going to deliver that services if that is going to go beyond just an air flight ticket. So it's kind of how you're going to coordinate with your partners? What if you're going to have Uber in there? What if you're going to have to exchange information with an airport? So it's like all of that delivery makes that us, we're going to have more revenue opportunities on the moment that customers are within in trip because that is going to be a moment, that is not going to be only you checking in because the check-in is going to be done, but you're going to be able to buy more products and services on that stage. So I think that is the innovation that I see. Luis Camino: It's already -- I mean, if you see in our figures and in our projections, we are already assuming to capture part of this value. Of course, as the contracts are being implemented progressively, so it will be progressive, but we expect in the medium term, this to really generate additional revenues for us, definitely not just with the current customers, but also with the new customers coming in. Caroline Borg: And in our actuals, it's already represented. It's part of the revenue per PB uplift that we've seen in Q4. Toby Ogg: It's Toby Ogg from JPMorgan. Maybe just on the segmental guidance for air distribution, sort of mid- to high single-digit. You mentioned, I think their growth potentially faster on the bookings side in 2026 versus last year. Could you just help us understand what would drive that potential acceleration if it were to materialize, what would be the building blocks of that? And then just on the remaining pricing-driven growth. Could you just help us with the drivers of that across booking mix and pricing trends? And how we should think about any incremental NDC bookings as well that perhaps might be on a net model within that? Luis Camino: You want to take. I'll start or... Caroline Borg: You can start, and I'll jump in. Luis Camino: I mean, yes, all these figures. When we say we expect higher bookings is mainly coming from the fact that, yes, we are signing customers definitely. We are increasing all our NDC agreements, our agreements with airlines bringing new content. So all that is into the equation. And as far, of course, as the traffic stays in the range that we have defined because that's the variable we don't control. We expect the volumes to be ahead of what we have this year. It's based on customer success, on signatures of NDC bookings, pieces of some new content that is coming into the platform, some reintermediation. So we are optimistic about our volume during the full year of '26. And with regards to the pricing? Caroline Borg: I will complement. So we've also referenced the global air traffic assumptions that we're making, again, based on feedback from you guys. So we're increasing our transparency there. To complement Luis' point, I think the booking dynamics are similar to what we're seeing for our outlook in '26 similar to what we're seeing in '25, but our revenue per booking growth will soften slightly. It will continue growing, but it will soften slightly. And the reason for that is booking mix, as Luis just mentioned. So there's a combination of low-cost carrier content and where that's coming through. We're seeing some pricing tailwinds starting to lap, so that will affect it. And of course, then the timing of our customer negotiations. So all in all, I think a similar booking profile from '25 to '26 with a softening revenue per booking trajectory. Alexander Irving: Alex Irving from Bernstein. Two from me, please. The first one, something is not wholly making sense to me in the way that we're talking about AI is used internally within the business. I love your help in understanding that better. Approaching this from a view of, are you using new AI tools to meaningfully improve the productivity of your software developers. It sounds like the answer is yes. Then if yes, should we be then expecting R&D investment to plateau because we can get more output through higher efficiency rather than cash spend? And the answer sounds like it isn't because CapEx is still going to be a double digit or low double-digit share of revenue. So if that's right, then why not? How are you deciding the right level of development spend is? And how have AI tools changed the way that you think about that level of investment? Caroline Borg: I'll start with the numbers and then maybe Niko you jump on the technical stuff -- you have a point as well. We all want to talk about this one, Alex. So CapEx, yes, low double-digit growth, but a declining trend over the outlook period. So that's the first fact that we expect that our CapEx profile will drop. Secondly, not all productivity gains result in a direct kind of cash out. We might have increased efficiencies, deliver projects to market quicker. Based on the level and speed of sales than commercial momentum that Decius is doing definitely on that case. The third point I'd make on that as well is that we're also committing to margin expansion. So our R&D spend is partly expensed and partly capitalized. So we are expecting and AI efficiencies, productivity efficiencies, amongst other things, are contributing to that margin expansion. So that's on the numbers, but . Nikolaus Samberger: Okay. Maybe to give a bit of color on how we use AI internally. So yes, we've deployed it first like, I would say, most of the companies for engineering. So I don't want all our engineers have access to AI tools. And okay, I can name a few, Claude, Copilot, and et cetera and basically, we give them the choice to select, depending on the task that is at hand. So we already see productivity improvements. However, if you want my honest opinion, the real gains are ahead with what is coming with Agentic. So we have started to deploy some solutions, but having more autonomous agents being there doing some of the activity will then unlock even more productivity, we believe. Second, the point I want to highlight is the way we've approached it is not solely as a cost reduction. It's -- as Carol was saying, there is an aspect of force multiplication, if I may say so. whereby we can implement faster, we can deliver faster. It enables us to -- our team to accelerate their intent, their speed, their capacity. This is our primary goal concerning all the pipeline that Decius talked about, and this is where we see the opportunity. Last aspect I want to highlight is beyond just the tools, it's really a working methodology change that we are embracing. The fact that we've used AI quite a long time in Amadeus helps us because it's in our culture. And in the working methodology, what is very important is to remember that we keep the human in the loop. I think you heard Luis talking about mission-critical systems. So as we deploy those solutions, we are very wise, very careful to make sure that we privileged stability, security for the solution, knowing that we operate in a very critical industry. Decius Valmorbida: I'll let you ask your second question, otherwise. Cristina Fernandez: Quickly, we're running out of time. Alexander Irving: Okay. Second question. Probably -- I think probably might be for you, Decius. You asked the acquisition of Skylink yesterday, and my initial read of this, it takes some functionality away from the TMC in the booking flow in the travel management flow. Does that reflect your assessment of the way that the travel industry is going to evolve in the future? And if so, what does that mean for Amadeus' own business? Decius Valmorbida: Okay. So First thing on the productivity point is, remember that we have a very large addressable market that if we really have more productivity, there are a lot more travel areas that we can cover. So I think that we -- this debate that is always around this idea that I don't know, everything has been already invented, and it is like there's -- if we have a lot of free capacity of servers, of developers and so on and so forth, There's plenty of new things for us to invent and the travel industry has plenty of space for us to cover. On Skylink, I think what we want is to have that capability of conversational AI across the board. As we said, we would like to give that to our employees. We'd like to give that to the professional travel user that we will use to make that more productive. We want to have that to deflect, as you were saying, a lot of requests that are coming from travelers that we believe that they can be automated, no? So what can that mean for TMCs? It can mean, a, much more productive environment for TMC because it's like if today, they need 20,000 people to service X amount of volume it means that probably in the future, they do not need to have as many people or they can cover a lot more, let's say, number of customers with the same amount of people they have. I think that is one. So why do intermediaries exist? And that's what I was saying is, it is much more than processing the transaction. It's kind of -- that is the part that it is about curating the content. It is about creating the certainty. It is about doing all of the edge cases. It is about. So it means that by automating that, it means that you can add a lot more value on the other aspects of the business. So in fact, I don't see this world of black and white. I do see opportunities for both providers and intermediaries to thrive in this new environment. Cristina Fernandez: Okay. Thank you very much. We ran out of time, but we have the lunch outside. So if you can stay, we'll be happy to address your questions. To the people on the line, we're very respectful of the fact that you've sent us questions as well, but we haven't had the time. We will answer your questions through the Investor Relations team. Thank you very much to everybody that has connected and we'll see you again in Q1. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the International Airlines Group Full Year 2025 Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand to Luis Gallego, Chief Executive Officer, to open the presentation. Please go ahead, sir. Luis Martín: Thank you very much. Good morning, everyone, and welcome to the IAG 2025 Full Year Results. As usual, I'm joined today by Nicholas Cadbury, our CFO, as well as the other members of the IAG Management Committee. I'm pleased to be announcing a record set of results today, highlighting the excellence of IAG's performance in 2025. We are delivering for our customers as our investments in operational and customer-related performance have led to another year of improving punctuality and customer Net Promoter Scores. We are delivering record operating profit, operating margin and return on invested capital. And we are delivering for our shareholders through the increased dividend and the new excess cash returns of EUR 1.5 billion. This is a significant increase on the EUR 1 billion buyback we announced last year. We continue to see a supportive demand environment that encourage our positive outlook. And as a result, we are planning further excess cash returns in the future. And we look to the future with great confidence as we continue to leverage our business model and execute our strategy, which will create value for our shareholders in the long term. In 2025, we have delivered world-class financial performance in each of our key metrics, continuing our track record over the past few years. We continue to grow revenue with robust demand for travel in our markets. Our operating profit and operating margin are now both at record levels, and our earnings per share has increased by over 22% this year. Our balance sheet is now in a very strong position. This has benefited from the strong free cash flow that we are now consistently generating despite a big step-up in CapEx during the year. And for our shareholders, we are creating significant value by earning an excellent return on invested capital of 18.5%. The fact that we are delivering strong results is not an accident, starting with the fundamental premise of IAG. Our group structure promotes excellence and accountability whilst providing the group-level support and direction that individual businesses benefit from. Our portfolio contains a diversity of markets, brands and business models that continually increase the resilience and sustainability of our performance through the cycle. Bringing this together is the secret sauce of IAG and sets us apart from any other airline group. Moving on to our strategy and targets. We are sticking to what makes us best-in-class. Our 3 strategic imperatives are designed to make our business stronger, more resilient and less cyclical. We have set out margin and return on invested capital targets that are appropriate for the group through the cycle, and we believe support a more sustainable long-term future. We are pleased to be delivering results that are at or above the top of those ranges, and we will continue to target the full potential for all of our businesses through our transformation program and capital allocation process. Ultimately, we want to create value for shareholders by delivering sustainable profitability and accretive growth in the long term. Over the past couple of years, we have highlighted 3 major areas where we could create significant value, and we are delivering on our commitments. British Airways has already reached its 15% margin, but still has more to deliver on its transformation program, including the commercial platform and fleet deliveries. Iberia is well on the way to its EUR 1.4 billion profit target, with an exceptional margin last year of over 16%, and we will continue to grow profitably in its core markets. And we will tell you more about the Loyalty's exciting potential at our Investors Day in June, both as a business in its own right as a significant contributor of value to the overall group performance. And on that note, I will pass over to Nicholas. Nicholas Cadbury: Thanks, Luis, and hi, everybody. I'm pleased to share our full year results. This first slide shows our very strong operating profit and margin performance. We've delivered a record operating profit of EUR 5.024 billion, up EUR 581 million versus last year. This is driven by strong passenger revenue growth and also good other revenue growth from loyalty, maintenance and also sustainability incentives and supported by the lower fuel cost. Our cost performance was in line with expectations and with the guidance previously provided to the market. I'm pleased with our margin performance, which continues to rank among the best in the industry, at 15.1%. It sits at the top end of our target range at 1.3 points higher than last year. On the right side, you can see how our strong markets, hubs and brands drove this exceptional performance in all our businesses, which we will detail in the next slide. All our operating companies delivered excellent results this year, building on the strong performance also achieved last year. Aer Lingus delivered a strong improvement in 2025, increasing its operating margin to 11% with operating profits at its second best level on record. The airline was affected by industrial action in a base last year and managed to hold unit revenue flat while growing capacity. This was despite a very tough competitive environment in Dublin, particularly from U.S. carriers that is ongoing. Alongside this, Aer Lingus has delivered strong cost discipline, supported by its transformation program. British Airways delivered an excellent margin performance at the upper end of the group target range. This was supported by strong premium leisure and improving corporate demand with cost performance reflecting investments in the business alongside its transformation program. Iberia also had a tremendous year, reaching a record 16.2% operating margin. The airline made excellent progress against its Flight Plan 2030, delivering EUR 1.3 billion of operating profit this year towards its EUR 1.4 billion ambition, driven by the strong revenue performance, particularly in Latin America. Iberia's costs were particularly affected by engine availability on both long haul and short haul, extra disruption and resilience costs. The cost increase also includes the cost relating to its growing MRO business that was particularly strong in the first half of the year. Vueling delivered a robust set of results, generating an operating profit of EUR 393 million and a 12% margin, among the strongest in the European low-cost sector. Revenues reflected a softer summer travel environment in parts of Europe, particularly Northern Europe, partially offset by the continuing strength in the Spanish domestic market. What really stands out, however, is Vueling's strong cost performance that Luis will touch on later. And IAG Loyalty, including Holidays, continues to deliver high-quality, high-margin earnings. The business yet again delivered the 10% margin growth ambition we set for it, reporting GBP 469 million of profit and an 18% margin, excluding the impact of the VAT dispute with the HMRC, which is subject to ongoing litigation, and we -- and we still feel confident the operating profit would have reached over GBP 500 million. Turning now to our revenue performance in more detail. Overall demand for travel remains strong throughout the year, underpinned, as just mentioned, by the diversity of our network and of our strong brands. Capacity grew by 2.4%, in line with our guidance that we gave at Q3 results, and we delivered an increase of 1% in passenger unit revenue at constant currency and flat on a reported basis, a solid outcome against a record 2024. If we look at the performance by region, we are pleased with the North Atlantic performance, where we grew capacity by 1.4%, with unit revenues up 1.5% at constant currency and importantly, showed an improving trend as we went through the second half with Q4 unit revenues up 1.8% at constant currency. Underneath this trend, were consistent with what we highlighted throughout the year, with good premium demand, partially offset by some softness in U.S. point-of-sale economy leisure demand and continued impact from U.S. direct capacity growth into our hubs in Dublin and Madrid and secondary European markets. BA drove the Q4 performance with unit revenue at constant currency increasing strongly year-on-year, driven by strong premium cabin and business travel demand, particularly from the U.S. point of sale despite a tough comparator last year. Latin America and [ Caribbean ], strongest performer in the network. Our capacity increased 3.3%, with unit revenue at plus 3.3% as well at constant currency. Iberia delivered another excellent year and drove the Q4 performance with premium cabin, LatAm point of sale and business travel, all performing strongly. In Europe, we increased our capacity by 2.2% with unit revenue down 2.1% at constant currency. As mentioned earlier, this reflects the softer demand in parts of the summer and also the additional British Airways capacity. Domestic saw us growing capacity by 2.2% with unit revenues flat for the year, reflecting strong demand, particularly in the Canary and Balearic Islands. In Africa, Middle East and South Asia, we increased capacity by 2.7%, with unit revenue up 0.8% at constant currency. And finally, Asia Pacific delivered a strong recovery with capacity up 6.4% and unit revenue up 4.2%, supported by a refocus of the network towards stronger performing markets such as Bangkok and Kuala Lumpur and the full year impact of Iberia's relaunched routes to Tokyo. Just turning to this year, we're planning to continue to grow the business in a disciplined way with capacity up around 3% in 2026. And briefly touching on what we're seeing so far this year, we're seeing a strong Q4 -- Q1, sorry, including the North and South Atlantic and some additional benefits from the shift to an earlier Easter. At this point, I'd just like to highlight the FX has a major factor. Over 2025, we saw the pound weakened against the euro and the dollar weakened against the pound and euro. At these current rates, you will know that there will be a significant FX headwind on revenue this year, particularly in the first half of the year, which we will be reducing progressively into the second half. And of course, this will apply to our cost base in the reverse with a favorable FX impact. Total unit costs improved 0.4% and non-unit fuel unit costs increased by 2.8% year-on-year, actually in line with our guidance. This full year cost performance benefited from FX movements of 1.3%, although it's worth noting that the increase in costs relating to the growth of other revenue to the MRO also drove around 1.3% of uplift as well. So both the FX and the other revenue costs neutralized each other out. Employee cost unit costs increased 3.8%, driven by operating investments, operational investments and payments linked to strong financial performance. Supplier unit costs rose by 0.8%, with transformation initiatives helping to offset inflation pressures and support investments in our customer experience. Ownership costs increased 10%, reflecting the new aircraft, cabin retrofits, lounge upgrades and digital platforms, all of which are for the benefit of our customers. Those impacts were partly offset by a 9.1% reduction in fuel costs driven by lower prices and partly offset by an increase in carbon-related costs, both ETS and CORSIA. We remain confident that our transformation program will continue to underpin cost benefits -- cost efficiencies as we move forward. For 2026, we expect nonfuel costs to be down around 1%, and that includes a benefit of around about 2%. So in other words, they're up 1% on a constant currency basis. Fuel prices have been very volatile. On the 31st of December, our fuel bill based on the forward curve then was estimated to be EUR 7 billion, including a 62% hedge that we have in place. Since then, jet prices have increased following the recent escalations and tensions in the Middle East. So based on the current forward curve, we can see an increase to around about EUR 7.4 billion. We'll have to see how this plays out over the next few weeks and months. This fuel scenario also includes a year-on-year increase from ETS and CORSIA of roughly EUR 150 million. Adjusted EPS increased by 22.4%, reflecting both the strong performance with the growth in adjusted profit after tax of 17% to EUR 3.3 billion and the share buyback program that reduced our weighted average shares count by 4.3%. Overall, this performance underscores the continued momentum in our earnings and our focus on delivering sustained value for all of our shareholders. We achieved a free cash flow of EUR 3.1 billion after investing EUR 3.4 billion of capital in the business. This was supported by the positive working capital movement, partly driven by IAG's loyalty and the Amex contract renewal as well as interest paid benefit from the early debt repayment. These benefits more than offset higher purchase of carbon assets ahead of the changes to free ETS allowances and the payment to HMRC relating to the IAG Loyalty tax appeal that were not settled until the earliest of 2027. I'm pleased to report that our balance sheet continues to be very strong, with net debt leverage of 0.8x and liquidity over EUR 10 billion, positioning us well for the years ahead. Our gross debt benefited from a EUR 1.3 billion favorable FX impact related to the U.S. dollar-denominated debt from the weakening of the U.S. dollar. We aim to keep our gross debt leverage between 1.5x and 2x. To this aim, we finished the year at 1.9x, having repaid EUR 1.6 billion of non-aircraft debt and taking 2/3 of our 25 aircraft deliveries as unencumbered. We remain committed to investing in our fleet, enhancing customer experience and building resilience. We've shown on this slide the phasing of CapEx over the coming years, which will put our CapEx allocation and balance sheet decisions into context. In 2025, CapEx was slightly lower than planned due to the timing differences and the phasing of some customer-related investments. This year, 2026, we expect CapEx to be around about EUR 3.6 billion with 17 aircraft deliveries, continued cabin retrofits, including British Airways, A380s and 787-9s and ongoing investments in property, especially the improvement to our lounges. Looking forward, we've been saying for a while now that our CapEx will increase in the coming years as delayed aircraft from the manufacturers start to get delivered and make up for the lower CapEx numbers we've seen over the last few years. For the last 4 years, this increase has continuously pushed to the right. However, we expect to start seeing this increase materialize in the next few years. In 2027 and 2028, we expect CapEx to average EUR 4.9 billion, mainly reflecting the delivery of the Boeing 737s for Vueling and the start of the 777-9 deliveries for British Airways in 2028. CapEx is then expected to increase further to an average of EUR 5.6 billion for 2029 to 2031 as the 71 wide-body aircraft we've ordered in 2025 and the previously delayed wide-body aircraft deliveries start to materialize, with around about 70% of these deliveries being replacement aircraft. Beyond this period, we'll return to our normalized CapEx run rate of around about EUR 4.5 billion from 2032 onwards. We're able to do this as we're making good returns on capital and have high disciplined approach to capital allocation to support our ambition to deliver focused capacity growth by 2% to 4% over the medium term. With this increase in future capital spend, we will still be strong cash-positive throughout these years, and we'll continue strong shareholder cash returns with a higher CapEx delivering higher profits. Given this confidence in our cash generation, the current very strong balance sheet and in preparation for this CapEx trajectory, we've decided to widen our guidance on distributing excess cash returns to 1 to 1.5x net debt leverage. And finally, our disciplined approach to capital allocation and how we manage our balance sheet, investments and shareholder returns. Firstly, we remain focused on balance sheet strength. Across the cycle, we maintain our net leverage aim of less than 1.8x. This being a proxy for investment-grade rating, which we are with both Moody's and S&P. And as I mentioned earlier, in the near term, we want our gross debt to be 1.5 to 2x, which puts our balance sheet in an extremely strong position. Secondly, as I've just described, how we'll continue to invest in the business, and we'll be doing so at high rates of return on capital. Thirdly, we're committed to a sustainable dividend through the cycle. For 2025, this equates to a total dividend of EUR 448 million, and our intention is to grow this broadly in line with inflation, while dividend per share will grow faster as we buy back shares. And lastly, we'll continue to return excess cash to shareholders as we've just announced a further EUR 1.5 billion of excess cash returns over the next year. This represents around about 6.5% of today's market capital. And over the 3 years since 2024, we will have distributed just under EUR 3 billion of excess cash, around 13% of today's market cap. Given our financial framework and ambitions, will still allow us to continue significant excess shareholder returns over the coming years while also reinforcing the balance sheet in anticipation of higher CapEx. Overall, this disciplined approach ensures that our balance sheet remains a source of strength, supporting the business through the cycle, giving us the flexibility to allocate capital where it creates the most value and positioning us to continue investing for the long term while delivering attractive returns to our shareholders. Thank you. I'll now hand back to Luis to continue with the strategic update about our business. Luis Martín: Thank you, Nicholas. I will now spend a few moments going through the strategy, which has worked successfully for us for a long time now. This will demonstrate how we can sustain this level of performance. Firstly, the backdrop is compelling. Demand for travel is and has been a long-term secular trend, which, if anything, has increased in recent years. And as Nicholas indicated in his preview of our deliveries over the next 6 years, supply is constrained by the aircraft and engine manufacturers. We have strong positions in highly attractive markets, which are served by more than one airline brand in every market. This diversity is a key component of the group's resilience and helped to deliver such a strong performance in 2025, even whilst the macroeconomic backdrop is not particularly supportive. Nevertheless, we grew passenger revenue in each of our core markets, with all of our airlines contributing to that growth. We are investing in our brands, which is delivering a better experience for our customers, and you can see in our NPS improvement across the last 3 years. The investment is across the customer journey, so includes on the ground and in the air. We are currently excited about our partnership with Starlink, which will provide high-speed connectivity across the group on every one of our airlines and the first Starlink-enabled aircraft will be operated by British Airways in a few weeks' time. On this slide, we have highlighted some examples of how transformation underpins our margin delivery, supporting both revenues and cost control. At British Airways, the improvement in on-time performance has been a fundamental driver of margin improvement over the last couple of years. It drives productivity, increases revenue and reduce cost of disruption. It is also the biggest driver of customer satisfaction. In 2025, they delivered OTP of over 80%, the best performance since 2014 and a 20-point increase over 2023. In the meantime, Iberia remains as one of the most punctual airlines in the world. Also at Iberia, they have focused on transforming their proposition over the last few years, reflecting the more valuable demographic of their customer base, particularly in the South American market. As a result, they have grown the premium customer base, and this has helped to drive their yields in the premium cabins. Vueling has delivered the best cost control of any low-cost carrier in Europe since pre-COVID. In particular, they have driven lower supply unit cost, which includes both maintenance and airports, which is an exceptional situation in the current operating environment. I will also mention at this point that Aer Lingus delivered a record NPS score and their best OTP since 2016, highlighting their customer focus point of difference in Dublin. All these improvements have been supported by collaboration and sharing best practices across the group, one of the core benefits of our structure and business model. IAG Loyalty continues to grow strongly as a higher growth, higher margin and capital-light business. Based on the earn and burn model where we incentivized the awarding of Avios by also increasing opportunities to spend them, it increased revenue by issuing 200 billion Avios up to 30%. And at British Airways Holidays, they benefited significantly from the changes to the BA Club with revenue from elite members increasing more than 15x faster than other customers. As I mentioned earlier, Loyalty expects to grow earnings by at least 10% each year and grew profit by GBP 49 million to GBP 469 million in 2025. This profit growth was even higher growth if you put to one side the disputed HMRC tax treatment at over 20%. The second major strength to our capital-light development is through our airline partnerships, which deliver accretive value without the need for investment in aircraft. We access 3,000 additional aircraft through our partners, which then unlock 2,600 additional markets through a one-stop journey. This allows us to cover 97% of all passenger demand from our home markets, with loyalty scheme benefits, a key factor. This powerful network, the world's largest delivers significant partner-enabled revenue to the group every year. We made progress with our sustainability road map in 2025. We increased our SAF usage to 3.3% of our total fuel volumes, up from 1.9% in 2024. This also helped to deliver carbon intensity of 77.5 grams of CO2 per passenger kilometer ahead of our target alongside our investment in more than 15 aircraft. As always, this was all delivered by our people. We are committed to supporting our employees through their careers at IAG. We recruited over 10,000 people in 2025, continue to recruit and train pilots and our dedicated airline academies and continue to develop pay structures with all our collective groups that benefit both parties. This includes an agreement 2 weeks ago with Iberia's ground staff. I would like to take the opportunity at this point to thank all of our employees for their hard work during the year. Over the last 3 years, we have created significant value for shareholders. Firstly, we have a portfolio of markets and brands that is unrivaled anywhere in the world and is valued by our customers. This drives attractive revenue growth. Secondly, our execution every day is delivering best-in-class margins and earnings growth, significant free cash flow and high return on invested capital. And thirdly, this creates value for our shareholders through the dividend and our program of historical and prospective buybacks. This is world-class shareholder value creation. So in summary, the market remains compelling. We will continue to execute on our strategy and deliver world-class margins and return on capital. We are rewarding our shareholders with a strong earnings per share and dividend per share growth as well as EUR 1.5 billion in excess cash returns. We plan to continue to return more excess cash to shareholders. And we are confident that we will create significant value for our shareholders in the long term. And now we open the line to your questions. Operator: [Operator Instructions] Your first question comes from the line of Jaime Rowbotham of Deutsche Bank. Jaime Rowbotham: Two questions from me. Firstly, the transatlantic unit revenues at constant currency were negative 3-point-something percent in Q3 but back to positive. I think it was 1.8% in Q4. So very encouraging. Could you talk a bit about the outlook for the transatlantic in summer '26? It feels like there's quite a few moving parts. Those economy cabin weaker trends in '25 become a soft comp, but at the same time, I don't know if you anticipate any disruption from the Football World Cup. And to what extent do you expect the premium cabin trends to remain strong? Any comments, please, on summer transatlantic unit revenue progression in 2026? Second question, Slide 17, very helpful in terms of laying out the medium-term vision on the CapEx. Could you just help us in terms of actual aircraft deliveries? Is there a particular year, 2029, 2030, when you expect to be at peak deliveries? And could you just tell us roughly what that might look like? Is it 40, 50 aircraft? What's the split between narrow-body, wide-body in a sort of peak delivery year, please? Luis Martín: Thank you very much. So North Atlantic, as you said, since the third quarter last year, we saw a rebound. We had a positive increase of unit revenue in the last quarter of the year at constant currency. And now what we see is an improvement in the trend over the last few months, in particular, in the case of British Airways, where even the non-premium leisure revenue has been booking well, U.S. point of sale, in particular, strong. And this is in contrast with what we saw in the third quarter of 2025. Business demand is also booking really well, both U.S. and U.K. point of sale. And premium leisure continues strong. So in Iberia and Aer Lingus, we also expect demand to remain strong, but they are having more increased competition in their hubs. But maybe, Sean, you can add some comment about British Airways. Sean Doyle: Yes. I think we've got a couple of things which have been very encouraging in Q4 and in Q1 as well as the business demand. So we're seeing strong demand out of the U.S. point of sale and pretty robust demand out of U.K. point of sale. And I think we've seen recently as well the kind of market out of U.S. point of sale to Europe more broadly is resilient. Like one example, to be honest, was the Winter Olympics, where we saw really strong demand out of the U.S. into markets like Italy, and we were able to capitalize on that over our hubs. So we're seeing that in the fourth quarter, and we see it in the first quarter as well. Luis Martín: Marco, do you want to comment? Marco Sansavini: Well, in terms of the performance in Iberia, also, we have seen very strong business evolution there. And it's true that in terms of our yields in economy, we have seen some pressure related to the increased competition, but that has applied primarily in Q3 that you saw reflected in last year, that you saw reflected also in the overall performance of the group. But in Q4, that strong increase has softened. And as a result, also, we saw an improvement of performance. Nicholas Cadbury: Just on the CapEx numbers, we'll come back to Jamie at a later date and give you kind of more kind of precise kind of delivery time, what's been delivered by little bit later. I mean what I would say is, in 2027, we're, of course -- at the back end of this year and into next year, we're, of course, starting the refleeting of Vueling into the 737. So that starts ramping up from '27 onwards. And that takes around about 6 years to do as well. And then in '28, you get -- start getting the deliveries of the 777-9s into British Airways. And then you get -- the planes that we ordered in March, really start to get delivered from '29 onwards over those kind of 4, 5 years. So we'll come back and probably give you a bit more detail later. Operator: Your next question comes from the line of Alex Irving of Bernstein. Alexander Irving: Two for me, please. The first one is on distribution. Specifically, how are you approaching the decision about whether and how to sell through large language models? Would you plan to engage directly with LLMs through an API or to rely on existing structures, GDSs, travel agents, continue to pay commissions? When do you think you will sell your first trip and ticket through an LLM? Second question, also on tech, specifically for BA. You're about 2 years into the implementation of Nevio. We've seen Finnair suggesting they're seeing a 4% uplift in pricing, 10%, 15% uplift in ancillary sales from its implementation. Is that sort of result achievable at British Airways? Or more broadly, how do you see the RASK impact of your IT transformation from a move to a modern retailing platform? Luis Martín: You want to comment, Sean? Sean Doyle: Yes. We are seeing -- we are now selling the vast, vast majority of our direct sales through our new platform. In fact, 95% of our volume went through new ba.com in the January sale. And I think the numbers we're seeing are encouraging. One is CSAT is much higher. I think two, things like look-to-book conversion has improved and we've also seen better trade-up and better average unit revenues coming through. That's kind of the first real sort of significant test that we've put the volumes through, but the numbers are encouraging. I think Finnair may be a little bit more advanced in adoption of Nevio compared to where we are. So we work with them across the joint business, and we do see some significant improvements that they're demonstrating on ancillaries. And that would have been part of the kind of business case that we would have put together a couple of years ago when we embarked on this journey. So encouraging signs both on CSAT and revenue conversion trade-up and ancillaries. Operator: Moving on. Your next question comes from the line of Stephen Furlong of Davy. Stephen Furlong: I guess 2 questions. Can you just talk about why the -- again, the excess cash below net leverage target has been widened. Is it to do with just the delivery or the CapEx step-up? Or is it to do with one eye on TAP? That's the first question. And maybe for Sean, just on -- I mean, obviously, BA is performing well in terms of margins. But I know from the Insight Day, I thought it was 2027 maybe when some of the investments come through that the underlying business probably feel that the, let's say, more resilient by then, maybe just the market is good right now or the way the dollar has gone and stuff like that. So just talk about more the resilience of BA and when do you think it's kind of in full bloom, as a word, that would be great. Nicholas Cadbury: Just starting on the kind of guidance on the distribution of excess cash, we widened the guidance to 1x net leverage to 1.5x. We've had fantastic results last year, really strong cash generation, and that gives us real flexibility to both distribute what we think has been a good return on capital in a 9% yield this year in terms of what we're returning to shareholders at the same time and strengthen our balance sheet further and invest heavily in the business. I guess the main thing for that, though, is we've got our eye on the increase in CapEx that comes in the next kind of -- next few years overall. So it's really making sure that we lock in the benefit we've had of the really strong year this year to really make sure that, that continues and that we're in a strong place to make sure we continue to give good shareholder returns and distribute excess cash. So we've used this kind of really strong opportunity to set the balance sheet for the increasing cash and those future shareholder returns. Sean Doyle: If I pick up on the BA question, Stephen. Yes, look, I think we have delivered the 15% 2 years earlier than we set out about 14 months ago. I think, as you said, some of the dynamics have probably worked in our favor, but I think we are seeing the benefits of transformation already. I think Luis mentioned the operational performance transformation, the benefits that gives to Net Promoter Scores and CSAT, but also the benefits it gives in terms of reducing nonperformance-related costs such as disruption. So we expect that to kind of flow through and carry on. Number two, I suppose, is the investment we've made in technology and new platforms. I think we are very excited about the new digital capability. It's performing well, but we have more to come in the coming months as we roll out more of that functionality. We have a new revenue management system, again, which is showing encouraging results. We have a new payments platform, which is increasing optionality and also increasing conversion. So I think we will see more value accretion coming from those levers as we look into '26 and '27. I think the other angle, I suppose, which we're excited about is growth. Nicholas mentioned CapEx, but we will see more long-haul aircraft come back into BA. Today, we're still a bit smaller than we were in 2019, and we feel we have a lot of opportunities to grow long haul, which again helps with margin growth and also helps with things like seasonality because it works very well in winter with a number of markets that we could serve. And finally is the onboard product. We will complete the rollout of the club suite. We're about 76% now at Heathrow. The 789s are going in this year, the A380 start, and we see really strong commercial and customer performance on the back of completing those reconfigurations. So I think we've made a lot of progress on what we said we would deliver on 15 months ago. But I'd agree there is still a lot of transformation that we will unlock in the next couple of years. Operator: Your next question comes from the line of Savi Syth of Raymond James. Savanthi Syth: Two questions from me. Just first, I was wondering if you could give a bit more detail on what you're seeing on -- in terms of engine durability, maybe supply chain and cost escalation. Just wondering across those 3 things, are things improving or not much changing or getting worse? And then second, I know you mentioned it was strong, but I was wondering if you could give -- please give a little bit more color on like corporate and premium trends across the airlines. Luis Martín: Okay. The first question about the supply chain. I think we talk about aircraft, the plan is that we are going to receive 17 aircraft this year. And we are pretty sure that the manufacturers, they are going to comply with this plan. In any case, we'll have some buffers in case -- we could have some delay. We continue with the issue that everybody has with the engines. We are having problems with the GE engines, in particular, in Iberia, where they are suffering the lack of spare engines in the 330s. We are having the problems with the GTF in Vueling. As you know, they have on average like 16 aircraft grounded because of this situation. And also in the case of BA, they still have 787 grounded because of the growth issue. We hope that in the case of BA, this situation is going to be recovered in May, but that's the plan that we have right now that we continue working with the different OEMs to try to improve the situation. But I would say it's improving, but slowly. Nicholas Cadbury: Yes. The second question was about corporate demand. We're trying to move away from comparing ourselves to 2019. We think that's kind of ancient history now. So all we can just say is actually, we've seen corporate demand be strong in Q4, and in the first early days into Q1, it's been good as well. Of course, that helps the yield curve, which is -- so it's been good. It's been strong across all kind of sectors, not just finance. So been good so far. Marco Sansavini: And in particular, let's say, the Latin American premium market has evolved, came very, very strongly. For instance, comparing to last year, the business market has increased in revenue 7% versus last year. And it's a bit like what we have been sharing with you when presenting our Flight Plan 2030. So there is, Madrid converting into the new Miami, seems not only to indicate an increase in overall traffic, but particularly, premium traffic from Latin American countries. Operator: Your next question comes from the line of James Hollins of BNP Paribas. James Hollins: Nicholas, one for you. On the unit cost guidance of minus 1% in 2026. If we reference Slide 13, you give a little bit of detail on the puts and takes across employees, suppliers, ownership. I was wondering if you would be willing to flag maybe how you expect those to move in 2026, if there's anything particular that you would see nicely down? Obviously, FX is the big help. And seasonally, I assume H1 better than H2 because of FX. Any other seasonality you might want to flag? And secondly, on Vueling, please. I know that IAG obviously has a policy of asking CEOs to beg for growth. And clearly, Carolina has won the battle. I don't know if Carolina is on, but I'd love to hear a bit more about the planned 50% passenger growth over the next decade in Vueling, whether it's -- where it is outside Barcelona? If there is, I assume there must be. Clearly, what happened internally to secure that investment? And maybe a bit more detail on what I think is called Rumbo 2035? Nicholas Cadbury: Yes. So this last year, we finished with nonfuel unit cost up 2.8%. We've always said that, that would moderate. And actually under a constant currency, it's up 1%. So it's doing exactly what we said it'll do. It's moderating. We have got a benefit, though, as you say, of around about 2% benefit from FX. So that's why it's down 1% overall. I think if you just -- just for information for everyone, if you look at the FX impact through this year coming, you're going to get a benefit in nonfuel CASK and you're going to get a headwind on revenue of around about -- in Q4, of around about 4%; in Q2, about 3%; and in Q3, of about 1%, and that should be -- hopefully should be flat in Q4. So that's the kind of shape of it. If you look at the nonfuel CASK, just the way it's phasing, you'll see there's a bit more of a kind of headwind in Q1 and probably Q3 overall, if you go to phase it across the year on a constant currency basis. Carolina Martinoli: Vueling? Okay. On Vueling plan, what we have presented is a plan for the next 10 years, with 20 million passenger growth. So the geographical focus is clearly Barcelona, domestic Spain, where we are leaders, we have over 1/3 of the market of Spain domestic and connecting Europe with Spain fundamentally through the 11 bases we have, Barcelona and plus other 10. This plan is very linked to the refleeting, which will restructure our cost base. Also, it will give us more gauge, and this is extremely important, especially in the case of Barcelona. You know Barcelona is a constrained airport with expansion plans in '31 and '32, but we will have a 14% gauge increase with the new fleet in average. Operator: Your next question comes from the line of Jarrod Castle of UBS. Jarrod Castle: I just want to come back to AI, but now more on the opportunity for taking out costs because obviously, we're starting to see companies at least announce large job cuts, today, it was Block. But I'm just wondering what are your plans to achieve efficiencies through AI adoption? And kind of related to headcount, are there any staff negotiations outstanding as well? And then secondly, just on the 3% capacity deployment, obviously, very useful Slide 36. But can you give some just regional color in big pictures where that 3% gets deployed? Luis Martín: Okay. So artificial intelligence, you know that in our transformation, 80% of the projects are linked to technology and artificial intelligence for sure, is critical. So we have projects, for example, in the area of maintenance where artificial intelligence is going to help us to be much more efficient. We have developed some tools, for example, in order to improve the planning that we do with our engines or our fleet. Artificial intelligence is going to help and is helping us also in the customer experience. And also, we are analyzing ways to be more efficient, but the objective is not to reduce the headcount, it's more how we can use artificial intelligence to improve customer experience and to improve also the efficiency of all of our workforce. So again, all the plants are based in technology. Artificial intelligence opens a big range of opportunity, and we are exploring all of them. Nicholas Cadbury: Just on the capacity 3%, you've got -- we've given you in the appendix where it's going to be by airline overall, so you can take a view on that. But if you look at North America, it's roughly in line with that, better than 3% overall. It's a bit better that even again on Latin America, where we're looking at kind of 4.5% plus capacity on South Atlantic, and it's pretty flat across Europe. It's up in Asia Pacific and base, but of course, it's a low base so. Jarrod Castle: And labor negotiations? Sorry. Nicholas Cadbury: We're in a relatively good position on labor negotiations. Operator: Your next question comes from... Nicholas Cadbury: We're in a relatively good position on labor negotiations. Operator: Your next question comes from the line of... Nicholas Cadbury: Could you introduce the question again, please? Operator: Apologies. Your next question comes from the line of Harry Gowers of JPMorgan. Harry Gowers: First question... hello? Can you hear me? Nicholas Cadbury: Yes. Harry Gowers: Hello? Can you hear me? Nicholas Cadbury: Yes, we can hear you. Harry Gowers: Yes, yes. Okay. Sorry. So first question, I mean, you talked about strong bookings in the Q1 in your outlook. So maybe like a little bit more color on what that might mean in terms of booked revenue or pricing? I mean, can we see the same group ex-currency RASK in Q1 that we saw in Q4? And then just second question on EBIT margins by airline. Just wondering what's the full potential for some of these businesses? I mean when I look at your Slide 11, the margins are already very high. Aer Lingus is at 11%; BA, 15%; Iberia, 16%; and Vueling, 12%. So maybe where do you see the margin upside by individual airline going forward? Luis Martín: Okay. So I think what we see now for a year, I think we have a lot of visibility for the first quarter. We are, for the first half, in line with the plan. It's true that the first quarter, we are going to have the benefit of the Easter that is helping. But when we look at the summer, Q2 and Q3, we only have about 30% book. So what we see is, in general, positive. Business traffic is growing and is helping the near-term bookings. And when we look at the different geographies, we talked before about North Atlantic, but LatAm also remains strong for Iberia. And also, we see a healthy performance in the Caribbean for BA. Europe also booked well. We see also a strong business demand in the case of BA. And the only region where we see some softness is Africa and Middle East. So I think in general, we are on plan, and we are confident for this year. Nicholas Cadbury: Yes. Just in terms of kind of full potential, of course, if very strong demand, you get low fuel price, of course, you can maybe go higher. I guess where we're focused on is delivering in the range we've already set out, the 12% to 15%. Our view is if we can keep towards the top end of that range and keep delivering at 15%, grow at 2% to 4% ASK that is incredibly strong performance overall generates huge amounts of cash, great shareholder returns overall and allows us to invest in the business. So that's where we're going. If the benefits go move in our favor and we get above that, that's great. But that's our aim, is to be kind of keep delivering out at that top end of the range. Operator: Your next question comes from the line of Conor Dwyer of Citi. Conor Dwyer: First question is around that margin question. Obviously, last couple of years, you've been at the upper end of that 12% to 15% range. We're obviously still talking about more transformation at BA, Loyalty will be growing above the rest of the group, and obviously, the trends in Iberia are very strong. So just wondering is there any scope for that kind of 12% to 15% to be moved up or even the lower end of that to be moved up? And then on the second side, just around free cash. Obviously, at the moment, the outlook for that looks super strong, but CapEx is rising towards the end of the decade. And obviously, you'll be intending to grow your top line. I'm just kind of wondering, do you envisage a scenario that in that higher CapEx environment, free cash is still able to be in and around the current level. Obviously, some investors will be somewhat worried that we have a couple of years here of super strong free cash generation in the 5, 6 years out, maybe that kind of normalizes. Nicholas Cadbury: Just in terms of the margin targets, we've got -- we're very comfortable where our margin targets are through the cycle at the moment. As I said earlier, kind of if we keep growing at 2% to 4% ASKs and hit 15% margin, I can't think of any other airline that's going to be able to do that as well over time. So that's a really great performance overall. So we're very comfortable with that as well overall. Just in terms of the free cash flow, I mean, we kind of said -- I said in my script, actually that you've got the kind of CapEx going up over time. Higher CapEx when you're delivering good margins, means higher profits at good returns. So it should continue to be strong cash generation overall. So actually, with the higher CapEx, actually should give you, over the longer term, even more confidence in our cash generation. Operator: Your next question comes from the line of Muneeba Kayani of Bank of America. Muneeba Kayani: Actually, I just wanted to talk about your range again. Like maybe I don't understand how -- what do you really mean by through cycle? Like what's the definition of that? And ROIC is clearly well above your target at this point. So both on margin and ROIC, if you can talk about what you mean through cycle? And into your growth algorithm, which you touched on in the slide, historically has been strong, but how do you think about that growth algorithm into the medium term? That's the first question. And then secondly, just going back on Loyalty. You talked about the Amex contract renewal had a positive impact on working capital. Can you give a little bit more details on what this renewal was? And how do you think about getting to that 10% growth? Nicholas Cadbury: Yes. I'll start with the Loyalty-Amex question. Yes, we're really pleased that we've signed it [indiscernible], which really underpins the profitability of our Loyalty business overall, and that's been one of the great sources of growth, is our partnerships, particularly on the kind of financial partnerships. And we'll talk a little bit more about that on the 3rd of June overall. We've got -- it's commercially sensitive in terms of how much -- how much it benefited our working capital, but we just thought it was worth calling it out overall. Definitions of through the cycle, good question. I guess it mean -- through the cycle just means that we think with normal kind of cycles of ups and downs in the economies and GDPs, of course, it doesn't mean if you get another COVID event or something like that. But we just think through that kind of normal GDP fluctuations that you get over a kind of 10-year cycle. That's what we're trying to aim our targets to be. Muneeba Kayani: And the growth algorithm? Nicholas Cadbury: I didn't quite follow your question on the growth algorithm, sorry. Muneeba Kayani: So as you think about the growth algorithm in the medium term, so you talk about the 2% to 4% ASK growth and margins kind of remaining at that stable level. So that drives kind of 2% to 4% EBIT growth, is how to think about it? And then you get the strong cash generation and buybacks driving EPS growth of high single digits. Is that the way to think about it? Nicholas Cadbury: That's a nice way of thinking about it. Operator: Your next question comes from the line of Ruairi Cullinane of RBC Capital Markets. Ruairi Cullinane: Congrats on the strong year. So firstly, how do you view the capacity backdrop on IG routes this summer? It looks pretty constrained to me on the Atlantic overall, but I think Nicholas also commented on elevated capacity growth from Dublin. And then secondly, domestic RASK was up over 8% in Q4 after declining in Q3 on trimmed capacity. So what drove that? Luis Martín: So the plan that we have for this year is to increase capacity by 3%. When we look at the capacity that we are going to have in the different markets, for example, North Atlantic, the capacity that we see out of London is going to continue benign, and we are going to have a flat environment. Madrid is going to be different. We expect significant increases, although it's true that part of this is driven by Iberia because they are adding capacity in North Atlantic. Also, they have now the new 321 Extra Long Range, and they are putting capacity there. Dublin is going to be a competitive market also, and they are going to have a growth close to 10% during the summer. South Atlantic, a little different. Capacity out of Madrid, we expect growth between 5% and 6% for the summer. If we look at intra-Europe, for example, the capacity out of London on IAG route is expected to be down in the first quarter but up to between 2% and 3% in the second and third quarter. Barcelona is also a place where we see we are going to have growth in the summer, around 5%, 6%. And where we see more capacity is in places out of Madrid and Barcelona in Spain. But this is the global picture that we see. Marco Sansavini: And talking about the domestic and in particular, domestic Spain, it's true, it has been very strong along the past years. And it's true that you have seen in Q4, in particular, an additional increase which is relating to the fact that both with Iberia Express and with Vueling, we have strengthened our relative position into the islands in particular. And at the same time, Ryanair in the winter reduced capacity to the island. So the combination of these 2 factors made our position even stronger. And that will continue. You will see it continue in 2026. In Q1, for instance, is already producing itself with an additional element, which is that you have seen the very -- the tragedy of the train accident in Spain, and that has led some corporations, for instance, to change their travel policy in domestic traffic and in general, consumers to shift more to train -- to flights. Therefore, you will see an underlying very strong demand throughout 2026 in domestic. Operator: Next question comes from the line of Gerald Khoo of Panmure Liberum. Gerald Khoo: If I could start with the sustainability of margins and return on invested capital. How sustainable do you think they are at these levels? It sounds like you are very comfortable about that. But what pushes you towards the middle of that sort of through-the-cycle range? Is it just an economic downturn? Should we expect return on invested capital to moderate as the CapEx ramps up? What impact does that CapEx ramp-up have on margin? And Secondly, you talked about the strength of premium leisure. I was just wondering how does the booking profile of premium leisure differ to sort of the network average and to non-premium leisure in particular? Does it book earlier? Does it look later? Is the sort of duration of stay longer or shorter? Nicholas Cadbury: Yes. I mean the sustainability of the margin, good question. I think there's lots of areas. You could say the short-term downturn in the market. You can say if there's increasing tension across the Middle East, what happens then as well. I mean just the example we called out on the call though as well that I think most of you consensus at EUR 5.2 billion, and that includes a kind of EUR 7.1 billion of fuel in there, and the fuel has got up to EUR 7.4 billion in the last few weeks as well. Now hopefully, we can pass some of that on to investors. I think we'll still retain our strong margins, but you got lots of kind of external variables that kind of impact that overall. But I think we're focused on making sure we commit to our transformation, commit to our growth plan, our disciplined growth plan as well and that kind of all, whatever circumstance just towards the most competitive margins that we can get overall. Luis Martín: And the second question, premium leisure, usually, they book in advance. So as we said before that business traffic is recovering. So -- and the pattern of booking of business traffic, usually bookings are late. So in some cases, we are holding the nerve because we know that demand is coming. And in some way, we are trading between premium leisure and business. But maybe Sean, you can comment with the... Sean Doyle: Yes. I think what we have been seeing is strong late in business leisure or business bookings certainly in Q1, and we try and protect inventory to capitalize on that. I think we've done some analysis and interestingly enough, people from our executive who are traveling for premium leisure will be booking 60 days plus in terms of travel plans. Your business traveler will be more like 40 days. So there's kind of a 2- to 3-week difference in the booking profile between one segment and the other. But as Luis said, it's one of the things that we look into next year to try and optimize because we see that late booking business demand has been pretty robust in Q4, and we're seeing it in Q1 as well. Gerald Khoo: Sorry. How does premium leisure book relative to non-premium? Is it earlier or later? Sean Doyle: I think it has a similar profile actually. I think when people are planning a holiday and they're planning a hotel and planning an itinerary, they'll tend to plan further out. So we don't see that marked a difference between the premium leisure and the non-premium leisure side. We do see premium leisure actually tends to book more directly through our channels. We do work with sort of online travel agents more for the non-premium side. Operator: Next question for today comes from the line of Axel Stasse of Morgan Stanley. Axel Stasse: The first one is on the BA and Iberia cost improvement and efficiency program that you guys have announced in the last couple of years. Can you maybe quantify the improvements heading into 2026? What -- are the other improvements done? Is it just about efficiency and therefore, depend on the aircraft delivery? Or is there something else we should be aware of? So that's the first one. And then the second one, coming back to the working cap effect from the Loyalty, should we expect this to reverse heading into 2026? I understand you're about to tell us more specifics, but how should we model this going forward? Nicholas Cadbury: So I think your question -- just on the working capital one. So there were 2 things that happened on the cash flow this year to Loyalty. One is we did benefit from some Amex, the signing of the Amex. We can't quantify that over time. So that gets smoothed across the P&L over the next x years that we signed the contracts for. So it doesn't reverse. You just don't get it again. We did though pay kind of EUR 450 million to the HMRC for this VAT case that we've got with HMRC that we feel very confident on. Actually, that comes into court later this year, but it probably won't get settled until 2027 probably. So you should get a reversal, but it might take a number of years before it does reverse overall. So just -- I think hopefully that answers your question on that one overall. Just in terms of the cost improvements, we don't give kind of specific guidance on the kind of transformation savings that we're doing. And we only do that because there's lots of moving parts, both the kind of inflation, the investments we're making, the growth we're having and the kind of transformation. And so it's all moving parts. But you can see that actually, if we're growing our kind of constant currency nonfuel CASK by kind of 1% and if you think kind of inflation is well above that as well and we're making kind of good investments in the company at the same time, you can see there's a high level of transformational benefits that we're putting through the P&L at the same time. Marco Sansavini: And maybe to give a bit of color of what is to come still in our efficiency programs. Clearly, supplier cost is one where through the strength of the group purchasing, for instance, we are having a lot of value creation in the coming months and years in our transformation plans that you will see coming through. And another key area of value creation there and efficiency is utilization. As you see, we've been evolving a lot through the years in reaching very high utilizations, and we still see room for improvement there. For instance, now we're taking new fleet, we are progressively introducing them, and we could not, of course, maximize the utilization of the new fleet in the first year with all the XLRs. And in 2026, you will see a very significant improvement there in our utilization and productivity. Operator: Our last question comes from the line of Andrew Lobbenberg of Barclays. Andrew Lobbenberg: I have 2 questions. One on competition on the South Atlantic. Clearly, premium goes really well for Iberia. Can you talk about how competitive that is against the Latin American carriers who are emerging from Chapter 11 and getting their mojo and yet Air Europa is wherever Air Europa is. So how does that go? And actually, in Latin America, you don't have a very wide footprint of partnerships locally. So does that impact your -- the power of loyalty and your ability to attract LatAm Latin originating premium passengers? And then the second question, at the risk of lighting, an obvious blue touch paper, do you want to talk around the relations with the airports, Aena and their airport charges Heathrow in their third runway and Dublin and its cap, which is on/off, on/off, I struggle to keep up. Nicholas Cadbury: That was 3 questions there, Andrew, but -- Marco? Marco Sansavini: And starting from the first... Andrew Lobbenberg: I'm not very good with numbers. Nicholas Cadbury: No comment. Marco Sansavini: If you look at our Flight Plan 2030, you would see that our starting point is to have a structural and maintain and foster a structural competitive advantage in cost versus our European competitors. We indicated that we have a 30% almost unit cost advantage versus the Air France and KLM and Lufthansa in Europe. But at the same time, in LatAm, in fact, LatAm carriers are -- have a much more competitive cost position. They have a cost position that is similar to ours. In some cases, even some corridors slightly better than ours. But we have a structural revenue advantage over there. We are the only carrier to Latin America that has, for instance, business class with full-flat position and doors. So we are the only one having 4-Stars Skytrax, all the others are 3-Star Skytrax. And we have, therefore, a premium revenue advantage that is also reflected by the fact that we've been building that through network coverage. We are the largest operator to Latin America by far and the one that has the most spread network, 18 countries are covered. Therefore, that competitive advantage in product and network spread is reflected into a premium advantage that is remaining. And in fact, we're building -- or what we are sharing is that our RASK in premium, you saw the comparison of our RASK in premium in 2019 and today is 34% higher. So this is a competitive advantage that we are building, strengthening and making stronger in time. Now certainly, as you mentioned, the Loyalty program is a key driver of that. We have mentioned, for instance, how much our top tier customers have increased in the year. So maybe, Adam, you can give some color there. Adam Daniels: Yes, sure. I think it's interesting that South America is particularly strong in the Loyalty space in terms of Loyalty businesses, and we are seeing significant growth, not only in terms of the membership, both in British Airways and Iberia, but also in terms of the deals that we're doing now there on the currency side, with financial services and elsewhere. So definitely, South America is a very bright spot in terms of the loyalty business and in terms of the collection of the currency and the drive to deliver or achieve the tiers. So we're very pleased with what we're seeing down there. Luis Martín: And about your third question about airports. So in general, I think that the approach is the same with the different airports that -- where we operate. So Heathrow, I think we don't want to have a debate about the cost of the project. So what we are saying is that we need to look at the facts, and the facts are that Heathrow is the most expensive airport in the world. You need to pay 2x or 3x more than what you have to pay in other big European hubs. So Heathrow has announced, it's not our number, they have in their web page, an expansion plan of GBP 49 billion. And we think that if that plan goes ahead, the passengers are going to pay double of what they are paying today. So we have done our internal analysis of the maximum level of investment that we think with the right facing, we can afford, in order to have flat charges for the passenger, and we have reached GBP 30 billion, is our number. And we can be wrong, but that's a reduction of 40% in the investment they are proposing. But in any case, what we are saying is if Heathrow is sure about what they are proposing and the extra passengers that we are going to have, I'm sure they don't have any problem to put a cap in the passenger charges. That, at the end, is the objective that we have. We have a cap in what they are going to pay, and we don't increase what they are paying today. That I think is enough. Then we support any project. Aena. Aena, we are working with -- also with the DORA III and it's similar situation. So we support the investment, not at any price. And for sure, the investment brings associated more passengers and more revenues. We hope more efficiencies. And because of that, we are defending that the charges for the passengers cannot rise so much. And in the case of Dublin, good news that the cap has been removed. What we are waiting is for an urgent progress of the legislation. And that's all. And I think that was the last question? Carolina Martinoli: That was the question. Luis Martín: Okay. So thank you, everyone, for listening today. We are very pleased that we have delivered another great set of results, and we are looking forward in a very positive way for 2026. Thank you very much.
