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Operator: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Burford Capital Fiscal Year 2025 and Fourth Quarter 2025 Financial Results Conference Call and Audio Webcast. [Operator Instructions] I would now like to turn the call over to Josh Wood, Head of Investor Relations. You may begin. Josh Wood: Thank you, Bailey. Good morning, everyone, and thank you for joining us to discuss Burford's fourth quarter and full year 2025 results. On the call, we have our Chief Executive Officer, Chris Bogart; our Chief Investment Officer, Jon Molot; and our Chief Financial Officer, Jordan Licht. Earlier this morning, we posted a detailed earnings presentation, which we'll refer to during the call, as well as our annual shareholder letter, and we also filed our Form 10-K for 2025. If you haven't already, you can find all of these materials on our Investor Relations website. Before we get started, just a reminder that today's call may contain forward-looking statements that involve certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed during the call. For information regarding these risk factors, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC. We will also be referring to certain non-GAAP financial measures during the call. Please refer to today's earnings materials and our filings with the SEC for additional information, including reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I'll turn the call over to Chris. Christopher Bogart: Thanks, Josh, and thanks, everybody, for joining us today. I'm going to take you through some key messages, and I'm going to start on Slide 9 of the presentation deck. And what I'd really emphasize about what happened in 2025 is that we had a standout year when it came to new business, which is the thing that we really have the largest amount of control over in this business. So we saw -- as you can see here, we saw very significant numbers, taking us well on our way to meeting our longer-term goals of doubling the base portfolio by 2030. If we were to keep on, on this clip, we would significantly exceed that goal. So that was just a terrific performance across the board: new definitive commitments, deployments, we added a net of $700 million of additional modeled realizations to the overall portfolio, taking that number to north of $5 billion now. So we're very pleased with how the year went from that perspective. As all of you will be aware, our realization activity, while still robust, was not as strong as it was last year. And that, of course, was a disappointment to us. That's, of course, also something that we have less control over, and it's something that as longtime observers of this business know, it's something that can ebb and flow with the level of activity going on in the courts. And we've been describing to you over the past several years, a world where we have a significant volume of older cases in the portfolio, which are simply not moving through the court system, the court process, at quite the pace that we would wish. We think that's probably still a hangover from the portfolio. In our shareholder letter this year, which I'd encourage you all to go and have a look at, we refer to -- we try to refer to it as 4 lanes of highway traffic trying to merge into 2. But the good news there is that the portfolio still had a significant level of activity, a good level of cash generation, and a good level of realizations. And most importantly, we're not seeing degradation in portfolio quality. The loss rates are stable. Our returns are stable. So the issue from our perspective is much more an issue of throughput and timing than it is anything else. And we'll take you through some more detail about that. However, that obviously impacted our income, which was down somewhat, and we'll take you through -- and Jordan will take you through in more detail just exactly how all of the numbers looked. So I'm going to turn to Slide 10. And this really highlights what happened on the new business front. It really was just a terrific year. You saw there a 39% increase in new definitive commitments. And that was coming off a year that was already relatively robust. That enabled us to significantly increase our portfolio base. That's the metric that we're using to look at our goal of doubling the business by 2030. And you see there, we've not only had a multiyear significant level of growth, but just this past year, we were able to put up a 20% growth rate in that number. So that's really very exciting for us, and it positions the business very, very well for the years ahead. Slide 11 takes you through realizations. And what you see in realization activity here is on the right side of this slide, you see that the world is continuing to go pretty well. We hit a new high of rolling 3-year average realizations. And so we're pleased with the level of portfolio activity that we're seeing. And you can also see there that we saw a number of portfolio events, basically right on top of the number of portfolio events that we saw in the prior year. But what really did happen there that caused the numbers not to be as robust as they were in the prior year is we simply didn't have as many big chunky wins. And you see that if you look at the graphic on the very left side of the slide, you see there that even though we had a roughly similar number of large-ish outcomes, we didn't have those big, big outcomes that drove the 2024 performance. And so when that doesn't happen, when we're missing one of those big, big -- or 1 or 2 of those big, big outcomes, you just inevitably see a decline in the overall realizations that the portfolio is driving. So if you look across here, we saw lots of activity, 69 assets add realization activity in fiscal '25 compared to 71 in fiscal '24. So that's an insignificant difference. But the dollars per realization event were just lower. That doesn't reflect portfolio quality. It just reflects the fact that we didn't have one of those big cases that we've been waiting for to show up and conclude and generate cash. It doesn't affect our enthusiasm for the portfolio, as Jon is going to go through in some detail. And again, our loss rates have been stable, our returns have been stable, but it just reflects the fact that we didn't have the kind of throughput that we had. The good news is all that stuff is still out there waiting. So it's not as though these things are gone. It's simply that when you look at our larger cases, we didn't -- we simply didn't have as much activity in them as one might have wished on a single year basis. And if you turn to Slide 12, you really see this illustrated in a more graphical format. Interestingly, we even saw -- if you look at gains year-by-year, we even saw an overall higher level of gains in fiscal '25 against fiscal '24. That's those 2 green bars on the left, $508 million to $579 million. But at the same time as we saw those higher gains, we also saw a somewhat higher level of losses. Now what does that mean? That doesn't mean case losses. Case losses, when you look at realized losses, those numbers are still pretty low, and you see those numbers there over on the right-hand side. Those numbers are low, our loss rates are acceptably low, and consistent with historical practice. So what's going on there? What's going on there is we have some unrealized losses. And I'm going to take you through a few examples of what creates an unrealized loss in our book because the reality is that while bad case events can also cause unrealized losses, so too can a number of things that don't speak to the underlying merits of the cases, things like changes in duration, changes in cost, and other extrinsic factors. And so it's important when you look at these numbers and you go into the accounting numbers as opposed to the cash numbers, it's important to bear in mind that there's quite a lot going on in the accounting, which is why we've always said we like to look at the cash performance of the business instead of the accounting performance. But since we have these accounting numbers, we're going to unpack them a little bit for you so that you can really see some of the dynamics in play. And before I delve into this, I'd also just encourage everybody to go and read our Shareholder Letter. I'm not going to go through every theme orally that we hit in that letter, but we talk there in some detail about topics like AI and our technology initiatives. We talk about our continuing market expansion, including our launches in Madrid and in Seoul, South Korea. And we talk at the end about Burford's overall role in the justice system and how we've become a very significant part of that overall process. But turning now to some actual examples so that you can see what's actually going on there. Slide 13 talks about a collection of cases that we call the proteins cases. And these are U.S. antitrust cases involving allegations of price-fixing in the proteins foods cases. So the reality of these cases is that they're going pretty well. You can see 4 different proteins there, all seeing positive outcomes and forward momentum. And in fact, we just had a significant win in one of these cases in the Seventh Circuit Court of Appeals, where one of the major proteins players had been trying very hard to cling to a settlement that was, in their mind, done before we became actively involved in the cases. And the Seventh Circuit rejected that effort, basically signaling that the cases were worth more than the settlement had been done for at the time. But the reality of these cases is that this is complex litigation, and it's taking somewhat longer than one would have wished. And the way that our accounting works, and Jordan is happy to answer questions about this later or offline. The way that our accounting works is that if duration extends past our original expectations, that's going to cause a reduction in our fair value. And so we, in fact, took a $22 million charge to earnings from nothing more than the fact that these cases are taking longer and costing more, even though they are proceeding well, and we're quite optimistic about their ultimate outcomes. So there's that sort of interim action in the numbers there that the complexity of our accounting now is causing that. And it's important that when you look at these numbers, you separate the things that are these interim time-based, non-merits-based dynamics from what's actually going on in the underlying merits portfolio. Turning the page to Slide 14, which is still a little bit in the proteins world. This is another example of where our earnings can be depressed from things that don't actually go to the underlying merits of the cases. One of the counterparties that we financed here, a very large wholesale distributor, has gone into Chapter 11, into the operating bankruptcy regime of the U.S. And that means that we and other creditors of this business are jockeying for a position. Now it's obviously not great when your counterparties go into bankruptcy. But here, the underlying claims that are our collateral are proceeding well and actually are continuing to be settled and to pay cash. So even though we, for accounting purposes, have taken a significant charge to earnings because of the pendency of this Chapter 11 proceeding, the reality is that the underlying collateral is continuing to perform, and we have reason for optimism that we're going to not suffer the kind of loss that you would normally associate with being -- particularly a potentially unsecured creditor in bankruptcy. So again, this is divorced from the underlying merits of the case, and it's an issue where -- it's a place where we actually expect cash to flow to the business over time. And a third example on Slide 15 is a mining arbitration where we see the benefits of having cross-collateralized portfolios. And here, we have 2 cases in play. One of those cases has had an initial unfavorable outcome. But the other case has yet to be decided, and the first one is on appeal. And either one of those cases, if successful, is sufficient to make up our whole entitlement out of these cases. However, the accounting reality is -- and the market reality, we're not trying to walk away from the market reality, is that when you have 2 chances to win as opposed to 1 chance to win, the asset is probably somewhat more valuable. And so having had a negative impact on 1 of the 2 chances to win, that causes appropriately a decline in the accounting carrying value of that asset. But it doesn't mean that we don't necessarily have every opportunity to both win the second case and get our full entitlement out of that 2-case cross-collateralized portfolio. So the purpose in going through all of these is really just to show you that there's a fair bit going on under the covers. It's not as simple as us just saying, okay, well, here's the case, we either win it or we lose it, and money comes in. That's how we look at the business on a cash basis. And on that basis, the business is doing very nicely. I would have liked some more cash in 2025 than we generated. But overall, when you think about the strength of the new business that we were able to create, the progress that we're making towards achieving our long-term goals, and the fact that both our returns and our loss rates have remained steady, that all tells me that this cash basis is a waiting game. And what's important to me is not to have the accounting get too much in the way of understanding that basic cash principle about the business. So we're happy to take your questions on that. But before I turn you over to Jordan, I don't think any Burford presentation these days would be complete without talking briefly about YPF. So turning to Slide 16. This is a slide that you've all seen before. I'm not going to go through it in any great detail. I think just about every Burford shareholder is pretty familiar by now with YPF and what's going on with it. And that slide is really there just to remind you of the basics. We did, however, add a new slide, Slide 17. And on that slide, we tried to pull together the threads of everything that is going on right now because there is quite a lot happening. So the main -- the big issue is that we're awaiting a decision from the Second Circuit Court of Appeals on what we call the main appeal, so Argentina's appeal of the underlying $16-plus billion judgment that has been growing now with prejudgment interest and post-judgment interest added to it. That appeal was argued on the 29th of October, and we're waiting for a decision. That decision, if past practice is any guide, you would expect that decision during the course of this year, although there's no requirement for that to occur. And like everything else about litigation, nothing about that is certain, and some litigation risk always remains in these cases. But in addition to playing a waiting game for that decision, there's actually a fair bit going on elsewhere. The District Court, the trial court that gave us the judgment in the first place, has been actively enforcing the judgment, has had many hearings over the past months, has been actively engaged in the process, has now scheduled a further evidentiary hearing on a whole variety of topics, including contempts and sanctions and Argentina's gold reserves for late April. So that's upcoming. There are some other collateral appeals floating around in the system. One of them is around the order that Argentina turn over its YPF shares as partial satisfaction of the judgment. There are some discovery issues around the senior Argentine administration officials' use of off-channel communications like WhatsApp and Gmail, and there are some procedural appeals. Those are not entirely calendared yet. The way the process works is that the Second Circuit tries to respect lawyers' schedules, and so it sends out a preliminary idea of when it might like to try to hear the appeals, and it's done that, suggesting the week of April 13th. It's had feedback from the lawyers about their availability, and now we're all waiting to see if they will pick a date during that week, or if they will push it off to some other sitting of the court. And then we have enforcement proceedings going on in 8 different foreign jurisdictions in which there's probably -- in which there's likely, in fact, to be a reasonable amount of activity in 2026. So with that, let me bring my introduction to a close and hand you off to Jordan, just with the overarching theme, though, that while I know people will have been looking for some more cash and some more realizations, and, of course, we would have liked that, too, the simple reality is that there's not much we can do about the pace of the conveyor belt, but we're very happy with the state of the business and the amount of new business we were able to generate, which sets us up very nicely for the future. And we're happy with what's left in the portfolio, as you'll hear from Jon. Jordan Licht: Thanks, Chris. Good morning, everyone. I'm going to take us through our 2 segments. That's the total segment. That's what we also call Burford-only. It's what the shareholders own. I'm going to jump straight into the Principal Finance and focus on the portfolio to start. If you look at the snapshot of where we are on Page 22, and you can see the portfolio is now $3.9 billion. YPF represents slightly below $1.7 billion. And then we've got deployed cost of slightly over $1.7 billion, and then unrealized fair value above that of around just under $500 million, which is around 27%, 28% of the total deployed cost. It sets us up, obviously, very well when you think about what the potential future of gains can be relative to how much cost in portfolio is out there. If you think about that number relative to our historic 82%, 83% ROIC, or we'll talk more about our modeled realizations in a couple of slides. The portfolio is also very diverse. You've seen these 2 charts before, and it remains -- the diversity still remains very similar in terms of geography with just over 50% in North America and continuing to expand, as Chris highlighted briefly, and we talk more about in the shareholder letter, as we explore other opportunities internationally. Asset type is also extremely diverse with a number of different, what I'll call, 20% type slices. In terms of moving forward, though, on how this segment, this is our Principal Finance segment, how did the revenue capital provision income play forward. First and foremost, I think Chris spent a lot of time with that on Slide 12, historically looking at breaking down the capital provision income between its gains and losses and then also the net realized gains and losses for the period. I want to remind folks that when you look at the movement out of fair value, you also have what's the transfer from unrealized to realized, which makes sense. When you have an asset that's been positively marked and has some fair value associated with it, when that asset concludes positively, you're going to see a reduction in fair value, and that flips itself into net realized gains, which makes sense. That happens every period. I think the other place to focus is on how the balance sheet actually moved itself forward. Hopefully, by now, folks are familiar with the charts on the bottom of Page 23, but I'll walk through it quickly, which is we have our asset value as of the end of the year, continued deployments as we invest in the portfolio, where it's healthy this year at $457 million. You have a duration impact. This is just the passage of time. As we move forward with respect to getting closer to the ultimate resolution or expected resolution of these assets, you have a change in discount rate. Works the same as bond math. Rates go up, the asset value comes down, and vice versa. In this period, for the year for our portfolio, the discount rate had an approximate 80-ish basis points of improvement, and that's then represented in that change in discount rate, which brought value of $75 million. And then you have the milestones and other impacts. And that is going to coincide neatly with the case studies that Chris just described, both positive and negative, as well as some of the other changes in models when we change a duration or there's an expected value change that plays itself in, and you can see the impact on fair value there. And then, of course, obviously, the realizations when the assets themselves turn into a settlement -- excuse me, turn into a receivable or cash, I'm finally finishing up with a little bit of foreign exchange impact. So overall, that's the march forward from just under $3.6 billion to $3.9 billion. Before I hand to Jon, a little bit more on the new business. If you look at -- I mentioned the deployments on Page 24, and you can see the relationship of '25 to fiscal year '24 on the bottom of the page, but also the new business. We wrote a lot of new business in the year, 39% growth of our definitive commitments. This is where we not just have entered into a relationship with a counterparty, whether it's a law firm or a corporate client, but have identified the cases and have committed to spend over the duration of those cases our capital. You can see the growth in 2025. I want to highlight also, though, that the absolute growth didn't come from necessarily reaching for more risk. The absolute values of the -- we've started to show you the bands in which we look at analyzing our cases from the onset. And you can see that the absolute amount of higher-level risk was pretty much the same as 2024, and most of the growth came then obviously from other areas in the portfolio, the lower risk kind of middle tier and lower tier buckets. So we're happy -- extremely happy with the type of new business that we put on as we continue to grow the portfolio. And with that, I'm going to turn to Jon. Jonathan Molot: Thanks very much, Jordan, and thanks to you all for joining. So as Jordan and Chris have both said, it was a very strong year when it came to new business and increasing the potential of the portfolio. And I'm going to turn to that, but I do want to first turn to Slide 25 and have a word about the past. When you look at Slide 25, as Chris and Jordan both said, the realizations were not in '25 what they were in '24, a record year. But as Chris also pointed out, it wasn't a lack of activity in the portfolio that we had 69 assets contributing to realizations in '25 compared to 71 in '24, pretty comparable, just not as many big, chunky realizations. There was one matter that was a large deployment that was fairly short term. And in fact, when you look at the ROIC numbers, part of the reason that the ROIC number for '25 was lower is that matter happened quickly enough that we had a 40% IRR, but only a 25% ROIC. I'd do that deal any day when it comes along, but it's going to affect the numbers. Nonetheless, you see that our track record across the 2 years produced an ROIC of 81%, which is almost spot on with the historical track record over a longer period. And that's not really surprising. If you turn to Slide 26, you've seen this slide before. Basically, the nature of our business is there's 3 possible outcomes for any time we put money out. We can have an adjudication gain. We go to trial and win. We can have an adjudication loss, so we can have a settlement. The vast majority of our matters settle. They settle at an attractive IRRs and ROICs, but below our historical performance. The reason for that is the wins far outweigh the losses, and that makes for a very attractive model. As long as we're rigorous in our underwriting and rigorous in our case management, and we continue to invest in this asset class the way we have, I'm pretty bullish on putting new matters into the portfolio given that track record. And if you turn to Slide 27, you've seen this, too, instead of dividing it into 3 buckets, we actually break it down over every investment we've made, show graphically. Those red bars, those are triples, better than a triple, meaning you've got an ROIC in excess of 200%. That stuff far exceeds the black bars where we have losses, many of which are only partial losses, and then you have the singles and doubles in between. And that's really what -- that asymmetric profile, that asymmetric distribution of returns is what makes it attractive and why I continue to want to just put money out in good deals as we've been doing. If you turn to Slide 28, you've seen this, too. This is broken down by vintage, and you see the IRRs and ROICs may bounce around, but they blend to something quite attractive. And basically, the last 2 slides are a comparison of the black bars to the red bars by vintage, right? The black bars is the money that went out, the red bars is the money that's come in. It's a bigger number. That's great. That's what's produced the IRRs and the ROICs. But day to day, what I'm focused on is the gray bars, right? That's the investments we've put out and continue to put out in a big way in '25, and I'll turn to that in a moment, that we have put out that are there to deliver value in the future. And if the gray bars, if we just perform the way we've been performing, it's an attractive -- and we actually think there's great potential there. And if you turn to Slide 29, this kind of tells the story about what a successful year it was in terms of new commitments. The modeled realizations for the entire portfolio as of December 31, 2024, the prior year, was $4.5 billion. As of December 31, 2025, it's $5.2 billion, a big increase. Why was that increase? Where does it come from? Well, we have $1.4 billion worth of modeled realizations from those new 2025 definitive commitments. That's what's been, I think, the success story of this year. You reduce it by $0.5 billion for the actual realizations. Of course, when the cash comes in, you have to -- the modeled realizations for the future go down. And not surprisingly, the net change in the portfolio, given what Chris described in terms of as an accounting matter, as a GAAP matter, that there are things that reduced fair value on an unrealized basis, it's not surprising that the models would also show some reduction. But overall, we more than made up for that with the modeled realizations from the new definitive commitments. And I'm really pleased with what we've done this year in setting ourselves up for the future, and I'm really happy with the portfolio. And with that, I'll turn it back over to Jordan. Jordan Licht: Thank you, Jon. I'm going to switch to Page 30 and talk a little bit about how do you tie that $5.2 billion then and think about that with respect to the Principal Finance balance sheet. So this is obviously on the ex-YPF basis. And the first piece to understand is, well, what if all the cases won, went all the way to the very end and adjudicated win. That estimate, that's what we sometimes call the win node, and it's where all of our initial work starts from. When you start to think about a settlement, when you think about the different probabilities of what could happen in the case, it derives from, well, what could happen if you actually won, even though the overall majority of our cases, 70%, 80% of them ultimately settle, well, that win node would be $12.8 billion. What we then do is we establish a model in which there's a litigation risk premium and, of course, duration, the discounting back. And when you bring that down, that window then settles at $2.2 billion, and that can be broken into the fair value that I -- that's the fair value that we have on the balance sheet, and that's broken into the net unrealized gains as well as the deployed cost. That's the $2.2 billion and the $1.7 billion. Where will that book of business ultimately land? The modeled realizations, as Jon just described, is $5.2 billion. And then ultimately, we believe in a modeled ROIC of 110%. That, of course, is based on a future estimate of deployed cost. The cases still have some money to spend to get to their ultimate conclusion. And so that's estimated on this slide to be at $2.5 billion. So that gives you a little bit of framework to think about how our modeled realizations tie to the balance sheet. Since many, if not all, of these cases exist in some form on our balance sheet and then in partnership with our asset management business, as they produce for the balance sheet Principal Finance, there's an expectation that they would produce asset management cash receipts. And so the correlation there would be approximately $350 million of future asset management cash receipts based off of the models. That's a perfect segue to take us into the Asset Management segment, which is the next page. I'm jumping straight to Page 33, in which, first, let's start on the right-hand side, cash. Cash has stayed fairly steady. We had $32 million in '23, dipped a bit in '24, back to $32 million in '25 in terms of the cash receipts from asset management. Income of $36 million overall for the year. That's going to track somewhat consistently with some of the movements in fair value. Again, since the assets very much mimic what's also in our Principal Finance segment, movements in those assets are also going to play out in the recognition of potential future income from our profit-sharing agreement with respect to the BOF-C fund. The other piece, though, to highlight in 2025 is the Advantage Fund and starting to receive income off of the Advantage Fund, as that portfolio continues to perform. Overall, you'll see the fund sizes in the bottom right-hand corner. If you look at the funds, they're predominantly in runoff, and you can see that in the black bar. BOF-C continues the sovereign wealth fund partnership, continues to be a partner to us. While the investment period ended, they're continuing to invest in assets as they move forward, amendments to those assets. We enjoy a good relationship and are exploring opportunities to continue that. Page 34 gives you some more detail on some of the other funds, but I'm going to jump into the next segment and focus on liquidity and cash first. Our liquidity and cash started off the year around $500 million. We discussed the robust year of having $530 million, obviously down from 2024, but the fourth quarter saw us back up over the $100 million level with respect to the fourth quarter in terms of bringing in cash. In the bridge, you also see the debt that was raised in the summer, and I'm going to talk about debt twice here. First, this was to pay off the existing bonds that were coming -- that came due in the summer of 2025. And that's why you see a net number that results. We did a $500 million issuance at 7.5%, but that number obviously is much smaller in terms of proceeds to the balance sheet to be deployed because we used the proceeds of that to pay off a bond. And then you can see that the cash that come in clearly covers our operating expenses. Finished the year at $621 million of cash. Before I do more on the capital structure, though, we'll hit expenses real briefly on Page 37. Overall, operating expenses slightly up from 2024, and there's a couple of reasons I'll go into for that. First, total comp and benefits, almost flat, a little bit higher than last year. You see some growth in salaries and benefits as you see some inflation, but as well as our expansion and building of the team. The movement between annual incentive comp and long-term incentive comp, that's what we effectively call carry or our carry program. There's some movement in between those 2 items in relation to 2024. It's important, I always remind folks that while we accrue carry, we only pay it out when we actually receive the cash. On the share-based and deferral compensation, a reminder, I did talk about this a couple of quarters ago. There is an element of this, which is the mechanical vesting or acceleration of the expense for some tenure-based awards, but the vesting of that, the actual delivery of those shares will still occur on the original schedule. In G&A, we were up from last year, mainly due to professional fees. Some of that -- proud to announce the completion of our transition to KPMG fully from E&Y, also the resolution of our material weakness with publishing of this 10-K, and there's some other policy-related items in the professional fees associated with the second and third quarter. But to take a step back, looking at all these numbers -- oh, I should mention one more thing. On case-related expenses, really hard to compare to 2024. We have a revenue item in 2024, where we won an insurance settlement on our behalf, and so you're going to see a negative number there in 2024. But the trend of that has come down, so $1.1 million in the fourth quarter, and it's come down significantly from the $15 million that we had seen in case-related expenditures in 2023. But when I look at all these numbers, I look at the right-hand side and try and understand, okay, how do these operating expenses look across the portfolio. The 2.3% looks very favorable in terms of our expected expense ratio across the portfolio and fits favorably into the unit economics that we discussed at length during Investor Day and how this expense base allows us to continue to achieve the ROE long-term target of around 20%. One more slide, and then I promise we'll get to Q&A, is just to hit the debt outstanding. I mentioned what happened this past summer. Well, we did the same thing, rinse and repeat, in the first quarter of this year. And so we've pro forma'd the schedule for that. We took out the remaining bonds in the U.K. We thank our investors who participated in those over the years, but the 144A market has become much more practical and available to us in terms of raising capital and efficiently for our balance sheet. We went out and raised and then went and paid off the last of those bonds. That also changed the slide. You no longer see 2 different types of covenant levels because we no longer have the incurrence covenants associated with those U.K. bonds, and now we just have the maintenance covenants that you can see we have plenty of room within those levels. The final comment that I would make is when I look at the pro forma life of our debt relative to the assets. The weighted average life associated with assets that concludes is under 3 years, and the active capital on our balance sheet is just over 3 years. But the weighted average life of our debt is 5.7 years. And so that shows that we have a laddered maturity schedule that matches neatly with the duration of these assets. And with that, I'll give it to Chris for some closing remarks. Christopher Bogart: Thanks very much, Jordan. And I'm on Slide 39. And just to really come and sum up here. We have what we believe is a pretty fantastic core operating business, and Jon took you in some detail through why we believe that. We have showed a consistent ability to grow that business over time, growing to what is now a very substantial player in the legal industry. We deliver cash regularly. We don't always deliver as much cash as we would like as 2025 is a testament to. But that doesn't mean the cash isn't coming. It just means the cash is somewhat delayed. I've used for years with many of you the analogy of the litigation process being a conveyor belt, and that's exactly what it is. It moves forward. It moves forward inexorably, but it twists and turns and moves at unpredictable speeds. We can't control that. But in some ways, we're the beneficiary of it because that is what gives us our completely uncorrelated returns. So we have growth, we have cash, and we continue to believe that this business can produce a long-term ROE in the 20% range, as we've said before. On top of that, we've got the YPF assets, which we think continue to have very substantial value and option value for the business. And we are continuing to grow this business, not only in the core business, but as we continue to drive throughout the legal ecosystem. So we thank you all for your support. And with that, we're happy to take your questions. Operator: [Operator Instructions] Your first question will come from the line of Mark DeVries with Deutsche Bank. Mark DeVries: I appreciate this is not going to be an easy question. But just looking across all the different matters in your portfolio, where they are in the development, can you give us any sense for how the outlook for realizations looks for '26 relative to 2025? Christopher Bogart: So the short answer to that is no for 2 reasons. One is because as a matter of policy, we don't guide that way, just because we simply feel like we're unable to do so. And number two is I used my 2 lanes -- my 4 lanes merging into 2. And the problem with that is that we don't really know the pace of that merging. Like if you go back to Slide 28 that Jon talked about, that shows you a lot of stuff that is, to use a technical expression, jammed up in the 2015 and onward. And there's stuff there that just shouldn't have taken that long. Some stuff in litigation always takes a long time. And I always get people asking me when they look all the way back on this chart, they say, oh, look, you've still got active deployments from 2010. Are you kidding yourself? Are those ever going to come in? And the answer is yes to that. We write them off if they're not going to come in. But we actually got some money out of that 2010 band this year, and we're expecting to get more in this coming year. So no is the answer to that question. But the simple reality is those cases are going to move over time, and we just don't know exactly what that timing looks like. It would be lovely if we could take this on a quarter-by-quarter basis and give you a pretty reliable projection, but we just can't do that. And candidly, if we were able to do that, I think that more people would do this business and the returns would be lower. So the fact that it is unpredictable, while I realize is painful to many of our current shareholders, it, in fact, is also, to some extent, a moat in this business. Mark DeVries: Okay. Any other color you can give us on what's driving this dynamic of the 4 lanes merging into 2? Are we still dealing with like backlogs related to court closures from the pandemic or other factors worth calling out? Christopher Bogart: No, I think you really are. Like when you think about what happened there, you had court closures at a time when there was no lessening of new disputes. And so you had the same volume of new disputes. If you look at the filing levels, it's not like they collapsed during the pandemic. So you had a world where all of a sudden, courts don't have any physical ability to expand their operations. We already have vastly fewer judges in courtrooms than we do for the number of cases filed. And the reason for that is that the system expects, just as our portfolio shows, most cases to resolve by settlement. But to get a case settled needs a catalyst, right? If you're a defendant, you're not going to settle a case if you can simply sit on your hands and not spend the money to settle the case. So you need to feel some pressure. And the pressure usually is the case is moving through the process along the conveyor belt that I described, and it's putting you at trial risk. So if the court congestion is kicking the trial risk out, then you're realistically also kicking that settlement pressure out. And look, I think it's getting better, but it's a lot for the system to absorb, given that every single year, something like 12 million new civil cases are filed in the United States. Mark DeVries: And then I've got an accounting question for Jordan. Jordan, do you have room to get more conservative on the duration assumptions on your fair values such that you reduce the risk that you have these negative fair value marks when you don't have a negative development, it's just a change in assumption related to the duration of the case? Jordan Licht: Absolutely. And I think that we're constantly looking at our models with respect to how to initially establish duration and then how it impacts over time. So yes, to the extent that we see it up at the onset, that we should set a duration that's longer, we can, and we have that ability. Operator: Your next question comes from the line of Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Regarding new definitive commitments, I was wondering if you could provide some color on the composition of those, understanding that '25 lacked some of those big case resolutions. So as we look at new commitments for this year, I guess, any color on the composition of maybe how many dollar amount or case-wise are these larger scale cases, that would be great. Christopher Bogart: Sure. So for those of you who are newer to Burford, let me just remind you that in addition to all of the gory detail that we provide in the slides and the 10-K and so on, we also publish on our website a detailed table that goes literally case by case and shows you for each new -- well, for each existing and for each new case that we put on, it shows you a bunch of demographic information. So it shows you the type of case, so whether it's, for example, a business court or an intellectual property case, or an antitrust case. It shows you the industry that's involved. It shows you the geography where the case is pending. And it shows you the size of the commitment that we've made, the amount of deployment against that case. And once we start to get returns, it shows you, again, on a granular line-by-line basis, what the returns are. And so you can pull that up, and you'll see that there are several dozen new cases in 2025 or new investments in 2025, and you can scan through them. And you'll see that there's quite a lot of diversification there. We typically span a significant number of industries, a number of case types, a number of geographies, and 2025 was no exception to that. And they also range in size from quite large commitments to significant matters to relatively small things that are single cases that nevertheless, we think have the potential to generate attractive future returns. So that's a useful source if you want to get granular about what's going on in the portfolio. Operator: And your next question comes from the line of Mike Piccolo with Wedbush. Michael Piccolo: I had 2 questions related to the negative fair value marks on the cases highlighted in the presentation. The first one with the Sysco proteins case, what are the potential gains for that? Christopher Bogart: The potential gains for the case? So we don't release individual case modeling expectation data for pretty obvious reasons that, that would feed very nicely into the litigation strategy of the other side. And so that's something that is not only something that we don't release, but something that we would regard as being protected by legal privilege. That being said, I think if you look at those cases, and there's quite a lot of public information about them, I think it's clear that the size of the claims in those cases is substantial. Michael Piccolo: And the next one with the bankruptcy case. Is the collateral separate from other claims? Christopher Bogart: Well, so we are entitled -- when we provide litigation finance to people, we're entitled to proceeds only from the claims that the companies have. So we're not a general creditor like a bank is where we're looking for repayment from any assets. Our claims are just for proceeds from the underlying claim outcomes. So the way that's going to play out is that as those claims pay, there's lots of things going on in that case. That was a multibillion-dollar distributor. So it's not as though the only cash flow sources are these litigation claims. So within the Chapter 11, there's cash flowing to the senior secured creditors and so on from the business operations and the business continues to function. But we have our handout for proceeds from the litigation claims, which continue to be strong and which continue to be resolving positively. So there is positive cash flow coming from those claims as well. Michael Piccolo: And just one last question. I don't think you guys give guidance, but in terms of your long-term ROE target, the 20%, when you say long-term, how do you bridge that gap from where ROE is sitting currently? Christopher Bogart: Well, we do it on a... Michael Piccolo: Like it's a matter of... Christopher Bogart: Yes, we do it on a rolling basis. We've certainly had individual years where our ROE was well in excess of that long-term target, and we've had years where it's well below it. Right now, as you can see from one of the early slides in the deck, our multiyear ROE is in the teens, but it's not up to our 20% target. And that's something that we believe, and Jordan walked through the unit economics associated with ROE at our Investor Day. And that's something that we still believe is achievable over a longer period of time. Josh Wood: Okay. Bailey, I think we'll jump in here with a quick question that's coming in through the webcast. We have a question. You mentioned before reluctance to buy back shares due to unpredictability of capital needs. If so, there seems to be no real justification to pay a dividend, especially with current share price. Why not turn off dividends and opportunistically buy shares instead? Christopher Bogart: Yes. So this is certainly a theme that we have heard from a number of investors, and it's something that we considered very carefully over the last few months, including with the Board and with our outside advisers. And the dynamic for us -- because I certainly understand the logic behind the concept. The logic for us works as follows. The dividend, we've had a constant level dividend for some years that pays at $0.125 a year. So in round numbers, think about that as being $25 million. So it's a pretty small amount. If we were to stop paying that dividend altogether, then we would turn a number of particularly U.K. income-focused fund investors into forced sellers whose funds would no longer permit them by their mandate to continue to hold Burford stock if we didn't pay a dividend at all. And so we basically weighed the value of a $25 million buyback, which we think is pretty low against the negative impact of turning a portion of our shareholder base, including some very long-term and loyal shareholders, turning those shareholders into forced sellers. And when we considered that balance, we ultimately came down on the side that the $25 million buyback wasn't enough to move the needle compared to the negative impact of the -- of losing those investors in the U.K. And so that's where we are. It's not -- it's a relatively fine call, I would say. And if the dividend had been dramatically larger, I'm not sure that I would have -- or the Board would have come out in the same place. But that -- just to give you transparency into our thinking, that was the underlying thinking behind it. And we also debated, well, do you do something in the middle. Do you reduce the dividend and take some of that and put it towards a buyback. And then we got into the point of saying, well, gee, at some point, we're dealing with such small numbers that it really doesn't make any difference for anybody. So that was the underlying logic. Josh Wood: Okay. One more from the webcast here. How is your underwriting changing to reflect potentially longer court times on new pieces of litigation? Christopher Bogart: Jon, do you want to... Jonathan Molot: Yes. I'm happy to take that. So we're constantly updating our modeling and underwriting based on our historical experience. And one way I think we've talked in the past that we've dealt with duration is to structure deals so the terms reward us for delay so that our returns go up as matters go longer. There's no doubt that we have paid increasing attention to that dynamic to make sure that we're compensated for the longer run times. So that's a little bit why also when Chris says that not having the realizations this year, of course, we would rather, but we feel good about the portfolio. The same case that resolved at this moment, if it resolves in another year, it may well be it resolves with a higher return for us, given the way we've structured things. And that's on top of the dynamic that often the question of whether it resolves now or later is going to be a product of the recovery level, both that whether it's going to be a settlement or an adjudication win, but also that settlements later on can end up being higher settlements. So we definitely take into account duration as part of our underwriting, and I like to think that we try to get better at it as time goes on and learn from experience. Josh Wood: All right. We'll do one more question from the webcast around debt structure. Why not obtain a revolver, delayed draw facility or securitization facility instead of discrete notes to better match capital unpredictability and allow for share buybacks? Jordan Licht: Sure. Yes. I was about to say Chris talked a lot about our thought process around share buybacks. How it relates to the capital structure, we're constantly looking for other ideas and exploring ways in which we can build the balance sheet. I do -- the asset itself is not as similar to some consumer or even commercial assets in terms of its predictability to fit neatly into a securitization facility or to obtain that in size relative to the balance sheet that we currently maintain. I understand the logic of that, and we're constantly in conversations. We haven't found the perfect match. And ultimately, the unsecured and covenant levels that we have, the cost of the capital, and the amount that we can put on has favored -- has become very favorable relative to some of the things that we've seen, especially the scale that we would need with respect to that. Christopher Bogart: Well, we have made it to the top of the hour. And with thanks, as usual, to all of you for your interest in Burford, quite frankly, for your patience as we wait for some cash and as we wait for some YPF news. We're looking forward to an exciting 2026, and we'll continue to keep you updated about where things are going. So thank you all very much. Operator: Thank you. This concludes today's conference call. You may now disconnect.
Operator: Good morning, ladies and gentlemen. We're starting our earnings call for 2025 and the new strategy plan for the period 2026 -2029. We welcome to all attendance via telephone and our web page. With us are Beatriz Corredor, Chair of the Board of Directors; Roberto Garcia Merino, Chief Executive Officer; and Emilio Cerezo, Chief Financial Officer. I now give the floor to our Chairwoman, Beatriz Corredor. Beatriz Sierra: Thank you very much, and good morning, everyone. First, I will start by highlighting the most notable events of 2025, and then our CEO, Roberto, will go deeper into the year's figures and discuss the close of the financial year. I will later refer to the environment in which the Board of Redeia brings this strategy plan. And once more, Roberto will go into deeper detail on it. And as usual, we will conclude with a question-and-answer period to address any of your queries or concerns. So. as I said, let's get started with the 2025 highlights. From an operational viewpoint, we can say we've made great progress with a record of investments in TSO, exceeding EUR 1.5 billion or 40% more than in 2024, a record figure in our 41-year history. And it's almost a fourfold increase in the investment rate in nearly 4 years. This effort includes the EUR 1.4 billion invested in the transmission network with 486 extra kilometers of circuit and 217 new positions to strengthen the network and facilitate the country's industrial and productive development. Moreover, the availability index of the national transmission network operated by Red Electrica sits at 98.39%, exceeding 98.06% achieved during 2024. It is therefore clear that 2025 was a key year also from the regulatory point of view as the CNMC published the remuneration letters for the new regulatory period going from 2026 to 2031. Also, the regulator approved the remuneration for the system operator for the '26, '28 period. This -- or with this, this financial year 2026 is expected to be better than the previous year as the current methodology takes the actual costs for 2024 and foresees a regularization based on actual data from 2025, which already has an impact on the 2026 bottom line. As for the transmission network, we believe it should be adequately remunerated during a time when the relevant role played by its reinforcement and its maintenance account for. Certainly, we were expecting further signals considering the effort being made in our infrastructure and we'll have to continue, as you will see during the presentation. In the field of income and revenues in parallel, we've made progress on high-impact corporate milestones, including the completion of the Hispasat sale with a payment of EUR 725 million for 89.68% stake that we had in the satellite company. As we have said before, this strengthens our financial position to continue enabling the energy transition in Spain. The European Investment Bank has become a key partner in this regard as they support us in funding strategic projects like the pumping station in Santa de Chira and the interconnection with France. In addition, we signed an extra EUR 1.1 billion in loans with several entities, including a EUR 300 million contract with the ICO and issued a EUR 0.5 billion green bond. But if there is a relevant event in 2025, we're talking about the big blackout on April 24, an unprecedented, unpredictable multi-factoral incident as acknowledged by all official reports, both from the European experts panel and from the Government Analysis Committee. These technical analyses confirm the sequence of events as described in the systems operators' report. All reports agree that it was a serious unforeseen event, oscillations, generation disconnections in some cases through shared evacuation structures with healthy voltages within the limits of the transmission grid and inadequate voltage control service. All this led the incident to an unprecedented, as I said, incident, both at a national and international level. This comes from the technical rigorous analysis of data. There is no guesswork here and no generalization. For this reason, Red Electrica confirms that it operated the system correctly in strict compliance with the regulations before, during and the blackout on April 28 because if there is a highly regulated industry in our country, that is the electricity sector, meaning that both the system operator and other parties involved must comply with the present regulation, which is obviously not approved by Red Electrica, but by the executive, legislative or regulatory authorities after due procedure, guaranteeing that all parties concerned are heard. And this is the case for the new control operating procedure, 7.4 on voltage control, which was requested in 2020 by Red Electrica and approved in June '25 now in the process of implementation or the measures proposed by the systems operator for a sudden voltage variations control or the new functions recently assigned to the operator, which we take on with huge responsibility as a sign of recognition to the work and professionalism of our team. I will now give the floor to Roberto García Merino, our CEO, who will give you more detail on the financial results for financial year 2025. Roberto GarcÃa Merino: And this has grown 4.2%, launched mainly by the increase of EUR 71 million of this regulated in Spain. This is due to the new financial contribution that was approved by the CNMC and the new types of help that has been given have been adjusted by the lower maintenance units that we need to spend. And internationally speaking, we have gone down a little bit because of businesses in Chile and because of the exchange rate between the dollar and the euro that was compensated in other countries like Peru and Brazil. So, the fiber optic business and the positive effect of the inflation of CPI-linked contracts is offset by the renegotiation of some contracts in our context of market concentration. With regards to operating expenses and without considering those that are offset by other operating incomes, including Salto de Chira, we see that the expenses grew 5.6% in an environment of increased activity and operational demand in line with the business growth and the network requirements. Personnel expenses went up due to a larger average workforce, which was necessary to be able to meet the challenges arising from the strong growth of the group's regulated assets and also higher salary costs. Other operating expenses grew basically due to higher maintenance costs in Spain, which have contributed to have a high availability rate for the transmission network. The EBITDA grew 4%, driven mainly by higher contribution from the TSO. Also, it's noteworthy that there is an improvement in international business, aided by lower operating expenses as well as the strong performance of fiber optic business, which combines higher revenues with more contained costs. The profit has reached EUR 506 million, which is 37.2% higher than 2024 due to the impairment recorded in 2024 following the agreement to sell Hispasat, while profit from continuing operations grew by 1.6%. We should say that the financial result worsened by EUR 20 million due to lower financial income in 2025 compared to 2024, mainly due to the lower placement of cash surpluses. Corporate income tax increased with an effect rate above 25% due to the fiscal impact and dividends that we received from group companies that are not part of the tax base. From the financial perspective, the net group's debt is EUR 5.4 billion at the end of the year, which represents an increase of EUR 100 million compared to December 2024. The cash generation, together with the EUR 725 million received from the sale of Hispasat and dividends from the group, especially from Brazil, have helped us to contain the growth of that debt and continue to have solid financial structure with an EBITDA rate of 4.4x and an FFO of net debt of 18.9%. With the results of 2025 and what we've already seen from the period of '21, '24, we can say that we have exceeded all the objectives set out in our strategic plan for the period of 2021, 2025, placing the company in a very solid position to tackle the challenges of the new strategic plan. The TSO investments have reached EUR 4.4 billion, exceeding the initial target of EUR 3.3 billion, ending with a historic figure, as was said before, of more than EUR 1.5 billion of TSO in 2025. The EBITDA margin stood at a solid 75.8%, which also has complied with what was foreseen. We have a balanced financial structure with a net debt-EBITDA rate of 4.4% and an FFO over debt of 18.9%, and we have preserved an A- credit rating with both Fitch and Standard & Poor's. Finally, we have ensured a stable shareholder return throughout the whole period, and we've improved even the initial dividend distribution target. In short, we're closing this plan in 2025 with an excellent level of execution and a very solid position in order to face the next stage. Now I'd like to give the floor back to our Chairwoman. Beatriz Sierra: In truth, it great to hear how we met our strategy plan exceeding expectations. So, allow me to congratulate the whole team for it. In recent years, the energy industry has undergone a radical transformation. We're witnessing a new scenario driven by 3 large dynamics: the acceleration of electrification, the growing demand for network infrastructures to connect a more dispersed and fragmented generation structure and the need to ensure a secure, sustainable and competitive supply always. Electrification moves on at an unstoppable pace and the demand for electricity grows faster than global energy consumption. This change is driven by new needs, starting with the expansion of electric vehicles and data centers, and continuing to the electrification of industry, the installation of electrolyzers, heat pumps and battery factories. All these elements are redefining consumption patterns and demand more robust, smarter and more resilient networks. Spain specifically faces an enormous opportunity. The growth of electricity demand associated to new industrial and digital consumption places our country in a strategic position within Europe. This scenario is not safe from significant challenges as it offers enormous potential to lead the energy transition and consolidate a cleaner, more efficient model in which Spain will take a leading position due to its high and secure penetration of renewable energies, reaching nearly 57% of our energy mix, including 8 gigawatts of photovoltaic self-consumption. In this context, electricity networks are the strategic enabler of the transformation. Without well-dimensioned robust grids, no transition is possible. Therefore, this is a strategic priority for upcoming years. Globally, and according to the World Energy Outlook 2025, global investment in networks will strongly grow until 2035, driven by the electrification of end consumption. For an electricity transmission operator such as Redeia, this scenario is a sustained opportunity for growth backed by a stable regulatory framework, increasing investment requirements, a clear road map for expanding and modernizing the grid and with agile administrative and environmental processing of projects, which is one of the major areas for improvement at present. Moreover, the decisive push also comes from European institutions to make decarbonization into the real driver for growth, security and energy autonomy, which are vital for the continent. In this regard, tools such as the networks package recently presented by the European Commission seeks to boost investment in electricity infrastructure, speed up permits and improve the coordination of network planning at the European Union level. And the same can be said of the Energy Highways project, identifying up to 8 large bottlenecks in Europe that need to be resolved urgently to complete the Energy Union. These include 2 new trans-Pyrenees interconnections, which are absolutely a must to meet EU targets and enable the degree of interconnection required by the Iberian Peninsula, which, as I usually say, is more of an electricity island than Ireland itself. This institutional commitment is fund much more complex environment. not only due to the massive integration of renewables, but also because of the emergence of new consumption modes and technologies. The electricity system is evolving towards a more dispersed structure with decentralized energy resources and increasingly active consumers. This requires new tools, new services and a much more dynamic operation of the system. To this end, digitalization will play a key role, smart grids, sensors, real-time control systems and technology platforms that will allow us to anticipate and manage events in a much more variable environment. In this context, storage will also play a fundamental role in maintaining system stability. And to face all these challenges, Redeia as system operator will have to develop new capabilities, ensuring the resilience of the system and guaranteeing the quality and security of supply at all times. In summary, we face a more demanding situation filled with opportunities to move towards a more efficient, secure and fully decarbonized system. Thus, the national integrated plan for our country sets a clear path to advance in decarbonization and electrification of the country, setting up very ambitious targets. Amongst these, reducing emissions by 55%, increasing energy efficiency, cutting in half our dependence from the outside and achieving more than 80% savings in renewable generation in the electricity mix. Of course, the vision requires infrastructure to support it, and this is where electricity planning comes into play for the period 25-30. This process mobilizes over EUR 13 billion in investment in the transmission grid to integrate new renewable generation, facilitate electricity consumption and strengthen security and supply. There is a '25 to '30 plan currently in the phase of analysis for the comments submitted by public consultation launched by the ministry is structured around 2 main principles. On the one hand, maximizing the use of the existing grid to make it more flexible and resilient and on the other side, deploying new infrastructures wherever necessary to integrate renewable generation, meet new consumption needs and reinforce the security and stability of supply. It also integrates new fundamental elements such as international interconnections and the connection between island and Peninsula systems. Beyond moving ahead on these projects from the new plant, I would also like to stop here for a moment to discuss the present state of the transmission network, which can be by no means be described as collapsed. The current grid enables the circulation of electricity produced by generation facilities for a total installed capacity of 150 gigawatts, a record for the national electricity system. 70% of this installed capacity comes from renewable sources, and it's much more dispersed and fragmented into smaller plants throughout the country. But not only that, with the current network built and planned, permits have already been granted for access and connection in projects totaling another 164 gigawatts, out of which 129 belong to wind and PV facilities, 16 gigawatts for storage facilities and 19 gigawatts for demand facilities. Out of the latter, 19 gigawatts, nearly 12 gigawatts of capacity granted since 2022, which is when the present plan was launched. And those 12 gigawatts are not in service yet, not connected to the grid and therefore, not generating demand because the developers have a minimum of 5 years to develop their projects and then connect to the grid. And even in those conditions, 25% of Red Electrica's nodes still have available capacity for new applications. Therefore, we cannot talk about lack of anticipation, considering another piece of the context. The present planning '21 to '26 contemplated proposals to deal with 2 gigawatts of new demand and 12 were granted. When these 12 gigawatts come into service, they will entail an increase of 25% of the present demand in the Spanish system. The capacity of the transmission network that distribution operators plan to reserve for facilities connected to their own networks also doubles the historical peak of the system, which is 45 gigawatts. Even so, we need to further reinforce our networks, both distribution and transmission. The energy transition is a historic opportunity for competitiveness, industrialization and the strategic sovereignty of Europe and the Iberian Peninsula and of course, specifically for Spain. The main projects for the future plan '25 to '30 includes major access running across the Peninsula, reinforcement of rings around large cities and new links between Islands and with the Peninsula, which will enable quick deployment of renewables and new electricity consumption connected to the electrification of our economy. We will continue to work on interconnections with France, Portugal and in the near future with Morocco to increase the security of our system. In addition to all this, we're implementing storage projects such as Salto de Chira in the Canary Islands or the Balearic Islands. And we're also integrating new voltage control elements in the Peninsula and new synchronous compensators are being installed to reinforce the voltage regulation capacity and will guarantee operational stability in scenarios with high renewable penetration and lower system inertia. In sum, it's a full nation program based on projects that structure and connect the entire national territory and will drive a visible transformation in each and every region, as you can see on this image, which is by no means exhaustive as it reflects only the scope throughout the country. Investment in infrastructure is necessary, but it is also necessary in technology, digitalization and new capabilities in a complex system where the priority remains secure supply. To achieve this, we have the best possible organizational framework, the TSO model created in Spain precisely with Red Electrica 41 years ago and then adopted by all European countries as it is the most effective system in terms of management, the safest in terms of operation and the most efficient in investment terms. Therefore, the new plan sets out an unprecedented level of investment and this plan will be translated into new infrastructure. Between the years '25 and '30, we estimate that we will commission EUR 8.4 billion, which actually might reach EUR 9 billion if the processing procedures are streamlined as proposed by the EU and the Spanish government. Looking ahead into 2031, virtually all the plan will have been implemented or underway with a potential of up to EUR 11 billion in commissioning and execution. In sum, we're going from ambitious planning to solid execution capacity with enough room to accelerate even further if the regulatory framework allows it. Going on to the international context, Brazil, Chile and Peru are 3 of the most attractive electricity transmission markets in Latin America, not only because they offer stable and predictable regulation framework, which is fundamental to guarantee legal certainty and long-term visibility for investments, but also because these countries have consolidated transmission models with centralized planning and transparent awarding processes, creating a favorable context for us to develop our transmission activity. As for telecommunications in Spain, which is the third fundamental pillar for Redeia, the industry has been undergoing a deep transformation process for years now. The consolidation of large operators and local operators continues in a context in which efficiency and scale play key roles in competitiveness. And certainly, cybersecurity has become an absolute priority. Networks require increasingly advanced measures to protect critical infrastructures and safeguard user data, a trend that will continue to intensify in the coming years. Another fundamental element is the rise of AI and automation, enabling networks in real time and significantly improving customer service, thus opening the door to new operating models. At the same time, the industry advances towards more sustainable networks with clear focus on energy efficiency and the reduction of carbon footprint, which is particularly relevant for operators with vast infrastructures over the territory. There's also a strong pains maintained in infrastructure development and sharing, which promotes efficiency and accelerates the offers significant opportunities for Rentel, the leading provider for dark fiber in the country from data centers and submarine cables to hyperscalers and the growing cloud ecosystem. The drive for technological innovation and digitalization will also be the focus of the group's technology platform, ELEWIT, which will emphasize on operational efficiency, security and the maximization in the use of assets. And to round up the framework that will surround the company in the coming years, it is it is important to convey the meaning behind this whole strategy plan, which determines each of our actions. I'm talking about our unshakable commitment for 2029. This commitment is a direct response to our context, a clear road map to drive energy transition based on neutrality, technical rigor and innovation, a transition always guided by a deep sense of public service to add value to individuals, territories, nature and biodiversity. This is a responsibility we take on to lead this change with vision, but also with facts and data. Our new sustainability plan that we're presenting to you today defines 2 major ambitions organized into 7 strategy vectors and supported by 5 management levers that guide our actions. The framework will guide not only our decisions, it will also make sure that each project, investment and step forward will contribute to a more sustainable energy model and generate a positive impact on the environment. In short, we are presenting today the way to turn our commitment into results and the way networks will become the true engine of sustainable transformation. For this purpose, we have set ambitious measurable goals that cover the entire group from promoting electrification and significantly reducing our emissions to ensuring a positive impact on nature and promoting regional development, including extending sustainability criteria to our entire supply chain. We're also reinforcing innovation and digitalization, consolidating our ethical governance model and moving towards increasingly sustainable funding. Together, these objectives enable us to tackle the energy transition with rigor, responsibility and clear foresight to ensure our growth that will always be accompanied by social and environmental value. For this purpose, we have our comprehensive impact strategy and a new social innovation plan. At Redeia, we understand the importance of dialogue and sustainable positioning as a key driver for management. And that's how we understand this dialogue, not just as a mere matter of transparency, but also as a strategic tool to build trust, anticipate expectations and position ourselves as a benchmark in sustainability, both nationally and internationally. And this is proven by our bottom line that shows our continued engagement because each of the assessments we go through from Standard & Poor's Global to MSCI measures not only our environmental, social and governance performance, but also allows us to benchmark our practices against the best standards in the industry. And thanks to this active listening approach to our stakeholders, and thanks to our alignment with international best practices and our commitment to sustainability, Redeia is now ranked at the top 1% of the world's most sustainable companies according to S&P and has once again obtained top ratings in key indicators such as the CDP's A list, among others. In sum, these results are not an end in themselves, but the natural consequence of a model based on transparency, rigor and the conviction that sustainability is central to our value proposition. We will continue to reinforce this position through open, constructive and constant dialogue with all of our shareholders so that we can continue to move forward in credibility and leadership. I will now give the floor back to Roberto Garcia Merino, our CEO, for a deeper explanation on our strategy for the period. Roberto GarcÃa Merino: Thank you very much. Now that we've analyzed this economic and sectorial context, I'm going to talk to you now about the new strategic plan for Redeia to the period 2029. This plan seeks to promote the energy model and connectivity of the future, generating a positive impact on climate change, nature, territory and people. The strategy '26-'29 that we're showing you here is a decisive step to consolidate our leadership and make sure that we have a robust electric system that is prepared for decarbonization, reinforcing the essential role that energy transmission plays in the energy transition as well as offering a reliable and technically advanced fiber optic network that will contribute to bridge the digital divide. In this regard, the plan focuses on a strong development of regulated activity in Spain. And therefore, it is our fundamental commitment for our company that more than 90% of our investments are allocated to transport and operation. This reflects our top priority for developing electricity planning, optimizing system operation and ensuring supply quality in a rapidly changing environment. At the same time, Redeia will continue to consolidate its international and telecommunications activities, which provides stability and long-term value. The strategy also focuses on operational efficiency, innovation, digitalization. These are key elements for a more demanding and decarbonized system. Similarly, attracting and retaining diverse talent becomes an essential pillar for successfully addressing the challenges facing the electric sector. Overall, this plan reinforces Redeia's mission to promote a sustainable and reliable and future-proof electricity system, providing shared value to society. Today, we present an ambitious investment horizon totaled EUR 6.5 billion, of which EUR 6 billion will be allocated to domestic transport activity. This brings us to a historic level of investment of TSO with an average annual investment of EUR 1.5 billion, which is 70% higher than the average annual investment from the previous strategic plans from '21-'25. If we consider the EUR 6 billion an investment that will be executed in the period '26, '29 as well the investment that took place in the year '25 and what will be taking place after this plan throughout the years of 2030 and 2031, the total amount of investment will reach levels close to those considered in the draft from '25 to 2030. Likewise, our firm alignment with the European Union's climate and sustainability objectives also reflects the fact that 100% of the TSO investments are eligible under European taxonomy. Therefore, we expect the transport part of Spain should interconnection in the Bay of Biscay as well as the deployment of another 400 kilowatts that will connect different regions or various regions along with installation of synchronous compensators in the Peninsula, Balearic and Canary Island systems as well as the Salto de Chira project. Together, these actions will enable the company's RAP to be EUR 12 billion in 2029, and it should grow more than 35% throughout this period, reaching EUR 14.4 billion if we bear or take into account the more than EUR 2 billion of work in process that will put up to service in the subsequent years. From another perspective, it's clear that we are facing the challenge of developing the necessary infrastructure to be able to achieve decarbonization in a highly competitive and saturated market environment. It is therefore essential to ensure the availability of the supplies and services that are needed to address the development of the TSO at a reasonable cost. However, the visibility that we have on investments for the upcoming years allows us to anticipate and take measures that significantly reduce the execution risks. Actions such as conducting comprehensive risk assessment, which has enabled us to design new purchasing strategies adapted to a more demanding industrial context and also entering into medium- and long-term framework agreements, which provides stability in prices, terms and volumes as well as executing commodity hedges to stabilize the cost of the more sensitive equipments are becoming fundamental to our business. Thanks to all of this, we already have more than 70% of our strategic supplies guaranteed up to 2029. All of this -- however, all of this investment would not make any sense unless we had a stable regulation behind it. And we believe that we now have good visibility and stability for the company in the next 6 years. I think they are already well known, the new methodology guarantees a return of investment of 6.58%. In addition, unit values have been updated both for CapEx with an average increase of 6.4% as well as operation and maintenance. In this case, an adjustment of 13.4% for maintenance income compared to the previous period. It is worthy to note that we've taken our first steps towards recognizing work in progress for unique facilities with amounts invested prior to the year and the commissions being recognized and capitalized for up to 5 years at the cost of debt, and that includes the calculation of the financial remuneration rate. In our continuous effort to generate value for our shareholders, we can say that the pursuit of operational efficiency and managing leverage and financial costs will enable us to achieve a return on equity of at least 9%. Although our activity will be focused on the transport business in Spain in 2026, we will also -- '26 to '29, we will also maintain an investment plan of EUR 150 million internationally focused on strengthening and expanding transport networks in Brazil, Chile and Peru. In this way, we consolidate our presence in these regions and increase our future options. We will also continue to invest in our dark fiber business, a market in which we are a leader, thanks to having a stable, predictable model and a long-term focus. Throughout the period '26, '29, we will invest about EUR 110 million, mainly aimed at strengthening our network, expanding capacities and meeting the demanding growth for high-quality connectivity. Our objectives for this period are focused on 4 main areas: maintaining our position as a leading provider, strengthening relationships with strategic customers, capturing new business opportunities and develop emerging business associated to the cloud and the high-performance computing. Also, we will continue to explore alliances with strategic partners that will allow us to expand our reach and reinforce our role as an essential part of the country's digital infrastructure. Another significant aspect is the technical innovation and digitalization, which are essential for driving the group's efficiency, especially in TSO. From at ELEWIT, we are developing solutions that optimize processes, strengthen security of supply and increase the use of our assets. Between '26 and 2029, we will allocate EUR 40 million to projects that support the investment plan and prepare our networks for the energy transition. For us, innovation is a key lever to ensure a safer, more efficient and future-proof system. Now let's focus on the evolution of our economic indicators looking ahead up to 2029. These are the direct reflection of a company that is prepared to face an unprecedented investment cycle, capable of maintaining sustained growth with a greater focus on might, which is above 5% per annum. And as far as the net benefit is concerned, that growth will be about 3%. The significant growth of the net debt is directly linked to the investment rollout that is contemplated in the plan, even so we continue to have a robust financial profile with ratios that will allow us to preserve a solid credit rating and continue to access financing in a competitive form and terms. As far as shareholder remuneration, we've established a dividend policy that assumes an annual growth of 2% until it reaches EUR 0.87 per share in 2029, ensuring sustainable and consistent growth in a context of historical investments for the group. The regulated business continues to be one of our most important cornerstones of results. 90% of the group's EBITDA comes from this activity, which gives us stability, predictability and a solid foundation for our future growth. The weight of the TSO will increase in the next coming years, driving the EBITDA growth, which will grow at a rate above 5% per annum throughout that period, reflecting our capacity to execute strategic investment, maintain operational efficiency and advance in the energy transition of the electric system. And now that we have presented the fundamental plans of our strategic plan, we will take a closer look at our financial objectives and the road map to be able to achieve them. So now I'd like to give the floor to Emilio Cerezo. Thank you. Emilio Cerezo Díez: Thank you, Roberto. As we all understand, in coming years, we will see a decisive boost in the development of electricity transmission network with an average annual investment of EUR 1.5 billion in the TSO. In other words, about EUR 6 billion over the entire period. This investment will mean that by the end of 2029, the RAB plus work in progress will be located at EUR 14.4 billion or a 30% increase compared to the end of 2025. At the end of 2025, the TSO RAB will exceed EUR 12 billion. EUR 11.4 billion from transport and EUR 600 million from Salto de Chira or an increase of EUR 3.1 billion compared to 2025. Focusing on the transmission grid, those EUR 11.4 billion in RAB will represent an average annual increase of 6.4%. Likewise, at the end of '29, Red Electrica will have a significant volume of work in progress for projects that will be commissioned in subsequent years. On the left-hand side of this slide, we break down the evolution of the transmission RAB from EUR 8.9 billion at the end of '25 to EUR 11.4 billion at the end of '29. The transmission network RAB will grow by EUR 2.5 billion as a result of the significant volume of commissioning of EUR 4.4 billion already net of subsidies, partially offset by the amortization of EUR 1.6 billion of RAB derived from the operation of the remuneration model. And on the right side of the slide, we show the evolution of work in progress expected to grow by EUR 600 million as transport investments will exceed the aforementioned commissioning operations of EUR 4.4 billion. To run this plan with maximum solvency, we've designed a solid diversified financial structure, allowing us to run the investment plan without increasing capital. Over the course of the next few years in our strategy plan, we will have funding requirements of approximately EUR 9.4 billion, mostly derived from the significant volume of investments that we've been mentioning along with the payout of dividends to our shareholders. As you can observe on the left-hand side of the slide, the EUR 9.4 billion will be funded through the FFO we will generate, the collection of subsidies and new financial debt contracts. First of all, there is the solid generation of operating cash flow, which continues to be one of the group's trademarks. Likewise, the collection of subsidies in connection with strategy projects will account for 14%, 14% of the sources of financing. The amount to be received will be approximately EUR 1.3 billion, and most of it will be collected between 2026 and 2027. Finally, using our solid credit rating, we will finance over EUR 3.8 billion via debt, which represent 41% of these EUR 9.4 billion in funding requirements. New financial debt will be raised by diversified and competitive access to financing markets. In this context, and during the term of the strategic plan, we plan to issue EUR 1.5 billion in hybrid bonds or 16% of our new sources of financing. Our financing structure evolves towards an even more diversified competitive model with greater weight of hybrid instruments, which at the end of the strategy plan will amount to EUR 2 billion. In 2029, the average maturity of debt will be 4 years, and the cost of debt will be 3%. Our competitive average cost of funding during the term of the strategic plan, which we estimate to be around 2.8%, along with the group's leverage capacity are vectors for creating value for our shareholders in the future. Moreover, we have a strong liquidity position at the end of 2025, reaching EUR 3.3 billion. As for currencies, we will continue to maintain a very significant weight of our funding in euros. At the same time, we would like to stress that we're taking decisive steps towards reaching 100% sustainable financing by 2030, thereby reinforcing our commitment to the energy transition and best practices in the market. The financial ratios we have set as targets for the period ensure a financial profile compatible with robust credit rating. These ratio commitments are head and shoulders above some of our European peers. FFO to net debt will be above 14%. Net debt to EBITDA will remain below 5.5x and net debt to RAB will remain below 60%. Together, these ratios confirm the sustainability of our growth and our financial discipline. I will now give the floor to our Chief Executive Officer to continue with the main conclusions. Roberto GarcÃa Merino: Thank you very much, Emilio. And to conclude this presentation, I'd like to summarize the key messages that define our strategic plan 2026, 2029 and the path for growth that we have built for the upcoming years. In this period, 2025, 2029, Redeia is undertaking the most ambitious investment cycle in its history with a total of EUR 6.5 billion, which is a figure that reflects our firm commitment to energy transition. A large part of these investments are aimed at expanding and modernizing the transmission network to meet the growing needs of electricity system, the massive integration of renewable energies, electrification of the economy and structural improvement and resilience of our infrastructure. All of this results in a significant increase of RAB of 35%, reflecting the expansion of the network and new commissioning reaching EUR 12 billion at the end of 2029, rising to EUR 14.5 billion if we consider estimated work in progress at the end of the plan. This investment effort is accompanied by a solid and responsible financial policy, highlighting that this plan will be financed using international financing alternatives without the need to increase capital, thus preserving stability for our shareholders and reinforcing the financial discipline that characterizes us. In addition, we maintain a policy of increasing sustainable dividends with an annual growth of 2% throughout the year, which will take it to EUR 0.87 per share in 2029. This reflects an appropriate balance between investment, financial strength and attractive shareholder results. And last but not least, I would like to highlight that the growth of our regulated assets will be the cornerstone of the group's value creation, reflecting an increase of EBITDA and the group profit for that period of time. Furthermore, we look beyond this period covering our strategic plan, we will consolidate the growth initiated this investment in this period as the RAB will exceed EUR 15 billion at the end of 2031, and we will also have work in progress worth around EUR 2 billion in projects that will become on stream in the future, which we'll be able to confirm once the new planning has been approved. We are on a solid growth trajectory, which ensures long-term visibility, representing a quantum leap for Redeia in terms of RAB with greater remuneration capacity and a structural contribution to the development of the Spanish electricity system. Thank you very much for your attention. And now we have questions and answers. Operator: [Operator Instructions] First question from Flora Trindade from CaixaBank. Flora Trindade: I have 2 of those. I imagine there will be many questions, so I don't want to take up much of your time. I wanted to understand the CapEx you have reserved for the plan because in '25, you had a CapEx of EUR 1.55 billion and then the average drops throughout the rest of the plan. I wanted to understand why this average goes down and whether you see any upside in these investment levels beyond 2026? That's the first question. The second one, in terms of your funding, you're not including any type of asset turnover or rotation. Is this part of the plan if things don't go exactly according to plan, what you intend to do and which countries might become a priority for you, if that's the case? Unknown Executive: Well, thank you very much, Flora, for your questions. First of all, I believe we have a very clear investment horizon for the -- for oncoming years, at least within the scope of our strategic plan. This year, we finished 2025 with a record number of approximately EUR 1.5 billion, which is the order of magnitude we expect as an average for the whole period of the future plan. Our engagement is EUR 6 billion during the period '26 to '29. That's 4 years. Therefore, our expectations, and we're pretty certain of those is that execution capability in terms of investment will remain around those EUR 1.5 billion per year during the length of the plan. And I believe we're making a significant effort to that endeavor. If we compare our present plan to the last one, that's an increase of 70%, 70, and the level of certainty in our investment is very high, even under strict standards since we have already secured practically all the critical supplies to run the plan and most plants are in a well-advanced stage of permits or commissioning. So that's a very solid calculation. About your question about assets. Well, fortunately, our starting point in financial terms is very robust despite the level of investments we're contemplating. We assume we can fund this strategy plan with our own capital without going to the market. Well, obviously, we will have to increase our hybrid debt. And certainly, we also have European funding and other types of subsidies. And our investment horizon will probably, after a rating review will remain robust in terms of financial solvency. So, we will not -- we will not need any disinvestments as we did in our '21 to '25 plan. Certainly, this yields for opportunities. In case the investment pace were to be accelerated, we have additional drivers like deconsolidation or the partial disinvestment of some non-TSO-related assets. But according to the initial plan, that will not be necessary, and we can finance our operations without any capital increases and just use the regular channels for funding in our plan. Operator: Next question comes from Javier Suarez from Mediobanca. Javier Suarez Hernandez: I had 3 questions. The first one has to do with the blackout that you mentioned recently throughout your presentation, like the origins and causes and effects of the blackout. So, I wanted to ask you, from your point of view, what -- actually, like what should we learn in Spain and the rest of Europe? What should we have learned from this blackout? And what measures have been included in your business plan to make sure that this situation does not happen again? And in that sense, I also wanted to ask about the documents that we'll be waiting for about the responsibilities that are connected to the blackout and what documents are these? And I understand there's one from the Spanish regulator. And is there any other type of fine? Or should we assume that the attitude of the management of not having money ready for this, would that change if we have some kind of fine because of the blackout? That's the first question. Second one has to do with the extending the business plan up to 2029. So why has the company not extended it beyond 2029? That really has to do with the new plan and the infrastructure plan has not been approved. But I do believe that there's a lot more visibility after 2029 and perhaps bearing in mind that the company will have new services above and beyond the last date of the business plan you've showed us perhaps the growth of the company has not been valued properly, valued too low, infra valued because of this. So, I would like to try and understand why have you decided to have a cutoff time for 2029 and not a date further on? Third question, financing for the plan. Have you included getting to the end of the plan? You decided to get there with EUR 2 billion with hybrid debt. And we're talking about the EPS now because that should discount the financial cost that is connected to this hybrid debt. So, it's fair to say that, that EPS growth will be lower than the -- what you've been pointing out? And to what extent could that be lower? Beatriz Sierra: Well, very well. How about if we divide up these questions? With regards to the blackout on the 28th of April and the reports that are pending, I think the most relevant one have already been printed, and we got one from the government committee and an article had to do with national security. Another was the report that the operating sister made, and they were obliged to do this because of the norms that we have, the laws that we have when something like this happens in Spain. And then also the -- we named -- the European Union named an expert panel for this, and that's the third one. So chronologically explains everything without any doubt of the data and the rigor, what were the various or different incidents that happened throughout this whole process, starting by what happened at 2 in the morning or at 12:03, rather. So very well. So, the transmission network never failed. We had more than 7,000 maneuvers without having any kind of failure. So, the maintenance of the part that has to do with Red Electrica was actually complied with at all times. And we'll see this in these reports and in forms. But we see that some of the laws were not complied with -- this is by the transport company. And in our annual accounts, we have not included this because we don't believe that we're going to be responsible for any matter, bearing in mind that we complied with the laws in a very strict manner. What we cannot ensure is that all of the agents of the sector actually did the same. Now in the strategic plan, there is -- well, it reflects many things, although it's not totally concrete, but it's the planning for 2025, 2030 that has not yet been approved. We hope it will be approved at the end of this year. But as we said before, here, we gather like a whole series of infrastructures that so far were not operative in Spain, such as synchronous compensations and also through changes in the planning in 2024 and especially in 2025, we have included tools for start comes and fast and other matters. So, our plan, Salto de has decided to make all of this infrastructure that will give us an operating system that is resilient and safe with greater guarantees so long as that we can always guarantee that the other agents of the sector comply. And as our CEO just said, we have taken some decisions to be able to have material and special material, especially the more critical ones to be able to be in the right condition to deploy this infrastructure as soon as possible because actually, the laws that we have now does not let us change this infrastructure at this point until such time that the planning has been approved completely. So, we have 70% of all of this material for this plan 2026, 2029. Therefore, we're in the right conditions to incorporate all of these new tools that the planning establishes for this electric network. With regards to the reports that are pending, we foresee that the main report at the end of March should be ready with the measures and recommendations will be incorporated into that report. And with regards to the regulator, as far as we know, files have been open and research is being done. They've asked information from the sector. And as it was recognized by the ministry from 67 companies that were asked for information, we have been the only one that has been totally transparent with the data and the origins, we at Red Electrica. And therefore, so that's a question that the regulator should answer. Like what is the period that this file is going to be ready? And what step will be taken once we know its content. Your turn. Roberto GarcÃa Merino: Thank you, Javier. Thank you for your questions. With regards to the plan and the period and how long it lasts, we've decided -- well, it has to do with the visibility that we have and the commitments that we have to assume with the market. As we were saying before, we are very clear and we are certain that our period of 2026, '29 is very clear. And we do have a certain sort of visibility or -- but not so much commitment for executing between 2030 and 2031 because as you said, that investment that will be taking place between 2030 and 2031, it depends also on the final approval of the new planning. But what is true is that we have moved forward with significant projects that will be up and running around about 2029. And right now, we don't know if it's going to be in 2030 or if it might be delayed until 2031. That's why we have not wanted to have a firm commitment with the market beyond 2029. What is true is that the visibility that we have of putting in service or the up and running that we can get by the end of 2031 is quite clear actually. Once we have reflected the level of the RAB of EUR 15 billion is also an objective that is something that we can attain. But of course, we have assumed this financial commitments is more complicated to do it in such long term. So, we wanted to give a reliable information and things that we know that we'll be able to comply for right now and then wait until we have proper approval of the necessary matters to be able to commit to things after 2031 for like 2030 and 2031. But what is true is that the visibility that we have now, and we're talking about the years '30, '31, we're talking about volumes that are above EUR 4 billion in those 2 years. So, we'll have to wait to see that we do have a proper plan to be able to be much more concrete on this matter. But in any case, the visibility that we're giving now as far as the evolution of the RAB is truthful, and we wanted to assume financial commitments up to 2029, where we have greater certitude. Emilio, would you like to answer the next question? Emilio Cerezo Díez: Thank you, Javier. With regards to what you said about hybrid debt, we want to have EUR 2 billion of hybrid bonds at the end of our plan, which bring us close to the maximum capacity that we have for that instrument so that we will be able to be qualified as equity content as far as our rating agencies are concerned. And it's true that the accounting treatment that we're giving to the hybrid, as you know, is to consider within our equity, the EUR 2 billion and payment for the interest is also registered within all of our equity and the profit and loss. And also, the increase of -- well, the interest rates of the hybrids, if we were to account for them within our results, the average result that we would have is would be less than 1% of these emissions throughout the next few years. Operator: Next question comes from Ignacio Domenech from JD Capital. Ignacio Doménech: Mine is about your rating. In 2029, you're setting up a guideline for a net debt exceeding 14%. And I understand that unless the S&P rating changes, that would not be compatible with maintaining BBB+. So, considering your talks with the rating agencies, do you expect them to soften these targets, this guidance or perhaps it's not a priority for you to hold on to that BBB+? Unknown Executive: Well, thank you for that question, Ignacio. About financial solvency, well, historically, and obviously, as part of this plan, Redeia's priority is maintaining a solid credit rating without committing to a different rating. Certainly, our investment volume will bring us close to financial ratios that might maintain the company in BBB+ just as will happen to other peers in the same field. Based on the analysis we have conducted on financial ratios, we're confident that we will remain there without making a firm commitment to any rating whatsoever. Our priority is remaining financially solid to tackle our strategic plan and maybe future developments, too. But consistently with other recent reviews from other agencies, we do expect to maintain that BBB+ credit solvency. That's what we expect from the outcome of rating agencies reports. They will have to assess a different Redeia without Hispasat in the group, and with a vision -- a different vision on the April 28 incident that differs from the view when the incident had just happened. So, in financial terms and in terms of debt, I am convinced that we will still have a good credit rating, and we expect a revision that will keep us at BBB+. Operator: Next question from Gonzalo Sanchez from UBS. Gonzalo Sánchez-Bordona: So, I have a couple of questions. The first one has to do -- well, first of all, I'd like to understand the possible leveraging that we have because of the risk of these figures going up and down that you presented today. Regarding investments and let me explain myself. If there is an additional delay from, we're waiting as far as like the approval of the investment plans, then I assume this could generate 2 situations and one would be that the investments are more expensive than what we foresee due to inflation. And then in the second place, the part that's not insured, that 30% that is not insured would be open to these fluctuations. So, I'd like to understand how are you considering this with regards to possible risks to going up or going down because as far as I understand, according to new regulation, there is a certain pass-through. But still, I wonder how would you consider this at a mathematical -- from a mathematical standpoint. So that's it going up, going down, but especially if it's going down. But as far as going up is concerned, you have given a delivery throughout 2026, very interesting as far as the EBITDA margin, which is much higher than what was considered in the plan. So now I understand that you're taking a much more conservative point of view as far as the increase of these margins. So, I'd like to understand what type of leverage the company has to be able to improve that result. And then generally speaking, any kind of upside or downside in this sense would be interesting. And then the second question has to do with what was mentioned about the rating. Due to the conversations, we had before, I understand that, that 14% would be within the ranges of BBB+, of 2 of these rating agencies. So, I'd like to understand what is the type of conversation that's happening with this on that subject matter, are you expecting a change? And if there is going to be a change, what kind of impact could that have in the plan with greater flexibility? I mean, what would the impact be in the plan? Unknown Executive: Thank you very much, Gonzalo. Very well. With regards to the commitment for investment, '26 to '31, this is actually quite -- you're right in what you say. There is a potential for delay in the planning. And if it were significant, it could affect it a bit. But I want to remind you that there is a volume for investment, which is a volume that is really quite important. These monies, they come from the planning that we have now and then we're putting it in the other plan that is being analyzed. So '26, '27 and all the way to part of '29 corresponds to that monies that we have at least for the next 3.5 years. And it's real and true. And of course, there will be something pending for the approval, for the planning, but we have this intuition and due to the interest, that is needed for the deployment of these infrastructures that it can be a quick approval in this very year. And we also have mechanisms that might be taking place throughout the strategic plan period in order to accelerate these periods and to be able to compensate a potential delay. So as far as investment is concerned, I think it's really quite -- the certitude level is quite high. So, we haven't wanted to commit beyond 2029 because then between 2030, 2031 will need to be approved later on. But as far as the plan period, these objectives are really quite firm. With regards to possible price evolution, I don't think we are -- we're in the situation we lived through 2 or 3 years ago. We do see that most of the supplies and the equipment have stabilized the prices. And in those critical supplies with a greater demand, we have acted or jumped the gun as it were, and that is much more concrete. And so, we don't see any difficulties or potential changes. And also, Gonzalo, the new framework that we have for regulations and distributions also gives us -- well, it permits us to assume various deviations as far as the cost of this is concerned. So, we're really quite comfortable in our objectives and the evolution of investments. With regards to what we can add to operating profit from a strategic plan and the ups and downs, the company has to have enough means to be able to face this growth, and it is a process that we have already started, and that will continue throughout this year and part of 2027. And that, in fact, does affect the rates of the EBITDA and its efficiency. And remember that we're starting with a volume that was quite relevant at the end of 2029. And of course, those ratios are going to affect -- have an effect. And of course, will be much more efficient in the future. But we have decided to be conservative as far as exploitation expenses are concerned to be able to maintain the growth that we're talking about. And just another thing, let's talk a little bit more about that the efficiencies that we see as far as financial structure is concerned for the cost of the equity and also some thoughts about the rating, but I also want to tell you what I was saying before with regards to the rating agencies and the [indiscernible] that Redeia has to them. As we said before, the context of the company has changed radically from the last few revisions, reviews and the focus on regulated activity is much clearer. And really, what we expect to see is a treatment similar to other companies within Europe that have these same types of ratios that are going to be better than what have been applied to us in other years and in Spain and in other years. But I believe that the relationship we have with these agencies is quite close. We do believe that this horizon of BBB+ is the horizon that we think that we can reach. However, in a hypothetic case that there's much more investment or a much more restrictive position from the agencies. I'd like to remind you that we still have leveraging or hedging within the company to be able to reinforce this financial structure of the group if it is needed. Thank you. And continuing with what you said, first of all, talking about ratios. I think it's really important to highlight that these ratios of our credit ratios are very solid. In fact, much better than many others within Europe. And it's important to highlight that. Quite sincerely, we think they are clearly compatible with a BBB+ as far as our agencies are concerned and even a AAA+. And we think that, that will be the qualification that we will achieve from now on a AAA+. And we're looking at a solid investment grade. But in any case, this is a decision that has to be taken by both agencies according to what they want to do and Standard & Poor's and the others. And as far as upsides are concerned and adding something and some aspects that Roberto was saying, I also think it's important to say that from a financial point of view, we see upsides quite clearly by improving our cost of the debt compared to what we have in the pretax 658. And in any case, we're going to have average financial cost that's going to be better than what we've already shown. So also, what improves this 46%. Bearing in mind how solid we are in our balance sheet and our projections and all of these things, we believe that we're going to have higher leverage than 46%, keeping that solid investment grade. And by combining these 2 factors, better hedging and better cost of our debt, which is highly competitive, will permit us to create value. And as you heard not too long ago, to be able to get a return on investment above 9% and one of the important leverages that we have to have that ROI that is so attractive to create value for our shareholders has to do with our capacity for hedging and to be able to get into debt at a very competitive cost. Operator: Next question from Fernando Garcia from RBC Capital Markets. Fernando Garcia: I only have one question after everything you've said, and it's about the incentives you're using for your net guidance for 2029. Emilio, you just talked about financial performance. So, are you also considering operational outperformance and are you using any of that for your 2029 guideline? Or are you considering any incentives to generate some upside for your 2029 guidance? Emilio Cerezo Díez: Excellent. Thank you very much, Fernando, for your question. Well, about the level of incentives we have integrated into the plan. As you know, our approach is usually very conservative. So, we prefer not to include any kind of incentives into the base case scenario we presented today. There might be an upside, but we don't want to make any comments on that. At an operational level, we're also being conservative in the hypothesis we have included into the plan. Certainly, by integrating new asset management policies and new elements related to innovation, we might -- just might achieve some operational efficiencies within the model. Unknown Executive: Perhaps just to give you a flavor on it, well, there is a remuneration for works in progress, and that affects the investment portfolio we have planned within the plan. Another part of the portfolio is not affected, but the way it is conceived it might represent a loss of return in terms of the financial remuneration rate. But that deficit generated by not applying work in progress to the whole asset base can be offset. And as Emilio was saying, by financial management with medium and final cost of debt under the regulation threshold established in the FRR, we can generate value above that 9% return on equity we're considering. Operator: There are no further questions in Spanish. We will now take questions. [Operator Instructions] Our first question comes from Arturo Murua of Jefferies. We are not receiving any audio questions from line. [Operator Instructions] Unknown Executive: Well, it doesn't seem like there were any further questions. So, we go on to the questions we have received online. Most of them have already been answered. Daniel Rodriguez asks us the estimated cost of hybrid bonds and whether or not it is contemplated into the 3.3% contemplated in the estimated cost of debt. And Mafalda Pombeiro has 2 quick questions. The EUR 6 billion CapEx target, is it gross or net of subsidies as year-on-year? Or does it follow a growing progression? Well, thank you. The cost of the hybrid instruments we're contemplating is approximately 4% to 5%. Certainly, as you know, the market is looking very attractive now. And if we were to invest, we would come very close to that 4%. That 3.3% we set up as average financial cost for 2029 does not integrate hybrid instruments, but it does integrate the cost of funding of our telecom business and our international business, which are funded mostly in U.S. dollars. As I said before during the presentation, our average funding cost in the plan is 2.8%. If we were to integrate 50% of the cost of hybrids, that would take us to 3%. And if we consider the entire cost of hybrids, that would bring us to approximately 3.2%. And perhaps to answer Mafalda, just to clarify the numbers, those EUR 6 billion in investment are a gross number. We can consider an average annual investment of EUR 1.5 billion, going slightly up or down 1 year or the next, but we consider EUR 1.5 billion as an annual average. It is important to remember. