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Operator: Greetings! Welcome to the Collegium Pharmaceutical, Inc. fourth quarter and full year 2025 earnings conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during this conference call, please press star zero on your telephone keypad. Please note, this conference call is being recorded. I will now turn the call over to Ian Karp, Head of Investor Relations at Collegium Pharmaceutical, Inc. Thank you. You may now begin. Ian Karp: Great, thanks. Welcome to Collegium Pharmaceutical, Inc.'s fourth quarter and full year 2025 earnings conference call. I am joined today by Vikram Karnani, our President and Chief Executive Officer, Colleen Tupper, our Chief Financial Officer, and Scott Dreyer, our Chief Commercial Officer. Before we begin today's call, we want to remind participants that none of the information presented today is intended to be promotional, and any forward-looking statements made today are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risks and uncertainties as detailed in the company's periodic reports filed with the Securities and Exchange Commission. Our future results may differ materially from our current expectations discussed today. Our earnings press release and this call will include discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website. With that, I will now turn the call over to our President and CEO, Vikram Karnani. Vikram Karnani: Thank you, Ian. Good morning, everyone, thank you for joining our 4th quarter and full year 2025 earnings call. 2025 was a year of transformative growth for Collegium Pharmaceutical, Inc. We delivered robust financial results due to strong commercial execution and deployed capital strategically to support long-term value creation. Importantly, we made meaningful progress on our three strategic priorities, which include driving significant growth for Jornay PM, maximizing the durability of our pain portfolio, and strategically deploying capital to further enhance shareholder value. In the 4th quarter, we saw continued momentum for Jornay among prescribers and across our key patient populations, including pediatrics, adolescents, and adults. We were encouraged to see that once again, total Jornay prescribers reached an all-time high in the quarter, which is particularly impressive given that Jornay first launched more than 6 years ago. This growth was supported by a strong back-to-school season, which began in Q3, as well as the positive impact from recent sales and marketing investments made throughout the year. In parallel, our pain portfolio continued to drive significant revenues with meaningful year-over-year growth in the fourth quarter. The continued performance of our pain portfolio enabled us to achieve record levels of both full-year total revenues and adjusted EBITDA, while generating significant cash flows to fuel our capital deployment strategy. Our dedication to patients and the communities we serve drives us every day, and it is the foundation of our success. With our achievements comes a significant opportunity and responsibility to further support patients and give back to our communities. Yesterday, we published our 2025 ESG report, which highlights the various ways we demonstrate our ongoing commitment to doing good as we do well. I encourage you to view this report now available on our corporate website. I want to thank the entire Collegium Pharmaceutical, Inc. team for their enduring commitment to operating with integrity and empathy as we deliver on our strategic priorities and serve patients who are at the forefront of everything we do. In 2025, we achieved record top and bottom line results, growing full-year net revenues by 24% and adjusted EBITDA by 15%. Strong execution across the enterprise enabled us to achieve our annual financial guidance. In our first full year of Jornay PM ownership, we drove significant growth in both prescriptions and revenue. Jornay PM prescriptions grew by 20% year-over-year and generated $148.9 million in net revenue, up 48% compared to pro forma 2024 revenue. Our pain portfolio generated $631.7 million in 2025, up 6% year-over-year, with all three of our core pain medicines delivering full-year growth. The continued solid performance of our pain portfolio further reinforces our belief that these revenues will prove to be durable in the years ahead. In addition, we generated more than $329 million in cash from operations in 2025 and ended the year with over $386 million in cash, up approximately $224 million from the end of 2024. Our net leverage ratio is now less than 1 time, which was an ambitious target we set for ourselves earlier in 2025. Finally, we made great progress executing our capital deployment strategy. In December, we announced the closing of a $980 million syndicated credit facility, which significantly improves our interest rate and debt terms and provides additional flexibility as we continue to seek opportunities to expand and diversify our portfolio through BD. The successful closing of our first syndicated credit facility reflects the strength of our financial outlook and demonstrates our commitment to maintaining a strong balance sheet. Earlier in the year, we repurchased $25 million in shares through our share repurchase program, reinforcing the importance of repurchases as an important component of our capital deployment strategy. Turning now to recent corporate updates. In keeping with our strategy of maximizing the life cycle of our pain portfolio and ensuring our medicines remain accessible to patients, in January, we announced supply and quality agreements with Hikma Pharmaceuticals in connection with our authorized generic agreement for Nucynta and Nucynta ER that was previously announced in 2024. This allows Hikma to launch authorized generics of the Nucynta products. Hikma recently launched an authorized generic of Nucynta and is expected to launch Nucynta ER in Q1 2026. Our AG agreement provides us with significant profit share, positioning us to maximize the value of the Nucynta franchise and compete effectively with third-party generics. We also continued to strengthen the clinical evidence supporting our portfolio, completing four real-world evidence studies for Jornay PM and three across our pain portfolio, generating meaningful new insights for healthcare professionals. We also supported investigator-initiated studies evaluating Jornay PM in adults and in patients with comorbid psychiatric conditions, helping to expand understanding in patient populations of growing clinical interest. As we enter 2026, we remain focused on our top three priorities mentioned before, with the ultimate goal of improving the lives of patients and driving near and long-term value creation for our shareholders. First, we will build upon the progress we made in driving growth for Jornay. In 2025, we accelerated Jornay's growth trajectory, delivering 20% growth in prescriptions and 48% growth in net revenue compared to pro forma 2024. As expected, we are starting to see the tangible benefits from the sales and marketing investments we made in 2025 to raise awareness of Jornay. These efforts included expanding our ADHD sales force and launching new commercial initiatives, which we expect will continue to drive momentum throughout 2026. As reflected in our 2026 guidance, we expect Jornay revenue of $190 million-$200 million, representing more than 30% annual growth. Second, we will continue to maximize the durability of our pain portfolio. In 2025, our pain medicines delivered 6% growth in revenues and generated robust cash flows that enable us to further invest in our business and support our capital deployment strategy. Third, we remain committed to disciplined capital deployment. Our approach balances portfolio expansion and diversification through business development, debt repayment, and opportunistic share re-repurchases. Our new syndicated credit facility provides additional flexibility to further drive long-term value creation as we work to expand and diversify our portfolio of differentiated medicines. With our proven history of delivering results, we are well positioned for near and long-term growth in 2026 and beyond. Our pain portfolio provides a strong financial foundation from which we continue to invest in our business. That foundation is bolstered by Jornay, a differentiated medicine with headroom for further meaningful growth, and that provides an anchor in neuropsychiatry and pediatrics from which we can continue to expand our portfolio. Our track record of successful business development, including our proven ability to rapidly integrate and invest behind newly acquired assets, provides a pathway for long-term value creation. With that, I will now turn it over to Scott to discuss commercial highlights. Scott Dreyer: Thanks, Vikram. Good morning, everyone. Jornay PM continued to perform well in the fourth quarter as we leveraged the momentum created in the third quarter and maximized the opportunity during back-to-school season. During the fourth quarter, we grew prescriptions, prescribers, and market share. Backed by strong brand differentiation and HCP perceptions, coupled with the growth trajectories just mentioned and our ongoing commercial investments, we are well positioned to drive additional growth for Jornay again this year. Jornay is a highly differentiated medicine and the only ADHD stimulant with once-daily evening dosing that provides symptom control upon awakening, through the afternoon, and into the evening. Many patients, including pediatrics, adolescents, and adults, report challenges starting their day, which is an area of key differentiation for Jornay as it begins working when patients wake up in the morning. In addition to efficacy upon awakening, symptom control throughout the day is important for most patients because it can eliminate the need for an additional booster at school or work. Jornay delivers efficacy that lasts throughout the day. HCP perceptions of Jornay continue to be highly positive. In market research, healthcare professionals rated Jornay as the number one ADHD brand in terms of product differentiation, with a score that was more than double that of all other medicines in the same category. In addition, over 60% of HCPs indicated a strong intent to increase prescribing, which was the highest among all other branded ADHD medicines. We also know that if a patient or caregiver specifically asks to try Jornay, physicians typically honor that request. Our commercial team remains focused on increasing awareness of Jornay's unique and differentiated profile to further drive utilization. We see opportunities to drive additional growth moving forward. In addition to raising awareness among HCPs, caregivers, and patients, other opportunities include initiatives to extend persistency and actions to further penetrate the adult market. Jornay was the fastest-growing stimulant for the treatment of ADHD in the fourth quarter and full year 2025, delivering record prescriptions in both the quarter and the year. In the fourth quarter, over 200,000 prescriptions were written, up 16% year-over-year, and over 760,000 prescriptions were written in 2025, up 20% year-over-year. This performance reflects strong commercial execution throughout the year, including the critical back-to-school season, as well as early impact from the new sales and marketing investments we made in 2025. Our expanded ADHD sales force and new marketing campaigns were strategically in place ahead of the back-to-school season to maximize the opportunity during this time. We continue to see their impact on prescriptions extending into the fourth quarter. In December, average weekly prescriptions were up to approximately 16,600, compared to 13,800 in July, an increase of 20%. We are excited to see that this momentum continued into January, with average weekly prescriptions of approximately 16,800, which was particularly encouraging given the typical Q1 dynamics, where there is seasonal pressure on volume due to annual deductible resets and higher out-of-pocket costs for patients. We expect strong prescription growth in 2026 as we continue to realize the full year benefit of our expanded sales force and marketing campaigns. Jornay's broad prescriber base also continued to grow, reaching an all-time high of over 29,000 in the fourth quarter, up 21% year-over-year. Not only are we seeing growth in new prescribers, but the depth of prescribing also increased throughout 2025, particularly with our targeted physicians. Jornay's market share of the long-acting branded methylphenidate market grew to nearly 26% in the fourth quarter, up 6.5 percentage points year-over-year. Importantly, we saw growth across both patient segments of our business, pediatrics and adults. In the fourth quarter, the pediatric and adolescent segment, which represents about 80% of total prescriptions, grew 14% year-over-year. The adult segment, which represents about 20% of prescriptions, grew 24% year-over-year. We see additional opportunity in the adult market, including raising awareness among HCPs that their adult patients' unmet need for efficacy upon awakening is greater than they think. We remain focused on driving significant growth in Jornay by raising awareness and maintaining broad patient access. In 2025, we made targeted investments to increase awareness and adoption with an expanded set of prescribers and to raise caregiver and patient awareness, so they ask their healthcare provider about Jornay. Our expanded sales team is targeting approximately 21,000 prescribers, up from 17,000 prior to the expansion. Importantly, they are also increasing frequency of interactions with key healthcare providers. As we end 2025, the majority of targets we added as part of the expansion have written a prescription for Jornay, and their depth of prescribing increased by the end of the year. Building on our efforts from last year, we continue to launch new marketing campaigns aimed at raising awareness of Jornay among healthcare providers, patients, and caregivers. Our non-personal marketing efforts include a comprehensive and broad campaign that surrounds healthcare providers via web and social media content, supporting the efforts of our sales force to drive awareness of Jornay's differentiated profile. During the back-to-school season, spanning Q3 and Q4, we increased our investment in these critical non-personal promotional programs, reaching an additional 50,000 ADHD prescribers who fall outside of the sales force targeting efforts. In total, our digital marketing actions target approximately 70,000 healthcare providers. We made significant and increased investment in digital marketing to activate adult patients and caregivers during the back-to-school season, as we know that their requests are one of the largest driving forces behind new prescriptions. We also focused on maintaining broad payer access for Jornay. We are pleased to share that we have secured new formulary access under a major commercial healthcare plan, which will be effective May first, increasing Jornay's coverage by an estimated 4.5 million covered lives. Turning now to our pain portfolio. Collegium Pharmaceutical, Inc. is the leader in responsible pain management, with a unique and differentiated portfolio of medicines, Belbuca, Xtampza ER, and the Nucynta franchise, which collectively represent approximately half of the branded ER market. Our pain portfolio is highly differentiated with strong brand fundamentals. Belbuca remains the only long-acting opioid medicine that uses buprenorphine buccal film technology. In market research, it was ranked as the number one branded ER opioid in terms of differentiation and favorability. Similarly, Xtampza, the only extended-release oxycodone medicine that uses our proprietary best-in-class abuse-deterrent technology, DETERx, was ranked as the number one ER oxycodone medicine in terms of differentiation and favorability. In the fourth quarter and full year 2025, we delivered strong performance in our pain portfolio, which continues to fuel the financial strength of our business. We grew combined revenues from our pain portfolio on a quarterly and full year basis, both up mid-single digits, and prescription performance was in line with our expectations, reinforcing our belief that the life cycle of these medicines may prove to be longer and more robust than is currently appreciated in the market. Average weekly prescriptions for both Belbuca and Xtampza were particularly strong in October through December, generating positive momentum as we enter this year. Additionally, we continue to see a large, and in the case of Belbuca, growing prescriber base, despite these brands being later in the life cycle, further supporting our expectation of durability for both brands. We have said before, we remain committed to maximizing the revenue from our pain portfolio while maintaining broad payer coverage. A reminder, we expect both our ADHD and pain portfolios to be impacted by the typical first quarter dynamics, when there is seasonal pressure on volume and gross to nets due to annual deductible resets and higher out-of-pocket costs for patients. This is in line with our expectations and reflected on our 2026 financial guidance. We enter 2026 from a position of strength as we remain focused on advancing our priorities for the year. We delivered another year of strong performance in 2025 across the entire portfolio. I am proud of our commercial team's execution, which set us up to enter 2026 in a position of strength as we remain focused on advancing our priorities of growing Jornay and maximizing the pain portfolio. I will now hand the call over to Colleen to discuss financial highlights. Colleen Tupper: Thanks, Scott. Good morning, everyone. I am pleased to share that we have delivered another year of robust financial results and achieved our 2025 financial guidance. This accomplishment is a testament to the operational execution and financial discipline across our organization. Full year 2025 net revenues were a record $780.6 million, up 24% year-over-year, and adjusted EBITDA was a record $460.5 million, up 15% year-over-year. We also generated robust operating cash flows of $329.3 million and ended the year with $386.7 million in cash equivalents and marketable securities. Additional financial highlights for the fourth quarter and full year of 2025 include: total net product revenues were $205.4 million in the quarter, up 13% year-over-year, and a record $780.6 million in 2025, up 24% year-over-year. Jornay PM net revenue was $45.9 million in the quarter, up 57% year-over-year, and $148.9 million in 2025, up 48% year-over-year, compared to pro forma 2024 revenue. Belbuca net revenue was $59.1 million in the quarter, up 7% year-over-year, and $221.7 million in 2025, up 5% year-over-year. Xtampza ER net revenue was $48.6 million in the quarter, down 6% year-over-year, and $199.3 million in 2025, up 4% year-over-year. Nucynta franchise net revenue was $47.9 million in the quarter, up 15% year-over-year, and $196.3 million in 2025, up 11% year-over-year. Revenue from the Nucynta franchise increased year-over-year, primarily due to profitability improvements from managing gross to nets, consistent with our payer strategy. GAAP operating expenses were $67.6 million in the quarter, up 12% year-over-year, and $283.6 million in 2025, up 37% year-over-year. Non-GAAP adjusted operating expenses were $57.5 million in the quarter, up 13% year-over-year, and $237.3 million in 2025, up 58% year-over-year. The increase in operating expenses in 2025 reflects ongoing costs to commercialize Jornay, as well as the targeted investments we made to drive future growth, including the expansion of our sales force and new marketing campaigns. GAAP net income was $17 million in the quarter, up 36% year-over-year, and $62.9 million in 2025, down 9% year-over-year. Note that GAAP net income in the quarter and full year was impacted by a one-time loss on extinguishment of debt of approximately $16 million, related to the extinguishing of our prior debt and refinancing with our new syndicated credit facility. Non-GAAP adjusted EBITDA was $127.3 million in the quarter, up 18% year-over-year, and a record $460.5 million in 2025, up 15% year-over-year. GAAP earnings per share was $0.54 basic and $0.46 diluted in the quarter, compared to $0.39 basic and $0.36 diluted in the prior year quarter. For the full year, GAAP earnings per share was $1.98 basic and $1.73 diluted, compared to $2.14 basic and $1.86 diluted in the prior year. Non-GAAP adjusted earnings per share was $2.04 in the quarter, compared to $1.77 in the prior year quarter. For the full year, non-GAAP adjusted earnings per share was $7.42, compared to $6.45 in the prior year. Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results. As of December 31, 2025, we had $386.7 million in cash equivalents and marketable securities, up $223.9 million from the end of 2024. We ended the year with net debt to adjusted EBITDA leverage of less than 1 time. We are reaffirming the 2026 financial guidance that was issued in January. We expect total product revenues in the range of $805 million-$825 million. This represents a 4% increase year-over-year, driven by Jornay growth and durable revenues from our pain portfolio. Our revenue guidance reflects an estimated impact of our authorized generic agreement with Hikma. Our agreement with Hikma provides us with significant profit share, positioning us to maximize the value of the Nucynta franchise and compete effectively with third-party generics. Consistent with prior years and typical first quarter dynamics that impact our industry, we expect a modest quarter-over-quarter decline in revenues in the first quarter of 2026 due to annual deductible resets that increase out-of-pocket costs for patients. We expect Jornay revenue to be in the range of $190 million-$200 million, a 31% increase year-over-year. We ended 2025 with Jornay full-year gross to nets of about 64%. We expect gross to nets in 2026 to remain stable in the mid 60% range. As a reminder, gross to nets tend to fluctuate on a quarterly basis, and we expect gross to nets to be highest in the first quarter and higher in the first half of the year compared to the second half, due to typical seasonal dynamics. We expect adjusted EBITDA in the range of $455 million-$475 million, up 1% year-over-year. We remain committed to creating value for our shareholders through disciplined capital deployment. Our capital deployment strategy balances expansion and diversification through business development, debt repayment, and opportunistic share repurchases. As Vikram mentioned, we remain actively engaged in evaluating opportunities to further expand and diversify our portfolio through business development, which I will elaborate on in a moment. In December, we announced the successful closing of our first syndicated credit facility, underscoring the strength of our financial outlook. The $980 million credit facility will mature in 2030 and consists of a $580 million initial term loan, a $300 million delayed draw term loan, and a $100 million revolving credit facility. The initial term loan was used to repay the $581 million balance of our previous $646 million term loan, with the delayed draw term loan and revolving credit facility both currently undrawn. Our new credit facility significantly improves our interest rate and debt terms, which is expected to result in meaningful annualized interest savings. The credit facility also provides additional capital that can be used to fund future business development opportunities to drive long-term value for shareholders. In 2025, we returned $25 million of value to shareholders through an accelerated share repurchase program. We have $150 million remaining in our current board-authorized repurchase program, which can be leveraged through December 31, 2026. We remain disciplined in our approach to business development and continue to evaluate assets that are commercial or near commercial, with cost-efficient sales and marketing requirements and exclusivity into the 2030s and beyond. We are focused on therapeutic areas where we can leverage our expertise and established infrastructure, including neuropsychiatry, pediatrics, and pain, while also remaining open to other specialty indications or rare diseases that are cost efficient, assuming they offer a compelling path to building a franchise. I am confident in our ability to build upon this track record when the right opportunity arises. I will now turn the call back to Vikram. Vikram Karnani: Thank you, Colleen. 2025 was a year of strong execution for Collegium Pharmaceutical, Inc., in which we achieved our financial commitments and delivered on our strategic priorities. We enter 2026 with great momentum and a clear focus on driving further growth for Jornay PM, maximizing the durability of our pain portfolio, and strategically deploying capital. These priorities position us to create long-term value for our shareholders as we build a leading, diversified biopharmaceutical company committed to improving the lives of patients living with serious medical conditions. I will now open up the call for questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, for our first question. Thank you. The first question is from the line of Les Sulewski with Truist. Please proceed with your questions. Jeevan Larson: Hey, this is Jeevan on for Les. Thanks for taking our questions. What assumptions underlie 2026 Jornay guidance, and how should we think about factors that could lead to upside? Have there been any competitive developments in the space that could impact Jornay demand? Thank you. Vikram Karnani: Thanks for the question, Jeevan. I think, if I understood your question, you were asking what assumptions drive the 2026 guide for Jornay. As we said before in our prepared remarks, we expect that growth to be driven by demand growth, as we expect relative stability in gross to nets between 2025 and 2026. If you do not mind repeating your second question, that would be helpful. Jeevan Larson: Yeah, sure. Have there been any competitor developments in the ADHD market that could potentially impact Jornay demand? Vikram Karnani: We monitor all the typical competitive dynamics in the market. We assess future launches that might be coming into this space. To date, we do not see much material change, both in the forms of current dynamics or in future launches that could impact Jornay demand. As a reminder, Jornay remains one of the only differentiated medicines in this space, specifically because of our proprietary delivery technology, which makes meaningful impact for patients, particularly those that are dealing with morning challenges. We do not expect that to be impacted anytime in the future. Operator: Thank you. Our next question is from the line of Brandon Folkes with H.C. Wainwright. Please proceed with your question. Brandon Folkes: Hi, thanks for taking my questions, and congrats on all the progress. Maybe just two from me. I know you have not given a peak sales range for Jornay, but can you help us frame how you are thinking about the ramp to peak? Are you thinking about a three- to five-year ramp to peak in your hands? Secondly, within Nucynta AG in the market, how promotionally sensitive is Belbuca and Xtampza at this stage of their life cycle? How do you think about the commercial infrastructure behind those products today versus perhaps if a generic came to market on either one of those? What is your hurdle to pull back on investment there? Thank you. Vikram Karnani: Thanks for the question, Brandon. I will take the Jornay PM peak sales question, and then we will have Scott address the Nucynta question. You are right. We have not previously talked about Jornay PM peak sales, primarily because we have, as I said before, continued to invest in sales and marketing activities for Jornay PM. As a reminder, we expanded the sales team from 125 to 180 sales reps back in April last year, and we also said that it takes about 6 to 9 months before you can truly start to see the impact of the expansion. We are right in that timeframe right now, where we are starting to see the impact of the expanded team, and we expect that to continue throughout 2026. I think once we have a better sense of what the impact of these commercial investments tends to be, we will have a much better sense, both of the peak opportunity as well as what that ramp looks like. We look forward to keeping you updated on what Jornay looks like, both in terms of the peak and how fast we can get there. Now, on the Nucynta question, I will turn it over to Scott and Colleen to weigh in. Scott Dreyer: I will start, Brandon. I think your first thing was, as Nucynta AG is here, how does that help us think about the sales force and is Belbuca and Xtampza promotionally sensitive? They are definitely mutually exclusive. Nucynta, later in life cycle, light promotional sensitivity. Belbuca and Xtampza, high promotional sensitivity. It is a different situation. It is not one where it is competitive, so to speak, versus other sales forces, but it is a highly complex marketplace. Our sales representatives are helping the offices navigate the payer environment and continue to change behavior. Definitely promotionally sensitive. We need our team, and just as a reminder, it is highly efficient. We have 100 in that sales organization that are supporting that $600 million plus revenue. We think we are in a good spot there. Colleen Tupper: Yeah, Brandon, I will just add on, as we have said previously, particularly our field forces, as Scott just mentioned, are focused on Xtampza and Belbuca, and we will invest through any of those potential LOE dates because of the uncertainty. In the event an event were to occur, we can pivot pretty quickly, and we have the ability to moderate investment there, and that is how we would approach that. I might just come back and remind you on Jornay PM that the LOE for is our base case IP is out to 2032, and given its differentiation, as you think about longevity, you should be thinking about that date. Brandon Folkes: Great. Thank you very much. Operator: Thank you. As a reminder, to ask a question today, you may press star one. The next question is from the line of David Amsellem with Piper Sandler. Please just proceed with your questions. David Amsellem: Hey, thanks. Just a couple from me. One, on capital deployment. Vikram, I know you have talked about rare diseases in the past and certainly given your background. I am wondering how you are thinking about it in terms of acquiring a rare disease-focused asset that is on the market and using that as a beachhead off of which you can add more rare disease assets, where you would leverage a patient services and a reimbursement hub. I know that is something that obviously you have a lot of experience with, but is that something you are thinking about, or are you leaning more into your existing therapeutic areas of expertise, like psychiatry? That is number one. Secondly, just talk more generally about the Jornay sales force. There is always room to expand. ADHD is, of course, a big market, but how are you thinking about right-sizing of the sales force, or potential for more expansion down the road, whether it is this year or next year? Thanks. Vikram Karnani: Thanks, David. On capital deployment, I think I will remind everyone that our capital deployment, particularly from a BD standpoint, as we have said before, the types of assets we are looking at are commercial or near commercial, primarily U.S.-based, that have LOEs into the 2030s and beyond. In an ideal world, we can get these assets in the areas where we have already made a significant commercial investment. If you think about psychiatry and pediatrics, where with the Jornay PM sales force, we already call on a significant number of prescribers. That would be ideal so we can get significant operating leverage... We have also said before that we are open to other potential areas, but they do need to be more capital efficient. As you have rightly identified, rare disease tends to be one of those areas where you can be a bit more TA agnostic, but you can build a franchise that creates operating leverage from creating a significant commercialization approach. One of them is the backbone of patient services, reimbursement hub, et cetera. As we have spoken before, both of those areas are attractive to us as we think about how we build our portfolio out for the future. In terms of the Jornay PM sales force expansion, I think what we previously said still holds true. When we expanded to 180 reps back in April, we did that because we believed that, given the number of prescribers, given what the prescribing behavior looks like and what the various deciles look like, we believed that 180 was the right number, and so we believe we are right-sized. Of course, if down the road we feel that we need to expand more, because we are only limiting our growth ourselves, then we will absolutely revisit that. At this point in time, we believe 180 is the right number, and we look forward to seeing the momentum we are going to drive this year. David Amsellem: Okay. That is helpful. Thank you. Vikram Karnani: Thank you. Operator: Thank you. At this time, I will turn the floor back to Vikram for closing comments. Vikram Karnani: Thank you, everyone, for joining our call. Wish you a great rest of the day. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
Operator: Hello, and welcome to Phathom Pharmaceuticals Fourth Quarter and Full Year 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded. With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead. Eric Sciorilli: Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's fourth quarter and full year 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer. A couple of notes before we get started. Earlier this morning, we issued a press release detailing the results we'll be discussing during the call. A copy of that press release can be found under the News Releases section of our corporate website. Further, the recording of today's webcast and the slides we'll be reviewing can also be found on our corporate website under the Events and Presentations section. Before we begin, let me remind you that we'll be making a number of forward-looking statements throughout today's presentation. These forward-looking statements involve risks and uncertainties, many of which are beyond Phathom's control. Actual results may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements. Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release. With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve? Steven Basta: Thank you, Eric, and thank you to our investors and analysts for joining our call this morning. Thank you even more to the Phathom colleagues for your diligence and dedication throughout 2025. It was a transformational year for the company, and we're now set to execute our growth and profitability plan. Let me start by summarizing the key points Sanjeev and I will be discussing today. We had a successful Q4. We delivered on expectations for both revenue and cash operating expense levels, coming in at the better end of our guided ranges. We've taken key steps in the recent 2 months to enhance our capital structure, reduce our interest expense and modify our outstanding term loan obligations. As a result, we believe our cash on hand, along with anticipated future cash generated from operations will be sufficient to satisfy all obligations under both our term debt and our revenue interest financing agreements. We're on track in guiding to operating profitability beginning in Q3 of this year and for full year 2026. Our $320 million to $345 million revenue guidance for 2026 reflects our operating expectation of continued solid growth from our GI-focused strategy and includes an accounting-related classification change, which Sanjeev will cover in more detail. Our sales organization is positioned to deliver, and we're seeing clear signs that our GI strategy is working. I'm very proud of what our team accomplished in 2025. We believe we've set ourselves up for success, both financially and operationally. Beginning the update today with our financial highlights for Q4 and full year 2025, our results are in line with our preannounced estimates from January and incrementally a bit better on expenses and on cash usage. We've delivered on the plan we set forth on our May earnings call and reiterated in our earnings calls in August and in October. Net revenues were $175.1 million for the full year 2025, representing 217% year-over-year growth. Q4 sequential quarterly growth was solid during a period of sales force alignment as we had discussed in our October call. In August, we guided to $165 million to $175 million for 2025 revenue. We updated that in October to $170 million to $175 million, narrowing it to the top half of the range. And ultimately, we delivered at the high end of that range. Our Q4 revenue was $57.6 million, in line with our pre-released January estimate of $57 million to $58 million. Cash operating expenses, excluding stock-based compensation, were $50.3 million for Q4, better than both the less than $55 million target we guided to and to our preannounced range of $51 million to $53 million. We delivered solid growth through the last 3 quarters of 2025 while cutting quarterly cash operating expenses by nearly 50%. Our net cash usage for Q4 of 2025 was approximately $5 million. That's 64% lower than Q3 and consistent with our expectations of reaching operating profitability beginning in Q3 2026 and cash flow positivity in 2027. We've taken significant steps to enhance our capital structure. Our goals were: one, to reduce any financing overhang or potential risks stemming from repayment obligations or cash covenants; and two, to reduce our interest expenses. In 2025, we got the fundamentals of our business in order, growing revenue and reducing expenses. That improved financial profile, enabled us to complete a successful equity offering in January and to renegotiate our debt terms as we announced today. We have modified our term loan agreement to extend the maturity date, which had previously been December of 2027, we've extended it to February 2029. And we've reduced our interest expense obligation and reduced the total outstanding principal amount. As a result of these capital structure enhancements, we believe our current cash plus the cash that we expect to generate from operations in the coming years will be sufficient to meet all obligations under both our term loan and our revenue interest financing agreements. Sanjeev will provide further details on these items and take you through our 2026 guidance. I'm very proud of our operating and financial progress these last 12 months. The entire Phathom team is dedicated to our objectives of growing revenue while being disciplined on expenses. We're exhibiting strong momentum, which we expect to carry forward throughout 2026. A few quick notes on our commercial progress. I said before how fortunate we are to be able to positively impact the lives of so many patients. Through February 13, over 1.1 million VOQUEZNA total prescriptions have been filled to more than 230,000 patients. We believe we're just starting to penetrate an enormous market. About 65 million patients have gastroesophageal reflux, of which 40% experienced inadequate symptom relief from PPIs. About 273,000 prescriptions were filled in Q4 alone. 174,000 of these were covered prescriptions growing 21% quarter-over-quarter and representing approximately 64% of the total prescriptions filled in Q4, while 99,000 were filled as cash pay prescriptions. Covered prescription volume drives our revenues while cash pay prescription volume improves physician perception of access and makes it easier for physicians to prescribe VOQUEZNA with confidence that their patients will be able to get the drug. Most importantly, both paths enable us to help patients in need of VOQUEZNA. Additionally, in November, we turned on a GoodRx offering, providing an alternative payment option for patients filling VOQUEZNA prescriptions sent to retail pharmacies. Looking forward, we have confidence in 2026 growth. We just completed our national sales meeting and the sentiment from the field is terrific. We start March with more than 285 of our 300 sales positions currently filled, a nearly full-strength sales organization. Our strategy to drive depth and frequency of calls to gastroenterologists is solid, and we believe it will ramp utilization and writing frequency among GIs treating GERD. 2026 will be an important year for us as we drive sales growth and transition to profitability. Overall, we continue to deliver as we guided on each of our previous earnings calls. Our 2025 results ended at the better end of our revenue and cash operating expense guidance ranges we communicated, and we believe we're on track to transition operating profitability beginning in Q3 of this year and to reach cash flow positivity in 2027. We've taken important steps to enhance our capital structure and mitigate any covenant or repayment concerns. The sales force is nearly full strength and energized following our national sales meeting. We're well positioned to execute and deliver on our strategy in 2026. I'll now turn the call over to Sanjeev to take you through our detailed financial updates. Sanjeev Narula: Thank you, Steve, and hello, everyone. I'm pleased to report our Q4 and full year 2025 results today. I'm encouraged by the changes we've made throughout 2025 and excited about what's on the horizon for '26 and beyond. We have a lot of important updates on the financial front, so let me get right into it. Steve provided some top-level highlights for the quarter, and I'll provide additional color commentary. Our revenues for Q4 of $57.6 million were consistent with pre-release and demonstrated 16% sequential quarterly growth. Aligned with the full year, the quarter also came in at the very top end of our guidance. As always, covered script volume primarily drive our revenue, while contribution from cash scripts and inventory dynamics remain minimal and consistent. Our gross to net for Q4 came in at the high end of 55% to 60% range we provided last quarter as a result of shifting rebating mix. Our full year gross to net was within our expectations. Our gross margin remained consistent in Q4 and full year at approximately 87%. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation of approximately $320,000, a 95% improvement compared to Q3. As you can see, this is a meaningful change in the operating profile of our company. As always, please refer to this morning's press release for a reconciliation between non-GAAP measures and their most directly comparable GAAP measures. Q4 cash operating expenses were about $50 million, notably favorable than the less than $55 million guidance we set forth earlier last year due to continued expense discipline. Similarly, our full year cash operating expenses of approximately $284 million came in at the low end of the range we provided on our Q3 call. We ended the year with about $130 million in cash and cash equivalents, which roughly reflects a $5 million cash usage in Q4 and signals a very clear path to operating profitability this year. Now let me turn to the enhancement in our capital structure. In January, we improved our capital structure via an oversubscribed equity offering. And today, we're announcing a modification of our term debt. As a result of these deliberate steps, we believe we now have a cost-effective and sustainable capital structure to meet our business needs and all of our debt obligations. The offering raised $130 million in gross proceeds, which brought our cash balance just north of $250 million at the start of the year. I'm pleased to announce today that we have successfully modified the terms of our outstanding term facility, which we believe will greatly benefit the company going forward. We reduced the remaining principal to $175 million outstanding and paid certain end of term fees and accrued paid-in-kind amounts from the original agreement. In total, we used approximately $56 million of our cash balance to streamline the facility. Additionally, we were successful in lowering the interest rate from 12% to 9.85%. Lastly, we extended the loan maturity date from December 2027 to February 2029. Partial monthly repayments will begin in 2028, which are anticipated to reduce the outstanding principal as well as our interest expenses. We expect we will be generating positive operating cash flow beginning in 2027 in advance of these repayment obligations. Overall, these modified terms reduce our interest expense, remove near-term payment hurdles and provide greater financial flexibility. Following our capital structure enhancement, we believe our cash on hand, along with anticipated future cash flow from operations will be sufficient to invest in our operations as needed and to satisfy all liquidity covenants and repayment obligations. For complete clarity on our covenant, we expect our highest cash flow requirement between now and September 30, 2027, will be approximately $130 million. The cash flow requirement is derived from our covenant in our revenue interest financing agreement, which becomes effective for the first time on October 1, 2026. All cash flow requirements relating to our term debt are substantially lower than those from our revenue interest financing agreement. Beginning October 1, 2027, we expect revenue interest financing agreement covenants will require that we temporarily hold a modestly higher cash balance, which will decline thereafter as revenues increase and we make additional royalty payments. To be clear, the cash flow covenants between the term debt and revenue interest financing agreements are not additive. We manage our liquidity to whichever covenant is the highest at any given point in time. Rest assured, for all these periods, we believe our cash on hand of approximately $190 million following our term debt modification and our anticipated cash generated from operations beginning in 2027 will be sufficient to satisfy all covenants at all time. We refer you to our 10-K filed earlier this morning for more information. While on the topic of our 10-K, I'd like to flag that in this year's document, we updated the business section and risk factors to reflect the company's transition to a primarily commercial entity. While the comparison against prior years will show significant tax changes, I want to be clear that we believe important updates are being covered during this earnings call and in this morning's press release. Now I'd like to move to our 2026 guidance. With our GI-focused strategy taking hold and our financial position enhanced, we're ready to deliver in 2026. Today, we are issuing guidance on several financial metrics, which reflect that sentiment. Before I get into the numbers, I'd like to provide clarity on the accounting-related explanatory note you saw in this morning's press release. Beginning January 1, certain third-party charges will be included in cost of goods sold instead of gross to net adjustments. All things equal, net revenue will be higher as a result of costs moving from gross to net adjustments to cost of goods sold, leading to a mostly net neutral effect on our gross profit line in our P&L. Importantly, this change is simply a different classification of these costs and does not impact the underlying operations of our business. We are estimating an approximately $17 million to $20 million shift in 2026 between 2 line items, which is reflected in following guidance. We anticipate 2026 net revenue will be $320 million to $345 million, including the estimated effect of the classification change I just described. As for gross to net, we believe the discount will be between 55% to 59%. We anticipate gross margin will be approximately 80%. As for spend, we are anticipating cash operating expenses, excluding stock-based compensation of $235 million to $255 million, which at midpoint reflects a 14% decrease compared to 2025 results. Now a few comments about the cadence of these items over the course of 2026. We believe revenue will exhibit a similar pattern to last year with approximately 40% being achieved in first half and approximately 60% being achieved in second half, with quarter 1 being the soft quarter due to typical seasonality. We expect expenses will be relatively stable on a quarterly basis, but will reflect a modest step-up from where we exited Q4 2025, accounting for nearly full strength sales team, new marketing initiative and full year cost of our EoE Phase II trial. Based on anticipated revenue, gross profit and cash operating expenses, we anticipate achieving operational profitability, excluding stock-based compensation by Q3 and in total for full year 2026. And finally, we believe we will achieve cash flow positivity in 2027. In summary, our financial profile has transitioned meaningfully, and I'm excited for this next phase. This quarter results were strong, coming in at the better end of our guidance we previously provided. Our operational momentum is solid, which gives me confidence in our 2026 revenue trajectory. I feel confident in our financial position and believe we have the resources we need to execute the plan and deliver on the guidance ranges we set forth today. With that, I'll now turn the call back to Steve for his closing remarks. Steve? Steven Basta: Thank you, Sanjeev, for the detailed financial review. I would like to extend my thanks to everyone at Phathom for their extraordinary efforts throughout 2025. I was able to meet many of our sales team members during our recent national sales meeting, and I'm heartened by their dedication and exceptional talent. Our transition to focus on gastroenterologists and to reach operating profitability is well underway. Thank you also to our shareholders for your support and confidence. We're dedicated to delivering value to reward your investment. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question or comment comes from the line of Kristen Kluska from Cantor Fitzgerald. Kristen Kluska: Congrats on a really strong end of the year and the work you were able to do around the interest, definitely very favorable here. So the question I have for you this morning is just recognizing it's still very much early days. What can you tell us about the early signals that you're seeing from this strengthened sales force and strategy, especially coming out of that meeting? Are you seeing that more of the GIs that were new to your strategy are converting? And are you also seeing some early signals of growth within those current GIs where you added more touch points? Steven Basta: Kristen, thanks so much for the kind thoughts and for bringing us to what I think is the most important topic actually, which is the core focus on our GI call point is the fundamental element of our growth strategy, and we are seeing consistent signs of momentum. It's interesting as you characterize the 2 different paths of sort of converting new writers versus growing existing writers. Virtually all gastroenterologists, not quite all, but a very high percentage of gastroenterologists have already written a script for VOQUEZNA. So we've got broad penetration within the gastroenterology community, both among physicians and among APPs with high conversion success already. What we focus on all of our sales force messaging in the context of our national sales meeting, in the context of the conversations that the regional managers are having with the territory sales representatives is all about how to grow writing frequency. We have what we refer to as an adoption ladder where physicians try the product and then we are trying to improve their consistency of writing and they become consistent writers and then we try to improve their consistency of writing and then they become adopters and so on. And as we grow in terms of the frequency of the physician writing an NRx for VOQUEZNA. And what we are seeing is very clear trends on those adoption letters associated with physicians moving up in category. So a tried physician will only have written 2 NRxs in the last quarter, a consistent physician will have written 6 or more weeks in the last quarter, et cetera. And we are seeing physicians move from one category to the next consistently, where on one of the metrics, we'd only had 400 or 500 physicians last summer that were in the upper categories. Now we've got well north of 2,000 physicians in the upper categories. So we're seeing that adoption rate among not just the highest frequency writers, but very broadly within the GI community increasing. And that's the focus of all of our sales force conversations. That was the focus of our national sales meeting is how do we take physicians through that adoption ladder. It's the focus of each of our coaching conversations, and we're seeing clear evidence of it in our writing pattern. One of the metrics that I find to be helpful as we think about the long-term opportunity for this product is what is the rate of adoption we've achieved among the top few hundred writers. And there, we're already seeing that we're now passing on average 20% penetration in terms of their PPI volume being converted to VOQUEZNA. And when we get to 20% conversion across the broader GI community, that's where we're approaching $1 billion of revenue potentially in GI. And that's clearly where we're headed over the next few years. Operator: Our next question or comment comes from the line of Annabel Samimy from Stifel. Annabel Samimy: And just following on from that comment. In the territories that you already have been pretty well aligned as far as the focus on GIs, do you have any sense yet of the dynamic of patients transitioning back to primary care, if you're starting to see pull-through in some of those more mature accounts? Just curious to see if that dynamic or if you've seen any pickup in the primary care area organically from that effort. And when everything -- everyone is on board and humming, do you expect an inflection? Or is this just a steady growth throughout the year? Steven Basta: So Annabel, that's a really important component of the long-term growth path is building beyond just GI to capture the return of patients to primary care and the growth there. Just candidly, we've not looked at it, at least I've not looked at it. I know our sales team is doing much more granular work on a physician-by-physician basis at the specific referral patterns for specific gastroenterologists to see their referring physicians and how they've adopted. I've looked at it much more broadly for the entire universe of primary care physicians, and we are seeing an uplift in primary care prescribing volume on a broad basis. The granularity that you're describing is very much an analysis that over time, we will do much more frequently. The near-term focus is on that core gastroenterology conversion point. And the expectation exactly to your point, is over the next 6, 12, 18 months, we're going to see those patients returning to primary care and see those growing, and we'll be looking at that metric more precisely. But what we are seeing on a broad basis when we look at the total prescribing in GI and the total prescribing and primary care is an uplift in both. Even though the majority of our sales force time is going to GI, that uplift broadly in primary care prescribing volume would suggest that we are seeing exactly that effect. So was there a second half of your question? Or did that capture it? Annabel Samimy: Expectation for any inflections once everyone is on board... Steven Basta: The inflection point question. Yes. So we don't map out -- we don't model out a specific inflection point. It's very hard to predict when does the slope change. What we are driving toward is consistent growth month-over-month, quarter-over-quarter because we're not trying to do a sea change kind of strategy at this point going forward. 2025 was very much a year of fundamentally shifting the strategy. We were changing call points. We realigned sales territories. We went through some pretty significant change. 2026 is just going to be a year of heads down execution. It is making sure that we are doing all of the right things. We're getting into the right offices. We're calling on gastroenterologists with the right frequency. We are delivering really good messages every time we call in gastroenterologists. We're helping them with all of their access needs. We are working through the process of enabling them to write VOQUEZNA scripts more frequently. And that drives our growth. So we don't need to inflect at any one point to a specifically different strategy. What we need to do is just execute this playbook and execute it well quarter-over-quarter. It's hard for me to predict exactly what the slope looks like on a quarter-by-quarter basis. I do expect that we're going to get steady growth, might accelerate at some point in time. It's really hard to predict that. What we're seeing is all the right signs of incrementally significant adoption among physicians and incremental success that our sales reps are having in each of these offices. Operator: Our next question or comment comes from the line of Dennis Ding from Jefferies. Anthea Li: This is Anthea on for Dennis. Congrats on the quarter. First on Q1, do you expect sequential quarterly growth given the deployment of the expanded sales force? Or are you seeing that seasonality plus the winter storms will still be headwinds here? And is there a plan to seek broader Medicare coverage for VUQUEZZA this year and if that's baked into guidance? Steven Basta: So Anthea, let me -- I'll briefly address the first part, and then I'll offer Sanjeev the opportunity if he wants to add more color on the seasonality in this process. We're clearly seeing the typical seasonality that occurs and the winter storms are clearly having some effect as well. We've seen slow weeks whenever the entire country is shut down because of an ice storm that has an impact. The -- it's -- we don't guide to revenue on a quarter-by-quarter basis with that granularity. So while we clearly acknowledge that Q1 is the weakest of the 4 quarters during the year, whether it's flat or up or down, we just -- we don't provide that quarterly guidance. What we've provided is full year guidance, but the underlying metrics that we're seeing in terms of our sales call activity the prescribing behavior of physicians, the growth patterns that we've been describing, all give us confidence in terms of where we're going to be on a full year basis. And so Sanjeev, if you want to chime in at all on seasonality? Sanjeev Narula: Yes. I think you pointed out, Steve, that we don't provide quarterly guidance. But I think what I said this time, if you look at in our kind of prepared remarks that we said earlier, if you look at the cadence of our business on a full year basis, we'll be roughly kind of same trajectory as we experienced in 2025. 40% of our top line revenue will be in the first half of the year, approximately 60% in the second half. And I said Q1 is going to be the slowest quarter because of typical seasonality. So I think that's kind of what we see, what the exact number is going to be. Obviously, you will hear that in the first quarter call that we talk about it. But clearly, it is the slowest to softest months because the typical seasonality. Steven Basta: And then the second half of your question, Anthea, I think, was related to Medicare. So we're not anticipating a fundamental change in broad Medicare coverage where we get coverage for all Medicare patients. What we are seeing is incremental Medicare prescriptions being covered either through medical appeals processes or through specific Medicare Part D plans. So as different Medicare Part D plans become more familiar with seeing VOQUEZNA prescriptions being submitted, they are beginning to cover those more frequently. And so we may see over time some increase in the number of Medicare scripts that are actually being processed and being covered, but it's not a broad coverage decision nor do we anticipate that there's going to be any broad fundamental change in a broad coverage decision on a system-wide basis for the entire population of Medicare patients. Operator: Our next question or comment comes from the line of Joseph Stringer from Needham & Company. Joseph Stringer: Just wanted to follow up on the previous question. Looking at the IQVIA prescription data and the impact of seasonality, is the magnitude of the seasonality effect this cycle in line with your expectations, I guess, all things considered? And maybe another way of asking is, are there any nuances about the launch now with the refocused effort that would make it more or less sensitive to seasonality? Steven Basta: So thank you for the question. It's really hard to characterize magnitude of seasonality one year versus another. What we're seeing is very similar to the pattern that we saw last year in terms of January being particularly light and then February is also light. And then by March last year, it started to pick up. So we would hope that, that same pattern -- not just hope, we actually expect that, that same pattern is going to come to fruition because you get several uplifts in March. We're coming off of the national sales meeting. Everybody is energized. We're going to have a full strength sales organization and physicians have had time to work through their plans. Patients who have switched plans now have time to figure out how they're going to get the drug covered. So all of those things that create noise in January as everybody is switching to a new health plan gets worked out in the first month or 2. So that effect just is there every year for a branded product, and we -- the specific magnitude of it varies by product. So we're starting to see what that pattern looks like for us. We're not seeing anything that's unusual in that regard. One thing that we have observed is the IQVIA reported numbers seem to be somewhat greater underreporting versus our internal numbers than historic norms. We think we've identified the cause of that, and that that's going to work itself out. But there may be a little bit of extra softness or delta in the IQVIA reported numbers versus what we're actually seeing. But the softness is real in January and February, and we think it starts to improve meaningfully in March. The other phenomenon that you cite is a real phenomenon as Anthea's question also had suggested that winter storms clearly not just had an effect on us, had an effect on a whole bunch of companies in the context of the slowdown for a week in January and slowdown for a week in February on the Northeast. So I don't want to overstate those -- that is I think the dominant effect is just the annual seasonality that we would expect to see every year. Operator: Our next question or comment comes from the line of Paul Choi from Goldman Sachs. Unknown Analyst: This is Daniel on for Paul. So we're curious about like if you could provide color on the proportions of prescriptions that are now filled to BlinkRx versus the new GoodRx that came online? And how is the economy of the channels versus the more traditional dispensary? Steven Basta: So there are several different parts to that. So let me take GoodRx first. GoodRx, we just turned on in November. And what that is, is -- I mean, already GoodRx had coupons on it for our co-pay support program. So if someone is at a pharmacy with a retail script and they need to get co-pay support because their insurance co-pay is high, they can go to GoodRx, they can get our co-pay card and in many cases, bring down the co-pay amounts significantly and in some cases, down to $25, which is our target co-pay where possible. The other thing that we turned on with GoodRx is the opportunity to do a cash pay purchase through GoodRx, which actually still would get reported into the IQVIA script numbers because it would be dispensed from a retail pharmacy, but there's a $199 option for a patient to purchase that. That's intended really for a patient who either can't access the co-pay card because they're on a government plan or for whom the co-pay would still be too high or would still be above $199 that it gives another alternative to a patient. Those numbers are still relatively small. It's a very small percentage of the overall number. It just got turned on in November. We'll give you a sense in future quarters. If that grows to be a meaningful number, we'll give some color on that. But at this point, it's a really small number. It's not a driver of anything, but don't want anybody to be surprised that, that option now exists. So we're trying to provide multiple ways for a patient in different reimbursement circumstances and different access environments to be able to know that they're going to be able to get access to the product as reasonably priced as possible. The percentage of scripts that are going through Blink, and I want to be sort of clear to distinguish between 2 things in this process. More than half of our prescriptions now in total are going through the Blink network to then be routed either as covered scripts to a pharmacy or as cash pay scripts to be dispensed directly through the Blink network. If -- when a physician sends a prescription -- designates a prescription to go to Blink, Blink will first adjudicate whether or not the script is going to get covered. If it gets covered, it shows up in the IQVIA numbers. It doesn't show up in our Blink cash numbers, even though Blink is an intermediary facilitated that process. So about half of our scripts in total go to Blink. They get routed. If they get covered, they show up in the IQVIA numbers. If they don't, they show up in our cash numbers. And as we described, something on the order of 36% of our prescriptions now are Blink dispensed cash scripts. So that's where the 2 different numbers are. That delta is scripts that are getting covered after they originally got sent to Blink. Matthew, does that address your question? Or was there a second part of that? Operator: Our next question or comment comes from the line of Chase Knickerbocker from Craig-Hallum. Chase Knickerbocker: Just a quick one. Steve, what inning do you think we are in as far as kind of getting reps to full productivity or kind of where you expect them to be after kind of shifting the focus in the fall, but also kind of changing the lines of like some of the geographical lines of a lot of these territories in the fall as well? Where do you think we are as far as the inning there? Steven Basta: Just to clarify, Chase, what inning of sales force transition? Chase Knickerbocker: Full productivity, Steve, as far as full productivity kind of with that transition in the fall. Steven Basta: Yes. So I think full productivity for a sales rep comes several months after the sales rep is on board because there is a training process, there's a learning process. It takes a month or 2 to get to know the accounts in your territory and to have scheduled all of the launch events. So we had a number of sales training classes that came in January and then our national sales meeting in February. By March, April, all of those folks are hitting the ground. I mean they're hitting the ground immediately after their training program. But within a month or 2, they've met most of the accounts in their territory, and they've got their launches scheduled and they've got momentum within each of those accounts and you start to see the real impact. So I would think we are to use the baseball analogy at the seventh or eighth inning of that 9-inning process of sort of the sequence of events where the sales force gets to be fully effective. Chase Knickerbocker: And sort of since that shift to focus in GI, have you seen kind of the increase in productivity that having more kind of condensed patient base at these prescribers would indicate? Or do you think there's kind of additional efficiency that we'll continue to kind of harvest over the course of this year? Steven Basta: Well, it's interesting. Even if the sales force is fully effective, you don't see the effect that day or that week or even that month in terms of sales because the majority of our prescriptions come from prior patients who have been prescribed the product who are getting refills, physicians who have previously already adopted the product who are prescribing it to an incremental physician. So what we are really doing is just moving the incremental adoption rate. So if you've sort of got a base 70%, 80% volume that's happening, you're really only impacting that 20%. Now if you become 30% more effective, that 20% goes to 26%, but it's 26% on top of a base 80% that already exists there. So when you see it, you don't see -- when you see greater effectiveness in our sales activities, you don't see an immediate change in revenue in a month. What you see is incremental effectiveness, but that incremental effectiveness is cumulative over time because the increased conversions of patients in that month aren't just scripts that month. They are refill in the next month and refill the next month and refill the next month and the incremental scripts in the next month, refill every month thereafter. So you see a cumulative growing effect. You don't have a sales force's activity turn into a sea change in revenue in that next month of revenue. If that makes sense as to sort of how these consistent use products end up building over time. Operator: Our next question or comment comes from the line of Min Lee from Guggenheim Partners. Min Lee: Congrats on the data. One quick question for me. What is the company's long-term vision beyond VOQUEZNA? I mean given that you guys have established this GI network, do you guys plan to utilize this network to consider maybe future partnership with companies that have already commercially ready GI assets? Or do you guys plan to maybe pursue any other indications beyond EoE? Steven Basta: So Min, thank you for the question. So at this point, the only new indication that we're pursuing actively is EoE for VOQUEZNA. There are other indications and other populations that are of interest that we're evaluating. We've made no decisions. For example, we did a Phase II trial for as-needed use, haven't made a decision yet about whether or not we wish to pursue that in a Phase III program, but there are other populations that also could be of interest. Our long-term growth plan, as we have indicated, is to build a GI company that will bring in additional assets. This year is very much a year of consolidating our execution plan building deep relationships at every gastroenterology office. The 300-person field force is going to have those deep relationships and is going to be fostering them and build a leverageable base that we could bring a second product into. We are also starting BD activities to explore what other products would make sense either to bring in a commercial product potentially or very possibly a Phase II or Phase III clinical stage product that could launch in a 2030, '31, '32 time frame before we get to our LOE date so that we're launching not just probably a product, but 2 or 3 products over the course of the next 4 or 5 years that would build out a GI pipeline. So we're starting those conversations. We have had people bring us several ideas that are interesting. I don't feel any urgency that we need to distract our sales force to the second product right now. We just need to grow VOQUEZNA. We need to just execute on our core activity set, but we are actively thinking about what products would make sense to bring in to launch over the next 2- to 5-year period of time, and that could mean products at various stages from commercial down to Phase II stage. But it has to be launchable within the next 2 to 5 years, so that's launched before our LOE date in 2033 or '34. Operator: Our next question or comment comes from the line of Martin Auster from Raymond James. Martin Auster: Congratulations on the successful 2025 and in particular, the recent steps you guys have taken to strengthen the balance sheet. I'm going to maybe follow up on one of the earlier questions on -- I appreciate your comments you guys made on Q1 seasonality. I guess I was curious if the plan resets and other factors that kind of contribute to seasonality, does that drive an uptick in the rate of cash pay patients you'd expect to see in the quarter? And then also on the gross to net guidance that Sanjeev provided, curious if there's any trends that are assumed within that 55% to 59% range or if that metric is expected to be pretty steady overall throughout the year? Steven Basta: So thanks, Martin. Appreciate the kind thoughts on the questions. I'll take the first half, which is around cash pay and the second half, I'll give to Sanjeev in terms of GTN and sort of expectations. We would expect that we'll see some uptick in the amount of cash pay patients. I don't have any guidance on how much that is. I don't think it's going to be too significant in that process. But you'll see some patients who have a high deductible plan where they will be able to get access to the product on a cash basis from Blink. And then as they work through their deductibles, they would then be able to get it covered at some later period. And so you may see some movement in cash pay percentage in the early months of each year. That's not just this year, that would just be in general as a pattern in this process. We don't provide guidance on what that mix is going to be on a quarter-to-quarter basis, but that would be a typical feature of the seasonality patterns that one might expect. Separately, in terms of GTN and patterns and trends on GTN. Sanjeev, do you want to take that? Sanjeev Narula: Yes. Yes, I'll take that, Steve. Thank you. So Martin, as you saw like in 2025, so we kind of narrowed the guidance, if you recall, in our Q3 call to 55%, 60%. And right through the last year, we were kind of operating within that range. Quarter-to-quarter, there are variations because your planned business may change from one quarter to the other. But overall, it was very consistent and stable. And that's kind of what I expect in the guidance that we gave early this morning, 55% to 59%. Overall, for the full year, we'll be within that guidance. Quarter-to-quarter, there could be changes depending on how the plan flows and the business flows from that perspective. Operator: [Operator Instructions] Our next question or comment comes from the line of Matthew Caufield from H.C. Wainwright. Matthew Caufield: We had one question on the landscape that came up from investors. There's a separate private company with later-stage clinical development in non-erosive reflux disease and erosive esophagitis based on the P-CAB formulation. And just curious on your longer-term thoughts on any prospective entrants into the P-CAB space later into the future and maintaining VOQUEZNA's positioning. Steven Basta: Matthew, thanks so much for the question. I apologize I muted for a second to cough. I just had a little bit of cold. But -- the -- I think you're likely referring to Sebela, which is a company that has tegoprazan in development. There is actually an additional P-CAB that's in development that's many years out. So we clearly track competitive developments, all of the P-CABs. And tegoprazan is a good product. We expect that it will go through the NDA process, and they filed their NDA in January, reasonable to expect they may be approved by early 2027, but it's not really for us to predict exactly what that time frame is or what questions might arise. One of the things that we think about is how does this market evolve as a second entrant in the P-CAB space comes in. And it's interesting there's one framework where sort of a question can arise are 2 P-CABs going to compete against each other. There's a different question, which is we're competing in a space of 110 million PPI prescriptions per year. And we've only done 1.1 million prescriptions overall since launch. So we're tracking now at a run rate that's running about 1 million prescriptions a year. So we're at 1% of the PPI market. If a second entrant comes in, they're not going to be trying to take prescriptions. We're both going to be growing the P-CAB awareness in the context of the market where patients are on PPIs and are significantly in pain on PPIs. The entry of a second product in a new category actually does have a tendency to change the mindset of physicians where it's no longer do I need to pay attention to this product if you're the first entrant, but it's -- do I need to pay attention to this category. And that increase in category awareness, I actually think will accrue to our benefit that the majority of prescriptions tend to go to the first entrant that has more history with which physicians are more comfortable that already has broad access. So the second entry tends to grow the category broadly and tends to grow revenue for both parties in that process. So we're actually thinking that it has a net positive effect on the P-CAB adoption broadly to have a second sales force out talking about P-CABs and how much value they can bring to a patient who is still in pain on a PPI. So we're looking forward to that broadening and that shift in mindset of physicians that you really do need to adopt PPIs. We think we've got great product. We think that physicians have been -- we know physicians have been really pleased with the effect that this has to their patients and patients who take this product love it. All of that is going to reinforce the fact that the lead product in the category gets the biggest uptick. Matthew Caufield: Congrats again on VOQUEZNA's trajectory. It's great to see. Operator: I'm showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