Cristina Fernandez: Hello, everyone. We're delighted to be here. Thank you for coming. Welcome to our 2025 results presentation. Our CEO, Luis Maroto; and our CFO, Carol Borg, are going to be presenting on our performance, our key developments, our outlook, and we will follow this with a Q&A session. We have invited Decius Valmorbida, President of Travel Unit; and Nikolaus Samberger, Senior VP in Technology and Engineering, to join us for the Q&A session. [Operator Instructions] And finally, today, we're going to be making forward-looking statements that may differ materially from actual results. So we ask that you please review the legal disclaimer that we have inserted in our presentation. The presentation has been uploaded to our corporate website. On this note, I'd like to ask Mr. Luis Maroto, to please join us. Luis Camino: So good afternoon. Thank you very much for joining us in person and here at the London Stock Exchange and for those of you online. A pleasure to see you interest in Amadeus and for us to present the progress we are making on our strategy, our solid '25 results and our midterm outlook. I would like to start with a few key takeaways. Fourth quarter revenues expanded 10%, adjusted EBIT 15% at constant currency. This result was largely due to acceleration in both our Air IT and Hospitality and Other Solutions segments. Full year '25 group revenue and adjusted EBIT grew 9% and 10%, respectively, at constant currency. Our free cash flow generation in '25 amounted to EUR 1.3 billion, 7% above '24, excluding positive nonrecurring impacts, and we completed the EUR 1.3 billion share buyback program in quarter 4 '25. So despite that challenging and evolving macro and geopolitical environment, we ended '25 strongly with revenue growth and profitability accelerating and successfully delivered on our '25 outlook. In terms of commercial activities, we continue to see a strong momentum in the fourth quarter. I will go into details a little later, but we are proud that Lufthansa Group plans to adopt Amadeus Nevio. TUI Airlines and Volotea have selected Navitaire Stratos. We delivered strong volume growth supported by market share gains and new customer implementations across our businesses. Progress continued in our industry transforming Hotel IT, ACRS, implementations, and we signed a strategic agreement are Direct Travel, one of the top 10 travel management companies globally. And finally, we continue to see good growth in our Professional Services, Airport IT and Payment Businesses. We continue to invest with conviction for the long-term future. We deployed over EUR 1.4 billion in R&D investment across our businesses and technology in '25 and expect to continue this level of investment to underpin long-term growth. As a leader in the travel and technology space, our objective is to be the orchestrator in an AI-enabled travel ecosystem, connecting suppliers, sellers and AI assistance to trusted dynamic travel data to scale in a neutral, secure and responsible way. Our decades of expertise in travel technology, deep integration within the travel ecosystem and unique competitive advantages give us a continued right to win. As AI assistance may gain a space with the primary interface in travel, we believe Amadeus will capture value as the essential infrastructure powering them, expanding our role and gaining further relevance. We remain committed to deliver against our strategy, continuing to build on our proven track record. We have confidence in our solid growth prospects for the coming years. And today, we are also announcing our midterm outlook. We are focused on driving value creation for our customers, employees and shareholders, delivering strong operating and financial performance into the midterm. We are targeting high single-digit group revenue growth, low double-digit adjusted diluted EPS growth and high single-digit free cash flow generation growth. Now let's turn to our quarter 4 highlights demonstrating how this fits into our overall strategic position. Amadeus is leading the airline industries retailing transformation with Nevio, our AI native next-generation Airline IT platform. As I mentioned earlier, we are pleased to announce that 9 airlines within the Lufthansa Group plan to adopt Amadeus Nevio. With this, British Airways, Air France-KLM and Lufthansa Group are all engaging with Nevio to advance model retailing. We have reached a tipping point. Today, 25% of Altéa PBs are engaged in Nevio program. And looking forward, we continue to see a strong engagement across all regions and expect momentum to build on Europe. Our Nevio implementations continue to progress, and I am pleased to say that Fin Air, an early Nevio customer, following its implementation of Amadeus product catalog and dynamic pricing reported new benefits, including increased ancillary revenues and optimized ticket pricing. Additionally, TUI Airlines and Volotea in Europe have selected Navitaire Stratos, our next-generation retailing portfolio for low cost and hybrid airlines. Navitaire Stratos is aligned with IATA offer and order standards and is being developed on an AI-powered flexible and cloud-native technology stack. In the airport space, Melbourne Airport will become the first airport to deploy new Amadeus seamless backdrop solutions. This incorporates the latest advances in self-service, making it easier to load backs and maneuver large items, thus reducing manual intervention and improving the passenger experience. In Hospitality and Other Solutions, revenue growth continued to accelerate as we anticipated through the fourth quarter, largely due to customer implementations and continued commercial momentum. Amadeus Hospitality platform offers the most comprehensive AI-powered portfolio of core capabilities to the hotel industry and is the most broadly connected ecosystem of partners. We are creating a global community platform of world-leading hotels on a mission to transform relationships with guests. We are advancing with Marriott International, Accor and The Ascot Limited to join Amadeus Hospitality Platform. We are pleased to say that the first Marriott International properties are now live on CRS with implementation plan going as expected and a meaningful number of Marriott properties scheduled to migrate gradually throughout '26. Also leveraging our e-money license, we have renewed and expanded our partnership with Mastercard, allowing Amadeus to operate as full scheme member with self-issuing capabilities. As for the Amadeus travel platform, which enables travel providers to retail through third parties worldwide, we continue to see steady volume growth and strong revenue per booking growth through the platform in quarter 4. We enriched our low-cost carrier content with the addition of West China and with expansion of Transavia content, the local airline of the Air France-KLM Group. At year-end, Amadeus had over 75 signed NDC airline distribution agreements. We also signed a strategic multiyear agreement with Direct Travel, one of the top 10 travel management companies globally under which Amadeus will provide direct travel with seamless access to the most comprehensive air hotel and ground transportation content through the Amadeus Travel platform. I would also like to point out that we have deployed advanced airline profile on Amadeus Travel Platform, a smart machine learning power solution to manage search traffic at scale. This solution significantly reduces unproductive traffic and make airlines and travel agents see a significantly lower look-to-book ratio in their systems as well as reduce infrastructure strain. Air France-KLM has reported major gains by implementing our solution as well as lastminute.com, who now has a significantly improved pull to book ratio and optimized search performance. And finally, regarding our technological capabilities, including AI, we have completed our cloud migration and continue to advance our partnerships with Google and Microsoft. Partnering with leading companies to transform travel, leveraging AI gives us confidence that the biggest and most advanced technology companies have chosen Amadeus as one of their strategic partners for travel. We all know there is a lot of sentiment in the market around AI. Agentic AI promises to transform travel in very positive ways, bringing increased personalization to travelers as well as productivity and efficiency gains across the value chain. Amadeus is uniquely placed to deliver Agentic AI functionality into products and solutions, supporting our customers on their own journey and to be the orchestrator in an AI-enabled travel ecosystem. I will elaborate more on this later. With this, I will now pass on to Carol to review our financial performance. Caroline Borg: Thank you, Luis. Let me just drop this a bit. I'm a bit shorter than Luis. We are good. Okay, great. Great to see so many of you in the room today. So thank you, and I'm delighted to communicate that we've delivered a strong Q4 to achieve a solid financial performance in 2025. We delivered high single-digit revenue growth and double-digit adjusted EBIT growth at constant currency, coupled with good free cash flow generation, achieving our 2025 guidance across all metrics. We display our performance of revenue and adjusted EBIT versus previous year also at constant currency to facilitate your understanding of Amadeus' underlying financial performance. More details on our foreign currency exposure and on our constant currency calculations as well as the complete information on our IFRS figures and their evolution are available in the appendix of this presentation and also in the Amadeus 2025 management review. So in 2025, we successfully delivered our 2025 constant currency outlook, reporting strong growth across our key financial metrics. Revenue of EUR 6,517 million, 9% growth at constant currency, 6% reported growth. Adjusted EBIT of EUR 1,894 million at 10% growth at constant currency or 9% reported growth. Profit of EUR 1,336 million, 7% growth. Adjusted diluted EPS growth of 9% at constant currency. Free cash flow of EUR 1,302 million, which is 7% growth, excluding nonrecurring flows in 2024. R&D investment of EUR 1,434 million, representing 22% of revenue. Pretax operating cash flow conversion of 94%, leverage at 0.9x net debt to the last 12 months EBITDA at the end of the year and our EUR 2 billion that was returned to shareholders in the year through both dividends and share repurchase programs. So in 2025, our group revenue grew by 8.5% at constant currency. Group revenue growth resulted from high single-digit revenue expansion across each of our segments, supported by volume expansion and customer implementations across our segments. Air IT Solutions revenue grew by 8.7%, the Hospitality and Other Solutions segment revenue delivered 9.6% growth and Air Distribution revenue expanded by 8%. Group revenue accelerated to 10% in Q4 at constant currency supported by double-digit revenue growth in both Air IT Solutions and Hospitality and Other Solutions and high single-digit revenue growth in Air Distribution. At constant currency, our adjusted EBIT grew 10.2%, resulting from the 8.5% revenue evolution discussed on the previous slide and also was contributed by cost of revenue growth of 3.2%, fundamentally driven by an increase in transactions, such as in air distribution and hotel distribution bookings and in payments due to the B2B wallet expansion. Reported fixed cost growth of 6.5% mostly resulted from an increase in resources, particularly in our R&D activity, coupled with a higher unitary cost, higher cloud costs due to a combination of our own volume growth and also to our progressive migration of the solutions to the public cloud; and finally, to the Vision-Box consolidation impact in Q1. Ordinary D&A expense increased by 4.4% as a result of higher amortization of internally developed software, partly offset by lower depreciation expense at our data center, given the migration of our systems to the public cloud. At constant currency, adjusted EBIT margin was 28.8%, a 0.5 percentage point expansion versus the previous year. And adjusted EBIT growth accelerated in Q4 to 15.4% at constant currency, supported by faster group revenue growth and softer fixed cost evolution. So now let's review the performance of our operating segments, starting with our Air IT Solutions business. Air IT Solutions revenue increased strongly in the year by 8.7% at constant currency. Full year revenue growth was driven by Amadeus PBs increasing by 3.8% and a 4.7% higher revenue per PB, which fundamentally resulted from positive pricing dynamics, including upselling to our new Nevio customers as well as from strong performance of our airline professional services and our airport IT businesses. Amadeus' PB growth in the year was driven by global air traffic evolution and the PB contribution from Vietnam Airlines, which migrated to Altéa in April 2024. Revenue growth expanded by 10.9% in Q4 at constant currency. This revenue growth is due to stronger PB volumes due to improved global air traffic evolution and an expansion of revenue per PB of 6.6%, an acceleration relative to Q3, mainly due to improving price effects and stronger performance of airline professional services. In Q4, our leadership in Air IT Solutions continued. In addition to the Lufthansa Group planning to adopt Amadeus Nevio as well as Volotea and TUI Airlines selecting Navitaire Stratos, as Luis just mentioned, we continue to grow our customer base with Pan American World Airways choosing our technology as the backbone for its core passenger and operational capabilities. We also broadened the scope of solutions adopted by our customers, such as Thai Airways that selected our AI-powered air dynamic pricing amongst other solutions and Jeju Air that selected Navitaire Edge shopping service, an innovative solution designed to give airlines greater control over look-to-book ratios and improve response times. In Airport IT, several airports at Indonesia and the Philippines will adopt our AI-enabled biometric technologies and airports across Australia and Japan will adopt our self-service bag drop solutions. Air IT Solutions contribution increased by 8.4% at constant currency, resulting from the revenue evolution that I've just described, offset by cost growth of 9.4%, which was fundamentally driven by an increased R&D investment, variable cost growth driven by the Airport IT business expansion and the consolidation of Vision-Box. Contribution margin was 70.7%, 0.2 percentage points below the previous year due to the Vision-Box consolidation impact, excluding which margin would have expanded year-on-year. Hospitality and Other Solutions revenue grew by 9.6% at constant currency in 2025. Revenue growth was driven across both hospitality and payments due to customer implementations and increased transaction volumes. Within Hospitality, the main revenue contributors were Amadeus Central Reservation System, sales and event management, hotel distribution and business intelligence. In payments, both our merchant services and our payout services reported strong growth. Hospitality and Other Solutions revenue growth in Q4 improved to 13.9% at constant currency, driven by stronger performances of both hospitality and payments supported by new customer implementations and higher transactions. In Q4, our growing relevance in hospitality continued to expand across our extensive portfolio, the most comprehensive in the industry, amongst others with -- sorry, beg your pardon, I missed something. We signed new customer agreements spanning across multiple verticals, including, amongst others, with Radisson Hotel Group and Travel Seller, Alibtrip in hotel distribution and Massanutten Resort in Hotel IT. In payments, travel sellers such as Fareportal selected our Outpayce B2B wallet. We also partnered with UnionPay to enable the acceptance of its cards and expanded our agreement with Mastercard to become a full Mastercard scheme member with self-issuing capabilities. Hospitality and Other Solutions contribution was 13.8% above the previous year as a result of the revenue growth I've just previously described, offset by cost growth of 7.4%, which resulted from higher variable costs driven by the volume expansion in both hospitality and payments and increased R&D investment. Contribution margin was 35.8%, 1.3 percentage points above the previous year. Air Distribution revenue increased by 8% in 2025 at constant currency, driven by 2.8% increased booking volumes and a revenue per booking growth of 5% primarily resulting from positive pricing effects. Amadeus' booking growth in the year was supported by continued commercial gains across the regions. Air Distribution revenue in Q4 softened slightly relative to Q3, largely due to booking evolution, which was negatively impacted by an increase in flight cancellations in the U.S. Beyond introducing advanced airline profile, addressing one of the biggest hurdles in NDC adoption by enabling search traffic management at scale and enriching our low-cost carrier content offering, we secured new travel seller customer wins, including L’alianX Travel Network in the Americas and Direct Travel, one of the top 10 TMCs globally. We also successfully delivered professional services to BCD, one of the world's leading corporate travel management companies. Air Distribution's contribution grew by 13.3% at constant currency as a result of the revenue growth I've just described, offset by a 3.2% cost increase, which mainly resulted from the bookings evolution. The contribution margin of the segment expanded by 2.3 percentage points to 49.6%. So now let's move on to review our R&D investment and capital expenditure. We continue to prioritize investment in R&D to deliver our organic growth, maintaining our leadership position. As Luis mentioned previously, we are proud of the commitment that we've made to make remaining relevant for our customers, ensuring that emerging technologies such as AI continue to be embedded across our entire portfolio. In 2025, R&D investment amounted to EUR 1.4 billion, growing by 7.6% versus the previous year. Half of that investment was dedicated to the expansion of our portfolio and the evolution of our solutions and AI capabilities, including Amadeus Nevio, Navitaire Stratos for airlines, our hospitality platform, NDC technology for airlines, travel sellers and corporations and solutions for airports and payment services. 1/4 to 1/3 was dedicated to our customer implementations across the business, such as Marriott International and Accor for ACRS, new Nevio customers and airline portfolio upselling and customers implementing NDC technology as well as efforts related to bespoke professional services provided to our customers. And the remainder was dedicated to our migration to the cloud and our partnerships with Microsoft and Google as well as the development of our internal technology systems. In the year, our capital expenditure increased by 5.6%, mainly driven by our continued investment in software development to maintain our leadership position. Capital expenditure represented 12.5% of revenue, consistent with the previous year. In 2025, we generated EUR 1,302 million of free cash flow. Free cash flow was slightly below previous year by 2.4% due to nonrecurring tax-related inflows in 2024. Excluding these nonrecurring effects, free cash flow in 2025 was 6.9% higher than the previous year as a result of our EBITDA expansion, a higher change in working capital inflow and a reduction in interest payments, partially offset by an increase in our capital expenditure deployed to strengthen our value proposition as well as higher taxes paid. We had a pretax operating free cash flow conversion of 94% in the year. Net debt amounted to EUR 2,141 million at the end of December 2025, EUR 30 million higher than at the same time last year, largely due to the acquisition of treasury shares under the share repurchase programs as well as the dividend payment, which was partially offset by our free cash flow generation and the conversion of bonds into shares. And finally, our leverage is at 0.9x net debt to EBITDA as at the end of December. So now on to our short-term organic outlook, our expectations for 2026. IATA forecasts global air traffic growth of between 4% and 5% in 2026. Based on this assumption, we expect our group revenue to grow at constant currency at high single-digit, supported by strong evolutions across all of our segments. We expect a stable adjusted EBIT margin performance in 2026 at constant currency, impacted by our cloud migration ramp-up during 2025, one of our key strategic investments over the past few years. Excluding this effect, adjusted EBIT margin in 2026 would expand. Please note that this timing effect impacts 2026 only, and therefore, we expect adjusted EBIT margin expansion in the midterm. More on that from Luis later. With respect to free cash flow, we expect to generate between EUR 1.35 billion and EUR 1.45 billion in 2026, with capital expenditure as a percentage of revenue in the range between 10% and 12% of group revenue. Again, please note that we expect to see some short-term seasonality with negative free cash flow growth in Q1 due to the timing of payments. Finally, our shareholder remuneration expectation. Ultimately, we seek to create sustainable value for our shareholders. Over the last 12 months, we grew earnings per share by 8.6% at constant currency. In addition, we returned EUR 2 billion of capital to shareholders through the ordinary dividend and the share repurchase program. The size of the buyback and the dividend both reflected our strong free cash flow generation, confidence that we have in our future and a desire to offset the dilution from the very important capital increase we made in 2020. As I've previously mentioned, we aim to create value through strong and sustainable earnings growth, compounding that growth through disciplined allocation of our capital on both inorganic opportunities and increased shareholder returns. Our confidence in continuing to create sustainable value for our shareholders going forward remains strong as evidenced by the fact for the first time, we have included an EPS growth target in the near- and medium-term outlook. We have a track record in delivering growth through evolution in technology, and we have the critical assets to lead in Agentic AI and power the future of travel tech with AI-enabled innovation. We will continue to generate cash and expand margins, all whilst maintaining a strong balance sheet to provide us with the optionality and flexibility to continue to deliver for our customers, employees and ultimately for our shareholders. Today, we are committing to low double-digit adjusted diluted EPS growth for 2026, given our confidence in the future, coupled with our strong 2025 performance. In 2026, we will distribute to our shareholders a dividend at the top end of our dividend policy range, which will amount to almost EUR 700 million, and we will launch a new additional share repurchase program of EUR 500 million to be executed within 6 months. Additional specification on the expected dynamics by segment at constant currency is as follows. So Air IT Solutions, we expect to see high single-digit revenue growth supported by PB growing in line with global traffic -- global air traffic growth, coupled with a positive revenue per PB growth, enhanced by continued upselling, new Nevio revenues as well as higher airline professional services and Airport IT revenues. In terms of contribution, we expect the margin to be dilutive versus previous year, driven by high growth in our airline professional services and Airport IT mix. Hospitality and Other Solutions. We are expecting double-digit revenue growth in 2026, accelerating from 2025. This volume growth will be supported by volume expansion and new customer acquisitions across our hospitality and payments portfolios. We expect contribution margin in this segment to continue expanding as we continue to gain operating leverage. And finally, Air Distribution. We expect our bookings to grow -- to continue to grow steadily, potentially faster than last year, supported by customer success and market share gains. We continue to expect an expanding unitary revenue per booking evolution, although it's likely to be a little slower than last year due to the expected timing of commercial negotiations. In terms of contribution margin in this segment, we expect stable margins in 2026. So I'll now hand back to Luis, who will close with our AI positioning, midterm outlook and final remarks. Luis Camino: Little bit higher. Thanks, Carol. And we are extremely proud of our '25 results in a challenging macroeconomic environment. So now let's pivot to our expectations over the midterm. But firstly, let me remind you of our core strengths. We are a large-scale mission-critical technology leader. We develop, build and support an impressive service-oriented architecture with over 600 applications and more than 10,000 micro services running fully on the cloud. We are the technology backbone for travel, enabling safe and efficient global operations. We openly work with others, build strategic partnerships and proactively deploy leading technologies to deliver value to our customers. We have deep, long-standing customer relationships at global scale. We are a trusted partner, combining our industry-wide scale and expertise, coupled with our deep customer relations to serve many of the world's largest airlines, hotel groups and travel sellers. We are the end-to-end travel data and intelligence leader. We understand, aggregate and convert complex fragmented data into true intelligence for our customers. Our in-depth knowledge of the complex process in travel, coupled with our deep access to relevant data allows us to provide the broadest end-to-end view of travel activity from inspiration to post-trip. We have a robust financial framework and resilient business model. We have a strategically aligned financial and capital framework with a proven track record of generating high single-digit revenue growth, solid and stable margins, high cash generation and long-cycle investments demonstrating resilience through industry cycles. We have a unique and diverse talent base empowered by a cohesive team culture and we are very proud of our talented, diverse and long-tenured workforce led by an experienced leadership team and power to drive a customer-centric, high-performing collaborative culture. I would like to take the opportunity to share our AI positioning and why we believe that AI augments and reinforces our core platform. We are uniquely positioned to orchestrate the AI-enabled travel ecosystem. We have embedded a neutral execution layer for the travel industry, and this is based on 3 strategic pillars: our status as trusted system of record in the industry, the power of our integrated and deeply connected business logic and our global scale. Firstly, we are the trusted system of record in the industry since 1987. Travel is a mission-critical industry with near zero tolerance for error. Availability, pricing, ticketing, passenger identity and airport operations, all demand accuracy, security and resilience. As a trusted system of record, we provide a single source of truth. Our customers trust Amadeus with reliable data that underpins safety, security, compliance and customer experience. That trust has been earned over decades through operational performance, regulatory compliance and institutional reliability. Secondly, the power of our integrated and deeply connected business logic. Our technology is deeply integrated across airlines, airports, rail, hotels, payments, identity and distribution, connecting hundreds of systems, products and workflows that have been built up over decades. This integration is not cosmetic. It is operational, contractual and regulatory and sits deep in the value chain. Replacing this level of integration and domain expertise is not a simple technological decision. It will require reengineering core workflows, retaining staff, recertifying systems and accepting significant operational risk. Being displaced is harder in practice than it appears in theory. The reality of integration creates a structural stickiness. We hold authoritative, reliable data and power workflows that are hard to unpick or replace. AI does not change this. In fact, AI depends on this level of integration. With our deeply connected systems and trusted data, AI remains superficial. And with them, it becomes transformative. We see an opportunity for us to be the orchestrator that digital assistants will rely on for travel, and we are actively engaging with AI platforms. This week, we also announced an acquisition of Skylink. This is an AI-first company specializing in orchestration and conversational automation for corporate travel. Over time, Amadeus will be expanding this AI-driven conversational capabilities beyond corporate travel across airlines, airports and hospitality. And finally, global scale. Scale is not just about size. It is about reliability, resilience, insight and operational learning at volume. Amadeus operates at global scale, processing up to 150,000 transactions per second at peak times, powering millions of searches and bookings every day. We support hundreds of petabytes of data, thousands of services and a platform used across travel verticals and more than 190 markets globally. This scale has been built over nearly 4 decades where we have been evolving, applying and adapting technologies such as AI in our products and solutions. Scale give us several critical advantages. First, investment capability in travel. We continue to invest in infrastructure, in security and in innovation, maintaining our leading position as a key player in the travel industry. Second, data and insight velocity. We power the leading brands in travel. This critical mass of customers bring unparalleled data breadth and operational insight. And third, making AI industrial rather than experimental. AI models improve with volume, diversity and real-world usage. Our scale allow us to deploy AI at a production level, focus on real business outcomes, not pilots or demos. These pillars complemented with our prioritized investment in R&D allow us to ensure that AI is deeply embedded across our portfolio and the number of AI use cases we operate today is countless. Agentic AI unlocks additional opportunities. We have consolidated hundreds of use cases focusing on the following end user solutions. Amadeus travel companion for the traveler. This enables our customers to power their traveler experience with AI through a travel servicing assistant across the different verticals in travel. We have kicked off with airline call centers automation with a strong early interest from our airline customers and for the hotel industry with the Ascott Limited as launch partner to be powered by Amadeus and Salesforce. Amadeus First Officer for professionals -- for travel professionals, sorry. This enhances our products and solutions with an AI conversation layer to help our customers better leverage the full product features and achieve superior outcomes. We have multiple solutions spanning all our customer verticals, such as guard for airports, Amadeus Advisor for hospitality and many productivity boosting AI agents for travel sellers. And finally, internal efficiencies. For employees, solutions designed to enhance internal efficiencies across the organization and from which we are already generating productivity improvements. We believe that for new players in the industry to become relevant channels, they will need the Amadeus execution layer in travel. We, therefore, see AI augmenting and reinforcing our position on our core platform. Our core strengths have enabled a proven and consistent track record of delivering strong and sustained profitable growth and high cash flow generation, giving us confidence in our midterm outlook. Finally, our midterm outlook. Our expectations are to continue to build on our commercial momentum and relevance as market leaders, executing our clear strategy to deliver the following financial metrics period over the '26-'28 period. Group revenue growing at high single-digit CAGR growth rate at constant currency, supported by a strong evolution across all our business segments. Adjusted EBIT margin expansion over the period, supported by operating leverage, Carol mentioned before. We expect to deliver low double-digit adjusted diluted EPS CAGR growth and also to generate solid and consistent free cash flow over the period, growing at a high single-digit CAGR growth rate, coupled with continued and disciplined investment program, through the period with capital expenditure at low double-digit percentage of group revenue to maintain our market and customer relevance. We are excited by the growth opportunities for Amadeus. The sector continues to evolve and no doubt Agentic AI will play a part in this evolution. Our core strengths provide us with the platform to embrace the changes in our space, demonstrated by our proven and consistent track record. We remain confident about our strategy and our ability to execute against it. With this, we have now finished our presentation. Thank you. Cristina Fernandez: Thank you, Luis. Thank you, Carol. I'm going to invite the management team, please to join us on stage, so we can start our Q&A session. So we're going to address the questions in the room first. [Operator Instructions] So Michael. Thank you. Michael Briest: Great. Michael Briest, UBS. Two from me on AI predictably. I mean there's a concern out there that with the coding tools driving down the cost of software development, maybe some of your airline customers might look to expand organically rather than buy some of the many modules that you sell on top of the PSS. What are your discussions there like? What are you doing to sort of prevent that or reassure investors that is not happening? And the second one there, Luis, I think you mentioned at the end, appreciate you working with Microsoft and Google. But are you doing anything with open AI or Anthropic do you expect to? Or do you see them as someone to keep sort of at arm's length? Luis Camino: Let me start with the last one and then Decius, you can take the first one. I mean, of course, we are engaging with all the AI platforms. But as you know, we have been working with Google and Microsoft as part of our cloud migration, as part of different agreements that we have with them. So we'll say we are more engaged with them, but this does not mean we are not talking to the rest of the platforms. We are. But I would say Microsoft and Google are more advanced than the others. Decius, about the customers? Decius Valmorbida: Yes. So today, on my conversations with the providers, airlines, mostly -- when we talk to them, where do you see the biggest opportunity? Is it on the revenue side? Or is it on the cost side in terms of efficiency? And I think that there is a lot of excitement on the revenue side, which is what this is going to allow them to do in terms of personalization, in terms of evolving, what is the mix of what they're selling to customers. And that's what they are gearing up to. So then the question is, if you have an IT team today and they are developing new features, you're saying, what is my focus. And it is like the focus is working together with us on saying how can we leverage the Amadeus building blocks to deliver what, let's say, that upside is going to be on the new channels that are going to be created rather than using those resources to replace infrastructure that already exists today. So I think that's how I see the dynamic today. George Webb: It's George Webb from Morgan Stanley. Also thank you for hosting in person. I think it's a good thing to do and it's appreciated. Couple of questions. I mean investors are obviously in the weeds and trying to work out what's happening. But I think also, it's helpful to have a kind of a simplified view of a company's strategy around AI. So maybe -- and maybe take back the level of detail we've had, if you just simplify at a higher level, how would you kind of characterize the operational strategy that you're going through with AI would be a good starting point from my perspective? I think the second question maybe a more specific one. We have seen good momentum around Nevio, Lufthansa Group being one of those examples. Could you perhaps share how the pipeline for Nevio is looking as you look forward, that would be helpful? Luis Camino: Okay. With AI, I mean, we have been working with AI for more than 20 years, and I would like Niko to complement that. So it's not new to us. It's part of our road map. We are implementing the new features, the advanced things that we see in our portfolio. So that's part of our core strategy. On top of that, we are also aiming to orchestrate the needs that the platforms, AI platforms may need in terms of data and connectivity with travel. So we are acting in both sides, and I explained why we believe we are in a very good position to do so. And I would like my colleagues also to elaborate a bit more. Nikolaus Samberger: Okay. Maybe I'll start. As Luis was saying, I mean, you may not realize it, but we have been using AI for many years. I joined Amadeus 20 years ago, and the team I joined at the moment now, we are calling it traditional AI was doing operational research. Then as we moved out of what we call TPF at the time, and we went on open systems. This opened completely the new door for us to adopt machine learning techniques, and so it has been embedded in our solutions, in our infrastructure, in our culture, I would say, our engineers are used to use this tool to develop any of our solutions. So to give you a bit of color, as I speak to you today, if by the end of today, we would have generated EUR 2.5 billion inference of machine learning in our system just for flight search. And if you take it globally, I would estimate roughly today EUR 15 billion inference of machine learning. And therefore, this, I believe, put us really in a good position when we had the ChatGPT moment end of 2022 that will adopt generative AI. And you heard Luis talking about it. We already embraced it. It's already part of our engineering and global set of tools that they have access to, not only engineers across the company. So I mean, yes, for us, it's a big opportunity. I mean we can talk about it, but I think it's best if Decius talk about the opportunity on the business. Decius Valmorbida: So let me go on the business and then tie in to the Nevio question that you just did. So it's like if we go into this AI world, I think it makes it very explicit that today, you have an industry that -- it is organized around supply. So you have supply that is marketing their products, but all of you are travelers. So it's like if you think as your travelers is are you buying a single element or are you buying a trip? So it is like on the moment. So the industry is selling flights, hotels and car rentals, but customers are buying trips. So it's how are you going to do that translation between trips and to the supply. So it is like that is the position of an orchestration layer. That is the position where you sit in the middle when you make that translation. Why? Because a romantic trip to Paris can have many solutions to it, and it can be a flight or it can be a car with a hotel or it can be something else. So then I think that's where we need to position ourselves. This requires every provider today that is looking at it to participate in this new market that is emerging and investing in technology. So I feel it is a quite interesting opportunity because it is the moment that we are going to harvest a lot of the foundational work that we have done. It is moving to the cloud, give us the scale. The years of diversification through all of the pillars travel allow us to have the integration. Having Nevio as the new flexible machine that will allow you to participate in that market and do retailing because you're going to be marketing trips rather than marketing only your own product comes at a very meaningful time. So it's like, I think that's what I see is what you see after the major European players, major players in the U.S., in Asia and the Middle East coming out with RFIs and RFPs. So we really see the market moving, and we expect now a lot more movement than these foundational customers, let's say, this way. James Goodall: James Goodall from Rothschild & Co Redburn. Maybe just a break trend and ask some non-AI questions. You talked to airlines being excited about the higher revenue environment. And we've also heard from BA this morning who are very quite bullish on revenue benefit they're driving on their new platform. So with airlines generating more revenue, how much of that benefit do you think you can look to share in? I think there's a number in the market of about 15% higher revenue per PB currently between an offer order system and a PSS. Do you think that could be higher in the long term, if airlines start generating a lot more revenue from these new systems? Secondly, just on the buyback. Are there any reasons why you didn't look to do more than EUR 500 million, given the strong free cash generation of the business and the outlook? And then, I guess, very finally, just on the EPS guidance of low double digit in the medium term. Is there a buyback assumption within that, please? Luis Camino: You want to start with the buyback and then I go back to... Caroline Borg: Yes. Sure. I was waiting for the buyback question. So thanks, James. So again, let me just reiterate in terms of the share buyback. We are committed to driving shareholder value, as I mentioned previously. Earnings growth, we are now guiding on earnings growth guidance. And then we want to compound that growth through disciplined use of our balance sheet. And again, just to remind everyone, I think we've been very clear on what we're saying in terms of our capital allocation policy, primarily organic growth investment, which we want to preserve our dividend policy and then M&A and shareholder -- additional shareholder returns are considered equally, yes? So the question really was around, well, why not more? James, give us a chance, like that we have announced today a double-digit growth. We feel the EUR 500 million that we've announced today represents about 90% of our free cash flow generation last year. So in our perspective, we think that this share buyback represents a good and compelling business model in conjunction with the outlook. I think the other thing I would say is that in this world that we're in, I believe -- we believe prudency in maintaining optionality and flexibility of our balance sheet is really relevant. So we think that we'll be at the lower end of our leverage range for a little while. But yes, this share buybacks feature as part of our algorithm, if you like, to increase value. To your point about, well, is there more coming? Again, we're taking this step by step, let us execute this. We're getting on with it. We're delivering it within 6 months. And then we will always consider share buybacks, M&A, additional organic growth as part of our capital allocation discipline. And what we commit is that we will achieve double-digit EPS growth. I'll start on the Nevio and then you give you the commercial answer. Decius Valmorbida: Yes, yes. Caroline Borg: We agree the T2RL assessment of mid-teens, 14% to 15% evolution or revenue gain as a result of airlines transitioning from PSS to OOSD, but maybe what are we seeing with our customers, Decius. Decius Valmorbida: Yes. I would say our growth in Airline IT, we have the 2 components of the growth equation. One are the PBs. So then you say, more people travel because of AI. So I think that one is more related to supply and it is more related to more planes. But then you go into the other equation, which is how many more modules and how much more scope and how much more work can I do on behalf of an airline if they're going. So typically, on a moment of very big transformation, do you want to be orchestrating 50, 60 providers that are everyone doing their own stuff? Or do you want to go with one partner that has, let's say, a lot of skin in the game and it is able to deliver your transformation from A to Z? So it's like, I think that's where we position ourselves, and we see that with all of the customers that we have done, the scope has increased, and you see that translated into higher revenue per PB because we are able to do more and innovation. If you point out our agreement that we have -- I'm sorry, with the project that we have now with Lufthansa, it evolves into something that we call delivery. So every time we were discussing about offers and orders, we're adding a step there. We are adding a whole new step that is called delivery. So delivery is about if you're going to do all of these fantastic things for the traveler, how you're going to deliver that services if that is going to go beyond just an air flight ticket. So it's kind of how you're going to coordinate with your partners? What if you're going to have Uber in there? What if you're going to have to exchange information with an airport? So it's like all of that delivery makes that us, we're going to have more revenue opportunities on the moment that customers are within in trip because that is going to be a moment, that is not going to be only you checking in because the check-in is going to be done, but you're going to be able to buy more products and services on that stage. So I think that is the innovation that I see. Luis Camino: It's already -- I mean, if you see in our figures and in our projections, we are already assuming to capture part of this value. Of course, as the contracts are being implemented progressively, so it will be progressive, but we expect in the medium term, this to really generate additional revenues for us, definitely not just with the current customers, but also with the new customers coming in. Caroline Borg: And in our actuals, it's already represented. It's part of the revenue per PB uplift that we've seen in Q4. Toby Ogg: It's Toby Ogg from JPMorgan. Maybe just on the segmental guidance for air distribution, sort of mid- to high single-digit. You mentioned, I think their growth potentially faster on the bookings side in 2026 versus last year. Could you just help us understand what would drive that potential acceleration if it were to materialize, what would be the building blocks of that? And then just on the remaining pricing-driven growth. Could you just help us with the drivers of that across booking mix and pricing trends? And how we should think about any incremental NDC bookings as well that perhaps might be on a net model within that? Luis Camino: You want to take. I'll start or... Caroline Borg: You can start, and I'll jump in. Luis Camino: I mean, yes, all these figures. When we say we expect higher bookings is mainly coming from the fact that, yes, we are signing customers definitely. We are increasing all our NDC agreements, our agreements with airlines bringing new content. So all that is into the equation. And as far, of course, as the traffic stays in the range that we have defined because that's the variable we don't control. We expect the volumes to be ahead of what we have this year. It's based on customer success, on signatures of NDC bookings, pieces of some new content that is coming into the platform, some reintermediation. So we are optimistic about our volume during the full year of '26. And with regards to the pricing? Caroline Borg: I will complement. So we've also referenced the global air traffic assumptions that we're making, again, based on feedback from you guys. So we're increasing our transparency there. To complement Luis' point, I think the booking dynamics are similar to what we're seeing for our outlook in '26 similar to what we're seeing in '25, but our revenue per booking growth will soften slightly. It will continue growing, but it will soften slightly. And the reason for that is booking mix, as Luis just mentioned. So there's a combination of low-cost carrier content and where that's coming through. We're seeing some pricing tailwinds starting to lap, so that will affect it. And of course, then the timing of our customer negotiations. So all in all, I think a similar booking profile from '25 to '26 with a softening revenue per booking trajectory. Alexander Irving: Alex Irving from Bernstein. Two from me, please. The first one, something is not wholly making sense to me in the way that we're talking about AI is used internally within the business. I love your help in understanding that better. Approaching this from a view of, are you using new AI tools to meaningfully improve the productivity of your software developers. It sounds like the answer is yes. Then if yes, should we be then expecting R&D investment to plateau because we can get more output through higher efficiency rather than cash spend? And the answer sounds like it isn't because CapEx is still going to be a double digit or low double-digit share of revenue. So if that's right, then why not? How are you deciding the right level of development spend is? And how have AI tools changed the way that you think about that level of investment? Caroline Borg: I'll start with the numbers and then maybe Niko you jump on the technical stuff -- you have a point as well. We all want to talk about this one, Alex. So CapEx, yes, low double-digit growth, but a declining trend over the outlook period. So that's the first fact that we expect that our CapEx profile will drop. Secondly, not all productivity gains result in a direct kind of cash out. We might have increased efficiencies, deliver projects to market quicker. Based on the level and speed of sales than commercial momentum that Decius is doing definitely on that case. The third point I'd make on that as well is that we're also committing to margin expansion. So our R&D spend is partly expensed and partly capitalized. So we are expecting and AI efficiencies, productivity efficiencies, amongst other things, are contributing to that margin expansion. So that's on the numbers, but . Nikolaus Samberger: Okay. Maybe to give a bit of color on how we use AI internally. So yes, we've deployed it first like, I would say, most of the companies for engineering. So I don't want all our engineers have access to AI tools. And okay, I can name a few, Claude, Copilot, and et cetera and basically, we give them the choice to select, depending on the task that is at hand. So we already see productivity improvements. However, if you want my honest opinion, the real gains are ahead with what is coming with Agentic. So we have started to deploy some solutions, but having more autonomous agents being there doing some of the activity will then unlock even more productivity, we believe. Second, the point I want to highlight is the way we've approached it is not solely as a cost reduction. It's -- as Carol was saying, there is an aspect of force multiplication, if I may say so. whereby we can implement faster, we can deliver faster. It enables us to -- our team to accelerate their intent, their speed, their capacity. This is our primary goal concerning all the pipeline that Decius talked about, and this is where we see the opportunity. Last aspect I want to highlight is beyond just the tools, it's really a working methodology change that we are embracing. The fact that we've used AI quite a long time in Amadeus helps us because it's in our culture. And in the working methodology, what is very important is to remember that we keep the human in the loop. I think you heard Luis talking about mission-critical systems. So as we deploy those solutions, we are very wise, very careful to make sure that we privileged stability, security for the solution, knowing that we operate in a very critical industry. Decius Valmorbida: I'll let you ask your second question, otherwise. Cristina Fernandez: Quickly, we're running out of time. Alexander Irving: Okay. Second question. Probably -- I think probably might be for you, Decius. You asked the acquisition of Skylink yesterday, and my initial read of this, it takes some functionality away from the TMC in the booking flow in the travel management flow. Does that reflect your assessment of the way that the travel industry is going to evolve in the future? And if so, what does that mean for Amadeus' own business? Decius Valmorbida: Okay. So First thing on the productivity point is, remember that we have a very large addressable market that if we really have more productivity, there are a lot more travel areas that we can cover. So I think that we -- this debate that is always around this idea that I don't know, everything has been already invented, and it is like there's -- if we have a lot of free capacity of servers, of developers and so on and so forth, There's plenty of new things for us to invent and the travel industry has plenty of space for us to cover. On Skylink, I think what we want is to have that capability of conversational AI across the board. As we said, we would like to give that to our employees. We'd like to give that to the professional travel user that we will use to make that more productive. We want to have that to deflect, as you were saying, a lot of requests that are coming from travelers that we believe that they can be automated, no? So what can that mean for TMCs? It can mean, a, much more productive environment for TMC because it's like if today, they need 20,000 people to service X amount of volume it means that probably in the future, they do not need to have as many people or they can cover a lot more, let's say, number of customers with the same amount of people they have. I think that is one. So why do intermediaries exist? And that's what I was saying is, it is much more than processing the transaction. It's kind of -- that is the part that it is about curating the content. It is about creating the certainty. It is about doing all of the edge cases. It is about. So it means that by automating that, it means that you can add a lot more value on the other aspects of the business. So in fact, I don't see this world of black and white. I do see opportunities for both providers and intermediaries to thrive in this new environment. Cristina Fernandez: Okay. Thank you very much. We ran out of time, but we have the lunch outside. So if you can stay, we'll be happy to address your questions. To the people on the line, we're very respectful of the fact that you've sent us questions as well, but we haven't had the time. We will answer your questions through the Investor Relations team. Thank you very much to everybody that has connected and we'll see you again in Q1. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the International Airlines Group Full Year 2025 Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand to Luis Gallego, Chief Executive Officer, to open the presentation. Please go ahead, sir. Luis Martín: Thank you very much. Good morning, everyone, and welcome to the IAG 2025 Full Year Results. As usual, I'm joined today by Nicholas Cadbury, our CFO, as well as the other members of the IAG Management Committee. I'm pleased to be announcing a record set of results today, highlighting the excellence of IAG's performance in 2025. We are delivering for our customers as our investments in operational and customer-related performance have led to another year of improving punctuality and customer Net Promoter Scores. We are delivering record operating profit, operating margin and return on invested capital. And we are delivering for our shareholders through the increased dividend and the new excess cash returns of EUR 1.5 billion. This is a significant increase on the EUR 1 billion buyback we announced last year. We continue to see a supportive demand environment that encourage our positive outlook. And as a result, we are planning further excess cash returns in the future. And we look to the future with great confidence as we continue to leverage our business model and execute our strategy, which will create value for our shareholders in the long term. In 2025, we have delivered world-class financial performance in each of our key metrics, continuing our track record over the past few years. We continue to grow revenue with robust demand for travel in our markets. Our operating profit and operating margin are now both at record levels, and our earnings per share has increased by over 22% this year. Our balance sheet is now in a very strong position. This has benefited from the strong free cash flow that we are now consistently generating despite a big step-up in CapEx during the year. And for our shareholders, we are creating significant value by earning an excellent return on invested capital of 18.5%. The fact that we are delivering strong results is not an accident, starting with the fundamental premise of IAG. Our group structure promotes excellence and accountability whilst providing the group-level support and direction that individual businesses benefit from. Our portfolio contains a diversity of markets, brands and business models that continually increase the resilience and sustainability of our performance through the cycle. Bringing this together is the secret sauce of IAG and sets us apart from any other airline group. Moving on to our strategy and targets. We are sticking to what makes us best-in-class. Our 3 strategic imperatives are designed to make our business stronger, more resilient and less cyclical. We have set out margin and return on invested capital targets that are appropriate for the group through the cycle, and we believe support a more sustainable long-term future. We are pleased to be delivering results that are at or above the top of those ranges, and we will continue to target the full potential for all of our businesses through our transformation program and capital allocation process. Ultimately, we want to create value for shareholders by delivering sustainable profitability and accretive growth in the long term. Over the past couple of years, we have highlighted 3 major areas where we could create significant value, and we are delivering on our commitments. British Airways has already reached its 15% margin, but still has more to deliver on its transformation program, including the commercial platform and fleet deliveries. Iberia is well on the way to its EUR 1.4 billion profit target, with an exceptional margin last year of over 16%, and we will continue to grow profitably in its core markets. And we will tell you more about the Loyalty's exciting potential at our Investors Day in June, both as a business in its own right as a significant contributor of value to the overall group performance. And on that note, I will pass over to Nicholas. Nicholas Cadbury: Thanks, Luis, and hi, everybody. I'm pleased to share our full year results. This first slide shows our very strong operating profit and margin performance. We've delivered a record operating profit of EUR 5.024 billion, up EUR 581 million versus last year. This is driven by strong passenger revenue growth and also good other revenue growth from loyalty, maintenance and also sustainability incentives and supported by the lower fuel cost. Our cost performance was in line with expectations and with the guidance previously provided to the market. I'm pleased with our margin performance, which continues to rank among the best in the industry, at 15.1%. It sits at the top end of our target range at 1.3 points higher than last year. On the right side, you can see how our strong markets, hubs and brands drove this exceptional performance in all our businesses, which we will detail in the next slide. All our operating companies delivered excellent results this year, building on the strong performance also achieved last year. Aer Lingus delivered a strong improvement in 2025, increasing its operating margin to 11% with operating profits at its second best level on record. The airline was affected by industrial action in a base last year and managed to hold unit revenue flat while growing capacity. This was despite a very tough competitive environment in Dublin, particularly from U.S. carriers that is ongoing. Alongside this, Aer Lingus has delivered strong cost discipline, supported by its transformation program. British Airways delivered an excellent margin performance at the upper end of the group target range. This was supported by strong premium leisure and improving corporate demand with cost performance reflecting investments in the business alongside its transformation program. Iberia also had a tremendous year, reaching a record 16.2% operating margin. The airline made excellent progress against its Flight Plan 2030, delivering EUR 1.3 billion of operating profit this year towards its EUR 1.4 billion ambition, driven by the strong revenue performance, particularly in Latin America. Iberia's costs were particularly affected by engine availability on both long haul and short haul, extra disruption and resilience costs. The cost increase also includes the cost relating to its growing MRO business that was particularly strong in the first half of the year. Vueling delivered a robust set of results, generating an operating profit of EUR 393 million and a 12% margin, among the strongest in the European low-cost sector. Revenues reflected a softer summer travel environment in parts of Europe, particularly Northern Europe, partially offset by the continuing strength in the Spanish domestic market. What really stands out, however, is Vueling's strong cost performance that Luis will touch on later. And IAG Loyalty, including Holidays, continues to deliver high-quality, high-margin earnings. The business yet again delivered the 10% margin growth ambition we set for it, reporting GBP 469 million of profit and an 18% margin, excluding the impact of the VAT dispute with the HMRC, which is subject to ongoing litigation, and we -- and we still feel confident the operating profit would have reached over GBP 500 million. Turning now to our revenue performance in more detail. Overall demand for travel remains strong throughout the year, underpinned, as just mentioned, by the diversity of our network and of our strong brands. Capacity grew by 2.4%, in line with our guidance that we gave at Q3 results, and we delivered an increase of 1% in passenger unit revenue at constant currency and flat on a reported basis, a solid outcome against a record 2024. If we look at the performance by region, we are pleased with the North Atlantic performance, where we grew capacity by 1.4%, with unit revenues up 1.5% at constant currency and importantly, showed an improving trend as we went through the second half with Q4 unit revenues up 1.8% at constant currency. Underneath this trend, were consistent with what we highlighted throughout the year, with good premium demand, partially offset by some softness in U.S. point-of-sale economy leisure demand and continued impact from U.S. direct capacity growth into our hubs in Dublin and Madrid and secondary European markets. BA drove the Q4 performance with unit revenue at constant currency increasing strongly year-on-year, driven by strong premium cabin and business travel demand, particularly from the U.S. point of sale despite a tough comparator last year. Latin America and [ Caribbean ], strongest performer in the network. Our capacity increased 3.3%, with unit revenue at plus 3.3% as well at constant currency. Iberia delivered another excellent year and drove the Q4 performance with premium cabin, LatAm point of sale and business travel, all performing strongly. In Europe, we increased our capacity by 2.2% with unit revenue down 2.1% at constant currency. As mentioned earlier, this reflects the softer demand in parts of the summer and also the additional British Airways capacity. Domestic saw us growing capacity by 2.2% with unit revenues flat for the year, reflecting strong demand, particularly in the Canary and Balearic Islands. In Africa, Middle East and South Asia, we increased capacity by 2.7%, with unit revenue up 0.8% at constant currency. And finally, Asia Pacific delivered a strong recovery with capacity up 6.4% and unit revenue up 4.2%, supported by a refocus of the network towards stronger performing markets such as Bangkok and Kuala Lumpur and the full year impact of Iberia's relaunched routes to Tokyo. Just turning to this year, we're planning to continue to grow the business in a disciplined way with capacity up around 3% in 2026. And briefly touching on what we're seeing so far this year, we're seeing a strong Q4 -- Q1, sorry, including the North and South Atlantic and some additional benefits from the shift to an earlier Easter. At this point, I'd just like to highlight the FX has a major factor. Over 2025, we saw the pound weakened against the euro and the dollar weakened against the pound and euro. At these current rates, you will know that there will be a significant FX headwind on revenue this year, particularly in the first half of the year, which we will be reducing progressively into the second half. And of course, this will apply to our cost base in the reverse with a favorable FX impact. Total unit costs improved 0.4% and non-unit fuel unit costs increased by 2.8% year-on-year, actually in line with our guidance. This full year cost performance benefited from FX movements of 1.3%, although it's worth noting that the increase in costs relating to the growth of other revenue to the MRO also drove around 1.3% of uplift as well. So both the FX and the other revenue costs neutralized each other out. Employee cost unit costs increased 3.8%, driven by operating investments, operational investments and payments linked to strong financial performance. Supplier unit costs rose by 0.8%, with transformation initiatives helping to offset inflation pressures and support investments in our customer experience. Ownership costs increased 10%, reflecting the new aircraft, cabin retrofits, lounge upgrades and digital platforms, all of which are for the benefit of our customers. Those impacts were partly offset by a 9.1% reduction in fuel costs driven by lower prices and partly offset by an increase in carbon-related costs, both ETS and CORSIA. We remain confident that our transformation program will continue to underpin cost benefits -- cost efficiencies as we move forward. For 2026, we expect nonfuel costs to be down around 1%, and that includes a benefit of around about 2%. So in other words, they're up 1% on a constant currency basis. Fuel prices have been very volatile. On the 31st of December, our fuel bill based on the forward curve then was estimated to be EUR 7 billion, including a 62% hedge that we have in place. Since then, jet prices have increased following the recent escalations and tensions in the Middle East. So based on the current forward curve, we can see an increase to around about EUR 7.4 billion. We'll have to see how this plays out over the next few weeks and months. This fuel scenario also includes a year-on-year increase from ETS and CORSIA of roughly EUR 150 million. Adjusted EPS increased by 22.4%, reflecting both the strong performance with the growth in adjusted profit after tax of 17% to EUR 3.3 billion and the share buyback program that reduced our weighted average shares count by 4.3%. Overall, this performance underscores the continued momentum in our earnings and our focus on delivering sustained value for all of our shareholders. We achieved a free cash flow of EUR 3.1 billion after investing EUR 3.4 billion of capital in the business. This was supported by the positive working capital movement, partly driven by IAG's loyalty and the Amex contract renewal as well as interest paid benefit from the early debt repayment. These benefits more than offset higher purchase of carbon assets ahead of the changes to free ETS allowances and the payment to HMRC relating to the IAG Loyalty tax appeal that were not settled until the earliest of 2027. I'm pleased to report that our balance sheet continues to be very strong, with net debt leverage of 0.8x and liquidity over EUR 10 billion, positioning us well for the years ahead. Our gross debt benefited from a EUR 1.3 billion favorable FX impact related to the U.S. dollar-denominated debt from the weakening of the U.S. dollar. We aim to keep our gross debt leverage between 1.5x and 2x. To this aim, we finished the year at 1.9x, having repaid EUR 1.6 billion of non-aircraft debt and taking 2/3 of our 25 aircraft deliveries as unencumbered. We remain committed to investing in our fleet, enhancing customer experience and building resilience. We've shown on this slide the phasing of CapEx over the coming years, which will put our CapEx allocation and balance sheet decisions into context. In 2025, CapEx was slightly lower than planned due to the timing differences and the phasing of some customer-related investments. This year, 2026, we expect CapEx to be around about EUR 3.6 billion with 17 aircraft deliveries, continued cabin retrofits, including British Airways, A380s and 787-9s and ongoing investments in property, especially the improvement to our lounges. Looking forward, we've been saying for a while now that our CapEx will increase in the coming years as delayed aircraft from the manufacturers start to get delivered and make up for the lower CapEx numbers we've seen over the last few years. For the last 4 years, this increase has continuously pushed to the right. However, we expect to start seeing this increase materialize in the next few years. In 2027 and 2028, we expect CapEx to average EUR 4.9 billion, mainly reflecting the delivery of the Boeing 737s for Vueling and the start of the 777-9 deliveries for British Airways in 2028. CapEx is then expected to increase further to an average of EUR 5.6 billion for 2029 to 2031 as the 71 wide-body aircraft we've ordered in 2025 and the previously delayed wide-body aircraft deliveries start to materialize, with around about 70% of these deliveries being replacement aircraft. Beyond this period, we'll return to our normalized CapEx run rate of around about EUR 4.5 billion from 2032 onwards. We're able to do this as we're making good returns on capital and have high disciplined approach to capital allocation to support our ambition to deliver focused capacity growth by 2% to 4% over the medium term. With this increase in future capital spend, we will still be strong cash-positive throughout these years, and we'll continue strong shareholder cash returns with a higher CapEx delivering higher profits. Given this confidence in our cash generation, the current very strong balance sheet and in preparation for this CapEx trajectory, we've decided to widen our guidance on distributing excess cash returns to 1 to 1.5x net debt leverage. And finally, our disciplined approach to capital allocation and how we manage our balance sheet, investments and shareholder returns. Firstly, we remain focused on balance sheet strength. Across the cycle, we maintain our net leverage aim of less than 1.8x. This being a proxy for investment-grade rating, which we are with both Moody's and S&P. And as I mentioned earlier, in the near term, we want our gross debt to be 1.5 to 2x, which puts our balance sheet in an extremely strong position. Secondly, as I've just described, how we'll continue to invest in the business, and we'll be doing so at high rates of return on capital. Thirdly, we're committed to a sustainable dividend through the cycle. For 2025, this equates to a total dividend of EUR 448 million, and our intention is to grow this broadly in line with inflation, while dividend per share will grow faster as we buy back shares. And lastly, we'll continue to return excess cash to shareholders as we've just announced a further EUR 1.5 billion of excess cash returns over the next year. This represents around about 6.5% of today's market capital. And over the 3 years since 2024, we will have distributed just under EUR 3 billion of excess cash, around 13% of today's market cap. Given our financial framework and ambitions, will still allow us to continue significant excess shareholder returns over the coming years while also reinforcing the balance sheet in anticipation of higher CapEx. Overall, this disciplined approach ensures that our balance sheet remains a source of strength, supporting the business through the cycle, giving us the flexibility to allocate capital where it creates the most value and positioning us to continue investing for the long term while delivering attractive returns to our shareholders. Thank you. I'll now hand back to Luis to continue with the strategic update about our business. Luis Martín: Thank you, Nicholas. I will now spend a few moments going through the strategy, which has worked successfully for us for a long time now. This will demonstrate how we can sustain this level of performance. Firstly, the backdrop is compelling. Demand for travel is and has been a long-term secular trend, which, if anything, has increased in recent years. And as Nicholas indicated in his preview of our deliveries over the next 6 years, supply is constrained by the aircraft and engine manufacturers. We have strong positions in highly attractive markets, which are served by more than one airline brand in every market. This diversity is a key component of the group's resilience and helped to deliver such a strong performance in 2025, even whilst the macroeconomic backdrop is not particularly supportive. Nevertheless, we grew passenger revenue in each of our core markets, with all of our airlines contributing to that growth. We are investing in our brands, which is delivering a better experience for our customers, and you can see in our NPS improvement across the last 3 years. The investment is across the customer journey, so includes on the ground and in the air. We are currently excited about our partnership with Starlink, which will provide high-speed connectivity across the group on every one of our airlines and the first Starlink-enabled aircraft will be operated by British Airways in a few weeks' time. On this slide, we have highlighted some examples of how transformation underpins our margin delivery, supporting both revenues and cost control. At British Airways, the improvement in on-time performance has been a fundamental driver of margin improvement over the last couple of years. It drives productivity, increases revenue and reduce cost of disruption. It is also the biggest driver of customer satisfaction. In 2025, they delivered OTP of over 80%, the best performance since 2014 and a 20-point increase over 2023. In the meantime, Iberia remains as one of the most punctual airlines in the world. Also at Iberia, they have focused on transforming their proposition over the last few years, reflecting the more valuable demographic of their customer base, particularly in the South American market. As a result, they have grown the premium customer base, and this has helped to drive their yields in the premium cabins. Vueling has delivered the best cost control of any low-cost carrier in Europe since pre-COVID. In particular, they have driven lower supply unit cost, which includes both maintenance and airports, which is an exceptional situation in the current operating environment. I will also mention at this point that Aer Lingus delivered a record NPS score and their best OTP since 2016, highlighting their customer focus point of difference in Dublin. All these improvements have been supported by collaboration and sharing best practices across the group, one of the core benefits of our structure and business model. IAG Loyalty continues to grow strongly as a higher growth, higher margin and capital-light business. Based on the earn and burn model where we incentivized the awarding of Avios by also increasing opportunities to spend them, it increased revenue by issuing 200 billion Avios up to 30%. And at British Airways Holidays, they benefited significantly from the changes to the BA Club with revenue from elite members increasing more than 15x faster than other customers. As I mentioned earlier, Loyalty expects to grow earnings by at least 10% each year and grew profit by GBP 49 million to GBP 469 million in 2025. This profit growth was even higher growth if you put to one side the disputed HMRC tax treatment at over 20%. The second major strength to our capital-light development is through our airline partnerships, which deliver accretive value without the need for investment in aircraft. We access 3,000 additional aircraft through our partners, which then unlock 2,600 additional markets through a one-stop journey. This allows us to cover 97% of all passenger demand from our home markets, with loyalty scheme benefits, a key factor. This powerful network, the world's largest delivers significant partner-enabled revenue to the group every year. We made progress with our sustainability road map in 2025. We increased our SAF usage to 3.3% of our total fuel volumes, up from 1.9% in 2024. This also helped to deliver carbon intensity of 77.5 grams of CO2 per passenger kilometer ahead of our target alongside our investment in more than 15 aircraft. As always, this was all delivered by our people. We are committed to supporting our employees through their careers at IAG. We recruited over 10,000 people in 2025, continue to recruit and train pilots and our dedicated airline academies and continue to develop pay structures with all our collective groups that benefit both parties. This includes an agreement 2 weeks ago with Iberia's ground staff. I would like to take the opportunity at this point to thank all of our employees for their hard work during the year. Over the last 3 years, we have created significant value for shareholders. Firstly, we have a portfolio of markets and brands that is unrivaled anywhere in the world and is valued by our customers. This drives attractive revenue growth. Secondly, our execution every day is delivering best-in-class margins and earnings growth, significant free cash flow and high return on invested capital. And thirdly, this creates value for our shareholders through the dividend and our program of historical and prospective buybacks. This is world-class shareholder value creation. So in summary, the market remains compelling. We will continue to execute on our strategy and deliver world-class margins and return on capital. We are rewarding our shareholders with a strong earnings per share and dividend per share growth as well as EUR 1.5 billion in excess cash returns. We plan to continue to return more excess cash to shareholders. And we are confident that we will create significant value for our shareholders in the long term. And now we open the line to your questions. Operator: [Operator Instructions] Your first question comes from the line of Jaime Rowbotham of Deutsche Bank. Jaime Rowbotham: Two questions from me. Firstly, the transatlantic unit revenues at constant currency were negative 3-point-something percent in Q3 but back to positive. I think it was 1.8% in Q4. So very encouraging. Could you talk a bit about the outlook for the transatlantic in summer '26? It feels like there's quite a few moving parts. Those economy cabin weaker trends in '25 become a soft comp, but at the same time, I don't know if you anticipate any disruption from the Football World Cup. And to what extent do you expect the premium cabin trends to remain strong? Any comments, please, on summer transatlantic unit revenue progression in 2026? Second question, Slide 17, very helpful in terms of laying out the medium-term vision on the CapEx. Could you just help us in terms of actual aircraft deliveries? Is there a particular year, 2029, 2030, when you expect to be at peak deliveries? And could you just tell us roughly what that might look like? Is it 40, 50 aircraft? What's the split between narrow-body, wide-body in a sort of peak delivery year, please? Luis Martín: Thank you very much. So North Atlantic, as you said, since the third quarter last year, we saw a rebound. We had a positive increase of unit revenue in the last quarter of the year at constant currency. And now what we see is an improvement in the trend over the last few months, in particular, in the case of British Airways, where even the non-premium leisure revenue has been booking well, U.S. point of sale, in particular, strong. And this is in contrast with what we saw in the third quarter of 2025. Business demand is also booking really well, both U.S. and U.K. point of sale. And premium leisure continues strong. So in Iberia and Aer Lingus, we also expect demand to remain strong, but they are having more increased competition in their hubs. But maybe, Sean, you can add some comment about British Airways. Sean Doyle: Yes. I think we've got a couple of things which have been very encouraging in Q4 and in Q1 as well as the business demand. So we're seeing strong demand out of the U.S. point of sale and pretty robust demand out of U.K. point of sale. And I think we've seen recently as well the kind of market out of U.S. point of sale to Europe more broadly is resilient. Like one example, to be honest, was the Winter Olympics, where we saw really strong demand out of the U.S. into markets like Italy, and we were able to capitalize on that over our hubs. So we're seeing that in the fourth quarter, and we see it in the first quarter as well. Luis Martín: Marco, do you want to comment? Marco Sansavini: Well, in terms of the performance in Iberia, also, we have seen very strong business evolution there. And it's true that in terms of our yields in economy, we have seen some pressure related to the increased competition, but that has applied primarily in Q3 that you saw reflected in last year, that you saw reflected also in the overall performance of the group. But in Q4, that strong increase has softened. And as a result, also, we saw an improvement of performance. Nicholas Cadbury: Just on the CapEx numbers, we'll come back to Jamie at a later date and give you kind of more kind of precise kind of delivery time, what's been delivered by little bit later. I mean what I would say is, in 2027, we're, of course -- at the back end of this year and into next year, we're, of course, starting the refleeting of Vueling into the 737. So that starts ramping up from '27 onwards. And that takes around about 6 years to do as well. And then in '28, you get -- start getting the deliveries of the 777-9s into British Airways. And then you get -- the planes that we ordered in March, really start to get delivered from '29 onwards over those kind of 4, 5 years. So we'll come back and probably give you a bit more detail later. Operator: Your next question comes from the line of Alex Irving of Bernstein. Alexander Irving: Two for me, please. The first one is on distribution. Specifically, how are you approaching the decision about whether and how to sell through large language models? Would you plan to engage directly with LLMs through an API or to rely on existing structures, GDSs, travel agents, continue to pay commissions? When do you think you will sell your first trip and ticket through an LLM? Second question, also on tech, specifically for BA. You're about 2 years into the implementation of Nevio. We've seen Finnair suggesting they're seeing a 4% uplift in pricing, 10%, 15% uplift in ancillary sales from its implementation. Is that sort of result achievable at British Airways? Or more broadly, how do you see the RASK impact of your IT transformation from a move to a modern retailing platform? Luis Martín: You want to comment, Sean? Sean Doyle: Yes. We are seeing -- we are now selling the vast, vast majority of our direct sales through our new platform. In fact, 95% of our volume went through new ba.com in the January sale. And I think the numbers we're seeing are encouraging. One is CSAT is much higher. I think two, things like look-to-book conversion has improved and we've also seen better trade-up and better average unit revenues coming through. That's kind of the first real sort of significant test that we've put the volumes through, but the numbers are encouraging. I think Finnair may be a little bit more advanced in adoption of Nevio compared to where we are. So we work with them across the joint business, and we do see some significant improvements that they're demonstrating on ancillaries. And that would have been part of the kind of business case that we would have put together a couple of years ago when we embarked on this journey. So encouraging signs both on CSAT and revenue conversion trade-up and ancillaries. Operator: Moving on. Your next question comes from the line of Stephen Furlong of Davy. Stephen Furlong: I guess 2 questions. Can you just talk about why the -- again, the excess cash below net leverage target has been widened. Is it to do with just the delivery or the CapEx step-up? Or is it to do with one eye on TAP? That's the first question. And maybe for Sean, just on -- I mean, obviously, BA is performing well in terms of margins. But I know from the Insight Day, I thought it was 2027 maybe when some of the investments come through that the underlying business probably feel that the, let's say, more resilient by then, maybe just the market is good right now or the way the dollar has gone and stuff like that. So just talk about more the resilience of BA and when do you think it's kind of in full bloom, as a word, that would be great. Nicholas Cadbury: Just starting on the kind of guidance on the distribution of excess cash, we widened the guidance to 1x net leverage to 1.5x. We've had fantastic results last year, really strong cash generation, and that gives us real flexibility to both distribute what we think has been a good return on capital in a 9% yield this year in terms of what we're returning to shareholders at the same time and strengthen our balance sheet further and invest heavily in the business. I guess the main thing for that, though, is we've got our eye on the increase in CapEx that comes in the next kind of -- next few years overall. So it's really making sure that we lock in the benefit we've had of the really strong year this year to really make sure that, that continues and that we're in a strong place to make sure we continue to give good shareholder returns and distribute excess cash. So we've used this kind of really strong opportunity to set the balance sheet for the increasing cash and those future shareholder returns. Sean Doyle: If I pick up on the BA question, Stephen. Yes, look, I think we have delivered the 15% 2 years earlier than we set out about 14 months ago. I think, as you said, some of the dynamics have probably worked in our favor, but I think we are seeing the benefits of transformation already. I think Luis mentioned the operational performance transformation, the benefits that gives to Net Promoter Scores and CSAT, but also the benefits it gives in terms of reducing nonperformance-related costs such as disruption. So we expect that to kind of flow through and carry on. Number two, I suppose, is the investment we've made in technology and new platforms. I think we are very excited about the new digital capability. It's performing well, but we have more to come in the coming months as we roll out more of that functionality. We have a new revenue management system, again, which is showing encouraging results. We have a new payments platform, which is increasing optionality and also increasing conversion. So I think we will see more value accretion coming from those levers as we look into '26 and '27. I think the other angle, I suppose, which we're excited about is growth. Nicholas mentioned CapEx, but we will see more long-haul aircraft come back into BA. Today, we're still a bit smaller than we were in 2019, and we feel we have a lot of opportunities to grow long haul, which again helps with margin growth and also helps with things like seasonality because it works very well in winter with a number of markets that we could serve. And finally is the onboard product. We will complete the rollout of the club suite. We're about 76% now at Heathrow. The 789s are going in this year, the A380 start, and we see really strong commercial and customer performance on the back of completing those reconfigurations. So I think we've made a lot of progress on what we said we would deliver on 15 months ago. But I'd agree there is still a lot of transformation that we will unlock in the next couple of years. Operator: Your next question comes from the line of Savi Syth of Raymond James. Savanthi Syth: Two questions from me. Just first, I was wondering if you could give a bit more detail on what you're seeing on -- in terms of engine durability, maybe supply chain and cost escalation. Just wondering across those 3 things, are things improving or not much changing or getting worse? And then second, I know you mentioned it was strong, but I was wondering if you could give -- please give a little bit more color on like corporate and premium trends across the airlines. Luis Martín: Okay. The first question about the supply chain. I think we talk about aircraft, the plan is that we are going to receive 17 aircraft this year. And we are pretty sure that the manufacturers, they are going to comply with this plan. In any case, we'll have some buffers in case -- we could have some delay. We continue with the issue that everybody has with the engines. We are having problems with the GE engines, in particular, in Iberia, where they are suffering the lack of spare engines in the 330s. We are having the problems with the GTF in Vueling. As you know, they have on average like 16 aircraft grounded because of this situation. And also in the case of BA, they still have 787 grounded because of the growth issue. We hope that in the case of BA, this situation is going to be recovered in May, but that's the plan that we have right now that we continue working with the different OEMs to try to improve the situation. But I would say it's improving, but slowly. Nicholas Cadbury: Yes. The second question was about corporate demand. We're trying to move away from comparing ourselves to 2019. We think that's kind of ancient history now. So all we can just say is actually, we've seen corporate demand be strong in Q4, and in the first early days into Q1, it's been good as well. Of course, that helps the yield curve, which is -- so it's been good. It's been strong across all kind of sectors, not just finance. So been good so far. Marco Sansavini: And in particular, let's say, the Latin American premium market has evolved, came very, very strongly. For instance, comparing to last year, the business market has increased in revenue 7% versus last year. And it's a bit like what we have been sharing with you when presenting our Flight Plan 2030. So there is, Madrid converting into the new Miami, seems not only to indicate an increase in overall traffic, but particularly, premium traffic from Latin American countries. Operator: Your next question comes from the line of James Hollins of BNP Paribas. James Hollins: Nicholas, one for you. On the unit cost guidance of minus 1% in 2026. If we reference Slide 13, you give a little bit of detail on the puts and takes across employees, suppliers, ownership. I was wondering if you would be willing to flag maybe how you expect those to move in 2026, if there's anything particular that you would see nicely down? Obviously, FX is the big help. And seasonally, I assume H1 better than H2 because of FX. Any other seasonality you might want to flag? And secondly, on Vueling, please. I know that IAG obviously has a policy of asking CEOs to beg for growth. And clearly, Carolina has won the battle. I don't know if Carolina is on, but I'd love to hear a bit more about the planned 50% passenger growth over the next decade in Vueling, whether it's -- where it is outside Barcelona? If there is, I assume there must be. Clearly, what happened internally to secure that investment? And maybe a bit more detail on what I think is called Rumbo 2035? Nicholas Cadbury: Yes. So this last year, we finished with nonfuel unit cost up 2.8%. We've always said that, that would moderate. And actually under a constant currency, it's up 1%. So it's doing exactly what we said it'll do. It's moderating. We have got a benefit, though, as you say, of around about 2% benefit from FX. So that's why it's down 1% overall. I think if you just -- just for information for everyone, if you look at the FX impact through this year coming, you're going to get a benefit in nonfuel CASK and you're going to get a headwind on revenue of around about -- in Q4, of around about 4%; in Q2, about 3%; and in Q3, of about 1%, and that should be -- hopefully should be flat in Q4. So that's the kind of shape of it. If you look at the nonfuel CASK, just the way it's phasing, you'll see there's a bit more of a kind of headwind in Q1 and probably Q3 overall, if you go to phase it across the year on a constant currency basis. Carolina Martinoli: Vueling? Okay. On Vueling plan, what we have presented is a plan for the next 10 years, with 20 million passenger growth. So the geographical focus is clearly Barcelona, domestic Spain, where we are leaders, we have over 1/3 of the market of Spain domestic and connecting Europe with Spain fundamentally through the 11 bases we have, Barcelona and plus other 10. This plan is very linked to the refleeting, which will restructure our cost base. Also, it will give us more gauge, and this is extremely important, especially in the case of Barcelona. You know Barcelona is a constrained airport with expansion plans in '31 and '32, but we will have a 14% gauge increase with the new fleet in average. Operator: Your next question comes from the line of Jarrod Castle of UBS. Jarrod Castle: I just want to come back to AI, but now more on the opportunity for taking out costs because obviously, we're starting to see companies at least announce large job cuts, today, it was Block. But I'm just wondering what are your plans to achieve efficiencies through AI adoption? And kind of related to headcount, are there any staff negotiations outstanding as well? And then secondly, just on the 3% capacity deployment, obviously, very useful Slide 36. But can you give some just regional color in big pictures where that 3% gets deployed? Luis Martín: Okay. So artificial intelligence, you know that in our transformation, 80% of the projects are linked to technology and artificial intelligence for sure, is critical. So we have projects, for example, in the area of maintenance where artificial intelligence is going to help us to be much more efficient. We have developed some tools, for example, in order to improve the planning that we do with our engines or our fleet. Artificial intelligence is going to help and is helping us also in the customer experience. And also, we are analyzing ways to be more efficient, but the objective is not to reduce the headcount, it's more how we can use artificial intelligence to improve customer experience and to improve also the efficiency of all of our workforce. So again, all the plants are based in technology. Artificial intelligence opens a big range of opportunity, and we are exploring all of them. Nicholas Cadbury: Just on the capacity 3%, you've got -- we've given you in the appendix where it's going to be by airline overall, so you can take a view on that. But if you look at North America, it's roughly in line with that, better than 3% overall. It's a bit better that even again on Latin America, where we're looking at kind of 4.5% plus capacity on South Atlantic, and it's pretty flat across Europe. It's up in Asia Pacific and base, but of course, it's a low base so. Jarrod Castle: And labor negotiations? Sorry. Nicholas Cadbury: We're in a relatively good position on labor negotiations. Operator: Your next question comes from... Nicholas Cadbury: We're in a relatively good position on labor negotiations. Operator: Your next question comes from the line of... Nicholas Cadbury: Could you introduce the question again, please? Operator: Apologies. Your next question comes from the line of Harry Gowers of JPMorgan. Harry Gowers: First question... hello? Can you hear me? Nicholas Cadbury: Yes. Harry Gowers: Hello? Can you hear me? Nicholas Cadbury: Yes, we can hear you. Harry Gowers: Yes, yes. Okay. Sorry. So first question, I mean, you talked about strong bookings in the Q1 in your outlook. So maybe like a little bit more color on what that might mean in terms of booked revenue or pricing? I mean, can we see the same group ex-currency RASK in Q1 that we saw in Q4? And then just second question on EBIT margins by airline. Just wondering what's the full potential for some of these businesses? I mean when I look at your Slide 11, the margins are already very high. Aer Lingus is at 11%; BA, 15%; Iberia, 16%; and Vueling, 12%. So maybe where do you see the margin upside by individual airline going forward? Luis Martín: Okay. So I think what we see now for a year, I think we have a lot of visibility for the first quarter. We are, for the first half, in line with the plan. It's true that the first quarter, we are going to have the benefit of the Easter that is helping. But when we look at the summer, Q2 and Q3, we only have about 30% book. So what we see is, in general, positive. Business traffic is growing and is helping the near-term bookings. And when we look at the different geographies, we talked before about North Atlantic, but LatAm also remains strong for Iberia. And also, we see a healthy performance in the Caribbean for BA. Europe also booked well. We see also a strong business demand in the case of BA. And the only region where we see some softness is Africa and Middle East. So I think in general, we are on plan, and we are confident for this year. Nicholas Cadbury: Yes. Just in terms of kind of full potential, of course, if very strong demand, you get low fuel price, of course, you can maybe go higher. I guess where we're focused on is delivering in the range we've already set out, the 12% to 15%. Our view is if we can keep towards the top end of that range and keep delivering at 15%, grow at 2% to 4% ASK that is incredibly strong performance overall generates huge amounts of cash, great shareholder returns overall and allows us to invest in the business. So that's where we're going. If the benefits go move in our favor and we get above that, that's great. But that's our aim, is to be kind of keep delivering out at that top end of the range. Operator: Your next question comes from the line of Conor Dwyer of Citi. Conor Dwyer: First question is around that margin question. Obviously, last couple of years, you've been at the upper end of that 12% to 15% range. We're obviously still talking about more transformation at BA, Loyalty will be growing above the rest of the group, and obviously, the trends in Iberia are very strong. So just wondering is there any scope for that kind of 12% to 15% to be moved up or even the lower end of that to be moved up? And then on the second side, just around free cash. Obviously, at the moment, the outlook for that looks super strong, but CapEx is rising towards the end of the decade. And obviously, you'll be intending to grow your top line. I'm just kind of wondering, do you envisage a scenario that in that higher CapEx environment, free cash is still able to be in and around the current level. Obviously, some investors will be somewhat worried that we have a couple of years here of super strong free cash generation in the 5, 6 years out, maybe that kind of normalizes. Nicholas Cadbury: Just in terms of the margin targets, we've got -- we're very comfortable where our margin targets are through the cycle at the moment. As I said earlier, kind of if we keep growing at 2% to 4% ASKs and hit 15% margin, I can't think of any other airline that's going to be able to do that as well over time. So that's a really great performance overall. So we're very comfortable with that as well overall. Just in terms of the free cash flow, I mean, we kind of said -- I said in my script, actually that you've got the kind of CapEx going up over time. Higher CapEx when you're delivering good margins, means higher profits at good returns. So it should continue to be strong cash generation overall. So actually, with the higher CapEx, actually should give you, over the longer term, even more confidence in our cash generation. Operator: Your next question comes from the line of Muneeba Kayani of Bank of America. Muneeba Kayani: Actually, I just wanted to talk about your range again. Like maybe I don't understand how -- what do you really mean by through cycle? Like what's the definition of that? And ROIC is clearly well above your target at this point. So both on margin and ROIC, if you can talk about what you mean through cycle? And into your growth algorithm, which you touched on in the slide, historically has been strong, but how do you think about that growth algorithm into the medium term? That's the first question. And then secondly, just going back on Loyalty. You talked about the Amex contract renewal had a positive impact on working capital. Can you give a little bit more details on what this renewal was? And how do you think about getting to that 10% growth? Nicholas Cadbury: Yes. I'll start with the Loyalty-Amex question. Yes, we're really pleased that we've signed it [indiscernible], which really underpins the profitability of our Loyalty business overall, and that's been one of the great sources of growth, is our partnerships, particularly on the kind of financial partnerships. And we'll talk a little bit more about that on the 3rd of June overall. We've got -- it's commercially sensitive in terms of how much -- how much it benefited our working capital, but we just thought it was worth calling it out overall. Definitions of through the cycle, good question. I guess it mean -- through the cycle just means that we think with normal kind of cycles of ups and downs in the economies and GDPs, of course, it doesn't mean if you get another COVID event or something like that. But we just think through that kind of normal GDP fluctuations that you get over a kind of 10-year cycle. That's what we're trying to aim our targets to be. Muneeba Kayani: And the growth algorithm? Nicholas Cadbury: I didn't quite follow your question on the growth algorithm, sorry. Muneeba Kayani: So as you think about the growth algorithm in the medium term, so you talk about the 2% to 4% ASK growth and margins kind of remaining at that stable level. So that drives kind of 2% to 4% EBIT growth, is how to think about it? And then you get the strong cash generation and buybacks driving EPS growth of high single digits. Is that the way to think about it? Nicholas Cadbury: That's a nice way of thinking about it. Operator: Your next question comes from the line of Ruairi Cullinane of RBC Capital Markets. Ruairi Cullinane: Congrats on the strong year. So firstly, how do you view the capacity backdrop on IG routes this summer? It looks pretty constrained to me on the Atlantic overall, but I think Nicholas also commented on elevated capacity growth from Dublin. And then secondly, domestic RASK was up over 8% in Q4 after declining in Q3 on trimmed capacity. So what drove that? Luis Martín: So the plan that we have for this year is to increase capacity by 3%. When we look at the capacity that we are going to have in the different markets, for example, North Atlantic, the capacity that we see out of London is going to continue benign, and we are going to have a flat environment. Madrid is going to be different. We expect significant increases, although it's true that part of this is driven by Iberia because they are adding capacity in North Atlantic. Also, they have now the new 321 Extra Long Range, and they are putting capacity there. Dublin is going to be a competitive market also, and they are going to have a growth close to 10% during the summer. South Atlantic, a little different. Capacity out of Madrid, we expect growth between 5% and 6% for the summer. If we look at intra-Europe, for example, the capacity out of London on IAG route is expected to be down in the first quarter but up to between 2% and 3% in the second and third quarter. Barcelona is also a place where we see we are going to have growth in the summer, around 5%, 6%. And where we see more capacity is in places out of Madrid and Barcelona in Spain. But this is the global picture that we see. Marco Sansavini: And talking about the domestic and in particular, domestic Spain, it's true, it has been very strong along the past years. And it's true that you have seen in Q4, in particular, an additional increase which is relating to the fact that both with Iberia Express and with Vueling, we have strengthened our relative position into the islands in particular. And at the same time, Ryanair in the winter reduced capacity to the island. So the combination of these 2 factors made our position even stronger. And that will continue. You will see it continue in 2026. In Q1, for instance, is already producing itself with an additional element, which is that you have seen the very -- the tragedy of the train accident in Spain, and that has led some corporations, for instance, to change their travel policy in domestic traffic and in general, consumers to shift more to train -- to flights. Therefore, you will see an underlying very strong demand throughout 2026 in domestic. Operator: Next question comes from the line of Gerald Khoo of Panmure Liberum. Gerald Khoo: If I could start with the sustainability of margins and return on invested capital. How sustainable do you think they are at these levels? It sounds like you are very comfortable about that. But what pushes you towards the middle of that sort of through-the-cycle range? Is it just an economic downturn? Should we expect return on invested capital to moderate as the CapEx ramps up? What impact does that CapEx ramp-up have on margin? And Secondly, you talked about the strength of premium leisure. I was just wondering how does the booking profile of premium leisure differ to sort of the network average and to non-premium leisure in particular? Does it book earlier? Does it look later? Is the sort of duration of stay longer or shorter? Nicholas Cadbury: Yes. I mean the sustainability of the margin, good question. I think there's lots of areas. You could say the short-term downturn in the market. You can say if there's increasing tension across the Middle East, what happens then as well. I mean just the example we called out on the call though as well that I think most of you consensus at EUR 5.2 billion, and that includes a kind of EUR 7.1 billion of fuel in there, and the fuel has got up to EUR 7.4 billion in the last few weeks as well. Now hopefully, we can pass some of that on to investors. I think we'll still retain our strong margins, but you got lots of kind of external variables that kind of impact that overall. But I think we're focused on making sure we commit to our transformation, commit to our growth plan, our disciplined growth plan as well and that kind of all, whatever circumstance just towards the most competitive margins that we can get overall. Luis Martín: And the second question, premium leisure, usually, they book in advance. So as we said before that business traffic is recovering. So -- and the pattern of booking of business traffic, usually bookings are late. So in some cases, we are holding the nerve because we know that demand is coming. And in some way, we are trading between premium leisure and business. But maybe Sean, you can comment with the... Sean Doyle: Yes. I think what we have been seeing is strong late in business leisure or business bookings certainly in Q1, and we try and protect inventory to capitalize on that. I think we've done some analysis and interestingly enough, people from our executive who are traveling for premium leisure will be booking 60 days plus in terms of travel plans. Your business traveler will be more like 40 days. So there's kind of a 2- to 3-week difference in the booking profile between one segment and the other. But as Luis said, it's one of the things that we look into next year to try and optimize because we see that late booking business demand has been pretty robust in Q4, and we're seeing it in Q1 as well. Gerald Khoo: Sorry. How does premium leisure book relative to non-premium? Is it earlier or later? Sean Doyle: I think it has a similar profile actually. I think when people are planning a holiday and they're planning a hotel and planning an itinerary, they'll tend to plan further out. So we don't see that marked a difference between the premium leisure and the non-premium leisure side. We do see premium leisure actually tends to book more directly through our channels. We do work with sort of online travel agents more for the non-premium side. Operator: Next question for today comes from the line of Axel Stasse of Morgan Stanley. Axel Stasse: The first one is on the BA and Iberia cost improvement and efficiency program that you guys have announced in the last couple of years. Can you maybe quantify the improvements heading into 2026? What -- are the other improvements done? Is it just about efficiency and therefore, depend on the aircraft delivery? Or is there something else we should be aware of? So that's the first one. And then the second one, coming back to the working cap effect from the Loyalty, should we expect this to reverse heading into 2026? I understand you're about to tell us more specifics, but how should we model this going forward? Nicholas Cadbury: So I think your question -- just on the working capital one. So there were 2 things that happened on the cash flow this year to Loyalty. One is we did benefit from some Amex, the signing of the Amex. We can't quantify that over time. So that gets smoothed across the P&L over the next x years that we signed the contracts for. So it doesn't reverse. You just don't get it again. We did though pay kind of EUR 450 million to the HMRC for this VAT case that we've got with HMRC that we feel very confident on. Actually, that comes into court later this year, but it probably won't get settled until 2027 probably. So you should get a reversal, but it might take a number of years before it does reverse overall. So just -- I think hopefully that answers your question on that one overall. Just in terms of the cost improvements, we don't give kind of specific guidance on the kind of transformation savings that we're doing. And we only do that because there's lots of moving parts, both the kind of inflation, the investments we're making, the growth we're having and the kind of transformation. And so it's all moving parts. But you can see that actually, if we're growing our kind of constant currency nonfuel CASK by kind of 1% and if you think kind of inflation is well above that as well and we're making kind of good investments in the company at the same time, you can see there's a high level of transformational benefits that we're putting through the P&L at the same time. Marco Sansavini: And maybe to give a bit of color of what is to come still in our efficiency programs. Clearly, supplier cost is one where through the strength of the group purchasing, for instance, we are having a lot of value creation in the coming months and years in our transformation plans that you will see coming through. And another key area of value creation there and efficiency is utilization. As you see, we've been evolving a lot through the years in reaching very high utilizations, and we still see room for improvement there. For instance, now we're taking new fleet, we are progressively introducing them, and we could not, of course, maximize the utilization of the new fleet in the first year with all the XLRs. And in 2026, you will see a very significant improvement there in our utilization and productivity. Operator: Our last question comes from the line of Andrew Lobbenberg of Barclays. Andrew Lobbenberg: I have 2 questions. One on competition on the South Atlantic. Clearly, premium goes really well for Iberia. Can you talk about how competitive that is against the Latin American carriers who are emerging from Chapter 11 and getting their mojo and yet Air Europa is wherever Air Europa is. So how does that go? And actually, in Latin America, you don't have a very wide footprint of partnerships locally. So does that impact your -- the power of loyalty and your ability to attract LatAm Latin originating premium passengers? And then the second question, at the risk of lighting, an obvious blue touch paper, do you want to talk around the relations with the airports, Aena and their airport charges Heathrow in their third runway and Dublin and its cap, which is on/off, on/off, I struggle to keep up. Nicholas Cadbury: That was 3 questions there, Andrew, but -- Marco? Marco Sansavini: And starting from the first... Andrew Lobbenberg: I'm not very good with numbers. Nicholas Cadbury: No comment. Marco Sansavini: If you look at our Flight Plan 2030, you would see that our starting point is to have a structural and maintain and foster a structural competitive advantage in cost versus our European competitors. We indicated that we have a 30% almost unit cost advantage versus the Air France and KLM and Lufthansa in Europe. But at the same time, in LatAm, in fact, LatAm carriers are -- have a much more competitive cost position. They have a cost position that is similar to ours. In some cases, even some corridors slightly better than ours. But we have a structural revenue advantage over there. We are the only carrier to Latin America that has, for instance, business class with full-flat position and doors. So we are the only one having 4-Stars Skytrax, all the others are 3-Star Skytrax. And we have, therefore, a premium revenue advantage that is also reflected by the fact that we've been building that through network coverage. We are the largest operator to Latin America by far and the one that has the most spread network, 18 countries are covered. Therefore, that competitive advantage in product and network spread is reflected into a premium advantage that is remaining. And in fact, we're building -- or what we are sharing is that our RASK in premium, you saw the comparison of our RASK in premium in 2019 and today is 34% higher. So this is a competitive advantage that we are building, strengthening and making stronger in time. Now certainly, as you mentioned, the Loyalty program is a key driver of that. We have mentioned, for instance, how much our top tier customers have increased in the year. So maybe, Adam, you can give some color there. Adam Daniels: Yes, sure. I think it's interesting that South America is particularly strong in the Loyalty space in terms of Loyalty businesses, and we are seeing significant growth, not only in terms of the membership, both in British Airways and Iberia, but also in terms of the deals that we're doing now there on the currency side, with financial services and elsewhere. So definitely, South America is a very bright spot in terms of the loyalty business and in terms of the collection of the currency and the drive to deliver or achieve the tiers. So we're very pleased with what we're seeing down there. Luis Martín: And about your third question about airports. So in general, I think that the approach is the same with the different airports that -- where we operate. So Heathrow, I think we don't want to have a debate about the cost of the project. So what we are saying is that we need to look at the facts, and the facts are that Heathrow is the most expensive airport in the world. You need to pay 2x or 3x more than what you have to pay in other big European hubs. So Heathrow has announced, it's not our number, they have in their web page, an expansion plan of GBP 49 billion. And we think that if that plan goes ahead, the passengers are going to pay double of what they are paying today. So we have done our internal analysis of the maximum level of investment that we think with the right facing, we can afford, in order to have flat charges for the passenger, and we have reached GBP 30 billion, is our number. And we can be wrong, but that's a reduction of 40% in the investment they are proposing. But in any case, what we are saying is if Heathrow is sure about what they are proposing and the extra passengers that we are going to have, I'm sure they don't have any problem to put a cap in the passenger charges. That, at the end, is the objective that we have. We have a cap in what they are going to pay, and we don't increase what they are paying today. That I think is enough. Then we support any project. Aena. Aena, we are working with -- also with the DORA III and it's similar situation. So we support the investment, not at any price. And for sure, the investment brings associated more passengers and more revenues. We hope more efficiencies. And because of that, we are defending that the charges for the passengers cannot rise so much. And in the case of Dublin, good news that the cap has been removed. What we are waiting is for an urgent progress of the legislation. And that's all. And I think that was the last question? Carolina Martinoli: That was the question. Luis Martín: Okay. So thank you, everyone, for listening today. We are very pleased that we have delivered another great set of results, and we are looking forward in a very positive way for 2026. Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the PAR Technology Fiscal Year 2025 Fourth Quarter Financial Results Conference 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, Chris Byrnes, Senior Vice President, Investor Relations and Business Development. Please go ahead. Chris Byrnes: Thank you, Stephen. Good afternoon, everyone, and thank you for joining us today for PAR Technology 2025 Fourth Quarter Financial Results Call. Earlier this afternoon, we released our financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q4 financials presentation as well as in our related Form 8-K furnished to the SEC. Before we begin, please be advised that remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our earnings release and our other reports filed with the SEC. Also, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measures in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8-K filed this afternoon and the earnings presentation available on the Investor Relations section of our website. Joining me on the call today is PAR's CEO, Savneet Singh; and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Savneet for the formal remarks portion of the call, which will be followed by general Q&A. Savneet. Savneet Singh: Good afternoon, everyone, and thank you for joining us. Before sharing details of a strong Q4 today, I want to reaffirm PAR's thesis. PAR is becoming an AI-driven hospitality platform company. Our 2 verticals, restaurants and retail are individually mid-teens ARR growers with significant white space, anchored by mission-critical systems of record with deep domain expertise. . The compounding nature of PAR's enterprise platform is driven by simultaneously allowing customers to play offense and defense via revenue generation and cost efficiency. This is especially true in times of underlying market instability, we're falling behind in digital adoption and its resulting margin loss is a formula for customer pain. Aggressive investment into our AI platform will deepen our performance and provide further customer expansion opportunities. We have never felt more confident about our positioning and the opportunity set in front of us. Now to review the numbers. In Q4, we delivered revenue of $120.1 million, up 14% year-over-year, driven primarily by continued strength in subscription services and an increase in hardware revenue. On a non-GAAP basis, we generated $2.6 million of net income, marking our third consecutive quarter of non-GAAP profitability. Adjusted EBITDA in the quarter was $7 million. Full year revenue reached $455.5 million, up $105 million year-over-year, including 21% organic growth with subscription services growing 40%. Most importantly, full year non-GAAP net income improved by over $30 million year-over-year, proving that our operating model is scaling. We continue to stress operating expense efficiency as we scale our business in Q4 was no different. As a percentage of subscription revenue, R&D came in at 25% and sales and marketing at a solid 13%, respectively, ahead of our targets -- respectively at or ahead of our targets. Turning to ARR. We exited Q4 with ARR of $315.4 million, representing 15% organic growth. Crucially, second half growth was more than double first half growth and was powered by cross-sell with over 80% of deals being multiproduct. Growth was broad-based, led by POS momentum and the resumed Burger King rollout, along with continued steady performance from Punchh and Plexure. The former continues to win new marquee brands, while the latter benefits from McDonald's international expansion, including a successful Japan launch. We also saw improving trends in ordering and payments. Now to review our business performance in Q4, starting with the operator solutions business. Q4 revalidated our platform strategy. We were selected by Papa Johns for a decade-long partnership and their 3,200 sites and we'll be rolling out PAR POS and PAR OPS to power their in-store tech stack. This win builds our momentum in the pizza category with TAM expansion already reflected in significant pizza pipeline for 2026. Further, we anticipate increasing our partnership with Papa Johns in the future with both expansion to select international markets and continued expansion within our platform. In addition to this marquee project, our bookings exceeded internal expectations and hit record highs with over $25 million booked for PAR POS alone. The mix skewed heavily towards enterprise, multiunit, multiproduct deployments. Enterprise customers are not buying point solutions, they're buying a unified platform with POS as a gateway into the broader PAR ecosystem. Our attach rates confirm this. Nearly 90% of Q4 operator deals were multiproduct in nature. Additionally, we continue to progress on our large Tier 1 opportunities. The world's largest brands continue to show more and more interest in the PAR platform, and we'll update investors as we convert these opportunities to bookings. We're hopeful that our intense focus on AI helps accelerate these opportunities as these brands are looking for ways to become AI-driven ahead of their peers. PAR OPS, our back office offering, is evolving from analytics to intelligence and even more importantly, product capability accelerated. Our first AI product, Coach AI is now being utilized by nearly 1,000 stores with roughly 1,000 active users, indicating high usability and market fit. Since launch, we've added enhancements and improved both usability and contextual awareness. The current version of Coach AI moves us into prescriptive operator recommendations, not just showing personnel what happened, but telling them what to do next. Crucially, we are embedding AI directly into daily workflows and are building towards a full self-driving product that is capable of direct and immediate store optimization. This is not incremental enhancement. This is marginal margin-driving capability for operators. The industry does not need more dashboards. It needs fewer decisions and better ones. Our goal is to embed intelligence into every operational layer such that actions drive outcomes. One of the most encouraging signals this quarter was the breadth and quality of momentum across our Engagement Cloud, both with new logos and existing customers. Starting with Punchh, we signed 2 new noteworthy brands, including Shake Shack, and also expanding meaningfully into the adjacent entertainment vertical with Lucky Strike Entertainment, which opens up a compelling new category for us. These wins reinforce Punchh's position as a category leader and validates our ability to extend the platform into new high-value segments. Ordering continued its strong momentum, adding 6 new brands in the quarter, including Savvy Sliders and Smokey Mo's. Importantly, these weren't stand-alone wins. They increasingly came as part of a broader multiproduct engagement, which speaks to how customers are buying the platform rather than the point solution. Across PAR engagement, co-sell and cross-sell momentum continues to build. More than 80% of new deals are now multiproduct consistent with last quarter and still trending higher. This quarter included the first large sale of PAR catering to Condado Tacos, where we successfully displaced a competitor. We also had the first major deployment of PAR Games with Smoothie King and the first significant sale of PAR Smart passes. Our retail delivered a strong quarter that demonstrated continued scale, engagement and execution across the platform, particularly with our largest enterprise customers. One of PAR Retail's newest and largest C-store customers is driving improved results as their program now exceeds 3.6 million members and continues to drive measurable changes in customer behavior. We are seeing higher visitor frequency, richer customer data and clear monetization benefits across categories. We continue to see broad adoption of PAR Retail as 3 new customers launched on the platform in Q4, but it gets better. I'm also excited to announce the launch of our newest AI product for C-stores and fuel retailers, PAR Drive AI, a fully integrated AI suite built directly into our unified platform. This isn't AI layered on top. It's intelligence embedded into the system's convenience and fuel retailers already use every single day. Not only making us AI native, but building AI and the workflow our customers run today alongside the security, data, and intelligence, our customers trust today. We also saw a strong performance in the quarter, driven by increased hardware demand by our restaurant customers and deployment activity across several of our large enterprise customers. Some of this acceleration is due to the switchover by restaurants to edge compute. Later this year, we'll be coming out with PAR's own portfolio to help support this move. We also saw strong momentum with new store openings and continued kiosk expansion, reinforcing the role of self-service and digital ordering within large QSR environments. In Q4, we experienced steady demand across large POS enterprise brands, including Dairy Queen and Burger King, where ongoing remodel activity, platform upgrades and new unit growth continue to drive consistent deployment volume. Even with the strong Q4, we saw significant cost pressures on key components, including solid-state drives, memory and processors being driven by significant demand from AI infrastructure build-outs, which is tightening availability and creating elevated pricing across the broader compute supply chain. We're moving early and aggressively with measures to protect our core hardware product lines, while also rationalizing configuration offerings based on component availability and evolving customer needs. As of today, we expect component cost pressures and constrained availability to persist until supply more fully catches up with demand, which we believe could extend into 2027. Importantly, we remain focused on mitigation through supplier diversification, product flexibility and the pricing discipline to ensure we can continue supporting customers. Before turning the call over to Bryan, I wanted to share a perspective on AI and its impact on software and even more specifically on PAR. The market fear around the durability of software in an AI-first world is palpable. I would be tone-deaf not to address this directly, PAR is suffering extreme sell down. We are at one of those rare moments where a technology shift is structural. For those of us in the restaurant technology space, we believe this moment represents an opportunity to lead. There are 2 key realities that guide us as we position PAR to be the leader in AI technology for restaurants. First, food service chains are among the most compelling environments for AI to create real measurable value. Brands compete on speed, consistency and quality, and their guests are already conditioned to engage digitally. At the same time, rising costs, structural labor challenge and tight margins mean AI isn't being evaluated as a future capability, but rather as a near-term operational imperative. We believe that among all physical businesses, restaurant AI adoption by end users will be among the fastest. And second, PAR is uniquely positioned to be the company that delivers it. PAR owns and is the ecosystem of record for tens of thousands of restaurants, every transaction, every labor input, every menu item, every guest interaction, every payment event, PAR is best positioned to be the provider that delivers an intelligent operating system, where POS captures the data, payments enriches the data, loyalty identifies the guests, PAR OPS structures the insight and PAR AI delivers prescriptive action. We believe that the winners of AI have 3 key components: a massive trove of industry-wide first- and third-party data; second, the complex integration into an end-to-end workflow; and third, customer trust, the least measurable and hardest to come by of the 3. For PAR, we have all 3. Our AI strategy isn't about adding a chatbot on top of our products. We are rethinking our entire product suite to deliver measurable outcomes autonomously. The vision stated plainly. We are building a platform that gives every restaurant brand, the firepower of the biggest brands in their segments. A single marketing manager at a 200-location chain should be able to execute with the precision, personalization and speed of the entire marketing department of the world's largest restaurant. We will empower them with a team of AI agents that actually do the work, strategize the new plan, build segmented audiences, configure campaigns, deploy one-to-one offers, optimizing in real time and reporting back what worked and what didn't, or imagine the regional OPS leader overseeing 150 stores, empowering them with the situational awareness of a Fortune 500 field organization through an AI layer that watches every location and flags what matters, recommends what to do and execute to fix before it becomes a problem. Now let zoom into the General Manager opening the store at 5:00 a.m. This lead should walk in with the preparedness of an executive chef running Eleven Madison, knowing exactly what to prep, who's coming in, what's trending and where yesterday's gaps were. A guest pulling into the drive-thru should experience something that feels like their favorite local spot remembers them and they're talking to a friend. The pattern is the same in every case. AI eliminates the gap between what small teams can do and what the best operators in the world actually do. Nobody needs another chat interface. What brands need is a system that advises you before you ask, assists while you execute and answers when you need it across every function at every location with the ultimate goal of driving profitable revenue. That level of scale and dependency makes PAR well situated in the deterministic orchestration layer of this new world. AI won't replace enterprise orchestration, but rather leverage it. We are seeing this firsthand with our customers today. Bryan? Bryan Menar: Thank you, Savneet. Good afternoon, everyone. We closed out 2025 with our most successful quarter in recent history. From our strong bookings, incremental ARR of $17 million and down through to our $7 million adjusted EBITDA. We continue to execute to our plan of driving organic growth across our products and the verticals we serve, while also driving profit improvement, all while ensuring the company has the right resourcing to execute with excellence on our growth trajectory and an aggressive AI transformation. Subscription Services continue to fuel our organic growth and represented 63% of total Q4 revenue. The growth from higher-margin revenue streams resulted in a consolidated non-GAAP gross margin of $61 million, an increase of $8 million or 16%, compared to Q4 prior year. We managed the growth while limiting operating expenses, which has enabled us to grow adjusted EBITDA for the third quarter in a row. Now to the financial details. Total revenues were $120 million for Q4 2025, an increase of 14% compared to the same period in 2024, driven by subscription service revenue growth of 18%. Net loss from continuing operations for the fourth quarter of 2025 was $21 million, a $0.51 loss per share, compared to a net loss from continuing operations of $25 million or $0.68 loss per share reported for the same period in 2024. Non-GAAP net income for the fourth quarter of 2025 was $2.6 million or $0.06 earnings per share, compared to a non-GAAP net loss of $37,000 or effectively $0.00 per share for the prior year. Adjusted EBITDA for the fourth quarter of 2025 was $7 million, an improvement of $1.2 million sequentially from Q3 and $1.3 million, compared to the same period in 2024, this positive movement is indicative of our ability to continue to drive growth with profitability. Now for more details on revenue. Subscription Service revenue was reported at $76 million, an increase of $12 million or 18% from the $64 million reported in the prior year and now represents 63% of total PAR revenue. Organic subscription service revenue grew 11%, compared to prior year when excluding revenue from our trailing 12-month acquisitions. ARR exiting the quarter was $315 million, an increase of 16% from last year's Q4, with Engagement Cloud up 19% and Operator Cloud up 12%. Total organic ARR was up 15% year-over-year. Incremental ARR growth accelerated in the second half of the year and we reported a record $17 million increase in Q4. This progression reflects strong underlying momentum in the business and positions us well entering 2026. Our growth is being driven by both site growth and increased ARPU, reflecting successful execution of our Better Together thesis, which is driving momentum in both multiproduct deals and cross-selling into our existing customer base. Hardware revenue in the quarter was $28 million, an increase of $2 million or 7% from the $26 million reported in the prior year. The increase was driven by continued penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at $16 million, relatively unchanged from the $15 million reported in the prior year. Now turning to margins. Gross margin was $49 million, an increase of $4 million or 10% from the $45 million reported in the prior year. The increase was driven by subscription services with gross margins of $39 million, an increase of $4 million or 13% from the $34 million reported in the prior year. Subscription service margin for the quarter was 51%, compared to 53% reported in Q4 of the prior year. The decrease in margin is due to an intangible impairment recorded in the current period related to the write-off of capitalized software development costs within our drive-thru business. Excluding the amortization of intangible assets, stock-based compensation, severance and the impairment loss. Non-GAAP subscription service margin for Q4 2025 was 65.8%, compared to 64.7% for Q4 2024 that margin includes the impact of a fixed product contract that we acquired from 1 of our 2024 acquisitions, excluding that contract, which is not reflective of core operational performance. Non-GAAP subscription service margin was 71% for the quarter, an improvement of 190 basis points versus prior year. The continued improvement is a strong sign of our ability to leverage economies at scale. Hardware margin for the quarter was 23% versus 26% in the prior year. The decrease in margin year-over-year was driven by increased supply chain costs, resulting from recently implemented U.S. tariff policies and supply chain constraints with memory components related to a significant increase in demand driven by the AI infrastructure industry. We continue to evaluate and implement pricing adjustments and modify procurement plans to mitigate the impact of supply chain cost movements on our hardware margins. We expect this environment to persist through 2026, and we'll continue to manage mitigation plans. Professional service margin for the quarter was 28%, unchanged from the 28% reported in the prior year. In regard to operating expenses, GAAP sales and marketing was $12 million, an increase of $2 million from the $10 million reported in the prior year. The increase was primarily driven by inorganic increases related to our acquisitions, while organic sales and marketing expenses increased a modest $700,000 year-over-year. GAAP G&A was $30 million, a decrease of $1 million from the $31 million reported in the prior year. The decrease was driven by a $1.5 million decrease of organic G&A expense year-over-year, partially offset by inorganic G&A expenses. GAAP R&D was $22 million, an increase of $4 million from the $17 million recorded in the prior year. The increase was substantially driven by a $3 million increase in development costs as we continue to invest to innovate our product and service offerings. Residual increase was driven by inorganic R&D expenses. Operating expenses, excluding non-GAAP adjustments was $54 million, an increase of $7 million or 15% versus Q4 2024. And when excluding inorganic growth, organic operating expenses increased a modest 8%, primarily driven by an increase in R&D investment during the quarter. Now to provide information on the company's cash flow and balance sheet position. As of December 31, 2025, we had cash and cash equivalents of $80 million. For the year ended December 31, cash used in operating activities from continuing operations was $27 million versus $21 million for the prior year. The increase in cash used in operating activities compared to the prior year was largely attributable to increased accounts receivable. We view the increase as an interim position and expect the days sales outstanding will stabilize and pull into historical levels during 2026. Cash used in investing activities was $13 million for the year ended December 31 versus $180 million for the prior year. Investing activities included $4 million of net cash consideration in connection with the tuck-in asset acquisition of GoSkip, capital expenditures of $3 million for fixed assets and capital expenditures of $6 million for developed technology costs associated with our software platforms. Cash provided by financing activities was $12 million for the year ended December 31, and versus $279 million for the prior year. Financing activities primarily consisted of the net proceeds from the 2030 notes of $111 million, of which $94 million was utilized to repay the credit facility in full. I'd now like to take a moment to reiterate and thank our PAR team and how they manage a successful strong second half of the year. We pride ourselves in making accretive capital allocation decisions and through our focus on operational execution, position PAR for sustained growth and success. We're proud of what we have been able to achieve, but we are, by no means, content on where we stand. We need to double down on executing to our strategy as we progress to 2026. We expect ARR to continue to grow in the mid-teens. And similar to last year, the net growth will be more muted in the first half of the year versus the second half, as Savneet mentioned. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A. Savneet Singh: Thanks, Bryan. 2025 is a strong year for PAR after a slow start, we added record ARR in Q3 and Q4, with a large swing in EBITDA and net income. We enhanced our platform functionality. We're first in our sector to commercialize an AI-native product in Coach AI. We won the industry's largest projects and drove multiproduct attachment across near 100% of our deals. In 2026, you should expect 3 things from us. First, continued growth momentum. We will sustain mid-teens organic ARR growth at scale, driven by multiproduct attachment, new logos and deeper partnerships with our existing customers. Similar to last year, we expect our second half will be stronger than our first half as we manage out some of our legacy low-margin customers in Q1. We preserve in-year upside from, one, commercialization of new market-to-market AI functionality and two, pipeline conversion of our large Tier 1 opportunities. Second, you should expect a step change in operational efficiency. We expect to eliminate roughly $15 million annualized OpEx through AI-driven automation and the natural synergies of operating at our scale by the end of Q1. Illustrative of this we've reached 100% adoption of AI across R&D teams with a meaningful shift towards agentic development. Most of our development is now happening via agents without human involvement in code. A year ago, developers were still touching almost 100% of code generated. That's driving real velocity, and we have doubled our road map commits into production in the last year. Third, you should expect for us to deploy parts of our operational expense savings into AI platform production. We will deliver code faster, bring to market new and commercializable AI-led products and demonstrably enhance our workflows with unified data. RAI investments are not a hedge for our existing business, but the all-out mandate. All of this is to set up 2027 for where we wanted to be, a leaner operating structure, a more powerful platform and a product road map that positions PAR to reaccelerate growth. PAR is only at the start of its growth runway. Our average customer uses just 1.8 PAR products from a list of 6 to 8 core software SKUs, meaning there is at least 3x organic upside within our base. Further, far from driving customer tech inertia, the ongoing restaurant value wars and implied margin pressures in the restaurant business favor consolidation behind a platform vendor like PAR and the move away from point solutions. Brands cannot afford to not compete across the entire operations frontier, and we are the only enterprise vendor that facilitates us near 100% of our deals are multiproduct for a reason. Additionally, AI platform investments will naturally drive ARPU expansion as customers are willing to pay for excess value. If technology unlocks a larger pie, it will be adopted with Coach AI as an early proof point. The food service technology market is being rewin now and the companies that win will be the ones with the data, the platform, the trust and the conviction to move decisively. PAR has all 4, along with a track record of execution and reinvention. We are quietly and confidently building our future. Operator, we can open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of George Sutton of Craig-Hallum. George Sutton: Savneet, you mentioned you never felt more confident about the opportunity set. You've not lacked for enthusiasm in the past. So I just want to put that into perspective. If you can give us a little bit more clarity what you mean there. Savneet Singh: Yes. I think that specifically, my excitement is really in the AI investments and the AI excitement from our customers. As I mentioned, we really do think, categorically, the restaurant and retail categories are 1 of the best places to adopt AI technology. These are businesses that are fighting extreme margin pressures, labor challenges, operational complexity and I think that AI is an operational imperative for them, a nice tool to try. And so when we see the end markets we serve, open to new products and then we look at our platform as truly the platform of choice, we really think it sets us up for an exciting opportunity to be the AI platform that our customers look to build their future on. George Sutton: Now speaking of AI, you mentioned these large enterprise deals that you are chasing, you are hoping that through using the AI components, you can speed up those deals. Can you just give us a sense of how that has accomplished many times, I know you're in pilot with these folks? Savneet Singh: Yes. My perspective is more that as restaurants in particular, look to adopt AI faster and faster, it should accelerate sales processes from vendors that can provide them those AI tools to become AI native. And so I think given how much time and investment and candidly, how far ahead we are of our peers, could potentially accelerate some of these deals that we are working really hard to get done. Operator: Our next question comes from the line of Mayank Tandon of Needham. Mayank Tandon: Savneet, could you speak to the state of the restaurant market? I asked because it seems like the traffic data is pretty mixed right now, but same-store sales have still been fairly healthy given some of the pricing leverage restaurant chains have. How does that square with what you're seeing on the ground in terms of demand for your products? Should we be looking at that as maybe a signal of how demand would impact you? Or is that maybe not that linear a tie-in or correlation rather? Savneet Singh: I don't think it's linear yet, but I think it is moving linear to the upside for us in the sense that this is a complicated environment for restaurants. You've got extensively flat to declining traffic for most you have a value war. You've got cost pressures from labor and your cost inputs through inflation across food stuffs and then you've got massive, massive challenge to win digital -- a new digital customer. And all that screams -- for you to make the investments to win in that environment, not to pull back and so we think it's a perfect environment to sell, and we think it's even a more perfect environment to use AI to bring these products together. Just imagine what I just described to you, how in the heck -- if you're running one of these great brands, do you expect to run a clean operation when you've got different tools running your online ordering, your loyalty, your drive-through, your digital exposure through loyalty and social media. It's really hard to do that. And I think this environment where there's extreme pressure on bringing guests in the door and extreme pressure on bringing costs down is a really, really great environment to be a vendor in, provided we can provide them the value to make their operations more profitable. So we think it's a great timing. As far as direct trends, we are seeing, I think, a stabilization. I think last -- the first half of last year was very painful for our restaurant customers. Q3 was a little bit better. In Q4, we saw stabilization, really good holiday traffic numbers. I think as you're seeing from some of the companies reporting, it's still mixed, but we're not seeing those extreme drop-offs we saw last year, which I think makes me hopeful that we're kind of past that period of time. Mayank Tandon: That's good to hear. For my follow-up, I wanted to just ask about how the ARR guidance, we can call it that, squares with what you would expect on the subscription growth side in terms of the trajectory over the course of the year? And the same question would be applicable to your margin aspirations for 2026. How should we expect that to trend? And can you provide a little bit more color maybe on sort of where you would look to exit the year, if you could share that? Savneet Singh: Yes. I think that we similar to last year, our first half will be lower than our second half. Our second half is looking to be extraordinarily strong right now from book deals that we have and so I feel very good about the second half. The first half will be a little bit slower in Q1, and a little bit of Q2, we are, as I mentioned, leaving legacy brands that are candidly not paying the value for the services that we have, which will lead to us having higher margins over time. And even with that, we feel really confident in getting to the mid-teens growth. And as I mentioned, I think we've got a couple of nice levers to expand beyond that with first some of these new AI product launches and second, the large Tier 1 opportunities. And so we guided to the mid-teens. And obviously, there's upside there, but we want to make sure we give you something we can hit. And the margin flow-through will come through very similar to last year's margin profile. So I expect the growth to be the driver of margin there. And again, upside there, dependent upon how we deploy the savings I mentioned on the OpEx side. As far as an exit, we expect the exit rate in Q4 to be meaningfully, meaningfully higher than Q1 or Q2. We are -- we haven't given guidance, but we expect that to be very, very significant, getting us pretty close to the run rate margins we want to get to as a company over time. Operator: Our next question comes from the line of Stephen Sheldon of William Blair. Stephen Sheldon: At a high level, I guess, what are you seeing in terms of restaurants [indiscernible] willing to make software changes and decisions right now? It seems like you have had a handful of encouraging wins with Papa Johns, Shake Shack [indiscernible] and obviously some others. So is it becoming a better environment for customers to make decisions on what to do with their front of house and back-of-house software, even with uncertainty around AI and dynamic consumer spending environment? And does that look any different in the mid-market versus enterprise? Savneet Singh: Good question. You're cutting a little bit in and out. So Steve, I'm going to take some liberties in guessing what you're saying. But I think that it's a great environment right now to be in our category. As I mentioned, we had record bookings last year ahead of our expectations. It was really, really exciting to see what was happening in Q4, and we expect that to continue. And we are definitely seeing that in the larger chains. We are continually surprised how many large chains are coming into the funnel. And I do think that is because some of the macro challenges that you mentioned, but the last caller mentioned as well, where brands really do need to figure out how to increase frequency, but also cut costs, and we're a great solution. I think the other core secular driver, though, is AI. I think there's not a brand in the world that is not exploring ways that they can leverage their data better. And we through luck or design are really the only platform that given that holistic view both front and back of house. And so to your question on where are we seeing in the front and back of house, we're seeing it everywhere. Both our engagement side and our operation side grew really strongly last year. We are seeing it a little bit more on the operations side of our business right now, where our brands are really going aggressive on upgrading the foundation of technology that back of house, if you will. But the front of house is not slowing, but we are seeing a little bit more there. In terms of are we seeing in the mid-market or the enterprise, I would say the -- we're seeing more pipeline created from the large enterprise, but the medium enterprise, call it the chains that are a couple of hundred up to 1,000 are moving as well. But I think there's a little bit of the larger change of the budget to make those investments. But we are seeing broad-based adoption. And I don't know if it's I'm comfortable saying it's more here or there. I just think we're seeing it everywhere at the moment. Stephen Sheldon: Very helpful. And hopefully, you can hear me. On the -- I think the other thing I wanted to ask about was in R&D, I think you talked about a $3 million increase in development costs. So can you give more detail on that? What drove that higher? And specifically, is that tied to some of the Tier 1 opportunities you're pursuing? Savneet Singh: Yes. So I think it kind of comes in a few buckets. So the first is we're making some pretty aggressive investments into AI. As you heard, we've already launched 2 products soon to be 3, and we'll continue to push that going forward. It is not whitewashing. It is not -- let's put an interface. These are real products that drive real value that we are charging for. These aren't, hey, we're now an AI product and it's the same price. And so there's a real investment going on there. A second part of it is when you're pushing into these large Tier 1 opportunities, there are -- there's more investment for us because these are categories that we have not been in before. For example, we were growing into pizza, and that is a new space for us. Entertainment is a new space for us. And at the same time, the configuration and changes needed to go after these new potential opportunities is important. And the good part is all that is reusable across others in that category. So that's the second part. And then the third part, we are making the investments to modernize every product at PAR. And so we built a really nice moat and a really nice lead, but we think the worst thing we can do is kind of sit here and do nothing. Now if you look collectively, our R&D expense is still 25% of sales, which we think is a very comfortable position to be in. But we really do have the reinvestment are going on, and it's only because we see so much opportunity in front of us today that candidly wasn't there 18 months ago, particularly as it related to AI. Operator: Our next question comes from the line of Samad Samana of Jefferies. Jeremy Sahler: This is Jeremy Sahler on for Samad. I guess first on the Papa Johns, you called out intra-quarter that you're expecting an ARPU of around $4,500 per store with price escalators. Are these stores below list price and the escalators are getting them back up the list? Or are the escalators to take you above the typical list price? And then I know you called out you have the opportunity to expand the deal with additional products. Should we expect something similar to the Burger King win where it can happen in same-store rollout? Or is this maybe -- are you just speaking of a future opportunity just kind of more greenfield? Savneet Singh: So it's market pricing for us. So I think it's great. We got really good pricing here. We're really happy with it. And I think the Papa Johns importantly is equally happy with it. It's PAR point-of-sale and PAR back office. So good high-quality deal for both of us. So market pricing. And our escalators are pretty normal now with any contract that we have. So very much in line with the brands we're signing today. As far as future opportunities, we sort of see 2 direct potential opportunities. The first is potentially upselling the brand on other products we have. That could be ordering, it could be payments. It could be all sorts of stuff that we've got, the AI products that I mentioned. And the second avenue for opportunity will be international expansion as we continue to internationalize core parts of our product, we want to -- and are pushing to try to win some of the international markets that they operate in. Jeremy Sahler: Great. That's great color. And if I think about the mid-teens ARR guidance, can you help us unpack how much of that is coming from new locations versus cross-seller products? And then I know you guys have some large renewals coming up -- legacy renewals coming up and there's an opportunity to take price there. How much is coming from that as well? Savneet Singh: Yes. I think we're probably 70-30 new logo versus existing customer. A lot of it will depend on some of the rollouts we have towards the year, but it's probably 70-30 from a new product to expansion, which is an incredible change for PAR, as you probably remember, for years, it was [indiscernible]. So clearly, the cross-sell and co-sell muscles really changed. Operator: Our next question comes from the line of Andrew Harte, BTIG. Andrew Harte: Congrats on the share buyback authorization. I guess maybe if you could just talk about maybe how you feel about the balance sheet, how do you plan to deploy that $100 million authorization? And I guess it also leads to what you're thinking about profitability and EBITDA margins continuing to scale for this year as well. Savneet Singh: Thanks Andrew. We want to have the optionality to return capital to our investors in every which way possible. And the prices that our shares are trading, we don't think make a ton of sense given the opportunity set, the white space and the long-term growth we see in front of us and obviously, the margin profile we want to get to. And so we want to make sure that we have that tool to operate and ensure that our shareholders are getting the best return. And so as we look to allocate capital, we sort of first look at what are the organic opportunities in front of us because those are the ones that we have tons of control and data to look back at. We'll look at the inorganic opportunities in front of us, and then we'll look at buying back shares. And so we want to make sure that we have the ability to do all 3 and figure out where we can get the highest return. We expect a strong year this year. As I mentioned, the second half, we're going to have a very, very strong year cash generation. And so we want to make sure we're prepared to be in the market when and if we see these disruptions that we've been seeing because we don't think it makes a lot of sense and completely understand a lot of the AI fears. But as a company, we truly expect to be a net winner in this AI market. We think it's important that we eat our own cooking. Andrew Harte: And then kind of a 2-part question on growth. You said in the fourth quarter, the PAR POS kind of results significantly exceeded your internal expectations. So I would like to kind of hear where that came out of or what it was that drove that? And then when you think about 2026 growth to, let's just call it, mid-teens, so call it 15% and it's a bit slower in the first half and then faster in the back half. I guess, how much of that, call it, 15% for the entire year is stuff that you feel really good about versus how much do you need some wins that you're tracking on to come across the finish line? Savneet Singh: I would say the majority of our plan for the year is pretty much there. We don't -- there's not a lot of go-get for us in our model right now, which is why I mentioned sort of the upside to our model is to get incremental adoption of our new AI products and potentially the bookings of large Tier 1 opportunities we're working on. So a good portion of it is booked and planned. Now listen, things can change, we could screw up, so on and so forth, but we feel pretty good about the visibility that we have there. Operator: Our next question comes from the line of Charles Nabhan of Stephens. Charles Nabhan: Savneet, appreciate the comments around the supply chain and hardware, given some of the price inflation in the chip market. But my question there is, are you seeing any impact on RFP activity from higher hardware costs? Or are you seeing restaurants and operators still willing to upgrade their software while maintaining their hardware? Savneet Singh: Great question, Chuck. So short answer is, we're not seeing any impact yet on the revenue side. In fact, as you can see, we've had a really good revenue year last year for hardware, and I hope that continues this year. So it is not slowing down refresh cycles whether those refresh cycles are tied to software upgrades or to net new just refreshing hardware, not refreshing software. But we are seeing on the cost side, where our margins were mid-20s, I think we expect margins will be 20%, 21% from a hardware perspective. So not the end of the world, but the increased volume has helped us offset the gross dollars. If prices continue to spike very, very meaningfully, it could potentially have an impact on our customers wanting to maybe hold off until they saw pricing come down. But we have not seen that, and these pricing pressures have started since April since -- the tariff started April of last year. And so we've had a pretty strong demand year even with that in place. But we're monitoring it very carefully. And it's just so hard to predict month-to-month, even week to week. And so as we mentioned, as Bryan mentioned, we're putting a lot of mitigation activities in place from reconfiguration to accelerated buying to ensure that we don't have any disruptions. And the reason we're not -- we're focused on disruption is we haven't seen a slowdown in demand. Bryan Menar: And I would just add to it as well, too, right, is mitigating plans are not only to manage the margin on the hardware. We're also making sure, too, as part of the plans that we have optionality to make sure that there is no impact in regards to our software growth and roll out, right? So we do have -- we are still hardware agnostic, but a lot of our customers want the attachment because they want the one vendor because we could service everything, right? But we do also have that optionality to give them what they need from a software standpoint and still have flexibility as to what how they're using. And so that may play into it as we go forward. And so we're managing both of those, and we're making sure it does not impact the software side of the house. Charles Nabhan: Got it. And as a follow-up, I wanted to ask about profitability as we think about our EBITDA estimates for the next couple of years. I know not all the ARR from this year is going to flow through to EBITDA. But in the past, you've talked about roughly a 70% to 75% flow-through to the EBITDA line from ARR based on roughly flattish OpEx. Is there any reason to expect a deviation from that framework? Or is that still a fair way of thinking about it? Savneet Singh: Certainly, we sort of talked about subscription services ARR at around 70% gross margins. Bryan mentioned, I think it was 71% when you exclude the 1 business unit. And then in incremental, we've always said -- we expect $0.20 of incremental or 20% incremental cost, although we haven't had that because the OpEx has been relatively flat. I don't think those trends change meaningfully, although we will see some investment in R&D this year. Again, not game-changing amounts, but we really do want to continue that AI investment. And so I think the subscription services margins will continue to hold, and you'll continue to see the gross profit dollars be there to support EBITDA growth and to cover any investment that we're looking at. Operator: Our final question comes from the line of Maxwell Michaelis of Lake Street Capital Markets. Maxwell Michaelis: Just one for me. If we look at -- actually, I got 2. If we look at the Bridg technology acquisition you guys made last month, I know you guys are -- you guys are going to see around $15 million of OpEx savings in 2026. Are you guys looking to invest in that platform at all? Savneet Singh: Of course, we're going to invest in it, but I don't -- that is not going to be a cash burn within Bridg. We've kind of budgeted for it to be profitable within PAR. Now if we see a ton of opportunity and we see -- ton of opportunity, we will. But we budgeted for it to be profitable within PAR and think it will. And the early customer feedback has been really excellent. Bryan Menar: Yes. And I think we'll be able to speak more to it when we get through the next quarter's earnings call, right, as we're closing on that in the near future. So we are definitely excited about how we can leverage that platform within our existing... Maxwell Michaelis: And then I guess if we just stay on the M&A trend, I mean, is that -- I mean, how -- if you were to rank it in terms of capital allocation in 2026, I mean, how does M&A rank in 2026 versus the share buyback and other areas of investment? Savneet Singh: It's always at a point in time. Today, we are disappointed with our stock price. And so I think it's very -- the PAR for M&A is very, very high. Bridg was a special opportunity for us. We bought it for roughly 2x ARR and ARR that we expect to grow, that's profitable. And so in the end, kind of really helping us complete a product suite of having both loyalty and nonloyal guest data in one platform that allows us to build a CDP and do a lot more going forward. So it was very strategic from a product perspective and then a good price. We're always looking at stuff, but I think M&A is lower on the priority list given where our stock price is. Operator: All right. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Chris Byrnes for closing remarks. . Chris Byrnes: Thank you, Stephen, and we want to thank everyone for joining us today on the call. We do look forward to updating you further in the coming weeks. Please have a nice evening. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to B3's Earnings Results Presentation for the Fourth Quarter of 2025, where Andre Milanez, B3's CFO, will discuss the results; along Fernando Campos, Investor Relations Associate Director. [Operator Instructions] As a reminder, this conference is being broadcasted live via webcast. The replay will be available after the event is concluded. Fernando Tavares de Campos: This is Fernando Campos from B3's Investor Relations team, and I'm here with our CFO, Andre Milanez, to discuss the results for the fourth quarter of 2025. To start, I'll ask Andre to comment on the extraordinary tax effects that mark the quarter and then provide a more general view of the revenues. Andre Milanez: Thank you, Fernando. Starting with the nonrecurring tax effect that impacted the company's net income for the quarter. First, we had the increase -- with the increase of the social contribution announced at the end of last year, we recognized during the fourth quarter, a negative accounting impact from the update of the deferred taxes. Related to the tax amortization of goodwill an impact totaling approximately BRL 1 billion. It is important to emphasize that the fiscal benefit has already been fully used and therefore, we will not have any other impact on the company's cash generation in the future as a result of this adjustment. This is solely a one-off and extraordinary accounting adjustment that we had during the quarter. On the other hand, we distributed BRL 1.5 billion in nonrecurring interest on capital as well, which was -- which helped to partially offset the negative impact from the deferred tax adjustment that I mentioned before. It is also worth to highlight that we still have around BRL 4 billion in nonrecurring IoC interest on capital to be distributed over the next years, which this will have a positive effect on the company's cash generation. If we were to exclude those two effects in the quarter, net income would have reached BRL 1.4 billion, which represented an increase of 22% in relation to last year. Speaking about performance, the quarter delivered solid results with an 11% increase in total revenues and growth across all segments. I would like to highlight the rise that we saw in ADTV throughout the quarter, which ended December at a level significantly higher than in September, showing a consistent recovery trend, which has been reinforced by the volumes that we have been observing in January and more recently during February as well. Fernando will now provide a bit more detail on the operational performance. Fernando? Fernando Tavares de Campos: Thank You, Andre. In the derivatives market, even with a slight annual decrease in total ADV, we observed a relevant sequential recovery with increases in mainly all contract groups during the quarter. Indexes and interest rates in Brazillian Reals, products continued to show strong momentum supporting the segment's performance, which was negatively impacted by FX and crypto products due to the devaluation of the USD against the BRL that impacted the RPCs of those contracts. In equities, ADTV reached 26.2 billion, an increase of 2% compared to fourth quarter 2024 and 20% compared to 3Q '25. ETFs, BDRs and listed funds continue to gain relevance, representing more than 17% of the total volume reinforcing the trend of investor diversification and the importance of the company's product diversification strategy. Fixed income remains one of the Big 3 key growth pillars. The corporate debt market continues to show strong progress with issuances and outstanding balances growing consistently. Treasury Direct also had another strong quarter with increases in both the number of investors and outstanding balance. Data, analytics and in technology, we delivered another quarter of solid results. data analytics solutions grew nearly 20%, reflecting strong demand from the credit, loss prevention and insurance vertical. In technology, we expanded the number of clients in the monthly utilization service and observed robust growth in market support services. It's worth noting that starting this quarter, we are including Shipay in this line, which contributed with BRL 5 million in revenue from November to the end of the quarter and added new capabilities to the ecosystem. Now Andre will comment on the remainder of the financial performance. Andre Milanez: Well, on the expense side, we remained with our cost discipline. Total expenses grew only 1.5% year-over-year with our adjusted expenses up by 4.7%, which was in line with the inflation for the period. We saw some stability in information technology expenses and a decrease in third-party services, which helped to offset increases related to the annual bargaining agreement and the structures that were merged into B3 in the beginning of the year. As a result of that, our recurring EBITDA reached BRL 1.83 billion, an increase of 15%, with a margin of 69%, consolidating another quarter of high operational efficiency. Our recurring earnings per share reached BRL 0.29 per share, a growth of almost 30% when compared to the fourth quarter of last year. Regarding new products, in November and December, we brought to the market new weekly option expiries for the Ibovespa global financial event contracts and the family of products linked to the S&P B3 Ibovespa VIX Index, reinforcing our strategy to broaden our portfolio and offer new hedging and exposure alternatives to investors. Still in the product pipeline, we received very recently authorization from CVM to launch the digital options on interest rates, FX, bitcoin inflation and GDP for professional investors at this moment. Our goal is to continue to work to offer this type of products to more investors and to expand also the products across other asset classes. Another important milestone was the launch in February of this year of the new positioning of B3's data and applied intelligence business under the new brand called Trillia which brings together Neoway, Neurotech, the infrastructure for financing unit, PDtec and DataStock reinforcing the construction of a new culture and strengthening our data and analytics offering. Thank you very much, see you soon. Operator: [Operator Instructions] Our first question comes from Renato Meloni from Autonomous Research. Renato Meloni: Just two quick questions. Wondering if you can just give some perspectives for ADTV for the rest of first Q here, really solid numbers on 4Q, and I think we're seeing similar trends here, but I'm just wondering if you have a more informed view to share with us? And then secondly, I'm curious on AI here, if -- how you're discussing potentially with partners or internally any opportunities that you could capture by integrating like data that you have with AI offerings? And how are those discussions there going? Andre Milanez: In relation to the ADTV, we saw improvements as you've seen in the numbers during the last quarter. January has continued that trend we already released the operational data on January and the average volume in January was around BRL 33 million, BRL 34 billion. February is still showing a good trend with volumes until now going over that mark. So far, it has been a positive trend that continued throughout January and February. As we discussed mainly so far, driven by international investors that have been allocating in equities. Regarding artificial intelligence, we have been exploring opportunities in terms of efficiency in software development and activities that can be -- can benefit from the use of AI. Last year, I think it was a year where there was a lot of knowledge building throughout the organization on the tools and how to use it. And we started to see an increase in the usage of those tools in daily activities in several areas throughout the company. But there is also a lot of opportunities particularly on the data side. Some of our offerings already have the use of artificial intelligence with machine learning and stuff, but we do see room for continue to improve that with Gen AI, with developing solutions that can be sold through agents and these kind of things. So this is going to be also an area of focus on the revenue side on how can we improve or increase our offering in terms of data solutions with the use of Gen AI. Operator: Our next question comes from William Barranjard from Itaú BBA. William Buonsanti Barranjard: I have two questions. The first one regarding the ADTV, right, you told us it's going strong in the first quarter. I would like to understand how the margins charged here is faring. If it's similar to what we saw in the fourth quarter if it's going down due to volumes and higher discounts to those volumes or not? And I have a second question regarding predictive markets. Last year, December, we've heard an interview from [ Juan ] from [ Kalshi ] that they were willing to come to Brazil. I would like to understand how you see B3 going forward acting in this market if this eventual [ Kalshi ] operation here in Brazil is something that you worry about or is a different business that you don't want to go to? Those are the two ones. Andre Milanez: I'll start with the second question, and then Fernando can comment on margins. As we discussed during the presentation here, we are moving towards this agenda of prediction markets, digital options. We just received approval from the Securities Commission to launch the first digital options with certain financial indicators, bitcoin, FX, the Ibovespa index, GDP and inflation, those at this stage are going to be only allowed or for professional investors. We are working towards expanding the access to these products to other types of investors and expanding the asset classes. So this is something that we will be exploring with the market over the course of this year which is not necessarily slightly different from what you've seen in other markets in terms of volumes. They are more concentrated towards other things such as sports and et cetera. This is not something that we will be pursuing at this stage. So it's going to be focused digital options or prediction contracts, whatever you want to call it, focused on financial indicators, which we believe could be very interesting and helpful to the market to investors. Fernando Tavares de Campos: So regarding margins, equities margins, given how our pricing scheme is structured, there are two main components that you have to think about it. So the first one is volumes. So when you think about volumes, this is something that probably is making our prices and our margins in the first quarter to be a little lower. But on the other hand, you have the mix. And the mix when you have more real money on the market, and that's what we've been seeing in the first 2 months for in flows, mainly from real money and massive managers and not HFTs, so this brings prices up a little. So all in all, we are seeing margins flat compared to the fourth quarter, given those two different dynamics. For the year, it's super hard to predict given that those two components, although the market is optimistic about our volumes, the mix is something that we do not have. It's super hard to predict. So hoping that answers your question. Operator: Our next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: A couple of questions also. Just a follow-up on the margins, right? Because last time we saw volumes spiked significantly, like in '21, '22 margin reached 80%. I'm not saying margins are going to go back to those levels. But just at least in the short term, should we see some benefits to margins just given this spike that we're seeing in volumes and then that sort of normalizes over time, which is what we saw some what happened last time, just to try to think about how much room there is for maybe some short-term margin expansion as volumes sort of pick up immediately. Any color on that would be helpful. And then second question, you still have BRL 4 billion in IoC benefits that you can realize. Just any color on the time line for realizing that? And then also not how can we think about the underlying factory, particularly over the next few years as you have to incorporate a higher tax rate. Andre Milanez: Thanks for the question, Tito. So in relation to your point about margins our -- in general terms, our schedule of prices share some of the operational leverage with clients as we reach high volumes. Having said that, not all of that operational leverage is shared. So on average, prices can be -- average prices can be lower. But that's the benefit of having a business model that has this high degree of operational leverage. So we pretty much need the same cost structure, the same setup to deal with volumes of BRL 20 billion or volumes over BRL 30 billion. So pretty much all of that increase that we see on revenues will flow straight to the EBITDA to the bottom line. So directly to your point, it is possible that we see some margin expansion as a result of that benefit of the operational leverage that our business model has. Regarding the IoC question, so yes, we still have a balance of around BRL 4 billion to be distributed in terms of IoC that was identified not used in the past. This was only possible because of a judicial measure that we took plus the fact that, that was rule as part of a leading case by the superior court. We -- the time line for you to use that will depend a lot on the limits that we will have to deduct that interest on capital, which is the higher of half of our reserves or half of our net income in general terms. So if we have one of those limits allowing us to deduct or to use more of the IoC, we will do that. So as a result of that, this is probably something that we will be discussing and announcing more towards the second half of the year where we will have more visibility as to the level of those limits to maximize how much we can distribute in '26. Daer Labarta: Great. And just -- excluding that, how should we think about the tax rates, particularly as it's going to be going up a bit? Andre Milanez: Well, as from the first of April, we will start to see an increase in our social contribution by 3%. That will then be increased by another 3% starting in '28. For the -- as we discussed for the short term, this IoC from prior years will help to more than offset that impact. I think there are things that we have been working on to try to reduce the tax burden that this increase will have in the company. But we will be somehow affected by that increase. I think there are ways, as I said, to reduce the impact of those measures, but this is something that we are still working on. Operator: Our next question comes from Yuri Fernandes from JPMorgan. Yuri Fernandes: I have one on operating leverage. Given we are seeing an acceleration on revenues, especially on ADTV and all those questions about margins and how they should track. My question is on the OpEx and CapEx lines. We know you have a guidance right for this year. But just checking given you have new products, new investments, modernization, AI, all those things combined, any chance that in the case you are positively surprised by revenues? We could see maybe a little bit of more higher expenses. I know the business model is its pre-leverage, right? So more revenues not necessarily meaning more expenses, but just checking if we see better revenues, you could kind of anticipate some cost. And then I would like to ask also on data analytics and technology. I think these lines, they have been pretty good lately. There is a little bit of price component, but we also see new products or new verticals doing fine. And this quarter, Trademate that I don't remember if you had a number for revenues, you start disclosing like a number for revenues. So if you can comment on in general terms on those lines data and technology, how should we think how much growth could we expect for this year? Andre Milanez: So the first one about expenses or operational leverage. Look, I think we have been trying to continuously find efficiencies in our, let's say, more mature activities in order to finance investments that we will continue to do in new products and new services expanding our portfolio modernizing our infrastructure. So at the moment, we do believe that the current level allows us to do that, so we can have a more controlled growth in terms of our expenses and CapEx without having to compromise investments in modernization and expansion of portfolio, et cetera. And that also imposes us a challenge to continuously find those efficiencies. So I don't think the positive trend in revenues changes that dynamic. I think the only variable that we have here is in relation to the what we call the revenue-linked expenses, which we have less control, right, so which are almost a consequence of a positive performance in revenues. If that happens, those should grow. But as a direct -- almost a direct impact of the growth that we will see on revenue. So I think that remains being the case. In relation to the data and technology, I'll pass it on to Fernando to give you a little bit more color, but I can come back at the end as well. Fernando Tavares de Campos: Regarding data, I think, like you said, we -- it's been a sequential -- we have been seeing sequential good quarters, good growth and it's a quality growth. We have been seeing in 2025 of the growth in data and technology, mainly on the analytics close to 70% was in recurring revenues, which gives us confidence for the future. So like I said, it's been in all the verticals, credit, insurance, even sales and marketing, loss prevention, and it's been mainly with recurring revenues. Although in the fourth quarter, we have more what we say here, one shot revenues, which is common. You guys saw that on the last few years, but it's a quality growth on data. In technology, it's like it's super stable as well. We do have all the access to our platforms and we have inflation adjustment for prices, and we have new initiatives. Regarding Trademate, it's something that you know we've been talking about it for a few in the past. It's something that excites us. In the year, the revenue was almost BRL 20 million. It's basically concentrated still on govies on the trading of government bonds. And we do have plans this year to increase and expand that to the revenues in corporate bonds as well. I don't know if Andre wants to complement. Andre Milanez: Yes, I think the revenues are on Trademate are still being -- the prices there are still being subsidized at this stage. We are more focused now in increasing liquidity, increasing volumes that are being traded electronically. There's still a lot of room for further electronification in that market, but we are so far happy with the results that we have been achieving, but that can be going forward a more relevant revenue stream for the company besides all the benefits that the market will have as a result of that increasing electronification. I think the only thing I would add is that with the merger that from the companies that we have last year, we are more and more working with all these companies together that was, let's say, marked by the launch of a new identity and brand for this data initiative and the idea is to work more and more closely combining all the skills and capabilities of these companies or the businesses that we had. And in our view, this will help to maximize and accelerate the potential that we have in terms of new products and solutions within that segment. So yes, we are very excited with the potential here and the results that we have been achieving so far. Operator: Our next question comes from Kaio Prato from UBS. Kaio Penso Da Prato: I just have a quick follow-up from this question from Yuri, but basically expanded a little bit. You're talking about data and technology, but we have been seeing like really good growth in all of these revenues lines, excluding the volume-linked such as equities and derivatives. So if you look to the rest of the business, the noncyclical part, just wondering if you can share probably this is a little bit more predictable what could be, say, targets of revenue growth going forward for 2026 or even further? Just to understand if you can maintain this double-digit pace or so, if this is a base effect. We are also seeing quite strong growth on the vehicle real estate, the OTC business as a whole. If you can share a little bit more about your thoughts on that would be good. Andre Milanez: Look, as you said, I think that was part of our strategy. The diversification provides us with different sources of revenue, sources of revenues that are less dependent on the cycles without necessarily raising the benefits of having those also cyclical business that can grow a lot in more favorable moments such as the one we have been seeing or a brief moment that we have been seeing now in the beginning of this year. That's why we also wanted to reinforce or bring -- call the attention of investors and analysts to that point during our Investor Day last year. I think we do believe with the without going into the detail of every line, and I think Fernando can provide more color here, but we do believe that those businesses can continue to grow double digits, some products with maybe high double digits, others low double digits. But we do believe that these businesses have -- we have the ability to continue to grow them at that pace. A lot of that will come from further penetration of existing products, cross-selling of solutions, et cetera, but a lot of that also coming from new products that we have on the pipeline to launch and bring to the market. So at least for the -- for this year and next year, I think this is -- and part of that growth already in some cases, already guaranteed given the nature of recurrency that we have in certain revenue streams. Operator: Our next question comes from Maria Guedes from Safra. Maria Guedes: Congrats on the results. So you have been heard for lines that have been performing really well recently, have equities, fixed income data and technology. But derivatives has been some kind of a laggard during last year. And we saw some acceleration in the fourth quarter. But I just wanted to understand what are the expectations for 2026. I mean you have some potential catalysts. You have new products to be launched. You have some moves in interest rates once Central Bank starts to cut SELIC. So do we -- should we expect to see some growth acceleration in the line? Just wanted to hear from you. Andre Milanez: Look, I think when you talk about derivatives and looking to what we saw last year, right? First, I think we had a very high comparison base, '24 was a very strong year for certain asset classes, particularly for derivatives on interest rates. We have to remember that there was a lot of