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Welcome to the Schneider Electric's Full Year 2025 Results with Olivier Blum, Chief Executive Officer; Hilary Maxson, Chief Financial Officer; and Nathan Fast, Head of Investor Relations. [Operator Instructions]. I'd like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now hand it over to you, Mr. Nathan Fast. Nathan Fast: Good. Good morning, everyone, and welcome to our full year 2025 results presentation and webcast. I'm joined in Paris today by our CEO, Olivier; and our CFO, Hilary. For the agenda, you already have the slides available. We'll go through them now and then make sure to have enough time for Q&A. As always, I want to remind everyone about the disclaimer on Page 2. And with that, Olivier, I hand it over to you. Olivier Pascal Blum: Thank you very much, Nathan. Extremely happy to be with all of you today. Look, more than 15 months in the job, the first time I'm doing really this earnings call with you for the full year '25. And I'm extremely excited to be with you to report on what happened in '25 and even more important, what we see for the future. As you know, with the management team, we did spend a lot of time in '25 to define the next cycle. We were with many of you during our Capital Market Day. And we launched the new mission of Schneider Electric, which is to be your energy technology partner, to be the company which will be at the convergence of electrification, automation, digitalization in every single industry, to drive efficiency and sustainability for all. That's what we call at Schneider Electric, advancing energy tech to the next level. And of course, I'm going to come back on that. The point I want to make here, it has really received a very, very good feedback. We got a very good feedback from the market, from our business analysts, from our customers, from our employees, from all our partners. So that's really exciting for us to enter '26 with this new positioning, which is giving a lot of inspiration for all our stakeholders. So now let's turn to the most important part, of course, of this call, which are our results. I'm pleased to report a very strong Q4 revenues growth at 10.7%, EUR 11 billion. And even more important for me, it's really the acceleration of the 2 businesses, the acceleration of Energy Management, but the acceleration again in Industrial Automation in Q4 with a growth of 8%. If you go look at the full year results, that's an important milestone for Schneider Electric. For the first time, we have exceeded EUR 40 billion in terms of revenue, with a 9% organic growth. So that's, as you can imagine, an important milestone for a company. And even more important is the acceleration that we have seen in our 2 business. I was just talking about Industrial Automation. We told you with Hilary a year ago that we will turn positive for Industrial Automation in '25. We did it, and we delivered 7% growth in H2, which as a result, has helped us to achieve 3% growth for Industrial Automation. As you know, Energy Management has been really the driving force from a growth standpoint for the past years, and it continue again to be the case in '25 with a growth slightly above 10%. So all in all, again, a great year from a top line standpoint, both businesses driving good contribution to the growth of the company and an important milestone, EUR 40 billion. When you go a bit deeper in all our achievements, we are pleased to report that we have achieved a margin expansion of 50 bps, which is in line with the target we set up for us at the beginning of the year, which translates in an adjusted EBITA growth of 12.3%, which is again within our guidance of 10% to 15%. Extremely important milestone also for Schneider Electric, free cash flow of EUR 4.6 billion with a conversion rate slightly above 110%, which show again the strong financial health of the company overall. We are pleased to report that we are going to distribute a dividend of EUR 4.2 per share, again, in line with our progressive dividend policy, which has been the case for the past 16 years. And our TSR has grown by 89% for the past 3 years. So all those financials show really the solidity of Schneider Electric strategy, but even more the solidity of our execution. And as you know, it's equally important for me and the team that we always look at our digital metrics, which are translated inside the digital flywheel. It has been an important transformation for Schneider Electric in the past cycle. It will continue in the future. And the digital flywheel is giving us really the illustration of the execution of our portfolio strategy transformation. So we reached EUR 25 billion of our turnover with digital flywheel, which represents 62% of our overall revenue. And pleased to report that it has achieved a growth of 15% last year. We continue to grow very fast on all the aspects of the digital flywheel, but very excited to see that we are now close to 20% of our total portfolio in services and software. And last but not the least, it has been an important focus for us in the past year, not only the acquisition of AVEVA, but the transformation of AVEVA, the acquisition of OSI. And last year, we have achieved an outstanding performance with 12% growth in ARR for AVEVA. It's also important to mention that '25 was the last year of our sustainability program, the one we launched 5 years ago. You know that we have this culture at Schneider since 20 years to launch every 3 to 5 years, a new program where we set up an ambition on where we want to take the company. And we are pleased to report that we have achieved overall our goal. I'm not going to go through all the metrics, but that's very, very important, and I'll talk later about -- when we speak about '26. The only thing I'd like to mention is when you look at all these metrics, if I just highlight some of them, extremely pleased to see that with the portfolio of Schneider, we have helped to save and avoid 862 million tonnes of CO2, which is tremendous since we created that initiative in 2018. You will see later that we'll keep going in the next chapter, but that show how the impact of the business of Schneider Electric can support all our customers everywhere in the world. And we have embarked not only our customer, but our partner, our supplier. Our supplier have also achieved their goals. So we divided by 2 the CO2 emission of our suppliers that were part of that program. And we continue to have a very strong focus on access to clean energy to many people who don't have access energy in the world. And we have achieved this milestone, which was super important for us, 50 million plus. Actually, we have exceeded reaching 61 million. And of course, all those achievements have been recognized multiple times in the past year. It's always great to be a leader in that domain. So if we wrap up '25 in short, as I said, a record year in terms of revenue, crossing EUR 40 billion, all-time high level in terms of backlog. We'll come back to that with Hilary. Extremely strong performance in adjusted net income and free cash flow and acceleration of the demand and profitability in H2, which is what we told you with Hilary when we were together in July. What is very important for me, and we told you that during our Capital Market Day, we are accelerating the transformation of the company. We have a plan. We are accelerating the transformation of the portfolio, making Schneider Electric the company which will advance energy tech to the next level. We are going to the next level to -- of our digital portfolio, leveraging AI and bringing energy and industrial intelligence. We have reinforced our multi-hub strategy in a world which is very fragmented. We do believe that our regional model brings a lot of advantage. We have reinforced in particular, in India for the international market with the acquisition of L&T last year, the completion, I should say, of the acquisition. And last but not the least, we spent a lot of time with the team last year to simplify the operating model to make sure we can generate more efficiency and create even faster execution. So now if I turn to '26. I'm not going to talk about the long term today. It was done during the CMD. But if I recap what we told you in London in December: We have 3 megatrends in front of us that have been the main driver of Schneider Electric growth in the past year: The evolution of the new energy landscape, electrification of usage everywhere in the world; digitalization going to next level with AI; and of course, a world which is more and more multipolar, and we don't believe it's going to stop. So for us, what is very important is to make sure we can leverage and accelerate really everything we do at Schneider Electric to make the most of those 3 trends. And of course, what we see, and I'm sure you see it as well, all those 3 trends are accelerating at the same time at a speed which is unprecedented, which impact, of course, all our end markets. But speaking about the end market, it's fairly positive for Schneider Electric. And we like always to go back to those end market growth and to tell you how we see the market. We continue to see a double-digit opportunity plus in data center and network, solid growth on buildings and industry, and we'll say a little bit more with Hilary also on that one. And we continue to see infrastructure growing fairly fast between 5% and 7%. What you see as a result of the past cycle, we continue to be a very, very balanced company in terms of exposure. We'll talk about geography, but balanced in terms of end market, having our 3 largest market contributing all to 1/3 of the revenue of Schneider Electric and infrastructure step-by-step going also to the next level with close to 15% of our revenue. So what's next for '26? We are basically going to execute our plan, our strategic plan, the one we present to you, which is really to advance energy tech to the next level of intelligence. We are going always to follow those 3 important transformation, which we have launched internally. We call that inside Schneider, our company program. This is a vehicle we are using to align all the entities of Schneider Electric everywhere in the world. For me, what is very important is not only to define the North Star, advancing energy tech, defining those strategic priorities but equally and even more important is how we align our teams everywhere in the world to make sure we execute faster the strategy of Schneider Electric. So talking about Energy & Industrial Intelligence, we want to reinforce our energy, our technology leadership. We've presented in detail our strategy in December, but I want to recap what we told you. We have built a huge portfolio in the past, which is extremely differentiated, starting by our legacy product business, but going to the next level of Edge Control, starting to do more and more in digital and software and digital services everywhere in our portfolio. What makes Schneider Electric very, very different at the end of the day? We are combining a unique expertise in different domains. Those domains are the building domain, the power and IT domain and the industrial automation domain. What we want -- we don't want those domains to innovate in parallel universe. We want to create a unified customer experience for our customer. Let's make it simple. Every time we sell solution to our customer, we want to keep it simple for our customers to commission the asset, to be able to leverage all the software, to create a unique user experience. It means that, for instance, you need to have a digital platform, which are the same, and we need to create hub, which are the same. So for us, it's not only about creating the largest portfolio in our industry in those domains, is to make sure we make it simple, easy for our customers to use all those offers of Schneider Electric. And what we want to do even more in the next cycle is to do it through their full life cycle. Schneider was known 10, 15 years ago as a company which was more at the CapEx stage when we built. We've moved big time in the past 5 years to make sure we are also at the design level. We can help our customers to design, to simulate, to create digital twin for their asset. And of course, when we have installed our solution, what we want to do even more through digital is how we can help them to operate efficiently, how we can help them to maintain efficiently, to extract data that will help them to manage the obsolescence of their asset, for instance. So all in all, this is what you see on this slide, which is the strategy of Schneider, I think. And what are we doing differently in the next -- in this cycle? Now we've reached a level where most of our assets are connected. Again, keep in mind the digital flywheel, going step by step to 70% of the digital flywheel. So it's about extracting all those data at all layer of our digital stack, extracting external data, federating, structuring those data in the data cube to make sure, thanks to AI, we can amplify what we give to our customer and deliver more intelligence. So it's about building the foundational model in AI, in energy and industry that will create more value for our customers in the future. And it's not something that we are dreaming to do in 5, 10 years from now. It's something we do already. If you take just one example of the data center, which is a place where we have invested, as you know, a lot in the past years. We are, of course, in the middle, as you can see, present at the build stage historically. We have reinforced our portfolio, for instance, with the acquisition of Motivair in liquid cooling. But what is equally important is being able to work with NVIDIA, with our customer, the large hyperscaler on how you can design and simulate, how you can work in the universe of NVIDIA, on how we'll behave digital and electrical infrastructure in the future based on the next generation of GPU that NVIDIA will launch in the future. And then we can move to a stage where we are working with our customers to design their own AI factory. We can build, we can execute with them. And we can also extract data at the end of the cycle to make sure we give more to those customers. So that's really a typical illustration of what we mean going to the next level of energy intelligence, unique customer experience, leveraging all the portfolio of Schneider and being able to do it through the portfolio of -- through the full life cycle of our customer. Now we have multiple proof points and other example we are doing. We are launching, for instance, EcoStruxure Foresight Operation, which is basically the convergence of power and building management in one software amplify with AI that can give a lot of opportunity for our customers to improve the efficiency of our building. And I'm not going to cover all the examples, but we have also what we presented to you in November -- in December, what we are doing in Industrial Automation with EAE, EcoStruxure Automation Expert, which is taking automation to the next level. So all in all, just as a recap, we are investing a lot in R&D. We are growing progressively to the next level of our journey in R&D with 7% approximately of our turnover. And having always in mind those end targets, which is keeping on increasing the part of our portfolio, which will be more digital, more than 70% by 2030, accelerating everything we do in software and services, so going step by step to 25% of our total revenue. And all of that helping us to multiply by 2 our recurring revenue as part of the turnover of Schneider. The second chapter, which is very, very important for me, and I'm passionate by technology. I strongly believe in innovation. I strongly believe that what will make Schneider Electric very different. But I'm equally passionate on how we are going to differentiate in front of our customer. You know it, but we have decided to go to the next level of the regionalization of Schneider Electric. So it's basically how we structure the company in terms of innovation, in terms of supply, but also in terms of sales and making sure that we are creating 4 regional loop: in North America; Europe; China, East Asia; and Southeast Asia and International to create agility and speed. So what does this mean in simple terms? You identify needs in one of those regions. You can speak to R&D people who are very, very close to you. You can speak to the supply chain people, and you can execute projects very, very, very fast. And you don't need always to go back to the top of the company. Now it doesn't mean that we want to cut Schneider Electric in 4 pieces. All of that is supported by a global governance where we define very clearly where we want to go in terms of R&D. For instance, what are the platform we want to develop, what are the choice we want to make in terms of electronic. Also the way we want to design our supply chain. But when this global framework has been defined, we want to empower our 4 regions to go much faster. And what we are doing also in terms of operating model evolution is how we go to the next level of engagement with our global customer, which, as you know, will represent a growing part of our sales. When we go, for instance, to cloud and service providers to utilities in all the segments, we are going to next level also of engagement with our global customer. So on this slide, you have a couple of, again, of proof points of what we are doing to make it happen. I'm just going to give you a few examples. We want to have 90% of our sales to be manufactured in each region. Manufactured means both what we buy from outside, but also the cost -- the labor cost that we have for manufacturing. So for us, it's important that we keep investing in all the regions. I said it, we've completed the acquisition of Lauritz Knudsen in India, which creates a very, very strong India hub to support the international market. We continue to invest in the U.S., in North America, for North America, especially to support the growth of our data center business, both in low voltage UPS, but also in liquid cooling with the acquisition of Motivair. Talking about Motivair, we have decided to open a new factory in India. Actually, we announced last week to accelerate the expansion of Motivair outside of North America. And we continue to leverage, for instance, China as one very important hub for us in terms of power electronics but also localizing offer like GVXL to make sure we are more competitive in the Chinese market. And we continue also to invest in Europe, new factory we are launching in Macon and taking our joint venture, Schneider eStar to the next level for electrical vehicle. So the last pillar of that transformation is operational excellence. Also extremely important for me. We've been very, very vocal with Hilary and the management team in December that we want to innovate in technology. We want to accelerate the growth of the company, but all of that has to translate in a very strong operating margin, strong return for our shareholders. And that's why we decided we need to accelerate all our plan when it comes to cost competitiveness and scalability. Cost competitiveness on one side because I want to make sure we always stay competitive in everything we do, the design of our product, the cost of our product, the cost of our solution for our customer, how we do a better job to collaborate with our supplier to deliver innovation, cost and time to market, which is very important for me. And having a very strong machine where we deliver strong industrial productivity every year. At the same time, I want Schneider Electric to be extremely scalable. We just said it, EUR 40 billion, huge milestone for a person like me who joined the company no more than 32 million -- 32 years, which was, I think, EUR 5 billion at that point of time. I mean it's just an impressive milestone. But if we want to go to the next level of our ambition, 7%, 10% growth every year, that's super important that we always work on the fundamental of the company, our IT system, our supply chain and so on and so forth. And I do believe we have a huge opportunity to leverage AI to keep really a strong level of scalability but also efficiency at the same time. And I said it, I will go very, very fast. We are also working a lot with the management team on how we keep simplifying Schneider Electric year after year to make it easier for our people to execute. Here again, a certain number of proof points on how we want to collaborate more with partner, supplier, company like Infineon, for instance. I mentioned going to next level of flexibility in capacity also, working strongly with companies like Samsung and Foxconn, for instance, where we believe it will give us an opportunity to accelerate really our capacity everywhere in the world, accelerate our competitiveness and an absolute obsession on at cost by design in order to contribute really to a very strong improvement of our gross margin. So a couple of examples that you have on that slide, but I remind you on the right-hand side of the slide, those operational metrics we've defined with Hilary during the Capital Market Day, which are absolutely essential for us. While we want to grow very fast, we want to stay very, very healthy at the gross margin level, always focus on the efficiency of the company. And last but not the least, always working also on our portfolio to make our portfolio more efficient. So these are really the main chapter that we presented to you on which we will give you an update every year, every half year on how we are progressing. But of course, I would not be complete if I would not speak about what makes Schneider Electric extremely different in the market, a very, very, very people and sustainability-centric company. I said it, we've completed successfully the past cycle when it comes to our sustainability achievement. We've presented that to you already. So I'm not going to go one by one, but we have launched our new program when it comes to what are the next transformation we want to deliver, with a very, very strong belief that as a company, we can have a lot of impact, but we believe that advancing energy tech will bring progress to all everywhere in the world. So there are a couple of metrics that we have kept from the past program. Again, saved and avoided emission, going to the next level. I told you 800 million tonne, plus we want to achieve 1.5 gigaton by the end of 2030. But new metrics we are building right now on how we can build, train more electrician in the world to support that big trend on electrification. And of course, always covering all the aspects of ESG and trying to impact our entire ecosystem, including supplier partner everywhere in the world. When it comes to people, we continue to invest a lot. Super important for me that, one, we keep our employees engaged in the transformation of Schneider. We are moving very, very fast. So we want to keep our employee along with us to keep the management, and we want really to make sure they are motivated and engaged to work with Schneider Electric. And at the same time, what is super important for me, we are moving really to this tech world, which require new competencies. So training our people in digital, in AI, in those new energy landscape technology is extremely important. And last but not the least, the second metric for us in terms of engagement is always offering the possibility of our employees to become shareholder of Schneider Electric and extremely pleased to tell you that 63% of our employees have invested in our worldwide plan last year with some country going above 80% of employee. So you imagine that's a strong demonstration of the commitment of our employees. And we've built this multiyear model, going to the next level of regionalization. We have a unique model of management where we want to have a very decentralized leadership, not only for the regional team, but also for the global people who are managing Schneider Electric. Why? Because I believe that in a world which is going to be more and more fragmented, that will make Schneider Electric much more agile and much faster to make the right decision. So to wrap up on the priority for me as the CEO of the company in '26, definitely, first and foremost, delivering a very strong performance. We'll come back to that with Hilary in a couple of minutes. But again, accelerating everything we do on the technology leadership side, being the absolute leader in the new energy landscape. We are the worldwide leader in electrification. We know the energy landscape is changing. It's bringing even more electrification, more change in our industry. We want to keep and reinforce that leadership. Going to the next level, leveraging AI and creating energy and industrial intelligence for our customers. And of course, with the data center market, which is growing fast, keeping an absolute leadership and making the most of this growth opportunity. Going to the next level of regionalization to satisfy even more our customers, local, regional and global. We see strong demand everywhere in the market. Most of the geography, all key geography will contribute positively in '26. So let's make the most of the growth everywhere in the world. And of course, executing seamlessly, the record high backlog that we delivered last year. Last but not the least, I said it, huge focus on operational excellence, gross margin improvement means strong focus on cost, productivity, pricing, margin obsession. This is very high in my agenda, very high in the agenda of the management team. And of course, we want to continue to build the next level of scalability for Schneider Electric and in particular, leveraging AI. So this is about the -- really what we plan to do in '26. But before going more in detail on how it translates in terms of financial ambition, I would like to hand over to Hilary, our Chief Financial Officer, to tell you more about our '25 financial performance. Over to you. Hilary Maxson: Thanks very much, Olivier, and good morning, everyone. Happy to be here with you all today. I'll start with our key financial highlights for the full year, some of which Olivier has already mentioned. Starting with revenues, and Olivier mentioned a few times, we're excited to show revenues of more than EUR 40 billion for the first time, finishing the year at EUR 40.2 billion in revenues, up 9% organic. In gross margin, as expected, we finished the year slightly negative. Despite this, we did continue to see a step-up in our adjusted EBITDA margin, which improved by 50 basis points organic, supported by strong cost control and the simplification actions we started in 2025. Our free cash flow was above EUR 4 billion for the third year in a row, a bit higher than our expectations, driven by strong operating cash flow and working capital improvements. In terms of net income, we were slightly negative at minus 2% with our adjusted net income up 4% recorded. And lastly, we did see a step-up in our ROCE to greater than 15% for the first time, reflective of our strong operating results. To get into a bit more detail, both businesses contributed to our overall growth in revenues of plus 9% organic with Energy Management up double digit for the fifth year in a row at plus 10% and Industrial Automation back to full year growth at plus 3%. And while it's not on this slide, I'll mention that all 4 of our geographies finished with positive full year organic growth in revenues in both businesses, a reflection of our strong portfolio positioning across our hubs. The positive contribution from scope is from Motivair and Planon, and we did finish the year with a negative impact from FX as anticipated, primarily due to the depreciation of the U.S. dollar and U.S. dollar impacted currencies. Based on current rates in 2026, we'd expect this negative FX impact to continue with minus EUR 850 million to minus EUR 950 million impact on full year revenues and minus 10 basis points impact on adjusted EBITDA margin. Of course, FX rates are not easy to predict. So to support your modeling efforts, we've updated our FX sensitivities to key currencies in the appendix of this presentation tied with the 2026 guidance we're giving today. Olivier already mentioned the 15% growth in our digital flywheel, which we use to track the progress of our transformation towards more digital and more recurring revenues. The only additional point I'll mention here is that you can see we're now at 79% recurring revenues in our agnostic software business. This recurring revenue profile supports greater visibility and margin and cash flow resilience over time, and it remains a central pillar of our value creation strategy. Turning now to our backlog at the end of 2025. We exit full year 2025 with a record backlog of more than EUR 25 billion and a growth of 18%. And just to note, that 18% is not in constant currency, so it reflects a similar drag from FX as we saw in our 2025 revenues. A couple of points I'll make here. First, this strong backlog will obviously support our sales in 2026 and into 2027. And more importantly, it gives us very good visibility, particularly in our data center business for the next 18 to 24 months. Second point, we did see a clear acceleration in orders in the fourth quarter, driven by data center, but not only, we also saw a good pickup in demand in infrastructure and in industry, including process and hybrid in the Q4. Moving now to Q4 revenues, which was a record high quarter for us. All 4 geographies contributed to our strong finish to the year, driving sales to EUR 11 billion, or plus 11% organic, and both businesses also contributed strongly. The positive scope is for Motivair. The first year there was very strong, better than business plan, and we saw a negative impact in FX in Q4, tied to the depreciation of the U.S. dollar and dollar impacted currencies. In terms of business models, we were up plus 4% in products with around half of that due to price as we ramped up our pricing to offset tariffs and inflation, particularly in North America. Our systems business grew very strongly, plus 19%, with growth led by data center with strong growth in Industrial Automation as well. Software and services was back to double-digit growth, plus 10% organic growth for the quarter, driven by double-digit growth in revenues in AVEVA and digital services. Turning to the 2 businesses. Energy Management was up 11% for the quarter, with North America at plus 19%, driven by growth in data center as well as industry and infrastructure. We did still see negative growth in residential in the U.S. and in Canada with some early signs, maybe wishful thinking of stabilization of demand in terms of orders in the U.S. In Western Europe, up 5% organic, the growth was led by data center with solid contribution from residential buildings. Asia Pacific was up 5%, with China up low single digit, driven by continued demand in data center with the building and construction markets still subdued. India was up double digit with strong growth in both products and systems, and Rest of the World was up 9% organic, with continued double-digit growth in Middle East and Africa. Industrial Automation was up 8% for the quarter, with North America turning to growth, up 5% organic, driven by discrete automation in the U.S., supported by the market as well as some investments we've made in the commercial organization there and with double-digit growth in both discrete and Process & Hybrid in Canada. Western Europe was up 8%, with growth led by AVEVA with solid growth in discrete and Process & Hybrid. Asia Pacific was up 7%, supported by sales at AVEVA with solid growth in discrete and Process & Hybrid. China was up low single digit and India was up double digit, both driven by continued growth in discrete. Rest of World was up 14% with strong growth across most of the region. Turning now to our P&L. We finished the year with adjusted EBITA of EUR 7.5 billion, up 12% organic, and we continued with another year of progression in our adjusted EBITA margin, up 50 basis points organic. This was driven by our strong organic revenue growth as well as strong leverage on our operating costs as we focused on cost control and started the implementation of our simplification program. These actions translated into our SFC to sales ratio, which stepped down almost 1 point to 23.3%. At the same time, we continue to support investments for the future in technology leadership and in customer differentiation. And you can see our R&D as a percentage of sales remained flat at close to 6% for the year. Our gross margin was negatively impacted by inflation, tariffs and by mix, partly offset by a strong acceleration in productivity in H2, and I'll speak more to that in a moment. Energy Management finished the year with adjusted EBITDA margin of 21.8%, flat to 2024, impacted by the same negative trends in gross margin as the group, offset by operating leverage. Industrial Automation finished with adjusted EBITDA margin of 14.2%, an improvement of 10 basis points organic, driven by improvements in gross margin, mostly offset by a deleverage in operating costs in the first half of 2025. Gross margin at the group level came in at 42.1%, down 40 basis points organic. And you can see the details quite clearly in the bridge. We did see a pickup in product pricing in H2, but not yet enough to offset headwinds from tariffs and raw materials, as expected. Mix continued negative for the full year, also as expected, due to the higher growth in our systems business. And we did see a strong pickup in productivity in the H2, supporting a stronger gross margin evolution in the second half of the year. Now Olivier will speak to more details in the trends we expect for 2026 in a few minutes, but we do expect a continued pickup in pricing throughout 2026, which, alongside the other drivers of our gross margin that we presented at our Capital Markets Day, should support a positive evolution of our gross margin in full year 2026. However, the timing of that ramp-up in price as well as the timing in RMI and tariffs will likely mean we continue with flat to negative gross margin progression in the first half of 2026 and tariffs being a bit difficult to predict at the moment. I mentioned the strong operating leverage we drove in our operating costs, or what we call our support function costs, in 2025 through both cost control as well as the kickoff of our simplification program. You can see we drove EUR 349 million in cost savings in 2025, more than offsetting inflation and allowing for investments in R&D, in commercial initiatives and in our digital backbone, including AI. Turning now to net income. Including scope and FX, our adjusted EBITDA is up 6%. As I mentioned in December at our Capital Markets Day, our restructuring costs did tick up to close to EUR 300 million tied to the simplification program that we kicked off this year and in support of the additional minus 1.5 to minus 2 points, we expect to drive in our SFC to sales ratio between '26 and 2030, and that excludes R&D. The only other item I would note is we did have an additional around EUR 100 million impairment in H2 tied to some equity method investments in the U.S. Alongside as anticipated increases in financing costs and PPA accounting, we did see a negative evolution of our net income of minus 2% with our adjusted net income, which excludes restructuring and impairments of EUR 4.8 billion, up 4% reported, or plus 14% organic, better reflecting our strong operating results. Free cash flow came in at a strong EUR 4.6 billion, a bit better than we expected, with strong operating cash flows, up 7%, and strong working capital improvements in inventory and days sales outstanding, driving a free cash flow conversion ratio of 106% or 111%, including those noncash impairments. As I mentioned in our Capital Markets Day, we'd anticipate our cash conversion ratio to be around 100% over the next years despite the capital investments we're making to support our growth, bolstered by structural working capital plans. And I'll finish with a slide on our balance sheet and ROCE. We did close the India transaction at the end of 2025, so you can see a small uptick in our net debt to adjusted EBITDA ratio. But overall, our balance sheet remains strong, well supportive of the A-level credit ratings we committed to at our Capital Markets Day. And I'm pleased to see our ROCE surpassed 15% at the end of 2025, reflecting our strong operating results. With that, I'll hand back to Olivier to cover our 2026 expectations. Olivier Pascal Blum: Thank you very much, Hilary. Indeed, let's close the first part of our call with what we see as a key trend in '26. It's going to be a summary because we've covered already a lot. But in short, what we see is a continued strong market demand, which will help us to drive growth and with positive contribution for all our end markets. Obviously, data center end market will lead the growth based on the growth demand -- the strong demand we've seen in '25 and we see that to continue in the future. What is very, very important for me is while we like and we love really taking the most of that opportunity, we will continue to position Schneider Electric strongly in industry and infrastructure, and we see great opportunity to accelerate the growth, and buildings to improve its contribution progressively also aligned with the macroeconomic trends. System will continue to lead our growth, but we see also some improvement on our product business, which will have a positive contribution this year and in particular, but not only in discrete automation, which has also been a very important point of focus last year. We'll keep growing in software and services. This is a translation of our energy intelligence story, with a very, very strong focus at the end of the day to drive more recurring revenues in all part of our business. The good news, all 4 regions will contribute to the growth, from North America, Europe, China, Southeast Asia and International, of course, led still by U.S. first and India probably second. But the good news is all markets will contribute positively. It's very, very important. We said it several times. What makes Schneider Electric very, very different, it's a balanced exposure by end market, by business model, also by geography, and we want really in '26 to continue to have this balanced exposure and to make sure we always make the most of those market opportunity and always building strong muscle for the future in case some part of the market might be less exciting in the future. So as a result of that, we are also putting a lot of action on price. Hilary said it. We want to be net price positive in value to be able to offset raw material impact and tariffs, ramp it up throughout the year. And as Hilary said, bringing and turning our gross margin positive during the year 2026. So the group expects the other driver of adjusted EBITDA margin expansion to be aligned with what we shared with you during the Capital Market Day. As a result of that, we have set up the following target for '26. So an adjusted EBITA growth between 10% and 15% which is supported on one side by a revenue growth of 7% to 10% organic. I insist organic is really an important point for us. We see massive opportunity in the market. And at the same time, we'll keep on increasing our adjusted EBITDA margin between 50 and 80 bps organically in '26. So all of that will translate our adjusted EBITDA in margin -- I mean, margin in a bracket of around 19.1% to 19.4% for the full year '26. So exciting year in front of us. We are ready. We have a plan. And definitely, we plan to accelerate the overall execution of that strategy in '26. So before we hand over to you for Q&A, today is an important also day. We made the announcement this morning that it will be your last earnings call, Hilary. Hilary has been with us for 9 years. She has been the CFO for the past 6 years. She's going to take the next assignment in the United States that will be announced later. And she will be replaced by Nathan Fast, which is actually on my left. So Nathan has been in the company for almost 20 years, have been doing a lot of different job in different part of Schneider Electric, the last one being Investor Relationship. So very pleased to have you Nathan, in this new role, and I'm sure you will build on the strong legacy that has been built by Hilary in the finance, and you will help us to execute that plan very, very fast and to drive strong shareholder return. Hilary, I want to thank you for the partnership. It has been a great journey in the past 10 years, but in particular, in the past 15 months, the 2 of us. You have been a fantastic support for me to become the CEO of Schneider Electric. So I want to thank you on behalf of the team here at Schneider Electric and wishing you all the best in your next chapter. Hilary Maxson: Yes. Thanks, Olivier. Schneider has obviously been a huge piece of my life and my career, and I'm extremely grateful to the Board, to yourself, the CEOs and colleagues with whom I've worked over these past 9 years and for the trust and support they've given me. And in particular, you mentioned I'm excited on the work we've done together over the past 15 months, to put the company on the trajectory we described in our Capital Markets Day and reiterated today. I'm certain I'm leaving at a time when the company is on a great trajectory, and I'm really pleased we've been able to prepare a great successor with Nathan over the past few years. I'm confident that he'll hit the ground running. And then just for those curious, my next role will be announced closer to the date of my departure. So Olivier, back to you. Olivier Pascal Blum: All the best, Hilary, and we will work together, you, Nathan and I in the coming weeks to do a very smooth transition and starting next week, by the way, with all our investor roadshows. So we'll continue to have fun together for a couple of weeks. Nathan, back to you for the next part. Nathan Fast: Okay. Olivier, maybe I can say a couple of words as well. First, I'd really like to thank Hilary, right, first, for her leadership across the finance function, but also the opportunity to have learned many, many things, Hilary, over the last 9 years working extremely closely together. And then I guess, Olivier, also maybe a bit to you. Thank you for the trust. I, of course, take the position with humility and determination to succeed together with you and your leadership team. So thank you for that. Nathan Fast: I'll make the transition then to the Q&A, of course. and thank you both for the presentation. We have around 20, 25 minutes. I'm sure there's a lot of questions, and I want to make sure we get to every analyst with the question. So if you can please just stick to one question, that would be great. And with that, operator, let's go to you for the first question, please. Operator: [Operator Instructions] The first question is from Phil Buller of JPMorgan. Philip Buller: Just to follow up on that CFO transition topic, if I can, to start. And obviously, thanks, Hilary, very best wishes for the next chapter, and congrats, Nathan, of course. The question is on timing. I've had a few investors asking about that today. It obviously sounds very smooth, but it's obviously also been announced shortly after a major CMD. So if you could just share some additional color as to the genesis of this, Olivier, perhaps, is this something that you were envisaging during the CMD buildup as you build those 2030 objectives together as a team? How involved was Nathan, in particular, in that process? And has anything changed? One of the data points offered at the CMD was in relation to the AVEVA margin expansion. And obviously, there's a question at the moment about software more broadly. So just a little bit more color about the genesis and the time line and if anything has changed in terms of the assumptions even in that relatively short period since the CMD, please? Olivier Pascal Blum: Sure, sure, sure. Well, look, as we said, and I'm sure you can feel it today, this is a very smooth transition that we are managing with Hilary. Just want to tell you that Schneider Electric is not one man or two people show. What we've presented to all of you at the CMD, it's the work of the entire executive committee. They have been associated to the building of this next cycle. I told you many, many times in '25 that it was time for Schneider Electric to build this next cycle, inventing what advancing energy tech and with actually more executive last year that we have usually to work all together as a team. And Nathan has been associated in the later part of last year, of course, as a new IR of the company in the building of that plan. So I understand that a change of leadership always raised question. But again, we respect, first of all, the choice of Hilary to take a new role and to have a next chapter in your career life. But what is very, very important at the same time, we are very, very solid team behind this plan. I've been now the CEO for 15 years -- 15 months. Before that, I was in Schneider again for more than 32 years. So I think what is super important and Hilary has helped me a lot to build this very strong plan for the next cycle. Whatever we presented to you in the CMD in terms of assumption, driver and how we want to accelerate the performance of Schneider Electric remain absolutely valid. And as I, Nathan has been associated through this plan from day 1, so I feel confident that we will manage this transition smoothly, and we are fully ready this year to execute our plan extremely fast. Operator: The next question is from Alasdair Leslie of Bernstein. Alasdair Leslie: So a question on pricing. I mean, obviously, if we look at that EBITA bridge, it does look like the gross pricing was still relatively muted in H2, but obviously, you're flagging an acceleration in Q4. I was just wondering if you could talk a little bit more about those kind of pricing exit trends. Any price increases you've already put through year-to-date? And then I was actually wondering if you could comment specifically on the pricing environment in China. Have you seen any stabilization or improvement in the deflationary environment there? It's a market, I think you said recently at the CMD that you were working on pricing as well. So what's the problem is for 2026 and our margins generally in China still holding up at high levels? Olivier Pascal Blum: Yes. Absolutely. Thank you very much for the question. I'll start and hand over to you, Hilary, to complete. Look, we told you last year in H2 with Hilary that definitely, we were ramping up step-by-step more pricing everywhere in the world and in particular, in North America, we know with impact of the tariffs. Last year, as you know, was a complicated year where we had up and down on tariff. It kept changing. So it was not always easy really to plan what would happen. Last year, in Q4, we put a very solid plan to accelerate pricing. What happened since Q4, we have seen also a huge increase of raw material. So there was, on one hand, the need to implement what we decided last year, but also to accelerate everything we plan in pricing to compensate the impact of raw material. We have a lot of silver and copper in all our products. So I think the good news this time we were ready with the initial plan of Q4, and it was just about how we accelerate to add on top of that the compensation of raw material. I'll let you complete maybe on the second part of the question on China [indiscernible]. Hilary Maxson: Yes, sure. Indeed. So we did see an acceleration in 2025 in the Q4 in pricing generally, of course, in particular, in North America, that's where we have the tariff impacts in front of us. China for 2025 definitely remain deflationary. So those low single-digit numbers that we're talking about in China would be higher without that deflationary. They're higher in volume. We would expect China -- it's not always easy to call. The government is trying to combat deflation. But in general, we'd expect China to remain deflationary in 2025. That said, with the uptick of raw material prices, which impacts far more beyond just our industry and our own competitors, we did start to see pricing and price increases, including with all kinds of local competitors across industries in this Q1 in China. So we expect there to be a bit of a turn there as well. And I'll just mention that we did update in the appendix of this presentation, a slide we gave a few years ago with the breakdown of copper and silver for us in terms of raw materials in 2025. So you can see all of the information. And like Olivier mentioned, '26, we expect that we'll continue that ramp-up that we already talked about in the second half of last year. Operator: The next question is from Andre Kukhnin of UBS.. Andre Kukhnin: I'll focus on data centers, please. Historically, you gave us very helpful disclosure on how much of your backlog is from data centers and distributed IT and how much of that sort of pure data centers and hyperscalers within that. Could you please give us those details for 2025? And the bigger question really, I wanted to get your view on how you're positioned for the 800-volt direct current architecture transition and in particular, what are your state of offering at the moment in solid-state transformer and solid-state braking? Olivier Pascal Blum: Absolutely. Well, look, it's a very important question. Maybe I can start by the second part of the question, Hilary, and hand over back to you for the first part on that backlog. Indeed, when you look at the evolution of data center, the type of AI factory you will have to build in the future to support the next generation of GPU of NVIDIA like Rubin Ultra or Feynman, that will require at one point of time, a different type of infrastructure. So that's why there is so much buzz on 800-volt DC. We see that it will be an important trend. It's very difficult to say by 2030, when you look at all the data, we say 200 gigawatts to be built in the world. We estimate all reports in the market estimate 15%, 25% of the demand could be impacted by 2030. What is super important, you are talking about an evolution of the electrical infrastructure, which is, again, where Schneider Electric has a very strong leadership. So we are developing one, what we call, as you know, the sidecar concept, which can be available immediately, which is a minor evolution of the infrastructure. But we are developing those full definitely architecture that could be ready by '28 when the market will start to grow. And we are leveraging here a lot of competency we have in-house, in particular, in China, but also we're working with partners. So again, that's a domain that we know very well because it's touching the core of the electrical infrastructure that creates actually also opportunity for Schneider Electric to stay extremely differentiated in the market in the future. And as I said, we have to get ready for a transition that will be slow, that will take time, but it's super important that as a worldwide leader in electrical distribution, Schneider Electric is the first one really to offer the most innovative solutions. So again, you're absolutely right. That's an important trend. We are extremely well positioned. We have accelerated our investment in '25 to develop concept. A bit too early to say because the demand is just about to start, but we are fully ready to face this new trend, which again will impact our market step by step between probably '28 and 2030. Hilary? Hilary Maxson: Thanks, Olivier. In terms of the backlog, you're right, we didn't give a backlog breakdown by end market. And I don't think we would intend to do that. But what we are doing, and you can see we've updated the exposure in terms of our 2025 orders across our end markets. So now we're doing that annually. I think you can infer generally the orders growth that we've seen there, and you can infer from that probably some component of data center and networks. Of course, out of the energy management piece of the backlog, which we showed, a good portion of that is data center and network, but not only. So we also had good growth in the rest of the end markets. Operator: The next question is from Jonathan Mounsey of BNP Paribas. Jonathan Mounsey: And may I just also say, sorry to see you go, Hilary, but welcome, Nathan. In terms of my question, will you just so -- the intake so far in Q1? I mean, obviously, there was a big step-up in DC intake in Q4, I think probably for all the players, and you've confirmed that again today. Just wondering whether that's really continued into 2026. And also, with the order intake where it is and with your comment around it really gives you visibility through for the next 18 months, are we saying now that kind of revenue growth in data centers is capped this year and what we're booking now is really for 2027? Olivier Pascal Blum: Do you want to start, Hilary? Hilary Maxson: Sure. So in terms of intake in Q1, well, we've said quite a few times before, and we're not quite done with the Q1 yet that we don't consistently look at orders as the right way to look at data center and network. But what I would definitely say is that demand for data center accelerated in the Q4, and we don't see a different change in trend in the Q1, if that's what you mean. That's the first part of your question. Visibility, indeed, we have good visibility. We've talked about it for some time, and you can see it even in orders in the backlog now, 18 to 24 months in terms of data center. In general, those projects now are being planned probably mostly in those later two years. That's what the hyperscalers and the others are doing. So yes, we would have a decent visibility on 2026 revenues associated with data center at this time, exactly. Operator: The next question is from Gael de-Bray of Deutsche Bank. Gael de-Bray: So just a follow-up on this. I mean, you obviously finished the year with a very strong backlog now exceeding EUR 25 billion. So can you help us understand how we should think about the timing of conversion, specifically for 2026 and '27? And what are the potential bottlenecks you may have to solve to convert that backlog into revenues? Olivier Pascal Blum: Yes. Thank you for the question. First of all, I'd like to remind and probably rebound on what Hilary said. In the way we operate in that market and in particular, with the large hyperscaler, we work with them on the design, we freeze the design, we look at the planning they need in terms of capacity, and it help us to adjust our capacity. So the combination of this work we are doing on design agreements we are making with them is helping us really to have a good visibility, as Hilary said, 18, 24 months on what's going to happen. To answer more specifically your question, in the acceleration of Q4, a large part of what we booked in Q4 will be executed more in '27, but that will impact a little bit '26. And the second part is definitely, we see an acceleration in demand of those AI factory everywhere in the world. We see that in North America, but I was just in India last week, for instance, for the AI Summit. We see also that India is accelerating. So that gives us the confidence that we can predict pretty well what's going to happen because we are really very well connected first with hyperscaler. We are operating in those key geography. And for a company like Schneider Electric, if we have a kind of 2 years visibility on the demand, we can react on capacity. We can do it by ourselves by building extra capacity. But we are also working more and more with different partners. I was mentioning Foxconn, the regional partner everywhere in the world to adjust capacity plus/minus if needed. So the only change for a company like us, probably a couple of years ago, we are looking at our overall capacity every 2 to 3 years, and then we move to 1 year. Now it's a very dynamic process where every quarter, we revisit the demand for the next 3 years, and we adjust eventually the capacity we need. Keeping in mind that we want to stay very balanced. So it's not only about building capacity for North America, but also making sure we are building capacity in the other part of the world. That's why I was saying you, for instance, before that we decided last year to invest in a new factory for liquid cooling in India because we see the demand for AI factory in India also coming, and that's why we have accelerated the execution of the plan. So that's how we are managing. There will be up and down. Of course, we'll continue to adjust. But I think we are fairly confident with the visibility that we have in the pipeline, the way we are working with all those key stakeholders and adjusting permanently our capacity. Hilary Maxson: And we do give a breakdown of the backlog between less than 1 year and more than 1 year. We would intend to meet the customer commitments we have. So all that backlog you see in less than 1 year, we'd obviously expect to accomplish in 2026. Operator: The next question is from James Moore of Redburn Atlantic. James Moore: Hilary, thank you for all your help and best of luck. And Nathan chapeau. Could I ask about software and AI and the disruption risk in sort of 3 dimensions. I think we're talking increasingly about software being made up of a kind of UI SaaS application layer that is going to be fully disrupted by agents, but under that a system of record and a database with more of a moat. And I would argue that your AEC business does have some of that top UI layer that could be disintermediated. Have you done any work on what proportion of revenue do you think that is at risk and what proportion you think is safe from AI directly substituting you? And secondly, as customers increasingly use AI to increase their workflow productivity and presumably, if you continue to price on a seat-based monetization model, you're going to see a decline in revenue. How quickly? And are you planning to pivot to tokens or to another form of usage? And how quickly do you think you can do that? And I guess the third dimension is you're going to be trying to increase the degree of AI in your own software products to add compute and value. Are you worried that, that aspect of AI uplift can also be disintermediated by others taking that aspect of the productivity improvement work? This is sort of quite a lot bundled into that. But Olivier, I'd be very interested in your thoughts. Olivier Pascal Blum: Thank you. No, it's an excellent question and indeed, a very complete question. Let me start. Of course, we are doing analysis permanently. And I tell you why, because when we really started to see even end of '24, the acceleration of AI, we discovered that it was a massive opportunity for Schneider. We've been quite vocal with you for the past 2 years on what we do in digital services. Digital services is basically a business where we extract data coming from all the assets that we make more connectable. We've been -- we built this offer that we call EcoCare. AI has helped us to go much faster actually in creating more value for our customer. So obviously, when we realize that it will help us to go much faster, and to deliver more value and you don't need to go through a very complex software in the middle. Immediately, what we've done with Caspar, the CEO of AVEVA, was ready to look at our own portfolio and to check if it could be disrupted. Now I don't want to be too oversimplified, but what AI brings is when you have simple repetitive task, a lot of information that you need to capture. And when you look at the portfolio of AVEVA, I don't want to say that we have 0 risk. But the large part of what we are doing is about leveraging extremely complex data that come from industrial infrastructure, working on very complex and critical installation, where cybersecurity, by the way, on top of that is extremely important. So I see that there is still a space for huge growth for all those complex software because we are solving complex problems for our customers. And here, as you said in one of your question, AI is also an opportunity to amplify what we have been doing with AVEVA with the AI agent to go to the next level. So at that point of time, I don't want to say we are not worried, but we believe a large part of what we are doing in our software portfolio is not impacted negatively, but more positively. I'll just give you a last example maybe before I hand over to Hilary on the pricing side. You take what we have been doing with ETAP. ETAP is about building a software to design electrical infrastructure for the future, where you have to simulate a lot of assets, which are extremely complex assets. That's what we are doing in the Omniverse, for instance, with NVIDIA. We don't see AI at all being able to disrupt that kind of software. Now again, building AI agent on top of our software to make it even easier for our customer to use it, of course, why not? So all in all, we are -- we believe we are in a good place. We will be attentive. And at the same time, wherever we don't have a strong software business, we believe it will help us to accelerate some part of our portfolio for simple implication that we can deliver to our customer. Hilary Maxson: And in terms of your question about the seat-based model or pricing in the software business, as part of the AVEVA transition to subscription, and we did a lot there. It's not just changing contracts and things like that. But you may recall that we've talked about the flex pricing model that we've been invoking at AVEVA more and more tied with Connect, but not only with most of the services of AVEVA and into OSI. That's the pricing model that we've been moving to over the past few years. And that's effectively token-based. So we didn't do that because of foresight on AI -- agentic AI, but that is the model that we've moved -- started to move to and that I feel comfortable will be sort of the model of the future for this type of software. Nathan Fast: Thanks, James. We probably have about 5 minutes left. So if you can make the questions pretty concise, then we can maybe fit in a couple more. Operator, next question? Operator: So the next question is from Ben Uglow of OxCap. Benedict Uglow: I will keep it brief. It's really just on Industrial Automation and the margins. I have to be honest, I am surprised to see your margins still below 15%. And I guess it's two things. One is why aren't we seeing a little bit more operating leverage? And certainly, that's what we have seen in some of your peers. And secondly, just in absolute terms, why are we so low? Is this to do with China and country mix? How much is to do with process? How much is to do with SaaS transition? If you can just give us a sense of what part of the business is keeping the margins so low, that would be helpful? Hilary Maxson: Sure. So with Industrial Automation, indeed, we did finish below 15%. I mentioned that on the positive side, we do start to see that -- those improvements in gross margin in the business, which is exactly what we expected as we moved into the second half. So the big -- the detractor, I would say, in 2025 is that we did continue to have negative operating leverage in the first half. So what's driving -- and I'll talk to that in a second, but what's driving those lower margins, we've mentioned it a couple of times. A big component of it for us has been mix, the mix between Process and Hybrid and Discrete. We saw Discrete start to come back in the second half. That's been a big component of the mix return for us, and we'd expect that to move forward in future. Second, AVEVA and that transition to subscription, we shared in the Capital Markets Day that we're going to be moving our adjusted EBITDA margins up there now more swiftly over the next couple of years. So that's been a bit of a detractor, although it was an improver, obviously, in gross margin in the second half in terms of mix contribution. And then we have had a real drag in terms of operating leverage at the business. We have Gwenaelle, our new leader there in Industrial Automation that spoke about the changes that she's making in not just 2026, but going forward. But we would expect all of that to be operating in the right direction on all cylinders in 2026. So we'll have some more improvement in mix, normal productivity. And AVEVA, we're almost done with that transition to subscription. So we'll start to see more and more contribution at the level of adjusted EBITDA as well. So yes, not where -- exactly where we would have liked to be in 2025, but I think all the levers are there for '26 and beyond. And we gave a little bit of an idea of that margin journey in the Capital Markets Day to 18% and perhaps even a bit better by 2028. Nathan Fast: Thanks, Ben. Maybe one last question, and we can try to go quick on this one. Operator, next question? Operator: The next question is from Martin Wilkie of Citi. Martin Wilkie: First, Hilary, thanks for all the debates and interactions over the years and good luck for the future. My question was just on the seasonality and the implications for the profit uplift in the second half. And I know you've not guided explicitly, but if gross margins are lower in the first half, presumably the organic EBITA margin expansion is sort of clearly less than 50 basis points. As we think about the implication for the second half and at the upper end of the range, it would have to be more than 100 basis points up in H2. Is that all driven by price cost? Or is the leverage from industrial automation coming back and the volume effect from that? Or is the AVEVA timing? What would drive that quite large uplift in profitability in the second half? Hilary Maxson: So in terms of seasonality, we have two pieces of seasonality in my mind. One, something that is completely out of our control, which is raw materials and then the pricing that we do beyond that. The pricing is obviously in our control. That can pull our seasonality one way or another. So we've seen in 2022, 2023, that seasonality going in different directions being pulled by that. And here, when I talked about that negative gross margin potential in the first half, that's a lot driven by that uptick in pricing. And for example, with tariffs, we don't have any baseline of tariffs in the first half, whereas we do in the second half. So there's timing there. The other component of seasonality that we generally always see in our business is just associated with volumes. We have stronger volumes in the second half than the first half. That's been a seasonality for a long time across the business. So we have stronger leverage and we have stronger productivity usually in the first half. So in 2026, in particular, we would have better baseline on RMI and tariffs, the pricing plus productivity and volumes and operating leverage, which is those differences you'll see between the H1 and the H2. Olivier Pascal Blum: And I'd just like to complete indeed, there are a couple of drivers which are very specific to what's going to happen in '26. But as we said multiple times, in the plan we built last year, we have the ambition to work on all the cylinders of the gross margin. So of course, this year, we have a very strong focus on pricing, and we'll keep on going and especially with raw material. It's pricing of product. It's also how we price our services business, how we bring the right level of selectivity in our system business. It's also working on the portfolio. We have historically some activity which are more dilutive than the others. You've seen in the CMD that we want to take out EUR 1.5 billion. So since last year, we built this very strong plan that we call gross margin obsession, making sure we work on all the drivers. But indeed, as Hilary said, there are some specific drivers for this year, but it's a short term and long term because we want really to make sure that we have an extremely solid gross margin, which is for me, the best reflection of the health of the business of Schneider Electric. Nathan Fast: Okay. Thanks, Martin, for the question. Olivier, you have one word, and then we... Olivier Pascal Blum: We are done with the question. I guess... Nathan Fast: Yes, we're done with the Q&A. Olivier Pascal Blum: So again, I want to thank you for spending time with us today. We are closing the chapter of '25. You can feel that we've been excited, EUR 40 billion, EUR 4.6 billion of cash flow generation. It has been the great year, but it's closed. We have a plan. Now our focus is really to make the most on '26 and make sure we can continue to drive a strong shareholder return. So we will be excited, of course, in the coming days, coming weeks to follow up with some of you and especially next week to go more in detail on that presentation. Again, thank you for the time spent with us. Thank you again, Hilary. All the best to you, Nathan, and focus on '26 now. Nathan Fast: All right. Thanks, Olivier. I think we'll stop there. Look forward to meeting you, Olivier, mentioned earlier on some virtual road shows in the coming weeks. And additionally, of course, the IR team is available for you to engage. Thank you very much, and have a good rest of the day. Olivier Pascal Blum: Thank you.
Operator: Greetings, and welcome to the Kimbell Royalty Partners Fourth Quarter Earnings Conference Call [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, Rick. You may begin. Rick Black: Thank you, operator, and welcome, everyone, to the Kimbell Royalty Partners conference call to discuss fourth quarter financial and operational results. This is for the time period ending December 31, 2025. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, February 26, 2026, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's earnings press release for our disclosure on forward-looking statements. These factors as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings press release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements. And with that, I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer. Bob? Bob Ravnaas: Thank you, Rick, and good morning, everyone. We appreciate you joining us this morning. With me today are several members of our senior management team, including Davis Ravnaas, our President and Chief Financial Officer; Matt Daly, our Chief Operating Officer; and Blayne Rhynsburger, our Controller. To start off, we are pleased to report strong fourth quarter results that helped cap off another outstanding year for Kimbell. We began 2025 with a $230 million acquisition of mineral and royalty interest beneath the historic Mabee Ranch in the Midland Basin, strengthening the Permian Basin as our leading area for production, activity and inventory. During the second quarter, we redeemed 50% of the Series A cumulative convertible preferred units, simplifying capital structure and lowering our cost of capital. In the fourth quarter, we grew production organically from the third quarter and exceeded the midpoint of our guidance. The favorable fourth quarter performance allowed us to declare a Q4 2025 distribution of $0.37 per common unit, up 6% from Q3 2025 as we continue to focus on returning value to unitholders. For the year, we returned $1.60 per common unit through quarterly distributions, all classified as return of capital and 100% free of dividend income taxes while also reducing debt through disciplined balance sheet management. I'm also pleased to report that our proved developed reserves increased approximately 8% in 2025 to a record level of nearly 73 million Boe. Our active rig count remains strong with 85 rigs drilling across our acreage, representing a market share of U.S. land rigs at 16%. In addition, our line-of-site wells continue to be above the number of wells needed to maintain flat production, giving us confidence in the resilience of our production as we progress through 2026. Now before turning the call over to Davis, I'd like to take a moment to provide some high-level comments on a topic we have received considerable investor interest about recently, which is our Barnett-Woodford potential across the Permian Basin. We own all depths across the vast majority of our massive acreage position in our portfolio, which means that we stand to benefit considerably from any development in new formations, including the Barnett-Woodford. As a mineral owner, we do not have to pay for test pilot programs or delineation projects, making this a meaningful catalyst for increased free cash flow from our unitholders for our unitholders in the future. We have already seen development of the Barnett-Woodford on our assets from some of our major operators, and we expect this to accelerate. Finally, as we reflect on 2025, we are grateful to our employees, Board and advisers for another successful year at Kimbell as we remain focused on generating long-term unitholder value. And now I'll turn the call over to Davis. Davis Ravnaas: Thanks, Bob, and good morning, everyone. As Bob mentioned, 2025 was another excellent year for Kimbell. I'll start by reviewing our financial results for the fourth quarter. Oil, natural gas and NGL revenues totaled $76 million during the fourth quarter and run rate production was 25,627 Boe per day, which exceeded the midpoint of our guidance. On the expense side, fourth quarter general and administrative expenses were $10.4 million, $6.2 million of which was cash G&A expense or $2.63 per Boe, within our guidance range. For the full year 2025, cash G&A expense was $2.51 per Boe, below the midpoint of guidance, reflecting operational discipline and positive operating leverage. Total fourth quarter consolidated adjusted EBITDA was $64.8 million. You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release. This morning, we announced a cash distribution of $0.37 per common unit for the fourth quarter. We estimate that approximately 100% of this distribution is expected to be considered return of capital and not subject to dividend taxes, further enhancing the after-tax return to our common unitholders. This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell's secured revolving credit facility. Moving now to our balance sheet and liquidity. As a reminder, on December 16, 2025, Kimbell amended its existing credit agreement to, among other things, reaffirm our borrowing base and elected commitments of $625 million, lower the cost of bank debt financing by a combined 35 basis points and extend the maturity to December 16, 2030. At December 31, 2025, we had approximately $441.5 million in debt outstanding under our secured revolving credit facility, which represented a net debt to trailing 12-months consolidated adjusted EBITDA of approximately 1.5x. We also had approximately $183.5 million in undrawn capacity under the secured revolving credit facility as of December 31, 2025. We continue to maintain a conservative balance sheet and remain very comfortable with our strong financial position, the support of our expanding bank syndicate and our financial flexibility. Today, we are also releasing our financial and operational guidance ranges for 2026. Our production guidance at the midpoint remains unchanged from 2025 at 25,500 Boe per day and demonstrates the ongoing development, diversity and stability of our production base. We remain confident about the prospects for continued development in 2026, given the number of rigs actively drilling on our acreage, especially in the Permian, as well as our line-of-site wells exceeding our maintenance well count. In closing, 2025 marked a period of significant industry consolidation across our U.S. peer group. Looking ahead to 2026, we are excited about our position as a leading consolidator in the highly fragmented U.S. oil and natural gas royalty sector, which we estimate exceeds $650 billion in size. Long-term demand for U.S. energy is expected to continue to grow, and we are well positioned to benefit through our diversified portfolio of high-quality royalty assets across the leading U.S. basins. With that, operator, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Nick Armato with Texas Capital. Nicholas Armato: So for the first one, maybe regarding your 2026 guidance, while I realize you don't provide quarterly guidance, could you perhaps speak to your expected production cadence for the year from 4Q '25 levels? Davis Ravnaas: I would say relatively stable. It's difficult to predict, obviously, because we don't control development. But I think you can assume a relatively stable development cadence over the course of 2026. Nicholas Armato: Perfect. Makes sense. And then for my follow-up, I wanted to ask about the competitive landscape for M&A. After last year's industry consolidation, how would you characterize the competitive landscape outside of the Permian now that there's maybe less competition? Davis Ravnaas: Yes, it's a great question. I'd say that we have 2 advantages the way we see it in terms of our competitive positioning. First, we can target deals that are very meaningful to us in the $100 million to $500 million size range. And we can also focus as we have historically in every basin across the country. So we're not just focused on one basin. So I think the combination of those 2 factors puts us in a unique position to be competitive on high-quality assets that are within that medium-sized range that can be meaningfully accretive to us, but they are also perhaps in out-of-favor basins. And a good example of that would be the LongPoint acquisition that we did a few years ago, which has been tremendously successful for us. A large portion of that acreage was the Mid-Con. And I think a lot of folks that are focused on the Permian only weren't interested in buying that package because of the significant Mid-Con component. The Mid-Con is an area that we are extremely bullish on. There's a favorable dynamic now with gas and NGL price improvement. We've seen recent consolidation within that basin, specifically within Oklahoma. And we remain very confident that that's going to be a basin of significant growth and will add a lot of value to our business going forward. Operator: Our next question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: First one, I saw your net line-of-site maintenance well assumption increased to 6.8 from 6.5. We thought that was interesting given that you're still heavily exposed to the Permian and lateral lengths and EURs and IP rates are all going up significantly as operators push longer laterals. So I thought that net count might actually come down a bit. A [ till ] is different from what it was 7 years ago in terms of the production profile. So can you walk us through kind of what drove that change? Davis Ravnaas: Sure. Pretty simple explanation. We determine that calculation once a year because a lot of work goes into it. And last year, in the first quarter in January, we acquired Boren, so 100% high upside unconventional horizontal properties. So when you add that into our mix, you would expect to see a very modest increase in the maintenance level. Timothy Rezvan: Okay. So just folding that in. Okay. Davis Ravnaas: Yes, exactly. Timothy Rezvan: Okay. That's helpful. And then as a follow-up, I noticed your net debt, and I think you're allowed to use net debt now in your numbers, so we'll look for that going forward, down $30 million in the last 6 months. I know there's no rush or urgency on the mezzanine equity. I'm sure, all else equal, you prefer to kind of clean that up. If we continue to see kind of the steady free cash flow whittling down debt and improving liquidity, how are you thinking about maybe addressing that? Would you look maybe in the back half of the year to take some down? Or is it more like leave it as is to give you optionality if there's M&A? Just trying to understand those dynamics. Davis Ravnaas: No, no, no. It's a good question. So there is a minimum threshold for the amount that we can redeem at any given time. We would probably anticipate redeeming some portion of it in the latter half of the year, but we'll be opportunistic about when we choose to do that and weigh the balance between cash interest expense on our RBL and what we're paying on the mezzanine. Operator: Our next question comes from the line of Noah Hungness with Bank of America. Noah Hungness: I wanted to start off here on realizations. Can you maybe just help us how to think about the natural gas realizations as a percent of Henry Hub, NGL realizations as a percent of WTI and differentials for crude for this year? Davis Ravnaas: Sure. Noah, Matt, maybe I'll turn that over to you. I know we almost always see some seasonality as we see realizations quarter-to-quarter. But Matt, maybe you can add some more detail to that. Matthew Daly: Yes, yes. So the oil differential was flat at 2% between Q3 and Q4. natural gas was 18% in Q3, went to 24% in Q4, and then NGLs was flat quarter-over-quarter. And you're right, David. Generally, we see for natural gas differential sort of a seasonal increase in differentials during the winter months. So Q4 and Q1, you'll see higher differentials. And as we get into Q2 and Q3, it will likely go back down closer to 18%. Obviously, with Waha and the takeaway capacity being built out of the Permian over the next couple of years, we expect that will certainly improve the long-term differentials for natural gas as those pipelines get in place. But again, it's more of a seasonal item. Again, Q4, Q1, a little bit higher differential for gas and drops in Q2 and Q3. Noah Hungness: And the NGL realizations, should we just kind of assume it's flat versus what 4Q was? Matthew Daly: I would assume flat between Q3 and Q4. Noah Hungness: Great. And then kind of building off of the realizations questions here. Can you guys maybe just talk about what the Waha price inflection in '27 will mean for you guys and kind of what your exposure to that theme is? Davis Ravnaas: I mean it should be a significant improvement for us and everyone else that's in the Permian. But Matt, I'll let you answer that question. Matthew Daly: Yes. I mean over 85% of our gas production is outside Waha. So you have -- you do have 15% that's exposed to that pricing, which is obviously was very low recently. So can we quantify the impact? I mean it's certainly going to be a catalyst, I think, for improving differentials as you get into the latter part of this year and into '27. We haven't quantified the improvement, but we're looking forward to seeing those differentials sort of long term much lower as those pipelines come into place. Davis Ravnaas: No, I think what we're more excited -- about I think what we're more excited about in the Permian is just the continued development of different benches. So we're seeing what seems like a rapid acceleration of delineation within the Woodford-Barnett area. So I know Bob commented a little bit on that in his opening comments, but that's a real opportunity for us to drive production growth across our basin at no cost to us. We're seeing just tremendous interest in developing the Woodford going forward. And I think that's a huge tailwind for our business. Noah Hungness: And do you guys -- I guess, just responding to that, do you guys think that -- is this more of a story where the activity will improve production? Or do you think you'll receive a bit of a revenue tailwind on the lease bonus side first? And if so, like do you have a rough idea how much that might be? Davis Ravnaas: More on the production side, good question. Almost all of our acreage is leased. So we will probably get some lease bonus impact from that. And when I think about that, it's going to be acreage that we own in areas that could be prospective for Woodford-Barnett, maybe more on the platform side than the Midland Basin that are currently unleased. But on the leased acreage, I mean, it's pretty easy just to go to our investor presentation and look at our Permian map. I mean, we just have tremendous exposure at all depth to that specific formation. So to the extent that, that continues to be developed, and we've already seen some developments. So on the Mabee Ranch, for example, Conoco has drilled a couple of wells that have been very good, and then we're surrounded by activity from other operators like Oxy and Fasken. So it is real. It's something that we've noticed in speaking to operators, their interest level increasing dramatically on that play. And I think you'll -- I'm sure across your coverage universe, you've seen other Permian operators talk about their development plans pursuant to that. So it's just a great example of why minerals are a wonderful business model. Operators that are on our properties are some of the most innovative people in America, and they're just constantly looking for ways to improve production, whether that's enhancing production techniques or drilling at different depths and different formations. And the good news is that as a mineral owner, we don't have to pay for any of that experimentation or proving out the best areas in which to apply CapEx. So it's going to be a nice windfall for us, and we believe in it. Noah Hungness: Are those leases HBP? Or are they set to expire, which means that the operators are kind of on the time line to get those drilled? Davis Ravnaas: Almost all of our acreage is HBP. Operator: There are no further questions at this time. I'd like to pass the call back to management for any closing remarks. Davis Ravnaas: Thanks to all, and have a wonderful rest of your week. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, and good afternoon, everyone. Well, thank you for joining us for KBR's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Drew, and I'll be the operator on the call today. During the call after the prepared remarks, we'll have a Q&A session. [Operator Instructions]. With that, it's my pleasure to hand over to Rachael Goldwait, Head of Investor Relations, to begin. Please go ahead when you're ready. Rachael Goldwait: Stuart and Shad will provide highlights from the quarter and full year and then open the call for your questions. Today's earnings presentation is available on the Investors section of our website at kbr.com. This discussion includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance as outlined on Slide 2. These matters involve risks and uncertainties that could cause actual results to differ materially from these forward-looking statements as discussed in our most recent Form 10-K available on our website. This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart. Stuart Bradie: Thank you, Rachael, and good morning, everyone. I will pick up on Slide 4. As we always do at KBR, I want to start with a brief Zero Harm moment. In 2025, we delivered industry-leading safety performance with our TRIR reaching an all-time low of 0.033 and Zero Harm days reaching an all-time high at 96%. These results really reflect strong discipline and accountability across our operations. More importantly, we speak to the culture we've built inside KBR. We focus on creating an environment where people look out for one another and where safety and well-being are part of how we operate every single day. That culture is especially important as we move through the spin, and it underpins the execution and results we will walk through today. On to Slide 5. Today's call will cover these key topics. First, I'll start with how we delivered our strategy in 2025. From there, I'll touch on why we see improving momentum and visibility as we move into 2026 across both segments, including how the quality of our earnings continues to improve. It's really important. I'll provide an update on the spin itself. And finally, Shad will walk through our financial performance for the year and of course, our guidance for 2026. On to Slide 6 and strategy. So as we enter the year, I want to start with a simple message. We executed our strategy in 2025 despite a very challenging award environment across both segments. We stayed disciplined, focused on what we can control and made meaningful progress across each of our strategic pillars. Firstly, drive and expand. In sustainable tech, we continue to expand globally with particular momentum in the global [ South ] and you've heard us say that before. We also made deliberate progress growing our OpEx-facing businesses, both organically and inorganically. And this, of course, reduces our exposure to CapEx cycles. The SWAT acquisition within our Brown & Root joint venture BRIS, which closed in January, was a key milestone, more than doubling the EBITDA of that business. In Mission Tech, we continue to leverage contract vehicles, including recent Air Force and Space Force awards, which you'll have seen, while expanding internationally and strengthening our presence in Washington. And that's to deepen engagement with both the administration and the Pentagon. Second, to deliver innovation. Innovation remains central to our strategy. In Sustainable Tech, we launched INSITE 3.0 this quarter through a new venture with Applied, enhancing operational performance across KBR licensed ammonia plants using physics-based AI. We also continue to advance Mura and other technologies as a long-term growth platform. In Mission Tech, our focus on deepening customer relationships and advancing our technology road map is paying off. Recognition as a top 10 Australian defense contractor, the Nova Excellence Award from NASA and the recent Golden Dome Shield seat all reflect is progress. Post-LinQuest, the establishment of a new Chief Technology Officer role and our digital design labs are strengthening our position as a true capability partner. Thirdly, drive operational excellence. Operational execution was a clear strength in 2025. We expanded margins by more than 100 basis points and generated operating cash flow with a conversion rate of 110%, delivering over $30 million in cost savings and expect this margin and cash performance momentum to continue into 2026. And finally, deploy capital effectively. We delivered $413 million in capital to shareholders in the year, and that's the highest in the last decade, successfully integrated LinQuest and delevered the balance sheet within a year. As we prepare for the spin, we remain highly disciplined, ensuring both companies are positioned with appropriate capital structures from day 1. With that context, let's turn to our segment performance, starting with Sustainable Tech on Slide 7. 2025 was a challenging year for Sustainable Tech, marked by a sharp decline in petrochemicals CapEx and a pause in many green projects as customers shifted their focus towards affordability and energy security. Now despite this backdrop, SPS proved remarkably resilient. Margins held up well in the first half of the year, and our teams responded really quickly, pivoting towards the Global South, LNG, ammonia and OpEx-driven markets where demand fundamentals remain strong. That pivot clearly showed up in the results. We delivered strong book-to-bill in both the third and fourth quarters and exited the year with solid work under contract for 2026. Geographically, Global South was a major source of strength with wins across Iraq, Saudi Arabia, Kuwait and Singapore. In LNG, we secured both the Abadi and the Coastal Bend front-end engineering design contracts, reinforcing our front-end positioning. And in ammonia, awards were truly global, reflecting the durability of our technology portfolio. We also continue to advance emerging technologies, including lithium extraction. And in Hydro-PRT recycling, after ongoing commissioning challenges, I'm pleased to report they are now operating continuously producing on-spec product with ramp-up expected through 2026. Now as we look ahead, our growth opportunities in 2026 are directly aligned with these same themes. To anchor that outlook, fourth quarter book-to-bill was 1.6x with a trailing 12 months book-to-bill of 1.2x. Backlog ended the year at $4.2 billion, and that's up 5% year-over-year and up more than 20%, excluding Plaquemines LNG. Our near-term pipeline, excluding LNG, is approximately $5 billion with about 80% from repeat customers showing the relationships that we have developed over time. And work under contract covers roughly 63% of our 2026 guidance, putting us above normative levels for this business going into the year. With that, let's turn to Mission Tech and on to Slide 8. Mission Tech also faced a challenging environment, as you're well aware, in '25, including award delays, reduced contingency activity and for us, particularly in Europe and the impact of the government shutdown. Despite those headwinds, MTS performed well. Revenue held up year-over-year, margins improved and cash performance was excellent. And this reflects a disciplined execution approach and the quality of the underlying portfolio. Strategically, we continue to move upmarket. Activity expanded with the U.S. Space Force and Air Force Research Lab, validating the LinQuest acquisition. We secured positions on key multiple award contract vehicles and defended several important recompetes, including HHPC and Tubuti. While we did lose the COSMOS recompete in 2025, this was at the lower end of margin returns within the portfolio. Importantly, there are no material recompete revenues expected in '26, reducing near-term recompete risk. Internationally, a standout, particularly Australia, with approximately $800 million in defense award contracts and high single-digit year-over-year revenue growth. While contingency activity declined in certain areas, the broader defense and intelligence portfolio performed well, particularly in missile defense, naval air, digital engineering and in R&D. Cross-business synergy bids are becoming increasingly important, and we have several opportunities in the pipeline that reflect a similar integrated cross-business approach. Looking ahead, the full year 2026 Defense Appropriations Act has been enacted. And MTS, we believe, is well aligned with this funding. We expect award cadence to improve, particularly in the second half of the year, supported by strong bid volume and contract vehicle leverage. To anchor that outlook, the trailing 12-month book-to-bill was 1.0. Backlog and options ended the year at $19.1 billion, and that's up 15% year-over-year with 40% funded, excluding PFIs. Bids awaiting awards totaled $17 billion with 80% of that number representing new business. We expect to bid more than $25 billion in 2026, and that will be up double digits year-over-year. Finally, work under contract already covers approximately 82% of our '26 guidance with minimal recompete exposure. On to Slide 9. Next, I'll provide an update on the spin-off transaction, which remains an important part of our strategy to sharpen focus and drive long-term value creation for shareholders, as you're well aware. Preparations continue to progress in line with our plan and our targeted distribution is anticipated in the second half of 2026. From a readiness standpoint, we are making steady tangible progress. Carve-out audits and pro forma financial statements are underway to support the Form 10 process. As committed, we made our initial confidential filing in late December, and we currently expect to file an amendment incorporating full year audited '25 financials in March '26. A similar time line is progressing for the private letter memo with the IRS, so all on track. We are also continuing to refine the transaction perimeter to ensure operational clarity and strong stand-alone positioning for both companies. And as part of that effort, we have decided to move the Frazer Nash Consultancy business and the U.K. Civil Nuclear project portfolio into Sustainable Tech. We have provided a supplemental financial information sheet for modeling purposes, and this is accessible via the QR code. And this change has no material impact to our long-term segment growth CAGRs or margins. As discussed previously, CEO and CFO recruitment efforts are underway. And in the interim, I have appointed Mark Sopp as Interim Spin CEO, leveraging his role as spin transitioning lead. And this positions Mark to effectively serve in the capacity while the search for a permanent CEO continues. These efforts, along with early branding initiatives support the future stand-alone companies are progressing in parallel with the broader separation work streams. Importantly, a dedicated spin transaction team continues to drive execution across the organization, really helping to minimize disruption to day-to-day operations while maintaining momentum. And I think you can see that in the delivery of the '25 bottom line results. The level of internal engagement and coordination continues to build, which gives us confidence in our ability to execute the transaction effectively. We'll continue to keep you updated, of course, as we progress. And with that, I'll turn it over to Shad. Shad Evans: Thanks, Stuart, and thank you to everyone for joining us today. I'm excited to step into the CFO role at an important time for KBR. Microsoft built a strong finance organization and a disciplined foundation, and I'm grateful for his leadership and the opportunity to build on that work. Looking ahead, my focus is straightforward: deliver on our financial commitments, support the financing and investor milestones associated with the Spin and maintain a disciplined financial structure that advances our strategy. With that, let's turn to the fourth quarter results on Slide 11. Revenues were $1.85 billion, down $223 million year-over-year, primarily reflecting award timing in MTS and reductions in EUCOM contingency scope. More importantly, profitability and execution were strong. Adjusted EBITDA increased $12 million and margins were 12.6%, up 190 basis points, driven by disciplined program execution and favorable mix as EUCOM volumes declined from lower-margin work. Adjusted EPS was $0.99, up $0.09 year-over-year, reflecting the stronger adjusted EBITDA performance and lower share count following open market repurchases. Turning to Slide 12 and our full year results. Revenues were approximately $7.8 billion, up modestly year-over-year despite the market volatility. We delivered strong performance in defense and intelligence programs, supported by the LinQuest acquisition, continued momentum in Australia aligned with its defense priorities and sustained demand in STS across our engineering, professional services and technology offerings. Adjusted EBITDA increased $100 million, and full year margins were 12.4%, up more than 100 basis points year-over-year. As Stuart mentioned, this performance reflects prioritizing high-margin growth, disciplined program execution and continued delivery on cost-saving initiatives across the business. Adjusted EPS was $3.93, up $0.60 versus prior year and supported by the increase in adjusted EBITDA and share repurchases, partially offset by higher interest expense and higher income taxes due to international mix in our underlying rate. That same dynamic is reflected in our 2026 ETR guidance, which I'll cover in a moment. Cash was a key highlight. Operating cash flow was $557 million, representing 110% conversion to adjusted net income. We exited the year with strong liquidity heading into 2026. Overall, revenues and adjusted EBITDA within our ranges for the year and adjusted EPS and operating cash flow exceeded the top end of our guided ranges. Turning to Slide 13. I'll focus on a few financial proof points that support the progress Stuart just outlined in Sustainable Tech. As discussed earlier, the market environment shifted materially in 2025. From a financial standpoint, STS offset those headwinds through mix, geographical expansion and increased exposure to OpEx-oriented and structurally stronger demand areas. That operating discipline is clearly showing up in the quality of earnings. Adjusted EBITDA has grown 16% since 2023, outpacing revenue growth and reflecting improved mix and cost execution. While margins were modestly elevated in 2025, we are on pace to meet our long-term margin target of 20% plus in 2027. This performance was delivered alongside strong cash conversion of more than 80% and a trailing 12-month book-to-bill of 1.2, providing good visibility as we enter 2026. Lastly, due to the recurring nature of risk and alignment with our OpEx strategy, we plan to update our adjusted EBITDA calculation beginning in 2026 to reflect our share of unconsolidated JV operating income. Previously, risk and other unconsolidated JVs were reflected through JV net income. This change improves transparency and aligns EBITDA with how we manage the business. Prior periods will not be recast as the impact is not material. Turning to Slide 14. I'll focus on the financial implications of the Mission Tech progress Stuart just outlined. From a financial perspective, the portfolio continues to move towards higher quality of earnings, driven by mix improvements, disciplined program selection and favorable contract structures aligned to the most durable and well-funded national security priorities. Since 2023, the integration of LinQuest, strong international execution and a more selective business development approach have supported mid-single-digit revenue growth while improving margin quality. Importantly, that improvement has been driven by commercial acumen and contract discipline, including a greater focus on fixed price and technically differentiated work, not volume. Even with near-term headwinds from award timing and process activity, the team remained highly selective in bids and recompetes, prioritizing returns and contract terms over scale. That discipline is showing up in sustained margin performance and a robust pipeline. Against that backdrop, the business is preparing for the spend with improving economics, solid visibility and strong alignment to long-term national security demand. Turning to Slide 15. Capital allocation and balance sheet discipline remain key strengths. In 2025, we returned a record $413 million to shareholders through buybacks and dividends, and we ended the year with net leverage of 2.2x. That reflects both strong cash generation and disciplined deployment. Looking ahead to 2026, our priorities remain unchanged. We're committed to maintaining an attractive and stable dividend through the spin transaction. And to that end, our Board approved an annual dividend of $0.66 per share or $0.165 per quarter for 2026. We also continue to invest selectively where returns are compelling. In January, we invested approximately $115 million to fund our proportional share of the SWAT OpEx acquisition with BRIS. A strategic transaction that enhances resilience to CapEx cycles and supports our OpEx expansion. As we execute this investment and absorb typical first quarter cash uses, including incentive payments, leverage may trend up modestly in the first half of the year before coming back down below the targeted 2.5 level as cash builds throughout the year. Ahead of respective Investor Days, which we plan to conduct before the spin, each segment will assess its capital deployment priorities based on its stand-alone profile. I'll now turn to Slide 16 and our fiscal 2026 guidance. We're providing full year outlook for a consolidated company to establish a clear baseline. The stand-alone outlook to be updated as we progress towards the planned spin in the second half of 2026. With that in mind, for fiscal 2026, we are guiding revenues in the range of $7.9 billion to $8.36 billion, adjusted EBITDA of $980 million to $1.04 billion, adjusted EPS of $3.87 to $4.22 and adjusted operating cash flow of $560 million to $600 million. At the midpoint, this implies approximately 4% year-over-year growth across all key metrics. We expect transition costs related to the spin to be approximately $140 million to $180 million, inclusive of onetime IT capital costs. To ensure transparency around ongoing performance, we will introduce an adjusted operating cash flow and an adjusted free cash flow metric in 2026 that add back spin-related cash outflows, allowing investors to better assess the core cash-generating capability of the business. From a modeling perspective, the guide assumes low double-digit growth in STS at our normative long-term margins of 20% plus. MTS is expected to grow at low single digits, also at a normative margin of 10% plus, which we expect to continue to improve over time. Capital expenditures are expected to be in the range of $40 million to $50 million for the year. Our projected effective tax rate is 26% to 28%, higher than the current year, and as I mentioned earlier, primarily reflecting a greater mix of work in the Global South. Estimated adjusted share count was 127 million, which is exactly where we exited 2025. We expect revenues and adjusted EPS to be weighted approximately 46% to the first half and 54% to the second half of the year. For modeling purposes, we expect Q1 '26 to be largely in line with Q4 '25. And on a recast basis, we anticipate moderate sequential growth in MTS as EUCOM is at its base activity levels and partially offset by seasonal sequential declines in FTS. As a reminder, we will be comping against elevated EUCOM contingency in the first 2 quarters of '26, which is roughly $60 million to $70 million per quarter. Our guidance includes key assumptions that are worth highlighting given the current political and economic environment. First, we assume the resolution of outstanding protests in the first half of the year. With award cadence in Mission Tech improving as the year progresses. Second, we assume that all material programs we currently support remain in place. Should that change materially, we will, of course, update as appropriate. Third, we assume modest improvement in interest rates in the second half of the year and stable foreign exchange rates relative to current levels. In closing, our 2026 guidance reflects a disciplined view of the current environment. We entered the year with solid work under contract, strong growth momentum and a highly committed global team. And with that, I'll turn it back to Stuart. Stuart Bradie: Thanks, Shad. I'm on Slide 17 with some key takeaways, and I'll close with 4 key messages. First, we executed with discipline in a challenging environment. Despite pressure across awards and funding, we delivered results in line with our updated guidance. We expanded margins and generated strong cash and returned that cash at record levels to shareholders. That performance under pressure reflects the strength of our operating model and the quality of the people inside KBR, our teams. Second, both segments exit 2025 with improving momentum and of course, visibility. In Sustainable Tech, the portfolio is better aligned to structurally stronger demand, while in Mission Tech, margin discipline, pipeline strength and funding visibility position the business well as award cadence improves into 2026. Third, the quality and the durability of our earnings continues to improve. Across the portfolio, we are being more selective. We're continually moving upmarket and leaning into innovation and digital differentiation. That focus is really driving better mix, more resilient margins and stronger cash generation over time. And finally, our spin-off prep is advancing as planned. We are making steady progress on separation readiness, capital structure planning and leadership and operational clarity, all with the goal of creating two focused, well-positioned stand-alone companies and, of course, delivering long-term value for our shareholders. With that, I'll turn it over to the operator who will open the call for Q&A. Thank you. Operator: [Operator Instructions] Our first question today comes from Tobey Sommer from Truist. Tobey Sommer: I was wondering if you could describe to us what the pipeline in STS is for sizable projects with Plaquemines closing out probably next year. Just to give us a sense for how we may be able to fill that hole and even grow. Stuart Bradie: Thanks, Tobey. Not an unexpected question. In terms of the book-to-bill in Q3 and Q4, I think you've seen the performance has been impressive across the spectrum. That includes technology and obviously, the broader capability set in the Middle East, and that's coming through and particularly in the OpEx area, which we feel is a strategic growth avenue we want to get after due to its -- due to the long-term contract nature of that giving sort of visibility into earnings over time. We've started this year in Q1 very strongly again in bookings in STS. So again, I think directionally, that's a very positive thing to see and obviously to disclose today. In terms of the broader pipeline, it's -- we've got a global business, as you're well aware. We see significant opportunity across the globe and across our capability set, and that includes ammonia and technology. It includes the broader technology set. I talked a little bit about Mura in my prepared remarks also. They are now running well. They've come through the 72-hour test products on spec and have actually sold that product already. So we'll see that ramp up through the course, and they've got a number of projects in their pipeline as well, which both as an investor and executor and technology provider, we will take advantage of. In the broader LNG area, which is one aspect of our business, it's not their business. I would say that we've got obviously work going on in Abadi. We've got Coastal Bend front-end design also ongoing. And we've got a number of others that we can't tell you about today, unfortunately, that we're looking at as we move through this year. I think the other key takeaway here is that many have looked at the equity and earnings line and seen that really as just Plaquemines coming through. We talked a few quarters ago about the importance we felt BRIS would be delivering in that area over time. They've really sort of outperformed as we headed into the end of this year and have a very strong book-to-bill themselves. And then with the addition of swap, we're obviously more than doubling that EBITDA contribution, which is why we're going to be showing you that more transparently going forward. And that all comes through the equity and earnings line that will start to hopefully get people thinking a little bit differently about the quality of earnings and the longevity of that earnings coming through the equity and earnings line. So hopefully, that gives you a rounded view of that. Tobey Sommer: It does. If I may ask my follow-up on the MTS side, backlog and options growth pretty substantial in the mid-teens and as well as the sizable awaiting award category. Maybe you could give us some color as to the drivers of the 15% growth in backlog as well as the more exciting areas where you've got bids awaiting award. Stuart Bradie: Yes. Thanks, Tobey. Obviously, we've announced a number of wins. We talked a little bit about HHPC and Tubuti, which come through with a number of year options in them, which helps in that arena. And more recently and very excitingly, the sort of Space Force and Air Force awards in the sort of higher-end digital area, starting to see some momentum around that. But just the broad portfolio internationally has been terrific as you -- as we talked about again in the prepared remarks. So that's really the story coming into the end of this year. As we look out into next year, obviously, we've got the work that's under protest. And I know Shad talked about that in his prepared remarks. And that's quite exciting because it takes us to new customers as well in terms of broadening our reach. And really, the work we're doing in missile defense, the work we're doing with Space Force, et cetera. And obviously, the award of the SHIELD, IDIQ really position us well for workflows under the sort of Golden Dome program also. And we're really seeing tangible wins in that arena as we've press released already. So that sets us up nicely for the future. But I am also excited about what's happening internationally, and it's a piece of our business that everyone sort of doesn't really talk about enough with Australia growing significantly, continually moving up market with an enormous backlog given its successful wins last year and really the U.K. as well with increased defense spending happening across not just in the U.K., but the broader Europe arena. Really positions us well going into '26 and actually well beyond, of course. So I think that's, again, gives you a sort of overall picture. We're very excited about the defense and intel portfolio in the U.S. The work on the protest is a lot of that in the R&S segment, of course. And then we obviously have the international portfolio that's performing extremely well, and I'll reiterate that better margins just because of its commercial nature. Operator: Our next question comes from Mariana Perez Mora from Bank of America. Mariana Perez Mora: So my first question is going to be to STS. And I think we and all the investment community will welcome more clarity on the EBITDA and the contribution from the joint ventures. But like in the meantime, how should we think about Plaquemines for how long it's going to contribute at these levels? And how should we think about Lake Charles or at least like Energy Transfer pausing and canceling that project and the impact to that contribution? And if we think, I don't know, 3 years from now, what are the opportunities you guys have to maintain that level of contribution from joint ventures? Stuart Bradie: That's a good strategic question, probably one best answered more fulsomely at the Investor Day, Mariana. But ultimately, as we said before, the contribution from Plaquemines will run consistently through all this year and into early next year. The increased focus in what we're doing around this and the addition of SWAT, and we're looking at obviously more organic and inorganic growth in that arena to build out that portfolio. And we'll talk about that more as we get through the rest of the year. And that bit of the business is performing really, really well. And so that will be an increasing part of that equity and earnings contribution, which is why we want to be more transparent around it to give, to give investors more confidence on the continued equity and earnings performance. But also it's on top line growth and top line growth and the associated EBITDA generation coming from that portfolio. And I think the book-to-bill of 1.6, again, really demonstrates the momentum that we're having, particularly in the Global South, but ultimately across the portfolio and really sort of delivering, I guess, confidence of future earnings. And that's why we've -- we're confident on the sort of double-digit growth on the revenue line for STS going forward. So I think, again, more to come on that at Investor Day. We'll get more into sort of the granular details there. But strategically, that's where we're heading. Mariana Perez Mora: And my follow-up on MTS you talk about Australia. You have been discussing that for a couple of quarters, how strong it is. And now you talk about the U.K. How is the award environment in the U.K. in general going? Like what is your book-to-bill? How meaningful are the opportunities in the near term? And what are the expectations for growth there? Stuart Bradie: Yes, good question. '25 was a slow award cadence in the U.K. due to the typical defense reviews and U.S. [ weak ] appropriations and really sort of pointing a pounds in this case to where the spend is going to be. That process is now behind us, and we can see clear spend priorities going into '26, which is why we are feeling pretty good about where we are and where we're positioned in the U.K. Again, more to come, and we'll get more granular in the Investor Day. But I think directionally, you can sense there is -- we've come through what is a flat year in the U.K. And now moving into a growth cycle within our portfolio. Operator: Our next question comes from Ian Zaffino from Oppenheimer. Ian Zaffino: Question would also be on MTS. Can you maybe give us the kind of the components of the guidance there? I'd imagine defense and intel will be very nicely up above kind of the guidance. But what should we expect maybe for readiness and sustainment? And any other kind of color you could give us on that? Stuart Bradie: Yes, quite right. Defense and intel is up, as Shad talked about. Science and Space is down due to pressure on NASA budgets, as you would expect. So that's contained within the guide. And then we've got RNS and the protests that are more aligned to RNS as we look through the course of the year. So assuming that they are successful, we will grow RNS nicely as well as the international portfolio we talked about. And it's also worth saying that -- but as I said in my prepared remarks, we did lose some of our recompetes, which were at the lower end of our margin performance. But in terms of the guide, although many -- well, not many, some of them are under protest, a couple of them are under protest. We have not assumed that we will be successful in those protests in the guide. So we've taken a fairly firm view that if we were successful, that would be upside. Ian Zaffino: Okay. And then you made a comment about doing M&A. How should we think about that? Is this something that's going to wait until after the spin, pre-spin? I don't want to jump the gun on the Investor Day, but how do you think about separating these businesses? Is it going to be 100% you thinking 80%? Just to get our arms around how you're thinking about capital allocation pre and then also post spin. Stuart Bradie: Yes. No, thanks. So our statements that we made when we announced the spin still hold. In terms of the leverage, the net leverage we're expecting to come out of those businesses is circa 2 on STS and circa 3 on MTS, which is well within market norms. We might be a little bit north or south of that, but we're not going to be far away. So those are good numbers to work from today. In terms of we've got some firepower, of course, as we go through the year to achieve those leverages. And if we find accretive M&A, we don't want to stand still. And I think we've proven that with the acquisition of SWAT to really advance our strategy in the sort of long recurring cycle of OpEx type contracts, and we'll be looking to expand in areas of strategic importance. So -- but we won't get out over our skis. We won't really sort of -- unless there's some significant transformational thing in the middle of a spin, which will be highly unusual. But ultimately, these will be fairly modest but accretive and strategic acquisitions. We don't want to stand still in this period as we've proven through the SWAT acquisition, which is a highly accretive deal for us. Shad Evans: Yes. And maybe just to build on that, Ian, on deployment, the year typically begins, as you know, with several funded and cash commitments around annual incentive and dividends. And this year, we'll also be incurring some spin-related transition costs as well. And so when you combine those with the strategic investment that Stuart said at the outset, with the normal capital expenditures, they effectively consume a lot of the free cash flow in the first part of the year. So as the year progresses, we'll, of course, continue to assess opportunities to deploy any excess cash, obviously, in the most effective manner in close consultation with our Board. But our focus really is, as we said all along, is making sure we're setting both of these businesses up with really strong balance sheets out of the gate. Operator: Our next question comes from Jerry Revich from Wells Fargo. Unknown Analyst: This is Kevin Uherek on for Jerry. Just had a question on SCS. Would it be possible if you could rank order the growth outlook by end market in 2026? Stuart Bradie: I think that really is one for Investor Day. Where we've got -- we've said this before, several avenues of growth. We're expanding our footprint in Iraq. We announced major wins there recently. We're expanding our footprint in Saudi Arabia across -- and both in different areas of the market. Of course, we picked up the Coastal Bend LNG feed and awarded front-end design in LNG. Technology continues to perform. It's difficult to give you a point estimate in that right now because of just the timing. But I would say that the way the portfolio performs, that double-digit growth is the way to think about it at the consolidated level. And we'll be obviously, as a stand-alone STS business, we'll be digging into this in more detail when we get to Investor Day. Jerry Revich: Got it. Understood. And then on the Mission Solutions piece on EUCOM cadence, does fourth quarter represent the run rate in activity? Or should we expect a step down in 1Q? Shad Evans: Yes, Kevin, it does. And so I'll just remind you though that the first and second quarters of '26 have a bit of a tough comp, $60 million to $70 million of what I'll call elevated levels as that then threw down and is now at its steady run rate coming into '26. Operator: Our next question comes from Adam Bubes from Goldman Sachs. Adam Bubes: In MTS, margins for the full year 2025, I think, were 10.4%. And it sounds like mix is improving there. So can you just expand on the puts and takes on the margin outlook for MTS embedded in the 2026 guide? Shad Evans: Yes. So happy to take that, Adam. Despite some of the macro headwinds that Stuart pointed out, I think operational performance throughout '25 is really strong. And as you said, resulted in a 10.4% margin, which again is in line with our long-term expectations for this business and really, I think, reflective of the profit first business development mindset within that organization. While we do hope to improve margins over time as we continue to see mix of that business move towards more fixed price work, we've not assumed any uplift in '26. And so it's flat sequentially from the 2025 run rates. Adam Bubes: Got it. Understood. And then you've talked a little bit about today increasing mix of recurring OpEx and digital solutions. Is there any way to contextualize what percent of revenues today is OpEx driven and where you think that can head over time? Stuart Bradie: So again, I think we -- obviously more an Investor Day there. Sorry, I keep saying that, but obviously, that's firmly on our minds. But that's part of the reason we are sort of showing more transparency around that OpEx business in BRIS. We do have an OpEx-facing business that we own 100% in the international arena, and we'll bring that all together when we meet later in the year for that Investor Day to show you just the opportunity there. We'll describe some of the long-term nature of those contracts. We'll give you an overall margin profile of that particular area. It's certainly within a range and what the outlook is. But we're excited about that strategically. We do think that assets across the world, of course, have increased significantly over this last decade. But the level of digital solutioning and thinking through how you can help your customer keep the plant up or make it more efficient and do predictive and analytics that support that is exciting, and we're right in the middle of all that. So I do think it's -- as assets age, there's going to be more volume of business in this area. And obviously, it's -- the demand is increasing, and we feel we're very well placed over time to take advantage of that. And I think for investors, I think the strategic upside of that is that the contracts are longer term in nature. There's greater visibility of earnings and cash across that book of business. So that's directionally where we're heading, but more to come again in Investor Day. Operator: Our next question comes from the line of Sangita Jain from KeyBanc Capital Markets. Sangita Jain: If I can ask 2 questions on MPS. My first one is, are you still exploring a sale of that segment? Can you speak to the process if you are? And is that still an option as you move towards the split? Stuart Bradie: I mean, you know I can't answer that question. So it's -- I mean we are committed to shareholder value. We've said that many times, it's 100% the truth. We're going through this spin process to prove that out and demonstrate that. We're open to approaches. We're open to anything that will enhance shareholder value. That's all I can really say at this point. Sangita Jain: Understood. And then on the MPS awards in protest, can you provide a little more detail on how many awards you're protesting and if any of them are outsized versus the others and also the timing that you're anticipating of those resolutions? Stuart Bradie: Yes, these are fairly in the public domain. The Mission Iraq award is circa $1 billion, and that's with the State Department. Then we have a classified program called K2A that's in the similar ZIP code. And then there's some -- we did get one out of protest in our favor, which was the prepositioned stock in Europe. So that's now running through the numbers. And that's the key ones at the moment. And obviously, we are protesting the COSMOS loss and the Diego loss as we speak. So -- but again, I would reiterate those are not in our numbers, the latter 2. So that's kind of where we're at today. Operator: Our final question comes from Andrew Kaplowitz from Citigroup. Andrew Kaplowitz: Stuart, can you talk a little bit more maybe about impacts of AI on KBR? I think you mentioned it briefly in prepared remarks, but how do we think about the mix between software and services and MTS? I mean you mentioned digital and sort of the growth there. I think there's quite a few security and regulatory barriers that should protect your business versus AI. But maybe you could elaborate on how you think about AI's impact on KBR's businesses. Stuart Bradie: Yes. We talked a little bit about this before, I think, in last quarter that I think there's a number of companies that created AI departments, et cetera. And I think they probably spend a lot of money with not a lot of gain. We've been very disciplined around how we approach this, and we very much look at use case solutions that actually drive an ROI. We've got a number of activities inside MTS that are funded by government, as you would expect, as we look at that from an R&D perspective, and that hangs off the back of our digital engineering labs that we press released recently and talked a little bit about in the prepared remarks, which are gaining good traction because of the speed to market of R&D projects, et cetera, as you would expect. More in the STS world, again, looking very strongly at use cases around accelerating engineering, making sure there's checks and balances within that engineering that avoid human errors, speed up progress. But at the same time, looking at how we operate facilities across the world or our customers operate facilities and using particularly digital twins and applying AI and machine learning to really sort of draw data and get trending over time to know what good looks like and make sure that operators can intercede at the appropriate time or the maintenance crews can intercede at the appropriate time. So it's a multifaceted approach, but ultimately, it's driven by use case ROI, and we put quite a bit of front-end effort into that, Andy, rather than just saying AI is good and just running at it. We've been quite disciplined. And that's on the front of office. I think in the back of office, increasing use of bots to drive efficiency and decrease human error, keep our SG&A in check or reduce it in fact, over time. We're rolling out Microsoft Dynamics across the STS portfolio, which is really the forefront of a digitalized ERP because our project controls, which gives us all the project data hangs off that, and we can look at things real time and start to make real-time decisions on commercial execution. And we've also got digital procurement hanging off the back of that and with a similar upside. And so I think that whole digital project execution philosophy underpinned by really a very modern and digitally enabled ERP is going to stand us in really good stead as we come out of the spin. So I think it's multifaceted this front of office driven by use case, the back of office, again, driven by use case, but obviously with different drivers. Andrew Kaplowitz: And Stuart, you just mentioned it, but like when I looked at the release for STS margin, it mentioned ERP. And so we always think about sort of ERP implementation as, I guess, a risk factor, but you got to over 20% margins again for '26. So how do you think about STS margins? Are they kind of going to be consistent here over the next few quarters? And do we expect improvement in '26 versus '25? Stuart Bradie: Yes. Quite right on the ERP. It's typically a risk. Our teams have done a fantastic job. We've rolled out Dynamics just to be fully transparent, we did a pilot in Singapore. It went well. We rolled it out in Australia, added more functionality, went back to Singapore, increased their functionality, rolled it out in India, rolled it out in the U.K. And now we're looking at how we roll corporate out in the U.S. and then we'll move to the Middle East. So I think we've proven that we can roll this out without blowing it out, which is always the risk. So hats off to our teams in sort of managing the execution and the implementation. In terms of margins across STS, I think we'll just stick with our statement that it's 20-plus percent across the portfolio. And as you've seen, we have done as we are prudent in how we account for things. And as we close out projects, you will get ups in certain months. But I think over the piece, the portfolio performance is 20-plus percent. And I think that's a good measure to stick with. Operator: Thank you. With that, we have no further questions in the queue. So I'll hand back over to Stuart Bradie for some closing remarks. Stuart Bradie: Thank you. Thank you very much. So just a few final thoughts. I think as we discussed on the call, 2025 started off as challenging a year as we've seen in many. But I think it really underscored the strength of the KBR portfolio. Our geographical reach being truly global and understanding each of the countries and the different drivers is a real plus, a very diversified customer base. And that really drove a lot of a true lack of concentration risk and being agile, both in terms of how we do a business and our business model that gives both Mission Tech and Sustainable Tech real resilience. And I think that came through in the -- particularly in the bottom line and the cash performance through the course of the year. So despite external noise, we did execute on our strategy, and we did so with discipline. And that's really about our people. The quality of our people and the commitment of our people is unbelievable, and my hats off to them. And so while we face revenue headwinds, margins did expand, cash was strong and that really, really reinforces the underlying health of the broader portfolio. So as we enter '26, we've got a solid foundation in both businesses, strong work under contract and as we discussed on the call, a strong pipeline. So I think we're really well positioned in both businesses as we head towards the spin and as we enter 2026. So thank you again for joining today's call. I would welcome Shad and Rachael officially to the team in this forum. And obviously, we'll be talking soon. So thank you very much. Operator: Thank you. That concludes today's call. You may now disconnect your lines. Thank you for joining.