Operator: Hello, and welcome to the Acushnet Company Fourth Quarter 2025 Earnings Call. My name is Josh, and I will be the moderator for today's call. [Operator Instructions] At this time, I'd like to introduce your host, Mr. Cameron Vollmuth, Director of Investor Relations. Cameron, you may proceed. Cameron Vollmuth: Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Sean Sullivan, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will make forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release, the slides that accompany our presentation and our filings with the U.S. Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial measures, including items such as net sales on a constant currency basis and adjusted EBITDA. Explanations of how and why we use these measures and reconciliations of these items to the most directly comparable GAAP measures can be found in the schedules in today's press release, the slides that accompany this presentation and in our filings with the U.S. Securities and Exchange Commission. Please also note that references throughout this presentation to year-on-year net sales increases and decreases are on a constant currency basis, unless otherwise stated. As we feel this measurement best provides context as to the performance and trends of our business and when referring to year-to-date results or comparisons, we are referring to the 12-month period ended December 31, 2025, and the comparable 12-month period in 2024. With that, I'll turn the call over to David. David Maher: 2 Good morning, everyone. Cameron has been with our team for a while, and it is my pleasure to welcome him to his first quarterly earnings call. We appreciate your interest in Acushnet and look forward to sharing our 2025 results and future outlook today. As a starting point, we are pleased with our fourth quarter performance as our teams executed our year-end plans and did good work preparing for the 2026 season and several product launches. As Sean will outline, revenues were up 7% for the period, and we generated nice momentum in our operating segments. Turning to Slide 4. For the full year, Acushnet achieved net sales of $2.56 billion and adjusted EBITDA of $410 million in 2025, growth of 4% and 1.5%, respectively. These results were made possible, thanks to the talented and dedicated associates who make up Acushnet and our committed trade partners who are on the front lines wherever golf has played. There are several highlights within these operating results, led by the Titleist Golf Equipment segment, which grew 6% on the year as investments in product development, precision manufacturing and fitting paid dividends across our golf ball and golf club businesses. As you will note from our revenue growth, the company is benefiting from recent capacity expansion projects, which will continue with a focus on cast urethane golf ball production and custom golf club assembly. In 2025, New Pro V1 posted gains across all regions, contributing to a 4% increase in golf ball net sales on the year with EMEA, Japan and the U.S., our fastest-growing markets. We are pleased with increasing demand for our AIM or alignment integrated marking golf balls. And operationally, we continue to benefit from the expansion of our automated custom imprinting capabilities, which is driving efficiencies and reducing lead times. Within equipment, 2025 was a strong year for Titleist Golf Clubs, which grew more than 7%, led by the successful launch of new T-Series irons and steady growth in metals and Scotty Cameron putters. Our Vokey wedge franchise also posted strong results in year 2 of the SM10 product cycle. Ongoing investments in product development and our global club fitting network frame how we characterize the Titleist Golf Club opportunity. Acushnet gear business increased 6% on the year with especially strong increases by Titleist Gear in EMEA and the U.S. and growing momentum for Club Glove travel products. Now moving to FootJoy. We are pleased with the direction this business has pointed. Sales were down 1%, mainly due to reduced discounted sales versus last year. On the strength of products like Premiere and HyperFlex, we are seeing a favorable mix shift towards our premium high-performance footwear franchises. And the FJ mobile FitLab program is delivering a value-added fitting experience, which helps golfers select the best footwear performance and comfort option for their games. And growth in gloves and apparel added to FootJoy's momentum and improved profitability for the year. Rounding out our portfolio, we continue to generate strong growth with our shoes brand up 9% on the year, led by double-digit gains in the U.S. Titleist Apparel also delivered a promising year, led by growth in China and our business in Korea. As to Acushnet's regional performances, full year 2025 results affirm our previous commentary about the Titleist Equipment segment, posting gains in all major regions, led by the U.S. and EMEA and softer conditions in Japan and Korea, where our equipment gains have been offset by declines in the correcting apparel and footwear categories. Acushnet's strong financial performance in 2025 supported ongoing investment across our business and the company's commitment to returning capital to shareholders. For the year, dividend and share repurchases totaled $268 million, bringing our total return over the past 4 years to more than $1.1 billion. And furthering Acushnet's commitment to our shareholders, I am pleased to announce that our Board of Directors has approved an 8.5% increase to our quarterly dividend payout in 2026 to $0.255 per share. This marks the ninth consecutive annual dividend increase since the program was initiated in 2017. These actions reflect the Board's confidence in Acushnet's ability to execute and their positive outlook towards the company's leading positions within the structurally healthy golf industry. As you will note, the company remains focused on investing to position the company for future growth while also returning capital to shareholders as appropriate. Now looking ahead, we start by pointing to the game's global momentum with worldwide rounds projected to have increased about 2% in 2025 with growth in EMEA, the U.S. and Japan and a flat year in Korea. In the U.S., our largest market, the number of golfers again increased, contributing to this rounds of play momentum. The global golf industry, as defined by golf courses, teaching centers and golf retailers continues to be healthy with strong financials supporting ongoing investments as the industry adapts to meet ever-evolving golfer preferences. Within Acushnet, we are enthused by our new product pipelines and sustaining momentum our brands carry into 2026. As is customary in even numbered years, we successfully launched a comprehensive lineup of new Titleist golf balls in this first quarter, including Pro V1x Left Dash and new AVX, TourSoft and Velocity models. It's also a busy year for Titleist golf clubs with new Vokey SM11 wedges and a new lineup of Scotty Cameron mallet putters launching in Q1. Both products debuted on worldwide tours earlier this year and initial responses have met our very high expectations. Plans are well underway for our new driver launch in late June earlier than our customary Q3 timing. Titleist drivers are #1 on the PGA Tour, and we are enthused by the great work from our product development and operations teams to provide added flexibility around launch timing. We will share more details about this product on our May call. One of our key narratives in recent years has been our focused investments in golf equipment R&D, operational efficiencies and capacity expansion and point to these investments as drivers to our recent growth and confidence in our ability to deliver enhanced innovation, product development and best-in-class golfer experiences, core attributes to the long-term success of Titleist Golf Equipment. Acushnet's gear business is well positioned coming off a strong 2025, and we are planning for growth led by gains in the U.S. and EMEA. Within gear, we pursue exceptional performance and quality to differentiate our products with discerning core golfers. The FJ brand continues to move forward in 2026 as we leverage high-performance Premiere and Pro/SL franchises to strengthen our position as the #1 shoe in golf. And we continually evolve our outerwear and apparel offerings with a focus on our premium segments as we position FJ for the future and manage near-term tariff headwinds. As to our investments in 2026, in support of Acushnet's priorities and our longer-term growth opportunities, we will prioritize strategic capacity expansion and the build-out of our global fitting networks for golf equipment and footwear, expand our B2B and D2C capabilities to new regions and invest in the future of the Titleist Performance Institute, where demand for PPI's golf-specific health, fitness and swing expertise is outpacing our available capacity. Collectively, we expect these investments will support our future growth plans and enable operating leverage over the long term. In summary, we are optimistic about the structural health of the golf industry and are focused on expanding our momentum in the Titleist Golf Equipment segment, strengthening our gear and FJ wearables business and investing in key initiatives that we believe will pay dividends over the next several years. I have confidence in the Acushnet team and their ability to provide dedicated golfers with leading products and services as we seek to build long-term value for shareholders. Thanks for your attention this morning. I will now pass the call over to Sean. Sean Sullivan: Thank you, David. Good morning, everyone. Turning to our 2025 financial results. Fourth quarter net sales were up 7% when compared to the fourth quarter of 2024, primarily driven by higher net sales in Titleist Golf Equipment. Adjusted EBITDA was $9.8 million, lower than last year's fourth quarter of $12.4 million. Looking at our segments, Titleist Golf Equipment was up 10% in the quarter, largely due to higher sales volumes of our T-Series irons and SM10 wedges, partially offset by lower GT driver sales, which comped against last year's launch. FootJoy net sales grew 4.5% during the fourth quarter, driven by favorable mix shift and higher average selling prices in footwear. Golf Gear net sales decreased 5% in the fourth quarter. Overall, 2025 fourth quarter gross profit of $211 million was up $3 million compared to last year's fourth quarter. As a reminder, during last year's fourth quarter, we recognized a onetime benefit related to a PTO policy change that impacted gross profit by approximately $7 million. Gross profit for the full year was $1.2 billion, up 3% or $34 million, primarily resulting from higher sales volumes, higher average selling prices and favorable mix. Gross margin fell to 47.7%, down 60 basis points from last year, primarily related to incremental tariff costs of approximately $30 million. SG&A expense of $206 million in the quarter increased $13 million compared to the fourth quarter of 2024. Last year's SG&A expense included a onetime PTO policy change benefit of approximately $9 million. SG&A expense of $833 million for the full year increased $32 million or 4% from 2024. Excluding the $9 million onetime PTO policy change benefit, the $23 million increase was primarily related to higher employee expenses, including the support of our fitting initiatives, higher A&P expenses related to product launches and higher information technology-related expenses. Interest expense was up approximately $6 million for the full year due to a year-over-year increase in borrowings. Additionally, we recognized a $17 million charge from debt extinguishment related to our fourth quarter refinancing, which I will discuss in a moment. Our full year effective tax rate was 21.9%, up from 19.2% last year. The increase in ETR was primarily driven by changes in our jurisdictional mix of earnings and a reduced income tax benefit related to the U.S. deduction of foreign-derived intangible income. Moving to our balance sheet and cash flow highlights. We continue to maintain a strong balance sheet and cash flow profile, enabling us to invest back in the business while also returning capital to shareholders. In the fourth quarter of 2025, given attractive market conditions, we proactively strengthened our balance sheet by extending our revolving credit agreement out to 2030 and refinancing our senior notes into a 2033 maturity at a more favorable interest rate. Our net leverage ratio at the end of 2025 was 2.2x. Our inventory levels increased $33 million or about 6% from year-end 2024, primarily due to higher tariff costs as well as increased inventory to support the accelerated metals launch in Q2. Capital expenditures in 2025 were $74 million, in line with 2024. Free cash flow, which we define as cash flow from operations less CapEx, totaled $120 million in 2025. This was down from $170 million in 2024 due to the increased inventory levels, additional spend related to the ongoing implementation of our new ERP system and our 2025 voluntary retirement program. During 2025, we returned $268 million to shareholders, consisting of $56 million in cash dividends and $212 million in share repurchases or approximately 3.1 million shares. As of February 21, 2026, the remaining amount on our share repurchase authorization was approximately $241 million. Turning to our full year 2026 outlook. Full year net sales are projected to be between $2.625 billion and $2.675 billion on a reported basis. On a constant currency basis, our current expectation is that consolidated net sales will be up between 2.5% and 4.5% compared to 2025, with growth across all reportable segments as well as growth both domestically and internationally with strength in EMEA and Rest of World markets. Turning to tariffs. As we discussed previously, we expect approximately $70 million of tariff costs in 2026, reflecting the tariff environment in place prior to the Supreme Court's February 20 ruling. While the decision impacts certain tariff programs, the timing, implementation and durability of any changes remain uncertain. As a result, our 2026 financial guidance reflects the continued assumption of approximately $70 million of tariffs. As we gain greater clarity on the path forward, we will update you with any material changes to our outlook. We expect our full year 2026 adjusted EBITDA to be between $415 million and $435 million. At the midpoint, our adjusted EBITDA margin would be approximately 16%, flat with 2025. As we remain focused on driving sustainable long-term growth, we continue to invest in the business through a number of strategic initiatives, including expanding our global fitting network across our Titleist Golf Equipment and FootJoy segments, strengthening our global B2B and D2C capabilities and enhancing consumer engagement through the Titleist Performance Institute. In 2026, we will continue the implementation of our new global cloud-based ERP system, which we expect to enhance our customer service, supply chain and finance capabilities and support operating efficiencies across the business. As a result, we anticipate approximately $6 million of incremental operating expense in 2026 related to the implementation. Given these investments, we expect full year 2026 SG&A growth, excluding the incremental ERP expense, to be generally in line with our sales growth projections as we believe these initiatives position the company for sustained growth and operating leverage. Looking ahead, our capital allocation strategy remains unchanged. We continue to prioritize investing back in the business and returning capital to shareholders through our dividend and an opportunistic share repurchase program. From a financial policy standpoint, we remain focused on maintaining net leverage at or below 2.25x on average, while allowing for flexibility to account for seasonality and other business needs that may arise. We expect capital expenditures in 2026 to be approximately $95 million. This step-up primarily reflects investments in golf ball manufacturing capacity and increased club production throughout the world as we scale our facilities to support the continued demand for our products. We view $95 million in 2026 as a high watermark with capital spending expected to step down in the subsequent years. In addition, we expect to invest approximately $25 million in capitalized costs associated with our ERP implementation in 2026. Turning to free cash flow. We expect 2026 to improve meaningfully versus 2025 and normalize back towards recent run rates. This improvement reflects the absence of several onetime cash outflows incurred in 2025, which I highlighted earlier. Moving to calendarization. We expect reported first half 2026 net sales to be up mid- to high single digits compared to the first half of 2025, with growth primarily coming from Titleist Golf Equipment driven by the launch of new SM11 Vokey wedges and the acceleration of our new metals launch to June. We expect first half 2026 adjusted EBITDA to also increase mid- to high single digits year-over-year as increased sales resulting from new product launches more than offset the impact of higher tariff costs. From a quarterly perspective, we expect first half growth in both net sales and adjusted EBITDA to be heavily weighted towards the second quarter, again, driven by the Vokey wedge launch and the acceleration of our metals launch into June. We expect first quarter net sales to increase low single digits, primarily related to the strength in our Titleist Golf Equipment segment. In closing, as David mentioned, the golf industry is structurally sound. Our product portfolio is well positioned, and our performance in 2025 reflects strong results by our entire team. We remain focused on execution in 2026 despite continued economic uncertainty with tariffs while also making the necessary investments intended to continue to deliver long-term growth for all stakeholders. With that, I will now turn the call over to Cameron for Q&A. Cameron Vollmuth: Thanks, Sean. Operator, could we now open up the line for questions? Operator: [Operator Instructions] The first question comes from the line of Simeon Gutman with Morgan Stanley. Lauren Ng: This is Lauren Ng on for Simeon. First, we just wanted to get more color on the 2026 product calendar. I know you guys alluded to this earlier in the call. But can you comment on your innovation pipeline for the new driver and new wedge launches? David Maher: So as we often do, we'll point you in an even numbered year '26, 2 years back to 2024, that's the best like-for-like view of our timing and product pipeline. And that holds true really in golf balls and wedges and putters for this year, also across our gear and wearables business. What's different, and we did call it out, is that we've elected to accelerate the launch of our new driver into late June. Typically, that happens in early August. So more to follow in terms of timing and product details, et cetera, but we wanted to give you that visibility to let you know that the model will be a bit different in '26 solely because of the driver launch timing change. We haven't brought that story to our trade partners. They're aware of it, but we haven't brought the product story to our trade partners. So until we do that, we're going to keep that under wraps. Lauren Ng: That's helpful. And just a quick follow-up. If you could just give us any more color on your expectations for the U.S. market specifically in '26 and maybe how we should think about volume versus price for these categories. David Maher: Yes. I'll start and maybe Sean can get into volume, price. But U.S. market, we've said for a while, has been our healthiest and it really starts with a strong consumer base, right? Rounds of play in the U.S. over the last 5, 6 years are up 25% and really driven by, I think we said it 7 or 8 years in a row of golfer increases. So from a golfer base and a participation standpoint, very, very healthy. I might add also, and I've talked about this before, in the late 2016, '17, '18 period, the industry corrected. We saw a contraction of retailers, manufacturers. So the industry got lean and fit, at the end of the 20-teens, and then we've seen this pandemic-led surge the last 5, 6 years. So came in fit and then went on a bit of a growth birth. So we like the fundamentals, industry participants, whether it's golf courses or teaching centers or golf specialty retailers are financially sound. So structurally, the U.S. market is probably our healthiest around the world. But part 2 to that, it's also benefiting from a very, very strong golfer base consumer participation momentum that we've seen over the last handful of years. So -- and the final point I would add is just in terms of how we think about the market today. It's February. The market is from an inventory standpoint, where it should be. Inventories are full and vibrant in open markets and lean and almost dormant in closed markets. That will change here in the next 4, 6 weeks. But no, we're enthused about the U.S. market and really led by what's happening at the golfer base in the U.S. Sean Sullivan: And Lauren, maybe what I'd add just on a segment basis, really, the focus for you should be in the golf equipment, again, reiterating and reinforcing the 2-year product introduction cycle. So '26 is obviously not a Pro V1 launch year. Historically, we have seen flat to down volumes in the ball business. But if you look at where we're at versus 2 years ago, we feel very good about where the golf ball business is performing and delivering. And then on the club side, again, you see the strong growth we experienced in '25. But if we look at volumes versus 2024, we expect good growth from the club business with the metals launch in '26 versus '24. Operator: The next question comes from the line of Randy Konik with Jefferies. Randal Konik: I think, David, for you, you had a meaningfully more constructive tone around the FootJoy business. It seems like all the efforts around product architecture, the FitLab are really paying off. So kind of maybe walk us through a little deeper on where we are with the FootJoy business. It seems like people are moving towards the premium products. And then after that, can you give an update on Japan and Korea? I think you said Japan will be up this year. I think that's a change. Korea flat to an improvement from down. But that -- you talked about apparel and footwear still languishing a little bit in those markets. Maybe give us an update on where we go from here with those markets in those categories. David Maher: Yes. Great. Thanks, Randy. So starting with FootJoy, we noted a year or so ago that coming out of what was an 18, 24-month correction period in the footwear industry following the pandemic surge, right? We had a whole lot of demand and just the way that supply chain works, we chased that demand as an industry. Demand normalized yet supply kept running. So we had an inventory correction issue that we dealt with as an industry, we feel we got through it about a year or so ago. So what it meant for FootJoy and FootJoy has got a wonderful long history, over 100 years, been the #1 shoe in golf for over 75 years. So we continually lean into the high-performance heritage of that brand as we think about innovation in the future. And we said a while ago, we're going to be more focused on the bottom line than the top line, again, coming out of this correction period. The team has done a really nice job of that. I made the comment earlier that while sales were down slightly, it really is -- it was a commentary or a function of lower closeout reduced volume sales. So I've called out a handful of our products, whether it's Premiere, whether it's Traditions, whether it's HyperFlex or Pro/SL. We're really leaning into our premium performance products, and we're rationalizing the product line down at some lower price points and raising the floor, if you will, on some of the lower price points. So structurally, we like where we are. I haven't really commented about what's happening with apparel, but it's a similar story. And the team is doing a really good job. So I'm pleased with the direction and trend lines of the FootJoy business, again, moderating top line, slower top line, but a more accelerated bottom line. The caveat to that is, of course, tariffs. So that business, more than others, heavily burdened by tariffs. We're doing a good job mitigating, offsetting the best as best we can. And then the final piece is FitLab, right? We're -- we've benefited as a company with ball fitting and club fitting going back into the '90s. Footwear fitting has arrived in full force with footwear, both in the U.S. and around the world. So FitLab is just another -- is another -- I talk a lot about products and services. That's another service, that helps optimize our products and make sure golfers have the very best experience, whether it's from a performance standpoint or a fit standpoint. So that's, again, high level on FootJoy. Your comments, Randy, on Japan and Korea, maybe just some level setting. Both those markets, we had some nice growth in equipment in certainly balls and clubs in 2025. Gear, wearables, FootJoy softer businesses. We run a Korea, Asia specific apparel business, Titleist apparel over there. So we've been pleased with the equipment business in Japan and Korea, but wearables have been soft for us and the industry. I'll make a couple of comments about Japan as we look ahead. We do expect growth, again, similar led by equipment, maybe tempered expectations in gear and wearables. And similar to Japan, we -- really a similar story in Korea, where we're a little bit more bullish about equipment and are taking a tempered measured, conservative outlook vis-a-vis wearables and footwear. So -- but in terms of rounds of play and what's happening in those markets, if I look at Japan, up slightly, rounds up slightly, that's a positive last year, up about 10% versus 2019. Korea is a little bit of a different story, similar, about last year, up about 20%, 25% versus 2019. So healthy markets, equipment landscape similar in Asia as it is in the U.S., the key differentiator is really wearables. Footwear and apparel has been softer for the last couple of years, which leads to our tempered expectations in those segments. Randal Konik: Super helpful. Just last question. A lot of the commentary has come through around, I guess, pricing. So is your view that the -- we still are in a very firm pricing environment across all categories, it looks like, in particular, balls and clubs, it feels pretty good. The consumer is very much willing to pay higher prices for more innovation, et cetera? David Maher: Yes. We're careful, right? We've said this before. We're careful with pricing, but we're dealing with the realities of input cost and distribution costs and labor and all that, but not to mention tariffs. So as we think about pricing, we took action more notably with FootJoy and gear in the second half of '25. You'll see some pricing action in equipment in the first half of '26. Yes, our job is any time you take price, you got to work a little bit harder to show value and whether it's improved product or a better fitting experience. We don't take it lightly, but so far, so good in terms of how we've both mitigated higher cost and in -- within that had to pass along some of those costs. So we don't take it lightly, but again, so far, so good. And again, first half of '26, you'll see some equipment price increases across our lines really attached to new club products. And then on golf balls, it's going to be more a U.S.-Canada story around Pro V1, where rest of world, we took some pricing measures last year. So we're trying to be thoughtful and strategic. We look at it case by case. We look at it market by market. But so far, so good. But again, as I said, every time we take price, it compels us to work a little bit harder on the product side and the experience side to make sure we're showing value. Operator: The next question comes from the line of Joe Altobello with Raymond James. Joseph Altobello: First question on the quarter. I was not expecting 19% club growth. And based on your guidance, I'm not sure you were either. So maybe talk about what drove that upside? Was there a timing issue? And why didn't we see that flow through on the EBITDA line? Sean Sullivan: Yes, Randy, I'll take it, Sean. I'm sorry, Joe. So yes, no, I think we saw in the quarter top line, we saw better-than-expected performance across all segments. particularly in clubs, as you called out, just really great execution by the team, continued strong demand. I think David talked about the T-Series iron. So just really pleased with how that played out. So as it relates to the conversion rate, again, we had the impact of tariffs in Q4, as you know, was $15 million, the largest quarter of the year against the total of $30 million. So not particularly a surprise to us in terms of how the bottom line delivered relative to our expectations. Joseph Altobello: Okay. That's helpful. Maybe on the subject of tariffs, I think you mentioned this morning, $70 million total, so that's, call it, $40 million incremental. How much of that is IEPA? Sean Sullivan: That is all IEPA. The incremental $40 million is the IEPA tariff. So as I said in my prepared remarks, we're going to -- similar to the approach we took last year, we're going to let things settle in, and we'll update you as appropriate rather than trying to follow the towing and throwing on this topic. So that's the current situation. Joseph Altobello: Have you filed for a refund yet? Sean Sullivan: No, we have not. But we're obviously monitoring the market, obviously, talking daily with advisers and assessing our approach and the ability to get a refund for sure. So still early days. Operator: The next question comes from the line of Matthew Boss with JPMorgan. Amanda Douglas: It's Amanda Douglas on for Matt. So David, with the healthy golf industry backdrop, as you cited, could you speak to your top priorities into 2026 to capture additional market share within the equipment category? And specifically, any initial feedback you've received from channel partners on your new launches as we look ahead to the core selling season? David Maher: Yes. Amanda, so just in terms of how we think about growth and share, I'll really bring it back to really what our core principles are, and that is, number one, get the product right, get it as good as we can get it. We validate it through the pyramid. And then we really invest behind our fitting experience. So we're trying to bring to golfers great product, and a world-class fitting experience that helps them decide that what we're bringing to market is better than what's in their bag, and that's it. So no magic tricks up our sleeve beyond get the product right, get the golfer experience right. Within that, we work real closely with our trade partners to educate them, to partner with them to make sure our golfer connections are effective and working. So that's as much the long-standing proven playbook. Amanda, help me. Part 2 of your question was about what? Repeat that, please. Amanda Douglas: Just any feedback you've received from channel partners on your new product launches. David Maher: So I'll just level set. It's February in the golf industry. Most of the industry is still under cover of snow as we are here. But early days, we like. We've launched a whole series of golf balls as planned, as expected. We're pleased. Almost too early to say on wedges and putters. Those are just arriving in the market here now. So I don't have a lot of great color to talk about how new products have been received. But what I can say about the market is when the weather is okay, people are playing golf. And when it's not, they're not. So we had a little bit of some ice storms across the Southeast in January, as you'd expect, that slows things down. But it's January. But by and large, when weather is okay, people are playing golf and the game is alive and healthy. In terms of really getting a sense for the market and what's happening. We've always said first quarter is really about shipment in. Second quarter gives you a read on what's happening in the market, how the consumer is behaving and how they're responding to your products. So we tend to reserve our commentary or assessment until a little bit later in the year. But yes, no, for this time of the year, we like where we are with the exception of, again, we're under 3 feet of snow here in New England. Amanda Douglas: That's helpful. And Sean, just as a follow-up, maybe if you could speak to your overall expectations for gross margins in 2026, maybe relative to the 60 basis point decline in 2025? And any differences you see between front half and back half gross margin drivers? Sean Sullivan: Yes. Just to reiterate what I said in my prepared remarks, as we look at 2026, we're expecting gross margins to be relatively flat to 2025. So I think in the context of higher input costs and particularly in our Golf Equipment segment as well as the incremental tariff landscape that we've talked about and some of the pricing actions we've taken, we feel very good about the ability to deliver and hold margins flat year-over-year. As it relates to gross margin first half, second half, again, I would guide you to what we talked about in terms of the growth. So seemingly, given what I've talked about in terms of first half sales and EBITDA contribution, I'll leave it to you to model how that gross margin may impact. You're probably going to see slightly higher in the first half, and maybe less so in the back. But overall, on a full year basis, like I said, consistent with 2025. Operator: The next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Noah Zatzkin: I guess just to kind of follow up on pricing and not only specific to you guys, but across the industry. What are you kind of seeing from competitors in terms of pricing? If you've seen it kind of broadly up, like have you, I guess, heard chatter or have a sense for how kind of retail partners are responding to that? And then kind of like within that framework, how do you think that positions you relative to some others? Meaning, are others kind of been more aggressive on pricing, similar? Just trying to understand kind of the pricing landscape. David Maher: Yes. So I guess, Noah, a couple of observations. One would be -- and I said this about Acushnet. I do think you could make this analogy to the total industry, and this is just from what we've seen. Again, the early pricing moves were gear and wearables just due to the life cycles of those segments. And we saw industry-wide that play out in the second half of 2025. You didn't see as much pricing action in equipment, balls and clubs in '25. So I think you're starting to see that now. So again, I think our profile and flow is similar to what you'll see in the industry. In terms of what we -- how we think about our positioning in all this, we're a premium positioned product, and we work hard to earn that position. And I know our competitors will as well. But by and large, yes, we are seeing price increases flow through retail. It's early, right? As I've said, it's early, it's February. But we are seeing some price increases flow through retail. I don't think anybody is surprised by that. We all saw that coming in as much as the fourth quarter. But in terms of how it stacks up and how the consumer responds, it really is -- it's going to take a few more months to get a read on how the consumer processes company A versus company B versus company C. But we do believe and feel pretty good about our position and our ability to take price. And I say that principally because of the belief we have in our products and the belief we have in the experience we can bring to golfers. So a little bit of more to follow in terms of how the market reacts, but that's common for this time of year. So I think that's the best we can frame it for you. Noah Zatzkin: No, that's really helpful. And you touched on this, I think, a little bit kind of as it relates to top line trends across different regions. But anything to call out in terms of maybe health of the sport across international markets? It's obviously early in the year, but any changes in how you're thinking about different markets? David Maher: Yes. I would just -- a good year for golf in 2025, right? U.S. was up, Canada, U.K., Mainland Europe, up, up, up, all good. So that's the first thing I'll point to. Many of those regions are now in their off-season. So again, I'll have a different answer 2, 3, 4 months from now, but they certainly come in with favorable positive trends. I will say we continue to be -- we see the consumer strongest in the U.S. That's not a surprise. We see durability -- the most durability across equipment, balls and clubs. And we've called out the watchouts of Korea and Japan, notably as it relates to really apparel in those spaces. But that's the regional view. But any time I can sit here in February and say rounds were up in most regions around the world, certainly in Western markets. That's terrific. And just to round out, Japan and Korea about flat last year. So didn't have bad years. They just didn't post the big growth in '25 that we saw elsewhere. Operator: The next question comes from the line of Doug Lane with Water Tower Research. Douglas Lane: Staying on around the golf. The resilience is impressive, another good year in the U.S. and elsewhere. But last year, if I remember right, the U.S. started out slowly and then it made it up -- more than made it up in the back half. So why was the difference between the first half and the second half last year in U.S. round of golf? David Maher: Doug, weather. Yes, really, that's simple. You had some tough weather. You had some tough weather in the Southeast that slowed things down, and that's just a fact of life in the golf business, Mother nature has her say. But that was the issue. We had a slow start due to weather, and then we saw weather normalize and nice to see the comeback in the U.S. market. Douglas Lane: And have you talked about who's playing the more rounds of golf? Is it more retirees? Is it more people in the South? Is it more amateur, teenagers? Really what's driving the increased rounds of golf, the persistent increased rounds of golf over the last several years? David Maher: Yes. So we point to -- we really point to the NGF, National Golf Foundation. They do a nice job, collecting data to help us understand the evolving golfer base. It's really coming from all angles, but I would say the avid is certainly playing and alive and well. But the 2 call-outs that, again, there call-outs that I'll pass along would be the fastest-growing segments over the last several years have been women and juniors. So they're certainly providing outsized contribution to the growth we've seen over the last handful of years. And just for context and just using some big round numbers, in 2019, there were about 800 million rounds of golf played worldwide. And that number is going to be just shy of $1 billion this year. So it's about a 23% increase. But in real-world terms, it's 180 million, 190 million more rounds of golf being played today. And as I say that, I'm always compelled to point to the PGAs and the PGA Club professional and the outsized role and contribution and importance of their work in taking care of the game and really growing the game. But that's -- hopefully, that answers your question. Douglas Lane: No, that's very helpful. And just one more, if I might. We read about and hear about the bifurcated consumer these days where the higher end continues to spend and the lower end seems to be a little squeezed. And you've got a pretty wide variety of products. You have low ticket, high ticket, consumables, durables. So how are you seeing consumer behavior here in your ecosystem? David Maher: I think we've talked a lot about it in terms of how our products are performing, but I will package your question to sort of point to our dedicated golfer, right? They're avid, they're passionate. They'll play if you can prove to them. If you can prove to them that you've got a better product, they're inclined to purchase it, and it's going to help them play better. So we like the construct and demographic that is this dedicated golfer we talk about. We characterize them as middle class plus. So they're a nice demographic. And we've said over time, they're recession-resistant. They're not recession-proof, but over cycles, we've seen they're committed and avid. So golf has a great consumer. You're right, we have a broad and vast portfolio of products in terms of varying price points. But by and large, we focus on premium performance, and that's where the bulk of our story is. That's where the bulk of our R&D efforts reside. That's where the bulk of our product line is constructed. So -- but I think the heart of your ask is this dedicated golfer, which the company sort of used as the sun to our solar system. And they're a strong cohort for sure. Operator: The next question comes from the line of JP Wollam with ROTH Capital Partners. John-Paul Wollam: If we could just start first on G&A. I think last time in November, we were maybe expecting to see some leverage there, just given you have the voluntary retirement program and kind of a good year or 18 months of prior investment. So just curious to see what kind of changed there. It sounds like G&A growth is expected kind of in line with revenue. So are there incremental? What kind of changed? Sean Sullivan: Yes, JP. So when I look at 2025 versus '24, I think if you normalize for the PTO in '24, you normalize for the ERP and some of the onetime things that I talked about, I think we have effectively delivered OpEx growth at less than the rate of sales. So I feel good about that in terms of '25. And I think as you -- as I talked about for OpEx in '26, again, we have some incremental expense as well, but overall, expect growth to be in line with sales. So again, we're making progress and delivering incremental benefits. And again, it's not a onetime unlock that's going to happen here. I think you're going to start to see that gradually over the coming years in terms of delivering operating leverage. John-Paul Wollam: Okay. Understood. And just one follow-up on tariffs. So understanding that it's obviously an extremely fluid situation. But if I think about kind of the -- what we maybe discussed as sort of the 4 levers to offsetting, pricing, vendor cost sharing, some G&A leverage. And then I think we talked about maybe being able to tighten some advertising and promotional expenses. And so really, the question is, as you think about the '26 guide, is there any tightening in terms of the advertising and promotional that if tariffs went away in the next 3 to 4 months, like you actually have an opportunity to invest more there and could see some top line upside? Is that -- how are you thinking about that? Sean Sullivan: Yes. I guess how I'm thinking about it is I feel really good about the guide, feel really good about the performance of the business, the ability to overcome the incrementality of the tariff landscape, albeit obviously seemingly changing. But now, we are continuing to invest in A&P. You'll see it in the filings. We increased A&P in '25, not significantly, but low single digits, and you've seen that the last couple of years. So we have incredible confidence in our Golf Equipment franchises in FootJoy. So we're going to continue to invest behind those. Certainly, given the -- as David said, it's early. It's February. But overall, we're not using this as an opportunity to pull back on A&P to support our long-term growth. So I think it's business as usual despite the tariff landscape. And again, we'll have to see how the year goes by, but we feel good about the guide in the context of all those. David Maher: Thanks, everybody. As always, we appreciate your time and interest this morning and look forward to getting back with you in a few months to provide updates on the quarter. Operator: Ladies and gentlemen, thank you for attending today's conference call. This now concludes the conference. Please enjoy the rest of your day.
Operator: Hello, and welcome to Liberty Media Corporation's 2025 Year-end Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded February 26. I would now like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations. Please go ahead. Hooper Stevens: Thank you, Kevin. Thanks, everyone, for joining us today on Liberty Media's Fourth Quarter and Year-end 2025 Earnings Call. This call today includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K followed by Liberty Media with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media, including adjusted OIBDA, constant currency for MotoGP, the required definitions and reconciliations for Liberty Media can be found on Schedule 1 and MotoGP or Schedule 2 at the end of the earnings press release issued today, which is available on Liberty Media's IR website. Speaking on today's call, we have Liberty Media's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali; MotoGP CEO, Carmelo Ezpeleta and other members of management will be available for Q&A. With that, I'll hand the call over to Derek. Derek Chang: Morning. Thank you, Hooper. And before I start, I just want to welcome Hooper to our team. This is his first earnings call for Liberty. Many of you know, Hooper already, he has obviously been part in and around the Liberty Complex, but we are very, very happy to have him with us here. It has been an exceptionally productive and successful year for Liberty. We are energized by the slower progress we've built across our businesses and are focused on accelerating our momentum this year. We have delivered against each of the priorities we articulated last year, namely one to continue F1's growth trajectory; two, to augment our portfolio with the acquisition of MotoGP; and three, to execute the Liberty Live split-off. Following the split-off last December, we are now a premier global sports investment vehicle anchored by 2 world-class motor sport leagues and operating in an industry supported by strong secular growth tailwinds. Looking ahead to this year, operational excellence at MotoGP and F1, while remaining disciplined and opportunistic with our capital to drive value for our shareholders and across our portfolio. Turning now to our operating businesses. At MotoGP, we see tremendous upside over time and are in the early stages of unlocking that potential. We don't expect to see these investments bear fruit immediately, but are laying the necessary groundwork to drive this sport forward. Since closing the acquisition last July, we've continued building on our commercial functions. We hired key personnel across sales, public relations, social media strategy with more additions to come. We're focused on driving knowledge sharing between MotoGP and F1 and believe this can support long-term value over time. I just recently returned from our Partner Summit in Barcelona, where we clearly articulated our strategy to teams, promoters and partners across the ecosystem. The enthusiastic response was a very positive sign as we build share momentum with a strong collective commitment to the future of our sport. For Moto, our 3 key priorities are: first, we remain focused on strengthening MotoGP's foundation and expanding its global footprint. We recently announced we are moving our Australia race to Adelaide, marking our first modern era circuit in a city center and we are excited to return to Brazil this year after a 20-year hiatus and look forward to adding Buenos Aires to the calendar next year, strengthening our presence in major international cities. Second, we remain focused on elevating the Grand Prix experience into a must intend event at every circuit. We continue to further enhance our hospitality offerings and improve the on-site fan experience. Finally, this work underpins our efforts to unlock our brand value to scale the sponsorship roster. We remain disciplined in our approach to sponsorship and are prioritizing brand alignment with high-quality partners over near-term wins. Now turning to F1. F1 once again delivered an exceptional year with the sport firing on all cylinders across growth, engagement and commercial momentum. We renewed with multiple long-term existing partners, we signed several new marketing partners, including Standard Chartered, our official wealth management and banking sponsor. As you saw earlier this morning, we just announced our broadcast extension with beIN in the Pan Asia region. And earlier this week, we announced the extension of our ESPN partnership in Latin America. Our third year of the Las Vegas Grand Prix was a resounding success and our relationship with the Las Vegas community has never been stronger. Importantly, we finalized the new Concorde Agreement to cover the 5 years from 2026 which provides us with durable financial economics in all F1 constituencies and constituents a stable base to invest into the sport and drive long-term value creation and an even healthier ecosystem. And 2026 should be an exciting season on track with Cadillac and Audi joining the grid. The new brands, cars and engines should lead to an incredibly competitive racing season ahead. Stefano and Carmelo will both provide more updates on their businesses later in the call. We look forward to continuing to support their strategic vision. Now I'll turn it over to Brian for more on Liberty's financial results. Brian Wendling: Thank you, Derek, and good morning, everyone. At year-end, Liberty Media had cash and liquid investments of $1.1 billion, which includes $539 million of cash at F1 and $197 million of cash at MotoGP. Total Liberty Media principal amount of debt was $5 billion at year-end, which includes $3.4 billion of debt at F1, and $1.2 billion of debt at MotoGP, leaving $499 million at the corporate level. F1's $500 million revolver in MotoGP's EUR 100 million revolver are both undrawn. At year-end, F1 OpCo net leverage was 2.8x. This is down from 3.3 that we gave at 6/30 pro forma for the MotoGP acquisition. And MotoGP's net leverage was 4.7x at year-end, down from 5.6x at 9/30. We expect to continue delevering at MotoGP this year. Liberty Media's overall net leverage was 3.6x. Turning to the F1 business. I'll make some brief comments about the fourth quarter but focus on full year comparisons primarily. A reminder that every quarter in 2025 had incomparable race count and mix. 2026 will also have incomparable race count and mix except for the fourth quarter. Majority of the variability in Q4 year-over-year results is due to one more race being held in fourth quarter compared to the prior year period. Q4 '25 had 7 races compared to 6 races in Q4 '24, with Singapore being included in the current year period but not the prior year period. Note that we operated the same number of Paddock Clubs during the fourth quarter, given that the Singapore Paddock Club is operated by the local promoter. For the full year, the business performed exceptionally well. Revenue grew 14% and adjusted OIBDA grew 20%, driven by growth across all revenue streams. Sponsorship revenue continues to increase from new partners and underlying growth and contractual increases. Media Rights revenue grew due to underlying growth in contracts, continued growth in F1 TV and the onetime benefit of the F1 movie revenue that was recognized in the second quarter. Race promotion revenue increased due to underlying growth in contracts. Other revenue grew primarily driven by higher hospitality and growth in licensing and freight income. Higher hospitality revenue includes revenue from the Las Vegas Grand Prix, and also revenue generated at Grand Prix Plaza from its growing private events business and the various new activations we opened in May of last year. Touching briefly on the Las Vegas Grand Prix. As Derek mentioned, our third year operating the race was a success, and we saw improved financial performance year-over-year. We continue to see a material benefit accruing from LVGP to the broader F1 ecosystem across various revenue streams, especially sponsorship, hospitality and licensing. Vegas continues to serve as a very successful test bed for product expansion and is integral to the continued growth of our sport in the U.S. Adjusted OIBDA increased during the year, driven by the strong revenue growth discussed above, outpacing increased operating and SG&A expenses. Higher operating expenses included higher team payments, and increased expenses associated with servicing our revenue streams. The increase in SG&A and -- the SG&A expenses was due to higher personnel and marketing costs. Team payments as a percent of pre-team share adjusted OIBDA were 59.7% for the full year 2025, representing 185 basis points of leverage against 2024. Over the past 4 years, we've seen an average of roughly 200 basis points improvement in leverage each year, and we expect 2026 to be approximately in line with this average. After 2026, for the remainder of the term of the new Concorde Agreement out to 2030, we expect the payout percentage to remain relatively stable. A reminder that team payments are best analyzed on a full year basis due to quarterly fluctuations in team payments as a percent of adjusted OIBDA. Looking quickly at MotoGP's results. As a reminder here, we closed the MotoGP acquisition on July 3. Our financial results are presented on a pro forma basis as though the transaction occurred on January 1, 2024, and the trending schedule will be posted to our website after the 10-K is filed including results in U.S. GAAP for the full year '24 on a pro forma basis. The majority of MotoGP's revenue costs are euro denominated and as such, are subject to translational impacts from foreign exchange fluctuations. In the following discussion, I'll focus primarily on constant currency results. Similar to F1, I'll make a few comments about the fourth quarter, but we'll primarily focus on the full year. Year-over-year comparisons are impacted by the mix of races, and generally, MotoGP flyaway races carry higher costs, which includes freight, travel and higher earth fees. MotoGP held 5 races in the fourth quarter of both this year and the prior year. Revenue increased at MotoGP during the fourth quarter as increased race promotion fees due to the race mix and contractual uplifts were offset primarily by lower proportionate recognition of season-based income with revenue from 5 out of 22 races being recognized this year versus by about 20 races recognized last year. For the full year, MotoGP had 22 races compared to 20 and 2024. Revenue grew across all primary revenue streams, primarily due to the 2 additional races held and contractual fee increases. Media Rights revenue also increased due to growth in VideoPass subscription revenue and other revenue benefited from increased hospitality revenue, which saw 2 additional races and increased attendance, partially offset by a decrease in fees related to MotoE. Adjusted OIBDA grew for the year driven by the higher revenue, offset by growth in operating expenses. SG&A expenses were lower, primarily driven by recognizing less bad debt expense in 2025 compared to the prior year. Note that bad debt expense in '24 was primarily related to race cancellations from years prior to 2024. Looking briefly at Corporate and Other results for the year, revenue was $414 million. This includes Quint results up until the split off on December 15 and approximately $33 million of rental income related to Grand Prix Plaza. Corporate and other adjusted OIBDA was $5 million and includes Quint results up until split off, Grand Prix Plaza rental income and corporate expenses. As a reminder, Quint business is seasonal with the largest and most profitable events taking place in Q2 and Q4. Note that Quint intergroup revenue from MotoGP is eliminated in our consolidated results through the spin date. Going forward, Quint will no longer be reported in our operating results. F1 and MotoGP are in compliance with their debt covenants at quarter end. And with that, I will turn the call over to Stefano to discuss Formula One. Stefano Domenicali: Thanks, Brian. 2025 was a thrilling season as we celebrated the 75th anniversary of Formula One with standout performances across the grid. 9 drivers across 7 different teams reached the podium, including phenomenal performance from rookies like Isack Hadjar. Congratulations to Lando Norris for winning the Driver Championship and McLaren for winning the Constructors' Championship. 2026 is set up to be another captivating season as it represents the next generation in F1 incredible history with new cars, engine and regulations. All signs point to an exciting kickoff in Melbourne next week, which we know will sell after intensive precision testing in Spain and Bahrain. We look forward to welcoming Cadillac and Audi to the grid and for the return of Ford with Red Bull and Honda with Aston Martin. In December, we also successfully completed the signing of various elements of the new Concorde Agreement with all teams and the FIA. Engagement across our fan base continues to grow. We welcomed 6.75 million attendances last season, our largest combined attendance in history, up 4% relative to 2024. Australia, Silverstone, Mexico and Austin, each, respectively, welcome over 400,000 fans over races weekend, and we had 19 events sellout with 11 setting new attendances records. The Paddock Club serve 65,000 race day guests, up 10% on the prior year. Last season, many of our Paddock Clubs sold out, and we increased revenue 20% per race on average. Robust demand continues for 2026 with record preseason sales and in partnership with our promoters, we are increasing capacity at certain races while looking to keep enhancing our guest experience. For example, at our Austin Grand Prix, the promoter is currently constructing the new facility at Turn 1, which will host a new Paddock Club space to accommodate more guests. Our promoters also have plans to upgrade the Paddock Club space in Mexico and introduce a new Gordon Ramsay experience in the Paddock in Shanghai, just to name a few developments. We continue to see strong engagement and reach across viewership and our digital and social platforms. Cumulative viewership is up across our broadcast and digital platforms. Global Live TV viewership across all session was up plus 21% year-over-year, showing increased appeal for our core product. F1 race weekends continue to broaden, with practice sessions showing strong increases in viewership. Screen popularity continues to increase with Sprint session viewership up to 10% year-over-year, and qualifying delivered the largest growth across all sessions with audiences up 23% year-over-year. For the Sprint races, we are currently in active discussions to expand the Sprint format up to 12 races in 2027 due to the high demand for promoters and fans. The Sprint format has also demonstrated the impressive performance across fan engagement. Our YouTube content generated 1.65 billion views, up 48% relative to 2024 and with YouTube highlights view, increasing 21% year-over-year. Passenger Princess reached 7.6 million total views, including 1.5 million views within the first week of release, highlights from the first 3 days of the preseason test in Bahrain reached over 8 million views on YouTube, which represents an increase of plus 64% compared with the Bahrain preseason testing session in 2025. And highlights from our first ever Barcelona shakedown reached nearly 17 million views on YouTube. We hope you will be tuning in for season 8 of Drive to Survive. For the fifth consecutive years, F1 continues to be the fastest growing sport on social media. We ended the year with 150 million social media followers, up nearly 20% year-over-year. Commercially, we had another strong year of renewals and new partnership. We have an active year of media rights negotiations, signing or renewing with broadcast partners across multiple territories, including the United States, Pan-Asia, Canada, Brazil, Latin America, Mexico, New Zealand, Japan and India. Apple is now our U.S. Media right partner, and we are excited by their vision, innovation and unmatched ability to reach and engage wider audiences through their platform and marketing scale. This was clearly demonstrated by the success of the full-time Oscar-nominated F1 movie last summer. Apple will be a key driver of our U.S. growth strategy, and we are excited to work with them to drive our next phase of growth in the years ahead. We see major brand alignment between Apple and F1 as this partnership brings together 2 global brands with a shared passion for innovation, excellence and entertainment. We also renew our extended contracts with 9 of our race promoters, including most recently with our promoter in Barcelona. The race will now be officially called the F1 Barcelona-Catalunya Grand Prix, and we rotate with our Belgium race year-by-year throughout 2032. And we will host a Grand Prix in 2028, 2030 and 2032, in addition to the race scheduled for this year. We are also excited to welcome back Portugal to the calendar under a 2-year deals starting in 2027. The third year of the Las Vegas Grand Prix was an outstanding success. Congratulations to the Vegas leadership team for delivering an exceptional race weekend that showcase the very best of Formula One. We sold out the weekend and welcome over 300,000 fans to Las Vegas, while setting up a number of new event sponsors. Content related to our race generated 1.8 billion impression over the weekend, and we are gearing up for another phenomenal race this year. Picking up on sponsorship, we closed out another strong year of growth and continue rising the momentum into 2026, having built out a good pipeline of discussions. We recently signed Standard Chartered as our official banking and wealth management partner in a new multiyear deal. Equally impressive is growth across our other revenue streams, including licensing and hospitality. Our legal partnership delivered great results in its first full year, generating over 27.5 billion impression across marketing activation. Pottery Barn Kids and Pottery Barn Teen continued sales momentum following the launch late last year. Our collaboration with KitKat is also thriving with the new F1 KitKat bars available in stores, driving enhanced retail visibility, and we are excited to roll out a new dimension of our partnership with Disney later this year. Following the successful launch of House44, our premium Paddock Club hospitality partnership with Lewis Hamilton and Soho House, it will expand from 5 to 9 races this year. Visitors to Grand Prix Plaza enjoyed 90,000 track rides at F1 drive last year, and we are excited to reopen Grand Prix Plaza to the public at the end of the January. We are also encouraged by the growth of F1 exhibition, which has sold 1.3 million tickets across all its exhibition and F1 Arcade, which recently opened in Atlanta and has 3 more new locations planned to open later this year. Track side retail sales grew over 30% last year, and F1 hub pop-up merchandise experience operating in Austin, Miami and Las Vegas. This hub saw strong foot traffic and retail sales, and it is planned to open hubs in more locations this year, monetizing untapped merchandising opportunity in key locations. 2026 brings continued focus on inspiring the next generation of F1 fans through our creative activation, partnership and collection appealing to all audiences across our fan bases. We are seeing incredible momentum across all phases of our business. Our sport has delivered exceptional growth, and we see significant upside ahead. The strategy work we are doing now will deliver lasting benefit to our partners, shareholders and our fans. In only a few years, we have achieved so much as a sport and as a business. But we have only begun to scratch the surface of what is possible and the potential for F1 is not being underestimated as we enter another exciting new chapter in our history. Avanti tutta, full speed ahead. And now I will turn the call to Carmelo to discuss MotoGP. Thank you. Carmelo Ezpeleta: Good morning, and thank you, Stefano. Liberty Media commitment and support of our strategic vision has been a strong ride out of the gate. We are encouraged by the collaborative approach and early progress we are seeing and we are working together to build a strong foundation to drive our sport forward. The 2025 seasons delivered the very best of our sport, through racing and dramatic story lines. We saw a standout performance across the grid with 13 riders on the podium across 10 teams. Congratulations to Marc Marquez on extraordinary come back and winning his seventh MotoGP World Championship. We welcomed a record 3.6 million attendees last season up 21% year-over-year and set attendance record at 9 different circuits. First-time attendees, representing 27% of our total attendance for season, up from 18% in 2024. The 2026 season is gearing up to be another thrilling season. We held our second season launch event in Kuala Lumpur with global attendance and video viewership year-over-year. Fans enjoy musical acts by global artists, including The Script, DJ PAWSA and DOLLA. The 2-day event culminated in a live launch show featuring show runs from teams and riders. We look forward to kicking off the season in Thailand this weekend. Our global fan base now measures 632 million fans, up to 12% from last year, and we continue to strengthen our brand. We recently launched our first event season marketing campaign. Why that's different? Which bring our evolved brand positioning to life and create brand consistency and amplification across all fan channels and touch points. We continue to invest in our fan insight platform to track brand awareness and engagement. This will support the long-term scaling of our commercial functions and enable more targeted and localized content initiatives. We added over 3 million social media followers in 2025 and ended the year with nearly 61 million followers across our own platform, including 4.5 million followers on TikTok, social engagement increases plus 61% and video views across our digital platform, excluding VideoPass, increased 20%. Fans consuming 1 million minutes on our YouTube content last season. Average household tuning into our broadcast grew 9% year-over-year. Satellite sprint races ratios continued to close the gap to Sunday's race coverage with average audience viewerships growing over 26% year-over-year for the Sprint. Subscribers to VideoPass, our direct-to-consumer video service, grew 5% from 2024. We recently extended our Sky Italia broadcast rights deal, and we have also renewed our Moto partnership through 2030. We also had an active year promotor of renewals, including the recent renewal of the Thai Grand Prix through 2031. We are excited to return to Brazil this year after 20 years, and welcome to the grid Brazilian MotoGP rookie, Diogo Moreira. Initial capacity in Brazil has already sold out, underscoring strong demand, alongside coverage from ESPN 41 will be the free-to-air broadcaster of the Brazilian Grand Prix Estrella Galicia 0,0 as title sponsor. Finally, last week, we announced the move of the Australian Grand Prix into Adelaide beginning 2027 under a new 6-year agreement. The landmark race will be the first MotoGP race to be held in a city center, and we are able to do so without compromising our safety standards. Adelaide is an ideal location, bringing MotoGP closer to its fans, and we are excited to put on a fantastic 3-day fan experience. We look forward to continuing to update the investor community on our progress. Now I will turn the call back over to Derek. Derek Chang: Thank you, Brian, Stefano and Carmelo. We appreciate your continued interest in Liberty Media. And with that, we'll open the call up for Q&A. Operator? Operator: [Operator Instructions] Our first question today is coming from Stephen Laszczyk from Goldman Sachs. Stephen Laszczyk: Maybe 2 on margin at F1, if I could. Brian, I appreciate the commentary on team payment in 2026. It sounds like the expectation for team payment operating leverage is for it to be in and around 200 basis points in 2026. So 59.7 going to 57.7 in 2026. Just wanted to confirm that thinking and then see if there were any upside or downside factors that you think investors should be mindful of as we track performance on that throughout the year? Brian Wendling: Yes. I'd point you to, we said that we added the word generally or primarily or approximately around the 200 basis points. So I wouldn't lock it in stone. As you know, we talked about before, there are different things that can impact the team payment percentage depending on where the profitability is coming from. But generally speaking, we would expect to see about 200 basis points of leverage related to the team payment piece in 2026. Stephen Laszczyk: Great. And then maybe just beyond the team payment operating leverage point this year and thinking longer term opportunities to grow margins at F1 over the next 3 to 5 years. What factors are still available to you to grow margins maybe outside of the team payment line item that could expand margins for the foreseeable future? Brian Wendling: Yes. Certainly, as we grow primary revenue streams, you would expect to see some leverage around those revenues. But we continue to invest in the business. And when you look at some of our other revenue streams, they certainly have costs associated with them. We've looked at growth in other costs of F1 revenue in the past. And you can certainly see partner servicing costs there as we grow our sponsorship revenue base, there's incremental Paddock Club obligations that are associated with that. So there is certainly costs associated with growing those revenues. But as we grow the primary revenue streams, we would hope to see some leverage there, but we're also going to balance that with continuing to invest in the business and try new things and try to grow the overall pie. Stefano Domenicali: Yes. And Brian, if I may say -- add something on that to complete the answer that Brian said, is that all the costs related are connected to the growth of the marginality because, of course, the more we are getting stronger, the more we need to serve what is important to activate. Therefore, that's our philosophy. And in all the revenue stream that we are bringing home, that's the approach. And if I may, also when we are talking about a deal that we have with promoters in the long term, we have the leverage to increase the possibility of investing through them to acquire more possibility to invest with other experience with Paddock Club extensions. This is one example, for example. But that's the philosophy is cost. It's always associated to an increase of marginality related to increase of our revenues. Operator: Our next question today is coming from Kutgun Maral from Evercore ISI. Kutgun Maral: Maybe following up and expanding on the margin discussion. I had a high-level question on the durability of your EBITDA growth, which was very strong in '25 and looks positioned to be healthy again in '26. Maybe taking a step back for a second. Since Liberty took over the growth algorithm has been fairly consistent and straightforward. You had rising popularity of the sport and brand combined with strong execution, monetizing revenue streams with a lot of untapped runway. In other words, there was comfort that regardless of the quarter or even year, there would be a lot of room to grow over the upcoming 3 to 5 years, and that vision has clearly played out. As you look out over the next 3 to 5 years now, though, how should we think about what sustains that attractive EBITDA growth profile as some areas either face tough comps or see new dynamics, whether it's lapping very strong sponsorship growth, managing the strategic balance and media rights, a race calendar that's already largely contracted or the new team payout structure? And finally, are there any underappreciated drivers or levers you'd point to that helps support growth from here? Derek Chang: Stefano, why don't you take this because you've obviously got the thoughts around the growth of the business more holistically. So I think that's a good place to start. Stefano Domenicali: Absolutely. Thanks, Kutgun. I mean let me start on one thing that I take the opportunity to thank, first of all, our shareholders, our team, the FIA, the teams and all the relevant stakeholders because we have left an incredible moment of our sport. I remember all the earnings calls since I was involved in that, every time was what's next, what's next, what's next. That's a mindset, it's not a guidance. So we have always proven to invest in our future because we do believe in the growth of our sport. And we do believe that in the future, there are so many new opportunities to keep running this rhythm because this is exactly what we are doing together. And the more is strong the ecosystem, the more we are able to catch new opportunities and all the driving force of our revenue streams. And that's why you see what has happened so far in the last couple of years not only in terms of turnover, but also in terms of EBITDA. And this will continue because we see, as we said so many opportunities to keep growing. And the fact we are stabilizing in certain ways, certain promoters deal will allow us to leverage, as I said before, other investments that will bring us other opportunity to return. We are able -- we were able to explore the possibility of engaging with new categories of our partners and largely, for example, if you look at the financial services, we were able to contract with other -- with multiple partners because we are identifying different categories. We are opening up the opportunity of digitalization so new opportunity. We are having licensing that is just starting a great momentum with the big deals that we have just even today announced for the bigger relationship with business and so on. So there is a lot of things that we're going to bring and to keep growing the sport business at all level. That's I definitely confirm. That's our mindset, our approach, we wake up in the morning with these things. We are in a competitive world, not only on the track that remains our focus for sure, but that's the aim of all of us doing this job to increase the return of our investors for sure. Derek Chang: Yes, I think that's right, Stefano. And look, I think what's -- what people need to appreciate also is just the strength of Stefano's team and the creativity there and sort of what they've been able to accomplish over the last several years in terms of revenue streams and categories that may not have been fully sort of appreciated in terms of what they could be. And if you look out now, what they've done, for instance, in the U.S., where can you take -- what other geographic markets are still out there that are large significant and potentially untapped. So we are constantly looking for those opportunities and ways to drive the business. I think the heart of it is what Stefano keeps pounding at, which is to help the sport, the engagement that the sport creates and all that sort of stuff is really the fundamental basis for this. Operator: Our next question today is coming from David Karnovsky from JPMorgan. David Karnovsky: Maybe just zeroing in on the prior question, but for sponsorship, really strong results this year, though arguably, that sets up a tough comp this year. So wanted to get your view on '26 growth? And how we should think about the follow through, not only from deals executed last year, but maybe kind of what's in the pipeline? Stefano Domenicali: I can answer on that, David, stay tuned. As we always shown, we are not -- and also, as Derek says, we are quite creative in finding new opportunities. You're going to see already this year some deals have lifted with new opportunity that we can offer new quality and new things that we want to offer. We don't have to forget one thing at the end of the day. Of course, now that the quantity is really, in a way, great, we need to focus on the quality of what we're bringing in. And this is really the thing that we are focusing because of course, we have a trajectory of new projects in the pipeline, but our focus is to keep the quality of the partner that now are trusting and following Formula One. Therefore, it's a trajectory that will continue. It's a trajectory that will enable us also in a competitive landscape to make some decision. And as we have in the field of promoters, we have the quality problem to have more often than -- more demand than offer. We are in the same spot also on the sponsorship side. So as I said, all the partners are happy. Our point is to create quality content for them, qualitative experience, qualitative value of what they're investing in Formula One. And that has been so far the case and will continue because, of course, the more we are able to succeed on it, we are able to attract even new ones approaching from other disciplines that is happening already, as you have seen, new partners to us. David Karnovsky: Okay. And then maybe just following up here. The press release had called out contribution from digital advertising. I think that's the first. Can you just clarify, is that inventory on the website apps or F1 TV? And what's the opportunity here? Stefano Domenicali: Well, the opportunity is quite important because now we are not only in the world of physical advertising, we have the digitalization that will enable us to use in all the different channel possibilities to put to the advertising but we have different platforms. We have the Podcast, we have YouTube. We have other social media opportunity, we will monetize in the future even stronger. Operator: Our next question today is coming from Bryan Kraft from Deutsche Bank. Bryan Kraft: I guess I'll ask the Vegas question. It seems like Vegas didn't generate really incremental revenue versus last year, but it did generate significant incremental EBITDA due to the cost side. So I just -- I guess I wanted to ask, is that a fair assessment? And what do you think the opportunity is in 2026 to grow Vegas, both in terms of top line and bottom line? Are there any key changes in how you'll approach the event or go to market with tickets this year versus in 2025? Derek Chang: Stefano, do you want to just talk about Vegas broadly? And then Brian and I can you talk about some of the more specifics? Stefano Domenicali: Sure. Sure, Derek. I mean, first of all, in a synthesis, or trying to be set at that point, it has been an incredible strong progress in what will deliver in the short term, even a big cash flow aim in that investment. I think that the key turning point of that has been our ticketing proposition. The fact that we have also a new different way of proposing the partner, the experience and the sales to them. But the most important one that will have a factor in the next couple of years is the new dynamic that we are creating with the community. And with the new things that we will announce in the due time, this will enable us to have an impact also on the P&L of this that is incredible, positive. And you will see soon that we want to make sure that this Grand Prix will keep being something incredible to be a sort of a spotlight of the year because the focus is to keeping that as a unique experience. And of course, you reduce the cost that is associated to the building up of this event in a new city like Vegas. And so therefore, the huge potential is definitely there. We have been very happy about the outcome of this year, and we're definitely going to be even more happy in the projects that we're going to do together in the next couple of years in front of us. Brian Wendling: Yes. And then specifically on the -- on Vegas results for 2026, we did see revenue growth. It's a little bit difficult with our various categories within Vegas because it doesn't all show up in race promotion. Where we really saw growth was we saw increased sponsorship revenues. We saw increased hospitality revenue associated with Vegas. And then also 2026 was a year of trying to achieve some greater cost savings. So we definitely saw some cost savings there. So pretty significant incremental profitability. It just doesn't show up in the race promotion line. It shows up in other spots. Bryan Kraft: If I could just ask, I mean, it sounds like based on Stefano's comments that you do see the opportunity to continue to grow Vegas from here though. Just to make sure I'm interpreting that correctly? Stefano Domenicali: Yes. Absolutely, yes. Sorry, I can't show the different numbers, yes. Derek Chang: Yes, very happy and excited about it. Operator: Next question today is coming from Peter Supino from Wolfe Research. Peter Supino: A question on capital allocation and your communication and then another one on media rights. So I actually start with the media rights. We were excited about your deal with Apple because we've long believed that the movement of important sports rights to streamers was a growth opportunity for the intellectual property owner. In your case, we've had investors go as far as to call your deal with Apple "a disaster" because of their perception that Apple means less distribution for F1 in an important growth market, the U.S. And so I wonder if you could comment on why in your prepared remarks today, you expressed so much confidence that Apple can expand awareness and engagement of F1? And then on the communications side, and I guess this ties to capital allocation, your stock in the last 6 months has become, at least from our perspective, mired in sort of a myopic discussion about team payments, margins and operating leverage, and it's ironic because Formula One is a growth company. And so I wondered if you could talk at all about ways in which your communications might help investors appreciate the duration and magnitude of your growth opportunities going forward? Derek Chang: Stefano, why don't you start on Apple? Stefano Domenicali: Yes. Thank you, Peter. I mean, first of all, I think that we are very, very happy about the deal with Apple for many reasons. And I think that it's important that the one that in our opinion, not so many, but anyway we respect that, of course, they don't understand the deal is because beyond that, there is a huge opportunity to increase the reach. There is an incredible opportunity for Apple to use all their channels, all their platform to promote our sport in a way that has never been done before. There will be the opportunity for the younger generation to be connected with the tool that is more logical for them to use in living the sport and our business. So I do believe that this will represent a big step opportunity to increase also our revenue streams, not only in terms of direct one, but also in terms of awareness in the American market that will enable us to convince also the one that are not believing on that, that is the right move. But on that, we are not even a single doubt. It's a great move. It's great things that will happen that will give a big boost to our performance in the American market. And that our community has not even a single doubt. Derek Chang: Yes. And I would add on that. I mean, look, everyone understands that the landscape has been changing for many years now. And the former sort of terminology around reach and things like that are a bit antiquated. And we see from an Apple standpoint is complete 100% dedication to F1. I saw Tim Cook and Eddy Cue at Super Bowl, and they've got the full weight of the organization behind it. And in that respect, it's not just sort of Apple TV, it's Apple music, Apple news, the Apple stores. So from a reach standpoint, there's many different ways that we will be able to reach and engage with our fans. I think the other thing that's interesting about Apple here, and we saw the news with the broadcasting races and IMAX theaters, right? And this sort of draws on my prior life in the pay television industry, like you wouldn't be able to do something like that necessarily with the traditional broadcaster because of a lot of restrictions that get put into traditional media deals, right? So Apple in that sense, and I think you'll see here in the near future, other announcements along those lines that will sort of bring more life into that. But I think there is that sort of ability to create new ground here, which we will do with Apple, are committed to do. I think the other thing that will be something to watch closely over the next 5 years is sort of what happens with the actual product. As we know, Apple is at its heart a tech company. We are a tech company. The broadcast is sort of very technical in nature, what you can actually do with that as a collective force will be interesting to watch over the next several years. I think on the second question, which was capital allocation. What we talked about at our investor conference was familiar themes, which clearly, we're in a deleveraging phase right now. Everyone understands that will sort of hit a point that we feel comfortable with respect to making additional investments. We've been pretty clear about our discipline in this respect and our desire to invest around sort of into the actual businesses themselves in and around those businesses, certainly, and then in similar sorts of asset classes where we've got great IP, low capital intensity and the ability for us to actually bring value either through insights we have, relationships we have, capital structures that we have, things like that, that will continue to allow us to have ourselves be a growth vehicle. Operator: Certainly. Our next question is coming from Joe Stauff from Susquehanna. Joseph Stauff: I wanted to ask, just following up on the number of changes in F1 this year, engine, regulatory and how that affects certainly competition in parity. I'm sure that's naturally the goal over the long term sort of drives interest in the sport. But just wondering the best way to think about how maybe some of this higher competition could affect the P&L in the near term, call it, 2026 versus next year? What are the near-term sort of impacts of how we think about the financial implications of that? Derek Chang: Stefano, why don't you talk about the changes and what you're seeing and all that sort of stuff and then we can get into what the implications are? Stefano Domenicali: Yes. Well, first of all, the implication -- let me start from one thing. The F1 has the duty to be always an innovator league sport, has been always -- that has been always the duty of our sport because by innovative, we can attract new investors. And the immediate effect of this regulation has attracted new manufacturers back into the sport. We have Audi, we have Ford, we have Honda, we have Cadillac that did come in because of this regulation. And if I may, before, of course, that has taken the second part of the financial, this would be an immediate effect on the financial because they will invest in our sport. They will invest in our initiatives. They will invest in all the ecosystem that would generate for them a sort of a platform to invest to let the brand be known by the customer. So that's a direct effect. On the other side, of course, there is a great interest, a great opportunity to showcase that the level of technology is always relevant to what is needed in the technological world. We have sustainable too. We have hybrid engine, and we've been always the first to believe on that. And we create excitement because the nature of the regulation will allow all the teams to develop this year car race the race. You're going to see a season where every race will be different, that will be, for sure, at the beginning bigger gaps that will be restricted because of the nature of the regulation. And therefore, as always, F1 understand when there is the need to move forward faster than the others, and that has been always our philosophy. And that will attract the interest not only of the one that I said to you before, but the new fans that through the new content that we are generating will connect to us and of course, by enable to be connected directly with them, we can even leverage the fact that we will offer something new to them. They're going to be a big push on the merchandising side of it. It's going to be big push also to our partner Quint to create new packages to promote to them. So this is the reason why we change the things for multiple reasons. Derek Chang: Yes. I mean just to follow on that. I don't think we sat here and said we're building a kind of incremental into the '26 business plan because of these changes. But that being said, as Stefano hit on quite clearly, these changes are going to drive continued interest and engagement in the sport. And hopefully, as he says bring in new participants, new fans and all the sort of accrued benefit that comes with that, that ultimately results in monetization. I think the other thing in parallel here that is happening this year, as you know, there are some big names that have come into the sport between Audi and Cadillac and Ford, Honda coming back. It's pretty significant in terms of someone like Cadillac spending on a Super Bowl ad and what they're doing to promote their team on the track. So this is all part of the evolution of what F1 is and Stefano and his team have done a fantastic job of cultivating relationships, cultivating these partnerships, building the sport into something that we do look at on a multiyear basis, not sort of how this is going to drive something in the next week or next month. And that's constantly what we're trying to do is built for the long term. Joseph Stauff: Understood. Maybe one just quick follow-up. Could you maybe just give us an update on the changes of the commercial team at Moto? And any other obviously changes that you're making, obviously, now that you own it for about 6 or 7 months and how to think about that? Derek Chang: Sure. This is Derek. I mean, as we stated, or Carmelo stated, we're in the process of sort of putting out our brand and executing behind it, really. And I think that part of that is what's happening at the track in the hospitality, and we're going to see some pretty dramatic improvements, I believe, over the course of this year, where we're putting these tracks -- our races, excuse me, as we're getting them closer to cities where we can benefit from all the infrastructure and the attendance and all of that sort of stuff, including, as we mentioned, in Adelaide, it's going to be right in the city center. And then how we go about sort of ultimately monetizing, commercializing that, we need the right team in place. And that's probably an area where we haven't had the sufficient sort of personnel there and we are building that. It's obviously not a heavy lift to sit there and hire folks up. So that's what we're in the process of doing. As we have stated previously, this will take some time in terms of the ultimate commercialization. We'll see some areas pick up sooner rather than later. But over -- if you look at F1 as a parallel, we're in our 10th year and you're still seeing some of these new revenue streams sort of being activated. So we continue to be even more sort of bullish on Moto even if the results don't necessarily show in the short term, it's clearly a long-term proposition for us, which is -- which -- and we like to invest in for that long term. So we're very excited. Operator: Our next question is coming from Ryan Gravett from UBS. Ryan Gravett: Just to follow up on the media rights topic. Now that you're through the latest round of renewals, not just in the U.S. but some markets in Latin America and Asia as well. Just curious what your key learnings were and how you think you're positioned for the next round of renewals in Europe over the coming years? Do you expect similar interest for digital players in those markets as well? Derek Chang: Stefano, do you want to start? Stefano Domenicali: Yes. Thank you. I mean, I think that our position with the media renewal, as you see, is quite dynamic. And I don't want to anticipate anything, but stay tuned in the next days, you will see something else coming up. The real point on that is the interest is very strong. The numbers are very strong. And the key focus on what we need to make sure we keep doing is understanding if we keep going because we are a worldwide market in the so-called traditional way of the delivering our sport to our credit broadcaster or in certain markets, there is an opportunity. As we did in U.S. to move into the streaming platform because each country is different. We have the incredible opportunity to be so strong worldwide, that we cannot have one single way of delivering our content in the same way and there are different time lines that we need to consider. So it's a bigger ecosystem. And I think that we have proven so far to make appropriate analysis before taking the final decision. So for sure, we want to be active and proactive in this world because the media right is not totally media right on the sports, the media rights are following other things in this moment. Therefore, I think that the reason why you see so many good news coming in is because we want to be proactive, and we feel that we are able to understand the evolution of the market, considering the difference that we have from area to area. But stay tuned because already next week going to be something new happening. Operator: Our final question today is coming from Ian Moore from Bernstein. Ian Moore: When we look at trailing motor results, I think everyone sees an opportunity to drive monetization, particularly sponsorship to where F1 kind of is today. But F1 itself seems to continue to overdeliver on sponsorship. So I guess, more generally, what do you guys kind of see as the right mature mix directionally of media rights, race promo, sponsorship for these businesses? And then, I guess, for motorsport businesses more broadly? Derek Chang: Yes. I think -- look, it's early, but I think along the same lines is probably not a bad place to end up. And it's going to be over time that some of this stuff happened. But I think you've already seen that we're announcing new races next year, which will lead to some uptick there. And -- but then the sponsorship side of things probably lags a little bit as we build the brand and reengage with the potential partners. But I do think that the ability for us to draft off of what F1 has done there and the Liberty name being able to sort of have credibility around what we're going to deliver with respect to Moto is something that we are excited about. Again, it will take some time, but we feel comfortable that that's going to happen. I'll just end by saying there's good receptivity in the market. This -- we had a partner someone, as I mentioned in Barcelona last week, a lot of good enthusiasm, a lot of good energy there. There's a lot of good enthusiasm in the investor base around teams. I can't tell you how many people have reached out expressing interest. So I think people see it. The other thing about Moto in comparison to maybe other sports right now of its size, which tend to be more emerging sports, Moto has a long, long history to draw on and many stories to tell as a result and an established fan base and established brand recognition. So we're starting from a place that's much different, and hopefully, it's something that we can accelerate here over time. Hooper Stevens: Thanks, everybody, for your participation in today's call. Apologies if we didn't get to your questions, we'll look forward to speaking with more of you offline. Thank you. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Hello, and welcome to the TORM Full Year 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Meldgaard, CEO. You may begin. Jacob Meldgaard: Thank you, and welcome to everyone joining us here today. This morning, we released our annual report for 2025, and we are satisfied with the results, which, once again, reflect our strong execution across the business. However, before I now turn to the results, I want to spend a little time talking about TORM and the foundation that enables these results and consistently differentiates TORM in the market. I want to talk about the key pillars of our business that have placed us in a strong position to date and that we believe will continue to do so in the future. We are immensely proud of what we have achieved here at TORM. Our ownership model and culture provides us with a clarity of purpose that streamlines our actions across the business. We are focused each and every day on staying one step ahead of other fleets to make the most of every opportunity. We believe our ability to deliver on this ambition for our shareholders is a distinct competitive advantage. Underpinning our strategic focus is the platform you will know as One TORM. We believe this is a point of difference that sets us apart. The model was originally built around a spot-oriented strategy to unite the business and accelerate decision-making and response time. It enables us to use real-time data and insights to share our deep expertise at the core of the business at a moment's notice. We are not complacent. Since its inception, we have continuously refined this model using the latest technology, advanced analytics and proprietary data at our disposal to ensure we remain as alert and responsive as we possibly can be. In short, we can identify and capture attractive trading opportunities even in the most challenging markets, and perhaps I should say, especially in challenging markets, exactly the type of markets which now characterize the shipping industry even as we see comparatively fewer headwinds here into 2026. For our shareholders, this approach offers a very clear advantage. We believe an industry benchmark for unrivaled consistency, strategic optionality and financial discipline that you can see once again in our numbers. And here, please turn to Slide #4. In here and on the next 2 slides, we show the key figures for the quarter and the full year. As always, I'll start with the quarterly numbers to give you a clear picture of how the business is developing. In Q4, TCE came in at USD 251 million, slightly above Q3, supported by firm freight rates throughout the quarter. This strong performance resulted in a net profit of USD 87 million, which enables us to declare a dividend of $0.70 per share, once again demonstrating our higher earnings translate directly into higher shareholder returns. During the quarter, we were active in the S&P market. We added 2 2016-built LR2s and 6 MR vessels built between 2014 and '18, while divesting 1 older 2008-built LR2. Several of the vessels were delivered before year-end, bringing our fleet to 93 vessels. And after completing the remaining deliveries at the start of 2026, our fleet comprises 95 vessels. Importantly, our investments were exceptionally well timed. Based on current broker valuations, the vessels we acquired have already been appreciated by a double-digit U.S. dollar amount. This reflects not only the quality of the assets and our disciplined approach to capital allocation, but also a market that continuously turned more positive, supporting higher asset values across the product tanker space. Now turning to Slide 5, we show the full year numbers. These are strong results. A year ago, our TCE guidance was USD 650 million to USD 950 million, and we closed the year towards the high end with USD 910 million. While not matching the all-time high in 2024, it remains a very satisfactory outcome. Freight rates strengthened from the first to the second half of the year and ended at attractive levels. In this environment, TORM achieved fleet-wide rates of USD 28,703 per day, which we are very pleased with and which again demonstrates our ability to outperform the broader market. Net profit for the year totaled USD 286 million, of which USD 212 million is being returned to shareholders. With that overview in place, let us take a step back and look at the broader market dynamics that shape the environment we operate in. And here, please turn to the next slide to Slide 7. And after a softer, but still historically strong 2025, product tanker freight rates have now returned to the average levels that were seen in the 2022 to 2024 market. Underlying demand for product tankers has remained steady, and the recent uplift in rates has been driven primarily by developments elsewhere in the tanker complex. The crude market has moved into territory that, while not unprecedented, is extremely rare. VLCC spot rates have surged to the USD 200,000 per day range, a unique and record-breaking level, and with charterers reportedly fixing 1-year deals above USD 110,000 per day. This strength is spilling over into the rest of the market, first into Suezmax and Aframax and then further into clean product tankers. If this momentum continues, we are potentially looking at a very interesting rate environment. At the same time, sanctions in the dirty Aframax segment have tightened vessel availability, triggering a large shift of LR2s from clean to dirty trade. This reduction in clean LR2 supply has further supported product tanker earnings. After several years of partial decoupling between segments, the product tanker market is once again being carried by the broader strength in crude. VLCCs, as mentioned in particular, continue to benefit from increased OPEC production, renewed stock building demand from China, heightened geopolitical tensions involving Venezuela and Iran and further consolidation in the segment. All these factors together have created one of the strongest cross-segment market backdrops we have seen in years. Please turn to Slide 8. And here, let's have a look at the product tanker demand side. Seaborne volumes of clean petroleum products have been trending upwards in recent months. However, the overall impact of the Red Sea rerouting has been largely neutral due to lower trade volumes and a partial return to Red Sea transits. Trade volumes from the Middle East and Asia to Europe have started the year at 30% below pre-disruption levels, which is largely a result of lower flows from India amid introduction of an EU ban on imports of oil products derived from Russian crude. At the same time, an increasing number of vessels have resumed transiting the Red Sea with an, on average, 40% of the clean petroleum product volumes on the Middle East, Asia to Europe route traveling via the Red Sea in 2025. This is up from under 10% in 2024. As a result, we see limited downside risk from a potential full normalization of the Red Sea transit as much of this effect has already been unwound and instead, a likely rebound in clean petroleum trade volumes after the normalization of the transit would increase ton-miles. This is reinforced by the closure of 5% of the refining capacity in Northwest Europe last year, which is driving higher import needs for middle distillates. Additional support comes from sustained strength in crude tanker rates, which limits the crude tanker cannibalization and also from rising clean product ton-miles driven by refinery closures on the U.S. West Coast. Kindly turn to Slide 9. Let's turn to now the supply dynamics. Newbuilding deliveries have increased here in 2025, but this has not translated into effective growth in the fleet trading clean products. In fact, since the start of 2024, nominal product tanker fleet capacity is up by 8%, yet the capacity actually trading clean today is 1% lower than it was at the beginning of 2024. This disconnect is primarily due to sanctions in the Aframax segment, which had incentivized a significant shift of LR2 vessels into duty trades. To illustrate this point, compared to the start of 2025, currently, there are 20 fewer LR2 vessels transporting clean petroleum products and, at the same time, 65 newbuildings have been delivered to the LR2 fleet during the same period. The scale of the sanctions is notable. 