volatility in the interest rate curve. We saw -- we started with the Central Bank cutting rates and then very suddenly changing hands and starting increase rates, again, that helped or triggered a lot of volatility and therefore, a lot of trading activity on derivatives last year. So that made the comparison more difficult. We also had the event that we discussed previously in terms of the increasing margin requirements that have had an impact on the volumes for the crypto derivatives. But in general terms, I think with the agenda of continuously launching new products with an expectation that given that this is an election year, that we will have more volatility and also with, as you said, expectation that we might get in closer and closer to the beginning of an easing cycle, I think all of those factors will benefit that business segment, and therefore, we can expect a better performance here than we saw last year. But again, not all of that is under our control. But the perspective is definitely more positive for that segment for those reasons that I described. Operator: [Operator Instructions] This does conclude today's Q&A section. I would now like to invite Andre Milanez to proceed with his closing statements. Andre Milanez: I just wanted to thank you all for your support for joining the call and listening to us. I think '25 was a very positive year for the company, a year where we were able to see the results of our strategy, playing an important role in delivering growth A lot of initiatives that were launched and worked on doing '25 that are going to also be important to the future growth of the company. And we entered '26 very optimistic and very excited with the opportunities that we have ahead of us and hope to continue to count on your support. Thank you very much. Have a nice day. Operator: That does conclude B3's presentation for today. Thank you very much for your participation, and have a wonderful day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Fourth Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Scott Melbourn, CEO. Mr. Melbourn, please proceed. Scott Melbourn: Thank you, operator. Good morning, and welcome to Source Energy Services Fourth Quarter 2025 Conference Call. My name is Scott Melbourn, I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. This morning, we will provide a brief overview of the quarter and the year, which will immediately be followed by a question-and-answer period. Before I get started, I would like to refer everyone to the financial statements and the MD&A that were posted to SEDAR and the company's website last night and remind you of the advisory on forward-looking information found in our MD&A and press release. On this call, Source's numbers are in Canadian dollars and metric tons, and we will refer to adjusted gross margin, adjusted EBITDA and free cash flow, which are non-IFRS measures as described in our MD&A. Except for the items just mentioned, our financial information is prepared in accordance with IFRS. As we expected, fourth quarter activity levels rebounded and we recorded sales volume of 907,000 tons for the quarter, an 18% increase over the fourth quarter of 2024. With this strong finish to the year and despite the commodity price challenges earlier in the year, 2025 was another good year for Source. We delivered record volumes and record revenue. We enhanced our logistics capability with the Taylor terminal, strengthened our last mile logistics with additional trucking assets and expanded our domestic sand capability to 1 million tons per year. We enhanced our shareholder return by initiating a share repurchase program, which repurchased and canceled 465,000 shares, and we reduced our term loan by $23.7 million. Noteworthy items for the year included sand sales volume of 3.7 million tons, a 5% increase over last year. Source also set a record for sand volumes delivered to customers' well sites through our last mile logistics team. Source generated total revenue of $700.3 million, a $26.4 million increase over 2024. We realized gross margin of $116.6 million and adjusted gross margin of $159.3 million, decreases of 8% and 2%, respectively, when compared to last year. Gross margins were impacted by a shift in terminal and product mix as well as incremental Peace River commissioning costs. Net income for 2025 was $33.1 million, an increase of $23.6 million over 2024 as Source benefited from lower share-based compensation expense and a recovery from the settlement of the Fox Creek lawsuit. Adjusted EBITDA was $112.3 million, an $11.6 million decrease from 2024. With that, I will now turn it over to Derren. Derren Newell: Thanks, Scott. In the fourth quarter, Source sold 907,000 metric tons of sand, generated $135.3 million in sand revenue. Sand volumes were 18% higher and sand revenue increased by $17.7 million as most of the delayed work from the third quarter of '25 was completed in the fourth. The average realized sand price per metric ton decreased by $4.02 compared to the prior year, primarily due to the sales mix of higher sales of lower-priced finer mesh sand. Well site solution revenue was $28.3 million for the fourth quarter, an increase of $1.6 million or 6% compared to the fourth quarter of '24. This increase was driven by higher volumes delivered by the last mile logistics, reflecting higher customer activity levels and longer trips to well sites compared to last year. Sahara units in Canada were 50% utilized during the fourth quarter and Sahara units deployed in the U.S. remain fully contracted and 100% utilized. Terminal services revenue was $0.9 million, an increase of $0.3 million compared to the fourth quarter of '24 due to higher chemical elevation volumes as well as an increase in sand elevation storage rates. As Scott said, total revenue for the year was $700.3 million, driven by increased sales volumes. Cost of sales, excluding depreciation, increased by $19.4 million for the fourth quarter compared to last year due to higher sand volumes and the incremental costs incurred at Peace River, as Scott previously mentioned. The increase in cost of sales also reflects higher people costs, higher repairs and maintenance expenses, mainly on the sand trucking assets we purchased last year and incremental royalties for the Peace River facility due to increased production. Lower third-party trucking costs partially offset these increases. On a per ton basis, cost of sales was impacted by a shift in terminal mix, which was partly offset by lower rail transportation costs in the quarter. The impact of foreign exchange on the U.S. dollar components, cost of sales drove a decrease of $0.25 to cost of sales compared to the fourth quarter of last year. Cost of sales, excluding depreciation, increased for the full year compared to '24 due to record sand sales volumes, higher transportation costs to move the volumes to the terminals and the customer well sites and the incremental cost of Peace River as well as a full year of Source's trucking operation from the Taylor terminal beginning its operations. Cost of sales did benefit from lower production costs achieved at the Wisconsin mining facilities. A weaker dollar increased cost of sales denominated in U.S. dollars by $2.54 per metric ton compared to 2024, which was largely offset by movement in exchange rates on revenues denominated in U.S. dollars. Excluding gross margin from mine gate, adjusted gross margins for Q4 were $39.07 per metric ton compared to $44.88 last year. Q4 was impacted by the incremental cost of Peace River as well as extremely cold temperatures and heavy snowfall in certain source customer operating areas, resulting in additional performance-related charges, which impacted gross margin by $0.52 per metric ton. For the quarter, the strengthening of the Canadian dollar led to a decrease in adjusted gross margin of $0.02 per metric ton. For the year, gross margin decreased by $10.8 million compared to '24. Excluding gross margin from mine gate, adjusted gross margin was $43.71 per metric ton compared to $46.99 per metric ton in '24. A shift in terminal mix due to the location of customer well sites, a shift in product mix to lower priced finer mesh sand sales, the incremental Peace River costs and incremental costs from commencing operations at Taylor, all contributed to the decrease. These impacts were partly offset by $3.6 million of incremental margin generated from Source's trucking operations and lower rail transportation costs realized in late '25. The weakening of the Canadian dollar negatively impacted adjusted gross margin by $0.24 per metric ton compared to last year. For Q4 '25, total operating and G&A decreased by $0.1 million. Operating expenses increased by $0.2 million, mainly due to higher royalties included in selling and administrative costs. This was partly offset by lower incentive compensation expense. G&A decreased by $0.3 million due to lower incentive compensation expenses and a reduction in related IT expenses in Q4 '24, Source implemented a new cloud computing software system, which resulted in incremental expenses in that period. For the fourth quarter -- sorry, for the year, totaling operating and G&A expenses increased by $2.8 million. Operating expenses increased by $4.8 million due to increased royalty-related costs, higher people costs because of increased activity levels and incremental terminal and trucking operations as well as higher workers' compensation insurance premiums. There were also additional repairs and maintenance costs on railcars and facilities in 2025. G&A costs were down $2 million due to lower incentive compensation costs, partly offset by the amortization of costs to implement the new cloud computing arrangement in 2024 and higher professional fees. Finance expense for Q4 2025 increased by $0.7 million compared to Q4 '24. In the quarter, the decision was made to allow the delayed draw facility to expire, which resulted in previously deferred capitalized costs being recognized. Source also incurred higher interest expense on lease obligations. These impacts were partially offset by lower accretion expense and higher interest income compared to the fourth quarter of '24. For the year, finance expense decreased by $4.2 million compared to 2024. The decrease was attributable to lower interest expense incurred for Source's credit facilities and incremental interest income earned on cash balances as well as lower accretion expense. These reductions were partly offset by higher interest expense for lease obligations. At year-end, Source had available liquidity of $59.9 million. Capital expenditures, net of proceeds on disposals and reimbursements and excluding expenditures on the Taylor facility were $7.1 million for the quarter, an increase of $1.6 million compared to last year. Growth capital increased by $2.1 million, mainly attributed to the expansion of the Peace River facility. Q4 '24, customer reimbursement related to the Peace River facility expansion lowered our total expenditures in that quarter. Maintenance capital expenditures decreased by $0.5 million for the fourth quarter of '25 due to lower expenditures on the facilities. For the year, capital expenditures net of proceeds on disposal and reimbursements and excluding Taylor, increased by $21.3 million. Growth capital increased by $15.7 million, primarily due to assets acquired in the third quarter for the future expansion of the Peace River facility as well as expenditures made on the current expansion to expand into its 1 million tonne capability. Maintenance expenditures increased by $5.5 million, driven by higher amounts for overburden removal and increased expenditures for Sahara improvements and upgrades as well as some equipment rebuilds for Source's trucking operations. Lease obligations increased from the prior year quarter, largely due to the timing of the addition of heavy equipment for Peace River and higher renewal rates on yellow iron leases for the Wisconsin mining operations. Source is now cash taxable in the U.S. and expect that it will be cash taxable in Canada in the next year or so. With that, I'll turn it back to you, Scott. Scott Melbourn: Thanks, Derren. As we look at industry activity in 2026 and beyond, we believe the continued development in the Montney will be a key growth driver for the industry. In response to this, Source has focused its capital expenditures over the past few years on the development of its capabilities in the Montney with the expansion of the Chetwynd terminal, the completion of the Taylor terminal and the expansion of the Peace River mine to 1 million tonnes of production. These improvements have positioned Source to provide an unparalleled mine to well site services for both Northern White sand and domestic sand. And in addition to our offerings in frac sand and related logistics, we have expanded our chemical transloading capability, which we believe will be a growth area for Source in 2026. We anticipate our net capital expenditures for 2026 to be between $30 million and $40 million, with the majority focused on optimization and mine development activities in Peace River and the existing terminal network. We expect 2026 to be another strong year for Western Canadian Sedimentary Basin completion activity, driven by additional export capability via LNG Canada as it ramps up its production. Over the longer term, we continue to believe the increased demand for natural gas driven by LNG exports, increased natural gas pipeline export capabilities and power generation will drive incremental demand for Source's services. Source continues to focus on our industry-leading frac sand logistics chain, and we have and will continue to execute on a number of opportunities to grow the company and further our competitive advantage. In addition to growth in our core markets, we continue to explore opportunities to diversify and expand our service offerings and to further utilize our existing Western Canadian terminals. Thank you for your time this morning. This concludes the formal portion of our call. We'll now ask the operator to open the lines for questions. Operator: [Operator Instructions] The first question comes from Nick Corcoran with Acumen Capital. Nick Corcoran: Just the first question for me, we're 2 months into '26. Any indication of how activity levels have trended relative to either the full year or the fourth quarter? Scott Melbourn: Yes. I think as we may have mentioned in our outlook before, we see 2026 right now as being a fairly flat year in terms of volume year-over-year. I think what we'll see in '26 in comparison to '25 is we'll see a little more steady. And so we expect kind of quarter-over-quarter to be much more steady than or much more flat compared to 2025, where we saw really heightened levels of activity in Q1 and Q2, then a significant dropoff in Q3 and then an increase in Q4. So we expect much more steady activity across the quarters in '26. I personally think that we'll have a little more activity in the back end of '26 as we start to see the impact of LNG Canada and we start to see the impact of more export capability out of Western Canada. But we're looking at it right now, we look like a fairly flat year-over-year in terms of overall volume. Nick Corcoran: That's helpful. And how much visibility do you have or how far out do you have visibility for your sand orders? Scott Melbourn: Yes. For the most part, we've got from our E&P customers, we'll have a fairly good visibility for the entire year. Pads will move from quarter-to-quarter. And so there still will be some movement within that forecast, but we have a fairly good handle on what the overall volume is going to look like for the full year. Nick Corcoran: Helpful. And then like there seems to be some good macro tailwinds for LNG and natural gas for power generation. Am I correct in interpreting that this will be more a back half? Scott Melbourn: Yes. I think as we look at the year, I think that if we see some movement in commodity price, especially natural gas price, that we'll see a much more activity sort of driven to the back half of this year. And so I think you're right in saying that the back half of the year has more upside potential than what we're seeing in the front half of this year. Nick Corcoran: Color. And then maybe one last question for Derren. I know margins were impacted in the fourth quarter by cold weather and peak service costs. Did any of those carry over into the first quarter? Derren Newell: No. We've seen much better performance so far out of these and cold weather knocked on wood, while it snowed, we haven't had quite the challenges that cold set up in December with the crazy amount of snow that fell up in Northern Alberta at the same time, hasn't impacted us the same way. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Scott Melbourn for any closing remarks. Scott Melbourn: Thank you for everyone who joined this morning. If you have any follow-on questions, please feel free to reach out to myself or Derren. Operator: This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Unknown Executive: Hi. Good morning, everyone, and welcome to TR's Full Year 2025 Results Presentation. It's going to be conducted, as usual, by our Chairman, Juan Llado; and our CEO, Eduardo San Miguel. It will last approximately 25 minutes, and you will be able to post your questions after our final -- Chairman's final remarks. I now leave the floor to our Chairman, Juan Llado. Juan Arburua: Hi. Hello, everyone. As usual, as Antonio has said, Eduardo San Miguel and I will guide you through these most relevant points that we're going to be covering in the presentation today. I will first walk you through the main financial and commercial milestones that we have achieved by this 2025 year. And all of this will be very much enhanced by Eduardo with much further detail and color. Eduardo also will continue with the financial section of the presentation. And finally, I will conclude with some financial remarks. Thank you. Here, this is different than other presentations. Let's start, which I think is a real highlight, with the financial performance of TR. Financial performance in 2025, which has been extremely solid and has definitely exceeded all initial expectations from the very beginning of the year. As shown in this slide, 2025 sales reached EUR 6.5 billion, representing 45% increase compared with the 2024 and therefore, exceeding the guidance set for the year. If we move to the EBIT level, 2025 reached EUR 291 million, which is 61% above 2024, which results in an EBIT margin of 4.5%, very much complying with the guidance established for the year. Nevertheless, that's important to note as well, we gained, in nominal terms, EUR 57 million above our initial goal, which is due to the sales increase. And finally, net profit amounted to EUR 156 million, reflecting an increase of 75% compared to the previous year. After these results, this performance, it has resulted, as you all were well known, in early repayment of our SEPI loan, which finally took place last December 1. This repayment of the loan has given us the financial flexibility to return to the shareholder remuneration policy with dividend payments resuming again this 2026 year results. And this is new as we never start with guidance. But with the solid financial foundations, I'd like to anticipate our guidance for 2026. We do expect sales to exceed EUR 6.5 billion with an EBIT margin above 5%, which translates into more than EUR 325 million. Our guidance for net profit is projected to reach the neighborhood of EUR 200 million. But it is important to note that the EBIT grows by more than 10% from EUR 291 million to more than EUR 325 million. And it is also important to see that net profit increases as well by more than 20%. However, this 2025 has not only been a year of outstanding financial results and very good execution and performance. But probably, I think it's more important that 2025, it's important to say and to explain to all of you, has been a year of quality, of positioning and has been a year of a real inflection point. In 2025, we have managed to place TR where we wanted TR to be. And let me go through why. First, we've positioned TR as a much stronger company in the Middle East. Second, with the leadership in the power business. Third, confirming TR as a trusted engineer service partner. And fourth, and this is very important, a very strong foundation in North America. And before Eduardo gets into details, let me give you some examples. On March 25, it was very well announced. We got the award of the Lower Zakum project for EUR 3.1 billion. We have been present for more than 20 years in the Middle East. But now today, I can confirm that we are positioned better than ever. We have strengthened this year our leadership in the power business. We have a strong backlog. And with the expansion of the combined cycle in Saudi Arabia, together with the new job for RWE in Germany, we talk in Saudi Arabia and we talk in Germany, that confirms that we are in this business well positioned to grow. Our engineering service has closed in 2025 with awards of EUR 333 million. And this is remarkable. This is a remarkable milestone that was defined only 2 years ago. But most important and very important is that of this EUR 333 million, more than EUR 70 million have taken place in North America which confirms our quality and definitely our growth potential. So all I wanted to do, this introduction of financials, our guidance and our positioning. And now I pass the floor to Eduardo, who will continue with the presentation. Eduardo San Miguel Gonzalez De Heredia: Okay. Thank you, Juan. Good morning, everyone. As Juan has explained, year 2025 has been a year plenty of solid achievements, repayment of SEPI, best ever EBIT. We're filling the backlog with a strategic new project. But there is also a deep transformation process inside TR moving forward that supports these achievements and is slowly reshaping the future of Tecnicas Reunidas. There are a number of drivers for this transformation, but I want to focus on 4 of them. First, expansion of our services business line. Second, our new strategy for the Power division. Third, the leadership we are settling in digital, artificial intelligence and robotics. And fourth, our presence in the geographical areas with the highest concentration of future investment. I will cover in the next slides where we are in those 4 drivers, but let me first devote this slide to explain to you why it is a real game changer. Expansion of the services business line obviously delivers a volume of profitable and less risky projects, but it is also the way to enter into the U.S. market and to keep on working in the world of energy transition. The new strategy for power that has to do with the spin-off of our Power unit that we expect to be completed before summer. Well, it has a purpose and its purpose is to maximize the opportunities for this sector based on more resources devoted and more focus. Through investing in artificial intelligence, digitalization and robotics, we will get cost efficiencies. We will increase our competitiveness, and we will generate opportunities to deliver digital services. And most importantly, it will contribute to redefine how our clients perceive us. And eventually, to complete our footprint with a solid presence in the U.S. was a must last year if we wanted to capture immediate future investments. And we have succeeded in consolidating our presence in the States. Together with the Middle East, we are where we want to be. So let's go one by one. First, the engineering services business line. 2025 figures are good and also promising. EUR 333 million in awards, more than 40 new contracts signed, a total of 11 frame agreements signed with major clients, 23 new clients we have started to work with through this business line. And the revenues amounted to EUR 254 million, halfway to our 2028 ambition of EUR 500 million of revenues and margins are in the range from 25% to 30%. So it has finally been a very, very good year. Second, artificial intelligence, digitalization and robotics. We launched a month ago a project called Reimagine TR. And our conclusion is we can fully transform the way of doing projects. It will take time. But in the meantime, it's an unlimited source of cost efficiencies. What is clear to us now is it is time to invest, and we will do it. That is why we have decided to increase our investment up to EUR 35 million per year from 2026 and onwards. And that is why we are planning to more than double the staff devoted to develop our programs. More than 400 people will be involved in digitalization and robotics by the end of 2026. And also, this investment will be partially paid by the clients because digitalization is becoming a source of services contracts with our clients. In fact, we have already contracts amounting EUR 65 million and another EUR 50 million under negotiation. And regardless if it is paid or not by the clients, digitalization and robotics are definitely a game changer in our sector. From civil works, structures, electromechanics, procurement, site and project control, everything can be digitalized. In fact, around 60% of the man hours in our sector can be automated with today's technology. Our internal estimation is we can capture EUR 200 million per year in cost efficiencies that will be translated into better margins or more competitiveness depending on the market situation. In any case, we will invest. We have to be ready for the future. The third driver is the power sector. $100 billion is expected to be invested annually by our clients next decade. And we have a business unit that has installed 25 gigawatts in the last 20 years, creating a unique relationship with the 4 existing turbine suppliers, GE, Mitsubishi, Siemens and Ansaldo. In our October Investor Day, we fixed our target of revenues being EUR 1 billion per year. It is not a major challenge considering the size of the market. But to secure the achievement of this target last December, we launched the spin-off of this business unit, and we have created TR Power. The new logo is up there in the slide. We have more resources. With the sole focus in constructing combined cycles moved by gas turbines, with fully separated financial accounts, with an identity distinct from TR that allows clients to better identify TR Power management team, we firmly believe the achievement of our target is closer. And eventually, the fourth driver is to consolidate our presence in the most promising markets. You have some numbers in the slide. They have been provided by McKinsey in its Global Energy Perspective. They may be slightly obsolete because they come from 2024, but it is an undisputed fact that a very relevant portion of the global investment will take place in North America, mainly in the U.S. and in the Middle East. Regarding the Middle East, TR has strengthened in the last 2 years a position that was already important in itself. We are developing local engineering services. We acquire equipment that is exported all around the world. We construct workshops to build robotic solutions, and we use it just to construct modules used in other geographies. On top of that, we are executing massive projects in terms of size and the most advanced projects in the world of the energy transition. So all those are very good reasons to be optimistic in the Middle East. A vast pipeline amounting EUR 35 billion is ahead of us in the next 18 months. And for North America, 2025 has been a year of consolidation. The strategic framework agreements with the different energy players are already leading to significant results with more than EUR 70 million in services awards in 2025. Furthermore, these engineering services will allow us to access to EPCs where the pipeline of opportunities in the next 18 months stands at more than EUR 24 billion. Without any doubt, the recent alliance signed with Zachry will enable us to grow faster and solidly. And obviously, the volume of investment in power generation driven by the artificial intelligence will provide us a number of good opportunities this year. So these are the 4 main drivers. Now let me elaborate about the financial figures of the year although Juan has already given a glance of them. We closed this last quarter of the year with sales of EUR 1.9 billion. This represents a 52% increase compared to the fourth quarter of 2024. This strong sales performance reflects a healthy delivery of our backlog, the acceleration plans currently being implemented across our Middle East projects and the continued growth of the power business. EBIT for the last quarter reached EUR 86.6 million. This represents a 74% increase versus the fourth quarter of 2024. EBIT margin reached 4.6%, making the 13th consecutive quarter of margin expansion. EBIT margin obviously is being driven both by the healthy backlog I mentioned before and the expansion of our services business line. And finally, let's now take a quick look at 2 key figures of our balance sheet. The net cash position at the end of 2025 amounted to EUR 332 million, reflecting the impact of the early repayment to SEPI. Without this repayment, the year-end net cash position would have totaled EUR 507 million compared to EUR 427 million we had the year before. Regarding equity levels, we ended 2025 with EUR 564 million, a very, very robust figure. This is why and after repaying SEPI loans, TR will resume its remuneration policy, committing to a 30% dividend payout against fiscal year 2026 results. And the final decision about a potential interim dividend will be made after summer. And now let me give back the floor to Juan for his final remarks. Juan Arburua: Thank you, Eduardo. Let's now finish, say that 2025 has been definitely a very strong year. But a year, our transformation has reached, as we have both said, Eduardo and I, a true inflection point. We have set the foundations for growth and profitability. Today, we have product, we do have quality and we have strengthened very much in regions and markets and very important, very talented resources. In this sense, and that is what I said before, for 2026, we can forecast revenues over EUR 6.5 billion and, as I said before, EBIT to exceed EUR 325 million with a margin above 5%. But I'd also like to note that it should not be a great challenge to end 2026 with EUR 6 billion of new awards. It's not a great challenge, but it is a challenge. But it's not a great challenge. EUR 7 billion of new awards. Eduardo San Miguel Gonzalez De Heredia: You said EUR 6 billion. Juan Arburua: I said EUR 6 billion? Eduardo San Miguel Gonzalez De Heredia: Yes. Juan Arburua: Well, that was a Freudian slip. EUR 6 billion. No, EUR 7 billion, EUR 7 billion, EUR 7 billion. That might give you the hint that EUR 6 billion is very, very easy. But I mean, we target for EUR 7 billion, and we -- usually, we always have that question. And before you ask us that question, we decided to tell you. We are targeting for EUR 7 billion of new awards. So let me finish by saying that TR transformation is really moving forward. I am optimistic, very optimistic because our future has never been and has never looked more promising. So thank you very much. And now we are here and ready to answer any questions that you may want to pose. Operator: [Operator Instructions] And your first question comes from the line of Ignacio Domenech with JB Capital. Ignacio Doménech: Congratulations on the results. I have 2 questions. The first one is on the EUR 7 billion awards expected in 2026. I guess you have a high degree of visibility on this. So I was wondering if you could give us some color on the split of these awards, maybe what would be the weight on services versus EPC. And based on the performance that we've seen in 2025 with some of your clients requesting to accelerate some of these projects and given this EUR 7 billion of awards, you think that 2026 could follow a bit the same path, the same trajectory we've seen in 2025 and potentially the outlook that you have guided for 2026 could end up being revised throughout the year? And the second question that I have is related with Teesside. I noticed on the annual report that the final decision is expected in 2026. So I was wondering if you have some visibility there or any detail that you could provide, okay? Eduardo San Miguel Gonzalez De Heredia: It's good to know that you have realized it's EUR 7 billion after the confusion. I have to be honest with you. I think it's -- we have quite good clear visibility about those EUR 7 billion first because everything that has to do with power is booming. We are involved in a number of projects. We have already, in fact, been awarded with some projects that has to be converted now into EPCs, and it will happen probably by the end of the year, early 2027. So a relevant part of this EUR 7 billion will come from the Power division, and there is no major doubt about doing that -- achieving that target. And regarding the traditional businesses, oil, gas, petchem, LNG, again, I think the visibility is quite high. We are already involved. In fact, we are already bidding for very relevant large projects, mainly in the Middle East. And the perspectives are very good. We do really believe we are offering competitive prices. We are doing the kind of projects we are experts in. We have the recognition of the clients. So to be honest, it's always a challenge to convert all our expectations into reality. But being honest, we believe that the visibility is very clear for those EUR 7 billion. But it has to be done, obviously. Regarding 2025, that guidance is low. Yes, I have to accept that this year, we may look a bit conservative providing guidance because we have beaten 3 times in a row our previous guidance. But we are trying to be fair with the figure we are offering you for next year. I think to reach this EUR 6.5 billion of revenues, but -- we may be slightly above if everything goes right. But I think for your estimations, your numbers, EUR 6.5 billion is a correct number. And we have missed the last question because we believe you are thinking about dividend. Is this correct? Ignacio Doménech: No, it's on the decision on Teesside, on the litigation, but I think the date is on the first semester in 2026. So just wondering if there's any -- you have any visibility there or anything that you could share, okay? Any potential upside there or... Eduardo San Miguel Gonzalez De Heredia: We are positive about the final outcome of this arbitration. That's how we have been giving that message to the market for a long time. But the only visibility we have now is it is expected to have a final outcome next April -- end of March. That's very confidential. I cannot enter into more details. Operator: And your next question comes from the line of Kevin Roger with Kepler. Kevin Roger: I'm very sorry, you're going to tell me that I'm a bit pushy, but I wanted to get your sense on the post-2026 linked to 2 elements. The first one is that you have a backlog today of more than EUR 10 billion that provides you a lot of visibility for '26, but you're going to use a lot of volumes from those -- from this backlog, EUR 6.5 billion on the EUR 10 billion something. You're going to get a lot of volumes that will materialize as soon as this year. So I was wondering if you can share a bit with us how do you see really the order intake trend for the next, let's say, maybe 6 months and that can contribute to the '27 top line and then the chance and the rationale to keep the '27 top line flat or you do see maybe some risk on a slightly lower top line in '27 because '25 and '26 have been at the end very, let's say, well above your expectations. So just to understand a bit the phasing of the order intake and how it can contribute to the '27 top line. And then the second one, it's maybe focusing on the power generation business. So you have announced the spin-off of the entity. You do announce that the commercial pipeline is relatively huge in that space. So if you can share also a bit with us the kind of region, I guess, probably U.S. that matter and the typical size of the project that you are chasing there. Eduardo San Miguel Gonzalez De Heredia: Thank you for the question. Well, it is math. I mean, we know the volume of backlog we currently have, and we know how we are going to deliver it throughout 2026, 2027. So give or take, around 85% to 90% of the revenues coming -- expected in 2026 will be coming from the existing backlog, but there is still something to be done with the projects to be awarded within this year. So when we say EUR 6.5 billion, again, please don't believe I am being conservative. It is really what we believe it will happen. The good news is that we will be delivering a small part of all the awards of the year 2026 within 2026. This means that most of the revenues will come in 2027 and onwards. So I think we are well balanced, right? Well balanced. When we talk about the pipeline of power, yes, the pipeline of power is massive. But basically, I think we are focusing in 3 geographies, and I'm not going to tell you nothing extraordinary. In Middle East, we see still new relevant opportunities, not only in the Middle East, but not only in Saudi, but also in the Emirates. So we are bidding there, and we believe we have a real chance of being awarded with big, large projects. The United States, well, it's what we expect. And it's clear, there are many opportunities this year. We've had a solid alliance with Zachry. Zachry is specialized between all their specialty they have. We are specialized in constructing combined cycles. So if the market is booming, our partner is a good constructor of combined cycles, not only a constructor because they are also engineers. Obviously, we should be having a very good opportunity this year in that market. In the Investor Day, we told you that we expect the project to be awarded before year-end or early 2027. So we believe the first project, the first EPC, and probably it will be a power unit, is coming soon. And also there are opportunities in Europe. We are bidding in Europe. And -- well, there are many, many, many opportunities. And that's why we needed to create a devoted team exclusively focused in this sector because we don't want to miss any opportunity. Kevin Roger: Okay. And one follow-up, if I may. Services, so frankly, you are quite very successful with EUR 250 million generated this year. What kind of growth do you target this year? Sorry if I missed that during the presentation. But when you argue that you have an order intake of EUR 333 million in '25, is it fair to assume that it will be the kind of top line that you're going to get in '26? Eduardo San Miguel Gonzalez De Heredia: Kevin, it's not as easy because in the services business line we have little experience. We've been involved here for 3 years, no more than that. We will definitely grow. So the starting point is EUR 333 million. We are expecting to pass EUR 500 million by 2028. I think this year, we should be finishing close to EUR 400 million, but below EUR 400 million. That's -- I have to be honest. That's what we expect. It's difficult for me to give you a more accurate figure because this is not 2 big projects. It's maybe 50 projects of very different sizes. And when they are going to be awarded, end of the year, early 2027, it's very difficult for me to predict. But slightly below EUR 400 million should be the target of awards. Operator: And the next question comes from the line of Mick Pickup with Barclays. Mick Pickup: A couple of questions, if I may. So I'll ask them one by one. Can I just talk about the new bids you started talking about? So obviously, the digitalization, the robotics was a big one. And you talked about 60% of hours in our sector suitable for automation and that EUR 200 million saving, obviously, big, big numbers. Can you just talk to what's in that? Is that your man hours? Are you talking subcontractor man hours as well? So robot welders, automated deliveries, how extreme have you gone to get to that EUR 200 million? And on the cash side of it, the investment plan, EUR 25 million to EUR 30 million a year, is that expensed? Or is that going to be CapEx going up? Eduardo San Miguel Gonzalez De Heredia: Well, Mick, I have to be honest with you, when I was talking about EUR 200 million, I was conservative. The figure can go beyond that, okay? When we were talking about Reimagine TR, we were thinking about let's change everything. And when we talk about change everything, we were talking about the construction as well. So there are -- when I'm talking about saving 60% of man hours, I'm talking about everything, both engineering services, procurement services and construction man hours. So yes, the future is going to be very different to what we see today. So for me to say this EUR 200 million are directly linked to the engineering or the procurement it's a bit complicated because it's not EUR 200 million. It's more than that. But there are potential savings in the whole chain. That's a fact. Antonio is in front of me and he's telling me to insist that cost efficiency doesn't mean savings over profit. It can be converted into being more competitive. So we have to be very careful when throwing these figures because you may believe that, well, those guys are going to multiply its EBITDA by 3 in the forthcoming years, and it's not the case. But we have those savings and we have to invest on it. And regarding if it's going to be CapEx or OpEx, I have to be honest with you, there are very clear accounting rules. And not everything can be CapEx. I mean there will be lots of expenses that has to be -- has to do with internal hours we will devote that probably will not be converted into CapEx. So for me, it's difficult to predict what percentage of this EUR 35 million will be CapEx. My purpose is not to create a big ball of fixed asset called digitalization investments. No. The idea is, well, let's try to find a way to balance it. And it's absolutely impossible for me to tell you today which percentage will be expense and what percentage will be CapEx. But it will be a mix of both. Mick Pickup: Okay. And then a second question on power. Clearly, you talk about opportunity sets on power and having good relationships with all the big OEMs for the turbines. But all I hear from my cap goods analyst is that if you want a turbine, get in the queue and you can have that turbine in 2030. So how does TR get in that queue? Eduardo San Miguel Gonzalez De Heredia: Sorry, there has been a little debate inside about how to answer you. But I think what makes a difference is we are extremely reliable for the [ EOMs ]. They know us very well. And when they have an opportunity, they ask us to be in the project. I mean they call us. They want to be partners of them. Obviously, this is -- there is a competition. But when you are with General Electric and you are constructing simultaneously 4 projects with them, it is obvious that once they have awarded a turbine to any specific client and if we are partners of them, for us, it's easier to be awarded with the construction of the plant. So sometimes clients are asking us, do you have a turbine for me? No, we don't have a turbine for you. That's something you have to talk with the supplier of the turbine. But it's how the [ EOMs ] are pushing us and they are offering us good opportunities all around the world. That's why we believe this good relationship with them is so critical. We are not opportunistic. There are many local companies constructing combined cycles around the world, but it's just one project. We have a track record of 25 projects in the last 10 years. And also, it's important the services division that also works in power is involved in the very early stages in the construction of combined cycles. So when you start early, it's easier for you to be the final company that will construct the plant. So there are many reasons to understand that being close to the [ EOMs ], you are in a better position to be awarded with the project. Operator: [Operator Instructions] Your next question comes from the line of Filipe Leite with CaixaBank. Filipe Leite: I have 2 questions, if I may. First one related with service activity and if you can give us the amount of EBITDA or the gross margin of service-related activity in full year '25. Second one on the artificial intelligence trend, just to confirm if you are involved or have any data center-related projects in your pipeline. Eduardo San Miguel Gonzalez De Heredia: Filipe, yes -- well, I don't want to say anything different to what I said in my presentation, from 25% to 30% is what we are currently doing, and that's what we expect for next year as well. And regarding data centers, not in the data center itself, but in the power units that should generate the electricity for the data centers we are currently involved. It would be a good source of business, mainly in the States from now on. Operator: [Operator Instructions] And we have no further questions at this time. I would like to turn it back to our speakers for closing remarks. Juan Arburua: Okay. Thank you very much. It's been a good year, and it has also been shorter than expected. So thank you very much for listening to us. Thank you very much for posing questions, which clarifies many other things we have presented to you and looking forward to talk and see you over the coming months. Thanks a lot. Bye-bye. Operator: Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Baldwin Group Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Bonnie Bishop, Executive Director, Investor Relations. Please go ahead. Bonnie Bishop: Thank you. Welcome to the Baldwin Group's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. Fourth quarter and full year financial results, supplemental information and Form 10-K were issued earlier this afternoon and are available on the company's website at ir.baldwin.com. Please note that remarks made today may include forward-looking statements subject to various assumptions, risks and uncertainties. The company's actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward-looking statements in the company's earnings release and our most recent Form 10-K, both of which are available on the Baldwin website. During the call today, the company may also discuss certain non-GAAP financial measures. For a more detailed discussion of these non-GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, please refer to the company's earnings release and supplemental information, both of which have been posted on the company's website at ir.baldwin.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of the Baldwin Group. Trevor Baldwin: Good afternoon, and thank you for joining us to discuss our fourth quarter and full year 2025 results. I'm joined by Brad Hale, Chief Financial Officer; and Bonnie Bishop, Executive Director of Investor Relations. Earlier this month, our industry experienced one of the most dramatic sell-offs in nearly 2 decades after the launch of AI-powered insurance applications and ChatGPT triggered fears of widespread broker disintermediation, eviscerating nearly $40 billion of market capitalization across our public broker peers in a matter of days. I wanted to start with a few direct thoughts on this as moments like these are exactly the kinds of moments that reveal the difference between businesses that are built for the future and those that are not. The critical question being debated today is whether AI will be a true competitor to brokers or an enabler for them. I believe the answer is both. AI will almost certainly drive a divergence of fortunes and success for talent and firms alike. Firms operating as transactional middlemen and commoditized insurance product lines should be concerned. At the Baldwin Group, based on our end markets, intentional go-to-market strategies and the overall complexion of our business, AI is a step function multiplier, enabling significant gains in productivity and enhancing our organizational speed and agility. I'll spend a few minutes addressing how we think about this and why at the Baldwin Group, we have been purpose-built for this era. In Personal Lines, which comprises approximately 38% of our total pro forma revenue, roughly 80% of that revenue emanates from embedded insurance distribution platforms, which we believe represent one of the ultimate moats in this environment. While the market is worrying about consumers asking a chatbot for insurance in our embedded businesses, we are focused on being the insurance solution of convenience sold through a trusted partner alongside a primary transaction such as buying a home, securing a mortgage or renting an apartment. We don't wait for our clients to search. We are already there. Our Westwood platform, which inclusive of the Hippo business we acquired, generated $190 million in pro forma revenue in 2025. seamlessly embeds directly into the home buying experience for 20 of the top 25 homebuilders in the United States who in aggregate sold 57% of all new homes sold in the U.S. in 2024. When a consumer buys a new home through one of our builder partners, Westwood binds a policy roughly 55% of the time and over 85% of those bound policies are escrowed in the consumer's mortgage payment. That is a deeply embedded, highly persistent revenue stream. Our national mortgage and real estate platform serves as an extension of our mortgage and real estate partners' client experiences, bringing protection directly into the consumer's moment of home purchase and financing through our proprietary technology platform, Coverage Navigator. In 2025, we onboarded 12 new partners, including New American Funding, a top 20 mortgage originator in the U.S. who moved to our platform from a competitor and has seen dramatic increases in conversion rates. I'm thrilled to announce that yesterday, we signed a 10-year exclusive agreement with Fairway Independent Mortgage Corporation, the sixth largest independent mortgage lender in the U.S. with over 67,000 loans originated in 2024. We currently expect to go live with Fairway on our Coverage Navigator platform in the second quarter. The growing momentum here is palpable and will drive deeper moats around our embedded business. Our renters insurance platform, which wrote over $280 million of premium in 2025, embeds directly into property management software, allowing a renter to purchase an insurance policy at point of lease in under 60 seconds. 100% of the premium flowing through this channel is into our own proprietary products built and managed by our MGA platform, MSI. Overall, these embedded solutions are easier, more intuitive and more seamless than initiating a separate process with a stand-alone AI agent. We've been investing heavily in embedded solutions as a direct strategy to transform how personal insurance is bought and sold because we foresaw the risk of disintermediation through technology. We are the disruptor in this marketplace. And importantly, since early 2024, we've been building AI into these platforms and are seeing real productivity gains, including digital agents taking phone calls and binding policies when coverage discussions are not required. Now shifting gears to Small Commercial. This is an area where we do believe AI can positively transform the insurance buying experience given the traditional brokerage economics for these small accounts are broken. High labor costs and low retention often result in low to negative margins. Fortunately, we have been proactively disrupting ourselves here via our Founder Shield digital platform, migrating small business clients to a digitally guided experience. The results have been significant. On average, for clients who have migrated to this platform, retention increased from 82% to 92%. Margins swung positively by approximately 40 percentage points and growth accelerated to 25% annually as the digitally guided buying experience led to cross-sell and upsell. We ended 2025 with $17 million of retail brokerage revenue on this digital platform and are in the process of migrating the remaining roughly $30 million of small business revenue onto this platform. While small relative to our overall business, we believe this platform will be a growth driver for us over time. Importantly, we are not waiting for an AI agent to disintermediate this business, but rather are leveraging our digital-first platform to serve it better and more profitably than any human-intensive model could. Turning to our IAS segment. We've intentionally constructed a business that skews toward clients with both scale and complexity, where deep product and sector experience are critical factors in the choice of an insurance adviser. The addition of CAC amplifies that strategy, bringing substantial expertise in complex industry sectors and risk products. Of our roughly $1 billion of pro forma IAS revenues, inclusive of CAC, approximately 70% is commercial insurance for midsized to large clients, 20% is employee benefits brokerage and consulting and 10% is personal insurance for high net worth families. Approximately 80% of IAS revenue comes from clients generating at least $50,000 of revenue for Baldwin, meaning they are generally spending more than $500,000 in insurance premiums across complex and sophisticated insurance program structures. We have organized the business around industry and product specialties. And one example I'm particularly excited about is our cross-functional team of experts from construction, natural resources, real estate, and complex property that is serving clients involved in data center development across all phases of the life cycle from project sponsors to developers of solar, wind, geothermal, natural gas, nuclear and energy storage projects to power producers and energy offtakers. This convergence of traditionally siloed practices allows us to move at speed with rapidly changing markets and is exactly the kind of advisory work that AI augments rather than replaces. Lastly, our UCTS segment wraps a strategic moat around the broader Baldwin platform. In this business, we build and manage proprietary insurance products. We price and analyze risk, adjudicate claims and facilitate the formation and management of third-party risk capital. AI will only enhance and accelerate our capabilities and productivity across all these domains. We have long held the view that the broker of the future, the broker for an AI world integrates across the value chain end to end, owning the client relationship, building and managing risk transfer products and arranging for the formation and management of risk capital. The proprietary product flowing through our embedded channels further insulates us from perceived risks of disintermediation as they are only available through us. It is our product and access runs through our platform exclusively. We are incredibly excited for this moment. We are structurally set up to quickly take advantage of the operational gains afforded by AI. Quite simply, the Baldwin Group was built to this era. With that, I will now turn to our results. Fourth quarter organic revenue growth of 3% was below our historical performance and reflects several headwinds we've previously discussed, including a 22% decline in profit sharing revenue that is largely timing related. Core commissions and fees organic growth was 5%. On a full year basis, we delivered core commission and fee organic revenue growth of 8%. Total organic revenue growth of 7%, adjusted EBITDA growth of 9%, 20 basis points of margin expansion and adjusted diluted earnings per share growth of 11%. These full year results place us at the top end of organic growth across our peer set. Normalizing for the onetime impacts from transitioning our QBE builder book to our reciprocal and the procedural change impacting the timing of revenue recognition in IAS, commission and fee organic growth would have been 8% in the fourth quarter and 10% for the full year 2025. Overall, organic growth would have normalized to 5% in the fourth quarter and 9% for the full year 2025. Additionally, the disruption in the Medicare marketplace impacting our Medicare business was a 100 basis point headwind to organic growth in the fourth quarter and a 70 basis point headwind for the full year 2025. Despite the revenue headwinds in the fourth quarter, profitability pulled through. Adjusted EBITDA margin expanded 100 basis points in the quarter to 20.1% and adjusted diluted earnings per share grew 15% to $0.31 per share. This was driven by the structural margin opportunity inherent across our platform as well as core operating leverage and was in the face of the $7 million decline in contingent commissions, which have a 100% flow-through to EBITDA. At the segment level, UCTS once again delivered outstanding results in the quarter with 16% organic growth and adjusted EBITDA margin expansion of approximately 330 basis points. Strong performance was powered by continued growth in multifamily, better-than-expected results in our commercial umbrella portfolio and builder product and contributions from Juniper Re. In Main Street, our core commission and fees organic revenue growth was 2%, while total organic growth was negative 4%, reflecting some pressure and timing of contingents. The quarter was negatively impacted by the continued QBE transition headwind at Westwood and Medicare retention challenges. As a reminder, the year-over-year QBE commission headwind should subside in May of this year, and we expect tailwinds over time related to the economics associated with managing the reciprocal. Normalizing for the impact of the QBE transition, total organic revenue growth would have been 2% for the quarter and 6% for the year. Further isolating out the impact of the disruption in the Medicare industry, organic revenue growth would have been 6% in the quarter and 8% for the year. Despite the top line headwinds, adjusted EBITDA margin expanded 460 basis points to 31.8%, an exceptional profitability result, showcasing the immense operating leverage we have as our investments in building our embedded mortgage business earn in. In IAS, fourth quarter core commission and fee organic revenue growth was flat, while total organic revenue growth was negative 2%, reflecting timing pressure on contingents and rate and exposure headwinds of nearly 10%, inclusive of the procedural accounting change we have previously discussed. Removing the impact of the procedural accounting change, total organic revenue growth would have been negative 1% for the quarter and 4% for the year. Underlying business momentum remains strong. Sales velocity was 19%, top decile for our industry and client retention improved by nearly 300 basis points in the fourth quarter. We increased our investment in frontline revenue-generating talent by 44% in the year, taking our net unvalidated producer pay from 1.6% to 2.3% of commission and fee revenue. Our client franchise, new business pipeline and overall business momentum is incredibly strong. We entered 2026 with optimism and excitement for our building momentum. On January 1, we closed our partnerships with CAC Group, OBE and Capstone. On a combined basis, these 3 partnerships delivered approximately $350 million of 2025 pro forma revenue, and we expect them to deliver roughly $400 million of revenue and approximately $110 million of adjusted EBITDA post synergies in 2026. Given the market's understandable skepticism around synergy achievement, the Baldwin and CAC teams worked diligently to action all headcount-related changes last week, which represent the largest quantum of expected expense synergies. Today, our integration efforts are ahead of schedule. New business momentum and collaboration across our collective teams is incredibly strong, and the strategic rationale for the wisdom of this business combination is playing out faster and stronger than anticipated. As of yesterday, the CAC team has $32 million of closed one new business in 2026 as compared to $20 million in the prior year period and is already actively working on $11 million of combined cross-sell opportunities with their new Baldwin colleagues, highlighting the momentum we have started the year with. Our theme for 2026 is Accelerate. The Goldilocks era for insurance intermediaries is behind us. The conditions that once lifted all boats have given way to a market that rewards only those with true capability, discipline and cohesion. At Baldwin, that shift plays directly into the strategy we have been executing for years. We have been thoughtfully assembling piece by piece, a diversified, vertically integrated platform designed to thrive in any market cycle, not just the easy ones. Central to this acceleration is our 3B30 Catalyst program, which we launched in the third quarter of 2025. In 2026, Catalyst becomes operational in earnest. We are executing the first phase of role transformation within IAS consolidating core technology platforms to improve connectivity and data clarity across the firm and infusing AI and automation into workflows to elevate colleague impact and enhance the client experience. We expect $3 million to $5 million of Catalyst-related savings this year, ramping meaningfully in 2027 and beyond. This is how we translate AI into a tangible competitive advantage. We remain anchored to our aspirational North Star of $3 billion in revenue and a 30% adjusted EBITDA margin over the intermediate term. And with that, I'll turn it over to Brad to detail our financial results. Bradford Hale: Thanks, Trevor, and good afternoon, everyone. For the fourth quarter, we generated core commission and fee organic revenue growth of 5%, total organic revenue growth of 3% and total revenue of $347.3 million. Looking at the segment level on a core commissions and fees basis, organic revenue growth was flat in IAS, 2% in MIS and 17% in UCTS. Total organic revenue growth was negative 2% in IAS, negative 4% in MIS and 16% in UCTS. For the full year, total revenue was $1.5 billion. Core commission and fee organic revenue growth was 8%, while total organic revenue growth was 7%. You heard Trevor speak to several idiosyncratic and market-related headwinds that impacted our 2025 financial results. To support digestion of those comments, I would point everyone to 2 new slides in our investor supplement, specifically Slides 6 and 7 that describe and quantify these impacts and bridge to a view of what normalized organic growth would have been for the consolidated business absent the idiosyncratic headwinds we've discussed. We recorded a GAAP net loss for the fourth quarter of $43.7 million or GAAP diluted loss per share of $0.37. GAAP net loss for the full year was $54.2 million or $0.50 per fully diluted share. Adjusted net income for the fourth quarter, which excludes share-based compensation, amortization and other onetime expenses, was $36.3 million or $0.31 per fully diluted share, reflecting 15% growth. For the full year, adjusted net income was $198.9 million or $1.67 per fully diluted share, growth of 11%. A table reconciling GAAP net income to adjusted net income can be found in our earnings release and our 10-K filed with the SEC. Adjusted EBITDA for the fourth quarter rose 10% to $69.6 million compared to $63.2 million in the prior year period. Adjusted EBITDA margin expanded approximately 100 basis points year-over-year to 20.1% for the quarter compared to 19.1% in the prior year period. Adjusted EBITDA for the full year grew 9% over the prior year to $341.5 million. Adjusted EBITDA margin for the full year was 22.7%, an expansion of 20 basis points year-over-year. Adjusted free cash flow for the fourth quarter was $11 million, an 85% increase year-over-year. Adjusted free cash flow for the full year was $87.2 million, a decrease of 5% from the prior year, driven by onetime partnership-related costs of approximately $15 million in Q4 that were largely tied to the CAC Group merger and were unplanned at the time of our last call based on the timing and execution uncertainty that still existed around the CAC merger. Net leverage remained flat in the quarter at 4.1x as a result of those onetime partnership-related cash uses. We took advantage of favorable market conditions in December, increasing our term loan facility by $600 million to fund the closings of CAC, OBE and Capstone, while maintaining our pricing of SOFR plus 250 basis points. Turning to capital allocation. I would first direct investors to the updated partnership scorecards in our earnings supplement, which highlights the meaningful value we've created through capital deployed to partnership activity. As we sit here today, the all-in blended multiple paid for all partnerships completed from 2020 to 2022, inclusive of earn-outs is 8.7x adjusted EBITDA. Specifically, I would call out Westwood, the sole partnership in the 2022 cohort and prior to CAC, the largest partnership in the firm's history. In addition to giving us an incredibly strategic foothold in the new homebuilder channel, the financial aspects of the transaction speak for themselves, with the purchase price, including earn-outs, now representing an adjusted EBITDA multiple of 5.6x. All of this highlights and validates our ability to attract high-quality businesses, integrate them effectively and deliver compelling post-earn-out returns for shareholders despite the overhang that earn-out payments have had on our free cash flow and deleveraging trajectory. Wrapping up on capital allocation, as previewed on our last earnings call and now given the dislocation that we believe exists in our share price today, the Board of Directors has accelerated and expanded its authorization of a $250 million share repurchase plan. We believe it is in the long-term best interest of our shareholders to take advantage of this opportunity by acquiring shares of the business we know best, our own, funded through excess free cash flow and if deemed prudent, periodic use of our revolver. Moving to guidance, which we are updating to reflect the CAC Group merger. For the full year, we expect total revenue between $2.01 billion and $2.05 billion and organic growth of mid-single digits or higher. As we've discussed, we expect organic revenue growth to ramp throughout the year, reaching double digits by the fourth quarter as we lap both the QBE commission headwind in MIS and the procedural accounting change in IAS. We expect adjusted EBITDA between $460 million and $480 million, representing adjusted EBITDA margin expansion of 20 to 70 basis points. We expect double-digit growth in adjusted free cash flow before onetime transformation and integration costs and adjusted diluted earnings per share between $2 and $2.10. One housekeeping note. I would point everyone to Slide 24 of our investor supplement, which lays out historical timing of CAC Group revenue and should help inform model updates. For the first quarter of 2026, we expect revenue between $520 million and $530 million and organic revenue growth in the low single digits. We anticipate adjusted EBITDA between $130 million and $140 million and adjusted diluted EPS between $0.61 and $0.65 per share. 