Operator: Thank you for standing by, and welcome to the Lynas Rare Earths Half Year 2026 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Lynas Rare Earths. Please go ahead. Jennifer Parker: Good morning, and welcome to the Lynas Rare Earths Investor Briefing for the half year ending 31 December 2025. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director. And joining Amanda today are Gaudenz Sturzenegger, CFO; Daniel Havas, VP, Strategy and Investor Relations; and Sarah Leonard, General Counsel and Company Secretary. I'll now hand over to Amanda Lacaze. Please go ahead, Amanda. Amanda Lacaze: Thanks, Jan, and good morning, everybody. Thank you all for joining today. I always think that it's a bit funny. You can see me, but I can't see you, but I hope that you're all well. And I'm incredibly pleased to be able to do this presentation. The first half of FY '26 has been one of those sort of half years where we were very busy, but it's really only in retrospect that the scale of what we were able to achieve has been properly illustrated. So look, I think it will be helpful to really step through the presentation that we launched today. We've got the obligatory disclaimers. And we have the important recognition of country as an operator in Australia in the mining sector, acknowledging and respecting the Traditional Owners of the lands on which we live, work and meet across Australia is important, and in particular, acknowledging and valuing our Aboriginal and Torres Strait Islander employees, partners and communities. So in the year-to-date, as I said, in the first 6 months of this year, we were busy. But as we look back on it in the rear vision mirror, gosh, we were really busy. Many achievements. So for a long time, we've been talking to you about the Lynas 2025 capital projects. And during this first 6 months of this financial year, a lot of milestones have been achieved with respect to those. The Mt Weld expansion project has been largely commissioned with the new flotation circuit operating at 70% of nameplate. I know that oftentimes, it's sort of, people will look at Mt Weld and I'll just say, well, we know the Mt Weld resource. We know the beneficiation circuit, all of this is pretty easy. I just would like to remind everyone, this is a big, complex project, as big as many other mining firms in Australia who don't do any processing past that initial beneficiation. We've had to commission 3 new mills. We've got new processes. We've got significant investment. I'll talk a little bit more about with water recycling. And so all of these things, it has been a complex commissioning and process and ramp-up process. And I'm really pleased with the progress that the team has made. Also of really important note is our 65-megawatt hybrid renewable power station is operational, and you can see some of the photos further on of the new wind turbines. The ramp-up at Kalgoorlie continues. We've undertaken a number of process modifications there to improve its performance. And I think as everybody knows, it has not been without its challenges, both internally and most particularly externally. It's very difficult to run a big complex plant like Kalgoorlie without reliable power. In Malaysia, where I think that we often don't put quite as much focus as we're talking about these things have been significant changes implemented as part of Lynas 2025, the uplift in production capacity, the processing of mixed rare earth carbonate and of course, the -- we had our first full 6 months of HRE or separation of dysprosium and terbium. So having done all of those things, and we've drawn the line under the Lynas 2025 capital program. It's really about how we're setting up the business for the next growth phase. And we started with the capital raise. We've announced the larger HRE separation facility that will go into Malaysia. We've announced some elements of our contribution to continuing industry development, including in metal and magnets, but also in terms of resource development. So as we look at all of this, I am minded to remind everybody that this is complicated. And I think I have mentioned it previously, but I would recommend to any sort of observer of this market, a particular study done by an engineer, Jen can provide information on this, but a consulting engineer on ramp-up curves for critical minerals and the fact that if you use McNulty, which is a 1 to 5 in rare earths outside China, you've never had anyone who's -- or in critical minerals projects generally, you've only had 1 or 2 projects. And this includes things like vanadium and nickel and as well as rare earths and a variety of other materials that has ever come close to a McNulty 1 or 2, which is the fastest, most trouble-free ramp-up. In other sectors, Lynas has performed best, and we were at a McNulty 4 ramp-up in Malaysia, and then we jumped up to a McNulty 2 in around about 2016. It is easy because we are an established player for people to think, oh, well, we've just brought on a new facility here and brought on a new facility there and everything is fine. But I would just remind everybody of the complexity and the value that derives from the fact that we are an established and experienced operator and indeed have been able to bring our new assets online, not trouble-free. That would not be fair to my operations team to say that, but certainly in very good order, and we continue that ramp up as we speak. We continue to put safety at the heart of everything that we do. And I was talking to our Board about this and as we were thinking about how do we present some of the safety information. And I made the point that it's a little bit disappointing in some ways that we hardly ever spend any time on the safety slide externally. We spend a huge amount of time, however, on safety, on personnel and process safety inside the business. And I would also take this opportunity to remind everyone that Australian mining leads the world in terms of both our approach and our performance with respect to safety and other sustainability practices. We're incredibly proud that the major maintenance that we undertook in Malaysia late in the second quarter, which involved over 30 subcontracting companies and 100,000 work hours was executed to schedule and without injury. We're incredibly proud that Mt Weld and Kalgoorlie employees achieved 12 months without any recordable injuries in December 2025. And as our projects move from commissioning to operations, we are very focused on our Yes, We Care HSE strategy because, yes, we really do care that everybody goes home safely and well every day. Then if we look at our financials, well, this is very pleasing for me as I make my last half year report, to be able to report such an excellent results. I'm also a bit sad that the next CEO will get all of the second half glory because as we've foreshadowed in our announcement, we expect that the market settings will continue to be positive. And I think everyone who's been following Lynas for some time would appreciate we are the only company that can take full advantage of the positive market settings because we are the company that is operating and producing today, not just lights but also heavies. So excellent performance, sales revenue, net profit after tax, EBITDA, all up. And of course, we have the big jump in cash and short-term deposits as a result of the capital raise, which is setting us up for towards 2030. When we look at it operationally, and this is one of my favorite photos. And I think some folks have been in Malaysia in the last 6 months would have seen this new part of product finishing. And it is just beautiful. It's part of our uplifting capacity that we have available to us now in Malaysia. So NdPr production was absolutely on track for record 6 months until we hit the problems with power in Kalgoorlie. So we're just a little bit off. But -- and as you can see from this, we're starting to roll off in terms of sort of final payments related to the capital program with Lynas 2025. Looking at that sort of with a bit of history, we've just put in the half years since FY '20. You can see that we are sort of consistently increasing on a rolling 12-month basis, we've certainly had -- and rightly so with all of the investment that we've made, we continue to set new production records. As I say to our operations team, every month should be a record as we continue our ramp-up of the new facilities. And then, of course, you can also see the benefits that come from the increased benchmark selling price. So the benchmark is moving higher, but our internal measure is how much we can beat that benchmark by as a result of our efforts and our negotiations with various customers. The market generally is very constructive right now. As we've indicated, the price in December 2025 was sitting for -- NdPr was sitting at $74 a kilo compared to $49 in December 2024. That price has continued to firm. And yesterday, we reached over the sort of magic $110 a kilo mark. And this really reflects a number of things. It does reflect the government actions in -- which is really starting to reshape the market. We are seeing governments Australia, Japan, EU and of course, the U.S. taking action to create a functional market, right? We have never asked for subsidies, but there is no question there has been market failure for many years in the rare earths industry and acting policies, which ensures that the market is functioning properly, we think is really important. And as those policies are implemented and the market responds, then the potential cost to government just goes down. I mean like at present, as the price sits above the $110 NdPr floor price, I'm sure the U.S. government is feeling very relaxed. We continue to be engaged closely with relevant governments, and I'm sure many people will have read various articles on the likelihood of governments other than the U.S. government also putting in place policy measures to facilitate a proper functioning market. So for us, huge opportunities. We make lots of NdPr, and we make now Dy and Tb. These are the products in greatest demand in terms of total volume, and we will shortly be producing some other materials, particularly samarium, which we expect to come through before the end of this financial year. I was hoping -- so -- and then it will follow up with gadolinium and neodymium and then other elements as we bring our new production facility in Malaysia online. Japanese magnet makers are winning new business. Ex-China magnet buyers are seeking direct supply to mitigate supply chain risks. As recently as yesterday, we had Chinese indicating further controls on materials to be exported to Japan. We have a very long-standing and productive relationship with our Japanese customers, and this certainly provides an opportunity for Lynas. And we are seeing significant demand for our bundled lights and heavies sort of being able to sell these together in the ratio that customers require them gives us a significant competitive advantage in the market. So we are -- this says we can capture value, we are capturing value from the current market upside. Just then just everyone can step through. I love this picture of Mt Weld. We've gone from this tiny baby little sort of concentrator, which is sitting sort of in the sort of top right-hand corner there below the process water pond. On your top left, I think it's quite helpful for people to see. Those are our tailings dams. But as you can see, they're like a beautifully sort of plowed field, not ready to be sown with wheat, but certainly ready to be remined and put back through our processing facility. Some of the elements of the new beneficiation plant means that we will be able to liberate some of the materials, which we did not recover in the first instance. And in those tailings dams facilities, we've actually been able to track the rare earths concentration at somewhere around about 7% to 7.5%, which makes it in and of itself a highly valuable mineral resource. Kalgoorlie continues to ramp up. Sorry, I missed -- no, Jen, you can go back. You can see 3 of our 4 wind turbines there. This is just terrific. We are so pleased with the new power station. It is not cheap. And I do get frustrated when people talk about how sort of the unit cost of a kilowatt hour of renewable power is cheaper than any other option. That's true, but only after you've covered the capital cost of the 4 wind turbines and 2,500 solar panels and the gas turbines, which need to be there to provide baseload power and the batteries as well. Having said that, it is true that on a variable cost basis, we now have electricity, which is significantly less costly than our previous diesel power station. But more importantly, we are really, really pleased that we've been producing in December, 92% of our power has come from renewable electricity. The wind at Knight has been a better source of power than we were expecting. And the power station is performing better than our initial target of 70% renewable content. So really very excited about that. And the second really significant initiative as part of the Mt Weld expansion was commissioning of some of the new water treatment facilities with our objective to achieve 90% of our tailings water to be recycled. We've been able to demonstrate that. We're not yet reliably and sort of delivering at that level, but we are confident that we will get there. And then Kalgoorlie, Kalgoorlie, I think I've said previously, we need to recognize there are 2 parts. Cracking and leaching, but -- we have many skills when it comes to sort of cracking rare earth ores in our company and the cracking and leaching part of Kalgoorlie is actually running pretty well, notwithstanding the outrageous, frankly, power disruptions that we had during the second quarter. The mix -- the carbonation circuit as with all new processes, we found as we've ramped it up that bottlenecks move around and that we need to enhance or improve certain processes. And we are doing that in a very managed and measured way, just like we did when -- really when we were ramping up the LAMP 10 years ago. And so Kalgoorlie continues to improve, but not yet where we would like it to -- quite yet where we would like it to be on a long-term basis. And then Lynas Malaysia is, once again, not giving me any sleepless nights at all. The Malaysian plant is running extraordinarily well. The -- particularly, we're seeing the benefits of the major maintenance on the cracking plant in the second quarter. It's running better than it has ever run in its life. The new separation circuits are stable and producing. And really, it's just a case of can we keep feedstock at the sorts of rates that we want them to. I think as we said, we produced Dy and Tb last year, and we've announced the new expansion, Heavy Rare Earths expansion plant, and we expect samarium production soonish. So all looking very good in Malaysia as well. In the U.S., the U.S. has -- well, boy, has the U.S. government really sort of discovered rare earths. We have continuing discussions with the U.S. government, particularly with respect to an offtake agreement, which is acceptable to us. Having said that, our engagement with particularly U.S. defense industries is really strong. And we are selling material into U.S. defense industries at very pleasing prices. We've also taken the opportunity to do a little brand promotion. I thought everyone would like to see our billboards as they were in various locations in Washington. So just -- Jen, moving on to the next one. I've really already talked about the hybrid power station and -- okay, now we'll move on to communities. And I think everybody who has even spent a few minutes with me over the years knows my view, which is that we cannot prosper if the communities in which we operate do not prosper as well. So in each and every one of our locations, we are incredibly connected to community. We think that it is a really important part of our success and also our culture. And I look at the faces whenever we have these photos. I look at the people that -- our people who are engaged in our community events. And I'm just really proud of them and really proud of the contribution that we make to improving the lives of the people who both work for us, but also their families and their community. So with that, I am very happy to -- yes, then we got the stuff about people. Then I'm really happy to take questions. Operator: [Operator Instructions] Your first question comes from Rahul Anand with Morgan Stanley. Rahul Anand: I just wanted to ask a question on sort of how you're going with securing that ionic clay deposit or supply from Malaysia for the HRE plant? And I guess, how much can you produce from the plant; currently in terms of yttrium, dysprosium and terbium if you're only using the Mt Weld feed? Amanda Lacaze: So we can't produce anything from the plant yet because it's not actually constructed. So we do just have our small little circuit that which is just doing the Dy and Tb, right now, we will have some samarium come out, but that's actually not from the ultimate facility. We're doing that via a bit of flow sheet development within our normal operations. We are working closely with a number of firms in Malaysia on working through the ionic clay development with the objective that we will have that as feedstock at the same time as we're bringing that new plant online, which we expect to be towards the end of calendar year '27. Rahul Anand: Yes. So my question was related to the new plant, Amanda. But I guess just as a follow-up, if there is at all a restriction from China in terms of, I guess, IAC leaching reagents or SX chemicals, is there a contingency plan? Or can you source them elsewhere as well once that plan comes up? Amanda Lacaze: We've already done that. We've already put in place contingency plans for all reagents and all equipment, which is required in Malaysia. We've been working on that since -- well, actually since before the initial issues in April last year, but certainly since that time. And so where when we started last April, there was a couple of critical path items, we have identified alternate sources for those items. And we are confident about our ability to continue to operate. But the point that you're making about sort of availability of reagents, equipment and expertise out of China is an important one and is another reason why Lynas is in such a strong position to take advantage of current market dynamics compared to other firms. Operator: Your next question comes from Neal Dingmann with William Blair. Neal Dingmann: Amanda, a quick question. Could you talk a little bit about offtake agreements, maybe even including, I know with Noveon, you have the MOU. So I'm just wondering, it seems like, again, now that you are cranking up production, I would assume everybody is sort of knocking at your door. Amanda Lacaze: Of course, sometimes we knock at their doors. Certainly, our objective is to ensure that we have -- ultimately that we have 100% of our offtake contracted to the highest value customers in the market. Our ability to be able to sell bundles of NdPr and Dy and/or Tb certainly gives us the opportunity to be able to capture, as I said, the highest value customers. And we're confident that as we ramp up over the next 3 years as some of the downstream capability outside China, downstream capability comes online that we will be to place 100% of our material outside China. Having said that, China is the largest rare earths market in the world, and we're happy to participate in the Chinese market as well. Neal Dingmann: Very good. And just a reminder on the heavies, what is the -- what's your capacity on the heavies? Can you remind me again? Amanda Lacaze: Well, at present, we haven't provided explicit capacity on Dy and Tb because it's a bit of an opportunity sort of circuit that we've put in place. But on the -- we have provided that. And actually, it would probably be best if I point to Daniel to give that sort of data. But at present, we -- if you take our production stats that we provided as part of the quarterly report for the first 6 months, that's probably a reasonable sort of an indication. Daniel, did you want to add anything to that? Daniel Havas: Well, the current circuit is doing -- has the capacity of 1,500 tonnes throughput. But as Amanda points out, we've not provided guidance on the breakdown of the Dy and Tb coming out of that. The new facility will allow us to have 5,000 tonnes of throughput and the figures were outlined in the release when we announced the heavy circuit -- sorry, the heavy facility that we're putting in Malaysia. Operator: Your next question comes from Austin Yun with Macquarie. Austin Yun: Just first question is on the cost side. Looking to understand what's driving the rise in the general and admin costs in this period. Also, understand how should we think about the depreciation charges given the run rate is ramping up at Kalgoorlie? Amanda Lacaze: Sorry, what was -- Austin, what was the second part of that question? I just missed it. Austin Yun: Sorry. The second part is on the depreciation charges. Amanda Lacaze: Depreciation? Okay. Austin Yun: Yes. The first one is on general and admin expenses. Amanda Lacaze: Okay. So I'm just going to ask Gaudenz to deal with both Part A and Part B, Gaudenz. Gaudenz Sturzenegger: Yes. Austin, thank you for the question. I think the first one, I understood was a G&A question. The other one was a depreciation question. On G&A, I think if you go a little bit to Note 10, which -- and the Note 2, which Note 2 in this case, I think a big portion of the increase is related to not absorbed depreciation and employment cost charges, which relate to Kal. So we are not yet running at the run rate we are planning. So that has impacted about $20 million, $25 million on this. And on depreciation level, I think here, important to go back to our main projects we have or we had. I think it's $800-plus million on Kal, $550 million for the Mt Weld expansion. And most of this has been capitalized before. So you will see now the impact on the depreciation side, there is a smaller portion, $100 million to $200 million, which is still to be capitalized in Mt Weld expansion, which should happen in this quarter. So I think it's a pretty solid base. You have seen there. There's probably a little bit more due to the second phase of the Mt Weld. But fundamentally, it's just the $1.35 billion, which are coming into operation and where we had the capitalization event. I hope that helps. Austin Yun: Yes, sure. So the depreciation charges will be even higher in the second half, potentially given the ramp up? Gaudenz Sturzenegger: Yes, exactly. Austin Yun: Okay. Just the second question is on Kalgoorlie. Amanda, you mentioned that it's still kind of in the ramp-up and the bottleneck is sort of shifting. I'm just keen to understand your operating model plan for this plant in the next 12 months. Are we still expecting a batch operation model? Or would you aim to switch to continuous towards the end of this calendar year? Amanda Lacaze: At present, we aim to -- at present, Kalgoorlie is extra capacity to the baseload in Malaysia. And so we manage production to that. And so that's not hard to work that out. We added 50% capacity to downstream. So we've got baseload comes out of cracking in Malaysia, plus half of that again coming out of Kalgoorlie. And we'll just manage it, whether it's sort of decisions on batching or continuous operation for longer batches, I guess, they're just operational decisions that we will make on what's the best operating and financial outcome. Operator: Your next question comes from Chen Jiang with Bank of America. Chen Jiang: Thank you for all the color on the rare earths market and comments about your sales in the presentation. First question, I'm just trying to understand your comments about Lynas continue to optimize your sales model, direct contracting and also you have ongoing negotiation offtake agreement with U.S. government. What's going to change going forward, especially for your 7,500 tonne per annum NdPr priority sales to Japan? And because you are ramping up, there will be incremental sales ex Japan. I guess, given -- how should we think about your pricing mechanism for NdPr? Because as you mentioned in the call, China NdPr price is $19 or 17% above the price floor. So I guess you are getting that USD 120 per kilogram higher than price floor or you can beat that benchmark for NdPr. Amanda Lacaze: So you've answered all your own question, Chen. Yet, our job -- the sales job and the sales measure that our Head of Sales provides to me on a monthly basis is what percentage above the equivalent benchmark rate are we achieving in terms of price. And we do achieve a premium versus the benchmark. It is different customer by customer for customer-specific reasons. And we don't provide sort of detail on all of our customer contracts, which wouldn't surprise you. I mean they're commercial and confidence and really such an important driver in our business. So we do still have -- however, we have some contracts which have floors and ceilings and the ceilings sometimes can be lower than the market price, but we've made a decision that made sense when we put those contracts in place. We have other contracts which are just pegged to the market price. So as the price goes up, we make more money. And then we have increasingly longer-term contracts and our discussion with all of particularly magnet buyers is that we're not interested in short-term contracts. We're interested in long-term contracts, which properly reflect the value of the materials that we produce. So we've always said this that we have a variety of different pricing mechanisms and the task of our sales team is to optimize that to give us the best possible return. And really a key measure on that is how much value are they adding, which is the size of the premium versus the benchmark. [ It's ] really good right now, as you can see. Chen Jiang: Yes, yes. I guess for your priority sale to Japan versus ex Japan, you would get a better price ex Japan. Is my understanding correct? Amanda Lacaze: We seek to get the best price in every instance, which is the right price for our customers and the right price for us. We have a very long-standing relationship with our Japanese customers. We have commitments, which are mutual commitments as far as those contracts are concerned. But I think that trying -- I understand why you are asking this and you're trying to deconstruct our revenue line. I'm not going to even give you breadcrumbs to be able to do that because the way that we deal with our customers is an important part of adding value in our business. And I don't want to be deconstructing the way that we deliver the final outcome. The issue is are we continuing to drive extra growth from our business? And are we driving that growth from a combination of volume and price. And I think that our results tell you that we are doing that. Chen Jiang: Sure. I understand. And just a second question on your balance sheet. So I guess you have over $1 billion cash sitting there from the equity you raised last year. Now thinking of the incoming operating cash flow over the next 12 months given NdPr price is so high and you continue to ramp up production. So you will have a lot of cash printing over the next 12 months. But your FY '26 CapEx kind of guided last year $160 million. So how should I think about your CapEx profile? I guess you won't keep piling the cash. How should I think about your CapEx profile and your organic growth over the next, I guess, near term or medium term? Amanda Lacaze: Thanks, Chen. So I think the first thing is that we did -- if we separate these 2 things, and actually, we do separate these 2 buckets of money as -- even on -- we still do a weekly forecast, and we separate these 2 buckets of money. We manage to the ex capital raise bucket. So really, what are we doing in terms of generating cash from operations and improving our position there. And that is really because it remains my heart desire that we are able to return some of that capital to our shareholders. The second piece, which we manage as a separate sort of bucket of money is the money that we raised for the Towards 2030 growth initiatives, and we will spend that money on those initiatives. So far, we have announced the $180 million, which is for the new HRE plant in Malaysia as well as that we are progressing rapidly on detailed documentation around things like the JS Link magnet factory in Malaysia, and we will be making further investments in terms of resource development once again, particularly in Malaysia. So that's the way that we are thinking about this with the objective that as we continue to generate more cash out of the business that we manage that accordingly, and we have the ability to make a decision on how and at what time and in what form might that be returned to shareholders, recognizing that we are still a growth business. The capital that we raised in August actually underpins our growth capability and we'll continue to do so. Operator: Next question comes from Jonathan Sharp with JPMorgan. Jonathan Sharp: Congratulations on the good result. Nice to see those NdPr prices coming up. First question just on the Towards 2030 5-year growth strategy, which one of the pillars is increasing capacity. But my question is, will this include expanding NdPr capacity at some point beyond 12,000 tonnes per annum? Now I understand that you're currently embedding the expansion that you've just done and some -- but yes, will it include expanding beyond the 12,000 tonnes per annum? And if I'm correct, my understanding is that there's a pathway to an additional 2.4 kilotonnes per annum at the concentrator, which was previously disclosed. You have the capacity of cracking and leaching once Kal's ramped up. And I would imagine the ability to expand solvent extraction is there with not too much capital. So really, my question is, why not expand further beyond 12,000, even if that's after 2030? Or is it more to do with the market being there to sell into? Amanda Lacaze: Thanks for the question, Jonathan, and welcome. I see that you're now [indiscernible] at JP. So yes, we will consider expansions beyond the current -- well, we've got -- we've said in the Towards 2030 like today, we got 10.5. We've said the stepping up to 12 is sort of a bit of a no-brainer. There are, however, some more substantial investments required to take it beyond that, but we know what they are. Some are at Mt Weld and some will actually be in Malaysia. You're right about our ability to be able to increase throughput and solvent extraction very cost effectively. But bear in mind, we just put on about 50% capacity increase in solvent extraction without a really serious price tag attached to it. The next step is going to have a few more costs associated with it. And some of those are going to be related to utilities and other management capabilities in Malaysia. The team is working on that. We expect over the 5-year period, yes, we will have placed 100% of what we produce outside China, and we will be looking for more production. And so therefore, we will be looking to drive production higher. But we don't have the precise plan on how all the bits of the jigsaw fit together to do that quite yet. Jonathan Sharp: Okay. And maybe just to dig in a little bit more on that. Would it be right to do 14,000 tonnes per annum after 2030? Or is there a number that you could give us? Amanda Lacaze: Well, I think -- as you've noted, Jonathan, we have identified 2,400 tonne uplift that would come out of Mt Weld. And we've previously identified that that's available and maybe towards -- I would think that our ability to place all of our NdPr outside China is dependent upon the speed with which the downstream industry develops. And so I think there's something like 7 different magnet projects in the U.S. at present. Some of them will never see the light of day. Others will come to market. We've got the projects that we're partnering with, particularly in the Korean metal and magnet making projects. We are confident that they will come online. So we will increase our NdPr production as downstream processing increases. So hopefully, those projects which do successfully come to market will start producing sometime in late '27, early '28. We'll have a watching brief on those to make sure that we're matching our production to that capacity. Jonathan Sharp: Okay. Great. And just second question. Congratulations on the very good... Amanda Lacaze: You get 2 questions -- I'm sorry. Go on, Jonathan. I shouldn't have joke. Yes, go on. Jonathan Sharp: Now I know you're still there. But as you do look to appoint the next CEO, what are you looking at in terms of capabilities? Is it operational execution, marketing, maybe government relations? And should we expect any changes in the direction under the new CEO? Amanda Lacaze: Look, you'll have to ask the Board that despite the fact that I think that I'm by far the most competent person to select the next CEO, the nonexecutive directors on our Board think they have the say, too. Anyway, I think that we have -- my job is to make sure that we have a business which is strong, which is resilient and which is able to continue to demonstrate the same sort of success that we've been able to demonstrate over my tenure. I would expect that given the quality of our track record that we would not be -- the Board would not be seeking to make an appointment, which would take the business in a fundamentally different direction. Sorry, everybody. I've just got a message that says that there are 7 more questions in the queue, and it's 10:54. So please, can we just have 1 question each so that we can try to give everybody a chance to ask a question. Operator: Your next question comes from Daniel Morgan with Barrenjoey. Daniel Morgan: Just on the market, it's clearly improved. Spot prices are rallying, customer inquiries is increasing. I'd basically just like to circle back to how you plan to run the volume side of the business going forward. So can you lift volumes materially from here? When do you think you can run the system at 10.5? Or is rectification and power issues that probably meaning that in the short term, you're going to be kept at 8,000 to 9,000 tonnes per annum? Amanda Lacaze: Daniel, good question. In the very short term, the 8,000 to 9,000 is probably right. In the short term, but not quite so very short term, we continue to be focused on the 10.5. 10.5 is roughly 30 tonnes a day. We know how we get that 30 tonnes a day, and we have many days where we are achieving the 30 tonnes a day, we're just not achieving it every day yet. And yes, that is primarily about Kalgoorlie and about the amount of feed that we're able to deliver into LAMP ex Kalgoorlie. Operator: Your next question comes from Scott Ryall with Rimor Equity Research. Scott Ryall: Amanda, on Slides 5 and 6 -- no, sorry, 5, you talked to how well the business was set up as an incumbent and with lots of capability and opportunities to expand into other areas. So I guess what you didn't say was that's your legacy, so congratulations. I'm wondering, just on a 3- to 5-year basis, given the excitement around rare earths in the last couple of years that has stepped up big time. How do you keep your staff and -- or protect your staff and protect your intellectual property, please, just in the context of your incumbency advantages? Amanda Lacaze: Yes. I think that's a really intelligent question because many times, people forget the importance of people in the business. We talk about IP, and there is no doubt that some of it is scientific IP, which can be properly documented, et cetera. But there's huge value that comes from just every operator in the company actually knowing what their job is, and that's a form of IP as well. We're very focused on ensuring that we are an employer of choice, and I don't expect that to change when we transition to a new CEO because Lynas is so much more than a single person. Lynas, I know that I'm the figurehead, but Lynas is every person who works in the company. And so the care and -- the care for each other that is a feature of the way that we operate and our focus on achievement and excellence, I believe, will survive me. Our people continue to work at Lynas because they get satisfaction from their jobs. They know they're doing something which is valuable and that they are valued for doing it. And I think that, too, after 12 years will definitely survive me. So being an employer of choice, yes, it's about making sure that we pay well and all of those things. But it's mostly about making sure that when you go home at the end of the day, you can say, I made a difference today, and we work very hard to make sure all of our people can feel like that when they go home every day. Operator: Your next question comes from Dim Ariyasinghe with UBS. Dim Ariyasinghe: Can I just get an update on the LAMP license? So it's due to expire on Monday. It feels like it's maybe just a rubber stamp that you need. But in the unlikely case that it doesn't go ahead, what contingencies do you have? Can Kal step up to ensure that the rest of the quarter is okay? Yes, if that's one question, that's it. Amanda Lacaze: Dim, I'm not sure that I've got a lot constructive to say about sort of the hypothetical of, let's say, we don't get sort of an extension on the license. I don't think that that's likely to happen. I think that the licensing environment, as we indicated, has changed. The new legislation went through and was gazetted at the beginning of December last year. It certainly should ensure that we're no longer in this sort of every 3 years, what's going to happen, but in a much more normalized licensing environment where if we meet sort of our requirements, we can reasonably expect that the license will continue. As we've indicated, we've done the things that we need to do. We've had the Atomic Energy Department has been in done its audit. We've received a very satisfactory rating, which is the highest rating available and we continue to run our operations safely for our people and our communities and the environment. So yes, would I have liked all of this to be resolved a month ago? Yes, but that's not the way the system works. But we will provide you with an update, I would expect within the next few days. Operator: Your next question comes from Paul Young with Goldman Sachs. Paul Young: Just this one should be pretty easy. I noticed that you've got a really good provisional pricing tailwind in the half of about $20 million. So your revenue beat the Street's expectations, and it was well above the cash receipts because of receivables increase in inventories, et cetera. But just on the provisional pricing tailwind, just to help us out going forward because you should actually see this benefit over the next 6 months as well, like a revenue tailwind on repricing of product you forward sold, but the price hasn't been locked down. Can you just help us just think about or just explain what your quotational pricing period is? Like as far as -- so we can look at -- we can actually just judge provisional pricing adjustments going forward? Amanda Lacaze: I can't give you chapter and verse on that, Paul, because it is different by customer. And the provisional pricing mostly relates to sales which are made into Japan. Sojitz carries that inventory and does actually denominate certain inventory for certain customers, which is why sometimes the tail is longer than we might otherwise expect it to be. But I'll invite Gaudenz to speak to it as well, but I would think that we should have most of it find its way through the system sort of within the next 3 months. Gaudenz, do you want to add anything to that? Gaudenz Sturzenegger: Yes, Paul, I think that's correct. You see it on the balance sheet receivable side already. But yes, it depends sale by sale also when the final sale is made to the customer. And that varies between 1 month and 3 months. Probably best you take -- if you want to model it, take about a 2 to 3-month lagging impact into consideration, then probably another 3 months before you see the cash really coming in or going out. I mean it's positive at the moment, has not always been like that, but we obviously enjoy the current setup, okay? I hope that helps. Amanda Lacaze: A little bit more color, Paul, because I think it's an interesting question, a little bit more color. We basically invoice when it leaves our factory gate. We go through a process of then tolling it in our toll metal makers. And then it goes from there into the magnet makers. And that actual -- that's part of what drives the difference here. And that is, as Gaudenz said, it's at least a 2-month period that we're talking about before it finds its way into the magnet makers. So yes, for modeling purposes, I think that you could assume a 2 to 3 months sort of lag is reasonable. Operator: Your next question comes from Austin Yun with Macquarie. Austin Yun: A quick follow-up. Just looking at your term deposit, keen to understand how did you explain the budget for that figure? Should we assume that the remaining balance will be what you set aside minus working capital requirement set aside for the downstream... Amanda Lacaze: Austin, I'm sorry, I have not -- you've just been garbled on my line. I don't -- can you start this question again, please? I can't understand what you're asking. Austin Yun: Sorry. I'm keen to understand the thinking for this term deposit and the remaining cash for the next 12 months, would that be the amount you set aside for the ionic clay project in Malaysia and also the downstream plant, the capital requirement? Amanda Lacaze: So that's basically a treasury question. So I'll let Gaudenz do that. I mean in terms of allocation into the different projects, we will disclose those as we finalize each of the projects. So we've disclosed the $180 million on the Heavy Rare Earths. We understand the profile of expenditure of that money and are managing it accordingly. But in general terms, treasury, I'll let Gaudenz say a few words to that. Gaudenz Sturzenegger: Yes. There -- I think it's probably better to look at it as a very dynamic process. I wouldn't really draw conclusions as you try to do that this is really specifically for certain spendings later on. I think also the terms we have there in that category are between -- beyond 3 months, but shorter than 12 months. It's more interest optimization approach we have there. So I will not read too much into the figure as such. And overall, we try to have a balanced approach, a cautious approach, but obviously, at the same time, optimizing the interest income. And at the moment, some of the shorter durations are better than the longer one. So it's pretty mixed. Operator: There are no further questions at this time. I'll now hand back to Ms. Amanda Lacaze for closing remarks. Amanda Lacaze: Okay. Thank you very much, and thank you all for your participation today and the questions that you have asked. And as with, I think, every CEO, I would remind you that any day that ends in "y" is a good day for Lynas and Lynas shareholders. So I look forward to seeing many of you over the next week or so. Thanks. Bye. Operator: That does conclude our conference for today. Thank you for participating, and you may now disconnect.
Thomas Russell: All right. Tony, we're ready. Tony Sheehan: Thanks, Tom. Good morning, and welcome to the H1 FY '26 update for Change Financial. My name is Tony Sheehan, CEO of Change, and I'm joined by Tom Russell, Executive Director. Similar to our usual webinar format, Tom and I will run through a presentation and then take Q&A at the end. If you do have any questions, please submit them through the chat function on this webinar. Okay. Just a little bit briefly about Change Financial. So, Change Financial provides innovative and scalable payment solutions for over 150 clients across more than 40 countries. We are a B2B business with 2 core products. The first being Vertexon, which is our Payments as a Service offering, which provides card issuing, card management and transaction processing. Vertexon supports prepaid, debit and credit card issuing, and there are 2 main models under Vertexon, the first one being processing only. Under this model, we provide the technology, which is a card management system to clients to run their card programs. The clients hold the necessary scheme and regulatory licenses to issue cards. So processing only is available globally and supports all major schemes. And we have clients using Vertexon in Southeast Asia and Latin America, including 2 of the largest banks in the Philippines running over 45 million cards on the platform. The second model is processing and issuing. This is only available in Australia and New Zealand. And under this model, clients utilize Vertexon for processing capabilities and leverage our regulatory and scheme licenses and issuing capabilities. So under this model changes the card issuer record and provides treasury, fraud and compliance services. Vertexon generated 85% of the group's revenue in H1. Our other core product is PaySim, so that's software, which enables end-to-end testing of payments platforms, processes and scheme rule compliance. The PaySim software is based on global messaging standards and can be sold globally. PaySim is the default testing standard for EFTPOS in Australia and has a blue-chip client base, including 5 of the top 10 digital payments companies. PaySim contributed 15% of the group's revenue in H1. So importantly, for both the Vertexon and PaySim, they are proprietary payments technology platforms, which are owned and developed in-house by Change. So this is an important -- this is important from a value and control perspective for the company. So, if we look at some highlights, so really strong financial performance in H1 with a record half year revenue result of USD 9.3 million. So that's up 29% on prior year. 70% of revenue is derived from recurring sources. So this provides a very solid base of revenue to grow from. The proportion of revenue from nonrecurring sources increased during the half due to the strong performance from licenses and professional services revenue. So one-off revenue is an important driver of overall financial performance and was a key contributor to the strong financial performance during the half. Our rolling 3-year revenue CAGR to 31 December is now 25%. Underlying EBITDA for the half was USD 1.8 million. So, this is a material improvement on the underlying EBITDA loss of USD 0.5 million in H1 FY '25. The key drivers of this significant improvement in the underlying EBITDA were revenue growth, stable fixed cost base and the U.S. cost outs from the exit of the U.S. operations. Now if we isolate the impact of the U.S. cost-outs, H1 FY '26 underlying EBITDA was USD 1.9 million versus an underlying EBITDA of USD 400,000 in H1 FY '25. So, we also delivered a maiden profit of USD 600,000 for the half. So that's a real key milestone for the company and something we're very, very proud of as well. We are seeing the operating leverage pull-through we've been talking about. We've been talking about this for the last few quarters. We want to continue to drive operating leverage moving forward to generate margin expansion as we continue to scale. So, PaaS is a key driver of our growth, and we have seen strong growth in PaaS metrics across the board. We now have more than 110,000 cards active in Australia and New Zealand. That increase in cards was driven by the Sharesies debit card program in New Zealand, which launched in October and also significant growth in one of our existing fintech clients in the prepaid card space. So, we will continue to drive revenue growth on the PaaS platform through organic growth from our existing clients. Our new clients already signed. So, we're currently onboarding 2 clients and also further client wins. One of our key priorities across the business is growing our PaaS client base in Australia. So, increasing our footprint in Australia will drive scale benefits. So, we have the product and the team in place to add significantly more clients and volume without having to increase our cost base. There's a significant opportunity in market size in Australia as well. So, we want to really replicate that success that we've had in New Zealand and bring it here into Australia as well. Over to you, Tom. Thomas Russell: Okay. Thanks, Tony. So, we cover a lot of this information in our quarterly webinars. So, the slides are here for new investors, but I won't spend too much time going over the same ground. If you do have specific questions, please ask them using the Q&A function, and we are more than happy to answer them at the end. As Tony said, we've had a great growth in our active card numbers with a significant number of new cards added late in the half. Active cards were up 66% versus H1 last year. We obviously finished onboarding and launched a significant fintech client in New Zealand in October last year, and we're also currently launching another significant fintech client who will soon be migrating existing cards across the Change. We report active cards, which is a leading indicator for expected activity, that is transactions and transaction volume. We want clients growing because the PaaS model is designed to support our clients through launch and then their growth is also our growth. The types of fees we earn from our clients are listed there in the bottom left table. Generally, the largest driver of PaaS revenue is a number of transactions, but we also charge for active cards volume fees depending on the type of transaction and other valued fees you see there. Okay. The 2 clients I just mentioned that have recently launched and are in the middle of launching already have a significant cardholder base and the volumes are starting to show in the coming periods. Change is a B2B business and sales cycles can take a while. But importantly, once clients are onboarded, they can be very meaningful from a revenue perspective and as clients go through their own rollout plans and their multiyear deals. One question we get a lot is, are you actually going to be able to compete in market? Why would someone use Change over a competitor? Well, if you look at this chart, 6 of these clients were one of competitors. So the answer is yes, we can and are competing in market. We are winning on features, service and reliability as one of the only options in market now that owns our own technology. So in short, we've already proved we can win clients. The graph here shows that both competitors -- from competitors, banks and other issuer processes, and we can win net new programs. The key focus for us is building up the number of clients on the right that are contracted and going through the onboarding process. We won a new client in Q2, which is just about to start onboarding. And with the momentum building and more of the deals maturing through the pipeline, you should expect to see the box on the right starting to grow again very soon. All that will drive recurring PaaS revenues in the short-term, but also over the medium to long-term. I've presented this slide before as well, including in our full year results. So I'll just quickly touch on the key points for anyone new. Firstly, the scalability of Vertexon. Our clients process and manage over 45 million debit and prepaid cards on the platform, including one client in the Philippines who issued more than 40 million cards. For our Vertexon on-prem clients, we historically sold a one-off license to them. From that point, clients pay an ongoing support and maintenance fee of around 20% for as long as they continue to use the platform. That includes us pushing quarterly updates to them to ensure their system remains compliant with the card scheme mandated changes. Importantly, many of these clients have been with us for more than 10 years. Vertexon is a core system for them when they roll out new features, for example, the Southeast Asian client recently launched a credit card offering. They pay new license fees plus ongoing support and maintenance. Some clients also expand card tiers, which drives additional license revenue. Revenue here is generally not linked to transaction volumes. PaySim operates in a very similar way. Clients pay an upfront license fee for the modules they require and then ongoing support and maintenance to receive quarterly scheme updates. It's highly modular. Clients typically start with 4 or 5 core modules and then they add additional testing functions over time, which drives further license and recurring revenue. Across both products, particularly Vertexon on-prem, we also undertake customization work where required, generating professional services revenue. Talking explicitly to the financials now. It was a great half financially for Change, a record revenue half with USD 9.3 million of revenue or AUD 13.3 million of revenue, which is up 29% on H1 FY '25. PaaS is now the biggest contributor to revenue and Oceania has overtaken Southeast Asia as well as our biggest region in the last 12 to 24 months. I like sneaking this into every presentation, too, but we've had consistent quarter-on-quarter growth now for the better part of 3 years, and we are on track to have doubled the revenue in the business in the last 3 years by the end of FY '26. Pleasingly, revenue was up across the board and recurring revenue continues to build. The revenue waterfall chart here clearly shows where the revenue comes from across the business. The growth in revenue is being driven by our PaaS clients, but also our Vertexon clients who use Vertexon's core system and have had it deployed into their banks for a long time. The team is doing a great job at managing project pipelines, and we are seeing that work and resulting revenue dropping through at higher rates than in previous years. As a reminder, approximately 70% of our global client base pays us in USD, 20% in New Zealand dollars and 10% in AUD. Turning to the profit and loss. So again, USD 9.3 million of revenue in the half. You can also see the benefits of the cost reduction and exiting the U.S. operations, which is now materially completed, and we're in the final stages of the process to wind down the U.S. subsidiary. As we always say, we have the team in place to support significant increase in revenue, and that's the power of the platform. We are now starting to also see the benefits of AI multiplying the scalability of the platform, and Tony will talk through this shortly. Significantly, we recorded a significant step change in underlying EBITDA with a positive result of USD 1.8 million for the half. For context, we made a USD 0.5 million EBITDA loss last year in H1, and we only recorded USD 200,000 for the full year of FY '25, a 9th of the half year result. This clearly shows the inflection point the company is going through. Looking at PaaS margins, these have started to expand as we have advised they would. Margins in FY '25 set around 26%, but in H1 FY '26 have moved to around 30%. We still have heavy onboarding activities, which we continue to expect to have as more clients are onboarded, but the impact of these lower-margin revenues and even costs during onboarding are diluted by higher recurring base of transactional revenue. As we scale, fixed costs like connectivity and digital pay certifications are spread across a larger revenue base and will support ongoing margin expansion. Turning to the balance sheet. At the end of December, we had USD 2.6 million of cash at bank, an additional USD 1.4 million of cash-backed security deposits. As flagged at the full year, we have started splitting out client settlement funds that sit on our balance sheet as well. These relate to our PaaS business. They were USD 2.5 million at 31 December and fluctuate depending on the day of the week. There also is an offsetting liability for USD 2.3 million, which is labeled scheme settlements payable, which we've now split out from other trade and other payables. We also maintain a healthy balance of contracted liabilities. These are already contracted paid for support and maintenance as well as professional services work that will be unlocked over the next 12 months. In the first couple of months of H2, we've also contracted some large projects with Vertexon on-premise clients that are not reflected in that 31 balance. Overall, the balance sheet is in very good shape, and we continue to drive profitable growth. We'll continue to strengthen the balance sheet. In terms of cash flow, the significant improvement has been driven by a significant increase in cash receipts, but also the stable fixed cost base. The increase in operating payments is primarily driven from PaaS COGS as volumes and revenues increased. CapEx has stayed relatively stable with capitalized software development only up slightly on the back of additional revenue-generating features rolled out to clients in the half. As we always point out, given the billing cycle and cash usage cycle in the business, H2 is expected to be much more improved again on a net cash flow perspective and remain on track to hit our target of cash flow positive guidance for the full year. Back over to you, Tony. Tony Sheehan: Thank you, Tom. So just briefly touching on the large market opportunity that we have in front of us. Many of you on the webinar today would have already heard us talk around this, but there are some new people on the call. So, I will go through this, but I'll go through it pretty quickly. There is more details in the appendix. So, we have a very large market opportunity for Vertexon and PaySim. So, what is our focus really to capitalize on these opportunities? We have identified target markets. So, for Vertexon, that is Australia, New Zealand and Southeast Asia. They are the regions that we are gaining traction and winning. For PaySim, it's global as the product can be sold globally without modification. Secondly, we have pivoted towards outbound sales hunting. So, we have reshaped the sales team and pivoted towards outbound sales. So, the BDMs that we have hired over the last 12 months continue to aggressively target outbound sales opportunities. Thirdly, it's growing and leveraging the partner ecosystem, so expand our partner ecosystem and work more closely with existing partners to drive mutual value. That partner ecosystem provides a one-to-many sales approach, which can be very effective for both Vertexon and PaySim. Fourth is cross-sell and upsell. So, work with our existing Vertexon and PaySim clients to drive project work, and for Vertexon clients, continue that journey towards migrating to PaaS or the latest on-premises version. We upsell the modern functionality and features to clients, which also drives incremental revenue across both products. So, if we look at some key operational achievements. So, to deliver on our financial results that Tom has just gone through, we have a clear and focused operational plan. So, some of the notable operational highlights for H1 include from a commercial perspective, we integrated a marketing campaign automation tool and commenced marketing nurtures for Vertexon and PaySim. So, this is to increase brand awareness and lead generation. We expanded our partner ecosystem. So, we signed 3 new PaySim partners and a new BIN sponsored partnership with a global processor. We also launched our first BIN sponsorship client in New Zealand. We've talked about them before, the Sharesies debit card program launched in early October. From a product perspective, we significantly enhanced the Vertexon PaaS digital capabilities. So, we upgraded our digitization offering, and we broadened our SDKs or our software development kit to enable faster and deeper client integration. So that's really key from a sales perspective as well is having a rich SDK, which does make it easier to integrate and offer more functionality. We continue progressing the PaySim modernization project. So, we completed a 64-bit upgrade to increase testing capacity for our clients. We also enhanced the PaySim ISO 222, which is account-to-account payments product offering. So that complements our ISO 8583 offering. And we completed dual domestic EFTPOS network connectivity in New Zealand. So that's important for our debit card programs and in particular, our financial institution clients as well. From an operations perspective, we strengthened the Vertexon PaaS platform monitoring to maintain high availability as volumes continue to scale. We also undertook ongoing high availability infrastructure improvements, again, for continued scaling. Some of the clients that we're in discussions with and one that we've won recently really is around the resilience and stability of our platform. So that is key for us from a business perspective. We also deepened AI integration across the business, and I'm going to talk more in more details around that now in terms of AI. So, if we look at -- looking a little more deeply at AI and what it means for our business. So AI is rapidly evolving on a daily basis. The enhancements in capability, particularly in the last few months is quite extraordinary. So, the evolution of AI has now reached the point where it can create significant opportunity and value for Change. AI is not new to us. So we already utilize AI in products, for example, fraud monitoring and over the last 24 months, have deployed AI to assist development and other business units. Now with the recent transformational improvements in AI, we are changing the way we adopt AI moving forward. We are embedding Agentic AI across development, operations and client delivery. This will enhance structural advantages and drive operating leverage across the business. So, what is the impact we see from embedding Agentic AI across our business? Firstly, it's around defending and deepening the moat. So, we have proprietary platform control. As we mentioned earlier, we own the technology for Vertexon and PaySim. So this enables faster execution versus competitors reliant on third parties. We have over 20 years of institutional trust in our products. So AI improves our resilience and scalability. Embedded proprietary business logic, so compounding advantage as AI trains on our internal data. There are also some things which AI can't shortcut. So for example, scheme certifications and regulatory licenses and compliance. From our perspective, AI strengthens our competitive moat rather than eroding. Secondly is to accelerate revenue, so faster product releases. So development cycles compressed from months to weeks. So, this will accelerate our product road map delivery, which is super exciting. Will enable faster client onboarding through reduced implementation time frames. It will enable more customization capacity. So that's improved -- that will improve our ability to win large and complex deals. And it will also improve client responsiveness, so stronger retention and cross-sell expansion. The third pillar that we see there is really to drive margin expansion and operating leverage. So increased developer productivity, so far greater output per employee. There will be automation assistance with support and reporting, reduced rework and testing cycles. The operational task, automation, so workflow enhancements to reduce manual engagement and also expanded operational capacity. So, AI will augment teams and drive financial efficiency. So, we are in a super exciting period of evolution for our business. In terms of the outlook, so on the back of a strong H1, we upgraded our guidance for FY '26 in late January. Many of you will be aware of that. Revenue is now expected to come in between USD 17.5 million and USD 18.5 million. So, the increased quantum of recurring revenue provides a very solid base for the business. Underlying EBITDA is now expected to come in between USD 3.1 million to USD 3.8 million. So that's a 15% increase at the midpoint compared to previous guidance, which we released in July. We've also maintained our guidance of being cash flow positive for the year. So as Tom mentioned, historically, our cash flow has significantly improved in the second half of the year. We expect that to be the case in FY '26 as well. So overall, it's been a great start to FY '26. Our focus is on growing the business and executing on our operating plan to deliver on our targets for the year. Tom, we might turn over to Q&A. I think we've had some come in. Thomas Russell: Yes. Thanks, Tony. Okay. So. the first one here is from Miles at Veritas Securities, who has recently picked up coverage of the stock. Thanks, Miles. To what extent are AI and automation enhancing your sales and marketing capacity? Tony Sheehan: Yes. So good question there. I think let's start with the marketing. What the -- what AI is enabling us to do is establish content faster, whether that's white papers, whether that's lead generation materials as well. So that's sort of the first pillar is around that content. It will also likely enable us to do AI-powered lead scoring as well. So, we will use signals, web visits, content downloads, engagement frequency to enable targeting to potential clients there. So, it will continuously learn from our CRM data that we have and refine that and refine the nurtures and the campaigns that are going out. And then what we would be hoping that will come out of that as well is the identification of more sales-ready leads earlier. So that directly leads into the sales side of the business as well. I did talk around the enhancements that Agentic AI, we see coming across the business in terms of product delivery, the road map, customizations as well and onboarding -- the speed of onboarding of clients. So, we think that when you combine that with marketing and the product from a sales perspective, we will reduce implementation friction, increase confidence, particularly during those large and complex enterprise procurement processes there and accelerate our sort of revenue recognition for new contracts. Thomas Russell: Thanks, Tony. Next one from Joe at MST. Congrats on the great result and maiden profit. Just wondering if you can give any color on the current sales pipeline. Tony Sheehan: Yes, I'll take that. So, the sales pipeline at the moment is in very good shape. We've got some very good opportunities that are down the bottom of the funnel, so well advanced in Australia, which is great on the PaaS side. Tom mentioned around when we talked around that onboarding slide where you can see the number of clients and building out that box down the bottom right in terms of clients that are signed. We will be looking to really build that out over the coming quarter or 2 as well. So, from a sales perspective, looking very strong there, which is great. We just need to get those conversions and close those deals hopefully in the coming months as well. And then Southeast Asia, we are still seeing good traction up there. We've got some really marquee clients up there, which is driving a lot of our professional services and license sales on the Vertexon on-premises side as well. So, some great opportunities coming through. Joe, needless to say, we just need those to drop through in the coming months as well. Thomas Russell: Thank you. All right. Laf from MST, who also covers the stock. I appreciate the extra color on AI. Can we talk to specifics on the costs and how they may change and investment versus possible savings? I'll let you take that one, Tony. Tony Sheehan: Yes. And Tom, jump in on this as well. So Laf, in terms of where we're at with that AI, that is rolling out in a very accelerated manner across our business. I think in terms of the costs and what that will change, we will be working on that in more detail in the coming sort of couple of months as well as we -- as that rolls out across the business. So, probably a little bit early for us to sort of talk around that investment and possible savings. Tom, I don't know if you've got anything you want to add to that? Thomas Russell: Yes. The only thing I'll say is that the actual AI tools don't cost a huge amount of money. So, it might surprise you, but we're not talking about huge amounts of money to make that investment in AI. We've already started doing that, as Tony said, over the last 12 months in particular, but the additional cost of AI is not great. And I think we can provide a bit more color on that in the coming sort of months to 6 months. Okay. Another question from Laf. Are the 3 wins in PaySim net wins, new wins? Tony Sheehan: Yes. So, they're partner wins, so they are net new partner wins, Laf, on the PaySim side. And so, they're in most of those -- one partner was in Latin America, 2 were in the Middle East as well. So, regions where we can sort of leverage that partner network to sell PaySim licenses in region. Thomas Russell: So, we sell a lot of licenses through partners currently in different parts of the world as well. So, we use them as a distribution channel. And what worked in the pitch for PaySim, how do you seriously move above a less than 0.5% market share? Tony Sheehan: Yes. So, with PaySim, it is extremely functionally rich. So, the software itself, functionally rich. We have resellers that have their own testing tools as well, but they sell PaySim because it is more functionally rich. In terms of how do we move past that 0.5%, we are undertaking a modernization of that product, so to improve the look and feel of that. That's where we would expect our Agentic AI to really accelerate that modernization of PaySim. It's also about direct sales. So, we've moved towards outbound sales hunting with the appointment of new BDMs last year, and that partner network, we talk around that one-to-many partner network for distribution as well. So, it really, Laf, comes from product. So that modernization is very functionally rich. Let's modernize it to improve the look and feel and then direct sales and partner sales, I think the partner sales network, which has been very good for us historically. We need to accelerate that, and that's one of our key focus areas. Thomas Russell: Back to AI. Do you think you can use it for any horizontal opportunities as a new revenue potential? Tony Sheehan: Look, in terms of horizontal opportunities, I mentioned it earlier around accelerating our road map. We have road maps for Vertexon and PaySim. Where I see the AI coming in is the acceleration of that, which is new products and features. So that is revenue potential. So absolutely see AI as accelerating our revenue potential and growth there. Thomas Russell: I've got another question here. What is the cost of remaining listed? Would the company not be better off being privately held? Look, that's something that people ask us from time to time. The cost is probably about USD 400,000 a year in terms of being listed. It's not cheap to be a listed company, which is why you see in the market now companies need to be bigger before they list. Look, it's something the company could consider, but we've got about 2,000 shareholders who I'm not sure would all appreciate being a private company. So, for now, we'll be staying listed. Michael from MST. Can you touch on some of the future products or enhancements you guys may be exploring over the next 12 to 24 months? Tony Sheehan: Yes. So, Michael, from a product perspective, if we have a look at PaySim, the modernization, which I mentioned in the presentation and also some of the last questions there, the modernization look and feel, also building out our ISO 222, which is our account-to-account solution as well. So, what we -- a core function that we have runs on 8583, ISO 8583. What we want to do is build out that functionality around account-to-account payments because that's a growing segment as well. So, that will be the real focus for PaySim. If we have a look at Vertexon, again, we have a long list on our product road map, which we go through with prioritization. Things that we are looking at, I've mentioned that we've significantly enhanced our digital capabilities on the PaaS platform. We will also be looking at loyalty and also account-to-account, so real-time payments to complement our card issuing. We're not going to be someone that competes for account-to-account payments, but it is a complementary offering for our clients around that card issuing. So that's probably some of the key things that we'll be looking at over the next sort of 12 to 24 months. And again, that's where we do expect that acceleration to happen through our sort of rollout of Agent AI. Thomas Russell: Thanks. Last question for now. Sean from Snowble. Does the use of AI affect your hiring decisions? Example, would you look at hiring less due to efficiency gains? So, I might take that one, Tony. So yes, I think that is our expectation. The platform, as everyone knows, is very scalable, and we've always needed to hire a few people to double the revenue, like we said for the future and like we've shown in the last sort of 12 to 24 months. We've had those people there the whole time. The revenue has doubled. We don't need to -- when we sign a new client, go and add more staff necessarily. There will become a point where we do. As we said before, we're sort of going through our AI rollout plan at the moment. It's happening very quickly, something we've been sort of been keeping a very close eye on and how it's going to affect us as a business. So we're well ahead of it. But over the next few months, I think we'll be in a position to talk more about that as we come into towards the end of the financial year. Okay. That's it for questions for now, I think, Tony. Tony Sheehan: Okay. Thank you for the questions, Tom and I always enjoy the engagement from investors and our analysts that cover our stock as well. Thank you for joining. Thanks for taking the time to join us on our H1 update. I look forward to keeping you updated throughout the remainder of FY '26. Lots of exciting things happening in the business. So, we'll keep that coming with our news flow as well and our quarterly updates that we provide.
Operator: Good day, welcome to the Daqo New Energy Corp. Fourth Quarter 2025 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead. Jessie Zhao: Hello, everyone, I am Jessie Zhao, the Investor Relations Director of Daqo New Energy Corp. Thank you for joining our conference call today. Daqo New Energy Corp. just issued its financial results for the fourth quarter of 2025, which can be found on our website at dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Jiang Xu, is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xu. Today's call will begin with an update from Ms. Xu on market conditions and company operations, and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary review as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information except as required under applicable law. During the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer this translation into U.S. dollars solely for the convenience of the audience. I will now turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead. Anita Xu: Hello, everyone. This is Anita. Happy Year of the Horse, and I will now deliver the remarks on behalf of our chairman, Mr. Xu. In 2025, China's NT Revolution Initiative supported the solar PV industry's gradual emergence from a cyclical downturn. As a result, solar products market prices rebounded from the third quarter onward, with the polysilicon sector posting the most notable gains. Following this trend, our utilization rate increased from 33% in Q1 to 55% in Q4, bringing our annual production volumes to 123,652 metric tons, in line with our guidance of 121,000-124,000 metric tons, representing a 39.7% year-over-year decrease from 205,068 metric tons in 2024. Furthermore, our 2025 sales volume reached 126,707 metric tons, exceeding production volume and reducing year-end inventory to a reasonable level. In the second half of 2025, we strategically ramped up sales efforts to capitalize on favorable pricing dynamics. The strong market response highlighted growing customer confidence in our product quality and their continued preference for our brand in this new pricing environment. Polysilicon ASPs decreased 7.2% from $5.66 per kilogram in 2024 to $5.25 per kilogram in 2025. This lower pricing, combined with reduced sales volume, resulted in revenue of $665 million in 2025, compared to $1 billion in 2024. Despite the decline in our top line, we significantly narrowed our losses during the year as compared to 2024. In particular, EBITDA swung to a positive $1.7 million in 2025, compared to a negative $337.4 million in 2024. While net loss attributable to Daqo New Energy Corp. shareholders narrowed to $170.5 million from $345.2 million in 2024. Moreover, we generated $66.1 million in positive operating cash flow in 2025, marking a notable turnaround from the $435 million outflow recorded in 2024. We continue to maintain a strong balance sheet and ample cash reserves. At the end of 2025, we had a cash balance of $980 million, short-term investments of $114 million, bank notes receivable of $136 million, and a fixed-term bank deposit balance of $1 billion. In total, these highly liquid assets stood at $2.27 billion, representing an increase of $57 million compared to the end of the previous quarter. This solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capitalize on long-term opportunities. Operationally, we continued to implement proactive measures in the fourth quarter to mitigate market oversupply, including operating at a nameplate capacity utilization rate of 55%. Total polysilicon production for the fourth quarter was 42,181 metric tons, in line with our guidance range of 39,500-42,500 metric tons. Our sales volume for the quarter reached 38,167 metric tons. In addition, we comprehensively reduced our production costs through process improvements, manufacturing efficiency gains, and raw material cost optimization. Extending our ongoing cost reduction initiatives, total production costs declined by 9% to $5.83 per kilogram in Q4 2025, from $6.38 per kilogram in Q3 2025. Total idle facility-related costs, which consist primarily of non-cash depreciation expenses, alongside approximately $0.10 per kilogram in cash costs for maintenance, also fell to $0.74 per kilogram in Q4 from $1.18 per kilogram in Q3, driven by higher production levels. Notably, cash costs decreased by 2% from $4.54 per kilogram in Q3 to a new record low of $4.46 per kilogram in Q4. In light of current market conditions, we expect our total polysilicon production volume in the first quarter of 2026 to be approximately 35,000-40,000 metric tons, and our full year 2026 production volume to be in the range of 140,000-170,000 metric tons. Chinese authorities demonstrated strong resolve in tackling irrational competition and industry overcapacity, formally designating anti-involution as a national priority within China's fifteenth Five-Year Plan, and the solar PV industry was a key focus of these efforts. These initiatives have driven a structural shift from price-based competition to value-driven differentiation. To advance industry governance, authorities deployed targeted measures, including standards, guidance, quality supervision, price enforcement, and promotion of technological progress. Specifically, this involved updating legislative frameworks such as the revised Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, which mandate that sales shall not be below cost. Furthermore, a new mandatory national standard was drafted to set strict energy consumption limits for polysilicon production on a per-unit basis. Led by the China Photovoltaic Industry Association, major polysilicon manufacturers have proactively responded to these initiatives, enforcing self-discipline and exploring innovative market-oriented approaches to combat excess capacity and pricing violations. These coordinated efforts have yielded measurable results in curbing overcapacity. The overall production volume fell by 28.4% to 1.32 million metric tons in 2025, and market prices surged more than 50% from the mid-2025 lows to RMB 50-56 per kilogram by year-end. Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher quality growth through 2026. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. In 2025, China's newly installed solar PV capacity grew 14% year-over-year to 317 gigawatts, setting yet another record high and proving that market potential continues to exceed expectations. As the global AI industry scales rapidly, space-based solar power is increasingly viewed as a vital solution to the immense and expanding energy demands of AI data centers, creating a significant new growth engine for the sector. Looking ahead, as one of the world's lowest-cost producers of the highest-quality N-type polysilicon, with a strong balance sheet and no debt, we remain optimistic about the sector and believe we are ideally positioned to capitalize on the market recovery and these long-term growth opportunities. We will continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in powering the future. I will now turn the call over to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead. Ming Yang: Thank you, Anita. Hello, everyone. This is Ming Yang, CFO of Daqo New Energy Corp. We appreciate you joining our earnings conference call today. I will now go over the company's fourth quarter 2025 financial performance. Revenues were $221.7 million, compared to $244.6 million in the third quarter of 2025, and $195.4 million in the fourth quarter of 2024. The decrease in revenue compared to the third quarter of 2025 was primarily due to a decrease in sales volume. Gross profit was $15.4 million, compared to $9.7 million in the third quarter of 2025, and gross loss of $65.3 million in the fourth quarter of 2024. Gross margin was 7%, compared to 3.9% in the third quarter of 2025 and -33% in the fourth quarter of 2024. The increase in gross margin compared to the third quarter of 2025 was primarily due to the decrease in production costs. Selling, General and Administrative expenses were $18.7 million, compared to $32.3 million in the third quarter of 2025 and $29.4 million in the fourth quarter of 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $0 for the fourth quarter and $18.6 million in the third quarter of 2025. The company recognized $19.3 million non-cash expense related to allowance for credit loss in the fourth quarter, mainly due to the uncertainty regarding the recoverability of long-outstanding other receivables. Let me give a little more color on this. During the early development stage of the company's Inner Mongolia polysilicon project, funds were lent to a local government-affiliated industrial park development entity for supporting the infrastructure building and development of our Inner Mongolia polysilicon site. The local government-affiliated entity will repay these funds later. However, due to the industry downturn that resulted in insufficient local tax revenue, the repayment has been delayed. As a result, we recorded an allowance for credit loss due to the delayed repayment of these funds. All amounts due have been reserved, and we do not expect any future related allowance for credit loss. R&D expenses were $0.7 million, compared to $0.6 million in the third quarter of 2025 and $0.4 million in the fourth quarter of 2024. R&D expenses converted from period to period reflect R&D activities that take place during the quarter. As a result, the foregoing loss from operations was $20.9 million, compared to $20.3 million in the third quarter of 2025 and $300 million in the fourth quarter of 2024. Operating margin was negative 9.4%, compared to negative 8.3% in the third quarter of 2025 and negative 154% in the fourth quarter of 2024. Net loss attributable to Daqo New Energy Corp. shareholders was $7.3 million, compared to $14.9 million in the third quarter of 2025 and $180 million in the fourth quarter of 2024. Loss per basic ADS was $0.11, compared to $0.22 in the third quarter of 2025 and $2.71 in the fourth quarter of 2024. Adjusted net loss attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $7.3 million, compared to adjusted net income attributable to Daqo New Energy Corp. shareholders of $3.7 million in the third quarter of 2025, and adjusted net loss attributable to Daqo New Energy Corp. shareholders of $170.6 million in the fourth quarter of 2024. Adjusted loss per basic ADS was $0.11, compared to adjusted earnings per basic ADS of $0.05 in the third quarter of 2025, and adjusted loss per basic ADS of $2.56 in the fourth quarter of 2024. EBITDA was $52 million, compared to $45.8 million in the third quarter of 2025 and negative $235 million in the fourth quarter of 2024. EBITDA margin was 23.7%, compared to 18.7% in the third quarter of 2025, and negative 120% in the fourth quarter of 2024. I will go over the company's full year 2025 financial results. Revenues were $665 million, compared to $1.03 billion in 2024. The decrease was primarily due to lower sales volume, as well as lower polysilicon average selling prices. Gross loss was $137.9 million, compared to $212.9 million in 2024. Gross margin was negative 20.7%, compared to negative 20.7% in 2024. The decrease in gross loss was primarily due to lower revenue. SG&A expenses were $118.2 million, compared to $143 million in 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $55.8 million and $72.4 million in 2025 and 2024, respectively. R&D expenses were $2.6 million, compared to $4.6 million in 2024. R&D expenses reflect R&D activities that take place during the period. As a result, the foregoing loss from operations was $270 million compared to $564 million in 2024. Operating margin was negative 40.6%, compared to negative 54.8% in 2024. Net interest income was $9 million, compared to $30.2 million in 2024. The decrease in interest income was due to lower cash bank balance, as well as lower bank interest rate. In addition to the interest income, the company did record $24.1 million in gain on short-term investments for 2025, related to the purchase of bank short-term investment products. Net loss attributable to Daqo New Energy Corp. shareholders was $170.5 million, compared to $345 million in 2024. Loss per basic ADS was $2.53, compared to $5.22 in 2024. Adjusted net loss to Daqo New Energy Corp. shareholders was $114.7 million, compared to $272 million in 2024. Adjusted loss per basic ADS was $0.70, compared to $4.12 in 2024. EBITDA was $1.7 million, compared to negative $337 million in 2024. EBITDA margin was 0.3%, compared to negative 32.8% in 2024. On the company's financial condition, as of December 31, 2025, the company had $980 million in cash equivalents and restricted cash, compared to $551.6 million as of September 30, 2025, and $1.04 billion as of December 31, 2024. As of December 31, 2025, short-term investment was $114 million, compared to $431 million as of September 30, 2025, and $9.6 million as of December 31, 2024. As of December 31, 2025, note receivable balance was $135.5 million, compared to $157 million as of September 30, 2025, and $55.2 million as of December 31, 2024. Note receivables represent bank notes with maturity within six months. As of December 31, 2025, a balance of fixed-term deposit within one year was $972.4 million, compared to $1.03 billion as of September 30, 2025, and $1.08 billion as of December 31, 2024. On the company's cash flows, for the 12 months ended December 31, 2025, net cash provided by operating activities was $56.1 million, compared to net cash used in operating activities of $435 million in the same period of 2024. For the 12 months ended December 31, 2025, net cash used in investing activities was $140.7 million, compared to $1.48 billion in the same period of 2024. The net cash used in investing activities in 2025 includes $179.5 million for the purchase of property, plant and equipment, primarily related to the remaining capital expenditures of the company's Inner Mongolia polysilicon project. For the year 2026, the company currently expects approximately $100 million-$150 million of capital expenditures for the year, primarily related to the remaining payments for the Inner Mongolia project, as well as maintenance CapEx. For the 12 months ended December 31, 2025, net cash used in financing activities was $0.9 million, compared to $47.4 million in the same period of 2024. The net cash used in financing activities in 2025 was related to $0.9 million in stock repurchases made by the company's subsidiary, Xinjiang Daqo, to its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin. Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Han with JP Morgan. Please go ahead. Alan Han: Thank you, management, for taking my questions, and it is great to see a recovery for the company. I have the first question regarding a potential buyback, because it is great to see we are finally generating positive operating cash flow for the full year last year. In this sort of environment, how should we think about a buyback strategy? Anita Xu: Thank you, Alan, for raising the question. First, I would say that share repurchase is absolutely a topic that we have been monitoring closely as part of our capital allocation strategy. We are taking a more prudent and informed approach, especially given the evolving landscape around China's anti-involution policies in the solar sector. While we definitely see tremendous value and intrinsic value in our shares, especially amid the current market dynamics, we believe it is essential to wait for more clarity on the policy implementation and the outcomes before proceeding. We believe that this wait-and-see stance would allow us to optimize the timing and the impact of the repurchase program better. Alan Han: Thank you. My next question is on the policy outlook. We are aware that a consolidation platform was formed in December, soon after followed by antitrust questions by some of the regulators. Can you give us color on how the industry consolidation would happen? Should we discount the consolidation for the moment, or how should we think about that? Also, I noticed one of your peers has just conducted M&A on buying out some of the small traders. Is that part of your strategy as well? Anita Xu: Thank you, Alan. Maybe I will answer the question of the recent acquisition by our peers first and then move on to the anti-involution dynamics. I would say that we see this as the individual player's strategic decision, reflecting their confidence in the sector's future and their determination to further strengthen their competitive positioning. For us, I would say we are completely open-minded toward opportunities that could create value for the industry and for our shareholders. We view such transactions as constructive and ones that would drive the market consolidation the national anti-involution policy is designed to achieve. Direct acquisition or consolidation via the SPV that you mentioned are both forms toward achieving the same goal, essentially shifting toward a more rational and more efficient industry structure, something that we strongly support. That being said, I want to reiterate that anti-involution is designated as a national priority within China's next Five-Year Plan. As one of the major players in the industry, we are determined to address the overcapacity challenge, which we believe would optimally become a value-driven game by innovations and technological progresses, instead of the current price-based competition, and lead to a healthier and more sustainable industry. Indeed, the SPV for consolidation that many of you might be aware of was successfully established by the end of 2025 in December, which marks the first step and signals our resolve to collaboratively tackle the overcapacity issue. Of course, it is not an easy task, with lots of back and forth within the participants and with the government entities. I want to say that discussions are actively ongoing, with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet fair competition and that we are abiding by the regulatory guidelines. To provide more color, we will approach this in well-defined phases, potentially with initial investment injections anticipated in the near term, which would lay the foundation of financial stability. From there, we will gradually move towards consolidation, allowing for more efficient resource allocation and enhanced operational synergies across the value chain. We believe that this structured progression will not only align with the current regulatory guidelines, but also position our company and the industry at large for longer-term resilience and profitability. We are quite optimistic about these developments. Alan Han: Okay, thank you for your answer. With that, I will pass it on. Anita Xu: Thank you, Alan. Operator: The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead. Phil Shen: Hey, guys. Thanks for taking my questions. As a follow-up to that last question from Alan, I was wondering if you might be able to share what are some of the key milestones that we should be looking for in the coming quarters that show progress on the mandatory national standard? There is a draft, but when does that become implemented, for example? With the Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, what are the milestones that we should be following so that we can see the progress in the industry structure, as well as the competition or the industry consolidating? Thank you. Anita Xu: Thank you, Phil. I would say because there is not much information, and there is a lack of clarity and transparency in the current dynamics, it is difficult for us to say exactly what we might be monitoring because not a lot of details are released until the policies land. Prices, we definitely see a pricing recovery, and as part of the price laws, sales should not be below the industry-level cost, so that is a positive side. I would say we would have to be a bit more patient with the policies, as the conversations are still ongoing. Phil Shen: Okay, got it. Thank you. Then— Ming Yang: This is Ming. Phil Shen: Go ahead, Ming. Ming Yang: Let me just quickly follow up. I think there is a very high-level government meeting coming up that will discuss the next Five-Year Plan. As part of that, I think there is a presentation by a key government agency on the progress of anti-involution. I think after the top-level central government meeting, more policies will come forward. That is something to monitor. Phil Shen: Okay, great. Thanks, Ming. Shifting over to the price outlook, I know there is not as much clarity on the milestones for policy, but what is your assumption for poly prices in Q1 and Q2? If you have a view for the rest of the year, that would be great. Thanks. Anita Xu: As I just said, as part of the Pricing Law, sales should not be below the industry-level cost. I would say the lower bound will be at least RMB 53-54 per kilogram, and we would remain around that level for the coming quarters. It is hard for us to say where prices would go in the coming quarters, because that would essentially depend on how the SPV would evolve and the pace of consolidation. Phil Shen: Okay, got it. For the things that you can control, costs were down and hit a record low in Q4. How much do you think you can lower your cash costs by the end of 2026? Thanks. Ming Yang: Hi, Phil, this is Ming. I think we continue to make progress on both production costs and cash costs. This quarter we benefited from lower energy price or cost, as well as manufacturing efficiencies. I think we should continue to benefit. I think for Q1 and Q2, we are likely to see similar cash costs to the Q4 level, and then further reduction in the second half. Phil Shen: Great. Okay. All right, Ming, Anita, thank you very much. I will pass it on. Ming Yang: Great. Thank you. Anita Xu: Thank you, Phil. Operator: The next question comes from Emmett Lau with Jefferies. Please go ahead. Emmett Lau: Thanks for taking my question. It is a follow-up on the previous question. Basically, it is intertwined. If the price you mentioned should be above RMB 60, the question here is: if the price is not allowed to push up to above RMB 60, then what is the incentive for acquiring others' capacities like the plan before? I do not know what was the thinking behind or if the acquisition will happen like what your peers are doing. Basically, are companies acting on a standalone basis, or how is the whole coordination versus the price coordinated? Anita Xu: Sorry, Lau, can you repeat the question again? I do not think I caught all the question. Emmett Lau: Yes. Previously, the incentive, to my understanding, is that the remaining players can push prices above RMB 60. I think there was some window guidance from the regulator saying that you cannot control prices. If the industry or the larger players are still going to acquire the smaller players, and you cannot push up the prices, what is the point of acquiring small players? How do you expect the price outlook going forward? If you could not make money, why would you acquire anyone? Anita Xu: As I said, I think it would have to be done in phases. First step is that you are not allowed to sell below cost, then gradually you would move on to consolidation and phasing out the excess and outdated capacities. It is hard for us to say how high prices can go, because we want to focus on a more market-oriented approach to achieving this. Emmett Lau: Do you mean the acquisition will happen in phases which probably last for a longer time? Anita Xu: Yes, I would say it would have to be done over a couple of years. It will not be done all at once. Emmett Lau: I see. I have noticed that prices actually have gone down a little bit recently from around RMB 60 to the 50-ish. I think futures price is below 50 already. What do you expect the pricing in the first quarter and second quarter? Anita Xu: Phil also touched upon the pricing outlook for the first half of 2026. I would say it would be at least around RMB 53-54, given that is roughly the industry-level cost currently. Moving forward, it will really depend on the pace of consolidation. That will determine. Emmett Lau: Understood. In Q4 results, if I simply divide the revenue by the sales volume, apparently the ASP seems to be lower than the spot prices. I wonder if there is some delay recognition that might be delayed to first quarter and support the prices in first quarter's result? Why was the revenue in Q4 slightly lower than the spot prices? Ming Yang: Do you mean that the ASP in Q4 was below spot price? Emmett Lau: Yes. Ming Yang: Okay. I think in Q4 the mix is such that because we were ramping up additional volume—production—and the initial batch of production from that initial ramp-up, it is consistent with our past experience that the qualities were not that great. Those actually had a market discount. Maybe in December, we kind of normalized in terms of product quality. It is that factor that led to a slightly lower overall ASP. Emmett Lau: I see. Could investors understand this as a factor that would be normalized in first quarter, meaning that even if the spot market prices are marginally lower, the ASP of the company will probably be more flattish than the decline in spot prices? Ming Yang: Yes, we would expect that. Yes. Emmett Lau: Thank you. My last question is on the broader perspective from the industry. Would you consider any acquisition? I noticed that Anita Xu mentioned you are open-minded, but are you liaising with any other specific player already, or it is still not on the schedule yet? Anita Xu: Thank you, Lau. As I mentioned at the beginning, we are open-minded toward different opportunities, either via acquisition or consolidation. As part of the SPVs, we are quite confident that we will see something in formation in the near term or in the coming quarters. That would be our primary focus for now. However, in the worst case, of course, acquiring directly would also be something that we could consider. Emmett Lau: I see. Thanks. I will pass on. Thank you. Ming Yang: Great. Thanks, Lau. Operator: The next question comes from Man Win with Goldman Sachs. Please go ahead. Man Win: Hello. Thanks, management, for taking my question. I have two follow-up questions. First is regarding our M&A target. I heard, Anita, you say you are open-minded for the acquisition opportunities. Could you elaborate from here? Is there any more keener target for us, like from 10-plus to further higher in the future? What kind of capacity do we prefer more in terms of acquisition on our own? That is my first question. Anita Xu: Thank you, Man. First, I would say that we are comfortable with where we are right now, given the current market dynamics, because essentially none of the players is operating at full utilization rates. Of course, in the future, like our peers, if we want to further strengthen our positioning by grasping more market share, we do not have a specific number in mind as to where we want to be. I would say, if it is aligned with the national anti-involution initiative, it is something that we will consider to do in the future. Man Win: Thank you. That follows my second question. Can you help us to understand a bit more, based on our conversation with government and with the leading industry players, how we should define the success of the anti-involution in the poly sector from here? Because in the past, we saw the poly price increase to above our operating cost, and then that could conclude the success of the anti-involution. It seems poly price continues increasing and is a bit bumpy. Also, there are some ongoing acquisitions. What shall we look forward to in terms of the future anti-involution progress? When can we call it a successful, complete anti-involution in our poly sector? Thank you. Anita Xu: First, I think that for the anti-involution initiative, it would extend over a number of years, given that this round the excess problem is very deep-rooted. The nameplate capacity, including everything, is more than 3 million metric tons, which is more than double the demand now. I would say until the more outdated and smaller players exit, and prices restore to a healthier level so that the industry as a whole becomes profitable to support the overall renewable energy goal. That is when we would say the anti-involution is completed. Man Win: Thank you, Anita. Can we understand in this way: the key target for the anti-involution is to sustain the poly price at over current level at least, to help facilitate outdated capacity exit, and that will take longer time than expected. Ultimately, the key target going forward is to take the smaller players offline. Is that correct? Anita Xu: Yes, I would say that is the aim. Man Win: Sure. The total outdated capacity too, right? Anita Xu: Yes, that is about the number. Man Win: Sure. Thank you so much. That is all from me. Ming Yang: Thank you, Man. Operator: The next question comes from Gordon Johnson with GLJ Research. Please go ahead. Gordon Johnson: Hey, guys. Thanks for taking the question. Really appreciate it. Piggybacking off a question that was touched on earlier, it seems like in the spot market, polysilicon prices had surged and now they have come off. Specifically, when I talk about the spot market, I am talking about the futures market. It also seems like, due to the policy changes in China, demand has been somewhat subdued. Can you give us an outlook on what your expectations are with the puts and takes around anti-involution? What is your outlook on polysilicon prices in the first quarter and maybe the second quarter? I have a follow-up. Thank you. Anita Xu: Thank you, Gordon. You are asking about the futures market and the pricing outlook for the first and second quarter? Gordon Johnson: Yes, please. Anita Xu: For the pricing outlook question, I can repeat it again. For the first and second quarter for pricing, as mandated by the Pricing Law, sales should not be below the industry-level cost. I would say it should be at least RMB 53-54 per kilogram in the coming quarters. For the futures market, I would say it is an area with the potential for risk management and pricing stability in our industry. We see participation in the futures market as an extension of the current sales strategy, offering the chance to hedge against volatility and to secure profitable margins. Similar to our approach on share repurchases, we are prioritizing policy clarity around the anti-involution dynamics in China before diving into the futures market. We will employ a more disciplined strategy in the future, gathering more insights as the policy unfolds, to ensure that our involvement is strategic and value creative. Gordon Johnson: That is helpful. Looking at the futures price, RMB 46.315 right now, and looking at the recent comments from the government on anti-involution, is there any potential that prices could come in in the first half below the RMB 53-54 range you are targeting? Is that something that you are pretty certain of? Anita Xu: I think that is the industry-level cost at the moment. Given that we are not supposed to be selling below that cost due to the Pricing Law, I would say it should be somewhat sustained at that level. Gordon Johnson: Helpful. The last question is, you made significant improvement on your free cash flow—congratulations—in 2025. Do you have any thoughts on how you expect free cash flow to trend this year? Thanks for the questions. Ming Yang: Hi, Gordon. Let me answer that. This is Ming. Thanks for your question. I think free cash flow will turn positive, especially in the second half of 2025. Given our expectation for both volume and average selling price to be held more steady, as well as costs to remain stable to lower, we do believe that. Based on the Q4 level, free cash flow should—without giving specific numbers—improve further from the Q4 level going forward for 2026. Gordon Johnson: Thanks again for the question. Ming Yang: Great. Thank you so much. Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Jessie Zhao: Thank you everyone again for participating in today's conference call. Should you have any further questions, please do not hesitate to contact us. Thank you and have an awesome day. Goodbye. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. My name is Corey, and I'll be your conference operator today. I would like to welcome everyone to Cronos Group's 2025 Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. At this time, I would like to turn the call over to Harrison Aaron, Senior Director, Investor Relations and Corporate Development. Please go ahead. Harrison Aaron: Thank you, Corey, and thank you for joining us today to review Cronos' fourth quarter and full year financial and business performance in 2025. Today, I am joined by our Chairman, President and CEO, Mike Gorenstein; and our CFO, Anna Shlimak. Cronos issued a news release announcing our financial results this morning, which is filed on our EDGAR and SEDAR profiles. This information and the prepared remarks will also be available on our website under Investor Relations. Before I turn the call over to Mike, let me remind you that we may make forward-looking statements and refer to non-GAAP financial measures during this call. These forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially from expectations are detailed in our earnings materials and our SEC filings that are available on our website, by which any forward-looking statements made during this call are qualified in their entirety. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in the earnings materials that are available on our website. Lastly, we will be making statements regarding market share information throughout this conference call, and unless otherwise stated, all market share data is provided by Hifyre. We will now make prepared remarks, and then we'll move to a question-and-answer session. With that, I'll pass it over to Cronos' Chairman, President and CEO, Michael Gorenstein. Michael Gorenstein: Thanks, Harrison. Cronos delivered a record year in 2025, growing net revenue by 25% organically, underscoring the continued strength of our core business and the progress we are making towards our strategic priority. We achieved record net revenue in the fourth quarter and for the full year, and we delivered record full year gross profit and adjusted EBITDA. These results reflect strong consumer demand for our leading brands and the growing contribution from Israel and our international platform. In Canada, we delivered record quarterly net revenue, up 42% year-over-year with key contributions from flower, vapes and edibles. Spinach continues to be a standout performer in the Canadian market and the second-most popular brand nationally. In vapes, Spinach delivered stellar performance in the quarter. In December, Spinach became the #2 overall vape brand in Canada, rising from the #4 share position in the first quarter of 2025. Within the vape cartridges subcategory, Spinach achieved #1 market share in the fourth quarter with our Cherry Crush and Blueberry Dynamite flavors as the 2 best-selling vape cartridges nationwide. This performance in vapes is a testament to our ability to leverage extensive R&D and consumer insights work to develop market-leading products that strongly resonate with consumers. We're looking to build on this momentum, and towards the end of the fourth quarter, we unveiled Spinach Puffers, our newest innovation in the all-in-one vape device category. Puffers offer bold flavors of high-quality liquid diamond-infused cannabis in a modern palm-style format with a dual ceramic coil for maximum flavor and smooth draws and a uniquely satisfying tactile grip. Puffers initially launched in select markets within Canada with distribution broadening to other Canadian provinces in early 2026. Innovation continues to be one of our biggest competitive advantages, and Puffers is another example of how we raise the bar on product quality, design and flavor. As we continue building loyalty with consumers, our focus remains on creating products that look, feel and taste great, delivering the exceptional experiences that define the Spinach brand. In edibles, Sour continued to deliver strong growth while maintaining category leadership with market share approaching 22% for the quarter. Growth was driven by fully blasted multipacks, which despite having just launched in mid-2025, were 4 of the top 10 selling edible SKUs in Canada in the fourth quarter, including the #1 edible SKU nationwide, reinforcing Spinach's leadership position in edibles and demonstrating the success of our innovation pipeline. In flower, Spinach remained the #4 brand in the quarter with supply constraints limiting growth potential. With the expansion of GrowCo now complete and the expanded cultivation space continuing to get dialed in, we expect these supply constraints to ease in 2026. Turning to Lord Jones. The brand remains the market leader in Canada in hash and live resin-infused pre-rolls, reinforcing its strength in premium formats where quality and differentiation matter most. Earlier this month, Lord Jones launched in Israel with a lineup of curated premium flower offerings featuring cold-cured large buds available in a series of limited-time drops, marking an important step in broadening the brand's presence. Internationally, PEACE NATURALS and LIFT posted another impressive quarter. In Israel, net revenue grew 52% year-over-year, the eighth consecutive quarter of record net revenue for Cronos in the market. PEACE NATURALS remained the top-selling brand in the market based on pharmacy data collected by Cronos, continuing to benefit from strong brand equity, consistent product quality and stellar commercial execution. Outside of Israel, PEACE NATURALS and LIFT drove a strong quarter for our other international markets, with net revenue up 68% year-over-year, led by growth in Germany as shipment timing normalized and demand remains strong. We capped off the year with the December announcement that we entered into a definitive agreement to acquire CanAdelaar, with closing expected in the first half of 2026. CanAdelaar is the largest company operating with the Netherlands legal adult-use cannabis program based on CanAdelaar management data, and is the only industrial-scale greenhouse cultivator within the program. Under the agreement, Cronos will acquire CanAdelaar for upfront consideration of EUR 57.5 million, or approximately $67.5 million, subject to certain adjustments with additional contingent consideration based on 0.5x CanAdelaar's normalized EBITDA in '26 and '27. The Netherlands has a deep cannabis heritage, and its coffee shops, which serve as cannabis retailers are known worldwide to have played a foundational role in the evolution of the legal cannabis industry. The Dutch legal adult-use cannabis program was enacted in 2020 to establish a closed regulated cannabis supply chain in 10 participating municipalities with the start-up phase beginning in the fourth quarter of 2023, and the program officially launching on April 7, 2025. The program is scheduled to run for 4 years from that date with the Dutch government retaining the option to extend it by up to an additional 18 months. The program is well designed and regulated to limit cannabis to responsible levels among adult consumers only, serving as a potential model for other countries. We are committed to the continuity of the program and cooperation with regulators, municipalities and all industry stakeholders to ensure its long-term success. Under the program, all 72 cannabis retailers in the 10 participating municipalities are now required to source their cannabis products exclusively from 1 of 10 licensed producers, including CanAdelaar. Including the 72 cannabis retailers in the program, there are a total of 562 cannabis retailers in the Netherlands based on data from the Dutch government, allowing for a potentially significant increase in the addressable market should the program be eventually expanded to additional municipalities or nationwide. European expansion is an important area of focus for us. And if completed, acquiring a market leader in Europe's largest adult-use cannabis market will allow us to further leverage our investments in borderless products at scale. Combined with a highly attractive financial profile and the expectation for accretion from the transaction, we're excited to bring CanAdelaar under the Cronos umbrella and to build upon the foundation that the company has established. Cronos maintains the strongest balance sheet in the industry with no debt and $832 million in cash, cash equivalents and short-term investments, allowing us to continue investing in growth, innovation and global expansion. Now I'll turn it over to Anna to walk you through our fourth quarter and full year financials. Anna Shlimak: Thanks, Mike, and good morning, everyone. I'll now review our fourth quarter 2025 results. The company reported consolidated net revenue of $44.5 million, a 47% increase year-over-year. The net revenue increase was driven by higher cannabis flower sales in Israel, Canada and other countries and higher cannabis extract sales in the Canadian market. Gross profit and adjusted gross profit in the fourth quarter were $16.2 million, equating to a 36% margin, a 670 basis point improvement from the 30% adjusted gross margin in Q4 2024. The year-over-year margin improvement was driven by higher average sales prices due primarily to a mix shift to Israel and other countries and higher sales volume. Adjusted gross margin declined from the levels realized in the first 3 quarters of 2025. This was driven by adverse production quality mix at GrowCo, as GrowCo dialed in the expansion as well as an expense timing in Q4 as part of that ramp-up. For full year 2025, adjusted gross margin of 43%, and we would view this as a reasonable margin level for the business. Operating expenses, excluding restructuring costs and impairments, were $22.5 million in the quarter, a modest year-over-year increase of $0.3 million. Adjusted EBITDA in the fourth quarter was $0.5 million, an improvement of $7.7 million year-over-year, driven by higher adjusted gross profit. While remaining positive, adjusted EBITDA was lower than reported in the first 3 quarters of the year, given the gross margin pressures and expense timing. We remain confident in the operating leverage of the business as production stabilizes and scale efficiencies are realized. Turning to the balance sheet and cash flow statement, the company ended the quarter with $832 million in cash, cash equivalents and short-term investments, up $8 million from Q3 2025, driven primarily by positive cash flow from operations before changes in working capital of $18 million and $3 million of proceeds from the sale of Cronos fermentation facility, partially offset by a $7 million working capital outflow, $4 million of share repurchases and $2 million of CapEx spend. In addition to this cash balance, we hold $21 million of loans receivable and $8 million of other investments. In summary, our fourth quarter jump in top line set a net revenue record, setting the stage for bottom line growth in 2026. For full year 2025, we achieved record net revenue, gross profit and adjusted EBITDA, demonstrating continued improvement in our operating fundamentals as we execute against our business objectives. With that, I would like to hand it back to Mike for a brief comment before going into Q&A. Michael Gorenstein: Thanks, Anna. In summary, we delivered meaningful improvements to our business and financial results in 2025, growing net revenue organically by 25% year-over-year, strengthening our competitive positioning across key markets and product categories. It's important to understand the context of this organic growth relative to our peers. Not only do we grow without acquisition, though most of our peers have ATMs and have been issuing shares to fund their businesses with a strong balance sheet and self-sustaining business, we have an active share repurchase program that led to a declining share count over the course of 2025. Looking ahead to 2026, we continue to be committed to our share repurchase program. We also will be opportunistic and disciplined while evaluating M&A opportunities. CanAdelaar is an example of a transaction that allows us to advance our borderless product strategy and establish a strong foothold in an important market. In addition to new market opportunities, we will also look for strong brands and IP that we can add to our portfolio. We see multiple drivers of continued momentum this year. The expected closing of the CanAdelaar transaction, increased production capacity following GrowCo's expansion, continued growth in our branded products and our increasing presence in international markets. We remain focused on delivering sustainable top line growth at attractive gross margins while maintaining disciplined cost management as we continue to scale Cronos globally and position the business for long-term success. Thank you, and we'll now open the call for questions. Operator: [Operator Instructions] Our first question comes from Bill Kirk of ROTH Capital Partners. William Kirk: I was hoping to talk a bit about product allocation coming out of the new GrowCo capacity. How are decisions made of where to send that product? How did it kind of get allocated in 4Q? And are there any considerations like permit timing or things like that, that might change the future allocation from what we see in 4Q? Michael Gorenstein: Thanks, Bill. I think when -- historically, we've been trying to figure out how to deal from a position of shortage and allocate. And so there's been a balance between how do we make sure that we're keeping a certain level of demand in markets, but also focusing on margin. And I think now that we have more supply coming online, and expect kind of the quality of supply to be consistent with what we've historically had. We'll be able to start filling more product in Canada, but also be a little bit more aggressive in scaling in Europe. So I think in Q4, you saw us trying to get a lot of the new product coming out. So we didn't maybe have the same normal fills we would, but that should go back starting this year to more consistent with what we had in the past with the exception that there's more product available for Canada than we historically had. William Kirk: Got it. And then, Anna, you talked about go-forward gross margins being similar to 2025 full year levels. What in particular leads to improving gross margin of what you reported in 4Q? Is it more price? Is it better mix? Is it lower costs? And then with the greater sales and scale from GrowCo, why can't gross margin be higher than 2025? Anna Shlimak: Sure. Thanks, Bill. Yes. So I mean, in Q4, there was a kind of a couple of adversities we faced. So we had some expansion-related production quality mix from the GrowCo scale-up as well as some onetime expenses that flow through COGS due to the ramp-up. So kind of those headwinds has impacted Q4, which we don't expect to have going forward. So that's why we feel like that full year 43% margin range is reasonable for us for the business. Look, I think there's potential for some margin expansion in the future, but we have to really be balanced, right? You could also have margin compression in Europe. We don't really know at this moment, but we feel good about kind of that full year 2025 run rate going forward. Operator: Our next question comes from the line of Kenric Tyghe of Canaccord Genuity Capital Markets. Kenric Tyghe: If I could just jump in with a follow-up on the gross margin quickly. I know you're calling out sort of similar levels to full year '25. Just for clarification, would those expectations factor in the close of CanAdelaar? Or is there a potential further upside, and that's perhaps what you're alluding to in your comments about there could be some further expansion through the year? How should we just think about the potential evolution here following up on your earlier comment? Anna Shlimak: Sure. So my comments were just for Cronos as a stand-alone business, not considering CanAdelaar that it is a profitable business as well with very nice gross margins. So we could see some margin expansion from that. But just from -- more speaking to our business as a stand-alone that 43% go-forward. Kenric Tyghe: I appreciate the clarification. And then just timing in the quarter, if I could, looking to the revenue and the revenue beat, you did call out that sort of 68% growth in international. I think it was plus 52% in Israel. How much of the revenue beat in quarter was timing shift versus just, call it, pure Q4? Anna Shlimak: Sure. So some of the -- there was some timing shifts for those international markets outside of Israel going from Q3 to Q4. We had some kind of shipping time as we move into Q4, but the rest is pretty -- our business is growing. So you should expect to see that from us going forward across our markets. Kenric Tyghe: Great. Sorry, maybe just one quick final one. CapEx, any sort of key initiatives we should be thinking through this year? Or is it reasonable to think that we'd be looking at something less than $10 million on the -- year given the spend in Q4 and what we currently understand your needs or goal will be in 2026? Anna Shlimak: Yes, I think that's right. I think those are appropriate levels for us going forward. Operator: Our next question comes from the line of Ryan Neal of TD Cowen. Ryan Neal: This is Ryan stepping in for Derek. Just want to quickly start on the domestic market. So obviously, you saw Canada was up more than 40% year-over-year. Can you guys just talk a little bit about some of the drivers there? And especially, I know you mentioned in Q3, there were still some softer flower sales due to the domestic supply constraints. Michael Gorenstein: Yes. I think one of the biggest drivers here is just having additional supply. And I think that's something that you'll see continue to work through. Before this quarter, we've really just been struggling with how to allocate the limited product we had. And I think now that we're starting to have more product come online that allows us to fill existing demand in the markets that we're already in. Ryan Neal: Great. And then you guys obviously have a pretty large capital base. I'm just curious how you view the current pipeline of potential opportunities and how you might deploy some of that moving forward? Michael Gorenstein: Sure. I think, first, staying committed to the buyback is an important thing for us. There's a lot that we're looking at internationally. I think whether that falls in the bucket of a new market and is there anything we can do to expand our platform, but also, are there new products, new brands that we can put on our existing platform and get the benefit of expanding those into new markets. So we'll continue to be disciplined and be opportunistic. And as you've seen from 2025, when there's opportunities, we'll certainly act on them. Ryan Neal: Great. And then I'll just put one more question in here. So curious about some of the innovation you guys are doing. I know you, at last call, mentioned a few launches. How are those trending? And sort of what are the categories that you're seeing the most strength in? Michael Gorenstein: Yes. I think one that you don't always see sort of immediately, and it's harder to measure, but genetics is a really important one for us. So there's a lot we've been doing over the years, breeding. And I think you're seeing every year the successes that come out of that, and we have some really interesting projects in genetics. So very excited there. Continuing to innovate in edibles is really important for us, keeping sours fresh. But I think that maybe the most exciting one for this quarter, and you'll see showing up in the data in Q1 in vapes, puffers. So it's our all-in-one. We've put a lot of time and work in making sure that this is going to be a big driver for us. And I think you're seeing the early success already. So puffers is, I think, all of us are very excited about right now. Operator: Our next question comes from the line of Pablo Zuanic of Zuanic & Associates. Pablo Zuanic: Mike, can you explain in the context of the consolidation we are seeing in Germany, Hifyre, DEMECAN, OGI, Sanity, why Holland was a priority over Germany, especially with the market consolidating and some distributors still being available? Michael Gorenstein: Sure. I think when I look at Germany, the first thing is, there's still regulatory uncertainty, and you've got some movement that's going through, and we expect in the coming months to get certainty. But I also think when you look at availability of licenses, distribution and opportunity to get into the market, it's there's plenty of opportunity to get in. There are many options there. And I think from a business model perspective, it can be difficult because some of the distributors that you look at buying, well, they have many brands on the platform. So there's a lot of different distribution. And I think you're not sure if you're picking up a business, are you're still going to have that distribution business because you're distributing your competitors. So it's something we continue to evaluate, think about the smartest way that we could deepen our presence in the market, but we thought the Netherlands was much more sort of on strategy. It's a market that without making an acquisition, we would have no way to get in because it's closed as far as import/export. It has its own supply base, its own brand. And we feel like it's not a step towards getting towards adult use and building a brand. It is moving directly into the adult-use market, in a place where you've had a 50-year history of adult-use sales, and we think gets the most brand leverage for any market across Europe, just given the kind of culture and history around the Netherlands coffee shops. And so we thought it just made a lot of sense, and it was a really unique opportunity for us. Pablo Zuanic: And then just a quick follow-up. Look, I mean, in markets like Australia, we've seen operators, distributors taking control of downstream assets, whether it's clinics or even online pharmacies. We're beginning to see that in Germany apparently, and it's happening in the U.K. I mean, Curaleaf owns a clinic there and an online pharmacy. How do you think about downstream opportunities medium, longer term? Or is that something that you prefer not to be involved in? Michael Gorenstein: It's a great question. I think we take a really long-term view on any acquisitions and capital spend. And I think it can be market specific, but I'm always looking at where do I think the market is going to end up. And if it's something where it's a more temporary business or we're worried regulations are going to change it, it's something where we prefer to be a customer than an owner of the assets. But if I think it's going to be locked in for longer, and we can model it out and see there's a long-term payback to being an owner versus a customer, then it's something we would consider. And I think it's really market specific, but I do go back to the experience we saw early in Canada. So if it's a market where we think it's going to go adult use or if it's a market where we think that regulations can change what that funnel looks like, it's something we would rather just spend money to help with marketing and demand versus be sort of an owner of that part of the funnel. Pablo Zuanic: And one last one, if I may. I know this is going back in time, but what lessons can you take from the option you had acquired in PharmaCann, right? You have an option to buy, I think, a stake in the company. And I know that's a while ago, but what lessons did the company learn from that? And how do you think about that lesson as the U.S. begins to reschedule? Michael Gorenstein: So I cut out there for a minute. I heard what lessons. And could you just repeat the part after that, I apologize. Pablo Zuanic: Yes, I'm going to repeat. I'm sorry. Yes, I'm going to repeat. No, going back in time, I believe that Cronos had an option to acquire a stake in PharmaCann in the U.S., right? That company hasn't done too well. What lessons did Cronos learn from that? And how does that color you are thinking about future opportunities in the U.S. as that country reschedules cannabis? Michael Gorenstein: No, it's a great question. I think there's two things that I would specifically point to. The first is that when we did that, it was a little bit of a hedge. If you recall, the timing was around sort of craze around the STATES Act. We didn't -- it was roughly 10% on the option. And part of the reason was we want to make sure we had distribution secured if you had reg move. And so part of that is it's still important. We didn't do a larger stake, and that we were being, I'd say, a little bit more disciplined and controlled. But I think also a bigger part is that you can't really move ahead of regulations. I think what we've seen in this industry is that when you try to be aggressive and move ahead of regulations, it doesn't usually work out. And specifically in the U.S., I think trying to get creative with structures doesn't always work to your advantage and making sure that you have a path to control, and you have ways of operationally being able to pivot when things change is pretty important. So the U.S. is really the market where I think those lessons are going to be most applicable given the federal legality, but size of the business in spite of that, still, I think, extremely important market and something that we monitor and think of other ways to get in, but it feels like until you have the actual opportunity to move in and operate and be able to directly own, it's better to just continue developing the portfolio and building up strength outside of the U.S. Operator: Thank you very much. This concludes the Cronos Group question-and-answer session. Thank you very much, and you may now disconnect.