1 in 4 vessels in the combined Aframax LR2 segment is currently under U.S., EU or U.K. sanctions. This comes on top of the fact that the order book is already balanced by the high share of overage vessels in this segment. Next slide, please, Slide 10. And here, let me just elaborate a little on vessel sanctions. So most sanctioned vessels were added to the list last year. So in 2025 alone, more than 200 Aframax and LR2 vessels were sanctioned. This is 3.5x the number of newbuilding deliveries in the segment in 2025, and it is equivalent to almost the entire combined newbuilding program for a 3-year period from 2025 to 2027. With 60% of these now sanctioned vessels being older than 20 years, their likelihood of returning to the mainstream market even if sanctions were lifted appears to be limited. And now turn to Slide 11, please. Geopolitical developments continue to be a major driver of market dynamics. And in fact, the list of different geopolitical drivers has only gotten longer in the past 4 years. The growing number of policy interventions and geopolitical flash points increases uncertainty and associated inefficiencies. Beyond the policies directly affecting product tankers, developments in the crude tanker market such as a potential tightening of sanctions against Iran, rising OPEC production are also indirectly supportive for product tanker demand. We sincerely hope for a ceasefire between Ukraine and Russia. However, we see the likelihood of trade returning to pre-war levels as very low or nonexistent in the foreseeable future given the EU's clear determination to tighten sanctions. The EU ban on Russian crude oil and oil products has been by far the most significant sanction against Russia in terms of ton-miles. And the new 20th sanction package the EU is working on is potentially adding a full maritime services ban to it, pausing an even larger share of Russian oil flows into the shadow fleet. This would likely further increase the inefficiencies of the fleet trading Russian oil. Please turn to the next slide, Slide 12. And in summary, the key geopolitical forces continue to shape this year's market. While a potential normalization of Red Sea transit is unlikely to weigh on the market, the EU's ban on Russian oil will continue to underpin longer trading distances. On the demand side, ongoing shifts in global refining capacity continue to support ton-mile expansion. On the tonnage supply side, the increase in newbuilding deliveries will be balanced by a growing pool of scrapping candidates and reduced participation from sanctioned vessels, factors that will influence overall tonnage availability and market equilibrium. Against this backdrop, I'm confident that TORM is well positioned to navigate an environment marked by uncertainty and supported by our solid capital structure, strong operational leverage and our fully integrated platform. So with that, I'll now hand it over to you, Kim, who will take us through the numbers. Kim Balle: Thank you, Jacob. Now please turn to Slide 14, and let me walk you through some of the drivers behind our performance this quarter and for the full year. Starting with the market backdrop. The product tanker market stayed strong throughout the fourth quarter, and that supported another solid result for us. For Q4, we delivered TCE of USD 251 million, which translated into EBITDA of USD 156 million and net profit of USD 87 million. Across the fleet, our average TCE came in at USD 30,658 per day. Breaking that down, our LR2 earned above USD 35,000, LR1s were above $31,000 and MRs were just under USD 29,000 per day. For the long-range vessels, these numbers were actually a bit better than we indicated in our Q3 coverage, reflecting continued strong markets, helped in part by very firm crude tanker rates. For the full year, we delivered TCE of USD 910 million, EBITDA of USD 571 million and net profit of USD 286 million. These are solid numbers. As expected, earnings moderated from the exceptional levels of last year, but they remain robust and importantly, very much in line with the guidance we shared in November. And turning to shareholder returns. With a strong Q4, earnings per share reached $0.88, and the Board has declared a dividend of $0.70 per share, bringing total dividends for the year to USD 2.12 per share. We continue to believe that our capital return framework strikes the right balance, clear, disciplined and supported by robust cash earnings generation. And with that overview in place, let us move to Slide 15, where we break down the earnings in more details and talk through the underlying drivers. Slide 15 shows our quarterly revenue progression since Q4 2024. With this quarter's results, we see a meaningful uptick building on the positive trajectory in freight rates and earnings we delivered over recent quarters. It's a clear indication of the favorable market environment we are operating in. For the quarter, we delivered TCE of USD 251 million and EBITDA of USD 156 million, making our strongest quarterly performance this year. The underlying uplift is driven by firm freight rates supported by solid fundamentals and a positive spillover from the crude tanker segment, as mentioned. Given our operational leverage, we were well positioned to benefit from what we already see as very attractive freight rates. Please turn to Slide 16. Here, we show the quarterly development in net profit and the key share-related metrics. For the fourth quarter, earnings per share came in at $0.88. Our approach to shareholder returns remain clear, disciplined and consistent. We continue to distribute excess liquidity on a quarterly basis while maintaining a prudent financial buffer to safeguard the balance sheet. For Q4, this has resulted in a declared dividend of $0.70 per share, corresponding to a payout ratio of 82%. This is fully aligned with our free cash flow and debt -- after debt repayments and reflects both the strength of our earnings and our ongoing commitment to responsible capital allocation. And now please turn to Slide 17. As shown on this slide, broker valuations for our fleet stood at USD 3.2 billion at year-end. This reflects a continued positive sentiment in the market and results in an NAV increase to USD 2.6 billion. Importantly to note, average broker valuations for the fleet increased by 4.2% during the quarter, driven primarily by higher valuations for our LR2 vessels, which saw the strongest appreciation. This uplift further underscores the improving market backdrop and the quality of our asset base. In the recent quarter -- or sorry, in the central chart, you can see our net interest-bearing debt, which now stands at USD 848 million, corresponding to 29.4% in net LTV. The increase reflects the vessels acquired during the quarter, which naturally required incremental funding. Importantly, even with this investment-driven uptick, our leverage ratio remains within the range that we have maintained over recent quarters, typically between 25% to 30%, underscoring the strength of our conservative capital structure. This stable leverage -- sorry, this stable level continues to provide us with ample financial flexibility to pursue value-accretive opportunities while safeguarding balance sheet resilience across market cycles. On the right, you can see our debt maturity profile. We have USD 135 million in borrowings maturing over the next 12 months, excluding lease terminations that have already been refinanced. Beyond that, only modest amounts fall due in the following years. Overall, our solid balance sheet gives us sustainable financial flexibility to navigate current market conditions with confidence and to pursue value-creating opportunities as they emerge. Now please turn to Slide 18. This time, we have added a new slide to show what is actually -- what it actually means for the value creation when we consistently achieve rates above the market average. The MR segment is our largest exposure and a segment where competitors also have meaningful scale, making it the most representative benchmark for the product tanker market. We could, of course, perform a similar comparison for LR2 vessels. However, the benchmarking becomes less robust as many of our peers operate only a relative small LR2 fleet, limiting the comparability and statistical relevance for such an analysis. That said, based on the data available, a comparable calculation for the LR2 segment would probably show the same picture. As shown on Slide 24 in the appendix, we compare the rates we achieved with those of our peer group. Quarter after quarter and year after year, we have consistently delivered rates well above the peer average and in most quarters, even market-leading. This performance is a direct outcome of the One TORM that Jacob discussed and which continues to differentiate us in the market. But on this slide, when we take the analysis a step further by quantifying what that actually means, then, holding everything else equal, we calculate the premium TCE by taking our spot TCE relative to the peer average, multiplying it by our operating base and comparing that figure directly with our dividend in each quarter from 2022 to 2025. This provides a clear transparent view of the tangible financial value created by outperforming the market. Two examples illustrate the impact. In 2022, we returned USD 381 million in dividends. Our premium TCE was USD 38 million, around 10% of the total dividends paid. And in 2025, based on the first 3 quarters, the premium reached USD 49 million compared to our full year dividend of $212 million, that represents 23% of the total. So the message is clear. Our strong rates have a material and measurable impact on our dividends returned to our shareholders. Across that period, which includes different market conditions, we have returned USD 1.6 billion in cash dividends. And our analysis show that premium earnings from the MR fleet accounted for roughly 15% of the total dividends paid over the past 4 years. And now please turn to Slide 20 for the outlook. We're stepping into 2026 from a clear position of strength and solid momentum across our business. In Q1, we have already secured 70% of our earnings days at an attractive average TCE of USD 34,926 per day. This strong coverage provides a robust foundation for the year and reflects the positive traction we are seeing across all vessel segments. With the coverage already locked in and the encouraging market outlook ahead, we expect TCE earnings of USD 850 million to USD 1.25 billion and EBITDA of USD 500 million to USD 900 million. Both ranges are based on our midpoint internal forecast, after which we apply a defined range to reflect the uncertainty associated with the full year outlook and the potential volatility in the market conditions as the year progresses. And we are entering the year with confidence and real momentum behind us. And with this, I will conclude my remarks and hand it back to the operator. Operator: [Operator Instructions] Your first question comes from Frode Morkedal with Clarksons Securities. Frode Morkedal: First question I have is on the EBITDA guidance or the revenue guidance. If you could, I'm curious about what type of spot rate assumption you made there? Of course, I understand there's a lot of moving parts in this type of guidance, but let's say, LR2, MR rates in the high end, what are -- what's the implied rate, if you can share that? Kim Balle: Frode, I can tell you about our methodology that we use when calculating our guidance for the year. So we take the coverage, the fixed days we have already made for Q1, and then we apply the unfixed days for the rest of the year with the forward curve that we see in the market for the remainder of that period. And then you get to a midpoint. And from that midpoint of TCE, you then deduct our normal cost and get to an EBITDA. And depending on where the freight rates are, we stress that with an interval. And as they are higher right now, you will see, compared to last year, that the interval is slightly higher than we had a year ago. That is due to both what I just said, the higher rates, freight rates, but also more earning days, of course. So that's the methodology behind. So we are basically building it on what we have achieved already and then the markets. Frode Morkedal: Right. So is it just FFA market or time charter rates that you're looking at or... Kim Balle: It's forward freight rates. Frode Morkedal: And can you just say like the midpoint, is that -- roughly is that curve today when you made the guidance? Kim Balle: It's around $30,400 across the fleet. Frode Morkedal: Right. Okay. That's a good reference point. So yes, but just I wanted to discuss how you see the strength in the crude market impacting the products? Clearly, you talked about the switching. I'm curious to know if you think there's more to go there? I have noticed that crude Aframaxes are still trading with quite a significant differential to LR2 spot rates. So yes, curious to hear your views. Jacob Meldgaard: Yes. Obviously, time will tell. But I think clearly, the strength that we are seeing across the crude segments is first and foremost, having a direct one-to-one impact on the behavior of the LR2 fleet and LR2 owners. So the incentive currently to switch from being participating as an LR2 in the CPP market and potentially moving into the crude market is a little depend on whether you are in the Western hemisphere or the Eastern hemisphere. But just as an example, as you point to in the Western hemisphere, there's a clear financial incentive to switch over. I think we will see more of that as we showed in the graph. There is basically fewer vessels that are available due to the sanctions regime imposed, especially by the U.K. and EU, but also by OFAC. So that means that the compliant requirements for our customers, whether it's in CPP or in dirty trade, is serviced by fewer vessels, fewer assets. And that is pushing rates higher as we speak. We see term rates rising, and they are not to the extreme volatility that we see in the VLCC segment, but still significantly higher for a 1-year charter today than what it was at the beginning of the year. And I think this trend, let's see how it plays out, but I think it is here to stay. So we're quite optimistic in the earning power in the segments, to be honest. Frode Morkedal: I agree. I guess the acquisition you made, I think it was 8 ships, right, in Q4. That was a pretty good timing. I think we discussed it last time, but maybe you could just discuss how you thought about the investment case at the time. Clearly, it's been a -- was a good idea to buy these ships. And secondly, what's your view now at this point in time of further opportunities to acquire ships? Jacob Meldgaard: Yes. So I think it's like this, that we did -- when we had the conversation, I think also on this call in Q4, I think we illustrated that we are looking at it quite methodically and just saying what is the sweet spot in terms of our expectation of the free cash flow that we can generate from an asset and where is the asset [indiscernible]. And what we identified was these pockets of that we could buy some LR2s and we did some here actually towards sort of mid-December bought a couple of ships. And clearly, today, the price of these assets and one of them is actually only delivering tomorrow is already up by 20%. So if you isolate it out and just say, yes, that's good timing. But the backdrop of that is, of course, also that now when we had to sort of do our own thinking around potential other acquisitions, clearly, with assets rising like this, it gets harder to make the next acquisition. So I think we were fortunate about the timing on these 8 ships. We actually had hoped, to be very honest, to have upped the end a little on that in terms of number of assets, but they were simply not available at that point in time at attractive prices. So I think we just had to regroup a little. Asset prices are moving quite fast, and we just have to regroup and make sure we still follow our methodology and not get carried away. But I'm optimistic that we can maybe identify a few, let's say, some other deals that sort of fits the bill on our return requirements. Kim Balle: Frode, may I just -- I need to answer your question. You started a bit more precise than what we did, just so it's clear how we do it on the guidance. I just didn't have them in my head, but I have the numbers here. So if you take Q1, we had covered 8,177 days with $34,208. Then we take the uncovered days, that's 25,691 at $30,371. And then you do the math from there. Then you come to a total number of days, operating days and average TCE. And then you get to a TCE and you stress that. Frode Morkedal: Right. That's good. So on the stress test, do you have like a percentage plus/minus or... Kim Balle: That's -- we derived it a few years ago, but the way we use it is plus/minus TCE, and it depends on how much the stress depends on what the actual TCE level is. The lower it is, the lower the stress is, the higher it is, the higher the stress is. So it depends on where you are on the actual TCE levels. Operator: Your next question comes from [ Clement Mullins ] with Value Investors Edge. Clement Mullin: I wanted to start by following up on Frode's question on Afras and LR2s. Could you talk a bit about the portion of your LR2 fleet that traded dirty throughout the quarter? And secondly, on the LR1 side, have you seen an increase in the proportion of vessels trading dirty over the past few months? Jacob Meldgaard: Yes. Thanks for those very precise ones. So I'll start from the back end of this. So we have not really seen that the dirty market has affected the LR1s in our fleet and in our case. And when we look at our vessels and on the spot, we basically have 10% to 20% of our LR2s trading spot dirty. And then we've got another 10% that is on term charter dirty. Clement Mullin: That's helpful. And you continue to outperform peers on the MR side with your chartering team doing an excellent job. Could you talk a bit about what portion of your administrative expenses is attributable to the chartering team versus kind of the corporate side? Any color you could provide would be really helpful. Jacob Meldgaard: Yes. So we actually don't account like that. We -- as I tried to illustrate also in the beginning, on the One TORM platform, we believe that it's not actually the chartering team that is the secret sauce. It is actually the power of -- that you have in an organization ranging from the employees who bought a ship to the people doing the accounting and operations, technical. And of course, also, as you point to, the chartering team, but their success is not an isolated thing that has to do with their ability, it's the whole structure. So we don't -- I don't have an answer. I don't know the number. It's not the way we think about... Operator: There are no further questions at this time. I'll turn the call to Jacob Meldgaard for closing remarks. Jacob Meldgaard: Yes. Thank you very much, everyone, for listening in on the annual report 2021 for -- 2025, obviously, for TORM. Thank you very much for listening in, and have a great day. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Millrose Properties Fourth Quarter and Full Year 2025 Earnings Results Conference Call. [Operator Instructions] I will now turn the call over to Jesse Ross, Millrose Head of Financial Planning and Analysis. Jesse, you may begin your conference. Jesse Ross: Good morning, and thank you for joining us. With us today to discuss Millrose Properties Fourth Quarter and Full year 2025 results are Darren Richman, our Chief Executive Officer and President; Robert Nitkin, our Chief Operating Officer; Garett Rosenblum, our Chief Financial Officer; and Steven Hensley, our Senior Market Risk Analyst. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to our fourth quarter and full year 2025 earnings release and investor presentation, both available on our website under the Investor Relations heading for a discussion of these matters and a reconciliation of non-GAAP measures. With that, I'll turn the call over to Darren. Darren Richman: Thank you, Jesse, and good morning, everyone. I'm pleased to discuss our results for the fourth quarter and full year 2025, our first year as a public company. For years, we have seen a clear opportunity in a housing market defined by persistent undersupply and builders seeking greater balance sheet efficiency. Even as the industry faced meaningful headwinds, affordability challenges, elevated rates and macro uncertainty, the structural need for housing capital remained unchanged. If anything, the industry shift towards capital efficiency has only accelerated and Millrose was designed for exactly this moment. Our permanent capital model provides builders with just-in-time homesite delivery system. We acquire and fund development under option agreements, builders take down homesites on a predetermined schedule and our shareholders receive predictable recurring income underpinned by U.S. housing demand. That income is not tied to home prices, land values or the pace of home sales. We generate contractual monthly option payments that spend multiyear contracts and are owed regardless of market conditions. We do not speculate on land appreciation, take entitlement risk or participate in homebuilding margins. Our capital is structurally insulated from the cyclicality of our builders' operating businesses. That is a fundamental distinction from every other land-based real estate business in the public markets today, and it is the foundation on which 2025 was built. 2025 was a defining year for Millrose. Despite a cautious homebuilding environment, we were embraced across the industry with a reception that exceeded even our own expectations, validating both the concept and our team's execution. Our investment balance outside the foundational Lennar master program agreement finished the year at approximately $2.4 billion, surpassing the $2.2 billion stretch target we had previously discussed. That outperformance reflects something important. Builders weren't just willing to work with us. They sought us out, both initiating new relationships and deepening existing ones. In a year when builders were exercising appropriate caution on an activity level, Millrose was aggressively taking share and pioneering new use cases for land banking capital. That is a direct reflection of what we offer, an experienced trusted partner with deep operational and technological integration, the ability to transact rapidly and at scale and a national team that understands the homebuilding business from the ground up. That accelerating pace of adoption translated directly to financial outperformance. We had previously provided a year-end run rate AFFO guidance range of $0.74 to $0.76 per share. Our 4Q AFFO came in at the top end of that range at $0.76, but the growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77, ahead of where we expected to be. We also demonstrated the uniquely cash-generative capital recycling nature of our business model with $3.4 billion of net homesite sale proceeds generated in 2025. Beyond the financial implications of that liquidity, we're proud of the real-world impact embedded in this number. Over the course of 2025, we delivered more than 31,000 homesites to builders across the country, projects with an average home selling price of approximately 20% below the national average for newly built single-family homes. Housing affordability remains one of the defining challenges facing the American housing market, driven in large part by the scarcity of entitled, well-located land. What we do isn't just financially compelling, it is genuinely additive to the housing supply where it is needed most. Looking ahead, we enter 2026 with a pipeline that gives us real confidence in our growth trajectory. Based on the transaction volume we demonstrated in 2025 and the depth of our current opportunity set, our base case expectation is that we can grow invested capital outside the Lennar master program agreement by an additional $2 billion, bringing total invested capital to approximately $10.5 billion, with over 40% of that balance outside the foundational Lennar relationship. That would represent a meaningful milestone in the diversification of our platform. I want to be transparent about how we think about funding that expansion because growth for its own sake has never been part of our objective. We remain committed to a conservative leverage policy with a current target of 33% debt to cap, and we will not issue equity below book value, which currently stands at $35.28 per share. On that basis, we can point with confidence today to funding approximately half of that $2 billion demand increase through existing debt capacity. We expect to deploy that $1 billion in invested capital growth by approximately midyear, exiting Q2 2026 with a quarterly AFFO per share run rate in the range of $0.78 to $0.80 a share. For the second half of that pipeline, we are being highly selective by design, concentrating capital toward the strongest counterparties, the most durable structures and the best located underlying properties. The opportunity set exceeds what we can fund today, and that is a position of strength, not a constraint. The equity optionality we retain is upside for existing shareholders, not a bottleneck to our business. On a valuation, our current AFFO multiple implies a meaningful discount to the competitive set of REITs, a gap we believe is difficult to justify given our lower leverage, our contractual income structure with high-quality counterparties and the projected 10% annual AFFO per share growth implied by our $2 billion growth expectation as described on Page 14 of our earnings presentation. Here, we've laid out an illustrative bridge from our current AFFO run rate to year-end 2026. At the low end, deploying $1 billion of net new capital at current yields would drive more than 7% growth in AFFO per share. Executing on this $2 billion opportunity set we see in front of us, funded with a prudent mix of debt and equity consistent with our stated leverage targets implies a 10% growth in AFFO per share. We believe that this valuation discount to our peers reflects the market still getting comfortable with a business model that is genuinely new to the public markets, and that is a fair and reasonable dynamic. But one we expect to resolve itself as we continue to demonstrate consistent execution. We operated through a challenging homebuilding environment in 2025 without a single builder terminating or threatening to terminate an option agreement. As that track record compounds, we expect investor confidence and our valuation to follow. We are optimistic that a re-rating is coming and that we will be able to raise equity above book value in 2026, which would allow us to fully capture the pipeline in front of us. Finally, the macro backdrop entering 2026 is the most constructive that we have seen since our spin-off. In many markets, the supply and demand imbalance that weighed on builder activity through much of 2025 is showing early signs of rebalancing. Lower housing starts have begun to work through excess inventory and moderating mortgage rates are supporting a gradual return of buyer demand. Against that backdrop, land values have proven remarkably resilient. According to a recent survey from John Burns Research and Consulting, one of the most respected voices in the residential housing market, land prices remain stable through 2025 and continue to increase in many markets. For Millrose, that is an important data point. It affirms the unique character of our entitled homesite assets, irreplaceable non depreciating perpetual options on U.S. home values and confirms that our portfolio is well positioned as the market continues to recover. 2025 proved the model. 2026 is where we intend to begin showing its full potential. We believe we have the platform, the pipeline, the partnerships and the track record, and we are just getting started. With that, I'll turn the call over to Rob. Robert Nitkin: Thank you, Darren. I want to spend a few minutes on what it actually takes to operate this platform at the scale we've described because the numbers deserve context. As of year-end, Millrose manages approximately 142,000 homesites across 933 communities in 30 states serving 15 distinct counterparties, 9 of which rank among the top 25 homebuilders in the country. During 2025, we deployed $5.5 billion in new land acquisitions and development funding and received $3.4 billion in takedown proceeds. Transaction volume of this magnitude is made possible by significant operational infrastructure working in sync with a large and experienced team. Every homesite takedown we process is a real estate transaction, not just a wire transfer or a ledger entry. As Darren mentioned, in 2025, we executed over 31,000 of those closings, each involving title work, deed transfer and state-specific closing requirements on a schedule that cannot slip because builders are running construction time lines that depend on us. What makes that reliability possible is our technology, a platform that gives builders real-time lot selection capability with every selection triggering automated portfolio updates, title tracking and closing workflows. But technology alone does include real estate transactions. Equally important is an experienced team of underwriters, servicers and asset managers with deep multiyear operating relationships with our builder partners and the willingness to pick up the phone and work through any time-sensitive request or transaction nuance. Growth amidst this volume of activity required the same level of discipline on the deployment side, expanding from one counterparty to 15 required demonstrating both homesite delivery reliability and new deal underwriting capacity, the ability to evaluate, diligence and close with high volume on externally driven deadlines. Our proprietary data set and underwriting tools built from years of transacting across every market we operate in allow our underwriting team to rapidly form a view on new opportunities before passing to our real estate diligence teams for legal and development review. These tools also provide real-time signals on local market dynamics, and you'll hear more on what we're currently seeing from Steven Hensley in a moment. Combined with close coordination between our underwriters and builder partner land teams, our diligence is both rapid and rigorous. That speed of execution alongside the unique reliability and permanence of our capital is a competitive advantage builders notice and consistently cite. Every new builder relationship benefits from our track record of efficient execution at scale, first with Lennar and now with 14 additional partners as well as the institutional credibility our team built at Kennedy Lewis in the years before Millrose launched. That combination of platform history and team pedigree that creates a level of credibility that cannot easily or quickly be replicated. We also bring to these relationships market insights and intelligence from our operations across 30 states that most individual builders simply don't have access to. We believe sharing that perspective makes us a more valuable partner and deepens relationships. The expanding share of wallet Darren referenced isn't just a financial outcome. It's a reflection of the compounding spirit of partnership we are committed to building across the industry. I also want to elaborate on our cross-termination pooling structures present on 96% of our portfolio by investment balance because pooling is more than a negotiated legal protection. It is, first and foremost, a relationship-defining mechanism. When a builder agrees to a pool, they are self-identifying as a partner seeking capital efficiency, not risk mitigation, and that distinction matters. These are builders who understand our model, embrace the off-balance sheet structure and are committed to a long-term programmatic relationship. It is worth being clear ride about what pooling does and does not do. It does not prevent a builder from walking away from an option contract. What it does is raise the cost of doing so, creating a meaningful economic disincentive that protects the integrity of the relationship without eliminating the builder's optionality. That balance is intentional and is part of what makes pooling a durable alignment tool rather than a blunt legal instrument. Beyond that initial alignment function, pooling is also a live risk management discipline. We maintain a real-time pooling analysis that tracks every pool by geography, duration and risk exposure as communities advance through their life cycle. Enabled by our technology platform, we monitor shifts in each pool's risk profile continuously, directly informing go-forward deal allocation. This active management is what keeps pools meaningful of over time, and it is a capacity that we believe is genuinely difficult to replicate without the scale and systems we have built. Looking ahead, the opportunity in front of Millrose is both substantial and highly actionable. Our pipeline is deeper, more diversified and more geographically balanced than at any point since launch. We are seeing increased engagement from existing partners and meaningful interest from new builders looking to shift more of their land strategy into off-balance sheet structures. As Darren described, we are being selective, but the pipeline gives us the luxury of that selectivity, and we are confident in the quality of what we are choosing to pursue. To fully capture this opportunity, we continue to build incremental capital and liquidity to enhance balance sheet flexibility and reinforce confidence for our counterparties. We are currently working with our bank group on additional floating rate debt capacity, both to diversify our fixed rate bond structure and to better match the floating rate nature of a portion of our option payment income. 2025 was the year we built and stress tested the infrastructure of this platform, the technology, the team, the processes and the capital relationships required to scale across the industry. That foundation is now firmly in place. With a pipeline that reflects deepening builder engagement and an improving broader market, we enter 2026 with a conviction in a further expanded accretive growth opportunity for Millrose and our shareholders. With that, I'll turn it over to Steven to share what we're seeing across our markets and why we're optimistic about the macro landscape ahead. Steven Hensley: Thank you, Rob. As we enter 2026, we're seeing encouraging signals that the spring selling season could look more like a normal healthy market. And I want to walk you through both the macro picture and what our proprietary data is telling us on the ground. At the macro level, a resilient consumer and broader economic stability provides near-term optimism for steady demand. Affordability is also moving in the right direction, supported by arising incomes, moderating home prices and lower interest rates, creating a constructive backdrop heading into the spring. These are not dramatic reversals, but they are consistent, reinforcing trends and that consistency matters. Operationally, the signals are similarly positive. Homebuilders demonstrated strong discipline through the second half of 2025, proactively reducing starts to align with demand and working down standing inventory. They've also made meaningful progress lowering construction costs, easing margin pressure and improving cycle times, giving them greater agility to respond across a range of demand scenarios to the spring. The shift toward more to-be-built sales and fewer spec homes is keeping inventory in check while supporting healthier margins. Taken together, the industry enters the spring selling season on solid footing and better position than it was 12 months ago. Turning to our proprietary MSA monitoring system. The data reinforces a mixed but improving landscape with some important distinctions by market. Last summer, we highlighted a handful of markets undergoing recalibration, particularly certain secondary coastal markets in Florida and parts of Texas. In Florida, inventory levels moderated meaningfully through the back half of the year with months of supply now below year ago levels in most markets. That is a notable improvement and reflects the builder discipline I just described playing out in real time. Texas continues to work through elevated supply and affordability challenges. We expect that normalization to remain a 2026 story and our underwriting reflects that patience. Las Vegas is another market where our model is signaling caution. Softer sales activity in the second half has led to rising supply pressure, and we are monitoring it closely. Conversely, we are seeing clear and broad-based strength across most of the Southeast. [ Charlotte ] remains one of the top-performing markets in our coverage, supported by strong employment growth and relatively tight supply. Our model is also picking up notable performance in several smaller Southeast markets, including Greenville, Columbia, Charleston and Myrtle Beach, where solid job growth, low supply and comparatively affordable housing are creating healthy, durable demand. These are not flash in the pan dynamics. They reflect structural demographic and employment trends that we expect to persist. Overall, we believe these signals point toward a more typical spring selling season and reinforce our positive long-term view of the housing market. The geographic diversity of our portfolio, spanning 30 states and 933 communities means we are not dependent on a single market's performance. We are well positioned to benefit from the markets that are strengthening now, while our underwriting discipline protects us in the markets that are still normalizing. With that, I'll hand the call over to Garett to walk through our financial performance. Garett Rosenblum: Thank you, Steven, and good morning, everyone. I'm pleased to walk you through our fourth quarter and full year 2025 financial results, which continue to demonstrate the cash-generating power of our business model and the direct translation of capital deployment into shareholder returns. For the fourth quarter, we reported net income of $122.2 million or $0.74 per share, driven by $179.5 million in option fees and $10 million in development loan income. For the full year, we reported net income of $404.8 million or $2.44 per share, our first fiscal year as a public company and one that delivered on every financial commitment we made at the outset. Fourth quarter adjusted funds from operations came in at $0.76 per share at the high end of our guidance range of $0.74 to $0.76 per share. But as Darren noted, the invested capital growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77 per share, ahead of where we expected to be. This outperformance reflects exactly what our model is designed to do. Every dollar deployed in other agreements at average yields of approximately 11% against the cost of debt of 6.3% drives directly accretive AFFO growth and expanding dividend capacity. That spread and our ability to sustain and grow it is the engine of our earnings trajectory. Book value per share at year-end stood at $35.28. For full year context, interest expense was $91.8 million, income tax expense was $20.5 million and management fee expense totaled $87.8 million. As a reminder, our management fee is calculated transparently at a fixed rate of 1.25% of gross tangible assets. Turning to the balance sheet. We ended the year with total assets of approximately $9.3 billion and total debt of $2.1 billion, resulting in a debt-to-capitalization ratio of approximately 26%, well inside our stated maximum of 33%. That headroom is intentional. It gives us meaningful capacity to fund the next phase of growth without compromising the conservative financial posture that underpins our investment-grade counterparty relationships and our dividend reliability. We ended the year with approximately $1.3 billion in total liquidity, providing ample capacity to support our investment pipeline. And as Rob noted, we are working with our banking partners to further expand that capacity, and we expect to deploy approximately $1 billion in additional invested capital by midyear, exiting Q2 2026 with an expected quarterly AFFO run rate of $0.78 to $0.80 per share. Our dividend performance reflects the quality and consistency of our earnings. For the fourth quarter, we paid a dividend of $124.5 million or $0.75 per share, an 8.4% annualized yield on equity, roughly 80 basis points higher than our first quarter dividend. That progression over the course of a single year is a direct result of the accretive deployment of capital and other agreements, exactly the strategy we outlined when we became a public company. Millrose remains committed to distributing 100% of AFFO to shareholders, and we expect that commitment to compound meaningfully as our invested capital base continues to grow. With that, I'll turn the call back to Darren. Darren Richman: Thanks, Garrett. I want to leave you with a few thoughts before we open the line. 2025 was not an easy year for the homebuilding industry, and that is precisely what made it such a meaningful proof point for Millrose. We operated through affordability headwinds, elevated rates and a cautious builder environment without a single option agreement terminated or even threatened. Our contractual income held, our capital recycled, our platform grew. That is not a coincidence. It is the design of this business working exactly as intended. What gives me the most confidence entering 2026 is not just the pipeline in front of us, but the flywheel nature of what we are building. Every community we deliver, every builder relationship we deepen and every dollar of capital we recycle adds to the platform that becomes harder to replicate and more valuable to the industry over time. We are still early in that process, and that is an exciting place to be. To the team, the execution you delivered in our first year as a public company was exceptional, and it did not go unnoticed. To our homebuilder partners, your trust is the foundation of everything we do, and we do not take it lightly. And to our shareholders, we are committed to earning your confidence every quarter, not by telling you what this platform can be, but by showing you. Operator, let's open the line up for questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Blouin with Goldman Sachs. Julien Blouin: Well, congrats on the strong quarter team. Just given the strong pace of deployment and the clear demand from homebuilders, I was wondering, as you start to come up against your internally set leverage cap, would you be comfortable going above that leverage cap for a brief time until your shares sort of reach book value, especially given your confidence that as you continue to execute your business plan, equity markets will eventually sort of catch up? Darren Richman: Julien, that's a good question. This is Darren. Thank you. Thanks for your time today. Look, we're going to adhere to the -- we don't want to hem ourselves in too much on the leverage target. In the context of maybe something strategic, we might push it. In the ordinary course, we're really going to kind of adhere to that target. There may be circumstances where we might change that for some period, but that really is the threshold goal. And let's -- for those people who are kind of new to the story, the reason why we set it at that conservative level is these are still volatile assets. And the reality is that we cycle through about 1/3 of our balance sheet every year in the ordinary course. And having that visibility and that cash in the ordinary course to be able to pay down our debt or neutralize the debt with cash on the balance sheet is just a very important asset for this company. So to answer your question, there may be circumstances where for a brief period, we feel comfortable and we have line of sight to take it beyond 33%. But the long-term goal has really been purposefully set at 33% for the reasons I just cited. Julien Blouin: That makes a lot of sense. You also mentioned in your opening remarks how you distinguish yourself from every other land-based real estate business in the public markets. And I think Rob was mentioning how the current AFFO multiple discount is sort of difficult to justify. I'm just curious, in your own internal conversations, how do you view -- or who do you view as your most relevant comps? Why do you view them as your most relevant comps? And then how do you view your current valuation relative to that comp set? Darren Richman: I think you've given me the easy question. This is some meat all the question for you, Rob, to answer. Robert Nitkin: Yes. Thank you, Julien. I mean people just ask us a lot, particularly for a somewhat new business model in the public forum with this homeside option purchase platform, who are your comp set? And how should we value you? And it's not our job to debate the academics of our price AFFO multiple. But we did think after our first full year of results now that we have more proof points, just to point out some of the differences versus the various REITs out there. And you and others have heard us say out loud that we think ourselves more of a triple net or infrastructure-related equity REIT, which is what we believe. But what's new this quarter -- what's new this quarter is that we have just more proof points in terms of both our AFFO growth per share that we've demonstrated and that we're projecting in the forward scenario, really afforded by just the math of our accretive spread investing, right, the yields we're able to invest at versus our cost of capital. Pointing out the low leverage, achieving those yields and those growth targets with the leverage that we have right now that as we were just talking about is pretty much below any other REIT, at least in our eyes in the industry, which we feel good about. And honestly, that was a lot of what we are so excited about thinking back before we even launched Millrose, why we were so excited to bring this business model into the public forum was to show the power of the yield, the growth and therefore, the total return that we afford our shareholders with low leverage. And on top of that, lastly, I would just say it's worth pointing out that while we have low duration, and that's another slightly differentiating item, you may say positive or negative from other REITs, we view it as a pure positive in that from a credit and risk management perspective, we're constantly refreshing the basis to contemporary market conditions and evaluating new assets that are sort of refilling our portfolio from a risk perspective. But at the same time, we've signed up to these repeatable operationally integrated relationships with our builders' counterparties. So it's not as if we have a brand-new cost of origination on each individual deal. Our origination is not episodic. It's a self-refreshing relationship with these builders, which, again, from both a credit and origination perspective, we think is the best of both worlds. So that's what we wanted to point out. Darren Richman: Yes. And I might add to that, obviously, to everything Rob just said. But to add to it, these are mission-critical assets as we talked about. Not only are they mission-critical, but these are the exact assets that are in scarce supply. Having land that's already entitled, approved for development, is the gating item to why we don't see more growth in volume. And so we're financing those assets that are in short of supply. And then the other items I'd add is we're doing this against the backdrop of a housing shortage. And maybe lastly, I'd add that these assets don't require any capital enhancement from like a CapEx perspective to refresh. And so this is all contractually related. So I think when you put all these pieces together, plus the growth that we laid out in this report that even if we achieve just $1 billion of in the ground, that's almost an 8% growth in AFFO on top of the already strong dividend that we're achieving. So when you kind of put all this together, it creates what we think is a very unique package of baseline dividend plus growth that to us -- look, we're students of the market, we're obviously talking our book, but to us, should result in a much higher multiple. And we do think we'll get there. This is still a young company. We're a year into it, and we're continuing to show proof points. So we do think, ultimately, we will trampoline ahead from a valuation perspective. Operator: Your next question comes from the line of Eric Wolfe with Citi. Eric Wolfe: You talked about $1 billion of new capital deployment by the middle of the year. How much visibility do you have towards that incremental $1 billion at this point? Is it based on deals you've already sourced and signed? And would those be new relationships or sort of continued growth among your current 15 counterparties? Darren Richman: Yes. And I'll start, Eric. This is Darren, and Rob will jump in. We've talked about this in the past with these forward flow relationships that we have where the industry is really starting to coalesce around rather than homebuilders looking at discrete parcels and trying to get them land bank and financed to entering into more programmatic relationships where they'll come to us and say, we need $1 billion of buying power or $500 million of buying power. And so we've talked about that. That totals about $9 billion across roughly 10 different counterparties, those forward flow relationships. We're going to naturally cycle through about $3 billion of our land portfolio in the next year that will need to be replaced. So some of that $9 billion will go into replacing those assets. And then -- and so the point is we have a lot of visibility and a lot of confidence around it. Some of those deals ultimately fall away because, obviously, our due diligence process will kick out deals that we don't want to be financing. So as we kind of distill down that forward flow quantum, we feel very comfortable with the guidance that we put out. And we want to be very thoughtful about guidance we give to make sure that we can achieve that. Robert Nitkin: Yes. And I might just add, as you know, Eric, there's also built into our existing $2.4 billion of other agreements and investment balance, the future development funding commitments that we've already signed up for, and we're including in that $1 billion projection. And so that will do a decent amount of the work for us. And so you asked the question, does that require any new counterparties. Based on the existing baked-in development funding projections, even net of homesite takedowns as well as that the aggregate of those $9 billion forward flow relationships Darren alluded to, if you said we weren't going to add another counterparty next year, which I don't think is true, I would still feel pretty confident about that number. Eric Wolfe: That's helpful. And then you also mentioned that you are working with your banking partners to access floating rate debt to hedge out your -- not hedge out, but just to hedge your floating rate option exposure. I guess what percentage of your net invested capital at this point is sort of floating versus fixed? And I guess, given expectations that Fed will cut multiple times next year, is it becoming more of a sort of popular agreement with homebuilders to try to do more floating rate type deals? Robert Nitkin: Yes. I would use -- it's not perfectly precise in this way, but I would use the proxy that our Lennar master program agreement rate is fixed, which is true and subject to resets on forward deals as has been publicly disclosed. And our other agreements bucket is vast majority floating subject to a floor. So while there's not infinite downside of rate cuts, there is some volatility, and that's the reason that our existing credit agreement, use of that with the floating rate mitigates any movement there, and we made the comments that you alluded to on additional floating rate debt. And then that's been -- I would add, that has not -- there hasn't been a change in fixed versus floating in these agreements since any recent rate cut cycles or anything like that. That's been the nature of the structure of these other agreements since before we launched Millrose, I would say. Eric Wolfe: Got it. Maybe just to be illustrative, like the 11% you're signing today, I guess, what would be like the floor on that? Just to help me understand sort of like how low that could go if rates came down meaningfully on that. Robert Nitkin: Yes, floor is probably between 50 and 200 basis points below sort of where that rate is. Operator: Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Craig Kucera: I see you added 2 counterparties this quarter. Were they the primary driver of the $690 million funded this quarter from third parties? Or are you seeing additional demand from your existing counterparties? Robert Nitkin: No. So it was 3 additional counterparties went from 12 to 15 this quarter, and the majority of the growth was from existing counterparties. And so the addition of new counterparties, we started to do initial deals with them and those initial deals with those incremental 3 counterparties were not the majority, but we've now brought them onto our platform. We onboarded them. We've negotiated docs with them, and it's our expectation that they'll continue to grow as we get more operationally integrated as a partner. Craig Kucera: Okay. Great. And just given your commentary on sort of the $2 billion of guidance, I guess, is it fair to say that we should think about that as being more or less in the bag? And when we think back to last year, you came out and were looking to close $1 billion when you first spun out of Lennar. We saw stretch targets throughout the year. Is that a potential just given the demand in the market? Darren Richman: This is Darren. It's a tough question to answer. We're not looking to sandbag anything. This is kind of our best assessment at this point in time, given the deal flow that's ahead of us and also given the need to raise additional capital. I'll remind you, last year, the volume was enhanced through M&A. And while we're aware of discussions that are out there from an M&A perspective, those are always difficult to model. And so none of that would be included in our forecast. So this really is our best estimate here and now. And I'll acknowledge one other thing that month-to-month, quarter-to-quarter, it's not -- it won't be a straight line in terms of that volume filling in, but we feel very confident given the pipeline and given the relationships that we will meet that year-end target of $2 billion. Craig Kucera: Okay. That's helpful. In the press release, you made have mentioned that you're delivering homesites to builders at an average sales price of 20% below the national average for new homes, which are predominantly Lennar homes just given that they've been closing the vast majority. But as you look at the third-party agreements you've entered into, is there any way to give us a sense from a budgeting perspective, whether or not those are more entry-level homes, maybe similar to Lennar or higher-priced homes? Or is that too difficult at this point? Darren Richman: Yes. I don't -- we're not going to go that deep into the guts of the operation at this point. Craig Kucera: Okay. Fair enough. Just one more for me. You made it clear that you want to issue equity below book, and you've got a debt target of 33%. You mentioned earlier, you might go a little above that. But given that the market is going to do what it does with your common stock, it would seem you could issue preferred that would be accretive to what you can deploy capital at. Is that a potential source of capital for you? Or do you view that as just more expensive debt? Darren Richman: It's not our preference to do that. As you would imagine, we're -- we ourselves are investors. We come from the credit landscape. We're very familiar with those type of products as well as converts and other arrangements that are equity-like. The goal here is really to keep the capital structure as clean as possible and as transparent as possible. Would we entertain them potentially, but that's not our plan right now. Operator: [Operator Instructions] I will turn the call back over to Darren Richman, CEO and President, for closing remarks. Darren Richman: Yes. I'd like to thank everybody again for joining us this morning. We're around if people have follow-up questions. Just in closing, really what we're looking for is durable fundamental growth, not short-term glitter. We're looking to continue to build new relationships and develop new use cases for land banking capital. We're very excited about the prospects for the business, where we are today and the reception we continue to get from our existing clients and new clients as well. So I want to thank everybody. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to Vistra's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. I would now like to turn the conference over to Eric Micek, Vice President, Investor Relations. Please go ahead. Eric Micek: Good morning, and thank you for joining Vistra's investor webcast discussing our fourth quarter and full year 2025 results. Our discussion today is being broadcast live from the Investor Relations section of our website at www.vistracorp.com. There, you can also find copies of today's investor presentation and earnings release. Providing our prepared remarks today are Jim Burke, Vistra's President and Chief Executive Officer; and Kris Moldovan, Vistra's Executive Vice President and Chief Financial Officer. Other senior Vistra executives will be available to address questions during the second part of today's call as necessary. Our earnings release, presentation and other matters discussed on the call today include references to certain non-GAAP financial measures. All references to adjusted EBITDA and adjusted free cash flow before growth throughout this presentation refer to ongoing operations adjusted EBITDA and ongoing operations adjusted free cash flow before growth. Reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the investor presentation available in the Investor Relations section of Vistra's website. Also, today's discussion contains forward-looking statements, which are based on assumptions we believe to be reasonable only as of today's date. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or implied. We assume no obligation to update our forward-looking statements. I encourage all listeners to review the safe harbor statements included on Slide 2 of the investor presentation on our website that explains the risks of forward-looking statements, the limitations of certain industry and market data included in the presentation and the use of non-GAAP financial measures. I will now turn the call over to our President and CEO, Jim Burke. James Burke: Thank you, Eric, and good morning, everyone. Thank you for joining us to discuss Vistra's fourth quarter and full year 2025 results. 2025 was a transformational year for Vistra. We made a number of moves that I believe underscore the value of our integrated model. We executed strategic asset acquisitions and entered into long-term power purchase agreements, accomplishments that were made possible by close collaboration across the company, including development, operations and commercial as well as our retail and functional teams. This tightly coordinated execution is a direct result of the focus and discipline of our people and reflects the One Team culture that drives our strong performance at Vistra. These accomplishments demonstrate our ability to deliver industry-leading power solutions to our customers, execute complex transactions and deliver day-to-day operational excellence, all while driving significant value for our shareholders. We remain confident in the ever-increasing customer demand for power, enthusiastic about the growth opportunities that load growth presents for Vistra and eager to continue to partner with our customers to realize those opportunities and serve their needs. We look forward to building on this momentum as we move through 2026 and beyond. Turning to Slide 5. Our integrated business model once again demonstrated its value and effectiveness as we delivered another year of record financial performance. For the full year, we achieved approximately $5.9 billion of adjusted EBITDA and approximately $3.6 billion of adjusted free cash flow before growth, both meaningfully above the midpoint of our original guidance ranges. These results reflect consistent operational performance from our generation, commercial and retail teams. The importance of operating assets safely and reliably was underscored during Winter Storm Fern at the end of January. During the 9-day event, where we saw significant cold front impact most of the U.S., including temperatures below 0 in West Texas and the Northeast, the team and the generation fleet delivered very strong performance. Our team not only operated safely during difficult weather conditions, but also ran our assets extremely well during the event. This, coupled with our commercial risk management approach, enabled us to serve our millions of retail customers and deliver a positive financial outcome, despite the high volatility of both gas and power prices. Moving to growth. We took meaningful steps during the year to expand and strengthen our generation portfolio. In October, we closed the acquisition of 7 modern natural gas generation facilities totaling approximately 2,600 megawatts from Lotus Infrastructure Partners. This transaction added highly efficient dispatchable assets across key competitive regions, including PJM, New England, New York and California. Winter Storm Fern was our first weather experience with these new assets, and we were pleased with their performance and with the value they added to our overall fleet. Building on the Lotus transaction, we recently announced our agreement to acquire Cogentrix Energy, which includes 10 modern natural gas generation facilities totaling approximately 5,500 megawatts of capacity, including 2 plants, Patriot and Hamilton-Liberty that were completed in 2016 with heat rates well below 7,000. Together with the Lotus acquisition, these assets will further diversify our fleet, improve our geographic balance and significantly strengthen our ability to meet the growing demand for dispatchable generation across the country. Owning and operating high-quality dispatchable generation in competitive markets is core to our strategy. We believe strategic acquisitions and asset integrations are one of our core capabilities that continue to deliver value to our shareholders. We also made significant progress contracting long-term nuclear capacity, enhancing the amount and durability of our cash flows. We have now contracted approximately 3.8 gigawatts of nuclear capacity through multiple power purchase agreements, including a 20-year agreement with Amazon Web Services for 1,200 megawatts at our Comanche Peak nuclear power plant in Texas and 20-year agreements with Meta covering 2,176 megawatts of operating capacity and an additional 433 megawatts of upgrades at our PJM nuclear plants, the largest nuclear operate supported by a corporate customer in the United States. We are excited to partner with these world-class companies to be able to continue to provide reliable 0 carbon electricity decades into the future. Overall, these and other actions taken in 2025 continue to strengthen Vistra's ability to reliably and affordably support the nation's growing power needs. Turning to Slide 6. For the eighth consecutive quarter, we continue to see a structurally improved demand environment that supports our long-term outlook. U.S. electricity consumption reached an all-time peak of approximately 4,200 terawatt hours during 2025, up about 2.5% versus 2024. We expect calendar years 2026 and 2027 to continue to show growth, which would mark the first 4-year period of sustained growth since the 4-year period ending 2007. Demand growth no longer appears to be episodic, but increasingly durable, a dynamic with important implications for the power sector. While the near-term outlook remains strong, we continue to believe the impact of data centers on tightening supply-demand dynamics will not meaningfully begin until late 2027 or early 2028, given most build schedules and interconnect timing. This is something we've been consistently messaging for some time. Load growth is real and significant, but it is likely not at the extremely elevated levels in the rapid time frame that has been forecasted by many third parties. The fact that we see the load growth coming more slowly than some forecast does not dampen our enthusiasm for the tremendous opportunities in front of us. In fact, we view a measured pace of growth as a positive. It naturally takes some time for supply and demand to go from concept to reality. We believe our company and the markets in which we operate can meet the moment. Our primary regions continue to outperform. We maintain our view that annual peak load growth of at least 3% to 5% in ERCOT and low single-digit growth in PJM is achievable through 2030. Importantly, we expect overall load growth to outpace peak demand, resulting in higher expected utilization across the system rather than short duration peaks alone, implying the economics of existing generation assets will improve on a sustained basis. Data center development remains robust, and we believe key markets such as PJM and ERCOT will continue to attract a disproportionate share of new load growth. While not every announced project will ultimately be built, even applying conservative assumptions, the level of activity supports the load growth outlook that we've discussed. Recent commentary from hyperscale customers reinforces this view as they continue to emphasize expanding investment in AI and digital infrastructure. Capital spending by the hyperscalers continues to rise to record levels and is expected to eclipse $700 billion in 2026, equivalent to roughly 50% year-over-year growth. This level of investment is notable and provides further support for sustained load growth. Demand growth creates meaningful opportunity for Vistra. Following the closing of Cogentrix, our large modern fleet of combined cycle gas generation assets will total approximately 26 gigawatts of capacity. Importantly, our fleet currently operates at a utilization rate of approximately 60%, and we continue to believe higher energy demand should drive materially higher utilization of existing assets over time, providing a practical and cost-effective way to meet load growth. Taken together, these trends underscore a demand environment that is structurally stronger than prior cycles, and Vistra is well positioned to meet growing electricity needs in our core markets. Moving to Slide 7. The Cogentrix acquisition represents the second opportunistic expansion of our generation footprint over the last 12 months. Similar to Lotus transaction, it is an acquisition of high-quality dispatchable assets in competitive markets at an attractive price that we believe will drive meaningful per share accretion. As I mentioned earlier, we believe successfully integrating and operating generation assets at scale is a core competency of the company as we've demonstrated time and again, starting with the Dynegy transaction and continuing with our Energy Harbor and Lotus acquisitions. For Cogentrix, we see similar opportunities to boost the portfolio's earnings profile over time as we get into our normal integration activities. From a financial perspective, we view the purchase price as attractive at approximately $730 per kilowatt of capacity, net of expected tax benefits, and we expect the transaction to deliver mid-single-digit adjusted free cash flow before growth per share accretion in 2027, with a high single-digit accretion on average over the '27 to '29 period. We look forward to closing the transaction in 2026 and welcoming our new team members to the Vistra family. More broadly, we continue to believe that natural gas generation will play a critical role in delivering reliable, affordable and flexible power to U.S. electricity markets. Winter Storm Fern reinforced this view. During the tightest hours, thermal generation accounted for approximately 93% of all power delivered to the ERCOT grid. Once again, demonstrating that when conditions are the most demanding, firm dispatchable resources are relied upon much more than on a typical day. We've seen this story repeat itself time and again during Elliott, Mara, Heather and now Fern. Given this backdrop, we will continue to evaluate future inorganic opportunities that create value within our integrated model. Moving to Slide 8. Our nuclear power purchase agreements represent a significant milestone, not just for Vistra, but for the industry. We have now signed approximately 3.8 gigawatts of nuclear capacity, including up rates under long-term contracts, more than any other power company in the country. These agreements executed with 2 of the world's leading technology companies represent meaningful long-term commitments to the safe and reliable operation of nuclear power generation in the United States. The first agreement, which we announced in September last year, is a 20-year contract with Amazon at our Comanche Peak nuclear plant in Texas. Under this agreement, Amazon will cite a facility on our property to utilize the 1,200 megawatts of capacity. Importantly, Amazon also plans to bring one-for-one backup generation, a structure we believe supports future expansion at the site, while maintaining reliability across the system. Progress on the site continues to be made with initial energization still expected in the fourth quarter of 2027 and full ramp expected by the fourth quarter of 2032. The agreement also includes options to explore new nuclear development with a specific focus on possible uprates and small modular reactors. We are excited about this partnership and the long-term potential at the Comanche Peak site. Building on that momentum, in January of this year, we announced long-term power purchase agreements with Meta. The agreements, which are also for 20 years, cover 2,176 megawatts of operating capacity from our Perry and Davis-Besse nuclear power plants and an additional 433 megawatts of upgrade capacity from our Perry, Davis-Besse and Beaver Valley power plants. We expect delivery of the operating capacity at Perry to commence in December of 2026 and Davis-Besse in December 2027. Uprate capacity remains longer dated with Perry upgrades expected to be online in the fourth quarter of 2031, with each subsequent year seeing an additional upgrade online until all 4 upgrades are completed by the fourth quarter of 2034. From an operating perspective, the plants will continue to operate as they do today with power flowing to the grid for the benefit of all customers. The financial impact from all of our nuclear PPAs is significant, providing the financial backing to operate these facilities for decades to come and in the case of the PJM nuclear sites to apply for additional license renewals and extend site operations into the 2050s and 2060s. Upon achieving full ramp of all the nuclear agreements, we see a pathway to nearly 25% adjusted free cash flow before growth accretion on an annual basis. From a capital perspective, the Comanche Peak agreement will not require significant incremental spend from Vistra and the PJM agreements for operating capacity won't require any additional spend. The PJM nuclear uprates will require growth capital over an 8-year period with the majority of the spend occurring after 2028. We believe these investments represent attractive growth opportunities given the higher capacity, expected improvement in reliability and the enhancements that will allow for an additional operational license extension, all while exceeding our mid-teens levered return requirements. Taken together, these nuclear PPAs position Vistra to support reliable carbon-free power as demand continues to grow, while also increasing and extending the earnings profile of our company for the longer term. While these agreements are important for our company, we have more we can do. We still see an opportunity to contract up to an additional 3.2 gigawatts of nuclear capacity across our Beaver Valley and Comanche Peak sites, including potential upgrades of approximately 200 megawatts at Comanche Peak. Continuing with the theme of an enhanced and more predictable earnings profile, let's move to Slide 9. We continue to make meaningful progress in derisking our business, locking in higher levels of contracted revenue while at the same time growing our total earnings. It's important to emphasize this point. We are not trading growth for stability. We are achieving both. Our percentage of contracted wholesale will increase substantially and shift the earnings certainty longer term and more insulated from changes with tax policy. This is particularly noteworthy as the earnings profile of the business continues to grow significantly on an absolute basis as well. On a consolidated basis, based on the contracts signed to date, when combined with the reliable contribution from our retail business, we expect nearly half of our total adjusted EBITDA to be generated from highly stable earnings sources, with the potential to increase this percentage as we execute on additional opportunities. This will be a meaningful shift in the composition of our earnings, reducing volatility, enhancing visibility and improving our credit profile. We continue to pursue attractive arrangements to serve our customers given the accretion to our business on many levels. Finally, turning to Slide 10. Our 4 strategic priorities remain core to delivering long-term value. With our One Team approach, we've demonstrated superior execution on these priorities. The acquisitions of Energy Harbor, Lotus and soon Cogentrix have proven to be valuable through adherence to price discipline, best-in-class integration and enhancements of scale. Our measured approach to development has enabled us to generate attractive returns, whether through contracted renewables such as Oak Hill and Pulaski or high-return thermal additions like our coal conversions, gas plant augmentations or Permian new build gas units. Turning to the balance sheet. Our prioritization of liquidity and low leverage has placed us in a strong financial position. Combined with the improved earnings profile of the company, we continue to expect leverage to decline and have been pleased to see multiple rating agencies recognize our improved credit profile. While this chart highlights the last few years, I would like to spend a minute on the future and how the continued execution of our 4 key strategic priorities will unlock multiple growth opportunities in the years ahead. Our generation development teams will continue to pursue highly accretive capacity additions. We continue to advance our plans to convert our Miami Fort facility in Ohio from coal to gas. While our targeted 500 megawatts of augmentations at our Texas gas fleet are largely complete, the team continues to study options at our current PJM fleet, which could total approximately 300 megawatts. Further, the team remains hard at work reviewing new PJM plant additions, which would likely involve expanding existing sites. Contracting work also continues. As I already mentioned, we still see an approximately 3.2 gigawatts of opportunities at Beaver Valley and Comanche Peak that can be contracted on a long-term basis. On the thermal side, we continue to make progress in our discussions with customers on new and existing gas solutions. We will continue to provide updates as those opportunities materialize. Finally, our retail team continues to deliver novel products to customers to help them better manage their budget, while meeting their power needs. The ability for customers to choose their provider, their electric plan and ultimately have some control over their energy needs is a proven way to address the concerns related to affordability. No matter the product category, customers prefer having a choice, and our team is working hard to make sure that we are the preferred choice of customers from residential to industrial, including the hyperscalers. Ultimately, we believe the combination of these capabilities position Vistra to be the energy solutions provider to our customers by developing and delivering innovative strategies to meet our customers' needs in this growing demand environment. I'm excited about what our team has accomplished and what we can deliver in the years to come. Now I'll turn it over to Kris to provide more details on the fourth quarter and full year results, outlook and capital allocation. Kris? Kristopher Moldovan: Thank you, Jim. Turning to Slide 12. Vistra delivered $5.912 billion in adjusted EBITDA for full year 2025, including $4.290 billion from generation and $1.622 billion from retail. The Generation segment continued to realize material benefits from our comprehensive hedging program. The strong realized revenue across the fleet and 2 months of contribution from the Lotus assets more than offset extended outages at Martin Lake Unit 1 and our Moss Landing battery facilities. The Retail segment continues to perform extremely well, benefiting from strong customer count and margin performance. Although the retail business continues to generate strong earnings in a variety of market conditions, 2025's record result was partly driven by some tailwinds that are not expected to repeat in the future, including some supply cost benefits and gains related to the Energy Harbor acquisition. Over the medium term, we continue to expect retail to achieve adjusted EBITDA in the neighborhood of approximately $1.4 billion. Turning to Slide 13. Based on our expectations for 2026 and our previously communicated range of midpoint opportunities for 2027 as well as the expected contribution in 2026 and 2027 from the Meta PPAs and the closing of the Cogentrix acquisition, we project to generate more than $10 billion of cash through year-end 2027. Our confidence in our outlook and cash generation is supported by our comprehensive hedging program and the downside protection of the nuclear PTC, resulting in a highly hedged position over the coming years. Even after allocating approximately $3 billion to our equity holders through share repurchases and common and preferred dividends in 2026 and 2027 and approximately $4 billion towards accretive growth investments, including the Cogentrix acquisition, the development of the Permian gas units and the PJM nuclear uprates supported by PPAs with Meta, we still expect to have more than $3 billion of additional capital available to allocate through year-end 2027, all while achieving an attractive net debt to adjusted EBITDA ratio of approximately 2.3x by year-end 2027. Although changes in power market fundamentals and customer preferences have expanded the growth opportunity set, the capital framework used to allocate this additional capital remains consistent, balancing shareholder returns, a strong balance sheet and growth through strategic investments. Our share repurchase program continues to produce tremendous value. Since initiating the program in November 2021, we have retired approximately 167 million shares at an average cost below $36 per share, delivering over $20 billion of value for our long-term shareholders. We currently have approximately $1.8 billion of share repurchase authorization remaining, enough to meet our annual share repurchase target through 2027. We continue to believe share repurchases offer meaningful value to our shareholders, particularly in light of the recent deals we've announced as our shares are trading at an attractive free cash flow yield relative to the average of the S&P 500. We expect our share repurchase program will continue to operate utilizing a 10b5-1 plan, allowing us to stay in the market even when in possession of material nonpublic information. While this plan allows us to remain consistent buyers of our shares, we have designed it such that it accelerates repurchase amounts during times of market dislocation, including the recent share price weakness in January and February. Turning to the balance sheet. We continue to target leverage metrics consistent with investment-grade credit ratings. We believe the improvement in our net leverage levels, combined with the higher earnings visibility from more contracted earnings streams, could position us for additional ratings upgrades potentially as early as later this year. For strategic investments, we will continue to be opportunistic yet disciplined in the deployment of capital. We haven't wavered on our target return threshold, whether for organic or inorganic growth investments, which remains mid-teens or higher on a levered basis. Finally, moving to Slide 14. We are in the early stages of a multiyear execution plan, driving a sustainably higher level of earnings power for our long-term shareholders. You can see on the chart, based on forward curves as of February 20 and a stable share count as of December 31, we continue to see adjusted free cash flow before growth per share to exceed $12.5 for 2026. Given additional actions taken to date, including the Cogentrix acquisition and Meta power purchase agreements, together with a simplifying assumption with respect to the deployment of our cash available for allocation through 2027 to share repurchases, we project adjusted free cash flow before growth per share to increase to approximately $16. Other actions such as the PPA with Amazon and the uprate supported by contracts with Meta won't contribute to our free cash flow until further into the future, but will be meaningful sources of increased contracted earnings. Over the long-term, we believe these transactions as well as the roll-off of out-of-the-money hedges will result in a meaningful step-up in our adjusted free cash flow before growth per share. Despite already delivering on multiple key initiatives, we still have numerous opportunities to further grow and stabilize our business. We see heightened engagement from our customer base across a range of additional opportunities, and we remain confident in our differentiated ability to meet our customers' needs and continue to increase our adjusted free cash flow before growth per share. Of course, share repurchases, and balance sheet management will continue to be an important component of our capital allocation framework. I will now turn the call back to Jim for his closing remarks. James Burke: Thank you, Kris. 2025 was a record year for Vistra, reflecting strong execution across the business and continued progress against our long-term strategy. Our improving growth trajectory, supported by an increasing level of contracted revenue provides greater confidence in our future cash flows. We enter the next phase of growth with a diversified reliable fleet, a strong balance sheet and a customer focus that positions us well to meet rising demand across our markets. We remain disciplined in how we allocate capital, applying a consistent framework that balances growth, shareholder returns and financial strength. I want to thank our team for their tremendous efforts to deliver value day in and day out for our customers, our communities and our shareholders. One last thing. I regret that I will be unable to participate in the live Q&A portion due to an unforeseen personal matter, but I am proud to share these remarks given the team's hard work and the company's strong performance in 2025 as well as the fast start out of the blocks in 2026. You are no doubt in good hands as my team, whom you know well, including Kris, Stacey Doré, Scott Hudson and Shawn Stuckey will address any questions that you may have. I look forward to connecting with many of you in the coming days and weeks. With that, I'd like to turn the call back to the operator for questions. Operator: [Operator Instructions] Today's first question comes from Shar Pourreza with Wells Fargo. Shahriar Pourreza: Just maybe starting off on PJM. Do the rule changes impact the Meta deal if PJM changes how new load gets treated? I guess, could there be kind of incremental cost for Meta? And if PJM tariff changes, is that sort of could be a net positive for additional load contracting like with Beaver Valley as we're thinking about future announcements. So have you seen any impact around future discussions while the rule changes are up in the air? It's a little bit of a 2-part question. Stacey Dore: Shar, this is Stacey. Thanks for the question. The PJM activity, of course, as you know, is very high. There are many moving pieces of the puzzle in PJM right now. We do not believe that any of the current activity affects our Meta deal. That deal is more akin to a typical front-of-the-meter deal. It's not tied to colocation or to any particular load. So we don't believe any of the PJM activity affects that deal. As I've mentioned, there is a lot going on in PJM right now. And of course, all customers and stakeholders are watching the activity closely. We expect PJM to file any time now an extension of the existing price collar for the next 2 auctions. Just this week, PJM did make a filing regarding specific tariff provisions applicable to colocation arrangements. We do think that getting clarity on the colocation tariff provisions will be helpful to the discussions that we continue to have about Beaver Valley and other colocation opportunities. Of course, we're also watching the reliability backstop auction filing that we expect PJM to make in the coming months. PJM is also working on load forecasting improvements and expedited interconnection track for new generation and in the longer term, possibly additional capacity market reforms. We're actively participating in all of these proceedings. And at the last open meeting, FERC commissioners made clear that they are also paying close attention to these activities, and they are ready to rule on these various proposals, all of which will continue to provide more clarity and investment certainty in PJM. It's too early to tell what will become of all of these proceedings, including the tariff proceedings around colocation that I think you're asking about. But we view the overall backdrop as positive because the administration, the state governments as well as most PJM stakeholders are rightly focused on the same objectives we're focused on, which are getting large loads connected quickly, and that includes support from FERC and the White House for colocation with existing generation, properly allocating costs across load classes and doing what's necessary to incentivize an appropriate amount of new build. And finally, avoiding unnecessary disruption to our existing market and existing resources. These are all the right goals to focus on. We share those goals. But of course, the details will matter, and we'll stay engaged on all of those proceedings to advocate for Vistra's interest. So we do think, at the end of the day, the continuing clarity and transparency around some of these upcoming rule changes will facilitate getting a deal done at Beaver Valley and possibly other colocation deals in PJM. And we continue to see a very high level of interest in Beaver Valley in particular. Pennsylvania is a market that the hyperscalers continue to focus on, and we think that site is very attractive for either colocation or a front-of-the-meter deal, we could do either one at Beaver Valley. Shahriar Pourreza: Got it. And then just lastly, as we're looking at the next leg of contracting opportunities, do you sort of have a view around hyperscaler appetite around gas risk? I mean, is there a preferred structure for Vistra for existing or new build assets in terms of contract structure? A peer presented sort of this viewpoint around a fixed capacity plus [ e-way call ] type of arrangement. So curious to see if that's a preferred path for Vistra as you guys are thinking about contracting gas. Stacey Dore: Yes. Thanks, Shar. Stacey, again here. So we do think that hyperscalers will contract for new gas build going forward. We are engaged in a number of those conversations as well. And we agree that we think the customers will ultimately take the gas risk there, which we're well positioned to help them manage as well. And so I think the kind of structure you're talking about with a large fixed capacity payment along with a variable component that includes gas risk is a structure that we see a lot of customer interest in. Those deals take time. Frankly, new construction takes time. And so we continue to focus on those, but to focus at the same time on the advantage that Vistra has in offering speed to market with so many of our existing sites being available to help to get a data center online. So we continue to have a high level of interest from customers on all of these different arrangements, including colocation with existing new build, colocation with nuclear plants as well. and renewables, PPAs, bridge power solutions and front-of-the-meter retail deals. I think Vistra is uniquely positioned with our large fleet of dispatchable assets and our leading retail, commercial and regulatory capabilities to serve these customer needs creatively and reliably. So we remain very excited about the numerous opportunities ahead of us to enter into more contracts with our largest customers. Operator: And our next question today comes from Angie Storozynski with Seaport. Agnieszka Storozynski: So first of all, thank you for showing us longer-term projections of free cash flow per share. I know I've been asking for those for quite some time. So I really, really appreciate it. And hopefully, we will have more of those projections to come in the future. But my main question is about this sort of debate about contracting of existing assets versus bring your own generation requirements. We're waiting, obviously, for those commitments from hyperscalers to be made about how they're going to power their data center load. And so I'm just wondering, how you see that requirement or that push vis-a-vis your large and growing generation portfolio? And then secondly, I'm