2025 was a year of meaningful progress for the Baldwin Group. We delivered our sixth consecutive year of top-of-industry organic growth, expanded margins and grew adjusted EPS by double digits. The actions we are taking to execute on CAC synergies, advance our Catalyst transformation program, scale our embedded and MGA platforms and grow investments in frontline revenue-generating talent reflect our conviction in the durability and value of this platform. We sincerely thank our clients for placing their trust in us, our colleagues for their tireless dedication and our shareholders for their continued support and patience. I will now hand it back to Trevor. Trevor Baldwin: Thank you, Brad. In closing, against the backdrop of relatively strong consolidated results in the wake of many idiosyncratic and market-driven headwinds, I want to acknowledge to our shareholders what has been a year of uneven financial performance, one that does not ultimately measure up to our own high expectations. Despite this, our business is entering 2026 well positioned to accelerate performance with strong underlying momentum across all 3 of our segments, incredibly encouraging early wins and synergy realization at CAC, innovation taking place across the value chain as we continue to bring clients and risk capital closer together and investments we have been making in automation and AI that we expect to drive meaningful gains in productivity and accelerated client value and impact. In many ways, our growth story is entering its most consequential chapter. Our business was purpose-built for this era, and we're excited about our ability to demonstrate that to all of our stakeholders. To wrap up with our prepared remarks, I want to share how proud I am of the way our colleagues navigated a complex environment in 2025. I want to thank our clients and insurance company partners for their trust, our colleagues for their resilience and commitment and our shareholders for their support in what has been a bruising year. With significant colleague ownership, our alignment is deep and enduring as we build long-term value together. We'll now take questions. Operator? Operator: [Operator Instructions] Your first question comes from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: First one here is -- I appreciate all your comments there at the beginning about what's happening with AI and the threat of disruption there and your competitive positioning. Maybe I just want to ask you to expand a little bit on that. If I think about, for instance, like an embedded solution like renters, to the extent that it does become easier for somebody to build some software or some program in an automated fashion, like how do you think about your moat, your defensive positioning to maintain your structure with clients that would prevent you from being disrupted in a product like that? Trevor Baldwin: Tommy, this is Trevor. Great question. I think, look, the narrative that AI replaces brokers is just far too simple. I think what AI actually does is it accelerates the divergence that was frankly already underway between platforms that own distribution, that manufacture risk products that source and manage risk capital and that ultimately embed themselves in the customers' workflows and ecosystems from those intermediaries that are simply in the middle and take a toll. The toll collectors are clearly in trouble. The platforms are not. And in fact, I believe the platforms are about to enter a true golden age. At Baldwin, we have been laser-focused not on building a brokerage, but on building an insurance platform. And we think about our platform through 3 lenses that I think directly map to the framework of why we believe there's a lack of fragility around this overall business model and ecosystem that we've created. The first is embedded distribution. Specific to renters, we are at point of lease through our property management software partners embedded and built natively into the workflow in their system. And then 100% of the premium throughput through the various renters products that is purchased via that channel is our own proprietary product. You can't get it anywhere else. And so if you want our product, you have to come through our platform. In addition to that, we're arranging and managing the risk capital that sits behind that product. So we control the entire value chain associated with how those renters insurance solutions are ultimately brought to bear, priced, adjudicated and how those renters customers are taken care of. So that's one example. It's a similar dynamic across our builder and mortgage channels with proprietary product, proprietary technology. And I would tell you, none of these areas are the core business functions of our channel ecosystem partners. What they're looking for is a high-quality partner that gives them certainty around execution and confidence that we're going to be able to uphold and deliver an ultimate client experience that's consistent with their overall experiential goals. So when you think about our broader platform, it's embedded distribution, it's advisory complexity. I talked earlier in my prepared remarks around both the scale and complexity of the type of clients that we serve and the end markets that we're serving them in. And then it's vertical integration. We don't just distribute products. We do. We own the customers. We are the retailer but we also build and manufacture the proprietary product, and then we source, arrange and manage the risk capital that sits behind them. And I think that's a central theme to why the platforms will not only survive but thrive in the world of AI and all of its impacts on knowledge work. Thomas Mcjoynt-Griffith: Great. And then I appreciate on Slide 7, your quantification of the idiosyncratic end market headwinds. I just want to ask you to unpack your expectations in terms of what's embedded in your guidance for the fourth one there, the market headwinds. Are you contemplating any deceleration in casualty rates? Is it a matter of property rates stabilizing at midyear? What's embedded in that? Trevor Baldwin: Yes. I mean we're expecting continued headwinds through most of 2026 from a overall market impact standpoint with that fading through the year to more of a neutral impact by the time the year wraps up. And that's less a function of the absolute rate, which we believe will continue to decrease and be competitive in property. We do believe rates will continue to ebb in casualty, and it's more a function of rate of change. And so what you saw in the fourth quarter is a rate of change of 1,500 basis points of total market impact because we swung from positive 500 basis point tailwind in the fourth quarter of '24 to a 10% headwind in the fourth quarter of '25. There's some nuances to that headwind, predominantly around our benefits business, which drove most of that, where we saw another quarter of pretty meaningful exposure compression. So that's not a rate dynamic. That's an exposure dynamic in our benefits business. But I would also tell you, we now have visibility into January 1/1 renewals where we renew about 40% of our overall employee benefits revenue for the year, and we saw a combined rate and exposure increase in January. So I think the back 2 quarters of '25, we saw a pretty meaningful exposure compression across our benefits clients, which I believe is reflective of some of the structural workforce transformation that's occurring as a result of AI across white collar, knowledge-based businesses, technology companies, a big cohort of which exist across our client base. So I think while I called a floor in the third quarter of '25, I clearly got that wrong. I feel really good about the fact that the headwinds will slowly subside through the year. We've got finite hard end dates around the QBE builder transition and the IAS revenue recognition procedural change. We've got pretty good visibility into the Medicare disruption that occurred in 2025, largely stabilizing, not expecting that business to go back to meaningful growth anytime soon, but I think the headwinds we face should largely subside there. And that's all what informs that mid-single-digit or higher organic guide that ultimately culminates into double-digit organic growth on a run rate basis by the fourth quarter. Operator: Charlie Lederer with BMO Capital Markets. Charles Lederer: You mentioned the growth in unvalidated producers. Can you provide color about how much your hiring strategy in IAS has been adding to sales velocity and how we should think about how that strategy plays in a softer market environment? Trevor Baldwin: Yes. So we increased our investment in frontline revenue-generating talent by about 70 basis points in the IAS business, Charlie. And I wouldn't think about that as having a material impact in year on sales velocity just because of the typical ramp time period associated with a lot of that talent. So the sales velocity for the year of around 19%, which, by the way, compares to an industry median of about 11% and a 75th percentile of about 15.5%. So continuing to perform at top decile results from a new business generation standpoint is largely from risk advisers that have been on the platform for more than 12 months. The folks in that -- the investment ramp that occurred through 2025 should begin building into new business and sales velocity results into '26 and fully into '27. Charles Lederer: And then maybe on the MIS side, I guess, how should we think about the cadence there? Obviously, you lapped the QBE impacts, I think, in May. On the homebuilder side, I guess, how is the underlying momentum there? Are you still ramping new partners there? And on the -- maybe you can talk about the same thing on the mortgage side. I know you announced a new partnership. Trevor Baldwin: Yes. So look, normalizing for the impact of QBE transition, Westwood's organic growth for the year was 9.5%. So that business continues to perform quite well despite what has become a little bit of a softer overall builder market. We feel really good about our position with 20 of the top 25 homebuilders in the country who accounted for more than 57% of all homes built in the U.S. is our partners. And we continue to take share, win new builders. And I'd say that the integration with Hippo and the builder partners that came over from that transaction has gone incredibly well. We're already through the TSA. They're fully on our proprietary tech Advantage+ and that business is humming along. So I think there's an expectation for builder volumes to be down somewhat in 2026. But I'd remind everyone that 90-plus percent of the revenue in the Westwood platform comes from renewals. And so the impact of builder volumes does not have a straight pull-through impact to the overall momentum in the Westwood business. That business continues to perform exceptionally well. Our mortgage business is doing fantastic. You saw most likely yesterday, the announcement around our new partnership with Fairway Mortgage Corporation, the sixth largest independent mortgage lender in the country, just a huge validation of the value of our technology platform and how that can enhance and accelerate the insurance buying experience of point of mortgage origination. In fact, Fairway already had its own sub-agency they were operating, and they ultimately came to the conclusion that they would be better off partnering with us because of the power of our technology rather than continuing to go it alone with their own insurance agency. So in conjunction with that partnership, we will be acquiring their small agency. It's about $1 million of revenue, so not substantial and continuing and plugging them into our coverage Navigator tech platform to accelerate momentum. The pipeline we have in the mortgage and real estate sector is quite large, over 45 providers that, in theory, would generate over $90 million of first year new business revenue. So we're actively working that pipeline, showcasing the value of our tech and how it truly enhances and elevates the overall mortgage origination process and experience. Operator: Gregory Peters with Raymond James. Charles Peters: Trevor, you mentioned in your comments a couple of times about the precipitous decline of your stock price. You highlighted the fact that so many of the employees at the company are also shareholders. So I guess I have 2 questions for you considering what's happened. First, can you talk about retention? I think your highest level producers are the Vanguard producers. I think that's what you call them. Anyways, but can you talk about retention? And then the second part of the stock price question is, I'm sure this goes all the way up to the Board. Is there any perspective of what you can do differently going forward other than just simple execution that will help restore confidence in the stock price? Or is there a shift in strategy that you're contemplating? Obviously, the share repurchase is a significant step. But I'm just curious about what's going on in the mindset in the company there right now. Trevor Baldwin: Yes. Greg, great question. So let's hit retention first. Look, none of our colleagues are happy or excited about share price performance over the past 12 months, and there's definitely frustration around that, but it's not impacting retention. Vanguard colleague retention was 94%. So it continues to be exceptionally high. We have not had any regrettable production talent losses over the past 12 months. I know there's been a lot of headlines around some pretty kind of broad-based talent defections across various industries. I would just say, one, we don't think very highly of some of the tactics that are being employed by many of these newer entrants who seem to be somewhat disregarding the type of approach that I think good self-respecting and competitive businesses take to winning talent. We're full believers in portability of talent. And I think the power of our platform, the strength of our culture and ultimately, the realization for our industry's very best professionals that they can build the most rewarding impactful careers here at Baldwin speaks through in the strength of our retention. But ultimately, we need our results to translate into share price performance over time. I think we can point to a number of examples of incredibly successful public companies who have gone through periods of dislocation and misunderstanding that's impacted their share price performance, but it feels like we've been there longer than most now over the past few years. To speak directly to some of what's ultimately driven some of that share price performance, we've got to manage expectations better. We came out and we've had to reset expectations for a variety of reasons, some specific to us, some market-driven. That obviously does not create confidence. And so what you're seeing and the expectations that we've laid out are a set of financial targets that we believe are quite achievable. I think when you look at the overall performance of our business through most any financial lens over the past 6 years since we went public, it's pretty remarkable. We've taken a business from $135 million of revenue to what is today on a pro forma run rate basis over $2 billion. We've grown earnings on a per share basis nearly at a 40% CAGR and free cash flow at a 45% CAGR. But we know there's things we've got to do to improve the overall financial profile of the business. We've got to continue to stay focused and disciplined around delevering. We've got to drive a realization of better free cash flow conversion. And ultimately, we've got to continue to deliver the outsized organic growth that has been a hallmark of our success over the years. I today am as confident as I've ever been, Greg, about the unique competitive position we're in and how purpose-built we are for this era and the impact of AI. As I mentioned earlier, we haven't been focused on building a brokerage. We've been focused on building an insurance platform that enables us to play across the ecosystem in a way that uniquely positions us to solve challenges and to ultimately build enduring moats around our competitive advantages. So our business is well positioned coming into 2026. The quality and the strength of our talent has never been better. The addition of CAC just continues to add to that as you think about the level of expertise we have in complex upmarket risk and insurance opportunities and the momentum is palpable. I mean you heard some of the remarks I shared around the new business success that CAC has come into the year with, closed new business, up over 50%, $11 million of active cross-sell business being worked on collaboratively between the Baldwin and CAC teams. It's incredibly exciting. But we're not close eye to the reality that there's some things around our financial profile that we've got to make real progress on, and we're committed to doing that. Charles Peters: So I appreciate your comments there. And I want to focus on 2 pieces of your answer at the end that I think are important, and it's the deleveraging and the free cash flow component. And I guess what I'm struggling with is how you're going to deliver on those 2 metrics while at the same time, aspiring to grow to $3 billion of revenue because I feel like -- based on your original vision that, that was going to require some more acquisitions. So maybe speak to just sort of how you're thinking about the deleveraging free cash flow components of that answer. Trevor Baldwin: Yes, Greg, we've got to drive meaningful margin accretion in the business through -- and we're actively doing that. If you look at the CAC integration, we outlined $43 million of cost synergies to be achieved over 3 years, and we've already actioned $25 million of that. We're 2 months in, 60% of expected cost synergies are actioned. And of the $17 million of revenue synergies that we had identified, we're already working on $11 million worth, 60 days in. So it's about continuing to transform our business, which is what 3B30 Catalyst is all about, which is repositioning the way in which work is done across our business to leverage the advantages of artificial intelligence, and we're doing that. We, over the past 90 days, built our own proprietary orchestration layer, GATOR that enables us to have synchronous and asynchronous coordination of workflows that are fully automated to be able to truly elevate and enhance the type of work that our professionals are doing while driving more seamless, more effective and more real-time interactions for our colleagues through the advantages of AI. What we're seeing in the early kind of days of some of these tools that we're rolling out is productivity gains upwards of 80%. Like to say that AI is going to have an impact or even transform businesses in our industry is probably the understatement of the day. The opportunity we have ahead of us here is immense, and we're going to unlock meaningful margin opportunity while accelerating organic growth. And that will put us in a position to be able to both delever the business through scale while also have it being in the position over time to be thoughtful around M&A. Bradford Hale: Greg, I just want to add, look, in the last 2 quarters, we've actually had quite a strong trend in the growth in adjusted free cash flow. In Q3, adjusted free cash flow from operations was up 26%. In Q4, it was up 85%. And Q4 was in the face of approximately $15 million of partnership-related expenses for the January 2026 deals, which was unplanned. As we delever the business, as Trevor articulated, we would expect our free cash flow conversion to migrate to the peer levels. With respect to leverage, I want to be clear in how we think about the balance sheet. Our long-term target leverage remains 3 to 4x. Nothing about today's announcement around buybacks changes that destination. What we're saying is that the path to that destination should be optimized for total shareholder value, not optimized for arriving at the lowest leverage ratio in the shortest possible time. We have no near-term maturities of consequence. In this context, mechanically deleveraging from 4.1x to 3.5x, 6 months faster, while our equity trades at a material discount to where we believe intrinsic value sits would be, in our view, a destruction of shareholder value and not a creation of it. So we're looking at this the same way we've always looked at it on a long-term basis and are committed to that path. Operator: Next question, Elyse Greenspan with Wells Fargo. Elyse Greenspan: My first question on organic growth. I guess, with the mid-single-digit guidance for '26, I was just hoping that you can give some color on the -- what the outlook is by business? And then a second part, keeping with organic growth. Obviously, you guys did highlight it, right, some specific headwinds, and I know they were called out on the slides. But within your organic growth guidance for '26, are you assuming any of the businesses start off the year in negative territory, right, just because obviously, the cadence is organic improving during the year. Trevor Baldwin: Yes. Elyse, we're not going to get into segment-specific outlooks here. What I would tell you is the headwinds, which all have finite end dates over the course of '26 are incorporated into that mid-single-digit or higher guidance, wasn't just mid-single. I would point that out. We expect OG to return to double digits by the fourth quarter. And we would not expect negative OG in any of the segments going forward. Elyse Greenspan: That's helpful. And then for the share repurchase program, the $250 million in that -- in the slides, right, this is opportunistic share repurchases. So within the EPS guidance that you've outlined, what is that assuming of the $250 million that is bought back during the year? Trevor Baldwin: We're not assuming share repurchases right now, Elyse. We are -- our appetite is going to be opportunistic based on where the shares trade. As share price goes up, our capital allocation priorities will shift. I think if you assume we deployed $125 million of capital into a share repurchase program over the year, that would result in about a 3% accretion. Elyse Greenspan: And then from -- we're almost 2 months into the Q1. So what have you seen from a market impact, so rate and exposure impact, I guess, quarter-to-date? And has there been any change in what you observed quarter-to-date relative to the fourth quarter? Trevor Baldwin: Yes. As I mentioned earlier, we've got pretty good visibility into 1/1 employee benefit renewals now, and we did not see the same exposure weakness in those 1/1 renewals that we had seen in the third and fourth quarters. Bradford Hale: And Elyse, just to clarify one comment, we wouldn't expect negative organic across any of the segments for the full year. We do expect MIS to continue to be pressured in Q1 before the transition date on QBE at 4/30. So just wanted to note that. Operator: Next question, Pablo Singzon with JPMorgan. Pablo Singzon: I think it's clear from your comments that you're something bearish about personalized that's more open market rather than embedded. So is your view here what the market seems to be assuming like something like digital AI agents will be able to quote and buy on their own, insurers are willing to provide them and buy more codes. I appreciate the sort of what's happening in some way in embedded, right, but in a more controlled environment where you own the platform. But I guess, do you think that's you what happens in the open market as well? Trevor Baldwin: Pablo, I don't know that I would go so far as to say that. I'd say there's already about 35% of the personal lines insurance market that proactively price shops today and goes direct. And so do those proactive price shoppers end up on an AI-driven comparison platform rather than going direct into a GEICO or Progressive website, like maybe. At the same time, I'm not sure insurance companies are going to be super excited to open up their quoting algorithms and APIs to a bunch of AI-driven chatbots, like there's real risk and concern around the channels to which business comes and the impact it has on loss ratios. There's real cost to quoting business. You have to run credit. There's data feeds and data pulls -- and so these insurance companies are very sensitive to quote-to-buying ratios. And if you hooked up an AI engine to one of these companies and just started redlining on quotes, they'd shut you down in less than 24 hours. So I think undoubtedly, the way in which personal insurance is going to be bought and sold is going to evolve and AI is going to have a huge impact on that. I believe quite strongly, and we've got some real proof points as recently as yesterday with Fairway Mortgage that embedded distribution is a big part of the future. It's not going to be the entire future, but it's going to be a big part of it. And different people have different buying habits and proclivities. Some people prefer a buying experience that's fully embedded inside the trusted partners ecosystem and the natural workflow that they're going through. And so long as they're presented with choice, they're done so quickly, and they're provided with a buying or shopping experience that gives them confidence that the market has been adequately shopped to give them the right coverage at the most competitive price, then they're not going to feel compelled to go out to a third-party chatbot-driven insurance platform or Google or whatever pick your direct-to-consumer platform is. So we believe embedded is one of the biggest net winners here, and that's why we've been so focused on building out that channel for the last 4 to 5 years. Operator: Next question, Josh Shanker with Bank of America. Joshua Shanker: A couple of years ago, the stock was soft. You did a lot of M&A. You argue it was the right M&A to do and it's paid dividends, but the market didn't like it. And you said, look, we are going to show you how much cash flow this company generates, and we're going to forestall future M&A to show that to you and along came the CAC deal, and you could not resist such a deal. It was a great deal for you, and the stock did the same thing. That may not be the only reason why the stock did the same thing. But I understand in your view that you couldn't pass up the opportunity. Right now, your stock is at $18 a share. You've announced a share repurchase program, but you're not making any real commitments about how you're going to actively execute that program. If buying CAC was such an emergency that couldn't be helped even though it sort of pushed on what you had told investors you wanted to do, -- how does that apply to the stock today and how you think about share repurchase? Is there not an emergency right now that you need to act? Trevor Baldwin: Josh, at 8x EBITDA, there is not a better use of capital than buying our own shares. And that's why the share repurchase program has been authorized. And at 8x EBITDA, we will be actively buying our stock. Joshua Shanker: And when you say that's for the next 12 months, should we expect if the stock is not going in that direction, you will fully exhaust that buyback this year? Trevor Baldwin: I'm not going to opine on exactly how much or how quickly we're going to deploy. But from a capital allocation standpoint, Josh, there is no better use of capital than acquiring in our own shares of the business we know best of all at a significant discount to what I can buy a far smaller, far lower quality insurance brokerage business for in the open market. It's not even a question. Operator: Next question, Andrew Kligerman with TD Securities. Andrew Kligerman: Thanks for that clarification around Josh's question. It sounds like you have a real interest in repurchase. I just -- I personally as well wasn't as sure because you said that you've not modeled any buyback into your leverage going forward. So thanks for that clarification. Trevor, you mentioned at the beginning of the call that it's important to set expectations and I believe, execute on those expectations. And I kind of look at this quarter and you did the CAC deal, you had a call in December. And your organic growth objective was mid-single digit for the quarter. It came in at 3%. The organic growth for this year now was mid- to high. Now it's mid or higher -- or no, it was high, now it's mid- to higher. So part of that -- and I think the quarter was super high quality. It's just -- this is sort of like missing a part. But at the same time, I'd like to know how confident are you in this new organic guidance of mid- to high. And by the way, you hit all the numbers on EBITDA and overall revenue. So again, I don't think it was a big deal, but I'd like to know that what's your degree of confidence now that you've set the guidance at the beginning of the year? Trevor Baldwin: Yes, Andrew, I mean, if we look at fourth quarter specifically, the driver of the gap in organic was the severity of rate and exposure headwinds we faced in IAS. That was more than we were anticipating, and that was predominantly driven by weakness in exposure in our employee benefits business. We believe where we have set expectations for 2026 is imminently achievable, and that's what we're focused on executing on. Andrew Kligerman: Got it. And then as I look at the IAS and the fourth quarter rate, that 1,530 basis point swing, as you kind of model out in IAS for the year, what -- I mean, kind of starting at a very high drop-off. What are you overall modeling in terms of a number for year-over- rate change or decrease? Trevor Baldwin: Yes. We still expect rate and exposures to be a net headwind for the year, but we expect that headwind to dissipate as the year goes on, particularly as we get into what will be some relatively friendly comps, particularly in the fourth quarter. So I would expect it to be a headwind in the first couple of quarters before becoming more neutral. And overall, I would characterize it as a slight headwind for the year. Andrew Kligerman: And I see. So a slight headwind being like single for the year, but maybe double digits in the first half. Does that seem... Trevor Baldwin: I wouldn't expect rate and exposure to be double-digit headwind. Remember, like the rate of change is so severe in '25 because it was going from positive to negative. But when you're going from negative to negative, you're not going to see the same rate of change. Operator: I would like to turn the floor over to Trevor Baldwin for closing remarks. Trevor Baldwin: Thank you all for joining us on the call this evening. We are excited for the growing momentum we have across our business in 2026. In closing, I want to thank our colleagues for their hard work and dedication to delivering innovative solutions and exceptional results for our clients. I also want to thank our clients for their continued trust and confidence in our teams. Thank you all very much, and we look forward to speaking to you again next quarter. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good morning, everyone. Welcome to the earnings conference call for the period ended December 31, 2025 for MidCap Financial Investment Corporation. At this time, all participants have been placed in a listen-only mode. The call will be open for a question-and-answer session following the speaker's prepared remarks. If you would like to ask a question at that time, please press star one on your telephone. If you would like to withdraw your question, press star two. I will now turn the call over to Ms. Elizabeth Besen, Investor Relations Manager for MidCap Financial Investment Corporation. Please go ahead, ma'am. Elizabeth Besen: Thank you, operator, and thank you everyone for joining us today. We appreciate your interest in MidCap Financial Investment Corporation. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President, and Kenneth Seifert, Chief Financial Officer. Howard Widra, Executive Chairman, and Gregory Hunt, our former CFO, who currently serves as a Senior Advisor, are on the call and available for the Q&A portion of today's call. I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of MidCap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our press release. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast, which may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our SEC filings, please visit either the SEC's website at www.sec.gov or our website at www.midcapfinancialic.com. I would also like to remind everyone that we posted a supplemental financial information package on our website, which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial Investment Corporation as MidCap Financial Investment Corporation, and we will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I would like to turn the call over to Tanner Powell, MidCap Financial Investment Corporation's Chief Executive Officer. Tanner Powell: Thank you, Elizabeth. Good morning, everyone, and thank you for joining us for MidCap Financial Investment Corporation's fourth quarter and year-end earnings conference call. Yesterday, after market close, we issued our press release and filed our annual Form 10-K for the period ended December 31, 2025. I will begin today's call with an overview of MidCap Financial Investment Corporation's fourth quarter results, followed by a discussion of our share repurchase activity, including the board's increased authorization, as well as our dividend announcement. Following that, I will hand the call over to Ted, who will walk through our investment activity for the quarter and provide a portfolio update, including a review of our software exposure. Kenny will review our financial results in detail. Net investment income, or NII, per share for the quarter was $0.39. GAAP net loss per share for the quarter was $0.14. This figure includes approximately $0.04 of one-time financing-related expenses. When excluding these one-time costs, GAAP net loss per share was $0.10 for the quarter. NAV per share was $14.18 at the end of December, down 3.3% compared to the prior quarter. The decline in NAV is primarily driven by a handful of investments, predominantly from 2022 and earlier vintages. Despite the loss for this quarter, we believe our focus on first lien positions, our cautious usage of PIK, and low software exposure keep us well-positioned. Additionally, recent paydowns from Merx and the full repayment of a position on non-accrual demonstrate our ability to maximize recoveries on challenged credits. During the December quarter, MidCap Financial Investment Corporation made $141 million of new commitments across 26 transactions. Net funded activity for the quarter was positive $25 million, which included a $7.5 million repayment from Merx. At the end of December, MidCap Financial Investment Corporation's investment in Merx totaled approximately $103 million at fair value, representing 3% of the portfolio fair value. Close going to quarter end in February, Merx repaid an additional $22 million to MidCap Financial Investment Corporation for a total amount of $29.5 million. Let me remind you about what remains in Merx. MidCap Financial Investment Corporation's remaining investment in Merx consists of four aircraft, plus the value associated with Merx's servicing platform. Merx earns income through its servicing activities from Navigator, Apollo's dedicated aircraft leasing fund, which currently owns 38 aircraft. Having deployed its equity commitments, Navigator is in the harvest period; as such, the fund is opportunistically monetizing assets to optimize fund level returns. Merx receives a remarketing fee on each aircraft sale. At the end of December, the servicing business represented approximately 29% of the total value of Merx. The servicing component of Merx will naturally decline as servicing income is received. Apollo's long-standing commitment has been to deliver positive outcomes in all instances where we manage investor capital. With respect to the public vehicles we manage across different asset classes, we have been active in evaluating potential strategies and options with the objective of maximizing realizable value for stockholders. During the fourth quarter, the market presented us with what we viewed as an attractive opportunity to repurchase our stock at a significant discount to NAV. We repurchased approximately 1.1 million shares at an average discount of 18% for an aggregate cost of $12.9 million, generating approximately $0.03 per share of NAV accretion. At these trading levels, we continue to believe allocating capital towards stock repurchases is more accretive than deploying capital into new investments. Accordingly, the board has authorized a new $100 million stock repurchase plan, which we expect to utilize aggressively in combination with a 10b5-1 trading plan to capitalize on what we believe is a compelling opportunity for our stockholders. This is in addition to our existing share repurchase authorization, of which approximately $7.9 million of repurchase capacity remains. Accordingly, MidCap Financial Investment Corporation now has $107.9 million available for stock repurchase. If the current discount continues and the trading volumes remain in their current range, we anticipate fully utilizing our current authorization by late May. Importantly, we believe MidCap Financial Investment Corporation's investment portfolio is extremely well-positioned, consisting of primarily true first lien loans with granular position sizes and limited tech and software expenditures. We remain convinced that the current market price does not appropriately reflect the intrinsic value of MidCap Financial Investment Corporation's high quality investment portfolio. We do not anticipate these stock repurchases will result in any material increase in our net leverage, given our visibility into expected repayments. Moving to the dividend. In light of the changes to base rates and other factors, we have reassessed the long-term earning power of the company, and the board has concluded that it was prudent to adjust the dividend. Accordingly, on February 25, 2026, our board of directors declared a quarterly dividend of $0.31 per share for stockholders of record as of March 10, 2026, payable on March 26, 2026. With that, I will now turn this call over to Ted. Ted McNulty: Thank you, Tanner. Good morning, everyone. I am going to spend a few moments reviewing our fourth quarter investment activity and then provide some details on our investment portfolio. MidCap Financial Investment Corporation's new commitments in the December quarter totaled $141 million, with a weighted average spread of 497 basis points across 26 different companies. The weighted average net leverage on new commitments was 4.0x in the December quarter. Gross fundings, excluding revolvers and Merx, totaled $156 million. Sales and repayments, excluding revolvers and Merx, totaled $119 million. Net revolver fundings were approximately $12 million. As previously mentioned, we received a $7.5 million paydown from Merx. In aggregate, net fundings for the December quarter were positive $25 million. Shifting to our investment portfolio. At the end of December, our portfolio had a fair value of $3.17 billion and was invested in 247 companies across 46 different industries. Direct origination and other represented 96% of the total portfolio. Merx represented 3% of the total portfolio. Liquid positions acquired from our mergers with two funds in 2024 totaled 1%. All of these figures are on a fair value basis. Specific to the direct origination portfolio, at the end of December, 99% was first lien and 92% was backed by financial sponsors, both on a fair value basis. The average funded position was $12.8 million. The median EBITDA was approximately $50 million. Approximately 94% had one or more financial covenants on a cost basis. Covenant quality is a key point of differentiation for the core middle market, as substantially all of our deals have at least one covenant. The weighted average yield at cost of our direct origination portfolio was 10% on average for the December quarter, down from 10.3% for the September quarter. The sequential decrease in the portfolio yield was driven by lower base rates, the placement of higher-yielding assets on non-accrual status, as well as the decline in the average spread across the portfolio. At the end of December, the weighted average spread on the directly originated corporate lending portfolio was 546 basis points, down 13 basis points compared to the end of September. Next, I will make a few comments about our software exposure, given concerns about potential AI disruption to software borrowers. You can find details on our software exposure on page 5 of the earnings supplement. As of December 31, 2025, software represented just 11.4% of MidCap Financial Investment Corporation's portfolio at fair value, which is well below the BDC industry average. These positions are primarily cash pay, 100% first lien, and highly diversified across 29 borrowers, with an average position size of $12 million. Our software book is diversified across a wide range of end markets and carries a low average LTV of 32%. The median EBITDA of our software portfolio companies is $52 million. Only two borrowers are PIK; income from our software portfolio is de minimis. The weighted average interest coverage of our software portfolio is 2.3x, in line with the overall portfolio. The weighted average net leverage is 4.6x, modestly below the overall portfolio, and the weighted average spread of the portfolio is 548 basis points, roughly in line with the total overall portfolio. MidCap's approach to lending to software companies has remained consistent, though we have become more selective in the current environment. Our strategy is always centered on borrowers with mission-critical products, high switching costs, and strong revenue visibility supported by long-term contracts. Moving to credit quality on the overall portfolio. Investments on non-accrual status declined to 2.6% of the portfolio at fair value, down from 3.1% at the end of the prior quarter. During the quarter, we restored two companies to accrual status, including our investment in LendingPoint following its restructuring, as well as our investment in Compass Health, which was fully repaid after the company's sale in February. We recognized a net gain of approximately $1 million on Compass Health in the December quarter, reflecting an increase in its valuation from 84 at the end of September to 94.5 at the end of December. We were repaid at par in February, and an additional gain of approximately $0.5 million will be recorded in the March quarter. This is an example of our ability to maximize value from challenged names. During the quarter, we placed three investments on non-accrual status, including our investments in Bird Rides, Banner Solutions, and Renovo. These three names accounted for about 36% of the total net loss for the quarter. Underlying portfolio company credit metrics were relatively stable quarter-over-quarter. Borrower net leverage or debt to EBITDA was 5.29x at the end of December, unchanged from the end of September. The weighted average interest coverage ratio improved to 2.3x, up from 2.2x last quarter, driven primarily by lower base rates and to a lesser extent, by earnings growth. We believe the steady revolver utilization rate we see from our borrowers is an indicator of greater financial stability and provides us with incremental and more frequent financial information. Revolving facilities provide insight into a company's liquidity position through draw behavior. At the end of December, the percentage of our leveraged lending revolver commitments that were drawn was essentially flat compared to the prior quarter. PIK income represented 4.8% of total investment income for the December quarter, roughly stable quarter-over-quarter. With that, I will now turn the call over to Kenny to discuss our financial results in detail. Kenneth Seifert: Thank you, Ted. Good morning, everyone. Total investment income for the December quarter was approximately $78.4 million, a decline of $4.2 million, or 5.1% from the prior quarter. This reduction was largely driven by lower interest income resulting from decreased base rates, new non-accrual positions, and continued asset spread compression. Weighted average yield at cost of our directly originated lending portfolio averaged 10% for the December quarter, compared to 10.3% in the previous quarter. Prepayment income was approximately $2.4 million, down from $3.2 million last quarter. Fee income was approximately $1.0 million, up from about $0.5 million last quarter. Dividend income was $231,000, relatively flat quarter-over-quarter. Our net expenses for the quarter were $42.4 million, a decline of $4.9 million, or 10.4% from the prior quarter. This decline was driven primarily by the absence of incentive fees, reflecting the impact of the total return hurdle feature, which eliminated the incentive fee, as well as lower interest expense, partially offset by higher administrative services. Portfolio had a net loss of $45.3 million, or $0.49 per share. Negative contributors for the quarter included our investments in LendingPoint, Renovo, Amperity, Bird Rides, New Era, and Banner Solutions, among others. Positive contributors to performance for the quarter included our investment in Merx and Compass Health, among others. As discussed on last quarter's call, in October, we extended and repriced our revolving credit facility, and we upsized and repriced our first CLO. In connection with these financing activities, we recorded a realized loss of approximately $3.4 million, or $0.04 per share, in the December quarter. Cost of debt for the quarter declined to 5.95%, down from 6.37% in the prior quarter, largely driven by these refinancing activities as well as lower base rates. For the December quarter, net investment income per share was $0.39. GAAP net loss per share was $0.14, or $0.10 excluding the aforesaid impact related to the one-time financing costs. Turning to the balance sheet, at the end of December, the portfolio had a fair value of $3.17 billion. Total principal debt outstanding was $2.0 billion. Total net assets stood at $1.31 billion, or $14.18 per share. The company ended the quarter at 1.45x net leverage. Gross fundings for the quarter, excluding revolvers, totaled $156 million, and net fundings for the quarter were +$25 million. This concludes our prepared remarks. Operator, please open the call to questions. Operator: Certainly. Thank you. Ladies and gentlemen, we will now open for questions. At this time, if you would like to ask a question, please press star one. You can remove yourself from the queue by pressing star two. Again, star one for questions. We will go first this morning to Richard Shane with J.P. Morgan. Richard Shane: Hey, guys. Thanks for taking my questions this morning. You know, look, our pattern on all these calls recently has been to ask about buying back stock, and you guys have leaned into that a little bit. You know, look, we follow Apollo Commercial ARI. They recently made a very interesting strategic decision, sort of looking at the landscape for different types of closed-end funds and these types of vehicles. I am curious, as you guys sort of look forward, what you think the future is. You know, for now, it looks like some of these discounts are going to be pretty persistent. Makes it hard to grow these vehicles. Does it make sense to continue to run MidCap Financial Investment Corporation in this way, or would you consider some more aggressive strategies to sort of unlock that value? Howard Widra: Yeah, this is Howard. I mean, I think we will consider everything. If we continue to perceive that the discount is unconnected to the value, I think it is sort of the point we are trying to make, it is like our obligation. It was true with ARI, too. Our obligation is to get the shareholders what their true return should be. I think you are pointing out the right issues. I mean, I think we still have to see how it plays out. The persistence of these discounts certainly, I agree, feels likely given everything that is going on across the whole market right now, but things can change. The answer is, we will continue to consider everything with an eye towards just making sure that the shareholders get the full value that we feel like they are entitled to in whatever form we can get it to them. Richard Shane: Got it. I appreciate that. I was almost hoping I was going to get a Gregory Hunt answer to my question, just so I could feel like an episode of This Is Your Life. Howard Widra: Yeah. Richard Shane: Thanks for taking my questions this morning, everybody. Operator: Thank you. We will go next now to Kenneth Lee with RBC. Kenneth Lee: Hey, good morning, and thanks for taking my question. Just to follow up on the repurchases there. To clarify, the new $100 million, is it discretionary? I assume that the normal restrictions of open trading windows apply there if that is the case, but just wanted to check on that. Thanks. Tanner Powell: Yeah, that is exactly right, Ken. Thanks for the question. As we noted in the prepared remarks, and as you alluded to, you do enter quiet periods, and for those periods, we would expect to implement a 10b5-1 that would enable us to be in market during those periods, such that we can maximize our share purchase activity. I would also call your attention to the comment we made in the prepared remarks, whereby if the current level of activity continues, we would expect to be able to exhaust our current authorization by late May. Kenneth Lee: Gotcha. Very helpful there. Just one follow-up, if I may, just around dividends. In terms of the new level here, I wonder if you could just talk a little bit more about some of the macro assumptions that went to that, and what gives you confidence that the new level is going to be sustainable over a certain period of time? Thanks. Tanner Powell: Yeah, sure. Certainly, as we undertake these models and try to sensitize to the myriad factors that can influence, our assessment was that when we looked at the earnings power and we looked at the models, $0.31 was appropriate and achievable. We have taken the action this quarter, and certainly, as I think we telegraphed in previous quarters, the move from rates from 5.4 to the 3.8 level, compounded by spreads in our primary market coming down, have certainly influenced the earnings power. We have made a lot of progress, as we have called out, with Merx. The Merx exposure is yielding roughly 2% on our books today. As that comes back, and we would expect the balance of our exposure to be, or lion's share of our exposure to be, repaid in the next 12 months. That presents some opportunity to cushion the dividend as well as also the capital structure initiatives that we have undertaken to reduce our cost of capital on our CLO, our first Bethesda CLO, as well as our revolver, which we were able to price down, as ways to mitigate the effects of lower base rates and the current spread environment. Kenneth Lee: Gotcha. Very helpful there. Thanks again. Operator: Thank you. Just a quick reminder, ladies and gentlemen, star one for questions today. We will go next now to Robert James Dodd with Raymond James. Robert James Dodd: Morning, everybody. First, yeah, to applaud the expansion of the buyback, but not just that, but the aggressive plan to use it. I think that is kind of the confidence boost that shareholders need. Not particularly, not just the annual accretion, but that you have got the liquidity to actually do that. On the main other question is, to flip to software, you have below average exposure, right? 11.5%. Not only that, I appreciate the other metrics that you gave, but the net leverage in your software book is 4.5. There is a lot of fear out there, some of it probably well-placed, that the software leverage might not apply, right? There might not even be EBITDA, but if it does exist, the leverage is much higher. That sticks for me. Can you tell us the type of businesses that enable you to get software exposure with portfolio average spreads and net leverage that is likely at least a turn, if not more below, kind of what the market expectation is for the amount of leverage that is on a software business? Howard Widra: Yeah. This is Howard. Let me try to take a crack at that because some of this is derivative of what MidCap originates. MidCap has financed itself historically through bank lines and CLOs. Availability of credit on both of those was limited to effectively 6 times EBITDA and not really ARR availability. What we originated into as the market sort of elevated to doing 7, 8 times deals or even just doing ARR-only deals, it was not where we focused. We focused on companies that inherently were already cash long and had more embedded consistency in their performance. In other words, did not need to spend huge amounts of money to continue to drive growth to get to some outside valuation, which obviously can be a great equity thesis, but sometimes it is a debt. What ended up being the MidCap Financial Investment Corporation share of that was that portion of the portfolio, if that makes sense. It was sort of an offset of the strategy that MidCap had, which was driven some. It was not like we had an unbelievably special sauce where we found different deals than other people found. It is that those deals that we tried to win met those criteria. Tanner Powell: I would emphasize, Robert, as we have talked with you in the past, as a derivative of MidCap and our focus on the middle market, the average level core size of $52 million, and importantly, in those software names in our software book, 90% has financial covenants. There is also an element of it which is related to the part of the market that we are focusing on, and also anchored to the dynamics that Howard mentioned with respect to our financing and how we have approached our entire business and software. Robert James Dodd: Got it. Got it. Thank you. I appreciate that incremental color, and again, congrats on the buyback. Operator: Thank you. We will go next now to Casey Alexander with Compass Point. Casey Alexander: Yeah, good morning, and thank you for taking my questions. My first, really only question is pretty simple. Your statement that the handful of credits all share a similar vintage suggests that there is a common thread that runs through the issue there. I was wondering if you could speak to what the common thread is that ties them together that emanates from that particular vintage? Howard Widra: I do not think there is a new common thread other than these are not new issues that have come up. These are credits that we have been working through over time. Although the markdowns were a little bit higher than we wanted this quarter, it was not like there was some precipitous change of what is going on. These are longer-dated credits, many of which have been on the watch list for a while. Tanner Powell: I would emphasize also, to some extent, the seasoning of a portfolio—it is natural that the vintage would be several years prior. Obviously, in that intervening time, we had the increase of rates, with some level of support or moderation with the recent decline. Then, to your point about common themes, we have talked with you, Casey, and the market about pockets of stress in the market, notwithstanding a fairly sanguine economic environment. We have talked about the lower end of the K. When we look at these credits, they often have idiosyncratic issues that are sometimes compounded by some of those pockets of stress and, in particular, some self-induced, such as acquisition strategies that either were not properly integrated and/or were very aggressive, which has compounded some of those thematic elements. It is a balance of idiosyncratic issues within those credits. The vintage happened to be one where you would naturally start to see some deterioration in terms of where you do have problems, and in the intervening four years, there has been a steep increase to borrowing rates, base rates, that has affected the companies as well. Casey Alexander: All right. Thank you for taking my question. Operator: Thank you. Just a final reminder, ladies and gentlemen, any further questions today, please press star one, and we will pause for just one moment. Ladies and gentlemen, it appears we have no further questions today. I would like to turn the conference back to management for any closing comments. Howard Widra: Thank you, operator. Thank you everyone for listening to today's call. On behalf of the entire team, we thank you for your time today. Please feel free to reach out to us if you have any other questions. Have a good day. Operator: Thank you. Again, ladies and gentlemen, that will conclude the MidCap Financial Investment Corporation's earnings call. Thanks so much for joining us, everyone. We wish you all a great day.