Ian Michael McLaughlin: Good morning, everyone. Thank you for joining us for Vanquis Banking Group's Full Year 2025 Results. I'm Ian McLaughlin, the Chief Executive Officer of Vanquis, and I'm joined this morning by our Chief Financial Officer, Dave Watts. Dave, good morning. David Watts: Good morning. Ian Michael McLaughlin: I'll start with an overview of our performance in 2025. Dave will then take you through the financial results in more detail, and I will then come back to talk about the strategic priorities, and Dave will then end by covering our financial guidance through to full year 2027. After that, as usual, we'll be happy to take your questions. If I can take you to Slide 4. You can see how our full year performance compares against both the prior year and against the guidance that we set out at the start of 2025. And the headline here is simple. We delivered a performance that was at or better than all of our key commitments for the year. Most importantly, after the turnaround of the business in 2024, where we delivered a loss before tax of GBP 138 million, we returned to profitability in 2025 with a profit before tax of GBP 8.3 million. During the year, we also took the opportunity to deploy capital to accelerate balance growth, which will support our future profitability. And you can see that in our customer interest-earning balances, which ended the year at GBP 2.8 billion, ahead of our guidance of greater than GBP 2.7 billion and therefore, well ahead of our original 2025 goal of greater than GBP 2.6 billion. Net interest margin was 16.8%, reflecting a deliberate shift in mix towards lower-risk secured lending in Second Charge Mortgages, as we've signaled previously. Excluding this, NIM actually increased by 50 bps, reflecting our continued pricing discipline in Cards and Vehicle Finance. Our cost-to-income ratio was in the high 50s, so again, in line with guidance and reflecting our improving operating efficiency. And return on tangible equity was 2.3%, so consistent with our guidance for a low-single digit return. Following the AT1 capital issuance in the second half of the year, our Tier 1 ratio increased to 19.3%, putting us in a strong position to support the next phase of our strategy. So while there's always more to do, we have delivered what we said we would in 2025, growing in a resilient and sustainable manner with margins and costs under tight control. After what is now 5 quarters of consecutive book growth and 4 quarters of consecutive profitability, you can see that the actions that we've been taking over the past 2 years are translating into more predictable and sustainable financial outcomes. Slide 5 sets out the underlying actions we've taken to deliver the results that I've just discussed. Now I'll step through a few of these. Firstly, as I've already mentioned, we accelerated our balance growth, but we did so with discipline, actively managing mix to maximize returns on deployed capital. Secondly, we continue to make strong progress on Gateway, our technology transformation program. The fundamentals of Gateway are now substantively delivered and the program will complete this year. We also delivered further transformation cost savings with efficiency gains creating positive operating leverage as the business continued to scale. Credit quality remains robust, reflecting continued customer resilience and responsible lending across all our portfolios. And we continued to develop our customer proposition, a bit more on that in a moment. Taken together, these actions will allow us to continue to transform the bank. Slide 6 then highlights the progress we made across our customer proposition and on risk management during 2025. We continue to strengthen all our product offerings, balancing growth, risk discipline and good customer outcomes, and we got busy. In Credit Cards, for example, we launched 66 new product variants, including credit builder, balance transfer and other promotional offers. We also expanded our retail savings range, including new ISAs and the Snoop-branded easy access account, strengthening deposit growth, product flexibility and cost-efficient funding. And Snoop continues to play an increasingly important role in our ecosystem, helping customers with their money management. Active users were up 12%, to 328,000, including 43,000 Vanquis customers. We also grew our partnership with Fair Finance. In 2025, this helped 20,000 applicants to identify around GBP 34 million in potential annual benefit entitlements. That's an average of over GBP 1,750 per annum per person. So genuinely helping people transform their financial lives for the better. We also delivered a profile raising campaign to refresh and relaunch the Vanquis brand with our target customers, including our successful partnership with the Professional Darts Corporation. We also introduced a new consistent customer satisfaction measure across the group during the year, giving us a more data-driven view of customer experience. And our overall CSI customer satisfaction score averaged 83.7 in 2025, and this is supported by consistently excellent Trustpilot ratings across both Vanquis and Moneybarn brands. Fundamentally, of course, Vanquis is a risk management business. We have, therefore, prioritized making meaningful improvements to our risk management capabilities. In Vehicle Finance, we developed a new credit decisioning platform, improving the speed, consistency, and quality of our lending decisions, and this contributed to the improved risk-adjusted margin performance in the business. In Credit Cards, we made many improvements to our credit risk scorecards through the year and to our affordability assessments. And we are upgrading the decisioning platform alongside other technology improvements, which I'll turn to in more detail on Slide 7. We launched our new mobile app as part of an enhanced digital onboarding journey, underpinning our clear focus on improving customer engagement, conversion and retention. Last February, we centralized around 30 billion rows of customer product and decisioning data onto a single modern platform, significantly strengthening analytics, insight, and decision-making capabilities. In Operations, we expanded the use of digital tools, AI and self-service functionality across key processes, again, significantly improving efficiency. And the impact here is tangible. Complaint handling costs, for example, were down 10% and fraud losses fell by 25% in 2025, as a result of these improved processes. And we're applying this disciplined approach across every aspect of our business. A good example, we've reviewed our property footprint and reduced space at our Bradford headquarters by over 70%, 7-0 percent, as we modernize and right-size to align with current and future workplace needs. Finally, all we have delivered is down to the engagement and efforts of our fantastic people, and we were pleased to see that colleague engagement improved significantly through the year, up 13 points, to 73%. And that improvement reflects growing confidence in the direction and performance of our business and resulted in Vanquis being certified as a Great Place to Work, for the first time ever. As I said earlier, there's more to do, and we are not finished yet. But hopefully, you can see that the progress made in 2025 is tangible, and we are seeing a positive response from colleagues and from customers. Alongside this internal progress, I should note that the external headwinds of 2024 and 2025 have also largely receded, for example, elevated FOS fees from unmerited CMC complaints, Dave will touch on that shortly. And I'd remind you that our exposure to motor finance commissions is differentiated and any potential liability remains limited for Vanquis. Overall, the 2 words I've used most to describe 2025 are discipline and delivery. Both of these will serve us well as we take this business forward from here. With that, I'll now hand over to Dave to take you through the financials in more detail. Dave, over to you. David Watts: Thank you, Ian. I'm pleased to present our results today, given the significant progress we have made in 2025. Slide 9 summarizes our headlines before I go into more detail. Our return to profitability was achieved by growing income, reducing costs, and importantly, the nonrepeat of the notable items that we reported in 2024. This is evidence that the financial impact of the business turnaround is firmly behind us, and we were able to focus on sustainable, profitable growth in 2025. With this backdrop, we accelerated balanced growth to build scale and drive long-term profitability. This was aided by our first AT1 issuance in October last year, which freed up additional capital to redeploy for growth. This growth comes with upfront IFRS 9 impairment charges, although credit quality remained strong and write-offs decreased. We maintained our cost discipline, delivering ongoing cost savings in excess of our commitment for the year. At the same time, we continue to invest in improving the fundamentals of the business, including our technology capabilities by the Gateway transformation program. Following the new FOS fee charging structure implemented in April last year, we saw a material reduction in CMC claims to FOS, resulting in much lower complaint costs in 2025. We also continue to dynamically manage liquidity and funding. We diversified our liquid asset buffer investments to generate higher returns. We introduced new savings products to provide more stability and flexibility while lowering our cost of funds. As a reminder, our exposure to motor finance commissions is differentiated and any potential liability is limited. While the final scope and mechanics of the FCA compensation scheme remains subject to change, we did recognize a GBP 3 million provision in 3Q '25. You can find further details on why our exposure is differentiated in the appendix. Going into more detail, Slide 10 summarizes the group's performance for 2025. We generated a profit from continuing operations of GBP 8.3 million, supported by a 5% growth in risk-adjusted income and a 33% reduction in operating costs. Excluding notable items, costs were down 9%, meaning the group generated 11% positive cost/income jaws. After factoring in tax, the profit from discontinued operations related to the sale of personal loans business and AT1 coupon costs, profit attributable to shareholders was GBP 8.2 million. At the same time, we grew customer interest-earning balances by 22%, to over GBP 2.8 billion. On Slide 11, you can see what this meant for our financial KPIs. GBP 8.2 million of bottom line profits translated into a return on tangible equity of 2.3%, in line with our guidance. This was driven by an improvement in the cost/income ratio to 58.4%, again, in line with guidance. As we previously guided to, asset yield, NIM and total income margin, all reduced, driven by the deliberate growth in lower margin, lower risk Second Charge Mortgages. Reduction in risk-adjusted margin to 11% was smaller, only 80 basis points, reflecting 110 basis points reduction in the cost of risk. With greater clarity on the cost of risk across our products, we intend to focus on risk-adjusted margin as a core metric going forward. The NIM drivers are set out on Slide 12. A small 20 basis points reduction in asset yield was more than offset by 50 basis points improvement from lower funding costs. This net positive outcome was more than offset by 170 basis points dilution due to a shift in mix towards Second Charge Mortgages and a 30 basis points reduction from a larger liquid asset buffer. As a result, NIM decreased at 16.8%. However, to highlight the group's pricing discipline, excluding Second Charge Mortgages, NIM increased 50 basis points year-on-year, to 19.4%. After factoring balance growth, net interest income rose by 3% in 2025. And importantly, it rose by 6% in the second half of the year. Slide 13 details our customer interest-earning balances, which increased to over GBP 2.8 billion. Credit Card balances increased 19%. This reflected both new customer acquisitions and increased card utilization by existing customers. Vehicle Finance balances reduced by 8% as we manage new business growth while we develop the new onboarding and servicing platform. Second Charge Mortgages continue to grow strongly, increasing by over GBP 380 million. Gross and net receivables increased by 21% and 25%, respectively. Importantly, we now have established debt sale programs in both Credit Cards and Vehicle Finance with the Vehicle Finance post charge-off asset continuing to reduce following the completion of a number of debt sales. Further details are set out in the appendix. Slide 14 summarizes the year-on-year impairment charge movement. Bottom line, impairment reduced by 2%, driven by a 5% reduction in gross charge-offs. Within this, Credit Card gross charge-offs reduced by 19% to a gross charge-off rate of 12.7%. This highlights the improving quality of the portfolio. Back-book credit risk improved with fewer negative stage migrations and lower impairment releases from write-offs and debt sales. In summary, the overall group cost of risk has reduced to 7.3% with all products coming within guided expectations, reflecting our responsible approach to lending. As you would expect, we anticipate impairment will increase in 2026, in line with balanced growth and have slightly refined the cost of risk guidance by product on this slide. In the appendix, we have included a slide on expected credit losses and coverage ratios. ECLs reduced 7% despite a 21% increase in gross receivables, reflecting increased Stage 1 and Stage 2 balances and a reduction in Stage 3. As a result of this improving credit quality, the group coverage ratio reduced to 8.4%. We remain comfortable with the current coverage ratio based on a clear understanding of the credit risk of our portfolios. Turning to operating costs on Slide 15. Total operating costs fell 33%, primarily due to the absence of 2024's notable items. Costs, excluding notable items, reduced 9% with transformation savings and lower complaint costs more than offsetting growth and inflation rate increases. We delivered GBP 28.8 million of transformation cost savings in 2025, well above the GBP 15 million we committed to. This included an acceleration of some Gateway technology-driven savings into 2025. Complaint costs reduced 44%, to GBP 26.6 million. This amount includes a GBP 3 million provision for motor finance redress. Excluding this provision, total complaint costs reduced to GBP 7.5 million in the second half, a much lower run rate than previously. As set out in the appendix, the material drop in FOS referrals from CMCs from the introduction of the new FOS charging structure in April was the main driver of the reduction. We did accrue discretionary staff costs, having not paid bonuses to colleagues for the last 2 years. This, alongside a 10% increase in customer-focused FTE drove a 2% increase in staff and outsourced people costs, albeit outsourced FTE reduced by 28% in the year. We have embedded cost discipline across the business. We expect operating costs to reduce further in 2026 and in 2027, driven by both Gateway and broader operating efficiency enhancements. Let me now touch upon the performance of each of the lending products, starting with Credit Cards on Slide 16. The business delivered a profit of GBP 38.2 million, up 27%. This is while growing interest-earning balances by 19%, which drove a 13% increase in impairment charges due to the expected IFRS 9 impairment provision on origination. At 10.2%, the cost of risk was at the lower end of the guided range, with 19% lower gross charge-offs as mentioned earlier, highlighting the improved quality of the book. With the portfolio having reduced 10% in 2024, balances at the end of 2025 were 7% higher than 2 years ago. The improved quality has been driven by the actions taken by the new experienced Cards management team, following the granular vintage analysis review. Asset yield declined 80 basis points, to 27.1%. This was driven by the weighted average APR of the portfolio reducing to 33.7% due to the increased take-up of balance transfers and 0% promotional offers, which increased to 15% of the portfolio. These offers are effective acquisition tools that are expected to drive further interest income over time. Excluding these offers, the weighted average APR increased to 39.6%, reflecting our disciplined risk-based pricing strategy. Combined with lower funding costs, NIM only reduced 50 basis points to 23.3%, while risk-adjusted margin was 15.6%. Overall, we are well positioned for continued profitable growth. We would, however, expect balances to grow at more moderate levels in 2026 and beyond. Slide 17 covers Vehicle Finance. Balances reduced by 8% as we manage new business volumes ahead of the new platform launch, which will be delivered by Gateway in the second half of 2026. The business remained loss-making, although the loss reduced materially year-on-year to GBP 12.7 million. Repricing actions lifted the weighted average APR to 29.1%, boosting both asset yield and NIM by 0.7%. Combined with a reduction in the cost of risk to 5.6%, risk-adjusted margin increased to 7.4%, driving a 31% increase in risk-adjusted income to GBP 54.2 million. Operating costs reduced by 17% to GBP 66.9 million. However, the resulting cost/income ratio of 69.9% remains far too high. Post the launch of the new platform, building scale and automated processes will be the key to improving efficiency. Second Charge Mortgages continued their strong growth as shown on Slide 18. Balances reached just under GBP 600 million. Risk-adjusted margin increased to 2.8%, and the business delivered a profit of GBP 5.4 million. With a weighted average loan-to-value on the combined First and Second Charge Mortgages of just over 70%, the cost of risk remains low. As a secured product, Second Charge Mortgages have a low RWA density, driving attractive returns on capital. We have rapidly become a market leader in this space. Through strong origination partnerships, we remain excited about its growth potential with the overall market originations growing annually at mid-teens percentages in recent years. Slide 19 shows the streamlined corporate center following the reallocation of both funding and operating costs of product lines. Excluding notable items, the corporate center has reported a loss of circa GBP 20 million in each of the last 2 years. It includes returns on the liquid asset buffer, interest costs on unallocated Tier 2 capital, and operating costs from retail savings and Snoop. Liquidity and funding remain core strengths, as shown on Slide 20. At year-end, we held GBP 653 million of excess high-quality liquid assets over the regulatory minimum. We continue to improve returns from the liquid asset buffer with GBP 250 million now invested in U.K. gilts. Retail deposits have grown to nearly GBP 3 billion, representing close to 90% of total funding. We have diversified our deposit mix, introducing both fixed and easy-access ISAs, as well as Snoop branded easy-access accounts. The former provides increased stability in the retail funding base, while the growth in easy-access accounts provides more pricing flexibility and has contributed to the reduction in the cost of funds over the last 12 months. We also tendered GBP 58.5 million of our outstanding Tier 2 capital. This further reduced funding costs and was part of a broader capital optimization transaction, which is summarized on Slide 21. At the end of the third quarter, we successfully issued GBP 60 million of AT1 capital and concurrently executed a Tier 2 tender. This transaction had no impact on the total capital ratio as the Tier 2 capital was replaced with AT1. The group retains a significant total capital surplus above its regulatory minimum. The key to the transaction was that we were able to improve the efficiency of our Tier 1 capital stack, increasing the surplus above the regulatory minimum, which is previously all held in CET1 capital. With this transaction, the binding capital measure for the group is now the CET1 ratio. With the regulatory minimum 230 basis points lower than the Tier 1 minimum, this transaction has freed up additional capital to deploy for profitable growth, which we accelerated in 2025 as can be seen on Slide 22. The CET1 capital ratio reduced by 2.3%, to 16.5%, as a 25% increase in net receivables equated to GBP 304 million of RWA growth. This was partially offset by the capital benefit from the statutory profit in 2025 and the personal loan sale. We expect profits to become a more significant positive contributor to the ratio in future years. At 16.5%, the group retains a surplus of 5.2% above our 11.3% regulatory minimum. This equates to GBP 107 million of surplus CET1 capital. The group's disclosed and undisclosed capital requirements were also reviewed by the regulator in the second half of last year, which gives us confidence to reduce our target ratio to greater than 14.5%, which I will cover later. Ultimately, our capital strength and the expectation of increased future profits supports our continued growth plans and the execution of our strategy. Finally, before I hand you back to Ian, given that bank is now a cleaner, more stable and predictable business, I would expect the level of detail required in our content to reduce in future presentations. Ian will now take you through our strategic priorities before I return to summarize our financial guidance. Ian Michael McLaughlin: Dave, thank you. I'd now like to take you through the market opportunity and how we will complete what is years 3 of our current strategic plan that will take us through to 2027. So Slide 24 shows how we frame our strategy in terms of our purpose and our ambition. Vanquis, as you know, is a specialist bank with a clear social purpose, focused on serving customers who are underserved by mainstream lenders. Our purpose is to deliver caring banking so our customers can make the most of life's opportunities. Now that means different things to different people. It might be accessing credit when it matters most, improving your credit profile to unlock better options or simply feeling more in control of your money. Caring banking is about how we show up for our customers whatever stage of their financial journey that they happen to be at. And it means understanding customers' needs, earning their trust, supporting them to make healthy financial choices, and being there for them when it matters most and when they need us most. Our ambition then builds upon that purpose. We aim to be the U.K.'s most trusted and inclusive specialist bank, unlocking financial opportunity for underserved customers and helping them thrive. And that ambition is very deliberate. It recognizes the scale of the market we serve and the responsibility that comes with serving these customers. This brings me to our strategy on Slide 25. And this is deliberately simple and practical, built around a new 3-pillar framework: serve more, serve responsibly, and scale profitably. And this is not a change in direction for us. It's just a clearer articulation of how we run and grow the business as we continue to move from turnaround towards sustainable growth. To give some more depth to these 3 pillars, serve more is about widening access to responsible affordable credit and deepening long-term customer relationships. Serve responsibly ensures that growth is predictable, well controlled with strong affordability, disciplined risk decisions and consistently good customer outcomes delivered. And scale profitably is how we turn that growth into returns through the disciplined cost control, capital allocation, and margin management that you are seeing us to deliver, and as Dave has just discussed in detail. Gateway underpins all 3 of these pillars by providing a modern, efficient technology platform to grow on and supports a lower run rate cost base. And together, these pillars link growth, control, and returns, and provide the framework that guides the decisions that we make and execute day by day. Looking now at Slide 26. This addresses one of the questions that I'm most regularly asked, which is what is the total market opportunity that Vanquis is focused on delivering to? And what this shows you is the U.K. has a large and persistent underserved adult population. Our research indicates that over 24 million U.K. adults face barriers to accessing mainstream credit. This is, therefore, not a niche segment. It represents more than half of the adult population who have an active credit profile. And importantly, this is a structural feature of the U.K. market rather than a cyclical one. At Vanquis, we exist to serve this segment responsibly, providing access to credit where it's affordable, appropriate and introducing customers to other solutions if we can't immediately serve them. Our existing product set allows us to address a large proportion of this market within our current risk appetite within Credit Cards, Vehicle Finance and Second Charge Mortgages, as Dave has just described. On Slide 27, you can see how we think about the market opportunity through to 2027 and how importantly we will grow within it in a disciplined way. We plan to grow balances across all our asset products, but that growth will be deliberate and phased. Credit Cards will continue to grow, but at a moderated pace compared to the 19% in 2025. Vehicle Finance growth is more back-ended, linked to the completion of our new onboarding and servicing platform under Gateway. From the second half of 2026, Vehicle Finance will become an increasingly cost-efficient line of growth, facilitated through the strong broker relationship that we have retained. Second Charge Mortgages plays a different role in our mix. As you know, this is a secured product with a lower risk weight density. It's become very successful for us, and we expect the rate of growth to continue at broadly similar levels. As this drives a mix shift over time, our group risk-adjusted margins will naturally change to reflect this, but the business we are writing remains attractive across all products and consistent with our return targets. Overall, what you're seeing us do is about balance, growing but managing mix and quality carefully so that we convert that growth into sustainable returns. Slide 28 is where serve responsibly underpins our ability to deliver the strategy with that discipline. And responsible lending is not a constraint on growth for us. It's actually what ensures that our growth is sustainable and predictable. In Credit Cards, more granular risk-based pricing allows us to widen access to credit while ensuring pricing accurately reflects individual risk and affordability, and that allows us to grow the book while maintaining credit quality and customer outcomes. In Vehicle Finance, you can see we've rebalanced the APR mix and tightened alignment between risk, pricing, and returns. And again, this will support controlled growth as the platform scales. And the Second Charge Mortgage product is primarily used for debt consolidation, enabling customers who have lower monthly outgoings and resulting in improved financial resilience for them. Loan-to-value ratios remain well controlled, as Dave mentioned, and that underpins the strong returns as this portfolio continues to grow. And these disciplines support responsible growth, protect customer outcomes and deliver predictable performance across credit cycles. Slide 29 shows how we support customers to improve their financial health, and Snoop is central to this, as I've mentioned. It acts as a key enabler of our inclusion strategy and long-term growth model. Using open banking data and AI, Snoop helps customers manage everyday money, helps them build confidence, and develop healthier financial behaviors. And for many users, this translates into meaningful savings over time through better bill management, smarter spending, and easier supplier switching. For those customers who are not yet ready, or we're able to offer credit right now, the program we've delivered with Fair Finance provides a responsible alternative for them. And the Vanquis Foundation and our community partners extend this support, investing in financial education, inclusion initiatives, and accessible debt advice to build capability with customers earlier and reduce long-term financial exclusion. Turning to Slide 30, and again, building on Dave's earlier comments, our banking license gives us a clear and durable funding advantage. Retail deposits provide a stable, low-cost funding that many specialist lenders do not have access to. And through 2025, as you've seen, our deposit costs reduced steadily. This reflects a combination of lower interest rates and the shift towards lower cost savings products. You can see this clearly in the funding mix on the slide. This has allowed us to price competitively, protecting margins and improving overall funding efficiency. We will continue to diversify and optimize our deposit base as we look ahead, expanding flexible savings products, and using Snoop as a scalable distribution channel to support efficient, low-cost deposit-led growth. In short, our funding advantage strengthens our margins, improves resilience across the cycle, and underpins our ability to grow profitably over time. Now coming back to Gateway on Slide 31. It's been an underlying theme of my remarks as it is the catalyst that underpins our long-term growth and innovation agenda. It's a fundamental reset to address the previous underinvestment in technology, which this business was suffering from. It will enable us to operate as a modern, efficient and digital-first bank and to scale. Importantly, as you can see on the left-hand side of the slide, the majority of Gateway's core capabilities have already been delivered with clear progress across customer experience, control, and resilience. Gateway is now an operational platform with regular feature releases and improvements. For example, we've already launched a chat channel for customers and are deploying agentic AI agents to improve service quality and to reduce our costs. Looking ahead, the last major components of Gateway complete in 2026, and the benefits then become structural through fewer systems, streamlined processes, and improved automation, which in turn means improved resilience, lower run rate costs, and better operating leverage. In short, Gateway is the strategic enabler of our business, allowing us to complete those 3 pillars of serve more, serve responsibly, and scale profitably. Let me pause there as we'll come back to expand further on our next 3-year strategic cycle at a future date. Our focus for now remains on disciplined execution and delivering 2026 as planned. With that, I'll now hand back to Dave to talk through our guidance. David Watts: Thanks, Ian. Slide 33 summarizes the guidance we have laid out this morning. Importantly, we remain on track to deliver our statutory ROTE guidance of low double-digits for 2026 and mid-teens for 2027. However, we expect profit to be higher in the second half of the year compared to the first half as balances mature and interest income builds. We now expect balances in 2026 to exceed GBP 3.3 billion and to increase to greater than GBP 3.7 billion by the end of 2027, as we balance growth with the improved profits required to deliver the higher ROTEs we are targeting. The balanced base and the deliberate change in product mix that Ian has talked about, including a greater proportion of Second Charge Mortgages, is expected to result in a continued reduction in NIM, to around 15.5% in 2026 and 14.5% in 2027. Now that we have a greater clarity on the cost of risk across our products and to better align to how we assess the performance of the respective products, we've also introduced risk-adjusted margin guidance. This is expected to reduce both in 2026 and in 2027, but remain above 9.5% and 9% in the respective years. Again, this is driven by the increasing proportion of Second Charge Mortgages. Alongside income growth, continued cost discipline will be a key lever of the improving profit trajectory over the next 2 years. This will drive cost/income ratio down from the high 50s in 2025 to the high 40s in 2026 and the mid-40s in 2027. Turning to Slide 34. The bridge on the left-hand side provides an indicative view of how we expect to deliver mid-teens ROTE by 2027. As you can see, risk-adjusted income growth is a meaningful contributor, but continued cost takeout is also a significant lever. This will be achieved through ongoing transformation savings, including an additional GBP 23 million to GBP 28 million from the completion of Gateway and an ongoing focus on cost discipline, driving further operational efficiencies across the group. At the same time, we will continue to invest in our business. As set out on Slide 35, we will continue to deploy capital for growth near term. As I have mentioned, we are now comfortable operating with a CET1 ratio guidance of greater than 14.5%. This follows the capital optimization transaction that we executed last year, the reducing risk profile of the business and the outcome of the recent regulatory review of the group's capital requirements. The existing capital capacity alongside the capital accretion we expect to generate from increased profits over the next 2 years means that we are well positioned to deliver the growth we are targeting. Having achieved what we said we'd do in 2025, we remain laser-focused on the execution of our plan and are fully committed to delivering sustainable long-term value for our shareholders. And with that, I'll hand you back to Ian. Ian Michael McLaughlin: Thank you, Dave. Turning to Slide 37. Let me close by bringing together our key messages from today. Vanquis is built on a set of clear and durable strengths. We operate in a large and structurally underserved U.K. market with persistent demand for responsible credit. We have a customer proposition designed to help them to build better financial resilience. Our banking license provides a cost-effective, deposit-led funding model and Gateway gives us a modern, efficient, and scalable technology platform. And these strengths are brought together through a clear and practical strategy, as I've described, with serve more, serve responsibly, and scale profitably. The strategic framework that we now have in place will allow us to build on the progress that you can see in these 2025 results. We can continue to grow sustainably, strengthening our franchise and delivering attractive long-term returns. That is how we will create long-term value for customers, colleagues, and our shareholders. Thank you for listening. I will now hand back to the operator to open the line for questions. Operator: [Operator Instructions] Our first question is from Gary Greenwood from Shore Capital. Gary Greenwood: I've got 3, hopefully not too long ones. So the first one was on 2CM and the sort of strong growth you put in on there. So just trying to get a better understanding of what your secret sauce there is in terms of how you're taking market share? Are you just pricing more aggressively? Or is there something else that's allowing you to grow faster than the market? Second one on Vehicle Finance is, when you're expecting that business to move into profit, I presume, when sort of Gateway is being fully delivered, but does that mean profitability full year '26? Or are we looking at full year '27? And then lastly, on costs, I think you said costs would come down in each of the next 2 years, just looking at consensus that's got costs coming down in '26, but going up in '27. So it looks like costs forecasting to come down in 2027. I'm just wondering where you think the sort of absolute base the costs will be, because I'm guessing they'll probably grow beyond 2027. I'm just trying to get an idea of the trough level. Ian Michael McLaughlin: All right, thanks Gary. First out of door with a question as always, so much appreciated. Let me take the first one on Second Charge Mortgages. As you said, it's been a really good growth story for us, and we expect that to continue. We've got 2 forward flow agreements in place that are covering nearly 20% of the market now, and it's a growing market. So we're being very careful about pricing. So we're not pricing to win business. In fact, we're quite -- we monitor that on a very regular basis, and we're holding that very firm. But it is a growing market. There are some new competitors coming in that create a bit of price pressure. But overall, we are growing in a growing market, and we're very happy with the way that's going for us. And about 75% of the customers that we've taken on are using it for some proportion of debt consolidation. So it fits really nicely with the purpose that I've just talked about. So Dave, anything you want to add on Second Charge? David Watts: Nothing else really. Ian Michael McLaughlin: Yes. So we're onwards and upwards with that. But there is a really important point here. We'll allocate our capital to where we think we're going to get the best return. So it's a balance between the asset products on an ongoing basis. And that then brings me to Vehicle Finance. As you've seen, we've moderated our growth quite carefully through 2025 in advance of that Gateway platform build that I talked about in my remarks a little while ago. That will really be the catalyst for scalable profitable growth, but we are looking -- you can see in our numbers that we did price up a little bit in that market even through 2025. So we're looking at how quickly can we get it to profitability through this year. And then there's a real step-up that happens when the cost to serve those customers and process that business through our lovely brokers comes down as we get Gateway's Vehicle Finance platform in place. But again, Dave, anything you want to add on that one? David Watts: Yes. Couple of things to add there, Ian. You've seen balances came down by 8% in 2025 as we managed our new customer business. That will continue that same sort of rate in the first half of this year, 2026, but that should stop at that point and start as the new Gateway application comes on board, start growing towards the tail end of 2026 and grow further into 2027, which will be the real catalyst for growth in our profitability in the Vehicle Finance business. Ian Michael McLaughlin: But, Gary, there's a really important point here that all of our products should be profitable on a standalone individual basis. So that's what we're aiming for. So if we're not actually there already as we are with Cards and Second Charge Mortgages, we've certainly got a plan to get there as soon as possible. So I think that probably covers that one. Dave, do you want to do costs? Obviously, that's been a big feature of our results over the last couple of years. David Watts: Yes. So as we covered in the presentation in 2025, we delivered over GBP 28.8 million worth of cost savings, which exceeded our GBP 15 million of commitment in 2025. Now part of that's going to roll through into '26 numbers. We're also committed to delivering another GBP 23 million to GBP 28 million of Gateway savings in 2026. The complaints numbers you saw have come down in the second half year to GBP 7.5 million. We'd like that to be at that level or slightly lower as we go through into 2026. There's other aspects of operational efficiency we're still looking at. whilst at the same time, we are still continuing to invest in the business as we go further forward. So as we've laid out, we expect '26 cost to come down from '25. '27 also be lower than '26, but we're not going to guide on an absolute amount of cost. Ian Michael McLaughlin: And all I'd add to that one, Gary, is, look, there's that old adage about you can't cut yourself to greatness. So there is definitely opportunity for us to take some costs out of the business, and we've done that and done that in a very disciplined way. I think we've beaten every single cost objective that we've put out since Dave and I started. And so you can -- that's something that we're good at, but it's not something we particularly enjoy. We want to get into a cycle where we're investing into the business. But how we invest will be much more around areas like data, like credit risk and into technology with benefits from AI will flow through over the next couple of years as well. So I think we're in a good place on costs, but we will continue that discipline of making sure we're investing where it generates a return. Gary Greenwood: Just to clarify, will '27 be the sort of trough for costs and costs will grow thereafter? David Watts: Gary, I'm going to stick to what we said so far, at '27 will be lower than '26. It comes down to what our forward-looking strategy would be. So I think we'll come back to the market probably next year. Ian Michael McLaughlin: Thank you, Gary. [ Gabriel ], have we other questions? Operator: Our next question is from Rae Maile from Panmure Liberum. Rae Maile: Rae Maile from Panmure Liberum. Two rather bigger-natured questions. Firstly, can you talk a little bit about the regulatory environment these days? Obviously, shareholders will know that regulation has been the bugbear of the non-standard market for many years. I wonder how has the regulatory environment developed over a period of time? And certainly, how has the company's relationship with the regulator changed over the last couple of years? And then secondly, Ian, you touched on the question of competition in Second Charge Mortgages. Could you talk more generally about the competitive environment that the business is facing, please? Ian Michael McLaughlin: Thank you, Rae. Two really good questions. Let me take the regulatory one first, as I probably with our Chief Risk Officer and Dave, again, who spend more time in front of regulators than anyone else in the business and rightly so. Look, my view is we've got a very supportive relationship. It's challenging, as you'd expect. I'm a firm believer and I've said this for decades of my career that you get the regulation that you deserve in the end. And I think regulators are seeing that what we're doing is well grounded in good customer outcomes, that we're trying to serve a market that we define. As you've just seen the numbers that we presented, there's a big underserved base out there that need help and that supply/demand equation is out of whack at the minute. There's more customer demand for less standard credit than there is supply into that market. So that's what underpins our investment thesis. And our purpose, which as I've described, is grounded in helping those customers when they often struggle to get help from other places. I would comment on as well as FCA, it's PRA and then Treasury have been incredibly supportive as well. So there's a big government agenda, obviously, behind this, which I think is in our favor, too. And you've seen tangible outcomes from those relationships. They're not just a nice fluffy thing in itself. It's actually about what changes as a result. Dave might want to comment on PRA and the Prudential Regulation in a second. But we certainly saw FOS changes and CMC charging changes, which were, I think, a very tangible outcome of very constructive conversations that we and other banks had been having with Treasury. So I'm very pleased about that as well. So I think so far, so good. It's -- but the relationships are incredibly important to us going forward, hence, I guess, your question. And we'll continue to invest in them and be open and transparent and do the right things for customers, as you'd expect. Dave, do you want to comment on PRA? David Watts: Yes. Look, we have a good working relationship with PRA over the last 2 years. I think you get some productive outcomes from opening up to your regulators and be clear with great clarity of how the business is operating, what it's doing. I think that was recognized in terms of a sort of positive triennial C-SREP review with PRA at the tail end of 2025, which I commented on earlier on. So yes, I expect to have a good productive relationship with them going forward. Ian Michael McLaughlin: Rae, if I could turn then to your question on competition, and thank you, as you described it for the 2 sort of higher-level questions. I mean, back to my point about supply and demand, we've got less than 2 million customers, and there's an opportunity pool of over 20 million, say, 24 million, as we've just described. So there's a lot of room here. So there is a really good target addressable market available to us. In Cards, if I just take the product, it's pretty stable. We haven't seen anything dramatic in terms of new competitors coming in. We watch that on a daily basis. And obviously, our pricing reflects what other activity is going on around us too. But you've seen in our NIM numbers and our risk-adjusted NIM, in particular, that we're very disciplined on our pricing, and there are times that we will pull back a little bit if we do believe we're getting squeezed. 2CM, I mentioned earlier on that. But broadly, we see that there's plenty of room for us to grow. Vehicle Finance is probably the watch one because, obviously, we've got the FCA redress scheme. We'll get the details on that towards the end of March based on current plans. And we'll see what happens to that market. I would expect there to be some people will choose not to participate. As that market gets through redress and cleans up, then there may be other people that will choose to come in. We'll keep an eye on that. But as I said, the key message for us is we've got a sort of 10x customer demand opportunity for Vanquis, and that's very exciting, and that's what we're focused on delivering to. Operator: Our next question is from James Allen from Berenberg. James Allen: Three questions for me, if I can. First one, you're clearly making good strides on improving return on tangible equity. I was just wondering where you would like to get to on a steady-state basis on that metric beyond FY '27. Second question, the rationale for the AT1 being excluded in the ROTE calc. Presumably, that's just to preserve the focus on returns for common equity shareholders when looking at that metric. And then final question, my understanding is you can't necessarily promote Vanquis products over other banks on Snoop at the moment. But is there any kind of potential change in regulation that may be coming in at some point that maybe would allow you to direct more customers into Vanquis products via Snoop? Ian Michael McLaughlin: James, thank you. I'll leave the AT1 ROTE calculation one to Dave in a second, but if I start with what's our ROTE trajectory. I think what you're seeing with Dave and I and the Board and our management teams is when we commit to something, we really commit to it. So we committed to getting to low-single digit ROTE in 2025. That's exactly what we've done. We've got a clear commitment for low double-digit ROTE for this year. And then we've got a mid-teens ROTE commitment for 2027. So that's as far as we're going in terms of our commitments. Underneath that, of course, we're looking at, as we go through every day, week and month quarter of this business, we're learning as we go and we're spotting new opportunities. So we will keep that all under review. And we, as Dave mentioned earlier, I think to Gary's question, we'll come back sort of this time or early in 2027 to talk about that next strategic cycle, that next sort of 3-year phase, and we'll update on ROTE and that. But what you can expect from us for this year is an absolute focus on delivering what we've committed in terms of our ROTE guidance. And Dave, anything you want to add on that one? David Watts: No, I think you've covered it in detail, Ian. Ian Michael McLaughlin: Do you want to do the AT1 calculations, ROTE... David Watts: So James, you're correct on your understanding that part there. So I'm glad that the character we've given in the presentation has enabled you to get to that position. Yes, it's the focus on the equity shareholders. Ian Michael McLaughlin: I wouldn't add anything to that. Then on Snoop and Vanquis. Look, Snoop has been a fantastic acquisition for us on a range of levels, but the quality of the customer proposition and how we're tangibly able to show customers how to manage their money better is perfect for Vanquis, and we're seeing that penetration into our customer base grow very nicely. Snoop itself is continuing to grow, as you can see from our numbers as well. So that works well. I think your question is a very good one about what more can we do to combine those 2 things. We are in the midst of rolling out a new mobile app for our customers at the minute. And what that will allow us to do is take some of those facilities and functionality that live in Snoop at the minute and begin to get that through into the wider Vanquis customer base, which we're very excited about. Now there's all sorts of things about Ts and Cs and permissions and so on that sit behind that, that are more complicated than anyone could imagine, but we are working our way through that very well. And that -- Snoop remains as a great example of how we help customers even if they can't access credit for us. So very similar to what we're doing with Fair Finance, it sits in that "Not Yet" proposition bucket that I talked about earlier and is critical. We also brought in an amazing management team with Snoop, who we've deployed across many senior roles over the -- across the bank rather than just in Snoop, and also a fantastic data insight engine where we're able to package up insights to our customers and present them as we do quarterly. But actually, they're very useful to other businesses as to what the buying habits of this customer base look like. So Snoop continues to be a very important part of our proposition. Again, Dave, anything that you want to add? David Watts: Yes. I think as you said, Ian, the integration of the staff has been excellent for Vanquis Group. As a whole as we go further forward in the near term and the medium-term greater integration of Snoop into the Vanquis banking app is going to be one of our priorities as we look forward. Ian Michael McLaughlin: Thank you, James. Hopefully that answer your questions. James Allen: That's very clear. Operator: Our next question is from Edward Firth from Keefe, Bruyette, & Woods. Edward Hugo Firth: [Technical Difficulty] if I looked on, I think it was Slide 15, you talked -- I think last year, there were around GBP 26 million of costs related to complaint handling. I mean, over time, is that like a 0 number? Or can you give us some idea of where you think that number will fall to on a sort of annualized basis, what you think is a reasonable number? That would be my first question. The second question was -- and I guess it's slightly a Snoop related question, but a lot of the growth at the moment is coming through from Second Charge Mortgages, which is a new product that you introduced, and that sort of massively exceeded expectations or certainly my expectations anyway. Do you still look for other products? Are you still looking at other areas that you could see potential for a sort of similar startup product line? And I guess that's particularly related to Snoop, where I guess you must have very good visibility on Snoop customers and the sort of products that they may or may not need. And I'm just wondering, are you still looking at other areas where we can perhaps get a similar performance that we've seen on the Second Charge Mortgages? And then I guess the final question, and they're all sort of broadly related. I mean Snoop is doing well [Technical Difficulty] looks like it got still GBP 15 million to GBP 20 million a year, something like that. You didn't give us precisely, but I guess that's the biggest driver of centrals. Can you give us [Technical Difficulty] at some point? Or what would be needed to get us to profitability for that business? Ian Michael McLaughlin: Ed, thank you. Your line cut in and out a little bit there. So let me just repeat the questions to make sure that everyone heard them. I think I caught them. First one, costs on complaints and what's the steady state. So I'll maybe let Dave pick that up. Second one, on Second Charge Mortgages and are there other products like that? We've obviously shown that we can launch a new product into a new market and do very well very quickly. So what else are we thinking about? And then I think the third one, if I caught it right, was about Snoop costs and central costs and Snoop profitability. So I'll maybe come to Dave on that one as well. But Dave, do you want to start with the complaints? David Watts: Yes. So Ed, thanks for the question. So on Slide 43 gives a more in-depth viewpoint looking at complaints in place there. And what you will see -- I think you asked the question specifically about resource handling costs. And Ian touched earlier on in his presentation about a 10% reduction from some of the technology we've introduced through the Gateway program there. So we're making progress. We talked about the second half of the year having an overall cost of complaints, excluding the Vehicle Finance FCA commission provision in place of about GBP 7.5 million. And with better customer outcomes delivered as part of our technology upgrades, we hope that number to come down, but that will be a number we'd hope to beat in the first half of next year and the second half of next year, so that's complaint costs there. Hopefully, that's covered. Anything else to add on that, Ian? Ian Michael McLaughlin: No. I think obviously, you want every customer to be completely happy all the time. Any good business would aim for that, but there is a practical reality that there will always be a level of customer interaction, and we will always stand up and do that as well as we possibly can. So that's part of our customer focus and our proposition. So nothing more on that from me. If we take the Second Charge Mortgage example, Ed, of -- there's a market that we weren't in a couple of years ago that we're now with those 2 forward flow arrangements I mentioned, if not market-leading, certainly in the top 3. So that has gone very well for us. We've learned a lot from that. We are always looking at what our customers spend or our analysis of what their needs may be and what does that mean for other things that we could expand our proposition into. You've seen us expand into "Not Yet" as we describe it. So where do we hit our credit -- our ability to offer credit that limit and then how do we help the customers if they sit at that point in time outside that limit, so hence, the Fair Finance and Snoop conversations that we've already had. But yes, we are looking at a range of other things. We've got plenty of room to grow though in the current product set as it stands. So don't expect anything immediate in terms of next steps. This is about maturing and settling our tech platform and our new operating model that we've spent the last sort of year or 2 building and growing where we can see the demand is today as well as understanding where we might expand to in the future. So I'll not say any more on that. I don't think there's anything from you, Dave? David Watts: Just to reiterate, there is significant market opportunity in the products we actually offer to our customers at this point in time. Ian Michael McLaughlin: Agreed. And then the Snoop costs and central costs, Dave, do you want to take that? David Watts: So we've got the corporate center, which contains a number of items. You know at half year, we did a sort of recutting of our product portfolio profitability, which did move some costs from the corporate center to give a greater clarity of our Vehicle Finance, Second Charge Mortgages and Credit Cards profitability, which I think it's landed quite well. What we've got this in the corporate center is not just Snoop income and costs. It's got the -- some unallocated Treasury results. It's got the costs associated with our retail savings business and some other sort of almost immaterial central items in place there. So I wouldn't just read that as pure Snoop. It's got a bundle of items in there. As Ian covered it on the previous question, Snoop has delivered more than just purely the revenues that come with the actual business per se as a management team and how they're helping out drive the overall bank further forwards on its digitization. So hope that's helpful. But Ed, if you've got any further questions, I'm happy to take them offline with you at a later date. Operator: Our next question is from Jackie Ineke from Spring Investments. Jackie Ineke: So I'm from the credit side. We're very happy holders of your AT1s and Tier 2s, and thanks for the good results. I have a couple of questions. First of all, just in terms of capital management, you have your Tier 2 outstanding. It's got an October call date. I understand from the change in regulations that you can tender those Tier 2s before the call date. I was just wondering if you're giving that any consideration. Obviously, it's trading well above par, so it might not work in terms of economics. But if you could give me your thoughts on that, that would be great. The second question is very much bigger picture, and you've talked about the competitive environment and the opportunities. But comparing you guys to the bigger U.K. banks, you have a very differentiated strategy. And I was just wondering if there had been any approaches or any talks with any of the larger banks? I know that's not what you want to do now and you're in the middle of a very strongly performing strategy. But have you been approached? And what's going on there? Ian Michael McLaughlin: I will let you cover the Tier 2, Dave, while I think about the second question. David Watts: Thanks, Ian. Jackie, thanks for your question. You'd understand we can't speculate on such tender offers at this point in time. We do note the call date. I think what's worthwhile bringing out is we did a big capital optimization transaction at the end of last year, where we issued GBP 60 million of AT1 and bought back GBP 58.5 million of Tier 2, bringing down the level down to GBP 141.5 million. That is dealt with quite a lot of the excess Tier 2 capital we had issued in the marketplace. We still have some excess at this time, which obviously will be considered as part of what we may do later on this year. I can't add any more at this stage. Ian Michael McLaughlin: But I'm glad you're a happy holder, Jackie. That's very good to hear. On the what's going on around us in the market, we don't spend a huge amount of time sort of thinking about this really, Jackie. I mean our job, and I think hopefully, it's been very clear from previous presentations and this one is to make Vanquis into the very best entity that we can make it for our customers and our colleagues and our investors, and that's what we're absolutely focused on. Do conversations come around every now and then? Yes, if there's anything reportable at any stage, obviously, we know our responsibilities. But for now, our absolute focus is delivering to the opportunity that we've got right in front of us. Operator: I will now hand over to James Cranstoun, Head of Investor Relations. James Cranstoun: There's actually no further questions on the webcast. So I think we can hand back to Ian and Dave to close. Ian Michael McLaughlin: Okay. Well, look, thank you, everybody, for your attention this morning and for your very good questions. We always enjoy that. I know we'll see many of you over the next couple of days, so we look forward to those conversations as well. Just as I end, I'll go back to what I said in my remarks earlier, I'd really like to just thank our customers for their -- enjoying the support that we're trying to give them, and they are the lifeblood of our business, as I described. I would also like to thank everyone in the organization. It has been a torrid couple of years. We are definitely back on the path that we wanted to be on now, and that's down to the efforts of our colleagues, the support of our Board. And I'd like to thank our investors as well. Their patience, understanding, and support has been fantastic through this. And to the question earlier also to our regulators and Treasury, who've also been very helpful. So look, we're on a good path now. There's a lot of work still to do, but it's a much better position than this business was in previously. So I'm delighted about that and very grateful for the hard work. On that basis, Gabriel, I think we will end the call there. Operator: Thank you, everyone. This concludes today's Vanquis Banking Group full year results 2025. Thank you for joining. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to Anika's Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 26, 2026. I would now like to turn the call over to Matt Hall, Executive Director, Corporate Development and Investor Relations. Please proceed. Matthew Hall: Good morning, and thank you for joining us for Anika's Fourth Quarter and Year-end 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used to the discussion today. With me on the call today are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our fourth quarter and year-end 2025 financial results and business highlights. Please take a moment and open the slide presentation and refer to Slide #2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations which are used in addition to results presented in accordance with GAAP financial measures. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. Reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our fourth quarter and full year 2025 press release. And now I'd like to turn the call over to our President and CEO, Steve Griffin. Steve? Stephen Griffin: Good morning, everyone, and thank you for joining us. Before turning to the results, I want to express how grateful I am for the opportunity to lead Anika and for the continued trust and support of our Board as I step into the CEO role. I also want to recognize Cheryl Blanchard for her leadership in repositioning the company and for the partnership she has provided through this transition. Under her tenure, Anika took important steps to sharpen its focus, including portfolio actions and progress across Integrity, Hyalofast and Cingal, which put us in a stronger position to execute going forward. I'm especially appreciative that in her new role as Executive Chair, we will continue to benefit from Cheryl's experience, perspective and relationships as we execute on our priorities particularly as we work to advance key regulatory, commercial and pipeline initiatives. As we begin today's call, I want to clearly outline the 3 strategic priorities that guide how we run the business, allocate capital and measure success. These priorities build directly on the foundation established under Cheryl's leadership and sharpen our execution as we move forward. First, revenue growth driven by the commercial channel. Our top priority is accelerating sustainable revenue growth with the commercial channel as the primary driver. This includes continued expansion of our international OA pain portfolio and scaling Integrity as a differentiated regenerative platform. These businesses generate attractive, stable margins, give us greater control over pricing and reduce our reliance on our OEM channel partners while meaningfully improving revenue diversification over time. The second priority is advancing our HA-based innovation pipeline, centered on Integrity, Hyalofast, Cingal and longer-term development opportunities. These programs address large underserved markets and will further Anika's leadership position in hyaluronic acid. We've made meaningful progress in recent years and remain focused on advancing these programs toward regulatory approvals in the markets where they are not yet approved. Third, improving operational execution. The third priority in an increased area of focus is strengthening operational execution. This includes improving manufacturing productivity, yield and capacity, which directly supports growth in both our commercial business and our OEM partnership with J&J MedTech, which continues to drive double-digit growth in Monovisc unit shipments. At the same time, we are establishing a more streamlined organizational design to improve profitability and cash generation. This is not a change in direction, but a sharpening of execution to ensure strategy translates into improved financial performance. With that framework in mind, I want to walk through our 2025 performance through the lens of these 3 priorities. First, revenue growth. In 2025, revenue growth was led by strong performance in our commercial channel, driven by international OA pain management and continued adoption of Integrity. With these two contributors together delivering commercial channel revenue growth of 22% in the fourth quarter and 15% for the full year, in line with our guidance. Internationally, our OA pain management portfolio, which includes Monovisc, Orthovisc and Cingal, delivered another year of strong growth and share gains. International OA pain revenue increased 28% in the fourth quarter and 12% for the full year, reflecting outstanding execution by our global teams and the durability of these products across multiple regions. Hyalofast also continued to gain traction outside the U.S., benefiting from its ease of use and differentiation. Importantly, our international business has driven strong double-digit growth with a lean cost structure. Integrity also had an exceptional year. In 2025, Integrity procedures and revenue more than doubled to approximately $6 million, marking its seventh consecutive quarter of sequential growth. Since launch, more than 2,500 surgeries have been performed with over 300 surgeons using the product and a majority scheduling additional cases. During the fourth quarter alone, approximately 600 surgeries were performed, up 20% sequentially, supported by continued surgeon adoption, new size introductions and expanding tendon applications. In 2025, our commercial growth was offset by our OEM channel as a result of a more challenging U.S. OA pain management pricing environment. OEM revenue declined 12% in the fourth quarter and 17% for the full year, consistent with expectations. Importantly, J&J MedTech, which sells Orthovisc and Monovisc maintained their market-leading position. As we focus on growing total company revenue, driven by outperformance in our commercial channel, we continue to work with our OEM partners to drive stability and predictability. Second, advancing the innovation pipeline. Through 2025, we continue to advance our HA-based innovation pipeline with meaningful progress across Hyalofast, Cingal and building on the Integrity platform. For HYALOFAST, we submitted the third and final module of the PMA to the FDA in the fourth quarter of 2025, including results from the FastTRACK Phase III study. As we previously reported, while the study did not achieve its prespecified co-primary endpoints, it did demonstrate statistically significant improvements across key measures of pain and function used to approve other cartilage repair products. As expected, we received a deficiency letter from the FDA in the first quarter of 2026 related to CMC and clinical data. While we can never make an assurance of FDA approval, we are actively engaging with the FDA, and we remain confident in the evidence supporting Hyalofast's clinical value. Cingal also made important progress during the year. Cingal has now surpassed 1 million injections across more than 40 international markets and continues to demonstrate strong clinician adoption. In the U.S. The FDA identified two remaining filing requirements for Cingal. The first was a set of required toxicity studies, which we initiated and successfully completed in 2025. The second requirement, the bioequivalence study was initiated in December 2025 and is now underway. Together, these steps keep us on track toward NDA submission and position Cingal as a differentiated solution and a large next-generation OA pain management market. Finally, Integrity continues to mature, not only commercially but clinically. We are now past the halfway point in our post-market clinical study and remain on track to complete enrollment this year. As a reminder, the post-market clinical study data will be used to support NDR filing, which will enable continued Integrity growth outside the U.S. and accelerate commercial growth in the U.S. In addition, a peer-reviewed MRI-based manuscript, led by Dr. Chris Baker, has been accepted for publication, demonstrating early clinical outcomes that align with our preclinical data and support Integrity's differentiated profile. Our third strategic priority, operational execution was a significant contributor to improved financial performance in the second half of 2025. Through improved manufacturing productivity, higher yields and increased throughput, we delivered expanded gross margins, positive operating income for the fourth quarter and meaningful free cash flow. These improvements not only strengthen profitability, but also enhanced our ability to support increased volumes for both our commercial products and our OEM partner. Fourth quarter revenue performance, which included the recovery of late shipments, demonstrated how increased volume and disciplined execution can drive improved throughput and productivity. While we do not expect these margins at this level every quarter, the quarter provides a clear illustration of the operating leverage that we can achieve as volumes grow, and we continue to deploy our teams efficiently. Operational execution goes beyond manufacturing and includes our ability to deliver growth with a lean, efficient back office organization that supports improved profitability. In line with this, we recently implemented a new organizational structure designed to streamline leadership layers, reduce expenses and better align resources with our highest priority growth initiatives. These changes include a combination of senior leadership role eliminations and releveling to better match the current scale of our operations. As we implement these changes, we will work through role transitions over the coming months, supported by the strong team we have here at place at Anika. As part of this evolution, we mutually agreed with David Colleran that he would transition from his role as Executive Vice President, General Counsel and Corporate Secretary, effective May 2026. I want to thank David for his leadership and many contributions over the past 6 years. All of the announced changes impact our G&A functions. Together with the recent leadership transitions, these actions are expected to drive approximately $2.5 million in annualized head count savings in addition to more than $3 million in stock-based compensation savings. As responsibilities are transitioned internally and the work is realigned, we expect to see improved profitability in the coming quarters. As part of this new organizational structure and as I step into the CEO role, Ian McLeod, our current Chief Accounting Officer since 2021 has assumed broader responsibilities across our finance and legal organizations. With these changes, we will not backfill the CFO, COO or General Counsel roles. Responsibilities are being absorbed by experienced senior leaders, creating a more efficient structure that supports sustained profitability and improved cash generation. With these priorities, accelerating growth, advancing innovation and strengthening operational execution firmly in place, we enter 2026 with clarity, momentum and confidence in our ability to deliver improved performance and long-term value. With that, I'll turn it over to Ian to walk through the financial results. Ian McLeod: Thanks, Steve. Before I walk through the financials, I want to take a moment to briefly introduce myself. I've had the privilege of serving as Anika's Chief Accounting Officer since 2021 and I'm excited to step into this expanded role supporting both our finance and legal organizations. I look forward to continuing to work closely with Steve and the broader leadership team as we execute our strategy. With that, let me turn to the results. Please refer to Slide 5 of the presentation as I provide updates on the fourth quarter of 2025. In the fourth quarter, Anika generated $30.6 million in total revenue which was flat year-over-year, consistent with our revised full year expectations. Commercial channel revenue grew 22%, reaching $13.3 million driven by strong international execution and continued momentum in Integrity, which is exceeding our commercial expectations. Our international OA pain management business remains a key contributor delivered 28% growth in the quarter, led by sustained market share gains for Monovisc and Cingal across several regions. In the OEM channel, revenue was $17.3 million for the fourth quarter down 12% year-over-year, in line with our revised full year expectations. Pricing for Monovisc and Orthovisc sold through J&J MedTech was lower year-over-year as previously communicated. Despite these pricing headwinds, both products continue to hold strong market leadership positions and contribute meaningfully to Anika's overall profitability. Non-orthopedic revenue also declined quarter, reflecting lower demand for legacy products. In the fourth quarter, gross GAAP gross margin increased to 63% from 56% in the prior year reflecting higher revenue from international OA pain sales and higher volumes of U.S. OA pain, both of which improved throughput and productivity within our manufacturing operations. The margin improvement underscores the structural benefits of our revolving revenue mix and positions us well for improvements in profitability as we move into 2026. We're pleased with the improvements in the second half gross margin and will continue to drive improvements in manufacturing operations into 2026 to increase throughput. In the fourth quarter, operating expenses were $18.5 million, up from $17.8 million in the same year last year. Selling, general and administrative expenses increased to $12.1 million compared to $11.3 million a year ago, driven by higher sales and marketing expenses, primarily with the growth of Integrity. Research and development expense was $6.5 million, flat versus prior year as we continue to invest in key regulatory and clinical programs, including ongoing work on Hyalofast and Cingal. We continue to monitor our total operating expenses closely to focus on disciplined spending, while advancing the program's most critical to long-term growth. Total adjusted EBITDA from continuing operations was $4.5 million in the quarter, higher than our revised guidance, reflecting strong commercial channel performance and expanding gross margin. Discontinued operations include the Arthrosurface and Parcus results, which were divested in late 2024 and early 2025, with all material transition work completed, we do not anticipate discontinued operations activity going forward. Now turn to Slide 6, where I will discuss full year results. For the full year 2025, Anika generated total revenue of $112.8 million, a decline of 6% compared to the prior year and consistent with our revised guidance for the year. Commercial channel revenue was $48.4 million, up 15% compared to the prior year and continues to be a key growth driver in increasing adoption across all our international HA-based OA pain management portfolio and continued Integrity growth. International OA pain management remained a bright spot, reflecting the strong execution of our international commercial team and distributor network and Integrity continues to outperform, driven by increased U.S. adoption and more than doubling revenue to $6 million in 2025. Revenue in our OEM channel totaled $64.4 million, down 17% year-over-year, in line with adjusted expectations. The decline was primarily driven by pricing and market dynamics of Monovisc and Orthovisc in the U.S. market. GAAP gross margin for the full year was 57% compared to 63% in 2024, reflecting product mix, higher manufacturing costs driven by the manufacturing disruptions from earlier in the year and legacy program costs. Looking at operating expenses for the full year. We continue to strengthen our discipline across the organization while ensuring we invested in the programs most critical to our long-term growth. Total operating expenses for 2025 were $74.9 million, down from $81.1 million in the prior year, reflecting the meaningful cost actions we executed throughout the year and our continued focus on efficiency. R&D expenses were $25.8 million, essentially flat with the prior year as we continue to invest in the regulatory and clinical work activity supporting Hyalofast and Cingal as well as the ongoing expansion of the Integrity platform. In total, we invested approximately [ $5.2 million ] in 2025 to support Hyalofast and Cingal-related regulatory and clinical activities, representing focused investments that will generate meaningful future benefit across both our OA pain management and regenerative solutions portfolios. SG&A expenses were $49.1 million, a reduction from $55.6 million in 2024 driven by lower G&A head count and expense discipline. For 2025, adjusted EBITDA was $5.3 million or approximately 5% of revenue which represents an outperformance versus our revised full year outlook of minus 3% to plus 3%. Our results reflect the positive impact of revenue, slightly ahead of expectations improved manufacturing yields and disciplined cost management. For the full year 2025, we generated $11.2 million in operating cash flow, an improvement over the $5.4 million we generated in 2024 driven by efficient working capital management and lower expenses. Capital expenditures for the year were $6.8 million, reflecting our continued investment in our manufacturing facility to support higher expected output of OA management and regenerative solutions products. We ended the year with $57.5 million in cash with no debt providing us with a strong liquidity decision and the flexibility to continue investing in our growth priorities while executing our share repurchase program. As previously communicated, we initiated a $15 million 10b5-1 stock repurchase plan in November 2025. In the fourth quarter, we purchased 5.5 million common stock. To date, the company has purchased $10.7 million in stock, and the program is expected to be complete in the second quarter of 2026. Now please turn to Slide 7, as I turn the call back over to Steve to review our financial outlook for 2026. Stephen Griffin: Thanks, Ian. For 2026, Anika is maintaining its previously communicated revenue guidance ranges by channel and introducing a total company revenue outlook. At the total company level, we expect full year revenue between $114 million and $122.5 million, representing a 1% to 9% year-over-year growth. This outlook reflects continued momentum in our commercial channel and the market dynamics in our OEM business. Within the commercial channel, we are maintaining our outlook of 10% to 20% growth year-over-year or $53 million to $58 million. Growth is expected to be driven by ongoing expansion of Integrity in the U.S. market, sustained Hyalofast performance outside the U.S. and increasing adoption of our international OA pain management portfolio. For the OEM channel, we are maintaining our revenue expectation of flat to down 5% year-over-year or $61 million to $64.5 million. This reflects anticipated Monovisc unit volume growth partially offset by lower pricing, while Orthovisc is remaining modestly flat for the year. Turning to profitability. As we expect adjusted EBITDA of 5% to 10% of revenue, at the midpoint of this range, this improvement reflects higher expected revenue led by the commercial channel growth, the benefit of our recently initiated G&A cost reduction actions, including leadership changes, as well as productivity and manufacturing gains supporting increased OA pain production, partially offset by modestly lower U.S. OEM pricing dynamics. To close, we entered 2026 with clarity, momentum and a strong foundation for sustained performance. Our commercial channel is delivering. Our innovation pipeline is advancing with purpose, and our operational execution is driving meaningful improvements in profitability and cash generation. We have the right strategy, the right organization and the right team in place to execute. I'm confident in our ability to build on this progress and create long-term value for our shareholders. Thank you for your continued support, and we look forward to updating you on our progress throughout the year. With that, we'll open the line for questions. Operator: [Operator Instructions] Your first question comes from Mike Petusky from Barrington Research. Michael Petusky: Steve, so real quick on the guidance slide, you guys have U.S. Hyalofast in 2027. And I'm just curious, is a meaningful contribution from Hyalofast in the U.S. aiming the '27, 10% to 20% guide? Stephen Griffin: I appreciate the question. We had previously shared that we had included about $3 million of anticipated revenue for Hyalofast in '27. We haven't changed that outlook, so it remains the same. Obviously, it's contingent upon approval in the U.S. So that's kind of the big open item that we'll work our way through, but that's the dollar amount associated with it. Michael Petusky: Okay. All right. Okay then. Then sort of moving on. In terms of the gross margin, obviously, was really strong this quarter. I'm just wondering as we sort of reset for '26, I mean, should we be thinking more like high 50s for sort of a normalized gross margin? I'm assuming that what you just delivered is not likely, at least sustainable in the near term, although you may get there over time. Stephen Griffin: Yes, Mike, I think you framed it very well. I think that's exactly what we're planning for. As you noted, I think it illustrates the capability that we have to deliver within our existing business and manufacturing capabilities. To your point, it's not always going to be at that level, but it gives our team something that we're shooting for over the longer term. The high 50s that you just noted though, is appropriate. Michael Petusky: Okay. Two more real quick. Obviously, a nice positive free cash for the year and evidently for the quarter. In terms of what you see going forward? And I know it's not an official part of your guidance, but I'm just curious, do you expect free cash to grow off of '25 levels? And if so, I mean, will it be slight or will be somewhat material? Stephen Griffin: Yes, sure. I would say '26 cash -- I expect it to be probably somewhat in line with '25 just given some of the puts and takes and dynamics that we just referred to. Obviously, we've got to work through some of the restructuring-related elements of the things that I just noted earlier about some of the operating expenses for the business. At this point, though I'd say modestly in line with the '25 results. Michael Petusky: Okay. And then just one more, and I'll let other people have a shot here. Obviously, international OA pain outperformed, had a really good year. I'm just curious, in terms of the dynamics internationally, I mean, are there countries where you're there, you're approved, but you're really sort of under optimizing? And then are there also new countries that you don't really have a foothold in, but you could actually commercially launch products? Stephen Griffin: Sure. Our international OA pain franchise is led by James Chase, who's done an excellent job, as you can tell, in creating a really sustained momentum. And I think it is a multitude of contributors. So first and foremost is market share gains in the places where we play today as well as growth in new markets. There's no one single market that stands out to kind of drive this top line growth. And I'd say he's got a long-term pipeline for each product in each country targeted with each distributor that we work with to find the right opportunities, and it goes out many years. So we're very pleased with the results that he's been able to generate consistently over the last 5 to 6 years, and we look forward to continuing to do that in this year's plan as well. Operator: Your next question comes from Anderson Schock from B.Riley Securities. Anderson Schock: Congrats on the strong quarter. So first, on the OEM channel, so you posted some strong sequential improvement, about 9% from the third quarter despite the continued pricing headwinds. Could you unpack what drove that improvement? And as you look at early 2026 order patterns in your conversations with J&J, what gives you the confidence that OEM lands flat to modestly lower for the full year? Stephen Griffin: Sure. Anderson, thanks for the questions. It's nice Like to talk to you again. We did see a bit of an increase, and I think it's tied primarily to volume and user demand. I noted earlier that we still see very strong end-user demand from a unit perspective on Monovisc, which is the largest contributing factor to the sequential improvement that you're noting. When we look to 2026, we've had many conversations with J&J as they look at the future of this market. We expect to see continued market share gains and volume growth, offset modestly by price. A little too early probably to tell exactly how it will play out. I mean, this is one of those businesses where it could be a little lumpy, and there is some fourth quarter dynamics in the United States to some extent. But we'll see it play out over the course of this year, but suffice to say that we believe that this is the appropriate guide for the year. Anderson Schock: Okay. Got it. And then with both the toxicity studies for Cingal now completed, the bioequivalent study initiated in December. Could you provide a more specific time line for the study's completion and expected NDA filing? Stephen Griffin: Sure. I appreciate the question. So the timing of the NDA filing is going to be paced by the enrollment of the bioequivalent study, which is the final clinical requirement for the submission, and we noted we began enrollment for that in December. The enrollment is ongoing, and the study remains on track. And in parallel to that, our teams are actively preparing other components associated with the NDA, so that we're positioned to move forward efficiently. Once the study is complete, I haven't been able to necessarily give you a timetable, but as we progress further down enrollment of bioequivalence study, we expect to provide that time frame. Anderson Schock: Okay. Got it. And then Integrity had $6 million of revenue for '25, more than doubling as guided. And as we think about '26 commercial channel guidance, can you help us frame how much of that growth is from Integrity versus international OA pain? And are there any revenue or procedure volume targets for Integrity in '26? Stephen Griffin: Internally, absolutely. In terms of what we will share externally, what I would say is we do expect another strong year in the commercial channel on the international OA pain side kind of in that double-digit range that we've seen. And I think when we look at Integrity, it had a very good year, obviously, from a variance percentage basis, it was up almost 100%. I don't think it's going to be up near that same range, but we're still talking about strong double-digit growth, and we're very pleased with the performance in the United States on that growth on Integrity. I'll give further updates as we go throughout the year in terms of the performance. Anderson Schock: Okay. Got it. And then finally, so you launched the larger shapes and sizes for Integrity. I guess, how is the early uptake trending? And is this opening up meaningful new call points beyond your existing shoulder focused surgeon base? Stephen Griffin: We did. We launched two new shapes and sizes last year, and it's gone well. We've seen strong uptick on those products. I'd say this market is still majority rotator cuff. So when we look at the overall market procedures, the rotator cuff represents still the largest portion of it, the largest portion of our overall revenue. But I think the new shapes and sizes help increase surgeon adoption and get further expansion into some of those smaller adjacent markets. We're pleased with how well it's gone so far and look forward to continue to drive adoption into 2026. Operator: Your next question comes from Mike Petusky from Barrington Research. Michael Petusky: All right. Excellent. I have a couple more, I appreciate the follow-up. Steve, in terms of the bioequivalence study, what is the targeted enrollment? Stephen Griffin: It's just under 60 patients. Michael Petusky: I mean is that -- I have no idea, is it fairly easy to enroll patients for this kind of study? Or is it a slog? Stephen Griffin: I wouldn't call it a slog. I mean it does have specific enrollment criteria designed to meet the FDA requirements. We're executing well, but enrollment can take slightly longer than maybe a typical bioequivalent study. So far, it's on track to what we would have expected. Michael Petusky: Okay. All right. And then would you be willing to share sort of the revenue run rate that Integrity ended the year with in Q4? I mean is it -- I mean, is it run-rating that $7 million, $8 million. Any help there? Stephen Griffin: We haven't necessarily broken it out by quarter, but we did $6 million over the course of the full year, and I think we noted that it grew 20% sequentially from 3Q to 4Q. So it's at a pretty decent run rate as we exit the year. I will also note, though, that, that tends to be the case. There's some fourth quarter seasonality just in the United States associated with procedural volumes. So as we look to the start this year, we do expect that seasonality effect to kind of continue, but we're very pleased with its growth. Michael Petusky: Okay. Great. And then just one last question. I guess around capital allocation. Obviously, you guys said what you said on finishing up the share repurchase commitment. But as you sort of look at the fact that you guys have been -- if presumably generate some free cash this year, you've got $55-plus million net cash on the balance sheet. I mean outside of the share repurchase, I mean, what are the priorities? I mean, is it potentially some small sort of tuck-in M&A? Or is that just not a thing you can focus on giving given where you are right now? Stephen Griffin: I appreciate the question, Mike. I would say our capital allocation priorities start first and foremost with being able to deliver for our patients and customers. So we obviously are spending CapEx to improve our manufacturing operations here in Bedford. We will continue to do that. So we'll make investments into our manufacturing capability, and that is the first and foremost. The second thing that we talk about is capital allocation is the investments we're making into our U.S. sales channel, those are still investments that we are making, and we very consciously evaluate those. And while we operate with a level of expense discipline, it is still an investment nonetheless, I think longer term, there are certainly opportunities for us to evaluate what else we may do. But at this point, it's not something that we're looking to share. We've got a lot on our plate in the very near term, some of the restructuring activities that we mentioned earlier, plus the activities for Integrity, Hyalofast and Cingal, knows a lot on our plate, a lot of shareholder value that can be generated by executing well. And I think the 3 strategic priorities we laid out at the very beginning: first, commercial revenue growth; second, advancing our R&D pipeline; and third, executing with operational discipline. Those are the priorities for us in the near future. Operator: And there are no further questions at this time. I will turn the call back over to Steve Griffin for closing remarks. Stephen Griffin: Great. Thank you all for joining us today. We hope you have a great week. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Operator: Good afternoon. I will be your conference operator on today's call. At this time, I would like to welcome everyone to Applied Optoelectronics, Inc.'s fourth quarter and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. To withdraw a question, please press star, then 2. Please also note that this call is being recorded today. I will now turn the call over to Lindsay Savarese, Investor Relations for Applied Optoelectronics, Inc. Ms. Savarese, you may begin. Lindsay Savarese: Thank you. I am Lindsay Savarese, Investor Relations for Applied Optoelectronics, Inc. I am pleased to welcome you to Applied Optoelectronics, Inc.'s fourth quarter and full year 2025 financial results conference call. After the market closed today, Applied Optoelectronics, Inc. issued a press release announcing its fourth quarter and full year 2025 financial results and provided its outlook for 2026. The release is also available on the company's website at ao-inc.com. This call is being recorded and webcast live. A link to the recording can be found on the Investor Relations section of the Applied Optoelectronics, Inc. website and will be archived for one year. Joining us on today's call is Dr. Thompson Lin, Applied Optoelectronics, Inc.'s Founder, Chairman, and CEO, and Dr. Stefan Murry, Applied Optoelectronics, Inc.'s Chief Financial Officer and Chief Strategy Officer. Thompson will give an overview of Applied Optoelectronics, Inc.'s Q4 results, and Stefan will provide financial details and the outlook for 2026. A question-and-answer session will follow our prepared remarks. Before we begin, I would like to remind you to review Applied Optoelectronics, Inc.'s Safe Harbor statement. On today's call, management will make forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations, which could cause the company's actual results, levels of activity, performance, or achievements of the company or its industry to differ materially from those expressed or implied in such forward-looking statements. In some cases, we can identify forward-looking statements by terminology such as believes, forecasts, anticipates, estimates, suggests, intends, predicts, expects, plans, may, should, could, would, will, potential, or thinks, or by the negative of those terms, or other similar expressions that convey uncertainty of future events or outcomes. The company has based these forward-looking statements on its current expectations, assumptions, estimates, and projections. While the company believes these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the company's control. Forward-looking statements also include statements regarding management's beliefs and expectations related to the expansion of the reach of its products into new markets and customer response to its innovations, as well as statements regarding the company's outlook for 2026 and for the full year of 2026. Except as required by law, Applied Optoelectronics, Inc. assumes no obligation to update these forward-looking statements for any reason after the date of this earnings call to conform these statements to actual results or to changes in the company's expectations. More information about other risks that may impact the company's business are set forth in the Risk Factors section of Applied Optoelectronics, Inc.'s reports on file with the SEC, including the company's annual reports on Form 10-K and quarterly reports on Form 10-Q. Also, all financial results and other financial measures discussed today are on a non-GAAP basis unless specifically noted otherwise. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation between our GAAP and non-GAAP measures, as well as a discussion of why we present non-GAAP financial measures, are included in the company's earnings press release that is available on Applied Optoelectronics, Inc.'s website. Before moving to the financial results, I would like to note that Applied Optoelectronics, Inc. management is attending the Susquehanna Annual Technology Conference tomorrow, as well as the Raymond James Annual Institutional Investors Conference on March 3. Additionally, management will host an investor session at OFC on Tuesday, March 17 in Los Angeles. This discussion will be webcast live, and a link to the webcast is available on the Investor Relations section of the Applied Optoelectronics, Inc. website. Lastly, I would like to note that the date of Applied Optoelectronics, Inc.'s first quarter 2026 earnings call is currently scheduled for 05/07/2026. Now I would like to turn the call over to Dr. Thompson Lin, Applied Optoelectronics, Inc.'s Founder, Chairman, and CEO. Thompson? Thompson Lin: Thank you, Lindsay. Thank you for joining our call today. We are pleased to deliver record fourth quarter results that were in line with or better than our expectations, and which came off the strongest year in our company history. Our results were driven by robust demand in both our CATV and data center business. In 2025, total revenue increased 83% compared to 2024 to a record $456,000,000. Data center revenue of $196,000,000 increased 32% compared to 2024, while our CATV revenue nearly tripled to $245,000,000 in the same period. We enter 2026 with strong momentum, and due to the thoughtful investment we have made, we have materially expanded our manufacturing capacity. We believe this positions us well to meet increasing customer demand and will lead to accelerating growth this year. During the quarter, we announced that we received our fourth 800G volume order from one of our major hyperscale customers to support its AI data center growth. This was an important milestone in our next generation data center roadmap and follows the successful qualification of our 800G products by the customer. It also reflects both the strength of our product portfolio and the deepened relationship we have with this hyperscale customer. We continue to work with this customer to finalize the firmware used in this module to ensure interoperability across their network, which we believe will be completed in March. We have begun ramping our production of this 800G module in anticipation of a strong volume ramp starting in Q2. Forecast demand for 800G modules are projected to exceed our production capacities to mid-2027, and we are working to add additional capacity to meet this demand. During the quarter, we saw particular strength for our 400G products with this customer, which more than offset our 800G revenue, which came in below our expectation of $4,000,000 to $10,000,000 due to the ongoing firmware optimizations I mentioned above. Looking ahead, we expect continued strength in our 400G business, although 800G is expected to dominate our revenue beginning in Q2. As a reminder, our Taiwan facility was already qualified for production of several 800G product types from this hyperscale customer during 2025. Our Texas facility was also qualified for production of some of our 800G products. During the quarter, we made advancements with qualifying additional product from our Texas facility with this customer and expect full qualification by mid-year. We expect, as we move throughout the year, to ship an increasing amount of 800G product from our Texas facility as we expand our capacity. In addition to this fourth major 800G customer, we have had indications from another existing hyperscale customer that they intend to begin to order 800G from us soon. Finally, a new hyperscale customer has begun discussion about qualifying our 800G and 1.6T product just within the last few weeks. So we feel increasing confidence about our trajectory in 800G and 1.6T receiver with multiple customers. During the fourth quarter, we delivered revenue of $134,300,000, which was in line with our guidance range of $125,000,000 to $140,000,000. We recorded non-GAAP gross margin of 31.4%, which was above the high end of our guidance range of 29% to 31%, and our non-GAAP loss per share of $0.01 was narrower than our current range of our loss of $0.13 to a loss of $0.04. Total revenue for our data center products of $74,900,000 increased 69% year over year and 70% sequentially. Sales of our 100G products increased 54% year over year, and sales for our 400G products increased 141% year over year. Total revenue in Q4 in our CATV segment was $54,000,000, which was up 3% year over year and in line with our expectations, but was down 24% sequentially from a record Q3. Similar to the last couple of quarters, we achieved a significant quantity of 1.8 GHz amplifiers to our largest CATV customer in Q4, and demand from this CATV customer continued to be robust. In addition to this customer, we continue to see momentum from a new set of MSO customers. With that, I will turn the call over to Stefan to review the details of our Q4 performance and outlook for Q1 2026. Stefan Murry: Thank you, Thompson. As Thompson mentioned, we are pleased to deliver record fourth quarter results that were in line with or better than our expectations, which capped off the strongest year in our company's history. Our performance was driven by robust demand in both our CATV and data center businesses. We enter 2026 with strong momentum, and due to the thoughtful investments we have made, we have materially expanded our manufacturing capacity. We believe this positions us well to meet increasing customer demand and will lead to accelerating growth this year. Throughout 2025, our focus remained on a few key priorities: one, scaling our next generation data center products, including both 400G and 800G solutions; two, expanding our production capacity in a disciplined manner to support anticipated demand, particularly in our Texas factory; three, diversifying our revenue base; and four, strengthening operational execution to improve our margins and long-term profitability. I am pleased to report that we made significant progress on each of these fronts and these will continue to be key priorities in 2026. Importantly, we saw, and continue to see, strong customer engagement around 800G and 1.6 terabit products, particularly as AI-driven data center investments accelerate. In 2025, total revenue increased 83% compared to 2024 to a record $456,000,000. Data center revenue of $190,000,000 increased 32% compared to 2024, while our CATV revenue nearly tripled to $245,000,000 in the same period. Additionally, we expanded our gross margins and made progress on our path to profitability. Turning to the quarter, in Q4 we delivered revenue of $134,300,000, which was in line with our guidance range of $125,000,000 to $140,000,000. We recorded non-GAAP gross margin of 31.4%, which was above our guidance range of 29% to 31%. Our non-GAAP loss per share of $0.01 was narrower than our guidance range of a loss of $0.13 to a loss of $0.04. During the quarter, we announced that we received our first 800G volume order from one of our major hyperscale customers to support its AI data center growth. This was an important milestone in our next generation data center roadmap and follows the successful qualification of our 800G products by this customer. It also reflects both the strength of our product portfolio and the deepening relationship we have with this hyperscale customer. We continue to work with this customer to finalize the firmware used in these modules to ensure interoperability across their network, which we believe will be completed in March. We have begun ramping our production of these 800G in anticipation of a strong volume ramp starting in Q2. Forecast demand for 800G modules are projected to exceed our production capacity through mid-2027, and we are working to add additional capacity to meet this demand. During the quarter, we saw particular strength for our 400G products with this customer, which more than offset our 800G revenue, which came in below our expectations of $4,000,000 to $8,000,000 due to the ongoing firmware optimization I mentioned above. We expect continued strength in our 400G business, although 800G is expected to dominate our revenue beginning in Q2. As a reminder, our Taiwan facility was already qualified for production of several 800G product types from this hyperscale customer during 2025. Our Texas facility was also qualified for production of some of our 800G products. During the quarter, we made advancements with qualifying additional products from our Texas facility with this customer and expect full qualification by mid-year. We expect, as we move throughout the year, to ship an increasing amount of 800G products from our Texas facility as we expand our capacity. Given the strong demand, we have continued to invest in our manufacturing capacity to support current and future demand. During the fourth quarter, we made solid progress on the production capacity ramp we outlined last year at OFC. Over the past several years, we have purposely developed and scaled automation across key elements of our production process, from laser fabrication to transceiver assembly and testing. This automation not only improves yield, but it also supports rapid scale-up with greater flexibility in terms of geographic location of production, and lower geographically indexed labor cost relative to many of our competitors who rely on traditional, more labor-intensive manual operations. As we continue to bring new automated lines into production, we expect this differentiation to increasingly translate into execution strength and significant revenue expansion. As we discussed at length at OFC last year, our focus remains on scaling manufacturing capacity for our next generation transceivers, particularly 800G and 1.6 terabit products, and we remain on track with the milestones we previously discussed. As we exited the year, we neared our target of 100,000 units per month of 800G capacity, with approximately 90,000 units per month of 800G capacity at year end, with roughly 31% of that production based in the U.S. We made tangible progress during the quarter through facility expansion and equipment installation, both of which are critical steps as we prepare for higher volume production. Our production capacity in the U.S. is currently in our existing footprint in Texas. During the fourth quarter, we announced that we signed an agreement to lease an additional building in Sugar Land. We began construction on this new facility earlier this month and are working hard to scale our production towards the middle to end of this year to achieve our 2026 targets. Looking further ahead, we expect that by the end of this year, we will be capable of producing over 500,000 pieces of 800G and 1.6 terabit products per month, with about a quarter of that output coming from Texas, as we expand into additional facility space and bring new production online. These investments reflect measured scaling of our footprint while aligning with strong and growing customer demand and qualification progress across both 800G and 1.6 terabit products. Further, we have recently had dialogue with another large hyperscale customer who has been a long-term customer of ours, and who is eager to begin qualification efforts for our 1.6 terabit products. This customer has also indicated a desire to purchase potentially significant quantities of 800G products from us in 2026 and 2027. We continue to discuss capacity availability and expect orders for 800G from this customer soon. It is also important to note our 800G and 1.6 terabit products can be manufactured on the same production line with the same process. While our 1.6 terabit products will require a different final testing, our 800G automated manufacturing lines have been developed with an architecture that will allow us to support future higher speed products as customer demand materializes and evolves over time. While we are encouraged by the conversations we are having pertaining to our 1.6 terabit products, we continue to believe that our 800G products will drive the near-term data center ramp, and our 1.6 terabit products are on track to begin to contribute to our overall revenue later this year. Before moving on to our fourth quarter results, I would also like to reemphasize our in-house laser capabilities, which we believe continue to be a strategic advantage for the company. As we have mentioned before, we have been manufacturing lasers internally for many years. Having these capabilities has allowed us to avoid some of the shortages that affect others in the industry. As we continue to expand our footprint in Texas, our in-house laser manufacturing positions us well to support both near-term customer needs and longer-term growth. We believe that in the future, CPO will continue to drive increased demand for high power lasers, and we plan to continue to expand our laser manufacturing capacity in Texas in order to accommodate these future growth drivers. During the fourth quarter, direct tariffs had a $1,200,000 impact on our income statement. As it relates to tariffs, as I have previously mentioned, while we do utilize some imported components in our transceivers, many key components, like our laser chips, are already manufactured in the United States. Importantly, in our 800G and 1.6 terabit transceiver designs, less than 10% of the value of these components used is currently sourced from China, and we have a path to further reduce that exposure to near zero that we have discussed on our prior earnings calls. Given the recent court decision on IEEPA tariffs, it is worth noting that Applied Optoelectronics, Inc. acted as the importer of record for many, if not most, of the tariff shipments we incurred in 2025. Turning to our fourth quarter results, our total revenue was a record $134,300,000, which increased 34% year over year and increased 13% sequentially off a strong Q3, and was in line with our guidance range of $125,000,000 to $140,000,000. During the fourth quarter, 56% of revenue was from data center products, 40% was from CATV products, and the remaining 4% was from FTTH, telecom, and other. In our data center business, Q4 revenue came in at $74,900,000, which was up 69% year over year and 70% sequentially. Sales of our 100G products increased 54% year over year, and sales of our 400G products increased 141% year over year. In the fourth quarter, 51% of data center revenue was from 100G products, 41% was from 200G and 400G transceiver products, and 8% was from 10G and 40G transceiver products. In our CATV business, CATV revenue was $54,000,000, which was up 3% year over year but was down 24% sequentially from a record Q3, and was in line with our expectations of $50,000,000 to $55,000,000. Similar to the last couple of quarters, we shipped a significant quantity of 1.8 GHz amplifiers to our largest CATV customer in Q4, and demand continues to be robust. In addition to this customer, we continued to see momentum with a newer set of MSO customers that we have talked about on our prior couple of earnings calls. Looking ahead to Q1, we expect our CATV revenue will be between $61,000,000 and $67,000,000. Looking further ahead, the broad-based appeal of our CATV amplifiers and software solutions has been evident in these customer engagements, and we see software as an increasingly important part of our CATV offering. Our Quantum Link software suite is designed to provide operators with enhanced remote management, visibility, and control over HFC network elements, reducing operational costs and improving service quality. If current momentum continues, and while it is still early in the year, we still believe that it is feasible that we could generate nearly $300,000,000 annually. While the vast majority of our CATV revenue expectations for this year are related to our amplifiers, we do anticipate that we will generate some revenue from our software solutions this year, and we will share more on the amount and timing as we progress throughout the year. Now turning to our Telecom segment. Fourth quarter revenue from our Telecom products of $5,100,000 was up 45% year over year and 37% sequentially. As we have said before, we expect telecom sales to fluctuate from quarter to quarter. For the fourth quarter, our top 10 customers represented 96% of revenue, compared to 97% of revenue in 2024. We had three greater-than-10% customers: one in the CATV market, which contributed 39% of total revenue, and two in the data center market, which contributed 31% and 21% of total revenue, respectively. Of note, one of these data center customers became a 10% customer for the first time in a long time and is a U.S.