just wondering, in PJM gas-fired new build, how you think you see the demand for long-term contracts for gas-fired new build ahead of this RBA, if you see any interest to contract for gas-fired new build outside of the RBA? Stacey Dore: Yes, Angie, thank you. This is Stacey. So on your first question around contracting existing versus new build, I mean, I think, obviously, the 2 large deals that we've announced at Comanche Peak and also across our PJM nuclear fleet are both deals that involve contracting with existing assets. So we've demonstrated that the hyperscaler interest is high with respect to that. And I think the Meta deal, in particular, is a very thoughtful approach where they are taking existing -- purchasing existing offtake and also supporting the nuclear uprates. And then at Comanche Peak, we're able to offer a speed-to-market solution for Amazon there. So I think those 2 deals, which were both fairly recent, demonstrate the interest by hyperscalers in contracting with existing assets. And we continue to have a number of conversations around other existing assets, including, as I mentioned, Beaver Valley, but also gas plants as well. There is a constraint around some of those existing asset deals, and that is the interconnection process, which you still have to go through when you're contracting if you're locating near an existing asset if you're locating the data center there. So obviously, we continue to work on a number of fronts in the ongoing regulatory processes for interconnection. And I think most markets are trying to move those processes forward, recognizing that we need to get customers connected. So I think you will continue to see a lot of interest in both. I do think colocation with existing assets continues to offer a speed advantage versus new build. But you'll see a combination of all of those solutions, and we're in all of those types of conversations with hyperscalers and others. Regarding your question around PJM new build, I do think that given that there -- it appears that PJM is targeting a reliability backstop auction, as early as this September that, that will feed into the conversations around new build in PJM in terms of customers trying to figure out whether it would be better to participate in the RBA or to bilaterally contract outside of the RBA. But the good news is that those rules will become clear in fairly short order. And it has not slowed the actual commercial conversations. Those continue in parallel about all sorts of new build options. But I do think the whole market is looking for clarity around the reliability backstop auction rules. And as you can probably see from a lot of the information that's been published about the PJM RBA discussions, we are heavily engaged and have submitted our own proposal in that regard. Operator: And our next question today comes from Jeremy Tonet at JPMorgan. Jeremy Tonet: Sending our best to Jim here. Just want to start off with regards to the 2027 midpoint opportunity. I grant that this isn't something that you normally change, but you seem like some pretty big developments here recently. So why not include the Meta opportunity here? And also post the near-term potential of $16 per share, just wondering if you might be able to provide order of magnitude of some of the further upside drivers there. Kristopher Moldovan: Yes. Thanks, Jeremy. I think we've said previously, and you mentioned it that we don't expect to update our guidance or midpoint opportunities on a quarterly basis. But of course, as you noted, we did announce 2 very significant transactions with the Cogentrix and Meta transactions since we last provided 2026 guidance and the 2027 midpoint opportunity. I think we didn't want to really update -- I think our view is once the Cogentrix deal closes, we'll update both. I mean we do -- we have mentioned that we expect Cogentrix to close in the second half of this year. And so there's a -- depending on the timing of that closing, we would be updating 2026 guidance at that time. And our belief is that's just the right time for us to go ahead and update both 2026 guidance and the 2027 midpoint opportunity. The other thing that I'll say is we put out a lot of disclosure about these transactions. I think with the disclosure we've put out, you could get to a -- I think, pretty easily to an addition to 2027 from just those transactions of -- in the neighborhood of $700 million to $750 million. Now that is absent any other impacts, including curve changes, other things. So again, it's hard to just add that on top. We'd have to roll everything forward. But -- and that amount also, you have to remember, it includes the full year impact of only one of the assets from Meta, and that will -- which will begin in the late 2026. So it will be a full contributor in 2027, whereas the second contract begins in late 2027. So I think it will -- we will update as we move along with the Cogentrix transaction. As for the $16, I think it's important to talk about what that is and what it isn't. We show a 2026 adjusted free cash flow per share amount, but that's just simply using our original guidance. It doesn't include Cogentrix, and it doesn't include any share repurchases. We're holding shares flat for even 2026. And as you're aware, we're already buying shares. So what we showed is, I think, a conservative number for 2026, but we wanted to show the growth of transactions that we've already announced. And again, those are from Cogentrix, excluding the tax benefits, just what we think that's separate. We haven't included those and from operating PPAs with Meta. We did make a simplifying assumption because we are going to be buying in that indicative number, the $2 billion, we'll be using the $2 billion that's already set aside for share repurchases, but we made a simplifying assumption of an additional $3 billion. So that's not a -- that's not a projection or there's no time around that. That's a short-term number. If we think about going forward, to your question on where this could go, we're showing some of the tailwinds, which would be the hedge roll-off and the -- and as well as other -- the PJM nuclear upgrades. But if we do look at just our -- as we go forward and we look at our cash available for allocation moving forward, and if we made a simplifying assumption that we used all of that cash for share repurchases between 2026 and 2030 of what we think we can generate and we use it at a price per share that's reasonably above where we trade today. I do think that the free cash flow per share could be -- would be in the range of $22 to $25, and that doesn't include some upside that we would look for transactions that are more accretive than share repurchases. Jeremy Tonet: Got it. That free cash flow per share with 60% conversion points to a pretty big EBITDA number there. So that's very helpful. And I just want to take a step back. You've talked a lot about the long-term PPA discussions here. But just at a very high level, how would you characterize the level of discussion now versus any point in the past? And just any qualification, I guess, between nuclear versus gas discussions here? Stacey Dore: This is Stacey. Thank you for that question. We continue to see a very high level of interest in power PPAs for data centers. We really see 2026 as the year in which customers are focusing on what is real and what is credible after spending the last couple of years sorting through a lot of different alternatives. And we think that really gives Vistra an advantage because we do have so many sites. We have so much land available, and we have a demonstrated capability of developing and operating generation. Our deal with Meta is a great example of that. It combines the purchase of operating capacity with financial support for new megawatts across our PJM nuclear fleet. And so we continue to be in numerous conversations with all of the major customers in this space about all of the various structures that we've been talking about. And I think we've shown -- we've demonstrated a real ability to execute not just on PPAs, but as a reminder, we've augmented our ERCOT thermal fleet by 500 megawatts of upgrades. We've executed on the Oak Hill solar PPA last year with Amazon as well as Pulaski with Microsoft. So we have those existing customer relationships, and I think we're viewed as a credible and viable partner for these customers. We've also -- we have in process not only the 433 megawatts of nuclear uprates, but 2 coal-to-gas conversions at Miami Fort and Coleto Creek as well as our Permian gas plants that we're building in West Texas. If you add all of this up between what we've already added to the grid and what is currently underway, under construction and under development, it's over 3,600 megawatts of capacity. And that's just the beginning that if we have customer PPAs for building new generation or for our existing assets, we will continue on that trajectory. So I think we see the appetite as high as ever, but the difference now versus maybe a year ago is I think the customers themselves are very focused on the deals and the opportunities that are actionable as they have sorted through what is real and what is credible, and we think that positions Vistra extremely well to support these customers. Operator: Our next question today comes from Steve Fleishman of Wolfe Research. Steven Fleishman: Best to Jim. Hopefully, everything is okay. I guess, Stacey, first, on the -- on the idea of the new build you've already done, but also further opportunities there. Just how do you feel about your equipment and EPC capability to meet needs not too far out. A lot of other people talk about being well positioned there. Maybe you could just talk to that. Stacey Dore: Yes. Steve, sure. Happy to do that. So as you know, we have one of the largest gas fleets in the country. We have excellent and long-standing relationships with all of the turbine OEMs, and we're frequently in conversations with third parties and bridge power providers about equipment that, frankly, they are trying to market, including parties that have already purchased turbines and are looking for places to deploy them. Because of our pre-existing development pipeline, we also have ample access to high-voltage equipment, and we have long-tenured relationships with multiple EPC providers that we are currently using for our development projects. So we do not see equipment or EPC as the gating items to building new generation or to developing behind-the-meter interconnections for existing sites. Customers have choices. And when they're ready to sign PPAs, projects can move forward. Vistra is certainly prepared to do that and can offer a variety of both speed to power options as well as long-term new build. Steven Fleishman: Great. And then totally separate question for Kris. Just as you -- the free cash flow per share chart was very helpful, and it looks like you're going to be on '27. The balance sheet is very strong. But the EBITDA with some of these -- a lot of the drivers really show up after '27 and the EBITDA will be going up a lot, which probably leaves a lot more balance sheet room. So could you just talk to kind of how you're thinking about balance sheet targets beyond '27? And then what you going to do with the cash? Kristopher Moldovan: Yes, Steve, thanks for the question. I think as we showed on the capital available for allocation chart, we have $3 billion between now and 2027, and that's even at a 2.3x. And that level would be strong and we think would be strong in consideration for strong investment-grade ratings. So yes, as we said, I mean, there's -- as we move forward, we expect the cash generation to be significant. And we're going to continue to stay balanced with capital allocation. We're going to continue to return capital to shareholders and take advantage of opportunities. Again, when our stock is under pressure. We're going to continue to maintain the balance sheet. We are focused on investment-grade ratings. And as we've continued to say, we don't want to be right on the edge of investment-grade ratings. We would like to get to that strong investment-grade ratings. But I think we can get there without a lot of debt paydown, we're just -- we can do that with some growth. And then obviously, we're going to continue to look for inorganic and organic growth opportunities, but staying disciplined to our return thresholds. And that hasn't changed in the last several years, and it won't change going forward. And it's not always easy to find growth opportunities that meet our return thresholds, and you don't know when they'll come along, but we're consistently -- we have a lot of things in front of us, a lot of organic opportunities. And so we'll continue to evaluate those. In the meantime, we can always pay down some additional debt and be ready for when those opportunities arise. Operator: Our next question today comes from Andrew Weisel with Scotiabank. Andrew Weisel: First, a question on nuclear uprates. I think you've talked about potential in the neighborhood of about 600. You've identified the 400 and change with Meta, and I think you talked about 200 today with Comanche. Does that essentially cover the opportunity? Or do you see potential for more? Kristopher Moldovan: No, I think that covers it. The 433 megawatts with Meta, those were -- those are in process. The 200 megawatts, we still have some work to do on those, and that's a future opportunity. But that -- for operates at the existing plants that covers it. Obviously, we're continuing to look at new nuclear and other opportunities. But from an operate perspective, that I think you've got it covered. Andrew Weisel: Okay. Great. Then on the gas side in ERCOT, I believe you're planning to move forward with Permian Power 1 and 2. The news about the batching process potentially impact those? My understanding is you haven't yet decided if you're going to pursue TEF funding. And if you did, they probably wouldn't be eligible for data center contracts. But do those dynamics impact your thinking? Or are you just moving forward despite the potential changes or uncertainty? How are you thinking about that? Kristopher Moldovan: No, I think we continue -- we made the decision on those. We had a lot of advantages, including the pricing on some equipment we had ordered and some -- the pricing out in West Texas and the land that we had. We continue to see those as being high-return projects. I think we're still in a tough process, and I would expect us to continue to stay in that process. And we're working through that. With respect to contracts, I think that we're -- there is interest from a number of different counterparties about those assets. And I think our view is that being in the TEF process doesn't prohibit us from locking in some of the revenue on those assets, but we're going to continue to feel out those opportunities and move forward only if we see something that we feel like is the right deal for the company. Stacey Dore: Yes. And Andrew, the batching process doesn't affect the TEF units. It's a load interconnection process that's being considered to start studying load requests on a more grouped basis as opposed to one by one, but it won't affect our Permian TEF units. Andrew Weisel: Okay. Great. Then one last one, if I can. On repurchases, can you talk about the flexibility under the 10b5-1 program? You mentioned it, I see you were pretty active year-to-date with $200 million, which is quite a bit ahead of the ratable pace compared to $1 billion for the full year. Can you just explain a bit how that works and what sort of discretion you have over the pace and timing and how to think about the outlook going forward mechanically under the 10b5-1? Kristopher Moldovan: Yes. I can't really get into the specifics, but we -- as we've said, we have structured it, and there's ways to structure those programs where -- depending on where the trading values are, it can increase the pace, and we obviously do that. You can see that in January and February at the prices that we've been trading, we've been leaning in. Same thing happened last year. There was -- again, early in the year, there was some price pressure. We leaned in -- the program leaned in. And then as the price rebounded, it pulled back, and we ended up spending right around the $1 billion last year. But importantly, as we looked at last year, if you look at the weighted average price throughout the year, our program beat that by just under $10 a share. So that's just -- that's -- the intention is for it to be more active when we see some price pressure. And we continue to tweak how we go about that. And when we get into open windows -- as we get into open windows, we're able to make changes, and we continue to rethink and optimize that program so that it's doing exactly what we wanted to do. Andrew Weisel: Okay. Sounds good. Appreciate it. Operator: And our final question today comes from David Arcaro with Morgan Stanley. David Arcaro: Stacey, thanks for all the updates here on where your discussions stand with potential counterparties. I was curious if you could just maybe give us any color on timing as to what we might expect for the next iteration of data center contracting activity that you might be able to achieve on your fleet. I know you've been very busy over the last couple of months, clearly with your successes. But I'm just wondering if you could give -- are we going to have to wait for the backstop auction in PJM, for example, and not expect anything until we get more clarity there? What's the pace of those discussions? And yes, any color on [indiscernible] would be helpful. Stacey Dore: Yes. David, well, it's only been 6 weeks since we announced the Meta deal. So you're not giving me a lot of time there. But I'm not going to comment on specific timing. I can just tell you that we have a number of conversations underway. Customers are very motivated to start making some of these things happen because they're anxious to get going with the data center development. So we feel good about where our conversations stand. And as we've always said, when we have an actual contract and agreement to announce, as you've now seen us do twice, we will announce that. David Arcaro: Okay. Got it. And then maybe just on Comanche Peak. I was wondering, what the -- maybe timing or milestones as to what would drive the uprate opportunity there? And could you be involved in any other on-site power opportunities, whether it's new generation or would you be involved in the backup generation there? Curious any color on that. Stacey Dore: Yes. Thanks, David. Yes, on the uprate timing, we're continuing to study that possible uprate at Comanche Peak. And -- but right now, honestly, we're very focused on executing for our customer, all the things that need to happen to make sure the data center on-site at Comanche Peak gets online on time. That's our #1 focus at Comanche Peak at the moment. But certainly, the team continues to explore the uprate in the background. And as we've mentioned earlier, we have the opportunity potentially with the same customer to add that uprate to the portfolio. So we'll continue to keep you updated as there's news on that front. Certainly, we have a lot of land at Comanche Peak, and we definitely could explore new generation at that site. As you may know, in the past, the company had looked at Comanche Peak Units 3 and 4. There was plenty of land to do that. In fact, we had an early application in with the NRC to do that before we pulled it kind of around 2015, I think. It's also a site that has access to gas. So there's a lot of opportunities to make that site really a center for energy and hopefully a data center as well with Amazon coming on site. Operator: That concludes our question-and-answer session. I'd like to turn the conference back over to Kris Moldovan for any closing remarks. Kristopher Moldovan: Yes. I just want to thank everybody that participated on today's call. As Jim noted in our prepared remarks, we're very proud of what the team accomplished in 2025. And as we've been talking about, we're very excited to execute on the numerous opportunities in front of us. So thank you for your interest in Vistra, and have a great day. Operator: Thank you. That concludes our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Hello, and welcome to the TORM Full Year 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Meldgaard, CEO. You may begin. Jacob Meldgaard: Thank you, and welcome to everyone joining us here today. This morning, we released our annual report for 2025, and we are satisfied with the results, which, once again, reflect our strong execution across the business. However, before I now turn to the results, I want to spend a little time talking about TORM and the foundation that enables these results and consistently differentiates TORM in the market. I want to talk about the key pillars of our business that have placed us in a strong position to date and that we believe will continue to do so in the future. We are immensely proud of what we have achieved here at TORM. Our ownership model and culture provides us with a clarity of purpose that streamlines our actions across the business. We are focused each and every day on staying one step ahead of other fleets to make the most of every opportunity. We believe our ability to deliver on this ambition for our shareholders is a distinct competitive advantage. Underpinning our strategic focus is the platform you will know as One TORM. We believe this is a point of difference that sets us apart. The model was originally built around a spot-oriented strategy to unite the business and accelerate decision-making and response time. It enables us to use real-time data and insights to share our deep expertise at the core of the business at a moment's notice. We are not complacent. Since its inception, we have continuously refined this model using the latest technology, advanced analytics and proprietary data at our disposal to ensure we remain as alert and responsive as we possibly can be. In short, we can identify and capture attractive trading opportunities even in the most challenging markets, and perhaps I should say, especially in challenging markets, exactly the type of markets which now characterize the shipping industry even as we see comparatively fewer headwinds here into 2026. For our shareholders, this approach offers a very clear advantage. We believe an industry benchmark for unrivaled consistency, strategic optionality and financial discipline that you can see once again in our numbers. And here, please turn to Slide #4. In here and on the next 2 slides, we show the key figures for the quarter and the full year. As always, I'll start with the quarterly numbers to give you a clear picture of how the business is developing. In Q4, TCE came in at USD 251 million, slightly above Q3, supported by firm freight rates throughout the quarter. This strong performance resulted in a net profit of USD 87 million, which enables us to declare a dividend of $0.70 per share, once again demonstrating our higher earnings translate directly into higher shareholder returns. During the quarter, we were active in the S&P market. We added 2 2016-built LR2s and 6 MR vessels built between 2014 and '18, while divesting 1 older 2008-built LR2. Several of the vessels were delivered before year-end, bringing our fleet to 93 vessels. And after completing the remaining deliveries at the start of 2026, our fleet comprises 95 vessels. Importantly, our investments were exceptionally well timed. Based on current broker valuations, the vessels we acquired have already been appreciated by a double-digit U.S. dollar amount. This reflects not only the quality of the assets and our disciplined approach to capital allocation, but also a market that continuously turned more positive, supporting higher asset values across the product tanker space. Now turning to Slide 5, we show the full year numbers. These are strong results. A year ago, our TCE guidance was USD 650 million to USD 950 million, and we closed the year towards the high end with USD 910 million. While not matching the all-time high in 2024, it remains a very satisfactory outcome. Freight rates strengthened from the first to the second half of the year and ended at attractive levels. In this environment, TORM achieved fleet-wide rates of USD 28,703 per day, which we are very pleased with and which again demonstrates our ability to outperform the broader market. Net profit for the year totaled USD 286 million, of which USD 212 million is being returned to shareholders. With that overview in place, let us take a step back and look at the broader market dynamics that shape the environment we operate in. And here, please turn to the next slide to Slide 7. And after a softer, but still historically strong 2025, product tanker freight rates have now returned to the average levels that were seen in the 2022 to 2024 market. Underlying demand for product tankers has remained steady, and the recent uplift in rates has been driven primarily by developments elsewhere in the tanker complex. The crude market has moved into territory that, while not unprecedented, is extremely rare. VLCC spot rates have surged to the USD 200,000 per day range, a unique and record-breaking level, and with charterers reportedly fixing 1-year deals above USD 110,000 per day. This strength is spilling over into the rest of the market, first into Suezmax and Aframax and then further into clean product tankers. If this momentum continues, we are potentially looking at a very interesting rate environment. At the same time, sanctions in the dirty Aframax segment have tightened vessel availability, triggering a large shift of LR2s from clean to dirty trade. This reduction in clean LR2 supply has further supported product tanker earnings. After several years of partial decoupling between segments, the product tanker market is once again being carried by the broader strength in crude. VLCCs, as mentioned in particular, continue to benefit from increased OPEC production, renewed stock building demand from China, heightened geopolitical tensions involving Venezuela and Iran and further consolidation in the segment. All these factors together have created one of the strongest cross-segment market backdrops we have seen in years. Please turn to Slide 8. And here, let's have a look at the product tanker demand side. Seaborne volumes of clean petroleum products have been trending upwards in recent months. However, the overall impact of the Red Sea rerouting has been largely neutral due to lower trade volumes and a partial return to Red Sea transits. Trade volumes from the Middle East and Asia to Europe have started the year at 30% below pre-disruption levels, which is largely a result of lower flows from India amid introduction of an EU ban on imports of oil products derived from Russian crude. At the same time, an increasing number of vessels have resumed transiting the Red Sea with an, on average, 40% of the clean petroleum product volumes on the Middle East, Asia to Europe route traveling via the Red Sea in 2025. This is up from under 10% in 2024. As a result, we see limited downside risk from a potential full normalization of the Red Sea transit as much of this effect has already been unwound and instead, a likely rebound in clean petroleum trade volumes after the normalization of the transit would increase ton-miles. This is reinforced by the closure of 5% of the refining capacity in Northwest Europe last year, which is driving higher import needs for middle distillates. Additional support comes from sustained strength in crude tanker rates, which limits the crude tanker cannibalization and also from rising clean product ton-miles driven by refinery closures on the U.S. West Coast. Kindly turn to Slide 9. Let's turn to now the supply dynamics. Newbuilding deliveries have increased here in 2025, but this has not translated into effective growth in the fleet trading clean products. In fact, since the start of 2024, nominal product tanker fleet capacity is up by 8%, yet the capacity actually trading clean today is 1% lower than it was at the beginning of 2024. This disconnect is primarily due to sanctions in the Aframax segment, which had incentivized a significant shift of LR2 vessels into duty trades. To illustrate this point, compared to the start of 2025, currently, there are 20 fewer LR2 vessels transporting clean petroleum products and, at the same time, 65 newbuildings have been delivered to the LR2 fleet during the same period. The scale of the sanctions is notable. 1 in 4 vessels in the combined Aframax LR2 segment is currently under U.S., EU or U.K. sanctions. This comes on top of the fact that the order book is already balanced by the high share of overage vessels in this segment. Next slide, please, Slide 10. And here, let me just elaborate a little on vessel sanctions. So most sanctioned vessels were added to the list last year. So in 2025 alone, more than 200 Aframax and LR2 vessels were sanctioned. This is 3.5x the number of newbuilding deliveries in the segment in 2025, and it is equivalent to almost the entire combined newbuilding program for a 3-year period from 2025 to 2027. With 60% of these now sanctioned vessels being older than 20 years, their likelihood of returning to the mainstream market even if sanctions were lifted appears to be limited. And now turn to Slide 11, please. Geopolitical developments continue to be a major driver of market dynamics. And in fact, the list of different geopolitical drivers has only gotten longer in the past 4 years. The growing number of policy interventions and geopolitical flash points increases uncertainty and associated inefficiencies. Beyond the policies directly affecting product tankers, developments in the crude tanker market such as a potential tightening of sanctions against Iran, rising OPEC production are also indirectly supportive for product tanker demand. We sincerely hope for a ceasefire between Ukraine and Russia. However, we see the likelihood of trade returning to pre-war levels as very low or nonexistent in the foreseeable future given the EU's clear determination to tighten sanctions. The EU ban on Russian crude oil and oil products has been by far the most significant sanction against Russia in terms of ton-miles. And the new 20th sanction package the EU is working on is potentially adding a full maritime services ban to it, pausing an even larger share of Russian oil flows into the shadow fleet. This would likely further increase the inefficiencies of the fleet trading Russian oil. Please turn to the next slide, Slide 12. And in summary, the key geopolitical forces continue to shape this year's market. While a potential normalization of Red Sea transit is unlikely to weigh on the market, the EU's ban on Russian oil will continue to underpin longer trading distances. On the demand side, ongoing shifts in global refining capacity continue to support ton-mile expansion. On the tonnage supply side, the increase in newbuilding deliveries will be balanced by a growing pool of scrapping candidates and reduced participation from sanctioned vessels, factors that will influence overall tonnage availability and market equilibrium. Against this backdrop, I'm confident that TORM is well positioned to navigate an environment marked by uncertainty and supported by our solid capital structure, strong operational leverage and our fully integrated platform. So with that, I'll now hand it over to you, Kim, who will take us through the numbers. Kim Balle: Thank you, Jacob. Now please turn to Slide 14, and let me walk you through some of the drivers behind our performance this quarter and for the full year. Starting with the market backdrop. The product tanker market stayed strong throughout the fourth quarter, and that supported another solid result for us. For Q4, we delivered TCE of USD 251 million, which translated into EBITDA of USD 156 million and net profit of USD 87 million. Across the fleet, our average TCE came in at USD 30,658 per day. Breaking that down, our LR2 earned above USD 35,000, LR1s were above $31,000 and MRs were just under USD 29,000 per day. For the long-range vessels, these numbers were actually a bit better than we indicated in our Q3 coverage, reflecting continued strong markets, helped in part by very firm crude tanker rates. For the full year, we delivered TCE of USD 910 million, EBITDA of USD 571 million and net profit of USD 286 million. These are solid numbers. As expected, earnings moderated from the exceptional levels of last year, but they remain robust and importantly, very much in line with the guidance we shared in November. And turning to shareholder returns. With a strong Q4, earnings per share reached $0.88, and the Board has declared a dividend of $0.70 per share, bringing total dividends for the year to USD 2.12 per share. We continue to believe that our capital return framework strikes the right balance, clear, disciplined and supported by robust cash earnings generation. And with that overview in place, let us move to Slide 15, where we break down the earnings in more details and talk through the underlying drivers. Slide 15 shows our quarterly revenue progression since Q4 2024. With this quarter's results, we see a meaningful uptick building on the positive trajectory in freight rates and earnings we delivered over recent quarters. It's a clear indication of the favorable market environment we are operating in. For the quarter, we delivered TCE of USD 251 million and EBITDA of USD 156 million, making our strongest quarterly performance this year. The underlying uplift is driven by firm freight rates supported by solid fundamentals and a positive spillover from the crude tanker segment, as mentioned. Given our operational leverage, we were well positioned to benefit from what we already see as very attractive freight rates. Please turn to Slide 16. Here, we show the quarterly development in net profit and the key share-related metrics. For the fourth quarter, earnings per share came in at $0.88. Our approach to shareholder returns remain clear, disciplined and consistent. We continue to distribute excess liquidity on a quarterly basis while maintaining a prudent financial buffer to safeguard the balance sheet. For Q4, this has resulted in a declared dividend of $0.70 per share, corresponding to a payout ratio of 82%. This is fully aligned with our free cash flow and debt -- after debt repayments and reflects both the strength of our earnings and our ongoing commitment to responsible capital allocation. And now please turn to Slide 17. As shown on this slide, broker valuations for our fleet stood at USD 3.2 billion at year-end. This reflects a continued positive sentiment in the market and results in an NAV increase to USD 2.6 billion. Importantly to note, average broker valuations for the fleet increased by 4.2% during the quarter, driven primarily by higher valuations for our LR2 vessels, which saw the strongest appreciation. This uplift further underscores the improving market backdrop and the quality of our asset base. In the recent quarter -- or sorry, in the central chart, you can see our net interest-bearing debt, which now stands at USD 848 million, corresponding to 29.4% in net LTV. The increase reflects the vessels acquired during the quarter, which naturally required incremental funding. Importantly, even with this investment-driven uptick, our leverage ratio remains within the range that we have maintained over recent quarters, typically between 25% to 30%, underscoring the strength of our conservative capital structure. This stable leverage -- sorry, this stable level continues to provide us with ample financial flexibility to pursue value-accretive opportunities while safeguarding balance sheet resilience across market cycles. On the right, you can see our debt maturity profile. We have USD 135 million in borrowings maturing over the next 12 months, excluding lease terminations that have already been refinanced. Beyond that, only modest amounts fall due in the following years. Overall, our solid balance sheet gives us sustainable financial flexibility to navigate current market conditions with confidence and to pursue value-creating opportunities as they emerge. Now please turn to Slide 18. This time, we have added a new slide to show what is actually -- what it actually means for the value creation when we consistently achieve rates above the market average. The MR segment is our largest exposure and a segment where competitors also have meaningful scale, making it the most representative benchmark for the product tanker market. We could, of course, perform a similar comparison for LR2 vessels. However, the benchmarking becomes less robust as many of our peers operate only a relative small LR2 fleet, limiting the comparability and statistical relevance for such an analysis. That said, based on the data available, a comparable calculation for the LR2 segment would probably show the same picture. As shown on Slide 24 in the appendix, we compare the rates we achieved with those of our peer group. Quarter after quarter and year after year, we have consistently delivered rates well above the peer average and in most quarters, even market-leading. This performance is a direct outcome of the One TORM that Jacob discussed and which continues to differentiate us in the market. But on this slide, when we take the analysis a step further by quantifying what that actually means, then, holding everything else equal, we calculate the premium TCE by taking our spot TCE relative to the peer average, multiplying it by our operating base and comparing that figure directly with our dividend in each quarter from 2022 to 2025. This provides a clear transparent view of the tangible financial value created by outperforming the market. Two examples illustrate the impact. In 2022, we returned USD 381 million in dividends. Our premium TCE was USD 38 million, around 10% of the total dividends paid. And in 2025, based on the first 3 quarters, the premium reached USD 49 million compared to our full year dividend of $212 million, that represents 23% of the total. So the message is clear. Our strong rates have a material and measurable impact on our dividends returned to our shareholders. Across that period, which includes different market conditions, we have returned USD 1.6 billion in cash dividends. And our analysis show that premium earnings from the MR fleet accounted for roughly 15% of the total dividends paid over the past 4 years. And now please turn to Slide 20 for the outlook. We're stepping into 2026 from a clear position of strength and solid momentum across our business. In Q1, we have already secured 70% of our earnings days at an attractive average TCE of USD 34,926 per day. This strong coverage provides a robust foundation for the year and reflects the positive traction we are seeing across all vessel segments. With the coverage already locked in and the encouraging market outlook ahead, we expect TCE earnings of USD 850 million to USD 1.25 billion and EBITDA of USD 500 million to USD 900 million. Both ranges are based on our midpoint internal forecast, after which we apply a defined range to reflect the uncertainty associated with the full year outlook and the potential volatility in the market conditions as the year progresses. And we are entering the year with confidence and real momentum behind us. And with this, I will conclude my remarks and hand it back to the operator. Operator: [Operator Instructions] Your first question comes from Frode Morkedal with Clarksons Securities. Frode Morkedal: First question I have is on the EBITDA guidance or the revenue guidance. If you could, I'm curious about what type of spot rate assumption you made there? Of course, I understand there's a lot of moving parts in this type of guidance, but let's say, LR2, MR rates in the high end, what are -- what's the implied rate, if you can share that? Kim Balle: Frode, I can tell you about our methodology that we use when calculating our guidance for the year. So we take the coverage, the fixed days we have already made for Q1, and then we apply the unfixed days for the rest of the year with the forward curve that we see in the market for the remainder of that period. And then you get to a midpoint. And from that midpoint of TCE, you then deduct our normal cost and get to an EBITDA. And depending on where the freight rates are, we stress that with an interval. And as they are higher right now, you will see, compared to last year, that the interval is slightly higher than we had a year ago. That is due to both what I just said, the higher rates, freight rates, but also more earning days, of course. So that's the methodology behind. So we are basically building it on what we have achieved already and then the markets. Frode Morkedal: Right. So is it just FFA market or time charter rates that you're looking at or... Kim Balle: It's forward freight rates. Frode Morkedal: And can you just say like the midpoint, is that -- roughly is that curve today when you made the guidance? Kim Balle: It's around $30,400 across the fleet. Frode Morkedal: Right. Okay. That's a good reference point. So yes, but just I wanted to discuss how you see the strength in the crude market impacting the products? Clearly, you talked about the switching. I'm curious to know if you think there's more to go there? I have noticed that crude Aframaxes are still trading with quite a significant differential to LR2 spot rates. So yes, curious to hear your views. Jacob Meldgaard: Yes. Obviously, time will tell. But I think clearly, the strength that we are seeing across the crude segments is first and foremost, having a direct one-to-one impact on the behavior of the LR2 fleet and LR2 owners. So the incentive currently to switch from being participating as an LR2 in the CPP market and potentially moving into the crude market is a little depend on whether you are in the Western hemisphere or the Eastern hemisphere. But just as an example, as you point to in the Western hemisphere, there's a clear financial incentive to switch over. I think we will see more of that as we showed in the graph. There is basically fewer vessels that are available due to the sanctions regime imposed, especially by the U.K. and EU, but also by OFAC. So that means that the compliant requirements for our customers, whether it's in CPP or in dirty trade, is serviced by fewer vessels, fewer assets. And that is pushing rates higher as we speak. We see term rates rising, and they are not to the extreme volatility that we see in the VLCC segment, but still significantly higher for a 1-year charter today than what it was at the beginning of the year. And I think this trend, let's see how it plays out, but I think it is here to stay. So we're quite optimistic in the earning power in the segments, to be honest. Frode Morkedal: I agree. I guess the acquisition you made, I think it was 8 ships, right, in Q4. That was a pretty good timing. I think we discussed it last time, but maybe you could just discuss how you thought about the investment case at the time. Clearly, it's been a -- was a good idea to buy these ships. And secondly, what's your view now at this point in time of further opportunities to acquire ships? Jacob Meldgaard: Yes. So I think it's like this, that we did -- when we had the conversation, I think also on this call in Q4, I think we illustrated that we are looking at it quite methodically and just saying what is the sweet spot in terms of our expectation of the free cash flow that we can generate from an asset and where is the asset [indiscernible]. And what we identified was these pockets of that we could buy some LR2s and we did some here actually towards sort of mid-December bought a couple of ships. And clearly, today, the price of these assets and one of them is actually only delivering tomorrow is already up by 20%. So if you isolate it out and just say, yes, that's good timing. But the backdrop of that is, of course, also that now when we had to sort of do our own thinking around potential other acquisitions, clearly, with assets rising like this, it gets harder to make the next acquisition. So I think we were fortunate about the timing on these 8 ships. We actually had hoped, to be very honest, to have upped the end a little on that in terms of number of assets, but they were simply not available at that point in time at attractive prices. So I think we just had to regroup a little. Asset prices are moving quite fast, and we just have to regroup and make sure we still follow our methodology and not get carried away. But I'm optimistic that we can maybe identify a few, let's say, some other deals that sort of fits the bill on our return requirements. Kim Balle: Frode, may I just -- I need to answer your question. You started a bit more precise than what we did, just so it's clear how we do it on the guidance. I just didn't have them in my head, but I have the numbers here. So if you take Q1, we had covered 8,177 days with $34,208. Then we take the uncovered days, that's 25,691 at $30,371. And then you do the math from there. Then you come to a total number of days, operating days and average TCE. And then you get to a TCE and you stress that. Frode Morkedal: Right. That's good. So on the stress test, do you have like a percentage plus/minus or... Kim Balle: That's -- we derived it a few years ago, but the way we use it is plus/minus TCE, and it depends on how much the stress depends on what the actual TCE level is. The lower it is, the lower the stress is, the higher it is, the higher the stress is. So it depends on where you are on the actual TCE levels. Operator: Your next question comes from [ Clement Mullins ] with Value Investors Edge. Clement Mullin: I wanted to start by following up on Frode's question on Afras and LR2s. Could you talk a bit about the portion of your LR2 fleet that traded dirty throughout the quarter? And secondly, on the LR1 side, have you seen an increase in the proportion of vessels trading dirty over the past few months? Jacob Meldgaard: Yes. Thanks for those very precise ones. So I'll start from the back end of this. So we have not really seen that the dirty market has affected the LR1s in our fleet and in our case. And when we look at our vessels and on the spot, we basically have 10% to 20% of our LR2s trading spot dirty. And then we've got another 10% that is on term charter dirty. Clement Mullin: That's helpful. And you continue to outperform peers on the MR side with your chartering team doing an excellent job. Could you talk a bit about what portion of your administrative expenses is attributable to the chartering team versus kind of the corporate side? Any color you could provide would be really helpful. Jacob Meldgaard: Yes. So we actually don't account like that. We -- as I tried to illustrate also in the beginning, on the One TORM platform, we believe that it's not actually the chartering team that is the secret sauce. It is actually the power of -- that you have in an organization ranging from the employees who bought a ship to the people doing the accounting and operations, technical. And of course, also, as you point to, the chartering team, but their success is not an isolated thing that has to do with their ability, it's the whole structure. So we don't -- I don't have an answer. I don't know the number. It's not the way we think about... Operator: There are no further questions at this time. I'll turn the call to Jacob Meldgaard for closing remarks. Jacob Meldgaard: Yes. Thank you very much, everyone, for listening in on the annual report 2021 for -- 2025, obviously, for TORM. Thank you very much for listening in, and have a great day. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Greetings, and welcome to Installed Building Products Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Darren Hicks, VP-Investor Relations. Thank you. Mr. Hicks, you may begin. Darren Hicks: Good morning, and welcome to Installed Building Products Fourth Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the 2025 fourth quarter and fiscal year, which can be found in the Investor Relations section of our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are based on management's current beliefs and expectations and are subject to factors that could cause actual results to differ materially from those described today. Please refer to our SEC filings for cautionary statements and risk factors. We undertake no duty or obligation to update any forward-looking statement as a result of new information or future events, except as required by federal securities laws. In addition, management refers to certain non-GAAP and adjusted financial measures on this call. You can find a reconciliation of such non-GAAP measures to the nearest GAAP equivalent in the company's earnings release and investor presentation, both of which are available in the Investor Relations section of our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; Michael Miller, our Chief Financial Officer; and we are also joined by Jason Niswonger, our Chief Administrative and Sustainability Officer. Jeff, I will now turn the call over to you. Jeffrey Edwards: Thanks, Darren, and good morning to everyone joining us today. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results in more detail before we take your questions. We closed out 2025 with a strong fourth quarter, delivering record sales and profitability for the year. While our core residential end markets experienced headwinds in part due to housing affordability, our commercial end markets performed extremely well as we focused on meeting the needs of our customers, profitability and product diversification across end markets. We continue to generate strong operating cash flow, which we use to support our growth-oriented capital allocation strategy. While we expect homebuilding activity to remain challenging in the near term, the long-term outlook for our installed services remains positive, and we believe we are well positioned to continue investing in strategic acquisitions while returning cash to our shareholders. Capital allocation decisions are among the most important we make as a company, and we take pride in our disciplined approach. For 2025, our adjusted return on invested capital was 24%, in line with the returns achieved over the previous 3 years. Even with industry-specific headwinds expected to continue to affect our new residential Insulation segment in the near term, our overall business has proved to be resilient. All the credit goes to the hard-working men and women across our more than 250 branches throughout the United States and those who support them from our office in Columbus, Ohio. To everyone at IBP, thank you for making 2025 a great year. As we continue to focus on profitable growth and maximizing returns for our shareholders, we remain committed to doing the right thing for our employees, customers and communities. Looking at our full year 2025 performance, consolidated sales increased 1% and same-branch sales declined 1%. Same-branch commercial sales growth was more than offset by residential same-branch sales growth headwinds. Residential sales growth within our Installation segment was down 4% on a same-branch basis for 2025 as both single-family and multifamily same-branch sales decreased from the prior year. With respect to our single-family end market, the spring selling season is underway, but it's too early to draw any conclusions for the rest of the year. We expect that given readily available labor and material and relatively short construction cycle times, construction activity is primed to accelerate without any of the production-related hurdles that existed in prior years. In our multifamily end market, our contract backlog continues to grow, which is encouraging. Our commercial end market was a real bright spot in 2025 with sales in our Installation segment up 10% on a same branch basis from the prior year period. Our heavy commercial end market continued to be the dominant driver of sales growth, which more than offset weakness in our light commercial end market. Based on the growth in our heavy commercial contract backlogs, we believe heavy commercial sales and profitability are poised to remain healthy in 2026. We completed 11 acquisitions, including bolt-ons during 2025, representing over $64 million of annual revenue. We remain disciplined in our approach to acquiring well-run businesses that make strategic sense, support attractive returns on invested capital and fit well culturally. Our core residential installation end market remains highly fragmented with considerable opportunity for consolidation. During the 2025 fourth quarter, we completed a total of 4 acquisitions, representing over $23 million of annual sales from a diverse product set in both residential and commercial end markets. Acquisitions included an insulation installer, a glass design and fabrication company, a drywall and framing company and a shower doors, shelving, mirrors, and accessories company. In addition, in January and February, we acquired an installer of insulation across new residential and commercial end markets throughout Texas, Louisiana, Arkansas, and Oklahoma with annual sales of approximately $5 million; a provider of a wide range of value-added mechanical insulation services for diverse commercial and industrial applications serving key commercial and industrial hubs across Wisconsin, Iowa, Minnesota, Michigan and Illinois with annual sales of approximately $13 million; and an installer of insulation primarily across new residential and light commercial markets throughout Kansas and Oklahoma with annual sales of approximately $3 million. Although deal timing is hard to predict, our current outlook for acquisition opportunities in 2026 is strong, and we expect to acquire at least $100 million of annual revenue this year. In terms of broader housing construction activity in the U.S., Census Bureau data for 2025 showed single-family starts decreased 7% from the prior year, while multifamily starts were up 18% for the same period. From a federal housing policy standpoint, we do not have any unique insight into the likelihood of changes in regulation coming to fruition or its potential impact or benefit. Our experienced leadership team has a history of operating through multiple housing cycles, and with our strong national market share and deep customer and supplier relationships, we are well positioned to continue to compete and win business. We remain focused on growing our operations profitably and allocating capital effectively to drive value for our shareholders. I'm proud of our team's continued success and commitment to doing an excellent job for our customers. Once again, to everyone at IBP, thank you. I remain encouraged by the fundamentals of our industry, our competitive positioning, and I'm optimistic about the prospects ahead for IBP and the broader insulation and complementary building product installation business. So, with this overview, I'd like to turn the call over to Michael to provide more detail on our fourth quarter and fiscal year 2025 financial results. Michael Miller: Thank you, Jeff, and good morning, everyone. Consolidated net revenue for the fourth quarter was roughly flat at $748 million compared to $750 million for the same period last year. Same-branch sales for the Installation segment were down 2% for the fourth quarter as a 23% increase in commercial same-branch sales almost fully offset a 9% decline in new residential same branch sales. Although the components behind our price/mix and volume disclosures have several moving parts that are difficult to forecast and quantify, we reported a 1.7% increase in price/mix during the fourth quarter. This result was offset by a 9.3% decrease in job volumes relative to the fourth quarter last year. It is important to note that our heavy commercial end market and the other Distribution and Manufacturing segment results are not included in the price/mix and volume disclosures. Our heavy commercial same-branch sales growth was incredibly strong at 38% during the 2025 fourth quarter. Including the heavy commercial installation sales, price/mix increased 6%, while job volume decreased 9% during the 2025 fourth quarter. With respect to profit margins in the fourth quarter, our business achieved record adjusted gross margin of 35%, an increase from 33.6% in the prior year period. The year-over-year increase in margin during the quarter was in part related to a shift in our Installation segment customer mix and successful management of direct operating costs in a demand environment that varied from challenging to healthy across end markets. Adjusted selling and administrative expenses were relatively stable compared to the 2024 fourth quarter. As a percent of fourth quarter sales, adjusted selling and administrative expense was 18.3% compared to 18.1% in the prior year period. Adjusted EBITDA for the 2025 fourth quarter increased to a record $142 million, reflecting a record adjusted EBITDA margin of 19% and adjusted net income increased to $88 million or $3.24 per diluted share. Although we do not provide comprehensive financial guidance, based on recent acquisitions, we expect first quarter and full year 2026 amortization expense of approximately $10 million and $38 million, respectively. We would expect these estimates to change with any acquisitions we complete in future periods. Also, we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31, 2026. For the 12 months ended December 31, 2025, we generated $371 million in cash flow from operations. The 9% year-over-year increase in operating cash flow was primarily associated with an increase in net income and improvements in working capital management. Our fourth quarter net interest expense was $8 million compared to $9 million for the 2024 fourth quarter as higher interest income from investments combined with lower cash interest expense on outstanding debt. At December 31, 2025, we had a net debt to trailing 12-month adjusted EBITDA leverage ratio of 1.1x compared to 1.09x at December 31, 2024, which remains well below our stated target of 2x. At December 31, 2025, we had $377 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the 3 months ended December 31, 2025, were approximately $17 million combined, which was approximately 2% of revenue. In January 2026, we closed a private offering of $500 million in aggregate principal amount of 5.625% senior unsecured notes due 2034. A portion of the proceeds were used to fully repay our $300 million notes due 2028. We also amended our existing $250 million asset-based lending revolving credit facility to, among other things, increase the commitments thereunder to $375 million and extend the maturity date to January 2031. Following the completion of these transactions, we have nearly $900 million in available liquidity and very modest financial leverage. Based on higher debt and cash balances, we estimate that first quarter interest expense will be approximately $11 million. With an even stronger liquidity position as a financial foundation, we will continue to prioritize acquisitions with long-term strategic benefits and attractive returns on invested capital. We expect positive free cash flow will continue to support shareholder returns and stock buybacks based on prevailing market conditions. During the 2025 fourth quarter, we repurchased 150,000 shares of common stock at a total cost of $38 million and 850,000 shares at a total cost of $173 million during the 12 months ended December 31, 2025. The Board of Directors authorized a new $500 million stock buyback program. The new authorization replaces the previous program and is in effect through March 1, 2027. IBP's Board of Directors approved the first quarter dividend of $0.39 per share, which is payable on March 31, 2026, to stockholders of record on March 13, 2026. The first quarter dividend represents a more than 5% increase over the prior year period. Also, as a part of our established dividend policy, today, we announced that our Board has declared $1.80 per share annual variable dividend, which is a nearly 6% increase over the variable dividend we paid last year. The 2026 variable dividend amount was based on the cash flow generated by our operations with consideration for planned cash obligations, acquisitions and other factors as determined by the Board. The variable dividend will be paid concurrent with the regular quarterly dividend on March 31, 2026, to stockholders of record on March 13, 2026. We are committed to continuing to grow the company while returning excess capital to shareholders through our dividend policy and opportunistic share repurchases. With this overview, I will now turn the call back to Jeff for closing remarks. Jeffrey Edwards: Thanks, Michael. I'd like to conclude our prepared remarks by once again thanking IBP employees for their hard work and commitment to our company. Our success over the years is made possible because of you. Operator, let's open up the call for questions. Operator: [Operator Instructions] The first question comes from the line of Philip Ng with Jefferies. Philip Ng: Congrats on a really strong quarter in a not easy environment. Your gross margin and EBITDA margin expanded nicely this year. So, pretty impressive. But in this current backdrop, when we look out to 2026, what's your confidence in protecting margins? Your largest competitor just reported results, they're calling out perhaps low single-digit price deflation in '26 and some price cost headwinds. So, how should we think about it as it relates to IBP? Michael Miller: Phil, this is Michael. Thanks for the compliment. We certainly are extremely proud with what the team has delivered not just in the fourth quarter, but this year. I mean, as it relates to margins, particularly gross margins, and I'll say at least probably 10 times today, like I do on every call, we don't provide guidance. But what I would say is that, as we look across the business, and we look at how well the commercial business is performing, we believe it will continue to do that. The other segment, which is the Manufacturing and Distribution segment is continuing to perform very well, and we think it will continue to do that. When we look at the core residential installation business, we really think of it as in 2 buckets. So, the first bucket being the regional private, move-up, custom, semi-custom builder. And we're really seeing relatively consistent demand there, which is -- we've seen that through really most of '25. And going into '26 as well, although clearly, which is something I'm sure we'll talk about on the call today, clearly, the year is off to a slow start, given some of the weather-related issues that have been experienced across the country. And so, what I would say is that where there's weakness and where there's pressure is within the entry-level production builder segment of our business. And right now, I think it's way too early to call whether or not there's an inflection and there will be an inflection in the spring selling season. Something that was a little bit encouraging, I would say, is that in the recent information released by the Census Bureau, if you look at single-family starts on a seasonally adjusted annualized rate, right? So, in the fourth quarter, those starts averaged about 6% higher than they did in the third quarter. Again, that was the seasonally adjusted annualized rate. So, that's a positive. And I think commentary from companies in our space that have reported have noted or highlighted that the production builders really decreased and slowed down their building in the fourth quarter in order for their standing inventory to catch up to demand. It's our belief that if the market is sort of flattish and we don't see an inflection on the entry-level side, that there'll probably be some level of rebuilding of those inventories. This continues to be a market where builders at the entry-level market are building spec. And we do believe there will be some recovery, if you will, in starts there that will be constructive. But as we look out from a macro perspective and sort of look at, again, that entry-level market, the affordability issue is still a real issue. And it's yet to be seen whether or not it is going to inflect positively this year and just how much it's going to inflect positively. If you look at -- I'm giving too much information on this one question, sorry. But I mean, if you'd look at what the public builders have disclosed from their guidance, I mean, they're talking about a pretty weak first quarter and really first half with an inflection -- pretty strong positive inflection in the back half of the year. Now obviously, we all know that's off of easy comps that helps drive that. But we think it's relatively constructive. And so, yes, I'm sorry if that was too much information on that one question. Philip Ng: No, that's great color, Michael. And then your commercial business has been a bright spot, right? It's growing nicely. It's a business you've improved and enhanced profitability. Is that an area where you guys can get behind a little more so from an investment standpoint, whether it's M&A or organic? Just kind of help us think through the opportunity set there, your ability to kind of continue to drive momentum? And do you plan to put a little more capital there to kind of support the growth? Jeffrey Edwards: Phil, this is Jeff. I would say, for sure, we'll -- as we always are, we'll be opportunistic as the situation kind of offers or demands. There is room for both organic growth and M&A growth. We haven't pursued it that hard yet because, quite frankly, we've been growing the base business enough where that hasn't been really tightening the screws. So, at this point, we feel very, very good about the business, and we do feel good about growth prospects going forward. Philip Ng: Okay. But Jeff, why haven't you put more thought or capital there? I mean, the base business has been a little squishier and this seems like a nice bright spot, and there's a lot of runway for heavy commercial, I think, for most companies that we cover. Jeffrey Edwards: I think it's really been probably the last 2 at most 3 quarters where we felt like it was really, really in a position where we didn't need to kind of continue to work the base business. But I think at this point, I'd say we're ready to try to grow that business. Well more than just organically because we've had a heck of a lot of growth really from an organic perspective. Michael Miller: Yes. And I think to Jeff's point, I mean, the key is that, that growth has been phenomenal, and it's not just been growth. It's been very profitable growth. And we wanted to make sure the team was ready to do additional acquisitions. The last thing we would want to do is kind of mess up their day, if you will, through the integration process of an acquisition and have them take the eye off the ball of the existing business. So, to Jeff's point, the past couple of quarters, we feel really confident that they've gotten to that point. Operator: Next question comes from the line of Stephen Kim with Evercore ISI. Aatish Shah: This is Aatish on for Stephen. I just want to talk about -- if you could talk about the M&A landscape? And has there been any change in terms of strategy in terms of what kind of companies could be targeted, specifically on that, just given interest from your largest competitor, has the commercial roofing market been an area of consideration? Jeffrey Edwards: Yes. This is Jeff again. As we've stated, I think, in previous calls, yes, we're definitely interested in the commercial roofing segment. And as you probably noted, we've done a few mechanical and industrial installation installers, and that's another area that we're interested in. So -- but again, I think we're on record previously as saying that we were interested in that business. So, I don't think it's a change in strategy. What I would say is that we've begun to really perform on those strategies a bit. But fundamentally, our core residential insulation installation business still presents tremendous opportunity for us, and we continue to pursue that area significantly just because we still have so much wide-open space as a company to acquire in that core business for us. So, it really is, if you will, a 3-legged stool in terms of our strategy there. Aatish Shah: That's helpful. And then, in the prepared remarks, you mentioned kind of a shift in customer mix in the Installation segment. Can you just detail that a little bit? Jeffrey Edwards: Yes. And just to clarify, that wasn't just insulation, it was the Installation business, so the kind of the residential installation business. And because we're continuing to see better sales rates with the semi-custom, custom builder and weaker sales rates with the production builder entry-level builder, that has a natural tendency, if you will, to improve and help gross margin. I mean just as a -- for example, during -- and this is based on the Census Bureau regions. But during the quarter, our Midwest Census Bureau region revenue was up mid-single digits, right? So -- and that market for us is -- it's, generally speaking, a higher gross margin market because of the higher amount of private semi-custom, custom homes that are built in that market. So, we definitely benefited in the quarter from our geographic mix as well as our customer mix from a gross margin and a profitability perspective. And I need to emphasize something that's very important is that our teams in the other regions of the country did an excellent job of maintaining profitability across the board with our customers and really highlighting and selling well to our customers the importance and quality of our installed services. And hats off to those -- to everyone in the field for doing such a great job. Operator: Next question comes from the line of Susan Maklari with Goldman Sachs. Susan Maklari: Let me add my congrats on a great quarter, guys. Well done. My first question is, talking about the growth that you've seen in the complementary products. That's something that you've really focused on recently. Can you talk about where we are in that process? And as you think about 2026 and the comps that you're going to face there, are there any implications we should be thinking about as that relates to the path for margins or for the growth that you're going to see coming through? Michael Miller: Yes. Sue, this is Michael. I mean, we have continued to see good uptake in the complementary products. The one thing I will say is, in the way that we sort of disclose those numbers in our investor PowerPoint, there's quite a bit of the complementary products that are related to the heavy commercial business. So that skews some of it. But I would say if we -- when we look at the information and we take out the heavy commercial business and look at just the complementary product sales growth and margin growth within the installed segment, again, excluding the heavy commercial business, it continues to improve, and we believe that we'll continue to see good uptake on the complementary product side. As we've talked several times, the lack of opportunity or the softness in the single-family market really helps drive uptake of the complementary products within the branches. Because compensation is so closely tied to profitability within the organization, the salespeople, the branch managers, the people that are running our branches are really focused on -- more focused on the complementary product opportunity when the insulation opportunity is a little bit softer, particularly at that production builder level. And within the production builders at the entry level, we do have very good complementary product penetration because of some of those efforts. Susan Maklari: Okay. That's great color. And then, you mentioned that you've recently done some more deals in the mechanical space. Can you talk about your interest there, where you are in that process? How we should think about what that could mean for the future of the business? And then maybe with that, any comments on your efforts to build out distribution as well and just where we are there? Jeffrey Edwards: Yes, Susan, this is Jeff. So, we definitely -- as Michael said, I mean, I guess if you wanted to consider it a third leg, we look at the mechanical and industrial as a huge opportunity for us. It's a business that's extremely fragmented. I would say, on average, the prospective businesses that we've looked at have been a little larger than what we see typically at some of our other kind of regular way acquisitions, and margins are very favorable in terms of overall for the company. So, we -- at this point, obviously, we think we'd love to find a little bigger business and kind of build out a platform. So, we'll see what the future brings, but that's definitely something that we're looking at. And on the internal distribution or the distribution side of the business, we've been very pleased with the progress we've made really in the last 2 quarters within that business. We -- at this point, I'd have to probably guess a bit, but I would bet that we are servicing 60% to 70% of our branches at this point from probably about 5 to 6 locations. And we have a few more to add. But otherwise, it's worked exactly as we thought it would, and it helped our margins. Michael Miller: Yes, certainly our gross margin. Operator: Next question comes from the line of Adam Baumgarten with Vertical Research Partners. Adam Baumgarten: Just on the -- you mentioned some positive mix impacts on gross margin from the better growth in custom and semi-custom and some regional factors like the Midwest. But the strong growth in heavy commercial, did that also contribute to the gross margin expansion? Michael Miller: Yes, absolutely. I think in the third quarter call, we sort of called out that we didn't expect that much of a tailwind, if you will, from the support or of the improvement -- profit improvement within the heavy commercial business. But I guess we were sandbagging a little bit there, quite frankly, because the heavy commercial business did continue its relative outperformance and we would estimate that the heavy commercial business added about 40 basis points or so to the gross margin improvement. Adam Baumgarten: Okay. Got it. Great. That's helpful. And then, just digging into the heavy commercial strength, I mean, was it pretty broad-based? Are there certain verticals like maybe data center that were kind of outsized contributors? Or just kind of what you're seeing there maybe by an end market vertical perspective in heavy? Michael Miller: Yes. And so, Brad Wheeler, our Chief Operating Officer, is here, and I'm going to have him add some color to this as well. But it's not data center related. I mean it's across the board with the big exception of high-rise multifamily. It's a lot of educational, it's health care, it's recreation, transportation. While we do some data center work, we don't chase it like other companies do. Brad Wheeler: This is Brad. Yes, it's really -- we've maintained our core, right, the educational and the -- even some of the offices is back, which has helped. Manufacturing has increased, which is great. So, it's really us sticking to our core and taking advantage of any data centers that we have in our platform. Operator: Next question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut: I wanted to first kind of go back big picture a little bit with the gross margins. We've had many quarters now where you've really executed very strongly and kind of at or above that 32% to 34% range that you've talked about. There's also been, as you've highlighted, good improvement in commercial. You're benefiting from the mix on the semi-custom and the geographic. And I'm just wondering, with all those factors kind of benefiting the margin, if you've kind of given any thought to perhaps thinking about gross margins over the next couple of years, maybe above that 32% to 34%, particularly given the strength in the fourth quarter. Michael Miller: Yes, that's a great question, and I'm glad that you asked it. We would -- it's our expectation that the gross margins would continue to be, particularly on a full year basis in that 32% to 34% range. As we were saying earlier to the answer to another question, I mean, fundamentally, when we look across the business, the only part that where we don't have really good visibility into either being flat or up is the production builder entry-level market. We believe when that market inflects and it will, we are very well positioned to participate in that upward inflection, but it will necessarily pressure gross margin just because that work is at a much lower gross margin. Now what it does come with is great OpEx leverage. So, it will improve -- it should improve OpEx leverage and improve EBITDA margins. So, right now, we're really just working hard to -- obviously, the parts of the business that are either flat or up, we're doing everything we can to maximize profitability there and positioning the business to really do well once that inflection happens. We really are confident about the team's ability to flex up to meet that demand when it comes. And it's way too early, as Jeff said in his prepared remarks, I mean, it's way too early in the spring selling season to say whether or not we're going to see the inflection this year. But I do think there is some opportunity with the production builders sort of rebuilding inventory, if you will, in the first half of the year. Michael Rehaut: Okay. No, I appreciate those thoughts. I guess, secondly, I was hoping you could review where you are from a price/cost standpoint in the fourth quarter. And you just had your competitor out earlier this morning talk about anticipated price/cost headwinds for 2026. I was curious on your thoughts of how that dynamic you expect -- how you expect that dynamic to play out for you in '26 and if that might be a headwind as well relative to what you're seeing in your current results? Michael Miller: Yes. I mean, certainly, at the entry-level part of the business, there's definitely price/cost pressure. The team is doing an excellent job of trying to manage through that. But there's definitely going to be pressure there until that entry-level aspect of the market inflects positively. But our team, again, I think they're doing a really good job of trying to manage that, but there's clearly pressure there for sure. And clearly, in the first quarter, we're going to have pressure from the weather. We estimated that in January and February that the weather impact was about $20 million to revenue in the first quarter. Now we're working to make that up, and we will work to make that up, but we're not going to be able to make that up in the month of March. It's just not going to happen. So, it's definitely making that up "is going to fall into the second quarter." So yes, we're going to face pricing pressure with our customers. But I think as a company, we know that we've done an excellent job, and we believe our results reflect our ability to effectively manage that price/cost pressure. Michael Rehaut: So, is it fair to say then, Mike, that you're not -- you're expecting the pressure to continue, but maybe not incremental relative to what you're seeing already in your 4Q results? Michael Miller: Yes. I think that's reasonable. Although the first quarter is always our weakest quarter, right? And the headwind that we have because of the weather impact, obviously, is going to be tough. But if we think of it, and we like to think of it on a full year basis as opposed to a quarterly basis, we feel good about what the team has been able to do. And if we have a flat to slightly down single-family market, excluding any acquisitions that we do, given the strength that we're seeing in the commercial business and the Manufacturing and Distribution business, we feel pretty good about the year in general, right? So, obviously, it's late February. It's hard to call a year at this point, but there's definitely reason to be pretty encouraged. Operator: Next question comes from the line of Mike Dahl with RBC Capital Markets. Michael Dahl: I want to take that last question and kind of flip it around and ask, in the fourth quarter, did you actually experience some effective price/cost benefits? I know there's a lot moving around in terms of mix and different types of mix, but it seemed like there was some opportunity for buyers such as yourselves to get some lower pricing on resi fiberglass in the fourth quarter and your reported pricing, again, understanding there's a lot of mix, but it was up. I'm just wondering if that -- if there was something like that, that actually also contributed to the gross margins because the heavy commercial disclosure was helpful, but margins being up 100 basis points year-on-year, even taking that aside is pretty impressive. Michael Miller: Yes. I mean it is predominantly mix related and the team's ability to manage the cost structure as effectively as possible in the current environment. So, I think there's been a lot of discussion around fiberglass pricing, the fiberglass manufacturers. In our opinion, and I'll have Jeff or Brad talk a little bit more about this. I think they've done a good job of managing capacity relative to the demand environment and I think they've done an excellent job of maintaining price. And I think it's clear to us that what they're focused on is maintaining price in the current environment so that when there's an upward inflection, they can keep that price as opposed to lowering price now and making it more difficult to get price back when there is an upward inflection. But I don't know if you guys want to add anything to that. Jeffrey Edwards: I think everything you said is accurate and I wouldn't add anything. Michael Dahl: Okay. Got it. Appreciate that. Second question, just on the commercial side and heavy commercial, it's interesting the comments on maybe doing some more inorganically now. Just on the organic side, I mean, with this type of strength in same-branch sales and the backlog that you're seeing, when we think about like organic OpEx or capacity expansions, how are you thinking about that in 2026? Do you really need to start to do more to support the growth that you're seeing in that segment? Michael Miller: Yes, that's a really good question given the growth rates that we're seeing. I mean, we clearly benefit from the highly variable cost structure. But I'll ask Brad to give some more commentary on our ability to bring up capacity to support the demand. Brad Wheeler: Sure. This is Brad again. Yes. So, a lot of it -- we expanded our geographic area as well. And part of the organic growth strategy would be, we go get jobs in other markets where we generally aren't participating. We build a backlog. And then once we have settled, we have employees and installers in that area, we're able to go and open an office. And that's sort of how we have our strategy set up right now. In addition, we are looking at other markets throughout the country that we feel would be a good fit to organically grow there as well. And, obviously, of course, acquisitions as well. Michael Miller: But our ability to flex both in the heavy commercial business, the light commercial business, all of the install businesses, our ability to flex up or down is very significant. I mean, obviously, we wouldn't disclose individual branch results, but there are some branches in Texas and Florida that have had pretty significant sales declines over the course of the year and particularly in the fourth quarter, but they have maintained their margins, right? And that speaks dramatically to the heavy variable cost structure of the business, and importantly, the manager's ability to manage effectively, right? One of the things that we believe, structurally, we benefit from is the highly variable compensation within the organization and particularly within the branch managers that provides a powerful incentive for them to manage the cost structure, whether that's managing it up or down based upon the volumes that they're seeing. Operator: Next question comes from the line of Ken Zener with Seaport Research Partners. Kenneth Zener: So, again, perhaps even more pronounced this quarter given your gross margin, the regional -- well, production builder versus your other bucket, right, has been affecting mix and you talked about margins, right, with customer mix, I think that's the same thing. Is there a way -- since you're disclosing so much, Michael, in terms of gross margin from commercial and they're up in res, is there a way for you to bucket the growth rates you're seeing in -- or the different rate of change within your production bucket versus your other regional bucket? [indiscernible] the magnitude is pretty good. I believe you said the regional you see flat or up, if I heard you correctly, you might have said that. Just any comments would be helpful. Michael Miller: Yes. So, if we look at it on a full year basis and we look at the private regional builders, basically, our business with them in the year was flat. If we look at our business with the production builders and when we say production builders, we mean the public builders, right? Because we can use them and talk about them in a different way because their information is public, right? So, when we're talking about sales with them, we're talking about, again, the public builders, not even a big private builder like David Weekly Homes. So, from the public's perspective, if we look at their homebuilding revenue, right, for the full year, it declined around 6%. And our revenue with them was down around 6%, which is exactly what you would expect. But that, again, was more than offset with the positive -- flat to positive growth that we had with the private builders. So, we feel that we're doing exactly what we're supposed to be doing. We're maintaining share with the publics, the production builders and working closely with them to not just maintain share, but maintain price and maintain profitability and to be there and to be able to support them when there's the inflection, but at the same time, leaning in and focusing very hard on our geographic weightings and our customers that are either growing or are at flat. So, the team is doing an excellent job of identifying where the opportunity is and working hard to maximize the benefits with that. Kenneth Zener: Really appreciated those comments. Now -- in regards to weather, which isn't something that historically, I think, is such a big deal, the seasonality 1Q from 4Q, it's been kind of all over the place. But if it's historically down, call it, mid-single digits, it sounds like you're expecting worse seasonality just because of the weather patterns we've had. Is that correct? Michael Miller: Correct. Operator: Next question comes from the line of Keith Hughes with Truist Securities. Keith Hughes: I've a question about multifamily. I've seen the government data, too, it shows a rebound -- pretty profound rebound in multifamily. Are we actually seeing that kind of boots on the ground? Is it that good? Or is it more just a bottoming going on? Michael Miller: Yes, Keith, that's a great question. And I'm really glad you brought it up because we wanted to talk about it. So, we believe based on -- so this is at a macro level, based on the information from the Census Bureau that was delayed a little bit, but that recently came out that multifamily cycle times have basically normalized to kind of pre-COVID, pre-supply side disruptions. And that was really driven by the fact that for the full year, multifamily starts were up like 18% and units under construction were down 13%. So, we believe that the multifamily market is coming into, if you will, equilibrium. There will still be some headwinds. I think in the first half of -- I don't think I know, in the first half of this year. Our team has done, as much as we sing the praises of the heavy commercial business, the reality is that multifamily team across the country and particularly CQ, we call out all the time, have done an incredible job of just outperforming dramatically the market opportunity that exists there. We have a lot of confidence in their ability to continue to do that. I mean their backlogs are growing and they're doing a great job of increasing the complementary product penetration within multifamily. So, yes, I mean, based on the starts for '25 coming into '26 and recognizing that the cycle time for multifamily is much longer than it is for single-family, we think that bodes well for full year '26 on the multifamily side, especially given the easy comps that all of us in the industry are going to be facing as it relates to multifamily. I would say, too, just because we're talking about cycle times, on the single-family side, cycle times are probably the best they've ever been. And I think a lot of the big production builders have talked about how efficient their cycle times are currently. And again, building on some of the comments that we made earlier, when we, again, look at the business and the only part of the business that we were not really confident in is the single-family production builder business, because those cycle times are so tight at the entry level, as soon as there is an inflection, the inflection to our install time is going to be very short. So we're going to feel it very quickly, and we'll scale up for it very quickly, unlike multifamily, right? Because the bid and book time on a project to when we actually do the install can be 12 to 18 months, right? So, this single-family inflection on entry-level production builder side can be pretty meaningful. It will be meaningful when it happens. We just don't know when it's going to happen. Operator: Next question comes from the line of Collin Verron with Deutsche Bank. Collin Verron: I was just hoping you can talk about IBP single-family branch sales growth relative to the national market in the fourth quarter and just how and why that might have changed from sort of how IBP performed versus the market in 2Q and 3Q? Michael Miller: Well, we continue to perform sort of above the market opportunity, I would say, and -- I mean, clearly, and we've talked about this for the past several quarters, we clearly benefit from our regional weighting towards the Midwest and the Northeast. I mean when we look at our single-family revenue and we look at our market share by census region, our largest, highest market share is clearly in the Midwest. And as I think pretty much everybody knows, the Midwest has been doing fairly well on a relative basis to the rest of the country. So, we feel good about the mix that we have. As I think we've said a couple of times, I mean, we're positioned very well with the production builders, entry-level builders once the inflection is there. But until that happens, we're continuing to lean in on our private and semi-custom, custom builders and to kind of work with the advantages -- inherent advantages we have from our regional diversification. Collin Verron: Great. That's helpful color. And then just really quickly on the commercial performance. I believe you characterized the backlog as healthy. But I was just curious if there's any more finer points you can put on sort of what you're seeing in the backlog in that early part of 2026 here and how much visibility that really gives you? Michael Miller: It's very healthy. So we feel very good about the business. I mean there's -- right now, it's just -- it's working incredibly well. And to be honest with you, since Brad's here, the team deserves a tremendous amount of the credit, but the leadership that Brad has brought to that team has been phenomenal. Brad Wheeler: Yes, absolutely. Michael Miller: And they've really stepped up. I mean it's just -- it's so impressive how well they've stepped up. It's just -- it makes us feel very proud. Operator: [Operator Instructions] Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Jeff Edwards for closing comments. Jeffrey Edwards: Thank you for your questions, and I look forward to our next quarterly call. Thank you. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Codere Online Fourth Quarter 2025 Financial Results. [Operator Instructions] I will now hand the conference over to Guillermo Lancha, Director of Investor Relations and Communications at Codere. Please go ahead. Guillermo Lancha: Thanks, operator, and welcome, everyone, to Codere Online's earnings call for the fourth quarter of 2025. Today, you will hear from our CEO, Aviv Sher; and CFO, Marcus Arildsson, our Executive Vice Chairman; Moshe Edree, will also join us in the Q&A session. Please note that the figures reflected in today's presentations are preliminary and unaudited and include certain non-IFRS financial metrics, which should be considered in addition to our IFRS results. Reconciliations and further details are available in the appendix. During this call, we will make forward-looking statements, which are subject to risks and uncertainties. While these statements reflect our current expectations, we undertake no obligation to update them after this call. A replay and transcript will be available at codereonline.com, where investors can also sign up for e-mail alerts. With that, I will go ahead and pass the call on to Aviv. Aviv Sher: Thanks, Guillermo, and thanks to everyone for joining us today. Before we go into details, I would like to say that we are very pleased with how we finished 2025, especially considering the number of challenges we faced during the year. We delivered a strong set of results with a record net gaming revenue of EUR 224 million and adjusted EBITDA of EUR 13.8 million, more than double than prior year. And we once again met the guidance range we had provided for the year. This gives us a lot of confidence in the strength of our business and our ability to continue growing profitability in 2026 and beyond. Starting with the highlights of the fourth quarter of 2025 on Page 8. We delivered EUR 60 million in net gaming revenue, which represents a 15% increase versus the fourth quarter of 2024 and the highest quarterly NGR in the company's history. This strong finish to the year was driven primarily by Mexico, where net gaming revenue grew 31% year-on-year and by continued growth in Spain, where NGR increased by 7%, confirming that the reacceleration in top line that we started to see in the second half of the year continued through year-end. In terms of product mix, casino accounted for 64% of our total net gaming revenue in the quarter, with remaining 36% coming from sports betting, broadly in line with what we have seen over the last few quarters. We continue to see casino a very important growth and engagement driver for the business, especially in markets like Mexico. From an operating KPI standpoint, the performance in the quarter was mainly driven by continued growth in our active customer base. We reached around 177,000 average monthly actives in Q4, which is 20% above the same period last year, reflecting both the strength of our acquisition funnel and improvement in retention. Average monthly spend per active was EUR 114, approximately 4% below Q4 of last year, which is consistent with the larger and more diversified portfolio of customers, including a higher proportion of Mexican players. On the acquisition front, we continue to invest in growing our customer base. During the quarter, we acquired 89,000 first-time depositors at an average CPA of EUR 166, the lowest level since early 2023 and which remain an attractive level, given the quality of the customers we are bringing on to the platform. We will continue to optimize the mix of the channels and campaigns, particularly in Mexico, but always with a clear focus on profitability and payback rather than absolute volume. In relation to our share buyback plan, we have continued to execute on the program we announced last year. Through yesterday, we have purchased approximately 391,000 shares of a total consideration of around $2.7 million under the plan, which has a total authorized investment of $7.5 million and runs through December 31 of 2026. We see this as a very attractive use of capital at the current share price levels, and a clear reflection of the Board and management confidence in the medium-term outlook for the business. Looking ahead, as Marcus will detail later for 2026, we are guiding net gaming revenue in the range of EUR 235 million to EUR 245 million and adjusted EBITDA between EUR 15 million to EUR 20 million. This guidance incorporates the management initiatives we are planning for 2026 as well as the impact of recent regulatory and tax changes in our markets, and we think it reflects confidence that we can continue and grow both the top line and profitability going forward. With this, I will now turn the call over to Marcus for the first time, I think. Good luck, Marcus, and cover the financial highlights for the quarter. Marcus Arildsson: Thanks, Aviv, and hello, everyone. If we now move to Slide 10, you can see our consolidated net gaming revenue and adjusted EBITDA by country. So in the fourth quarter, NGR revenue increased by 15% year-on-year from EUR 52.6 million to EUR 60.7 million. This growth was driven primarily by our 2 core markets. Mexico, net gaming revenue grew by 31% to EUR 32.8 million and Spain, where it increased 7% to EUR 24.5 million. In our other markets, Colombia, Panama and City of Buenos Aires, these markets contributed EUR 3.5 million in the quarter, 25% less than in the prior year quarter, as a result of the decline in the Colombian revenue on the back of the 19% tax on deposits that have been in effect for most part of 2025, but expired towards the end of the year. This top line performance is translating into profitability and reflects operating leverage in our business model as we scale and as well as continued improvements in marketing efficiency and certain cost discipline. In the fourth quarter, we delivered positive adjusted EBITDA of EUR 6.7 million, which was EUR 4.8 million above Q4 of 2024 and included EUR 7.1 million of contribution from Spain and EUR 4 million contribution from Mexico, which has now clearly inflected towards profitability. For the full year 2025, adjusted EBITDA reached EUR 13.8 million, more than double the EUR 6.4 million we reported in 2024 and in line with the upper end of the guidance we provided a year ago. If we move to Page 11 to have a look at our consolidated P&L. There, you can see marketing expense was EUR 21.4 million, slightly below last year in absolute terms and significantly lower as a percentage of NGR, reflecting improved efficiency in our marketing spend. The rest of our operating expenses, namely platform and content costs, gaming taxes and personnel were essentially in line with the growth in NGR. Altogether, this cost structure resulted in an adjusted EBITDA of EUR 6.7 million in the fourth quarter, implying an EBITDA margin of around 11% compared to less than 4% in Q4 2024. Looking now at our consolidated figures on Page 12. You can see the key operating metrics that underpin these results. The 50% growth in net gaming revenue in Q4 was driven by higher average monthly active players, which reached approximately 177,000 players, 20% above those of Q4 2024. The growth in active customers was fueled by higher FTDs, which increased by 89,000 in the quarter, 22% above the prior year period. On the bottom right, you can see that customer acquisition efficiency remains at attractive levels with a consolidated CPA of around EUR 166 and trending downwards in the quarter. Taken together, these KPIs confirm that we're bringing more customers onto the platform at good unit economics and keeping them engaged over time. Turning to Spain on Page 13. Net gaming revenue in the fourth quarter was EUR 24.5 million, up 7% versus Q4 2024 as a result of a 14% increase in the number of active customers to 56,000. With Spain being a mature and tightly regulated markets, especially in terms of advertising, we are pleased to continue growing our portfolio of customers while maintaining a strong profitability. Looking at Mexico on Page 14. Net gaming revenue increased 31% year-on-year from EUR 25.1 million to EUR 32.8 million. As opposed to prior quarters, the Mexican peso was roughly flat in the fourth quarter of 2025 compared to the prior year period. Revenues were primarily driven by very strong growth in active customers, which grew to around 99,000 in the fourth quarter 2025 compared to 69,000 in the same period the previous year. In December, we reached more than 100,000 active customers in the country for the first time, a very exciting milestone for us as we continue to build a sizable portfolio ahead of the World Cup later on this year. As discussed during last year, player value from customers acquired throughout 2025 has been lower than in prior years, but they've also come with a lower upfront CPA. And our performance this quarter reflects that optimization between the existing portfolio and the new acquisitions. All in all, Mexico continues to be the growth engine for Codere Online. We're building scale, increasing brand awareness and improving our product and customer experience in the country, all while remaining focused on profitability. If we turn to the balance sheet on Page 15, you can see that we closed this year with EUR 50 million of total cash, of which approximately EUR 45 million is available. These figures include the impact of EUR 2.4 million in share repurchases that Aviv commented on. In terms of our net working capital position, we ended the year with a negative EUR 22 million or around 10% of our full year net gaming revenue, which is in line with prior quarters and our structural negative working capital position. This combination of negative working capital and growing scale supports our cash generation, which we expect will continue to improve and give us the flexibility to keep investing in growth. And as we have started to do, return capital to shareholders through the share buyback program. Turning to Page 16, looking at our cash flow. We generated EUR 13.4 million of cash flow before share repurchases and the FX impact on cash balances. This shows that the business is now delivering not only positive adjusted EBITDA, but also converting a significant part of it into cash flow. As a result, our available cash increased by close to EUR 10 million from EUR 35 million at the beginning of the year to EUR 45 million at the end of 2025. Finally, turning to Page 18, where we are providing our 2026 outlook. As Aviv mentioned earlier, we expect net gaming revenue in 2026 to be in the range of EUR 235 million to EUR 245 million, which at the midpoint represents around 7% growth versus 2025. We also expect adjusted EBITDA to be between EUR 15 million and EUR 20 million compared to EUR 13.8 million in 2025, which is more than 25% growth at the midpoint of that range. This outlook assumes a marketing -- excuse me, this outlook assumes a marketing investment broadly in line with that of 2025, which we believe is the right decision given that 2026 is a World Cup year and was also considering the current competitive landscape in Mexico. We want to make sure we fully capture this opportunity to reinforce our brand and further expand our customer base in what is already our key growth market. At the same time, we continue to see clear evidence of operating leverage in the model. As our brand matures and our customer base growth, we expect that over time, marketing as a percentage of the net gaming revenue will continue to trend down while still allowing us to grow the top line. In other words, 2026 is a year where we are leaning into the opportunity in Mexico, but we see a path forward towards a more efficient marketing profile in the medium term. That's all from my end. I will now hand it back to Aviv for some closing remarks. Aviv Sher: Thank you, Marcus. Before we move to the Q&A session, I would like to thank once again to the whole team. It's been a hard year, and we worked very hard in order to accomplish these results. The start, as you remember, was a bit bumpy, but we finished strong as expected and as we promised to the market. I would like also to thank the investors and the analysts that have joined us today for their ongoing support and interest in Codere Online. With that, I will hand the call back to the operator to open the line for questions. Thank you. Operator: [Operator Instructions] Your first question comes from the line of Michael Kupinski with NOBLE Capital Markets. [Operator Instructions] Michael Kupinski: I'm just wondering, how competitive is Spain currently on promotional activity? And are margins stabilizing in that market? And then I just have a couple of follow-ups on Mexico. Aviv Sher: Okay. So thank you, Michael. We still see it competitive, but we are seeing that it's kind of going into a plateau. And we are able to grow our customer base with the current promotional -- let's say, the current promotional activity or current promotional KPIs that we are using. It took us a couple of quarters to stabilize it, but we are seeing 2 consecutive quarters with growth. So I think we've kind of found out what to do with all these promotions going around. So it's competitive, but I think we are able to compete now. Michael Kupinski: Got you. And then in Mexico, I was wondering if you can update us on the regulatory environment there. I know that there was some discussions evolving around the federal regulations. And I was wondering if you can give us an update there. And then more recently, I know Mexico had some issues about some of these cartels and things like that. I was wondering if that had any impact on your business there? And in particular, how that might be affecting maybe some of your marketing efforts in Mexico? Aviv Sher: Regarding the regulatory framework or the federal regulatory framework, unfortunately, I have no news. It's been -- the government has been busy, as you probably know, with other things like what you've mentioned with the cartels, are there some internal fights. We are also aware that 2 of our largest competitors there were shut down due to, let's call it, regulatory problems, but it's more political problems internally. And they are not cooperating at the moment, building a regulatory framework, so I would say that the conversation with them are a bit stuck. Maybe it will -- at the beginning of this year, they will come back and continue this legislation process. As you know, they increased the tax. I think they chose that over completing the regulatory framework, and this is their solution at least for the short term. Regarding cartel and the news, the online business is not affected. We didn't see any changes in the numbers if this is the question. Retail location, I'm not sure I'm able to comment, but in general, if the government orders to close down locations or close down areas, than we are doing as the government are saying. But in the terms of online activity or our marketing efforts, nothing has changed at the moment. The city itself is safe. The areas around the cities are safe. So... Moshe Edree: It's Moshe here, Michael. I think that's an opposite. I think that towards the World Cup, both the regulator and the government will have motivation to keep things calm as possible and to give some sort of like a friendly environment to sport, which will support us in the online. Michael Kupinski: Yes. And I was thinking just weirdly that it may be that more people staying at home might play more casino games and things like that online. I thought that maybe that might even benefit you in a way. Moshe Edree: From what we hear from our guys in Mexico, it's not as big as it sounds in the news. I mean it's not like huge riots. It's very local and in certain areas. Operator: Your next question comes in the line of Jeff Stantial with Stifel. Jeffrey Stantial: Maybe just hitting on guidance and the Mexico tax hike, which is where we've been getting most of the questions. Can you walk us through the financial impact contemplated in guidance, both in terms of the gross impact as well as what you're assuming for mitigation? Aviv Sher: Yes. You want to start, Marcus, do you want to comment on that? Or you want me to take it? Marcus Arildsson: Sure. No, I can start. I mean, first point, maybe we don't give precise individual guidance on specific items in specific countries. Having said that, the increase in tax is a negative for us as it is for all players and all our competitors in the sector in general. The things we've been doing, when you think about the outlook for this year, it's -- the outlook is a net effect of many, many issues. One of the issues is the tax issue in Mexico. As you know, and as I think we detailed in the previous call, in the last call in November, we are taking a number of mitigation measures in Mexico, both in terms of, number one, our marketing front; number two, in terms of certain of our suppliers that we're working with and overall operational efficiencies. That's what we're doing principally in Mexico. And I don't know, Aviv, if you want to add something else to that... Aviv Sher: I just want to comment to answer your question. I think in terms of revenues, we don't see a risk to the revenue generation. We will continue to generate revenues. In terms of marketing investment decisions regarding this year budget 2026, we are -- we managed to -- through our models to keep at least the same level of investment or not even more with the World Cup coming. So this will not be smaller this year. Regarding the EBITDA, there will be an EBITDA effect. We see it. It's not as big as we thought. We are able to mitigate most of it. There is some effect, but it's not a danger to the business. The business will continue to grow. And I think the guidance that we gave is, let's say, very -- we don't bake in optimistic number there. This is very down to earth like we always do. And we believe that we can deliver those results. Jeffrey Stantial: Great. And I guess just to follow up on that a bit. Can you add some color on what you've seen from competitors following the tax hike? Have there been any immediate exits? Has promo and marketing behavior adjusted yet? And how do you see that adjusting going forward heading into the World Cup? Aviv Sher: Well, we all know, as I said, that from a regulatory point of view, 2 big competitors have shutdown just before the World Cup. We are still not -- we don't have the news that they are returning or coming back to the game. And we think that some -- we know that some competitors want to come into the market. We hear the rumors, we talk to people. The fact is that there is no change as we speak, in, let's call it, the advertisers map in Mexico, it's still the same, but minus 2 big competitors. I didn't see yet new comers with big budgets. I know that they are talking. We heard the rumors. I know some of them are contemplating whether to come in now or not with those tax changes. Eventually, I believe they will come in. But at the moment, as we speak, I didn't see any changes in this map. It's still the same as the last, let's say, 3, 4 quarters, minus 2 big competitors. Jeffrey Stantial: Great. And if I could squeeze one more in. Maybe given the change in player values in Mexico, how does this sort of change your prioritization of geographic expansion and investment elsewhere in Latin America? Aviv Sher: No, I think the opposite. I think we are seeing less -- our CPA went lower. The player value for Mexico is a bit higher or a bit lower or remains the same, let's say, around the same number, but CPA is lower. So the ROI is better. We will continue to invest into Mexico. Going into new markets at the moment before the World Cup, I don't think it's wise for us. I think we will continue if we have, let's call it, excessive income or excessive EBITDA, the next dollar, we will still invest into the 2 core markets that we have, which is Spain and Mexico. In Spain, also, we see good results, and we see opportunity to grow. We are growing. So still our money, ROI on the investments over those 2 markets is still big. I don't see us coming into new markets in the near future. Operator: [Operator Instructions] Your next question comes from the line of Arthur Roulac with Three Court. Arthur Roulac: I have a couple of questions. One, can you chat a little bit about Colombia now that the -- I guess, the VAT tax, I believe, has been removed and what that may mean or may not mean in terms of investment and opportunity going forward there? Can you hear me? Aviv Sher: We can hear you. I don't know if you want to start taking the question... Arthur Roulac: Oh, did you not hear my question? Aviv Sher: We have Internet problems, I think, on my end. Can you repeat it, please? Arthur Roulac: Sure. Sorry, Aviv. I was just asking about Colombia. Now that the VAT tax has been, I believe, repealed at the end of last year, maybe early this year. What do you view is like are you going to be putting money back into that market? Are you viewing it more positively? What are your thoughts about it? Aviv Sher: Yes. So yes, it's a good question. The straightforward answer is that we are still not sure if this VAT removal is permanent or not, I'm still not able to get a final answer from lawyers. Let's say, in the past few weeks, since the removal, we see good recovery in our clear database. At the moment, until it's clear to us whether this VAT removal is permanent or not, we will not continue to invest. Once we understand if this removal is permanent, then we are able to take this decision. For now, we are enjoying players coming back, enjoying our promotions. So it's a positive KPI. And right now, in our budgets, we are still treating the VAT as if it exists. So there is a small upside there if we understand that this VAT removal is permanent. Marcus Arildsson: Maybe just to add to the, Aviv as well. Of course, we have the elections on the horizon. And another point also just to mention, just recently within the last few days, there were some further legislative changes in Colombia which seems like there is a small tax that we may be caught up in, which is not a gaming tax, but it's a small additional tax that have been introduced under the last emergency decrees that have been instituted in this country. And so I just wanted to mention that the environment continues to be fluid, and we would like to -- we'll be a little bit more on the sidelines, so to speak, until that we see that the environment turns up and that we can have more certainty around the outlook for the medium term. Arthur Roulac: Got it. On the marketing side, obviously, revenues have grown a lot. I think when you originally raised money, you're doing about EUR 80 million and let's say, you do EUR 240 million, EUR 245 million, EUR 250 million this year. Marketing as a percent has come down a lot. Most of your competitors that are more mature, I think they'll be in like the low 30% range this year, are down at between 15% and 20%. Can we think about as a steady state marketing? Is there a reason to think you'd be materially different than the rest of the industry around the entire world from a marketing as a percent of revenue once you get in a more steady-state period? Aviv Sher: Yes. I'll answer to that. I think it's an easy question and an easy answer. In Spain, where we are more mature, you see those kind of ratios, even less, right? We are in the same way, the same behavior, let's say, like the rest of the world. In Mexico, we still believe we are in a growth phase, and we have a strong competition with Caliente and others that are putting heavy funds into the market. We do see low CPAs there. So we believe that we are still in a growth phase. In a growth phase, you cannot maintain those kind of ratios. So -- and right now, Mexico consists most of the marketing spend. So if you separate between Spain and Mexico, in Spain, we are meeting this criteria. In Mexico, I think in the future, not the near future, we will be able to meet this criteria. But we are still in a growth phase. I still want to make more investments and to take more market share, especially with 2 competitors right now that are down. World Cup is coming up. So let's say, Spain, we are already there. Mexico will take us more time to meet it. Moshe Edree: And I want to add something, it's Moshe. It's a very conservative approach to analyze the ratio between marketing spend and revenues. I think that what is more accurate and more I think that from our perspective, at least, it's about the cost per acquisition. And as far as we can lower with the same quality of players, the cost per acquisition, by many aspects of efficiency and some actions that we are taking with the CRM. So we prefer to approach and to purchase as much as we can in players as kind of like a firepower for the year ahead. So it's less about how much we're spending versus the revenues. It's more about how many players can we acquire with a certain amount of CPA as a target that we give ourselves, but we know that the ROI is on a certain multiple of returns over years. And in Mexico, as Aviv said, we still see a very good ratio. We see that we can maintain very stable and even getting lower the CPA over time. By the way, that's what dictates in the end, the market share. I mean that's how you build market share in the market. Arthur Roulac: I've got 2 more, I'll just squeeze in. One, in the revenue guidance, are you making any assumption about foreign exchange in there. Are you just assuming that where the foreign exchange was at the end of the year will be consistent throughout the entire year? Aviv Sher: Marcus, do you want to comment on FX? Marcus Arildsson: Yes, sure. Well, I mean, we have our forecast. So at the end of last year, the forecast that we had built in into observing the market, the foreign exchange market and the forwards with respect to the exchanges. That's what we have built into our guidance. Of course, the guidance will be subject to those exchange rates in reality moving up and down during the year. So I think so far in the year, the Mexican peso has improved a little bit with respect to the euro. So that is helpful for us. We'll see how it continues to develop during the year. But clearly, there is an FX component in the forecast. Arthur Roulac: Got it. And my final one is, can you share you what competitors have been perhaps rumored or market chatter with around who may or may not be interested in entering the Mexican market. Aviv Sher: Yes. So we are -- we heard about Hard Rock wants to come in. We know a company from Spain called VERSUS, which is R. Franco, that are planning to come in. We know Sportium with Ganabet that already bought a huge sponsorship with Tigres wants to come in. And we know that local players like Big Bola just changed platform and wants to make investments. I think those are like, let's say, the 4 big ones that are sitting on the fence. But in terms of advertisers map, I haven't seen them. Novibet is there on the background with the sponsorship with Cruz Azul that is not taking a lot of attention. So there are competitors. I think right now, the big ones are the ones that are taking position is Playdoit just behind us, I think, and Winpot is over there as well. So yes, the market is becoming more and more as, let's call it, saturated in terms of advertising on TV, still Caliente and us are leading the market by far. Operator: Your next question comes from the line of Ryan Sigdahl with Craig-Hallum. Ryan Sigdahl: Good day, guys. Nice execution. Sticking on kind of World Cup marketing spend. Last quarter, you said that you were going to kind of lean back into the higher player values, probably CPA going up just based on the channel mix you were going after. It feels like you kind of continued with the same trend you were -- or strategy you were doing last quarter or recently this year. I guess maybe talk through what you're seeing if that strategy changed from the update you gave last quarter and kind of where you're targeting and which channels for those players? Aviv Sher: Okay. So what happened in the last quarter, if you remember, is that we bought low player value with low CPA and this strategy, we ended it at the end of the first quarter, mid-second quarter. So this traffic from the mix has disappeared. What you see now is actually a lower CPA with the same player value. So it means that we are able to optimize our efforts and buy more players with less money. So the strategy didn't change, but I think the team did a good job in optimizing. It took us a little bit of a while and investing into technology and discipline, let's call it like that. So we are able to execute this way. And we will continue. We see, as Moshe said before, CPA goes down, probably, we need to increase investments in order to take more market share. So overall, we are happy. Strategy didn't change. The execution changed a bit, but the strategy is still the same. Ryan Sigdahl: Very good. And then just maybe the cadence of that marketing spend this year. Is it more concentrated Q2, Q3 at the World Cup? Or is it more spread out? And how much of that can you do kind of in anticipation and ahead of the World Cup starting? Aviv Sher: No. I think I commented in the past, right now, the World Cup prices are a bit too high for us. So in terms of spread, we will continue to spread or make the efforts the same as we did every year. And maybe just spreading it more evenly because usually during the summer, we are reducing the advertising spend. So here, we will continue to spend around the World Cup, but with no increase during those months. No increase relatively to other months, right? So I think in terms of cadence, we'll spread it more or less the same as we did in the previous years. Hopefully, with some upside from the World Cup because we will continue to invest around the World Cup in the summer, which we're usually lowering our investment there. And so I think this is the tactical way that we see this year. Ryan Sigdahl: Last question for me. You launched a poker app, I guess, talk through why -- or in Mexico, I should say, talk through why that makes sense in Mexico? And then if there's any other product or capabilities you plan on adding? Aviv Sher: Yes. So poker is a nice product. It will take us more time to push it, let's call it exclusively. Right now, it gives more benefits to our customers. We are about, I think, to launch, at least, to quiet launch bingo to have more products into our mix in Mexico. So in that sense, we have nice products coming up. But they are more supportive. I don't think they will become a main product but more supportive of our, let's call it, game portfolio to our -- to keep retention and to keep the players happy with more kind of products. If we see that there is an ROI in any of those products, we will start investing, let's call it, on a separate line of business, whether it's bingo or poker. But right now, we launched them as a supportive games. They are doing fine. At the moment, nothing exciting over there. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back to Guillermo Lancha, Director of Investor Relations and Communications, for closing remarks. Guillermo Lancha: Thank you. So if there are no further questions, I guess we can leave it here. As usual, if you have any follow-ups, feel free to reach out to either Marcus, Aviv or myself. We will be speaking again with our Q1 '26 earnings around mid-May. So thank you, everyone, for joining us today. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings. Welcome to National Storage Affiliates Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund, you may begin. George Hoglund: We'd like to thank you for joining us today for the Fourth Quarter 2025 Earnings Conference Call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nsastorage.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, February 26, 2026. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, core FFO and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I'll now turn the call over to Dave. David Cramer: Thanks, George, and thanks, everyone, for joining our call today. The fourth quarter provided further confirmation that our portfolio performance has inflected in a positive direction. We are benefiting from the significant operational efforts executed by our team over the past few years to position NSA for outsized growth. We produced solid results for the quarter and delivered wins in several areas, including all but 1 of our 21 reported MSAs saw improvement in same-store revenue growth versus what we reported in Q3. Same-store revenue growth was down 70 basis points in the fourth quarter compared to down 260 basis points in the third quarter, a substantial improvement. We experienced sequential improvement each month of the quarter. Year-over-year occupancy also continued to improve, finishing the year down 70 basis points. Remember, we were down 140 basis points at the end of the third quarter. Our core FFO per share results came in at the top end of our guidance range, beating consensus. Looking at the full year, we delivered a handful of notable accomplishments, including we consolidated another brand, reducing the number of remaining brands to 6 and an additional growth driver with the formation of our preferred equity investments platform, we continue to execute on our portfolio optimization program by exiting 5 states and selling 15 properties totaling $97 million. We also acquired 10 properties totaling $75 million across our joint ventures and on balance sheet. And most importantly, we exited the year on solid footing with positive momentum that has carried into 2026 as January end-of-month occupancy was up 20 basis points year-over-year. We've clearly turned the corner. The tremendous efforts undertaken by our team to internalize the PRO structure, dispose of noncore assets, upgrade and centralize our marketing, revenue management and operations platforms, along with the consolidation of brands and the move to one web domain are paying off. Looking at 2026 and beyond, the backdrop for self-storage is improving. First, new supply is currently stable and is projected to decline over the next few years to levels well below long-term historical averages, with the impact becoming more meaningful in 2027. Second, there is momentum in the current administration to address home affordability, which could provide a boost to the housing transaction market and self-storage demand. Lastly, increased stability in self-storage pricing practices could lead to rising street rates, providing a near-term lift to revenue growth. Now let me comment on our relative position within the sector. Our portfolio fundamentals have inflected positively, and we have the most to gain from a recovery in the level of housing turnover. Our enthusiasm is supported by the fact that we're starting the year with strong rental volume, an inflection from negative to positive year-over-year occupancy and an encouraging trajectory of same-store revenue growth, while we remain focused on disciplined expense controls. As we enter the spring leasing season, we will continue to focus on driving internal growth with increased marketing spend, competitive position in terms of rate and promotion, solid execution from the sales process and remaining assertive with our ECRI strategies. Meanwhile, we continue to improve our portfolio through capital recycling and reinvesting in our properties while also growing our portfolio through expansions and acquisitions. I'll now turn the call over to Brandon to discuss our financial results. Brandon Togashi: Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.57 for the fourth quarter and $2.23 for the full year, at the high end of our guidance range as our focus on operational improvements is starting to be reflected in our results, with same-store revenue and NOI coming in for the high end of the full year guidance ranges. For the quarter, same-store revenues declined 70 basis points, driven by lower average occupancy of 120 basis points, partially offset by year-over-year growth in average revenue per square foot of 100 basis points. This is meaningful improvement from the 2.6% revenue decline in the third quarter, with 9 of our reported 21 markets delivering positive revenue growth. For the full year, same-store revenues declined 2.3%. Expenses declined 80 basis points in the fourth quarter while growing 3.1% for the year, slightly below the low end of our full year guidance range, benefiting from our meaningful expense control efforts. Most notable savings came from payroll costs that were down 4.1% in the quarter and 2.8% for the year as we continue to find efficiencies with hours of operations and staffing. Meanwhile, marketing was up 37% for the quarter and 31% for the year as we continue to invest in customer acquisition spend in markets where we clearly see the benefits. Outside of same-store operations, the lighter tropical storm season led to favorable results within our insurance captive, where we retain a portion of the property casualty coverage for our stores. This resulted in lower expense in the other line item within operating expenses compared to the run rate from the first 3 quarters. Moving to the transaction environment. We completed the sale of 3 assets during the quarter for $24 million. And subsequent to quarter end, we sold 3 additional properties for $21 million and acquired 1 wholly owned property for $10 million. Our portfolio optimization program will remain active in 2026 as we prioritize scaling in markets while generating proceeds for deleveraging and funding attractive investments through our JV and preferred equity programs. Our on-balance sheet investments will largely be to fulfill 1031 requirements. Now speaking to the balance sheet. We have ample liquidity and maintain healthy access to various sources of capital. We have $375 million of maturities this year, consisting of a $275 million term loan that is due in July and $100 million of unsecured notes due in May and October. We have optionality and we'll most likely address these maturities with a new term loan. Our current revolver balance is approximately $400 million, giving us $550 million of availability. Our leverage continues to come down with net debt to EBITDA of 6.6x at quarter end, just slightly above our 5.5 to 6.5x target range. Now moving to 2026 guidance, which we introduced yesterday and the full details of which are in our earnings release. The midpoints of key items of our guidance are as follows: Same-store revenue growth of 90 basis points, same-store operating expense growth of 3%, flat same-store NOI growth and core FFO per share of $2.19. We have also guided to acquisition and disposition ranges of $50 million to $150 million. In both cases, these amounts represent NSA's share. With regard to same-store revenue, we foresee the year-over-year growth steadily improving as we progress through these next couple of quarters. As Dave mentioned, our occupancy is slightly positive year-over-year at the end of January, and that spread has continued into February. At the midpoint of our guidance range, the $0.04 decline in core FFO per share is due to growth in G&A of approximately $0.02. This growth primarily comes from assuming target level cash incentive comp as the same expense in 2025 for our corporate team was below target levels given company performance. The remaining $0.02 is attributable to a combination of headwinds from debt refinancings and the tough comp for our insurance captive based on my earlier comments regarding the favorable results in the fourth quarter of 2025. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator? Operator: [Operator Instructions] Our first question is from Samir Khanal with Bank of America. Samir Khanal: I guess, Dave, when I look at your guidance, you're calling for a healthy improvement here in revenue growth. down about 70 basis points in 4Q, getting to about 1% at the midpoint. I think this sort of puts you even above the peers here. So maybe help us kind of walk through kind of how you get there. Talk about the breakdown, let's call it, occupancy through the year, rate growth, move-in rate growth and even ECRIs, how are you thinking about all that? David Cramer: Yes, Samir, thanks for joining. Thanks for the question. I'll start off and then I'll have Brandon walk us a little bit of the cadence. I think where I would start is what's different today versus where we were a year ago when we were giving guidance is, our transitioning is done. Our platform is working very, very well. Our synergies and our strategies are working very, very well. All the work we put into our people, process and platforms is complete. And so there's no distraction or no moving pieces right now. So as we sit here in '26 versus where we were a year ago, we just came off of PRO internalization and had a lot of moving pieces. Right now, we're no longer chasing occupancy. Here to say that occupancy in January was 20 basis points up year-over-year. That's something we haven't seen for a couple of years. And so that gives us a high level of confidence that we'll continue to work on that occupancy gains throughout the year. The rate environment is stable. We have seen good contract rate growth through the back half of 2025. We expect to have solid contract rate growth through the year of 2026. And that comes from also the strength in the ECRI program. We're now more assertive than we have been historically. And that's because we have a high confidence level in our marketing program and our customer acquisition platforms. We're seeing very, very high levels of rental volume. We finished on a square footage basis about 11% up year-over-year in the fourth quarter. Keep in mind, that was muted because we were down about 10% in October because of a hurricane comp. And thus far in January and February, those numbers are even stronger. So we're just very, very pleased with the rental output we're getting at the top -- through the top of the funnel all the way to the rentals themselves. And so I think for us, looking at all the things we're thinking about, RevPath is positive, occupancy is positive, contract rate is going in the right direction, and our platforms are really working. I think for us, where we're coming from, where we've been, we feel very, very confident on how 2026 will play out. And I'll let Brandon kind of walk you through the cadence of the year. Brandon Togashi: Yes. I think the main thing I would add, Samir, and you touched on it in your question, the negative 70 basis points that we delivered in the fourth quarter, Dave remarked in the opening about how that improved. So it was more negative to start the fourth quarter, and it got less negative trending towards flattish as we got to the end of the fourth quarter. And then based on the data points that we've given for end of month January occupancy, in my remarks about how that's continued into February, we just feel comfortable that we're starting the year within the negative 30 to positive 210 revenue range, whereas a year ago, we were delivering a quarter and starting the year that was, frankly, well below the low end. So it required much more of an improvement than what's required now. Samir Khanal: And I guess just as a follow-up, maybe as we're talking about the guidance, maybe you can hit on expense growth here, right? I mean you have about 3% for this year. Maybe talk kind of the components to kind of get there as we think about '26. Brandon Togashi: Yes. Samir, I'll go -- most significant line item is property taxes, so we'll start there. We're assuming a range of 3% to 5%. That's consistent with kind of multiyear averages for our portfolio. Personnel, you saw the good success that we had in that line item, both in the fourth quarter as well as for the full year '25. We're expecting similar successes. I expect that line item to be flattish in 2026 over '25. And then outside of those 2 line items, I would say the largest percentage increase is going to continue to be marketing expense, not to the tune of the 30-plus percent that we saw this year, but still probably in the teens on a year-over-year growth rate. And after that, a lot of the other line items fall generally in that low to mid-single-digit range that we have for the total OpEx guide, the one exception being insurance. we do believe we're in a better market. Our renewal was in April 1. And so we are forecasting that line item to be a year-over-year decrease in the cost. Operator: Our next question is from Michael Goldsmith with UBS. Michael Goldsmith: First question is on the January occupancy being up 20 basis points. Can you talk a little bit about what's driving that? I think you talked a little bit about strong rental volumes. It seems like marketing spend is up, but can you walk through some of the moving pieces? Are you cutting rate to drive that occupancy higher during the slower season? Just trying to understand the moving pieces and context around the occupancy improvement. David Cramer: Yes. Sure, Michael. Thanks for the question. Thanks for being here. I think it's a combination of all those things. Clearly, we committed to a higher marketing spend really through the back half of 2025, and that was based upon our conviction that we were seeing the activity at the top of the funnel and our ability to convert those into rentals. And so we've done a really good job looking at the sales process all the way through the funnel and our conversion rates. And so that would include how you use discounting, where you're priced in the markets, the amount of marketing spend and when you're spending that money. This is where AI and some of the AI technologies and the modeling we have are really starting to pay off and the fact that the teams are doing a really, really good job as we model our marketing spend and model our dynamic pricing and use of discounts to really work on that closure within that funnel. And so we've seen a significant improvement in our ability to really work the conversion rates through that funnel. So I would tell you, from a pricing standpoint, we're keeping the same competitive position we've kept through the back half of the year. We did a good job holding occupancy and not having the seasonal trough that you normally would have, and that's a function of marketing spend pricing, discounting and then use of call center and staffing hours and those things. So I think all those things in place. We're not undercutting markets. We're not trying to go out and try to move markets one way or the other. We're just staying within the appropriate competitor set to get the results we want. Michael Goldsmith: Dave, and as a follow-up, like where do you see yourself to the point of actually having pricing power, right? Occupancy is improving, you're improving operationally, you're talking about strong rental and volume. So is there a certain level of occupancy where you think you would have pricing power? David Cramer: It's a really good question, and it really varies by market and by store. So we do have markets that are having some good success, like a couple of the ones that jumped off the page, Wichita, Colorado Springs, even Portland, if you look at Portland, where supply and demand are in check and those markets are responding well to not only street rate or market pricing, but the ECRI programs and what you're able to drive through the ECRI programs are working very effectively. And that's really, I think, as you look at our portfolio, we do have a lot of stable markets where they are benefiting very much from all of the changes we've made within the company and all of the adaption that we've done within the company is helping those markets. The other markets, Michael, like Phoenix and Atlanta and Gulf Coast of Florida and stuff, it's really a supply issue where until you really get that balance and get a better demand profile to get these stores filled up, it's going to be harder to get pricing power. The one thing I would add into that, too, is it's also -- we've noticed you got to get granular down to the unit size. It's one thing to scrape overall properties and look at overall occupancies and overall pricing power, but there are subsets of unit types that are seeing pricing power within some of our markets because supply and demand is in check on that particular demand for that unit. Operator: Our next question is from Juan Sanabria with BMO Capital Markets. Juan Sanabria: Congrats on the successes on the post PRO internalization. Just hoping for a little bit more color on kind of the move-in rate trends throughout the fourth quarter and into January as well as kind of how the quantum and or cadence of ECRIs has changed maybe year-over-year or however you could help us contextualize that? David Cramer: Sure. I'll start, and then Brandon wants to jump in here. I think what you have seen and you will see from us is our move-in rates as they went through the fourth quarter narrowed on a year-over-year spread. And that's because if you think about 2 years ago in '24 when we were internalizing the PROs, we reset street rates pretty hard in the back -- really the fourth quarter of 2024 and left them elevated outside of the competition range probably until April or May of 2025. And so our comps on a year-over-year basis are tougher the first 5, 6 months of this year, just on the move-in rents. Now for us, we're getting the rental volume we want. We're effectively priced where we want to be priced in the markets. But I think you guys will see us go negative on move-in rates probably the first 4 or 5 months of the year and then get back to more of a neutral to positive position from June, July on. But we are seeing significant rental volume. Again, I'll reiterate, we're not undercutting the market. We just adjusted our competitive position to really work on customer count and do it as smart as we can to get to a better revenue output. The back half of that question was -- I'm sorry, I'm done a blank now. Juan Sanabria: ECRIs and how that's changed the quantum or cadence. David Cramer: Yes. Thanks, Juan. Sorry about that. The cadence hasn't changed. So we're still hitting the ECRIs around the same timing that we have been hitting them. I do know our magnitude of rate increases has increased on a year-over-year basis. All of the testing and the things that we're doing and our confidence in the ability to attract new customers and drive additional rental volumes is allowing us to be more assertive on the rate increases through all of the steps, whether it be first, second, third, fourth across the board. And so that's also helpful as we look at our revenue projections this year. Juan Sanabria: Great. And then I was just hoping you could comment on when you're leasing units if the size or the number of square feet that is being taken up has changed. I know at one point, I think it was last year that has gone down for a bit. But curious on kind of the latest thoughts around how many square feet people are actually leasing today and how that's trending. David Cramer: Yes. Good question and good memory. We certainly -- this time last year, we were facing probably about a 5 to 6 square foot per rental square footage roll down. We've since closed that back up. We're back up to where most of our rentals are either at the same level or a little bit bigger in square footage. And so that's also very much helping in stabilizing occupancy and making sure we're attracting the customers for the units that we're vacating. So feeling good about that progress we made. That really flipped for us really in the -- probably starting September of last year, and we've been able to hold it all the way through February thus far. Operator: Our next question is from Todd Thomas with KeyBanc Capital Markets. Todd Thomas: I appreciate the detail on January and some February data with regards to occupancy and move-in rents. It seems you've recovered a lot of ground. You described '25 as sort of a tale of 2 halves, first half being a little weaker, followed by an improvement in trends in the second half. Is 2026 from sort of a revenue growth standpoint also expected to be sort of a tale of 2 halves? Or do you think you can continue to recover in the back half of the year when some of your comps begin to normalize? Brandon Togashi: Yes, Todd, this is Brandon. I do think that we'll have the benefit of some easier comps in the first half of the year and partway through the third quarter as well. The fourth quarter will be the tougher comp. We see the year-over-year same-store revenue growth steadily increasing as we go throughout the year until maybe we plateau a little bit because of what you touched on, it does get a little bit tougher of a comp starting in the back half of the third quarter and then really for the entirety of the fourth quarter. Todd Thomas: Okay. And then Brandon, Dave, too, I think you both touched on reducing leverage as a priority. And I just wanted to ask whether the guidance includes any sort of deleveraging initiatives really primarily, I guess, outside of organic EBITDA growth? And do you have a leverage target for year-end '26? Brandon Togashi: Yes. So our 5.5 to 6.5x range remains kind of the long-term target for us just outside the top end of that at the end of 2025. Based on the midpoint of the same-store NOI guide, Todd, as you know, flat on that metric and FFO being relatively flat, it's really calling for leverage to stay fairly neutral, a little bit of seasonality depending on which quarter you go through, because the metric is calculated on an annualization of the given quarter, as you know. But outside of that, I would say by the end of '26, it's going to be fairly similar to the end of '25. Capital deployment will affect that. You saw the guide on acquisitions and dispositions at the midpoint of each, we're saying that, that would be neutral. Obviously, changes month by month based on the deals that we're seeing, the success we're having on some of the disposition initiatives, any of the particular deals in front of us that we're underwriting for acquisition largely through the joint ventures, as we said earlier. So the timing and the success on those fronts could drive it and move it a little bit. But generally, at the midpoint, you're seeing it stay pretty constant. Operator: Our next question is from Salil Mehta with Green Street Advisors. Salil Mehta: Just a quick one here to start off. Sorry if I missed this before. I know you guys mentioned January and February occupancy, but did you guys provide any color on where move-in rates are thus far in 1Q? David Cramer: Yes. Thanks for joining, it's Dave. What we talked about is our move-in rates will inflect negative for the first probably 4 or 5 months of the year, and it's due to a little tougher comp from 2025 and where we're positioned in our markets to make sure that we're maximizing flow through the funnel and conversions and customer count, working towards our revenue goal because that's what we're trying to work towards. But I think you will see some negative move-in rates for the next -- probably until about June, and then we think they'll inflect back to a more neutral positive for the back half of the year. Salil Mehta: Thanks for that insight. And given the roughly, I guess, 1% move-in rate growth and overall rental rate growth in the quarter, how are you guys balancing the trade-off between occupancy and rate growth going forward? Is one going to be a bigger priority than the other? You guys kind of mentioned that you guys aren't chasing occupancy. Does that mean that you guys are happy with where occupancy levels are at currently? David Cramer: Yes. I think you're touching on it. It's a balancing point of marketing spend and the use of price and discount to get better conversion and really occupancy can lead to revenue. And so for us, we think we are at a point where we can use those levers effectively and drive some more customer count, which will increase our occupancy. And so the fact that we're starting the year coming out of January on a positive note on a year-over-year basis, as we look at our year, we think we'll be able to continue to work on the occupancy side of the house effectively with that -- and that's a nice revenue output for us. So that is, as you think about our year, we think we'll be more occupied at the end of 2026 than we were in 2025. Operator: Our next question is from Michael Griffin with Evercore ISI. Michael Griffin: Dave, I'm curious if you can touch a little bit on sort of organic customer demand. Obviously, I think it's a positive seeing the same-store revenue growth inflect into next year, but it feels like that's more an enhancement of marketing initiatives and capturing more of the top-of-funnel demand as opposed to the pie maybe expanding a bit. So can you talk a little bit about organic customer trends? How are new customers versus renewals? And really is the inflection driven by, I guess, capturing more of the pie of customers out there rather than expectations for more customers to come back to the market? David Cramer: Yes. Good question. Thanks for being here. I would agree with your premise. And I think we're approaching 2026 with a mind frame that the competitive environment will be very similar to what we face in 2025. Nationally, we know that new deliveries are coming down. But that number takes a while to be absorbed. And so I think as you think about our stores that are facing competitors in a 3- and 5-mile ring, we don't see a material change in the number of stores facing that competitor set in 2026. So we're going to be very focused on just executing and trying to take more of the pie. And certainly, every month, you go deeper into absorbing new supply, it helps, but we did not, in our guidance at our midpoint, really model in any catalysts or anything that's really materially different in the way we're thinking about how the competition is going to look for 2026. Michael Griffin: That's certainly some helpful context. And then maybe just on the external growth opportunities. It seems that particularly the acquisitions component of that might be more in kind of the JV structures that you've laid out. But can you give us a sense of what kind of product type you're targeting with those whether it's going in cap rates, your yield requirements? Just maybe give us a sense of kind of external growth priorities and the investment pipeline for the year ahead. David Cramer: Yes, a really great question. First of all, we're targeting markets where we can densify our portfolio, get better synergies, get better operational efficiencies. And that's been part of our portfolio optimization program now for a couple of years. And so the markets we are targeting are really around where we think we can have good efficiencies and good success in buying properties. We're probably a little less attracted to the markets that are really struggling right now because we'll want those markets to improve before we want to step into them. But we have a number of markets where we have had good success. We've seen the inflection points. We're seeing things go in a positive direction, and we're very actively working in those markets to come up with acquisitions. The best cost of capital right now for us is our JVs and the new structure, the preferred equity structure, we'll lean into that this year as well. And then we will buy on balance sheet, if needed, primarily used probably to fulfill 1031s as we come across those through the dispositions. But we're willing and able to want to buy, but we're just being very diligent with our money right now because it's -- certainly, there's -- you got to be very smart and you got to be very diligent on how you put your money out and deploy it. Operator: Our next question is from Ravi Vaidya with Mizuho Securities. Ravi Vaidya: I wanted to ask about the rent per occupied square foot. You've seen strong improvement there on both a year-over-year basis and a quarter-on-quarter basis. Do you -- how do you see this metric trending in 1Q '26 and throughout the balance of '26 as well? Do you think it's going to be stable, accelerating or decelerating? David Cramer: Good question. Thanks for joining. We approach 2026 with continued improvement in the achieved rate. It becomes more challenging when you have bigger roll-downs like we're facing today. So our rent roll-downs are in the low to mid-30s at this point. And so the strength of our ECRI program and the improvements we've made around how we implement the ECRI program will help offset that rent roll down. But we did throughout the year, show modest improvement in the achieved rate as we went through the year. Ravi Vaidya: And I wanted to ask another question about the guide. I know that you mentioned that we don't have any housing-related catalysts or any other demand catalyst for achieving the same-store revenue guide. But what are some of the potential levers of maybe upside or elements of conservatism that might be baked in given that the broader operating environment remains a bit choppy. David Cramer: Yes. Good question. I'll start and then Brandon, if you want to jump in. Certainly, things that can move the guide around. And one of the primary things is asking rents. If we see good improvement in asking rents, and we see a good spring leasing season. And that's the hard part about sitting here today, it's February. And if we were sitting here in May, I think we'd have a lot more light on how active the spring leasing season was. If we have good rate, we're able to drive the street rate asking rents up as historically this industry does. And so that's the one thing that we don't know, and that could push the guide up or it may push you to the low end if street rates don't cooperate and you get more volatile competitive environment as far as the revenue side of the house goes. And that would affect occupancy and it would affect, obviously, what you're driving home for the achieved rate if you're any movement on that street rate. Anything else? Brandon Togashi: Ravi, I mean, one thing I might add is just that's outside of our control, obviously, is just the regulatory environment and any state of emergency declarations due to severe weather or other events, our portfolio is not currently subject to significant restrictions there. But obviously, that could play a factor. There's always some elements of that in the portfolio as you go throughout the year. In the state of Oklahoma, we had some restrictions in 2025 that impacted our OKC and fulsome markets. So that's just one variable. But we try to, as much as you can, incorporate some element of that as we think about kind of the normal course revenue management program. Operator: Our next question is from Ron Kamdem with Morgan Stanley. Ronald Kamdem: Just 2 quick ones. Just can you just contextualize your dividend payout ratio for this year? And sort of -- I think you talked about sort of an inflection. Is it sort of a '27 or ' 28, like when do you sort of anticipate getting that back to sort of even as this inflection sort of plays out? David Cramer: Ron, thanks. It's Dave. Thanks for the question. Yes, certainly, we -- the guidance would imply we're not covering the dividend this year. We will be light on covering the total payout. Certainly, as we think about it, we are at an inflection point. We are seeing fundamentals turn positive. We're seeing our organic growth turn positive. And there are moving pieces, investment activity and things like that, that can move FFO around. We did come off of covering the dividend in third quarter and fourth quarter of last year. And so I think we have very good discussions with our Board. Our Board is very in tune to what the outlook of the company is. And right now, I think to your point, as we finish the end of the year, we probably will be back to where we're covering 100% of the dividend towards the back half, really the fourth quarter of the year and then into 2027, if the fundamentals keep improving, we'll certainly be in a much better position. But we're certainly aware of where the payout ratio is, and we're working very hard to accomplish that to be lower. Ronald Kamdem: Great. That's helpful. And then my second question, I think the release sort of noted that all but one market saw sort of sequential improvement, which I thought was interesting. I mean, could you just double-click on whether the heavy supply markets versus maybe the lower supply, how those are sort of performing and what your expectations are in terms of that -- the strength of the inflection? David Cramer: Yes. Good question. I'll start and if Brandon wants to come in here. But you're touching on it. The markets where we are still facing a tremendous amount of competition that needs to be absorbed are the ones that are really not inflecting positive are going to take time. And really, it's just time. And in some markets like Phoenix, they need to stop building because they're still building in Phoenix. And so you make 2 steps forward and then you have to take 3 steps back as somebody adds some more product to the market. The markets that don't have that, and I mentioned a couple of them earlier, Colorado Springs, Wichita, Portland, we're seeing nice solid sequential growth in rate and occupancies have been steady, and we're seeing some pricing power in those markets, and we're having good success. And so fortunately, we do have a diversified portfolio. We have a lot of our markets that are going in the right direction. And so that makes us feel very good as we think we've hit that positive inflection point. And even a market like Atlanta, which is improving, it's still very much negative, but we are seeing some consistency and some stability in some of these markets, which is encouraging to us. Operator: Our next question is from Eric Wolfe with Citigroup. Eric Wolfe: You mentioned the positive trends on occupancy year-to-date. I was just wondering if it was possible for you to update us on where RevPath has been trending. Just to understand how average realized rents have been moving through the early part of the year, especially given your comment around seeing more success on ECRIs. David Cramer: Thanks for joining and good question. RevPath is following the similar trends. We are seeing improvement in RevPath that would be consistent with nice solid ECRI gains and obviously, the improvement in -- or stabilization in occupancy and slight improvement in occupancy. But the RevPath is growing, yes. Eric Wolfe: And it looks like your other property-related income or revenue was a 40 bps drag on your same-store revenue growth this quarter. Can you just talk about what's embedded in your guidance for that line item and where you see it trending throughout 2026? Brandon Togashi: Yes, Eric, it's Brandon. That line item will continue to be a little bit of a drag. That includes our -- the tenant insurance dollars that are retained at the store. We've always had some amount of tenant insurance dollars reported within the store level NOI dating back to the PRO structure. So that's just remained. And as we talk about all the things that Dave has hit on here, the jocking between street rates, marketing spend, our discounting and promotion initiatives, the -- at the time of rental upsell and tenant insurance, we have altered that over the past couple of quarters in order to prioritize getting that rental. And so that's created a little bit of a drag in that line item. And so we expect that to continue in '26, although it does -- that comp gets easier as we get to the middle part of the year. Operator: Our next question is from Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: First question I had was, again, while guidance does not really contemplate any real change in the housing market. Just curious how you guys are thinking about, again, some of these affordability initiatives that President Trump is trying to make happen. I mean just kind of take a look at all of that. I mean, do you kind of feel like the housing market could get better, so this could potentially be a positive catalyst? Or do you kind of look at it and kind of say it's more you'll see a whole bunch of refinancing activity because mortgage rates are now down at 6%, but it's still not low enough to really stimulate housing demand? David Cramer: Yes. This is Dave. Thanks for joining the question. That's a hard one. I mean, we are encouraged with the fact that at least everybody is talking about it, and they're trying to find a solution or some solutions to get progress there. Our -- we did not look at 2026 of any type of cracker catalyst in that piece of it. We just approached '26, and that would probably remain the same. Any improvement of that would be much welcome. We would be positioned for outsized impact should they crack any of that and open up the resale market or things like that. But I think we see the same data that you do. There's a lot of listings, there's a lot of stuff going on out there, but we've just not seen any significant improvement yet. Omotayo Okusanya: And then second question, the preferred equity platform. Could you just talk a little bit -- it sounds like everything is not kind of in place. Can you just talk a little bit about kind of how deployment is going to work there and how quickly you think you can kind of put out capital? David Cramer: Yes, sure. It's a 2-year program that we'd set up that we wanted to get the capital out in 2 years. Certainly, we are working very, very hard. We do have 3 properties under contract today, totaling a little over $50 million. So we're pleased that we've got that stood up and we've got properties under contract. We'd like to get that out as quick as possible if we can find the right deals. So it's hard to handicap those. Those transactions are lumpy and timing is -- cannot be particularly seen, but we are happy that we're off and running, and we're certainly looking at a lot of properties and there are a lot of opportunities. Operator: Our next question is from Wes Golladay with Baird. Wesley Golladay: I just have a quick question on the portfolio optimization. When you get through this year's dispositions, will you be largely done with the program? David Cramer: Wes, it's Dave. Yes, I think so. We've done the majority of the heavy lifting and the larger work. This year, we'll wrap up a lot of that. And then after that, it will just be as things materialize and stuff. But yes, most of the heavy lifting is done. Operator: Our next question is from Annabelle Ayer with Barclays. Annabelle Ayer: Can you remind us of your strategy for payroll and how you think about the trade-off between like lowering payroll costs versus potentially losing sales? David Cramer: Yes. Annabelle, thanks for joining. We've been working for a number of years on how to model payroll. And I can tell you with the data we have today and much better tools that we have today, we certainly want to meet the customer when they want to meet us and how they want to shop with us. And so there's no singular answer to perfect staffing levels. We have markets where we have to have more staffing with more hours and markets where it's less. But what I do know is we have a much better line of sight. What we've been working on is hours of operation. And that would be, can we be open later? Can we be closed earlier? Do we need to be open 8 hours, 10 hours, 12 hours a day? Do we need to be open 6 hours a day? We've certainly put a lot of emphasis around our customer care center and our call center teams are doing amazing things, plus we've implemented AI there. So we have a lot of automation built in there where we do not have to be around. We've put obviously the bar codes on the window. We have an app stood up. But for us, it's pretty fluid in markets and pretty fluid in stores, but we have seen payroll savings. And we do think there are more additional payroll savings for us as we go forward. But we will not try to do that at the expense of the customer. But I do believe, clearly, the customer expectation and when they want us around and how they want us has changed. There's definitely that digital transformation is real, and it allows us to just be a little more flexible when we're at the store. Annabelle Ayer: And then one more. You guys have invested a lot in your website and platform over the last year or two. How much more of a benefit do you see coming from improved search rankings and higher conversion rates? David Cramer: Another good question. We've certainly put a lot of effort there, and we've seen a lot of success. If you look at our visibility scores and our outranking scores, and it's a true testament to the rental volumes. When we talk about rental volumes being up 20% and 30%, that's all of these things coming together and working very, very well. So we're extremely happy. Obviously, you're never done. You're always working and trying to find another penny here and another rental there. And so the teams are working very hard with their modeling and how we're evolving our AI modeling. And there's a lot of progress around what we're doing with Google and around our -- how we're looking at our search and how we're looking at our paid search and our effectiveness around all of the channels that are available to us. And so I'm very pleased with the progress, but still more to come there. Operator: Our final question is from Michael Goldsmith with UBS. Michael Goldsmith: Back for a couple of follow-ups. First, I think you mentioned some restrictions in Oklahoma, like including Tulsa. Can you kind of clarify what you're referring to there? David Cramer: Yes. I'll jump in a little bit, Michael. What we had last year is they had high wind and fire, major restrictions around counties because it was so dry. And so what we faced for a number of months was a restriction on how much we could increase rates at a certain particular time. And so we set a little calmer on Oklahoma through probably 5 or 6 months of that year. And then we had a pretty good lift in January around working back through the portfolio in Oklahoma and catching folks back up to where we wanted them to be. Like Brandon said, a lot of these state of emergencies, they're generally pretty short in nature, and they're not as widespread. I mean it will be by county or by city sometimes. And that one just happened to be a wildfire one that hung on because they had such dry conditions for such a long period of time. Michael Goldsmith: And then, Brandon, a follow-up just on the refinancing. Can you walk through what's untapped for this year and just how you're thinking about it? Brandon Togashi: Yes. The -- No, the $375 million that we have coming due this year concentrated $275 million on that term loan and then $100 million on the private placement notes. As you can see on Schedule 4 in the supplemental, the blended rate on that $375 million is about 4.25%, and so if we, as I said earlier, executed a refinancing of all of that through the term loan market, again, depending on whether we take some of that floating or fix it all for the tenor, you're probably in the mid- to high 4s. And so that's -- let's just say that's 0.5% of rate reset on that notional. And so that kind of -- it's a partial year impact in 2026, Michael. So that kind of gets to some of that interest expense headwind that I mentioned earlier. That's just kind of the plan A. There's obviously the private placement market or the secured market. So we feel comfortable with being able to address the maturities. That will be the main focus for our finance team. And then I was also referring to in my comments earlier, and you see it footnoted in our guidance table, one of our joint ventures has about $360 million of debt that comes due in October. And so currently, the plan there would be to refinance that. And so that's a 3.5% in-place interest rate. So there would be a rate reset at the JV level, and then we would pick up our 25% share of that. So that's all incorporated into the guide. Operator: There are no further questions at this time. I would like to turn the call back over to Mr. Hoglund for closing comments. George Hoglund: Thank you all for joining us today, and we appreciate your continued interest in NSA. And we look forward to seeing many of you investors next week at the conference of Florida. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the United Parks Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Matthew Stroud, Head of Investor Relations. You may begin. Matthew Stroud: Thank you and good morning, everyone. Welcome to United Parks & Resorts Fourth Quarter and Fiscal 2025 Earnings Conference Call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.unitedparksinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson and Jim Forrester. This morning we will review our fourth quarter and fiscal 2025 financial results and then we will open the call for your questions. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call we may reference non-GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC. Now I would like to turn the call over to our Chief Executive Officer, Marc Swanson. Marc? Marc Swanson: Thank you, Matthew. Good morning, everyone, and thank you for joining us. Before we turn to the quarterly and annual results, I want to point out that we uploaded a presentation to our Investor Relations site that includes some supplemental information that covers certain topics and other important points that we want to get across. I will refer to those slides later in my remarks. With that, let me get into our results. Our fiscal 2025 results did not meet our expectations. While the consumer environment was uneven and our results were impacted by negative international tourism trends and volatile weather during certain peak visitation periods, we should have delivered better results, particularly on the cost side of the income statement. We have moved decisively to address our less than optimal cost management and have updated and focused our plans and investments for 2026 designed to drive attendance and guest spending across our parks. These include a compelling lineup of new rides, shows, attractions, an updated events calendar, an expanded concert lineup, new and upgraded food and retail locations, a revamped and enhanced marketing plan and strategy as well as other investments that we expect will drive demand and spending across our parks. Combined with disciplined operational execution and an additional heightened focus on cost management and efficiency, we are confident these initiatives position us to deliver strong performance in 2026. Our fourth quarter performance was impacted by lower international visitation and fewer operating days compared to the fourth quarter of 2024. The net impact of weather was essentially flat compared to last year as the recovery from hurricanes in the prior year was offset by unfavorable weather during certain peak visitation periods, particularly in San Diego and Williamsburg as well as Florida in the peak last few days of the year. Excluding the impacts of international visitation and operating days, underlying attendance trends would have been approximately flat for the quarter. Importantly, we reported record in-park per capita spending in the quarter underscoring that guests continue to respond positively to our offerings and spend when they visit our parks. In 2025 and through February 24, 2026, we repurchased 6.7 million shares representing approximately 12% of the shares outstanding underscoring our strong cash flow generation, long-standing commitment to returning excess cash to our shareholders and deep conviction in the exceptional value of our shares. Looking ahead to 2026, Discovery Cove advanced booking revenue is up high single digits and company-wide group booking revenue is pacing up over 50%. We also continue to see meaningful upside in our sponsorship business and view it as a $30 million-plus revenue opportunity in the coming years. Our priorities remain clear: deliver memorable differentiated guest experiences that drive attendance and guest spending, operate with discipline and efficiency and build long-term value for shareholders. I want to thank our ambassadors for their hard work and dedication as we move through 2026. In 2025, we received numerous industry accolades, including SeaWorld Orlando being voted as the #3 Nation's Best Amusement Park by USA TODAY Readers and it was also recognized as a Golden Ticket Awards Legend for its 17-year streak of being voted the Best Marine Life/Wildlife Park. Aquatica Orlando was voted at #3 for the Nation's Best Outdoor Water Park by USA Today Readers. Discovery Cove was awarded the 2025 Best Family Travel Award by Good Housekeeping and Newsweek Readers' Choice Awards voted it the #1 Best Animal Encounter in Florida. In addition, Discovery Cove received USA Today 10 Best Readers' Choice Awards. Its Wind-Away River was named the Best Lazy River in America. The park was also previously ranked as the #1 Theme Park in Orlando by the same publication. Busch Gardens Williamsburg was named the World's Most Beautiful Theme Park for the 35th consecutive year by the National Amusement Park Historical Association and reclaimed the title of Most Beautiful Park at the 2025 Golden Ticket Awards. For 2026, company has an outstanding lineup of new rides and attractions, popular events and new and improved in-park venues and offerings across its parks. Company's new rides and attractions include the following. At SeaWorld Orlando, we have SEAQuest: Legends of the Deep. Guests will embark on a vibrant submersible adventure through dazzling undersea ecosystems where they'll encounter extraordinary lifeforms, breathtaking environments, and inspiring stories of the sea. This groundbreaking attraction plunges explorers into an environment of awe and mystery guided by the SeaWorld Adventure Team. At SeaWorld San Diego, we will debut a re-imagined and immersive version of the Shark Encounter this spring as part of the Fin Shui project. Guests will encounter mesmerizing new shark species alongside a vibrant array of marine life, including additional sharks and colorful fish as the expanded exhibit transforms into a dynamic underwater adventure. At SeaWorld San Antonio, we will introduce Barracuda Strike, Texas' first inverted family coaster. The one-of-a-kind attraction invites guests of all ages to dive into the deep and experience the ocean's most agile predator like never before. With every twist, drop and tight turn; Barracuda Strike will deliver a rush of excitement that's bold enough for thrill-seekers yet built for the whole family. At Busch Gardens Tampa Bay, we will soon open the all-new Lion & Hyena Ridge, an extraordinary new addition to the park's award-winning animal care portfolio and the most ambitious new habitat in more than a decade. This reimagined area of the park expands the existing space to more than double its previous size, creating nearly 35,000 square feet of dynamic savanna terrain where 2 of Africa's most iconic species will thrive, a pride of 5 young male lions and a pair of playful hyenas. And finally, at Busch Gardens Williamsburg, we'll have Verbolten - Forbidden Turn, a re-imagined indoor/outdoor multi-launch roller coaster opening this spring with new immersive storytelling and special effects. This family roller coaster delivers surprises at every turn as it transports visitors through the Black Forest soon discovering all is not what it seems. Our balance sheet continues to be strong. On December 31, 2025, net total leverage ratio is 3.4x and we had approximately $789 million of total available liquidity and approximately $100 million of cash on hand. This strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with the goal to maximize long-term value for shareholders. So as we mentioned, we posted some slides on our Investor Relations website. So I'll be turning our attention to those slides now. This presentation addresses certain topics that we have heard from shareholders that they'd like to be covered and some important points that we would like to get across. Beginning with capital spending on Page 5. We spent just under $220 million on CapEx in 2025, which is generally consistent with what we expect to spend on an annual basis going forward to support our business and growth initiatives. On Page 6, we lay out our very exciting lineup of new attractions, events and shows for 2026. I won't go through all of what's on the page in detail, but I encourage you to review the page to see what we have in store for our various parks this year and to see what we are so excited about this lineup. As you can see, we have a number of things still to be announced in key markets like Orlando that we are excited about. On Page 7, we lay out our current key strategic initiatives. On hotels, we continue to have discussions with potential partners and are working deliberately to bring the best option forward. We will continue to update you as we make progress. On real estate, as we have discussed before, we have extremely valuable and strategic real estate holdings. We are actively evaluating various monetization opportunities, which we can discuss in a bit more detail in a few pages. On sponsorships, we have made good progress and have a nice pipeline for 2026, $15 million and growing, and we see significant upside in the coming years. On international and IP partnerships, we are in multiple active discussions and we'll have more to share in the coming quarters. On marketing, we have a new and enhanced marketing strategy that we expect will lead to more optimized media spend, better creative execution and a more integrated approach to communicating with and attracting guests. On costs, we are really focused here with a new set of processes and plans that we can discuss in more detail in a few pages. On technology, we are pursuing various initiatives, including embracing automation, robotics and AI to help us deliver more revenue, reduce costs and improve guest experience. We also continue to work on our CRM initiative and various park enhancements. On Page 8, we provide a bit more detail on our real estate. We have over 2,000 acres of owned real estate, including over 400 acres of undeveloped land. We estimate the replacement cost of our parks to be over $10 billion or about 2.5x our current enterprise value. In other words, our current enterprise value is less than half the replacement cost of our assets. While the public markets may not be appropriately recognizing the value of our assets, others are. We have received multiple sale-leaseback proposals that we are currently evaluating and have active discussions with various partners on hotel development, timeshare development, residential development and other commercial development on our owned property. We have nothing more to share on this today and we will update you when we do have more to share. On Page 9, we provide a brief update on Orlando. Epic Universe is a great addition to the Orlando market and we believe has benefited the entire market. We are pleased with our attendance results in Orlando in 2025 and our 2026 forward booking numbers at Discovery Cove and our group booking numbers are both up. We are excited about the investments we are making in Orlando this year and we expect strong performance across our Orlando parks in 2026. Page 10 outlines how we think about driving future attendance growth. We obviously have been disappointed by our attendance over the past few years. Our attendance has been impacted by various factors, including a combination of post-COVID consumer behavior volatility, a difficult run of extreme weather, international headwinds driven by geopolitical and other factors and a less than optimal execution at times. We are confident the drivers on this page will lead us to grow attendance in the near and long term. The next page outlines drivers of future per cap growth split between admission and in-park per cap. We expect to grow our per caps in excess of inflation over time. We have done a decent job of growing in-park per cap consistently over the last several years and have seen admission per cap declines over the last number of quarters. Admission per cap has been impacted by various factors recently, including more promotional activity. While our primary focus is to grow total revenue, we expect to grow admissions per cap over time driven by the drivers outlined on this page. We have significant headroom for pricing in many of our markets, including in Orlando. We are a really good value for our guest. The next page outlines our current cost initiatives, which total $50 million of gross cost reductions across labor, OpEx, SG&A and cost of goods sold. As already stated, we have a renewed focus on costs and are not pleased with how we managed this part of our business at times in 2026. We expect to deliver better outcomes in 2026. One quick correction as far as how we manage this business -- how we manage our costs in 2025 not 2026. Obviously we expect to deliver better outcomes in 2026. The next page lays out an illustration of where our EBITDA would be if we achieved our 2019 or 2008 attendance levels and grew our total revenue per cap as outlined on prior slides and achieved our cost savings goals. As a reminder, this is not meant to be guidance. It's just meant as a simple illustration to show what we believe the earnings power of this business would be at the 2019 attendance levels and if we return to the 2008 historical peak attendance levels while growing our total revenue per capita along with the cost-saving opportunities and strategic initiative opportunities we have noted. As you can see in this illustration, we would have $900 million to $1 billion of EBITDA. Just a reminder, this is not guidance, but rather a simple illustration. The next page outlines our current market valuation. This page underscores why we believe our shares are such an exceptional value at current prices. We are currently trading at 5 to 6 multiple points lower than the pre-COVID peer group multiple. We are currently trading at 5.5x to 6.5x levered free cash flow. The Board and company strongly believe our shares continue to be materially undervalued. We have confidence in our business, our growth prospects and the value of our assets. In any reasonable way you look at it, we feel there is significant upside opportunity in our current share price. Yet as we outline on the next page, we have outperformed all peers over a long time period. On the following page, we show illustratively where our stock price would be if we achieve our recent 2024 EBITDA and traded at various discounts to the long-term pre-COVID multiple for the peer group and where our stock price would be if we achieve the $900 million of illustrative EBITDA shown on Page 13 and bring the return to 2019 attendance column. As you can see, our stock price is currently trading at a substantial discount to all numbers on this page. Lastly, we outlined the key takeaways on Page 17. We have a clear strategy for 2026. We will spend capital with discipline. We have meaningful upside from our key strategic initiatives. We have significant asset value with various avenues to monetize and we are trading at a fraction of our replacement value. We are well positioned in a growing Orlando market. We have clear opportunities to grow attendance per caps, revenue and EBITDA and we are extremely undervalued just about any way you look at it. I'm excited about the significant investments we are making and the many key initiatives we have underway across our business that we expect will improve the guest experience, allow us to generate more revenue and make us a more efficient and more profitable enterprise. We are building an even stronger and more resilient business that we are confident over time will deliver improved operational and financial results and meaningful increases in value for all stakeholders. With that, Jim will discuss our financial results in more detail. Jim? James Forrester: Thank you, Marc, and good morning. During the fourth quarter, we generated total revenue of $373.5 million, a decrease of $10.8 million or 2.8% when compared to the fourth quarter of 2024. The decrease in total revenue was primarily a result of decreases in attendance and admissions per capita partially offset by an increase in in-park per capita spending. Attendance for the fourth quarter of 2025 decreased by approximately 126,000 guests or 2.6% when compared to the prior year quarter. The decrease in attendance was primarily due to a decrease in international visitation compared to the prior year quarter. In the fourth quarter of 2025, total revenue per capita decreased 0.2%. Admission per capita decreased 2.2% and in-park per capita spending increased 2.1%. Total revenue per capita decreased due to decreases in admissions per capita partially offset by increases in in-park per capita spending. Operating expenses decreased $1.8 million or 1.0% when compared to the fourth quarter of 2024. Selling, general and administrative expenses increased to $8.7 million or 17.4% compared to the fourth quarter of 2024. We reported net income of $15.1 million for the fourth quarter compared to net income of $27.9 million in the fourth quarter of 2024. We generated adjusted EBITDA of $115.2 million in the quarter. Looking at our results for fiscal 2025 compared to fiscal 2024. Total revenue was $1.66 billion, a decrease of $62.7 million or 3.6%. Total attendance was 21.2 million guests, a decrease of approximately 378,000 guests or 1.8%. Net income for the year was $168.4 million and adjusted EBITDA was $605.1 million. Now turning to our balance sheet. Our December 31, 2025, net total leverage ratio was 3.4x and we had approximately $789 million of total available liquidity, including approximately $100 million of cash on the balance sheet. The strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with a goal to maximize long-term value for shareholders. Our deferred revenue balance as of the end of December was $143.3 million, a decrease of 4.7% when compared to the prior year normalized for noncash write-off of bad debt expense. This balance greatly improved to being down 1.4% as of the end of January. Through December 2025, our pass base, including all pass products, was down approximately 4% compared to December 2024. Our 2026 pass program includes our best-ever Best Benefits and we are pleased with the momentum we are seeing in sales as we head into our peak selling season in the next few weeks. Finally, as of December 31, 2025, we invested $217.5 million in CapEx, of which approximately $182.4 million was on core CapEx and approximately $35.1 million was on expansion or ROI projects. As outlined by Marc in the presentation, for 2026 we expect to spend approximately $175 million on core CapEx and approximately $50 million on CapEx for growth in ROI projects. Now let me turn the call back over to Marc, who will share some final thoughts. Marc? Marc Swanson: Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the fourth quarter of 2025, we came to the aid of 178 animals in need. Over our history, we have helped over 42,000 animals, including Bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. We're excited about our ongoing and upcoming events this quarter, including Mardi Gras at all SeaWorld and Busch Gardens Parks, Seven Seas Food Festival at all SeaWorld Parks and the Food and Wine Festival at Busch Gardens Tampa Bay. We are also excited about the ongoing and upcoming concerts we have planned for our SeaWorld and Busch Gardens Parks this year. I want to thank our ambassadors for their efforts during our recent holiday season and the preparation for our current and upcoming events this spring. I'm excited about the opportunity set in front of us both in the near term where we see clear paths to driving meaningful progress and over the medium term where the growth potential is even greater. We are focused, well positioned and confident in the investments we are making, the operational efficiencies we expect to realize and the value we can build for stakeholders. With that, we can now take your questions. Operator: [Operator Instructions] And our first question comes from the line of Steve Wieczynski with Stifel. Steven Wieczynski: So Marc, if we think about 2026 and look, obviously you guys don't have a ton of visibility into your day-to-day operations. But you did note Discovery Cove and group bookings are both up nicely at this point. Wondering though how you guys are thinking about attendance growth for this year outside of Discovery Cove and group bookings. Obviously, you still have kind of these headwinds from the international side of the business. But do you think it's possible at this point to grow attendance with some of those headwinds still in play here? Marc Swanson: Steve, it's Marc. I can take your question. What I'm excited about is what we talked about, the new attraction and event lineup that we're investing in and we do believe will lead to attendance growth. So great lineup in Orlando. Some of the things we've announced, some of them are still to come. And then as I mentioned in my prepared remarks, there's attractions across the parks. So you've got something just about everywhere. And so I really think the lifeblood of giving people a reason to visit is having new attractions and events and shows and things like that. So feel good about the lineup we have. We know international, as you mentioned, was still a headwind here to start the year. We expect that will normalize as we begin to lap some of the factors that drove that down last year. So assuming that normalizes for those reasons and we start to lap some of those things from last year, that gives me some confidence that at least we can hopefully stop kind of the decline in international. And then as we always talk about, we know there's weather impacts throughout the year. If we get a year of normalized weather, that certainly would be a factor in continuing to be able to add attendance in some of our parks. So that's kind of how we're thinking about it. It's really anchored by the attraction lineup and the event lineup and the new shows and things like that. Steven Wieczynski: Okay. Got you. And then second question maybe just turning to capital deployment and maybe how you guys are thinking about leverage. I guess what I'm trying to understand here is if we look at the end of the year, I think your cash balance was, I don't know, somewhere around $100 million. It seems like you guys have already kind of bought back, let's call it, $90 million of stock this year. So cash balance is probably a little bit tighter at this point. So obviously it probably seems like you did take on a little bit of leverage to buy some of this stock back. I guess what I'm trying to figure out is where you guys feel comfortable from a leverage standpoint at this point and moving forward? Marc Swanson: Sure, Steve. I can help you with that. I mean obviously we don't have a target leverage ratio or anything like that. We're comfortable where we are now at the end of the year and not to say we won't be comfortable with something higher than that or lower than that. So really the way we think about it is we work with the Board when there's opportunities to return cash to shareholders and we take that into account, our leverage ratio into account when we're doing that. Obviously as you know in this business, we're kind of this time of year at kind of the trough of the cash generation, right, and then it will start to pick up as we get into the spring and into the summer. So that's one factor to keep in mind. But I would say we're comfortable with the leverage ratio at the end of the year not to say that we wouldn't go higher or anything like that. We don't have a target. We just really work closely with the Board on deploying that cash accordingly. Operator: Our next question comes from the line of James Hardiman with Citi. James Hardiman: So maybe an offshoot of Steve's question, but the language around 2026, I think strong financial performance is how you termed it. I think the previous few years you had talked about record revenues and EBITDA and sometimes attendance. And so this seems like a departure from that given the consistency of those projections in previous years. I don't know if that's more a function of sort of increased conservatism as you look back given that that growth has been elusive or is there something as we think about 2026 where there's some increased uncertainty? Just trying to understand the philosophy of, I don't know, guidance if you want to call it that. Marc Swanson: Yes. James, I mean we're not giving any sort of guidance obviously. I think it's really just a function of we're excited about 2026, the lineup we have. As I mentioned to Steve, the lineup of attractions and events and everything we have going on, some of the macro trends hopefully improve. Hopefully, we get some better weather as well and then obviously there's things we can better manage ourselves. So I'm not guiding you anything. I don't know where that will lead us. But obviously we believe we're going to grow the business in 2026 with everything we have going on. James Hardiman: Got it. And then you've talked a couple of times about how maybe the cost performance is not where you would have liked it to be in 2025. Maybe let's just do -- if we could maybe do a postmortem there. I mean coming into the year, I think you guys had targeted $50 million to $75 million of gross savings. Maybe sort of how did you do against those goals? It looks like total expenses were actually up about $25 million. And so maybe it's just that the gross to net, are there any callouts there I guess is the question? And then as we roll that forward to 2026, right, there's another $50 million of gross cost savings. As we think about the coming year, how should we think about that gross to net walk? Labor is obviously a big one, but how should we think about your ability to flow some, most, all of that to the bottom line? Marc Swanson: Yes. James, let me start and then Jim can add whatever he would like. But look, as you know, we've worked at cost for quite a while at this company is something we've prided ourselves on and we hold ourselves to a really high standard and it's reflected in our margins that we've grown since 2019. Nonetheless, we believe we can do a better job and there was times in '26 that we weren't optimal on managing costs and reacting to things as quickly as we could and those are things that we're going to try to correct here in 2026. So we have a lot of focus on this. We hold ourselves to a pretty high standard. Even with all that, if you look at like the cost growth in EBITDA cost, kind of the cost between revenue and adjusted EBITDA, it was I think just about 3% in 2025, which again it's low single digits, but we manage and have high expectations to do better than that. And so that's our goal for 2026. And there's some initiatives that we laid out on the slide that we think can help us get there and so that's what we're aiming for. But Jim, anything you want to add? James Forrester: Yes. I would just say again to echo Marc, there are a number of headwinds that we've got going on; contractually or legislatively required minimum wages, the presence of hurricanes in some of our parks that happened in 2024 that we're recovering on and adding labor back for things that had to be closed and those type things. As Marc said, under our response to business conditions, we have to take those into account much more aggressively and dynamically match our volume for the guests and the labor that we're spending against that. And we need to use technology and a wide variety of resources at our disposal to be more nimble when it comes to that. We've also got property tax and insurance that we are actively engaged on and trying to react to those. Again lots of headwinds over there both from a taxing authority trying to get more taxes. And then our marketing spend is something that we have tried to do some test and adjust with and sometimes that hasn't resulted in the attendance we hoped for. And so we're going to dial that in more aggressively to make sure that those decisions to spend are targeted. James Hardiman: Got it. And just to clarify, the wage headwinds that you called out, that was a '25 event. Do we expect similar pressure in '26 or has that subsided? How do we think about that? James Forrester: The bulk of that would come from minimum wages. So Florida has legislatively constitutional required minimum wage increases as well as San Diego as well publicized have a very substantial minimum wage increase in 2026. So we're planning for those actively, how we're reacting to those so that we can take business conditions into account, our pricing for both in-park and our admissions to cover those costs and then to be again more aggressive in our match of the volume we're experiencing as well as use of technology and other tools to minimize those labor costs. Operator: Next question comes from the line of Arpine Kocharyan with UBS. Arpine Kocharyan: So you mentioned cost improvement many times in prepared remarks and also in the release. But I was wondering regardless of where demand shakes up for 2026, what would that in aggregate add to your EBITDA for this year versus last? And to go back to the question on $50 million of cost you mentioned in the slides, what part of that is incremental today versus what you were targeting before and what was in the base already, if you could clarify? Marc Swanson: This is Marc. Let me start and Jim can add anything. But I think the point on cost is we could have done better in 2025. We've got new discipline around some of the processes there, some new procedures around that. We've got a number of initiatives that I laid out in the slide. So we're very focused on that. I don't want to guide you to any specific numbers or anything like that. But I can tell you we're highly focused on this. Jim mentioned some of the activity we have going on to offset some of the kind of anticipated headwinds and then we have to do a better job of reacting to and proactively addressing things that maybe we don't know right now. So that's how we're approaching it. I think a more heightened attention to how we manage it and really focusing on it every day. We hold ourselves to a high standard, as I said, on cost. James Forrester: The only thing I would add, Marc, is what we're planning is not so much to rely on the revenue or the attendance to cover some of these. We are aggressively trying to anticipate those headwinds that we know are on the horizon for taxes or these labor costs that we've talked about or in continued health care costs and try to address those on the expense line to try to at least flatten the year-over-year growth if not decrease it and that's our plan. In fact we've got some -- in our budget, we have plans to reduce costs on that basis. But again I don't want to guide to that, but that is our goal. Arpine Kocharyan: Okay. And then on early demand indicators, you mentioned momentum for 2026 pass product. Could you maybe give a little bit more detail in terms of volume and price? It sounds like you're seeing good improvement versus down 4% that you saw in 2025, but obviously it's early. What early demand indicators you're looking at and a little bit more detail on the pass product would be helpful. Marc Swanson: Yes. We called out 2 of the things that we do have visibility into, which is Discovery Cove reservations and then kind of group bookings as well. Those are some of the indicators we have. We don't have as many as maybe others in the industry not having hotels and things like that. But the 2 we did call out, Discovery Cove and group, again look promising for 2026. I can tell you there are some other things that are maybe a little bit smaller, but nonetheless, things that we do look at like our VIP tour bookings are trending well. Some of our in-park products we feel good about. So there's a myriad of things that look promising. These aren't again the lion's share of our revenue or anything like that, but they are the things that we have visibility into, right? On the pass, what I would tell you there is it's very early in the kind of cycle of pass sales. We do sell passes year-round, but really we start to see that ramp up here as we enter like spring into early summer depending on the park location. So we know we have a good product. We know there's reasons for people to visit with our rides, attractions, events. We expanded our concert lineup this year to include all the SeaWorld and Busch Gardens Parks and we're really excited about that. It gives people another reason I guess to buy a pass. So we'll see where pass sales ultimately end up. The key period is still ahead of us there. Arpine Kocharyan: Okay. That's helpful. Just on Discovery Cove, it seems like booking came down from more than 20% that you had previously given to now high single digits. I know probably most of the time you start at a higher number and then that comes down a little bit, right, as you enter the year. Is it just that or is there something else going on there? Because you had disclosed I think a more than 20% number for that for 2026 previously if I'm not wrong. James Forrester: Yes. Here's what I'd say. I think we're pleased to see the high single digits. It's a great park and we're confident that that's going to have another solid year in 2026. It had a record attendance year in 2025. So we're building off of that. Operator: Next question comes from the line of Thomas Yeh with Morgan Stanley. Thomas Yeh: Just 1 on the macro level. You've talked about the consumer environment as being uneven I think for 2 quarters now. Can you maybe just expand a little bit on that? You grew in-park spend clearly in a relatively healthy way, but admissions per caps down. Is there maybe just any evidence you see within the portfolio performance of a K-shape where, say, Discovery Cove at the higher end is performing, but you might be seeing lower-end consumers fall off? And then just for 1Q in terms of the pacing, can you just talk about how core attendance has been shaping up so far? And I think you had some Easter timing shift headwinds last year. Any update on that and how we should think about that for '26? I think it's a little bit earlier this year, but still in April. Marc Swanson: Let me start with your first comment. I mean obviously pacing on Q1, I'm sure everybody is well aware of the weather across a good part of the country especially in Florida in January and February has been a challenge for us and I'm sure many others in the theme park industry. So that is what it is. The good news is January and February are relatively small months and the quarter is really driven in large part by how we do in March. So we still have that ahead of us. Your question on kind of timing of Easter, Easter is earlier this year, it's on April 5. So kind of the start of what we would call Easter week backs up a few days into March. We do have though some other kind of negative calendar impacts in Q1. So my guess is those will kind of offset each other. We have 1 less Saturday in March this year than last year, but we again have a little bit few more Easter days in the month of March than last year. So they probably even out, but that's kind of how we're thinking about it. On your question on per caps, as I said, I look at in-park per cap spend to kind of gauge how people are doing and we've done a good job of growing that pretty consistently now for a few years. And so I think people find compelling reasons to come to spend money in our parks or whatever that may be on whatever product that is. And I think we can continue to tailor that to all income levels and we have to do a better job of that. We know there's people who clearly have been impacted over the last year I'm sure with some of the economic conditions over the last couple of years and there's people that are maybe not as impacted as those. So we have to tailor our products to make sure we're capturing opportunities from all demographic and income levels and we'll continue to do that and that's a big part of our strategy obviously going forward is to continue to grow in-park. James Forrester: The one thing I might add, Marc, is that we talked about the K-shape economy. We do do demographic surveys of our guests and I looked at that in preparation for this call seeing that we actually don't show significant changes in our income levels of our guests as we segregate them. We're not seeing that the large shift at least in our business when we compare to the prior year. Thomas Yeh: Okay. That's very interesting. And then just a quick follow-up on the land monetization initiatives. I think you spoke in particular a little bit more about sale-leaseback interest. Can you just talk about how you weigh that in terms of how compelling that potential opportunity is? And it doesn't seem like it could be mutually exclusive necessarily with developing the land in other ways either. So maybe kind of just double tap on that. Marc Swanson: Sure. The point we've been making now for several quarters and I think we leaned into it even more today is we have significant opportunities with our real estate and it could be a variety of -- it could be a sale leaseback, it could be developing that land into shopping, housing, entertainment, whatever it may be, hotels. So the point is there's a lot of valuable real estate and there's multiple ways to monetize that. We'll work obviously with our Board. I think you're very familiar with the makeup of our Board. We're obviously more than 50% owned by a private equity firm and we get a lot of obviously guidance and counsel obviously from them and the rest of the Board on how to use cash. So I'm confident working together with the Board, we'll come to the right conclusions on how best to monetize our assets. I think the exciting thing is that people recognize the value, maybe not everybody because it's not, I don't think, fully appreciated by the public markets. But the people that we talk to or talk to our Board, they see that value, and that's what we were trying to point out in some of the slides. Operator: And our last question comes from the line of Lizzie Dove with Goldman Sachs. Elizabeth Dove: I wanted to ask about Orlando and I guess kind of Epic specifically. I know you've kind of called out in the past Orlando has been pretty solid or was pretty solid in 2025 at least from an attendance perspective. I'm not sure you've given detail about per caps or kind of costs. But as we get the kind of full annual impacts of Epic this year, it sounds like they're trying to kind of ramp that up even more. Just how you think about that in terms of the impact to your Orlando trends? Marc Swanson: Yes, it's still a great opportunity. As we've consistently said, we think Epic in the market brings more people to Orlando and we have again the opportunity to share in that growth like we have for the last 50-some years that we've been in Orlando. So I would point to the things we're adding in our park, SeaWorld Orlando for example, the new rides attractions. Some of this hasn't been announced, but I can tell you it's some exciting stuff and these are differentiated than what you're going to get at Epic and I think that's a key part of what sets us apart. You're coming here for a different experience. It's a great thing. SeaWorld is a great park in itself. It's a differentiated experience with what we can offer with the animals and some of the rides that are blended in with animal components to them. So we like that setup obviously. And then I haven't even mentioned Discovery Cove, which is a really good park as well and then we have Aquatica, which is a great water park. So we like that we're investing in a market that continues to attract high quality investments from other people as well. We think that benefits everyone. And we'll continue to do our part to drive people to our parks while they're here. I would point out, as I've said in the past, I also believe we have a value proposition that's really strong for guests that are in the market and want to experience again a differentiated product. I think we can do that at a good value as well. Elizabeth Dove: Got it. That makes sense. And then I wanted to ask about sponsorship given you kind of called that out as a big opportunity. I think a couple of quarters ago, you said you were expecting for 2025 at least maybe mid-single digits EBITDA. Curious if you realized that in 2025. And then when you talk about this $15 million-plus pipeline and kind of going to $30 million over time, like how much visibility you kind of have into that? Marc Swanson: Yes. What I'm excited about is what I mentioned on the go forward is the 2026 pipeline is exciting. We mentioned $15 million plus and growing. We think the opportunity over kind of the coming years or long term, however you want to think about it, can be $30 million plus. So we like the pipeline. We like what we see now and the potential for this over the coming years. James Forrester: The only thing I might add, Marc, is sometimes these relationships take a while to develop or review and over time they will bear fruit. And I think the company is comfortable, as Marc said, that pipeline that we have some concrete plans coming up in the future we'll be able to share. Operator: That concludes the question-and-answer session. I would like to turn the call back over to Marc Swanson for closing remarks. Marc Swanson: Thank you, Desiree. On behalf of Jim and the rest of the management team at United Parks & Resorts, I want to thank you for joining us this morning. As you heard today, we are confident in our long-term strategy, which we believe will drive improved operating and financial results and long-term value for stakeholders. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Greetings, and welcome to the Eagle Point Income Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may begin. Darren Daugherty: Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the Fourth Quarter and Fiscal Year 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the SEC. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our full year 2025 audited financial statements and fourth quarter investor presentation with the SEC. These are also available in the Investor Relations section of the company's website, eaglepointincome.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom? Thomas Majewski: Thank you, Darren, and good morning, everyone. During 2025, the CLO market experienced challenging conditions, and the company was not immune to these broad market dynamics. While default rates in the loan market remain below long-term historic averages, the company's financial performance and total return for shareholders last year were adversely impacted by a number of key factors. These factors included the effect of reduced SOFR levels on CLO debt investment income, ongoing loan spread compression impacting our CLO equity portfolio and a broader negative general sentiment in the market towards credit. Throughout the year, we actively managed our portfolio within our investment mandate as the market evolved, seeking opportunities across both CLO debt and equity as well as certain other asset classes beyond CLOs. We believe our long-term distribution track record reflects the durability of our strategy across different interest rate cycles and credit environments. As we move into 2026, we believe healthy underlying borrower fundamentals and our disciplined approach will position us well. Looking at the company's results for the year, EIC generated a GAAP return on equity of negative 0.7% and a total return on our common stock of negative 15.2%, assuming reinvestment of distributions. We paid $1.98 per share in cash distributions to our common shareholders or 15% of our average stock price during the year. During 2025, the elevated level of CLO refinancings, resets and calls contributed to early repayments across our CLO debt portfolio. Paydowns within our CLO debt portfolio totaled $147 million during the year. Because many of these investments were purchased at discounts and were then repaid at par, the repayments did generate $0.12 a share of realized capital gains during the year. During the course of 2025, we participated in 10 resets and 6 refinancings across our CLO equity portfolio. Each reset extended the reinvestment period to 5 years and together with the refinancings resulted in average CLO debt cost savings of 46 basis points for those CLOs. Looking at the fourth quarter results from last year, the company generated net investment income less realized losses of $0.03 per share, which was comprised of $0.35 of net investment income and offset by $0.32 of realized losses. The realized losses were primarily attributable to portfolio repositioning, including rotating out of certain positions from underperforming CLO collateral managers. The fourth quarter net investment income of $0.35 per share compares to $0.39 of net investment income per share recognized in the prior quarter. The decline in net investment income was driven primarily by 2 factors; first, SOFR declined during the quarter, reflecting the continuation of Fed rate cuts in the second half of 2025. This directly impacted our CLO debt portfolio as the coupons on our CLO debt positions generally have a floating rate based on SOFR. Second, continued tightening in broadly syndicated loan spreads, which has outpaced the decline in CLO liability costs also reduced earnings from our CLO equity portfolio. We refer to this market dynamic as spread compression. Despite the decrease in net investment income, portfolio cash flows remain robust. Recurring cash flows for the fourth quarter totaled $19 million or $0.79 per share, and that compares to the prior quarter's $17 million or $0.67 per share, representing an approximate 18% increase quarter-over-quarter. The increase reflects the quality and diversification of the company's investment portfolio. And notably, fourth quarter recurring cash flows exceeded our regular common distributions and total expenses by about $0.15 per share. NAV decreased to $13.31 per share as of December 31, which is down from $14.21 per share at the end of September. This was largely driven by continued loan spread compression, which has caused CLO equity valuations to decline. Our GAAP return on equity for the fourth quarter was negative 4.2%. Our investment strategy allows us to deploy capital across CLO debt, CLO equity and other credit asset classes in both the primary and secondary markets. This flexibility enhances our ability to allocate capital where we find the most compelling relative value. During the fourth quarter, we deployed about $45 million into new investments. Of that amount, $26 million was invested in other credit asset classes such as infrastructure credit, asset-backed securities, portfolio debt securities and regulatory capital relief transactions with a weighted average effective yield of 21.6%. Importantly, our adviser has expertise in these other credit strategies and has been invested in them for some time for other funds and accounts that our adviser manages. We've also continued to actively optimize our capital structure seeking to reduce financing costs. During the fourth quarter, we completed the full redemption of our 7.75% Series B term preferred stock. We also entered into a new revolving credit facility with an attractive cost of capital and a 3-year maturity. And then earlier today, we announced our intention to fully redeem the company's 8% Series C term preferred stock, which at present represents our highest cost of capital. During the quarter, we also repurchased $19 million of common stock at an average discount to NAV of 18.2%, resulting in a NAV accretion of approximately $0.14 per share. In November 2025, we announced that our Board of Directors had increased our common share repurchase authorization to $60 million. These actions reflect our ongoing commitment to enhancing shareholder value, and we expect to opportunistically continue buying back shares when they are trading at material discounts to NAV. We believe our shares remain undervalued and repurchasing them represents a very attractive use of the company's capital. Last week, we declared 3 monthly distributions of $0.11 per share for the second quarter of 2026, which is in line with the distributions we declared for the first quarter. We believe the current monthly distribution level of $0.11 per share aligns with the company's near-term earning potential in today's lower interest rate environment. As a reminder, when setting the monthly distribution level, the company's Board of Directors considers numerous factors, including the cash flow generated from the company's investment portfolio, our GAAP earnings and the company's requirement to distribute substantially all of its taxable income. CLO debt is a floating rate asset, so it is expected that our earnings power will generally move in line with benchmark rates. That said, we continue to believe CLO junior debt offers compelling risk-adjusted returns compared to many other broader credit market opportunities. We believe the company's portfolio is well positioned to drive returns in any economic environment and rate cycle. The scale and experience of our adviser, Eagle Point, remain key advantages as we seek to capitalize on opportunities in a dynamic market environment. I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market. Daniel Ko: Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the fourth quarter. Loan market fundamentals remained largely stable through the year despite occasional bouts of volatility due to headlines concerning tariffs, interest rates and global geopolitical factors. Loan issuers continue to have positive growth in their revenues and EBITDA throughout the year, contributing to a relatively healthy credit market. The S&P UBS Global Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025. The trailing 12-month default rate decreased from 1.5% at the end of September to 1.2% as of December 31, still considerably below the long-term average of 2.6%. As of December 31, our portfolio's default exposure was 32 basis points. Continued rate declines should support a lower default rate environment as issuers save on interest costs. CLO new issuance rose slightly to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the 2024 record of $202 billion. Fourth quarter resets and refinancings were $54 billion and $20 billion, respectively. Combined full year CLO issuance, including resets and refinancings, hit $546 billion for 2025, exceeding last year's total volume of $511 billion. Tight loan spreads and increased supply of new issue CLOs were headwinds to CLO equity returns, causing some pressure on our results. At the same time, new issue loan activity is picking up with several large loan deals recently announced. This increase in supply could cause loan spreads to widen as the market absorbs higher loan volumes, leading to potentially higher equity cash flows in the future and creating a potential tailwind for CLO equity. CLO debt spreads have remained resilient despite the modest volatility that we observed in the fourth quarter. Our CLO BB positions, which are focused on the higher quality portion of the market, benefit from attractive yields and our subordination. As of December 31, we had $52 million of cash and undrawn revolver capacity available, providing ample liquidity to deploy into attractive investment opportunities or opportunistically repurchase our stock and deliver long-term value for our shareholders. With that, I'll hand the call over to our advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results. Lena Umnova: Thank you, Dan. During the fourth quarter, the company recorded net investment income or NII less realized losses from investments of $0.7 million or $0.03 per share. This compares to NII less realized losses of $0.26 per share in the prior quarter and NII and realized gains of $0.54 per share in the fourth quarter of the last year. Including unrealized investment portfolio losses, GAAP net loss was $15 million or $0.60 per share for the fourth quarter. This compares to GAAP net income of $0.43 per share for the third quarter. The company's fourth quarter net loss was comprised of investment income of $15 million, offset by net unrealized losses of investments of $16 million, net realized losses of $8 million and financing and operating expenses of $6 million. In addition, the company recorded an other comprehensive loss attributable to changes in the mark-to-market of the company's liabilities recorded at fair value of $1 million for the fourth quarter. We paid 3 monthly distributions of $0.13 per share during the fourth quarter of 2025. And last week, we declared monthly distributions of $0.11 per share for the second quarter of 2026, in line with the distributions for the first quarter of 2026. As of December month end, the company had outstanding preferred securities, which totaled 31% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions. As of December 31, the company's NAV was $312 million or $13.31 per share versus $14.21 per share as of September month end. During the fourth quarter, we repurchased over 1.6 million shares of our common stock for $19 million at an average discount to NAV of 18.2% per share that resulted in NAV accretion of $0.14 per share. Looking at our portfolio activity during the month end of January, the company received recurring cash flows from its investment portfolio of $14 million. To note, some of the company's investments are still expected to make payments later in the quarter. As of January month end, net of pending investment transactions and settlements, the company had $85 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of January month end was between $13.23 per share and $13.33 per share. I will now turn the call back to Tom to provide closing remarks before we take your questions. Thomas Majewski: Thanks, Lena. The fourth quarter reflected our continued focus on active portfolio management amid dynamic market conditions. Performance faced technical headwinds driven by spread compression in the leveraged loan market and the pace of repricings rather than deterioration in credit fundamentals. Throughout this environment, we have focused on relative value and disciplined capital allocation across CLO debt and selectively CLO equity and other asset classes in the credit market beyond CLOs. We continue to actively execute on our share repurchase program as we view our stock as undervalued and believe repurchasing shares at a discount represents an attractive use of capital. Looking ahead, we remain constructive on the CLO market fundamentals. We have a robust pipeline of refinancings and resets, which we believe will help lower the liability costs in our CLO equity portfolio. At the same time, increased new issue loan activity may help rebalance supply and demand in the loan market over time, which we also believe could be incrementally supportive for CLO equity. Overall, we believe the current market environment represents a compelling opportunity for patient, well-capitalized investors with a strong balance sheet, active portfolio management and a continued focus on relative value, we believe Eagle Point is well positioned to navigate the evolving market conditions and deliver solid risk-adjusted returns and long-term value for our shareholders. Thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator? Operator: [Operator Instructions] Our first questions come from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with just a follow-up on some of your comments, Tom, about the realized losses in the quarter being driven by rotating out of some underperforming managers. Wonder if you could just add a little more color to that on what particular measures or metrics were they kind of falling short of expectations? Just kind of curious if you can add something there. Daniel Ko: Erik, this is Dan. So I guess in terms of the underperforming collateral managers, these are some of the ones that had, I guess, more credit issues and kind of loan spread compression that we had kind of anticipated on the CLO equity side. Maybe there were a handful kind of on the CLO BB side as well that have kind of underperformed our expectations on credit. And so we just thought that it was best to exit and kind of rotate into both other CLOs, but also some of the asset classes away from CLOs that you've seen kind of grow kind of within your portfolio, whether it's collateralized fund obligations, asset-backed securities and then some other portfolio debt securities, which are all kind of asset classes that Eagle Point and other funds -- within Eagle Point are investing in. We just found kind of better relative value there. And so thought we would kind of enhance the yield of the portfolio as well as kind of add a little bit of diversity within the portfolio through those. Erik Zwick: That's great color. And then in terms of the announced redemption of the Series C term preferred stock, curious about your source of funds for redeeming that? Is it kind of a combination of cash on hand and maybe utilization of the new revolver? Or how do you plan to fund that? Daniel Ko: Yes, exactly. So there's -- it's definitely the revolver, new revolver that's in place. There's kind of cash on hand, but also just there continues to be a lot of refis and resets. So for our CLO debt, that means that we're getting paid off kind of at par stuff that we typically bought at a discount earlier. So we're achieving that convexity and then able to kind of get par back and use those proceeds to ultimately pay back the EICC. Erik Zwick: Got it. And then last one for me. In the press release, there's an indication that the weighted average expected yield on the CLO portfolio was 12.5% at the end of the quarter, and that was up from 11.6%. Curious the driver of that increase, was it kind of income related or more in the denominator, just the change in the fair market value of the portfolio? Daniel Ko: I think it's more just so that we -- it was a little bit, I guess, of the denominator, but it was also just kind of being able to redeploy into kind of wider yielding assets versus CLO BBs and CLO equity. So it's really that kind of non-CLO bucket that was accretive. Erik Zwick: Got it. That's preferred rather than a change in the denominator. Operator: Our next questions come from the line of Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Lena, were there any nonrecurring items in the earnings? Lena Umnova: No, there were none, this quarter. Christopher Nolan: Okay. And then I guess a follow-up on Erik's question on the refi. Should we expect the investment balance sheet investment portfolio to shrink in the first quarter and possibly into the second quarter as well relative to year-end? Daniel Ko: No. I mean, I guess we're obviously redeeming kind of the EICCs, but -- and we have been kind of opportunistically buying back our stock. That being said, we typically, over the long-term target a 25% to 35% leverage ratio. And we're -- I guess, with the EICCs being redeemed, we'll be kind of on the lower end of that. So I guess we have that target of 25% to 35%. And I guess that's really kind of all I can say for now. Christopher Nolan: Okay. And then I guess for the indication is you're going to be focusing less on CLO, more on alternative credit assets. Are these going to be assets which you have any sort of direct exposure you directly underwriting let say, a company? Or is it you're going to be buying packaged securities as before? Daniel Ko: Yes. No. So this is -- these are investments that are being made kind of across the Eagle Point platform and other funds or accounts that we manage. We have dedicated teams that are focusing on these investments. And then the EIC based on kind of the merits of the investment and based on kind of my decision as the portfolio manager can participate in these investments. And so relative to kind of the opportunities that we were seeing in CLOs, we found that these other non-CLO investments, I guess, provided a better relative value opportunity. So that could change tomorrow if we find kind of CLOs provide a better kind of relative value kind of attractive yield. But during the fourth quarter, we found better relative value within these kind of non-CLO asset classes. Operator: We have reached the end of our question-and-answer session. I would now like to hand the call back over to Tom Majewski for any closing comments. Thomas Majewski: Great. Thank you very much, everyone. We appreciate your time and interest in Eagle Point Income Company. Hopefully, we're giving some good color on the strategy for the portfolio as we move forward. Certainly, we'll remain in the foreseeable future to the focus on the core of a CLO BB portfolio, but with the goal of enhancing the return where we can just as we've added CLO equity from time to time, similarly introducing some other asset classes that we're investing in across Eagle Point's broader platform where we see opportunities on a relative basis to add incremental value. So we're excited about the company. Our #1 job is to be delivering strong returns to shareholders through credit products. And we believe as we continue to evolve the strategy of the portfolio consistent with broader developments here at our firm, we're excited for the future prospects for EIC. We appreciate your time and attention. Lena, Dan and I are around today if anyone has any follow-up questions. Thank you. Operator: Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Unknown Executive: Welcome to everybody. We're just going to wait half a minute or so, to let everybody get on to the event today. There's been a lot of interest, which is good to see. So just bear with us. Right. Okay. I think we've got a decent number now. So welcome to the webinar today from McBride, who will be covering their recently announced interim results and also talking a little bit about the outlook for the business. One or two administrative points first. This presentation is being recorded. So should you miss any of it, you can watch it again. We will be very keen to address questions after the formal presentation, which you can submit via the question button on your screen. And the presentation deck that the boys will be talking to is already available on the McBride Investor Relations page as well, along with lots of other useful materials. We're very pleased to be welcoming back CFO, Mark Strickland; and the CEO, Chris Smith. And I'm now going to pass over to you, Chris, if you can start the presentation. Christopher Ian Smith: Thanks, Andy. Good morning to everyone, and welcome to our interim results deck and presentation for the 6 months to the 31st of December 2025. We'll cover today -- on the next slide, please, Andy, a series of -- I will cover off headlines and an update on our business progress before I hand over to Mark, who will take you through a more detailed look at some of the financials, and then I'll come back to myself for the outlook and then into questions, as Andy said. Before I step through the various slides, I'd just like to comment that there are three key themes that the past 6 months can really be summarized by: First, a continued delivery of our strong financial and operational performance for the third consecutive year now. Secondly, the passing of a significant milestone in our transformation journey with our first SAP go-live in November. And then third, a clear demonstration of a balanced approach to capital allocation to support both short-term shareholder returns and longer-term value creation from business investment. Next slide, please, Andy. This is the sixth set of results, interims and finals that I presented, where the group has reported profitability levels at double the historic average, cementing our new financial strength and our optionality to deploy resources to support future growth, in line with our ambitions as we set out at our Capital Markets Day about 2 years ago. The market continues to move in favor of the private label offer we provide with the latest data showing that private label share has started rising above recent all-time highs, providing a solid platform for McBride to continue to prosper. Our divisional and central teams continue to drive the business forward, tightly aligned to their strategies, supporting our customers as our private label proposition expands to provide value to the retailers and consumers alike. McBride's private label volumes continued to grow this past period, albeit at slightly lower levels than we saw in the past 2 years, with total sales revenue increasing just under 1% to GBP 475 million. We have secured a robust pipeline of new business wins, expected to start during the second half year, leading to positive momentum as we exit financial year 2026, and we move into the next financial year of '27. Our excellence and transformation agenda has continued at pace these past 6 months. Productivity and other operational improvements, together with tight management of overheads has seen margins maintained despite competitive pricing pressures and inflationary pressures. EBITDA, EBITA, and PBT all remain consistent with the first half of last year, with EBITDA margins just under 9% for the first half and with the full year expected to be over 9%. I'm really pleased to be able to confirm that our first SAP S/4HANA go-live in the U.K. was successfully completed in the period after 2 years of preparation and design. This multiyear program is the platform for future efficiency and operating excellence as we upgrade McBride to the latest best-in-class ERP systems. Our continued strong profit levels and cash generation has supported a balanced approach to capital allocation. In the period, nearly GBP 13 million of shareholder returns were deployed in the form of reinstated dividends, share buyback program and share purchases to reduce future dilution from employee share awards. Our overall share price rise since September 2025, represents a market cap price of approximately 40%. Additionally, capital expenditure rose to support growth, efficiency and transformation programs. The group remains active in considering all options for deployment of capital in seeking to grow shareholder value. I'm now going to move on to provide an update on a series of key business progress topics. At our Capital Markets Day in February 2024 -- the next slide, please, Andy -- we set out a number of key ambitions to measure our progress. At this midpoint of FY '26, we remain committed to these key targets over the coming years, and our progress since 2024 continues to perform in line. Our volume growth, whilst a little slower these past 6 months, is comfortably ahead of the target set in 2024 cumulatively. We have an encouraging set of contract wins starting in the second half, which is expected to support better growth rates into FY '27, and a number of other material growth options in development at this time. Our EBITDA margins are consistently around the 9% level, with another 1% required to reach our 10% ambition and almost at the double of the level of the historic levels of 5%. We said at the Capital Markets Day in February 2024, that shareholders should expect some minor variability of this ratio as modest input cost swings will either benefit or impact the group's profitability between periods. Our debt position remains well within our targets, and this is after nearly GBP 13 million deployed in the past 6 months for shareholder returns. Our long-term committed facilities and liquidity availability provides ample scope for further capital deployment in pursuit of our strategic ambition. ROCE remains well above the targets and our work on excellence and transformation is delivering tangible improvements to support and develop the robust platform the group needs to support long-term success. Moving on to an update on the markets that we supply. We present here the usual panel data, which we receive each quarter. As a reminder, the data is 12 months trailing value and volumes. It covers the top 5 economies of Europe, all the bricks-and-mortar retailers and all the household categories that we supply. We've been tracking this data for over 4 years now. Having grown substantially between 2022 and 2024, private label market share in volume terms, as shown by the green line on that chart, stabilized over the last 12 to 18 months. This latest data insight, however, shows that the overall total market continues to grow a little bit towards the lower end of our 1.1x to 2x -- sorry, 1% to 2% projections, with private label again outperforming brands across all categories, with private label volume share now up to 36.1%, a 0.3% rise compared to the last 4 quarters. We will wait to see over the next 2 data drops if this further rise is sustained, but this latest data confirms our view that the more likely direction of travel is for private label to continue to take share and not revert back to pre-2022 levels. Moving on to the divisions, and I'll now give a brief update from all the businesses. Next slide, please, Andy. Mark will cover off the financial performance later, but we have seen strong profits progress overall in Unit Dosing, and Aerosols, but Liquids, and Powders was slightly weaker. The Liquids division has had a very busy period and at the same time, has had to handle the first go-live of the S/4HANA program at the U.K. Liquids site. The division saw overall volumes higher, especially from contract manufacturing, which was up 9%, with private label flat. The uncertainty on the rollout of the EU's deforestation regulation or EUDR, has seen pressure on certain raw materials, especially for the Liquids business, where palm oil derivatives are actively used. As a result, the division did see modest rises in material costs in a market where such small rises are not really able to be passed on. The business, however, was vigilant, of course, in its cost management and product engineering, and managed its margins very well in the period. With future growth anticipated, especially from laundry, the division continued to invest in capacity and new packaging formats to be able to secure new business going forward. In Unit Dosing, we saw a strong operational performance with the benefits of our Flexilence program, where we now ensure that all our pod formats can be supplied in all the various packaging formats required by customers, yielding output and headcount efficiencies. Overall volumes here were lower year-over-year, but all in contract manufacturing, where a loss contract from last year annualized out at December. Private label volumes were flat, some ins and some outs amongst various customers and some delays in a few product launches. But strong wins in recent tenders are expected to launch in the second half and early into FY '27 to provide good growth prospects ahead. The Powders business continues to outperform its strategic targets overall. The market for private label laundry has remained steady with private label share growing as branded volumes continue to fall. Total volumes for our division in McBride in Powders were broadly flat with an overall private label slightly weaker than our contract business, which is about 40% of revenues in this division. Like the other divisions, recent wins expected to launch again in the next 6 months or so will provide good growth in future periods. In the meantime, strong operational control and focus has seen margins steady with some automation capital investment introduced helping drive margins higher. Our Aerosols team have delivered again this year. Volumes were 15% higher and are now close to the 100 million cans target. Very strong growth in Germany was a result of focus over the past few years in this targeted market. A GBP 2.5 million investment in a new production line is mostly complete now and is providing the capacity needed to take us past the 100 million cans level. Finally, our Asia business, so we had a bit of a mixture with weaker-than-expected private label sales in Southeast Asia, and a quieter Australia with a loss of one part of the traded goods supply from our European business. However, prospects are looking more positive with our first household wins in Australia for products made in Malaysia expected to launch in the next month or so and a series of new contract manufacturing opportunities in discussion. Moving on to an update on our transformation program or excellence agenda, as I call it, and this has continued at pace through the period. After over 2 years of setup and design work from the SAP team, we successfully launched the new global template with the first go-live start of November in the U.K. business and Corporate Center. It is pleasing to confirm that the business is operating as usual with some limited disruption in the early few weeks to our warehouse operations, where whilst the systems are working, we became capacity limited. We did miss some sales in that short period of time, which we estimate to be about GBP 3 million with a roughly GBP 1 million impact to EBITA. This challenge was resolved quickly, and the business has seen record output and shipment days since. The focus here has now moved quickly to lessons learned, and we're now deep into planning the Wave 2 rollout of this new global template to ensure we maintain pace towards the efficiencies and benefits that will accrue once we have more locations on this new platform. The other 3 main programs in the overall plan: service, commercial, and productivity are all now into business as usual, with the service program completing in September and the commercial excellence project completing in December. Both are yielding good results with improved processes in use across the business and visible KPI improvements. Next slide, please. The past 6 months has demonstrated the group's flexible approach to capital allocation. With the strength of the group's trading position and its funding capacity, we have deployed nearly GBP 30 million in shareholder returns. At the AGM in December, shareholders approved the Board's recommended recommencement of annual dividends with the resulting payment in November of GBP 5.2 million. In light of the market valuation so far below the Board's view on where the group should be valued, the Board launched two value initiatives in the autumn. First, GBP 6.4 million was spent on buying shares at an average price of GBP 1.26 through the Employee Benefit Trust, or EBT, in order to fund the EBT with adequate share levels to use for satisfying future incentive awards that are expect to divest in the next 2 years. These share awards would normally be satisfied by new issue shares, thus diluting the total shares in issue. And hence, this action worth approximately 0.7p per share of reduced dilution in future EPS calculations. Secondly, the Board launched a GBP 20 million share buyback scheme in December. There was only 1 month for buying until the end of the half year, but GBP 1.3 million have been deployed to 31st of December. All of these actions have supported a strong recovery in the share price and our market capitalization, up approximately 40% since final results in September last year, a significant rise. But as a reminder, we are still only trading on a 4.9x EV EBITDA multiple. At this point, I'm now going to hand over to Mark for a more detailed financial review. Mark Strickland: Thank you, Chris, and good morning, everyone. The McBride business has delivered another solid set of results. As well as delivering good results, the business has also demonstrated a balanced approach to capital allocation, prioritizing short-term shareholder returns whilst at the same time, retaining the flexibility to fund our longer-term ambitions. As a result, I continue to have huge optimism for what the business can continue to deliver for its shareholders into the future. So looking at the financial highlights. Group revenues were up GBP 3.8 million, 0.8% on an actual basis, but on a constant currency basis, they were down slightly 2.1%. Whilst private label and contract manufacturing volumes were both up, McBride branded volumes suffered slightly and declined. Adjusted operating profit was down slightly to GBP 31.5 million. Without the SAP impact, adjusted operating profit would most likely have been up slightly. As in previous years, profit levels have been maintained through good margin management and overhead cost control. Adjusted EBITDA at GBP 41.8 million was on a par with the previous year's first half. Earnings per share were down to 10.8p per share, predominantly due to a particularly hard prior year comparator in relation to taxation, which was 25% in the last year first half versus 30% this year. We expect full year 2026 taxation to be broadly in line with the full year prior year rates. Over the last 3 years, we have progressively strengthened our balance sheet through cash generation and debt control, this period being no different. For the first half of the financial year, our free cash flow was a generation of GBP 24 million. And our debt -- net debt only increased slightly to GBP 120.6 million despite the nearly GBP 13 million paid out in dividend, the EBT and on share buyback. This shows that the business through its proactive capital allocation policy has the ability to balance both the short-term shareholder returns whilst retaining a flexible platform for future investments in growth, be they organic or through M&A type activities. Looking at financial performance. This slide looks at the group and divisional performance on both an actual and constant currency basis. There were 3 main drivers of the actual revenue growth of 0.8%. One, firstly, volume; secondly, price and mix; and thirdly, FX. The volume growth of 0.4% arose from contract and private label volume growth, combined with the Aerosols continued growth. And as I said earlier, that was offset by a reduction in the McBride branded volumes. The second impact was the price and mix impact with two elements at play. Firstly, there's been an element of pricing pressure, but this has predominantly been offset through product reengineering and ongoing margin management. Let me explain that further. In other words, whilst the selling price may be lower, the profitability is often similar to other products as these are often lower cost format products. Secondly, there were more sales of lower value products in the first half of the financial year compared to that of the prior financial year. The third and final impact was FX, mainly with the pound-euro exchange rate moving towards the EUR 1.15 to the pound. Next, the divisional review. So looking at Liquids. At a revenue of GBP 269 million, the Liquids division represents around 57% of the group. As mentioned earlier by Chris, there was a limited impact in November and December from the SAP S/4HANA go-live. Despite this, volumes grew 0.1% with most markets stable and only France displaying a slight decline. Margins were impacted by competitive pressures, inflation and some marginal raw material increases that couldn't be passed on to the customers given their small size. The division still delivered an adjusted operating profit of GBP 17.7 million, which represents a return on sales of 6.6%. We continue to invest in this business for the future. Now moving on to Unit Dosing. For the first half of the financial year, the Unit Dosing division delivered a revenue of GBP 116 million. On a revenue basis, the Unit Dosing represents circa 24% of the group. Whilst contract manufacturing volumes were weaker in the first half, the outlook is good for year-on-year overall volume growth in the second half of the financial year. The division delivered improved profitability in the period of GBP 12.5 million as a result of continued production efficiencies, the benefits of transformation and ongoing tight overhead cost control. At 10.8%, the division's return on sales is a pleasing step-up from the prior year. Finally, the Unit Dosing division through its Flexilence initiative and the range of its formats it can now offer -- for example, its soft pods portfolio -- continues to be well set to continue to gain business in future tenders. Moving on to Powders. At circa 9.5% of our overall revenue, the Powders division operates within an overall steadily declining market. Sales at GBP 44.9 million were lower than expected, impacted by slightly softer private label demand, primarily in the U.K., together with delayed launches of new contracts and product mix changes. Adjusted operating profit declined by GBP 1.1 million to GBP 3 million, mainly due to the aforementioned lower revenue. However, because of good cost control, operational efficiency and again, product cost engineering, the division continues to deliver a healthy return on sales, in line with our medium-term expectations. Finally, as with Unit Dosing, this business segment has a good pipeline for growth into the future. Now moving on to Aerosols and Asia Pacific. Between them, Aerosols and Asia Pacific represents circa 9.5% of the group's revenue. Over the last few years, our Aerosols division has been a huge success story. This was no different for the first half of 2026. Volumes grew by some 14.6%, whilst revenue grew by 18.1% to GBP 33.9 million, delivering an adjusted operating profit of GBP 2.1 million and closing in on our midterm return on sales ambitions. The growth is supported by significant contract wins in Germany, combined with personal care launches elsewhere in Europe. The first half of financial year 2026, also saw the continuation of the significant investments for capacity expansion at the Rosporden site in France. This investment is on course for completion in the second half of this financial year. Our smallest division, Asia Pacific, has been impacted by subdued private label demand in Southeast Asia, and has had to focus on cost management to preserve its profitability. That said, it has made good progress in private label household in Australia. Whilst currently being an incubator business, we still remain optimistic that there are significant opportunities, which will mean that we will be able to grow this business over the next couple of years. Now looking at costs. For the first half of the 2026 financial year, input costs remained flat, benign overall. But as you can see from the left-hand chart, they still remain significantly higher than in 2021. Inflation is still prevalent and some costs are still rising, albeit at slower rates than over the last few years. Hence, McBride's continuing focus on margin management has been key to the delivery of this solid set of results. This consistency of performance means that McBride as a group remains very well placed to sustain underlying profits in future years. As with most businesses, technology remains a key focus. And indeed, McBride has embraced new technology, believing that this will be a key positive differentiator going forward. Chris has indicated that the Wave 1 of the S/4HANA project has successfully gone live in the U.K., and we expect to complete the rollout of the project during the 2028 financial year, which is in line with what we indicated when we set sale on the project. We continue to invest into and benefit from our data analytics function. Real-life example of this capability is some of the market analysis information that you saw in Chris' earlier presentation. In terms of overheads, as you would expect, we continued our focus on cost optimization. Overhead costs have been tightly controlled with reductions in both distribution and administrative costs as a percentage of revenue. Moving on to other financials. Year-on-year interest remained broadly flat as did interest cover. Exceptional costs were GBP 2.4 million relating to the SAP S/4HANA implementation and an ongoing review of the group's strategic growth options. Regarding taxation, the effective tax rate in the first half was 30%, which compares to the first half in 2025 of 25%, but a full year rate of 32% in 2025. The actual tax paid in half 1 was GBP 1.8 million compared to GBP 7.1 million the previous year as the cash payments normalize for the payment of in-year liabilities only as opposed to FY '25 when there was an element of catch-up from the financial year 2024. At GBP 14.8 million, capital expenditure levels were up from GBP 12 million the previous year as the business continued to invest in the future. It is expected that the group will spend around GBP 30 million to GBP 33 million over the current full year and that the level of expenditure will continue at circa GBP 30 million for the following year before dropping off in line with the completion of the SAP project. Finally, on to net debt. As indicated at the start of my presentation, the business continues to generate strong cash flows and resulting in net debt control and a small increase to GBP 120.6 million. The business has strong core liquidity with around GBP 135 million of headroom and also has an unutilized EUR 75 million accordion facility, providing continued optionality for future capital allocation decisions. In conclusion, the business continues to be run well. The share buyback delivers good value for our shareholders. As a result of the successful SAP global template implementation, future implementation risk has been significantly reduced. And the business still has optionality through its balance sheet strength. Thank you, and I will now pass you back to Chris. Christopher Ian Smith: Thank you, Mark. As you've heard throughout the presentation, business momentum is good, and the first months of our second half have seen volumes in line with our estimates, with the start-up of new business wins still on track to meet the time lines required to meet our second half targets. As mentioned earlier, the private label market overall is expected to maintain its strong position of recent years with some potential for further growth if private label continues to grow share. We expect material costs to remain stable, possibly with some weakening of pressure for natural alcohol-based materials and recycled content plastics. Other inflation is being managed through tight overhead control and vigilance on allowing new costs to creep in. Our teams have delivered really well on all our transformation initiatives and the recent success of such a major milestone of the first SAP go-live gives confidence about the rollout of our global template to all other locations over the next 2 to 3 years. This should be seen as a big risk reduction point for investors, and the focus will turn to driving expected efficiencies, enhanced insights, and better decision support. At this stage, nearly 2 months into the second half, I'm pleased to confirm we expect to deliver full year results in line with analyst expectations. With our normalized funding position alongside ongoing high profitability levels, the reset resilient and stronger McBride is poised to consider a range of future value creation ideas to support our midterm ambitions to grow the group further and deliver still higher margins. Thank you. Now for questions. Unknown Executive: Yes. Thank you very much, gentlemen, very comprehensive and impressive performance continuing, which is good to see. Right. Plenty of questions already in. So let's dive in. First of all, about S/4HANA and the Wave 1. Can you comment a little bit more about what you've learned from the process, because no systems integration usually happens without some teething issues. And we have a related question, why did you choose to roll it out in Liquids first? Mark Strickland: Shall I pick that one? So we've learned an awful lot through the process, far, far too much to sort of go through in this 30, 40 minutes. The biggest one is testing in volume. It's the volume testing, particularly in warehousing. We had a very, very narrow issue within what's called a V&A, a pick and dispatch area. Third-party logistics worked well. Third-party warehousing worked well, but Middleton has a very specific need for putting product into and out of what's called very narrow aisles. And we didn't test the volume enough through that. Ultimately, it worked, but we became a little bit capacity constrained. So testing volume was a big learning. Training was a little bit last minute, possibly need to do a couple of weeks earlier, but we also know we don't want to do it too early. And we also concentrated on what's called the happy path. So when things go right, we probably, in hindsight, should have concentrated a little bit more on what's called the unhappy path. So how do you correct things when they go wrong. But overall, I've got to say I'm very pleased with the implementation. There's lots of peripheral learnings. There always are. But I think the way the whole team pulled together really displayed the McBride ethos and the McBride values, both the project team and the site team. It was a combined effort. Sorry, what was the second part? Unknown Executive: Why U.K.? Mark Strickland: Why the U.K. Essentially because we had two instances of SAP, one in the U.K. and one in Europe. And the U.K. only had 2 sites. So it was the simplest to move across on to new SAP. We would have had to move 12 sites and we would have ended up with 3 different instances of SAP, whereas moving the U.K., we only -- we kept 2 instances. So it's a bit of an easy decision really. Unknown Executive: Understood. Thank you. A number of questions about inorganic growth. And Chris, you referred to your low EV/EBITDA rating, although it is improving. We have a question, is that a hurdle for you to make larger acquisitions? Christopher Ian Smith: Well, yes, I think certainly, when it was down at 3 and a bit times as a multiple, it was a huge hurdle. I mean, look, the level of M&A that we might be looking at and in fact, the inorganic can also extend to contract manufacturing opportunities with where you might need capital. You may not need new sites. You just may need to fill your existing facilities with new capital. The ranges of values that we're talking about are all manageable with our debt facilities. Look, we look -- there's a lot of benchmarks in the industry at the moment around what people are paying for home care businesses with the Reckitt transaction with Advent recently. We also know there was one in Spain recently. So we have a -- I think the industry is kind of honing in on what that range of multiples need to be. And I guess having got the share price back up a little bit and got better value for shareholders with our rating today, we get closer to making it not so meaningfully difficult, if you like. Look, and I think in most cases, on the M&A side, the synergy benefits can be quick. And therefore, we look -- we'll also look at speed with which we get that multiple down post acquisition with synergies. So we're acutely aware of the challenge around multiples, but I think we've narrowed the gap, and I think we know what we need to pay. And I don't think shareholders will be -- we're not going to be out there paying 8x or 9x for anything. So people shouldn't worry. Unknown Executive: Okay. And looking at potential targets, could you say in a perfect world, which we definitely don't live in, which segments or which region would you most like to increase or find bolt-ons to add on to the current structure? Christopher Ian Smith: Yes. Look, we will absolutely align our M&A targets and contract manufacturing, frankly, with the key missions and the strategies of the company, right? So look, we're a European-focused business. So we're not going to be, I suspect, suddenly acquiring stuff in the U.S. or South America. Our focus is in Europe. There's a little bit of obviously, focus in Asia around how we develop that business, that incubated business that Mark talked about to make that more substantial, a little like we've done with Aerosols, right? We've got that business now to be credible and valuable to us. And we're on the same mission, of course, with Asia. But look, the bulk of it will be in Europe. And then we talk strongly about the bulk of our activities are going to be in the higher-margin, high capability categories where we're strong. So laundry, dish, that sort of area, probably the main focal areas. Unknown Executive: You've pre-empted a question here about contract manufacturing. Is that another part of the business quite competitive at the moment that you would still be looking to grow capacity and scale in? Christopher Ian Smith: Totally. Yes. I mean, we've said strongly, we want to get contract manufacturing to be 25% of the business. We don't want to do that by shrinking private label. We want to do by growing contract manufacturing. We believe that 25% is the right level for us to have a kind of core, core layer of solid long-term partnership relationships with some branders for categories and volumes that may not be efficient for them to manufacture. So yes, absolutely, that's a key part of our focus, and it's another potential use of capital to create long-term value. So absolutely. There's quite a lot going on in the industry at the moment. So we're quite busy with potential opportunities, nothing certain, but there's more at the moment perhaps than we've seen for some time potentially out there. Unknown Executive: Yes. This leads on to a question about capital allocation and perhaps an opportunity for you to say how, how long gestation period certain acquisitions can take to come to fruition. But the question submitted is, how do you look at the contrast between value in your own shares and doing more buybacks or allocating it in terms of nonorganic growth? Christopher Ian Smith: Well, we're constantly looking and reviewing this, of course. I think we like to think of -- we believe we've got a short-term need sometimes like with the share buyback right now and the acquisition of shares for EBT. We recognize that we have investors that like the dividend stream, and we think that the share and the equity is a mixed proposition on index re-rating as well as cash from things like dividends and other shareholder returns. But we also recognize we -- the industry and I would say the McBride platform needs to expand in the mid and long term, and we recognize in this industry that consolidation of the space for the benefit of retailers. I think the sustainability journey and regulatory environment is going to become tougher, and you need to be bigger and bigger in this industry to lead. And I think -- so we have all those at play, and we have active conversations. I guess the Board's call here is at each juncture, what is the right decision. But I think we'll -- we've demonstrated in this last period a fairly agile and what's the word variable, not variable is the wrong word, mixed approach. We're looking at all options. Unknown Executive: Yes. Well, that's the benefit of financial health and the balance sheet that allows flexibility to adapt to opportunities, I would think. Perhaps a couple of questions for you, Mark, on costs. Impressive progress. And the question is, you can't add infinitum cut costs as a percentage of revenues. So what do you think is a realistic target in the medium term as the transformation benefits all work their way through? Mark Strickland: Yes. So I think it's a very good point. At the end of the day, on occasions, it may actually be worthwhile putting extra cost into the business because the benefits you get back from that extra cost far outweigh the cost. So I don't have a particular target in mind because it depends on the different segments of the business. So the different segments will have different overhead needs. As we invest into technology, I would hope that a lot of the speed of decision-making comes down, but also the cost of that decision-making comes down. But also, let's not forget that the software companies also like to put up the license fees as well for utilizing that software. So it is a balance. I don't have a specific ratio or a specific cost in mind, but I always talk about cost optimization, not necessarily cost saving because we can't save ourselves rich. We do have to invest in this business, and we do have to grow the business. Saving will keep us in business, but I don't know anybody that's ever saved themselves, rich. Unknown Executive: Wise words, wise words. And specifically, on input costs, we've got a comment, which is very true that you're not involved in the supply of precious metals or rare earths that can make some businesses in a particularly painful position at the moment. But are there any concerns within the supply chain more about the cost of shipping or anything like that as you move some of the basic commodities around to your sites? Mark Strickland: So at the moment, being honest, it's pretty benign. It's relatively flat, okay? We've got underlying inflation, but we can recover that through efficiency. So at the moment, we don't foresee any particular headwinds. The only caution I would say is we don't know what Donald Trump may do next. So I guess -- but that's a concern for everybody. But everything else being equal, we see the raw material environment, the shipping environment as being pretty benign. Unknown Executive: Okay. And probably also for you, Mark, you've mentioned that in the half, there were more -- the mix saw more lower-value products. Is there any specific factor behind that? Or might we see that rolling into the second half as well? Mark Strickland: I shouldn't get overly concerned that it's a lower headline price because ultimately, we're interested in pound notes margin. And it will depend on which retailer, which product sets, what we've won, what we've lost -- sorry. So there will always be a natural ebb and flow in our mix going through. So no, I don't think there's anything -- there's certainly nothing concerning me about our mix at this stage. Unknown Executive: I suppose related, not necessarily a question from McBride, but someone has commented that is there an ongoing trend of end consumers effectively getting less volume in their product at a higher cost. I suppose that all weighs up in the battle for market share with brands. Christopher Ian Smith: Well, there's a trend a bit some sustainability driven even cost of transport and so forth to compaction. So I mean, it's even quite variable across Europe. If you buy a laundry liquid in Southern Spain, you might have to need weightlifting training to lift your 4-liter bottle home. The same number of washes in Germany or the U.K. will be in a 1-liter bottle. And there is a perception -- potential perception of value gap when you make that transition because what you're buying looks a lot smaller. So -- but I think it's the right thing to do, and we will continue to progress that on the grounds of sustainability and -- we got a lot more bottles of 1-liter laundry liquid in a lorry than 4-liter bottles, right, and value too. So I think the value position for consumers is perhaps more driven by quality of performance than it is around pure value position in price points on shelf because the reality is that the private label continues to outperform many of the brands in tests and wider and wider audiences are learning that. And I think understanding the value option does just as good a job, right? So I think we will continue to fly the flag for private label as a whole, not just for McBride, of course, around helping consumers understand the value. It's not just a product for expression for poor people. This is for smart people because why do you need to spend twice the price and have no improvement in your cleaning performance. And by the way, most of the things you buy, you put under the sink and never look at again. So it's not that you're buying something beautiful to look at. So I think the consumers are becoming more savvy and the retailers are supporting that with their proposition. Unknown Executive: Then perhaps just a couple of more strategic questions to finish with. Can you comment as much as you'd like to about what your various competitors in certain divisions are doing? And also the same question for contract manufacturing. Christopher Ian Smith: Look, I think the industry as a whole is relatively steady, I would say, in the private label space. I think we see quite an orderly setup at the moment. Look, we've all -- the private label industry -- the private label share chart I showed earlier, which went from around 31% up to 36%. You think that's only 5% or 6% growth. But actually, it's 5% or 6% on 30%, right? So the private label space, the majority of the big players in private label are still active in private label. They've all grown with that market, and I think we've all been going through that. And of course, it's helpful when you -- we're a manufacturing business, right, putting volumes through manufacturing plants is always helpful in terms of overhead costs and recoveries. So nothing particular to comment, I would say. The contract manufacturing space, there's obviously some publicity around the Reckitt's disposal of home essentials into private equity hands. That's going through a transition at the moment. That may create opportunity. And we are seeing on average across the European space, at least and some to Asia where there's optionality being considered on outsourcing more perhaps than we've seen for a while. So maybe I'll leave it at that, Andy. Unknown Executive: Okay. And then I think good notes on which to finish. You referred that consistently to very good progress against the Capital Markets Day targets that were set a couple of years ago. So there is a question is, given that rate of progress, might you be reassessing some of those targets and setting further medium-term objectives in the not-too-distant future. Christopher Ian Smith: Well, look, look, we look at strategy every year. We look at our targets every year. We're not going to reset them every year, of course, in the public domain. But we would, of course, look at some point to update that and refresh that. We haven't set a time on that at the moment. In fact, Mark and I were just talking about it yesterday as to when that might be. But look, we are -- I'm a big believer in being clear on the direction we're taking the business, the understanding of that within our teams and for our customers and suppliers, of course, is super important. And we remain vigilant on adapting, course correcting, filling in gaps that we think we've missed all the time. So we don't sit still with those ambitions and those strategic ambitions. Yes, there will be a point maybe in the next year where we will have to do that update and refresh. But look, we're very positive about the progress. We need to continue to progress our medium-term ambitions of getting revenues over GBP 1 billion and EBITDA up to 10%. And Mark and I've always said that we wanted to continue to move the EBITDA up double again, right? And -- but we will need a bigger train set probably to do that than we've got today. But we're also going to do that in the right judicious way when the time is right. Unknown Executive: Well said. Great. Well, can I thank our audience for their interest and the very interesting range of questions. You will receive a feedback format of this event, which the company would be delighted if you could share your thoughts over. As mentioned already, the deck use is on the McBride Investor Relations page, along with lots of other materials. In terms of looking forward, which the company can't be too specific about, there is, of course, a recent equity development research note after the interims with, I'm glad to say, an increased fair value of 245p per share that these 2 gentlemen are smiling at approvingly that I'd recommend you review for further detail. Last but not least, of course, many thanks to Chris and Mark, and congratulations not only to them, but the whole McBride team on many years now of very impressive progress, which we hope will continue through the second half and beyond. So thank you for your time, gentlemen. Christopher Ian Smith: Thank you, too. Thanks, everyone.