Operator: Good morning, ladies and gentlemen, and welcome to Nexa Resources S.A. fourth quarter and full year 2025 earnings conference call. Please note that today's event is being recorded and broadcast live via Zoom, with access also through Nexa Resources S.A.’s Investor Relations website. A slide presentation accompanying the webcast is available for download, as well as a replay of the conference call following its conclusions. As a reminder, all participants are currently in listen-only mode. Following today's presentation, we will open the floor for questions. To ask a question, if you are joining via Zoom, please click Raise Hand. If your question is answered, you can lower your hand by clicking Put Hand Down. You may also submit your questions via the Q&A icon at the bottom of your screen. Please include your name and company when submitting your question. For participants joined by phone, press star followed by 9 to raise or lower your hand. Once announced, press star followed by 6 to mute or unmute your microphone. Written questions that are not addressed during the call will be answered afterward by the Investor Relations team. Questions from media outlets will be handled separately by our Corporate Affairs team. Now, I would like to turn the conference over to Mr. Rodrigo Cammarosano, Head of Investor Relations and Treasury, for his opening remarks. Please go ahead. Rodrigo Cammarosano: Good day, everyone, and welcome to Nexa Resources S.A. fourth quarter and full year 2025 earnings conference call. We appreciate your time and participation today. During the call, we will discuss Nexa Resources S.A.’s performance as detailed in the earnings release issued yesterday. We encourage you to follow along with the presentation available through the webcast. Before we begin, please turn to slide number 2, which contains our forward-looking statements disclaimer. We ask that you review the information regarding these statements and the associated risk factors. Joining us today are our CEO, Ignacio Rosado, our CFO, José Carlos del Valle, and our Senior Vice President of Mining Operations, Leonardo Nunes Coelho. With that, I will now turn the call over to Ignacio for his remarks. Ignacio, please go ahead. Ignacio Rosado: Thank you, Rodrigo. Good day, everyone, thank you for joining us today. Starting on slide number 3, Nexa Resources S.A. delivered a strong finish to the year with our fourth quarter results demonstrating consistent operational execution and the benefits of our disciplined focus on safety, efficiency, and cost management, all within a supportive pricing environment. On the mining side, zinc production reached 91,000 tons, a solid increase both quarter-over-quarter and year-over-year. This performance was driven by stronger results across all our operations, with Aripuanã standing out as it achieved its highest quarterly production to date, a clear reflection of its growing operational stability. In our smelting division, total zinc sales were 142,000 tons. While Cajamarquilla continued to deliver a stable output, the sequential volume was constrained by lower production at our Brazilian smelters and softer demand for zinc oxide. Financially, the operational performance translated into our strongest quarter of the year. We reported net revenues of $903 million and adjusted EBITDA of $300 million, with both metrics showing relevant improvement across all comparable periods. This was underpinned by higher realized prices for zinc and our key by-products, combined with our increased mining volumes. We recorded a net income of $81 million or $0.38 per share and generated $51 million in free cash flow. As a result, our net leverage improved to 1.7 times, further strengthening our balance sheet. Looking now at the full year 2025, zinc production totaled 316,000 tons, successfully achieving our consolidated mining production guidance, with all individual metals also landing within their respective target ranges. In smelting, total metal sales reached 567,000 tons, which is in line with the midpoint of our guidance. From a financial perspective, full year net revenues were $3 billion, while adjusted EBITDA reached $772 million, one of the strongest levels in the company's history. This performance reflects solid operational execution, combined with a favorable pricing environment for zinc and key by-products. Net income for the year was $223 million, or $1 per share. Free cash flow was negative $105 million, which included debt reductions and dividends. A combination of a supportive pricing environment and disciplined cost management allowed us to reduce gross debt and reinforce our financial flexibility. With that, let's move to slide number four to take a closer look at our mining performance. Our quarterly zinc production of 91,000 tons represents a 9% increase from the third quarter, driven by enhanced operational performance at Vazante, Aripuanã, Cerro Lindo, and Atacocha. For the full year, our production of 316,000 tons of zinc met guidance. As we have previously discussed, volumes were impacted in the first half due to temporary operational constraints and lower grades. On costs, our consolidated mining cash cost, net of by-products, improved sequentially to negative $0.58 per pound, benefiting from stronger by-product grades and lower treatment charges. For the full year, cash cost came in at negative $0.30 per pound below our guidance, reflecting our disciplined cost management and favorable price dynamics. The cost per ton of run-of-mine was $56 in the quarter, a sequential increase primarily due to higher operational costs at Aripuanã as we continue to ramp up and stabilize the asset. On a full year basis, this cost was in line with our guidance. Financially, the mining segment delivered a robust performance, with net revenues of $532 million and adjusted EBITDA of $266 million in the quarter, translating to a strong 50% EBITDA margin. This was fueled by higher metal prices and improved operational execution. For the full year 2025, the segment generated approximately $1.6 billion in net revenues and $658 million in adjusted EBITDA, a 42% margin that clearly demonstrates the earnings resilience of our mining portfolio. With that, let's move to slide number five for a closer look at Aripuanã's operational progress. In the fourth quarter, Aripuanã achieved its highest production level to date, a direct result of enhanced operational reliability, reduced plant downtime, and lower workforce turnover. The fourth tailings filter arrived on site in early November, and its installation is progressing as planned. We achieved key structural and mechanical milestones during the quarter, keeping the project firmly on schedule. Commissioning remains on track for the first half of 2026, positioning us to reach full operational capacity in the second half of the year. This is a critical step towards unlocking the plant's full potential and securing long-term cash flow generation. On exploration, recent drilling has confirmed new mineralized extensions, reinforcing our confidence in the asset's geological upside and its potential for further life-of-mine extensions. Now, please turn to slide number 6 for an update on the Cerro Pasco Integration Project. In parallel with our operational progress, we have advanced preparatory studies for Phase 2, including technical assessments of the Picasso shaft and several underground integration alternatives. Our goal is to define the most efficient long-term configuration to maximize value from this highly prospective mineral district. Looking ahead to 2026, we will intensify Phase 1 construction and commissioning activities with a strong focus on discipline and consistent execution. The Cerro Pasco Integration Project remains a key strategic driver, supporting a potential life-of-mine extension of over 15 years, enhancing profitability, and solidifying Nexa Resources S.A.’s long-term presence in one of Peru's most important mining districts. Next, on slide number 7, I would like to highlight the continued progress of our exploration program. Our 2025 exploration plan delivered solid results across our key assets, reaffirming their geological potential. In slide number 7, you can see deep intersections with high metal grades across all mines. At Cerro Lindo, activities focus on expanding known ore bodies in the southeast region. Drilling confirmed the continuity of mineralized zones, particularly in ore body 8C, which supports the mine's long-term production profile. At Aripuanã, exploration concentrated on the Massaranduba target, where drilling confirmed new mineralized areas, including thick, high-grade intersections in a recently identified structure. At Vazante, brownfield exploration advanced near existing infrastructure, confirming extensions of known zones and enhancing operational flexibility within the current mine plan. Finally, at Pasco, exploration continued delivering positive results around the integration target, which remains a strategic upside for the Cerro Pasco Integration Project. Together, these results reinforce our resource and research inventory, paving the way for further life-of-mine extensions. Now, let's turn to slide number 8 to review our smelting performance in more detail. Turning to the smelting segment. Sales were 142,000 tons for the quarter and 567,000 tons for the full year, in line with our 2025 guidance. The sequential decline was primarily driven by lower production at our Brazilian smelters and softer demand for zinc oxide. From a cost perspective, the quarterly cash cost was $1.41 per pound. This reflects the impact of higher zinc prices and lower treatment charges, which impact margins in an environment of tight concentrate supply. For the full year, cash cost was $1.28 per pound, in line with our guidance. Conversion cost was $0.34 per pound in the quarter, slightly lower sequentially. On a year-over-year basis, the increase is attributable to higher operational costs and unfavorable foreign exchange variations at our Brazilian units. For the full year, conversion costs remain below our annual guidance, demonstrating disciplined cost control despite a challenging environment. From a financial standpoint, the segment generated net revenues of $573 million, and adjusted EBITDA of $34 million in the quarter, reflecting the challenging market environment and operational constraints. For the full year 2025, net revenues totaled approximately $2 billion, with adjusted EBITDA of $113 million, corresponding to an EBITDA margin of 6%. Looking forward, increasing global mine supply is expected to lift treatment charges, supporting a gradual rebound in margins. With that, I will now hand the call over to our CFO, José Carlos del Valle, for a detailed review of our financial results. Jose, please go ahead. José Carlos del Valle: Thank you, Ignacio, and good morning, everyone. Let's turn to slide number 9 for an overview of our financial performance. We closed the year with strong momentum in the fourth quarter, driven by improved operational execution and supportive pricing environment. Starting with the upper left chart, in the fourth quarter of 2025, net revenues reached $903 million, up 18% sequentially and 22% year-over-year. This growth was fueled by higher average metal prices, stronger contribution from by-products, and improved mining performance. For the full year, net revenues totaled $3 billion, a 9% increase compared to 2024. Moving to adjusted EBITDA, we reported $300 million in the quarter, a significant improvement, both quarter-over-quarter and year-over-year, translating to a 33% EBITDA margin. This reflects stronger price realization, combined with improved operating leverage from increased volumes. For the full year, adjusted EBITDA reached $772 million, up 8% versus 2024, with a margin of 26%. This demonstrates the resilience of our integrated mining and smelting portfolio across varying market conditions. Overall, the year reflects disciplined execution, pricing support, and effective cost management across our segments. Now, let's turn to slide number 10 for a closer look at our investments. For the full year 2025, total CapEx reached $352 million. The majority was directed towards sustaining activities, including mine development, maintenance, and tailing storage facilities, all fully aligned with our operational priorities and commitment to asset integrity. CapEx execution came in slightly above our $347 million guidance, primarily due to the appreciation of the Brazilian real against the US dollar, which had an approximate impact of $7 million during the year. In the fourth quarter, CapEx totaled $125 million, in line with our plan. Regarding the Cerro Pasco Integration Project, phase one investments reached $12 million in the quarter and $42 million for the full year. This was slightly below the initial plan of $44 million, reflecting disciplined project execution and cost control. Moving to the lower section of the slide, exploration and project evaluation investments totaled $78 million for the year, below the initial plan of $88 million. This performance is consistent with our capital allocation framework, which aims to maintain our focus on mine life extension and portfolio optimization. With that, let's turn to slide number 11 to review our cash flow generation. Starting from the $772 million of adjusted EBITDA, after adjusting non-operational items, we can see that during 2025, we generated $846 million in operating cash flow before working capital on other variations. From this amount, we invested $354 million in CapEx across our operations and paid $254 million in interest and taxes, reflecting both our investment cycle and our capital structure. Working capital and other cash flow variations had a negative impact of $212 million. Operational working capital remained essentially flat, with the movement largely explained by other cash items, including some one-offs. We continue to advance initiatives to enhance our cash conversion cycle and further strengthen liquidity. Foreign exchange variations contributed positively by $13 million, mainly due to the appreciation of the Brazilian real. As a result, cash flow before loans, debt payments, and dividends totaled $39 million. On the financing side, we can see a net debt reduction of $96 million, reflecting our liability management efforts and consistency in our debt reduction strategy. Additionally, during the year, we successfully issued a 12-year bond in April and completed the full redemption and partial tender offer of two earlier maturity bonds. Towards the end of the year, we also executed early repayments of some debt facilities, along with our regular lease liability payments. These actions were essential to further strengthen our maturity profile and advance our overall debt reduction strategy. Furthermore, we also distributed $48 million in dividends, including share premium reimbursements and payments to non-controlling interests. After these movements, free cash flow for the full year was -$105 million. Importantly, this outcome reflects deliberate capital allocation decisions, including debt reduction and shareholder distributions, while maintaining strong operating cash generation. With that, let's move to slide number 12. As you can see, our liquidity position remains robust, supporting a solid balance sheet and an extended debt maturity profile. We close the quarter with total liquidity of $842 million, including our undrawn $320 million sustainability-linked revolving credit facility. Our average debt maturity increased to 7.6 years, compared to 5.6 years at the end of 2024, with an average cost of debt of 6.49%. This improvement reflects our proactive liability management actions during the year. Importantly, our available liquidity, excluding the RCF, covers all financial commitments over the next 5 years. Finally, net leverage improved to 1.7x, down from 2.2x in the previous quarter, supported by higher last 12-month EBITDA and a reduction in net debt. We continue to optimize our capital structure through funding diversification and disciplined liquidity management. Maintaining a maturity profile that is aligned with the life mine prospects of our assets remains a priority, while preserving our investment-grade rating and a competitive cost of capital. Looking ahead, we remain committed to further deleveraging and reducing gross debt over time, with a target of lowering interest expenses and enhancing financial flexibility. With that, I will now hand the call back to Rodrigo to discuss market fundamentals. Rodrigo Cammarosano: Thank you, José Carlos. Turn now to the zinc and copper markets on slide number 13. As you can see, zinc prices remained well-supported throughout 2025. This strength was largely driven by persistent concentrate tightness and substantially low LME inventories. Treatment charges, particularly in China, averaged negative levels during the year, a clear reflection of raw material scarcity. Imported TCs ended the year around $60 per ton, is still well below mid-cycle conditions. Structurally, the zinc market continues to reflect limited near-term mining supply growth relative to smelting capacity. This imbalance has supported prices, even against a backdrop of macro and trade-related volatility. Looking ahead to 2026, we expect a gradual improvement of mining supply, which should support a modest recovery in treatment charges from the historically low levels seen in 2025. However, this recovery is likely to be regionally distinguished. In China, smelters are expected to calibrate capacity utilization based on domestic concentrate availability and TCs for imported concentrate. Outside China, high energy costs and sub-historical TCs may continue to constrain margin expansion in the near term. Zinc prices should remain supported, at least in the first half of 2026, by tight inventories, resilient demand, and a softer US dollar environment. Against this backdrop, Nexa Resources S.A. integrated mine-to-smelter platform remains a key differentiator. It allows us to partially mitigate concentrate market volatility and preserve margin resilience across cycles. Turn now to copper. Prices appreciated in 2025 on the back of supply discipline and sustained demand driven mainly by electrification. Trade policy volatility added uncertainty during the year, the underlying structural fundamentals remain constructive. Incremental supply additions are unlikely to fully rebalance the market in the near term, meaning medium-term supply constraints remain a key theme supporting copper price. Let's turn to slide 14 for a look at precious metals. Moving now to silver and gold. Silver was one of the best-performing metals in the fourth quarter of 2025. The rally was supported by strong investment flows, monetary policy expectations, and sustained industrial demand, especially from solar energy, electrification, and AI-related infrastructure. Silver's dual role as both a monetary asset and an industrial input continues to support its demand profile. Importantly for Nexa Resources S.A., we produce around 11 million ounces of silver annually, which provides meaningful precious metals exposure within our base metals portfolio. Beginning in the second quarter of 2026, this is a key point, our silver streaming agreement steps down from 65% to 25%. This materially increases our realized exposure to silver prices and enhances EBITDA leverage going forward. It is a relevant structural catalyst for our earnings profile. Turning to gold, prices traded near record levels in the fourth quarter, supported by central bank buying, ETF inflows, a softer US dollar environment, and elevated geopolitical uncertainty. Gold continues to provide portfolio diversification and countercyclical support. Looking ahead, US monetary policy and geopolitical developments remain key drivers for precious metals price. Now, on Slide 15, I will comment on the developments of our ESG agenda. Let me briefly turn to ESG. In 2025, we continued to advance our ESG strategy as an integral component of our business management. On climate and decarbonization, we consolidated renewable energy supply across our operations and continued implementing operational efficiency initiatives aimed at managing emissions intensity. We also advanced circular economy initiatives, reinforcing our focus on waste reduction and resource efficiency across our units. From a governance standpoint, we maintained our CDP rating at B for both climate change and water security, and further reinforced the integration of our ESG criteria into our enterprise risk management framework. Community engagement also remained a focus, with continued investments in local infrastructure and structured development programs both in Brazil and Peru. Our participation at COP30 reinforced our long-term commitment to climate action and responsible mining. Now, I would like to address an important governance development. Over recent months, we conducted a structured review of our public ESG targets. The objective was to enhance methodological consistency, improve transparency, and ensure alignment with operational realities and updated baselines. As a result of this process, we are proposing recalibrated targets grounded in three pillars. First, technical robustness and including refined baselines and third-party verification. Second, strategic transparency with recognition of operational constraints and industry dynamics. Third, sustainability of commitments, ensuring that targets remain realistic, measurable, and aligned with long-term business performance. We will disclose the full methodology and detailed targets in our sustainability report in 2026 materials. Now, moving to our final slide, our focus and priorities. I will now hand it back to Ignacio for his comments. Ignacio, the floor is yours. Ignacio Rosado: Thank you, Rodrigo. Turning to slide number 16. Before we open the floor for Q&A, let me close by reinforcing our strategic drivers and priorities. Aripuanã continues to be a key near-term catalyst. The fourth filter is progressing on schedule and will unlock full production capacity in 2026, positioning the asset to further strengthen cash generation. Supported by a long reserve life and resource base, Aripuanã is a core contributor to our long-term value creation. At Cerro Pasco, the integration project targets a relevant life of mine extension within a well-established mineral region. The project enhances asset integration, improves operational flexibility, and enhances the profitability profile of the entire complex. Exploration continues to deliver across our assets, paving the way to further life of mine extensions and reinforcing the quality of our asset portfolio. At the same time, we remain disciplined in our approach to growth. We continue to evaluate value accretive opportunities selectively. Operational and financial discipline remain central to our strategy. We are focused on generating sustainable cash flow to continue strengthening our balance sheet and to support a balanced capital allocation approach that includes deleveraging and shareholders' return. Finally, ESG continues to evolve as a core pillar of how we manage the business at Nexa Resources S.A. In 2025, we enhanced our governance framework, improved methodological consistency in our public targets, and reinforced the alignment between sustainability commitments and operational realities. Our goal is clear: increase transparency and ensure ESG execution strengthens the long-term sustainability of the business. As we look ahead, we enter 2026 with improved operational stability, disciplined capital allocation, and a well-defined set of priorities focused on business resilience and consistent shareholder returns. With that, let's open the floor for your questions. Operator: Thank you. We will now begin the question and answer session. To ask a question, if you are joining via Zoom, please click the Raise Hand button. You may also submit your question using the Q&A icon at the bottom of your screen. Please include your name and company when typing your question. For participants joined by phone, press star followed by 9 to raise or lower your hand. Once announced, press star followed by 6 to mute or unmute your microphone. Our first question comes from Pedro Melo, from Citi. Pedro Melo: Hi, can you hear me? Ignacio Rosado: Hi, we can hear you. Pedro Melo: Okay, thank you. Thanks for taking my questions. My question relates to the seasonal rainy period at the Aripuanã assets this quarter. Could you provide some color on the evolution of the asset production throughout this year, given the seasonal context of the first quarter and the inauguration of the fourth filter affecting the second half of the year, please? Ignacio Rosado: Yes, it's a very good question. In January, we have To give you an idea and based on some numbers, the bottleneck that we have with these 3 filters, tailings filters, takes the plant at around 140,000-145,000 tons per month, okay? We have been delivering production at this rate during the last 6 months. In the last 3 years, the rainy season, that was very heavy, caused a lot of pressure on the filters, and that's why we needed to slower this throughput, because the filters were not performing at this capacity, okay? In the case of January, we had a rate of 140 again, and given that we are mining a high-grade zone, we produce a very high zinc equivalent production. We are in the same rate as the previous 6 months that were wet season. In February, it went also very well. We needed to reduce the throughput a little bit because we want to make sure that we pass the rainy season in a very smooth way, but we maintain the silver equivalent production, and actually we increase it because also we were accessing zones of higher grades. This is going to be the case for March, which is important. Compared to previous years, this plan shows that with this rainy season that we are facing, this plant is starting to stabilize at these levels, okay? In April, we're gonna implement the fourth filter that is gonna be in ramping up between April, May, and June. With that and the capacity of these filters, we should be able to reach full capacity in the second half of this year. We see that the rainy season is no longer a bottleneck, and we are confident that Aripuanã finally is gonna be at full capacity. Pedro Melo: Thank you. It's so clear. Operator: The next question came in by phone. Please state your name and company before asking your question. Orest Wowkodaw: Oh, hi, this is Orest Wowkodaw with Scotiabank. Can you hear me? Ignacio Rosado: Hi, Orest, we can hear you clearly. Orest Wowkodaw: Thank you. My question is around your silver. Obviously, there's been a ton of interest in the market, with silver pricing really having moved up. We've seen some really extraordinary valuations out there for silver streams. I'm just curious, I know you have an existing stream, but I'm curious if you're at all contemplating doing additional silver streaming that could potentially bring you significant cash to just fully delever the balance sheet fairly quickly. José Carlos del Valle: Hi, Orest, thank you for the question. You're right. We are an important producer of silver, produce around 11 million ounces, this is certainly has a strong contribution in our results and in our valuation as well. As you mentioned, we do have a prevailing silver streaming agreement in Cerro Lindo that actually has a step down in probably in May of this year, when we reach a milestone of 19 million ounces. That in itself is going to bring some additional benefit to our annual results. To your specific question, whether we are considering this, I mean, no. You know, we're always looking for the best options to have a strong balance sheet and to maximize the balance of having a, you know, strong financials, the investment-grade rating, and the needed cash. We are confident with the structure that we have today. We view positively the recent trend in prices, not just of silver. We're confident that with that, we will be able to generate a strong cash flow and continue with our commitment of reducing debt in the coming years. Orest Wowkodaw: Okay. It's not something that's a high priority right now? José Carlos del Valle: No, it's not. Orest Wowkodaw: Okay. Thank you. Operator: Once again, if you would like to ask a question, please click on Raise Hand at the bottom of your screen. The next question comes from Camilo Pardo from Kallpa Securities. Camilo Pardo: Hello, Rodrigo. Good morning. Thanks for taking my question. My name is Camilo Pardo. I'm at Kallpa Securities, Peru, and my question is related to the one before, and it is: how should we think about the cash flow impact of the Cerro Lindo silver stream in 2026 and 2027, if applicable, considering that deliveries are priced at a fixed percentage of a spot? Ignacio Rosado: Yes. Hi, Camilo. Thank you for the question. Yeah, as I mentioned, you know, we've had this silver streaming agreement for a while, and there's a step down that is reached when we deliver 90 million ounces. This is going to happen in the next few months. We and these percentages that are committed to the silver streaming agreement will go down from 65% of the Cerro Lindo silver production to 25% of the Cerro Lindo silver production. There's 40% that in the past had to be delivered to the streamer, and now will stay within Nexa Resources S.A. You can do the math, you know, at the current prices, what the impact of that will be. Operator: Thank you very much. Operator: I would like to turn the call over to Mr. Rodrigo for the writing question. Please go ahead. Rodrigo Cammarosano: Thank you, operator. We have one first question here from the audience. The question is, recently, there has been some news related to strong rains in Peru. Can you comment if there has been any incident or any an incident in any of our operations or logistics? Ignacio Rosado: Yes, yes, there were. Yeah, Peru is facing again the El Niño phenomenon, and we are not facing any impact on production and on logistics now. We have been working through the years in this. We had some event in Cerro Lindo of summer heavy rain, nothing happened, and we are managing that, and production hasn't been impacted, and in the case of Pasco as well. We are well prepared today for those events. We don't know what will happen in the future, of course, but so far we haven't been impacted by that. Orlando Barriga: Thank you, Ignacio. The first question was from Orlando Barriga from Credicorp Capital. We have a second question here, is: Can you provide color on Phase 2 of the Cerro de Pasco integration project, and, especially in regards to the start-up date and when we expect to have access to high-grade reserves at Atacocha? Ignacio Rosado: This is a very good question, and this is a very good problem to have, I would say. We don't have any specific date because we are already starting on planning this second phase, because we have been drilling heavily in the intersection of the 2 mines, and because of that, we have been finding a lot of resources with very high grade. Because of that, we decided to postpone this phase 2. Having said that, we will still drill this intersection, and in, I would say in 1 or 2 years, we will have an inventory of reserves that is more important for us, and with that, we will build a mine plan. We don't have any specific date to access high grades at Atacocha. They are good grades, probably the intersection have a higher grades, the NSR is higher. We will know eventually when we will have the mine plan, we will keep the market informed, for the time being, it's a very good problem to have, specifically, we don't have a date, we will have some color in the next one or two years. Rodrigo Cammarosano: Well, thank you, Ignacio. We have another question from the audience. Is there, and there is this ambition of the management to use the instrument, I believe it is the one that José Carlos mentioned, to lock in the benefits of currently high silver prices? José Carlos del Valle: Yes, hi. As I mentioned, we're not considering silver streaming as an option today. It's not a priority. We always listen to proposals. Obviously, there's a lot of interest in silver. It's currently not a priority. Rodrigo Cammarosano: Thank you, Jose Carlos. We have another question that comes from Omar Avellaneda, from Compass Group. Can you provide an update on Ayawilca project and Tinka Resources investment? Omar Avellaneda: Yes. Well, in Ayawilca, we said before, it's a very good project, and we are always assessing what we are gonna do with this project. The environmental impact study was disapproved, and we are now at the stage that we have to sit with the government to see how we perceive this as a this important project going forward. For the time being, we don't have any specific action for that, especially only sitting with them and see how can we envision this in the coming years. In the case of Tinka, there was a follow-up, the, on equity that we didn't. Ignacio Rosado: We decided not to go through, because, we believe that is a very important asset, but we have other priorities, so we got diluted. Okay? I guess there is another question around, in that, in also, in all that around the elections. Rodrigo Cammarosano: Yeah. Let me read the question again. There's a sequential question from Omar, which is: "Can you comment on current electoral environment in Peru, and the company thoughts on the, on this matter? Omar Avellaneda: Yeah. Well, it's a, it's a shame that we have another president that is gonna stay for the next 3 months in Peru. The last one lasted only 4 months, and there is a lot of political noise around this, and it's very, very difficult to digest, especially for people outside Peru. Having said that, I would say that the economic context of the country is very strong, and the economic development of the country, in a sense, does not follow this political problems that we face. Okay? Regarding the new president that will come, it's very difficult to say. We have to wait until the first round that is happening in April. In any case, in all of these years, Peru has been a stable country from an economic point of view, with a stable exchange rate, growing, and the political environment does not impact most of the economic development of the country. In the mining sector specifically, we, our surroundings, our stakeholders, especially communities, we have very good relationships with them in most cases, and they also don't follow these political problems that we are facing. Actually, the relationship that we have with them and the way we treat that relationship from an economic point of view is the thing that matters, okay? That's why this new president won't influence in the next three to four months in the way we, our relationship with communities. We'll see what happens in April, and we will, we can, we come back to that question later on, okay? Rodrigo Cammarosano: Thank you, Ignacio. we got another question. from Orlando from Credicorp Capital: "You amortize around $120 million in debt, gross debt, during the 4Q. How much are you planning on paying down in 2026 and 2027? Orlando Barriga: Thanks for the question, Orlando. Yes, as we have been mentioning in our last calls, debt repayment is a priority. In the absence of any major changes, the idea is that any excess cash that we generate, you know, we will use to pay dividends according to our dividend policy, and the rest will go to pay down debt. That's, that's the plan. Rodrigo Cammarosano: Thank you, Jose. We got another question. This is more specific in regards to the hedge of silver and gold. "Could you provide details on the floor and upper limit of the hedging program for silver and gold? José Carlos del Valle: Yes, thank you for the question. That's true. We did a small portion. We hedged a small portion of our silver production. Also taking into consideration that we have a silver streaming agreement, so it was a small portion of our silver production, mainly in Peru. The floor is around $52, and the cap is around $84. Rodrigo Cammarosano: Thank you, José. We have another question here from the audience, comes from Pedro Melo, from Citi. The question is more related to the medium-term strategy for the company. "If the company managed to implement the fourth filter for Aripuanã, execute a turnaround by reducing leverage and gross debt, with extension of mine life being constant, I mean, the replenish of the mine life, such as, let's say, with the Pasco Complex project, what should be the company's next step for long-term investments? Pedro Melo: Yeah, very good question. As José Carlo mentioned, the idea is that with these price levels and the stability on operation that we are showing now, especially with Aripuanã, we generate a significant cash flow this year, and we try to start reducing, in a significant way, our debt. This debt was accumulated because of the Aripuanã project. Based on that and the other fronts going forward, Aripuanã is stabilizing and growing, Cerro Pasco is stabilizing and growing, and Cerro Lindo being stable, and Vazante as well, and the smelters recovering part of the profitability with a market that is changing. Nexa Resources S.A., with the current assets is in a solid position, exposed to very good prices and bringing down debt. With that, I would say that the next step is that we are very active looking for opportunities in the market, especially in copper. We have a list of alternatives that we have assessed and we are very close to. I would say that if that happens through this year, we will be more active looking for these opportunities, because the balance sheet that we will have is gonna be more flexible to try to achieve those. It's very simple: a solid company exposed to prices and trying to look for the opportunity in copper. Rodrigo Cammarosano: Thank you, Ignacio. I will hand it back to the operator. I believe we have some, a couple of questions from through the phone. Operator: Thank you. The next question comes from Henrique Braga, from Morgan Stanley. Henrique Braga: Hello, team. Thanks for taking my question. I just wanted to follow up on Cerro Pasco. If you could give additional details on your CapEx disbursement that you have envisioned for the project this year and the next. Thank you. Rodrigo Cammarosano: Hi, Henrique, this is Rodrigo. I can take this question. We are on track with execution of the phase one. The CapEx that we spent last year was pretty much in line with the expectation for the year, around $42 million. We believe that the CapEx for this year should be the same amount, because the idea is to complete the phase one this year. This will pave the way for phase two, just like Ignacio mentioned. Execution's on track, and CapEx so far is on budget. Operator: This concludes our question and answer session. I would now like to hand the call over to Mr. Ignacio Rosado for his closing remarks. Mr. Rosado, please go ahead. Ignacio Rosado: Thank you very much. Before we conclude, I would like to briefly address the recent intense rainfall in Juiz de Fora here in Brazil. We recognize the impact these weather conditions have had on the municipality, express our solidarity with the local community. We reaffirm that our dam structures continue to be closely monitored and remain safe, with no change in their stability levels. Safety remains at our top priority, we reaffirm our ongoing commitment to the integrity of our operations, our employees, and the communities that we operate. In this case specifically, we are providing full support to employees who have been affected by the situation and the community in general. Regarding our first quarter, we are looking forward to have a strong quarter from an operational point of view. Hopefully, we close the quarter with exposed again with these prices. We look forward to speaking with you again during next quarter. Have a great day, and thank you very much again. Operator: Thank you. This concludes today's conference call. We appreciate your participation and interest in Nexa Resources S.A. You may now disconnect.
Operator: Good day, everyone, and welcome to today's ANI Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Earnings Results Call. Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Courtney Moverly. Please go ahead. Unknown Executive: Thank you, Erica. Welcome to ANI Pharmaceuticals' Fourth Quarter and Full Year 2025 Earnings Results Call. This is Courtney Moberly, Investor Relations for ANI. With me on today's call are Nikhil Lalwani, President and Chief Executive Officer; Stephen Carey, Senior Vice President and Chief Financial Officer; and Chris Mutz, Senior Vice President and Head of ANI's Rare Disease business. You can also access the webcast of this call through the Investors section of the ANI website at anipharmaceuticals.com. This call is accompanied by a slide deck that can be accessed by going to the Events section of the Investors page of our website. You can turn to our forward-looking statements on Slide 2. Before we begin, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to ANI's Pharmaceuticals management as of today and involve risks and uncertainties, and including those noted in our press release issued this morning and our filings with the SEC. Going such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ANI specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. During this call, we will also refer to certain non-GAAP financial measures. These non-GAAP financial measures should not be considered as an alternative to financial measures required by GAAP. The non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measures in a table available on the slide deck accompanying this call. The archived webcast will be available for 30 days on our website, anipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and reported on February 27, 2026. Since then, ANI may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Nikhil Lalwani. Nikhil Lalwani: Thank you, Courtney. Good morning, everyone, and thank you for joining us. 2025 was another year of outstanding execution and growth by the ANI team, highlighted by our remarkable results in the fourth quarter. At the core of everything we do is our purpose of serving patients improving lives. With our progress in the last year, we are well positioned to continue delivering on that purpose in 2026 and beyond. Starting with Slide 4. In 2025, the company delivered record revenue adjusted non-GAAP EBITDA and adjusted non-GAAP diluted EPS, driven by strong performance across our rare disease and generics business unit. For the full year, we grew total company revenues by 44% year-over-year and adjusted non-GAAP EBITDA by 47% year-over-year. In addition, we delivered exceptional growth for our lead rare disease asset, Cortrophin, with full year revenues up 76% year-over-year as we meaningfully expanded our reach in underpenetrated specialty indications and serve more patients. With our strong R&D and operational capabilities, our generics business continued to outperform, growing 28% year-over-year in 2025. Turning to Slide 5. We believe the momentum we generated in 2025 positions us for continued growth in 2026. Our priorities for this year are threefold. First and foremost, ANI's transformation into a leading rare disease company. For our lead asset, Cortrophin Gel, we plan to maximize its multiyear growth opportunity by addressing the significant unmet need across indications. We will continue to build on our momentum in the key underpenetrated specialty indications in nephrology, neurology, rheumatology, ophthalmology and pulmonology. In addition, for building and deploying a 90-person organization dedicated to acute gardioarthritis fares. For this expansion, we plan to capture sizable and unique additional opportunity in gout to expanding awareness and adoption of Cortrophin for appropriate patients by newly identified physicians in polity and primary care. For ILUVIEN we are focused on returning the product to growth by leveraging the commercial and patient access initiatives established in 2025. Importantly, we continue to believe in the long-term potential of ILUVIEN as we believe the addressable patient populations across DME and NI UPS are at least 10x the current number of patients treated with ILUVIEN today. Our second priority is continued execution in our generics business by leveraging our superior R&D capabilities, operational execution, U.S.-based manufacturing and business development expertise as well as maintaining our current cadence of 10 to 15 launches annually. We continue to make progress on this priority and anticipate another year of strong performance and cash generation from our generics business that will enable us to further invest in our rare disease business. Our third priority is executing a disciplined capital allocation strategy. We are focused on driving organic growth by investing in our dedicated organization for Cortrophin in acute gartiarthritis flares and investing a high single-digit percentage of generics revenue into generics R&D and to drive inorganic growth by exploring opportunities to expand the scope and scale of our rare disease business. . Turning to Slide 6. We believe the 3 2026 strategic priorities will drive long-term growth and value creation for the company. In 2026, we expect to deliver over $1 billion in revenue, representing 23% growth over 2025 at the midpoint of our guidance range. Rare disease is expected to account for approximately 60% of our total revenues in 2026 with Cortrophin growing 60% year-over-year. We also expect to expand the bottom line with adjusted EBITDA forecasted to grow 23% year-over-year at the midpoint of our guidance range. Later in the call, Steve will provide more detail on our 2026 guidance. In summary, 2025 was a pivotal year for ANI as we delivered record performance and drove significant growth across the business lines. We are entering the year from a position of strength and are focused on executing on our 3 strategic priorities. We anticipate that our virtuous cycle of growth in which our generics and brands businesses generate meaningful cash flows to support our rare disease business will drive our transformation into a leading rare disease company. I'll now turn the call to Chris to discuss our rare disease business in more detail. Chris? Christopher Mutz: Thank you, Nikhil, and good morning, everyone. Starting with Slide 7. Looking at 2025, I'm proud of our team as we closed out the year strong, delivering another excellent quarter, marked by significant growth for Cortrophin Gel as we expanded our reach in underpenetrated specialty indication. During the fourth quarter, the number of cases initiated and new patient starts reached another record high, and we saw broad growth across all of our targeted specialties, rheumatology, nephrology, neurology, pulmonology and ophthalmology. Prescribing for Cortrophin gel and acute gouty arthritis flares remained a key growth driver this quarter. This indication is unique to Cortrophin gel among ACTH therapies and represented approximately 15% of total utilization. Notably, gardiaarthritis has also been a strong catalyst for new prescriber additions, including many providers who are previously unfamiliar with ACTH. We also continue to realize meaningful revenue synergies and ophthalmology with fourth quarter Cortrophin gel volumes in ophthalmology over 2x that of the same period a year ago. Ophthalmology remains a fast-growing targeted specialty for Cortrophin gel and we believe there is further upside as we expand awareness of Cortrophin gel for patients with severe allergic and inflammatory eye conditions. Turning to Slide 8. Looking at the market more broadly, the ACTH space has returned to growth following the launch of Cortrophin Gel in 2022 and approached $1 billion in sales in 2025. We expect it to increase significantly in 2026 with Cortrophin gel growing by 55% to 65%. Turning to Slide 9. We continue to believe that the addressable patient populations across our key indications remain significantly underpenetrated. For example, there are roughly 10 million patients in the U.S. with [indiscernible] about 36% received treatment annually, and they have 1.5 to 2 flares on average per year and about 8% of those patients with severe gadiarthritis and injectable treatment for their flares. This group of 285,000 patients represent our addressable patient population. Importantly, prescribers who were previously naive to ACTH represent approximately half of our total Cortrophin gel prescriber base, and this cohort continues to expand. We believe the most significant opportunity for growth is through overall expansion of the ACTH market by addressing unmet needs of appropriate patients. To capture the multiyear growth potential of Cortrophin gel, we continue to focus on 3 key strategic priorities outlined on Slide 10. We are investing in high ROI commercial initiatives. Building on the commercial expansion we executed in 2025, we are now taking the next step to capture the unique opportunity for Cortrophin Gel and acute [indiscernible] flares with our new 90-person dedicated organization. There are several reasons why we are confident about the opportunity in acute gadiarthritis flares. As I highlighted earlier, there is a large addressable patient population of 285,000 patients. Second, Cortrophin gel is the only approved ACTH therapy for acute cardio arthritis flares. And third, we have a proven track record in this indication. Prescribing for acute gadioarthritis laris represented approximately 15% of Cortrophin gel use in 2025. In addition, we ran successful pilots across 10 territories in primary care and podiatry. This gave us further confidence to expand our organization to capture the opportunity in acute [indiscernible] The hiring process is underway, and we expect to deploy this team by midyear. While we anticipate the expansion to the impact in Cortrophin gel volumes in the second half was 2026, we expect a greater impact in 2027 as the team reaches full productivity. Additionally, we continue to focus on enhancing patient convenience. Our Cortrophin gel prefilled syringe offering, which we launched in April of last year, simplifies administration and provides a more convenient option for patients. The launch of the prefilled syringe has been well received by both patients and prescribers and continue to support broader adoption and serve as an important growth driver for Cortrophin Gel. Finally, we continue to invest in generating robust clinical evidence to support physician decision-making and confidence in Cortrophin Gel. As part of this effort, we are advancing a 150-patient Phase IV study in acute [indiscernible] flares. This trial, along with ongoing collection of preclinical and real-world data across core indications is designed to reinforce Cortrophin Gel differentiated nonsteroidal mechanism of action and provide insights that may support adoption and treatment guidelines. We also continue to generate robust preclinical data for our key stakeholders on Cortrophin Gel differentiated mechanism of action across multiple disease states. This remains a critical growth initiative. As expanding the body of evidence supporting Cortrophin gel use across indications help physicians make more informed treatment decisions. On Slide 11, turning to our retina franchise. We are continuing to advance several initiatives to support ILUVIEN sales. Our fully onboarded commercial team is focused on educating and engaging the retina community, and we are ramping up peer-to-peer educational programs and field activities with updated marketing materials to enhance physician understanding of ILUVIEN and its 2 indications. In June of last year, we began promoting ILUVIEN under the combined label for chronic NI UPS and DME. Our sales teams have been educating customers nationwide, while our market access team worked with payers to establish coverage for the new chronic NIPS indication, all 7 Medicare Administrative Contractors or MAX have now updated their policies to cover ILUVIEN for NI UPS. Among the top 20 commercial payers, all those with ILUVIEN specific policies have updated them to reflect both DME and NI UPS indications. We also implemented initiatives to help physician practices navigate ongoing Medicare market access challenges that have persisted since January 2025. As a reminder, patient support foundations, such as good days had limited funding in 2025, affecting their ability to assist Medicare patients with co-pay support across retina products. Our team has gained traction with leading retina practices, helping them explore pathways secure ILUVIEN for eligible patients under the Medicare Part D benefit using a specialty pharmacy, the same approach used for Cortrophin gel access. In addition, we continue to share results from our NewDay study of ILUVIEN in patients with DME and which were presented at prominent medical meetings, including most recently at the Flow Retina International Congress in December and the Hawaiian and Retina Conference in January. With that, I'll turn the call over to Steve for the financial update. Steve? Stephen Carey: Thanks, Chris, and good morning to everyone on the call. I'll review our fourth quarter and full year 2025 results and 2026 guidance in more detail. In 2025, we delivered on our financial commitments, generating robust top and bottom line growth and significant cash flows. Starting on Slide 12. The ANI recorded revenues of $247.1 million in the fourth quarter, up 30% over the prior year period. For the full year 2025 ANI generated record revenues of $883.4 million, up 44% versus 2024. Revenues from Cortrophin Gel in the fourth quarter were a record $111.4 million, up 88% from the prior year period. In 2025, Cortrophin gel delivered $347.8 million of net revenue, up 76% year-over-year driven by strong adoption across neurology, nephrology, rheumatology, pulmonology and ophthalmology. ILUVIEN net revenues were $19.8 million in the fourth quarter and $74.9 million for the full year 2025. Revenues for generics in the fourth quarter were $100.8 million, an increase of 28% over the prior year. The outperformance for the quarter was driven by continued strength in the partner generic launch that occurred in the third quarter of 2025. Full year revenues in 2025 for generics were $384.1 million, an increase of 28% over the prior year, reflecting our strong R&D capabilities, execution and steady cadence of new product launches. Now moving down the P&L on Slide 13. As a reminder, when I speak to our operating expenses, I will be referring to our non-GAAP expenses which are detailed in Table 3 in our press release. Generally, our non-GAAP operating expenses exclude depreciation and amortization, stock-based compensation and certain costs related to litigation and M&A activity. Please refer to Table 3 for a full reconciliation to our GAAP expenditures. Non-GAAP cost of sales increased 43% to $99.8 million in the fourth quarter of 2025 compared to the prior year period primarily due to net growth in sales volumes and significant growth of royalty-bearing products. Non-GAAP gross margin in the fourth quarter was 59.6% and a decrease of approximately 400 basis points from the prior year period, principally due to product mix, including significant growth of royalty-bearing products, including Cortrophin and a partner generic product that was launched in the third quarter as well as lower brand revenues. For the full year of 2025, non-GAAP cost of sales increased 44% to $339.5 million compared to the year before and non-GAAP gross margin was 61.6%, down approximately 10 basis points from the prior year. Non-GAAP research and development expenses were $11.7 million in the fourth quarter, a decrease of 27% from the prior year period, driven by timing of rare disease and generic programs. For the full year of 2025, non-GAAP research and development expenses increased 18% to $49.5 million compared to the year before due to higher investment to support future growth of our rare disease and generics businesses. Non-GAAP selling, general and administrative expenses increased 28% and to $70.2 million in the fourth quarter, driven by spend for our new larger ophthalmology sales team, promoting Cortrophin Gel and ILUVIEN and continued investment in rare disease sales and marketing activities including the expansion of the rare disease team in the first quarter of 2025. For the full year of 2025, non-GAAP selling, general and administrative expenses increased 46% to $264.6 million. Adjusted non-GAAP diluted earnings per share was $2.33 for the fourth quarter compared to $1.63 per share in the prior year period. For the full year of 2025, non-GAAP diluted earnings per share was $7.89 compared to $5.20 the year before. Adjusted non-GAAP EBITDA for the fourth quarter was $65.4 million, up 31% compared to the prior year period and was $229.8 million for the full year, up 47% compared to the prior year. We ended the fourth quarter with $285.6 million in unrestricted cash up $140.7 million as compared to the $144.9 million as of December 31 of the prior year. Cash flow from operations was $30.4 million in the fourth quarter of this year and $185.2 million on a full year basis. As of December 31, 2025, we had $629.1 million in principal value of outstanding debt, inclusive of our senior convertible notes and term loan. At the end of the fourth quarter, our gross leverage was 2.7x and our net leverage was 1.5x our full year adjusted non-GAAP EBITDA of $229.8 million. This morning, we are pleased to reaffirm our 2026 financial guidance, which reflects significant top and bottom line growth. Our guidance outlined on Slide 14 is as follows: 2 sorry, 2026 net revenue of $1.055 billion to $1.115 billion representing year-over-year growth of approximately 19% to 26%. Cortrophin Gel net revenue of $540 million to $575 million representing year-over-year growth of 55% to 65%, driven by continued volume gains. Consistent with prior years and typical industry dynamics, we expect first quarter Cortrophin general revenues to be down sequentially from the fourth quarter and to represent approximately 13% to 14% of total 2026 revenues slightly lower than in 2025, when the first quarter accounted for approximately 15% of full year revenues. This effect is driven by 2 factors: first, we are experiencing typical seasonality related to the impact of insurance reverifications, which appear to be taking slightly longer as compared to the prior year. Due to increased Cortrophin patient volume in the physician's offices and in some parts of the country due to weather-related physician office closures that temporarily delayed the reverification process. While these factors impacted January, we have since seen a 25% jump in volumes dispensed and acceleration in new patient starts in February, and are confident that the momentum will persist in March as physician offices complete work through the reverifications backlog. Second, our full year Cortrophin guidance is inclusive of initial script volume expected to result from our 90% organizational expansion to support our gaudy authorities flares indication. Revenues associated with this expansion will first occur in the third quarter and are expected to build momentum throughout the fourth quarter. As we look further out into the year, we remain confident in our full year guidance and the significant multiyear growth opportunity for Cortrophin Gel. We expect very significant sequential growth in the second quarter as typical first quarter dynamic subside. We then expect further sequential gains in the third and fourth quarters, driven by continued performance of our portfolio, pulmonology and ophthalmology teams, in addition to the full deployment by the end of the second quarter, of our new 90-person organization focused on acute cadiarthritis flares. We expect ILUVIEN net revenue of $78 million to $83 million, representing year-over-year growth of approximately 4% to 11%. We expect adjusted non-GAAP EBITDA and of $275 million to $290 million, representing year-over-year growth of approximately 20% to 26%. And from a quarterly cadence perspective, we expect adjusted non-GAAP EBITDA to be down sequentially in the first quarter and modestly down as compared to the first quarter of prior year driven by quarterly revenue dynamics. We then expect sequential growth in the remaining quarters of the year, with the fourth quarter representing the highest quarter by a significant amount driven by incremental contribution from our gout focused team expansion. We expect adjusted non-GAAP earnings per share between $8.83 and $9.34, representing year-over-year growth of approximately 12% to 18%. We expect adjusted gross margin to be 59.3% to 60.3% in 2026, which is down from 2025, driven by significantly higher forecast sales of royalty-bearing products the non recurrence of revenues from our first half 2025, 180-day exclusive launch of [indiscernible] and the expectation of lower brand sales. We currently anticipate a full year U.S. GAAP effective tax rate of approximately 26% to 28%. And consistent with prior quarters, we will tax affect our non-GAAP adjustments for computation of adjusted non-GAAP diluted earnings per share, utilizing our estimated statutory rate of 26%. We anticipate between $21.5 million and 21.8 million shares outstanding for the purpose of calculating full year non-GAAP diluted EPS and finally, please note that we will continue to exclude from our adjusted non-GAAP diluted EPS calculation, the dilutive shares included in GAAP diluted EPS, which are expected to be offset in full by the cap call transaction. With that, I'll turn the call back to Nikhil. Nikhil Lalwani: Thank you, Steve. Turning to Slide 15. In closing, we delivered a remarkable 2025 characterized by significant growth across Cortrophin Gel and outperformance in our generics business. We've entered 2026 in a position of strength and remain focused on achieving our strategic priorities, including accelerating our transformation into rare disease, continuing to execute in generics and deploying capital in a disciplined manner. . Overall, we expect to deliver over $1 billion in revenue in 2026 with rare disease representing approximately 60% of total revenues. With that, operator, please open the line for questions. Operator: [Operator Instructions] And we'll take our first question from the line of Glen Santangelo from Barclays. Glen Santangelo: Nikhil, obviously, Cortrophin continues to surprise on the upside, and you sort of make the case that you believe there's a multiyear opportunity here as you expand into these under-penetrated indications. And you're obviously investing in the sales force to try to take advantage of that. Without giving us guidance beyond 2026, I don't know if there's any high-level commentary you can sort of give us -- can you help us think about how meaningful this multiyear opportunity could be. And I am guessing you're starting to think about a peak sales number, maybe it's a little bit premature, but how do you think about that? And then my follow-up to Stephen's going to be -- the royalty steps up this year. Can you help us think about how that royalty is going to step up so we can sort of better model gross margins going forward? Nikhil Lalwani: Yes. Thank you for your question, Glen. Look, I think we believe in the significant multiyear growth opportunity for Cortrophin but I think the key really is Slide 9 in our deck from this morning, where we highlight the addressable patient populations across indications. . And these are significantly underpenetrated, not just by us but across the ACTH category. So we believe that there is a much larger number of patients that are yet to -- that are appropriate for ACT therapy that are yet to benefit from this therapy. So we see a significant multiyear growth run rate for the category and also for Cortrophin. And we're investing to build momentum in 2016 and beyond, right? So high ROI commercial initiatives like the 90% organizational expansion for gout, but we did an expansion last year. We're enhancing convenience, we launched a prefilled syringe last year. We're continuing to evaluate opportunities to further enhance patient convenience. And importantly, we're generating both scientific and clinical evidence we advanced Phase I clinical trial. We're advancing a Phase I clinical trial for Cortrophin in gout as well as a robust pipeline of investigator-initiated trials across disease trades. So we believe in the strong multiyear growth opportunity and are investing to ensure that we can capture that opportunity? And again, we believe in the opportunity for the category as a whole to keep growing for several years. And then your second question on the Merck royalty in 2025, annual revenues of Cortrophin Gel reached a level by which we surpassed the highest royalty tier for incremental net sales, the way in 2025 itself, we were in the highest royalty tier for the royalty. And then we currently anticipate the blended royalty rate to be in the high 20s in 2026. Operator: And we'll take our next question from David Amsellem with Piper Sandler. Glen Santangelo: So I had 2 on Cortrophin. So one, I'm trying to get a better sense of how you're thinking about operating leverage going forward. So you're adding the 90 reps, you're calling on primary care, you're calling on podiatrist. I'm just wondering how promotion intensive you perceive the gout indication to be and what that means for potentially further expansion. So just help us understand that and how you're thinking about operating leverage. That's number one. And then number two, are you thinking about indications like sarcoidosis and ophthalmic indications -- can you talk about the number of vials used or duration of treatment in those kind of indications versus gout? And what I'm trying to get at is the value of a given patient across the different opportunities within the Cortrophin franchise. So if you could help us provide color there, that would also be helpful. Nikhil Lalwani: Great. Thank you for your question, Dave. So the first question on operating leverage. Look, we're still in high-growth mode, and we continue to balance growth and profitability as we drive that growth, right? So when you look at 2025, our guidance implies EBITDA growth of 20% to 26%, and the EBITDA margin as a percentage of growth -- sorry, as a percentage has stayed in the same in our 2026 versus 2025 despite a our very significant investment in this 90% organization for a graft and then also related OpEx, right? So the total implied OpEx increase at the midpoint of our guidance is about $50 million, majority of which is for the gal expansion. And despite that, we're keeping the EBITDA margin percentage the same in '26 versus '25. We strongly believe that as we had seen even with the expansion last year of the sales force that we will see partial impact from the organization expansion for gout in 2026, and we'll see full impact in 2027, right? So the full year impact and -- because it takes the sales force, we'll have them in place by mid-year they'll have impact in Q3 and Q4. And then you'll see full impact in 2027, obviously driving operating leverage. So that's the question on operating leverage. And look, I think the key is in terms of further expansions, the key is the addressable patient population, right? As you know, we currently have a combined team that details into nephrology, neurology and rheumatology. That's called our portfolio team. We expanded that team in 2025, right? We still have a much larger addressable patient population that we can address, not just in these 3 beauty areas but across areas. So with an ability to reach physicians and reach patients there would be benefit from further expansions. Obviously, but that's down the field as we capture this multiple multiyear growth opportunity. I mean the key in terms of the current year investment we're seeing impact on this year retaining the EBITDA margin percentage and then going in 2027, we'll see a much bigger impact with the same level of SG&A this year. Your second question was on the duration of treatment across indications. The duration of treatment does indeed vary sarcoidosis has a much longer in use and more miles per patient, whereas acute [indiscernible] flares has a lower number of vials per patient that is appropriate, right, at the time of the exacerbation or flare. So there is a variance across the nation that we serve with Cortrophin Gel. Thank you, David. Operator: And we'll go next to Vamil Divan from Guggenheim Securities. Vamil Divan: Great. Maybe one more on Cortrophin. I could sort of building on the earlier question. So this additional 90% organization using is dedicated to the county opportunity in targeting primary campaign. I'm just trying to get a sense of again sort of the leverage of the opportunity for them to do other things beyond just gouty arthritis will they be going to any other specialties? Or are there other indications they'll be focusing on? Or is it strictly just for a arthritis. Just trying to get something in the ability to leverage that additional investment. And then second question, I guess, more for Steve on the business development side. And you've talked about investing and kind of expanding the rarer disease opportunity here. I'm just trying to get a sense of given where your leverage is now. So what you're willing to do in terms of leverage versus using equity or as you think about the size of potential deals what you beat in terms of options for financing those sorts of opportunities. Nikhil Lalwani: Thank you, Vamil. So on the 90% organization, that's for gout. And as a clarification, not all 90 are in sales. So majority of that any person grew its sales expansion, but there are obviously patient support operations and marketing and other support areas, too. . But yes, that organization and the sales organization and the rest of the organization can be leveraged both for other indications that they treat or primary care and purity do treat other indications that Cortrophin is indicated for, our focus is primarily on gout, but there are other indications potentially that they can treat, which [indiscernible] for the appropriate patients. but can be leveraged for that. But in addition, that sales force can also be leveraged by adding another product in the basket just like we did for ophthalmology. So that option is available. Obviously, our -- the opportunity in acute garden arthritis flares is very significant. We've identified 7,000 HCPs, that treat the most severe acute cardio arthritis flares patients, and that is our -- that is the primary focus of this expansion, and that is what we will be -- we focused on as we put this