-based large hyperscale customer. In Q4, we generated non-GAAP gross margin of 31.4%, which was above the high end of our guidance range of 29% to 31%, and was up from 31% in Q3 2025 and 28.9% in the prior-year quarter. The year-over-year increase in our gross margin was driven primarily by our favorable product mix and our cost reduction efforts. Looking ahead, we expect continued gradual improvement in gross margins, although we continue to expect that the revenue mix in data center in the next few quarters will be a slight headwind. We remain committed to our long-term objective of returning non-GAAP gross margins to around 40%, and we believe that this goal is achievable as our mix shifts toward higher-margin products and as we capture additional efficiencies across our operations. That margin expansion, combined with increased scale, positions us to move toward sustainable profitability, which we currently expect to achieve on a non-GAAP basis beginning in Q2 of this year. The revenue figures presented above are net of a contra revenue amount due to the accounting for warrants provided to customers. As a reminder, this amounts to approximately 2.5% of revenue derived from certain customers to whom Applied Optoelectronics, Inc. has provided warrants in exchange for future revenue. In Q4, the amount of this contra revenue was $730,000. Total non-GAAP operating expenses in the fourth quarter were $49,300,000, or 37% of revenue, which compared to $31,500,000, or 31% of revenue, in Q4 of the prior year, and were in line with our expectations of $48,000,000 to $50,000,000. Non-GAAP operating loss in the fourth quarter was $7,100,000 compared to an operating loss of $2,500,000 in Q4 of the prior year. GAAP net loss for Q4 was $2,000,000, or a loss of $0.03 per basic share, compared with a GAAP net loss of $119,700,000, or a loss of $2.60 per basic share, in Q4 of the prior year. On a non-GAAP basis, net loss for Q4 was $600,000, or $0.01 per share, which was narrower than our guidance range of a loss of $9,000,000 to a loss of $2,800,000, or non-GAAP income per share in the range of a loss of $0.13 to a loss of $0.04. This compares to a non-GAAP net loss of $1,000,000, or $0.02 per share, in Q4 of the prior year. The basic shares outstanding used for computing the earnings per share in Q4 were 70,300,000. Turning now to the balance sheet, we ended the fourth quarter with $216,000,000 in total cash, cash equivalents, short-term investments, and restricted cash. This compares with $150,700,000 at the end of Q3 2025. We ended the fourth quarter with total debt, excluding convertible debt, of $67,300,000, compared to $62,000,000 at the end of last quarter. As of December 31, we had $183,100,000 in inventory, which compared to $170,200,000 at the end of Q3. The increase in inventory is primarily due to raw material purchases for increasing production. We made a total of $84,000,000 in capital investments in the fourth quarter, which was mainly used for manufacturing capacity expansion for our 400G and 800G transceiver products. In 2025, we made a total of $209,000,000 in capital investments, which was above the CapEx projections we gave on our Q4 call last year of $120,000,000 to $150,000,000 for the full year. This was primarily due to increased customer demand projections. In Q4, the direct tariff impact on capital equipment was $3,100,000. As we have mentioned before, while we will continue to do our best to minimize any impacts, tariff rates and equipment import mix may cause future results to vary materially. Notably, we source equipment from all over the world, including from both domestic and international locations. Going forward, we believe we are well positioned for sustained growth across both our data center and CATV businesses, and the capital investments underway are expected to fundamentally strengthen the company as we execute on these opportunities. Given the recent surge in customer inquiries and apparent rising demand, we believe that by mid-2027, 100G and 400G revenue will be approximately $90,000,000 monthly, 800G revenue will be approximately $217,000,000 monthly, and 1.6 terabit revenue will be approximately $71,000,000 monthly. Altogether, this represents $378,000,000 in monthly revenue for transceiver products. However, we believe that the customer demand is even larger than this. In order to accommodate this expected surge in demand, we plan to more than triple our laser manufacturing in Texas. We are evaluating our CapEx projections for 2026 and we intend to share those at a later date. Moving now to our Q1 outlook, we expect Q1 revenue to be between $150,000,000 and $165,000,000, accounting for a sequential increase in CATV revenue as well as a sequential increase in our data center revenue. We expect non-GAAP gross margin to be in the range of 29% to 31%. Non-GAAP net income is expected to be in the range of a loss of $7,000,000 to a loss of $300,000 and non-GAAP earnings per share between a loss of $0.09 per share and breakeven, using a weighted average basic share count of approximately 76,400,000 shares. Looking more broadly at 2026, while it is still early in the year, we expect to generate over $1,000,000,000 in revenue this year, with a non-GAAP operating profit of over $120,000,000. This revenue level is limited by our production capacity and supply chain, not market demand, which we believe is much larger. Based on our planned capacity additions, we expect to see continued strong sequential revenue growth in the first two quarters, with an acceleration in the second half of the year as new production capacity comes online and additional customer qualifications are completed and orders begin to ship. We believe that this is an ambitious yet achievable target based upon our customers' forecasts and what we know about the unprecedented investments that are being made in AI infrastructure. With that, I will turn it back over to the operator for the Q&A session. Operator? Operator: We will now begin the question-and-answer session. Again, to ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw a question, you may press star, then 2. At this time, we will take our first question, which will come from Simon Matthew Leopold with Raymond James. Please go ahead. Simon Matthew Leopold: First, just a very quick clarification, if I might. I missed the value you mentioned on 800G revenue. I know you had a little bit of a software firmware glitch and said it was below the guided or the $4,000,000 or so. But what was the value of 800G in the quarter? A lot below or a little below? Stefan Murry: We did not break out exactly, but it was a bit below $4,000,000. Thompson Lin: A lot below is delayed to Q1, but we have emphasized the end of the day may be big in Q2 next year. Plus the target—our revenue in this year is $1,000,000,000. Simon Matthew Leopold: And I wanted to really focus on the trajectory for gross margin improvement. I want to maybe first start with understanding how much of your laser production is in-house today versus external merchant lasers. And I guess I appreciate that typically, as you ramp production, there is sort of a learning curve of improving yields and things like that. So I would like to make sure we have a good understanding of really the timeline or trajectory to achieve that target you mentioned of 40%. So sort of where are we now, and what is the roadmap? Thank you. Thompson Lin: I see no end because, as I say, the gross margin for 1.6 is much, much higher than the other product. And I would say that, okay, on the monthly revenue, as we say, I think by Q2, sometime in Q2, like June, July, or something like that, the revenue, like $378,000,000. So it depends on the portion of 1.6T transceiver. So at that time, I believe the gross margin should be 35% to 38% overall gross margin for all the transceiver revenue. So we believe we can achieve 40% gross margin by, like, Q3 or Q4 next year. Stefan Murry: By the way, Simon, just to make sure you are on the same page, the revenue figures that Thompson mentioned were 2027 Q2, not this year. Thompson Lin: Yes. It is very important. Okay. No mistake. Simon Matthew Leopold: Thank you for that because I wrote down 2026. So you anticipated my mistake. No one can do this on the road. Okay. Thompson Lin: No. It is impossible. No. I appreciate that. No. Thank you for that. And then Simon Matthew Leopold: Before I pass, maybe just a quick check-in on the cable TV side of the business in that it sounds like you remain very confident in the trajectory. However, the outlook offered by the big cable operators was not as inspiring. Can you sort of help folks triangulate between the CapEx forecast and your involvement in cable TV upgrades? Thank you. Stefan Murry: Sure, Simon. I mean, I think as we have said consistently, the overall CapEx numbers are one thing, but where the money gets spent is another thing. And I think they are spending this year and next year a significant amount of their spend is going towards the amplifiers, the outside plant part of the network. And that is where we play. So are some other parts of the network, in the nodes and other things, that maybe are slower to ramp, although I think those are also ramping, you know, pretty significantly as well. So it really—you have to look at it on a kind of granular basis. The other thing is we have got a lot of new customers that we alluded to in the call earlier. We will start to see some significant contribution from those newer customers as well. So it is not just the, you know, one or two or three top largest MSOs, but also a wider swath of smaller companies that are contributing to our revenue. Thompson Lin: And, Simon, let you know by end of this year, I would say more than 95% of laser will be AI laser. Because right now, there is a huge issue of laser shortage. And, actually, even some supplier to us want to get this from them. We—we had at least one year, even longer. So that is why we announced we will invest $300,000,000 in Texas—triple, even more than triple. The purpose, as we said, we need to increase our laser capacity by Q2 next year, and that is to fulfill our transceiver demand. And let me emphasize: the transceiver demand is much bigger than what we projected. Right now, the number we say, the $378,000,000 of transceiver revenue, in June, July next year—okay, not this year—it is limited by our capacity and the supply chain. It is not limited by the customer demand. Simon Matthew Leopold: Thank you for taking my questions. Operator: And our next question will come from Michael Edward Genovese with Rosenblatt Securities. Please go ahead. Michael Edward Genovese: Great. Thanks very much. So it sounds like instead of having a steady kind of ramp, this 800G we are expecting to come in with really big numbers starting 2Q this year and then, you know, huge numbers next year—by 2Q next year. I guess for the ramp in 2Q this year, could you just go over some of the milestones, maybe talk about the issue on the firmware, but also the ongoing qualification milestones that you have to hit to kind of have that ramp in 2Q? Stefan Murry: Right. So as you mentioned, in order for the ramp to start in earnest, our 800G products have to be interoperable with all the different platforms that are out there at this particular customer. There is a lot of them. So the firmware has to be modified to work with all those different platforms. Hardware-wise, everything is fine. No problem with that. Firmware is good on most of the platforms. We just have to make some tweaks to get it to work across all of the different platforms that they have. And that is really—the customer and us have agreed that that should be done in the middle of next month. So a couple of weeks, three weeks from now, something like that. And then that is basically the last hurdle to kind of unleash the ramp. As we talked about, we have already started manufacturing products for that ramp. So from a manufacturing standpoint, we are gearing up. Just to touch on the beginning part of that question, too, about kind of nonlinearity of the ramp, that is because what you are seeing is our production capacity coming online. Right? It is not gated by demand, it is gated by our ability to produce, and that does not come on in a linear fashion. Right? You build a production line and you get a step function, not a smooth ramp. Thompson Lin: Yes. Let me emphasize. Because every customer has so many different switch, transceiver supplier, so many different kind of ASIC. And, you know, when a customer adds more switch, this will change the firmware. We were supposed to get a green light to ship out already in December. The delay is not our problem or whatever. It is because, you know, how come build AI—you know, the whole system is much more complicated than before. That is why it takes much longer. And right now, I think we feel very comfortable. And right now, let me say, we have got almost two years of loading forecast from more than one customer. Let me say that, okay? For 800G. And, right now, let me say that more than one customer, at least two or even three, they would like to buy all the transceiver we can make for 800G and 1.6. Because Applied Optoelectronics, Inc. laser. And right now, it is limited by our capacity and the manpower and the supply chain. So that is why we are trying everything to ramp up. It takes time. It takes time. That is why I say going on this year, we say $1,000,000,000. And let me say that dimension is much, much bigger than $1,000,000,000. But that is a number we feel comfortable. At least we feel minimum 99% confident we can deliver. Otherwise, the revenue will be much bigger than that. Let me say that. Same thing for the 1.6T transceiver for the, you know, dual—right next year is still limited by supply chain. So there is a lot of issues we need to solve. And the other thing I am going to tell you, in the short term, we should receive more than $100,000,000 of 800G transceiver orders within a few months—maybe, I do not know, one month, two months—for sure less than three months. We should receive more than $200,000,000 of 1.6T transceiver orders. Alright? Transceiver orders. We are not buying the transceivers or receiving the orders—zero. We do not buy transceiver. We make transceiver. So for sure, okay, that is how great the market is. But, you know, so many things—this is okay? It is very complex. The whole team is working crazy. You know? This is a good problem. Yep. We are—we are going to talk to—let me say that. Alright? Michael Edward Genovese: I got it. Sounds great. I guess, is it fair to say that it sounds as though when you say demand on the 800G side is already very high, does that mean orders? Like, I mean, do you have that level of orders already in for 800G? Thompson Lin: Coming soon. At least from two customers. Because they want to make sure we commit to our promise. You know? You have the problem—yes, we will give us the loading forecast. But to make sure we guarantee what we promise, then sometime we need to allow agreement and sign down. For sure they give us order, okay? This is at least by this year, or something like that. Michael Edward Genovese: Perfect. And last question for me. On the 500,000 units, I think you said by end of this year, and I think that is 800G and 1.6. Just the mix between Taiwan and the U.S.—I mean, it sounds like you are expanding capacity in both places. Is it, I guess, harder and more expensive to do it here, which is why only a quarter of the capacity will be here? Would you prefer to have more here if it was easier? What is the goal—what is the decision making on where to put it? Thompson Lin: It takes longer time to expand in the U.S. I think the investment is great. I think it is the, I would say, the best in the U.S., let me say that. But let me say that by end of next year, I would say more than 55% would be manufactured in the U.S., or even 60% or 65% for 1.6T. Because that is why we just—we just got—you know, we just did groundbreaking a few weeks ago. It takes time. We need more cleanroom, more space. It is quite expensive. And it takes time to do the cleanroom. Then we can have equipment, then we do a qualification and training. It takes time, but catching up. Alright? So the number will change a lot, but let me say that more than 80% to 85% of investment will be in Texas. Michael Edward Genovese: Okay. Perfect. Thanks so much. Really exciting. Looking forward to following this more and to seeing you guys at OFC. Thank you. Operator: Thanks. And our next question will come from George Notter with Wolfe Research. Please go ahead. George Notter: Hi, guys. Thanks very much. Really impressive conversation here in terms of the demand profile. I guess I am just curious about what you are seeing on tariffs. Obviously, we have had some moves on tariffs recently. 15% across-the-board tariff. I am not sure if transceivers are going to be exempt or what the situation is. But can you just talk about kind of the tariff situation, maybe the perception your customers have on tariffs, and how that may or may not be translating into orders? Thanks. Stefan Murry: Yeah. I guess there are two ways to say that. First of all, I mean, I think anybody that is telling you they confidently know exactly what the tariff situation is going to be throughout the year is probably not being truthful. I certainly do not. You know, we have a viewpoint on, you know, obviously, on the current tariffs. It is pretty much in line with where we have been in terms of tariffs. I mean, I do not expect—if things stay the same as they are now, I do not expect it to dramatically change, you know, kind of the tariff picture that we outlined on the call earlier. That being said, you know, we are looking at the options in terms of the IEEPA tariffs. Those have been outlawed. At least there is some pathway where we might be able to recoup some of those. The other thing that I have said pretty consistently, and I think it ties in with Thompson’s earlier comments—while it takes a while to build capacity in the United States, the one place where I am pretty confident in saying it is not going to be tariffed is product that is made in the U.S. And that is what we are scaling up to do. So the more—as time goes on—the more we can do in the U.S. and the more that we can attract other supply chain partners, which we are doing, to move their production to the U.S. as well, that will help us. You know, in the long term, that is going to be the solution for really minimizing the tariff impact. George Notter: Got it. And then the comment about recouping tariffs—I think you said you were the shipper of record. Is there—how much could that be? What is the potential, you know, upside you guys could get if indeed you can recoup those? Thanks. Stefan Murry: I mean, sure. If we could recoup all of it, you know, we had about $4,600,000, I believe, just last quarter in tariffs. We probably paid last year $7,000,000 or $8,000,000 in tariffs overall. Again, we are still analyzing exactly how many of those are IEEPA-related; not all tariffs are that way. So there is a lot of nuance there. But, I mean, you know, it is not going to dramatically change our picture, but it certainly would be a welcome cash flow development for sure. George Notter: Great. Thanks, guys. Thompson Lin: Yep. Operator: Again, if you have a question, you may press star then 1 to join the queue. Our next question will come from Ryan Boyer Koontz with Needham & Company. Please go ahead. Ryan Boyer Koontz: Great, thanks. Just maybe stepping back a little bit, as you think about the ramp in 400G with your large customer and 800G, which is pending, maybe you can compare the production and demand view—compare and contrast between those two—that gives you confidence in executing your own capacity and visibility from your customer for those two different product lines. Stefan Murry: Great. Thank you. Sure. I mean, the 400G products, as we said, are going to continue—I think there is going to be continued strength in the sales of those products, driven by a couple of large customers, much the same ones that we have already been shipping to, although we are seeing increased demand from at least one of those customers. As we said in our prepared remarks earlier, 800G is expected to dominate those sales starting in Q2 of this year. So, you know, we will see more revenue in 800G in Q2 than we did in 400G. And then moving through the year and into next year, I think we are going to continue to see very strong ramp in 800G, because that is most closely associated with AI. Right? That is the closest to the AI compute clusters, at least until we get to 1.6 terabit later this year. Ryan Boyer Koontz: That is helpful. And then, you know, on your laser supply, indium phosphide—you know, we were down into your facility in the fall. Where are you in terms of, you know, the equipment you need and kind of lead times with regards to expanding indium phosphide production, and any color you could give us there in terms of building out your new facilities and acquiring the necessary equipment? Thank you. Stefan Murry: Yeah. I mean, as Thompson mentioned, we are planning to triple our production of indium phosphide related devices here—laser devices made on indium phosphide materials—by the middle part of next year, and we have line of sight into all that equipment. Some of it has already been— I mean, it would be a long conversation to go through every piece of equipment and what the schedule is. But the bottom line is when we talk about tripling our capacity, that includes the equipment that we either have on order or have line of sight into order that will be delivered in time to accommodate that ramp. Ryan Boyer Koontz: Great. And just maybe one last I can squeeze in. In terms of cable TV, you mentioned another customer. I assume that is a large U.S. customer that is moving forward at 1.8 GHz here in terms of DOCSIS 4.0 ESD. Stefan Murry: Yeah. It is. We have a number of customers. I would—again, I want to caution, none of those customers are as large as our largest customer, okay? But in aggregate, I think they could be a significant contributor to the revenue, which is what I was trying to outline earlier in response to Simon's question. Ryan Boyer Koontz: Great. Appreciate that. Thanks. Stefan Murry: Yep. Operator: And our next question will come from Tim Savageaux with Northland Capital Markets. Please go ahead. Tim Savageaux: Hi, good afternoon. A couple of questions I wanted to follow up on. Looks like, given the increase in cable in Q1, you expect data center revenues up about $10,000,000. I guess, what is driving that if you do not expect 800G to ramp until Q2? Stefan Murry: Well, I think we are going to see two things. We will see a growth in 400G, continued growth in 400G, and then we also do expect to see some in 800G, just not, you know, the dramatic ramp that we expect to see starting in Q2. Tim Savageaux: Okay. Great. So principally 400G. And you mentioned some, I guess, near-term gross margin headwinds driven by mix, I think you said, but you do have cable TV up in Q1. So I want to get a little more color on what is happening gross margin-wise there. Stefan Murry: In Q1—yeah, as we said, I mean, at the end of the day, you look at our guidance, it is kind of a wash in terms of gross margin. We are seeing, you know, a little bit of headwind coming from the product mix, especially—you know, 400G, as I mentioned earlier, is going to continue to grow in Q1 until later when 800G starts to take over. Meanwhile, in cable, gross margins there are better, and they are actually expanding. So that is kind of the put and take on that. That is why it ended up being kind of a wash. Thompson Lin: As we said, with the brain now—800G—we need time to fine tune the production in the year. That is why this is early stage of volume—make 800G. That is why we—that is why I say by Q2 next year, the overall gross margin will be 35% to 38% just for transceiver. By end of next year, we believe we can achieve more than 40% goal gross margin for all the transceiver by Q4 2027. Tim Savageaux: Okay. Let me just—one and a half more here. You mentioned expectations for 800G to, I guess, dominate revenue. Trying to get a sense of what that means in Q2. You should have about, you know, in the $40,000,000 range for 100G, probably will be in the $40,000,000 a quarter range for 400G. Would you expect 800G to be larger than both of those combined in Q2? Or how might you frame that? Stefan Murry: What we are saying is it will be our largest segment within the data center. You know, it will be the largest—it will be the largest revenue of those three: 800G, 100G, 400G. I think it will be more than $25,000,000. Thompson Lin: Or $30,000,000, I know, something like that. As I said, the issue right now is not the demand, okay? The Q1—the Q4 delay—due to the firmware optimization. But Q2, Q3 is limited by our capacity. Alright. It is not a demand issue. Let me say that. Because as we say, we received demand from the customer—from two customers. Even—I say we got the order from them pretty soon, within a few weeks. Then the next issue is the supply chain and our manufacturing capacity. So I would say I am very confident to $25,000,000, but customer demand could be $35,000,000 to $40,000,000. So we will just see how—we feel comfortable right now. The numbers we say here are not a customer demand issue. It is Applied Optoelectronics, Inc. manufacturing and supply chain issue. Let me say that. Tim Savageaux: Okay. Great. And then I guess last question for me. You talked about the potential for $1,000,000,000 in revenue in calendar 2026, I think, or in total. I wonder, from a customer standpoint, how would you expect customer concentration to look in that scenario? And I know you have a big guy on the cable side. I am principally talking about data center. Do you think—if you break down the revenue, right, if you just take a round number of a billion, would you—if you break down—would one customer be at half of that, or what have you? Stefan Murry: So if you break down the revenue, right, if you just take a round number of a billion, subtract the $300,000,000-ish that we have in cable TV, that gives you $700,000,000-ish left over. Right now, I would expect that is going to be dominated by—most of that is going to be two large hyperscale customers, and they will probably be roughly equivalent, you know, exiting the year. We will see how that plays out. It is pretty early to say exactly how the timing on that is going to go. But I would expect at least two to be sort of comparable in size—let us put it that way—and then, obviously, a third one that would be, you know, smaller in scale but still significant. Thompson Lin: So I would say we would have three hyperscale customers to be more than 10%, or much more than 10%, for the whole year. Tim Savageaux: Got it. Appreciate that color. Thanks very much. Thompson Lin: Yep. Alright. Thank you. Operator: At this time, we have no further questions. I will turn the call now over to Dr. Thompson Lin for any closing remarks. Thompson Lin: Okay. And thank you for joining this call today. As always, we want to extend a thank you to our investors, customers, and employees for your continued support. We continue to believe the fundamental drivers of long-term demand for our business remain robust, and we are uniquely positioned to deliver and to drive value from those opportunities. We look forward to seeing many of you at upcoming investor conferences as well as OFC. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. My name is Demi, and I'll be your conference operator today. At this time, I would like to welcome you to the Payoneer Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Michelle Wang. Please go ahead. Michelle Wang: Thank you, operator. With me on today's call are Payoneer's Chief Executive Officer, John Caplan; and Payoneer's Chief Financial Officer, Bea Ordonez. Before we begin, I'd like to remind you that today's call may contain forward-looking statements, which are subject to risks and uncertainties. For more information, please refer to our filings with the SEC, which are available in the Investor Relations section of payoneer.com. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered in addition to and not instead of GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings materials, which are available on our website. Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on investor.payoneer.com. All comparisons made on today's call are on a year-over-year basis, unless otherwise noted. With that, I'd like to turn the call over to John to begin. John Caplan: Good morning, everyone, and thank you for joining us. Payoneer is the financial operating system for Global Commerce. We have a 20-year head start building assets, network effects and brand that are highly differentiated and difficult to replicate. We have proven product market fit, deep global distribution and the payment and regulatory infrastructure to support profitable growth at scale. We are capturing share in a large and growing market and continue to strengthen our strategic advantages every quarter. First, Payoneer has global scale that eliminates the friction of growing cross-border. We processed over $87 billion in volume across 190 countries and territories in 2025. When a manufacturer in Vietnam pays a supplier in Mexico, when a business in India wants to sell on Japan's e-commerce marketplaces, or a software developer in Dubai invoices a client in Germany, we're there. Payoneer supports cross-border commerce across every SMB use case. Second, trust and safety built over decades. We are regulated in key markets around the world and have built robust compliance infrastructure based on years of experience navigating the challenges associated with cross-border payments, particularly those into and out of emerging markets. Third, we are driving growing profitability through discipline. We've increased adjusted EBITDA ex-interest from negative $25 million in 2023 to positive $40 million in 2025, while investing in innovation and strengthening our capabilities. We're entering 2026 with conviction around our margin expansion opportunity. We are orienting Payoneer towards an AI-first strategy, which will reshape our customer experience, operations and cost structure. The impact is tangible across every major function. Engineering is shipping code meaningfully faster. Our go-to-market team is using AI for scoring leads, improving funnel efficiency and increasing ROI. And in our customer support and compliance teams, AI agents are creating a flywheel effect, better customer outcomes, greater efficiency for our teams and a structurally lower cost base. Our leading position in cross-border B2B payments uniquely positions us as stablecoins and AI fundamentally reshape global money movement. We are the beneficiaries of this innovation and have the assets, scale and market position to capture outsized value. Before I dive into our record 2025 results, I'd like to spend a moment on our 2026 outlook. We plan to deliver significant core profitability expansion. We expect to more than double core adjusted EBITDA to $90 million at the midpoint. Revenue ex-interest of $900 million to $940 million represents 12% growth at the midpoint. This accounts for finishing the work we started in 2025 to optimize our checkout business and our customer portfolio. These actions are expected to reduce our 2026 revenue growth by approximately 300 basis points, but will lead to higher margins and a stronger, healthier customer portfolio. We plan to exit the year with mid-teens growth and mid-teens core margins. Now turning to our results. 2025 was a pivotal year for Payoneer. We increased the utility we provide to our customers, made deliberate choices about where to focus in a dynamic environment and executed and innovated with discipline. The results, they speak for themselves. We grew revenue ex-interest 14%. B2B revenue grew twice as fast at 28% as we take share from traditional financial institutions. B2B now represents 30% of our revenue ex-interest, up from 20% in 2023. We strengthened and expanded our ecosystem of enterprise relationships, including with Airbnb, Upwork, TikTok Live, Alibaba, Mercado Libre and Best Buy. 21% ARPU expansion ex-interest, driven by upmarket momentum and multiproduct adoption, 9 basis points of SMB take rate expansion, $7.9 billion of customer funds held in Payoneer accounts, up 13% year-over-year and outpacing volume growth. We have hedging strategies in place to reduce interest rate sensitivity. We have locked in a substantial portion of interest income for 2026, 2027 and 2028 regardless of the interest rate environment. We improved our unit economics and are driving meaningful efficiencies in our operations. Other operating expenses, which include customer onboarding, support and KYC costs were down 3% in 2025. While at the same time, we grew volume and revenue, mix shifted to more complex verticals such as B2B and added to our regulatory licenses. Total adjusted EBITDA of $272 million, a 26% margin was up year-over-year, as we unlocked substantial operating leverage and powered through a $25 million headwind from declining interest income. We delivered $40 million of adjusted EBITDA ex-interest, nearly triple versus 2024. We generated significant free cash flow of $146 million, representing nearly 200% free cash flow conversion. These aren't just great numbers. They reflect a healthy, strong business that is positioned for long-term value creation. We believe our current share price does not fully reflect the strength of our balance sheet, the durability of our cash flows, or our long-term growth opportunities, including those from Agentic Commerce and stablecoin. We've continued to align our capital allocation with our conviction in the intrinsic value of our business. In 2025, we stepped up our buybacks, repurchasing $175 million of shares, including $80 million in Q4 alone. We plan to continue buying our shares at or close to these levels. Since we began our transformation in 2023, we prioritized unlocking Payoneer's full potential with a sharp focus on profitability. At our inaugural Investor Day, we presented the first phase of our strategy and disclosed metrics that focused on "ideal customer profiles" customers that were profitable based on a simple minimum volume threshold. In the 2 years since, we have delivered meaningful impact. Today, we're proud to share that all customer cohorts are profitable. We've grown our ICP base by 8% and increased ARPU by more than 50%. We've delivered a 17% CAGR in our revenue ex-interest, and we've significantly expanded core profitability and demonstrated consistent 25% adjusted EBITDA margins in the declining interest rate environment. We're now entering the next stage of our transformation. We're moving further upmarket to focus on larger, more sophisticated customers. Customers receiving tens of thousands, or even hundreds of thousands of dollars a month on Payoneer's platform are generally scaled, often multi-entity, multi-geography businesses. These businesses have proven business models, complex cross-border needs and potential for significant wallet share expansion. They also demonstrate significantly higher ARPU, retention and product adoption characteristics. We have strong product market fit and proven ability to serve these businesses. For example, Customers with $600,000 or more of annual average volume in their Payoneer account now represent 42% of our revenue, and they were our fastest-growing segment in 2025, driving 60% of our overall growth. The UAE is a great example of a region where our upmarket strategy is taking hold. The city of Dubai is 1 of 5 major global business hubs. Its economy is projected to double over the next decade, driven by service exports and 20,000 foreign-owned companies registered there in 2025 alone. Payoneer is successfully acquiring and serving these cross-border businesses, which is driving our strong results. Our business from customers in the UAE generated over $1 billion in volume and $15 million of revenue in 2025. Revenue is growing nearly 50% year-over-year, driven by large IT and digital marketing agencies. To support our upmarket strategy, we are making targeted investments to expand and enhance our value prop. For example, we recently launched expanded capabilities in Mexico and Indonesia. We plan to expand our product offerings in India, the world's fastest-growing large economy, supported by our recent in-principle license authorization. We recently acquired Boundless, which deepens our workforce management capabilities for global teams. And we're adding more partners to expand working capital and credit solutions, enabling customers to access the capital they need to invest in inventory, marketing and expansion. We will press our near-term advantages and make bold bets to position ourselves at the center of ongoing innovation in the payment space. One of these big bets is stablecoin. We believe Payoneer is uniquely positioned to bridge traditional finance and blockchain-based payments. Here's why. We have world-class last mile infrastructure in emerging markets, supported by the robust and complex regulatory framework necessary to operate compliantly at scale. We have deep compliance expertise to onboard and support customers in markets that are complex to serve. We have long-standing trusted relationships with millions of cross-border SMBs around the world. We are partnering with Bridge, a Stripe company to launch stablecoin capabilities. We launched a wait list a few weeks ago and have brought our first customers live. What's most exciting about this is that stablecoin is TAM expanding for Payoneer. We are seeing meaningful interest from larger scaled businesses that fit the upmarket profile we're pursuing, and we are seeing new customers come to Payoneer for these features across a diverse set of markets and industries. As part of our broader stablecoin strategy, we have also just this week applied to establish an uninsured national trust bank in the United States. We expect this will enable Payoneer to seamlessly integrate stablecoin capabilities within our broader ecosystem. We plan to unlock utility for our customers, remove complexity and barriers to entry and open up additional addressable markets for a new breed of digitally native global businesses. We are on a multiyear journey to position Payoneer as a category-defining company in cross-border commerce. We have demonstrated that we have the right team, a strong position in the market and a track record of successful execution. I'm proud of our team, grateful to our customers and excited for our future. Thank you all for your confidence and support of Payoneer. I'll now turn it over to Bea to discuss our financial results and 2026 guidance in more detail. Bea Ordonez: Thank you, John, and thank you all for joining the call today. Payoneer's full year results, mid-teens growth, 26% adjusted EBITDA margin and significant cash flow generation demonstrate the strength of our business. We are delivering profitable growth, optimizing transaction cost economics, unlocking meaningful leverage and making investments to position our business for sustained long-term growth while returning capital to our shareholders. Turning to our fourth quarter results. We delivered record quarterly revenue of $275 million, with revenue, excluding interest income, up 9%, driven primarily by strong and accelerating growth in our B2B franchise and the ongoing implementation of our pricing strategy. ARPU increased 15% in the quarter as we continue to focus our efforts on larger customers and drive increased adoption of higher-yielding products. ARPU, excluding interest income, was up 21%, marking our sixth consecutive quarter of 20% plus expansion. Total volume grew 10% year-over-year, reflecting strong enterprise payouts volumes with SMB volumes growing by 5%. Volume from SMBs that sell on marketplaces was up 1%. We saw an acceleration in marketplace volumes intra-quarter and mid-single-digit volume growth during the holiday season, in line with broader industry trends. Fourth quarter B2B volume growth of 21% accelerated significantly sequentially, led by strong acquisition and ramp-up of large customers, especially in China, Asia Pacific and EMEA. Our B2B franchise accounted for 30% of our revenue, excluding interest income in the fourth quarter, and we are confident that we can continue to deliver strong growth as we penetrate this massive market. During 2025, we saw strong and accelerating growth in enterprise payout volumes. Full year enterprise payout volumes grew 17% with growth reaching 27% in the fourth quarter. As John noted, this strong growth was driven by both expanding and deepening relationships with existing clients and from onboarding new enterprise clients, including Airbnb, TikTok Live and Best Buy, among others. Enterprise customers value our global scale and reach, the security of our platform and our extensive payout network. For example, we recently renewed our relationship with Upwork, which has been an important partner for us for over 15 years. Together, we will continue to support the ambitions of entrepreneurs globally, and we are actively exploring stablecoin payout solutions together, reflecting our commitment to innovation and to investing in the future of money movement. Given strong momentum in 2025 and our current pipeline, we believe we are well positioned to continue driving strong enterprise payout volume growth in 2026. Our Q4 SMB take rate of 113 basis points was up approximately 4 basis points year-over-year as we continue to drive faster growth in higher take rate areas of the business and from the ongoing execution of our pricing strategy. Customer funds increased 13% year-over-year to $7.9 billion, partially offsetting the impact of lower interest rates on our interest income revenue. We generated interest income of $56 million in the quarter. Customer funds grew at a substantially higher rate than SMB volumes in 2025, a direct reflection of the trust customers place in our platform and of the utility we provide through our multicurrency accounts receivable and accounts payable capabilities. We have developed and implemented a robust interest rate hedging program designed to secure portions of our interest income as interest rates, especially in the U.S., continue to decline. As of December 31, 2025, we had hedges in place related to approximately $4 billion or 51% of customer funds through our portfolio of treasury securities and term deposits and through derivative instruments. Through these programs, we have secured over $130 million of interest income in 2026, over $110 million in 2027 and over $90 million in 2028, irrespective of the direction of short-term interest rates. We plan to lock in additional amounts through reinvestment as the portfolio runs off, providing a durable revenue stream. On a go-forward basis, our expectation remains that balances should broadly grow in line with volumes over time, while balance behavior is, of course, impacted by a range of factors, including customer usage behavior, the global macro environment and prevailing interest and FX rates. Total operating expenses of $246 million increased 6%, primarily driven by increases in IT and communication expenses and labor-related expenses, including from the impact of our EasyLink acquisition in China. Transaction costs of $43 million were roughly flat year-over-year despite a 9% growth in revenue, excluding interest income, primarily from greater operational efficiency and from the impact of the new agreement we signed with Mastercard in July. Transaction costs represented 15.6% of revenue, a decrease of around 90 basis points year-over-year, even with the impact of lower interest income. Excluding interest income, transaction costs represented 19.6% of revenue, a decrease of approximately 180 basis points reflecting the improving profitability and margin characteristics of our portfolio. Sales and marketing expense increased $5 million or 8%, primarily due to a higher labor-related costs and increased incentives related to our card offering. G&A expense increased $5 million or 15%, primarily due to higher labor-related costs, including from our EasyLink acquisition, higher facilities costs related to our offices in Israel and higher IT and communication costs. R&D expense was roughly flat, while other operating expenses decreased by $3 million or 6%, primarily due to lower consulting fees and lower labor and related expenses. Adjusted EBITDA was $69 million, representing a 25% adjusted EBITDA margin in the quarter. Adjusted EBITDA, excluding interest income, was $13 million, a five-fold increase versus the prior year period. For full year 2025, we generated $40 million in adjusted EBITDA, excluding interest income, nearly 3x the 2024 number. We are unlocking meaningful leverage through our increased scale, the deepening of key strategic relationships and ongoing efficiency and cost discipline. Net income was $19 million compared to $18 million in the fourth quarter of last year. Basic and diluted earnings per share were both $0.05, in line with the prior year period. We ended the quarter with cash and cash equivalents of $416 million. For full year 2025, we generated significant free cash flow of $146 million, nearly 200% of our reported net income, enabling us to both invest in our business and return capital to shareholders. Additionally, in January 2026, we announced the acquisition of Boundless, an Ireland-based employer of record platform for approximately $13 million plus earn-out provisions amounting to up to $4 million. During the quarter, we repurchased approximately $80 million of shares at a weighted average price of $5.76, a significant acceleration from the third quarter. And as of December 31, had approximately $192 million remaining on our current share repurchase authorization. Turning to our 2026 guidance. Our 2026 guidance reflects our confidence in continuing to drive strong growth in our SMB franchise and in our ability to unlock substantial and sustained leverage in our business model. We expect revenue to be between $1,090 million and $1,130 million with $190 million of interest income and revenue, excluding interest income between $900 million and $940 million. We expect core revenue growth of 12% at the midpoint. As John highlighted, we are taking deliberate actions in 2026 to move our business upmarket and to deliver sustainable higher-margin growth. Our core revenue guidance includes an approximately 300 basis point headwind to our growth rate, reflecting anticipated churn related to our transition to Stripe's Checkout solution as well as from changes to our acquisition focus and onboarding flows. We have been migrating our Checkout offering to the new Stripe solution over the past 6 months and are pleased with our progress and the expanded capabilities our customers can now access. We expect the transition to be accretive to both revenue less transaction costs and adjusted EBITDA in 2026 and that this new partnership construct should continue to deliver more favorable yield and margin dynamics as we scale. We expect to accelerate our revenue ex interest growth over the course of 2026 as we execute on our upmarket strategy, optimize our portfolio, realize the full quarter impact of pricing initiatives rolling out throughout the year and lap tougher comps, including with respect to the timing of tariff impact. We expect high single-digit growth in the first half of the year, increasing sequentially in the second half to exit the year at a mid-teens growth rate. We expect to drive significant incremental profitability as we focus on portfolio health, customer mix and expense discipline. We believe this focus, along with the investments we are making to drive long-term profitable growth, position us to deliver mid-teens growth rate in 2027 and beyond and ongoing expansion in our profitability, excluding interest income. Our 2026 guidance at the midpoint assumes high teens B2B volume growth, mid-single-digit growth in volume from SMBs that sell on marketplaces and mid-teens enterprise payout volume growth. We expect transaction costs to be approximately 15% of revenue, down 70 basis points year-over-year from the impact of ongoing optimization in our bank and processor network, including our renewed agreement with Mastercard and from the migration of our checkout portfolio to the Stripe solution. We expect revenue less transaction costs to grow faster than revenues, even including the impact of a $42 million decrease in interest income. Our guidance for adjusted OpEx, which represents revenue less transaction costs and adjusted EBITDA is approximately $660 million at the midpoint, a 7% increase year-over-year. At constant currency, we expect adjusted OpEx to grow roughly 4% year-over-year, significantly lower than our growth in revenue, excluding interest income. This reflects our focus on increasing the profitability of our core business from investments in our platform, including in Agentic AI-driven solutions and from further diversifying the distribution of our labor footprint, including by increasing our presence in India. We are strategically moving the company towards an AI-first strategy in 2026, to drive step function efficiency gains across our entire ecosystem. Agentic models are being deployed to increase product delivery velocity, improve our customer experience, drive go-to-market ROI and reduce resource-heavy workflows, particularly in customer support and compliance. We opened a new technology hub in Gurgaon, India in 2025, building on our existing presence in the world's fastest-growing major economy and allowing us to access India's deep technology expertise. We are also expanding our operations and compliance hub in Bangalore, India. Our 2026 OpEx plan also include meaningful investments related to our stablecoin offerings and our bank charter application, which, if approved, we expect further position us for sustained long-term growth. We expect adjusted EBITDA to be between $275 million and $285 million, an approximately 25% margin and an increase of around $8 million year-over-year despite an estimated headwind of approximately $42 million in interest income. Excluding interest income, we expect to deliver adjusted EBITDA of between $85 million and $95 million, more than twice the 2025 level and achieving a double-digit margin for the first time as a public company. Also for the first time as a public company, we expect adjusted EBITDA, excluding interest income to be positive even when fully burdened for stock-based compensation. We expect adjusted EBITDA ex interest income will meaningfully scale over the course of the year as we fully lap the impact of tariff policy changes introduced in the second quarter of 2025 as we continue to scale our B2B franchise and as we lap near-term headwinds from our checkout migration and other portfolio actions. We also expect our overall adjusted EBITDA margin will increase sequentially throughout the year. Payoneer enables cross-border global commerce at scale, and our business benefits from the ongoing globalization and digitization of commerce. We remain focused on supporting and serving the third-party sellers that are critical to e-commerce marketplaces and on further penetrating the massive cross-border B2B segment. We are making meaningful investments in our platform, including in our money movement capabilities and in our regulated infrastructure. We are shifting our business towards a higher quality, healthier and more sustainable portfolio and unlocking significant leverage in our core business. We believe that, our current market valuation represents a significant discount to the intrinsic value of our company. Beginning in the fourth quarter of 2025, we significantly accelerated the pace of our share repurchase program. In the fourth quarter, we repurchased approximately $80 million worth of shares and assuming fairly comparable stock price levels to today, would expect to use the entirety of our remaining $192 million in repurchase authorization in 2026. 2025 was a record year for Payoneer. We drove strong profitable growth in a dynamic macro environment, unlocked significant leverage in our core business and made important investments to strengthen our franchise. We are now happy to answer any questions you may have. Operator, please open the line. Operator: [Operator Instructions] Your first question comes from the line of Cris Kennedy with William Blair. Cristopher Kennedy: As you move upmarket, what metrics should we follow or what KPIs should we track to see the progress as you make that strategy? Because we know your segment disclosures will be changing. John Caplan: Yes. Cris, great question. And I think the way I think about it and the team here thinks about it is we have a really strong business upmarket. In Q4 of '25, the customers that did over $50,000 accounted for 42% of our revenue, up 10 percentage points versus the first quarter of 2022. So we have a very healthy and strong upmarket business, and we see really solid product adoption, more average volume per customer and very strong ARPU. And we will continue to share with our shareholders the ARPU growth, the traction we have, cross-selling products and our volume per customer growth. Cristopher Kennedy: Okay. Understood. And then real quickly on the profitability, core profitability, clearly, you're making progress there. Can you talk about the long-term opportunity to expand margins on that metric? Bea Ordonez: Yes. Thanks for the question, Cris. Yes, look, we're really focused on expanding the ex-interest profitability in the business. Our guidance at the midpoint calls for $90 million of core adjusted EBITDA before interest income, and that's more than 2x what we delivered in the prior year. So significant leverage unlock. We're growing our top line. We're increasing our margins, including the margins we get from our transaction-based business, and we're improving the profitability and long-term health of the portfolio. All of that is showing up in those metrics, and we feel confident that we can continue to deliver that kind of unlock. We talked a little bit about the AI-first strategy that we're deploying. So as I look out beyond 2026, we feel really good about our ability to continue to unlock leverage in the business. Operator: Your next question comes from the line of Nate Svensson with Deutsche Bank. Christopher Svensson: Hoping you could talk a little bit more about the trends in the marketplace business. So volume growth did decelerate a bit, but you did call out an acceleration intra-quarter, I think, to mid-single digits. And I know a lot of folks out there try to track some of the larger third-party marketplace data as a proxy for your business here. I know that's an apples-to-oranges comparison. But nonetheless, I would love to hear about trends on what you saw in marketplace and kind of how you expect that to play out in '26 to get to the mid-single-digit volume guide for the year. Bea Ordonez: Yes. Thanks for the question, Nate. So look, we had called out back in November when we reported Q3 that we were seeing slightly softer October marketplace volume. We indicated thereafter that we were seeing similar trends in November. So what we saw is more or less in line with the expectations. We actually saw a strong holiday season, right, back end of November and into December, mid-single-digit marketplace volume growth in December, which look, to your point around sort of apples to oranges as we look to the broader holiday spending trends is in line with those broader trends at mid-single digit. And we've seen modest acceleration in that marketplace volume coming into January and February. So look, again, last year was a pretty dynamic environment. I think we saw the impact in sort of late Q3 and into Q4 of tariffs. We're seeing modest acceleration coming into the year. Our franchise is strong, and we feel good about continuing to accelerate off of this baseline. Christopher Svensson: That's helpful. And nice to hear the January and February commentary. I guess, just the follow-up question, just more broadly on the 2026 guide. So it's nice to hear that you're expecting to accelerate through the year, exit at mid-teens. I know, you mentioned some of the lapping impacts, the transition from optimizing checkout, customer portfolio, all that stuff. But I think like the big question that I have, and I'm getting this morning is just on the confidence and visibility in that core trends in the business. Again, you mentioned the lapping impacts and the other initiatives. But really just more color on your confidence visibility into getting us to a mid-teens exit rate as we leave 2026. Bea Ordonez: Yes. Thanks for the question. So look, we've called for high single-digit core revenue growth in the front half of the year, accelerating to exit in those mid-teens. A few factors give us confidence there and are driving that acceleration. One, and I think maybe foremost, we're seeing significant acceleration in our B2B business. That was -- that grew 21% in volume terms in Q4. So we're seeing really nice momentum in that business. It grew intra-quarter and good momentum coming into the year from really everything you heard in the prepared remarks, our focus on high-value customers, getting more focused on new and differentiated acquisition motions. The ongoing acceleration in our enterprise business as we continue to ramp up new partners. We talked about some of those names, some of those logos on the call. That's driving some of that. The benefits in the back half of the year of some of the pricing strategies that we continue to roll out, largely targeted at the long tail. John talked a little bit on the call. around how we look at that portfolio overall. And then finally, as we noted, really just lapping, if you like, the headwinds and getting to the back half of the year, lapping that tariff impact and some of the headwinds that we talked about in terms of the portfolio actions we're taking, including the transition to Stripe, and that transition is more front-end loaded. So a long list of things, but a carefully sort of worked out view on how we accelerate the business throughout the year. Operator: Next question comes from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani: Maybe you guys could talk a little bit about sort of the opportunity for the bank and sort of how you see that unfolding for yourselves and maybe just the time line from here? Bea Ordonez: Yes. Thanks for that question, Sanjay. Look, we're really excited about the momentum in this space. As we called out, this is a strategic investment, both rolling out capabilities with Bridge in terms of stablecoin capabilities, and our bank charter application. We think that positions us at the center of really ongoing innovation in the payment space. And so we've made those announcements over the last couple of weeks. We've been hard at work across a range of work streams, including launching those capabilities. In terms of the bank charter, it really allows us to do a few things, right? It allows us to be able to issue and manage reserves in a compliant infrastructure in support of stablecoins. It allows us down the line to custody should we choose to do so. But ultimately, it does what Payoneer does as a part of our core value proposition, right? It brings these digital currencies into a regulated and trusted ecosystem and one where we can seamlessly integrate into the fiat rails and the existing fiat ecosystem that we already operate for our customers. So think of it as a step within that broader strategy. We're really excited. We're working hard, and we really do think it positions us at the center of innovation in the cross-border payment space. Sanjay Sakhrani: Okay. Great. And maybe just like a 2-part question on some of the questions that were asked before. But that 300 basis point headwind, sort of is that the final piece? And then we no longer have any sort of impact from transitioning the customer base or any of the services? And then secondly, just as we think about these tariffs and the start and start and changes in policy, I'm curious how you think that affects your business and sort of the marketplaces. Bea Ordonez: Yes, happy to take the first part. So yes, we called out that headwind to provide that disclosure, and it's really 2 elements. One, it's the transition to the Stripe solution. And we called out high single-digit million headwind to revenue in '26. we're very comfortable with that headwind, right? We've talked about this solution. It delivers best-in-class capabilities to our customers and ultimately, higher-yielding, better margin portfolio dynamics. So that is part of it. The other actions are really sort of in line with what we've talked about shifting to a healthier portfolio, and we're comfortable that we leave those behind as we exit 2026. Again, moving towards that larger portfolio of customers, lower risk portfolio that really gives us confidence to build sustainably at that mid-teens growth. John Caplan: And just on the tariffs, I think we are very confident that actually the shifting tariff landscape actually presents a real opportunity for Payoneer. And I think, it's driven by our global presence, a, and our ability to capture those shifting trade flows as Chinese sellers and Chinese merchants globalize their focus on distribution, they're increasingly turning to Payoneer as their financial operating system. The uncertainty in 2025 with the stop-start nature of the tariffs caused sellers to have to try to stop and start, frankly. But now that we begin to see normalization, obviously, the Supreme Court last week creates a little bit more uncertainty. But I imagine heading into the April meeting that with President Trump and Chairman Xi, we should ultimately see clarity and certainty, which will be a tailwind for Payoneer long term. Operator: And there are no further questions at this time. I will turn the call back over to John Caplan for closing remarks. John Caplan: Thank you, and thank you, everybody, for joining us today and for your participation this morning. We delivered record results in 2025, and we're excited about the significant opportunities for us in '26 and beyond. I want to thank our team globally for their hard work, commitment to our customers, to one another, to our shareholders, and we look forward to speaking with you again in May. Thanks, everybody. Operator: This concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Good morning. Welcome to Lantheus Holdings, Inc.'s fourth quarter and full year 2025 conference call. All lines have been placed on mute. This call is being recorded. A replay will be available in the Investors section of the company's website approximately two hours after the completion of the call, and will be archived for at least 30 days. I will now turn the call over to Mark Guarnieri, Vice President of Investor Relations. Mark? Mark Guarnieri: Thank you. Good morning. With me today are Mary Anne Heino, our CEO and Executive Chairperson, Amanda Morgan, our Chief Commercial Officer, and Bob Marshall, our CFO. We will begin with prepared remarks and then take your questions. This morning, we issued a press release, which was furnished to the SEC under Form 8-K, reporting our fourth quarter and full year 2025 results. The release and today's slide presentation are available on the Investors section of our website. Any comments could include forward-looking statements. Actual results may differ materially from these statements due to a variety of risks and uncertainties, which are detailed in our SEC filings. Discussions will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in the Investors section of our website. I will now turn the call over to Mary Anne. Mary Anne Heino: Thank you, Mark, and good morning, everyone. It is a pleasure to be back with you as CEO at an important moment for the company. I want to start by recognizing Brian for his leadership and for ensuring a smooth transition. While my role as CEO will be interim as we complete the search for the next Lantheus Holdings, Inc. CEO, I am thrilled to be back in the operational leadership role with the same passion and commitment that those who work with me will remember. I have taken time to meet with shareholders over the past months and appreciate the ongoing opportunity to listen to your feedback. My intent is to seamlessly transition our strategy and the execution of that strategy to the incoming CEO. I will note, the board and I are successfully progressing our CEO search, and I am pleased with the candidates we have met thus far. Before I offer comments about our business achievements for 2025, I would first like to share that Lantheus Holdings, Inc. products helped impact the lives of approximately 7 million patients in 2025, underscoring the real-world importance of the work our teams do every day. Now, turning to the results, I would like to start by highlighting the important progress we made in 2025 to shape our strategic focus within the radiopharmaceutical industry. The decisive actions we took in 2025 include: We closed 2 complementary transactions that diversified and will accelerate our near-term revenue stream across our commercial radiodiagnostic portfolio. First, the acquisition of Neuraceq, our beta-amyloid-targeted PET radiodiagnostic, which now serves as the commercial cornerstone of our Alzheimer's disease portfolio. We are excited both about the growth potential of Neuraceq and the expanding amyloid PET imaging market. In 2026, we expect Neuraceq's growth will exceed that of the overall market. Second, our acquired product candidate OCTEVY, a neuroendocrine PET radiodiagnostic currently under FDA review. Upon approval, OCTEVY will enter the well-established gastroenteropancreatic, or GEP-NET, PET imaging market. This product fully complements our nuclear medicine customer base and allows us to broaden our offerings to the customers we already engage with for PYLARIFY and Neuraceq. In 2025, we also took meaningful steps to further build out the portfolio of radiodiagnostic products Lantheus Holdings, Inc. offers to the prostate cancer community. Our primary focus in 2025 was defending our leadership position in the PSMA PET imaging space with PYLARIFY, and we believe that position will serve as a key advantage as we prepare the market for our new formulation later this year. This past year, we also advanced Lantheus 2401, our Phase 3-ready gastrin-releasing peptide receptor, or GRPR, targeted radiodiagnostic for prostate cancer. GRPR is a biologically distinct target from PSMA. An estimated 15%-30% of prostate cancer patients do not express PSMA. Lantheus 2401 has the potential to complement PSMA PET imaging by identifying disease in patients who may be PSMA negative or equivocal, extending the addressable population while fitting within our existing prostate cancer franchise. With these acquisitions and the other activities accomplished to build out our pipeline, we believe that Lantheus Holdings, Inc. now has the broadest radiodiagnostic pipeline among our peers in the radiopharmaceutical space. Finally, we completed the divestiture of our legacy SPECT business on January 1, 2026. While the SPECT business was foundational to Lantheus Holdings, Inc.'s renowned reputation in nuclear medicine over many decades, our strategic intent is to prioritize investment in, and the commercialization of, innovative PET radiodiagnostics on a forward basis. Having narrowed our strategic focus to radiodiagnostics, we believe we can deliver sustainable and attractive revenue growth in the mid and long term. Looking ahead to 2026, we are fully focused on commercial execution and revenue generation with our current commercialized assets, as well as successfully advancing a number of approval milestones for our registrational stage products. Our top priority is to maintain and strengthen our leadership in PSMA PET by sustaining PYLARIFY volume growth while preparing the market for the launch of our new PSMA PET formulation. That transition will take place in the fourth quarter of 2026, with the material commercial impact of that launch beginning in 2027. In neurology, we are excited to drive momentum with Neuraceq through expansion of our PMF manufacturing network, as well as the opportunity of introducing Neuraceq to our existing nuclear medicine PYLARIFY customers. Neuraceq, as well as the radiodiagnostic products currently under FDA review, will be offered to our nuclear medicine customer base as part of a comprehensive portfolio of Lantheus Holdings, Inc. products in 2026 and beyond. We have the potential for multiple FDA approvals this year. The first, our new PSMA PET formulation, second, OCTEVY, third, PNT2003, our radioequivalent formulation of Lutathera for the treatment of gastroenteropancreatic neuroendocrine tumors or GEP-NET, and fourth, MK-6240, our tau-targeted PET radiodiagnostic. Assuming approval for each of these products, the commercialization plan will be thoroughly targeted to align with market and access readiness, an approach we believe underpinned our successful PYLARIFY launch. We are able to leverage our PMF network and commercial infrastructure, investing in line with the expected revenue growth opportunity of each product in 2027 and beyond. As I have already mentioned, our strategy and related investments going forward will focus on radiodiagnostics. As a result, we are optimizing our cost structure to match this focus, enabling us to deliver on the EPS targets we announced today, while leaving additional opportunity to further improve that profile in the future. We are selectively prioritizing first and best-in-class later-stage PET radiodiagnostic assets that complement our current commercialized portfolio and our nuclear medicine customer base. As part of this strategy, we have decided to pursue value-maximizing alternatives for the radiotherapeutic assets in our pipeline. Given the broad portfolio we have built to date, we do not anticipate pursuing any significant M&A activity in 2026, though we remain open to opportunistic tuck-in acquisitions of portfolio-aligned diagnostics. Our priority is to complete the integration of our recent transactions early in 2026 to fully capture their value. As I have outlined, 2026 will be a year of commercial execution and regulatory milestones as we focus our efforts and investments to serve our nuclear medicine customers. With strong mid-and long-term revenue drivers, a robust late-stage pipeline, and a clear strategic roadmap, we are confident in our ability to drive meaningful performance gains that support a compelling mid-and long-term outlook for our shareholders. Let me now hand over to Amanda, who will offer highlights on performance and commercial execution across our portfolio in oncology, neurology, and cardiology. She will then provide an update on our late-stage diagnostic pipeline. Amanda? Amanda Morgan: Thank you, Mary Anne. We are positioning the business for its continued growth by driving commercial readiness ahead of multiple upcoming launches, beginning with our new PSMA PET formulation. First, let us discuss our fourth quarter results and priorities for 2026. I will begin with PYLARIFY, our market-leading agent, which posted solid performance in the fourth quarter in a highly competitive market, with volume up approximately 4% year over year. Our continued successful commercial execution and pricing discipline were the drivers of this performance. Notably, the vast majority of our annual volume in 2025 came from long-standing accounts, demonstrating the resilience and commitment of our customer base and the clinical value of PYLARIFY. As a reminder, pricing concessions provided late in the second quarter of 2025 reset 340B pricing in the fourth quarter. Our best price, which determines what is offered as 340B pricing, was unchanged in the second half of 2025. There will be no further change to our 340B pricing in the first half of 2026. We believe we have the broadest end-to-end coverage of PSMA PET imaging value chain, delivering consistent availability, reliability, and dependability to our customers. This level of operational excellence is a clear source of competitive advantage. We will extend this proven capability across each product we launch into the radiodiagnostic market, with the intent to accelerate adoption and drive both mid and long-term growth. I will highlight performance of our commercialized Alzheimer's imaging product. Neuraceq contributed $31 million for the quarter, driven by strong commercial execution. In 2026, we will further support that execution with the onboarding of six additional PMF sites. We are excited about the potential of Neuraceq in Alzheimer's disease PET imaging market. As the already second-most utilized and fastest-growing beta-amyloid PET imaging agent, Neuraceq addresses a large and expanding opportunity. With more than 7 million people currently diagnosed with dementia in the U.S., demand for amyloid PET imaging is increasing, driven both by the adoption of Alzheimer's disease-modifying therapies, or DMTs, as well as by guideline expansion for diagnostic use earlier in the care pathway for patients with mild cognitive impairment and early Alzheimer's disease. Finally, DEFINITY remained a strong contributor to our overall performance and delivered over $85 million in the fourth quarter. 2026 marks DEFINITY's 25th year on the market, and it remains firmly positioned as the market leader with more than 80% share. Now turning to our promising late-stage pipeline. 2026 is a critical and exciting year for commercial launch preparedness for several of our registrational stage assets. Specific to radiodiagnostics, it is important to align investment and launch timing with market access and value chain readiness to optimally realize the commercial opportunity. We have 3 radiodiagnostic assets and one radioequivalent therapeutic with near-term regulatory approval timelines. First, our new PSMA PET formulation, with a PDUFA date of March 6, offers the same diagnostic properties of PYLARIFY with a similar safety and efficacy profile, while delivering manufacturing efficiencies that will immediately improve supply availability. As with any F-18 radiodiagnostic, launch timing and success depends on having broad PMF network in place, as our focus will be on supply continuity. A central tenet of our launch strategy is to ensure we have coding, transitional pass-through status, and broad payer coverage in place before commercial launch, thereby ensuring customers have access to and coverage for the new formulation. By leveraging our already established infrastructure and strong nuclear medicine customer relationships, our goal is to ensure the transition from PYLARIFY to our new formulation will be a seamless experience while providing what will be the only F-18-based product in the PSMA imaging category with transitional pass-through reimbursement. This approach, informed by our deep experience in radiodiagnostics, will be executed on a rolling regional basis in the fourth quarter of 2026, which will minimize risk during the commercial launch. We believe these actions position a new formulation for continuous, sustainable growth beginning in 2027. Second, OCTEVY, our gallium-based PET radiodiagnostic for NETs, with a PDUFA date of March 29, will support clinical decision-making in patients with neuroendocrine tumors. Assuming FDA approval, we will have the opportunity to launch OCTEVY as the only neuroendocrine PET radiodiagnostic with transitional pass-through reimbursement. As a gallium-based agent, OCTEVY will be offered through existing radiopharmacy networks, which Lantheus Holdings, Inc. has long-standing relationships with. Our team is eager to begin the launch process for both agents in the second half of this year, with the expectation that they will begin to have a material impact on our performance in 2027. Turning to PNT2003, our registrational stage radioequivalent therapeutic to Lutathera. We are awaiting FDA approval and anticipate a court ruling mid-year on our Hatch-Waxman litigation. PNT2003, like OCTEVY, will be a natural addition to the Lantheus Holdings, Inc. commercial portfolio of products offered to our nuclear medicine customer base, enabling portfolio leverage across this common customer. MK-6240, our registrational stage tau-targeted PET radiodiagnostic for Alzheimer's disease, currently represents an important asset within our biomarker solutions portfolio and is the leading imaging agent supporting late-stage Alzheimer's DMT development. It is currently the most widely used imaging agent in amyloid and tau-targeted therapeutic candidate clinical programs. MK-6240 currently serves as the imaging agent for treatment eligibility in 17 pharma-sponsored therapeutic programs. The PDUFA date for MK-6240 is August 13 of this year. Collectively, our registrational stage assets will deliver on our strategy to maintain and expand our leadership in innovative PET radiodiagnostics and drive sustainable mid and long-term growth. In 2026, our commercial priority is clear: maximize the value of our current product portfolio by navigating a competitive marketplace with discipline and executing upcoming launches with excellence. I will now turn the call over to Bob to provide more detail on our fourth quarter and full-year results and outlook. Bob? Robert J. Marshall: Thank you, Amanda, good morning, everyone. I will provide details of the fourth quarter and full year 2025 financials, focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted. Revenue for the fourth quarter was $406.8 million, an increase of 4%. Revenue for the full year was $1,541.6 million, an increase of 0.5%. Turning to the details, radiopharmaceutical oncology, currently comprised solely of PYLARIFY, generated fourth quarter revenue of $240.2 million, flat sequentially and down 9.7%. For the full year, PYLARIFY delivered $989.1 million, down 6.5% from the prior year period. The result was above expectation, with price and volume favorability as compared to our previous estimates. Precision Diagnostics delivered fourth quarter revenue of $143.2 million, representing a 22% increase. The category was driven by net sales of DEFINITY at $85.3 million, or 1% lower, due to the prior year competitor supply challenges, which drove higher than expected revenue during Q4 2024. For full year, results were $330.2 million, up 3.9%. Neuraceq delivered $31 million in the quarter and $51.4 million since the acquisition in late July. TechneLite and other SPECT revenue for the quarter was $26.9 million for the fourth quarter and $111.4 million for the full year. Strategic partnerships and other revenue was $23.3 million, up 203.3%, due to a strong quarter for MK-6240, as well as the recognition of a $6 million milestone receipt relating to an out-licensed asset. Full year revenue was $59.4 million, with MK-6240 contributing slightly less than half of that amount. Gross profit margin for the fourth quarter was 65.1%, down 289 basis points from the fourth quarter 2024, due mainly to year-over-year decreases in PYLARIFY net price and the inclusion during 2025 of the Evergreen manufacturing facility and Neuraceq volumes, which were not in the comparative period, all offset in part by favorable PYLARIFY dose volumes. Operating expenses at 30.9% of net revenue were 179 basis points unfavorable from the prior year, but within previously guided spending levels. Increases in research and development, the majority of the year-over-year change, were a continuation of our planned investments to advance our clinical stage portfolio. The sales and marketing increase was largely due to having a full quarter of the Neuraceq sales team and related activities. G&A was flat in the period, despite ongoing and a litigation expense for our PNT2003 asset and the inclusion of LMI and Evergreen operating expenses. Other income and expense was $2.3 million of expense. Operating profit for the quarter was $138.9 million, a decrease of 8.5%. Total adjustments in the quarter were $66.2 million of expense before taxes. Of this amount, $17.5 million and $16.5 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization, respectively. The company recorded an unrecognized loss of $9.5 million, attributed to its equity investments in Perspective Therapeutics and Radiopharm Theranostics. Additionally, the company recognized a $5 million payment in the quarter relating to the RELISTOR royalty stream sale, which was reflected in other income. Further, the company incurred $21.7 million in acquisition, integration and divestiture-related costs. The remaining $6 million is related to other non-recurring expenses. Our effective tax rate was 19% in the quarter and 25.3% for the full year. The resulting reported profit for the fourth quarter was $54.1 million, and a profit of $110.7 million on an adjusted basis, a decrease of 4.1% from the prior year period. GAAP fully diluted earnings per share for the fourth quarter were $0.82 and $1.67 on an adjusted basis, an increase of 4.7%. On a full year basis, GAAP fully diluted earnings per share were a profit of $3.41 and a profit of $6.08 on an adjusted basis, a decrease of 10% from the prior year. Turning to cash flow. Fourth quarter operating cash flow totaled $90.2 million, as compared to $157.7 million in Q4 2024. Capital expenditures totaled $8.8 million, $7.6 million less than the prior year. Free cash flow, which we define as operating cash flow less capital expenditures, was $81.4 million in Q4 2025, a decrease of $60 million from the prior year period. The majority of the variance lies within working capital, with a $49.3 million decrease, driven primarily by the acceleration of accounts payable associated with the cutover activities for the SPECT business ahead of the divestiture on January 1. Increase in accounts receivable related to timing of sales and the go-live to a direct billing model transferred from one of our significant PMF partners, as well as an increase in inventory due to the timing of production runs and expansion of the PMF network. Additionally, the company repurchased $100 million, or 1.77 million of its own shares during the quarter, leaving $200 million of authorization for buybacks outstanding. Lastly, cash and cash equivalents, net of restricted cash, now stand at $359.1 million. Before turning to our expectations for the full year 2026, there are a number of line items that we would like to clarify to put the right context on 2025 versus 2026 comparisons. Beginning with revenue, we completed the divestiture of our SPECT business effective January 1, 2026. As such, you should remove $111.4 million from the 2025 baseline year. Further, as mentioned, we recognized a $6 million milestone payment related to an out-licensed asset in the fourth quarter. Taken together, the comparable baseline would be $1,424.2 million. The EPS impact on these adjustments equates to approximately $0.16. Operating expenses also require normalization adjustments for comparison's sake as well. During 2025, the company reduced accrued bonus expense, resulting in approximately $0.14 of benefit to 2025. That should not repeat in 2026. Further, the company recognized approximately $4 million or $0.04 of employee retention credit benefits occurring in Q2 of 2025, also not likely to repeat. Therefore, the appropriate adjusted EPS comparison should be $5.75. Turning to expectations for 2026 fiscal year. While we expect several product approvals this year, given the timing of commercial launches, as Amanda discussed, we do not anticipate meaningful revenue contribution this year. Our focus in 2026 will be the continued commercial execution, assuring a successful transition for our new PSMA PET formulation, setting the stage for revenue and earnings growth acceleration exiting 2026. For the details. The forecast for PYLARIFY considers the annualization of pricing decisions made in 2025 and related impacts, as well as the potential for renewed competitive dynamics as the year progresses. Notably, as the only one other commercially available F-18 agent nears the end of its transitional pass-through period as of September 30. We see PYLARIFY net revenue declining 8%-10% year over year, consisting of increased volume, offset by modest price erosion. To assist with modeling, each quarter should be fairly similar sequentially from a net revenue perspective, with volumes and discounts growing throughout the year. This includes the fourth quarter, during which we will undertake the transition of our PMF channel partners from PYLARIFY to our new formulation on a rolling geographic basis. We see Neuraceq growing triple digits inorganically. DEFINITY is expected to grow low to mid-single digits. Taken together, we forecast worldwide net revenue of $1.4 billion-$1.45 billion for 2026. Moving down the P&L, gross margin continues to model at approximately 65.5%. While we have the opportunity to leverage our established infrastructure and common targeted customer base, we will continue to invest in sales and marketing in support of our new PSMA PET formulation, as well as OCTEVY, to ensure broad availability and access. R&D is expected to move to 10%-11% of revenue, an increase of approximately 200 basis points across a number of phase-gated projects, anchored by our GRPR diagnostic agent. G&A should be essentially flat with 2025 at 10% of net revenue. Our net interest expense and other is expected to change in 2026 to $5 million of expense from approximately $9 million-$4 million of net income in 2025. This $9 million headwind is due largely to lost interest income on funds we used on our 2025 M&A activity, as well as through share repurchases executed throughout 2025. The effective tax rate is expected to increase slightly by about 1 point to 26%. Fully diluted shares outstanding should average 66 million shares for the year. Altogether, we forecast EPS in a range of $5.00-$5.25. As Mary Anne noted, following last year's considerable M&A activity, we are undertaking a full review of our pipeline portfolio and expense base. We are committed to focusing on investment in related commercial efforts, largely on our diagnostic portfolio. For the therapeutic assets in our pipeline, we are contemplating alternative opportunities to advance these assets and optimize their value for the company and our shareholders. This process will take the better part of 2026, during which we are confident that there will be further opportunities to rebase the company's earnings profile and growth trajectory with annualized synergies achieved, in addition to the avoidance of higher costs of late-stage R&D development, often associated with therapeutic product candidates. We believe that the therapeutic pipeline has material value, this plan is intended to unlock that value for shareholders, which is not reflected in our stock price or our guidance. With that, let me turn the call back over to Mary Anne. Mary Anne Heino: Thank you, Bob. While we focused in 2025 on the competitive dynamics experienced in the PSMA PET imaging market and our work to successfully integrate acquisitions, we are now taking purposeful steps to sharpen our focus on our strategic priorities, especially in the diagnostic space, and leverage both our capabilities and portfolio in 2026 and beyond. Allow me to again state our priorities for 2026. Maintain our market leadership in PSMA PET by sustaining PYLARIFY volume growth. Execute a seamless transition to the new PSMA PET formulation beginning in the fourth quarter. Increase momentum for Neuraceq by expanding our manufacturing footprint and driving deeper penetration in existing accounts and accounts where a strong PYLARIFY relationship already exists. Advance our assets currently under FDA review through regulatory approval milestones and effect fit-for-purpose launch activities with those assets that offer the earliest and best revenue return. Selectively develop other pipeline assets towards key stage gates and decision points, and allocate capital with discipline, prioritizing radiodiagnostics, seeking to optimize the value of our radiotherapeutic pipeline, and maintaining financial flexibility while committing to a leveraged P&L that delivers value to our shareholders. We enter 2026 with confidence in our strategy and our ability to deliver, recognizing this represents a year of intentional investment and portfolio prioritization that will position the company for solid financial performance and durable value creation. We do so, we remain focused on the patients we serve, having helped impact the lives of approximately 7 million patients in 2025. I want to thank our shareholders, employees, and our loyal customers for their continued support and dedication. I will now turn it over to Q&A. Operator? Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question per person. One moment for questions. Our first question comes from Anthony Petrone with Mizuho Cap Financial Group. You may proceed. Anthony Charles Petrone: Thank you, hi, Mary Anne, welcome back. Hope you are doing well. Hi, Bob, Amanda, Mark, hope everyone is doing well. Maybe I will start off with 2 quick ones. Just know a lot of folks are on the line here, but start with, you know, just the March 6 PDUFA date for next gen PSMA PET imaging agent. Thanks for the updates there on a fourth quarter rollout. When we think about taking a glass half full approach, assuming, you know, the PDUFA date goes as expected, and we get clearance, you know, what will be the timing when we do secure coding, you know, when we get realization on what the TPT sort of reimbursement rate will be, and maybe a little bit of detail on how you will begin that transition, specifically with long-term contracts that are out there, and I will have one quick follow-up. Thanks. Mary Anne Heino: Anthony, I will take that, thank you so much. It is, as I said, great to be back in my operational role here. As you noted, it is absolutely a glass wonderfully half full about our new PSMA PET formulation. Let me review some of the dates we are assuming here, that will also then, I think, explain our strategy as we move forward. As you noted, our PDUFA date is March 6. The two items that Amanda referenced that are important with the launch of any PET-based product, is you need to ensure that you have secured a HCPCS code as well as transitional pass-through status, those are two separate activities. We would anticipate that we would have in place by October 1, our HCPCS code, and that for having submitted our transitional pass-through application by June 1, that will also be in place by October 1. It is very important that those events precede your commercial entry into the market. That is why you hear us referring to late 2026, or specifically the fourth quarter, for the operational rollout of the PMF. As you can remember from our PYLARIFY launch and from the other launches of F-18-based assets into this category, you have to stand up or get approved each PMF separately because they each represent a GMP-approved manufacturing site. Our goal is to make sure that we never have disruption of product Lantheus Holdings, Inc. product availability in that market. We have chosen a regional-based rollout, allowing for duplicity so that we absolutely still have service in place to flip from PYLARIFY to our new formulation, which we will offer a name and start using as soon as it is approved. And we anticipate for making sure that that is the risk, that will take us the fourth quarter to accomplish. Coming out of the fourth quarter, we will have a network as broad as we have in place currently for PYLARIFY in place for our new formulation, and that is why we keep referencing to say that significant revenue related to that product will really occur beginning in 2027 and not as much in 2026. We feel like we have got all bases covered here. We are all, you know, waiting for the March 6 date. It is right in front of us now, and you can certainly imagine that there will be a press release, around that date, to communicate what we have heard from the FDA. Anthony Charles Petrone: Excellent. Just a quick one is just the market dynamics for PYLARIFY, as is today, down 8%-10%. We know that there is a study out there, POSLUMA versus PYLARIFY, a head-to-head study. I believe it reads out at ASCO. Maybe what is baked into the negative 8%-10% per share shift? How does the outcome of the study play into that? Thanks again. Welcome back. Mary Anne Heino: Thanks, Anthony. Kind of interesting to talk about that study, because I will be honest and say we do absolutely have some concerns regarding the study design that was used. First and foremost, there is no randomization in the study. If you read the protocol and you see how it was executed, the PYLARIFY images were always captured first. In a fully randomized trial, you would probably expect to see something different. Also what is concerning, there is no truth standard. If you look at the design of the study, they are really measuring just SUV and detection rate. The kind of the odd thing about that is, when you measure detection rate that way, you actually give yourself credit for false positives. The high detection rate may be due to the false positives that are already noted in that product package insert. Also, if it is just from a math perspective, the study was not powered to show statistical significance. From a clinical perspective, there is really two relevant comments here. First, bladder SUV values do not impact diagnostic performance, and that is what the study is really measuring. Second, and very much not in line with current clinical practice, the men in the study, because of course it was all male patients, were not allowed. They were actually prevented from voiding prior to having their scan done. That is very much the opposite of what happens in clinical practice today. I will say we are glad to see continued scientific investigation into this incredibly important class, but we also would very much hope that it would be rigorous scientific evaluation. I will share with you, because you referenced, how did that bake into our forecast? The results of that study really do not bake into our forecast. Operator: Thank you. Our next question comes from Richard Newitter with Truist. You may proceed. Richard Samuel Newitter: Hi, thanks for taking the questions. I just wanted to put a finer point on what your kind of pricing and unit growth played out, how that played out in Q4 2025. You were at 3% unit growth, I think you said. In the third quarter, you had about a 500 basis point, 340B driven price headwind to contend with in the fourth quarter. I am getting to, like, a high single digit unit growth rate in Q4. Is that right? You know, what was behind that? Did the market improve? Did you just call back some share, if that is in fact right? Maybe, Bob, can you give us a little more on what the market assumptions are for 26 for PYLARIFY and kinda what your unit and price assumptions kinda are within that? Thank you. Robert J. Marshall: Rich, I will take that. In terms of growth, I mean, listen, it was a great quarter from a PYLARIFY perspective. Obviously above our expectations. It was both volume and a little bit of benefit actually coming from the gross to net price change. You know, I think when we talked about it during kind of the fourth quarter, you know, following our call and whatnot, we had sort of pegged it at sort of the mid-teens, and that is effectively what we saw. That was maybe slightly more favorable than the actual teens growth that we were kind of thinking. You know, as I think Amanda pointed out, I think it was like 4% volume growth, and it did turn out to be our single greatest sort of volume performance in the quarter. I mean, excuse me, for the full year. When I think about assumptions going into how we are playing out 2026, we are thinking sort of a similar sort of low single-digit volume growth for the year. Much not too dissimilar from 2025. From a pricing perspective, what we have done is that while we have seen a lot of consistency in the market from a pricing perspective over the last couple of quarters, you know, as we think about one of those competitors losing pass-through, that they may actually look to try to use pricing as a mechanism to drive share. We have been really pretty disciplined, and we have been really explicit that as we think about executing our strategy, that we are going to stay disciplined. We are not going to chase business that is not good for the medium to long-term value of that franchise. The guide assumes that we see sort of a continuation of some, you know, incremental price that would sort of move us from sort of the mid-teens of where we are now to, you know, maybe the high teens as we progress through the year from a gross to net adjustment perspective. That is why you see sort of what I have laid out as sort of a sequentially net revenue, sort of neutral outcome for each of the quarters throughout 2026. Mary Anne Heino: Rich, this is Marianne. Does that answer your question? Richard Samuel Newitter: Yeah, it does. It sounds like you are not seeing any dramatic changes to the pricing environment currently. To be prudent, you are because this is what took you by surprise and all of us by surprise last year, you are embedding that assumption that there will be another kinda regular way price price erosion situation, or you will have to walk away from that business incrementally. That is a placeholder in your guide, and you do not really assume any contribution from two-point-o. There could be upside if those things do not play out that way, and you start to get some benefit from two-point-o, if all goes well next week, and you can execute on the transition faster. Is that a fair way to look at these numbers? Mary Anne Heino: Yep. Rich, absolutely. I have to say, it is such a great pleasure to have analysts like yourself monitoring our business where you know the market so well and also understand our strategy. You are really spot on with how we are thinking about the market. Richard Samuel Newitter: Okay. Thank you, guys. Operator: Thank you. Our next question comes from Roanna Ruiz with Leerink Partners. You may proceed. Roanna Clarissa Ruiz: Hey, morning, everyone. Was curious, could you elaborate a bit more on one of your comments about pursuing value-maximizing alternatives for radiotherapeutic assets to support long-term growth? It made me think about, are you thinking about different features of products that you are looking for? Could this be part of near-term BD? I know you mentioned on the comments, possible tuck-ins this year, I was just curious if you could explain a bit more there. Mary Anne Heino: Absolutely. I am glad that everyone is kind of picking up on the comments that both Bob and I made about this intentional focusing of our strategy. We really see it as the natural outcome of all the activity that we had in 25 and even 24. We have now a very broad portfolio of both diagnostic and therapeutic assets, our intent is to, and we think our obligation to our shareholders, is to make sure that the value of each of those is considered. We certainly could not handle or accomplish the advancement of that entire portfolio. We have chosen to focus in on the diagnostic asset then. As you will see, I had a pipeline slide in the middle of my presentation, it will also show it again at the end. It really is a very broad portfolio there. When we refer to the therapeutic assets, what we are referring to is, and we have undertaken a full review of our whole portfolio, but looking really at what are the stage gates for the therapeutic assets that really define value for them, so that as we consider how they should be then driven further, and it will be through external or alternatives or partnered alternatives, how is it best for us to present the value and the clinical utility of these products? A lot more to come, a lot more to come on that as we talk throughout the year. I will mention, and it really comes back to what you mentioned with tuck-ins, further tuck-ins for diagnostic opportunities. If we find them and they fit, then, yes, absolutely, we will consider them. Even as we talk about the therapeutic assets, I probably should be clear to say that when I talk about that, I am not talking about PNT2003. That product is right before us as far as regulatory approval opportunity. It is a natural fit into our portfolio of products and, again, our customer base. We are already committed to what we believe will be a very successful launch of that product. Operator: Thank you. Our next question comes from Matt Taylor with Jefferies. You may proceed. Matthew Charles Taylor: Hi, good morning. Thanks for taking the question. I guess I will ask one on Neuraceq. It came in nicely in Q4, and your guidance, you said, it was, I think, at least triple-digit growth. You know, I guess, not that that is a bad growth rate, but why could not it actually be higher than that, given the momentum that you have and also the sequential growth that we are seeing in some of these Alzheimer therapeutics? Mary Anne Heino: Matt. We absolutely do see... triple digits, pretty good to hear, Matt. I think what you are also hearing from us, again, we inherited that product as of, we will call it, midyear last year. One of the things, again, this comes back to F-18-based products in this market, you have to have the manufacturing footprint to be able to bring your product broadly to patients. I will say, I think the numbers have been discussed before, but the number of standing PMFs for Neuraceq at the time we acquired it was, call it, mid-20s. We added a few, and someone might correct me if I am wrong there, but we added a few, and then our intent is to add six more this coming year. Therefore, we will start to approach having what we consider a broad geographic footprint for that product. I am sorry, I have been corrected. The starting number of PMFs when we inherited the product was 16, and again, we will continue to add. That really is our the way that we measure how far we can take the product into new areas. The other part of our, what we think is a very promising forecast, is our ability to take the product deeper into the accounts where it already is based on some changes in guidelines and the broadening that we saw in the PIs last year, as well as by also leveraging the relationships that we have in accounts with other Lantheus Holdings, Inc. products. Happy to be wrong here and have it even further exceed what we have, but I think we have been very practical, optimistic, but practical with our forecast. Bob, do you want to add something there? Robert J. Marshall: I do, because well, people can figure this out from a mathematical situation. By triple digits, we are talking certainly in, like, call it the 140%-150% range of inorganic growth off of what was a very good fourth quarter, which was the first full quarter that we actually had the asset in the portfolio commercially. Operator: Thank you. Mary Anne Heino: Does that answer your question? Operator: Our next question comes from Paul Choi with Goldman Sachs. You may proceed. Karishma (for Paul Choi): Hi, thank you for taking our question. This is Karishma on for Paul. If the upcoming Biogen data shows meaningful tau reduction, but no benefit on cognitive measures, how does this affect your go-forward investment in your tau program? Thank you so much. Mary Anne Heino: I am sorry, could you repeat what you are referring to? No, the study. Can you repeat the first part of your question, please? Karishma (for Paul Choi): Yeah, sorry. If the upcoming Biogen data shows meaningful tau reduction, but no benefit— Mary Anne Heino: Oh, yes. Karishma (for Paul Choi): —on cognitive measures, how does this affect your go-forward investment in your tau program? Thank you. Mary Anne Heino: Okay. I am sorry, there was, we just did not hear the first part of your question, but it makes the perfect sense. We will, of course, are very eagerly awaiting those data, but I think there is very, very strong scientific evidence already that the presence of tau and the quantification of tau is aligned with cognitive performance of patients. That really is something that is slightly different than the role that amyloid plays. Amyloid, and, you know, to think about it, I guess, bluntly, amyloid comes early, but it does not always match to cognitive change in patients, where there is a much stronger correlation between rise of tau, especially in certain areas of the brain, and unfortunately, related cognitive defects for patients. I think what we are seeing in this market, and we are kind of all seeing it in real time because that is the wonderful thing that is happening around us. There really is now a market that is willing and acting on taking these products that are disease-modifying and starting to use them in patients. The kind of complementary use increased use of imaging, both amyloid and tau, will come along with that. I will not speculate on data that are not out yet, other than to say we are, from a scientific perspective, we are fairly confident in the role of tau in the market. As you heard, Amanda mention, in our biomarker business, tau is our product, MK-6240, is the number one product that is used in what we see as the 17 underlying, the ongoing studies in the market. Operator: Thank you. Our next question comes from Larry Solow with CJS Securities. You may proceed. Lawrence Scott Solow: Great, thank you, I echo the welcome back, Marianne. It sounds like the CEO search is progressing though. You know, is this gonna be like a, do you feel like it is a 6-month, 12-month type of thing? Any thoughts on just timing? Mary Anne Heino: It, it is progressing, Larry, and it is good to be talking with you again. I am gonna say two things that I think are in our favor. I think this is an incredible opportunity for someone to step into what the future of our company and where we are going to be taking this company. I think as exciting as that is to me, I think it is also something that is exciting to the candidates we are talking to. The other thing I will say is, as everyone knows, we sit fairly adjacent to what is an incredibly active market in the United States, and that is the life sciences market in Cambridge. That is also, I think, been very much a boon for us in our search. I will say, this will not be a surprise to anyone, that the potential slate of candidates for us who are purely radiopharmaceutical or have radiopharmaceutical, is very narrow. This is just not a large industry. There, just from a history perspective, there have not been a lot of CEOs in this industry. As you can imagine, those of us who are here probably have competitive blocks from going to competitors in a role as significant as the CEO. Having said that, I will reiterate what I said, I am very pleased with the candidates that we have met, and to me, it is also a declaration or a demonstration of how far radiopharmaceuticals have come, and what they mean and represent in overall life sciences now. Operator: Thank you. Our next question comes from Yuan Zhi with B. Riley. You may proceed. Yuan Zhi: Good morning. Thank you for taking our questions. Maybe to Mary Anne, when comparing Neuraceq to the number one leader in that space, where do you see improvement opportunities to catch up in market shares? Is it availability, guidance, difference, or pricing? Any additional color will be appreciated. Mary Anne Heino: Sorry, your voice was actually very muffled, while you asked your question, and we are going to have to ask you to repeat it. Yuan Zhi: Yes, I am sorry. When comparing Neuraceq with the number one leader in that space, where do you see improvement opportunities to catch up in market shares? Is it availability or guidance or pricing? Anything you see opportunities in? Mary Anne Heino: Very well understood now. Thanks so much. Let me first start by correcting. Neuraceq is the second most utilized beta-amyloid imaging agent in the space. The product with the highest market share in the space right now is actually Lilly's product, Amyvid. As far as where we see the growth opportunities, growth opportunities for Neuraceq in the market, short, mid, and long term is, first and foremost, there have been some changes to the guidelines regarding the use of beta-amyloid imaging for diagnosis of patients with different levels of Alzheimer's disease. That is the first, and it is very much testament to that. I think the launch and now that what we see is continued uptake of the DMTs, the drug modifying therapies for Alzheimer's disease, come with what will be associated imaging, not only to validate that the patients would be eligible for those therapies, but then there is also the potential to monitor those patients during therapy. All of those, both of those activities would add volume to the amyloid imaging market. Finally, very specific to Neuraceq, this is not a price play. You mentioned, is this gonna come from purely from price or growth? The answer to that is no. It really is driven by two factors. The first is, and most important, broadening the geographic footprint from which Neuraceq is available for distribution to all of the centers that do amyloid based PET imaging. The second is, within those accounts, and especially accounts with this already a PYLARIFY relationship, deepening the penetration of Neuraceq use in those areas. You heard me refer several times throughout my comments to the nuclear medicine customer base. We feel very strongly that we have a key advantage in our relationship there. Long, longstanding history, that has been the central focus of Lantheus Holdings, Inc.'s commercials efforts since we were essentially launched as a company back in the late 50s. It is a long relationship, it is a deep relationship, and it is a very trusting relationship for having brought them all the products before, but certainly PYLARIFY. Where we find ourselves now, very fortunately, which we absolutely intend to take advantage of, is that we have the ability to bring a portfolio of products into this customer space. One of those will certainly be Neuraceq. I would also like to clarify a comment that I made before, regarding the POSLUMA versus PYLARIFY head-to-head study about the final point about patients not being allowed to void. That is not an accurate statement. What I should have said is that while patients were encouraged to drink, they and they were encouraged to drink, they were not instructed to void, or did not, were not, you know, made to void. I apologize for that error in how I presented it. Operator: Thank you. Our next question comes from Justin Walsh with JonesTrading. You may proceed. Justin Howard Walsh: Hi, thanks for taking the question. In the medium to long term, can you comment on your expectations for the relative revenue contributions for your product portfolio segments? Just wondering how important prostate cancer is versus other solid tumors versus neurology and PET imaging. Mary Anne Heino: I absolutely am happy to comment on that, I hope also that kind of came through in our comments to say that while we are incredibly fortunate to have up to four approvals this year, I think I was repetitive, as was Bob and even Amanda, in sharing that we expect revenue uptake to begin significantly in 2027. That really is related to the nature of how these products come out into the market. The very important considerations of ensuring that you have access and coverage, as well as insurance coverage, but here we are talking about market coverage as well, in place before you commercially, you put your commercial effort really behind it. It does not mean we are not getting ready for the launches; it just means that we will not execute the launches, and see the return for them, we are saying largely in 2027. From a revenue perspective, I hope you appreciate how much effort we did throughout end of 2024, all through 2025 to diversify our revenue base. Going forward, it is safe to assume that revenue derived from our prostate cancer franchise of products will be the main driver. We see lovely contribution from Neuraceq. We have, absolutely have strong expectations for contribution from our other launch products that we will be taking to market. Fair to say that the cornerstone and the majority of our revenue will be from PYLARIFY. That is why for 2026, we... We again repeated this several times, we are laser-focused on the transition to and introduction of our new PSMA PET formulation. Operator: Thank you. Our next question comes from Andy Hsieh with William Blair. You may proceed. Tsan-Yu Hsieh: Great, thanks for taking our question. Like a Neuraceq, you are going to be launching into markets with incumbents with Pluvicto and the therapeutic 2003. Can you outline some product-specific and commercial infrastructure differentiations that you can leverage to gain an upper hand as you launch these two products, you know, in the future? Thank you. Mary Anne Heino: Yes, the very good question. Just to clarify, of course, Neuraceq is already in the market. We did not launch Neuraceq. Those products have been in the market for over a decade. I will say that Neuraceq is the second most utilized product in what is a 3-product market. Important notes about the other products that you mentioned, we will put PNT2003 aside because that is a therapeutic. As Amanda mentioned in her comments, Pluvicto, one of the important considerations of Pluvicto is that it will have transitional pass-through status and reimbursement, as will our new formulation in the PSMA franchise. That will be an important consideration and is an important consideration for many customers, especially given that the Pluvicto market is approximately 80% hospital-based. As everyone is aware, the concept of transitional pass-through payment is really applicable for traditional Medicare patients who are seen in the hospital setting. We see that as a key advantage as we take that product to market. From MK-6240, which also has, you know, an approval and a PDUFA date later this year, that is a product that is already well established through our biomarker solution business, and there we will continue to support that its role as being the number one tracer used in what are the wealth of clinical trials being undertaken by pharma in the study of tau and amyloid-based Alzheimer's disease. Operator: Thank you. As a reminder, you may reenter the queue after you ask your question. Please press star one one on your telephone to ask a question. Our next question comes from Kemp Dolliver with Brookline Capital Markets. You may proceed. Brian Kemp Dolliver: Thanks. Quickly, for Bob, could you go through the comments again on the sales and marketing guidance for 2026? Robert J. Marshall: All right. That is fine. I can manage that. More or less what we are thinking of in terms of like total OpEx, you are gonna see two of our sort of three sort of OpEx categories, sort of increase in spend. I did note specifically that we would see R&D up around that 10%-11% mark. With regard to sales and marketing, and I do think that this is when I look at consensus files, this is, I think, the one sort of like underappreciation for the work that we need to put in front of 20, you know, the different products that we are hoping to launch, you know, going into 2027. The work and it mirrors almost what we did with PYLARIFY back in, when was that? 2021. Mary Anne Heino: Mm-hmm. Robert J. Marshall: From that perspective, I think you are gonna model it somewhere in, call it the 12-ish, 12.5% range of revenue. That, I think, together with a flat G&A, you know, again, keeping some leverage in those functions that are supporting, but really kind of putting the money in the investment where we hope to see a solid return for shareholders. That is how you should model things. Mary Anne Heino: Oh, sorry. I just did want to add a comment there, that kind of finishes out Bob's thought. I think also what we were also trying to communicate that is important here is that we have leverage as we take these new launches through, and certainly sales and marketing expense is part of that, as we take these new launches out to the market, that one of the great opportunities we have is leverage, as we have already got a full voice and presence, with those, that customer base. You heard me say, and I will repeat it again, fit for purpose investments commensurate with the opportunity, but also with the investments we have made, prior in those same customer bases. I would say overall in the channel. Operator: Thank you. Ladies and gentlemen, there are no further questions at this time. Thank you for participating in today's conference. This concludes the program. You may disconnect and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the APA Corporation Fourth Quarter and Full Year 2025 Financial and Operational Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephane Aka, Managing Director of Investor Relations. Please go ahead. Stephane Aka: Good morning. and thank you for joining us on APA Corporation's Fourth Quarter and Full Year 2025 Financial and Operational Results Conference Call. We will begin the call with an overview by CEO, John Christmann; Steve Riney, President, will then provide an update on our Permian inventory; and Ben Rodgers, CFO, will share further color on our results and outlook; Tracey Henderson Executive Vice President of Exploration is also on the call and available to answer questions. We will start the call with prepared remarks and allocate the remainder of time to Q&A. In conjunction with yesterday's press release, I hope you have had the opportunity to review our financial and operational supplement, which can be found on our Investor Relations website at investor.apacorp.com. Please note that we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website. Consistent with previous reporting practices, adjusted production numbers cited in today's call are adjusted to exclude noncontrolling interest in Egypt and Egypt tax barrels. I'd like to remind everyone that today's discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, A number of factors could cause actual results to differ materially from what we discuss in today's call. A full disclaimer is located with the supplemental information on our website. And with that, I will turn the call over to John. John Christmann: Good morning, and thank you for joining us. On today's call, I will review our full year 2025 results, outline our continued progress across key strategic initiatives, and discuss our outlook and plans for 2026. 