Joahnna Soriano: Good afternoon, everyone. Thank you for joining us today, and welcome to Ayala Land's Full Year 2025 briefing. Let me begin by introducing our panel, Meean Dy, President and CEO; Jed Quimpo, CFO and Treasurer; Mike Jugo, Head of the Premium Residential Business Group; Mariana Zobel De Ayala, Group Head for Leasing and Hospitality. We are also joined today by members of our management committee, Robert Lao, Head of Strategic Growth, New Ventures and Central Land acquisition; Darwin Salipsip, Group Head of Construction Management; Raquel Cruz, Head of the Core Residential Business Group; and Isa Sagun, Chief Human Resource Officer. We likewise acknowledge your presence of our broader management team. Please note that the press release and presentation materials are available on our Investor Relations website. For any questions that we may not be able to address during the briefing, we will respond via e-mail at the soonest possible time. At this point, I'd like to turn it over to our CFO, Jed Quimpo for his presentation. Jose Eduardo Quimpo: Thanks, Joe. Again, good afternoon to everyone, and thank you for joining us this afternoon for our full year 2025 analyst briefing. Allow me to present the key highlights of our 2025 financial and operating results, and then I will give the floor to our CEO. We are pleased to report that Ayala Land delivered total revenues of PHP 190.2 billion, up 5% versus prior year and net income of PHP 39.1 billion, up 39% versus prior year. Excluding gain from our sale of our 50% stake in Alabang Commercial Corporation and what we call as core revenues. Core revenues amounted to PHP 178.9 billion just 1% below prior year, and core net income reached PHP 30.6 billion, up 8% versus prior year. We invested in capital expenditures totaling PHP 92.9 billion, up 10% versus prior year with notable increase in our leasing and hospitality asset investments. Our balance sheet remains strong with net gearing ending at 0.78:1 within our guardrails on leverage. On portfolio segment revenues, despite market headwinds, Property Development revenues reached PHP 113.9 billion, plus 1% versus prior year following strong bookings of estate lots and offices for sale offsetting lower residential revenues. Leasing and Hospitality revenues reached PHP 48.7 billion, plus 7% driven by broad-based growth across all our segments, this despite ongoing renovations in key malls and hotels. Service revenues was down to PHP 11.8 billion, minus 34%, as a result of lower third-party contracts of our construction business and the absence of airline revenues, which we sold late 2024. Interest and other income was up PHP 15.8 billion primarily driven by gains from the sale of our stake in Alabang Commercial Corporation amounting to over PHP 11 billion. On our income statement, first, as mentioned, total revenues reached PHP 190.2 billion, plus 5% versus prior year. This is on the back of, number one, real estate revenues reaching PHP 174.5 billion, just slightly lower versus prior year as we saw stable property development revenues, improving leasing and hospitality revenues, but tempered by lower service revenues. Our interest and other income was up 275% primarily driven by the sale of Alabang Commercial Corporation. Total expenses reached PHP 134.1 billion, down 3%. We registered lower real estate expenses, PHP 104 billion, down 7% driven by the revenue mix where there was an increase in sales of estate lots an increase in share of leasing business in our overall mix and the absence of airline expenses. General and administrative expenses amounted to PHP 10 billion, up 9% and we registered a GAE ratio versus core revenues of 6%. Interest expense, financing and other charges amounted to PHP 20.1 billion, primarily driven by 2 factors. First, increase in total borrowings and increase in cost of debt; and number two, in 2024, we reversed provisions previously made for airline operations following its sale late 2024. Earnings before income tax came in at PHP 56.1 billion, registering EBIT margin of 40% and on a core EBIT margin basis 36%, 300 basis points better versus prior year. Provision for income tax was at PHP 10.5 billion with an effective tax rate similar to that of prior year. Noncontrolling interest increased by 7% to PHP 6.4 billion, mainly due to the higher net income of AREIT attributable to its own public shareholders. Consolidated net income climbed to PHP 39.1 billion, excluding the gain from the sale of Alabang Commercial Center core NIAT grew by 8% to PHP 30.6 billion, just shy of the 2x 2025 GDP growth. Turning to our detailed revenue breakdown. Property development was stable at PHP 113.9 billion despite market headwinds. Residential revenues hit PHP 91.4 billion, slightly lower by 4% versus prior year on strong core residential bookings, partially offsetting weakness in the premium residential bookings. Estate lots rose to PHP 17.7 billion, up 21% on strong bookings from Circuit Makati, Arca South in Taguig and Centralia in Pampanga. Office for sale increased to PHP 4.8 billion, up 40% on robust new bookings at One Vertis Plaza in Quezon City and the Genetic Corporate Plaza in Makati. On leasing and hospitality, broad-based growth across the entire portfolio, delivering revenues of PHP 48.7 billion. Despite ongoing reinventions in our flagship malls, shopping center revenues reached PHP 24.2 billion, 5% up versus prior year due to higher occupancy, lease rates and merchant sales. Offices reached PHP 12.2 billion, 5% higher on stable occupancy and higher average portfolio rental rates. On hospitality, it climbed to PHP 10.6 billion, up 9% on higher room rates and new capacity following our purchase of New World. Again, this despite renovations in key hotel assets for most of 2025. Industrials jumped to PHP 1.7 billion, up 37% versus prior year, on the contribution of industrial land, which we housed in AREIT and new cold storage facilities. Services was 34% lower year-on-year at PHP 11.8 billion. Construction stood at PHP 8.9 billion, 31% lower versus prior year, following our completion of third-party data center project in 2024. Property management and others dipped 42% to PHP 2.9 billion due to the absence of airline revenues. Property management by itself was stable, delivering PHP 1.9 billion. In terms of margins, most of our product gross margins and EBITDA margins are within our targets. For the Property Development business, Residential business registered 47% for horizontal products and 41% for our vertical products. Estate lots came in at 55%, primarily as a result of the product mix, and office for sale was steady at 48%. On our Leasing and Hospitality business, shopping centers delivered stable 64% EBITDA margin. Offices was likewise stable at 89%. Hospitality was at 22%, which we expect to improve with renovated room capacity now back online, which we brought back in 4Q 2025. Dry warehouses was stable at 78%. Cold storage was at 23%, which we similarly expect to trend up as we stabilize new capacity that we brought in. Services which is composed of construction and property management are at 5%, well within our expectations. Next, let me walk you through the operating performance highlights of our businesses, starting with Property Development. Total sales across our Property Development portfolio amounted to PHP 142.3 billion, basically flat versus prior year. Premium sales was slightly down at 3%, again, this despite market headwinds. Core was up 1% on our focused sales effort to move our inventory and stay ahead of the industry. Estate lots delivered PHP 17.1 billion in sales, up 16% as we saw robust interest in our various commercial, industrial and leisure lands. We launched a total of PHP 60.4 billion projects in 2025, notably 40% lower versus prior year, in line with our continued focus of capital efficiency. Deep diving on the residential products. Residential sales was sustained at PHP 125.2 billion, just 1% down versus prior year. By segment, our premium generated nearly PHP 80 billion in sales at PHP 78.6 billion. Our core market delivered positive year-on-year growth at PHP 46.6 billion. On an overall basis, our residential revenue as of end 2025 stood at 19 months, better than the 22 months as of end 2024. By product type, vertical sales was resilient at PHP 82.3 billion, up 2% year-on-year anchored by Laurean. Horizontal sales declined by 7% to PHP 42.9 billion as we saw buyers look at our estate lots as an alternative. We launched a total of PHP 46.6 billion in residential products last year, again, notably 42% lower versus prior year as we focus ourselves on selling existing inventory. Almost 3/4 of our buyers are local Filipinos and on a year-on-year basis was flat. Sales to overseas Filipinos stood at 17% which declined by 4% to PHP 20.7 billion, and sales to other nationalities was lower by 7% to PHP 12.8 billion, primarily attributable to sentiment headwinds or tighter terms and our shift to more premium segment products. Moving on to the op stats of our Leasing and Hospitality business. First, on shopping centers. We manage a total gross leasable area of 2.2 million square meters in 2025 and opened 29,000 square meters of gross leasable area during that year. With additional space in Ayala Malls Vermosa, and the opening of new malls in Evo City and Park Triangle. Lease-out was 1% higher year-on-year at 91%. We have a rolling pipeline of over 800,000 square meters of new mall space, 86% will be within our existing and our future estates. For 2026 alone, we will open over 200,000 in GLA, our largest annual incremental GLA to deal. This includes new malls at Arca South, Gatewalk in Cebu, an additional leasable area in Park Triangle, TriNoma, Nuvali, Evo City, and Greenville. On offices, our total GLA stood at 1.5 million square meters, and we opened 48,000 square meters with new assets in Nuvali and Atria in Iloilo. Portfolio average lease out is at 87%, 4% lower versus prior year, following completion of new facilities. Lease rate is up 2% despite continuing elevated supply in the market. Our 5-year expansion pipeline is over 300,000 square meters. Most of which will be concentrated in our key estate in Makati, BGC, Vertis North and Cebu. On hospitality, we ended the year with 4,658 rooms with net additional rooms of close to 400 primarily driven by the acquisition of New World last year. Hotel occupancy improved to 68%, plus 1% versus prior year, and resource occupancy was stable at 42%. Our updated pipeline involves the following, we look to open Mandarin Hotel this year, bringing in an additional 276 rooms, and in the next 5 years, build out and deliver over 1,500 additional keys. Finally, on our industrial real estate business, we ended the year with dry warehouse portfolio of over 380,000 square meters and cold storage pallet positions of 31,500. This boosted by acquisitions that we made in 2025. Our lease out on a dry warehouse is at 85%, following the addition of new capacity. On cold storage, it improved to 80% with new clients, sign-ups and robust demand from clients. We are looking to double our cold storage capacity in the next few years and have likewise secured sites for potential build-to-suit dry warehouses to expand our portfolio. For this year 2026, we are opening an additional 9,000 pallet positions of new cold storage capacity at Artico Consolacion in Cebu City. As mentioned, we invested a total of PHP 92.9 billion in CapEx, 10% higher versus prior year. Leasing and Hospitality was a major driver, doubling investment to PHP 27.1 billion and accounting for just under 30% of our total spend. Of this total spend for leasing and hospitality, 3/4 of which went to expansion CapEx, and 1/4 to reinvention initiatives. CapEx for residential was 38% of total primarily focusing on build-out of projects for delivery. Estates investments comprised 18% of total CapEx and the balance of 15% were for continuing land acquisition commitments. Our debt position continues to be well managed with 90% contracted into long tenures. Total gross debt as of end December 2025 stood at PHP 318 billion, up 13% versus prior year. We have kept our average maturity stable at 4.8 years. Our average borrowing cost was slightly up, ending at 5.5%. A bit over 70% of our debt is on a fixed basis and just other 30% is on a floating basis and of the floating component, almost 1/3 of that as an option to convert the fix. Our balance sheet remains strong, with net gearing ratio of 0.78:1. Cash and cash equivalents stood at PHP 19 billion. Our stockholders' equity grew by 7% to PHP 385 billion. Our current ratio is at 1.59:1, and our interest coverage ratio, just looking at core earnings is healthy at 4.9x. To summarize, Ayala Land delivered total revenues of PHP 190.2 billion and net income of PHP 39.1 billion, excluding gain from the sale of our 50% stake in Alabang Commercial Center, core revenues registered PHP 178.9 billion and core net income reached PHP 30.6 billion, up 8% versus prior year. Thank you. Joahnna Soriano: Thank you, Jed. We'll pass it onto our CEO for her message. Anna Maria Margarita Dy: Thank you, and good afternoon. Thank you for joining our full year 2025 analyst briefing. So I won't revisit the 2025 numbers in detail because Jed has already covered them thoroughly. Instead, let me step back and highlight what sits behind the results and how we're positioning the business for the next phase. Let's start with what 2025 demonstrated. Number one, capital efficiency is improving. We delivered roughly the same level of residential sales in 2025 as in 2024, but with 40% fewer launches. This tells us two things. First, our products are sustaining demand well beyond their initial launch cycles. And second, our sales organization is extracting more value from our existing inventory. A market like this, capital discipline matters, we are becoming more productive with every peso deployed. Number two, active portfolio management and shareholder returns. The sale of Alabang Town Center allowed us to recycle capital from a matured asset and fund higher return opportunities. This reflects the discipline we aim to consistently apply in managing and recycling capital. You've seen this, you've seen us take these steps when we sold AirSWIFT in 2024 and then repositioned by acquiring New World Hotel in 2025. At the same time, we continued to return significant capital to our stakeholders or to our shareholders, distributing 65% of prior year's income through dividends and share buybacks. We have concluded our share buyback program, and we'll be canceling the shares acquired under it supporting 10% EPS growth, all told, we delivered ROE of 12.5% in 2025. Even in a tight market, our ambition remains the same, to deliver earnings growth at the multiple of GDP growth. Number three, the leasing pivot is underway. We have been steadily repositioning to balance the portfolio with recurring income and that shift is becoming more visible in the numbers. Our leasing business delivered 7% year-on-year revenue growth. And excluding the reinvention related disruptions, growth would have been 11%. Renovated malls and hotels are being reopened. The New World acquisition has expanded our hospitality footprint. And going forward, leasing will account for a larger share of capital deployment. 38% of total full year CapEx from 29% in full year 2025. By 2027, we expect our EBITDA to roughly balance between leasing and development, strengthening our earnings profile and balancing profitability and growth. Number four, quality is a long-term differentiator. Quality is job #1 remains a work in progress, but we are seeing tangible proof points. Park Central Towers is now turning over and has been very well received by buyers and industry partners. Laurean Residences reflects our next generation of design thinking and deeper integration with our hospitality capabilities. The Heights Katipunan shows our focus on student residence with targeted amenities and enhanced security. Across our flagship malls, say the hotels and need the resorts, reinvestments are producing more contemporary, consumer-relevant and higher-yielding assets. These investments don't just translate into earnings overnight, but they strengthen pricing power, market position and secure long-term returns. Here are outlook and priorities for 2026. We are planning for another challenging year. The reality is that GDP growth is projected to stay below 5% and residential supply in Metro Manila remains elevated. But we are not waiting for this cycle to turn. We are leaning into the parts of the portfolio that grow more reliably while keeping our property development business stable and capital efficient. Number one, we will accelerate our leasing growth. The biggest driver of earnings growth in 2026 will be leasing. We will start with sweating existing assets, many of our renovated malls and hotels are now operational and the focus shifts to consumer delight and operational excellence. After completing the renovation of 5 key assets in 2025, our focus is now monetizing these upgrades, and we project a 10% to 20% room rate uplift from these newly renovated properties. The reinvention of our flagship malls will be completed by the end of June 2026. So by middle of this year with the reopening of Glorietta and Greenbelt and following the completion of Ayala Center Cebu and TriNoma in December 2025, we expect these renovations to generate a 15% to 20% uplift on rent. Alongside extracting value from recently completed assets, we will continue expanding the leasing platform. Leasing will account for a larger share of capital deployment as we scale malls, offices and hospitality within our states. In 2026, we will open over 200,000 square meters of new retail GLA, the largest single year addition in our history. We started with the opening of Arca South Mall last weekend and saw over 200,000 visitors in just the first weekend. We will open over 70,000 square meters of new office space in Evo City, Arca South and Gatewalk. In addition, we signed 3 new major leases with big multinational firms in Quezon City and Cebu totaling 82,000 square meters. The Mandarin Oriental will reopen in the fourth quarter, adding another 276 rooms to our hotel portfolio, but more importantly, this marks the return of 5-star hospitality to Makati after more than a decade. We are scaling our cold storage business thoughtfully, working towards doubling current capacity over the next few years. These represent meaningful steps in recurring income that will build over the next several years. Number two, keep residential stable, but more disciplined. On property development, despite market headwinds, our objective is to keep it stable as we lean in on the strength of our domestic and international sales team -- teams and by focusing on projects where we have high conviction on value proposition and sales momentum. This approach allows us to protect margins and ensure we maintain our market leadership. We have clear sight of PHP 30 billion of new launches firmly scheduled for 2026, and we have already launched pipeline that we can move on as we see market windows open. This gives us flexibility to scale quickly as the demand supply dynamics improve. We expect to deliver roughly the same level of residential sales as we did in 2025, and we will continue to be #1 in the residential space. Number three, continued disciplined capital returns. We are maintaining our 30% of prior year's net income dividend payout. We are also declaring a special dividend from part of the ATC or Alabang Town Center or Alabang Commercial Center proceeds, and we will continue to return excess capital to shareholders where appropriate. Four, protect the balance sheet and preserve flexibility. Historically, in periods like this, opportunities tend to surface, and we are beginning to see some of this emerge. Maintaining a strong balance sheet ensures we have the capacity to deploy capital quickly when these opportunities meet our return thresholds and strengthen our strategic position. For this reason, we will manage our existing businesses within their means and keep sufficient balance sheet headroom to act decisively when the right investments present themselves. So for 2026, we expect steady property development revenues and retaining our #1 position, a double-digit growth in leasing revenues with the biggest ever delivery of leasing GLA, continued margin improvement from operational excellence PHP 70 billion to PHP 80 billion in CapEx with a higher proportion going towards leasing and debt levels to be maintained well within our guardrails. Taken together, this positions us to generate earnings growth ahead of GDP and deliver higher return of capital via dividends to our shareholders. Thank you. Joahnna Soriano: [Operator Instructions] Rafael go ahead. Rafael Alfonso Javier: Rafe from BofA Securities. First of all, congrats on the good earnings result for the full year '25. My first question would be on the lot sales. I understand that I think there was a lot of catch-up that you did in the fourth quarter. I wanted to know how we -- how it's -- how it will look this year, I mean in terms of the quantum and the timing so that I mean, it will help us also with forecasting going forward. Yes. That's my first question. Anna Maria Margarita Dy: So maybe let me answer that first question first. So we always say that lot sales are about 15% of our -- that's how we look at it. 15% of our total pickup for the year. And for 2026, that's still what we're looking at. Now in terms of timing, that frankly is a little bit harder to predict because these are deals and I'm sure you noticed that on the third quarter, it was actually quite weak. So these were deals that were still being worked on, and they would just happen to close on the fourth quarter. So there is a level of, I guess, lumpiness when it comes to these transactions. But at least when we're looking at the full year, it's still about 15% of the pickup is what we're looking at for our lot sales. Rafael Alfonso Javier: Okay. And my next question is on land bank utilization. I understand it is also part of the mandate last year to really net utilize rather than acquire. How is the progress last year? Jose Eduardo Quimpo: So our total utilization, Rafael last year is over 800. So the more precise number is 879. Rafael Alfonso Javier: Okay. I think my last question is just a housekeeping one on the residential inventory level. How is it looking so far? Do you have a target to -- I mean, a target level that you want to achieve this year? Joseph Carmichael Jugo: Yes. So thank you for the question, Rafe. So we've actually improved the inventory levels by a month. We ended the year about 19 months coming from 20 months and our aspiration for this year is to be somewhere in the 17- to 18-month range. Joahnna Soriano: Jelline from JPMorgan also has a question. She's virtual attendee today. Sorry, there seems to be feedback. We have a question here from Niki Franco from Abacus Securities. He has a couple of questions. Number one, what's our outlook for borrowing costs this year? Jose Eduardo Quimpo: Yes, I'll take that one. So as you know, there are projected or there has already been a reduction on policy rates. And when we talk to the analysts, the projection is there could also be another one. So taking this in mind, the way we model 2026 is that we are expecting or we're targeting to keep our borrowing cost at similar levels. So we ended the year at 5.5% We aim to keep it at 5.5% . Joahnna Soriano: The second question is of the 1.5 million office leasing portfolio, what percent is leased to BPOs? Mariana Zobel De Ayala: 70%. Joahnna Soriano: Of the 200,000 retail GLA to be opened this year, how much of this new space versus reopen spaces? Mariana Zobel De Ayala: That's entirely new space. Joahnna Soriano: Okay. If there are no questions from the floor, we'll call in Jelline next -- sorry, Gilbert, go ahead. Gilbert Lopez: More granularity or discuss your dividend policy. Moving forward, now that to end here buyback. Anna Maria Margarita Dy: So I think even before the buyback, we were already doing about 30% of prior year's net income, which we intend to keep, so we're maintaining that. This year, in particular, we're doing a special dividend because of -- from the proceeds of the sale of Alabang Commercial Center. I think the 30% is probably what we are seeing something that's more stable for now. Going forward, it's really special dividends in the event that we have an asset monetization event. Gilbert Lopez: So thank you, Meean. So for the special this year, how much does that bring your payout to inclusive of the special? Jose Eduardo Quimpo: So it should drop here about 33% of prior year. Gilbert Lopez: So it's around 10% -- so from 30% becomes 33%. Anna Maria Margarita Dy: Of core net income. Joahnna Soriano: Go ahead, Jelline. Yes, if you can just type in the question, we'll move on to Joan. Sorry, I think we're having some technical difficulties. So we'll just wait for the investors to type in the questions. Okay. So this one is from Daniela Picacho AB Capital. On residential launches, just to clarify, PHP 30 billion is your base case target for 2026. If so, what would be the triggers to push that higher? Is it purely dependent and you bring in your inventory life to sub 17 to 18 months? Or would you have to consider overall or system-wide inventory you see 4 years worth of inventory life? Also, can you remind us of the inventory life for your premium is. Anna Maria Margarita Dy: We don't generally provide the breakdown, but let me answer the first question. So there are 2 figures. One is our inventory level, which may not necessarily be the only thing. The second is, what would be the competitive environment in that particular area. So I think the analysis would need to be more specific to the target market of the project. So for example, you're launching something in geography A, then we'll have to look at who else is playing in geography A? And what's the inventory going to be out there? . Joahnna Soriano: On malls, you guided for roughly 15% to 20% rental uplift from reinvented projects. Could you quantify how much of this uplift should realistically flow into 2026 revenues versus later years? And what portion of this is already locked through signed leases? Mariana Zobel De Ayala: So the 15% to 20% uplift should be seen immediately for 2026. The basket of merchant replacement program, Jelline, we talked about already took effect. Now Obviously, that also happens on a rolling basis because every year, we allocate a certain part of the GLA, which we refresh or reinvent. Joahnna Soriano: Thank you, Mariana. We also have a question here from [indiscernible] can you provide an overall outlook on the demand scenario in the residential segment both at the premium and core and in Makati and other provinces as well? Yes, this is for residential. Anna Maria Margarita Dy: I suppose for us, the demand outlook remains very positive. Our launches have actually been very well received, I think, Laurean, which we launched this year 37%. Joahnna Soriano: 37% Heights Katipunan at 17%. Anna Maria Margarita Dy: Yes, 17%. So if you ask us, actually, we believe that demand continues to be robust. Maybe where this question is coming from is why the relatively low level of launch for this year. So for us, it's not so much a demand issue. It's really more of a supply issue. And we'd like to make sure that, I guess, this industry-wide supplies first taken up before we push more supply out there. So I think that's really the concern. It's not that we are concerned about the demand. It's just we want the supply to be absorbed first before we launch full blast again. Joahnna Soriano: He also has a question here on the current level of cancellations in the residential segment. We're now at 7.7% as of full year 2025, which is slightly better than 7.9% in the 9 months 2025. Any other questions from the floor? Still waiting for two to type Go ahead, Carl. Carl Stanley Sy: This is Carl Sy of Regis Partners. I just have a few questions, mostly on the residential segment. So first, it looks like the reservation sales of the core segment fell in the fourth quarter, both on a year-on-year and quarter-on-quarter basis. From what I can tell, there were still promotions and discounts offered during that period. So while I understand there was, let's say, a flood control corruption scandal going on. Is that -- do you attribute the weakness mostly to that? Or is there some other -- something else? Also on the residential segment looking ahead, do you have some launch plans? Do you have a more positive outlook on core versus premium or Metro Manila versus provincial? Joseph Carmichael Jugo: I think quarter 4, as we all know, a lot of negative sentiment. So I think that we didn't heavily -- whether it's a premium or our core market. But what we are looking at is really specific performances of certain projects. I think the Heights project, when you launched it, it's now at 17%. And Laurean had a very, very good take-up. We are ending as of today, PHP 10.4 billion or it's 37%. So the demand is there, based on certain projects and locations. As our CEO mentioned, certain geographies is really more challenging because of the supply situation now. Anna Maria Margarita Dy: Maybe to add to that. So your second -- I'll try to answer. Second question is, are you more confident about certain segments. So horizontal, we remain very bullish, horizontal -- obviously, horizontal ex Metro Manila. In fact, most of our launches, except one will be horizontal this year, including some provincial horizontal launches outside Metro Manila. In terms of core, why did core decline in the fourth quarter, I think there's -- Katipunan got launched first quarter of this year. So I think there's a recovery in the first quarter. Carl Stanley Sy: When you see a horizontal launches predominantly in 2026, would it be fair to say that's mostly premium? Anna Maria Margarita Dy: No. Actually, we will be launching core horizontal as well this year. Carl Stanley Sy: Got it. And then I'll ask a little bit about the office segment. I think if I heard correctly, you signed about 80,000 square meters of space already for this year. And with some context here, a lot of investors are concerned about the BPO sector, particularly in light of artificial intelligence. I want to check if the 80,000 square meters is predominantly BPO? Mariana Zobel De Ayala: Yes, it is. I think we're still tracking -- I think IBPAP believes that from a revenue standpoint, BPO should grow 5% from a headcount standpoint, 2% to 3%. So we generally follow that guidance. That being said, our headquarter offices actually grew at a faster clip than BPO unsurprisingly. Joahnna Soriano: I think Jelline's questions were similar to Carl, but we have a couple of other questions from Consilium. Can you please provide clarity on your -- okay, sorry, Sangam, we don't provide the breakdown for inventory. And then they're also asking about the strong pickup in the lot sales. Does this indicate that improving sentiment to premium level. Anna Maria Margarita Dy: I think we achieved what we set out what we thought would achieve. I mean it's just that some of the sales we thought would have happened in the third quarter ended up happening on the fourth quarter. But I guess the same forecast last year as this year, about 15% of our sales, our total take-up will be coming from the lot sales. Joahnna Soriano: Correct. We have a question here from RJ Aguirre of UBS. He wants to ask about the rationale behind selling ATC. This is arguably one of the group sought after Millstone location. And on market market, it's up for rebidding, this is going to be a priority for the group. Jose Eduardo Quimpo: So yes. So let me take the question on Alabang Commercial Center. So just to frame it, if you look at the gross leasable area attributable to Alabang Town Center, that's actually less than 5% of our 2.2 million square meters. So I think from a portfolio management basis, it's not super impactful. If you use 5%, that's being a threshold of something that is impactful. Number two, if you run valuation, we are effectively sold at a cap rate of 3%, 3% cap rate. So as most of you know, when we transact something, for example, with AREIT, we turn out in the area of 6.5% to 6.8%. So having a buyer that's willing to pay a cap rate -- effective cap rate of 3% was a clear -- from a financial perspective, a clear value offer on the table. What allows -- what it allows us to do is actually be able to recycle a substantial amount of capital. So if you imagine if we can generate yields on our commercial leasing assets in the area of 10% to 12%, the money that you raise on a 3% cap rate and redeploy, you have sufficient capital to, number one, reinvest in very similar footprint and number two, have sufficient available balances to actually provide tangible returns on capital. So when I say returns of capital, it gives us an opportunity, for example, to give special dividends as what we're doing in 2026. Anna Maria Margarita Dy: Yes, it's really a straightforward, I guess, capital recycling story. We're getting returns from a very mature asset. Meanwhile, we're opening 200,000 square meters of mall space today. We have 600,000 square meters of malls under construction and under planning. So this is simply reallocating capital from an asset that is already matured to one where we believe there will be more upside. The second question had to do with market market. So I think it's also been disclosed by BCA that we are in discussion for the extension of market market on the portion of the property that they are thinking of bidding out. I think we are also seeing in the news some government assets that they would like to privatize and to dispose. And as I said earlier, we do want to keep headroom in our balance sheet because times like this opportunities seem to surface. Joahnna Soriano: We have a question from Niki of Abacus Securities. With major advances in artificial intelligence models announced in recent months, how concerned is management about the large exposure to BPOs, primarily in offices, but also the possible knock-on effects for residential? Mariana Zobel De Ayala: Maybe I'll take for the offices portion. I think in the short term, we actually feel it might help -- the technology might help leapfrog some of the challenges on education and training side. I think generally speaking, medium to longer term, we're focused on opportunities around low vacancy areas and high-traffic areas. So that would be Makati, BGC, Candon City and Cebu. So I guess that's to say that we do imagine that AI will take effect on the sector. Anna Maria Margarita Dy: I guess the second question was AI impact on... Joahnna Soriano: Knock-on effects to residential, if any, in relation to... Anna Maria Margarita Dy: I suppose it's -- the effect would be more macro in nature. If AI affects BPOs and BPOs affect the GDP or the economy and employment, then that's the more indirect but impactful negative effect on residential. But direct effect, I don't think we see anything. Joahnna Soriano: These are the questions of Joy Wang from HSBC. What is your precommitment occupancy for the 200,000 new space to be introduced this year, is a 15% to 20% increase in rent just under rental rate for the new space. Mariana Zobel De Ayala: Yes. So I think we've committed to keep our lease-up rate at 91%. So that will be, again, blended across the entire portfolio, taking into account that some of the newer malls will take a little more time to mature. In terms of the rental rate, so the 15% to 20% quoted was really on the merchant replacement program. So that's taking existing tenants and replacing them for higher-yielding tenants. Joahnna Soriano: This one is for Jed. How should we think about the special dividend policy? Would this be a percent increase of the investment gain during the year or the previous year? I think this was already answered earlier by Jed. So the dividend policy, 30% of prior year's income. We're increasing that to 33%. So it's effectively a 10% increase from our existing dividend policy. Jose Eduardo Quimpo: Yes. So we're tracking 33% of prior year's income. I'm sure you already saw the disclosure. So regular cash dividend stays at 30% of prior year's core net income, but we saw the opportunity to return capital. And so we're declaring an additional 10% of that by way of special dividends. Joahnna Soriano: She also has a follow-up question. Management mentioned about capital return to shareholders while keeping sufficient capital for investment, what is the right balance sheet capacity that management wants to keep? How much more capital can we expect management to return to shareholders? Jose Eduardo Quimpo: Yes. So on returns to capital, as I mentioned, we are tracking 30% plus an additional 3% regular and special dividends, that's for 2026. That's what we're planning on. In terms of leverage position, as mentioned, we are at 0.78x net debt to equity in terms of our balance sheet. From our perspective -- from management's perspective, we want to make sure that we don't reach one. So from our that room between 0.78:1 is actually the dry powder that we want to give. And the more we're able to expand that, the more it allows us to give room for key acquisition opportunities. Joahnna Soriano: We have questions now from Jelline with JPMorgan. On capital deployment, launches and CapEx budgets appear lower on a year-on-year basis, while management does not intend to increase the buyback program. How do you plan to deploy freed up capital? What will entail to commit to a higher minimum dividend payout? I guess from a regular standpoint? Jose Eduardo Quimpo: So I guess Jelline, the math, eventually, if you run all your models is that you'll probably see us taking on very little incremental debt for 2026. So from overall sources and uses of funds, the net change is really that you'll see Ayala Land aim to minimize incremental debt for 2026. Joahnna Soriano: She also asked for the RFO mix in 4Q 2025, that's 8%. In terms of inventory to be completed this year, we're looking at about PHP 6 billion or 3.5% of inventory. Any more questions from the floor? Unknown Analyst: I'm Paul from [indiscernible] first of all, congrats on your 4Q results. I have questions about the -- first about the mall performance. I'd like to ask for the occupancy rate of your newly opened malls like Park Triangle and Arca South. And what's the current tenant behavior regarding this -- on the newly opened malls? Mariana Zobel De Ayala: So for Arca, we're actually almost 90% leased out for the first phase that we opened. And for Park Triangle, we're 65% leased out. Unknown Analyst: Thanks Mariana. And another follow-up question is how much is Ayala Malls same mall sales growth for full year 2025 compared to 2024. Mariana Zobel De Ayala: Yes. Same mall revenue growth was 7%, and the overall sales growth was 10% year-on-year. Unknown Analyst: Excluding reinvention, how much is the... Mariana Zobel De Ayala: One moment, let me get that for you. Joahnna Soriano: Yes. Ex reinvention. Mariana Zobel De Ayala: Yes. Okay. Ex-reinvention. Those figures that I gave. Unknown Analyst: And another question about the RFO promos. Can you provide us a recap or a refresh on how the management is currently trying to reduce the current inventory there. That's what RFO promos are you offering? And how much discounts are usually available for buyers? Joseph Carmichael Jugo: So generally, the RFO promos are stretch payment schemes or fairly sizable cash discounts. But I also want to highlight that our RFO situation now is much, much lower. It only represents 4% of total inventory. So it's quite low. Joahnna Soriano: We have one final question from Daniela Picacho. Just a follow-up. Just a follow-up. You said resi cancellation rates have improved to about 7% to 8%. Could you share whether recent cancellations are concentrated in specific price segments, geographies or older vintages? I'm curious if newer bookings are showing better buyer quality. Joseph Carmichael Jugo: So on the better buyer quality, what we've done and that has also admittedly impacted sales as we've tightened up on some of the down payment requirements. So even some of our launches, we do require down payments, especially for the core market. So that should help future cancellations or prospective cancellations. Most of the cancellations are actually in certain areas. So it's not spread out throughout the -- all of the projects within the premium core products. Anna Maria Margarita Dy: Sorry just cancel it's a percent of revenue. It's very close to where we were already in 2019. I think we were 6%, if I'm not mistaken, we were about 6% in 2019 before the pandemic, about 6% of cancellation. 6% of revenues. Cancellations is equal to about 6% of revenue. So now we're at about 8%, which is a very big movement from where we started a few months -- a few years ago. Joahnna Soriano: Correct, yes. Okay. Last question from the floor. Okay. If no more questions, that concludes our briefing on Ayala Land's for 2025. If you have any further questions, please feel free to reach out to the team. A recording of this briefing will also be made available on our website. Once again, thank you for joining us this afternoon.
Operator: Greetings, and welcome to the Acme United Q4 and Year-End 2025 Financial Results Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir. Walter Johnsen: Good morning. Welcome to the Fourth Quarter and Year-end 2026 (sic) [ 2025 ] Earnings Conference Call for Acme United Corporation. I'm Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read the safe harbor statement. Paul? Paul Driscoll: Forward-looking statements in this conference call, including, without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions and adequacy of capital and other resources are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation, high interest rates and the imposition of new tariffs or changes in existing tariff rates. In addition, we've experienced supply chain disruptions, and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release. Walter Johnsen: Thank you, Paul. Acme United delivered record sales and earnings in 2025. It was not easy, but we did better than we ever have. Our net sales were $196.5 million. Net income was $10.2 million, and earnings per share were $2.49. When high global tariffs were announced in April 2025, our customers scrambled. They delayed and canceled retail promotions, opted to have no stock rather than import items for losses and searched for new lower-cost sources. We have purchased extra inventory at the end of 2024 in anticipation of some increased tariff levels and supplied our regular customers with their planned orders. Our team in the United States and Asia reacted quickly. When the Chinese tariffs for our products were reduced from 145% to 30% in late April 2025, we put over 50 containers on the water within days. We worked with our suppliers to open new factories in Vietnam, Thailand and Malaysia. We increased our production in India and Egypt. We negotiated cost reductions from our suppliers, obtained lower freight rates, generated productivity from savings in our domestic plants and increased prices very modestly. Our team supported our customers, and they delivered. There were many highlights in 2025. Our first aid team introduced a patented automatic replenishment system for refills. This product sensors components that were used, lost or became obsolete in an industrial first aid kit, and automatically generates replenishment orders. A typical customer will save 30% to 50% and sometimes more over traditional van-based delivery. The Westcott team expanded our market share of cutting tools, particularly in the craft market. We used our patented nonstick technology to develop differentiated products to work with tapes, glues and sticky substances. We also increased our line of ceramic tools to safely cut and open boxes, and increased sales of our industrial cutting tools. We invested in robotics in 3 sites in the United States to assemble refills of first aid components. These investments in the recurring portion of our first aid business are generating savings and improving product quality. We installed new software to optimize inventory placement in our large warehouse in Rocky Mount, North Carolina. We then streamlined the process flow of inventory and purchased drones to nightly do inventory reconciliation. Acme United purchased a 78,000 square foot plant on 12 acres in Mt. Pleasant, Tennessee for approximately $6 million. This facility will expand production of our Spill Magic cleanup products, bodily fluid kits and blood-borne pathogen kits. We are moving into the facility in the first quarter of 2026, and we have just purchased new automated processing equipment. We continue to purchase advanced production equipment for our Med-Nap facility in Brooksville, Florida to produce medical-grade alcohol prep pads, antiseptic wipes, and other items used in our first aid kits. We are building a microbiology lab, expanding our quality assurance team and preparing our documentation and controls to be a serious domestic supplier to the broader U.S. medical market. In January 2026, we purchased My Medic, which is the leading direct-to-consumer supplier of advanced first aid and bleed control products in the United States. And it has over 500,000 social media followers and a product line that we hope to expand. The company had revenues of approximately $19 million in 2025, and the purchase price was $18.7 million. Our first aid business in Canada grew strongly. We gained share in the industrial and retail sectors and continued expansion of our e-commerce business. And sales of Hawktree Solutions, which was acquired out of bankruptcy in late 2023, exceeded our expectations. In Europe, we expanded our market share in cutting despite an overall weak economy. We acquired a direct-to-consumer supplier of cutting and sharpening tools in October 2025. Annual sales were approximately $2 million for this acquisition, and the purchase price was $1.6 million. In our first aid segment in Europe, we expanded the marketing and sales team, improved product sourcing costs and began to expand aggressively. As we move into 2026, we see growth in our first aid and medical segments and a return to more normal merchandising and promotion in the retail market. We are excited about the investments we have made in domestic production and our expanded international sourcing. And we believe we are very well positioned as we enter 2026. I will now turn the call to Paul. Paul Driscoll: Acme's net sales for the fourth quarter were $47.5 million compared to $45.9 million in 2024, an increase of 3%. Sales for the year ended December 31, 2025, were $196.5 million compared to $194.5 million in 2024, an increase of 1%. Net sales in the U.S. segment in the fourth quarter were constant compared to the fourth quarter of 2024. U.S. sales declined 1% for the year ended December 31. Sales of first aid and medical products were strong. However, sales of school and office products were lower mainly due to the cancellation of customer orders as a result of tariff uncertainty. Net sales in Europe increased 22% in local currency for the quarter. Sales for the year ended December 31, 2025, increased 4% compared to 2024. The sales increase for both the quarter and the year was mainly due to additional sales from the line of cutting and sharpening tools acquired on October 1, 2025. Net sales in Canada increased 14% in local currency for the quarter. Sales for the year ended December 31, 2025, increased 16% compared to 2024. Sales of first aid products were strong. However, there was a decline in sales of school and office products. The gross margin was 38.2% in the fourth quarter of 2025 compared to 38.7% in 2024. The gross margin for the year was 39.4% compared to 39.3% in 2024. SG&A expenses for the fourth quarter of 2025 were $15.2 million or 32% of sales compared with $15.5 million or 34% of sales for the same period of 2024. SG&A expenses for the 12 months of 2025 were $62.7 million or 32% of sales compared with $62.2 million or 32% of sales in 2024. Operating profit in the fourth quarter of 2025 increased 27% compared to the fourth quarter of 2024. Interest expense for the year went from $1.9 million in 2024 to $1.6 million in 2025. The decline in interest expense was due to a combination of lower debt and lower interest rates. Net income for the fourth quarter of 2025 was $1.9 million or $0.46 per diluted share compared to $1.7 million or $0.41 per diluted share in the fourth quarter of 2024, an increase of 10% in net income and 12% in diluted earnings per share. Net income for the year ended December 31, 2025, was $10.2 million or $2.49 per diluted share compared to $10 million or $2.45 per diluted share in 2024, an increase of 2% in both net income and diluted earnings per share. The company's bank debt less cash on December 31, 2025, was $18.5 million compared to $21.5 million on December 31, 2024. During the 12-month period, we paid $2.3 million in dividends, purchased the line of cutting and sharpening products in Germany for $1.6 million and generated $13 million in free cash flow before the $6 million purchase of our new facility in Tennessee. Walter Johnsen: Thank you, Paul. I will now open the call to questions. Operator: [Operator Instructions] Our first question today is coming from Jim Marrone from Singular Research. Jim Marrone: Walter, nice quarter. I had a couple of questions on the acquisition. So as far as the integration, if you could just kind of share a little bit on how you plan on integrating My Medic? Is it going to be part of the first aid offering to the same customers or something completely different? If you could speak to that? And before you answer that, just a couple of more questions with regards to that acquisition. The revenues are approximately $19 million and you purchased it for $19 million. Do you have an idea of what the multiple is on that as far as maybe an EV or EBITDA multiple? And was it acquired using all cash or a combination of other things? Walter Johnsen: Okay. So the acquisition of My Medic we think is a pretty meaningful acquisition for the company. It's got 0.5 million social media followers. And to put that in perspective, when we were at the SHOT Show, which is a very, very large military gun and hunting show in Las Vegas a week later after we purchased My Medic, I felt like we had one of the leading brands on the SHOT Show floor, it was just amazing to see the people that were coming in. One moment, I'd be looking at the Israeli military, another SEAL team and then hunters and outdoorsmen and police departments and security personnel. So that acquisition gives us a direct-to-consumer business that we hope to expand. And we intend to do that by differentiating some of the products within first aid to be able to be going into selected retail, not broad retail, selected retail where it complements the sale of direct-to-consumer, perhaps with different products. It will all be part of the first aid offering, and we'll be able -- we hope to be able to broaden the direct-to-consumer sales of other items that we carry within the Acme first aid and medical area. For example, we have Safety Made, which personalizes medical products, including first aid kits. It's a very, very simple step for us to be able to do personalization for the L.A. police department, for example, or one of the military units that comes by, and we can do that domestically and quickly. Sales were $19 million, and the EBITDA was somewhere between $1 million and $1.5 million. So you can figure out the EBITDA from that. The purchase price, while it was $18.6 million, there was $1 million, which was an earn-out for hitting some growth objectives during the next 2 years. And then there was a holdback of about $3 million for various potential contingent liabilities. So the net out-of-pocket was about $4 million less than the $18.6 million purchase price. We're excited about it, and we're careful because the team built something special, and we want to keep it. But we have sourcing capabilities that are, we believe, unsurpassed in the first aid area given our scale and our operations globally. And we have a broad product line that we think we can help them supplement and a direct-to-consumer, I mean, a direct sales force to retail. So all in all, it's a great platform with wonderful people. And our job is to integrate but carefully. Jim Marrone: Right. Great. Just as a follow-up. So when you say select retailers, we assume that it will be the same retailers that you sell the cutting tools to? Or would it be a different distribution? Walter Johnsen: We sell to almost every retailer in North America. And so we have a pretty broad choice of where we do that, but we wanted to be selective. And that list is still being developed. But I hope we're successful and we're able to tell you where that has distribution in the coming quarters. Jim Marrone: Right. And as far as looking forward, and you mentioned that there may be further acquisitions down the road. Will it be -- will it continue in first aid and medical? Or could it possibly be in the cutting tools segment? Where do you see the acquisitions going forward? Walter Johnsen: Well, acquisitions are opportunistic, of course, but we also self-generate most of the deals. And we're looking to expand both our horizontal distribution, in other words, buying competitors and taking a half step away from some of the core current first aid items to be able to expand how we can address pre-hospital emergencies. And that's a very broad market. My belief is we'll probably find an acquisition that either does that in first aid or medical, or it's a supplier of components, for example like Med-Nap that made the alcohol prep pads that go into first aid kits. So it might be a vertical acquisition as well. But that's the primary area we're looking. Operator: [Operator Instructions] We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Walter Johnsen: Well if there are no further questions, this call is complete. I look forward to delivering good results in the first quarter and the rest of the year. And I look forward also to speaking with you at the end of the first quarter. Thank you for joining us. Goodbye. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Hello, ladies and gentlemen. Thank you for standing by, and welcome to Zai Lab's Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. It's now my pleasure to turn the floor over to Christine Chiou, Senior Vice President of Investor Relations. Thank you. Please go ahead. Christine Chiou: Thank you, operator. Hello, and welcome, everyone. Today's earnings call will be led by Dr. Samantha Du, Zai Lab's Founder, CEO and Chairperson. She will be joined by Josh Smiley, President and Chief Operating Officer; Dr. Rafael Amado, President and Head of Global Research and Development; and Dr. Yajing Chen, Chief Financial Officer. Dr. Shan He, our Chief Business Officer, will also be available to answer questions during the Q&A portion of the call. As a reminder, during today's call, we will be making certain forward-looking statements based on our current expectations. These statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from what we expect due to a variety of factors, including those discussed in our SEC filings. We will also refer to adjusted loss from operations, which is a non-GAAP financial measure. Please refer to our earnings release furnished with the SEC on February 26, 2026, for additional information on this non-GAAP financial measure. At this time, it is my pleasure to turn the call over to Dr. Samantha Du. Ying Du: Thanks, Christine. Good morning, and good evening, everyone. Thank you for joining us today. Zai Lab is at an important point in our evolution. We are building a company increasingly defined by global innovation, resting on a foundation supported by a commercially profitable China business and R&D infrastructure. Today, our global oncology, immunology pipeline is reaching a scale and maturity that fundamentally changes the profile of this company. We have multiple global programs advancing rapidly through the clinic and with zoci in pivotal stage. We see a clear path toward our first potential U.S. approval by 2028. Importantly, we advanced zoci from IND to global Phase III in less than 2 years, an industry-leading pace that reflects the strength of our integrated U.S. and China development model. This capability enables faster, more capital-efficient execution, is now being applied across our broader pipeline. Our China business continues to provide stability and leverage for our global R&D efforts. Despite a challenging macro and operating environment, full year revenue grew 15% year-on-year, and our commercial profitability continues to improve. Looking ahead to 2026, our priorities are very clear. This is a year focused on execution and preparation. We expect several meaningful pipeline catalysts, including clinical data for zoci in brain metastasis, neuroendocrine carcinoma and first-line small cell lung cancer as well as first-in-human data from our IL-13/IL-31 receptor bispecific program in atopic dermatitis. On the regional side, we have important pivotal data readouts for large opportunities such as povetacicept in IgAN and elegrobart in thyroid eye disease, both of which enhance the durability of our China growth engine. Business development remains an important lever for us. Our presence and capabilities in China provides access to one of the world's most important fast-evolving innovation ecosystems, creating opportunities that can meaningfully strengthen and prioritize both our global and regional pipeline. Ultimately, our objective is to build a company that can make a lasting difference for patients while creating substantial value for shareholders. With that, I'll now hand the call over to Rafael, who will walk you through the progress of our R&D pipeline. Rafael? Rafael Amado: Thank you, Samantha. 2025 was a year of significant progress for our R&D organization as we continue to build globally competitive pipeline. Over the course of the year, we initiated a pivotal trial in oncology, advanced one additional oncology program into the clinic and moved our lead immunology asset into clinical development. With that, I'd like to walk you through our progress, starting with zoci, our potential first and best-in-class DLL3-targeting ADC and a cornerstone of Zai Lab's global oncology portfolio. In second-line and third-line small cell lung cancer, we have initiated a global registrational Phase III study, which will enroll approximately 480 patients across second-line post-platinum and third-line post-tarlatamab settings with a control arm reflecting real-world global practice, including topotecan, lurbinectedin or amrubicin. Importantly, zoci has advanced at a rapid pace, significantly faster than is typically observed for programs in this space. Based on current time lines, we anticipate a potential accelerated approval submission in 2027 and our first global approval in 2028. Clinically, zoci has demonstrated encouraging efficacy in heavily pretreated extensive-stage small cell lung cancer, including an 80% objective response rate in 10 patients with untreated brain metastases. The ability to treat both intracranial and extracranial disease without treatment interruptions represent a meaningful potential advantage for patients, and we look forward to presenting this data in the coming months. Equally important, zoci continues to stand out for its favorable safety profile with low rates of severe treatment-related adverse events. We believe this profile supports zoci's potential role as a backbone ADC in first-line combination regimens, including those that reduce chemotherapy burden. We plan to initiate a first-line pivotal trial in small cell lung cancer and to advance zoci into additional novel combination regimens before year-end. Beyond small cell lung cancer, we see a compelling opportunity for zoci in neuroendocrine carcinomas or NECs, a large underserved population with no approved DLL3-targeted therapies. Enrollment in our global Phase Ib/II is progressing very well, and we plan to present initial data this year with the goal of initiating a registration-enabling study by the year-end. Taken together, we believe zoci's differentiated efficacy and safety profiles, including activity in brain metastases, positions it to address a significant unmet need across small cell lung cancer and neuroendocrine carcinomas where the total addressable global market is estimated to exceed $9 billion. Beyond zoci, our next wave of innovative global assets continues to advance rapidly. ZL-6201, our internally discovered LRRC15-targeting ADC, received U.S. IND clearance and the global Phase I study was quickly initiated thereafter. ZL-1222, our PD-1/IL-12 immunocytokine is progressing through IND-enabling studies and ZL-1311, a next-generation T-cell engager or TCE targeting MUC17, represents our first globally owned TCE with an IND planned by year-end. In immunology, ZL-1503 is our internally discovered IL-13/IL-31 receptor alpha bispecific antibody for atopic dermatitis and is designed to address both itch and inflammation with the potential for enhanced and faster onset of efficacy associated with less frequent dosing than current biologics. The global Phase I/Ib study is enrolling well, and we expect first-in-human data later this year. Now turning briefly to our key late-stage regional programs, starting with our immunology portfolio. Efgartigimod continues to expand across multiple autoimmune indications with ongoing development across a broad clinical program. Recent late-stage results support further label expansion and additional Phase III readouts are expected this year and next with China being a valuable contributor to global enrollment. Povetacicept remains on track with an interim analysis for the global RAINIER Phase III study for IgAN planned for the first half of 2026, and enrollment is ongoing in the global pivotal OLYMPUS Phase II/III study for primary membranous nephropathy. Lastly, for elegrobart, our partner, Viridian expects to report top line data for the global registrational REVEAL-1 study in active TED. This will be in the first quarter of 2026, followed by top line results from the global registrational REVEAL-2 study in chronic TED in the second quarter of 2026. Elegrobart has the potential to become the first subcutaneous IGF-1R therapy approved for TED in China. Turning to our local oncology portfolio. For TIVDAK, we expect approval in China in the first half of 2026, which will build naturally on our established ZEJULA commercial platform, further deepening our leadership in women's cancers. Finally, for Tumor Treating Fields, the FDA approval for Optune Pax in locally advanced pancreatic cancer earlier this month represents an important milestone in this disease, and we will work closely with China's NMPA under the innovative medical device pathway to support an expedited review. Together, these achievements reflect the depth and quality of our pipeline, one that is advancing with speed and efficiency. And with that, I'll hand it over to Josh. Joshua Smiley: Thank you, Rafael, and hello, everyone. Before getting into quarterly performance by product, I want to briefly frame how the business progressed more broadly in 2025. During the year, we made important progress across market access, portfolio optimization and business development. We successfully completed NRDL renewals for key products and achieved guideline updates supporting VYVGART in generalized myasthenia gravis and KarXT in schizophrenia, both of which strengthen the durability of our commercial portfolio over the long term. At the same time, we sharpened our focus by divesting noncore assets and regions, allowing us to reallocate resources toward higher priority growth opportunities and to improve operational efficiency. From a business development perspective, we maintained a highly selective and strategic approach. During the year, we entered targeted collaborations to explore novel combination strategies in first-line small cell lung cancer and strengthen our oncology platform with the addition of a MUC17/CD3 T-cell engager. Together, these actions reflect our disciplined approach to external innovation, complementing our internal pipeline while preserving financial flexibility. With that broader context, I'll now turn to our quarterly commercial performance. Fourth quarter revenues increased 17% year-over-year to $127 million, and full year revenues grew 15% to $460 million, reflecting steady progress across our commercial portfolio. Starting with VYVGART. Physician confidence remains strong and patient demand has been stable. Fourth quarter revenues, however, reflected channel dynamics related to NRDL renewal and hospital purchasing patterns. In 2026, we expect a more measured near-term growth profile influenced by pricing dynamics and evolving competition. The long-term trajectory of the franchise remains intact, supported by clinical guideline expansion, affordability initiatives and additional indications and formulations. Turning briefly to ZEJULA. We delivered a strong fourth quarter driven by first-line BRCA-positive new patient starts. While some variability is expected early in the year due to volume-based procurement dynamics for olaparib and seasonality, ZEJULA remains well positioned in the first-line setting. Looking ahead, KarXT represents a significant near-term growth opportunity. We expect to initiate the commercial launch in the second quarter of 2026 with a clear focus on disciplined execution, building disease awareness, establishing clinical confidence and laying the groundwork for broader adoption. Recent inclusion in a national expert consensus on negative symptom management builds on last year's inclusion in national treatment guidelines and reinforces growing recognition of KarXT's profile. In summary, 2026 is a year focused on maintaining the strength and stability of our existing business while preparing for multiple growth opportunities ahead. That includes continuing to build the VYVGART franchise, executing a high-quality launch for KarXT in schizophrenia and advancing key late-stage assets such as povetacicept in IgAN, elegrobart in TED and TTFields in pancreatic cancer. The investments we are making across commercial and R&D today are designed to support a multiyear growth trajectory extending well beyond 2026. And with that, I will now pass the call over to Yajing to take us through our financial results. Yajing? Yajing Chen: Thank you, Josh. Now I will discuss highlights from our fourth quarter and full year 2025 financial results compared to the prior year period. Fourth quarter total revenue grew 17% year-over-year to $127.6 million, driven by strong contributions from XACDURO and NUZYRA. XACDURO performance reflected strong patient demand and expanding hospital adoption, though supply constraints during the year limited the full realization of underlying demand. NUZYRA continued to benefit from broader market coverage and increased penetration. Total revenues for the full year were $460.2 million, representing 15% year-over-year growth. Turning now to our expenses. Our commitment to financial discipline is reflected in improved operating leverage with both R&D and SG&A declining as a percentage of revenue year-over-year. R&D expenses for the full year declined 6%, driven by lower personnel compensation costs and increased in the fourth quarter due to fast progression of global clinical trials. SG&A expenses decreased 12% and 7% year-over-year for the fourth quarter and full year, mainly due to the reduction in general and administrative expenses because of strategic resource optimization. As a result, loss from operations improved 19% for the full year to $229.4 million and improved 25% when adjusted to exclude noncash expenses, including depreciation, amortization and share-based compensation. We maintain a strong cash position, ending the quarter with $790 million. Looking to 2026, our focus remains on strengthening the foundation of our regional business, executing across our global pipeline and thoughtful capital deployment to support both near-term launches and the long-term growth drivers. With a strong balance sheet, we are well positioned to execute against these priorities. And with that, I would now like to turn the call back over to the operator to open up lines for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Jonathan Chang of Leerink Partners. Jonathan Chang: First question, can you provide any color on how we should be thinking about revenues and expenses for 2026? And then second question on the global pipeline for zoci, can you remind us of the implications of the intracranial activity in patients with brain mets? And how does this impact the opportunity and positioning of the drug? Joshua Smiley: Thanks, Jonathan. It's Josh. I'll start with 2026, ask Yajing to make a comment, and then we'll hand it over to Rafael to talk about zoci. I think as we think about 2026, as we mentioned on the upfront comments, we see good growth opportunities for VYVGART. We're seeing good volume gains throughout the second half of the year. We expect that to continue in 2026. We're pleased with how we're -- how we ended the year with ZEJULA. And while we're facing a generic market now for Lynparza, we expect to continue to hold our position and in some cases, hopefully grow. XACDURO should be a good driver for us this year. And of course, then we've got a couple of important launches coming. COBENFY in the second quarter, we will begin our commercial launch and then TIVDAK later this year. So I think when you think about those things together, certainly, we're looking for good commercial performance and good growth on the top line for the year. For expenses, I think we're in good shape on SG&A, very modest investments required to support launches. Obviously, we're going to put the field sales force in place to launch COBENFY, and that will drive some incremental costs. But I think otherwise, we're in good shape as it relates to synergies and efficiencies across our SG&A. R&D should be relatively in line with what we've seen in the last few years. Obviously, big focus and resource allocation to our global portfolio. But as some of our late-phase opportunities start to -- in China start to come offline, we've got capacity there. So I think sort of flat to very modest growth in R&D. So this year, pretty straightforward thinking. Obviously, we've got some pushes and pulls as it relates to when things are approved and when we get them into the market and otherwise. I think then as we think about '27 and on, we'll start to get the benefits of these launches like COBENFY and TIVDAK and some of the assets that Rafael talked about in his upfront comments. Yajing, I don't know if you want to add anything to that? Yajing Chen: Maybe just to add a little bit more dynamics in 2026. I mean 2026 is a transition year. I think underlying demand growth, as Josh talked about, is very true. Also, we want to be mindful of other dynamics, moving pieces, including the IV -- the VYVGART IV price adjustment and maybe later on the rebate dynamics in the fourth quarter for VYVGART, the Hytrulo. So -- and then we are sort of like looking at the hospital budgeting purchasing behavior as well. So this is part of the reason that we want -- we are probably not going to provide the full year guidance at this time, but those are the moving pieces. When we get more clarity, we can share more specifics later in the year. Joshua Smiley: Thanks, Yajing. Rafael, do you want to talk about zoci, please? Rafael Amado: Yes, absolutely. So brain metastases, obviously, in this disease is a big problem. About 70% of patients develop brain metastases. And I think the speed with which patients' experience responses with zoci is well appreciated among investigators and it's actually one of the key properties of the molecule. So we've reported up to 80% response rates in patients with untreated metastases. So there are 2 situations. If a patient comes in with brain metastases, oftentimes, they have to have brachytherapy or some local regional therapy, which delays systemic therapy, whereas if it's an uncomplicated untreated met, patients can go into zoci directly. And we see, again, pretty high activity in the brain. The other is there are some drugs that may have activity, but then there is a high rate of relapse in the brain where the brain is a sanctuary site. So using zoci prevents recurrences in the brain, which is really important. So we've reported in RECIST criteria before, and we're planning to report now in the first half of the year using RANO criteria, which is a response assessment that is used in neuro-oncology is a much more stringent one where it's bidimensional and uses 50% instead of 30%. So it really characterizes the responses in the brain, and we look forward to presenting that in the first half of this year. Operator: [Operator Instructions] Our next question comes from the line of Li Watsek from Cantor. Li Wang Watsek: I guess my first question is more about sort of the U.S.-China development model that you alluded to in the opening. So I just wonder, can you elaborate a little bit more other than maybe sourcing assets from the region? I guess, how much clinical derisking or time line acceleration can you achieve by leveraging some of the resources in the region? Joshua Smiley: Thanks, Li. It's Josh. Rafael, why don't you talk a little bit about this point to Li's question? Rafael Amado: Sure. So our model obviously has been speedy development in China based on pretty efficient development structure as well as regulatory and other functions in China, and that's led to the success of registrations local regionally. And now we're applying that speed, relationship with investigators and sites to add China to global trials or to be the sole site when we want go/no-go decisions with products. So we now have all our global trials really, including China participation, and that really has allowed us to move with speed and quality. So, that will be also the case for Phase III studies. We expect that China will participate and enroll about 1/3 of the patients, at least that's our expectation, for instance, on our current pivotal trial in second-line with zoci. So I think all in all, this efficiency that we have built over the course of the past 10 years in China is serving us well as we are now expanding our pipeline towards global assets. And we are seeing the fruits of that by, for instance, zoci moving within 2 years to Phase III from IND as an example. Li Wang Watsek: Okay. And then my second question is on zoci. And obviously, you guys are going to present data in neuroendocrine. So just wanted to get a little color in terms of expectations, what sort of data you guys going to present, what's good data? And in terms of regulatory pathways, can you maybe just conduct a single-arm study to get approval, maybe expand a little on that as well? Rafael Amado: Yes. NEC is a complex group of diseases and first-line is treated with chemotherapy. There is the gastroenteropancreatic subgroup and then other neuroendocrine carcinomas that exclude lung because lung tends to have a different prognosis. And when you look across the board in second-line, chemotherapy really has dismal activity in terms of response rate and PFS. So our study has started in second-line and is looking at GEP, neuroendocrine carcinoma, non-GEP neuroendocrine carcinomas or extrapulmonary. And then there's a group that is looking at neuroendocrine tumors, which are less aggressive. So an initial data set will be presented in second-line. We are pleased with what we're seeing thus far. We will have, I think, sufficient patients to make an assessment in terms of the response. The durability may be limited, but we think that there's enough information there to present in the first half of this year. And there may be about 60-plus patients that will be included in this analysis. Like you said, we are sort of ourselves seeking a regulatory path for NEC in second-line. And this is actually the subject of regulatory discussions that we're initiating now in terms of whether a single-arm would be sufficient or whether a randomized trial would be required. It's unclear what the control arm would be in the second option, but it's still a possibility. So those discussions are beginning now as we uncover the data. And we're also thinking about what to do in frontline as well. As you know, some T-cell engagers are getting into this space, and we would probably consider something in first-line in combination, but that is standalone in the future. We want to sort of see what we can do to help patients in second-line where options are just scarce. Operator: [Operator Instructions] Our next question comes from Michael Yee of UBS. Michael Yee: We have 2 questions. First, just wanted to understand, given all the thoughts and comments you have talked about regarding steady revenue growth and pushes and pulls as it relates to financials this year. Does the company believe that they could achieve breakeven or profitability by the end of the year? Do you think that's something that is achievable given what we had expectations for last year? And then the second question is, obviously, zoci and DLL3 are critically important. What is the expectation for completion of enrollment and the timing of reading out the primary endpoint on response rate in order to file? Joshua Smiley: Great. Thanks, Mike. How about Yajing, you talk about the cash flow, and then we'll hand it over to Rafael. Yajing Chen: Yes. So our corporate profitability, I mean the cash flow breakeven is definitely continue to be a very clear objective for Zai Lab. We will manage the business accordingly. Our business right now is commercially profitable today. That provides a stable foundation for the company. At the corporate level, I think the timing of the profitability is really driven by the 2 primary factors. One is the top line growth, the rate of the growth and the other one is the level of investment that we choose to make in the high-value global programs. So I think at this time, we remain efficient, disciplined in our spending. We do expect the corporate profitability to emerge. I won't be able to share the guidance for 2026, where we're going to be, but that's definitely the goal for us to continue to drive. And also, I want to mention that we are focused on progressing towards the goal, but also focus on continue to expand our global pipeline. So we do want to preserve the flexibility to invest when we see the strong value. Joshua Smiley: Thanks, Yajing. Go ahead, Rafael. Rafael Amado: Thanks, Josh, and thanks, Michael, for the question. So the study started in December. It's a global trial. It started in the U.S. first, and China is coming online imminently as Europe will and North America and other countries in Asia as well, Asia Pacific. Our plan is to have about 75% of the patients enrolled by the end of the year. We have to have everybody enrolled before we do the interim analysis for response. And we think that we will finish enrollment at the end of the first quarter of next year and do the analysis and subsequently file. So we're hoping for an approval in 2028. And the study, as you know, is a combination of second-line as well as post-tarlatamab patients, and we're balancing the accrual of each one of those subgroups in the study. So 2027 end of accrual and filing and 2028, hopefully, accelerated approval. Operator: [Operator Instructions] Our next question comes from Yigal Nochomovitz from Citigroup. Caroline DePaul: This is Caroline on for Yigal. Could you talk about your strategy to grow VYVGART, specifically how to increase cycles per patient? Joshua Smiley: Thanks, Caroline. VYVGART, we are focused on moving the cycles per patient to the minimum of 3, which is what's embedded in the national myasthenia gravis guidelines in China that were updated in July of last year. Of course, in the clinical data, getting out to 5 or more over a 12-month period demonstrates really significant benefits. But our focus right now is on 3. We're making reasonable progress, and we made reasonable progress in 2025. We -- if you just look at average cycles closing out the year in 2025, we improved versus 2024 by more than 50%. So we're on the way, but we're not yet on average at 3. So I think we've got a couple of key initiatives to help drive that focus. I mean the first is to leverage the guidelines, and that's through our medical professionals and our sales professionals. And I think that's really important, and we're seeing the benefit of that. We know guidelines make a big difference in China. They make a big difference in most markets. And this has been just -- it's been a build the market approach with VYVGART. So I think we're making good progress there and certainly have the clinical data and now the national guidelines to support that. We are also working on affordability initiatives, while NRDL listing is clear for VYVGART, patients do pay co-pay and pay out of pocket. So we've got in place an online support program that helps patients navigate things like appointments and resources and otherwise to help on the logistics and the co-pay. We have a targeted co-pay assistance program that helps, and it really is focused on the national guidelines and focused on ensuring we can get patients out to 3 cycles without -- with as minimum economic burden as possible. We are seeing the benefits of those focus points. And I do expect during the year that we'll continue to see good expansion in duration of therapy and get the majority of our -- certainly patients who are in the acute phase of the disease, the majority of those patients, I think this year are going to get to 3 and more cycles. We also, this year, though, are expanding, really focusing on patients who are in the non-acute phase. They, of course, also benefit from long-term therapy and getting 3 or more cycles, but that's probably going to be a little bit longer climb to get there. So I think as we look at the data throughout the year, we've got great patient expansion opportunities by leveraging our strength in acute patients, moving to non-acute. Those acute patients, I think the initiatives are underway and having results that will get us out to those on average, 3 or more cycles. And then the non-acute patients will start to pick up and add certainly good volume growth throughout the year. So I think that's -- we're quite excited about the opportunities with VYVGART this year, the opportunities to get to many more patients and for them to get the full benefits of the drug through persistence and duration. Operator: [Operator Instructions] Our next question comes from Anupam Rama from JPMorgan. Anupam Rama: On the global second, third-line DLL3 study, which is enrolling patients, you kind of talked about this, but can you remind us what the ultimate regional breakdown of sites is going to be given this is a global effort? And is there a breakdown of patients that need to be ex China, for U.S. and more global approvals? Joshua Smiley: Thanks, Anupam. I'll start, but Rafael can talk about the enrollment and how we're thinking about that. But I think first, if we look at small cell lung cancer and focus first on the U.S., I think in the second-line and later settings, we see about 15,000 patients available. First-line is probably 25,000. If we sort of look at that on a major market, Western market sort of look, that's probably 100,000 patients total in small cell lung cancer that are eligible for treatment in first or later-line settings. So it's a big opportunity. And of course, when we sort of size that and you guys have done this as well, it's approaching $10 billion probably in terms of total opportunity, and we think zoci can fit really well in that space. I think when we look at neuroendocrine, we're probably in the U.S., it's somewhere in that [ 5,000 to 10,000 ] sort of range, maybe similarly in other markets. We have more to learn here, I think, as we continue to work through the trial. But it's not insignificant, I guess, is what I would say. Rafael, maybe you can talk about enrollment. Rafael Amado: Sure. The distribution, I think, of the countries and patients coming from China and other regions is really designed to make sure that we have enough patients post-tarlatamab that reflect real-world usage in the United States. That may be up to 30% of patients or so coming from the United States. About 30% of patients will come from China. This is a reasonable number. I don't think it's ever been questioned that a percent of patients of that magnitude can jeopardize approval in a positive study. The rest of the patients will come from Europe. in terms of post-tarlatamab patients, obviously, we count on Japan as well. We count on the U.K., some countries where a lot of studies have been done with tarlatamab. And obviously, the United States where tarlatamab is gaining market share. So I think that's probably the distribution that you should expect on the study. Operator: [Operator Instructions] Our next question comes from the line of Cui Cui of Jefferies. Cui Cui: So I have 3 questions for the management team. The first one is as a follow-up to the JPMorgan question. So could you please share some more details on zoci? So because for this time, we are also very excited to see the clinical trial design for the first-line small cell lung cancer, including the [ combo regimen ] and also for the strategy of NEC. Will it also be advanced to the first-line treatment in the future? And my second question is regarding the KarXT. So what should we expect from KarXT in 2026 and 2027? And how will you build your commercialization team going onward? And my last question is also -- because for the past 1 year, we also saw some deals regarding the autoimmune bispecific. So can we talk about some [Technical Difficulty]... Joshua Smiley: Thanks, Cui Cui. Rafael, why don't you start and then I'll come back in with the next 2. Rafael Amado: Yes. Maybe I'll focus on the first-line opportunity. I mean just the overarching sort of desire for zoci to be the centerpiece ADC for different lines of therapies and combinations. And that is because of its low incidence of grade 3 toxicity, activity in the brain and high response rate really and durability. So on first-line, we've seen in the first study, the Phase I/II study 001, we've been enrolling patients in first-line for some time. We started with a doublet with atezolizumab and then a triplet adding carboplatin. And we hope to present mature data towards the second half of this year. We have -- just to give you a sense, we've treated about 60 patients or so, and we continue to follow these patients. I think once we have an idea of the activity, we will then make a decision of what the design of the frontline study should be. Our desire is for it to be one that spares chemotherapy. But also, we have our eyes on how the frontline set of landscape is going to change with the entrance of IMDELLTRA potentially in frontline and other TCEs in frontline. And if we continue to see this high level of activity, we will be testing with other agents as well to see whether this combination offers even more activity for patients in first-line. So I think stay tuned to the data, but our final design will be when we actually see the entire durability and activity in first-line with the data that we've been able to elicit from the Phase I/II study. Joshua Smiley: Thanks, Rafael. I'll talk about KarXT for a minute. Cui Cui, we're really excited about this opportunity, was approved without only -- product approved without a black box in this setting, first new mechanism in more than 70 years. So there's a really exciting introduction here. We'll launch the product commercially in the second quarter. So we're going through all the process now of getting product in and labeled and inspected and otherwise. So second quarter, we'll be out with the product in the market. Of course, we don't have NRDL listing this year, just given the timing, but we do expect that in 2027. So this year's focus will be on getting physicians' experience using the drug, getting a commercial team up and running. I think prescribing here is really concentrated in China. So while there were, I think, in 2024, over 2 billion days of atypical antipsychotic prescription use. We -- when we look at how that's prescribed and how it's managed, it's probably 800 institutions, give or take, that make up a vast majority of that volume, at least from a sort of initial prescribing and monitoring perspective. So we'll focus on those institutions at launch. That generates something in the range of 100 plus or minus sort of commercial team. So very focused this year, and we'll expand as necessary, but we do see this as a relatively efficient big opportunity. And again, for this year, I think in terms of financials, I wouldn't expect significant sales. Again, this is going to be a non-NRDL product for patients who otherwise aren't going to have things like commercial insurance or other access to payment mechanisms. But for 2027, I think if you look at NRDL and how to think about this, if you look at the branded olanzapine, for example, it's in the range, I think, of about $5 a day on NRDL, paliperidone, similar. So there's, I think, a pretty straightforward reference here. Final comment I'll make on KarXT is I do think this is a relatively straightforward opportunity. Atypical antipsychotics are monotherapy, is like 90-plus percent of the standard of care today. This is a drug that brings great additional benefits in terms of safety and negative symptoms, and we'll be educating physicians on those points this year in preparation for what I think will be an exciting unlock in terms of financial value beginning in 2027. On business development, we've got Shan on the phone and Rafael, we're spending a lot of time around the world looking at opportunities. But certainly, as you mentioned, I think if you look at the innovation happening in China, particularly in areas that we're interested in oncology and immunology modalities like ADCs and T-cell engagers, there's a lot of good opportunities to pick from, and you should expect us to continue to do that. We announced recently a deal on the MUC17, which I mentioned earlier. And I think that's kind of our typical kind of deals you should think about from us would be late preclinical targets that are -- have some biological precedence and where we can move fast, leverage the clinical development expertise that Rafael talked about earlier and have a chance to introduce first and best-in-class products in oncology and immunology to the world, and we're really excited about that. Operator: We will now take the last question from Linhai Zhao from Goldman Sachs. Linhai Zhao: My question is around zoci. The first one is regarding the Phase III trial for the second-line small cell lung cancer. Understood that the current clinical protocol does not take tarlatamab as a control arm, but it was allowed to be available both as a prior treatment option and the post-progression treatment options. So on that end, I want to collect your thoughts on the potential risk of having an elongated OS for the control arm given that you're allowing tarlatamab both before and after the second-line treatment? That's the first question. And the second question is about first-line. Understood that you're going to share the Phase I trial data for both doublet and triplet in the second half. And just want to collect your detailed plans about when do you want to make a decision on what to choose from doublet versus triplet in first-line? Joshua Smiley: Go ahead, Rafael. Rafael Amado: Thanks for the question. Maybe let's start from the second one. In terms of first-line, we would like to start the first-line study, Phase III study this year. So in spite of the fact that it may take some time for us to see durability, we may just use a landmark in terms of patients without progression at a given number of months and then make a decision. And again, our strong desire is to spare chemotherapy because that's really what leads to most of the morbidity. And most patients can only get about 4 cycles of carbo/etoposide and a checkpoint inhibitor because they progress, actually, the majority of them, some of them are intolerant. So if we're able to give more therapy with ZL-1310 plus a checkpoint inhibitor with the kinds of responses that we see in second-line, we should be better in first-line, and we think we stand a good chance of actually having a positive trial. So that's for first-line. I expect that we will launch a study by the end of the year. And then with regards to your question about tarlatamab, I mean, the patients will be post-tarlatamab in both arms, but they can only come in if they have progressed on tarlatamab. So they -- some may have responded and progressed, some may have been de novo resistant patients, but they will be equally in each arm and the study is stratified for post-tarlatamab versus no tarlatamab. So in that regard, I think each arm will perform equally. With regards to post-progression therapies, the same things apply. We obviously cannot control post-progression therapy. Some patients may get tarlatamab, some may get lurbi, some may get something else. But they should, because it's a sufficiently large study, get those therapies equally in each arm. So whatever advantage tarlatamab may afford in terms of survival, it should be the same in each one of the arms. So we're not really concerned about bias here, particularly in the post-tarlatamab patients that entered the study because they're stratified, and again, they can only come in if they have progressed. So I hope this answers your question. Linhai Zhao: Just to quickly clarify that you're saying that you're not really concerned about bias between the 2 arms. Can you share a bit more because I would say if the patients use zoci in the second-line, would the physicians still wish to use tarlatamab after zoci? Rafael Amado: The physician may use tarlatamab after zoci, but so could they after topotecan, for instance, or lurbinectedin. So I guess what I was saying is that tarlatamab is a post-progression therapy, which, again, in survival studies, in any study, we cannot control, but they should be used equally frequently in both arms, because once they progress, it's up to the investigator to decide what therapy to use. Operator: We have come to the end of the question-and-answer session. With that, I would like to hand the call back to Samantha Du for closing remarks. Ying Du: Thank you, operator. Thanks, everyone, for taking the time to join us on the call. We appreciate all your support and look forward to updating you again after the first quarter of 2026. Operator, you may now disconnect this call. Operator: Thank you. That concludes today's conference call. Thank you all for participating. You may now disconnect your lines.