team in place by midyear. And look, we've made very good progress on the recruitment. We have our sales leadership and the area business directors in place and we're now moving to recruitment of the sales team members, and we will launch by midyear. So on the acute a few [indiscernible] players expansion. And then I'll turn it to Steve to answer your question on BD. Steve? Stephen Carey: Yes, thanks for the question. We're incredibly pleased with the cash flow dynamics of the company in 2025. We're ending the year with $285 million on the balance sheet and the business generated $185 million from operations in 2025. And as you see in our full year guidance, right, we're projecting continued both revenue and profitability measures growth and so we expect very healthy cash flows in 2026 as well. . And so at this point in time, right, given the strategic imperatives of the company to expand rare disease we anticipate accruing that cash to the balance sheet to build that war chest for future business development and M&A activities. I think what you've seen us do consistently, you can look back to when we purchase Novidium in 2021, when we purchased Alimera in 2024, right? We take a balanced approach to how we finance these types of activities. And in terms of leverage ratio, right, we like to take a reasonably conservative approach there. I think what we've done in the past is we'll take leverage up to the 3-ish range, maybe a touch above 3% on net leverage but always with a clear line of sight in terms of organic delevering. And if you look back, right, to the close of Alimera, we were just right around 3x net levered and here, just 5 quarters downstream, we've cut that leverage in half really driving with organic growth in the business. So I think you should expect similar moves in the future. Okay. Operator: And we'll take our next question from Dennis Ding with Jefferies. Yuchen Ding: We have 2. So on Cortrophin, thanks for the color on Q1, it seems like the winter storms were an unexpected impact, but bad things are recovering. So I'm wondering when you take a step back and think about the first versus second half split, it seems like it will be meaningfully second half weighted, and that does put pressure on the gout expansion going as planned. So how do you give investors confidence that will go as planned and the PCPs will be okay with prescribing a very expensive product. And then question number 2 is specifically on gross margins. So the royalty to work, I believe, is capped around 30% so we shouldn't really get any more incremental headwinds moving forward. But how are you thinking about buying that royalty down given how much cash flows you guys are generating? And is that a priority for you? And how do you also convince Merck to come to the table? Nikhil Lalwani: On thank you for your questions. Dennis, look are new dedicated field force for acute [indiscernible] arthritis flares will be deployed by midyear. And are reasons to believe are, number one, the large underpenetrated market opportunity and Cortrophin is the only approved ACTH product with this indication? Second is we have a successful track record in got plus of our volumes in 2025, coming from gout in rheumatology and nephrology. . And number three, our successful pilot programs across 10-plus territories in primary care and parity offices, which we ran in 2025, right? Would see the most severe acute [indiscernible] arthritis flares patients. And so we saw success with those pilot programs, and that gave us the confidence to deploy this larger sales force and the large organization in an indication where we have the indication, and we are the only ACTH product available, right? So with the field force deploying the midyear, we expect to see in Q3 and Q4, like we saw in 2025 when we did the expansion for our portfolio sales force. And we'll see the full realization in 2027, right? As we're expanding our field force, we're also investing in clinical evidence generation through a Phase IV trial to expand usage over time. That's on the gout expansion. And then your second question on the Merck royalty, look, I think we've -- in we are always evaluating potential opportunities, but we do not comment on active or nonactive business development initiatives, especially with our partners. And thank you for your question, Dennis. Operator: And we'll move next to Ekaterina Knyazkova. Ekaterina Knyazkova: Just 1 from me. So just on Cortrophin gel, have you seen any recent changes on the patient access front, just are you seeing any payers or plans getting more triple or coverage or reimbursement? Or are you seeing kind of trends that are similar as you were seeing last year? Nikhil Lalwani: And thank you for your question, Ekaterina. Look, we try to find a balance between sharing information that is helpful to investors and that is competitively sensitive. . Having said that, at an overall level, we have not seen material changes from an access perspective. again, we're targeting or we're reaching -- trying to reach the appropriate patients as a late-line therapy with Cortrophin gel but thank you for your question. Operator: And we'll go next to Thomas Smith with Leerink Partners. Thomas Smith: Two on Cortrophin, if I could. You mentioned about 15% of utilization came from acute gave arthritis in 25. Could you just give us a sense of what your expectations are for where that number goes in '26 and '27 given the sales force expansion efforts? . And then could you give a little bit more color on the Cortrophin pilot programs executed in primary care and pathology. Any details I guess, on specific feedback from those prescribers versus your other specialty types and any specific learnings you're implementing to help better target those offices. Nikhil Lalwani: Yes. Good morning, and welcome to your first ANI conference call. Tom, great to have you. So the first question is on our current business. in gout, about 15% of our volume comes from gout. As we deploy this targeted sales force and broader organization, we do expect it to increase significantly. We're not putting a number to it at this time, but we'll keep you updated, obviously, on our progress. I think the important thing to highlight here is that if you look at the ANI Cortrophin story, a big part of that success has been being able to reach new physicians. Almost half of our physicians that have prescribed Cortrophin were naive to the category, [indiscernible] prior to the entry of Cortrophin gel. And if you think about -- and this dovetails into your second question around the pilot programs. If you think about the HCPs that we're reaching through this expansion, we're targeting -- we're trying to reach about 7,000 ETPs that we've identified across territories, right? Majority of these right? Obviously, some were part of the pilot programs that we had across 10 territories, but most of these have not been. And so that will further expand, right? And the success we've had in being able to reach new physicians right will continue. It has given us that for them, and we'll continue as we reach these new primary care and podiatry care physicians, right? So what will also expand is not just the gout volumes as a percentage of Cortrophin volumes, but also the number of physicians and a number of new physicians that were naive to ACTH. And then going back to your second question regarding -- or I guess, second part of your second question on the pilot programs. I think that we've had a lot of learnings in terms of the discussion to be had with the primary care and proprietary physicians in terms of identifying the appropriate patients, how to work with their offices right to work through the enrollment of fulfillment process? And then also, learnings on primary care and podiatrist are very large sort of number of HCPs that are there in the country but really figuring out the 7,000 that treat the most severe acute guard arthritis flares, how do you identify them with the claims and other data that is available so that you're reaching the appropriate patients? That's been part of our learnings through the pilot programs through 2025. And thank you for your question, Tom. . Operator: And we'll take our next question from Les Sulewski from Truist Securities. Leszek Sulewski: Congrats on the progress. Three for me, Cortrophin first, you noted that 15% of utilization is coming from gout. How would you expect that trend to uptick once the new team is in place? And is this a good representation of the percentage of the total consultant revenues? And then will you have some of the results from Phase IV trial in time for the sales force expansion? And the second, on ILUVIEN, can you provide an update on the specialty pharmacy progress and perhaps just kind of your thoughts on the patient access? And then lastly, on generics, how are you thinking about product cadence and erosion as we move through the year. Nikhil Lalwani: For questions. I'll take them one by one. So the first question on the gout -- we do believe that the 15% of volume of current volumes will expand, right, as a percentage of total volumes with this investment. So we will see a significant uptake we will update you as we move along. On the trial, we are -- the trial -- the Phase I trial is progressing, and we will provide meaningful updates as that trial progresses. If the organization expansion, right? We've already hired, as I said, the sales leadership and the ABD, they're your business directors. The organization will launch in full by midyear. The results of the trial will not be in place by then. So that's on the come later on, and we'll obviously provide updates on the trial. The second question was on ILUVIEN. So on ILUVIEN, we continue to make progress in the growing use of the alternative access channels to navigate the market access challenges for Medicare patients. We are seeing prominent practices adopting this alternate workflow and use of alternate channels. And it's basically patients that have access to the drug benefit. And that's the same procedure that or process that we use and workflow that we use for Cortrophin. And so we've seen prominent retina practices use it. Now what we -- what has happened with the foundation funding is we had seen some early contributions to the funding earlier this year. And though this hasn't had a meaningful impact on patient access to ILUVIEN it was open for a few days and then it was closed back. So our guidance for 2026 does not assume that the funding will return in any meaningful way. and we will continue to closely monitor the situation and of course, stay focused on growing the use of the alternative access channels to navigate the market access challenges in addition to the strategic investments in marketing and medical affairs to support the increased awareness of the new day clinical data for DME, establishing the coverage for both DME and NI UPS and then obviously the strength in the commercial team and further enhanced promotional efforts. So that's on ILUVIEN. And then finally, your question on the genetics cadence. We are continuing to have a strong cadence from our -- driven by our R&D capabilities of 10 to 15 launches. That will help support growth of the generics business and cash flow generation that we are reinvesting into rare disease to accelerate the transformation of ANI into a leading rare disease company. And thank you for your questions, Les. Operator: And we'll take our next question from Brandon Folkes with H.C. Wainright. Brandon Folkes: Congrats on the progress. Maybe just sort of following on from the line of question on Cortrophin. Outside of gout, is it any way you can just give us some color in terms of how you're seeing the ACTH market shape up? Are prescribers choosing one product over the other or prescribers using both where they can. You talked about adding new prescribers. Can you just help us think through when you convert these new prescribers, are you generally converting them to sort of be a Cortrophin prescriber or a ACTH believer in prescriber? And what I'm trying to get to is how competitive is the next script for a potential patient right now versus a continued market expansion. How long do you see sort of the market expansion playing out versus market expansion as well as share capture between the 2 and within the category driving growth. Nikhil Lalwani: Yes, thank you for your question, Brandon. So I think your first question was on the ACTH market beyond and I think that we'll just point to a couple of points. Number one is that we see growth across indications across the core indications that we launched with, which is in rheumatology, nephrology and neurology in addition to in the pub and ophthalmology. . If you think about the ANI's growth in Cortrophin in 2025 in Cortrophin, a significant portion of that came from just growth across all these specialties outside of gout. Now gout also was a driver but there was significant growth across these other specialties too. And then really, the thing that's underpinning and that really goes to your second question around the competitive situation. And this is, to us, not about share capture at all. This is about market expansion, reaching the appropriate patients and the addressable patient population is very significant. And highly underpenetrated, right? So it's significantly underpenetrated across indications. And so the fact that 2 players are out there trying to address the appropriate patients ultimately supports the overall market growth and ensures that the appropriate patients get the benefit of ACTH treatment for their indications. And then maybe the last part of your question, which was -- we are -- our team is out there trying to convince and this is a little bit on a lighter note. But our team is out there trying to convince patients -- I'm sorry, current confused physicians of the appropriate patients for Cortrophin, right, and not the broader ACTH category. So thank you for your questions, Brandon. Operator: And I would like to now turn the call back over to Nikhil Lalwani for closing remarks. Nikhil Lalwani: Thank you, everybody, for taking time to join the ANI discussion. We look forward to updating you on our progress and are looking forward to a strong 2026. Thank you so much, and we will remain focused on our purpose of serving patients, improving lives. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Gogo Inc.'s fourth quarter 2025 earnings conference call. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I will now turn the call over to Will Davis, Head of Investor Relations. Please go ahead. Will Davis: Thank you, and good morning, everyone. Welcome to Gogo Inc.'s fourth quarter 2025 earnings conference call. Joining me today to discuss our results are Chris North, CEO, and Zachary Cotner, CFO. I would like to remind you that during the course of this call, we may make forward-looking statements regarding future events and the future performance of the company. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call. Those risk factors are described in our earnings release filed this morning and in a more fully detailed note under risk factors filed in our annual report in October and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is February 27, 2026. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of more information or future events. During this call, we will present both GAAP and non-GAAP financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter earnings release. Our call is being webcast and is available at ir.gogoair.com. The earnings release is also available on the website. After management comments, we will host a Q&A session with the financial community only. I will now turn the call over to Chris North. Chris North: Thank you, Will, and good morning. I am pleased with our product and synergy execution in 2025, as we transform Gogo Inc. from a U.S.-focused entity into a global, multi-orbit connectivity provider in the fast-growing and dynamic business and military government aviation markets. Consistent with prior earnings calls, I will focus on the continued demonstrable progress made across our compelling new product portfolio. These include Gogo Inc. 5G and Gogo Inc. Galileo, with two models, HDX and FDX, all of which are providing game-changing increases in capacity, functionality, speed, and consistency. I will also highlight our long-term growth prospects from our military and government customer base, which will further improve our revenue mix and diversification. As we look forward this year, we expect combined Galileo and 5G shipments to exceed 1,000 units. We expect that the activation of those aircraft will create a high-margin, recurring service revenue stream that sets the stage for free cash flow growth and long-term strategic value. Let us review the strong demand trends within the underpenetrated global business jet market. Industry sources indicate global business jet flights are 30% higher than pre-COVID levels, with aggregate growth from key global fractional operators even stronger at around 40%. Leading global business jet OEMs highlight strong book-to-bill ratios and backlogs necessary to support continued delivery growth. The 854 new private jets delivering in 2025 marked the highest output since the industry delivered 874 units back in 2009. These factors, along with the relatively low broadband penetration of the 41,000 global business aircraft market, create a backdrop for attractive long-term growth. Will Davis: Let us review our outlook for Gogo Inc. Galileo. Chris North: Our global LEO-based service with two offerings. Starting with HDX, which was purpose-built to fit on all 41,000 global business aircraft. It is ideal for the 12,000 midsize and smaller aircraft outside North America without broadband, and the 11,000 midsize and smaller aircraft in North America that fly outside CONUS or want faster speeds than 5G air-to-ground. By contrast, FDX is geared specifically for 10,000 large global business aircraft. Galileo operates on the Eutelsat OneWeb satellite network, and we are pleased to see the continued measures by Eutelsat to strengthen its balance sheet and access the capital needed to support its recent order for 414 new LEO satellites, ensuring full operational continuity for its constellation into the late 2030s. Given that HDX has a total addressable market over four times that of FDX, shipments and installations of HDX will naturally be much higher than FDX. The product has also been designed to fit in many mid- to large-cabin aircraft tails, which expands the opportunity from standard LEO fuselage mountings. The average monthly service revenue and profit per FDX will typically be higher than HDX. Our Galileo pipeline consists of over 1,000 aircraft, with the current weighted sales pipeline of more than 400 aircraft. We believe this aligns with our projections for growth in 2026 as we expand opportunities and close new business. We continue to see a favorable pipeline mix with a 60/40 split between U.S. and global markets. This mix is critical for our success, as we upgrade loyal customers in the U.S. market and expand to unserved markets with high-speed connectivity in the international markets for business and military and government customers. As a reminder, inclusive of all aircraft equipped with Gogo Inc. broadband connectivity, 35% to 40% are large jets, 30% are medium, 25% are light, and less than 5% are rotorcraft. Now turning to STCs. STCs are a critical part to building our global LEO business, and we continue to make solid progress: 35 HDX and FDX STCs in the U.S., Europe, Brazil, and Canada with a total addressable market of 4,000-plus aircraft covering 34 aircraft models. We continue to expect 20 more STCs to be completed in 2026. While the total number of STCs is important, not all STCs are created equal. For example, in recent weeks, we achieved FAA validation for the Bombardier Challenger models 300, 350, and 3500, and for all Global models except the 7500 and the 8000, and the EASA validation for the Dassault Falcon 2000. Given the installed base and growth potential, a Challenger STC is worth substantially more to us than a larger STC due to the operator’s budget and airframe value. However, with the versatility of our product portfolio, the Learjet has access to our 5G air-to-ground product, which is a better solution for both the aircraft mission and budget, all without compromising the need for high-speed connectivity. In 2025, Gogo Inc. shipped over 300 HDX and FDX antennas, with 84% to named customers. By 2026, we expect to have shipped nearly 900 Galileo antennas, and with an expected ship-to-install time of about three to six months, we see a potential path to 700 Galileo aircraft installed by the end of this year. If we assume a $4,000 average monthly service profit per Galileo aircraft, implying $480,000 in service profit over 10 years, if 1,000 Galileo aircraft are activated and paying, we will demonstrate the long-term growth opportunity with our LEO product portfolio and overall market position in aviation. Let us shift to our global fleet business, which we continue to expect to be a key growth driver. As highlighted on our Q3 call, we have a clear opportunity to provide Galileo service to 1,000-aircraft-and-above fleet customers, which include all major global and domestic U.S. entities. I am now even more confident about that outcome. In 2026, we estimate that one-third of our Galileo shipments and AOL will be tied to our global fleet accounts. STCs installations by VistaJet began in November and will continue to ramp through 2026. We were pleased that VistaJet recently announced a major Bombardier order for 40 Challenger 3500 business jets with options for an additional 120 more. If fully exercised, the total contract value would approach $5,000,000,000, expanding VistaJet’s fleet to around 400. VistaJet announced that Gogo Inc. Galileo was a cornerstone of its digital and in-flight innovation pillar as part of the VISTA 2030 growth strategy. Our largest fleet customer in terms of activated aircraft remains NetJets, and we expect that to remain the case for some time. NetJets is the world’s largest fleet operator with over 1,000 aircraft, including EJM, and existing orders are expected to expand its fleet by several hundreds over the next few years. As a reminder, the NSS contract renewal that Gogo Inc. announced in February 2024 is still active. Gogo Inc. has installed HDX on dozens of aircraft in the NetJets European fleet, including Challenger 350s and Phenom 300s, Latitudes, and we continue to expand installations. Within the NetJets North America fleet, we currently expect to install HDX on the Phenom 300 and the Ascend platforms. Historically, NetJets has utilized multiple connectivity sources globally, and they have confirmed that Gogo Inc. will remain a key partner to help facilitate connectivity upgrades for their global fleet in the coming years. In addition to fleets, we expect that Galileo line-fit option wins will be another critical source of long-term growth. We are aligned for option with HDX at Textron for the Ascend, Latitude, and Longitude models and will benefit once our options are available later in the year. Additionally, as announced last quarter, FDX will be a LEO line-fit option for all new Bombardier Challenger and Global business aircraft types. We expect revenue generation from this important win in early 2027. Further, I am pleased to say that we have secured another line-fit option win with a major global OEM for both HDX and FDX that will highlight the growing momentum for Galileo in the market. We would expect an official announcement before 2026. In our view, these wins validate Gogo Inc. Galileo technology and demonstrate the valuable long-term relationship we have with our global business aircraft OEM partners, along with the desire to have competition in the LEO marketplace. Let us continue with Gogo Inc. 5G. It substantially increases the speed, performance, and capacity of our ATG network. We completed the activation of our first 5G aircraft in December, and true network availability started last month. Our current focus remains shipping boxes pre-provisioned for 5G customers that already have the 5G antennas and wiring installed. We are happy to report that 5G service commenced in Q1, and we expect 5G activations to significantly ramp up through 2026. Gogo Inc. has 5G line-fit deals with five OEMs, two of which are already installing the AVANCE L5 box on the production line today. These boxes will get swapped with the LX5 5G box upon 5G service activation. We continue to believe that 5G will fill a large void in the market for customers who only fly domestically in the U.S., particularly those with light and medium-sized aircraft. Further, we suspect 5G will serve as a valuable backup service on certain aircraft seeking redundancy and enhanced capacity. We recently unveiled updated 5G pricing, highlighting its positioning as a cost-effective way to increase speed tenfold versus our current L5 solution. Monthly service pricing for unlimited data is now $5,500, and 5G equipment MSRP is now $100,000, allowing for a full installation below $150,000 and making the connectivity market competitive. To that end, we expect to ship over 500 5G boxes in 2026 and expect to reach nearly 400 5G aircraft online by the end of this year. Let us shift to the LTE upgrade of our ATG network, which will be largely subsidized with FCC funding. The LTE upgrade provides multiple benefits: one, it accelerates Classic upgrades to AVANCE; two, it increases network capacity and speeds; and three, it accelerates our U.S. government business on the ATG network given enhanced network security. We shipped a record 472 air-to-ground equipment units in Q4, up 8% from 437 in Q3, split between 175 AVANCE units and 297 C1 units. We believe that our C1 strategy is working. C1 AOL increased from 101 in Q3 to 313 in Q4, and we expect to end 2026 at around 800. The C1 box swap takes only a few hours and benefits from FCC subsidies, allowing the system to activate once the LTE network is turned on. We completed 95 Classic-to-AVANCE upgrades in Q4 as AVANCE AOL grew 8% year over year to 4,956. AVANCE now represents 77% of our air-to-ground fleet and continues to grow each quarter. The combination of C1 installs and the AVANCE upgrades drove our Classic AOL at year-end to around 1,100, or only 17% of our air-to-ground fleet. We expect our Classic AOL to reach zero sometime in Q4 2026. As of Q4, about 300 Classic AOL are part of fractional or managed accounts, a.k.a. fleets, with a defined upgrade path, leaving only 800 Classic aircraft not associated with a fleet account. All in, our Q4 ATG AOL trends were the best of any quarter in 2025. The continued upgrade of our Classic fleet to both C1s and AVANCE combined with our LTE rollout and the expected ramp of 5G in 2026 is expected to ultimately moderate the downward pressure on our ATG AOL. Sustained service revenue growth continues to depend on our new product ramp, including Galileo and 5G. Let us now turn our attention to our GEO business. We ended 2025 with 1,321 GEO AOL, up 6% versus the prior year, driven by line-fit positioning. We attribute slower GEO AOL growth to deactivations from an increase in aircraft for sale, triggered by the timing of aircraft bonus depreciation. We expect our GEO investments to continue to improve speed and performance, which we will also leverage with our military and government customers. Our recent upgrades to the Plane Simple Ku product have already shown results of higher download and upload speeds. We continue to expect large business jets with long global missions to migrate over time to multi-orbit LEO and GEO solutions for increased capacity, consistency, and redundancy. Our SVR router is now on 2,500 GEO aircraft and is synchronized with AVANCE routers on another 5,000, totaling 7,500 systems available for new product upgrades with our box swaps versus expensive interior rewiring. Lastly, I will address our military and government growth opportunities over the next several years. Global defense spending is rising, and the broadband penetration of the military and government aircraft is even lower than the business jet market. Our expanded military and government sales force is in active discussions with government agencies across the globe: the U.S. Department of Defense, NATO, Brazil, the Middle East, and Southeast Asia. A recent industry report highlights a market size of 6,200 combined transport and special mission military aircraft globally, of which 1,600 are in the U.S. We believe these represent excellent opportunities for our military and government broadband solutions. As this is a very underserved market, primarily with narrowband service, global governments require diversity among their aero bandwidth suppliers and will place a premium on multi-orbit, multi-band service for redundancy and performance. We believe that Gogo Inc. is the only player who can fulfill this requirement. The reality is we are already seeing a significant transformation in our business. Our military and government aviation revenue grew 34% year over year, and our international growth was an impressive 94%. The net effect of this growth remains muted by the winding down of legacy land mobile narrowband service, a process that is expected to largely complete in 2026. The key point is that our revenue mix quality within military and government will improve substantially over time. In addition to the traditional military and government market, we are increasingly optimistic about the market potential within the UAV and ISR markets. The U.S. Department of Defense expects to order over 1,000 Class II and Class III drones in the next two to three years. While not all details of our success can be publicized due to their confidential nature, we are excited to begin delivering on our recent contracts, including receipt of U.S. Air Force mobility approval to sell Plane Simple Ku-band hatch mounts to C-130 aircraft, with a TAM of over 1,000 airframes; multi-orbit wins to provide LEO, GEO, and 5G connectivity to a division of the U.S. government; and a five-year contract with SES Space & Defense for a blanket purchase agreement through U.S. Space Force Space Systems Command, with a $33,000,000 contract ceiling value. Thank you for the continued support, and I trust that you will all see our outstanding progress transforming Gogo Inc. into a global, multi-orbit player with robust broadband growth opportunities in both the business jet and military and government markets. I will now turn the call over to Zach for the numbers. Thanks, Chris, and good morning, everyone. Zachary Cotner: Fourth quarter results were largely in line with expectations, highlighted by strong equipment shipments and an increase in inventory spend in advance of our Galileo ramp this year. Additionally, our key 2025 financial results for revenue, adjusted EBITDA, and free cash flow were all at the high end of our guided ranges as aggressive cost controls and synergies balanced out product investments. As Chris discussed, we believe the ultimate activations of our Galileo and 5G equipment shipments will help drive service revenue growth longer term. On our Q3 call, I flagged a potential need for incremental working capital in 2026 to support new product shipments and our anticipation of continued ATG AOL volatility, tempered with further optimization of OpEx and CapEx. My discussion of our 2026 financial guidance later in the call will incorporate these elements. I will now provide an overview of our fourth quarter and 2025 results, then I will review the outlook to streamline our balance sheet, and lastly, I will discuss our 2026 financial guidance. Gogo Inc.’s total revenue in the fourth quarter was $231,000,000, up 3% year over year on a combined pro forma basis as well as sequentially. Total service revenue of $192,000,000 increased 61% versus the prior year and increased 1% sequentially. Total ATG aircraft online at the fourth quarter was 6,402, a decline of 9% versus the prior year period and down 2% sequentially. Total AVANCE AOL increased 8% versus the prior year period and now comprises 77% of the total ATG fleet, up from 65% a year ago. Since 2022, our total AVANCE AOL has grown by nearly 1,700 aircraft. Given the sequential increase in C1 AOL, from 101 to 330, our Classic AOL is now approximately 1,100, and our 2026 guidance assumes zero Classic AOL by year-end. Total ATG ARPU of $3,378 declined 3% year over year and 1% sequentially, largely due to the pricing reduction on several of our unlimited plans in advance of our new 5G pricing of $5,500 a month for our unlimited data plans. Total broadband GEO AOL, excluding end-of-life networks, totaled 1,321, up 6% from the prior year and down 2% sequentially. As Chris noted, many of the GEO deactivations in Q4 were triggered by an increase in aircraft sales, which is common at year-end for tax purposes. Most GEO broadband aircraft are under fixed-term contracts, which helps support revenue predictability. However, our revised GEO outlook reduced the present value of our earn-out liability by $7,000,000. Now turning to equipment revenue. Total equipment revenue in Q4 was $39,000,000, up 104% year over year and 15% sequentially. Total ATG equipment shipments of 472 were an all-time high and up 8% sequentially from the prior record of 437 in Q3. In 2025, ATG equipment shipments totaled 1,631, nearly matching the combined shipments from the prior two years. As expected, AVANCE shipments of 175 declined sequentially as market demand shifted to C1, which increased 30% sequentially to 297 to support the Classic conversions. Now moving to our margins. Gogo Inc. delivered combined service margins of 50%, which was in line with our expectations. I will provide further service margin context in the 2026 guidance discussion later in the call. The write-off of legacy equipment drove equipment margins negative in Q4 and was expected as normal business course. In addition, HDX equipment pricing remains close to cost. Now turning to operating expenses. Total Q4 operating expenses, excluding depreciation and amortization, were $58,200,000, up slightly sequentially due to the ongoing litigation expense, which was $8,400,000 during the quarter. Let us now turn to our major strategic initiatives: 5G, Galileo, and the LTE network upgrade and the FCC reimbursement program. Total 5G spend in Q4 was $1,700,000, almost all tied to CapEx. Total 5G spend in 2025 was $12,600,000, which we expect to decline by about 50% in 2026. Q4 Galileo spend was $2,600,000, with 70% tied to CapEx. Galileo spending of $10,000,000 in 2025 is expected to decline considerably in 2026 to $1,500,000 as we exit the investment phase and embark on product shipments and service activations. We expect total development costs for both HDX and FDX will be about $40,000,000, well below our original plan of $50,000,000. Given our expectation for strong long-term Galileo success, we believe that our ROI on the Galileo investment will be very attractive. And finally, our LTE network upgrade and FCC reimbursement program. In Q4, we received $34,000,000 in FCC grant funding, bringing our program-to-date total to $93,900,000. As of year-end 2025, we reported a $27,800,000 receivable from the FCC and incurred $35,700,000 in reimbursable spend in Q4. The receivable is included in prepaid expenses and other current assets on our balance sheet, with corresponding reductions to property and equipment, inventory, and contract assets with a pickup in the income statement. Moving to our bottom line, Gogo Inc.’s adjusted EBITDA in Q4 was $37,800,000, in line with our implied 2025 guidance. Net income for the quarter was negative $10,000,000 but was affected by a $10,000,000 litigation settlement accrual, a $4,000,000 charge related to a valuation adjustment on a prior investment in a supplier, and a write-down of legacy equipment that I previously mentioned. While we have removed a significant amount of cost from the combined company, particularly in headcount, we continue to identify new sources of cost reductions in various areas, including real estate, back office, software solutions, and CapEx rationalization. Moving to free cash flow. In 2025, we generated $89,200,000 in free cash flow, which was at the high end of our guidance range of $60,000,000 to $90,000,000. Free cash flow was slightly negative in Q4 due to previously flagged factors, including a $17,000,000 increase in inventory tied to our new products as well as lower EBITDA. Let us now turn to our balance sheet. Gogo Inc. ended the fourth quarter with $125,200,000 in cash and short-term investments and $848,000,000 in outstanding principal on our two term loans, with our $122,000,000 revolver remaining undrawn. Our Q4 net leverage ratio was 3.3x and within our target leverage ratio of 2.5x to 3.5x. Our Q4 cash interest paid, net of hedge cash flow, was $17,000,000. Our hedge agreement remains at $250,000,000 at a strike price of 2.25 bps, resulting in approximately 30% of the loans being hedged. As a reminder, the hedge amount will decrease to $200,000,000 on 07/31/2026 and expires on 07/30/2027. In 2025, cash interest paid, net of hedge cash flow, was approximately $67,000,000. Our immediate focus remains exploring ways to optimize and delever our balance sheet while reducing interest expense. Between cash on hand and our revolver, we have approximately $250,000,000 in liquidity, which we believe is significantly higher than our requirements to operate the business. We continue to believe our expected free cash flow over the next few years will drive excess cash to refinance the debt and ultimately return capital to shareholders. In our earnings release this morning, we provided the following 2026 financial guidance: total revenue in the range of $905,000,000 to $945,000,000, with 80% tied to service revenue and 20% to equipment revenue. This implies overall growth of about 2% at the midpoint. Adjusted EBITDA in the range of $198,000,000 to $218,000,000 and free cash flow in the range of $90,000,000 to $110,000,000, implying 12% year-over-year growth at the midpoint. We expect approximately $30,000,000 for strategic investments in 2026, net of any FCC reimbursement, down about 45% from our strategic spend of $56,000,000 in 2025. The majority of our strategic investments this year are tied to fleet promotions and STCs and will flow through operating expenses. Net CapEx of $20,000,000 after $45,000,000 in CapEx reimbursement from the FCC reimbursement program as we complete the LTE ground network build. In addition, here are some incremental points that could aid in your modeling to provide context. Mix heavily influences our overall service profit. ATG service margins are about 75%, and blended GEO margins are in the high 30s, with Galileo margins at scale in the middle of those. Equipment margins are expected to be in the mid-single digits, and service profit is anticipated to account for over 95% of total gross profit. Our 2026 free cash flow estimates exclude an estimated $40,000,000 earn-out payment in April, which we expect to pay from cash. In conclusion, we have made significant progress in the past fifteen months since the closing of the Saginaw deal. Our three-year end product investment cycle is nearing completion, and we expect to see strong benefits from the rollout of 5G, HDX, FDX, and our LTE network. I want to express my gratitude to the Gogo Inc. team for their hard work in driving our transformation and their commitment to outstanding customer service. Operator, this concludes our prepared remarks. We will now open for questions. Please open the queue for questions. To withdraw your question, please press star 11 again. Please rejoin the queue if you have any additional questions. Operator: Our first question comes from Scott Wallace Searle with ROTH Capital Partners. Scott Wallace Searle: Good morning. Thanks for taking the questions. Thank you for the detailed outlook. Very helpful in terms of going through the numbers and the analysis. Maybe to start just real quickly, Chris, in terms of NetJets, this has been, I guess, a lightning rod for the company in the last several months. What is your expectation in terms of your growth with NetJets? Will you ultimately be adding to the absolute number of NetJets AOL that you have online across the different types of aircraft across the different geographies? And then I had a follow-up. Chris North: Yeah. I think the big thing is that NetJets remains a customer, and we are expanding the customer base with them, especially with the European fleet. We are in a technical transformation with the services that we provide them. So if you look at most of the opportunity that we have, it is on our Galileo service, and we are continuing to roll that out. And they still remain a very important part of our future in business and a customer of ours. Scott Wallace Searle: Gotcha. Then, as it relates to the Classic transformation, we are down to about 1,000 aircraft right now. I know there is a cutover point in the middle of this year. A couple of things: It sounds like by the end of this year, that is going to be resolved at one point or another. You expect to have zero Classics online. I am wondering how you are seeing the conversion rate in terms of going to C1 and upgrade to AVANCE? So in other words, what is the number going to look like within that base as we get to the end of this year? And last one I could throw in as well. You know, Satcom growth within the MilGov space has been very, very good. It sounds like you are going to be growing this year, going to be growing that faster than the rest of the business. But I am wondering if you could give us a framework of what that could look like in terms of percentage of mix by the end of 2026 and maybe 2027? Thanks. Chris North: Yeah. I mean, I will start with the MilGov piece. The MilGov is, we are seeing a lot of opportunity in Europe. Still, as I mentioned in the call, we are also transforming that business and removing the narrowband exposure in that business to broadband. I think the exciting thing really on the product portfolio is we are positioned now with 5G, Galileo, and our GEO broadband offerings that we have broadband offerings for all of our customers no matter whether they are in business aviation or government. And they have a true broadband offering or multiple broadband offerings, which is pretty exciting because then all of a sudden, you have multiple revenue streams coming from an airframe instead of a single as well. The government part of the business, we are already seeing a lot of opportunity with UAVs. Europe is obviously doing a lot more focus on expenditure on military spending. I think we are reaping the rewards of that as well. The DOD is a very underpenetrated market, as I mentioned on the call. You look at that, you know, they had the 25 by 25 campaign a few years ago. They still have not reached that. Our technology is a lot more deployable, cost-effective, aviation-built, aviation-grade, and they also do not want interdependencies on a single supplier. So I think, you know, as we see that mix, it will take a long time for that to be the same levels as business aviation, but we just see that as continuing to grow between 2026, 2027, and beyond. Zachary Cotner: Yeah. And I think from a mix standpoint, you know, like we said, we do anticipate it is going to grow faster this year than last year. And, you know, a big driver of that is obviously equipment, but we also won a pretty sizable contract kind of late Q3. That is why you saw the nice Q4 pop in the MilGov numbers, which should continue for most of the year. And, you know, on the equipment side, you are going to see a lot more growth on that, largely because, you know, if you think of the aircraft those go on, those are obviously quite a bit different than business aviation. So it just takes a little bit longer to get those put on the aircraft, and, you know, the guys are keenly focused on it. Scott Wallace Searle: Yeah. And the mix of Classic, or what you expect to be the outcome of those remaining 1,000 Classics in terms of conversion to C1 versus upgrades to AVANCE and kind of what you have got factored into the current 2026 guidance? Thanks. Zachary Cotner: Yeah. So, you know, when we look at the AVANCE/Classic mix, you know, the guidance does assume that there is an extension granted, and so it does not go dark in Q2. It is still going to decline, and, you know, there will be some AVANCE declines. There will be some C1 decline, Classic. Right? So, but long story short, our view is between Classic, AVANCE, then also with the addition of 5G, the total ATG portfolio will be down about 1,000 units by year-end, and then the Classics basically are assumed to not convert at year-end. Scott Wallace Searle: Great. Thank you. Operator: Our next question comes from Sebastiano Petti with J.P. Morgan. Sebastiano Petti: Hi. Thank you for taking the question. I guess, Chris, just following up, I think you talked about specifically the NetJets expanding their fleet there in Europe. Overall, can you maybe give us a little bit of color on what you are seeing from an international perspective across the portfolio between the backlog on Galileo? You touched on some of the MilGov interest, you know, for DOD but also maybe internationally. Maybe kind of start there, then I will have a follow-up. Thank you. Chris North: Yeah. I think the big opportunity that we announced back on the Q3 call was the fact that we won VistaJet, and I talked about that today as well. That is a significant win, but also if you look at Luxaviation, Avcon Jet, you know, that backorder on those large fleet operators outside of NetJets, specifically within Europe as well, is significant and a thousand-plus aircraft. We know that we are still holding true to that number regardless of NetJets. We are still excited about the NetJets rollout in Europe as well, and the feedback we have had on the product, they have been extremely ecstatic. If you look at our pipeline, it is around, still maintains a 60/40 split with international. I think the sentiment is definitely from our international customers. I think the fact that Eutelsat OneWeb is also a European operator, I think that has some clout to it, but more importantly, these guys have not had a broadband solution on a number of these aircraft, especially those that cannot support the rather expensive installation costs going into the tail or the size of that. So we expect that to expand, and we are seeing very interesting markets pop up in Southeast Asia and other markets where, you know, popular airframes like the Phenom are there, but we have zero connectivity. And we are really the only solution that can get down to that size of airframe with a true aviation install. The MilGov market as well, a lot of that expansion in the MilGov market that we have talked about specifically, mostly is at this point coming out of NATO. We cannot talk about specific projects, but we are winning projects against our competitor, which is great. I think that is a really important point to make as well. So we are not the only bid when we are winning these. And I think that pivot towards our technology just shows its versatility from going into anything from a UAV to something that is a small platform aircraft. I think that is also giving us good dividends as well. So we expect that to grow. We have expanded the international team for the business as well, and, yeah, we are very hopeful and enthusiastic about where that is going. Zachary Cotner: Yeah. And I would just make one other point to reiterate Chris’s comments. You know, if you look at some of our metrics we reported, you will see we have started adding the LEO units online, and more than half of those are in Europe. So I think that is really proving the point that Chris has articulated, that that is a very strong market for us. Thank you. Operator: Our next question comes from Justin Lang with Morgan Stanley. Justin Lang: Hi, good morning. Thanks for taking the questions. Chris, appreciate the comments around Galileo and 5G aircraft online expectations this year. But curious if we could provide a little more color on what level of service revenues from the new products are factored into the guide currently? And just on the top-line range, what factors might push you to the high end versus the low end this year? What should we be watching for? Thanks. Zachary Cotner: Yeah. So I think from a, there is obviously a lot of ins and outs to this because the ATG revenue on the existing book is going down significantly. Right? That is about $40,000,000. And then the remainder of kind of the decline in service is from the GEO business. But, you know, we do expect a nice little uptick on the LEO. I would say the LEO service revenue is offsetting not quite half, but almost half of the decline in the legacy products. And then, obviously, the equipment mix, that is a big piece of the revenue bridge from last year. Justin Lang: Got it. That is helpful. And then just, sort of cadence basis, should we expect a much stronger second half this year as some of these new products dial in? Or is that a stretch? And then maybe, Zach, just on free cash flow cadence, because I think you have suggested some unique working capital demands this year. If we could hit on that, that would be great. Zachary Cotner: Yeah. So I think a couple points. One, it does take three to six months, about, on the HDXs to get installed, so you are right. It is going to take a little bit of time to see the service revenue. From a free cash flow perspective, like we said in Q4, you saw kind of an inventory build. You will probably see that in Q1 as well, and that is really for all the shipments. Right? So we have to make sure we can deliver these orders as requested, so we are ramping up. I think the ramp will be done this quarter, and then you will see more and more flows out in Q2 and Q3. So I think from a cash flow perspective, you will see better cash flow in the other three quarters. Then, was there another one? Did I get all—okay. That is helpful. I think I— Justin Lang: I will sneak one more in just on the MilGov topic. It is strictly around the C-130 opportunity you are talking about? Chris, and I think there is a mention of over 1,000 aircraft in the TAM. So how big of a discrete revenue opportunity is this for you? And, sort of secondly, I think we saw you won a seat on the MDA SHIELD IDIQ a little while ago. So how should we think about potential Gogo Inc. contribution to Golden Dome? Thanks. Chris North: Yeah. I think if you look at the TAM for the C-130, it is 1,000. So that is pretty significant, and getting that hatch mount, which is a really important product for those guys because it is very low-cost installation again. I think that has been one of the prohibiting points for the military, actually fitting communications onto the aircraft. I think, you know, the wins that we are having with the DOD around things like Golden Dome, we will see how that pans out over time, but I think our approach is really kind of pushing in the adaptable, really easy, low-cost install. We are moving away from the thousand-dollar hammer, or them having to fund our business whereby hundreds of millions of dollars—we do not need that. We are really very specifically focused towards our military customers to get them quick, expandable technology that can be upgradable very easily in the future as technology changes. I think that is really resonating with the military. And then if you look at the overseas military outside of the DOD, which is a huge opportunity—obviously, the DOD does the largest spend globally on military spending—aviation is becoming so much more important. Border patrol and also head of state. And we have had wins in the last twelve months around anything from surveillance aircraft right through to significant heads of state wins, and so it is a really versatile portfolio. We believe that it is a really underserved market, very much like the business aviation market with broadband connectivity. So we just see that being a very positive outcome for the business. And the nice thing is, as well, we really do not have to put a lot of CapEx in adapting the technology either. It is really kind of off-the-shelf commercial aviation technology that we have kind of developed for business—purpose-built for business aviation. We are actually able to take that and put that into those markets. And I think the C-130 is just one platform that is obviously utilized globally, but there are other airframes there like the A400M, which is very popular in Europe. So we are really going after that part. We have really boosted up the sales team. We put that under new leadership, and we are seeing significant kind of uptick from that. So we are really excited about it. Justin Lang: Great color. Thank you. Operator: Our next question comes from Alexander Phipps with OHA. Alexander Phipps: Guys, thanks for the call today. Overall, congrats on the quarter. Seems like it is starting to stabilize a bit. How should we think about, I guess, I understand the concept of people getting a backup with GEO to supplement their LEO. But how should we think about where ARPU should stabilize on the GEO business longer term if someone is just using it as a backup solution. Chris North: I think the big thing is if you look at total revenue by the airframe. Right? So I think that is going to change over time. So where we have had a traditional single kind of source coming from the airframe as a primary communication method, whether it is GEO or ATG within CONUS with the U.S. market, now with Galileo, and obviously the demand that we are seeing for LEO, which is brilliant, I think the big thing is for those global operators having continuity of service globally is so critically important. I think the way we are looking at it is kind of a blended offer for those larger aircraft, which is similar to what we probably get from GEO today, but we will see that more as a blended offer from connectivity forms. So that is the way we are kind of looking at it right now. Alexander Phipps: Got it. And then on the online fitting, so it is good to hear that you guys are going to be getting a bunch of new line fits for the HDX. Do you know what percentage of, I guess, what percentage of planes on the GEO side, let us say, that are line-fit with a Satcom Direct solution are also currently line-fit with a Starlink solution? And, I guess, how exactly does that work? Does the tail of the plane—and then the customer—need to keep the GEO solution and then get the Starlink solution installed at an MRO after the fact, or can they actually opt just to get Starlink and not have the SD solution put in the tail? Chris North: I will answer in a couple of different ways. So at this point in time, I think we have set ourselves up that when you buy an aircraft across any airframe over the next twelve months, we are in a position that ultimately you will either choose the competitor or us when it comes to LEO. That is a really important point to make. GEO is still line-fit across those OEMs which can actually fit it into the tail. And we are seeing the fact that customers do want an alternative. If at the moment they are not installing our solution as the LEO solution, they are still seeing the need for GEO. The reason for that is when you look at the larger airframe manufacturers, you know, these aircraft fly fourteen hours. They are flying all around the world. And there are large portions of the LEO network, from a regulatory perspective, that are still not connecting today. So you really need that assurance of that GEO backup. The other thing which we are also seeing is a lot of our customers like that assurance because we provide a lot of different things that other people do not provide as well, such as cybersecurity, continuity of service, and a number of value adds. And also, having that connectivity allows our support, which is global—you know, we have got human beings who can answer the phones, but we have also put a lot of technology into our back end so we can filter through where really the issues are with the aircraft and fix issues for customers really before they even know about them or are reporting them back to us. So I think that GEO position as a backup, but also from a continuity of service providing bandwidth, we are seeing that customers are also still utilizing the service even if they have LEO onboard because we are also pushing off a lot of information and synchronizing those with other OEMs such as engine manufacturers, operations, tracking the aircraft. So it is a lot more nuanced than just providing connectivity. So we are seeing that, but I think the really exciting thing just to reiterate is we will be in a position over this year that, you know, we are a genuine choice for a customer no matter the size of the airframe. But all of our customers now have a true broadband solution whether it is kind of 5G as an entry service and then LEO service as a, like, a primary LEO low-latency, high-bandwidth product at an enterprise-level communication method as well. So it is a really exciting time for the company. Zachary Cotner: Yeah. And I would just kind of dovetail on that. I think it is a critical point on the line fit. When you look at the GEO adds we have had this year, those are almost all exclusively line fit. Right? And that was kind of the old Satcom way that we were able to grow that business so well, because, you know, like you said, you had to pick a provider, and that is where we will be at the end of this year and the beginning of next year. Whereas this year, it is a lot of aftermarket, and you have got to slot guys into maintenance times, and it is a bigger sales lift until you get line fit. Chris North: Yeah. And I think now, at least, we have also got both ends of the market. We have got a really strong MRO base. We have got amazing MRO partners. And we have also got amazing OEM partners. And we have a direct sales team who are going out to customers when they are specifying their airframe or they are maintaining their airframe, whether it is in the aftermarket. They can actually walk customers through what connectivity solutions are needed for the size of airframe and the mission that they actually have for that aircraft as well. So, you know, I think we are going to the market in a kind of multipronged way anyway. Alexander Phipps: That is super helpful. I guess just two quick follow-ups on that. On the point where customers are going to still use—they will have the GEO as a backup, but they are going to be using a LEO high-bandwidth solution—like, where should ARPU shake out? Is it half of where it is now for the GEO solution? Is it, like, a quarter? Just any comments on that. And then I guess on the line fit, like, just to kind of say it a different way, like, I mean, if you go on a commercial airplane right now, there is still an ashtray in the bathroom, and that is not because they think someone is going to smoke in it. It is because the door to the bathroom got an STC back in 1960 with the ashtray in it. Like, do planes have to—if they have an STC with an SD solution in the tail—will it be rolled out? Like, will that plane always be delivered with that in the tail, or will customers have the option to just get Starlink and not have that in the tail of the plane. Chris North: Well, I think the big point is on communications, it is always choice. So outside of safety services, the OEMs always enable choice on what connectivity solutions that you have, and that is also then dependent on the STC. So you absolutely have choice on not specifying different connectivity. However, it is very different to commercial aviation where kind of utilizing the connectivity service onboard is a chargeable event and kind of the attrition for the airlines is quite—it is a really different model. For a business jet, it is a necessity and a need. And then also, it really depends on the utilization, who is using it, and therefore, whether it is primary or backup. We have seen that this is not a new thing for us. If we look at our narrowband service to when GX came in as a service, that did not just go away. We are still activating narrowband services with our OEMs today. So I get your point on kind of, like, the analogy with the ashtray. I think this is more kind of really—yeah, the STC has been invested in. It is also very difficult to get things on airplanes, to your point. So these things linger around for a while. But we are seeing utilization on the GEO service even if another service is on board, as we do with narrowband services that are being utilized with GEO onboard as well. So we have got a lot of experience in this, and that is the bit where we do feel that it will be a multipoint approach with a lot of customers with the larger aircraft. Obviously, on the smaller aircraft, that is a little bit different. We usually see a single source of communications as the primary communications method. However, the nice thing is with the HDX, it can really get down to those smaller airframes where actually our competition antenna is quite large. So I think that is the bit where, you know, we feel really quite strong about different sizes of the market. And then with 5G coming in as a revolutionary service for these Classic customers or people going to C1s, you know, really this is going to true broadband. So again, you know, we are seeing OEMs investing in 5G for the line as well. But I think the choice for the customer has always been there, and there is nothing new with that. I think that is the biggest takeaway from my perspective. And then on the numbers side, really on the ARPU, the ARPU will really settle—you know, that is a really tough one to navigate at this point because we are still seeing strong offers from GEO because of the necessity of having that backup. But at some point, we truly do believe that it is going to blend together, whereas where we really see the true blended rates, we see that being around what we get from GEO today on the kind of higher end because they are ultimately getting multiple services. The nice thing with Gogo Inc., we are the only company who provides all of those services, and we can send the customer an integrated bill so they are not looking at—it is almost like utilizing your mobile phone. You know, you are not looking at how much network utilization you took off AT&T versus Verizon. You will be looking at this from us as a blended bill from Gogo Inc., very simple, but ultimately knowing you have got the assurance of backup on your data as well. Hope that makes sense. Alexander Phipps: Yeah. That is super helpful. I promise one more quick one, and then I will shut up. It is, like, gun to your head, just to help conceptualize what the white space looks like because, to me, it seems like there is a lot of white space. Like, excluding MilGov, just BizAv, like, what do you think the mix will be five years down the line in terms of composition of your fleet—North America or, let us say, EMEA and APAC—on types of service? I think—well, just like AOL. Just like AOL. Like, I mean, obviously, right now, the AOLs are—like you said, half of the LEO that came online are Europe, if I recall correctly. Like, do you think that that is going to be the mix longer term? Do you think it is going to be, like, 50% of your LEO fleet is non-U.S. and 50% domestic? Or is that just right now? Chris North: I think we are seeing the demand. We have always been seeing the utilization of business aircraft outside of North America is growing at a rapid rate. So therefore, I think it would be a logical assumption that the splits that we have got at the moment—you know, North America is obviously the biggest market. We believe we will hold a good percentage in that. And I think having that kind of 60/40 split is a good way of thinking of it long term. And as the international market grows, and we will grow into that, we also have offices all around the world, so we can really kind of support those customers. But also those customers over a period of time, you know, they will be taking aircraft from the OEM. And the nice thing now is they can actually spec it at the OEM with our services. So I think that will naturally grow as well, but I think that kind of 60/40 split is the kind of way we are thinking about it for the business over the next few years. Alexander Phipps: Super, super helpful. And thanks so much, guys. Chris North: Yeah. No. It is— Operator: That concludes today’s question-and-answer session. I would like to turn the call back to Will Davis for closing remarks. Will Davis: Thank you, everyone, for your participation in our fourth quarter earnings call. Operator: You may disconnect. Will Davis: This concludes today’s conference call. Thank you for participating, and have a great day.