2025 was a highly successful year for APA, defined by continued progress against our strategic priorities and strong execution across our asset base. We entered the year with a clear objective to materially reduce our overall cost structure, part of which was to make significant further strides in terms of operational excellence. We set a goal to reduce our controllable spend by $350 million on a run rate basis by the end of 2027 without compromising safety, asset integrity or our commitment to exploration. Through the dedication of our employees and strong leadership alignment, we exceeded this target over a significantly shorter time frame and have line of sight to exiting 2026 at a $450 million run rate. Ben will provide more details on this topic. During the year, we also met or exceeded oil production guidance in the Permian every quarter in 2025 on a lower-than-planned capital budget. In addition, we also made significant progress on a comprehensive assessment of our Permian Basin inventory, incorporating our improved cost structure. This effort confirmed the depth and quality of our drilling opportunities and validated substantial upside potential. Additionally, it increased our confidence in sustaining long-term oil production while delivering competitive capital efficiency. Steve will provide further color on our Permian inventory position shortly. Moving to Egypt. Our focused activity under the new gas pricing framework drove meaningful production growth, establishing the foundation for a sustained multiyear strategic focus. On the oil side, strong reservoir management through targeted waterflood activity has helped stabilize gross volumes over the past three quarters. In Suriname, our partner, Total, continues to execute at a high level as we advance toward a mid-2028 first oil date. On the exploration front, our Sockeye discovery in Alaska further confirm the prospectivity of our approximately 325,000 acre position, providing a strong basis for future exploration and appraisal activity. In summary, the disciplined execution across our asset base and strong delivery of our cost reduction initiatives drove more than $1 billion in free cash flow generation in 2025 of which we returned approximately $640 million to shareholders. We also significantly strengthened our balance sheet, ending the year with less than $4 billion in net debt. Turning to 2026. Our strategic priorities are clear and our capital plan is disciplined. We will sustain operational momentum, further reduce our cost structure, continue strengthening our balance sheet, and invest in the future through exploration. In the United States, our $1.3 billion capital program is designed to maintain relatively flat oil production year-over-year at approximately 120,000 to 122,000 barrels per day despite significant weather-related downtime in the first quarter. This represents an improvement relative to our preliminary outlook discussed in November, reflecting continued gains in operational and capital efficiency. In Egypt, we will invest approximately $500 million to slightly grow BOE production year-over-year. As our activity becomes increasingly gas-weighted, gross oil production is expected to decline slightly, while gross gas volumes continue on a growth trajectory year-over-year. After just 1 year of focused successful gas drilling, we now have visibility into a runway of new development inventory and near-field exploration opportunities. This has laid the foundation to support continued growth, and we expect to deliver approximately 540 million to 550 million cubic feet per day this year. This volume outlook includes a minor impact from our withdrawal from a small noncore concession, which Ben will address shortly. Under our new pricing framework increased gas production strengthens free cash flow and further establishes Egypt as a key value driver within our portfolio. For the GranMorgu development in Suriname, we will allocate approximately $230 million in capital. On the exploration front, we are investing approximately $70 million to advance high-impact opportunities across our portfolio. This includes a return to exploration drilling in Suriname Block 58 in the fourth quarter and planning and readiness spend ahead of an active first quarter 2027 drilling season in Alaska. In aggregate, our total portfolio spend is $2.1 billion, roughly 10% lower than last year. This plan is operationally manageable and preserves flexibility to scale activity in response to commodity price movements. In closing, the progress we delivered in 2025 reflects a fundamental transformation of APA's base business over the past several years. We have high-graded the portfolio, significantly reduced our cost structure, strengthen the balance sheet and further advanced our exploration efforts, resulting in a more focused, resilient and capital-efficient company. These actions have translated into stronger free cash flow generation in a structurally more competitive asset base in both the Permian and Egypt. In the Permian, we have enhanced returns through disciplined capital allocation and significant efficiency gains while building depth and durability in our inventory, which is expected to sustain oil production and deliver competitive capital efficiency for the next decade. In Egypt, we continue to strengthen asset durability through both commercial and operational initiatives. This includes a focused gas strategy supported by an improved pricing framework that complements our established oil base. Our high-quality development and near field exploration program is expected to drive gas growth and support a strong long-term outlook. Together, the strength of these base businesses form the foundation for sustained free cash flow generation for the next several years. Starting in 2028, the addition of Suriname will provide a meaningful step change and continued growth in free cash flow through at least the early 2030s. I will now turn it over to Steve, who will provide more details on our Permian inventory. Stephen Riney: Thank you, John. The Permian Basin is Apache's foundational asset. It's our largest source of both production and free cash flow, and it consistently attracts the largest amount of capital. One of our strategic objectives is to build and grow a high-quality portfolio of assets. In the Permian, we have made great progress on this over the past 2 years. That progress can be summarized in three key efforts. Portfolio actions, cost structure improvements, and refining our development approach. So let's take a quick look at each of these three key efforts. Throughout my remarks, I will reference slides from our financial and operational supplement, which is available on our website. In terms of portfolio actions, we have high-graded our Permian asset base, leveraging scale and localized knowledge to maximize economic inventory. This was enabled through the Callon acquisition and exits from noncore assets like the conventional Central Basin platform and our fragmented position in New Mexico. We now hold approximately 450,000 net acres across the Midland and Texas Delaware basins with more than 95% of that acreage held by production. Our position is now concentrated in a few key areas, presenting two primary benefits. It enables economies of scale in our operations and provide significant flexibility in the pacing of activity. Turning to our progress on the cost side. Our momentum has been evident over the last several quarters. Beginning in 2024, the successful delivery of Callon synergies significantly lowered breakeven oil prices from what Callon experienced in 2023. In 2025, we made further strides in drilling, completions, equipping and facilities costs on a per lateral foot basis. As shown on Page 11 of our supplement, our current drilling and completion costs averaged $595 per foot in the Midland Basin and $750 per foot in the Delaware Basin. These costs reflect a mix of landing zone depths and compare very favorably to both public and private peers. We have also significantly reduced facilities costs as we have moved to more brownfield expansions. Finally, our development approach has historically involved wider well spacing with larger completions. That approach drove very strong per-well productivity. However, as our cost structure improved, it enabled us to drill more wells on tighter or denser spacing and to moderate completion intensity. This translated to more economic inventory greater recoverable reserves and a higher overall net asset value. There is a reinforcing mechanism at play here as well. Lower cost enables more dense development. increasing density accesses economies of scale and economies of scale, reduce costs even further. Taken together, these three efforts, portfolio actions, cost structure improvements and a refined development approach, have significantly improved both the quantum and the quality of our economic drillable inventory. Importantly, these are not temporal improvements resulting from macro drivers. These are sustainable improvements, and we expect to see more in the future. Before I dive into the details of Permian inventory, let me share our perspective on how we classify locations. Every location or opportunity in our Permian portfolio falls into one of three categories. Economic inventory, technical upside and prospective leads. The first category is what we call economic inventory. On Page 12 of the supplement, you will find a skyline plot of how we currently view Permian economic inventory. This includes only operated locations expected to generate at least a 10% rate of return. At this point in the characterization process, there are two factors driving a naturally conservative outcome. First, this is entirely based on our current cost structure, assuming no future efficiency gains or technology improvements. Secondly, there has to be a high level of confidence in the production forecast, where further appraisal or delineation is required, we reduced location counts oftentimes to zero until they are further derisked. We currently carry around 1,700 locations in economic inventory, which is a baseline that we will continue to refine and build upon. We are confident this will continue to improve, both in quantity and quality through advances in resource understanding, technology and capital and operational efficiencies. We refer to the second category of locations as technical upside. Technical upside represents locations in established or emerging Permian Basin plays that we believe will be the next subset of locations to progress to economic inventory. As you'll see on Page 13 of the supplement, we believe there is significant technical upside potential. Continued delineation success and ongoing efficiency gains remain key drivers for advancing these locations into economic inventory. Approximately 2/3 of our technical upside today is in the Delaware Basin with the vast majority in shallow landing zones. The Avalon and the first and second Bone Springs. There has been significant activity in these zones in the Northern Texas Delaware, and we have recently drilled two First Bone Spring wells in Ward County. While there hasn't been much industry activity that far south, early performance is promising. Therefore, we are planning a 4-well appraisal test later this year. Opportunities like this are largely unrepresented in our economic inventory, but this appraisal could advance a full year of drilling activity from technical upside into economic inventory. The best part of having this much upside in the shallow zones as this should be some of the lowest cost development in the Delaware Basin. With less geologic complexity and a longer track record of development, our subsurface understanding is much more advanced in the Midland Basin. Despite this, we continue to see technical upside through spacing refinement and further delineation of both established and emerging zones with roughly half of this technical upside residing in the deeper benches. For example, there has been extensive industry activity in the Barnett in Western Midland County, and most of our DSUs there carry locations in economic inventory. By comparison in areas like Upton County, there has been very little Barnett activity. As a result, the vast majority of our DSUs carry Barnett locations only as technical upside. In our view, this reflects a need for further appraisal, not a lack of prospectivity. In aggregate, we have roughly 1,700 additional locations within our technical upside. The boundary between economic inventory and technical upside is not a function of economics, but a technical maturity. As these opportunities advance, we expect many to compete favorably with the economic inventory illustrated in the skyline plot on Page 12. It is equally important to understand we have not attempted to characterize all potential locations in the first two categories. The third category, prospective leads are those which we have not yet characterized at all. These opportunities are not currently included in our technical upside. They carry subsurface or completion-related risk and have limited or no historical development. As the basin continues to mature, some of these leads may underpin future upside. In closing, as we see things today, we are confident we can sustain oil production volumes at today's levels for at least the next 10 years. And we see meaningful potential to extend that further. The scale of the technical upside characterized in actual location counts is at least as large as the economic inventory we are presenting today. We believe the future will bring more locations from technical upside into economic inventory, and locations will continue to move to the left on the skyline plot with improving economics and lower breakeven prices. Our progress in 2025 demonstrated our standing as a leading operator in the Permian Basin. We improved capital efficiency, strengthen the depth and quality of our inventory and increased confidence in long-term performance. Our Permian position is anchored by a long runway of inventory with a sustainably improved cost structure and a competitive development approach. All of this is underpinned by a cored-up asset base that is largely held by production. The Permian is well positioned to underpin robust free cash flow generation for the company for the next decade and beyond. I will now turn the call over to Ben. Ben Rodgers: Thank you, Steve. For the fourth quarter, under generally accepted accounting principles, APA reported consolidated net income of $279 million or $0.79 per diluted common share. Consistent with prior periods, these results include items that are outside of core earnings. The most significant after-tax items impacting adjusted earnings include $36 million of noncash impairments and $29 million for unrealized losses on hedges offset by a $47 million gain on our decommissioning contingency. Excluding these and other small items, adjusted net income for the fourth quarter was $324 million or $0.91 per diluted share. APA generated $425 million of free cash flow in the fourth quarter, of which $154 million was returned to shareholders. For the full year, free cash flow was more than $1 billion, and APA returned 63% to shareholders through both common dividends and share repurchases. Permian oil production significantly exceeded our fourth quarter guidance. Primarily driven by incremental completion activity, improved run time and milder than normal weather. In the first quarter of 2026, we have already experienced 3,000 barrels per day of weather-related downtime which is reflected in our guidance. In Egypt, gross gas production of 501 million cubic feet per day was below guidance due to unplanned temporary pipeline disruptions late in the quarter. This was remediated and operations have since resumed to normal. LOE came in below guidance, driven by progress across our portfolio from ongoing cost-saving initiatives, namely in the North Sea and Permian. Net debt ended the year just below $4 billion, down approximately $1.4 billion from year-end 2024 through a combination of free cash flow generation, asset sales and payments from Egypt. This progress brings us closer to our long-term net debt target of $3 billion. Additionally, interest expense was approximately $80 million lower compared to 2024. Wrapping up 2025, our proved reserves increased approximately 9% year-over-year, surpassing 1 billion barrels of oil equivalent, and our all-in reserve replacement ratio exceeded 160% for the year. The team's execution in the Permian and in Egypt enabled us to grow reserves despite a 13% year-over-year decline in SEC oil prices underscoring the quality of our inventory and the capital efficiency of our development program. Turning to our cost reduction initiatives. 2025 marked a year of remarkable progress across the entire company. We captured over $300 million of savings and exited the year at a $350 million run rate, achieving our original target 2 years ahead of schedule. This reduction in controllable spend improved margins, expanded free cash flow and strengthened the resilience of our base business. For 2026, as outlined on Page 7 of the supplement, we expect controllable spend to decline by another $200 million. Only half of this reduction is incremental savings, with the remainder driven by lower Permian activity relative to 2025. All of this is incorporated in our annual guidance for capital, G&A and LOE. Each category is below 2025 levels with the exception of LOE. While we expect operating expense savings to continue through the year, they are being offset by various market-related headwinds, primarily in the Permian and North Sea. We will work throughout the year to mitigate these pressures, but at this point, we expect 2026 LOE to be slightly above 2025. The progress achieved in 2025, combined with the additional savings we expect to capture in 2026 positions us for a structurally lower spend profile as we move into 2027. By year-end 2026, we now estimate our run rate savings will reach $450 million. These savings are sustainable and position us to be a cost leader as we continue to drive efficiency and long-term value creation. Turning to our outlook for 2026. John already outlined our high-level capital investment plans and expected production trajectory. So I will focus on a few additional items. Starting with the Permian, 2026 development capital is expected to be around $1.2 billion. In addition, we plan to invest approximately $100 million for base capital projects aimed at structurally reducing LOE and improving uptime. These projects offer attractive 6- to 24-month paybacks and enhance the durability of the asset with LOE benefits starting in the back half of 2026 and building into 2027. As a result, total Permian capital will be approximately $1.3 billion for 2026. Moving to Egypt. We recently elected to withdraw from a small noncore concession as part of our ongoing portfolio high-grading efforts. These assets fall outside of the merged concession area established in 2021 and do not benefit from the new gas pricing framework. While the concession did not generate free cash flow, our exit will reduce oil and gas production volumes. The quantified impact is detailed on Page 16 of our supplement. Shifting to decommissioning and asset retirement obligations, we expect combined gross spend to increase to approximately $280 million in 2026. This reflects lower spending in the Gulf of America, offset by higher planned activity in the North Sea. As a reminder, all North Sea decommissioning expenditures receive a 40% tax benefit. After incorporating these tax impacts, we expect net spend for 2026 to be approximately $225 million. Shifting now to our oil and gas trading portfolio. which continues to be a meaningful contributor to free cash flow. Based on current strip pricing, we expect these activities to generate approximately $650 million of pretax income in 2026. From 2020 through the end of this year, we expect to have generated nearly $2 billion in cumulative pretax income from our trading activities underscoring the scale, consistency and value of this business within our portfolio. In closing, 2025 was a strong year for APA. We significantly exceeded our cost savings targets, generated over $1 billion of free cash flow, reduced net debt by more than $1.4 billion and continue to high grade our portfolio. Our focus remains on disciplined capital allocation, further cost efficiencies, continued balance sheet improvement and advancing our high-return development program and exploration opportunities. With that, I will now turn the call over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Doug Leggate with Wolf Research. Douglas George Blyth Leggate: John or maybe this one is for Ben. But I'm trying to understand this Permian CapEx guidance, the $1.2 billion -- $1.3 billion to $1.2 billion. I wonder, can you offer any color on the impact of this $100 million? What's the nature of that spend? How does it show up in the payback you talked about? Any kind of color on the LOE, for example, impact would be appreciated. And then my follow-up, John, if I may hit exploration. There's been a number, it looks like EGPC has been announcing a series of recent gas discoveries, a quick hit stuff, if you like. But you've also put new exploration numbers in the budget for this year, presumably Alaska and Suriname. I wonder if you could offer any color on what the program looks like in those three areas. And specifically, I believe there's a potential game changer target in Alaska, if you could speak to the prospectivity around that as well, that would be great. John Christmann: Yes. Thank you, Doug. What I'll do first is just address the exploration. Maybe have Tracey chime in, and then I'll have Ben come back on the LOE and the capital question. In general, we've got $70 million in the budget this year. $20 million of that is really prep work in Alaska for ice roads. There's another $50 million that's late in the year for predominantly Suriname as we will be returning to exploration in Block 58 with a well, the exact spud date is not yet set, but we expect it to be late fourth quarter. So that's how that $70 million breaks out. Clearly, we're also active in Egypt. And just to spend a couple of seconds there, what you've seen and with the progress in Egypt, last year, when we -- or November 24, when we updated our new price mechanism, it really shifted a gear for us and let us start focusing on gas in the Western Desert of Egypt. You saw last year with the progress in terms of what we're able to do in growing our gas volumes. We went after some low-hanging fruits, some things we knew were there. But now we're really starting to work the exploration inventory, and I'm very, very excited about what's coming in Egypt. We've got some pretty key wells that we'll be drilling. Some of the things you referenced. EGPC has been announcing some of the smaller things. But we're excited about that. And I can let Tracey talk about Alaska, but in general, we're prepping for a big winner. Likely two wells in early '27, likely an appraisal at Sockeye. We're still in the process of getting back the seismic that we're having reprocessed. So that's still coming in. But you'll likely see us drilling an exploration well and an appraisal well in early winter of '27 in Alaska. So Tracey, you can comment a little bit just on the geology there. Tracey Henderson: Sure. We've got a really robust and diverse prospect inventory on the block. And as John said, we're focused right now on reprocessing the new seismic data and maturing that entire inventory. We've had success in the bottom set play at Tumbleweed and in the top set play at Sockeye. And so we're going to be focusing really in the near term on maturing a lot of what we see as analogous prospects to the Sockeye discovery, and that will be a focus for the near term in the next drilling season. And as John said, we'll be looking to appraise the Suriname discovery as well. So we've got a lot going on in the background, getting ready for the next season in terms of defining the inventory and next steps. John Christmann: Yes. And just to clarify, we'll start building ice roads this winter for the late '26, early '27 Alaska drilling season. So Ben, I'll go back to you now on the Permian Capital and the $100 million we're spending. Ben Rodgers: Sure. So Doug, we started spending some capital last year we talked about in August and November on some of these LOE projects. As we did that, we identified some additional opportunities going into 2026. A lot of it is around compression and facilities consolidation. There's some artificial lift dollars in there as well. But -- so it's a lot of different projects spread throughout the basin. And the way to think about it is, as you get to the back part of '26, we expect that our LOW will come down by somewhere around $3.5-plus million per month. And so when you annualize that number, you're kind of in the $40 million to $50 million of ongoing savings in LOE. So spending that $100 million gets you $40 million to $50 million of savings, which is pretty much in line with the kind of 1- to 2-year payback. Douglas George Blyth Leggate: Ben, just to be clear, that -- so presumably, that's like rented equipment becoming capital equipment or something of that right? Ben Rodgers: That's a portion of it. But it really -- it spans across a lot of different pieces in the basin. Steve, I don't know if you want to add some color? Stephen Riney: Yes. I just -- I wanted to add some color to the LOE investments because really, they have three purposes. Obviously, one is just -- it's $100 million of capital investment that will drive down costs. And actually, we -- our estimate is that we'll exit '26 on a monthly LOE run rate that's $3 million to $3.5 million lower than it otherwise would be. So that's just the cost side, just investing to reduce costs. But we're also investing in things that will increase the reliability and the resilience of production volume. As John said, we had an amazing fourth quarter on uptime. And we've been looking at what are all the various sources of downtime that we have and we experienced and some of it is related, just the reliability and resilience of facilities and equipment. And so there are some investments that could be made there that could improve uptime for the future, maybe not as good as fourth quarter, but maybe better than what we've experienced in the past. And then thirdly, there are some opportunities on the inventory side. I'm sure we'll talk about inventory in a bit, Permian inventory. But there are some actual -- actually some high LOE areas where if we can invest in some of the facilities, we can drive down LOE. That moves some of -- maybe some of the high breakeven inventory that you see on that inventory skyline plot to the left, it also will serve to bring some of the technical inventory onto that skyline plot. So there's lots of purposes for that LOE investment. John Christmann: And last thing there. Some of that would be rental equipment that Callon had that we will be investing in. So -- but thank you. Operator: Our next question comes from the line of John Freeman with Raymond James. John Freeman: The first question, you all had a huge beat on U.S. oil volumes, and you all cited a few different items that drove that improved run time, incremental completion activity and more moderate weather. This may be difficult to answer, but if you sort of went back and I guess, like a post you looked at your original guidance versus the big beat, can you sort of flesh out a little bit for us sort of the impact that each of those had, like the improved run time versus a few incremental completions versus the moderate weather? Just trying to flesh that out a little more. John Christmann: Yes. I mean, John, I'll take a cut at it and have Steve add some detail if we need to. But I mean, first of all, you look at fourth quarter, first quarter are historically are periods when you've got the most weather impact. And fourth quarter was almost flawless in terms of no downtime. So that in itself is something we typically will bake in. Fourth quarter where there was virtually no weather, obviously, that changed in January. And we've had a lot of weather in the first quarter. So when you look at fourth quarter versus first quarter, that is a big chunk of it. Secondly, we were able to bring some TILs earlier into the year and some of those just cleaned up a little quicker than we expected them to. And that's going to drive a pretty big portion of it just because we had wells cleaning up, you had forecasted downtime. In fact, we were able to give the workover rigs both holidays off, both Christmas and Thanksgiving because the run times were so good fourth quarter. Stephen Riney: Yes. We don't have -- I don't have exact numbers on any of that, John. But I would just say roughly 1/3 each, three big impacts virtually no weather downtime in the fourth quarter. the TILs and then the actual improvement in underlying run time was just phenomenal during the fourth quarter. So I would just say 130 each, probably. John Freeman: Great. That's helpful. And then my follow-up, looking at Slide 11, we also show the really good progress on the D&C per foot down 30%. And then sort of looking at your development plan on Slide 14, and I don't quite have everything I probably need on there to back this exactly, but it just looks like back of the envelope, the D&C per foot looks like it's continued to go lower on your '26 program. Would it be possible to maybe get sort of the just rough breakdown of those 130 completions in the Permian between Midland and Delaware and then just sort of a rough idea of kind of what you all are baking into the plan on like a D&C per foot basis? Stephen Riney: Yes. We're not prepared to do that on this call. You can maybe have a follow-up call, with Stephane and Ben and the team after this, John. What I would just say is that we made huge progress on drilling and completion costs in 2025. The at the end of the year, especially in 2025, if you looked at some of the shallow wells that we were drilling in both basins we actually got to a point where in the Midland Basin, we were under $500 a lateral foot. And in the Delaware Basin, we were under $700 a fit. So we are continuing to make progress. We're not -- we're certainly not done with that. And the drillers, I know are anxious to get after other opportunities here in 2026. So we believe that will continue to improve. There is a mix effect on all of that. But I think when you go through the math, you'll find that it's pretty in line with what we've been doing as we went through '25 and ended 2025. But I'll let you guys do that off-line in a separate call. Operator: Our next question comes from the line of Neal Dingmann with William Blair. Neal Dingmann: Sorry, guys, to the delight. Can you hear me? John Christmann: Yes. Neal Dingmann: John, for you or Steve, just wondering, could you talk a little bit about just Permian inventory, how the potential sensitivity is, especially around some of your gassy assets? John Christmann: Yes. I mean, if you look today, what we looked at was really the oil inventory. So you're not going to have any of our pure gas location counts in there. Those will be separate. And Steve, you can jump in a little bit on. Stephen Riney: Yes. Just to kind of not maybe a bit of an overview on inventory. Yes, sorry. A bit of an overview on the inventory in general, as we said, economic inventory, I'd say the cutoff that we have between economic inventory and technical upside is probably, I would say, and you probably imagine this to be true for us. We are maybe a bit on the conservative side. But 1,700 gross locations in economic inventory. What do we mean by economic inventory? We have -- it's got to have a very high confidence in terms of being able to draw a type curve for it. And we have that confidence either from our own experience or offset operators that have good analogs to what we're going to be drilling. The economics include all drilling, completion, equipping and facilities costs, and it's actually burdened with central facilities, which some people don't do, they just stop at ped level facilities, but we include the gathering system, saltwater disposal, we include central tank batteries. And it has to have a 10% rate of return to make it into economic inventory. The technical upside inventory is, as I said in my prepared remarks, it's stuff that it's the next -- it's the next best opportunity for bringing stuff through appraisal and development into the economic inventory bucket. And I don't want people walking away from the call thinking, okay, this is kind of like pie in the sky stuff. Actually, it's not at all. 40% to 50% of our entire technical upside inventory is shallow Delaware Basin. So it's the Avalon and first and second Bone Springs. And in my prepared remarks, I talked about -- there were two wells that we drilled that had pretty promising results. Well, if we drilled those two wells today at our current cost structure for drilling wells, those wells would be breaking even at $41 WTI. And so this is stuff that falls right into the good end of the Skyline plot. That's all -- every bit of that stuff is in technical upside, not in inventory. And so we're going to be drilling a 4-well spacing test later this year in that area. And those are the types of things that we're going to be doing to move technical upside into economic inventory. We actually -- we actually have several appraisal tests or spacing tests going on, both in the Delaware Basin and in the Midland Basin this year for that very purpose, moving quantum of inventory out of technical upside into economic inventory. Neal Dingmann: Great detail, Steve. And then just a second one just on Suriname. I just want to make sure I think this is the case. Is the 100% of that $230 million in suggested capital for the year strictly focused on the GranMorgu? Or are you assuming any other parts of -- would it be spent in any of the maybe parts of Block 58 or 52? John Christmann: No. The $230 million there is for GranMorgu and then the exploration capital would be covered in the exploration side. Operator: Our next question comes from the line of Bob Brackett with Bernstein Research. Bob Brackett: If we can talk about Egypt and the 7.5 million acres you have there much of that -- some of that acreage is well connected with existing gas pipelines, but there's a whole lot of territory fairly far from gas pipelines that could hide some fairly large needs or prospects. Can you talk to your exploration philosophy for gas out there? Is it efficient from the peer? Or is there some appetite to step out to some of the more distant opportunities? John Christmann: No, Bob, I mean, I think the big thing to think about there is we've been in the Western Desert for 30 years. We've shot multiple versions of 3D seismic as we learned to try to see deeper searching for oil. We started out drilling the big bumps on the oil side, the 4-way closures to the 3-way migrated to the strat traps. And really, November 24, we enter into a new gas price environment, and it lets us start that process over on the gas side. So as I mentioned, we went after some things we knew were close that we could tie in and now the exploration team is stepping back and really looking in the pockets that are deeper where we knew there was gas that we stayed away from. We've also added 2 million acres last year of new acreage. So we're stepping back and doing a regional look and Tracey can comment a little bit on that, but we're taking a regional approach on the gas side. And that's what I'm excited about is, is it's bringing a lot of structures into play that historically, we knew were gas, we steered away from. Tracey Henderson: Yes. Thanks, John. No, I think as John said, we put a lot of effort in the last year of going back and building a better regional picture too with lookbacks over what we've been exploring for the last few decades. And as John said, we've got a lot of areas that we've historically avoided because we knew that they were going to be gas prone. So we've reprocessed seismic data. We stood up teams to really focus on this specifically and are currently building out more of an inventory of what we see as our longer-term gas portfolio of some of which of those wells we will start to see this year. So I think we've got -- we're in a really good place on that. Operator: Our next question comes from the line of Michael Scialla with Stephens. Michael Scialla: I wanted to follow up on the Permian inventories, Stephen, I think you said in your prepared remarks that if the test, I think you were referring to on the Bone Spring were to be successful, that could replace a year's worth of drilling inventory. Is that essentially saying this 4-well spacing test in the Bone Spring could add like -- could move 130 locations from the technical to the economic inventory is that a correct read? Stephen Riney: Yes. That's a correct read. And that's just for the first Bone Spring. As I said just a few minutes ago, actually 40% to 50% of our 1,700 technical upside locations are in the Avalon first or second Bone Springs in Delaware Basin, mostly in Ward and Reeves County and a bit in Southern Winkler County. And that test in the First Bone Spring won't prove up all of that, but we'll prove up concepts related to all of that because we believe, at least in some places, that's one big tank. So yes, it can prove up just in the First Bone Springs in that area up to another year worth of drilling, but there's a lot more at play there. Michael Scialla: Got you. And then I wanted to follow up on Suriname. The $230 million of development. Is all that going toward the FPSO? Or is there actually a development drilling that's going to take place? I know you've got some exploration drilling plan on late '26, but is there any development drilling in that $230 million number? Or is that separate? John Christmann: It's everything, Mike, and we will be starting the drilling. Those rigs coming on late next year, early '27. So there could -- some of that would fall in on the drilling side, too. But the whole $230 is for the GranMorgu development project. But yes, that's -- it's on the FPSO, the umbilicals, a little bit of everything, and we will start drilling development wells. Michael Scialla: So you're contemplating two rigs running kind of late in the year there, exploration... John Christmann: There will be multiple rigs, yes. Operator: Our next question comes from the line of Scott Hanold with RBC Capital Markets. Scott Hanold: Yes. Could you give us a sense of in the $1.3 billion spending in the Permian, how much of that is going to run these various sets to look at the technical upside? And is that something that you plan on having sort of working into the budget in 2020 and beyond? Or will there be a point where we see a little bit of drop off in Permian spend because you've kind of done most of that work? John Christmann: No, Scott, I mean, we've got a steady diet. I mean last year, we're flowing back now a 4-well Barnett test. So you should just envision in that one. Two, we've got a steady diet of testing that we're doing, both delineation and appraisal. And that's going to continue. I mean, that's the nature of the basin, right? So we've got the development piece that you're drilling off of those results, but you're going to constantly be drilling wells in that technical category that can move things up. So a pretty steady diet. We've got several we did last year, the last several years and several more this year. We've got a path we're flowing back, and there's more Barnett we'll drill later this year. Scott Hanold: Okay. Okay. Understood. And could you talk about your growing a little bit. It doesn't look like there's any exploration spend there you look initially farm down part of that right now. But like what is sort of the path? What are the next steps there? And what could be to start seeing some activity? John Christmann: Yes. I mean our next step in Uruguay, we have had a data room open. There have been a lot of interest from the industry. We are looking to farm down. So at some point, we'll have something to say about that. And then we'd be looking at a well. It's probably likely '27, but it could be -- there's a chance it could be late this year, but it's likely '27. Operator: Our next question comes from the line of Josh Silverstein with UBS. Joshua Silverstein: The capacity and the trading benefit continues to be a positive driver for you guys, and clearly still a big beneficiary of wide spreads in 2026. Can you talk about how you see this trending next year in '27 as 4-plus Bcf a day of new Permian pipeline capacity comes online, does that 650 start to come down? And then maybe do you offset any of that with some higher of your own volumes. So there's kind of no net reduction there. Ben Rodgers: Sure. Yes. So this year's $650 million, you look at next year, it does come down just based on strip there is quite a lot of takeaway coming online late this year, a little bit next year. We'll kind of see what happens to Waha. This is a trend that we've seen over the last really 7 years, of deep discounts, and then you get an increase when the pipelines come on as they fill up and then it gets challenged again. So we'll see what industry activity and things do to continue to push gas production in the basin and where that lands. Some people say it will fill up pretty quick and others are skeptical. And that's just going to be driven on types of wells that are drilled, GORs, the amount that's flaring now that can be put on the pipes, et cetera. So it does come down next year. It's still positive actually for 2 years out for us kind of through '28, and then our extension options on those begin in '29. And so we'll look at the market at that time and figure out what to do. But as you look for the next 3 years, it's positive for us across that and the LNG book. And to your point, if those spreads do compress and that is through Waha strengthening, then yes, we do get better prices than on our equity gas and it doesn't fully offset that because we have a little bit more capacity than our production, but it does mitigate that drop on the marketing side because you're making more on your equity gas that you're producing. Joshua Silverstein: Got it. Maybe just sticking on the financial front. The balance sheet improvement efforts have been really good, now down to $4 billion at year-end '25. You still have the $3 billion kind of long-term target there. Is the goal to stick with that 60-plus percent of free cash flow going to shareholders until you meet that target? Is there any sort of flex to this? Or do you want to make sure you're hitting that target this year? Ben Rodgers: Yes. I mean, we think that 60% is competitive. We've exceeded it every year since we outlined that in 2021. We've exceeded the 60% and we think that that's a prudent level right now. We also are using portions of our free cash flow to invest in exploration. And I think a lot of our peers don't have the exploration portfolio that we have. We're thinking about that longer term as well. And so that 60% takes that into account as well as balance sheet management and managing our ARO and decommissioning spend and so we're managing all of that. The $3 billion target we put out, recall that was kind of at a mid-cycle price of $70, we'd get there in kind of 3 to 4 years. Prices go higher than that. We can get there potentially by the '27, '28 time frame, and they're lower, then it will be end of the decade. The point is that we've made a lot of progress through cost savings, capital efficiency, execution in the field and all of that pulled together has increased free cash flow last year. You look at '25 free cash flow compared to '24 free cash flow. It was up over 20% with lower prices. And so that's just a testament to what the team has done and we used a lot of that to return to shareholders, but we also paid down a lot of debt. So just -- we've got flexibility in our program, as outlined with the Permian inventory and the Egypt Gas, you take all that together, we still feel pretty good about reaching that $3 billion kind of at current prices in the next couple of years. Operator: Our next question comes from the line of Leo Mariani with ROTH. Leo Mariani: I just wanted to follow up a little bit on the Permian inventory. Just wanted to make sure I sort of understood it from a definition perspective here. when you guys kind of talk about a 10% or greater rate of return, is that like a field level sort of pretax return. Just wanted to make sure I sort of understood that. Does that not include like any kind of corporate burden or anything for G&A? Stephen Riney: It doesn't include a corporate burden, but it does include full field cost burden. And it is before tax and after tax, we probably won't be paying tax for quite some time. Leo Mariani: Okay. That's helpful. And I just wanted to follow up on Egypt. You guys spoke about this. I mean, you could give us a little bit of a quantification, you did speak about how Egypt gross oil was going to decline in 2026. Is there kind of a rough ballpark percentage on that in terms of the decline you're going to see? John Christmann: Well, Leo, I mean, if you look at it, we've been able to with the waterfloods, hold oil volumes flat for the last 3 quarters. So we're still prioritizing oil we've just shifted the gas rigs up to 50% from we started last year at 25%. So we're just going to be drilling more gas wells on a relative basis. And so as a result, we're going to forecast gross BOEs, gross gas or gross oil to slightly decline. But we've had a pretty good track record of being able to sustain that through the waterflood projects. Stephen Riney: Well, and also quite a few of the gas fields. Our rich gas have condensate with them, and so that shows up as oil volume as well. John Christmann: And some of the new exploration acreage also is perspective for oil as well. So -- but it's just how we steered gross oil. Operator: Thank you. I would now like to turn the call back over to John Christmann, CEO for closing remarks. John Christmann: Thank you. In closing, let me leave you with the following thoughts. 2025 was an excellent year for APA, reflecting strong execution and meaningful progress towards cost leadership. We delivered substantial cost reductions ahead of schedule, generated over $1 billion of free cash flow and significantly strengthened the balance sheet. At the same time, we sustained Permian oil production on lower capital grew gas volumes in Egypt and continue to advance the Grand Margo development in Suriname. With a structurally lower cost base and a stronger balance sheet, we are well positioned to unlock the full value of our high-quality Permian inventory and expect to deliver sustainable production and competitive returns for the next decade and beyond. With a strong foundation, disciplined capital allocation, and a clear line of sight to incremental free cash flow from Suriname beginning in 2028. We are very well positioned going forward. With that, I will turn the call back to the operator. Thank you. Operator: Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.
Cindy Rose Quackenbush: Good morning, everyone. Good morning, and warm welcome to our 2025 preliminary results and strategy update. By the way, that's our new brand refresh. I hope you like it, created by Landor AMP and Man versus Machine, WPP agencies, all powered by WPP Open. So look, I'm delighted to welcome you all here to One South Work Bridge to our campus here in London, which in many ways is symbolic of the future of WPP. It's modern, it's adaptive, it's collaborative workspace for our talent, our clients and our partners. So the plan this morning is I'm going to start with some opening remarks, and then I'm going to hand over to Joanne Wilson, our Chief Financial Officer, to share our 2025 preliminary results. Then I'll share our strategy update, and then we'll open up to Q&A. Before we start, I'd like to recommend that you take a moment to read this cautionary statement while I get out of your way. So Joanne and I will be joined on stage later by Brian Lesser, who's CEO of WPP Media. When we get to the media section of the presentation, and most of my senior management team are here in the audience as well. Let me start by saying that WPP is an extraordinary company. We are built on agency brands with remarkable histories going all the way back to the 1800s. Some are still well known today. Others have evolved into new parts of WPP. But together, they have roots in creating iconic work that moves people and shapes culture. We serve some of the biggest, most demanding clients in the world, and we steward and grow some of the most well-known brands on the planet, several of whom you'll hear from and see referenced throughout today's presentation. And our business model is actually very simple. We exist to make our clients successful. We help our clients build brands that matter, drive meaningful engagement with their consumers and drive outcomes for their business. It drives growth for them and growth for us. However, it's really clear that what has made us successful in the past will not make us successful in the future. And as you can see from the numbers that we released this morning, our performance is not where it needs to be. Yes, of course, there are externalities we can point to market volatility, economic headwinds. But really, the results point to the need for us to embrace a single unified growth strategy to execute with increased rigor and evolve as the needs of our clients evolve. After several years on the WPP Board of Directors, I took this role with a clear thesis in mind as to what we need to do differently. We've spent the past 6 months as a team validating this thesis through rigorous analysis and by speaking directly to our clients and actively listening to their feedback. And the good news is we haven't been waiting for today's presentation to take action. We've already made several decisive changes, and you can see the positive results in our recent new business success. In the fourth quarter of 2025, WPP was #1 in JPMorgan's net new business rankings for the first time since 2020 with a series of excellent client wins across media, creative and our integrated offer. These include being appointed the U.K. government's lead media agency, Reckitt and Henkel Media in Europe, Kenvue and Haleon Creative globally, TruGreen Media in the U.S., Norwegian Cruise Line Global Media, Suncor Media, just to name a few. And I'm delighted to say we've maintained this strong momentum into 2026, winning Jaguar Land Rover, Global Media and Integrated Services. In fact, the impact from new business wins in 2026 already exceeds the impact of new business wins for all of 2025 combined, and it's only February. So while the turnaround of our business will take time, our momentum is undeniable, and these wins give me huge confidence that we are firmly on the right path. My team is united, committed and hungry to win. Today's session is the culmination of months of detailed work by our team. We have a bold plan to make WPP a simpler, more integrated company, one that's fit for the future, relentlessly focused on growth and brilliant execution. Personally, I'm very excited to be here at a time of such revolutionary change, and I feel quite privileged to lead WPP as we play a defining role in shaping the future. So I'll come back shortly and talk about our view on the evolving landscape and our growth plan for the new WPMP, which we're calling Elevate28. But first, I'm going to hand over to Joanne to take you through our 2025 results. Joanne? Joanne Wilson: So thank you, Cindy, and good morning, everybody. And can I add my warm welcome to you here today. So let me start by taking you through the main financial headlines for 2025. Our like-for-like revenue less pass-through costs fell 5.4% for the full year due to client assignment losses and spending cuts. Now this is slightly better than our most recent guidance for a decline of 5.5% to 6%, and it reflects a Q4 like-for-like decline of 6.9%, and that's a deterioration from the third quarter decline of 5.9% -- in the context of the weaker top line, we delivered a headline operating margin of 13%, in line with our expectations and down 180 basis points year-on-year on a like-for-like basis. Our fully diluted EPS was 63.2p, a decrease of 28.4% year-on-year, with the impact of reduced headline operating margin and a higher headline effective tax rate, partially offset by lower net finance costs and noncontrolling interests. Turning to cash flow. Our adjusted operating cash flow before working capital was GBP 1.2 billion, down from GBP 1.3 billion in 2024 and at the top of our most recent guidance range and includes GBP 82 million of cash restructuring charges. On my next slide, I provided some color on our net sales performance, both for the fourth quarter and across the full year. And please note that we have included more detail in the appendix to this deck. Now you have some of the detail here on trends by business, by region and by client sector, but I thought it would be more useful to unpack some of those trends by theme to help give a sense of what is WPP specific and what is more market driven. And when we consider what is WPP specific, the major negative impact to call out both for the full year and for the fourth quarter is the impact of gross client losses, which deteriorated through the year. Now this was driven by the impact of incremental losses in year in 2025. And by segment, this particularly weighed on media, by geography on the U.S. and the U.K. and by client sector on CPG and TME. Now against this, we had the positive impact of new business wins in 2024 and '25, which indeed contributed progressively through the year. The aggregate level of in-year wins, however, was lower than we initially expected and significantly below what we have experienced over the past number of years. This was in part because of a lower win rate, but in EMEA, it was because of a lower level of aggregate new business activity. Industry estimates are that global pitch activity was down double digit in the year. While we saw an encouraging new business performance in the fourth quarter with the wins of Reckitt, Henkel, the U.K. government, Pizza Hut, NCL and JLR, the impact on our like-for-like performance is expected to take time to ramp up, and we expect the overall net new business headwind to sustain into the first half of 2026. The final theme to call out is spend by existing clients. We characterize the year as one of more cautious spending from clients with a higher degree of volatility than we would typically expect to see. Now the impact was seen most strongly across the CPG, auto and the tech and digital services sectors. And while many of our businesses were impacted, it weighed most heavily on Ogilvy. The waterfall chart on this next slide bridges our headline operating margin from 15% in 2024 to 13% in 2025, a 1.8 percentage point deterioration on a like-for-like basis. There are a number of moving parts and starting with staff costs, including our severance and incentives on the left. Now these reduced by GBP 576 million on the back of lower permanent headcount, which ended the year down 8.7% and reduced use of freelancers, which was down 14% year-on-year. However, due to that lower revenue, this resulted in 180 basis points drag on our margin. This was amplified by the impact of increased severance and other associated costs, which was up GBP 89 million in the year, taking a further 100 basis points of margin. And we did increase investment levels in WPP Open in AI and data, and this was more than funded by a reduction in back-office costs, leading to a net reduction in tech spend and other costs of GBP 128 million. Again, with the impact from those lower revenues, this translated into a 60 basis point drag on margin. These drags on margin were offset by a 50% reduction in staff incentive payments to GBP 182 million, providing a margin cushion of 140 basis points, which is equivalent to 120 basis points like-for-like if we exclude FGS. And taken together, this resulted on that net margin move of 200 basis points on a reported basis and 180 basis points on a like-for-like basis, which includes 20% of the impact from the disposal of FGS and from FX. Now moving to my next slide, we show our headline income statement. Overall reported revenue less pass-through costs was GBP 10.2 billion, a decrease of 10.4% year-on-year on a reported basis. Our headline operating profit was GBP 1.3 billion, which was down 22.6% year-on-year on a reported basis and is consistent with that 13% operating profit margin. Our net finance costs of GBP 274 million were slightly down year-on-year on lower average net debt and lower interest rates. And our effective tax rate increased to 32% given that lower profit base and the impact of nondeductible fixed elements. By contrast, noncontrolling interest of GBP 43 million was down year-on-year, partially driven by disposals. Our headline diluted EPS, as I said, was 63.2p and down 28.4% on a reported basis. The Board has recommended a final dividend of 7.5p, giving a total dividend of 15p for 2025. Now while this is a reduction year-on-year, it represents a stable dividend from the first half, and it underlines our commitment to maintaining shareholder returns. We include a full reconciliation between our headline and our reported financials in the appendix. And the main items I would call out are the impact of restructuring programs as well as further goodwill impairments of GBP 641 million, which primarily relate to our integrated creative agencies and property impairments of GBP 114 million, both of which are noncash in nature. Now this next slide bridges the year-on-year movement in net debt, which ended 2025 at GBP 2.2 billion versus GBP 1.7 billion in 2024. Our adjusted operating cash flow before working capital was GBP 1.2 billion and reflects a lower level of cash profit, partially offset by a lower level of CapEx and a year-on-year decrease in cash restructuring costs, which came in at GBP 82 million. Our working capital saw an outflow of GBP 334 million, primarily driven by the temporary impact of reduced staff incentives, adverse FX movements and business mix. Within this, our trade working capital, excluding the impact from FX was broadly flat year-on-year. We remain disciplined on our working capital management and saw an improvement in underlying operating metrics year-on-year, including reduced overdues. We saw an outflow of GBP 17 million from earnouts of GBP 65 million and the net impact of dividends to minorities and from associates and earn-outs have decreased year-on-year and are expected to continue to progressively fall in 2026. Our net interest and tax contributed to a total adjusted free cash flow of GBP 202 million and note that the tax payment includes GBP 43 million of one-off taxes related to the disposal of FGS Global. And turning to the uses of cash, M&A spend was GBP 147 million and largely related to the acquisition of Infrum, while cash dividends amounted to GBP 343 million. Adding in the impact of buybacks at GBP 97 million to offset the dilution from incentives and other factors, including FX, our spot net debt was GBP 2.2 billion, up GBP 500 million year-on-year. Now my next slide provides more detail on our overall net debt and our leverage profile. As we've already said, we think it's more prudent to look at average adjusted net debt through the year rather than the year-end level, which typically benefits from a favorable working capital position. Now our average adjusted net debt was slightly down year-on-year at GBP 3.4 billion compared to GBP 3.5 billion in 2024. However, given that lower headline EBITDA, the average adjusted net debt to headline EBITDA ratio for 2025 was 2.2x, which was up from 1.8x in 2024. While our average leverage ratio has increased, our maturity profile stands at 5.8 years and the average coupon on our net debt is 3.5%. We, of course, also completed a successful GBP 1 billion bond issue in December 2025, which more than covers our GBP 650 million bond maturity in September 2026. We have no covenants. And as of December 2025, we had GBP 4.4 billion of liquidity, including an undrawn committed RCF of $2.5 billion, which does not mature until 2031. And furthermore, I'm very pleased to share that today, Fitch Ratings has assigned WPP a BBB rating with a stable outlook, reinforcing our investment-grade balance sheet. And on my final slide for now, I have shared guidance for 2026 across key financial metrics. Now we will talk about the impact of our strategy update later this morning. But for 2026, we're setting the following parameters in terms of our headline guidance. Our like-for-like net revenue growth is the most important metric for judging our business, but it is a lagging indicator with account losses continuing to drag for around 12 months after they first start to impact. And meanwhile, new account wins take time to bed in and move toward a steady state. For the year as a whole, we estimate that gross client losses will represent a 500 to 600 basis point drag, an increase from the 300 to 400 basis points in 2025. At the same time, the positive impact on like-for-like from gross client wins in 2026 already exceeds that for the full year 2025. Now while it is still early in the year to indicate the impact of new business in the full year, we do expect it to be a more significant drag in the first half in 2025. We are encouraged by the new business performance in the fourth quarter and the performance year-to-date and the nature of the pipeline. And as a result, we anticipate a progressively improving impact from net new business through the course of the year. Now reflecting all of this, we are guiding to like-for-like revenue less pass-through costs down mid- to high single digits in the first half of 2026 with an improving trajectory in the second half. And we also anticipate that the first quarter will see the weakest like-for-like for the year. On profit, there are a number of moving parts that will impact our headline operating margin. On the positive side, we will benefit from the annualized impact of cost actions, which were taken in 2025, alongside a part year benefit from the cost initiatives we are implementing as part of our new strategy. We also expect a lower impact from headline severance costs. Against this, we will continue to invest in WPP Open in AI and in data as well as our growth drivers and also expect to rebuild our incentive pools. Cindy and I will share greater detail on both the growth drivers and the cost initiatives as part of our strategy update. Taking all of that into account, we anticipate headline operating profit margin in the range of 12% to 13%. And turning to cash flow, we continue to focus on adjusted operating cash flow before working capital as the most important metric, reflecting the potential for volatility in the year-end working capital position, including both the anticipated costs associated with historical plans as well as the restructuring costs linked to the Elevate28 8 plan, we anticipate adjusted operating cash flow before working capital of GBP 800 million to GBP 900 million. This includes total anticipated cash restructuring charges of around GBP 250 million, of which around GBP 190 million are associated with the Elevate28 plan. Excluding these charges, we would anticipate adjusted operating cash flow before working capital of GBP 1 billion to GBP 1.1 billion. And finally, in terms of leverage, given the expectation of a further moderation in headline EBITDA, we would anticipate our average leverage metrics to move up further in 2026. We do, however, expect average net debt to remain broadly stable, and we note that any proceeds from asset disposals during the year will be used to strengthen our balance sheet, providing a greater degree of financial flexibility. Now you will find more detail on other modeling assumptions for 2026 in our preliminary results press release. And that is it for me for now, and I will hand back to Cindy, who I know is very keen to share our strategic update. Cindy Rose Quackenbush: Thank you, Joanne. Thank you. Look, the first thing I want to say to you is that I fully recognize that recent years have been disappointing from a shareholder perspective. I acknowledge our performance on core metrics like net sales margin, free cash flow. It's disappointing. No one is more determined to turn that around than I am. And as I said in my opening remarks, I took this role with a clear thesis as to what we needed to do differently. We've spent the past 6 months as a team really validating that thesis with rigorous analysis and by actively listening to feedback from our clients. There are plenty of reasons for optimism, and I'm going to get to those in a moment. But first, I thought it's just appropriate to share with you some of the feedback that we have received from clients. It's clear and consistent and not only supports my thesis, but provides us with an excellent blueprint for what we need to do differently going forward. Clients pointed to the fact that our complexity got in the way of true client obsession. We were siloed. We were hard to navigate. We haven't been intentional enough about evolving our integrated proposition to adapt to the changing needs of our clients. It's taken us too long to land our data proposition and our media business has suffered as a result. Now the good news from my perspective is that all of these issues are fixable. And as I said, we've already started to do so. So while it's true that our performance hasn't been where we want it to be, it's also true that WPP is full of potential and has all the ingredients that we need to win. We have incredibly talented, hard-working people with deep domain expertise who do amazing things for our clients, for some of the most demanding clients in the world, I might add, every single day. We have world-class capabilities that span the entire marketing workflow from media to commerce, creative, PR, production, digital experiences, software engineering, data, AI and more. We've made really smart investments over the years in technology that have now enabled us to build WPP Open into a powerful future-facing agentic marketing platform, giving us a real competitive advantage. We have a presence in over 100 countries around the world, which means we can serve the most complex multinational, multi-client brands in the world. We have a scaled media offer and partnerships with every relevant player in the ecosystem. But maybe most importantly of all, we have an ambitious, competitive, high-energy team that is ready to embrace change and hungry to win. So notwithstanding the challenges, which are clear, I stand here with immense optimism because we're at a really pivotal moment in WPP's journey. We're not just adapting to change. We're actively shaping the future. We are building a WPP that is more agile, more connected, more powerful than ever before, a WPP that is simpler to work with, fit for the future and built to win. A WPP that is obsessed with the client -- the success of our clients and as a result, that drives better returns for our shareholders. So our strategy starts with a new mission, to be the trusted partner for the world's leading brands in the era of AI, valued for combining cutting-edge media intelligence, trusted data solutions, world-class creativity, next-generation production and transformative enterprise solutions to help our clients navigate change, capture growth and capture opportunity. Now there's 4 key objectives of our strategy, and we're going to unpack these in some detail. But just to summarize, our objectives are to drive superior growth for our clients, to become a simpler, more integrated company, to leverage our agentic marketing platform, WPP Open for competitive advantage and to create firm financial foundations for the future. As I said earlier, this is going to take time, but we've already made a promising start. And to support our growth strategy, we've built a very detailed execution plan that broadly spans these 3 distinct phases. Our immediate priority is to stabilize the business, make the structural changes needed, strengthen our execution, win and retain clients to sustain our current market momentum. The next phase is about building on these foundations and returning the company to growth sometime during 2027. And the third phase will be about accelerating our growth so we can capture our fair share of the market from 2028 and beyond. And just to summarize what you can expect from this plan in terms of outcomes, you can expect the stabilization of our performance in the near term, a return to growth sometime in 2027, gross cost savings of GBP 500 million over 3 years, a reallocation of investment against our key growth priorities and a more focused portfolio, an investment-grade balance sheet, as Joanne said, and greater financial flexibility. So that's the basic framework, the time line of our growth strategy and what you can expect in terms of outcomes. We're going to unpack all of this in more detail. But before we do, I would like to step back, if I may, and just do a bit of scene setting to offer some perspective on how we see the world changing, the needs of our clients evolving and the opportunity of AI. So for some time now, we've known that our industry is experiencing dramatic transformation. With the rapid diffusion of AI, we're not just seeing incremental shifts in consumer behavior, like this is a complete metamorphosis of the commercial ecosystem. Brands are now discovered in AI-driven conversational search. All the old barriers that protected established brands are gone. creators and influencers have reshaped consumer preference and can launch brands in an instant. Media is everywhere. It's in everything. It's no longer episodic and campaign-driven. It's continuous, always on, a stream where social, search and physical spaces all blend together. Commerce is the new organizing principle. Every action, every interaction is shoppable, and we're rapidly shifting to agented commerce where AI agents do the shopping on our behalf. Trust is scarce, right? It must be earned every day in this world of synthetic content and deep fakes. Brands need to balance hyperpersonalization with personal privacy. And as the world is flooded with AI-generated content, the demand for verifiable human creativity, craft, empathy, taste is increasing as key brand differentiators. These changing dynamics are not fleeting trends. The acceleration of AI is unstoppable. And as I said, it's driving a complete metamorphosis of the commercial ecosystem. And this is the reality our clients are navigating every day. The fragmentation, the complexity, the pace of change is dizzying for our clients and the paths to growth are much harder to find. He's never been more urgent to build compelling trusted brands that endure for generations and provide competitive advantage and long-term enterprise value. To cut through this noise and find new growth audiences in this environment, brands need to embrace new strategies grounded in deep data insights, real-time signals and AI that acts on these signals at the speed of light. In this perpetually changing environment, clients don't need more traditional marketing agencies. What they need is a new playbook for growth and a trusted partner who can help them build it and operationalize it. A partner that operates as an intelligent orchestration layer across creativity, media, commerce, data and tech who fuses technical expertise with breakthrough creative thinking into one cohesive approach to modern brand building. At WPP, we work with some of the most consequential brands and clients on the planet, Coca-Cola, Unilever, Nestle, Kenvue, Ford, so many more. We know how to navigate disruption. We know how to find signal in noise and help clients build new paths to growth. Now for many clients, this new playbook for growth means real transformation at every level. So I spent the last decade delivering large-scale technology transformation to enterprise clients around the world. And I can tell you, it's not easy. Clients need to have AI-ready data foundations and agentic tool and governance in place. They need to be trained and skilled. Processes need to be reimagined. There's really no shortcut when it comes to AI transformation. Every client I meet is going through it, and they all need our help. So for WPP to seize this opportunity, we need to evolve from being a collection of traditional marketing agencies to being a trusted partner for growth and transformation, helping our clients build modern marketing capabilities and move boldly and confidently into the future. A wonderful example of this kind of partnership in action is the Coca-Cola Company. Let's hear from Manolo. [Presentation] Cindy Rose Quackenbush: Commerce and Retail media at 23% and high-velocity content production at 38%. These changes that we're making at WPP to integrate our client proposition will enable us to cross-sell more effectively and grow our share in these fast-growing markets. So that's my perspective on how the world is changing, what it means for our clients and the opportunity of AI. Thanks for indulging me in that. But I'd like to now unpack our growth strategy in a bit more detail. So as I mentioned earlier, we have 4 strategic objectives: to deliver superior growth for our clients by reorienting around an integrated proposition to become a simpler company moving to 4 operating units across 4 regions with common incentives across the company, to leverage the power of our agentic marketing platform, WPP Open for competitive advantage and to create firm financial foundations for the future. We've built a detailed plan that sets out the actions we're taking to deliver on these objectives, and the entire management team worked together to build this plan. This was the ultimate team collaboration. We're all behind it. We're all aligned and committed to its execution. There are 8 core pillars to the plan, which you can see on this slide, but I'm going to double click and I'm going to double-click briefly on each of them, but I do want to start with WPP Open, our pioneering agentic marketing platform because it sits at the center of everything we do. It's where all of our capabilities come together into one integrated end-to-end platform. It's the cornerstone of WPP's own transformation, and it's how we deliver services, transformation and growth to our clients. WPP Open is a platform that we've been investing and building for a few years now. We recognized that we needed an end-to-end orchestration layer to connect workflow inside of WPP. And the platform enables us to scale intelligence and best practice across our group and reimagine business process and client solutions with the agentic capabilities that now live inside Agent Hub, an important recent addition to the platform. But let me show you an example of the power of the platform with a recent example from Google Pixel. Using WPP Open and AI personas, we analyzed millennial conversations from across social media, uncovering a shift towards romantasizing everyday life and reframing mundane moments as cinematic moments. Guided by this insight, our brand agent recommended focusing on Pixel's camera coach feature to help users take control of their story. Thanks to specialized agents, our workflow moved from social listening to creative concepts in just 1 hour. With Google's advanced AI models within WPP Open, campaign assets were approved and live within 24 hours. And this delivered a 3% increase in brand uplift, demonstrating a new marketing flywheel where insight, creativity and production really move at the speed of culture. So recognizing the pace of technology change, we knew that the future of marketing would look very different than in the past. And to anticipate these changes, we've significantly enhanced the platform over the past 12 months. Open Intelligence is our foundational intelligence layer that securely connects trillions of live data points from clients, partners and WPP in a privacy-first way. And it's now integrated and powers the entire WPP platform end-to-end. We consolidated our technology and data solutions into one organization. We have one WPP development team, one integrated product road map and one set of design and portfolio management principles, which dramatically simplifies how we think about evolving this platform in the future. Our people work on WPP Open every day, and it features in every client pitch as the single unified agentic platform that clients need to deliver integrated marketing workflows and a collaborative workspace where humans and agents can work together to deliver a system of growth that clients can trust. There are many, many point solutions available in the market today that address pieces, fragments of the marketing workflow, and they're often tied to specific platforms, leaving clients to manage costly complex tech stacks with fragmented workflows. WPP Open solves this problem in a single end-to-end platform. It's an agnostic system built on a common data model. It gives clients one source of truth to integrate operations, optimize investment and drive growth at scale. It's really hard to explain technology, though. So let me show you how this works. [Presentation] Cindy Rose Quackenbush: Great. So I talked about the importance of partnerships because in today's changing world, like no single company can go it alone. WPP Open, as the name indicates, is open by design. We will continue to enhance our own technology with the very best and latest AI models and agentic tool sets through our groundbreaking strategic technology and data partnerships with Google, Microsoft, TikTok, Meta, Amazon, Stability AI and more. These partnerships don't just give us access to new AI models and tools. They enable us to bring cutting-edge innovation resources to our clients and unlock important new routes to market, particularly important for our Enterprise Solutions business. You might have seen earlier this week, we announced a significantly expanded partnership with Adobe, embedding their industry-leading AI marketing suite directly into WPP Open. This is a powerful integration that delivers effective streamlined marketing operations for our clients, enabling them to scale personalization, optimize media and create on-brand content efficiently with agentic AI workflows. This build, buy and partner approach that ensures that WPP Open remains at the forefront of cutting-edge technology innovation so that our clients always have state-of-the-art capability at their fingertips. WPP Open is a significant source of competitive advantage for WPP. This platform puts AI to work to transform our clients' marketing function and enable new outcome-based commercial models, tying our success directly to client growth. So that's WPP Open. Now let's go back to the strategic plan and briefly step through the actions we're taking to deliver on our growth objectives. Our first key action focuses on media and data and positioning these capabilities at the core of our integrated client proposition. Brian Lesser joined WPP 18 months ago and has done a fantastic job spearheading the transformation of WPP Media. He's implemented structural change and led the acquisition and integration of InfoSum, which now underpins our differentiated data approach. We know there's more work to do, but recent wins in WPP Media that Brian and his team have secured give us full confidence that we're on the right path. So I'd like to invite Brian to the stage now to dive a bit deeper on WPP Media's transformation. Brian? Brian Lesser: Hi, everybody. Good morning. And thank you, Cindy, for the introduction and for leading the way at WPP. 12 months ago, I promised a transformation, and we delivered. We have united WPP Media, placing our clients at the heart of everything we do, ready to unlock limitless growth in a media everywhere future. Our foundation is built on our proprietary open intelligence, driving real-time predictive decision-making. Today, I'll detail how we're now perfectly set up for success with the client always at the core of a truly integrated WPP, powered by a differentiated platform that sets us apart. This is our winning recipe, and I'll share tangible case studies proving this model is designed to win. From the outside, it might seem as if all marketers have the same basic needs. The truth is that every client is unique with vastly different context, growth strategies and audiences. This is why we have restructured the way we work to ensure each client's unique needs sit at the heart of our business. This radical client centrality is allowing us to unlock true integrated marketing across WPP. We have built a single financial and data ecosystem that eliminates siloed operations to bring the full power of WPP's people and tech to life. This empowers us to deliver seamless connected solutions that cut across the traditional ways of doing business like customer experience, commerce and social and influencer that accelerate client growth. Whether it's a media pitch, a creative pitch or a production pitch, more than ever, clients are looking for a single integrated solution. This is what we're now set up to deliver and why clients are choosing us. You can see the power of this integrated approach with Mazda. When creative is as intelligent as you're targeting, you don't just reach people, you move them. Mazda's first to the finish was a groundbreaking branded content series. It spotlighted trailblazing female racecar drivers connecting on a human level beyond motorsport. This innovative program became the first branded content designated a prime video original. It showed how media intelligence fuels powerful storytelling. The series achieved 16 million minutes watched, drove 93% new website visits, increased purchase consideration by 23% and contributed to Mazda's highest sales year ever. This is the type of results the new WPP media generates. Our data approach isn't merely an evolution. It's a fundamental revolution. Traditional marketing with its static definition of identity and commoditized view of audiences is increasingly obsolete and constrained by privacy risks. We ask a different question, what signals truly matter to our audiences. We unlock intelligence from diverse live signals, context, interests and behaviors to find new patterns in the consumer journey. This identifies new growth audiences and predicts their future actions to accelerate business growth. Central to this is our market-leading solution, enhanced by InfoSum, which establishes private data networks directly within our clients' environments. This enables secure multiparty data collaboration without any data ever moving. This decentralized approach breaks down silos, creating comprehensive AI-ready consumer insights from previously inaccessible sources, far surpassing traditional ID matching alone to deliver truly predictive intelligence. For the first time, clients can harness the full potential of their first-party data from any cloud or warehouse environment. including Adobe, AWS, Microsoft Azure, Google Cloud, Salesforce, Databricks and Snowflake. This proprietary intelligence can then be connected and enriched with our comprehensive identity data and robust network of over 350 integrated partners, giving us access to quadrillions of real-time signals. This allows us to produce faster, smarter and more effective marketing across all leading global platforms like Amazon, Google, Meta, LinkedIn, Snapchat and TikTok. By synthesizing this vast data, we build predictive media strategies that deliver deeper engagement and superior client growth, moving beyond just reach and frequency and validating actual outcomes with historical performance data. To bring this to life, consider our work with Heineken. They needed a way to connect their first-party consumer data with ITV's on-demand viewing audience and Tesco shoppers. Powered by InfoSum, Heineken was able to identify relevant audience segments based on age and real-time drinking preferences. Crucially, Tesco provided closed-loop measurement of sales impact, all without moving or sharing any customer data out of Heineken's environment. In a world where measurable outcomes truly matter, the campaign success wasn't measured in brand uplift or impressions, but in real sales data from Tesco stores, which increased by an impressive 189%. Another real-life example of driving business results through our market-leading data and technology solution. Powered by Open Intelligence and enhanced by InfoSum's federated learning infrastructure, WPP Open offers a unique agentic marketing platform. This gives our clients speed, simplicity, scale and AI innovation to modernize marketing, optimize media and accelerate their growth. Our differentiated approach to data is helping move marketing beyond legacy static databases by enabling more connected and intelligent ways of working. For Coca-Cola, this means bringing together creativity, technology and real-time insights to create more integrated marketing experiences. There's no one better than Manolo to share how WPP Open and Open Intelligence are transforming marketing at the Coca-Cola Company. [Presentation] Brian Lesser: Our strong Q4 2025 momentum continued into 2026. with WPP Media achieving its best January in 4 years for net new business wins, leading all media holding companies. We have an inspired, dynamic market-leading team of winners leading this charge. The change in our culture has been palpable. Major integrated wins like JLR and Estee Lauder confirm our strategy works. Our winning client-centric proposition built on this future-proof integrated foundation rapidly meets evolving client demands and delivers truly predictive intelligence. With media at its core, WPP is now exceptionally positioned to drive continued growth, sustain client relationships and deliver significant value for our investors. Thank you, and now I'll hand it back to Cindy. Cindy Rose Quackenbush: Thank you, Brian. Thanks so much. So the next key action we're taking is to establish next-generation production and creative capabilities. And I'm going to start briefly with production. Just last month, we announced the creation of WPP Production, our new production unit led by Richard Glasson. And of course, we marked the occasion with a video. [Presentation] Cindy Rose Quackenbush: So as I think you can see, production is being pretty radically transformed, and we're facing into this head on by fundamentally reimagining how it all works. WPP production, it's a mouthful. It's designed to solve for both volume and performance. We operate an end-to-end content orchestration through WPP Open as one unified content production engine. We're establishing high -velocity studios deeply integrated into WPP Media for real-time measurement and content optimization. And we're centralizing commissioning and supplier management to in-source more work where appropriate and create a more curated roster of external production partners. We're investing. We're investing in cutting-edge capabilities, high-velocity studios, as I mentioned, Gen AI studios, virtual production, video effect of virtual effects and digital twin pipelines. With WPP production, we are well positioned to support our clients as they look to transform and often consolidate their content production activities. And we're confident over time, we will take a greater share of this market. So next, I want to talk about creative. Like we know how critically important creativity is to our clients. I talked a bit earlier about the increasing demand for verifiable human creativity and craft in the era of AI. This is an important source of brand differentiation and value creation for our clients. And while the market for creative service is projecting limited growth over the medium term, creative capabilities are still a vital element of an integrated proposition, and there is significant opportunity for us to unlock white space across our client portfolio through joint propositions and cross-sell. So recognizing these factors, today, we are formally announcing the launch of WPP Creative, led by John Cook, and this organization will be home to our most iconic agency brands, VML, Ogilvy, AKQA, Berson, Landor, Design Bridge and Partners. I want to be very, very clear on this one. We are not merging agency brands. We are not consolidating agency brands. We are not sunsetting agency brands, okay? On the contrary, John and our agency leaders will unite them in new ways and empower them like never before. I've spoken to many clients. They all share with me how much they value choice and the unique perspectives and cultures that our agency brands provide. However, they also want to make it easier for those agencies to collaborate and efficiently access the whole breadth of WPP's capabilities. A simplified structure also removes barriers for our global client leaders, creating a frictionless path to our top talent so we can put the right resource in front of the right client at the right time without the constraints of the past. With WPP Creative, all of our agency brands will have access to the full modern stack of commerce, customer experience, digital platforms, enhancing their client proposition and expanding the go-to-market channel for these services. Much greater alignment with WPP Media and WPP Production will ensure that creative ideas are instantly adaptable and executable across the whole customer funnel. While agency brands remain, WPP Creative will have a more competitive cost base from a simpler, more unified operating model and greater shared infrastructure. I'm excited that WPP Creative will double down on our agency brands and arm them with the capability they need to make them more modern and more united than ever before. And we're already seeing the power of bringing together our portfolio in recent successes securing, for example, the creative mandate for Kenvue, the parent company to well-known brands like Listerine LSTERIN, Sudafed, BAN-AD and more, a strength also recognized by our client there. Next, I'd like to spend a few minutes talking about enterprise solutions. Because today, every global business needs a partner that can help them build, run and evolve their core platforms and systems in a world where AI is part of everyday operations. Businesses are being forced to rethink how they establish competitive advantage and the potential to reinvent workflows has never been greater. For some of our clients, the need is clear and well articulated. For others, the need is completely unarticulated. They know there's a better way, but they don't know what it looks like. To partner most effectively with our clients on their AI transformation, we are elevating our existing enterprise solutions capability into a new externally facing operated unit called WPP Enterprise Solutions, led by Jeff Geheb. Enterprise Solutions provides a complete enterprise transformation offer for clients that spans consulting, content, customer experience, commerce, CRM and platforms. We have a unique ability to fuse these capabilities with media intelligence and world-class creativity to build an AI-powered marketing operation end-to-end for our clients. WPP Enterprise Solutions benefits from multiple routes to market, including via our agency brands and both direct and partner-led go-to-markets as well. These multiple routes to market maximize our coverage and enhance our ability to cross-sell, capture white space, TAM growth opportunity within our installed client base and will drive more direct and partner-influenced revenue. The enterprise transformation market is huge. It's worth $230 billion and projected to grow cumulatively 7% over the next 3 years. Although our share of that market today is small, the opportunity is really significant. And actually, we already have really solid foundations to build on. Today, our Enterprise Solutions business employs around 10,000 people and generates around $1.8 billion of revenue. It's about 13% of our overall group net revenue. This business has quietly built a book of exceptional clients and has already earned notable industry recognition from Gartner, Forrester and IDC. In many ways, as I like to say, Enterprise Solutions is the hidden gem within WPP that we will now elevate to become the crown jewel. And if you ask our clients at Ford, it's already the crown jewel. We have a partnership with Ford that started with J. Walter Thompson 80 years ago, and we've continued supporting them with cross-functional teams as their needs have evolved. Let's hear directly from Ford. [Presentation] Cindy Rose Quackenbush: Great. Okay. So we have talked about how we're going to deliver superior growth for our clients by reorienting around an integrated proposition that brings together media creative, production enterprise solutions, all powered by WPP Open. Now I want to talk about the organizational changes that we're going to make to become a simpler, more integrated company because these are key enablers for our strategy. And as I mentioned earlier, we haven't been waiting for today's update to change how we engage with clients. We know that when we show up as the new WPP, as the best of WPP, we win. But to build on our current momentum and make it sustainable, we need to radically simplify our organization really to unlock true client centricity. So to do that, WPP will no longer be a holding company. We will no longer be a shopping basket full of stand-alone businesses, hundreds of stand-alone businesses. We're going to move to a single company model. with 4 operating units across 4 regions with incentives that closely align to the overall performance of WPP. Being a single company with a simpler structure and common incentives are critical enablers of our strategy. As part of these structural changes, we'll also further simplify corporate functions, particularly in finance and people to reduce duplication, increase our use of shared services and redesign our processes, leveraging AI and Agenta capabilities. Alongside these structural changes, we're also focused on significantly strengthening our execution, both in terms of client service delivery and new business growth. At the heart of WPP's relationship with our largest clients are our global client leaders, our GCLs -- and our GCLs are already masters of creating value. But our existing operating model and our incentives and our internal processes have not always afforded them the agility needed to deliver seamless client-centric services that unlock new avenues for growth. I'm sure my GCLs in the room would agree. But we're transforming our approach. We're going to empower our GCLs with the authority and the resources to function as true leaders for their client portfolios, exercising strategic leadership rather than merely orchestrating a bunch of activities. This is going to include greater control over client P&Ls and the authority to make the best strategic decisions supported by streamlined internal processes designed to eliminate organizational friction and provide access to the right resource at the right time. We're also establishing a new team of client solution architects. This team will apply deep industry expertise to develop winning growth strategies for clients and then architect tailored solutions to deliver on those strategies, unifying technology, media data, all of our marketing capabilities to really drive successful execution. And finally, we're establishing more integrated growth operations, creating a stronger network of growth talent across WPP with a shared hunger to win. These changes will enable us to build on our current momentum, all of our recent wins as we strengthen our new business engine and champion a stronger winning mindset. And speaking of winning mindset, the next core priority for us, perhaps the most important of all, is to embed a high-performance culture to attract and retain the world's best talent, grounded in collaboration, client obsession, humility, accountability and a hunger to win. I know from experience that culture can be the biggest differentiator and competitive advantage of them all. Talented people choose to join companies and stay at companies that have strong cultures where they can thrive in their careers and be their authentic selves. I also know that changing culture takes time and persistence, and it's about both winning hearts and minds. I think winning hearts is about inspiring people with a new mission that feels fresh and relevant and clear. It's also about creating an environment that feels safe and inclusive, where creativity, where intelligent risk-taking are valued, where failure is treated as a path to learning and continuous improvement is celebrated. Now winning minds is about getting the basics right. So that's about clear communication and active listening to people, investments in learning and development. We've got to ensure that our people are building new capabilities with a focus on AI so they can deliver what our clients need from us. It's about common incentives across the company that just unlock collaboration and frictionless resource sharing. It's about performance management and feedback to allow us to build that culture of accountability and greater talent mobility and career progression opportunities. But what I really want is for people to have a world-class employee experience and feel proud to be on a winning team and proud to be part of WPP. Now the final pillar of our Elevate28 execution plan is about creating firm financial foundations for the future. And that's about creating capacity to invest in growth and building a WPP that's fully optimized to deliver for our clients. I'm going to hand over to Joanne now to step through the financial aspects of our plan. Joanne? Joanne Wilson: So thank you, Cindy. And okay, let me share the financial framework, which underpins our Elevate28 8 plan, including our approach to capital allocation. Elevate28 8 is first and foremost about getting WPP back to growth, and our financial priorities underpin that. In the near term, our focus will be on stabilizing the business, and that means improving our net new business performance and our client retention. As I mentioned earlier, net sales like-for-like is a lagging indicator, and that will take time to recover as we cycle through historic client losses. Now as we progress through the 3 years of our plan and we deliver strongly against the core growth building blocks, which I will talk to in a later slide, we anticipate a return to taking our fair share of the market. And in some areas and over time, we will seek to outperform the market. And to support this, we will unlock GBP 500 million of gross annual cost savings between now and 2028, enabling a reallocation of investment towards our growth drivers. And this will, in turn, support a rebuild of margins. And finally, we are setting out to make WPP a simpler and more focused business reducing the perimeter of the group and then still doing strengthening the balance sheet and providing a greater degree of financial flexibility. As you've heard today, we are already implementing many parts of our plan. However, it will take time to deliver and to realize the full benefits in our operational and in our financial outcomes. As Cindy indicated, we see delivery across 3 phases. In 2026, we will stabilize the operational performance of the business, leveraging the improved competitiveness of our media and our data proposition and our production consolidation. We will action our cost saving plans, and we will prioritize investment into the parts of our business, which represent the largest growth opportunities. In parallel, we will take a more proactive approach to our portfolio, unlocking embedded value and operating with a tighter and a more focused perimeter. This will require focused execution and a rigorous reallocation of resources to support our growth plans. Now as a lagging indicator, we expect organic growth to remain subdued in 2026, and we also anticipate margins to remain below historic levels as we reinvest savings to support growth. Alongside this, we expect an elevated average leverage ratio. From 2027, we expect to start to see a progressive ramp-up of the benefits from both our operating model changes and the investments we are making to enhance our new go-to-market, our integrated proposition and from scaling capabilities, including our full service enterprise solutions and production. It is our ambition for the group to return to growth during 2027 for margins to start to rebuild and for our leverage to start to come down. And from 2028, our plan assumes a significantly improved operational performance characterized by accelerating growth and improving margin and strong cash conversion. While we are not providing specific medium-term guidance today, rest assured, we are relentlessly focused on immediate stabilization and disciplined execution of the building blocks to return WPP to growth. And let me spend some time on those building blocks of growth, which we are, of course, aligning our investment priorities against. And I'll start with media. Now the market for Media Services is around $40 billion and is forecast to grow at a 4% CAGR from '24 to '28. And within this, commerce and retail media is a high-growth market, expected to deliver a CAGR of 23%. As you heard from Brian, we have been busy transforming our media and our data proposition and improving our execution. And this not only supports our ambition to improve new business and retention across our media business, but it will also enable us to deliver that improved integrated proposition for our clients with media at the heart. And our recent win with JLR is a great example of that. Now taking back our fair share of the media market is the most significant growth opportunity for WPP at a group level, and it's a core tenet of Elevate28. Now the second area is our next-generation production offer. Now while the overall production market is seeing muted growth, we are seizing the opportunity to take share, internalizing third-party production spend by our agencies, which is estimated at hundreds of millions over the course of Elevate28. We have also identified significant incremental opportunities from new ways of originating creative work, leveraging GenAI and BFX pipelines, which enable us to build next-generation studio capability and make much more of our client work directly. High-velocity content production is a great example of this, which despite being a relatively small proportion of the overall production market today is forecast to grow at a CAGR of 38% over the next 3 years. As the largest production agency globally and with our investment in dedicated capabilities, including content studios, we are well placed to take more than our fair share of this opportunity. We are working with a number of our large clients already in these areas, and we've leveraged innovative content opportunities in some of our recent new business wins. And finally, scaling our enterprise solutions proposition. The enterprise solutions market, as we define it, is forecast to deliver a CAGR of 7%. We play in this space already, but as part of a fragmented offering, existing within agency silos and as such, our current share of the market is low single digit. Now scaling our enterprise solutions across all of our creative brands as well as establishing it as a distinct pillar and investing in direct go-to-market capability, we believe will enable us to significantly grow our market share over the course of Elevate28. The strength of our capability in this area has been recognized by Forrester, amongst others. And with many recent client wins, we are confident we will see an improving growth trajectory. For 2026, the focus will be on consolidating these capabilities under one leader, establishing a strong direct go-to-market team and leveraging partnership opportunities such as the one announced this week with Adobe. Now cumulatively, these opportunities represent a significant white space gross revenue opportunity estimated at up to $900 million over the term of Elevate28 8. And delivering against our growth priorities will, of course, require investment, which will be self-funded from our cost initiatives. Our shift to a new operating model will yield significant efficiencies, building on what we have already done. Since 2024, we have removed GBP 300 million of gross cost savings and our Elevate28 operational plan unlocks a further GBP 500 million of gross annualized cost savings by 2028. Now we expect the associated cash restructuring costs to be around GBP 400 million and for those to be incurred across '26 and '27. It's important to emphasize that our cost actions are targeted at improving our execution and supporting our growth priorities as much as they are about simply removing costs from our business, and they will come from 3 key areas. The first area is that shift to a new operating model. It will drive a more simplified, more integrated way of working. It will enable us to scale our capabilities across the organization and support a stronger and a more effective client proposition. We will consolidate leadership at a global, at regional and at market levels, providing clear roles and responsibilities for our people. We will optimize spans and layers. We will remove duplication across our creative assets, driving a more aligned model, enabling a more effective cross-selling and providing a more holistic view of client success and outcomes. The second bucket focuses on structural cost savings. And as a result of our new operating model, we will deduplicate corporate functions, particularly across our finance and our people teams. We'll further leverage our shared service centers and create centers of excellence. This will set us up to unlock more scaled productivity savings from greater automation and the use of AI across our corporate functions. And the third bucket will come from rationalization opportunities. We will deliver savings from our real estate footprint and from across our long tail of markets and agency operations. In 2026, we expect to realize at least GBP 100 million of in-year P&L savings and GBP 250 million of annualized savings. The estimated restructuring costs associated with these savings in 2026 is around GBP 190 million. Now these targeted actions will improve our execution as well as enable a reallocation of investment into the highest growth opportunities across our business, supporting a rebuild of our margins over time. We will prioritize investment across 3 key areas. Firstly, we are bolstering the main engines of the Elevate28 plan, which you've heard about today. We are directing investments specifically into media and commerce into high-velocity production and enterprise solutions to ensure we capture demand in those high-growth areas. This will include investment in commerce and influencer and analytics talent and in content studios. Second, we are investing to upgrade our go-to-market approach with a focus on our client needs and our new business capabilities. Alongside this, we will rebuild our incentive pool, and we have redesigned our incentive model to align it to our new operating model and with the aim of disincentivizing the past siloed way of working. Third, we are sustaining our commitment to WPP open to data and to AI. To give you a sense of scale, in 2025, we invested more than GBP 300 million in this area, and we will protect this investment to ensure continued enhancements to our technology platform and our AI capability. In 2026, we are expecting to reinvest all of the in-year savings from the cost initiatives into the first 2 priorities, and this is reflected in our margin guidance for the year. Now these investments will be made in a disciplined manner, and we will fully leverage our more integrated approach to benefit from scaled capabilities and a rigorous prioritization in the areas that will drive the highest growth opportunities and returns for WPP. And let me move on to talk about our portfolio review. In recent months, we have conducted this review aimed at assessing opportunities to unlock embedded value and refocus our perimeter. Now this review has covered all assets that we own, whether an operating unit or a minority investment. We've evaluated how each strengthen our proposition and fit our future integrated offer. While we have many great assets within our portfolio, it may not be optimal for us to remain owners either in whole or in part of some of those in the future, and we've applied that best owner assessment to identify the assets where value is potentially maximized outside the group alongside a plan for continuing to rationalize noncore passive investments. Now this has also been an exercise in determining the areas we want to prioritize investment in and being rigorously disciplined in our allocation of capital. And of course, underpinning this is a disciplined approach to M&A with a focus on organic execution in the near term. With the review now complete, we are moving directly to action. And while we don't have specific transactions to announce today, the work is underway, and we will update you in due course. And that leads me to our approach to capital allocation, which is framed across 3 clear priorities. First, we are committed to our investment-grade balance sheet. This is our foundation. Our primary focus here is retaining strong liquidity, reducing our gross debt and improving our leverage ratios over time. As shared earlier, Fitch Ratings has assigned WPP, a BBB rating with a stable outlook, further solidifying our investment-grade balance sheet. Our second priority is funding organic growth. As you heard, we are prioritizing investment in the highest growth and the highest returning areas of the business. And crucially, we are funding this through our cost initiatives I shared today with a strict focus on scaling capabilities that support growth across the entire group rather than in silos. And third, we will share the proceeds of growth. We aim to balance consistent, sustainable shareholder returns over the medium term with inorganic investment. Reflecting this, the Board have proposed a full year dividend of 15p for 2025. We will apply a focused approach to M&A, deploying capital only when an acquisition is clearly more efficient than building that capability internally. And beyond that and as appropriate, any excess capital will be returned to shareholders. And finally, for me, a brief note on how we -- how our reporting is going to evolve to reflect this new structure. Now the current structure is shown here, and our ultimate objective is for our financial reporting to map directly onto our new organizational model. For segmental reporting purposes, the 4 operating units, which are the engines of our business will be included in an enlarged global integrated agencies reportable segment, which will now include public relations and our design agencies. For regional reporting, results will be broken down by North America, EMEA, Latin America and APAC. And over time, we want to give you better visibility into the engines of our business. And therefore, within global integrated agencies, we will provide specific disclosures on net revenue and organic growth for our key capabilities, media, production, creative and enterprise solutions. So that's all for me, and I will hand you back to Cindy to wrap up. Cindy Rose Quackenbush: Amazing. Thank you, Joanne. Home stretch folks. So before we conclude and open up to questions, I just want to spend a minute on how my team and I will hold ourselves accountable and measure success. As Joanne mentioned, our primary focus is to return our business to growth. Organic growth is our most important success metric and getting back to consistent organic growth is our North Star as a management team. But as you know, organic growth is a lag indicator and will take us some time to deliver. So beyond the lag indicators, you can see on the right-hand side of the slide behind me, we've also included on the left a few leading indicators and success metrics that my team and I have as part of our own scorecard. -- that will provide tangible evidence along the way that the actions we're taking are working. I won't read them to you, but you can see there are things like new business wins, client retention, cost savings, asset disposals. These are the types of lead indicators we'll be rigorously managing, and we're confident that these will drive the outcomes that matter the most over time, consistent organic growth, supported by a solid financial foundation. I also want to reassure you that we're not going to just simply disappear and report back on KPIs in a year's time. We really want you to see the execution of the strategy in real time. We want to invite more frequent engagement with our investor community. So over the coming months, we'll be hosting a series of deep dive webinars to take you further under the hood of our key growth engines, specifically in the areas of media, next-gen production and enterprise solutions. So I know we've shared a lot of information with you today, and thank you for listening. But I have to say our mission has never been clearer to be the trusted growth partner to the world's leading brands in the era of AI. Elevate28 is a bold plan for a simpler, more integrated WPP. We will stabilize the business, return to organic growth, create capacity to invest and deliver attractive returns for our shareholders. And we'll do that by delivering growth for our clients by being a simpler, more integrated company by leveraging our agentic marketing platform, WPP Open for competitive advantage and creating firm financial foundations for the future. I am very confident that WPP has a bright future ahead. This is a WPP that is fit for the future and built to win. Now we're going to draw this strategy update to a close. We're going to invite questions from the audience for me, Joanne, Brian or any members of the senior leadership team. And I want to thank you. Thank you very much. Thomas Singlehurst: Thank you very much, Cindy. My name is Tom Singlehurst. I head up Investor Relations for WPP. We're going to go to questions. We'll -- before we dive in, a couple of quick parish notices. For those in the room, we're going to bring a mic to you. So if you can just be patient. If you could state your name and which firm you represent, that would be fantastic. And to make sure we've got enough time for everyone, it would be hugely appreciated if you could ration yourself to maybe 2 questions and a follow-up. [Operator Instructions] But let's start with questions in the room. Laura, maybe start with you. Laura Metayer: Laura Metayer from Morgan Stanley. Three questions today, please. First question on differentiation and competitive advantage. I'm curious, what do you think is the single differentiation of WPP. Obviously, we've heard from peers need to like have an integrated offering, a focus on data, driving leading with AI. So I'm just wondering what do you think is the single differentiating factor of WPP. Second question is when you talked about the JLR win, you said you pitched it as an outcome-based revenue model. Do you mind providing a little bit more details here, like any KPIs that -- and if you can also say maybe like telling us a little bit more generally, like how you think the revenue model will evolve and what sort of KPIs will be used to measure performance? And then lastly, on the Enterprise Solutions business, could you give us an example of a typical project of WPP here and how it differs from leading IT services consultants because obviously, it's part of an agency. Cindy Rose Quackenbush: Sure. Thank you for your questions, Laura. They're great. I'll have a go at the first one and then maybe invite Johnny Horny to talk about JLR. He led the pitch and maybe Jeff Geheb to give an example of an enterprise solution engagement, if that's okay. So I think Brian was incredibly articulate on this. I tried to paint a picture of WPP Open as a very different proposition, right? And it's -- because it's integrated, it's not a point solution. It transforms the entire end-to-end marketing workflow. It's powered by Open Intelligence, which is our foundational data layer. And we've integrated InfoSum's distributed data collaboration capabilities, which means it's built for the future of marketing, not the past. And that is an incredible competitive advantage. Like we have all the ingredients we need to win. And what we really needed to do is pull it all together into an integrated proposition and then power it with this incredible platform that we have. And frankly, when clients see that, they see the power of it and its ability to drive growth without compromising on data ownership. We win in head-to-head competition. That's what you're seeing happen. But I don't know, Brian, do you -- is there anything you want to add? Brian Lesser: I think one of the things I said was that every client is different. And there is no one approach to driving business results for clients. We've built a platform in WPP Open that is flexible that includes our own proprietary technology, but also partners effectively with other companies. So we're always ready for what's next. And we built a data model that similarly doesn't rely on a static data asset that is a legacy CRM solution. Instead, it relies on the ability to connect any and all data sources so that we can be more intelligent and more dynamic in understanding consumer behavior and driving those business results for our clients. So it's different for every client. But as Cindy said, it's really an integrated approach across all parts of our business grounded in that data and technology strategy. Cindy Rose Quackenbush: Thank you. I would just add, we are still contracting with JLR. So there's a limit to what we can share. But Johnny, why don't you say a few words? Johnny Horny: Yes, sure. Yes. Thanks for mentioning that. We haven't officially been appointed by JLR. We pitched throughout last year, went into a period of exclusivity with them through January, and we're now contracting and hoping that by March will be live. But at the core of our pitch to your question, I guess, what's our secret sauce? I think our secret sauce is where you put everything you've seen this morning together. So starting with Open Intelligence to be able to build cohorts and understand audiences in a way that doesn't require us to do simply old-fashioned ID matching, but to keep the data where it is, keep it safe and secure and then put that into a team that we're going to build with JLR, where we and they are all together on the open platform end-to-end. And it's the end-to-end integrated nature of this offer that I think then allows us to make what I think are becoming genuinely competitive offers when it comes to outcomes. So those outcomes aren't do you like the agency you work with, those outcomes are, are we selling more product? And will we get paid on being able to sell more product by being able to build their brands and measurably show that there's greater levels of desire for their products and the crown jewels of brands that they've got. So we haven't finished contracting, but those are the defining and that pitch was against all the major holding companies. I think those are going to be the integrated propositions that will see us win JLR and hopefully many more JLRs pulling these ingredients together. Cindy Rose Quackenbush: Thanks, Johnny. Joanne Wilson: Can I just build on that because Laura, I think stepping back a little bit, your question is around what happens with a time and materials model with AI. And the story is really moving on. Hopefully, you picked it up today. Our clients are using us and it's for the industry really. They need brand safety. They need to know that they have got cultural nuances. They have the best creative and strategy talent, working with them on their brands to really differentiate. And also that they've got the access to the best talent. And navigating through what is an incredibly and ever more complex ecosystem is incredibly challenging for CMOs. It's getting tougher and tougher. And that's what they're paying us for. It's no longer they're paying for us to create 5 ads. In fact, we can create 1,000 ads, but it's how do you get those ads into the right audiences. And that's really what they're paying for, which is really enabling this output-based pricing, it's outcome-based pricing, and it's also shifting more to tech fees and licensing fees as well. So this will be an evolution, but we're making lots of progress in this area. Unknown Executive: To answer your question about enterprise solution scaling. So let's just stay with automotive. This could be JLR. It's certainly true with Ford. So when you begin to solve a marketing problem around content transformation or a customer experience challenge for marketing and you start with the CMO, you quickly evolve that conversation and realize that's an enterprise problem you're solving. Content doesn't live in marketing. It lives as an asset of the entire company. Customer experience lives as an asset of service, brand of product development. And so the nature of our work usually begins with the marketer and then it expands further and further and further. And soon, we're in rooms with IT leaders, procurement leaders, service leaders. And instead of using their silos to define how we work, we're pulling them together. And with AI, that's collapsing at an even more increased rate of change. So AI platforms right now are -- they're collapsing the buying patterns with IT buyers used to buy a platform, implement it for years and then draw the business in. Nowadays, there's a really fast iteration cycle. So we're finding ourselves in rooms now starting with marketing, but really extends to all the stakeholder groups. Thomas Singlehurst: Can we go to Nico. Nicolas Langlet: Nicolas Langlet from BNP Paribas. I've got 3 questions. The first one on the existing business with clients. which was definitely a weak part in the 2025 performance. Can you tell us a bit more about what happened? Is it related to scope reduction, pricing pressure? Or can you give us more detail about that? And what are the concrete actions you have already implemented to stabilize the business with the existing clients? The second question on WPP Open Pro. Can you give us an update regarding the rollout, the first feedback and what sort of opportunity you see in the mid- to long term? And finally, of the GBP 500 million gross cost reduction, have you included any benefit from generative AI tools in that GBP 500 million? And if you can share that? And of the GBP 500 million, how much do you plan to reinvest in the business? Cindy Rose Quackenbush: Yes, why don't you take the first? Joanne Wilson: Okay. So look, Nico, it's absolutely the right question. If you look at our performance in 2025, we talked about a drag from net new business of about 150 basis points. So that points to just under 400 basis points from the underlying business. And the majority of the cuts that we saw really came from the creative part of our business. And as I said in my prepared remarks, it was really an overview, and we did see significant spending cuts, particularly from the start of Q2. Look, we can point to different reasons for it, but there was an awful lot of uncertainty, and we saw heightened volatility across clients. We've talked about the polarization. Many clients, we saw very strong growth during the year, but others cut significantly and at very short notice as well. And effective, we tend to have more project-based spend in our business. And of course, that's often the first places that get cut when we see that volatility. And I would also just add that as you heard from Brian today, Brian and the team have been incredibly busy in the last 18 months really setting up our competitive proposition for the future, redesigning how we deliver for clients. And that undoubtedly has had some disruption in the business and the underlying business. And we've been very deliberate in Elevate28 that Brian and the team have done a lot of the heavy lift and their focus is now on execution. So it sort of brings you on to the second part, what are we doing about it. So if you think about that for media. And then with the creative part of the business, we are building an incredible powerhouse within WPP Creative. We did get in our own way a lot of the time in the past with our silos. WPP Creative will enable scaled capabilities across all of our agencies. WPP Open as well will enable our creative teams to work in a standardized way, and that's everything from big large clients to smaller clients. So it will improve what we're delivering, and that will help both with our larger clients and that tail of clients where we've seen more reductions in spend. And I think that's really important with creative. Sometimes we get very focused on the headline cost saving, but it really is about creating a more agile organization with fewer silos. And just on the GBP 500 million of growth savings and how much we're going to reinvest. I talked about the in-year savings in '26 being GBP 100 million annualized savings will be GBP 250 million. All of that we're going to reinvest in 2026. I talked about this priority to stabilize and invest in the growth drivers, we will do that. Look, it's too early to say how much of the remainder we will invest, but I would assume that we will invest as much as we need of that to support our growth ambitions. Cindy Rose Quackenbush: I'm happy to say a few words about WPP Open Pro. It's early days, right? We only launched a few months ago. But what we did was basically productize or SaaS-ified certain capabilities from within the WPP Open platform. And we did it to target the mid-market SMB kind of end of the client segment. The clients that would largely look to self-service that kind of capability. I'm very encouraged actually. We've got a number of deals with clients. We've got a very healthy pipeline against this, albeit it's small in absolute terms. I think the interesting learning from my perspective is our top 100 clients, say, are looking at WPP Open Pro as a way to software enable the long tail of markets that they service. So rather than having full teams on the ground, you can start to see a world where they can software enable their long tail. And that's kind of interesting. Thomas Singlehurst: Perfect. Maybe we can go to Adrien. Adrien de Saint Hilaire: Cindy, this is Adrien from Bank of America. So I've got maybe 2 questions maybe for Brian and maybe one for you, Cindy. John, I know we're talking this afternoon. So I'll leave the financial questions maybe for later. But maybe, Brian, on -- you talked about all the business wins in Q4 and Q1 and well done on that. Can you tell us like what was the factor or what were the factors behind those wins? And how much of a factor price was behind those wins? And then secondly, I know we've talked about this before, but you put data at the core of your strategy. But how do you solve for the fact that you don't really have, as far as I know, at least a proprietary identity graph compared to competitors? And maybe more for Cindy. So today, we heard a lot about the opportunities. Sorry to come back on the risk. How much like revenue attrition would you expect in maybe in creative because of AI deflation around the revenue per head, for example, how much would you anticipate for the next couple of years? Brian Lesser: Adrien, in terms of the new business wins, everything that I showed in terms of our proposition contributed to those wins. And without going client by client, what I said about every client being different applies to how we pitch business and then how we ultimately service business. So whether that was winning JLR or NCL or the various other wins, each one of those solutions was different. And the great thing about our platform is it allows that and it enables us to go in and do things differently for clients. So selling cars is different than selling cruises is different than various other clients that we have. So I think that contributed to it. The way that we're structured also helps quite a bit. So we're not going into these pitches as Mindshare or Wavemaker or one of our other agencies, we're going to these pitches as WPP media. And increasingly, we're going into these pitches as WPP. So we get a lot of help from our colleagues at VML and Ogilvy and AKQA and from WPP production. And the clients see that, and they know that while we're pitching one thing, we're going to offer a full breadth of services over time. All these pitches are competitive, so price is always a factor, but that wasn't a defining factor in any of these pitches. We have a proprietary identity asset. One of the things that you have to understand is that identity is pretty ubiquitous in the market. So there are lots of companies that provide identity solutions. And it's really an old-fashioned notion of what we need to do to join up disparate data points. So we also have an identity asset called MerLink. We see every adult in the United States and we use that. We also use other partners like Experian when we want to augment that. And because we have a solution that allows us to access any identity asset, it's really not a problem for us. Having identity is such a small part of what you have to do to understand consumer behavior. What we do have is InfoSum, which allows us to connect to hundreds of other data sources. And instead of those being household addresses or e-mail addresses, these are what are people consuming on TikTok? How are they interacting with creators on YouTube. Those signals are much more important than having a traditional identity asset, which again, is a legacy system and fairly ubiquitous and accessible in the market. Cindy Rose Quackenbush: Yes. I would just build -- thanks for your question, Adrien. I would just build on what Brian said. I mean, I've never met a client that doesn't want more for less. That's not a new dynamic. We operate in a very highly competitive market and price pressure is a constant feature, right? But I would say that we probably accept on some level some downward pricing pressure from AI productivity, if you will. But what we're doing here is creating an organization that can cross-sell more effectively to address the white space within our installed client base and be more effective at converting new business. If you take our top 25 clients, for example, we probably capture at best 1/3 of addressable spend. When we unlock this collaboration and cross-sell opportunity for WPP, we have massive opportunity to offset and grow in those areas. Thomas Singlehurst: Why don't you pass it on to Steve, given he's right next to you. Steven Craig Liechti: Steve Liechti from Deutsche Numis. Just on the -- some numbers, sorry. You said 5% to 6% gross hit from losses. Can you quantify the '25 and '26 to date wins to kind of give us some idea of a net number to work off as we stand today? So that's the first question. Second, Brian, in the new setup and the new kind of pitch that you're doing to clients, where you haven't won, why was that? I know things is different, but it would just be useful to hear some insights there. And you also said you had some more work to do as well in your comments. I just wonder from my perspective, how much is the pitch that you're going with the clients now absolutely the right pitch? And what more is there that you do have to do? Brian Lesser: It's a very dynamic business. So it's very rare that the right pitch today is the right pitch a week from now or a month from now. So when I say we have more work to do, it's that we're on a constant quest to meet the needs of our clients in a rapidly evolving world, and that's never going to change. Structurally, we're set up to win, and we have been winning. From a data and technology standpoint, I feel great about where we are. We have the building blocks in place to evolve, not just win today, but evolve as the market evolves. So I feel great about that. In terms of why we didn't win, I say all the time to the team, you can be the best in a pitch, you can be the best on the day and you can still lose a pitch. And there are lots of factors that go into it. Sometimes it's price. Sometimes we don't feel comfortable with where a prospect is taking us in terms of commercial negotiations. Sometimes it's an affinity for one of our competitors between a CMO that knows a certain team. So there are lots of different factors that go into it. And we're not going to win every pitch, but we need to go into every pitch with the right solution for clients. And then I feel great about getting our fair share and actually exceeding our fair share and starting to win back the market share that we've lost. Joanne Wilson: Thanks for the question, Steve. I'm always hesitant at this time of the year to give a net new business because there's a whole year to play for, there's a pipeline, et cetera. But let me share some of the data that we've already shared and you'll be able to kind of broadly figure it out. And then I'll just give you some context around the pipeline. So last year, we said that our gross wins were 300 to 400 basis points of drag, and then we ended up at the top end of that. And we said that the net new business impact was about 150 basis points for 2025. Really encouraging, the gross win impact for 2026 exceeds and that gross win impact in 2025, and that really reflects in recent months, the new business, the better business performance that we've seen, and that's really encouraging. 