P. Williams: Well, good morning, everyone, and welcome to Derwent London's 2025 Full Year Results Presentation. And before moving on to the results, you will see another news this morning and a strong set of a building in Whitfield Street, more to follow. Now the order of today's presentation is slightly different. As well as, you'll be hearing from Emily and Damian. While Nigel is not on the stage, he is, of course, here for some Q&A. Now turning to Slide 2. The group's business model and portfolio provide strong foundations on which to build on an exciting and successful future. Our portfolio is strategically positioned with 75% in the West End and 81% within a 10-minute walk of Elizabeth line station. These are London's best performing areas. It is high quality with significant embedded reversion potential, a diverse tenant base and robust vault. Flexibility has always been fundamental to our approach, and we look to continually adapt our portfolio to evolving market conditions to ensure that we are well positioned for future market evolution. We have an exciting West End focused development pipeline in some of the strongest submarkets, presenting a real opportunity to drive rents and, therefore, returns. Our schemes are designed to meet the full spectrum of occupier demand from the London commands, headquarter space, which serves our core customer base as well as furniture flex product, all delivered to our exacting standards and complemented with high-quality amenity. We also have good visibility on income growth. Our reversionary potential of GBP 70.9 million will come through into earnings as we continue to lease up and deliver the best phase of next phase of schemes. but we're not standing still. There is substantial opportunity ahead to create further value. Now turning over. 2025 was a solid year of execution. We completed asset management transactions with rental income of nearly GBP 60 million, a record year. And in the context of a low vacancy rate, we agreed over GBP 11 million of new lettings at rents 10% above ERV. In terms of disposals, we sold GBP 216 million in 2025 and 2026, we're off to a good start. Since the start of the year, we've exchanged contracts of GBP 140 million, including Whitfield Street announced today with a further GBP 140 million under offer, broadly in line with December book values. Proceeds will be redeployed into higher return opportunities, including selective developments, acquisitions and other accretive alternatives. Emily will provide more detail in this shortly. 2026 has started with strong momentum with GBP 1.5 million of new leases completed, and we're under offer with a further GBP 14.4 million, including all of the offices and network. In addition, there is GBP 4.4 million in negotiations. Slide 4. This momentum provides a momentum -- a springboard for growth. Our market outlook informs our immediate action plan, which is focused on accelerating returns through active portfolio management and disciplined capital allocation. We are now past the inflection point with the outlook characterized by 3 powerful drivers. Firstly, London, which is our market, we have an unrivaled expertise in demonstrating its enduring dominance as a European and -- on the European and global stage. Once again, it is proving its resilience and agility in adapting to change, reinforcing its position as Europe's undisputed business capital. Secondly, the ongoing strength of the occupational market, supported by high demand and very limited supply. You will hear more on this from Emily in due course, who'll provide further context on this. Finally, improved liquidity in the investment market driven by a return of capital flows both into London and into offices. Turnover is up with larger lot sizes now transaction. The combination of our proactive execution and positive market dynamic gives us the confidence to increase our 2026 ERV guidance for our portfolio to plus 4% to plus 7%. I will now hand over to Emily and Damian, who will take you through our immediate strategy and provide more detail on the financial outlook. Thank you. Emily Prideaux: Thank you, Paul. Looking now at our immediate priorities. Our near-term strategy is clear, firmly focused on returns, position the portfolio to capture the strongest rental growth and capital appreciation opportunities through active portfolio management and disciplined capital allocation with a clear focus on execution and total return on capital. Recycling will accelerate. We plan to dispose of up to GBP 1 billion over the next 3 years and at a faster pace than our historic run rate of GBP 200 million per annum. These disposals will be focused primarily on mature assets where the business plans have been delivered or where prospective returns are lower than alternative opportunities available to us. Capital redeployment will be disciplined and returns driven. We will systematically assess the relative merits of all options open to us at any one point in time. The foundations of our capital allocation framework will be built on maintaining a strong balance sheet and a net debt-to-EBITDA below 9.5x. Within that framework, we will consider share buybacks alongside selective development where we have confidence in strong returns and strategic acquisitions that support a pipeline for the next decade and contribute to long-term value creation. Overall, our focus is to proactively manage the portfolio to ensure an appropriate risk return profile that delivers both earnings growth and attractive total accounting returns. Damian will cover this in more detail shortly. So what does this look like in practice? HQ offices will remain our core business, where we continue to have strong conviction. We will also continue to deliver flex and do so at proportionate levels aligned to market demand and in a way that ensures sensible cost ratios and a simplified operational model that is portfolio rather than asset by asset led. As such, our overall flex offering will likely grow to circa 10% to 15% of the portfolio from the current circa 8%. Both our HQ and flex workspace are supported and enhanced by our DL member platform. Whether we're buying, selling or investing, we will do so within a disciplined risk return framework that balances income resilience and earnings growth with value creation. This may well involve the acquisition of core plus assets in the future as well as the development projects we are well known for. We will selectively develop those office schemes where we have confidence in the medium- to long-term returns. These include Holden House and Middlesex, where we are already on site as well as Greencoat & Gordon and 50 Baker Street, both due to start later this year. In addition, we will seek to drive value via strategic unlocking and alternative uses on sites, working alongside relevant partners to maximize returns. These include Blue Star House, Old Street Quarter and 230 Blackfriars Road, and we'll touch more on these later. Finally, we have an established brand and platform, and we believe there's opportunity to leverage this more effectively. This could take the form of development management fees, promotes, partnership structures or other arrangements that are returns accretive. I'll now hand over to Damian, who will provide more detail on the balance sheet as well as the outlook for earnings and total accounting return. Damian Wisniewski: Thank you, Em, and good morning, everyone. So taking a look at our returns outlook and earnings first. The 2 large recent projects at Network and 25 Baker Street are now essentially complete. Baker Street provides annualized rent on a net effective basis of about GBP 18 million a year or GBP 22 million headline. Based off ERV at the year-end, Network's annualized rent will be about GBP 11 million or GBP 13.7 million headline, and we expect rental income here to commence around the middle of the year. Our debt refinancing is complete for now. Our average interest rate increased in June '25, but is now expected to be largely stable through to 2031. Admin expenses were reduced in 2025, and we're targeting further cost savings to come. So with rental values growing and cost inflation easing, we now expect to see another period of earnings growth over the medium term. This feeds into our total accounting return outlook, too, also expected to benefit from improving development surpluses on our carefully chosen schemes and accelerated capital recycling. We will not lose our well-established financial discipline. That is based on low leverage, a focus on balancing value creation against interest cover and earnings and our 18th consecutive year of increased ordinary dividends. Now looking at the earnings outlook in more detail. We currently expect 2026 rental income from 25 Baker Street and Network to be about GBP 18 million higher than it was in '25. This will be supported by rent reviews and other new lettings across the portfolio. We've allowed for disposals of about GBP 400 million this year, but the earnings impact is small as the average IFRS rental yield is close to our marginal interest rate. West End projects, including Holden House and the refurbishment of Middlesex House, will, however, reduce earnings in the short term. There are also additional voids at Page Street, which is being marketed for sale and 50 Baker Street. We're targeting further cuts in admin costs this year. And after disposals and CapEx, we forecast our average debt to fall. However, the refinancing of the convertible bonds in June last year increased our weighted average interest rate by about 50 basis points. We're also expecting about GBP 6 million less interest to be capitalized in 2026 than in '25. Putting this all together, we therefore expect 2026 earnings to be about 42p to 44p a share in the first half, followed by 52p in the second half. That is 10% ahead of H2 '25. So overall, about 3% to 5% lower than in '25, but rising significantly in H2. 2027 should then see EPRA earnings step up. We estimate that about 5% to 10% growth from the 2025 level or about 15% above '26 levels. And this is as growing rents are captured and we capitalize more interest. And then by 2030, we see earnings rising very substantially. Our models indicate at least 25% to 30% of uplift as rental reversion is captured and income flows from completed projects at Holden House, 50 Baker Street and elsewhere. Now considering the total accounting return. The 3 main building blocks are shown on this chart: earnings, capital growth and development returns. These are now supplemented by a fourth, a renewed focus on accelerated disposals to provide further options to boost our returns. Earnings first and assuming investment yields in our sector remain stable, 3% or a little more based on NTA is a realistic level. As the NTA grows, so will earnings. Next, capital growth, where we believe 3% to 5% of NAV is a reasonable outlook, allowing for the rental growth we're now seeing, backed by stable investment yields and allowing for a typical 1% or so adjustment for CapEx and voids. The third aspect is the increasingly attractive development returns, now growing again after being squeezed over recent years. IRRs up to expected letting are now regularly hitting 10% or more for our current and future projects, but rental growth could push these further. Our analysis shows a positive development contribution every year since our first major scheme in 2010. The final element is to free up capital from the higher disposals mentioned earlier into an improving investment market. This could be for future value creation schemes as well as potential share buybacks should that be more attractive at the time. We've set a GBP 1 billion sales target over the next 3 years, which could provide up to about GBP 250 million of excess capital. That's after allowing for planned schemes and the acquisition of Old Street Quarter in late '27. So now moving back to our 2025 results and the financial highlights. We show a solid performance for 2025, the net tangible assets up to 3,225p per share and a 5% total accounting return. Gross and net rental income was slightly higher than 2024, but EPRA earnings were affected by lower surrender premiums and higher finance costs after the midyear refinancing. Note also that our trading profits are excluded from the definition of EPRA earnings. Our debt metrics were all very sound, helped by the disposals totaling GBP 216 million and a busy year of refinancing. Finally, the dividend, which has been increased again by 1.2% and remains well covered by EPRA earnings. Next, the 2.4% uplift in EPRA NTA over the year. After dividends, the group retained 25p per share from earnings, including 8p from disposal profits and other items. The trading profits all came from our 25 Baker Street scheme, the majority from the sale of 24 out of the 41 residential units at George Street. The revaluation surplus in 2025 was equivalent to 51p per share. Of this, 20p or about 40% came from development surpluses. These figures are after slightly higher-than-normal deductions for additional CapEx and voids in 2025, together about 40p per share. Now the next slide, some additional valuation data. As in 2024, our ERVs grew at about 4% with the West End outperforming. Valuation yields remained stable, helped by the rental growth outlook and moderating central bank rates and inflation. Our topped-up initial yield on an EPRA basis at the year-end was 5.1% and the true equivalent yield was 5.71%. The portfolio remains good value with average topped-up rents around GBP 65 per square foot. Now EPRA earnings. These are set out here with the 3 main categories: property, admin and finance. Gross rents were up by GBP 3.5 million. And after property costs and impairment, net rental income was slightly higher than 2024 too. However, surrender premiums were GBP 2.5 million lower this year. So overall, net property and other income was GBP 1.7 million down on 2024. As mentioned earlier, we focused on cost efficiencies again in '25 and admin expenses were down by GBP 2.4 million on an EPRA basis despite inflationary cost pressures. Net finance costs were up significantly in the second half of the year. This is mainly due to the GBP 175 million of convertible bonds, which had an IFRS rate of 2.3%, being refinanced in June with new 7-year bonds at 5.25%. This took our weighted average interest rate up by about 50 basis points over the year. Average debt was also GBP 110 million higher than in '24, though this was partly offset by GBP 2 million -- GBP 2.9 million more capitalized interest. The higher finance costs took EPRA profits down to 98.4p per share. But if we add back the trading profits, which are excluded from EPRA EPS, adjusted EPS was 102.1p. The next slide shows movements in gross rents. After a delayed completion date, 25 Baker Street contributed GBP 5.4 million in 2025 and the retail units at Soho Place, another GBP 0.9 million. Other lettings and asset management transactions added GBP 7.6 million. GBP 10.2 million of income was lost due to space taken back or becoming vacant. Like-for-like gross rents were up 2.4%, impacted by our EPRA vacancy rate increasing from 3.1% to 4.1% through the year. We incurred GBP 182 million of CapEx in 2025, almost half of which was at Network and 25 Baker Street. The ungeared IRR up to PC at Baker Street was 11.3%, with network expected to deliver between 8% and 9% and we'll update these figures later in the year. These both represent good returns after significant yield expansion through the life of each project, helped by disciplined cost control and rents almost 20% above original appraisal levels. CapEx in 2026 is expected to be 22% lower at about GBP 142 million. 50 Baker Street is not yet committed, but we do expect it to move ahead in the summer and are particularly optimistic about return prospects here. Emily will take you through these later. Next, the ERV bridge, which we're now showing on a net effective rent basis to help make earnings forecasting easier. The previous headline rent basis is also shown at the bottom of the chart. Total rental income reversion is now GBP 70.9 million after incentives allowed at 20% and with GBP 216 million of future CapEx. Note that the pure reversion on the right-hand side from reviews and expiries remains at GBP 15.9 million, but this figure is after reclassifying GBP 3.8 million of reversion into the major projects category. Now refinancing. And as noted earlier, we were busy in June, issuing new unsecured 7-year bonds and redeeming the convertibles. As noted, this caused our weighted average interest rate to rise, giving an average through the year in 2025 of 3.8%, up from 3.3% for the whole of 2024. We expect our spot rates to fall in March 2026 when we repay the 6.5% LMS bonds. This should keep the average for 2026 at around 3.8%, but we believe lower in the second half than in the first. Redeeming those LMS bonds will also mean that by the end of Q1, all of our debt will be unsecured. At the moment, we're not expecting to issue any more fixed rate debt in 2026, any funding needed most likely coming from bank facilities. However, it's good to know that other debt capital markets remain both liquid and competitive with margins looking increasingly attractive. Our debt position is summarized on the last slide with all debt ratios and covenants comfortable. Cash and undrawn facilities rising over the year to GBP 627 million. Fitch retained our A- senior unsecured rating last year since when our gearing has fallen. Our borrowings had a weighted average unexpired term of 4.2 years at year-end and net debt to EBITDA was reduced to 9x. We anticipate it falling further through 2026. Thank you. And now back to Emily. Emily Prideaux: Before moving to our operational activity, let me set the scene with an overview of the London office market, where we have good reason to be optimistic as we look ahead. Firstly, London itself, where we have the highest concentration of top universities worldwide, providing an unmatched talent base. It is Europe's unicorn capital and #1 VC investment as well as Europe's leading financial center. It also ranks third globally for AI venture capital investment behind only the Bay Area in New York in the U.S. and is Europe's biggest hub for generative AI. We recognize the ongoing debate on this topic, and it will, of course, change how people work. Overall, we do not believe AI will remove the need for high-quality offices, and we believe London is one of the global cities best positioned to benefit given its depth of talent, innovation and global connectivity. As with any fast-moving driver of change, we will stay close to these developments and be ready to adapt as the opportunity evolves. London's strength is also reflected in sector diverse office demand, underpinned by a broad knowledge-based economy and finance, technology and creative industries all in growth. This global city attracts both blue-chip corporates and high-growth occupiers, and its diversity makes it significantly more resilient through the cycles. London is where global businesses want to be. And the office occupier market fundamentals are strong. 2025 saw robust activity, 11.4 million square feet of take-up with over 3.5 million square foot under offer. Importantly, 80% of deals over 20,000 square foot were expansionary, signaling genuine business growth. Vacancy remains low and prime vacancy sub-2%. Looking ahead, we expect a significant supply punch, rental growth and lease events working in landlords saver with occupier renewals extending income and rent reviews now delivering good reversion. The occupational market is inflecting positively, and we're well positioned to benefit. And what are occupiers looking for? Real estate quality matters more than ever, buildings with a rival impact, rich amenity, flexibility and quality, be that retrofit or new build. Location and connectivity, very important, proximity to crossrail, transport more generally, talent and amenity. But critically, all that London has to offer is what makes it a city, which attracts domestic and European businesses and HQs. The scale and depth of industry and skill is unmatched in Europe. We understand these drivers. Our portfolio is built around them, and our forward-look strategy is designed to capture the value they create. Finally, turning to the investment market. Liquidity is now improving. Investment volumes in 2025 totaled GBP 7.1 billion, a 40% increase on the year previous. Yields have stabilized. The market has inflected and investor confidence is improving, driven by a strong occupier market and supply crunch, as we heard earlier. 2025 also saw the return of the large lot size transactions with double the numbers seen in the year before. This is a trend we're expecting to continue in 2026 as debt costs reduce, boosting overall levered returns. GBP 23.5 billion of equity is now targeting London, an 18% increase on 2024, and Knight Frank reported in a recent survey that offices are the most targeted sector by investors in 2026. Geopolitical events elsewhere are enhancing London's appeal and its position as global safe haven. All this means that we are expecting a further increase in turnover in 2026 to over GBP 10 billion, and this will contribute positively to our plans for disposals. Now to our own portfolio activity. We completed GBP 216 million of disposals in 2025, and we exchanged contracts for disposals totaling GBP 145 million in 2026 so far. In addition, we have GBP 135 million under offer and are in discussions on GBP 100 million. These sales support our target of GBP 1 billion of capital recycling into an improving investment market where proceeds can be more effectively redeployed elsewhere into higher return opportunities. In addition, we will continue to selectively hunt for value-creative opportunities to acquire, be that to support medium, long-term value through development or to support income in the nearer term. Turning to leasing performance. 2025 was a resilient year with GBP 11.3 million of new leases signed, around 10% ahead of ERV. As the chart shows, leasing activity across the standing portfolio has been broadly consistent with long-term averages for a number of years. Excluding pre-let, this highlights the strength of underlying demand for our space. And we've started '26 with strong momentum, GBP 14.4 million under offer, including all of the space at Network as well as the GBP 1.5 million transacted and a further GBP 4.4 million in negotiations. These figures support a strong year ahead for leasing activity. Turning to Slide 29 and asset management. '25 was a record year for asset management with transactions completed across GBP 59 million of income, almost 30% above our previous peak. More importantly, though, was the quality of what we achieved. Our focus was on capturing reversion, extending income and aligning lease profiles with our longer-term asset strategies. Through early and proactive engagement with occupiers, we were able to structure transactions that balance flexibility with greater income visibility while mitigating void risk and future capital expenditure. Rent reviews of GBP 37.4 million secured over 7% above previous rents, reflecting the strong rental growth across submarkets and renewals and regears with long-standing occupiers, extended lease lengths and deepened relationships. Transactions such as Adobe at White Collar Factory and Burberry at Horseferry House demonstrate the strength of our occupier partnerships and reflect the positives for us of occupiers taking the stay put option, while major rent reviews at Brunel and 80 Charlotte Street enabled us to capture good reversion. Overall, this was a year where active management translated directly into stronger income security and enhanced reversionary potential. And this will be an important part of business activity as we look ahead in this market. Moving to developments. At 25 Baker Street, which completed in August 2025, offices were 100% pre-let at 16.5% above appraisal ERV, generating headline rent of GBP 21.7 million and an ungeared IRR of 11.3%. And at Network W1, the offices are now fully under offer. Practical completion of the building is expected within the next week. Full details of the financials on this will be confirmed once transacted in coming weeks. We've maintained good returns on these schemes in spite of significant outward yield shift. Looking ahead, we have a focused and disciplined development pipeline, which remains a core part of our business model and driver of future returns. We're making good progress on site at Holden House and strip-out works have commenced at Greencoat & Gordon. Both of these schemes are in well-connected locations in submarkets with strong demand and limited supply with completions targeted in 2027 and 2028, respectively. We're also on site now with the comprehensive refurbishment of Middlesex House, where we're giving new life to this tactful 1930s Art Deco warehouse building in the heart of Fitzrovia. Together, these schemes, 2 of which are traditional refurbishments, represents a substantial value opportunity for the group with double-digit attractive expected returns. And importantly, this growth potential is already within the portfolio, driven by projects under our control, providing clear visibility over future earnings and value creation. At 50 Baker Street, we're due to commence an exciting new build development later this year. This is a scheme positioned in a submarket with very limited supply, great connectivity and strong growth prospects, which deliver all those things on the occupier wish list, amazing arrival and amenity, large floor plates, flexibility and quality design and architecture, of course. Our base appraisal shows strong returns with rental growth expected to enhance them further given the strength of the Marylebone occupier market as well as the product to be delivered. Alongside our near-term development pipeline, we also have over 1 million square foot where we are actively exploring alternative primarily living-led uses and strategic partnerships to maximize long-term value creation. At Blue Star House working with an operating partner, planning consent is in place for apart-hotel development scheme. At Old Street Quarter, we are working with related Ardent in a development management capacity for the time being to progress a mixed-use living-led campus. Importantly, the structure of this allows flexibility over delivery, including joint ventures, forward funding or indeed plot sales, allowing us to deploy capital selectively and efficiently. And at 230 Blackfriars Friday Road, early feasibility work indicates significant residential-led potential with scope to materially increase floor area. Together, these assets provide meaningful optionality to partner, develop directly or realize value through sales. So in summary, operationally, 2025 has been a strong year, accelerating capital recycling as liquidity improves, resilient leasing activity, record asset management activity, successful delivery and pre-letting of major developments and a disciplined pipeline with attractive expected returns. Now over to Paul, who will wrap up. P. Williams: Thank you very much indeed, Emily. Now to outlook on Page 35. As you heard, there is significant activity across the business. We are busy. GBP 140 million of disposals signed since the start of the year with a similar amount under offer and a further GBP 100 million in negotiations. The stage is set for 2026 to be a strong year for leasing. And we're on site of 3 really exciting projects, which we have forecast will deliver an average IRR in excess of 10%. We have a clear plan for the accretive redeployment of disposal proceeds as we seek to balance near-term income with value creation in the medium term. This includes potential share buybacks. London feels different. The fundamentals are good. The office cycle has really turned a corner. Rents are growing strongly. Investment liquidity has improved markedly with London offices being the most demand sector. There has been a notable pickup in activity. We're seeing more inquiries from potential occupiers and increasingly broad range of investors are knocking on our door. And this is the foundation of our ERV increase for 2026 to plus 4% to plus 7% and our confident financial outlook. Now a personal reflection. As you know, I've made a decision to retire after 38 years at Derwent. I've been with the business man and boy, and I'm proud of what we have achieved over that time. I'm excited for 2026 and beyond and that the business is well placed with a great team. Thank you. We're now going to take questions from the room and then from those who are joined remotely. P. Williams: Questions, please. Thomas Musson: It's Tom Musson at Berenberg. A question first on the perceived AI risk to tenants. The market is beginning to price some of this in recent share price moves. Interestingly, a lot more in the U.S. Would you expect property valuers to react here, perhaps assuming greater tenant covenant risk or changing assumptions around lease renewal probabilities? Just would be interested if any of this has been part of conversations you've had with them. Emily Prideaux: Yes. I think, firstly, one of the benefits we obviously have is how close we are to our occupiers and indeed other occupiers in the market. So any area of change like this will always stay close to. I think in terms of the property sector more specifically in the valuation point you read, there's 2 strands to the AI debate at the moment. One is the direct demand versus the indirect impact, if you like. To date, we're not seeing that reflected negatively by any means in the valuation piece. I think the covenant point is as with any of the other big tech booms we've seen over the cycles. There will obviously be winners and losers in that. And from our perspective, we always take that covenant risk piece very seriously. But on a more general piece in terms of the AI story, I think we feel, as I mentioned, that globally, I think London is somewhere that should really position themselves well for that. But it's something we're going to stay very close to as things evolve. Thomas Musson: Second one, you mentioned potential share buybacks in the event of being in a surplus capital position. At what point would you consider yourselves to be in a surplus capital position? Do we wait until you've cleared this year's CapEx requirement, for example, or some of next year's too? Just interested how you think about that. P. Williams: Look, we have a plan to sell something over GBP 1 billion over the next 3 years. We started off really well this year. We have got some investment going into the portfolio for really accretive developments. But as we build up those resources, I think we should have a good look at that and be open-minded. Damian, do you want to add a bit to that? Damian Wisniewski: Yes. Tom, it's a good question. I think let's get some disposals out of the way. We've made a good start to the year. Personally, I think we need to get sort of 200 plus under our belt before we can seriously look at what we do. We do have Old Street quarter coming up in probably late 2027. So we need to look at that in our forward funding plans as well. So I think the GBP 400 million this year is a good start. We've mentioned there could be up to GBP 250 million of excess capital over the 3 years. That doesn't mean to say we have to wait for 3 years. So I think we will look at this as we go, and we will see how things progress. I don't want to commit to a particular number today, but I hope you can see how we're thinking about this. Thomas Musson: That's helpful. Maybe if I could ask one last one, just on the residential sales at 25 Baker Street. I think at the half year, you'd exchanged on 23 of the 41 units today. I think you say you sold 24, so one more. What's the demand like right now for those? And are you having to meaningfully adjust price there to generate interest at this point? And should we address our trading profit expectations for the rest of the units? P. Williams: I think we started off really well with prices well above our underwrite and there's some very strong prices, particularly for the bigger units, GBP 3,700 a square foot. We've got a little one that's left. They will take a little bit longer time, but they're great flats in great location, but it will take a little bit longer. Damian, do you want to add to that? Damian Wisniewski: Yes. Just one other point to make is that the 2025 result included the cost of all the affordable housing. So from here on, it's essentially profit. Now the market has definitely got slower, and I'm pretty sure we'll see pricing coming off a bit. But we've got quite good headroom here. So confident that at some point, we will see a pickup. A lot of beds for sale. So if anyone is interested, please let us know. Adam Shapton: Adam Shapton at Green Street. I had to put my hand down then when Damian bed didn't want to look I was volunteering. Firstly, congratulations, Paul and Nigel, on retirement, let me say that. Before I get into questions. Just a clarification on the GBP 1 billion of disposals number. Is that in addition to what's already exchanged and under offer or... Damian Wisniewski: No, GBP 1 billion includes the figures that we've done this year. So GBP 1 billion over -- we would have done GBP 280 million, I think, as the deals get done. So that's a good start. So we're hoping that we're going to get something close to GBP 400 million this year. So that's the plan. Adam Shapton: And just in that context, if I may say 3 years sounds quite conservative to do another GBP 750 million. What's the limiting factor there? I mean you talked about improving market. You quoted Knight Frank on all the equity... Emily Prideaux: Don't view the GBP 1 billion as a cap. I think what we're looking to do is proactively dispose here mature assets where the business plan is delivered and where we think we can deploy other more accretive opportunities. So it's not a fixed number per se. And depending on the market and where we're at in terms of other opportunities that may move. Adam Shapton: So both the number and the time scale might conservative. Is that fair? P. Williams: We're seeing liquidity improving because obviously big assets are GBP 100-odd million today. Last year, I think they doubled GBP 100 million the year before we difficult. So I think as we see liquidity go up, and if we can get a strong price for those assets, we're going to be realistic and sensible. But I think we want to make sure when we do sell, we sell well and we sell at the right price with the balance sheet in good place. I want to make sure that we do it strategically. Richard and his team are well set up to do that. And I'd say we will accelerate disposals and we see a strong price for something and we can use the money more accretively, we would certainly do that. Adam Shapton: Great. Just 2 more. On the flex growth, Emily, you mentioned going from 8% to 10% to 15%. I think I'm right in saying the 8% is a mixture of F&F and third-party operators. Emily Prideaux: Yes. Adam Shapton: So what's the shape of that? Emily Prideaux: The growth from 8% to 15% is more around our portfolio and what expires within that time frame of a size and location where we think will naturally move to flex. So it's not proposing that we're going out shopping per se for an extra 7% of that stuff. It's more that we're looking at where the sub 10,000 square foot units coming back in the right submarkets and they will likely convert. Adam Shapton: Okay. But we should expect to be more your in-house as it were rather than leasing? P. Williams: We've got a number of refurbishments at the moment, which I think we're ideally placed for that sort of thing. Adam Shapton: Okay. And maybe somewhat related to that, on admin costs, you made some good progress. How should we think about a floor of where that could get to in today's money? Given your strategic ambitions, you want to sweat the platform more, where could the... Damian Wisniewski: I think our target for this year is another couple of million. I think at that stage, that feels like it's quite lean. There would have to be quite structural changes before we can go much lower than that. But that's a reasonable target for now. Callum Marley: Callum Marley from Kolytics. A couple of questions. Outlined the new strategy today with disposals and buybacks. But the stock has obviously been trading at a material discount now for a few years, and you've had a while to act on it. Why are you committing to this now? Emily Prideaux: I think in terms of the strategy, in terms of -- we're looking at all optionality here. So we're disposing, but then obviously focusing on the balance sheet. You've seen track record of development and investment where we're committed and where we want to commit. Obviously, looking at the dividend and as Damian touched on, which you can pick up on the share buybacks come as and when we reach that surplus. So it's looking at the whole picture and that optionality around that, keeping open-minded to that. Damian Wisniewski: I think also the key really is how the investment market is now opening up. we have had 2 years where it's been quite challenging to sell large lot sizes. And as a result, the leverage has crept up a bit. The balance sheet is still strong, but maintaining a strong balance sheet has always been one of our foremost requirements. we now have more options coming open to us as well. So -- and the other thing, of course, is maintaining earnings. And you've got the situation now where the IFRS yield on most of the things we're looking to sell is probably very close to our marginal interest rate. So the earnings impact of disposals is much less than it was, say, 3 or 4 years ago. So I hope that gives you some idea as to how... P. Williams: I think that's the point with the market opening up more liquidity, give more opportunity to sell and consider what we do with that money. So I think that the market equity has improved a lot. Callum Marley: Got it. And then the 25% earnings growth target, is that built on sustained rental growth? And if so, what's the number? Damian Wisniewski: The rental growth to 2030, essentially, what we're doing is we're building into our models some growing reversion from rental growth of around about 4% per annum. We've also got, I think, expecting increasingly attractive returns from projects like 50 Baker Street and Holden, where the gearing impact as well, it improves those returns still further. You factor that in, about half of the rental growth comes from those 2 projects and about half of it comes from the rest of the portfolio. Callum Marley: So 4% is the... Damian Wisniewski: So roughly 4% per annum is what we're putting in our models going forward, yes. Callum Marley: And if I could just ask on Page 22, just looking at the prime office rents, seem to be flat from 2015 to 2019. What makes you think that '25 to 2030 that is going to be 4% a year going forward? P. Williams: I think -- firstly, I think there's a pretty tight supply crunch and that demand is pretty good. People are growing. 80% of the deals last year with 20,000 square foot people were growing. Rents do need to increase in order to -- a small proportion of people's outgoing. So I think if people want to be in good locations, they need to pay the right rent for the right location. So I think it is time for landlord to earn a bit more money. So I think we feel pretty positive about it. Last few years, despite the difficult macroeconomics, we've been consistently letting at 10% above ERV. We have strong visibility about inspections and viewings and tenant demand. So I think we feel pretty positive about. London is a place to be. People want to be in town. Emi, do you want to add to that? Emily Prideaux: Yes. I think the 4%, if you look at the sort of big houses prospects over the next 5 years, that's probably pretty conservative. I think the supply crunch is a big driver at the moment. London has got a supply shortage that we haven't seen before. Part of our repositioning is making sure we're in the right place for that. But I think the 4%, we're pretty comfortable with from a market perspective. And this year, we're in a place where every submarket in London is now projecting growth, whereas before it has been much more spiky following COVID. So you're really seeing that evening out now in terms of a more lateral growth across the city. Damian Wisniewski: Rents have fallen behind other costs quite substantially over the last 5 years. They're now beginning to catch up, and we're seeing our rents growing now at a slightly faster rate than overall cost. But really, that's been squeezed quite a bit over the last 5 years. If you go back to the last big rental cycle, which was sort of 2012 onwards to 2015, our earnings pretty much doubled in that period. And I'm not forecasting a doubling, that would be nice. We'll come back next year, hopefully. But I think our 30% increase feels very realistic given that we are seeing really quite a shift in the dynamics and overdue, I think. Zachary Gauge: It's Zachary Gauge from UBS. A couple of questions from me. One is on the ERV growth conversion into capital growth during '25. Obviously, 4% ERV growth. I think at the portfolio level, you're only 0.8% on capital growth. Can you touch on why the value was -- aren't giving you the uplift when yields were effectively stable and why you're confident that going forward, that will convert into the 3% to 5% capital growth that you've guided to? And then the second one, sort of again, picking up on the share buyback point and capital allocation. I noticed that the net debt-to-EBITDA target seems to have shifted slightly from getting it below 9 at the end of this year to now sort of 9.5 going forward. Bearing that in mind and the capacity that gives you, should we sort of see the GBP 250 million of excess capital from the GBP 1 billion of disposals as the high watermark for buybacks? And would that then be sort of flexible depending on where you sit on the net debt-to-EBITDA ratio and obviously doing potentially more disposals than GBP 1 billion. P. Williams: So Damian, do you want to start with... Damian Wisniewski: I'll start with the second question. So the 9.5 isn't a target. We've currently got it down to 9, I'd prefer it to be lower than that. We're expecting it to be lower by the end of this year. So 9.5 is really where I think we see the upper limit over the next few years. Could there be a bit more available? Yes. I think we need to see how we go on this. We'll update you as we go. But the 9.5 is very much an target. On the valuation point, I think I mentioned earlier, we've got about 40p a share of additional CapEx and discounting for voids and the time effect of rental growth coming through. That did impact us in 2025. We've looked over the last 10, 15 years. And the average amount by which we see valuations impacted by CapEx and voids is roughly 1% per annum. Last year, it was more like 2%, 2.5%. We have been looking at a number of new schemes to try and grow rents. And I think that was one of the reasons you've seen a bit of a step-up in 2025. But we don't think that is a normal level, and we think it will come back down closer to its 1%. The only other point to make is that our 3% to 5% is on NTA -- and the -- obviously, the rental growth is on the gross asset value. So there's an impact there as well, which helps. Zachary Gauge: Sorry, on the GBP 250 million being the top end of buybacks and dependent on additional disposals? Damian Wisniewski: Not a top end at this stage. I mean let's wait and see. I think -- I don't think it's all going to come in one go either. I think we need to get the disposals underway, look at the capital allocation at the time, and we'll take it from there. But -- so 3 years isn't forever either. So let's see where we go. Emily Prideaux: I think it's going back to the plan we've talked about, Zach, in terms of looking at all of those -- the options available to us alongside one another. P. Williams: Paul, I think you had your hand up. Yes. Paul May: It's Paul May from Barclays. Just 3 questions, I think, for me. You regularly provide the ERV target, but I think through the presentation, I've noticed sort of welcomed increased focus on earnings and cash flow moving forward. Do you think you'll consider providing a like-for-like rental growth target per annum moving forward? I appreciate you said the 4%, but just sort of give some color there in terms of converting ERV growth into actual cash flow would be sort of welcome. Regarding the disposal of Whitfield Street, obviously, I understand Lone Star is a pretty high cost of capital enterprise. Do you have any indication as to what they're expecting on that site and why they can hit their sort of 20% plus IRR targets versus what you would have expected to achieve on that site? And then just on the 2030 targets, is it reasonable to assume that that's relatively back-end loaded. There will be a little bit of bumpiness between '27 and '29. And then as those schemes complete, that should come through into 2030? P. Williams: Well, just touching on Wakefield Street first. I mean, obviously, they will have a fairly -- probably a bit more aggressive view on rental growth. We're very happy with the price. I think a net initial of the price of 5%. [indiscernible] on the 5% is good. bit of vacancy coming up. It's a 20-year-old building. I can't really speak for them as to where they think their returns could be. They're probably reflecting the same thing we are as much as the West End is very tight, rents are growing and a very good location. So they're probably targeting pretty aggressive rental growth. But for us, we think recycling support and getting some more money into the portfolio, we can secure a strong price, which we did, and we're investing elsewhere. So I think it's all about their view about where rents might grow. We're not renowned for being overly aggressive on where we see rents growth. So I say we're delighted with the start of the year, how much sales we've done, how much we've got under offer. We wish them well with the purchase. I'm sure they'll be delighted with it some time. As I say, we've done -- we've made our money there. It's a 20-year-old building, and we've got plenty of other opportunities to spend the money. Do you want to talk about… Damian Wisniewski: Yes. First of all, on the like-for-like rent, it's an interesting idea. I think we'll certainly consider it. I mean the point to make here is that the rental growth grows the reversion and it takes time for that to be captured into earnings. And so you tend to get this cycle where initially, the like-for-like rents lag behind ERV growth. But at the end of the cycle, they can often outpace it. So we found -- in that period, we mentioned earlier that 5 years when rental growth was very low. For the first 2 or 3 years of that, our like-for-like rents were still growing nicely because they were based on previous reversion. So you get this slightly different timing impact coming on. We'll think about how we might guide to that going forward. In relation to the earnings, you are right. A lot of the uplift comes from 50 Baker Street and Holden House and others coming through probably in late '29, early '30. So it is quite a step-up in '30. We do think though that there will be some nice solid earnings growth in '28, '29, but it's really then a step up in '30. Paul May: Perfect. Sorry, last couple. One, coming back to the initial question on AI. Do you think your portfolio or your tenant base of smaller -- generally smaller tenants, smaller floor rates actually offer some protection in that AI world given it's probably larger entities that are cutting back on some of the graduate recruitment. P. Williams: Well, short answer, yes. I think very big banks, et cetera, who knows. I think one of London's great benefits is to buy a diverse space. Average -- I think average size of our lettings across our portfolio, about 15,000 square foot. I think that gives quite a lot of resilience with such a range of different occupiers. Emily, do you want to add to that? Emily Prideaux: I think that covers it most other than to say, obviously, the way we look at our portfolio generally and AI falls into this is to make sure we've got everything to meet that match demand. So the high growth at the lower end, probably in the fitted space growing up to the 50 Baker Street. So I think like any other, I think we'll make sure it's balanced in that way. Paul May: I am sorry, just final one linked to that. The 10% to 15% on flex, given that 15,000 square foot sort of average tenant mix, and that's probably skewed by a few large ones and then quite a few even smaller ones. Could flex become a significantly larger part of your portfolio than the 10% to 15%? Emily Prideaux: At the moment, we think the 15% is probably where it still makes sense from maintaining everything that we have to look at in terms of cost ratios, operational efficiencies and overall net-net returns in terms of extra CapEx and everything else that goes into it. So at the moment, that's where we think we will always continue to kind of mirror the market and make sure we're delivering what we believe the market is. Over the years of flex and all the headlines it's grabbed, it's never really moved much from the sort of 4% to 7% of the total market activity. So it feels -- we're looking at that on all the financial metrics, but also where we think the market is. So -- of course, it could change in the future and we'll adapt as we need to, but that's where we feel it's right at the moment. P. Williams: I think that's a good point as a percentage of the market. It's relatively small. We got a lower headlines and it's done well. But we also like our headquarters, nice long leases, helps our valuations. Thank you, Paul. Any other questions we've got from the room more? Do we have anyone online on telephone? Operator: First question from the phone comes from the line of Marc Mozzi from Bank of America. Marc Louis Mozzi: My first question is around how is the Board weighting M&A optionality as a way to boost shareholder returns and addressing the gaps that have been created by the recent senior departures. Emily Prideaux: I think it's a question around how -- was the question just bear with me that the -- how do we think about perspective of addressing succession matters. P. Williams: I mean, obviously, we're very focused on our business at the moment. And obviously, I've made a decision that I'm going to retire and there is a process going ahead with finding a successor. So the focus is on the business. There's nothing to report to say about M&A, particularly. Unless we misunderstood your question, Marc, it wasn't a great line. Marc Louis Mozzi: It was a question. My second question is around effectively given AI-driven derating of New York office stock prices, do you still view share buybacks as the right call in that environment? And the next one related to that is how confident are you in the long-term earnings and total return specifically target that you've provided through 2030? P. Williams: Well, I think firstly, it's always got to be a balance between buybacks and investment and all the rest of it. And obviously, it's got to be seen as an opportunity at the moment. Damian, do you want to add anything to that? Damian Wisniewski: Yes. I mean the principal things we're trying to do, we're trying to accelerate disposals to give us more options. The first thing we do is maintain a strong balance sheet. The second thing is we invest in our accretive returns for our schemes. After that, we have options. And the AI is one of the many factors we take into account in looking at investment decisions. And we're all trying to work out what it means short term, medium term and long term. For now, though, I think hopefully, our capital allocation outlook is clear, and we will keep our eyes and ears open to see how things move forward. But I'm not sure we can say much more at this stage. Marc Louis Mozzi: I just wanted to have your thought. And the final question for me is, how much disposals are you assuming in your 2030 target? Damian Wisniewski: 2030. So we're assuming about EUR 1 billion in the next 3 years and I think a couple of hundred million a year per annum after that. Is that right, Jennifer? Unknown Executive: Yes. Damian Wisniewski: Jennifer does all the modeling, so she knows. Marc Louis Mozzi: GBP 1.2 billion, GBP 1.3 billion? Damian Wisniewski: About GBP 1.3 billion, GBP 1.4 billion over the 5 years. P. Williams: We got one more. Operator: The next question comes from the line of Alex Kolsteren from Van Lanschot Kempen. Alex Kolsteren: Two questions on this presentation. So you mentioned EUR 2 million of cost savings target in 2026. What's the reasonable amount to assume for 2027 on top of that? Damian Wisniewski: Yes. So we took about GBP 2.4 million came off our EPRA cost in 2025. We're anticipating a similar level in 2026. I think our models assume inflation after that, but we will be looking to make this business as efficient as we possibly can. So anything we can do after that to reduce costs will be done. There isn't a specific cost target, I think, in the 2027 model at this stage, but that doesn't mean to say we won't look at further efficiencies. Alex Kolsteren: And then one more on the capitalized interest. On Slide 9, you say that the capitalized interest in 2027 is about GBP 8 million higher than in 2026. On Slide 51, where you break down your CapEx pipeline, the 2026 number is GBP 6 million and 2027 number is GBP 8 million. So where does the remaining GBP 6 million increase come from? Damian Wisniewski: Yes. I mean these figures in the back here are for essentially the committed schemes. If you look at the top half of the report. There is -- in the bottom, it says consented 50 Baker Street. That is not yet in the top half of the project because it's not been committed. When it does get committed, and we're assuming it will do, then it will go into the top half, and we'll show you the capitalized interest. So that figure in the outlook includes capitalized interest for 50 Baker Street, the appendix doesn't. Unknown Executive: There are 2 questions on the webcast. The first says, while you've mentioned the possibility of share buybacks, are you taking any other active steps to reduce the gap between the current share price and the net asset value? P. Williams: Well, we're hoping this presentation will help. I mean we're selling, we're letting. We think the market is improving. The fundamentals are good. So actively, we're looking at other options of whether buybacks or something similar. Emily? Emily Prideaux: That's exactly that. The plan you've heard today is laser-focused on shareholder returns and what we get and where our focus is in that regard. Unknown Executive: And then the last question is, within the 2030 guidance, does it take account of a potential share buyback? Damian Wisniewski: No. P. Williams: That's an easy answer. Thank you, everyone, for today. We're all around if anyone wants to have a chat afterwards, pick up the phone or obviously on tour as well. So thank you for your attending today. I know it's a busy week for everyone, and have a good day. Thank you very much.
Operator: Greetings, and welcome to the NOG Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce you to your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin. Evelyn Infurna: Good morning. Welcome to NOG's Fourth Quarter and Year-end 2025 Earnings Conference Call. Yesterday after the close, we released our financial results. You can access our earnings release and presentation in the Investor Relations section of the website at noginc.com. We will be filing our 2025 10-K with the SEC within the next few days. I'm joined this morning by our Chief Executive Officer, Nick O'Grady; our President, Adam Dirlam; our Chief Financial Officer, Chad Allen; and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows: Nick will provide introductory remarks, followed by Adam, who will share an overview of NOG's operations and business development activities, and Chad will review our financial results. After our prepared remarks, the team, including Jim, will be available to answer any questions. Before we begin, let me remind you of our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause the actual results to be materially different from expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick. Nicholas O'Grady: Thank you, Evelyn. Welcome, and good morning, everyone, and thank you for your interest in our company. I'd like to take the time to reflect upon 2025, discuss our plans for 2026 and also share my views in regard to the macro oil and gas environment and how it may affect our company and strategy. While our equity total return was down in 2025, our adjusted EBITDA was actually up 1%, and this was with oil prices down some 14% on average. Our share count was 2% lower year-over-year, our net debt was down modestly year-over-year, all of this despite closing over $340 million of acquisitions, including Ground Game. Our financial results are a testament to our consistent hedging and the decisions we made regardless of market perceptions in the short term, which are manifested in multiple compressions. We were judicious and strategic on how we deployed and allocated capital in 2025. Our natural gas spending increased dramatically and our oil spending declined. NOG is now seeing record natural gas volumes aligned with some of the highest seasonal prices seen in many years, and we and our operating partners have tried to deploy the bare minimum on the oil front to preserve our precious barrels for a better day. Our 2025 ground game focused more on long-term development versus drill bit projects given the fluxing pricing environment. It is our intent to capitalize on attractive land pricing while still maximizing our long-term return on capital as we anticipate incredible return development opportunities on these lands over time. As a result, we grew our footprint organically by over 12,000 acres last year, extremely cost effectively with advantageous and low-risk long-term leases. Our land assembly effort may have made us look less capital efficient in the short term, but it's the exact type of capital allocation tactics companies should take in times such as these, and we believe our decisions will pay dividends in the years to come as commodity pricing improves. In the first quarter of this year, we've already grown that land position substantially once again. And while the market likely treated our equity based on a deceleration of growth estimates in the short term and the continued decline of forward prices, we also took great pains in extending our maturity wall and increasing our liquidity to bridge to the next cycle. In fact, even after closing our joint Utica acquisition with Infinity and using our revolver to finance that transaction in its entirety, we will still have more liquidity than we started with in 2025. These are all purposeful moves to allow us to navigate a cyclical business while also creating value during a downturn. As oil declined into the 50s later in the fourth quarter and into this year, we saw a notable change in operator behavior with a significant slowdown in new activity and a deferral of existing activity. While in the short term, this can affect us, it helps solidify our belief that 2026 will mark the trough of the oil cycle. This also may lead to a slowdown in capital spending, offset in part or in whole from ground game opportunities as one would expect during weaker periods. In our view, there are 2 potential outcomes for oil: one of continued middling prices for the bulk of the year, which ultimately leads to an increase of pricing within a year or 2, or conversely, a sharper short-term decrease in pricing, which leads in the end to the same outcome, higher prices. In either scenario, NOG will come out stronger. We are well hedged and our spending decisions over the last 12 months have proven wise as we have pushed and preserved high-value development for a higher price environment. Geopolitical noise in the short term has a lot of people guessing, but fundamentals are set to improve. We've heard investor rumors that somehow our dividend could be in question. I'd like to address that directly as we think this chatter is totally unfounded. While nothing in life is ever completely certain, our dividend is built for an even significantly weaker environment than we face today, where we would ultimately be at a cash flow breakeven level during the trough of the cycle post dividend. And we believe that our dividend can be sustained for many years, even though we don't believe that oil cycles work in a way that we will be in a breakeven scenario for an extended period. We built our dividend to last and ultimately to grow through cycles. So while we, of course, must manage risk, we are dedicated to sustaining and growing our dividend over the long term, and we believe the attractive yield it provides today is a great opportunity, particularly at the trough of the energy cycle. Our macro view and the belief oil's trough is coming will pivot the execution of our ground game in 2026 from leasing, in some cases, to drill-ready projects. Organic activity, as always, will be dependent on short-term commodity prices, but our ground game capital deployment will be targeted on investments that will create the coiled spring growth effect our investors saw in 2021. What we're seeing in real time is that drill-ready projects, something we saw as mostly unattractive in 2025, are slowly becoming a much better place to be. While leasing remains active as we focus on the long term, the ground game will definitively evolve in 2026. I'll let Chad and Adam cover this further, but our guidance is reflective of the marketplace. In our low activity scenario, we do see some reduction in oil volumes, but a much more dramatic reduction in spending. In that low activity scenario, we'll generate substantially larger amounts of free cash flow at today's strip while deferring and pushing our high-value development for a better environment. In the higher case scenario, we'll see some acceleration of activity, a reduction in the curtailments we've carried for some time and a higher TIL count. While free cash flow would be lower at today's prices, it certainly would also drive higher future production. And of course, in this environment, it's quite possible that the overall pricing environment would wind up being much higher. Our ground game can play a major role in the in between of these scenarios regardless of the environment, where opportunities may arise for us to deploy ad hoc capital throughout the year, and we expect and hope to do so, especially in a tougher environment. On the M&A front, we continue to evaluate assets as they come to market. With that said, however, we are satisfied with the portfolio strategic positioning, and moreover, we believe that quality assets that meet our criteria, particularly on the oil front, possibly will only come to market if we see a healthier market price point. So we'll focus our discretionary capital on the ground. In the past several years, we've seen some aggressive new entrants to the smaller deal side of the market, and much of that capital has become sidelined as these parties' prior investments are proving to have been poor capital allocation decisions. This should now provide NOG with a clear competitive advantage in the current environment. On the development side, it's important to understand the inherent alignment built into our business model. Our operators are rational and the activity we have seen curtailed and deferred will be activated into a healthier environment. Consequently, NOG should see disproportional benefits as the market improves. But what that means is that as the cycle recovers, we create far more convexity to the upside exactly when you're supposed to have it, when prices are stronger. I recognize that our business model may make our journey a bit lumpier when comparing us to a typical operator, but it also has the potential to enhance long-term returns significantly versus a production targeting mindset. NOG has pioneered the large non-op at scale, moving to a broad-based multi-basin, multi-commodity platform over the last 8 years. We effectively created the large co-purchase partnership and reinvented to some degree the joint development agreement. We're not done innovating and evolving. We are reevaluating how we operate, how we allocate capital and even how we source capital. Over time, the initiatives we are evaluating have the potential to enhance our value creation capabilities, our returns and our business model. So stay tuned for these developments. It's going to be a great year. NOG has a differentiated coil spring-like exposure to the cycle. It could take much of 2026 for the oil markets to fully recover. But as any good investor knows, the market will be well ahead of that. I can't say in my investment career I have seen a period where energy equity saw multiple compression at the same time that oil prices were declining. Cyclical stocks should never be valued at peaks or troughs but at a mid-cycle marginal cost of production. This leads to multiple compression during high prices and expansion during low prices. We saw such a period during the trough of gas prices in 2024, but that has not happened for oil stocks and certainly not specifically in our case. For our investors and prospective investors, this phenomenon presents a clear opportunity in NOG's shares, especially because NOG has true right way risk. Our volumes and activity from operators will rise with pricing. I'm extremely excited about how we're positioned and for what lies ahead. Now I'll turn it over to Adam. Adam Dirlam: Thank you, Nick. I'll start by reviewing the operational details for Q4, what we're observing in the current environment and how we're thinking about 2026 activity levels, followed by our business development efforts and the broader M&A landscape. As a whole, Q4 came in line with expectations as we saw activity ramp exiting the year. During the quarter, we added 24.2 net wells to production even as a number of our operators deferred completions due to commodity pricing. Deferrals notwithstanding, recent results have topped expectations with Appalachia, the top-performing basin relative to forecast, and the Uinta and Williston fast following. Given the accelerated completion activity in the fourth quarter, we saw our wells in process draw down 7.8 net wells, finishing the year with a total of 45.6 net wells. The Permian currently makes up over 1/3 of the wells in process, while Appalachia makes up just less than 1/4 and the Williston and Uinta make up the rest. In addition to our wells in process, we have 13 net wells that have been elected to but not yet spud, with the Permian making up roughly 2/3 of the total. Lateral lengths remain elevated as operators continue to drive normalized cost down and bolster returns in an effort to counter current commodity prices. As we exited the year, both our wells in process and our elected AFEs were averaging around 13,000 feet with normalized well costs down nearly 5% quarter-over-quarter. In addition, our operators have been high-grading locations, and we elected to over 95% of our well proposals during the quarter with expected returns significantly higher than our hurdle rate. 2025 marks the year where we've seen an acceleration in activity across Appalachia, and we are poised to significantly increase activity levels as we scale and further diversify our asset base after closing our Utica acquisition in late February. Pro forma for the transaction, NOG will have increased its Appalachian footprint by 45%, now totaling approximately 90,000 net acres, including over 100 identified gross locations on the Antero asset alone. The scale and diversity of NOG's asset base will provide us with a unique optionality as we head into 2026 regardless of the price environment. We will adapt to market dynamics and deploy capital according to what we are seeing on a real-time basis. As such, we have provided guidance reflecting a range of outcomes. As it stands right now, with our current wells in process and based on the conversations that we have had with our operators, we expect activity levels for 2026 to be roughly split with the Permian at 40%, 25% to Appalachia, 25% to the Williston and 10% to the Uinta. As far as timing is concerned, this year's well activity will be relatively evenly weighted between the front and the back half of the year, while we forecast spending to be a bit more front-end loaded with a 60-40 split. And while we don't provide quarterly guidance, we expect the usual downtick in Q1 driven by elevated Q4 activity levels along with weather and commodity-related curtailments, and from there, moving higher in Q2 with a relatively flat cadence thereafter. The mix and pace of our activities could shift based on how commodities perform during the year. If organic activity slows in a particular basin, we'll consider reallocating capital to another more constructive area of the business. Additionally, we may focus more on the ground game to seize countercyclical opportunities that arise. Turning to the M&A landscape and our business development efforts. NOG has remained more engaged than we ever have been. As mentioned earlier, our integrated upstream and midstream Utican transaction is now closed, and we are excited to get to work on our fifth major joint acquisition with our partners at Infinity. Our assets' resilient inventory with average breakevens below $2 will be a significant focus as we prosecute development plans and grow volumes beyond 2030. In addition to the 100-plus locations already identified, there is potential for incremental value creation from both the undeveloped upstream footprint as well as the midstream fee potential. Looking ahead, there are several large assets in the market right now, something to the tune of $6 billion in total. That said, it pays to be patient as many of those assets are not the right fit for NOG. However, we are expecting a number of potential opportunities coming down the pike that could be of greater interest. All else being equal, we expect the ground game to continue to take center stage as we leverage our proprietary infrastructure and further enhance our portfolio through smaller acquisitions while screening a number of different joint development opportunities. In this environment and, in particular, the fourth quarter, the team did a phenomenal job taking advantage of the disconnect in the market as operators and the competition exhausted their budgets for the year. In the fourth quarter alone, we were able to pick up over 6,000 net acres and 1.2 net wells across 33 transactions, a quarterly record. The acreage alone represented over 50% of the ground game acreage picked up in 2025, and we finished the year with 12.8 net wells and over 12,300 acres while evaluating over 700 opportunities. We don't see our progress slowing down in the first quarter either as a number of committed transactions are slated to close in the first part of the year. However, most encouraging are the results from our recently acquired acreage that is already getting converted into development. From our acreage acquisitions in Ohio alone, we've seen 14 well proposals with some of the strongest economics across our portfolio. We'll continue to navigate this environment as we have every other down cycle by staying nimble, allocating resources to the most capital-efficient projects and creating long-dated and durable value for our stakeholders. With that, I'll turn it over to Chad. Chad Allen: Thanks, Adam. Our fourth quarter financial results and production cadence were down the fairway with no major disruptions. And despite the persistent macro headwinds faced by the industry, NOG's diversified and scaled platform continues to deliver, outperforming internal estimates on production and EBITDA for both the quarter and the year. Fourth quarter total average daily production was 140,000 BOE per day, up 7% from Q3 2025 and up 6% versus Q4 2024. For the year, total average daily production was 135,000 BOE per day, topping the high end of our guidance, up 9% as compared to the full year 2024. The outperformance was driven primarily by a continued ramp in our gas assets. Fourth quarter oil production increased 3% to 75,000 barrels of oil per day sequentially, but was 5% lower year-over-year as some of our Q4 wells were deferred as price sensitivity among our operators became more acute. The ramping of our Appalachian JV drove gas production to record levels for the third consecutive quarter with 392 MMcf per day, up 11% sequentially and up 24% from Q4 2024. For the full year 2025, NOG's oil production was 75,646 barrels per day with gas production coming in at 356 MMcf per day. Moving on to our financial results. Adjusted EBITDA in the quarter was $367 million and free cash flow was $43 million. For the year, adjusted EBITDA was $1.63 billion with free cash flow of $424 million. Adjusted net income in the fourth quarter was $82 million or $0.83 per diluted share, excluding the impact of the $270 million non-cash impairment charge we took in the fourth quarter. For the year, adjusted net income was $453 million or $4.57 per diluted share. GAAP net income was impacted by $703 million in non-cash impairment taken over the course of 2025. As a reminder, NOG accounts for its assets under the full cost method as opposed to the successful efforts method, which does not perform historical price-based asset tests. Driven by lower average oil prices, we recorded a series of non-cash impairment charges beginning in Q2 under the ceiling test of our full cost pool of oil and gas assets. These impairment charges are not indicative of the quality of our assets. They are merely dictated by weaker oil prices year-over-year. As the cycle recovers, we do not get to write up the same assets that we impaired on the way down. We are one of the only companies among our peers that utilize the full cost method. We are evaluating in making a change in our accounting method to successful efforts as it's more aligned with our peers, providing a better basis for comparability. Moving on to pricing. Oil differentials in Q4 averaged $5.05 per barrel as compared to $3.89 in Q3 as we saw widening seasonal differentials in the Williston, offset by improvement in the Permian. For the year, oil differentials were $5.53 per barrel, in line with our expectations. Natural gas realizations in the fourth quarter were 58% of benchmark prices, reflecting ongoing Waha market weakness as well as lower absolute NGL prices and a lower NGL to natural gas ratio. For the year, natural gas realizations were 79% as compared to 93% in 2024. Lease operating cost per BOE in Q4 were $9.30, improved by 5% as compared to the third quarter and by 3% as compared to the fourth quarter of 2024. For the year, LOE per BOE was $9.61, up 2% from 2024. Despite higher volumes, we continue to see higher workover and maintenance-related costs. CapEx in the quarter, excluding non-budgeted acquisitions and other, was $270 million, reflecting another record quarter for ground game, as discussed by Adam. The $270 million of capital was allocated with 44% to the Permian, 26% to the Williston, 8% to the Uinta and 22% to the Appalachian Basin. Approximately $193 million of total spend in the quarter was allocated to organic development capital. Total CapEx for the year, excluding non-budgeted acquisitions and other, was $1 billion, inclusive of $174 million of ground game investment in 2025. The fourth quarter and, frankly -- and the first quarter of 2026 have been busy as we took a number of actions to enhance liquidity in our maturity wall. Starting with our revolver. In November, we extended the maturity date from June 2027 to November 2030, keeping the borrowing base and the elected commitment the same. The revolver was further amended just this week. We upsized the borrowing base to $1.975 billion and increased the elected commitment by $200 million to $1.8 billion, reflecting the addition of our joint Utica acquisition to our asset base. In October, we issued $725 million of notes with a 7.875% coupon and retired nearly all of our 2028 notes with an 8.125% coupon. Just last week, we gave notice to the holders of the remaining $20 million of our 2028 notes, and we will be redeeming those notes at par on March 4. After closing our joint Utica acquisition earlier this week, we have over $1 billion of liquidity available to us. Moving on to guidance. As Nick discussed earlier, given the lack of visibility with commodity pricing in this environment, we are providing 2 ranges that capture potential production, operating expenses and CapEx in a low activity environment and a high activity environment. For details concerning each scenario, please refer to the 2026 guidance page in our earnings presentation on Page 15. That concludes our prepared remarks. Operator, please open up the line for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Neal Dingmann of William Blair. Neal Dingmann: Nice details again today. Nick, my question, you -- I think it was last night you talked about and mentioned that you have notably more than the typical amount of wells that have been spud -- that have not been spud, but have been consented. I'm just wondering what -- maybe you or Adam, what's your guess as to when these wells are finally drilled and completed? Is it just a matter of when, not if? Or maybe talk about why we're seeing that today. Nicholas O'Grady: That's right, Neal. As Adam also noted in his comments, we have a large D&C with -- and about 13 net wells we've consented to that still haven't been spud. We sometimes have given kind of specific TIL timing guidance throughout the year, and we chose not to do that this year. The range is obviously anywhere from 70 to almost 90 wells this year, which is really wide. And we think it would be a disservice to try to predict the behavior, because it's been moving around substantially in real time. As an example, a lot of these proposals were delivered to us in November and early December, and then we've seen significant changes as pricing weakened late in the year and early into this year. The recent geopolitical spike in oil thus far hasn't shown a reversal in that behavior. But I think particularly from our private operators, which is meaningful to us -- but what I can say is if you look at this in history, especially as an accrual accounting shop, we have seen periods of time where we have had to bring forward accruals. We've had -- ironically, we're talking about not spending enough money, but we've had periods where our CapEx has been accelerated, and we've seen those things move really quickly. So that can happen again. I think it's really going to just be dictated a little bit, as I talked about, by right way risk with commodity pricing and specifically oil. And what I would tell you is that we look a little bit different. If you're a -- when you compare us to, say, an operator and you're comparing -- look, I recognize estimates and all these things and changes to estimates. I spend a lot of time on that side of the table. But our optical capital efficiency -- whereas an operator targets a maintenance level of production and then tries to spend as little as possible to achieve that, they may look more capital efficient as things go down. We actually may look the opposite in the sense that we have committed capital, we have accrued capital in many cases, but we're managing significant curtailments or significant deferments. And so we -- and you don't have to believe what I'm saying. You can look back to 2020. If you look in 2020, we looked far less capital efficient on the way down than other companies. And in 2021, we looked far more capital efficient because all of that capital that's in the ground and it's been determined -- that's been committed comes to fruition. So I don't know if that's too much or too little. Or you want to add to that, Adam? Adam Dirlam: Yes. I guess the only other additional color that I'd add, I think we alluded to it in the prepared remarks, which you've got about 2/3 of those 13 wells in the Permian. And if you're looking at kind of half cycle expected returns, you're looking at something well north of 40%, 45%. You've got 235 gross wells in total as well. So you've got a handful of diversity. And so I think it's really going to boil down to just what the gross level activity levels look like. Nicholas O'Grady: Yes. And that's the point, is that I don't think this is a function of economics in the sense that -- all of the activity that we have seen deferred or pushed has been largely economic in this environment. Especially, when you get to our private operators, it's not a question of whether they can make money on it. It's a question of whether they should, right? They'd rather defer those to a better day. I recognize in the shorter term that can have an effect on numbers, but in the long run, you're going to make a -- this is an ROI game and you're going to make a lot more money. You can't eat IRR, as they say. Neal Dingmann: Yes, great details. And then, Nick, maybe take the M&A question in a different direction again. You guys certainly have been active in -- I just -- it doesn't seem like looking at the stock price that you're getting rewarded for just how much bigger inventory position you have today than, let's say, even a few years ago. And so my question is, on the other side, just given how great right now the seller's market is, especially given what ABS players are paid for mature, would you consider divesting maybe not a lot, but some to -- if the market continues to reward for this? Nicholas O'Grady: Yes. I mean, look, we are for sale every day. Our assets are for sale every day. We'll always look at what makes the most economic sense for the company. I alluded to this in my prepared remarks -- prepared comments, excuse me, that we have been evaluating a lot of different outcomes. And without being too forward, I would just say -- we're pretty creative people, right? And I think that's been demonstrated over time. And we've got some creative ideas that could effectively bridge some of the things you're discussing over time. Operator: Your next question comes from the line of Charles Meade of Johnson Rice. Charles Meade: Nick, this is I guess maybe a basic question, but worth -- I want to take a shot at trying to illuminate how you're going to -- how are you going to know and how are we going to know whether you're tracking the low end -- or the low activity scenario or the high activity scenario? I mean there's an obvious -- yes, go ahead. Nicholas O'Grady: Yes. No, I recognize it's not a basic question and it's not one that is unexpected because it's obviously an extremely wide set of outcomes. And we are dealing with the fog of war. And like I said, people watch the price of oil and expect behavior to change accordingly. And it does, but it takes a little bit more time, right? You need duration. So when things go down, behavior changes. When things go back up, it takes a while before that behavior changes. And so what I would tell you is, one, the onus is on us. We will communicate throughout the year. And I think, two, there's a complicating factor between the low kind of activity and the high activity, which is that obviously we have an active ground game which can fill that gap. The other thing I'd point out is we are carrying substantial amounts of volume shut in, which is very different than the average operator. A lot of our privates have curtailed volumes. Some of it has been due to pricing. Some of it has been due to Waha issues and just the inability. And some of the deferral of activity has actually been driven by some of the gas issues you're seeing in New Mexico. But what I'd tell you there is that we will continuously try to tighten that band throughout the year and we will try to communicate. And I think -- again, we've tried to take a pretty -- one of the things that I would point out in the high case, which is that what we have done in that case is we've made the assumption, "Okay, a more normal activity," but we're not turning it on, say, today. We're really pushing a lot of that out till later in the year, which is why the oil volumes might optically look a little bit different. But obviously, it would change the actual -- and I don't want to say the exit trajectory because the timing could be very wonky depending on when that stuff comes on, but it could potentially mean that. So -- but I will give some comfort, which is that either one of these scenarios aren't going to affect our maintenance capital levels for the level of volumes you're talking about. So my point being that to the extent we spend more through that ground and we bridge that gap, even if we do see the low scenario, those dollars right now are kind of in between where we're going to be at any -- so as you look towards the following year, stable to growing activity. Adam Dirlam: The only other piece that I'd add to the deferments is we had about 4 net DUCs get pushed in Q4, and that's something that can get turned on at any time as well. So it's the combination of not only the curtailments, but the DUCs that have near-term catalysts depending on what kind of near-term pricing we're seeing. Nicholas O'Grady: Yes. And the one -- I'll just leave one thing because I think optically, we have sort of indicated that we would front half weight some of the capital, even though the capital in total is -- or excuse me, the development in total in both scenarios is considered to be relatively evenly weighted. That front half is 100% driven by ground game activity because we've had atypical success early in the year. Charles Meade: Interesting. That's good detail. Second question, you've drill down on Appalachia. So that was a -- it was a strong 4Q for you. You guys have already closed this Utica deal here in 1Q. Can you give us a sense -- I mean, to the extent you were surprised, or I think, Adam, you said your -- Appalachia was the most ahead of plan of all your geographies in 4Q. Is that carrying over into 1Q? And is the -- and can you give us any -- I know it's early, but anything incremental what you're seeing with the joint Infinity assets? Adam Dirlam: Yes. So I'll give a brief overview and then let the smarter people in the room finish the conversation. But I just say this, that -- timing plays a role in that and performance, right? So performance has been really, really strong on both our legacy Appalachian assets and on our joint development agreement and obviously, as we perceive, on the forward case in Antero. In case of the Antero assets, I would say you can see it in the purchase price adjustment that we've obviously had a strong -- it performed strongly prior to us taking possession of it. So that's -- or that means we get a reduction in that purchase price. I think as it pertains to the legacy assets, they've continued to surprise us month after month, year after year. They just are incredible. It explains why gas has been depressed for so long because they're so good. And on our joint development JV over the last year, we've seen both timing and performance improvements. But I will tell you that like, for example, it's not a totally linear in the sense that I believe most of the completions that we're expecting are actually in April. So in Q1, in general, it's not going to be some huge thing. However, performance relative to plan versus linear performance are different things. I don't know if you guys want to add to that. Nicholas O'Grady: No. I think you nailed it. Adam Dirlam: Yes. And Charles, I'll just finish with just saying that I think we -- when we look at these assets, right, we have historically always underwritten things based on the prior operator, right? But that doesn't mean that necessarily is what we think we can do with those assets when we take possession. So we have great hopes for the Antero asset that we'll be able to see performance and cost improvements over time. Operator: Your next question comes from the line of Scott Hanold of RBC. Scott Hanold: Nick, thinking about the -- I guess, the high case, low case on the budget, can you give us a sense of where some of the uncertainty is more? Is it more on the private operators versus the public? And has any of that started to show itself? Like are you getting a better read right now? So my question comes down to, is there a point in time where you're going to commit to, say, one case or the other? Or do you think that having kind of 2 cases is a reasonable sort of way to look at moving forward? Nicholas O'Grady: Yes. I mean I think at this point in time, it's definitely still reasonable, Scott. I think there's going to be a time where it has to meld into one, right? And I think that's what we'll try to do. And obviously, we want to do -- look, we -- we have incredible insight to what we do over a 12- and 24-month period. However, the timing of it, as you've always known in our business model, it's harder to do quarter-to-quarter, right? And so -- and sometimes in a period like this, it becomes -- I mean, if you go back to 2020, we just had to flat out withdraw guidance because we couldn't predict the timing of that. But in the end, it actually wound up -- for example, those decisions -- we saw half of our -- I don't mean to get off topic. But we saw half of our Williston volumes shut in for the better half of 2020. Well, when we went backwards and tested that versus everyone else who tried to keep their production flat, we made an additional $100-plus million in profit by turning those wells back on later on. So what I say is we have good alignment with our operators, but it is going to take some time to get some clarity in terms of some of these things. I can just tell you what -- so you asked about public versus private. On the private side, this is something -- a trend that we saw really in the beginning or really early, probably the middle of last year, where we've seen a slow slowdown, a deferral, curtailments, et cetera, et cetera, et cetera. And that has stayed on. What I'd tell you from a public operator perspective is -- obviously, I'm not -- I am watching all the public companies report, and I would just say that what publicly stated guidance and activity levels look like versus what we are seeing don't necessarily foot, which tells us that that's part of the reason we have 2 sets of guidance in some ways because a lot of what they're saying versus what they would indicate would suggest there's going to be a change in behavior throughout the year. Scott Hanold: Got it. And then when you take some of the enhanced governance you've put in place and some of these larger transactions you've done, when you think about 2026 -- I don't know, pick whichever case you want to do or just sort of give an average, like how much of your '26 activity do you think is underpinned by -- this guidance is underpinned by enhanced governance, where you've got some reasonably good predictability? Nicholas O'Grady: I'm not sure I have that number off the top of my head, Scott, but we can get back to you on that. Jim is saying he thinks it's around half. Jim Evans: Yes. Scott Hanold: Okay. Okay. Nicholas O'Grady: Yes. But what I'd say is this, like, look, we have commodity price triggers in almost all of our large joint development agreements. We haven't hit those price triggers. So it wouldn't necessarily change an activity. But I'll use an example. In one of the cases, we went to the operator and said we would really prefer to defer this activity because there's a better time. So it's not just them. Sometimes we ourselves would rather push that activity to a future day where it makes more economic sense. Operator: [Operator Instructions] Your next question comes from the line of Noah Hungness of Bank of America. Noah Hungness: To start off here, Nick, I was hoping, could you help us quantify maybe what the EBITDA or free cash flow upside would be from the coiled spring that you've spoken about here. I'd assume, let's say, like $65 of WTI? Nicholas O'Grady: Yes, I mean, I -- look, I think there's probably -- it's a bit interesting because right -- I think every $5 a barrel is something like $100... Adam Dirlam: No, it's about $100 -- between the low and the high, is that what you asked? Nicholas O'Grady: Yes. Adam Dirlam: Yes, it's probably about $100 million to $150 million. Nicholas O'Grady: But if you factor in, call it, $5 a barrel, right, you're talking -- that's another $150 million. So that's why in my prepared comments I talked about that. Yes, sort of a low case maintenance capital, which obviously generates more cash at today's strip, and a high case, which actually would generate less, albeit that's an averaging effect because when you look at the annual numbers versus obviously where we're expecting sort of that stuff to come in gradually, you may kind of on a terminal basis look a lot different. But you make the assumption that in the $65 world, which is about $5 delta on the strip today, that's $130 million to $150 million a year of extra cash for us alone. And so where I would go with that is that -- that change means that your free cash flow may be the same or even superior in the high case just because you're -- that's happening in a slightly better environment. Noah Hungness: That's helpful. And then for my second question is, in the low versus high activity scenarios, could you maybe talk about how much of the CapEx is related to ground game spend versus your just standard D&C? Chad Allen: Yes. Give me one second. So you're looking at about $150 million to $200 million between the 2. Operator: [Operator Instructions] Mr. O'Grady, there are no more questions in the queue. Do you have any closing remarks? Nicholas O'Grady: Yes, please. Thanks. Thanks for joining us today. NOG is well positioned to navigate through the current market volatility. Our assets are performing well. Our liquidity is abundant, and our investment opportunity set remains strong. We're grateful for being aligned with strong and capable operators, and look forward to keeping you informed on our activities and achievements in the coming weeks. Thanks again. Operator: This concludes today's conference call. You may now disconnect.