2025 was a much lower activity year for new business. What we have seen in recent months is the pipeline activity building up again, which is also encouraging. And I would also often get asked, what's defensive and what's offensive? And it's very interesting when you look at the pipeline and the opportunities, it's less black and white than that. It's oftentimes you're defending some scope, but you also have an opportunity to win more. And so it's getting much more nuanced. But as I said, encouraged by the activity, the pickup in the pipeline and of course, the momentum that we've seen in recent months. Thomas Singlehurst: Perfect. I'm just going to do a couple of questions from the webcast, and then I will get back to the room. First one is on the broader strategic shift at WPP to become a more holistic partner to solve challenges for clients. Does this increasingly take WPP into competition with different competitors? And how well do you think you are positioned to win against them? Cindy Rose Quackenbush: Yes, that's for me, right? Look, I think we have all the ingredients we need to win. Like we have, as I said, amazing talent, incredible capabilities, fantastic technology and technology partnerships. We have scale. We have the trust of our clients, which is super important. What we need to do now is pull it all together into an integrated proposition and lead with our agentic marketing platform. And when we do that, I think what you're seeing is we're pretty hard to beat for clients that are ready for that. Like all of our clients are on a journey. Some are really at the very beginning, some are way down the line and most are somewhere in between. But when you see the power of that, turn up in your office and the growth that we can deliver, again, without compromising on data ownership, it's a very strong proposition. So I feel very confident that we're going to be in a great position to deliver this on a repeatable sustained basis. Thomas Singlehurst: Perfect. And one more from the webcast before coming back to the room. It's on a very important topic, which is leverage. So I presume for Joanne. A question here about clarifying the leverage framework. You previously guided to a net leverage target of 1.5 to 1.75x. Has this target been withdrawn? And how do you manage the process with the rating agencies regarding an investment-grade rating? Joanne Wilson: Okay. What we've clearly shared today in our capital allocation framework is our commitment to an investment grade balance sheet and that feels more relevant as we progress through Elevate28 plan feels more relevant than the historic range that we had and we are very committed to that investment-grade balance sheet. And I think, as I said in my remarks, and that's reinforced with the Fitch rating. I want to spend a bit of time on leverage as well. Leverage is really driven by, obviously, EBITDA and net debt. And our net debt -- our average net debt through '25 has actually come down slightly. And so our elevated leverage as a result of that lower EBITDA. And hopefully, as you've heard today, and we presented a plan that is going to get us back to growth. And obviously, with that, we'll follow improved margin, profitability, improved cash generation and we'll help that out. We also talked about the importance of reducing our gross debt. We talked about the role that the portfolio review will play on that. And over the course of Elevate28 we expect our leverage to come down. We do have liquidity at the end of the year of GBP 4.4 billion. Our maturity profile is 5.8 years. We recently refinanced our bond, et cetera. So we're in a very strong position. In terms of the rating agencies, I mean, many of them are here today. And we have a very strong relationship with the rating agencies. We engage with the rating agencies, we listen to what's important from their perspective. And like all stakeholders, we take that into consideration as we ensure that we're making the right decisions and taking the right actions to ultimately deliver long-term returns for all of those stakeholders. Thomas Singlehurst: Let's come back to the room. Can we go to Julien at the back. Sorry, yes, when you get the microphone back. Sorry. Julien Roch: Julien Roch with Barclays. Looking at Page 41, you have a production CAGR over '24, '28 of minus 1% for the industry. I thought it was a growing part of agency services. So why the decline for the industry? And what can WP production can grow at? That's my first question. Then on organic, accelerate organic growth in 2028, previous CEO had a 3% plus organic guidance. So if everything goes according to plan, what's your cruising altitude? What is your ambition? And then lastly, moving from holding company to a single company, does that mean one P&L per country? Or will you still have separate P&L for the new 4 entities? Or will you still have separate P&L per agencies? Cindy Rose Quackenbush: Sorry, Joanne, I think you're on. Joanne Wilson: I might need to repeat your second question, but let me answer the first and the third first, and we can come back to that. Yes, look, on production, and I shared this in my remarks -- prepared remarks that there's subdued growth in production overall. That's not the way to look at what production can mean for our business and how that can contribute to our growth. Hundreds and hundreds of millions of dollars that our clients spend and their production today goes outside of WPP. It goes to a variety of third-party providers. And hopefully, as you saw today as well, production is being completely revolutionized and transformed by AI. We talked about particular parts of production, high-velocity production, which is growing at 38%. That's a very small part of the production market today, but it is a huge opportunity. And as the largest agency globally and with the investment that we're making in content studios and with our team, we're incredibly well placed to take advantage of that. And also with the WPP production consolidation, we are much fit for purpose to really internalize a lot of that client spend, which we can, in an integrated proposition, make it more efficient for our clients. So it's really, really a win-win and our clients are getting the very best of production capability in the market and that AI investment as well. In terms of the P&Ls, so how we will operate and maybe I'll start with WPP Creative and then look at it overall. So the WPP Creative will run on P&Ls. The regional and market models will mirror media. And in certain markets as well, actually, those media and creative and production operations and teams will be even more integrated. But we will have one P&L for WPP Creative for the markets. For the agencies, we will still measure them on their revenues and their contributions, but that will not be the lead P&L. And then across the other 4 areas, of course, they will each have their P&Ls that will roll up to WPP overall. I think the most important thing is as we talk today about the incentives, we have redesigned our incentive model so that it's much more aligned -- everybody is much more aligned on a WPP outcome, and we struck that balance right where it's still incentives that people can really influence as well. So a much simpler P&L structure even if I did. Cindy Rose Quackenbush: Just to build on that because I'm trying to see what's behind your question. Please don't underestimate the enormity of the change that we're making. We're moving from hundreds of stand-alone operating companies to 4 operating units across 4 regions. And this common incentive that is linked to WPP's overall performance is going to change behavior in very dramatic ways. It's going to take all the friction out of the organization. It's going to make us much more client obsessed. It's going to enable us to put the right resource in front of the right client at the right time. So I just wanted to say -- please don't underestimate what's involved in making these changes that we're proposing. Joanne Wilson: And then, Julien, I think your second question was around our ambition on organic growth, if that's right. Julien Roch: That's right. Joanne Wilson: And I said we weren't going to give specific medium-term targets, and that was quite intentional. We talked about the 3 phases. The job that we have to do as a management team in '26 is to stabilize the business, continue to build on that new business momentum and improve our client retention. And that will get us back to growth at some point during 2027, and then we will accelerate from there. So I'm intentionally not putting a number on it, but you can -- that will give you a sense of what we're expecting in terms of the trajectory. Julien Roch: No, I understand that you don't want to give us like a '28 numbers, but it's more -- actually, it's probably more a question for Cindy, right, is what's your ambition in terms of growth rate in 5 years, in 10 years? What would you consider a success for WPP is achieving the previous target of 3% or you actually have more ambition than that? -- without giving us a year or whatever, but what's the... Cindy Rose Quackenbush: I'd like to get to the end of Elevate28 capturing our fair share of the market and then go beyond. But look, we're -- in the short term, I'm absolutely focused on delivering growth for clients, building on our market momentum and stabilizing our performance. And that will remain our short-term focus. Thomas Singlehurst: Can we go with Annick? Annick Maas: Annick Maas from Bernstein. And first question is, as a company which is employing 100,000 people in a world where change is becoming more and more -- it's accelerating basically, how can you stay nimble and keep up with this pace? Or what are the challenges here? The second one is on AI, and this is probably for and it's more conceptually. I guess AI is leading to staff efficiencies in terms of absolute numbers of stuff, but you also have an unprecedented industry structure with one less players. So how do you think conceptually about number of staff and absolute and staff cost inflation in the next years? And then you spoke about the rationalization of the portfolio. I suspect you speak with a few players. Who are these potential buyers? Cindy Rose Quackenbush: Good. Well, look, I'll say in terms of staying nimble, like that's a continuous process, right? We invest in skilling and building new capabilities in our employees on a continuous basis. We have creative technology apprenticeships. We have all kinds of formal AI coaching and training that we put our people through. But I think it also -- it's about also staying close to our partners. We have what we call forward deployed engineers. So we take resources from our technology partners. We put them into our organization. We train them on our platform. And then we send them into clients to co-innovate on new solutions. So I think just being in and around this environment creates a very, as I said, very AI native mindset where we can just continuously build these capabilities. These aren't capabilities you build through formal online training. You have to get your hands on it and actually put it to work for clients. And that's -- that's really how we're staying nimble and in front of things. But do you want to take the question on... Joanne Wilson: Yes. And exactly through the questions, I think. Nico, I think it was you asked me about AI efficiencies and I didn't answer. Look, as we look at the business going forward, undoubtedly, if nothing else changed, we can do more with less. So we can do a lot more with a lot fewer people, but it's never just as simple as that. What we're able to do now for our clients is before we might have created 5 ads and we were managing that. Now it might be 1,000 ads and they're very different how those ads need to be used to target audiences and drive returns. That's requiring different skills and different talent in the organization. Now some of that, we are upskilling our people, some of that we're bringing new talent into the organization. And if you think about the plan that we shared today, we will be reallocating talent around the business. So yes, we will be delivering cost savings. And in people -- in a business where most of our cost savings are people, that will mean a reduction of certain heads, but we will be reinvesting back into talent, different types of talent, commerce talent, influencer talent, much more analytics talent. We already have that at scale today, but really, those are the areas that we will be investing in and with that will come a different profile. In terms of how we measure it, the most important metric will be revenue per head, and that will reflect also our ambition to grow and do more with people, decouple our revenue model from our FTEs. And that's really all around our client delivery. In the back office, there's an opportunity, and we're already doing it in pockets. How do we leverage open, how do we leverage AI to drive productivity savings in our back office. And with the plans over Elevate28, we will do much more of that, much more at scale and on a standardized level. Just in terms of the question, is there AI productivity you asked built into the GBP 500 million. There is on the back office side. But on the front office, the way we think about it is we are creating productivity efficiencies in how we do things, but we're reinvesting that back into delivering even more value, even more outcomes for our clients. And then that feeds into the evolution of our commercial model as well. So that's all built into our plans. But we don't pull out and say we're going to deliver productivity savings from that delivery. We think about it much more holistic. There was a third... Thomas Singlehurst: Portfolio. Joanne Wilson: The buyers. Well, look, as I -- as we shared and particularly in the people business, incredibly sensitive, and we don't -- we're not at a point where we're ready to share externally. What is important is that we've seen an opportunity where we have embedded value of great assets that we have, and that will give us greater degree of financial flexibility and enable us to target our capital allocation more. And for some of these assets, there are many buyers, some of them are attractive assets. Thomas Singlehurst: We go with Ciaran. Ciaran Donnelly: A couple left for me. Joanne, maybe just on your comments on 2027. Can you clarify how we should understand the comments of growth during 2027? Should we think about that as implying a positive exit rate on like-for-likes rather than necessarily positive like-for-like growth for FY '27 in total? And then maybe, Cindy, could you just give us a bit more color on the new incentives? I guess, how do you kind of balance it between individual remit and kind of growth targets? And I guess, just in terms of what they look like versus the legacy incentive structures, how different are they? And then just finally, I mean, on the legacy structures, do they roll off over a period of time? Or what is that phasing period between the new structures and the old structures going at? Joanne Wilson: Very quick answer to your first, it's the latter. So it's during 2027. So you should think about it as a positive exit rate rather than for 2027 as a whole. Cindy Rose Quackenbush: So on the incentives, basically, if you're sitting in an operating unit, your incentives are 50% tied to your operating unit and 50% tied to WPP. If you're in WPP as part of a corporate function, you're 100% WPP. If you're a GCL, you're paid on your client growth. It's that simple. And it's dramatically different from where we are today, where if you're in an agency, you're paid on your agency results primarily. So that is very, very different. And that's why I think it's going to unlock very different behavior, much different collaboration. In the past, our agencies competed with each other. That was the model. Today, when we go into a pitch, we cast the right resource for the right client at the right time and -- it enables that. It enables a much more client-centric approach to the business. Just to add, we're implementing that in 2026. Thomas Singlehurst: I got a couple of people in the wings. I'm going to start with Anna, I think, at the back, and then we'll come to you, sir. Anna Patrice: Anna Patrice from Berenberg. A couple of questions from my side. So you were talking about the evolving remuneration part from time and material to project-based. So maybe how it has evolved in the past over the last couple of years? Like what's the share of time and material overall? And where do you see that going into the future? And what could be the impact on your profitability? That's the first question. The second question on the capital allocation, you were also referring to M&A. So just quickly, maybe what are you looking for? What are the things that are still kind of white spots for you that you would like to enforce within the overall WPP? Joanne Wilson: Shall I take the first one? Cindy Rose Quackenbush: Yes. Joanne Wilson: So just in terms of that evolution, and it's -- that's the way you should think about it. This will be an evolution in our commercial model. And this is an evolution for the industry and for our clients as well. So there's 3 key areas that we look at. One is output-based pricing and where we see more and more of that is in our production business today. We then have performance or outcome based pricing. We've talked a little bit about that. I mean we've always had an element of that in our fee structures with clients, but that's becoming increasingly important, particularly as Brian had shared today how we can measure that outcome more. And the third element is just tech and labor fees as well. That can be through licensing fees, through bundles, through subscriptions, et cetera. And all 3 of those we have in our business today. So with many of our clients for parts of work that we do for them, we're working with our clients to understand what works best, what aligns structures. clients we have going much more major outcome and others, it's more of an evolution of it. So really that's the way to think about it. So -- but very, very much encouraged by the shift that we're seeing. And as we are more and more confident in what we can deliver for our clients, of course, that creates more stickiness with clients. We see a big opportunity to enlarge the scope of what we do for clients. And you asked specific on margin on a per unit basis, we often say, of course, if you just look at it and everything else is the same, it would be deflationary in revenue because we can produce units at a lower cost. But actually what's more important, what clients are paying a premium for is all of that brand safety, the culture strategic input that we're bringing and how we can drive more growth. We're able to do that in a much more efficient way. And so we're looking at this to be ultimately over time, margin enhancing for us. Cindy Rose Quackenbush: Yes. On your question on M&A, again, I would just repeat that Phase 1 of our plan, we are really deeply focused on stabilizing our performance, delivering growth for our clients and building on the current market momentum that we have. As we get into later stage and free up capacity to invest in growth, we certainly will. And I would -- I stand by the statement we have everything we need to win. But as we create capacity to invest, I'll be looking to enhance in those growth areas that we mentioned, media, data, commerce, social influencer and the growth areas. But that's not the short-term focus. Short-term focus is on stabilizing our performance. Thomas Singlehurst: Gentlemen over here has been by patient. Jérôme Bodin: Jerome Bodin from ODDO BHF. Two questions. The first one on the WPP creative. So just to make sure I have properly understood. Will the idea be to pitch from WPP creative or from at the network level? That's my first question. And then also still on WPP Creative. So I have understood that the idea is to improve the mobility in terms of talent between all the networks. So how do you plan to make the improvements from a pure HR perspective in terms of systems and HR architecture? I think it's not so easy. Second question on disposal. So I fully understood that you can't give any names, but could you maybe explain what could be the idea in terms of disposal? Will it be an asset disposal at 100%? Or could you partner with someone with a minority stake? And then linked to that, could we have an update on Kantar on the stake in Kantar, where you are? And what do you plan? Brian Lesser: What was the last question? Joanne Wilson: Kantar. Cindy Rose Quackenbush: John? You want to say a word on WPP Creative, our CEO of WPP Creative. John Seifert: You can see where it came from. Thank you. Yes, first of all, on WPP Trade, it's -- after being at some of these investor meetings in the past, it's nice not to come and talk about a big merger that we're going through in the creative agencies. I've done that before. We all know that game. We've got -- in the analysis we've done in the last 6 months, we've got really powerful agencies. We've done that work in these last 5 years. And I saw that just this week, the drum creative rankings, #1, Ogilvy, #2 VML. It's not a super power we want to walk away from. So that's thing number one. And so I'm really excited about the strategy of not merging things, but getting behind our agencies. So that's a precursor to your first question, which is -- we're not using WPP Creative as a brand or an agency. It's not an agency. It's an operating system lets those great agencies, those very creative agencies operate together because we have a couple of beliefs, and we heard this from our clients. Our clients love our agencies. They love the choice. They love the creativity, they love the diversity, but they found it hard to work with them and found that either the clients or our GCLs, our global client leaders had to do the navigation, and that was difficult. So we're doing what we think is the best of both worlds, build around these great agencies, highly recognized, very creative agencies that make it easier to navigate. So WPP Creative is simply a way to navigate. It's an operating system. It's not an agency with a very light layer of infrastructure between them to make that happen. And if we do that, we will grow better than we ever have before as WPP and as creative agency. So if we unite them in the right way, which we are, -- we have the second part of your question, which is the ability for talent to move around between those agencies or to team up for client assignments. That's something we haven't had as well as we should have in the past. So that mobility, the second part of your question is key, and that's one of the reasons for the group. If we do this, we can also put better capability across all our creative agencies. Cindy talked about enterprise solutions. Jeff talked about it. This will be different than other holding companies creative agency groups, if you will, because of the embedment of everything Jeff and Cindy talked about with Enterprise Solutions. So to your point, WP Creative is not an agency. It's an operating system lets the great agencies. The creative agencies of WPP be great individually and be great together; and two, it allows for talent mobility. Cindy Rose Quackenbush: Jerome, thanks for your question, and I hope you'll forgive me for not answering it. We're not going to name any assets or give any further guidance today. We've carried out a complete strategic review of our group. We've identified assets that we feel we're probably not the best owners for in the long term. We've started a formal process. And as soon as we have anything to report, we will. But thanks for the question. Joanne Wilson: And I'll just follow up with Kantar, which you asked specifically about. I mean, Kantar, obviously, they sold the media part of the business last year. And they now have 2 divisions, Numerator Worldpanel and Kantar Brands. And those 2 divisions, they've done a big lift in terms of those 2 setting them up to operate independently, and that will be completed in the next few months. Obviously, that gives more flexibility in terms of realizing value from that business for both ourselves and BN, and we're very aligned with BN on the time lines for that, but nothing really more to add. I mean I think just specifically to your question on could this look like minority sales? Yes, it could. So there may be some assets that we bring majority owners into as well. Thomas Singlehurst: And Richard. Richard Kramer: I will keep it to 2 questions. Richard Kramer from Arete Research. Cindy, you mentioned productizing WPP Open and Pro and for the mid-market in particular, do you see offerings like Meta, Andromeda and Google Pomelli as fundamentally competing with WPP? Or do you see them as somehow complementary? And my question for Brian, there's been a lot of recent discussion and disclosure around principal trading and rebates. How are you going to address this question of transparency going forward? And is this an opportunity in the market for you to take some more share? Cindy Rose Quackenbush: Thanks for your question, Richard. As I said, there's a lot of point solutions out there. Some are tied to specific platforms. I think when companies start to stack all these up, -- it becomes expensive, complex and you break the workflow. So I don't -- I think what we have is fundamentally different. It's an end-to-end platform. We are agnostic and independent in terms of how we invest our clients' media budgets. And we have relationships with all the major platforms anyway. So I think what's behind your question is, are we going to be disintermediated by the big tech players? I don't think it's that easy to just turn on a solution in a client environment and watch the magic happen. And this involves real transformation and our clients need help. As I suggested, their data is not always ready. Their people aren't always ready. Their systems aren't always ready. So I see a real opportunity in being that intelligent orchestration layer. I don't see -- we're not seeing a disintermediation dynamic play out in any way. Brian Lesser: In terms of principal Trading, building compelling performance-oriented products has always been a part of our business, Richard, as you know. In fact, WPP was really a pioneer in building products that drive value for clients. In many cases, those are part and parcel of the services that we provide our clients. And in other cases, it requires us to invest, invest in technology, invest in our trading partners, invest in sources of data and then pull all of that together on behalf of our clients to drive performance. In a lot of markets for a lot of different channels that we service, we do sell principal media products to our clients. And those products are actually built with our clients. And they are asking us for more, frankly. Both Cindy and Joanne touched on the fact that our clients, in many cases, are CMOs, CMOs are under tremendous pressure to prove the value of marketing and grow their business. And so in many cases, they come to us and they say, how can you help us navigate addressable television? How can you help us navigate social media or commerce or retail media. And with our clients, we design products where, in many cases, we have to invest in those products. So it's a part of our business, and it's a growing part of our business, and I continue -- I expect it to continue to grow over time. In terms of us taking share, I do think that we can take share through our investment in those products. Again, if you come back to our strategy with respect to technology, we're not trying to sell assets that we acquired for billions of dollars. We're trying to work with technology companies, data companies, media companies to connect these things to build products that drive better performance. So in many ways, we are more impartial, more objective in how we construct our principal-based media products, and therefore, they're more compelling to our clients, and I expect they'll buy more of them over time. Thomas Singlehurst: Now we promised to get you out by midday. I've got a couple of questions, 3 from the webcast, and then we'll draw a line under it. But first one for Joanne, once again on leverage and the balance sheet. Could you please let us know if you intend to refinance the September '26 bond out of cash or by issuing another bond? That was the first question. Joanne Wilson: That's easy. We've done that. We refinanced in December, our GBP 1 billion bond, which covers that September maturity and our next maturity after that isn't until May '27. Thomas Singlehurst: Perfect. Second question, we've had a couple of these, and so I'm synthesizing them, but it's -- for you, Cindy, it's about the transition from moving from the Board to being a CEO. Can you talk about the challenges and surprises during that process? Cindy Rose Quackenbush: Gosh, how long do we have? Well, look, I think on balance, it was a strategic advantage because I knew the team, I knew the business, I knew many of the clients. So I think I avoided the 6-month onboarding experience that perhaps an outsider would. And actually, I had -- as I said, I had a thesis even before I arrived in the role. And so I just think it was a strategic advantage and helped me get to where I wanted to get to faster and actually started making changes relatively quickly. So -- but there's always surprises along the way, right? We'll save that for another day. Thomas Singlehurst: Final question. A couple of people have mentioned the Enterprise Solutions capability, the fact that it's 13% of revenue, and that feels high. Where does it come from? Is it -- where are the assets based? And what's their genesis? It might be one for John and Jeff. Cindy Rose Quackenbush: Jeff, do you want to take it? Jeff Geheb: Sure. Cindy Rose Quackenbush: Okay. Go forward. Jeff Geheb: Yes. So the nature of where it came from is 10 years of acquiring companies, 10 years of building capability inside of our creative agencies inside of really every company inside of WPP to be relevant was expanding into new asks. So they were expanding into CRM. They were expanding into technology because their value proposition required them to do it. And so what it happened over the years is that we had distributed capability all over the company. And through the acquisitions, integrations, as John mentioned, specifically when VML and Wunderman Thompson came together, we began to pool all of these assets together, and we could bring them to clients in new ways that didn't require them to, I think Cindy said, shop. They could come together in a holistic offering. So where would you have found it? You would have found it in all the different P&Ls, all the different regions, all the different markets. And so really, what we're doing now is just we're bringing them together, and we're putting under a framework where not every company or a capability is competing on to itself. And so for the first time, you're going to find it seen outside of the context. This isn't a start-up. I mean we've been doing this for a while. We've been competing on this for a while, but you'll just find it under VML. You would find it in Ogilvy, you would find it distributed throughout the network. So that's where it came from. Cindy Rose Quackenbush: So we're strapping rocket boosters to... Jeff Geheb: Yes. That's right. Cindy Rose Quackenbush: WPP Enterprise Solutions. Good. Shall I wrap? Okay. Super. Look, I want to thank you all for joining us today. I mean I've met many of our shareholders individually over the past few months, and I'm genuinely always grateful for your insights and for your support. And thank you. I want to thank you from the bottom of my heart for your trust in us. And we really look forward to sharing our journey as we move forward. So thank you all for coming and for listening. Thank you.
Operator: Hello, thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc. fourth quarter 2025 and full-year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will open for questions. If you would like to ask a question during that time, please press star, then 1 on your telephone keypad. I would now like to turn the call over to Kurt Hallead, Treasurer and Investor Relations. Kurt, please go ahead. Kurt Hallead: Thank you so much. Good morning. Thank you for joining TETRA Technologies, Inc.’s fourth quarter and full-year 2025 earnings call. The speakers for today will be Brady Murphy, Chief Executive Officer, Elijio Serrano, Chief Financial Officer, and Matt Sanderson, Chief Commercial Officer. Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-K. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties, as outlined in our SEC filings. In addition, we may refer to adjusted EBITDA, free cash flow, and other non-GAAP financial measures. Please refer to our press release for reconciliations of non-GAAP to the most comparable GAAP financial measures. These reconciliations are not a substitute for GAAP financials. We encourage you to refer to our 10-K that was filed yesterday. After Brady, Elijio, and Matt provide their comments, we will open the line for Q&A. I will now turn the call over to Brady. Brady Murphy: Thanks, Kurt, and good morning, everyone. Welcome to TETRA Technologies, Inc.’s fourth quarter and full-year 2025 earnings call. Before we get into the quarterly results and outlook, I would like to begin the call by acknowledging and highlighting the exceptional efforts and the 2025 performance of our leadership team and all of the TETRA employees. 2025 was a challenging year for the U.S. oil and gas industry, marked by reduced levels of U.S. onshore activity and a volatile global economic environment. Despite these headwinds, there is a long list of TETRA’s record financial achievements, as well as overwhelming support for the company’s strategic developments. I will highlight some of the outstanding financial achievements and progress against our 2030 objectives, which we communicated as part of our ONE TETRA 2030 strategy at our investor conference at the New York Stock Exchange last September. I will turn it over to Matt Sanderson and Elijio Serrano to summarize our fourth quarter results and provide an update on our balance sheet. Headlining our exceptional 2025 performance is our Gulf of America Completion Fluids team. For the fifth consecutive year, TETRA was ranked the top supplier in the Gulf of America for product quality and overall performance for offshore completion fluid suppliers in the well-respected Kimberlite International Oilfield Research Report. As the market and technology advanced to 20K ultra-high-pressure and ultra-high-temperature wells, our innovation leadership is resulting in market share gains. TETRA’s Gulf of America revenue increased well over 50% in 2025 compared to 2024, driven by participation in deepwater projects, including three CS Neptune wells that we completed in the first half of the year for a super major. Our unique zinc-free, high-density completion fluid allowed them to complete their high-pressure wells on schedule without exposing their production facilities to zinc in the production flowback. The performance of our Gulf of America team drove our completion fluids and products EBITDA margins to improve 420 basis points from 28.9% in 2024 to 33% in 2025. The combination of our vertically integrated business model as the only service provider that manufactures our own fluids and our unique technology portfolio gives us a very strong market position. Supporting our global completion fluids business is our West Memphis manufacturing team, which is the heart of our bromine-based completion fluids and our PureFlow electrolyte production. Using elemental bromine sourced through a combination of open market purchases and our long-term supply agreement, we produce offshore completion fluids, including CS Neptune, and the PureFlow-based electrolyte. 2025 was a record production year for West Memphis, producing 40% more bromine end products than our long-term bromine supply agreement allows. The West Memphis team also expanded their production and distribution capacity to ship PureFlow electrolyte to Eos in tanker trucks rather than totes to keep up with their expanded production. Another 2025 record performance is our global calcium chloride business, which set both revenue and adjusted EBITDA records and again outperformed GDP in 2025. We hold a market-leading position in Europe and a strong second place in the U.S. market. In addition to our food-grade products, we are encouraged by the outlook for our tech-grade product lines, supporting the reintroduction of chip and other high-tech manufacturing operations in the U.S. Although still a small percentage of our U.S. calcium chloride revenue, our tech grade for chip manufacturing grew by 144% in 2025 over 2024. The combination of these three record-setting operations, Gulf of America, West Memphis plant production, and calcium chloride business, not surprisingly, resulted in record-level revenue and adjusted EBITDA for the completion fluid segment as a whole in 2025. This performance occurred despite an estimated 55% fewer floating deepwater rigs operating globally than the 2014 peak, and we believe we are still in the early days of anticipated Eos production ramp-up. This is one of the reasons we are still very well positioned to benefit from the multi-year deepwater activity recovery and the electrolyte growth highlighted in our ONE TETRA 2030 strategy. Moving on to the strategic milestones for 2025 in the fourth quarter. During the year, we made significant progress on our new bromine plant and reached a major milestone in December by erecting a 120-foot-tall titanium bromine tower and support structure at our Evergreen plant site in Southwest Arkansas. We completed phase 1 of the planned three phases on time and materially below budget. We have advanced the detailed engineering design for phases 2 and 3, placed orders for long-lead items, refined the plant’s total cost, and are finalizing the detailed schedule. By designing the plant around the bromine tower’s capacity of 75 million pounds of bromine annually, we will have 56% more low-cost bromine available to us than the 48 million pounds we published in our definitive feasibility study in August of 2024. Since that study was completed, we have increased our demand outlook for deepwater completion fluids and now expect total bromine product demand to reach the 75 million plant capacity by 2029. Once we have the final upstream wellfield schedule from Standard Lithium and Equinor’s Reynolds unit, from which we intend to receive the post-lithium extracted brine, with board approval, we intend to FID the project. For the reasons highlighted, we expect the Arkansas bromine project’s economics to be improved from what we previously published. Continuing on with our Arkansas brine resources, we are pleased with the progress towards finalizing JV terms with Magrathea for the production of magnesium metal, using the rich concentration of magnesium, also in the same Smackover brine on our 40,000 acres. Magnesium is classified as a critical mineral by the U.S. government and is used to produce a highly valued metal for the Department of War and other U.S. industries. For our planned partnership, we would combine Magrathea’s advanced process technology with TETRA’s deep operational expertise and a world-class magnesium resource base from our Southwest Arkansas brine acreage. Magrathea has already secured Defense Production Act Title III funding from the Department of War to support its commercial phase one, planned to be on-site at TETRA’s Evergreen plant. We are optimistic that further government support is possible for our future commercial plans. Finally, as it relates to our Arkansas brine resources, and as we highlighted in our 2030 strategy, lithium has been viewed as a future opportunity beyond our 2030 targets. With lithium prices increasing back to over $20,000 per metric ton, we are reengaging direct lithium extraction technology companies and evaluating technological and cost efficiency advantages to understand the current economic environment. As a reminder, TETRA is the designated operator of the Evergreen brine unit and owns 65% of the brine minerals, including lithium, while ExxonMobil owns the remaining 35%. Our final strategy update concerns desalination for beneficial reuse. We are very pleased with the results of our EOG commercial plant desalination operation in the Permian Basin. This phase two grassland study has been running with over 95% uptime for the past four months following completion of the greenhouse phase one study. This grassland study is evaluating oil and gas-produced water desalinated through TETRA’s OASIS technology. Of great significance is that TETRA was issued a patent for our TETRA OASIS TDS end-to-end desalination solution. We are pleased that our unique pretreatment, combined with exclusive membrane and post-treatment technologies, has been recognized as a unique and patentable solution for desalinating oil and gas-produced water for beneficial reuse. The biggest desalination update since our Investor Day in September is the growing attractiveness of West Texas for data centers, which has shifted our customers’ priorities and our focus. With data centers straining electric utility grids and driving price increases, behind-the-meter, cost-effective power has become a major driver for data centers. With West Texas’ low-cost, abundant natural gas, ample and affordable land, and a friendly regulatory environment, it is easy to understand why. The one challenge West Texas does have is a lack of fresh water for power and data center cooling. With over 20 million barrels of produced water per day, there is far more water available by desalinating produced water. This is an extremely attractive option since operators need to reduce the amount of water they reinject for disposal, and converting it into a viable resource for power and data center cooling is a double win, given they now have a revenue source instead of incurring disposal costs. Our customer plan for 25,000 barrels per day plants has been shifted to greater than 100,000 barrel per day desalination plants, as one data center could require as much as 200,000 barrels of desalinated water. This is a very dynamic environment that has not changed the fact that operators need a solution for disposal well pore space filling up. It has provided an exciting acceleration opportunity that has significant potential for TETRA. All these efforts are contributing towards the goals we laid out for 2030, including our future segments focused on specialty chemicals and with water desalination and treatment. Looking forward to 2026, we see continued momentum towards our 2030 objectives. We expect incremental revenue growth driven largely by a material increase in electrolyte business and major contract awards in Argentina. Argentina has been a real success story for us as our team has secured contracts to meaningfully expand our production testing business, anchored by our proprietary and highly efficient SandStorm technology. In addition, our team secured three early production facility contracts. The combination of winning more early production facility contracts and gaining market share with SandStorm is expected to double our revenue in 2026 compared to 2025. Argentina’s margins are accretive to our overall water management and flowback margins, and are more stable given the long-term nature of our contracts. On the completion fluid side, Gulf of America activity in 2025 was heavily weighted towards completion and less towards drilling. 2026 activity is forecasted to be higher in drilling, including more exploration, with less completion activity. We do not expect the Gulf of America to reach the same record levels as in 2025. This is projected to cycle into stronger 2027 completions activity, and our 2030 targets for this business are on track. Our onshore water and flowback services business continues to benefit from longer laterals, increased sand and water usage, and more production-related activities, including water treatment and recycling. We expect the net impact of all these to result in overall modest growth in 2026. We have secured third-party bromine supply for 2026 and 2027 to bridge our growing bromine demand and until our bromine processing plant is brought online. These third-party supplies will allow us to keep pace with expected material increase in electrolyte and robust deepwater market, but they do come at an incrementally higher cost relative to our current long-term bromine supply agreement, which is consistent with our expectations. Although it is possible for one or more CS Neptune jobs to materialize in 2026, without CS Neptune projects and somewhat higher short-term cost of bromine, we expect our completion fluids and products adjusted EBITDA margins to be in the 25%-30% range, which is consistent with the average margin range for this segment over the past seven years. The increased cost for additional bromine supply has been anticipated as a bridge until we have our bromine processing plant operational. It further supports the strong business case and significant EBITDA increase we expect for this segment starting in 2028, when the plant is operational. For water and flowbacks, flowback services, the continued focus on differentiated technology and our profitable international growth contribute to improved adjusted EBITDA margins from 12% in 2025 to the mid-teens in 2026. With that, I will ask Matt Sanderson, who is currently, and for the past two years, done a great job as our Chief Commercial Officer, to update us on the fourth quarter highlights, and then Elijio Serrano to close out with our balance sheet and update. Before turning the call over to Matt and Elijio, I would like to again express my and the board’s deep appreciation for Elijio’s contributions and efforts over the past 13 years. Last October, we announced that Elijio had notified TETRA of his intentions to retire at the end of March. Over the past six months, Elijio has worked with Matt to ensure a seamless and orderly transition of the CFO responsibilities. Matt has been with TETRA for over nine years, and as stated, most significantly as Chief Commercial Officer. The board and I spend a lot of time on succession planning to ensure we have the talent necessary for the organization to execute on the base business and deliver our longer-term goals. This transition will allow us to do so. Elijio has agreed to remain available to Matt, me, and the board as an advisor, so we can leverage his skills, knowledge, and relationships with our investors, the financial community, our lenders, and the financial team. While this might be Elijio’s last quarterly earnings call, we fully expect that in the background, he will continue to support the organization as we methodically march towards our 2030 goals. With that, Matt will provide some additional color on the fourth quarter results before handing over to Elijio. Matt Sanderson: Thank you, Brady. As mentioned, 2025 was a record-setting year for TETRA on several fronts. This included our strong fourth quarter performance. Completion fluids and products revenue of $83.7 million was up 22% compared to a year ago, including a material increase in shipments of electrolyte. Our adjusted EBITDA margins remained strong at 28.2%. Water and flowback services revenue of $63 million was flat compared to the third quarter, despite the traditional year-end slowdown in the U.S. market. Inversely, we saw stronger activity in Argentina as we started another early production facility during the quarter. We expect to start another one this week, setting us up for a strong year in 2026 in the Vaca Muerta region, as Brady mentioned earlier. Production testing activity remained strong on the back of our SandStorm technology. Adjusted EBITDA margins improved 100 basis points on aggressive cost reductions and a continued focus on new technology and automation aimed at reducing personnel at the well site. Despite competitive pricing pressures in U.S. land, our adjusted EBITDA margins remained relatively flat during the year. Our focus remains on leveraging technology on higher margin opportunities and generating free cash flow in this segment. Corporate and other expenses were $11.3 million and included materially higher variable compensation expense, resulting from our team’s record 2025 performance. This variable compensation includes both short-term and long-term incentives, including returns on net capital employed targets and a total shareholder return, or TSR, over a three-year period, which is structured to align management’s interests with those of our shareholders. For the three-year period that we are being compared to our peers, we were in the top quartile of our peer group. As a result of that increase in shareholder value, our long-term variable cash compensation increased $2 million over the third quarter. In the fourth quarter, we also changed our corporate office location, which will reduce our corporate G&A expenses by approximately $2 million per year. We will be participating in several upcoming investor-related events in the first part of this year, which have been listed on our website. I look forward to working closely with our current and future shareholders, along with the broader investor community. On a personal note, I would like to congratulate Elijio on his upcoming retirement. I sincerely appreciate all of Elijio’s support during these past nine years, and I wish he and Mary all the best on the next chapter in their life together. With that, I will turn it over to Elijio to cover cash flow and the balance sheet. Elijio Serrano: Thank you, Matt. I will highlight three areas, then we will open the call up to questions. The first one is free cash flow. Cash flow from the base business in the fourth quarter was very solid at $21.8 million. For the year, free cash flow from the base business was $83 million. As you recall, all during 2025, we have been communicating our objective of generating over $50 million of base business free cash flow, and we did $83 million. Included in 2025’s free cash flow was $19 million in cash proceeds from the sale of our shares in Kodiak Gas Services, following our divestiture of CSI Compressco. Just like we did with our previous sale of shares in Standard Lithium, we timed our sale of Kodiak shares near their 52-week high. The organization is very focused on managing cash flow and managing working capital, so we can maximize cash flow from our base business to invest into our bromine project in Arkansas. Despite a $12 million increase in fourth quarter revenue compared to a year ago, our cash management efforts allowed us to reduce working capital by almost 20%, or by $21 million, to $88 million at the end of 2025. To demonstrate the quality of our customers and our internal focus on timely invoicing and collections, days sales outstanding improved 13% from 71 at the end of 2024 to 62 days outstanding at the end of 2025. Base business capital expenditures were $30.5 million, and investments in Arkansas were $45 million. We also capitalized $4.5 million of interest expense, consistent with GAAP requirements on large capital projects. Consolidated TETRA free cash flow, including all our Arkansas investments, was $33 million in 2025, demonstrating the strength of our base business to allow us to invest into the projects and still be free cash flow positive. This will allow us to keep making progress towards our 2030 goals without over-leveraging TETRA. The second topic of emphasis is our balance sheet. Even after we invested $45 million into Arkansas, we ended the year with cash on hand of $73 million, double where we started the year at. Net debt is $109 million, down from $143 million at the end of 2024. Our net leverage ratio improved from 1.8x at the end of 2024 to 1.1x at the end of 2025. We have nothing outstanding on our revolvers. As of this week, we had borrowing capacity of approximately $7 million on our revolvers. Brady mentioned the growth in our business in Argentina. Argentina is cash self-sufficient for us. We are not having to support Argentina by moving cash there to double the business in 2026. We expect to begin repatriating cash to the U.S. in 2027, given the strong performance that we expect from them with long-term, stable, early production contracts. The third topic is our tax loss carryforwards. As of the end of 2025, we have a tax loss carryforward of approximately $84 million that can offset almost $300 million of taxable income in the United States. In 2025, we were able to use approximately $7 million of this deferred tax asset to reduce our U.S. cash taxes in the United States. This tax loss carryforward is of significant value to TETRA and TETRA shareholders as we continue to grow our business and move towards the 2030 goals, with expected higher U.S. income from our bromine plant and from water desalination facilities. Lastly, given this is my final earnings call, I would like to express my appreciation to the TETRA organization, our board of directors, the research community, and our shareholders for the opportunity to work with all of you. TETRA is in a great position to deliver on our 2030 goals and create even more value to our shareholders as we grow our earnings. Tiffany, with that, we will open the call to questions. Operator: At this time, if you would like to ask a question, press star, then 1 on your telephone keypad. To withdraw your question, simply press star, then 1 again. We kindly ask that you limit your questions to one and one follow-up for today’s call. We will now open for questions. We will pause for just a moment to compile the Q&A roster. Your first question comes from Stephen Gengaro with Stifel. Please go ahead. Stephen Gengaro: Thanks, good morning, everybody. Matt Sanderson: Good morning, Stephen. Elijio Serrano: Good morning, Stephen. Stephen Gengaro: It will be odd without Elijio next quarter, but we will keep talking to him. I think the first thing is, when we think about the comments on the fluid side and how the deepwater market looks in 2026 versus 2025 for fluids, and how that evolves into 2027, can you just talk a little bit about what you are seeing, just any incremental color on how we should be thinking about the offshore, well, basically, the non-industrial piece of fluids? Brady Murphy: Yeah. Yeah, sure, Stephen. As mentioned, we had a record-setting year for our completion fluids business in 2025. Really, when you think about it, we are still way below where the market peaked in deepwater in 2014. As I mentioned, we are 55% below where we were in the peak, and we are setting records financially. We had a couple of tailwinds with us in 2025 because the Gulf of Mexico, as I mentioned, was largely in completion phase. These cycles happen in deepwater. If your drilling campaign is ongoing and you are doing less completions, that has an impact on us. If you are doing more exploration and less development, that has an impact on us. 2025 was a great year. 2026 is still going to be a very strong year for us. But we are seeing a cycle into more drilling phase and less completion phase. Again, that cycle will reverse itself in 2027. I will say the overall deepwater market is overall continuing to look very positive over the next three to four years. Hopefully that helps with your question. Stephen Gengaro: Yeah, it does. The other question I had on that was, when we think about margin progression and on the fluid side, obviously we can sort of back out the first half of 2025, which you had the TETRA CS Neptune work. Brady Murphy: Yeah. Stephen Gengaro: The guidance parameters you gave, is it what is driving that? Just kind of normalized margins, ex Neptune, and what is the pricing situation look like for the deepwater fluids? Brady Murphy: Yeah. Our pricing power is pretty strong in the completion fluids. We are the innovation leaders, and we think we get a premium for that. We are also vertically integrated from the standpoint of being able to produce our own fluids. We feel we have an advantageous position in that regard. I mean, as I have mentioned, we are securing third-party bromine at a higher pricing level, spot market pricing levels, than our long-term supply contract because we are growing in both the deepwater and the Eos demand. That does put a little bit of pressure on our margin side, but as we communicated, we think we are going to be in that range, 25%-30% for the year in the segment, which is really consistent with our past seven years. I think what it does highlight is, again, the strong business case that we have for our bromine plant, because when we bring that plant online, we will have 75 million pounds of bromine available to us at significantly lower cost than what we are paying today. That is, again, part of our 2030 objectives that we have outlined. Stephen Gengaro: Thanks. Just one really quick one on the margin side. I do not think you have ever said this. I do not know if you will tell us, but any guidance on how much of your bromine needs are serviced by the long-term LANXESS agreement? Brady Murphy: I do not know that we have communicated that. Stephen Gengaro: Okay. Brady Murphy: Stephen, do you know, Elijio, if that is public knowledge? Elijio Serrano: We have indicated that approximately 75% of our historical needs have been met under a long-term agreement, and we have been doing open market purchases for the rest of it. As Brady mentioned, with the volumes increasing, we are doing more and more open market purchases. Brady Murphy: The percentage of open markets is definitely increasing, Stephen, as we grow and we support the electrolyte ramp up. We are going to continue to see that in 2026 and 2027 until we bring the plant online, which will have a dramatic change. Stephen Gengaro: Great. Thank you for all the details. Brady Murphy: Yeah. Thank you, Stephen. Operator: Your next question comes from the line of Martin Malloy with Johnson Rice. Please go ahead. Martin Malloy: Good morning, Elijio Serrano, enjoyed working with you for a number of years and wish you the best in retirement. Elijio Serrano: Thank you, Martin. Brady Murphy: We are going to keep him busy, Marty. Do not worry. Martin Malloy: Okay, good. I wanted to ask about the desalination plants. It seems like, obviously, the size of the potential projects has increased substantially. I would imagine that there are a number of different parties involved, from E&P companies to midstream to the data/power providers. Can you maybe help us with how we should think about the timing of these commercial contracts potentially getting finalized and then the time to revenue? Brady Murphy: Appropriate question, Marty, because even since our Investor Day in September, we were going down a path with several customers who had a really sincere interest to stand up our 25K design plant in 2026. That has changed dramatically since our September discussion, and multiple customers, multiple data centers are now part of the discussion and have kind of taken over, I would say, the opportunity set that we initially were thinking about. It also includes the fact that we have to do additional engineering work. Well, we completed our 25K engineering study, but clearly, when you go to 100K and above, we have to kind of restart that engineering cycle. As you stated, there are multiple parties involved with this: the supplier of natural gas, a potential midstream supplier who has got water or an operator that has their own water, the power generation itself, and the potential hyperscaler, whoever that, in the case may be. It is a multi-party process, and it is an exciting process. West Texas is looking very favorable, I would say, in terms of the future of these data centers. Quite frankly, we have been open the fact that we, to date, and still, to our knowledge anyway, we are the only ones that have communicated an end-to-end full commercial offering for desalinating produced water for beneficial reuse. We are very encouraged by the patent that we received in the fourth quarter that provides more validation that we have got a cost or a technological advanced position. In terms of timing, look, we are hopeful that one of these data center desalination projects will materialize in the first half of this year. Obviously, we were not planning on much revenue in, if any, revenue in 2026. It does hopefully set us up for a first revenue of a large facility sometime in 2027. Martin Malloy: That is great. For my follow-up question, just wanted to ask about bromine and you are having to go out in the spot market and make purchases to meet the demand. It sounds like from Eos’s call earlier this morning, demand is not the issue. They have had some temporary execution issues ramping up, but the demand is certainly out there and they will be increasing their manufacturing going forward. Does it make sense to try to accelerate the timing of bringing that bromine project online? It seems like you were trying to pace it, so you kept it within free cash flow. Given the ramp-up in demand and potentially completion in the deep water coming back in 2027, does it make sense to try to bring in the completion date for the bromine facility? Brady Murphy: Yeah. The bromine facility is really being a schedule-driven project right now. The timing of being able to get the contractors on site, get all of the major equipment, tagged equipment, on location. We are not slowing the pace of this project by any means to try to pace it with cash flow funding. We are moving as quickly as we can. We are still on schedule for the fourth quarter of 2027, Marty, but there may be a little bit of opportunity to pull it in a little bit, but we want to be conservative with our estimates on that. Martin Malloy: Great. Thank you. I will turn it back. Brady Murphy: Thanks, Marty. Operator: Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead. Bobby Brooks: Hey, good morning, guys, and first want to say, Elijio, congratulations on the terrific career, and I am glad I have got to know you pretty well over the past couple of trips we have had the last few years, including you taking me on my first trip to Midland. Elijio Serrano: Thank you, Bobby, and hopefully, that was a very good experience for you. Bobby Brooks: Absolutely. Wanted to double-click on the desal stuff. Thought it was really exciting to hear the customer conversations have pivoted from the 25,000 barrel a day to 100,000 or more plants. What I wanted some more clarity on was, I thought when you did the engineering on the 25,000 barrel a day plant, that it was sort of modular and scalable in nature, so you could kind of just stack four to get to that 100,000 number. Maybe I am misunderstanding it. Could you just discuss if that is the case, like, why not just deploy four of them to hit that 100,000 goal? Brady Murphy: Yeah, good question, Bobby. We did anticipate that if we started out with 25,000 plants, that as volumes increased, we would be able to build them in a train type of environment, right? Another 25. When you know you are going to start, instead of a 25,000 plant, and you are going to start with a 100,000 or more, obviously, there are efficiencies to be gained out of a large 100,000 barrel per day plant versus just going and building four separate 25,000 facilities. With that in mind, our customer is asking us to prepare for a much larger facility, as opposed to, “Well, let us just build four 25,000s and put them together.” Because there are some economies of scale to be had. Bobby Brooks: Absolutely. That makes a lot of sense. Maybe to dive a little bit deeper there, I think it took a couple of quarters to get the engineering finalized for the 25,000 barrel a day plant. Do you think that might be a little bit accelerated, since I am guessing there is probably some crossover, where you are kind of starting at second base rather than starting at first base with this engineering plan? Brady Murphy: Yeah. No, absolutely. I mean, the fundamentals of the engineering are in place, so we will get some efficiencies as we move into the 100,000-plus plant site. If we were starting from scratch, this would clearly be a six-month exercise, but we are not. We feel fairly confident within the next three to four months, we will have a good range of where we need to be to move into a commercial discussion. Bobby Brooks: Great. Then just one last one for me. Just on the kind of base business, water and flowback services, U.S., if we think, if you take the assumption that onshore U.S. activity stays flat, do you think you can continue to outperform that just through the value add that you provide at E&Ps? Or is it probably more likely you kind of stay, if it is in a flat environment, you stay flat as well? Brady Murphy: Yeah. I mean, the SandStorm technology uptake really continues with our customers, and we have more room to grow on that side of the business. As I am sure you heard during our Investor Day, we are de-emphasizing our water transfer business somewhat. We are still supporting that business and looking for the efficiencies that we would like to get out of that business, but investing less in growth. As that piece of our business becomes, which is our lower margin business, becomes less of our North America business, we fully expect the flowback side of the business to continue to increase share. That is what is helping us, along with Argentina, to continually drive our overall margins up in that segment in 2026. Bobby Brooks: Got it. Great to hear. Maybe if I could just squeeze in one more. I thought it was really exciting hearing the industrial calcium chloride for chip production had really outstanding growth in 2026. Could you just maybe remind us, is that being supplied to domestic chip manufacturing, international chip manufacturing, or is it a mix of both? Brady Murphy: It is domestic chip manufacturing, and really, we are in the early days of that growth. Calcium chloride provides a really valuable part of the solution for these chip manufacturers because it neutralizes fluorine or fluorides, which we know are an environmental concern. We fully expect that business to grow as the chip manufacturing market grows here in the U.S. Bobby Brooks: Perfect to hear. Congrats on the excellent 2025. I will return it to you. Brady Murphy: Thank you. Operator: Your next question comes from the line of Jonathan Tanwanteng with CJS Securities. Please go ahead. Jonathan Tanwanteng: Thank you for taking my questions and next quarter. I was wondering if you would go a little bit more into the decision to bring on a third-party supplier for bromine. Does that indicate that you are having any issues with your current supplier, or perhaps any delays or shortfalls expected when you ramp the new facility? Or is it purely just the demand for bromine is exceeding what you already had contracted? That is the first part of the question. The second part is, are you expecting to pass on some of that higher input cost through to your customers? Brady Murphy: Remember, bromine feeds two important parts of our business: our completion fluids, our deepwater completion fluids, which had a record year in 2025. It also supports our electrolyte production, which, Eos electrolyte production as they ramp. We are definitely securing third-party supply well above now the long-term contract. There is no issue with the long-term contract. As we have stated publicly, that contract does wind down through the end of 2029, which dovetails very nicely with our bringing the plant online in 2028. We have some success with pricing because of our innovation leadership. That does help offset some of the increased price of bromine. Again, that is consistent with the guidance range that we have given between 25 and 30 for the segment, which is consistent with our past seven years, really even overcoming the increased costs of bromine, that we see the short-term issue in 2026 and 2027. Jonathan Tanwanteng: Got it. Thank you. Then you did mention you are expecting to hit that plant capacity in 2029, just two years after you open it. I am wondering if or what the plan is for excess bromine supply after that? Is it to stay with these third-party contractors, or are there extension opportunities that you can do with the assets that you have? Brady Murphy: Yeah, the 75 million will be the current tower that we have. We have plenty of resource in the ground, in our brine, to continue building out additional capacity. Most likely, we will go to the market with incremental bromine supply above the 75 million, at least for a period of time, until we see whether or not we have reached a whole new plateau of future bromine growth above our 75 million. For the short term, we would expect to go to the market for any needs above that. Jonathan Tanwanteng: Okay, great. Thank you. If I could squeeze one more in there, do you have any expected shortfall in supplying bromine in the short term to both your completion business or the battery business? Are you expecting to satisfy all the demand with these new agreements? Brady Murphy: We have secured, contractually secured, what we need for 2026. Obviously, as we get closer to 2027, we will do the same thing. We are in good shape for the supply. Jonathan Tanwanteng: Got it. Thank you. Brady Murphy: Thank you. Operator: Your next question is a follow-up from Stephen Gengaro with Stifel. Please go ahead. Stephen Gengaro: Thanks. Just a quick one, I might have missed this earlier, so I apologize. The margin guidance you gave on the water side for 2026 is pretty healthy. What is behind that guidance? Elijio Serrano: That is simply reflecting stronger pricing pressures in the Permian Basin, that we are working toward offsetting some of that with aggressive cost actions that Roy McNiven and his team are taking. We believe we will remain in the teens with that business, especially with Argentina coming on. Stephen Gengaro: Okay. Thanks. Just a quick follow-up. When we think about the progression through 2026, given what you know as far as seasonal factors, et cetera, any sense for or any color you could give on where the consensus sits for the first quarter EBITDA, which I think is like in the $23 million-$24 million range? Elijio Serrano: Yeah, as you know, we are not giving any guidance for the year, much less for the quarters. The only spike that we see will be the second quarter spike that we traditionally see in Northern Europe with the calcium chloride business. Otherwise, I think each of the quarters are going to reflect offshore activity and the timing of projects. Stephen Gengaro: Great. Sorry about that. My phone was not on silent. I apologize. Okay. Elijio Serrano: No problem. Stephen Gengaro: That is very helpful, and thanks for the details. Brady Murphy: Thanks, Stephen. Operator: Your next question is a follow-up from Jonathan Tanwanteng with CJS Securities. Please go ahead. Jonathan Tanwanteng: Hi, thanks for the follow-up. I do not know if you mentioned this specifically, but just given where you sit with the OASIS negotiations on the data center side, when is the earliest you think you could have a large-scale, the $100+ million plant online and starting to produce? Brady Murphy: Probably the earliest I would say would be Q2, probably more like mid-year of 2027, would be our expectation. Jonathan Tanwanteng: Okay, great. Does that also take into account factors like the relative difficulty of things like getting gas turbines on site and things like that, just given where backlogs are for power generation? Brady Murphy: Yeah, we cannot comment on the other partners in these programs, kind of where they are on securing everything they need for these projects. We are having specific discussions with multiple customers as it relates to data centers on our role, and they are aware of our timeline. They are obviously asking us if we can shorten that timeline, but that is a realistic timeline for us to stand up that size of a plant. Jonathan Tanwanteng: Okay, great. Thank you. One more just high-level question. Is there any sort of long-term impact that you might expect in the offshore business, based on just the changes in Venezuela and how that might be impacting the overall energy market? Brady Murphy: Yeah, I mean, our view of Venezuela, I think it is positive for both the country and the oilfield services long term. I do not think you are going to see a huge impact in the short term. We had a business, TETRA did, in Venezuela, that we will look at returning or at least selling completion fluids into that market, by way of participation. In terms of the overall energy market, my view is it will not be significant in the short term. Jonathan Tanwanteng: Understood. Thank you. Operator: That concludes our question-and-answer session. I will now turn the call back over to Brady Murphy for closing remarks. Brady Murphy: Well, thank you very much for joining us. 2025 is in the books as a record year for TETRA Technologies, Inc., and really a year that our strategic initiatives came into focus for us with our ONE TETRA 2030 strategy, and we are very excited about the future. Thank you all for joining us and participating with us today. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good day. Thank you for standing by. Welcome to Vital Farms, Inc.'s fourth quarter and full year 2025 earnings conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand it over to your host, Brian Shipman, Vice President of Investor Relations. Please go ahead. Brian S. Shipman: Good morning, and welcome to Vital Farms, Inc.'s fourth quarter and full year 2025 earnings conference call and webcast. Joining me today are Russell Diez-Canseco, Vital Farms, Inc.'s Executive Chairperson, President, and Chief Executive Officer, and Thilo Wrede, the company's Chief Financial Officer. By now, everyone should have access to the company's fourth quarter and full year 2025 earnings press release issued this morning. During today's call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and do involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release, the company's annual report on Form 10-K for the fiscal year ended December 28, 2025, that was filed with the SEC today, as well as the company's other SEC filings for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please refer to today's press release and presentation, each available on the investor relations section of our website, for a reconciliation of non-GAAP measures referenced in today's call, including Adjusted EBITDA and Adjusted EBITDA margin, to their most directly comparable GAAP measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. After our prepared remarks, we'll open the line for questions. As a reminder, please limit yourself to one question plus one follow-up so that we can hear from as many participants as possible. I'll turn the call over to Russell. Russell Diez-Canseco: Thank you, Brian. Good morning, everyone. Before we walk through our record 2025 results, I want to share an important leadership update. After nearly 20 years of visionary leadership, our founder, Matt O'Hayer, has decided to retire as executive chairperson and as a member of our board of directors. Matt founded Vital Farms, Inc. in 2007 with just 20 hens. Beyond building a brand, he pioneered an entirely new category in the grocery aisle based on the belief that we could scale the humane treatment of animals. Equally important, he was determined to operate Vital Farms, Inc. as a truly different company, one galvanized by a common purpose of improving the lives of people, animals, and the planet through food, and with a focus on positive long-term outcomes for all stakeholders. It is an honor for me to build on his legacy of vision and leadership over the last 20 years and continue our journey toward becoming America's most trusted food company. Matt O'Hayer remains our strongest advocate and our single largest shareholder, and I'm thankful to continue to partner with him as an advisor to me and the rest of our board. Effective February 24th, the board appointed me to serve as Executive Chairperson and CEO. This unified leadership structure is the most effective way to maintain our strong momentum, drive our 2026 strategic initiatives, and continue progressing toward the targets we set at the Investor Day in December. I'm also pleased to share that Denny Marie Post will continue to serve as our Lead Independent Director. Denny's extensive experience as a public company CEO and her deep commitment to our stakeholder model provide the oversight and strategic perspective that are vital to our governance structure. Our board remains committed to robust, independent oversight and will continue to maintain high standards of corporate governance as we enter our next phase of growth. I'm grateful to be able to partner with Denny as we look to the future. I want to start our update where I always do, which is by acknowledging our crew. In 2025, it was the resilience and commitment of our team that made that possible. As I reflect on 2025, it's clear that Vital Farms, Inc. has built greater organizational strength while also delivering strong financial results. We didn't just grow. We scaled while staying true to our mission. We're proud to have successfully completed our major 2025 initiatives. We added a third production line at ECS, implemented a robust new ERP system, and transitioned to a new dedicated cold storage facility less than one mile from ECS. We've also rebuilt our inventory and remediated the previous material weakness in our internal controls, which Thilo will discuss shortly. For the full year 2025, net revenue grew more than 25% to $759.4 million, which was the midpoint of the revised revenue outlook we shared at our Investor Day in December. Adjusted EBITDA exceeded $100 million for the first time in company history, growing 31.6% to $114 million. Now let me walk you through several of the milestones that I'm incredibly pleased our team accomplished last year, laying the foundation for our future growth. First, on the operations side, we successfully rebuilt our egg inventory throughout the year and brought our third ECS production line online in October. We can now dedicate the first two lines to longer production runs of our top four SKUs while using the third line for specialty SKUs with lower volumes. This change increases our efficiency, and we're excited to see productivity improve over time with all three lines up and running. We're also building both lines at our Seymour facility concurrently to stay ahead of demand. We believe by building concurrently, we will accomplish better construction economies as we build toward our $2 billion revenue target. This reflects our confidence in future demand and our commitment to staying ahead of growth opportunities rather than chasing them. Second, on the commercial side, this was a record revenue year. As I mentioned, delivering $759.4 million in revenue and $114 million in Adjusted EBITDA is a significant accomplishment for us. Our growth consistently outpaced the broader market. In 2025, we gained 25 basis points of volume share within all outlets of MULO+, according to Circana, making us the top share gainer in premium shell egg brands. According to the same data source, year to date through February 15th, we gained 35 basis points of volume share, again, positioning us as one of the top share gainers in premium shell egg brands. These share gains provide further evidence that we have created a strong and growing business built on improving the lives of people, animals, and the planet, while at the same time delivering world-class financial results. Third, our farm network expanded to more than 600 small farms committed to our pasture-raised standards, where hens roam freely on open pastures with year-round outdoor access. Adding approximately 175 farms in a single year is a testament to the trust we've built in the agricultural community around our unwavering commitment to humane animal care. Farmers want to be a part of what we're building because we offer a path to a sustainable livelihood while being stewards of the land and champions of animal welfare. Fourth, we successfully completed our ERP implementation with zero unplanned shipment interruptions, returning to and then exceeding pre-implementation production levels within a month. Finally, our recent marketing campaigns have driven brand awareness to 34%, an increase of 8 percentage points in 2025, widening the gap between us and our closest competitors. We are now working closely with our retail partners to convert that brand interest into actual purchases through an expanded shelf footprint and optimized promotional cadence. As we move into 2026, we are seeing a dynamic consumer environment, and our focus is on driving high-quality household penetration, resulting in profitable velocity, so that our brand maintains its premium position in the market as we march toward our 2030 targets. While we've successfully transitioned from a state of supply allocation to unconstrained capacity, we're managing this pivot with discipline. We're not interested in buying market share through aggressive discounting just because the commodity market is in a glut. Our current volume pace reflects a deliberate focus on high-quality shelf placements, ensuring that as we fill our expanded capacity, we're doing so with stakeholders that support our long-term goals and uphold our premium brand promise. At our Investor Day in December, we shared our updated long-term target of $2 billion in net revenue by 2030, with Adjusted EBITDA margin between 15% and 17%. These goals are grounded in the operational capabilities we're building and the market opportunity we see ahead of us. Our brand still represents only a fraction of the total shell egg market, giving us substantial runway for growth. We serve nearly 16 million households through approximately 24,000 retail locations, but there's so much more opportunity ahead. The capacity investments we're making, the operational excellence we're demonstrating, and the brand strength we're building create a powerful combination for sustainable growth. The progress we made in 2025 represents meaningful steps toward that goal, and I'm genuinely excited about what lies ahead. With that, I'll turn it over to Thilo to walk through the financials. Thilo Wrede: Thanks, Russell. Hello, everyone. I would also like to share my personal gratitude to Matt. His vision was the catalyst for everything we've built, and I've enjoyed his partnership and constant push to improve in my almost three years at Vital Farms, Inc. Russell, congratulations to you on your new expanded leadership role. I'll now turn to a review of our fourth quarter and full year 2025 performance. I will walk through our outlook and cadence for 2026. Net revenue for the full year 2025 was $759.4 million, up 25.3% year-over-year, and $213.6 million in the fourth quarter. This growth was driven by a balanced contribution from volume and price mix. Benefits from our May price increase and ongoing shift to the Organic portfolio were partially offset by increased promotional activity to drive consumer trial. Gross profit rose to $285.7 million, or 37.6% of net revenue. The modest margin contraction from 37.9% last year was primarily due to higher labor and overhead costs as we scaled our operations. SG&A expenses were $159.4 million, or 21% of net revenue. We demonstrated significant operating leverage here, reducing SG&A as a percentage of sales by over 110 basis points, but still increasing marketing investment by $10.4 million. This discipline, alongside improved shipping efficiencies, which helped offset higher line haul rates, helped to deliver our record profit. Adjusted EBITDA surpassed $100 million for the first time in our history, reaching $114 million for the full year and $29.2 million for the fourth quarter. Net income was $66.3 million, or $1.44 per diluted share. CapEx for the year was $82 million, which aligns with the outlook we shared at our December Investor Day. We ended 2025 with a strong balance sheet. Our cash equivalent, and marketable securities on December 28, 2025, stood at $113.4 million, a decrease of $46.9 million from the end of 2024, reflecting the investments we are making to expand our production capacity. We have no debt outstanding. Finally, before discussing our outlook, I want to highlight that we have successfully remediated our previously disclosed material weakness in our internal controls. We're glad to have this important work behind us as we move into the next fiscal year. Just to remind everybody, the material weakness had not resulted in any restatement of our financials. Looking ahead to fiscal year 2026, we're introducing a new net revenue guidance range of $900 million-$920 million, representing more than 20% growth, mainly volume-driven at the midpoint of the range. The revenue growth has us on track towards our 2030 targets. While this is a more measured start than our December outlook, we are building a rock-solid foundation in 2026 with stable retail inventory, rather than chasing short-term targets that could compromise the quality of our 21% long-term CAGR. It also is acknowledgment of the current macro environment and recent volatile scanner results we've observed so far in January and February. Even though we have already gained healthy volume share year to date, as Russell had mentioned earlier, volume growth so far is lagging our initial expectations. After the previously discussed several weeks of slow shipments following our ERP implementation last year during the lead-up to the peak holiday period, we are still recapturing shelf space. At the same time, we're having fruitful conversations with our retail partners about expanding our shelf space over the course of the year. Retailers are excited about our improved supply this year and the role that we continue to play in the egg set. In addition, the two severe winter storms over the last four weeks make retailer orders additionally challenging to calibrate against what we would consider normal demand. We believe all these fluctuations are more reflective of short-term market disruptions, and we see continued healthy consumer demand, which is supported by our consumer survey data. We continue to prioritize profitable velocity over simply chasing raw volume growth. Consequently, we are setting Adjusted EBITDA guidance to be within a range of $105 million-$115 million this year. This reflects a margin of 12.0% at the midpoint, which is within the range of our previous 2027 long-term targets and puts us strongly on the path to the new 2030 long-term targets we committed to at the Investor Day. With the improved supply dynamics also talked about, I want to spend a moment on how to think about cadence for the year. In the first half of 2026, we anticipate some short-term noise in order patterns from recent winter weather events and as our retail partners normalize their inventory levels following our move out of supply allocation. We view this as healthy stabilization that allows us to enter the back half of the year with a clean runway and high-quality shelf presence. With that, the first quarter of 2026 will likely reflect a more measured growth rate than previously assumed as the retail inventory channel normalizes. From there, we expect growth to reflect the lapping of last year's quarterly performance. As we operate in a more stable supply environment, we anticipate normal promotional spending this year with a heavier concentration in the middle quarters. We're intentionally utilizing the tailwinds from our May 2025 price increase to fund a return to a trial and conversion program. This is not defensive price matching. It is an offensive investment in household acquisition and reinvestment of price into penetration. Our margins reflect the strategic promotional activity, our continued investment in ECS staffing, and the impact of the volatile Q1 ordering environment. We expect CapEx of $140 million-$150 million in 2026. Our CapEx guidance reflects continued investment in long-term capacity and infrastructure, including progress at Vital Crossroads. We remain focused on disciplined capital deployment and free cash flow generation, consistent with our long-term owner-oriented mindset. While we expect to fund our 2026 projects primarily through existing cash and operating cash flow, we're evaluating the most efficient capital structures for our expansion, including the potential use of our revolver or other ways to optimize our balance sheet. To be clear on our capital allocation priorities, our primary commitment is the completion of Seymour. That leaves us with untapped debt capacity. And our board of directors authorized a $100 million 2-year share repurchase program. We're in the unique position of being able to fund our largest ever growth cycle, while simultaneously having the balance sheet flexibility to defend our intrinsic value if market dislocations occur. Looking forward, we anticipate a meaningful pivot to strong, sustainable, free cash flow generation in 2027 and beyond, once the heavy spending on VXR is completed. As mentioned before, we expect each CapEx dollar dedicated to our neutrality to generate more than $5 of annual revenue capacity. As these assets come online, we expect to see significant cash flow accretion as we leverage the infrastructure we are building today. Our long-term guidance remains unchanged. We're targeting $2 billion of net revenue by 2030, with a gross margin of 35% or better, and an EBITDA margin of 15%-17%. This is an exciting time at Vital Farms, Inc. We have highly loyal consumers. We continue to expand and deepen our relationships within our network of more than 600 small farms, we remain focused on driving greater retail penetration and raising brand awareness to deliver our eggs and butter to more and more households with each passing year. Once again, we thank you for the time and interest in Vital Farms, Inc. today, for the confidence that you have placed in us with your investment. Let me turn it back over to Russell. Russell Diez-Canseco: Thank you, Thilo. Before we open the call for questions, I want to circle back to where I started, with gratitude: to Matt for his vision and his leadership, to our crew who executed through our ERP transition and brought our third line at ECS online seamlessly, to our farmers who expanded their capacity alongside us while maintaining the highest standards of animal welfare, and to our retail partners who continue to believe in our mission. Thank you. This foundation of trust and collaboration is what gives us such confidence in the growth potential in the years ahead. The capacity investments we're making are about ensuring that when a consumer reaches for Vital Farms, Inc., we're there every time at full strength. The organization's values are as strong as ever, and our crew continues to raise the standards for the Vital Farms, Inc. brand and to drive the organization forward. Looking ahead, we believe we remain structurally advantaged with significant long-term opportunity. Our brand still represents only a fraction of the total egg market. We enter 2026 with unconstrained supply, giving us substantial runway for growth. Consumer awareness of animal welfare and food sourcing continues to increase. Vital Farms, Inc. has established itself as the trusted leader in this space. Once again, we thank you for your time and your interest in Vital Farms, Inc. With that, we're happy to take your questions. Operator: At this time, I'd like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Please limit your comments to one question and one follow-up. Your first question comes from the line of Scott Marks with Jefferies. Your line is open. Scott Marks: Hey, good morning, all. Thanks so much for taking our questions. Morning. You know, obviously, just wanted to ask a little bit about expectations for the year relative to what was laid out at Investor Day. Obviously, been some volatility with winter storms and some of the order patterns you mentioned. Maybe what was it that gave you the, I guess, confidence to change, to change the outlook now, as opposed to maybe waiting a little bit, you know, until later in the year to see if some of this volatility normalizes? Russell Diez-Canseco: Thanks, Scott. Hey, it's Russell. I'll kick us off, and then we'll ask Thilo to chime in as well. You know, we've run this place with a lot of intentionality for a lot of years, and this isn't the first time that we've seen some kind of volatility in the broader category, and we've seen some noise from things like winter storms. We always wanna make sure that we're setting ourselves up for success and that we're setting ourselves up to meet and exceed the expectations we line out for ourselves and that you all have for us. I think this guide gives us the right amount of room and flexibility to, again, build on all the strengths we're coming into the year with, while still acknowledging that there's a broader macro environment in which we're operating, and there's a lot of short-term noise in sort of what all the various players are doing to make sure that they can sell all the eggs they're producing. Thilo Wrede: Yeah, Scott, I would just add to that. You know, we called it out in the prepared remarks. It is a bit of a volatile environment right now. We are clearly gaining share in the category, so we are outperforming the category. It is a bit of a noisy environment right now, and I think we've built a track record of beating our initial expectations that we set at the beginning of the year, every year since the IPO. We figured rather than going into the year and, you know, clawing our way to the initial outlook that we gave, we just set expectations very clearly at the beginning, and then we keep our pattern of beating expectations that we set at the beginning of the year. Scott Marks: Appreciate the color on that. Next one for me, just relating to the ERP. You know, I think as we think back to, you know, maybe ahead of ERP implementation, you had spoken about shifting some inventory in, you know, ahead of the cutover. And then I think Thilo made a comment in the prepared remarks today about regaining some shelf space that may have been lost during that period. So wondering if you can just kinda help us spur away, you know, what was the actual impact from ERP? You know, whether it was, you know, shelf space or changes in order patterns or anything that can just help us get clarity around what the actual impact was and how we should think about, you know, magnitude of recovery from that? Russell Diez-Canseco: You know, we've talked quite a bit about that short-term dislocation. As we've come back into a very, I think, advantageous supply situation with rebuilt inventories, the conversations with retailers have been, frankly, terrific. We've shifted from, "Hey, can you ship what you're talking about?" to, "How can we grow together?" I'm looking forward to reset cycles this year based on those early conversations, we're really talking about making those long-term plans to grow together. We are clearly a category leader. We're seen as playing that role for our retail partners, I think we're well on our way to kind of recovering and putting that process past us. Scott Marks: Thanks very much. I'll pass it on. Russell Diez-Canseco: Thanks, Scott. Operator: Your next question comes from the line of Brian Holland with D.A. Davidson. Your line is open. Brian Patrick Holland: Thanks. Good morning. I wanted to... about, you know, some of the comments that you made around, the challenging sort of macro environment and squaring that with, you know, your core consumer, and some of the behavioral metrics that you described. Just squaring how or why you would be incrementally concerned over the next, whatever, several months or year about the impact of the macro on your core consumer, just given everything that you've said, and I think historically, sort of, you know, been less concerned about competitive dynamics in the category, widening price gaps, et cetera. How do we square those two things? Russell Diez-Canseco: Sure. First of all, we're not seeing evidence of a big change in sort of the confidence or, sort of economic reality of our core consumers. That's not a primary source of concern or a change in how we view that. That said, I think we've all seen and continue to see a category that's going through some disruption as we've got plenty of players out there with maybe more eggs than they planned to produce or collectively planned to produce, and we're seeing some, you know, more intense action on the shelf as other players, I think, look to move their inventory. While that doesn't mean that we're losing consumers or volume to them, it's certainly competing for attention with retailers and with consumers for ad space and for mind share. In that situation, it doesn't prompt us to change our value equation. It doesn't prompt us to rethink our value proposition to consumers. It might mean that we have to be a little more patient as we continue to add consumers over the course of the year and convert all that great awareness to trial, because we don't want to, you know, frankly, waste a bunch of our time and money trying to compete in the short run for the attention of consumers who are looking for a hot price in an ad. We just have to, I think, set ourselves up to continue to take a really measured approach to adding high-quality households and high-quality new placements and let some of this other noise kind of play itself out. Brian Patrick Holland: Okay, kind of playing this forward, outlook this year, I think is, you know, low 20% range on the top line. That's an algorithm that you would have to hold from here through 2030, I think, to hit that $2 billion of revenue, if I'm not mistaken. The thought coming into this year was, you know, you'd be lapping capacity constraints in 1Q and a little less so in 2Q. 4Q, you would then have the ERP disruption. You know, quote-unquote, "easier compares." Now, we've obviously introduced some volatility, as you referenced, whether that's weather, or some other things in the category. How do we think about the level of confidence, the sources of confidence behind maintaining this level of growth, which really demands almost no deceleration from here through 2030? What are the sources of confidence behind that? Maybe if I could just ask, what flexibility would you have from a capacity standpoint and a build-out standpoint as it pertains to Seymour if the sales decelerated at a greater rate than what you're projecting? Russell Diez-Canseco: Sure. Again, the consumer value proposition is still very much there. You know, I start with all the work we did last year to make sure that we took supply chain constraint off the table in terms of being a constraint to our continued growth. We've got the capacity at ECS. We've got our third line, which gives us the opportunity to lean in both to capacity expansion and efficiency because we can allocate space to the various lines more efficiently. We're gaining volume share, and that's the thing I would point to as a continued proof point that what we're doing is working. As we head into 2026, the setup is we've got a massive gain in awareness, which is the leading indicator for us of trial and ultimately to loyalty. That's there in spades. We're very judiciously, as always, using our marketing and commercial resources to convert that awareness into trial. The capacity's there, the brand awareness is there, the consumer sentiment is there, and it's a question of, I think, operating and executing at a very high level. The thing is, we're built for this environment. We are, I believe we've got the best team in the business, the best brand in the business, the best supply chain in the business, and this is a year in which our ability to execute at a high level will continue to drive our growth. Thilo Wrede: Brian, I would add to that unlike in the previous last few years, growth this year is gonna be pretty much all volume growth. Our volume growth is actually at this guidance, is actually accelerating year-over-year. I think that's an important piece to keep in mind. It's a bit more expensive growth, because obviously, volume comes with costs associated with it, but it's high-quality growth, right? Brian Patrick Holland: Great. Thanks. I'll leave it there. Operator: Your next question comes from the line of Matthew Smith with Stifel. Your line is open. Matthew Smith: Hi, good morning. Thanks for taking the question. A couple of questions on the EBITDA guidance range. The midpoint suggests a couple hundred basis points of margin contraction. Within that, can you talk about gross margin versus middle of the P&L investment? I believe the expectation for revenue growth, Thilo, you just mentioned, is mostly volume-led. Would you expect price mix to be positive for the year with carry-in pricing funding the promotion normalization, or is that part of the margin bridge as well? Thilo Wrede: Price mix, I think we said in the prepared remarks that we are reinvesting the price increase from last year back into promotions. I want to be very clear with that. The promotional comparison, if you look at it year-over-year, even compared to the last few years, we're actually planning for a different environment this time around than the last few years. In the last years, when you had the Avian Influenza or we had our own supply constraints, there were times when every year last year, well, in the last few years, there were times every year where promoting didn't make a whole lot of sense for us because we didn't have the supply to support it. This year, it's a different story. This is not a step up in promotions to drive volume. It's really a return to where we should have been promoting for quite a while and weren't able to. As Russell said before, this is to convert the awareness that we have generated into trial and ultimately into household penetration, and to keep demonstrating to our retail partners that we're a good partner for them. We want to, we want to move the category forward. Obviously, this has an impact on gross margin. We still expect operating expense leverage, and we expect positive price mix benefits, certainly not to the same degree as in previous years. We keep benefiting from a shift towards Organic, it's not going to be the same price mix benefit that we had in prior years. Matthew Smith: Thank you. Just as a follow-up for clarity around first quarter expectations, there was some shipment noise, both in the fourth quarter, then you mentioned, you know, 2 factors in the first quarter. Within the first quarter, do you have a view on if you expect your shipments to be in line with consumption? Just some clarity there would be helpful. Thank you. I'll pass it on. Thilo Wrede: I mean, in general, our shipments are roughly in line with consumption. There's always timing differences. There are differences in how scanner data extrapolates, you know, contribution from different channels. We've always talked about that we have some unmeasured channels, food service and the wholesale channel in particular. There's always going to be a bit of a difference between our reported shipments and what you see in consumption, but directionally, they usually align. Operator: Your next question comes from the line of Robert Moskow with TD Cowen. Your line is open. Jacob Henry: Hey there. This is Jacob Henry on for Rob. Thanks for the question. I think just one from me. I know you've talked before about building confidence with retailers before getting more shelf space. On that topic, I'm just curious if you can provide an update on where you feel you stand in that process. Like, do you have any visibility into any green shoots with retailers, where maybe there are plans in place to get that third or fourth SKU, whatever it may be, or is this kind of more of a long, long-term conversation? Russell Diez-Canseco: Without being specific, the conversations are going very well. We are operating at a very high level. Our service levels have really recovered from a year of being much more constrained in supply, as we've talked about over the last four quarters. Those are very fruitful retail conversations. We're a powerful tool for a retail category manager to grow their category profitably, with our partnership. These are welcome conversations, they're fruitful ones, and we're excited to share more as those resets occur. Operator: Your next question comes from the line of Megan Clapp with Morgan Stanley. Your line is open. Megan Clapp: Hi, good morning. Thanks. Maybe just to follow up on the first quarter on Matt's question, just to put a finer point on it. You know, I think you said relatively in line shipments for scanner. I think, Thilo, in your prepared remarks, you also said just a more measured start versus what you had previously expected. I think you had previously expected the first half would be stronger than the second half, just given some of the easier laps. Is it still fair to assume in one Q, you would expect, and two Q for that matter, you would expect the revenue growth to be above the full year guide? Thilo Wrede: I think at this point, Q1, we're a bit more cautious on it than we were before. I think when we look at Q2 and Q3, there's no change in how we think about them compared to how we thought about them, let's say, 2 months ago. Q4, you know, expectations for Q4 compared to what we had at the Investor Day back in December, haven't changed. Q4, I think we have, if you want, relatively easy lapping because Q4, post the ERP implementation, with a few weeks of slow shipping, there's just a easy lapping that we can catch up on. With that, maybe the second half might be a bit stronger than the first half. That's how I would look at it right now. Megan Clapp: Okay. I guess just to follow up there, just trying to square, you know, why the first quarter is changing and the rest of the year is not, if shipments will be in line with scanner, because that would imply that demand is running a bit weaker than you had expected. As we get into the remainder of the year, are you embedding some sort of recovery in the shelf, in the shelf space? Are you assuming kind of that demand doesn't change in the rest of the year, or the promotional environment from others that you're seeing gets better? Just trying to kind of understand what changes as we get out of 1Q, understanding there has been a lot of volatility. Russell Diez-Canseco: Yeah, I think there are two kind of underlying or maybe spring-loaded drivers of that consistency and that growth. One is the continued benefit of the consistency with which we're showing up on shelf, regaining that space, some of which is a conversation with a retailer, and some of which is simply operational at the store level, when you've now got the product back in your back door, and you need to cut it back in or make sure you're giving it the space that was allocated to it. Then having consumers see us back on the shelf. That's an important part of the process. You know, the other part is that we're having very fruitful conversations with retailers about continuing to expand distribution, expand placements as part of our ongoing long-term strategy for growing with the best retailers in the country. A lot of that has to do with kind of the consistent strategy of expanding those top 4 SKUs and demonstrating the performance that they deliver for our retail partners. We've got the product, and that makes for a great conversation, and that will unfold over the course of the year. Megan Clapp: Okay, thank you. Operator: Your next question comes from the line of Jon Andersen with William Blair. Your line is open. Jon Andersen: Hey, good morning, thanks for the questions. You mentioned in the prepared comments, awareness, brand awareness levels are up, I think, 800 basis points year-over-year, which is a significant leap. I'm wondering if you could talk a little bit about the, you know, what you see as, you know, the key drivers there and that kind of acceleration in brand awareness over the past 12 months. I guess peeling the onion a little bit, you know, there's kind of really positive awareness and maybe more kind of awareness that might come into being for more mixed reasons. I'm just wondering if you could talk a little bit about the equity of the brand and what you're seeing and maybe some of the panel data in terms of loyalty and repeat at present, and if there are any levers or adjustments you think you need to make from a value proposition standpoint. Then if I could just follow up with a second one. You've announced a $100 million share repurchase. I'm not sure if you've had an authorization, share repurchase authorization historically, but maybe you could talk about, you know, the reason for that now and how you might think about utilizing that, you know, going forward, the criteria. Thank you. Russell Diez-Canseco: Thanks, Jon. I'll take the part about kind of brand equity and household awareness. I'll let Thilo talk about share repurchase. You know, a key message here and a key reason why I think we saw such substantial increase in household awareness is that we're pretty consistent in our approach to how we go to market. At a time when, you know, we were constrained on supply last year, we didn't go dark with our marketing because we think about marketing as a way to drive brand awareness over the long term, 12, 18, 24 months out, converting that to demand. This business is designed and built around the consistency of expanding households, expanding trial, and expanding production, and expanding farm count, all very much in line. The net result of which is that we didn't go dark when we might have simply because we didn't, you know, we didn't have as many eggs as we would have liked to sell or as much production capacity as we might have liked. That also means that we're not, you know, hitting the gas or wasting money, on unproductive marketing efforts in a year when we've got more upside. We're very consistent in our marketing approach. It's really a, you know, a playbook and an approach that we've owned over a lot of years to convert that awareness into trial and repeat, and that's what we're setting about to do this year. Thilo Wrede: Yeah, Jon, on the share repurchases, we did not have a share repurchase authorization before. This is the first buyback program that the board has authorized since the IPO. I would say there are two factors at play here. One is, look, we're listening to shareholders. We're listening to the buy side, the sell side. We've gotten a lot of questions over the last 12 months in particular about how we use our balance sheet. We have this unused debt capacity. As you know, we are debt-free. We have over $100 million in cash. We are investing this cash in building out the Seymour facility this year. That still leaves a lot of balance sheet potential there that we've been holding as dry powder. Now is a good time for us to think about what can we do with that dry powder to create shareholder value. That is where this decision to create the share repurchase authorization, so that when there is an opportunity in the market to buy back our stock at attractive levels, that we're able to step into that. That is really the reason behind it. It's I would look at it as a sign that we're maturing as a company a bit. We're doing the things that we think are the right things for creating long-term shareholder value. It's a sign that, you know, we're listening to the shareholder conversations that we're having. Jon Andersen: Makes sense. Thank you, guys. Operator: Your next question comes from the line of Benjamin Theurer with BMO Capital Markets. Your line is open. Benjamin Theurer: Hi. Thank you for taking the questions. My first is related to the aggressive recovery in industry egg supplies. That seems to have coincided with, you know, more volatile order patterns. I'm just wondering, in the past, you have stated that you look forward to supplies recovering because that will give Vital the opportunity to outperform. I was just hoping if you could revisit this view and maybe reaffirm your conviction that this will play out if we were to assume the industry supplies will continue to recover. Russell Diez-Canseco: Yeah. Our conviction is as strong as ever. The number one thing I'd point to is our continued gain in volume share. That's a great indicator of the health of our brand, the health of our supply chain, and the health of our consumer trust and consumer relationship. We are absolutely built for a time and a place where the brand is what's gonna matter. We're being differentiated is what's gonna matter. Where a strong, trusted relationship with a retailer is what's gonna matter. This is a year in which it's not simply enough to have eggs in a market that will take any egg available. That's where I think our strengths will really come to bear. Benjamin Theurer: Great. Thank you. My final question is a bit of a segue. Can you just talk about Amazon's move to add roughly 100 additional Whole Foods units and what the incremental opportunity might be for Vital? Thanks. Russell Diez-Canseco: You know, I think, first of all, it's certainly exciting for us. Amazon and Whole Foods continue to be our largest retail partner, and I don't think it's a coincidence that some of our largest customers are also the ones that are seeing the most success and the most opportunity to expand their footprints. We really look forward to continuing that partnership and to grow with them. There's an exciting opportunity to continue to grow with partners like Amazon and Whole Foods. That is all welcome, almost spring-loaded upside, for sure. Operator: Your next question comes from the line of Eric Des Lauriers with Craig-Hallum. Your line is open. Eric Des Lauriers: Great. Thanks for taking my question. Just wondering if you could provide a bit more color on what you're seeing year to date in the pasture-raised category overall. In terms of the second half stabilization or perhaps even, I guess, Q2 stabilization, do you see category stabilization as sort of a prerequisite to your order pattern stabilizing, or is there something in the conversations you're having with retailers that gives you confidence in that second half stabilization, sort of irrespective of what the category does? Thank you. Russell Diez-Canseco: Thanks for that. The pasture-raised, and I would say more broadly, the outdoor access category continues to be the strength in egg category overall. Gaining volume share, gaining dollar share, against the backdrop of more muted volume growth for eggs overall. Historically, egg consumption has grown about with population growth in volumes....That's been very different for specialty and branded products and offerings like ours, where we've driven a large share of overall category growth and much outsized relative to our share of the category. We're seeing that strength continue. It's pretty exciting because the ability of private label brands to trade up their purchasers of more commodity-type eggs into outdoor access private label is also quite strong. What we're seeing, that, is evidence of a much broader conversation, and a much broader set of households in this country that are becoming conscious of their food choices and are willing to vote with their dollars for something better. It's, it's a real validation of what we've been doing for a lot of years, and we see it as a sign of strength. Operator: Your next question comes from the line of Ben Klieve with Stifel. Your line is open. Ben Klieve: All right, thanks for taking my questions. I'm wondering if you guys can help us understand the magnitude of the promotional increase that you have talked about on the call today. We certainly knew there was gonna be an increase this year, I'm wondering, first of all, if the magnitude of the promotional increase this year is kind of in line with what you had thought it would be historically. Then also the degree to which the EBITDA margin compression this year is kind of in line with what your thoughts would have been around the Investor Day a couple months ago. Russell Diez-Canseco: Sure. Thanks, Ben. I wouldn't characterize our promotional cadence or stance as stronger or deeper than we had originally projected. This is very much a return to a more normal cadence of promotional spend, and that certainly hasn't changed. What's really different for us versus other players in the category is that we're not creating promotions to drive volume in the short run, which we see as maybe a way to rent volume share, but not actually to substantially move the business forward. We're using promotions to drive trial and begin that process of converting a consumer to our brand, and that continues to be the way we think about it. Our focus is on building this thing for the long haul and hitting that $2 billion goal that we set out for 2030, which we believe is still very much in our future. That hasn't changed. It's very consistent with what we had planned when we spoke to you at Investor Day. I'll let Thilo talk a little bit about the evolution of EBITDA over time. Thilo Wrede: Yeah, Ben, just to, you know, put what Russell just said differently, the way we are thinking about promotional spending this year is it won't be different from how we have spent on promotions in the past in specific quarters. The reason why I put it that way is, as I said before, over the last few years, I don't think there's been a single year where we ran promotions for the full year, because there was always some outside event, AI, our own supply constraints that prevented us from running promotions for the full year. This is gonna be a year where currently we're planning to run promotions for the full year. The level of promotions for the full year will mirror what we've done in individual quarters in the past. Unlike in prior years, where we've only hit it for specific quarters, we'll hit it for the full year. That will have an impact on gross margin and on EBITDA margin, and you see that in the guidance. That impact is not different from how we thought about it at the Investor Day. Ben Klieve: Okay, very good. Thanks for taking my question. I'll get back in queue. Operator: Your next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open. John Baumgartner: Good morning. Thanks for the question. I'd like to ask about the composition of Vital buyers. I think at Investor Day, the buy rate for low incomes was up something like 50% over the past 3 years, and that speaks to the breadth of appeal. I'm curious the extent that might now be a drag in 2026, given financial stress in that cohort. As you modeled this year, are there any specific pressure points you're building in, either from low incomes or others? Maybe not so much from trade down, but more just limiting the rate of building additional households this year. Russell Diez-Canseco: Yeah, I, look, I think that the process of adding additional households doesn't change. The kinds of households that we do attract, may change with the benefit of hindsight, and we'll see how that plays out. We're seeing no, you know, we've got no reason to think that our ability to attract and retain new households this year is off algorithm or outside of our normal, sort of, growth formula. John Baumgartner: Okay. I apologize if I missed it, but if we think about, you know, aside from the promotion this year, how do we think about other marketing reinvestment, whether above the line, in the middle of the P&L? Any thoughts on marketing, either magnitude or shifts in delivery versus history? Russell Diez-Canseco: You know, I think in terms of magnitude, as we've consistently discussed, you know, we have a very measured approach to marketing. We continue to explore opportunities to find profitable ways to invest, as we expand into the 5%-6% range on marketing. I don't know that that changes a lot this year. I think that we've always used some portion of that budget on sort of baseline or more tried and true vehicles, and then we've always got some where we're experimenting and trying new things. Historically, we focused almost entirely on top of the funnel and adding households, growing that awareness. We now have the benefit of a lot of awareness built, so we'll have the opportunity to try some things perhaps we haven't focused on as much in the past around driving repeat and loyalty. We'll look forward to seeing how those play out as the year goes on. John Baumgartner: Great. Thanks, Russell. Thilo Wrede: That we're, you know, plan is still to keep increasing our marketing spend in total dollars. We continue to build the brand, to Russell's point. We've built a lot of brand awareness. There's a lot more that we want to do there. This is also a year where we want to convert a lot of that brand awareness into trial, right? If marketing can play a role there, I think that's that's a push that we need to go after as well. Russell Diez-Canseco: Perfect. Thank you. Operator: Your next question comes from the line of Gerald Pascarelli with Needham & Company. Your line is open. Gerald Pascarelli: Great. Thanks very much for taking the question. I just have one. I wanted to go back to one of Brian's previous questions, just on the confidence of the long-term targets, but specifically related to EBITDA. At a 12% expected margin this year, you're 400 basis points below the mid-point of your 2030 targets. I understand that pricing is muted right now, right? Like, given some of the compression we're seeing with private label. If the market remains volatile and gets increasingly competitive, you know, you essentially need to invest more behind your brand, I'm curious if you could just lay out the levers you have to drive operating leverage to achieve those targets. If you could bridge that for us. I guess specifically, does your target embed a certain range of rate increases in a more normalized environment? Any color there would be great. Thank you. Thilo Wrede: Gerald, let me start with the 12% implied margin. When we gave targets, long-term targets back in 2023 at our Investor Day back then, we had said that by 2027, we want to get to a 12%-14% EBITDA margin range. We were above that last year. We'll be in that range this year. Yes, it's a decline year-over-year in margin, but I would say we're still very much on track to where we thought we were a few years ago. We continue to be on track to the target that we set 2 months ago for 2030. I think as we continue to grow, we continue to get benefits of scale, especially in operating expenses. We talked about, and you can see that in our numbers, how our SG&A scaled, last year, will continue to scale this year. This year, because the growth is so much more volume-driven than prior years, there is an impact on gross margin, which flows through. Overall, in operating expenses, every year we're getting scale benefits, just from the growth that we are generating on the top line and not having to grow operating expenses to the same degree. Gerald Pascarelli: Perfect. Thanks. Operator: There are no further questions at this time. I turn the call back over to Brian Shipman. Brian S. Shipman: Great. Thank you for your time and interest today. Please feel free to contact us with any follow-up questions. Have a great day. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 FTAI Aviation Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Alan Andreini. Please go ahead. Alan Andreini: Thank you, Kevin. I would like to welcome you all to the FTAI Aviation's Fourth Quarter 2025 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer; David Moreno, our President; Stacy Kuperus, our Chief Operating Officer; and Angela Nam, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe. Joseph Adams: Thank you, Alan. 2025 was a defining year, and I'd like to start today by highlighting the major achievements we've accomplished over the past 12 months, positioning FTAI for further success and market leadership in the years ahead. We began the year with the launch of the strategic capital initiative or what we call SCI, raising our first fund focused on acquiring 737NG and A320ceo aircraft. This allowed FTAI to maintain an asset-light business model while the fund acquires narrow-body aircraft at scale. The SCI investors benefit from FTAI's engine maintenance capabilities as well as our decade-plus track record of successfully investing in on-lease narrow-body aircraft. Market demand for the first fund was exceptionally strong, including our own 19% co-investment in just 10 months, we secured $2 billion in equity commitments, making SCI I the largest fund ever dedicated to narrow-body midlife aircraft. Together with the support of our leading financing partners, ATLAS, an affiliate of Apollo and Deutsche Bank, we will invest $6 billion in total capital in Fund I. Deployment for 2025 has been strong with 130 aircraft now closed as of December 31. The portfolio has a large concentration of aircraft with engine maintenance needs, which leverages the fund's agreement with FTAI for engine exchanges and further differentiates our offering to investors. I am also pleased to announce that we have started the fundraising process for SCI II off the back of great success we've had with the first vehicle. David will share additional details around the 2026 plan, but I can also share that we have an anchor equity commitment for SCI II, which positions us to start investing out of SCI II once the first vehicle wraps up its final few investments in the next couple of months. Turning now to results. Aerospace Products finished the year with great momentum, generating $195 million of Q4 adjusted EBITDA at a 35% margin, an increase of approximately 66% year-over-year and up 8% from $180 million in Q3 of last year. For the full year, we delivered $671 million of adjusted EBITDA, in line with our upwardly revised target of $650 million to $700 million and well above our original goal of $600 million to $650 million. This represents 76% growth over the $380 million generated in 2024 and is over 4x the $160 million we reported 2 years ago only in 2023. Our growth is driven by the value we provide to the industry by offering readily available fixed price engines. A flexible and cost-efficient alternative to traditional CFM56 and V2500 shop visits. We save our customers time and money, and our growth reflects the increasing market adoption of our products. The long-term outlook for the aftermarket on these platforms continues to strengthen as airlines increasingly opt to extend the life of their existing fleets rather than retiring aircraft for the newest technology. Shop visits for the LEAP and GTF engines are not expected to surpass the CFM56 and V2500 until at least the middle of the next decade, supporting a long and durable addressable market for many years for us. We're seeing this inflection point in the market today. Total maintenance spend is now expected to grow at a double-digit rate this year to approximately $25 billion per annum, up from $22 billion per annum projected last year. Retirements remain at historically low levels and shop visit demand is shifting towards heavier maintenance overhauls that signal longer economic useful life for these engine types. Altogether, these trends reinforce our confidence that FTAI's differentiated MRE or maintain repair and exchange model and competitive advantages position us to continue to lead the aftermarket. We remain firmly on track to achieve our interim goal of reaching 25% market share through a combination of new and repeat customers as well as an increasing volume of engine exchanges from SCI funds each year. Turning to production. We refurbished 228 CFM56 modules this quarter across our 3 facilities, an increase of 68% compared to Q4 2024, bringing our total for the year to 757 modules. This surpassed our 2025 goal of 750 and was an outstanding collective achievement by our 1,000-plus highly skilled and dedicated employees spread across 13 locations on 3 continents. 2025 was a defining year for our Aerospace business as we continue to widen our competitive moat. Our multiyear materials agreement with CFM provides with OEM replacement parts supply, thrust performance upgrades and component repair, reinforcing our shared priority to extend the life of the CFM56 engines through an open MRO ecosystem. This agreement enhances supply resilience, helps us meet strong demand from our customers and supports the continued scaling of our core module remanufacturing platform. Before I hand it over to David to talk about our key priorities for 2026, I want to take a moment to congratulate him and Stacy Kuperus, who were appointed President and COO of FTAI earlier this month. A well-deserved promotion for both David and Stacy. They've been exceptional leaders for many years at FTAI, and we're very grateful for their commitment to this business. With that, I will pass it over to David. David Moreno: Thanks, Joe. I would now like to talk about our priorities for 2026. First, I'll share an outlook for strategic capital. We are pleased to report that the capital deployment for SCI I is largely complete. As Joe mentioned, we closed 130 aircraft in 2025. As of today, we now have 276 aircraft closed under LOI, representing $5.3 billion of our $6 billion target, and we remain on track to be fully invested by the end of the second quarter. As we complete the deployment of SCI I, we have started the fundraising process for the next fund, and we can share that we have an anchor equity commitment in place for SCI II. We expect to start investing SCI II by June 30 and look forward to continuing to execute on the strategy of combining on-lease aircraft investing and engine maintenance to generate outsized return with greater downside protection. Our ambition is to become the world's largest manager of mid-life narrow-body aircraft, and we believe we're well positioned to achieve this goal over the next few years. Shifting to our aerospace products production outlook. We are revising our 2026 target upward from 1,000 to 1,050 modules, representing a 39% growth compared to 2025. We continue to strengthen the foundation of each shop in our maintenance network, which will support the next phase of growth. In Montreal, throughput continues to improve as our training academy scales and the benefit of specialization and workflow optimization are now visible in daily output. We began integrating Palantir's artificial intelligence platform, providing our teams AI-driven insights and actions to further reduce downtime, optimize our supply chain hub and act as a significant accelerator to productivity. In Rome, since our joint venture began in Q2 of last year, we have almost doubled the employee base from 101 to 185 today, rapidly building the workforce needed to take on greater repair volumes at high levels of productivity. The integration of Rome into the broader MRE network is in its advanced stages and coordinated training in Montreal's Training Academy has accelerated the development of Rome's team's technical capabilities. At the same time, our investment in infrastructure and component repair capacity will support our goal to double production in 2026. In Miami, our integration of last quarter's ATOPS acquisition is progressing well and positions Miami to be a major hub for MRE production. We have added highly experienced engineers and technicians, expanded the floor space and the proximity to our existing facility and test cell drive significant synergies. The ATOPS Portugal facility is also being incorporated into our logistics network and is already making a meaningful contribution to our field service operations in Europe. We've also made significant progress with our 2 component repair investment, Pacific and Prime Engine Accessories, both of which position us for meaningful CFM56 repair cost savings this year. At Pacific, we relocated the business into a new 75,000 square foot facility to support the compressor blade repair volumes required by our own MRE network. At Prime, we've invested heavily in tooling and equipment and are ramping up hiring so the Connecticut facility can become FTAI's global hub for engine accessory repairs. With substantial progress across our facilities and the combined build-out of our broader MRE ecosystem, we are well positioned to achieve further production growth in 2026 and beyond. Strengthening this foundation has been a major focus for us and sets the stage for the next phase of FTAI's evolution. Finally, at the end of last year, we announced the launch of FTAI Power, our new platform dedicated to converting CFM56 engines into aero derivative Power turbines. This business has been in development for over a year and is built on the simple belief that the CFM56 engine, already the most proven and widely deployed engine in commercial aviation history, will play a critical role in meeting the world's accelerating need for electricity. The surge in demand for AI data center has created an unprecedented and long-term need for fast, flexible and scaled Power solutions. Traditional infrastructure was never designed for the scale and speed of demand we're now seeing. With FTAI Power, we're adapting the world's largest and most reliable engine platform to deliver a 25-megawatt unit that offers grid operators greater flexibility and faster deployment. It's the exact same value proposition that has driven our success and scale in aerospace. Before moving on from Power, we'd like to provide an update on our progress across 5 areas: number one, engine feedstock and working capital; number two, facility readiness; number three, our procurement strategy; number four, customer engagement; and number five, production timing. First, feedstock and working capital. As we scale the Power platform, we are targeting approximately $250 million of working capital to support turbine feedstock and a rotable pool of key components, including generators, gearboxes and control systems. In the fourth quarter of 2025, we increased inventory by approximately $150 million to secure additional turbines required to support our expected 2026 production ramp. We are intentionally building inventory ahead of demand to ensure execution certainty as commercialization advances. Second, facility readiness. We have begun retrofitting our Montreal facility to establish a dedicated production line for the Power business. As a reminder, our Aerospace and Power businesses must remain fully separate. Components that transition from Aerospace into Power applications will not return to aerospace service. Maintaining the separation is critical both from a regulatory and asset integrity standpoint. And although the additional space is not required for 2027, we are planning to well ahead for future expansions in Montreal, Miami and Rome to support the growth of the business. From a labor perspective, the core technical skill set required for the CFM56 platform directly translates to our Power application, providing a strong operational foundation. In anticipation of growth across both Aerospace and Power, we scaled our Montreal workforce from approximately 360 employees at the beginning of 2025 to 570 today, representing an increase of roughly 60%. In parallel, since opening our training academy in June, we have enrolled 220 trainees in total and are graduating over 50 per quarter, further strengthening our pipeline of skilled technicians to support sustained production growth. Third, we continue to refine our supply chain strategy for non-engine components and partners. Our approach will be a combination of a multi-vendor sourcing of key components, collaboration with third-party vendors with proven track records and the build-out of in-house capabilities that will allow us to control production from turbine to final assembly. Given the scale we aim to deliver in the market, this multipronged approach will give us the flexibility and the predictability to fulfill our commitments to customers. Fourth, customers. We continue active discussions with hyperscalers and data center operators. While we're not providing specific commercial details at this stage, engagement remains strong and focused on long-term deployment structures. As a reminder, the aero derivative platform is highly versatile asset capable of supporting baseload backup and peaking applications. We are currently seeing particular interest in baseload deployments, which aligns with our objective of establishing a durable foundation for long-term growth and which is consistent with our current theme in the market of bring your own Power. Fifth, timing. We expect the first production units of Mod-1 to be delivered in the fourth quarter of this year. Our confidence continues to increase as we progress through final execution milestones. We continue to target 100 units of production in 2027. We are excited about the opportunity ahead and confident this platform will become a very significant contributor to FTAI's long-term growth. I'll now hand it over to Angela to talk through 2025 numbers in more detail. Eun Nam: Thanks, David. The key metric for us is adjusted EBITDA. We ended the year strongly with adjusted EBITDA of $277.2 million in Q4 2025, which was up 10% compared to $252 million in Q4 of 2024. The $277.2 million EBITDA number was comprised of $195 million from our Aerospace Products segment, $113.2 million from our Leasing segment and negative $31 million from Corporate and Other, including intersegment elimination and start-up expenses associated with our Power initiative. As expected, Aerospace EBITDA continues to exceed and outgrow Aviation Leasing's EBITDA. Now let's look at all of 2025 versus all of 2024. Adjusted EBITDA was $1.2 billion in 2025, up 38% versus $862 million in 2024. Aerospace Products had yet another great quarter with $195 million of EBITDA at an overall margin of 35%, which is up 8% compared to $180.4 million in Q3 of 2025 and up 66% compared to $117.3 million in Q4 2024. Overall, we generated $671 million of adjusted EBITDA for 2025 in Aerospace Products in alignment with the revised higher estimates for the year of $650 million to $700 million. Turning now to Leasing. Leasing continued to deliver strong results, posting approximately $113 million of adjusted EBITDA in Q4. This included $20 million from the SCI through management fees and co-investment returns and $93 million from leasing assets on our balance sheet. We expect the mix of Leasing EBITDA to continue shifting towards the SCI as we launch new SPV partnerships each year on a programmatic basis and pivot away from balance sheet aircraft leasing. For the full year, Aviation Leasing generated $609 million of leasing EBITDA in 2025, just above our target for the year of $600 million, including $54 million from Russian insurance claim recoveries. We also ended the year at 2.6x leverage on the low end of our targeted range of 2.5 to 3x agreed upon with our rating agencies. In addition, we are pleased to see recognition of our improved credit last quarter with 2 notch upgrades from both S&P and Fitch. With these actions, we have now achieved our objective of maintaining a strong BB rating across all 3 agencies, reflecting the continued strengthening of our balance sheet and the durability of our business model. Lastly, in 2025, we generated $724 million of adjusted free cash flow compared to our original guidance of $650 million and revised guidance midyear of $750 million. This figure is further adjusted for 3 key investments we made in the fourth quarter to support our 2026 growth initiatives. First, strategic capital for larger fund size and faster deployment pace increased our co-investment by $52 million. Second, FTAI Power, where, as David mentioned, we proactively invested $150 million in additional turbines to support the 2026 production ramp. And third, we invested an additional $50 million in hot section parts, a critical input for our engine maintenance business in a market where parts access is very tight. And with that, I'll hand it back over to Joe for final remarks. Joseph Adams: Thanks, Angela. As we close out 2025, I want to reiterate how proud we are of what the FTAI team has accomplished. This was a year defined by execution, scale and strategic progress across every part of our business. We launched the SCI platform and completed the fundraise for the inaugural vehicle, launched the fundraising for SCI II, expanded our global MRE footprint and laid the foundation for FTAI Power, all of which strengthens our competitive position and supports durable long-term growth. Our Aerospace Products segment continues to demonstrate the Power of our MRE model, delivering exceptional year-over-year growth and establishing a clear leadership position in the CFM56 and V2500 aftermarket. Our Aviation Leasing business is evolving into a high-quality fee-driven asset management platform with recurring earnings and expanding co-investment opportunities. Following a very strong start to 2026, we're even more confident in achieving the guidance we outlined last October. We're updating our outlook to increase total EBITDA by $100 million, split half attributable to an increase in Aerospace Products and half from leasing coming primarily from insurance settlements tied to Russian asset recoveries. As a result, we now expect total business segment guidance of $1.625 billion, up from $1.525 billion. This includes $1.05 billion from Aerospace Products, up from $1 billion and $575 million from aviation leasing, up from $525 million. 2026 is going to be a year of continued growth and new business launches at FTAI. Our new initiatives are bigger and growing faster than we originally projected, and we will be making larger investments in growth to maximize value and speed to market. While we remain confident in our original target to generate $1 billion of free cash flow after incorporating several positive developments and incremental growth investments, we now expect 2026 free cash flow of approximately $915 million. This reflects $100 million of additional EBITDA, less $85 million of increased SCI investments tied to the launch of SCI II and $100 million of additional Power working capital to support the 100-unit production pipeline for 2027. As a growth business, it's our priority to pursue high-return opportunities, and we are confident that these investments across SCI, Power and Aerospace will drive meaningful value into 2027 and beyond. As a result, redistribution of capital remains a strong consideration. And therefore, for the second consecutive quarter, we're increasing our dividend from $0.35 to $0.40 per share per quarter. The dividend will be paid on March 23 to shareholders of record of March 13, which marks our 43rd dividend as a public company and our 58th consecutive dividend since inception. Overall, we enter 2026 with strong demand, a robust production pipeline and a clear strategy to scale both our engine maintenance and asset management platforms. The investments we've made in our facilities, our people and our broader ecosystem position us to meet rising customer needs and capture the significant opportunities ahead across Aviation Leasing, the aftermarket and now the rapidly growing Power requirements driven by AI. I want to thank our employees around the world for their dedication and hard work, our partners for their continued support and our shareholders for their confidence in our long-term vision. We're excited for the year ahead and look forward to updating you on our progress. With that, I will give it back to Alan. Alan Andreini: Thank you, Joe. Kevin, you may now open the call to Q&A. Operator: [Operator Instructions] Our first question comes from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: I have two questions, please. The first one would be on AP margins. So when we look at Aerospace Products margins, they've been nice and steady at the mid-30s level throughout most of this year, and you've talked about reaching 40% potentially in '26. Can you talk about how the access to the PMA blades and now CFM, the materials deal supports the margin profile and mix going forward, along with some of the other initiatives you've been taking to support margin upside? Joseph Adams: Sure. Thanks, Sheila. So when we talked about growing our margins from 35% to 40%, we mentioned three parts to that. First was the PMA HPT blade, which has been approved. Second was additional lower-cost parts supplies, which we've now achieved through both buying -- additional used service material, but importantly, with the deal that we did with CFM, which included parts and repairs. And then third was continuing to grow our piece part repair capability, which we -- as David mentioned, we've advanced significantly with Pacific Aerodynamic in California and the Bauer joint venture in Connecticut. And we've also added a lot of piece part repair capability in Montreal, and we continue to add a lot of repair capability. It's been a priority of ours for the last -- as we mentioned, for the last 3 years, and it's critical to sort of maintaining a low-cost position and developing competitive advantages in the overhaul of those engines. So great progress on all of those. So everything we wanted to have in place to achieve that 40% margin is in place, and we are very confident that we have the capability to do that, to grow that in 2026 to 40%. I will say on the further positive development side, the there are a number of the large airlines in the world or largest airlines in the world that are increasingly in the mix for our MRE products, I'd say more so than ever before. And over the last 6 to 12 months, we've increasingly been engaged on bigger deals. And if we have the opportunity to accelerate market adoption and pick up some of the bigger programs, we will prioritize that over adding incremental margin to the business. If we can get more EBITDA from a broader base of customers faster, that we believe is more valuable than simply increasing percentage points of margin. So that's sort of the way I would give the state of affairs today. Sheila Kahyaoglu: Perfect. And then if I could ask another one on FTAI Power. It sounds like through the commentary from David and the slides that you guys feel comfortable you have the right inventory to support the launch of the Power business here. Can you maybe talk about steps from now through 2027 in terms of how you expect to achieve 100 units next year from a labor and equipment perspective? And secondly, how you're thinking about ultimately your ability to service these turbines once they're in the field? David Moreno: Sheila, this is David. I can take that. So just as far as the ramp-up first, right, we've been working on the Power initiative for over a year. So as we mentioned earlier, we've been leveraging the same infrastructure that we have, which includes our Montreal facility, which, as we mentioned, we've been hiring at a rapid pace. We feel very good about production for 2027. And in general, going from 0 to 100 as far as production units for Power is going to go a lot faster than when we started Aerospace going 0 to 100. And that's for the same reason that we're leveraging the infrastructure that we have as well as the feedstock of engines. We see that as very complementary to our Aerospace business. Now the second piece as far as maintenance and the opportunity there, we actually think this is a very important piece of our business model, not only from a revenue standpoint, but from a value prop to our customers. We're not going to provide exact numbers on the revenue opportunity, but just to give you just a general flavor, the engine, the turbine itself is going to have a similar life cycle as it does for Aerospace, which means every 5 to 6 years, it's going to require maintenance. As the business scales, that's going to be the aftermarket servicing and that is going to be a significant opportunity for us. From a customer standpoint, as you know, our ethos as a company is all around 0 downtime for our customers. And we're going to leverage the same exact exchange model that we've had a lot of success with, which is the turbine and module exchange model to offer that as a big differentiator in the market. It's going to set us apart from a lot of competitors. Operator: Our next question comes from Kristine Liwag with Morgan Stanley. Kristine Liwag: I guess like one, with the assets you need to acquire for SCI I, and Joe, you launched like SCI II, that would be my follow-up question, but let me finish this one first. So you've got the assets you've got to acquire for SCI I, the higher 2026 module target from 1,000 to now 1,050 that David called out. And you've got the donor cores for the 100 Power conversions for next year. Can you talk about the sourcing environment? Where are you getting this from? And how has been the pricing in that environment? And are you able to source all this volume? And then the follow-up to that would be, you've got also the launch of SCI II. I mean, how large could be SCI II? Joe, you had previously mentioned that normally, the second fund is larger than the first one. And your first fund is $6 billion. So just wanting to understand how you could support all this growth. Joseph Adams: Sure. So thanks for the question. I mean just going back, as we mentioned, the investment opportunity in current generation narrow-bodies is probably $30-plus billion a year of total investment. So our goal was to achieve $6 billion a year and which is a meaningful part of that, but not a disproportionate amount of those assets. And we've been successful being able to do that largely by focusing on assets that have a high level of shop -- engine shop visit intensity, which as you can expect, is that's where our natural advantage is because we have inventory and we can manufacture engines, whereas other financial buyers typically do not. So we've focused on that part of the market. In sort of a macro sense, a lot of lessors and a lot of airlines took the advantage to keep assets longer coming out of COVID because lease rates are going up and asset prices were going up and every airline needed that lift. So it was a great environment to hold on, but people have reached sort of limits where now they're getting new deliveries, average age of the portfolio has pushed out limits with debt investors. So we're seeing more and more volume coming to market, and we're a great counterparty for everyone for lessors and for airlines because we can solve engine problems, which is usually the biggest problem in the space. So as you mentioned, the $6 billion, we estimate we'll end up with about 350 aircraft in that first fund. That's 700 engines that will be fully committed to FTAI Aviation under the MRA contracts. And by the middle of this year, we'll start investing out of SCI II. I believe that we'll probably launch the size of SCI II around the same size of $6 billion, which, as you remember, was double what we originally launched SCI I at was $3 billion, then we raised to $4 billion and ultimately did $6 billion. So we'll probably launch SCI II at $6 billion. And our total -- our goal as a business, as we stated before, was to grow the asset management business to a $20 billion business, which this puts us in a very nice position to be able to say we're on track to achieving those goals and making it a significant player in that industry and the largest in the world for current generation narrow-bodies. So it's been great. I mean, when we launched it, people were a little bit taken aback by the size, but we've been able to do very good deals, get great returns, generate solutions for airlines. Airlines, in many cases, now recommend to their other lessors that they sell to FTAI because they like the fact that they don't have to do engine shop visits anymore. So it's really a nice flywheel that's in motion now. Kristine Liwag: Great. So it sounds like you're able to source all the volume to feed these businesses, right, Joe? Joseph Adams: Yes. And if you think about -- I mean, the Power business, one of the markets, if you take the total engine universe size of about 20,000 CFM56 engines in the world and the estimated retirement rate from the market is generally between around 2% to 3% per year. So if you take 2%, that's 400 engines a year get parted out every year. So for the Power business, if you just go buy 100 of those and say, don't part them out. They're worth more to us than they're worth in the secondary market for part value, you have -- you could get 25% of the part out market and satisfy your needs for the Power business every year. It's such a huge market. And 2% a year doesn't really estimate. I mean, if 2% a year existed in perpetuity, it would take you 50 years to use up the CFM56 market. So it's going to get bigger. But I just use that as an example. And we have not been an active buyer of engines that were part out candidates previously, but we will be now. Kristine Liwag: Super helpful. And following up on the FTAI Mod-1 that you expect to have ready for the 4Q this year. Can you talk about the technical specs of this derivative so far as you do that conversion? How has been the efficiency of this as a gas turbine? How does it compare with other things in the market? And also, look, to get to the 100 next year, do you have these orders lined up? How firm are your discussions with customers? And what would be the distribution of your customer set for next year, how firm are those? Joseph Adams: So I'll start and then pass it to David. But from a spec point of view, we estimate that the efficiency of the aero derivative will be comparable to other aero derivatives in the market. We are estimating a 25-megawatt output. So it puts us in a nice size range with a 35% to 40% efficiency and a 9,000 heat rate. So very similar to other aero derivative options in the market today, which have been sold for 30 to 40 years. It's not a new product. So we think we're competitive with that. We think, ultimately, the reliability and durability of the CFM56 will prove to be a competitive advantage from an overall total cost basis in that we think that the servicing cost and the maintenance costs will ultimately be lower. But it will take some time for us to prove that out. So that's sort of the first part of the question. You want to take the second? David Moreno: Yes. As far as interest, as I mentioned, we're seeing interest -- significant interest on baseload application. And what's really resonated as far as the Mod-1 with customers is really three things, right? Number one is scale and reliability. So the scale of engine feedstock as well as the reliability of the CFM56. It's the engine that's flown the most amount of hours. It's the most reliable engine ever produced. The second point is speed to Power, right? And everyone wants Power now. So not only just being able to deliver the units, but also actually putting them on site. So being a trailer mounted unit and being deployable very fast in about 2 weeks is really a key advantage for our product. And number three is ultimately flexibility. And we talk about flexibility across the entire business, but this unit is no different. It's 25 megawatts which is a perfect size for stacking for data centers that are growing. And then we talked about the maintenance piece, which is we're going to offer flexible maintenance, which is going to be a key differentiator for the product. So overall, there's a lot of interest for long-term use. As we mentioned, we're trying to set ourselves up for what's best long term. We're going to be updating the market as kind of we progress through that when appropriate for us. Operator: Our next question comes from Giuliano Bologna with Compass Point. Giuliano Anderes-Bologna: Congrats on another great quarter. As a first question, when you look at module production, the production this year was greater than what was originally targeted. I'm curious what the -- what are the things that are driving that production and how that's being impacted. Stacy Kuperus: Sure. Thanks. This is Stacy, and thanks for the question. I'm very proud of the work our team did in 2025 on module production. As a reminder, and as Joe said, in 2024, we had a total -- in Q4 of 2025 with total production of 228 modules, which is approximately a 68% increase from Q4 2024. And this was done -- this was a tremendous accomplishment by the teams and the result of disciplined execution with clear focus on three things for us, which is our people, our parts and process. So first on the people. Our Montreal Training Academy launched in 2025, and as David mentioned, has enrolled over 220 trainees. We've developed our own in-house training program, which includes augmented reality technology and has improved graduation rates and shortened training times. Second, on parts, we've made targeted investments in 2025 to expand our repair capabilities through Pacific Aerodynamics and Prime Engine Accessories. We've also upgraded significant piece part repair capabilities inside our facilities in Montreal and Rome. Combined with our strategic agreement with the OEM, these steps establish a strong foundation for our part strategy that position us for success in 2026. Lastly, on the process, supported by our partnership with Palantir, we've been optimizing our operations across all locations, which includes from asset management to supply chain. Leveraging AI-driven insights has allowed us to unlock additional efficiencies. And building on that digital foundation, we've also strengthened collaboration across the shops, sharing best practices and creating synergies through our MRE network. So I think looking ahead for 2026, our goal is to increase production by approximately 39%. And then -- and we feel very confident in that based on all these things, and this gives us our confidence in our ability to continue to scale. Giuliano Anderes-Bologna: That's very helpful. Maybe a slightly different -- slightly different topic and hopefully, this hasn't come up yet. But sometimes towards the end of the year, some sales could flip around from quarter-to-quarter, especially around year-end. I'm curious if that could have had any impact on the fourth quarter results this year specifically. Joseph Adams: Yes, it did. I mean we the Aerospace Products EBITDA came in a little bit less than what we thought it would be a few months ago, and it was primarily two reasons, one of which was we've added over 100 employees to the business. And there is a slight lag, I would say, not a major lag between costs and productivity. So there's some impact from that. And then secondly, as you point out, there are some customers who preferred to take delivery in Q1 as opposed to Q4. So we did have a few engines that slid from 2025 into 2026. And being a very customer-focused organization, we accommodated those needs. Everybody has budgets. So yes, there's a little bit of that, but I think it was a combination of the two reasons for the difference. Operator: Our next question comes from Josh Sullivan with JonesTrading. Joshua Sullivan: Just on cash flow, given the investments here in Q4, how do we think of '26 and the cadence of investments through '26, just the puts and takes? Joseph Adams: Yes, I'll start. I think it's a great opportunity in 2026 and that we have more cash flow available and more growth opportunities available. So we're very excited about it. I'll pass it over to Angela to give you the details. Eun Nam: Yes, happy to. So for 2026, we do expect to generate $1.2 billion in free cash flow before any new growth initiatives. So as mentioned by Joe, with the revised adjusted EBITDA guidance for 2026, we expect an additional $100 million, $50 million more from cash flow in Aerospace Products with the additional production and another $50 million in Leasing from settlement of Russian claims. What you also saw in our 2025 free cash flow walk was that we called capital on our SCI I earlier by $52 million. So that improves our cash flow in 2026. So that overall is an increase of $152 million to the 2026 free cash flow, getting us to $1.2 billion before the growth initiatives. So as mentioned by Joe, we do expect acceleration of our SCI II investment increase of about $137 million in 2026 as we will call capital earlier for deployment. And then secondly, for the remainder of our $250 million that we expect for Power, so $100 million related to that. So that brings us to the $915 million that we shared with the group. Joshua Sullivan: Got it. And then just one on the continued struggles of the OEM supply chain, Airbus adjusting deliveries here. Can you just comment on any impact on the leasing environment, aircraft engine or leasing duration? Any comments you can make just on the general environment? Joseph Adams: Well, I mean, we continue to be in love with the CFM56 and the V2500, and it just -- it keeps getting better and better. So we didn't expect as much of a tailwind, but the current assets, the existing fleet is so durable, predictable, reliable. And importantly, it just makes money for the operators. And that's what drives retirements. It's not technological, it's economic. So the lower the cost we can drive on the engine maintenance and the better -- and the other newer assets seem to be going in the opposite direction, which just gets better and better for us in terms of longevity. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles Walton: On the Power initiative, is it fair to expect a relatively steep delivery ramp through '26 to get to that 100 for deliveries in '27 -- excuse me, steep delivery ramp through '27 to get to the 100 deliveries in '27. And so what does that mean for the exit rate of production or deliveries into 2028? Joseph Adams: Well, I would say we haven't really mapped all that out yet. We've got 10 months before January of 2027 to gear up and set what we would expect to be a monthly production rate. So we've got ample time. We've got all the material that we need to go into the end products that's required from third parties. We've already got multiple counterparties identified. We've got purchase orders that have already been executed. So we're planning ahead. I don't -- I wouldn't say it's going to be a very steep. Our goal would be to make it not terribly steep in terms of the ramp-up. And given that we have ample time to do that, I think it will just make for a more efficient production. The other thing is we may do multiple locations. We may not just do one location in terms of assembly. So we can have different sort of the diversification of supply and geography that will help also smooth that out. Myles Walton: Got it. And Joe, it sounds like you're not seeing really much of a cannibalistic effect of this Power initiative. You sort of talked to the 25% share on the growing MRO business, which gets you to $6 billion of revenue there at 40% margins. And then this Power business looks like it's another $2 billion to $3 billion of revenue. So you're talking about building an $8 billion to $9 billion business at 40% margins in Aerospace Products. Is that sort of where you're leading us to? Joseph Adams: Sounds good to me. But no, I think -- I mean, we don't see it as being at all cannibalistic. I think it's complementary and that the natural extension of the life after an aerospace life of 30 years is a ground-based operation. So it's a perfect life extender for the CFM56 and V2500 as other aero derivatives have proved out before this. So -- and the supply of both raw material, if it's just not parting out an engine instead of parting it out, that doesn't take away from the existing supply of aerospace engines. The labor force is different. The third-party vendors are different. So it really is an add-on as opposed to detracting in any way from what our current Aerospace business is. Operator: Our next question comes from David Zazula with Barclays. David Zazula: I guess following up on that, could you give any more color on your expectations for margins in the Power business? And specifically, why you think your part of the value chain here in this delivery is going to earn you the type of margins you previously talked about? Joseph Adams: Yes. So what we said on margins to date is that we expect the margins to be as good or better than margins in our Aerospace Products business today. And one of the main reasons why we're very confident of that is that the -- we have assets that are nearly fully depreciated that we can repurpose into a whole another life and add potentially 10 to 20 years of life on to assets that we previously otherwise might have been scrap. So we have a cost of input on the turbine that no one can match and a supply of that, that no one can match that -- and we also have built up repair capabilities, sourcing of used serviceable material parts, PMA, everything available known to mankind. We have already been working on that for the past 7 years. So there's nobody that could come close to us in terms of the input cost of a turbine. And that is the most expensive and complicated and constrained part of the Power business today. If you talk to anybody, I'll tell you what -- the biggest constraint on the Power side right now is getting turbine blades, HPT blades, in particular. So that -- we've solved that by taking an existing asset that is near -- at or near the end of its life and then creating a whole new life for it. David Zazula: And then could you talk about the strategic M&A strategy and how that plays into the Power business? And specifically, do you need to execute on that strategy to get to your margin target? Or is that kind of stand-alone? Joseph Adams: No, it's -- I mean it's stand-alone. We've built FTAI solely really almost exclusively with organic growth to date, and that's always our base case. If we find ways to accelerate it that are available that are at reasonable costs, we will always look at that or take advantage of those opportunities. But we always start with a base plan that we can execute on our own. And then if we can figure out a way that makes it better is something that we can do faster or cheaper, we will look at that. So that's our plan is basically organic and do it ourselves. And if we have an opportunity as we've done with adding some maintenance facilities and repair businesses in the aerospace side, we will look at that as well. Operator: Our next question comes from Shannon Doherty with Deutsche Bank. Shannon Doherty: We were very pleased to see GE Aerospace and CFM's endorsement of the FTAI business model. Maybe Joe or David and David, congratulations on your promotion. Can you provide us more color on the partnership there? Joseph Adams: Sure. So it's something we think was very positive, works well for both parties. The agreement itself is a multiyear deal that covers three things: supply of parts, piece part repairs and component repairs and thrust. And so from an FTAI point of view, it allows us to have more -- access to more parts and volume at good pricing, which means we can scale and grow our business while continuing to drive down costs. And from the CFM perspective, what they've expressed to us is their value proposition to their customer is based on an open aftermarket. And open aftermarket ultimately delivers the best product, the lowest cost, the lowest total cost of ownership and the longest life for that asset, which means if we're working together, what we can do is create bespoke solutions for customers as we've done with SCI and then we've done with many airlines. And we can optimize green time and ultimately save customers time and money, which means the asset flies longer, which means you sell more parts, and so everyone wins. And at the same time, we can provide PMA for customers who like those products. So we have a great portfolio of solutions for the whole market. Shannon Doherty: That's great. And Joe, as a follow-up, did you mention that you're going to do 350 aircraft in SCI I? I think that original target was going to be 375. And is that going to be the same size for SCI II, you're looking at 350? Joseph Adams: It should be about similar. I think the 350, sometimes if you buy slightly younger vintage aircraft, you pay a higher price per aircraft just because you have more life on it. So it's going to swing around. It could vary by the types of deals we end up doing, but 350 is a good number for both. Operator: Our next question comes from Brian McKenna with Citizens. Brian Mckenna: Okay. So you're still clearly in growth mode here and you're leaning into a number of opportunities. This does come with some upfront costs and investment, including hiring. So when you look across the business today, specifically some of the newer initiatives, where are you incrementally adding headcount? How should we think about the pace of hiring into 2026? And then is there a way to think about the related impact to cash comp as well as stock-based comp? David Moreno: Yes. So this is David. As we mentioned in our prepared remarks as well as comments from Stacy, we've been actively growing the workforce. So we're going to continue to do that. In general, in the market, there's a constraint of talent for technicians out there. And we want to make sure that we're always controlling that, and we're able to get ahead of that. So obviously, what was very key to that initiative was the training academy, which allows us to take talent and incubate that within our organization. We're going to continue to do that in 2026, right? Obviously, we're expecting to get to our 25% target on the Aerospace as well as add Power. So I would expect similar ramp-up as far as employee headcount as the shop as well as we're also looking at other opportunities for shops, let's say, east of Rome, right? So we talked about in the past opportunities in the Middle East as well as in Southeast Asia. So those are opportunities to grow headcount, and I don't see us stopping that anytime soon. Brian Mckenna: Okay. That's helpful. And then on SCI II, clearly, a ton of focus on private credit in the market today. Really, the focus has been entirely on corporate direct lending in areas like software. I would actually argue all this volatility is probably a good thing for capital flows into areas like asset-based finance, and there's been increasing demand for hard assets that are more insulated from AI. This is exactly the kind of exposure that sits within SCI. So I'd love to get your thoughts here, what you're seeing from a demand perspective for SCI II? And then has sentiment or conversations shifted at all as fundraising starts to pick up here for the successor fund? Joseph Adams: Yes. So we're seeing that. I think that if investors are looking for asset-based uncorrelated cash -- contracted cash flow, you came to the right place, right? We have that. So we are in a great position, I think, on sort of absolute basis and a relative basis in the market. And all of our capital is locked up. It's private equity self funds. So we feel like we're -- we have a terrific product. I was reading recently about what they call the halo trade, which is heavy assets, low obsolescence, and that's the new theme. And we have -- we certainly qualify for both of those. So we are -- we feel very good about the market and where the private credit opportunities that we can offer people, how they compete with other things in the market. And I don't think that fund -- I mean, I should never say something won't be hard, but it feels like we're in a really good position having fully invested Fund I and launching Fund II into this market. Operator: Our last question comes from Andre Madrid with BTIG. Andre Madrid: I know for competitive reasons, you've decided not to share an anchor customer, and I know somebody kind of pointed to this earlier, but I don't know if it was answered clearly. So I just want to hit a head on. But is there just one customer lined up? Are there several lined up? I mean, can you provide any color on the order book or if a fleshed out order book even exists right now? Really any color to show that there's firm customer demand for Mod-1? Joseph Adams: Yes. We have an anchor investor as we announced, and we have a number of other investors who are currently invested in Fund I that want to re-up. So demand from the existing group of investors is being reflected as quite strong. In terms of deal flow, we have a pipeline of deal opportunities that we've been working on. One of the things that when we started SCI I, we really started into a new business from a cold start. In other words, we had no pipeline and not a lot of deal flow. So we built that up and we're able to invest in 18 months, the $6 billion of capital. And now we have a pipeline of opportunities we've been working on. Some deals can take 6 months, 9 months a year in some cases. So the more that we have been at this, the more developed we have as a pipeline and feel very good about the ability to deploy that money. Andre Madrid: Sorry, Joe, I said Mod-1. I meant FTAI Power, like if there's one or several customers and if the order book exists yet for Mod-1. My apologies. Joseph Adams: No problem. I thought we were still on SCI. David Moreno: Yes. As we mentioned, right, we're being very strategic on how we take on these orders. We're talking to hyperscalers, data center operators. Some of these folks want the entire capacity. But look, our focus is beyond 2027 and the outer years, right? We want something that's going to be 10 to 20 years plus durable. And I think now we understand we have a key asset, which is the turbine, and it's our best job to just do what's best for the company long term. So we're going to provide updates as we progress through those 100 units, right? And just right now, it's not the right time from a commercial standpoint to do so. Andre Madrid: Got it. Got it. And then I know you said in the press release, you say Mod-1 development is on track. But can you provide some more specific updates of what steps remain here on out? I think you might have alluded to some earlier, but maybe if there's like a more step-by-step plan that you could outline. Joseph Adams: Really, what we said is we've done a substantial amount of testing. Everything is designed, parts are ordered, and we will produce the first unit this year. That's kind of the most -- that's really the time -- the highlights that we've given so far. Operator: Ladies and gentlemen, this concludes the Q&A portion of today's presentation. I'd like to turn the call back over to Alan. Alan Andreini: Thank you, Kevin, and thank you all for participating in today's conference call. We look forward to updating you after Q1. Operator: Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Welcome to the Primo Brands 2025 Fourth Quarter and Full Year Earnings Conference Call. I will now turn the call over to Traci Mangini, Vice President, Investor Relations. Traci Mangini: Thank you, operator, and hello, everyone. With me on the call today are Eric Foss, Chairman and Chief Executive Officer; and David Hass, Chief Financial Officer. Our discussion today includes forward-looking statements within the meaning of U.S. securities laws, which are subject to risks and uncertainties that may cause actual results to differ materially. For more information, please refer to the forward-looking statements disclosure in our earnings release. In addition, the definitions of and applicable reconciliations for any non-U.S. GAAP measures are included in our earnings release and supplemental earnings slides, which were made available today on the Investor Relations section of our website. With that, I'll pass it over to you, Eric. Eric Foss: Thanks, Traci. Good morning, and thank you all for joining us today. To set the framework for today's discussion, I'll start with a high-level review of our fourth quarter and 2025 results, take you through our progress on our direct delivery customer experience and our 2026 growth and capital allocation priorities, and David will then take you through the details of our quarterly and annual performance as well as our 2026 guidance. We're encouraged by our performance as we finish the year and how that positions us into 2026. In the fourth quarter, we delivered net sales of $1.554 billion, a decrease of 2.5% on a comparable basis from prior year, which included an improved pace of recovery for our direct delivery business. At the same time, we built on the strength of our well-known brands at retail, further expanding our leadership position through dollar and volume share growth in the category for the quarter. For the full year 2025, we delivered comparable net sales of $6.660 billion, down 1% from the prior year. These results demonstrate the strength and resilience of our business model and indicate early signs that our initiatives are resulting in an improved trajectory for the business positioning us for continued operational and financial improvement as we move forward. Our fourth quarter comparable adjusted EBITDA was $334.1 million, up 11%, with related margin of 21.5%, up 260 basis points versus a year ago. Our annual comparable adjusted EBITDA was $1.447 billion, up 7.4% with a related margin of 21.7%, up 170 basis points from prior year. As we set our sights on 2026, our top priority is to get the business back to growth while also expanding margins that leads to generating consistent growth in free cash flow. In 2026, excluding our office coffee service business, which we exited at year-end 2025, we anticipate comparable net sales growth of flat to 1% and an adjusted EBITDA range of $1.485 billion to $1.515 billion. This implies margin expansion of 60 to 80 basis points on top of our attractive adjusted EBITDA margins. Going forward, we're positioning the business for top line growth and margin expansion to drive solid earnings, free cash flow generation and long-term shareholder value. I've recently completed my first 100 days as Chairman and CEO of Primo Brands. I've been doing a lot of listening with key stakeholders, including our associates and our retail partners as well as conducting market visits, looking closely at opportunities, capabilities and processes across the business. What remains clear is the investment thesis behind the merger is firmly intact. We compete in an attractive growing category and have a differentiated portfolio of leading brands, and we benefit from an advantaged route to market. As One Primo, I'm confident in our ability to drive top line growth and margin expansion to leverage the power of our strong free cash flow through disciplined allocation of capital and to develop a winning culture to fuel ongoing success. So let's start with top line growth. We're very well positioned in our industry. We compete in an attractive category. Unlike some categories within consumer staples, the bottled water industry has structural tailwinds given quality questions around municipal water and the ever-increasing focus on health and wellness and hydration. The category is large, highly penetrated, frequently purchased and continues to be one of the fastest-growing categories within liquid refreshment beverage category. Within the bottled water category, we are the clear leader with a comprehensive portfolio of brands and advantaged route to market designed to serve all consumer occasions across product, format, channel, price point and time of day. We are the third largest player by volume in liquid refreshment beverages and the leader in branded water and healthy hydration in the United States. We have strong industry-leading brands. And if you look at brand health, we have the top 5 bottled water brands as measured by our biannual study. So we believe we have a strong base from which to grow, and we see multiple top line building blocks for 2026. First, we're focused on improving our customer experience in our direct delivery business, which we call customer direct. Encouragingly, we believe we are making progress. We saw continued strength in top-of-the-funnel demand, and we saw trend improvement in the quarter on a customer net adds. Our on-time in full or as we refer to OTIF, which is a key performance indicator and priority going forward, continued to improve throughout the quarter. From a customer feedback perspective, our Net Promoter Score increased every month and our Trustpilot ratings returned to pre-integration type levels. While we're pleased with our progress, we still have work to do to stabilize and return our direct delivery business to consistent growth. As we move forward, we have initiatives underway that include implementing a new warehouse management system for superior supply chain execution from product supply to in-branch inventory to help satisfy customer demand. On the technology side, following the completion of the last 2 rounds of integration in the coming months, we will be fully integrated and our focus will be to continue to harmonize our systems to create better management tools, data analytics and insights as well as improve our digital and app experience for our customers. We intend to continue to optimize the customer journey, including a new program to support customer retention called Solve by Sundown, which should help us address and resolve customer service issues faster. It connects our customers more closely with our call center as well as our operational teams, reducing friction that could lead to customer loss. While early, we're pleased with how the team is responding with urgency to drive continued improvements. Lastly, we're envisioning a new approach to our call center to elevate satisfaction throughout the customer experience. This includes improved digital opportunities and leveraging AI to more quickly serve and solve customer issues. Our second building block is to drive executional excellence at retail by fully leveraging both the power of our brands and advantaged route to market. We intend to increase our presence across the store. Our goal is to have more feature frequency, which leads to more display inventory, while also expanding our shelf space and cold drink penetration and scaling our sizable exchange and refill footprint. On the brand front, we're excited about our marketing calendar for 2026. It includes partnerships with Major League Baseball for our regional spring waters, where America's favorite past time joins with America's favorite water brands. Complementing this, we will continue to lean in behind our premium brands with partnerships with high-profile events like the Golden Globes, where the Saratoga's Blue Bottle recently showed up on the red carpet. And next up is the Academy of Country Music Awards with Mountain Valley. We believe these programs leverage consumer passion points and serve to increase the positive brand perceptions and build momentum. Our third initiative is to prioritize premium. Mountain Valley and Saratoga Springs, while still relatively small, have been meaningful contributors to growth. Combined net sales for these brands increased an impressive 44% in 2025, driven by strong demand in retail and away-from-home. With our investments in capacity coming online across the first half of 2026 and the marketing campaigns I just mentioned, we plan to continue to grow share and distribution for these highly accretive brands. Our final building block is implementing a more strategic and holistic revenue management approach across price points, package types and channels. This will allow us to zero in on SKUs that matter most to the consumer focusing on the most profitable packages and channels and simplify our production and route to market. We remain focused on the long-term potential of our business within the water category and are confident in our ability to grow and enhance margins. Investing in those areas provides an opportunity to enhance growth in our premium business, gain our fair share of opportunities like cold drink and enhance portions of the direct delivery relationship with our customer. As it pertains to the integration in 2025, we completed the first 5 and most complex rounds. Despite reserving the final 2 rounds until 2026, we were able to realize tangible synergies in 2025, and we remain confident in our ability to complete the final integration rounds. Synergy capture remains just one driver of our margin expansion. We have multiple other levers to drive long-term margin expansion, like building on our pricing competencies across the business, as I just mentioned. In addition, opportunities for ongoing cost and productivity initiatives across our supply chain with increased facility automation, warehouse management oversight and reducing SKU complexity, all while driving an efficient SG&A structure. These efforts support continued growth in free cash flow, providing us even greater financial flexibility. Leveraging the power of our highly cash-generative business, we continue to take a disciplined approach to capital allocation to optimize our returns. We intend to put the right support behind our brands, innovation, supply chain and commercial operations to drive sustainable, profitable growth. We plan to balance these investments alongside reducing our net leverage ratio and returning cash to shareholders by both growing our dividend and executing against our share repurchase program. Finally, for us to be successful, we need to continue to pursue a winning culture. We're committed to being one Primo team, developing a team and culture that is obsessed with our mission, including putting the customer at the forefront of all we do and ensuring our frontline focus gives our frontline associates the training, tools and technology to meet and exceed customer expectations every day. To sum up, the industrial logic of the merger remains intact. We have more work to do to fully restore our direct delivery service model, but we're making progress, and I believe we are well positioned for the future. Now before I pass it to David, I'd be remiss if I didn't share how proud I am of the entire Primo Brands team. I continue to be impressed by the pride and passion of our people. We have strong employee engagement scores from our internal surveys, which clearly demonstrates that our unified team is committed and motivated towards driving a successful 2026. We remain focused on our mission of hydrating a healthy America with one culture and one unified set of behaviors and values. With that, let me turn the call over to David. David Hass: Thank you, Eric. As you've just heard, we are making progress. Our fourth quarter top line results were achieved due to improving service levels, which supported volume recovery in our direct delivery business. We believe this indicates early signs that our initiatives are resulting in an improved trajectory for the business into 2026. Now before we get into the details on the financial results, recall that the GAAP financial comparisons in this morning's press release reflect the 2025 results of the new Primo brands versus 2024 results that are primarily of the base legacy Blue Triton plus the combined company after the merger date. This is a typical GAAP reporting outcome of a merger transaction. To assist with more apples-to-apples comparisons, we will be primarily discussing comparable results, which incorporate the combination of both legacy organizations while adjusting for the exited Eastern Canadian operations for both years 2024 and 2025. Also recall, volume for Primo Brands is defined as case goods equivalents, which are measured in 12 liters. For the fourth quarter, comparable net sales declined 2.5% versus the prior year, driven by a 2.9% volume decrease, partially offset by a 0.4% increase from price or mix. The volume decline was driven by both retail and direct delivery. In retail, we cycled higher hurricane purchase activity in 2024, but finished the year largely in line with our expectations. Direct delivery declines were driven by a lower customer base. However, as Eric mentioned, while the customer net adds were negative, we saw month-to-month improvement throughout the quarter. Our premium brands helped to offset this volume decline and contributed to the favorable price/mix in the quarter. Saratoga and Mountain Valley net sales were up 39% in the quarter, continuing the strong momentum behind these highly accretive and consumer-coveted brands. Sequentially, the business showed continued signs of improvement, highlighting a positive inflection in our direct delivery business. The fourth quarter decline in this channel was 5.3% and represents an improvement from the 6.5% decline in the third quarter. Comparable adjusted EBITDA increased $33 million to $334.1 million with comparable adjusted EBITDA margin up 260 basis points to 21.5% versus the prior year. On a full year basis, comparable net sales declined 1% or $65.3 million to $6.660 billion. The 1% decline versus the prior year includes a 0.6% volume decrease and a 0.4% decrease from price or mix. Net sales for the direct delivery channel were down 3.2%. This was largely due to the lower volume related to the integration as previously discussed. This was largely offset by the strength in the mass and away-from-home channels with net sales up 0.9% and 1.2%, respectively, and by the continued strength of our premium brands with Saratoga and Mountain Valley net sales up 44%. Notably, our results include interruptions from the Hawkins tornado, which occurred in the second quarter and 1 less trading day from the leap year adjustment impact in 2024. Leap Day in 2024 created a net sales headwind of $17.6 million for 2025. Separately, disruptions caused by the Hawkins tornado created a net sales headwind of $27.4 million. So all in, the cumulative aspects of these 2 activities alone was approximately $45 million. Further, our office coffee services business weighed on our results as we wound down the business in 2025. This business contributed approximately 40 basis points of our 1% full year decline. Comparable adjusted EBITDA increased $100.3 million to $1.447 billion with comparable adjusted EBITDA margin climbing 170 basis points to 21.7% versus the prior year. Moving to our balance sheet and cash flows. Our balance sheet remains in solid position with year-end debt capital, gross of deferred financing costs and discounts totaling $5.2 billion. Our liquidity remained strong with approximately $990 million of availability between our cash balance and our unused line of credit. At year-end, our net leverage ratio was 3.37x. We generated $680 million of cash flow from operations for the full year when accounting for significant items, including, but not limited to, our integration and merger activities, our cash flow from operations would have totaled approximately $996 million. Additionally, we invested approximately $245.7 million in capital expenditures, excluding integration and natural disaster Hawkins related capital expenditures, which resulted in adjusted free cash flow of $750.3 million. When compared to the prior year, on a combined basis, adjusted free cash flow grew $105.4 million. For full year 2025, our adjusted free cash flow conversion, which we define as adjusted free cash flow divided by adjusted EBITDA, was 51.9%. Related to year-end capital allocation, we have the financial flexibility to reinvest in the business while at the same time to return significant cash to shareholders. Our full year 2025 total capital expenditures were $434.4 million. This included $151.5 million in integration capital expenditures and $37 million of natural disaster Hawkins-related capital expenditures, with the remainder supporting growth and maintenance spending. We also returned significant cash to shareholders in 2025, which included actively executing our share repurchase program as we view our stock as a compelling investment. As of year-end, we had repurchased $193 million of our stock or 10.3 million shares under the Board's $300 million share repurchase program authorization announced on November 9, 2025. There remains approximately $107 million available for share repurchases under the program authorization. In addition, prior to establishing the share repurchase program, we repurchased approximately $214 million of shares from entities affiliated with One Rock. Moving to our financial outlook. We remain confident in our ability to reestablish annual growth in our business. As a reminder, for 2026, we will cycle the exit of our office coffee services business, which accounted for $25.5 million of our 2025 net sales. This puts our comparable or equivalent 2025 ending net sales at $6.635 billion. This is the base from which we are establishing our full year 2026 guidance. We expect organic net sales growth in the range of 0% to 1% with the return to growth weighted in the second half. We face a difficult first quarter comparison, cycling 3% year-over-year sales growth, after which we expect the comparable trend to improve over the balance of the year. In direct delivery, we expect to transition to top line growth in the second half of the year on trend improvement and as we cycle the onset of the disruptions that began in the second quarter of 2025. We expect growth in our consolidated retail channels, driven by the strength of our brands, our commercial plans and continued momentum from premium. This is supported by capacity expansion from Saratoga, which remains on track to come online this spring and our New Mountain Valley facility, which remains on track to open midyear. Further, we will develop and implement our revenue growth management capabilities over the course of the year. Lastly, in terms of revenue phasing within the year, we expect a typical pattern in terms of quarterly contribution percentage to full year net sales with the year being relatively balanced 50-50 between first and second half and the first and fourth quarter representing lower contributing shoulder seasons. Turning to adjusted EBITDA. We expect a range of $1.485 billion to $1.515 billion with a midpoint adjusted EBITDA margin of 22.5%, up approximately 70 basis points year-over-year. Our guidance midpoint contemplates adjusted EBITDA growth in excess of our midpoint net sales guidance as we expect to benefit from the productivity of synergies, partially offset by investments as we improve our customer experience, redesign of our call center and invest in capabilities to drive future growth. We expect adjusted free cash flow in the range of $790 million to $810 million, which we expect to support our capital allocation priorities. We intend to deploy approximately 4% of net sales in capital expenditures. Additionally, we have approximately $100 million anticipated remaining integration capital expenditures, of which $50 million was carried into 2026 due to project timing. Also, given our commitment to returning cash to shareholders, last week, we announced our Board of Directors authorized a $0.12 quarterly dividend, which annualizes to $0.48 per share, a 20% increase. We also intend to continue to execute our share repurchase plan, which has approximately $107 million remaining under the $300 million authorization. With that, I'd like to turn the call back to Traci. Traci Mangini: Thanks, David. To ensure we can address as many of your questions as as possible, please limit yourself to 1 question only. And if we have time remaining, we will repoll for additional questions. Operator, please open the line for questions. Operator: [Operator Instructions] And your first question comes from Derek Lessard with TD Cowen. Derek Lessard: Just wanted to hit on some of your key KPIs in the quarter, more specifically on the direct delivery side. I think the silver lining view is that the volume decline wasn't as bad as expected. So I was curious, like how did some of those KPIs, tips and what have you, how did they perform exiting the quarter? And then maybe as a follow-up, how should we be thinking about the guide in terms of when you expect to get back to your historical financial algorithm? And maybe said another way, should we view your 0% to 1% sales guide as conservative? Eric Foss: Derek, it's Eric. And thanks for joining us. So I think as it applies to customer direct, yes, I've used the word encouraged relative to how the quarter progressed. I think you're well aware that we had some work to do on the business process side. We had and still have some work to do on the technology and tools side, including the capability side, some work with the call center. But I think as I look at the business, as simply as I can state it, what's really, really important to us around the supply chain is to really make sure we get an accurate forecast. We get product produced to schedule. We eliminate the warehouse out of stocks, and we get trucks loaded as scheduled. And if you look at those KPIs, each and every one of them improved dramatically, and most of those are, I would say, north of the high, high 90s from where they were when we really were experiencing some pretty significant challenges. Where I think we still have some work to do is on OTIF. And while we saw, again, sequential improvement each and every month as the quarter progressed, we're still not where we need to be. We need to get OTIF back north of 90%. And so there's still some work to do on that side. I would tell you some other positive indicators from my perspective are we saw our customer calls reduce to kind of pre-merger levels as we exited the quarter. And we also saw a very important indicator, our customer quits were lowered and our customer nets increased as we exited the year. So again, all in all, encouraged with more work to do. Relative to your second question around the guide, I guess the way I would describe it is when I walked into the job about 3 months ago, there were 2 issues that were really front and center for me. The first was to fix the overall customer experience on our customer direct business. We just talked about that. And the second was to get the business growing. And we delivered a down 1% in 2025, not at all where we want this business to perform. There's more work to do on the direct delivery front. But our focus right now is to make sure we get the company growing and we deliver against our financial commitments. As you think about the year, we've got more difficult comps certainly in the first half of the year. But again, once we get the business growing again, I think we can better assess the upside potential. But ultimate -- our ultimate goal is to reach obviously the full potential of this business, and I've got a very high degree of conviction and confidence in our ability to do that. So we remain very optimistic. We've got multiple growth vectors for this business, and our intent is to capture that to drive sustainable, profitable growth. Operator: Your next question comes from Nik Modi with RBC Capital Markets. Nik Modi: I was hoping you could just provide a little bit more color and maybe some details on the top line guidance drivers across channels, volumes and just kind of thinking about the pricing strategy. I know there was an expectation that you'll be able to harmonize pricing in the delivery business in '25, but obviously, that got thrown off track with some of the integration issues. So any color you can provide just to give a sense of kind of how you're thinking about the details in the divisions on your top line guide? Eric Foss: Sure, Nik. I think first, from a sequencing perspective, if you think about the full year, I touched a little bit on this in Derek's question, but there's no doubt the growth will be more second half weighted. We would expect trend improvement pretty much quarter in, quarter out as the year unfolds. And importantly, we expect to not only stabilize the direct delivery business, but to see that business return to growth. So I guess one of the ways I would characterize it as we think about the growth algorithm going forward, we would expect it to be balanced, meaning both volume and price and within price, both rate and mix. We've got a really big opportunity, I think, Nik, on the immediate consumption business, in particular, in our cold drink business. We're far less developed on that area of the business than we are in the future consumption business. And so over time, the profit pools available in the industry around immediate consumption and cold drink are a big, big mix opportunity for us. Continuing to play the leadership role we played in premium, obviously, also plays to a mix advantage for us. And then I think in addition to the customer direct business, which we spent most of our time focused on and talking about with investors, I'm a big, big believer that not only more strategic revenue management across all the business, but importantly, I think continuing to really dial up our executional efforts at retail to be a much more complete executor across the key causal indicators of feature activity, display inventory, shelf space are real, real opportunities for us from a selling strategy standpoint. So we would expect to see the top line growth progress. And again, even over time, I think you'll see it be very broad-based across channels, brands, packages. Operator: Your next question comes from Andrea Teixeira with JPMorgan Asset Management. Drew Levine: This is Drew Levine on for Andrea. So Eric, just hoping to dig in a little bit more just following up on Nik's question. Maybe you could just provide some context on what's embedded in the guidance from a retail perspective. Obviously, category has gotten off to a good start here in 2026 with some pantry loading benefit. You mentioned lapping the Hawkins issue, lapping some poor weather into the spring. So more context there would be helpful. And then related to that? Maybe on the other side, if you want to call anything out from a phasing perspective, maybe from direct delivery side, if there's been any impact from the severe winter weather here in the Northeast where you have disproportionate share? Eric Foss: Sure. Thanks for your question. I'll start, and I'll let David jump in as well. I think let me take your second question first. I think weather hasn't been our friend as we started the year, but I think the teams have done a really good job. The good news is kind of the first wave of weather that hit us, I think we were able to proactively get out ahead of it. And so I think all in, it's probably going to be a little bit of a headwind, but not overly significant in terms of our ability to both show agility to respond to it as we think about how the quarter will play out. I think -- relative to our retail business, again, we've started the year in a very, very strong position, not just within the water category, but across the broader liquid refreshment beverage category, had a very strong share month during the month of January. We would expect that to continue. And again, as I said earlier, I think the way we're approaching this is we want to get balanced and broad-based growth across the enterprise. So we want to return the customer direct business to growth. We certainly want to continue the momentum we've seen on our retail business. We want that to be both volume-driven as well as some price as we get a little more strategic on the revenue management and price pack channel architecture. So I would say our intent and the way we've built the plan is to have balanced and broad-based growth across channels, across brands, packages and certainly geographies. David, do you want to add anything on the sequencing? David Hass: Yes. Thanks, Drew. So I think as Eric just mentioned, our goal within that implied 0.5 is obviously a tougher start to the year with volume as we have some of those volume headwinds coming in the customer direct business based on obvious disruptions and things that occurred in 2025. We do expect that to balance out with volumetric growth in the second half of the year and notably in direct itself in the latter quarter, partial Q3, but largely Q4. So we do expect that to be balanced. Obviously, it's retail and as the premium areas like Saratoga and Mountain Valley volumes from our investments come online, there's obviously potential for those to continue to perform strongly. So again, we view this as a tale of 2 halves with that second half really getting us back into more of a normalized and balanced volume and price sort of contribution. Operator: Your next question comes from Lauren Lieberman with Barclays. Lauren Lieberman: Free cash flow guidance came in better than we were thinking and implies growth ahead of the EBITDA growth. So we're just kind of curious about that piece and kind of specific opportunities there that you'll be pursuing. David Hass: Lauren, this is David. So thanks for the question. Areas there that we have are year 1 was really not focused on working capital enhancements. We were bringing together payable teams, bringing together procurement arrangements. And then obviously, as the direct delivery business ran into some obstacles from the integration, that concluded with some collection and some other AR timing complexities. So we believe that on a more normalized operating platform, we can begin to work through some of the benefits of the merger, both with turns, days against our procurement spend as well as a smoother collection process with our direct delivery customers exhibiting less disruption from their service. When there's less disruption from service, there's a lot better payable from the customer to us. So our AR is smoother. There's not a lot of disputing activities that go on within that. And then over time, our credits, so things that we would have issued that could have been a detriment to our sales should stabilize and go back to more normal course patterns, and that should also help. Obviously, on the CapEx on the base investment, that remains consistent. The integration CapEx and the Hawkins repairs, we're adding back. So that's not really a contributing factor. But it's largely around our working capital benefit and sort of working through that. Operator: Your next question comes from Daniel Moore with CJS Securities. Dan Moore: Appreciate all the color. In terms of pricing, how much of an impact do you expect discounting promotions to win back new customers will impact pricing in '26? And when should we think about lapping or anniversarying those initiatives? And then just secondarily, when do you expect to inflect a positive month-over-month growth in net customer adds? Eric Foss: Yes. Daniel, I think a couple of things. I think relative to the reinvestments, if you think about 2025, obviously, given the disruption, we had reinvestments that centered around route labor, call center labor, additional routes that we ran on weekends and absorption of overtime. And then we had the investment, probably more specific to your question around the customer winback initiative. We're continuing to invest in that initiative. And I think as we go forward, we would continue to see reinvestments broadly around the business of marketing and brand building. Certainly, we're looking at making sure we're wired to win and we've got the right selling resources in place across not just customer direct, but our entire business. And then in the area of technology and capability, continued reinvestments on those. So I think we would want to see those investments drive sustainable profitable growth. And I think as we think about that on the specific return to growth on the customer -- direct customer net, hopefully, I would anticipate that maybe sometime in the second quarter that we might see that development. Operator: Your next question comes from Peter Galbo with Bank of America. Your next question comes from Steve Powers with Deutsche Bank. Stephen Robert Powers: Eric, following up on that net add conversation, I guess, is there a way to frame, I guess, what I define as kind of the active customer base in the direct business, kind of where you are now relative to where you were pre-disruption? That would help. And then secondarily, related to recruitment and getting those net adds trending more positive. Is there a way to kind of frame aggregate incremental investment in '26 versus '25? And are those efforts first half loaded as you try to kind of kickstart the recruitment effort? Eric Foss: Yes. I think the answer is yes, they'd be first half loaded as we continue our recovery. So I think more first half than second half to answer your second part of your question. I think the way I would frame it, and obviously, we're not going to give a lot of specific numbers for a lot of different reasons on the competitive front. But the way I would think about it is -- the great news is that the top of the funnel never really has been disrupted. So if you look at our customer adds really throughout the year other than a little bit of kind of typical seasonality, if you will, the top of the funnel remains strong throughout the year. And the real trough was what we experienced during second -- starting in the second quarter, continuing in third quarter. And then as I mentioned earlier, a pretty nice rebound on the quick side and therefore, the net side as we exited the year. So I think, as I mentioned on the earlier question, we would expect customer nets to kind of return to positive sometime in the second quarter. Obviously, the initiatives we put in place are focused to do that as soon as we can. And I just think that, again, whether you look at our direct delivery business or the exchange and refill business, I mean, the beauty of this is there is just a ton of opportunity for us to take advantage of. And again, most of the efforts that we're recovering from are ones that are well in our control. And so we feel confident about the initiatives returning that business to the kind of growth trajectory we expected when we put the deal together. Operator: Your next question comes from Peter Galbo with Bank of America. Peter Galbo: Sorry about that technical issues this morning. Eric, Dave, thanks for all the detail. I was hoping to get a little bit more color just on cadence actually of EBITDA for the year of kind of the $1.5 billion. I know you gave some color around the sales cadence, but just any help on kind of the phasing on EBITDA, particularly as we think about the first half would be helpful. David Hass: Thanks, Peter. We will expect that to sort of be a little bit different than sort of our, what I'll call, 50-50 setup, if you will, from the top line. And largely, that would be a little bit more, call it, like 48, 52 kind of setup. So not terribly off, but what that really means is a first half kind of lean in on some of these continued investments. So what would that look like? That would look like higher route counts to stabilize service and return the business to the appropriate levels of OTIF and other things that customers expect. And then over time, that can phase back out. That's just one example, but that would be why you have a little bit different of a seasonal pattern sort of first half, second half within the business specifically. Now I will say that if those RGM and other capabilities come online and we have greater permission both with our retail customer as well as our direct delivery customer base, that could change, but that's sort of the initial landscape view of how we've laid out EBITDA, the margin progression that we talked to in the guide. And again, we'll comment on that further as the year progresses. Operator: [Operator Instructions] Your next question comes from Andrea Teixeira with JPMorgan. Andrea Teixeira: Just one, David, maybe you could just update us on what the synergy capture was in the quarter? And then what's left to capture in '26 from the remaining 2 rounds of integration? David Hass: Sure. So again, we substantially covered off the synergy capture required inside the calendar year of '25. How we look at 2026 starts with 2 integration waves that we have left. One was a few last weekend actually. And so far, that seems to have gone well. Again, we can see things pretty quickly in that regard now that we've had a little bit more space between the prior integration waves and the ones we're executing this year. The team deployed significant training on-site sort of teach-ins and things, and that seems to have gone quite well. And obviously, the way we were able to navigate the recent storms, again, performed very smoothly through that. The last wave is a little bit closer towards the end of the quarter in which, again, we experienced and expect that training and sort of teach-in activity to sort of help that occur. From there, what will happen is some additional consolidation through teams where systems or other things that were prevented from being captured due to those last waves being incomplete will start to occur. So again, I think we remain very confident in our ability to sort of execute against that. Obviously, we have placed some investments in the business either to win back the customers or to sort of increase our service attention, and those should be able to be sort of looked at and reviewed as we get closer to midyear and understand sort of our glide path into year-end 2026 and potentially again, set us up for a 2027 period that looks and feels a little bit more different and normalize to how we want to attack and execute against the business. Operator: Your next question comes from Steve Powers at Deutsche Bank. Stephen Robert Powers: David, actually, a follow-up on Lauren's question on free cash flow. I agree the underlying guidance for free cash flow came in a bit ahead of our expectations as well. I'm just curious if you have any estimate of any -- I guess, of free cash flow net of any integration synergy capture or restructuring cash costs. Just trying to get a sense for where you think the actual free cash flow will land for the year if you've got that visibility. David Hass: Yes. I mean, again, outside of the integration CapEx add-back that we sort of go through, we really don't have any sort of curveballs that are occurring in the business. So again, we feel pretty confident that the flow-through, we'll be able to produce an increase in our cash flow from operations. Our CapEx will remain in line with where our sales are going. Obviously, the One, Big, Beautiful Bill has provided some tax benefit where some of that occurred in '25. We'll get some additional deployment and execution of that in '26. And then it really comes down to focusing in our working capital improvements to sort of go from there. But again, we can follow up with any sort of activities you need there. But again, we feel pretty confident in our ability to sort of step through the year and sort of deliver that value. Operator: That concludes our Q&A. I would now like to turn the call back over to Eric Foss for closing remarks. Eric Foss: Thank you. Well, in closing, again, I'm more energized and excited today than I was when I stepped in this role a few months ago. We continue to see encouraging trends as we close the year and look to returning to growth and achieving our financial commitments. So I want to thank everybody for joining us and appreciate your interest, and everybody, have a great day. Operator: This concludes today's conference call. We thank you so much for your participation. You may now disconnect.